Harmony Biosciences Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 31, 2023

There are 11 speakers on the call.

Operator

Good morning. My name is Ashley, and I will be your conference operator today. At this time, I would like to welcome everyone to Harmony Biosciences Third Quarter 2023 Financial Results Conference Call. All participant lines have been placed on mute to prevent any background noise. Quarter.

Operator

After the speakers' remarks, there will be a question and answer session. Quarter. I will now turn the call over to Louis Denae, Head of Investor Relations. Please go ahead.

Speaker 1

Thank you, operator. Good morning, everyone, and thank you for joining us today quarter as we review Harmony Biosciences' Q3 2023 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 lifecycle, we believe non GAAP financial results quarter. Our speakers on today's call are Doctor.

Speaker 1

Jeffrey Dano, President and CEO call. Jeffrey Dirks, Chief Commercial Officer Doctor. Kumar Badur, Chief Medical Officer and Sandeep Kapadia, Chief Financial 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.

Speaker 2

I would now like

Speaker 1

to turn the call over to Doctor. Jeffrey Dana. Jeff?

Speaker 3

Thank you, Louis, And thanks everyone for joining our conference call today. Q3 2023 was the strongest revenue quarter in Harmony's history. The pace of growth in net revenue and average number of patients on Wakeix is rarely seen in year 4 of commercialization of an orphan rare disease product. What is driving this strong continued growth of Wakeix and narcolepsy is the meaningfully differentiated product profile, The strong underlying patient demand, the sizable market of 80,000 patients diagnosed with narcolepsy in the U. S.

Speaker 3

And the consistent executional excellence of our commercial organization. I am proud of this accomplishment. And even more important, I am pleased that our efforts continue to help even more people living with narcolepsy. I also know that there are many more people living with narcolepsy who could potentially benefit from Wakeix, and that is what we are focused on. For the Q3 of 2023, we reported Wakeix net revenue of $160,300,000 An increase of 37% year over year.

Speaker 3

We believe that the vast market opportunity, which remains in narcolepsy, Along with the differentiated product profile of WAKIX provides us the ability to grow the franchise for years to come And we remain confident that Wakeix represents a $1,000,000,000 plus opportunity in adult narcolepsy alone, and we are well on our way. In addition to our very strong commercial performance in Q3, we also continue to advance our current ptolecint lifecycle management programs As well as expand our pipeline and diversify our portfolio beyond sleep wake. Kumar will provide additional details on our call from the Phase III INTUNE study of patelicit in patients with idiopathic hypersomnia or IH. While the primary endpoint did not reach statistical significance during the randomized withdrawal phase, a robust clinical effect was demonstrated In the open label phase of the study and almost 90% of the patients who completed the trial elected to continue into the long term extension study, which I want to reiterate our commitment to the IH patient community as we are actively pursuing an indication for prytolacin in IH and are optimistic in our ability to bring a non scheduled treatment option to patients living with IH and the healthcare professionals who treat them.

Speaker 3

We believe that based on the totality of the evidence that we have seen thus far along with the Tollcint receiving orphan drug designation for IH, There is an opportunity for us to work with the FDA on a path forward. Once we have completed our review of all the data, We will engage with the agency with this goal in mind. Our current life cycle management programs for Tolleson represent about 100,000 diagnosed patients in the U. S. So if successful, these could contribute with our partner BioPreje on new formulations of the Tolleson with the goal to potentially extend the Tolleson franchise with new IP out beyond 2040.

Speaker 3

We are advancing these programs into the clinic and Kumar will provide more detail on them later in the call. Another key component of our growth strategy is acquiring new assets through business development to Expand our pipeline beyond Wakeix and diversify our portfolio beyond sleep wake. On that front, I'm excited to report that we recently closed the acquisition of Zenerba Pharmaceuticals and have added the investigational product Xigel to our pipeline. This acquisition represents an excellent strategic fit for Harmony with development programs focused on orphan rare neuropsychiatric disorders With significant unmet medical needs. With Xigel, we added a novel product candidate and 2 late stage development programs that could potentially launch during the wake of life cycle.

Speaker 3

Xigel is currently in a pivotal Phase III trial for patients with Fragile X syndrome with another opportunity based on positive Phase II data in patients with 22q deletion syndrome. Both of these indications, if successful, represent a significant market opportunity With the potential to serve 80,000 U. S. Patients living with Fragile X syndrome and another 80,000 with 22q deletion syndrome. We have welcomed former ZINERBA members to the Harmony team and are excited to work with them to advance the zygel development programs and bring a potential new treatment option to patients living with orphan rare neuropsychiatric disorders with high unmet medical needs.

Speaker 3

As for business development, we are not stopping with the Zynerba acquisition, but remain very active with a dedicated business development team, which is continually assessing the BD landscape. We remain focused on orphan rare neurology assets and our assets in other neurological diseases where we can leverage our existing expertise and infrastructure. We are looking for assets across a range of development stages, including both early and late stage Given our continued confidence in the underlying strength of the business and our conviction in the growth potential for the company, This morning, we announced a new share repurchase program of $200,000,000 Given our financial flexibility, We are committed to deploying capital to maximize shareholder value. In conclusion, Q3 2023 was the strongest revenue quarter in Harmony's history and our business is strong. We are committed to bringing a non scheduled treatment option to patients with IH and are advancing every aspect of our business, including our pipeline programs and business development efforts.

Speaker 3

I am very proud of the dedication and commitment across our organization as we remain focused on developing and commercializing innovative treatments for patients living with rare neurological diseases quarter who have unmet medical needs. I will now turn the call over to Jeffrey Dirks, our Chief Commercial Officer, to provide more details on our strong third quarter commercial performance. Jeff?

Speaker 4

Thanks, Jeff. Q3 was another strong quarter for Waco's. We had the strongest revenue quarter in our history with continued growth momentum in our underlying business fundamentals and top line performance metrics. Net sales for the Q3 were $60,300,000 which represents a 37% growth from the same quarter prior year And the Q1 of over $150,000,000 in net sales. We continue to see strong double digit growth in net sales for WACX In year 4 of our commercialization, which reflects the high interest of Wakeix in the narcolepsy market.

Speaker 4

The consistent growth in the business reinforces quarter. Our long term belief that Wakeix represents a $1,000,000,000 plus opportunity in adult narcolepsy alone. I'd like to share a quarter. Few key highlights from our performance in the Q3 on Slide 5. The average number of patients on Wakeix in the 3rd quarter increased to approximately 5,800, An increase of approximately 350 average patients sequentially from what we reported last quarter.

Speaker 4

This impressive growth in average patients in the 3rd quarter Was driven by strong top line demand and new patient starts that offset typical summer seasonality, yielding quarterly results consistent with the results we saw in Q2. The growth in average patients on Wakeix speaks to continued product adoption and most importantly, the large remaining diagnosed patient opportunity that we continue to tap into each quarter as the market allows. Strong patient interest and prescriber adoption continue to be key drivers of the growth in average number of patients on Wake call. We saw continued strengthening of the WACUS prescriber base in Q3, both in-depth and breadth of prescribing. The number of unique prescribers on WACICS increased again in the Q3.

Speaker 4

And importantly, we continue to see growth in the WACICS prescribing within the OxiVate enrolled healthcare professionals, even with the availability of new and generic OxiVate options. As we continue to share the meaningfully differentiated product profile of Wakeix and the unique feature of being the only FDA approved treatment for EDS and cataplexy that is not scheduled as a controlled substance, offers broad clinical utility and appeals to a broader narcolepsy healthcare professional audience and patient base, which is a driver of our continued growth. We continue to see meaningful penetration and growth across the approximately 9,000 narcolepsy treating healthcare professional prescriber base. And recent market research conducted in October of this year supports our view of continued future growth in Wakeix prescribing. Research conducted with approximately 70 healthcare professionals with or without experience with Wakeix prescribing shows the following.

Speaker 4

100% of the healthcare professionals surveyed with Wakeix clinical experience stated they would prescribe the same or increased prescribing of Wakeix in the next 6 months. More than 40% of those healthcare professionals surveyed who had not prescribed Wakeix to date indicated the intent to prescribe Wakeix in the next 6 months. Nearly 60% of those healthcare professionals who would prescribe Wakeix to date stated they were likely to recommend Wakeix to peers and colleagues. And consistent with previous waves of research, one of the highest performing drivers and differentiators for Wakeix was the unique feature as the only non scheduled treatment option. The availability of new and generic oxybate options hasn't impacted the continued growth or existing strong payer quarter coverage for Wakeix, given the meaningfully differentiated product profile.

Speaker 4

Our ability to reach and educate the broad narcolepsy treating healthcare professional universe It's happened to the full diagnosed adult narcolepsy patient opportunity gives us confidence in continued growth and the long term growth potential for Wakeix. In summary, I'm excited by the strong commercial performance in the Q3. In fact, the strongest revenue quarter for Harmony to date. We saw strong growth of 37% in net sales versus the same quarter prior year. We saw strong growth in the average number of patients on Wakeix to approximately 5,800, an increase of approximately 350 sequentially from what we reported last quarter.

Speaker 4

We saw continued expansion and strengthening in the Wakeix prescriber base within and beyond oxybate REMS enrolled healthcare professionals. And payer coverage remains strong even with the availability of new and generic oxybate options. I appreciate the dedication and impact of the entire commercial team and the passion that they have for our business and the narcoSD patient community. This strong performance gives us confidence in the long term growth potential for Wakeix And reinforces our belief that Wakeix represents a $1,000,000,000 plus opportunity in adult narcolepsy alone. I would like to now turn the presentation over to Kumar Badur, our Chief Medical Officer to provide an update on our clinical development pipeline.

Speaker 4

Kumar?

Speaker 5

Thank you, Jeff. Good day, everyone, and thank you for joining the call. Moving on to our clinical development pipeline,

Speaker 4

call. As shown on Slide

Speaker 5

7, starting with our development program in idiopathic hyperphylmia. We saw a robust clinical effect in the Phase III INTUNE study with almost 83% of the patients Responding in the initial 8 week open label treatment period with an average of 9.4 points improvement quarter. In addition, almost 90% of patients elected to participate call. The long term extension study. While no statistically significant difference was observed between the pitalosant and placebo groups on the primary endpoint of At the end of 4 week double blind and randomized withdrawal period, positive trends sharing pptilosant It's approached statistical significance at a p value of 0.06 as well as on other endpoints, Including PROMISE SRI, FOST10 and Sleepiness Share Questionnaire.

Speaker 5

The safety profile of pitalosant In patients with idiopathic hypersomnia is consistent with the established safety profile of pitulacin and no new AEs were observed. Almost 90% of the patients who completed double blind randomized withdrawal period elected to participate in the ongoing long term extension study And we continue to collect the safety and effectiveness data from this study. We remain committed to the idiopathic hyperphormia community and are focused on pursuing an indication call. For pitollosant in patients with idiopathic hyposmia. We are in the process of conducting a thorough review call.

Speaker 5

Of the full data set, which will inform the next steps for the program. We believe that based on the totality of the evidence that we have seen thus far, Along with the Tolofense receiving orphan type designation for idiopathic hypersomnia, we look forward to engaging with the FDA. In Tata Willi Syndrome, we received FDA alignment on the protocol for the Phase 3 TEMPO study in patients with PWS, It will satisfy the requirements for both the registrational trial and now pediatric exclusivity as well. We expect study initiation in the Q1 of 2024. In myotonic dystrophin type 1, or DM1, We are on track for topline data from this Phase II proof of concept signal detection study in the 4th quarters.

Speaker 5

As for pediatric narcolepsy, we are on track to submit a supplemental new drug application to the FDA for an indication in pediatric narcolepsy quarter. In addition to our current life cycle management program for pitalofen, we continue to make progress And provide an update on the status of the program as shown on Slide 8. We have advanced the first formulation Into the clinic this quarter. The first formulation is an enhanced pitalophene based formulation designed to deliver Beyond 2,040 with a potential for new IP and explore additional indications. This formulation will have a full development program.

Speaker 5

The second formulation is on track for advancement into the clinic later this quarter. The second formulation is a pitalacin based modified formulation with a potential for clinical differentiation. The opportunity here It's a fast to market strategy for patients with narcolepsy within the VASIC's life cycle. This formulation We'll have an abbreviated development program. We are also pleased to expand and diversify our pipeline quarter.

Speaker 5

We closed the acquisition just about 3 weeks ago, and we look forward to providing a more detailed update on the quarter. At our next earnings call. We have seen a seamless transition of activities and continued engagement with the clinical trial sites and investigators. Designer acquisition adds another innovative product candidate, call. Xyzel is the 1st and only pharmaceutically manufactured synthetic cannabidiol devoid of THC And formulated as a patent protected permeation enhanced gel for transdermal delivery through the skin into the circulatory system.

Speaker 5

Xyngel is manufactured through a synthetic process in a GMP facility. Therefore, it is devoid of PSC And has the potential to be a non scheduled product if approved. Similar to Matrix, Xycin represents a portfolio and a product opportunity and is currently in a pivotal Phase III clinical trial call. Additionally, ZYFN was studied In an open label Phase II proof of concept study in patients with 22q deletion syndrome known as the INSPIRE trial. Both of these indications, if successful, represent a significant market opportunity with the potential to serve 80,000 U.

Speaker 5

S. Individuals with Sazerlec syndrome and another 80,000 individuals with 22q deletion syndrome. To conclude, we have made great progress not only in advancing our pipeline, but also expanding and diversifying it with the addition of ZaiSalle. I look forward to sharing additional updates as we continue to make progress On behalf of Harmony, I would like to thank all patients and their families and commitment in helping us to advance our development programs. I'll now turn the call over to our CFO, Sandeep Kapadia, for an update on our financial performance.

Speaker 5

Sandeep?

Speaker 6

Thank you, Kumar, and good morning, everyone. This morning, we issued our Q3 press release and filed their 10 Q, where you'll find the details for our financial and operating results. Our financial performance is also shown on Slide 9, 10/11. We're pleased to report another quarter of strong revenue growth, improved profitability and continued cash generation. We also made continued progress across many of our business priorities, including completing the Zenerba acquisition, Refinancing our debt at a lower cost of capital as well as executing on our share repurchase program.

Speaker 6

Overall, we remain confident in the continued growth in the business. So let me take a moment to take you through quarter. The details of our financial results. For the Q3 of 2023, we reported our strongest revenue quarter in company history With net revenues of $160,300,000 compared to $117,200,000 in the prior year quarter, Representing a growth of 37%. Performance in the quarter reflects the continued strong underlying demand for Wakeix.

Speaker 6

In the Q3, we did see a partial recovery in trade inventory levels of a couple of days compared to the 2nd quarter, Which we noted on our previous Q2 earnings call. In the Q3 of 2023, Operating expenses were $63,500,000 compared to $82,300,000 in the prior year quarter. The lower operating expenses were Primarily driven by the $30,000,000 licensing fee incurred last year as part of the 2022 LCA with Bioprhyge, Partially offset by expenses related to the commercialization of Waitix and the advancement of our clinical development programs. Quarter. Operating income improved for the Q3 of 2023 operating income of $64,500,000 compared to 11,900,000 quarter.

Speaker 6

Non GAAP adjusted net income for the Q3 of 2023 was $58,800,000 or 0 point 97 quarter. Compared to $58,100,000 or $0.95 per diluted share in the prior year quarter. The prior year quarter included a $74,500,000 benefit related to a valuation allowance and a $30,000,000 licensing fee related quarter. We believe non GAAP adjusted net income better reflects the underlying business performance. Please see our press release for a reconciliation of GAAP to non GAAP financial results.

Speaker 6

For the Q3 of 2023, We ended the quarter with $438,400,000 of cash, cash equivalents and investment securities on the balance sheet. The balance reflects continued cash generation with $63,000,000 in cash from operations, quarter, partially offset by share repurchase activities. During the Q3, we executed on our share repurchase program and repurchased approximately 1,400,000 shares of common stock for $50,000,000 As you heard from Jeff, This morning, we announced a new share repurchase program of $200,000,000 The new program demonstrates our continued confidence in the underlying strength of our business and our conviction in the growth potential for the company. Our strong balance sheet allows us not only For us, it's not an either or scenario and we're in a fortunate position given our profitability and growing cash balance. Looking ahead, we expect quarter over quarter growth for Wix in Q4.

Speaker 6

We also And supports the continued commercialization of Waytix. As a reminder, we paid approximately quarter. $60,000,000 in Q4 for the acquisition of Zanumbra using cash from our balance sheet. Pending final determination, we to account for the transaction as an asset acquisition, which would result in a significant one time charge in the 4th quarter Along with related restructuring costs. Overall, we remain confident in Wafiq's being a $1,000,000,000 plus opportunity in adults in our coleslaw alone, And we're well on our way given the strong results this quarter with the potential to contribute up to an additional $1,000,000,000 if approved and other current lifecycle psilocin programs.

Speaker 6

In conclusion, we're very pleased with our strong financial performance year to date and remain well positioned for continued growth. And with that, I'd like to turn the call back over to Jeff for his closing remarks. Jeff?

Speaker 3

Thank you, Sandeep. In summary, Q3 2023 was the strongest revenue quarter in Harmony's history, quarter. And we continue to execute on our growth strategy across the business. We remain focused on Growing our core business and helping even more adult patients living with narcolepsy with Wakeix, advancing our pipeline across both our patelizant and Xigel Clinical Development Programs. Working with our partner Biopreje on new formulations to extend the portfolio of orphan rare disease assets covering all stages of development and deploying capital to maximize shareholder value through our share repurchase program and business development activities.

Speaker 3

This concludes our planned remarks for today. Call. Thank you for joining our call. And I will now turn the call back over to the operator to facilitate the Q and A session. Operator,

Operator

quarter. Thank We'll take our first question from Francois Brisebois. Please go ahead. Your line is open with Oppenheimer.

Speaker 2

Hi, thanks for taking the questions. Congrats on the quarter here. So just A couple of things Sandeep mentioned it. And so in terms of the trade inventory, kind of small issues or In the Q2, I was just wondering how much did that create kind of a boost maybe in this quarter In terms obviously not the patient adds, but maybe in terms of the cost, if you look at it that way and just maybe the impact there going forward, you mentioned you're quarter. Growth in the Q4 quarter over quarter, is that growth in terms of patient adds or in terms of revenues?

Speaker 2

Thank you.

Speaker 3

Yes. Good morning, Frank. Thanks for the question. I'll have Sandeep provide some more explanation on that for you.

Speaker 6

Yes. Call. Frank, as we mentioned last quarter, I mean, we did see a partial normalization of inventory that we saw a bit of a drawdown quarter. Last quarter, as we mentioned last quarter was about a week that was in Q2 and we saw roughly about half of it recover in this quarter. So again, It's a small impact overall.

Speaker 6

We feel that it's important to keep investors updated on the impact generally. As you know, these fluctuations quarter. Our completely part of our business depends on where the quarter ends and so forth. With respect to Q4, we continue to expect Top line growth from revenues as well as we continue to expect patient adds. I mean maybe Jeff, do you want to comment anything on the expectations on Q4.

Speaker 4

Sure. So Frank, I would reiterate, we did see a benefit of a couple of days of inventory, but you That with the strong top line performance in new patient starts that really drove that highest quarter of net revenue that we've seen since our launch. And as Sandeep call. Explain, you typically see a little bit of an incremental build in inventory at the end of the year, which is traditional across the inventory, but we're anticipating growth Across all of our key fundamental metrics, average number of patients, unique prescribers as well as net sales.

Speaker 2

Okay. Thank you. And just in terms of the new formulations, can you just maybe level set remind us of the IP situation and the Progress on I know, we do a touch on it, but maybe the progress on the new formulations and what they could potentially do, just a little more color on the 2,040 dimension.

Speaker 3

Yes. Frank, just to clarify, in terms of the IP situation with Wakeix or the new formulations?

Speaker 2

Sorry, I mean, just the IP with Wakeix and what new formulations could do to it?

Speaker 3

Sure. Okay. So in terms of the IP situation with WayKen, so we believe in the strength of our IP and that goes out call. Based on the Polymorph patent with patent term extension to March of 2,030. And then I think as you're aware, we're pursuing pediatric exclusivity, which would provide an additional 6 months protection out to September of 2,030.

Speaker 3

So that is our base case on our IP situation for Wakeix. Turning to the new formulations, I'll have Kumar Sort of comment on those efforts, but by design, the intent there and what we're working was generating new IP with regards to enhanced and novel formulations based on ptolecen and Kumar can provide a little more color on those programs.

Speaker 5

Sure. Thank you, call. Hey, good morning, Frank. Thanks for the question. Yes, we are working on 2 formulations with our partner call.

Speaker 5

I'm pleased to share the update on this. We have made substantial progress over the past few months. The first formulation is an enhanced pyridolacin based formulation that is designed to deliver an optimized PK profile and quarter. The opportunity here really is to generate new IP and extend the pittolacin franchise Beyond 2,040. We are looking for new indications with this particular formulation, and this formulation will have a full clinical development program.

Speaker 5

That's formulation 1. In terms of formulation 2, we are on track to advancing this formulation quarter. This is a pitalisin based modified formulation with the potential for clinical differentiation, And the opportunity here is a fast to market strategy for patients with narcolepsy within Vafiq's life cycle. This formulation will have an abbreviated development program. So overall, 2 formulations making steady progress.

Operator

Thank you. We'll take our next question from David Amsellem with Piper Sandler. Please go ahead.

Speaker 7

Corp. So I've got a couple. First, in terms of prescriber dynamics, can you talk to Your penetration of Wake X among providers who are not enrolled in the Oxidate Just wanted to get a sense for how you're doing in that piece of the prescriber audience. So that's number 1. And then number 2, just back to the formulations, just given the setback in IH, would it be intuitive to think that You would pursue IH to the extent you are going to go forward in IH.

Speaker 7

Would you pursue it With one of these new formulations, how should we think about that? Thank you.

Speaker 3

Yes. Thanks, David. I'll ask Jeff Dierks to respond to the first question about the prescriber dynamics on the prescribers outside the oxybate realm.

Speaker 4

Sure. So David, we're extremely pleased with the growth in the new prescriber base of Waikix. And obviously, as we continue to add new prescribers, the vast majority of them are those healthcare professionals that are not quarter. As we've disclosed, there's about approximately 5,000 of those healthcare professionals that are not enrolled in the oxibate REMS program. And we continue to see meaningful penetration in that group.

Speaker 4

I think at the last earnings call, David, we talked about being about 20% penetrated within that audience. Call. It's closer to about 25%, but we continue to see very steady growth and adoption within that audience. And it really gives quarter. Afford to see opportunity based on the overall benefit risk profile, the broad clinical utility of the product for Wakeix into the full diagnosed narcolepsy patient opportunity and that gives us a ton of confidence as we look at Wakeix represented $1,000,000,000 plus

Speaker 3

So David, let me address the second question with regards to new formulations and NIH. So the new formulation of the total sympathy, the thinking there is obviously we have an innovative product with a novel mechanism of action and the opportunity Through formulation work and new IP to extend the pitulcine franchise out not just beyond 2,030, but 2,040. With regards to idiopathic hypersomnia, let me be clear in terms of where we are coming off the Intune study. Call. We saw a robust clinical effect in the trial in the open label phase and we are going through the full data set and reviewing that which We'll inform our strategy in terms of approaching the FDA as we continue to pursue The indication for IH based on the Intune study in those data.

Speaker 3

So at this point, we expect to Complete the review of the data by the end of November. And then we're going to prepare briefing document, meeting requests soon after that And approach the agency. We remain committed to the IH patient community. We are actively pursuing an indication call. As a non scheduled sort of product and the opportunity given the current treatment options for patients with IH.

Speaker 3

So We are not looking to new formulations, but we will pursue the IH indication based on the work that we've done thus far.

Operator

Call. We will take our next question from Omid Fadi with Needham and Co. Please go ahead.

Speaker 6

Hi, good morning. This is Yiseng Li on for Ami. Congrats on the Wicked Growth in the quarter and thanks for taking our questions. Call. 2, if I can.

Speaker 6

Historically, it looks like kind of the sequential adds and average patients on Waitix from Q2 to Q3 Similar to that from Q3 to Q4. Any factors this quarter you'd highlight such that we would not expect a similar dynamic to occur this year? And then maybe my second question is, as we're nearing the end of the year, we'd love to know your latest thinking on potentially providing 2024 weekly sales guidance at the next earnings update or otherwise. Thank you.

Speaker 3

Yes, Theresa. Thanks for the question. Jeff starts on the first one.

Speaker 4

Sure. So Ethan, with respect to thinking about Q4 with respect to average number of patient growth as per quarter. So again, we continue to be extremely pleased with the continued growth in the average number of patients and our obviously underlying strong business fundamentals. We saw a sequential add of approximately 3.50 average patients from what we reported in Q2. And I think the impressive quarter.

Speaker 4

Growth that we're seeing in the average patients in the Q3 was driven by strong top line demand and new patient starts that offset the typical summer seasonality that we had usually see every year. And it speaks to really not only continued product adoption, but most importantly the large remaining diagnosed patient opportunity that we continue to tap into as the market allows. Yes, while we're not providing forward looking guidance, we are pleased with the momentum heading into Q4 and we do anticipate and fully expect Continued growth for WACX for the remainder of 2023.

Speaker 2

Okay. Sandeep, comment on thoughts.

Speaker 6

I think our guidance was the natural point, quarter. And where analyst estimates are generally, we've been pretty consistent overall, absent obviously inventory quarter. Fluctuations quarter over quarter. We remain confident in weight gain 1,000,000,000 plus in narcolepsy alone, quarter. And we are continuing that sort of is our mid- to long term guidance, if you want to call it.

Speaker 6

And then we also see the opportunity to contribute additional $1,000,000,000 if approved in other LCM current LCM programs. So We're confident in the long term growth potential for Wayfairx. And with respect to probably short term guidance, things like that, I mean, like I said, we'll consider early next year would be the natural point. Quarter.

Operator

We'll take our next question from Charles Duncan with Cantor Fitzgerald. Please go ahead.

Speaker 8

Good morning, Jeff and team. First of all, congratulations on nice commercial quarter. And thanks for taking our question. I didn't have any commercial questions that I wanted So I'll just ask 2 on the pipeline. And that is primarily relative to the INTUNE study.

Speaker 8

We recently conducted a KOL call And Dave, we're that KOL was quite enthusiastic about the results that you saw. And so a question that I have for you is when you go study or will it be around evaluating the data in the Intune study alone and its open label extension? Thanks.

Speaker 3

Hey, good morning, Charles. Thank you for your question and sort of the feedback that you received on the Intune study. I mean, I think that the approach with the agency is really first, as I mentioned, and I'll turn it to Kumar, call. Looking at all the data and understanding obviously the robust clinical effect quarter. We saw upfront in the 8 week open label phase and almost 90% of patients electing to go into the long term extension That continues on.

Speaker 3

And we also continue to collect long term safety and effectiveness data that we could use to go to the agency in addition to the data from the INTUNE study. The approach is to build this strong case with regards to the totality of the evidence coming out of the trial, Along with the Tulligent received orphan drug designation for IH that the FDA granted. And then you look at the current treatment options, you look at overall benefit risk, you look at the need and we build the case and discuss that with the agency where it could fit into treatment options. Quarter. So that is the overall approach.

Speaker 3

And Kumar, I'll ask if you have any additional thoughts on strategy.

Speaker 5

No, I think Jeff you covered

Speaker 8

quarter. Okay. And then as a follow-up, I guess You probably can't provide any information on the persistence within that IH open label quarter and the potential for persistence being greater NIH than even it is in narcolepsy. Thanks.

Speaker 5

Good morning, Charles. Thanks for the question. With narcolepsy and idiopathic hypersomnia, both of them are quarter. And there is data, strong data to suggest maintenance of effect in patients with Let's see based on all the clinical trials that we had done thus far, specifically with the INTUNE study, In the open label part of this study, we saw a robust clinical effect. I mean 8 to 9 patients who completed the 8 week open label treatment period quarter.

Speaker 5

Based on ESS of greater than or equal to 3 criteria, which is much more stringent than the criteria from the American Academy of Sleep Medicine. And also, we saw a huge magnitude of response, 9.4 points drop from baseline to the end of 8 week open label treatment period. And to your question about The long term extension study, as Jeff alluded to earlier, almost 90% of the patients elected to participate in that study, And we continue to collect the data on the safety and the efficacy parameters. We don't have those data yet, And we are planning to have our data set sometime towards the end of November, where we will start seeing the safety

Speaker 3

quarter. And can we

Speaker 8

assume that meeting in say possibly the Q1, obviously it depends not only on your schedule, but is that kind of the target?

Speaker 5

Good question, Charles. Right now, we are focused on a thorough review of the data, Which will inform the strategy when we meet the FDA. Right now, we are planning to complete all the assessment and analysis by the end of November. And immediately after quarter. We'll start working on the meeting request, briefing document and request a meeting with the FDA in early 1st quarters of 2024.

Speaker 3

Yes, Charles. I would just add, yes, so we're moving sort of expeditiously, this is obviously a high priority for us. So we're moving quickly to review all the data, put in the meeting request And get in front of the agency to have this discussion as we actively pursue the indication for propulsant and IH.

Operator

From Danielle Brill with Raymond James. Please go ahead.

Speaker 6

Hi. This is Daniel Ni filling in for Danielle. Call. Congrats on the strong quarter. We have a question on if there is new updates on the citizen petition.

Speaker 6

And second question on that. We see that there is no reporting of patients on wake expecting this quarter And there's only average patients reporting. And is this the new convention for the future earning as well? Thank you very much.

Speaker 3

Sure. Thanks for your question. Jeff, why don't in terms of exiting number of patients, you want to just address that first and then I'll speak to the citizen's petition.

Speaker 4

Sure. So, I mean the exiting number of patients for this quarter was approximately 5,900 patients. We disclosed exiting patients in the previous two quarters to really hate Help to frame the dynamics in those quarters. You tend to see the typical payer seasonality in Q1 and obviously we had an inventory dynamic in Q2. But we've always historically reported average number of patients because we believe that average number of patients on Wakeix is the best metric to assess the continued growth and uptake of the brand, given that it takes into account new patient starts, continuing patients and all the patient medication behavior, compliance, persistency discontinuation rate.

Speaker 4

And I think that what we're seeing in that strong growth in average number of patients demonstrates not only the strong interest in the narcolepsy community, It really highlights that large remaining diagnosed patient opportunity that we continue to tap into as the market allows. Okay.

Speaker 3

Thanks, Jeff. And as far as let me come back to your question on the citizen's petition and just an update on that. So as you may recall, the FDA issued a to the system's petition in September to meet its statutory requirement of 180 day response. And at that time, it said it needed more time to review the CP. So this is a standard response that the FDA uses More than 50% of the cases and it's what we anticipated.

Speaker 3

So, while we first wanted to wait to give the agency a chance quarter. Now that there is no defined timeline for the FDA to respond, we're taking action to try and get the FDA Issue of final response in a timely manner. We're evaluating those options in regard to how to best sort of assist and work with the agency In issuing a final response. It's our position that Wakeix is the only non scheduled treatment option approved for adult patients with narcolepsy. Call.

Speaker 3

That it would be a disservice for patients and healthcare professionals to continue to be sort of impacted by the unfounded allegations in the petition regarding the safety and efficacy of Wakeix, which could possibly kind of impact the treatment decisions. So we affirm the regulatory validity of the Wakeix NDA. We remain confident in the overall risk benefit profile of Wakeix. And based on the robust clinical development program and the post marketing safety data that we quarter. Submit to the FDA on a regular basis and the FDA reviews.

Speaker 3

So to date, the agency has not contacted us regarding the citizen's petition. But as we go forward, we will work with the agency and welcome their close attention and review call. Because we're confident that once they review the unfounded allegations in light of all the information available to them, It's our position that they will ultimately deny the petition based on its lack of Merck and that is sort of the update on the citizen's quarter.

Speaker 2

Very helpful. Thank you very much.

Speaker 3

Thank you.

Operator

Thank you. We'll take our next question from Jason Gerberry with Bank of America. Please go ahead.

Speaker 6

Hey, guys. Good morning. Thanks for taking my questions. First one for me, just on your annual or I guess your net sales capture per patient, your average patient number, It looks like the revenue capture is stepping up, offered you a nice tailwind on a year over year basis and has kind of Continually been grinding upwards. I was wondering if you could talk about the extent to which that's a trend or just seasonality because call.

Speaker 6

When we look at the gap between first half sort of net sales capture per patient for second half, that gap continues to widen. And I'm wondering how we think about that Going into 2024. And then just second one on the share buyback. Just wondering how you're thinking about priority of the buyback versus M and A. I would think that I would think that the buyback is mainly where you see opportunistic opportunities to defend the stock if it's weak And that M and A may be a priority over buyback, but I wonder if you can clarify that.

Speaker 6

Thanks.

Speaker 3

Yes. Thanks, Jason, for your question. Sandeep, you want to Speak to revenue per patient first.

Speaker 6

Yes, sure. I mean, look, I think you see the general usually every year quarter. First half, especially in the Q1, that tends to go down as you have higher gross to net deductions and impact of that. And then it improves as we go throughout the year in terms of gross to net deductions, typically levels off By the 3rd Q4 of each year. And generally, the key change versus prior year, yes, we're up about 8% On that metric.

Speaker 6

And we took a price increase of about 10% early this year. So if you take plus or minus the impact of the price increase as well as quarter. Yes, some inventory fluctuations essentially gets you to that 8% that we saw year over year. And the way to think about it going forward, I mean, and generally, like I said, gross to net is relatively flat for Q3, Q4 second half of the year. And then of course, As we go into Q1 of next year, you'll see the same dynamic again where we will have higher gross net deductions and so forth.

Speaker 6

So it's quarter. Following the natural seasonalization and pattern that we've observed over the last couple of years for this product, which again is not product specific, it's really industry specific, I would say, quarter. I know, Jeff, was there anything else you wanted to comment on that?

Speaker 4

Yes. So I mean, Jason, I think the only other factor quarter. To consider when you're looking at average revenue per patient is the patient assistance program engagement that we've seen has been relatively consistent. And so as the number of patients on average patients continues to grow and the participation in the free goods program is relatively flat, You'd see a slight incremental benefit as we're adding more revenue generating patients. It's nominal, but I think to Sandeep's point, when you couple that with the gross to net and the price increase, That's really what's kind of driving.

Speaker 4

So you should anticipate a slight increase in the average revenue per patient moving forward based upon Traditional price increases that we would take as well as just a relatively flat participation in our free goods program as we continue to grow the average number of patients on Wakeix.

Speaker 6

Yes.

Speaker 3

And with regards to the share buyback, I'll just start and hand it over to Sandeep. Jason, I think as Sandeep mentioned in his comments, it's not sort of Either or, I think that obviously we're in a strong position with regards to deploying capital either towards share repurchase or business development efforts. Call. Sandeep, further thoughts on that?

Speaker 6

Yes. No, I think that's right. It's really not a question of either or. I think we're in a well position. Given our profile of the company, as We have a very different profile as a company, and we think we can also well positioned to execute on share buyback As well as business development.

Speaker 6

And of course, it's going to fluctuate quarterly and we'll provide an update to investors as we make progress on both Yes.

Speaker 3

And I think we remain committed in terms of our business development efforts and understanding the importance of Growing the pipeline and diversifying our portfolio to drive long term growth.

Operator

Thank you. We'll take our next question from Greg Stavanez with Mizuho Securities. Please go ahead.

Speaker 9

Hi, good morning. Thanks for taking the question. Congrats on the progress. Two quick questions if I could. 1st, just going back to the new share repurchase and comments around potential flexibility BD.

Speaker 9

Should we assume or any comments you want to provide on kind of the size of the Deals going forward, certainly, Zynerba was, I think, as you mentioned about a $60,000,000 transaction, given that you got A new $200,000,000 share repurchase, is that $60,000,000 kind of the happy place for you guys in terms of the types of deals

Speaker 5

and the size of deals you

Speaker 9

want to do, so that's my first question. And then second, just on patent litigation with P4s that have been filed. I just wanted to ask if you could confirm whether you have initiated patent litigation or patent lawsuit yet and any thoughts around timelines with respect to that. Thanks so much.

Speaker 3

Great. Thanks for your questions. Sandeep, I'm going to comment first on

Speaker 6

I think I wouldn't necessarily read into the Zenerba transaction call. The same as what we would do potentially in the future. I mean, look, we have $438,000,000 as of the end of last quarter. We continue to generate positive cash flow. We have access to the public markets as needed.

Speaker 6

I mean, we would be in we're in a position to do sizable transactions beyond quarter. I think it will really be the types of opportunities that we see that will determine not necessarily We have good flexibility in terms

Speaker 5

of capital deployment.

Speaker 3

Okay. And Greg, with regard to your question on patent litigation and paragraph 4 filings. I think as we previously have communicated based on the commercial success with Wakeix, we fully expected to see paragraph 4 filings and we received additional filings beyond the first two that we initially received and have shared and disclosed. So I think that we'll provide updates on the process as it moves forward. This is a long process, I think, as you're aware.

Speaker 3

We prepared for the generic filers and this is really the start of the process. We have 45 days From the date of each of the paragraph 4 notification to file the lawsuits, which invokes the 30 month stay, quarter, which obviously prevents the FDA from approval, the generic filings during that timeframe. So we've engaged expert IP counsel call to represent both Harmony and Bio Projekt in the patent litigation. And we are confident in the strength of our IP, prepared to vigorously quarter. And we'll provide updates as that process moves forward.

Operator

Thank you. We'll take our next question from Makurin Jenkins with Goldman Sachs. Please go ahead.

Speaker 10

Call. Good morning, everyone. Could you just maybe clarify, I think for formulation 2, you highlighted an abbreviated development program. So what does that Actually mean in terms of the need for and size of Phase 1, Phase 2 and Phase 3 studies? And how quickly do you think you can kind of like get a program like that To market.

Speaker 10

And then I guess as a follow on to that question, do you primarily see this as quarter. This launch would be a Switch campaign ahead of generic and launches. And then what lessons can you learn from other Switch campaigns that

Speaker 2

you would apply there? Call.

Speaker 3

Yes. Good morning, Corinne. Thanks for your question. I'll have Kumar sort of comment on the approach to the second formulation quick to market strategy. From call.

Speaker 3

From a commercial perspective, I'll ask Jeff Dearth to share thoughts on what that could offer to the market.

Speaker 5

Yes. Good morning, Karen. The formulation 2 It's a pitulacin based modified formulation, and we are on track to get into the clinic in the second half of this quarter. In terms of the attributes and the potential clinical differentiation, We do believe that this particular formation will have different attributes and several different clinical differentiation, But we are not in a position to comment on that because the exact nature of the formulation or the differentiation because of the IP and competitive reasons. But this will be a fast to market strategy and we anticipate to launch within the VASIC lifecycle.

Speaker 5

Call.

Speaker 4

And Karren from a commercialization strategy with the new formulation to it will not be a switch strategy. This is a brand new product and given the level of dissatisfaction that we see in the marketplace, the significant unmet need, People living with narcolepsy need new treatment options. And so we see this as a unique option that will be differentiated from Wakeix and provide a new therapeutic option for patients. So we see Wakex and this new formulation being able to coexist and provide 2 unique options to people looking for therapeutic treatment for EDS or cataplexy, no adult narcolepsy.

Speaker 10

And just to clarify, when you say within the LACIG cycle, I assume you mean your base case, which is 2020, like mid-two thousand and thirty.

Speaker 3

That's correct. Yes, that's correct, Trent. Okay, thanks. Thank

Operator

you. I'm showing no further questions at this time. I would like to turn the call back to management for closing remarks.

Speaker 3

Thank you, operator, and thanks everyone for joining our call today and for your interest in Harmony. As you heard from us this morning, our business remains strong and we have confidence in the long term growth potential of our company. We look forward to providing updates as our business advances. Thank you and have a great day.

Operator

Thank you. This does conclude today's Harmony Biosciences' 3rd quarter 2023 financial results conference call. You may now disconnect your lines and have a wonderful day.

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Earnings Conference Call
Harmony Biosciences Q3 2023
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