Harmony Biosciences Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 1, 2023

There are 12 speakers on the call.

Operator

Good morning. My name is Todd, and I will be your conference operator today. At this time, I would like to welcome everyone to Harmony Biosciences' 2nd Quarter 2023 Financial Results Conference Call.

Speaker 1

After the speakers' remarks, there will

Operator

be a question and answer session. Please be advised that today's conference may be recorded. I will now turn the call over to Louis Finney, Head of Investor Relations. Please go ahead.

Speaker 2

Thank you, operator. Good morning, everyone, and thank you for joining us today as we review 2nd Quarter 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 better represent the underlying business performance. Our speakers on today's call are Doctor.

Speaker 2

Jeffrey Deano, President and CEO Jeffrey Derp's Chief Commercial Officer Doctor. Kumar Badur, Chief Medical Officer and Sandeep Kapadia, Chief Financial Officer. Moving on to Slide 2. As a reminder, we will be making forward looking statements today, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties.

Speaker 2

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. I would now like to turn the call over to Doctor. Jeffrey Dano. Jeff?

Speaker 2

Thank you, Louis, And thank you everyone for joining our conference call today and for your interest in Harmony. Before I comment on our strong second quarter performance, which is reflective of our focused execution and operational excellence. I want to highlight why Harmony continues to be a growth story and outline the key elements driving our growth. We continue to drive growth in our core business for Wakeix and narcolepsy and Based on this, we are confident that Wakeix represents a $1,000,000,000 plus opportunity in adult narcolepsy alone. Our current life cycle management programs for ptolecint, notably our Phase 3 program in idiopathic hypersomnia or IH Continue to demonstrate strong momentum and if we are successful in IH and our other current life cycle management programs, These indications could generate up to an additional $1,000,000,000 opportunity.

Speaker 2

Our work with our partner, BioPreje, on new formulations of is progressing with the goal to potentially extend the pettolacent franchise with new IP out beyond 2,040. And with a profitable business and strong balance sheet, we are in a favorable position to bring in new assets through business development to build out a robust pipeline and portfolio of products. In fact, it is the ongoing confidence in our core business and our conviction in the long term growth potential for Harmony that is the reason behind this morning's announcement that our Board of Directors authorized a $125,000,000 share repurchase program. This program reflects our confidence in the strength of the company and our commitment to deploy capital to maximize shareholder value. Starting with our core business, Our strong commercial performance is a result of the unique and meaningfully differentiated product profile of Wakeix in the proven excellence of our commercial organization.

Speaker 2

For the Q2 of 2023, We reported Wakeix net revenue of $134,200,000 representing an increase of 25% year over year, driven by the continued underlying demand for Wakeix, tapping into a large market opportunity of approximately 80,000 diagnosed patients with narcolepsy in the U. S. The momentum we highlighted last quarter carried into this quarter, during which time we saw the highest top client prescription demand since our first full quarter of launch in 2020 and the strongest quarter of new patient starts in our history. This is unique as it is not typical to see sustained growth in year 4 post launch for an orphan rare product. With another strong quarter of growth behind us, we continue to be confident in Wakeix being a $1,000,000,000 plus market opportunity in adult narcolepsy alone.

Speaker 2

And Jeff Dirks will provide further insights into the reasons we remain confident in the future of this opportunity. In addition to our strong commercial performance in Q2, we are also extremely pleased with the progress that we've made across all of our current ptolecint lifecycle management programs. Our clinical teams have been very busy advancing all three programs with key catalysts coming from each of them later this year. Notably, we are on track for top line data from our Phase 3 registrational INTUNE study in adult patients with idiopathic hypersomnia in the Q4. As a reminder, last We announced completion of enrollment in this study 9 months ahead of our base plan, reflective of the significant interest from patients and Healthcare Professionals in patellecint as a potential treatment for IH.

Speaker 2

We are very excited about this opportunity, which if successful could represent the next new indication for Wakeix. In follow-up to a positive end of Phase 2 meeting with the FDA to discuss our Prader Willi Syndrome or PWS development program, We plan to initiate a pivotal Phase III trial in patients with PWS 6 years of age and older in the 4th quarter. And we are on track for top line data from our Phase 2 proof of concept signal detection study in Type 1 myotonic dystrophy also in Q4. Altogether, IH, PWS and DM1 represent about 100,000 diagnosed patients in the U. S.

Speaker 2

So if successful, our current life cycle Programs could contribute up to an additional $1,000,000,000 of revenue to the Way Kids franchise. In addition to our current life cycle management programs for pitulacin, we are making progress on new formulations of pitulacin that we are co developing with our partner, Bioproger, with the goal to generate new IP and extend the Pitulcet franchise out beyond 2,040. Lastly, we've advanced our strategy in pediatric narcolepsy and plan on submitting a supplemental new drug application for a pediatric narcolepsy in the Q4 and in addition are actively pursuing pediatric exclusivity for Wakeix. As you can see, we have made major progress across all of our development programs and Doctor. Kumar Bador will provide you with more details on these later in the call.

Speaker 2

Another key component of our growth strategy is acquiring new assets through business development to expand our portfolio beyond WACX. To achieve this, we intend to leverage our strong financial position with approximately $430,000,000 in cash, cash equivalents and investment securities at the end of the second quarter to acquire additional assets across a range of development stages, including both early and late stage with the potential to launch both during and after the Wakeix lifecycle. Since taking on the CEO role at the beginning of the year, the team and I have been actively engaged in business development, evaluating a number of opportunities focused on rare orphan neurology assets and or assets in other neurological diseases where we can leverage our existing expertise and infrastructure. This is a high priority for us as it is a key component of our long term growth strategy. While we are disciplined in our approach, ensuring not only a strategic fit, but also appropriate valuation, We are also working with a sense of urgency and understand the importance of having a robust portfolio in place.

Speaker 2

Overall, I am extremely proud of the outstanding progress that our team has made across every aspect of our business, which demonstrates that Harmony continues to be a growth story. I will now turn the call over to Jeffrey Dirks, our Chief Commercial Officer, to provide more details on our commercial performance. Jeff?

Speaker 3

Thanks, Jeff. The The second quarter was another strong quarter for Waking with continued growth and momentum in our underlying business fundamentals and top line performance metrics were the strongest we've seen since launch. Net sales for the 2nd quarter were $134,200,000 which represents 25% growth from the same quarter prior year. The strong double digit growth in net sales for Wafer in year 4 of our commercialization demonstrates the continued high interest and adoption of Wakeix in the narcolepsy market and reinforces our long term belief that Wakeix is a $1,000,000,000 plus opportunity in adult narcolepsy alone. I'd like to share a few key highlights from our performance in the Q2 on Slides 56.

Speaker 3

The average number of patients on Wakeix in the 2nd quarter increased approximately 350 patients sequentially to approximately 5,450 patients. This impressive growth in average patients in the 2nd quarter was driven by a strong performance in top line demand and new patient starts. In the Q2, we saw the highest top line prescription demand since our first full quarter of launch at the beginning of 2020. We also had the highest number of new patient starts in our history. The growth in average patients on Wakeix speaks to the continued product adoption and solid business fundamentals, strong top line prescription demand, growth in new patient starts along with continued patient refill behavior.

Speaker 3

We exited the Q2 with approximately 5,600 patients on LACON, with strong momentum coming out of the 2nd quarter. We believe this metric of exiting patients helps to provide additional context to our strong performance leading into the Q3. Strong patient interest and continued prescriber adoption continue to be key drivers of the growth in the average number of patients on Wakeix. The number of unique prescribers of Wakeix increased again in the Q2. And importantly, we continue to see the Wakeix prescriber base expand beyond healthcare professionals enrolled in the OXUVATE REMS program.

Speaker 3

As we've shared in previous earnings calls, 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 our broader narcolepsy healthcare professional audience and patient base, which drives the continued growth in the depth and breadth of our prescribers. Across the nearly 9,000 narcolepsy treating healthcare professional prescriber space. We continue to see meaningful penetration and growth. We see growth in the depth of prescribing among the approximately 4,000 healthcare enrolled in the OxoBate REMS program, an expanded breadth of new prescribers in the approximately 5,000 healthcare professionals not enrolled in the OxoBate REMS program. The availability of a generic oxybate and the launch of a once nightly oxybate at the end of the second quarter hasn't impacted the continued growth of WAYHX.

Speaker 3

We continue to see meaningful growth in prescribing and patients on Laixix along with strong payer coverage. Our ability to reach and educate the broad narcolepsy treating healthcare professional universe and tap into the full diagnosed adult narcolepsy patient opportunity gives us confidence in continued growth

Speaker 4

and the

Speaker 3

long term growth potential for Waygx. Recent market research conducted by Harmony supports our view of continued growth for Waygx. Research conducted in June of this year with approximately 70 healthcare professionals with and without experience with Wakeix prescribing showed the following. 100% of the healthcare professionals surveyed with wake its clinical experience stated they would prescribe the same or increase their prescribing of Wakeix months. Nearly 40% of those healthcare professionals surveyed who have not yet prescribed Wakeix to date indicated the intent prescribe Wakeix in the next 6 months.

Speaker 3

And consistent with previous waves of research, one of the highest performing drivers and differentiators for Wakeix with the unique feature as the only non scheduled treatment option. In summary, I continue to be excited by the strong commercial performance of Laguixin adult narcolepsy. In the Q2, we saw the highest top line prescription demand since our first quarter of launch in 2020, leading to the all time high in new patient starts. Strong growth in the average number of patients on Wakeix. Continued expansion and strengthening of the Wakeix prescriber base beyond the oxybate REMS healthcare professionals And payer coverage remains strong even with the availability of newer versions of Oxivate.

Speaker 3

These are tremendous achievements and I appreciate the dedication and impact of the entire commercial team and the passion they have for our business. This strong performance gives us confidence and the long term growth potential for WACUS and reinforces our belief that WACUS is a $1,000,000,000 plus opportunity in adult narcolepsy. I would like to now turn the presentation over to Kumar Badur, our Chief Medical Officer, to provide an update on the clinical development and current Lifecycle Management Programs for Harmony. Kumar?

Speaker 4

Thank you, Jeff. Good day, everyone. Moving on to our clinical development pipeline to expand the clinical utility of pithalosant towards potential new indications in patient populations living with rare neurological diseases as shown on Slide number 7. Starting with our development program in IH, We were extremely pleased to complete enrollment in our Phase 3 registration trial in adult patients with IH, also known as the INTUNE study, at an accelerated pace and 9 months ahead of schedule. The strong interest we have seen both from the patient community and clinical investigators resulted in this accelerated timeline and we are now on track for top line results in the Q4 of this year.

Speaker 4

If this Phase 3 trial is successful, it could represent the next new indication for VAK8 in adult patients with IH. PiccoloSant would offer a new mechanism of action to treat patients with IH as piccoloSant works through histamine to promote wakefulness. We view this as a significant market opportunity with approximately 40,000 patients diagnosed with IH. In addition, this opportunity could have significant synergies with our existing commercial footprint as there is a significant overlap in the physicians who treat patients with narcolepsy and those who treat patients with IH. For Carterville syndrome, We recently had a positive end of Phase 2 meeting with the FDA, where we discussed the results from the Phase 2 proof of concept trial and ALIGNED on the Phase III trial in patients with PWS.

Speaker 4

We now plan to initiate a Phase III trial in patients with PWS, ages 6 and older in the Q4 of this year. Moving on to myotonic dystrophy type 1 or DM1. We are on track for top line data from the Phase 2 proof of concept signal detection study in the Q4 of this year. In addition to our current lifecycle management programs for Vitalosynx, we continue to make progress on new formulations with our partner BioPhrasee with a goal to generate new IP and extend the PYTHOLOSINE franchise beyond 2,040. We will provide an update later this year on the status of these programs.

Speaker 4

Regarding pediatric narcolepsy, We are working with BioPhoJ towards the submission of a supplemental new drug application to FDA for an indication in pediatric narcolepsy, Phase, which we expect to file in the Q4 of this year. Regarding pediatric exclusivity, we have made progress with FDA in gaining alignment on the requirements for pediatric exclusivity for patients. The Phase 3 study in PWS Plan to be initiated in the 4th quarter is part of the requirements. To conclude, we have made significant progress in advancing our clinical development programs with Vitaloscience and look forward to providing you with further updates later this year as we enter a catalyst rich second half of twenty twenty three regarding our development programs as highlighted on Slide number 8. All of our current LCM program We'll reach an important milestone in the Q4, and we look forward to sharing the news with you when that occurs.

Speaker 4

I would like to take this opportunity to thank all the patients and their family who are participating in clinical trials as well as the clinical investigators and site personnel for their efforts and commitment in helping us to advance our clinical development programs for peterlofine. I will now turn the call over to our CFO, Sandeep Kapadia, for an update on our financial performance. Shandhi?

Speaker 1

Thank you, Kumar, and good morning, everyone. This morning, we Q2 press release and filed our 10 Q, where you'll find the details of our financial and operating results. Our financial performance is shown on Slides 9, 10, and 11. We're pleased to report growth across several of our key metrics, including strong revenue growth, improved profitability and continued cash generation. This quarter, we also have several important updates with respect to the strength of our balance sheet and the additional opportunities to drive value for shareholders.

Speaker 1

Our financial performance also gives us the confidence for the remainder of the year as we continue advancing our growth strategy. So let me take a moment to take you through the details of our financial results. For the Q2 of 2023, where reported net revenues of $134,200,000 compared to $107,000,000 in the prior year quarter, representing a growth of 25 Tech. Performance in the quarter reflects the continued strong underlying demand for WAYKEX. In the 2nd quarter, Specialty pharmacy buying patterns resulted in a lower trade inventory levels at the end of the quarter as compared to the beginning of the Q2.

Speaker 1

In the Q2 of 2023, operating expenses were $62,300,000 compared to $55,000,000 in the prior year quarter. The higher operating expenses were primarily driven by our ongoing commercialization of Waitix and the advancement of our clinical development program. Operating income improved with Q2 2023 operating income of $46,900,000 compared to $33,100,000 in the prior year quarter, representing an increase of 42%. Non GAAP adjusted net income for the Q2 of 2023 was $45,900,000 or $0.76 per diluted share compared to $34,700,000 or $0.57 per diluted share in the prior year quarter, reflecting our strong revenue growth and Prudent Expense Management. We believe non GAAP adjusted net income better reflects the underlying business performance.

Speaker 1

Please see our press release for a reconciliation of GAAP to non GAAP results. During the Q2 of 2023, We ended the quarter with $429,600,000 of cash, cash equivalents and investment securities on the balance sheet. In addition, last week, we entered into a new $185,000,000 term loan facility led by JPMorgan, which further reduces our cost of capital, ensures a strong balance sheet and provides us with greater financial flexibility. We used the net proceeds from the term loan and existing cash balance to repay our existing debt of approximately $7,000,000 and related fees and expenses. The new facility has a lower interest rate, reducing our annual interest expense by approximately $6,000,000 The financing is another step in the growth evolution of the company as we continue to optimize our balance sheet.

Speaker 1

Looking ahead, for the remainder of the year, we expect continued quarter over quarter growth in revenues and average number of patients on WAYTIGS. We also expect to continue to invest in R and D and SG and A as we advance our clinical development program and support the commercialization of WAYTEX. Overall, we remain confident in WAYTEX being a $1,000,000,000 plus opportunity in adult narcolepsy with the potential to contribute up to an additional $1,000,000,000 if approved in idiopathic hypersomnia and other current lifecycle management programs. As you heard from Jeff, given our confidence in our core business and our conviction in the long term growth potential of the company, This morning, we announced that the Board authorized a $125,000,000 share repurchase program. Our strong balance sheet and cash generation allows us to be opportunistically return capital to shareholders, while still maintaining sufficient capital to advance our growth strategy.

Speaker 1

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

Speaker 2

Thank you, Sandeep, and thank you, Jeff and Kumar. In summary, Harmony continues to be a growth story, and we are making significant progress on advancing our growth strategy. We will remain focused on Growing our core business and helping even more adult patients living with narcolepsy with Wakeix. Completing our Phase 3 registrational trial in Pathic Hypersomnia and delivering top line data in the 4th quarter initiating our Phase III pivotal trial in PWS in Q4. Working with our partner, Bioprege, on new formulations to extend the patellecine franchise to help even more patients living with rare neurological diseases.

Speaker 2

Delivering on our long term growth strategy by acquiring new assets to build out a robust pipeline for which we are well positioned to execute on given our strong financial position and strategically deploying capital to maximize shareholder value. This concludes our planned remarks for today. 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, can you please open the call to questions?

Speaker 2

Thank

Operator

We'll take our first question from Danielle Brill with Raymond James.

Speaker 5

Hey, guys. This is Alex on for Danielle. Thanks for taking our question. Just wondering if we could dive a little bit more into the 2Q wake ex dynamics. Juggling the numbers a bit, in a normal quarter, I think we would have expected a bit higher revenue than we saw considering the strong net patient adds.

Speaker 5

So firstly, what was the impact on the lower inventory purchasing this quarter on a quantitative basis? And then Wondering if

Speaker 2

you could share a little bit more color

Speaker 5

on the dynamics of potential impacts of gross to net compliance and whether what we're seeing as patients were added late in the quarter? Thanks so much.

Speaker 2

Sure, Al. Good morning, Alex. This is Jeff. So I'll ask Jeff to Jeff to comment on some of those two dynamics in the Sandeep BOS and also with Croce and Ed to provide some color on that.

Speaker 3

Yes. So Alex, what I would say with respect to starting with patient medication behavior, Compliance discontinuation rate persistency, it was relatively consistent with what we've seen in the previous quarters. We've got really Strong patient feedback in terms of their satisfaction on the product and we continue to see a broadening of our prescriber base. When you asked a question about trade inventory, I'll turn that over to Sandeep to talk a little bit about that and the implications on revenue.

Speaker 1

Yes, sure. I mean thanks, Jeff. Trade inventory, as I mentioned, was down about a week compared to the beginning of the Q2. So that gives you an estimate of at least The impact that we've seen on the top line. But I think importantly, as Jeff mentioned, we've seen good strong underlying demand.

Speaker 1

It was one The strongest quarters in terms of top line demand. And what we've also seen, what I would also say is in the month of July, we've seen a partial So again, consistent overall what we would typically expect. And I think our question regarding gross to net, really nothing to report there except we did see what we expected. Generally, you see an improvement in the Q2 from the Q1 and that's exactly what we saw There was primarily the impact during the quarter was really around trade inventories. And like I said, it's about a week.

Speaker 2

Yes, I think, Alex. Yes, sorry. To summarize, really, the strong patient demand and as we mentioned, our strongest sort of top line patient demand since our first full quarter for launch and really just impacting our timing of inventory is really what you're seeing.

Speaker 5

Great. Thanks so much for the color.

Speaker 2

Sure.

Operator

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

Speaker 6

Hey, thanks. So just got a couple. So First on the buyback, can you talk about how you're thinking about capital deployment beyond just the $125,000,000 here. In other words, is this something that buybacks or something that you may revisit down the road and is that going to be sort of a recurring fixture of your overall capital deployment strategy. That's number 1.

Speaker 6

And then number 2, does this impact your ability to execute on a BD transaction of significant size. In other words, are you setting your sites smaller given that buybacks are something that you are now doing. And then just lastly on the new protola and assets. I know you're going to provide an update, so I'm going to ask the question. Should we think of these as new molecular entities or new formulations or a bit of both.

Speaker 6

Thanks.

Speaker 2

Sure, David. Good morning, David. In terms of the buyback, I'll ask Sandeep to provide some perspective. But I think a high level, it provides us optionality in terms of optionality with regard to deployment of capital, both in repurchase as well as looking at business development deals. And Sandeep can kind of expand on our thinking around that.

Speaker 3

Sure. What I would say

Speaker 1

is, look, it's a natural evolution of the company, right? We have a very strong balance sheet, continued cash generation. So we have the opportunity to opportunistically to return capital to shareholders while still maintaining I would say sufficient capital for other important priorities, including business development. So this is not an either or. This is in addition, I would say overall.

Speaker 1

And certainly given our stock price right now, it's really Creative use of capital to execute to really drive maximize shareholder value from that perspective. So hopefully that gives you a little bit of color in terms of we don't really see this as either or. Such thing is really just a natural evolution of the company. We're $430,000,000 on the balance sheet and we have capacity to do business development as well. And to your other question, as you know, we also did a recent financing as well that we announced last week about $185,000,000 led by Very syndicated banks, which again gives us continued access to capital if needed For potential business development in the future as well.

Speaker 2

Yes. And David, just to reinforce in terms of business development, as I've mentioned before, It continues to be a high priority for us. And obviously, since I took on the CEO role at the beginning of the year, we've been actively engaged the team and looking at We've gone deep on several. So it continues to be a high priority. We have optionality and access to capital and that's how We'll look at sort of deploying that in addition to the potential for share repurchase.

Speaker 4

Good morning, David, and for the question on the psilocin based assets. We are working very closely with the Bioprodis on these work and the formulation work is ongoing. These are psilocin based assets With the potential for generating new IP and the potential to extend the pitaloscent franchise well beyond 2,040, We do expect to provide an update later this year on these pitalosant new pitalosant based assets.

Speaker 2

Yes. Thanks, Kumar. So they are yes, they are not new molecular entities, basically new formulations, enhanced formulations of the Tolleson. And as As Kumar said, updates coming later this year on our progress on those programs.

Speaker 6

Okay, helpful. Thanks guys.

Speaker 1

Thanks Dave.

Operator

We'll take our next question from Ami Fadia with Needham and Company.

Speaker 7

Hi. This is Poona for Ami Sadiya. Thank you for taking my question. I guess just wanted to ask if you can talk a little bit about where you are in your On your work in the life cycle management for VACID, like what needs to be completed before you're ready to give the treatment update by end of the year? And if the new formulation that you mentioned could be used in any of the indications that you are procuring.

Speaker 2

Sure. So in terms of our lifecycle management updates, Kumar can provide Color on that, but I think as we shared, all of our current life cycle management programs, we're looking ahead to milestones later this year in Q4. And advancing those leading with the IH, idiopathic hypersomnia and the Phase 3 registrational trial there. Kumar can provide more color on each of those and with regards to where we are.

Speaker 4

Good morning, Manav. Thank you for the question. In terms of life cycle management, as we mentioned earlier, We have a catalyst rich second half of this year. Let's start with idiopathic hypersomnia. We are on track for top line results in idiopathic hypers Omnia in the Q4 of this year.

Speaker 4

On DM1, we are also on track for top line results in the Q4 of this year. Just as a reminder, the DM1 study is a small signal detection proof of concept study that is not In terms of PWS, we had a good meeting with the FDA, the end of Phase II meeting, We aligned on the study design. We plan to initiate this study in the Q4 of this year. And also, we are planning To submit pediatric narcolepsy sNDA in the Q4 of this year. So really, a lot of activities Happening in the second quarter of second half of this year in terms of life cycle management of vacate.

Speaker 2

Yes. Thank you, Kumar. So, Poonam, I think really good progress, really good momentum, and we're excited for the catalyst coming later this year on our development programs.

Speaker 7

Thank you so much.

Operator

Thank you. We'll take our next question from Francois Voie Brisebois with Oppenheimer.

Speaker 6

All right. Thanks for taking the question. Just a few here. So in terms of the exit numbers, is this something that we should in terms of a metric we should start expecting every quarter or is just a thing that we've seen in the past few quarters?

Speaker 2

Yes. Thanks, Frank. Good morning. Jeff Erics, comments on the exit number?

Speaker 3

Yes, Frank, good morning. So we provided Number at the end of the Q1, just given some of the payer seasonality and the headwinds. And I think just given the dynamics of the 2nd quarter and really being able to Quantify and be able to share with you the momentum coming out of Q2 into Q3 and the strength of our business we provided it. As you know, I believe that average number of patients is the most meaningful metric that we can provide because it encapsulates all of the patient medication behavior into one number. It's new patients, it's refills that includes compliance, persistency and discontinuation rates.

Speaker 3

And it most closely aligns to net revenue on a quarterly basis. So I think from an exit number of patient perspective, it provides additional context in some quarters. But I think the number that really is most meaningful is average number of patients, Frank, And as we shared in our prepared remarks, we saw sequential growth of approximately 3 50 patients from what we reported in the Q1, where we have approximately 5 1450 patients on the product and again really tremendous results for year 4 of our rare orphan launch And we're really excited about momentum that we're seeing coming into Q3 and we're anticipating strong sequential growth through the remainder of the year and thereon. And We have a lot of conviction that WEGIX is going to represent a potential $1,000,000,000 plus opportunity in adult narcolepsy alone.

Speaker 6

Great. And then if I could just follow-up with, so as you mentioned, there's been a new oxivate that's been launched on the market and it seems to have no impact on Wakeix so far. But can you just talk about the reimbursement? Is reimbursement going well if someone is on both enoxibate and Wakeix. And can you just talk about maybe the evolution?

Speaker 6

Are you seeing more patients that are on both or is Still a pretty small percentage. Thank you.

Operator

Sure. Go

Speaker 3

ahead, Jeff. So from a managed care perspective, Frank, we continue to be extremely pleased with The favorable market access coverage for Wakeix. We haven't seen any changes to our formulary position with the introduction of a generic oxybate earlier this year or With the launch of the once nightly oxibate at the end of June, as a matter of fact, we've actually seen some increases and improvement in some of the Type 1 plans within managed care. And we have no knowledge of any plans that require Wakeix to be stepped through and oxybate. And more importantly, There are no plans where there is an NDC block or exclusionary decision made for Wakeix.

Speaker 3

So, 100% Appropriate adult narcolepsy patients have access to Wakeix either through a positive formulary that's published or through some type of Medical Necessity or Exceptions policy. With respect to Wakeix and oxybate, What we've seen has been relatively consistent. It's been a low double digit percentage of the Wakeix patients are also on an oxybate. Again, you're going to see as this category evolves a little bit as you know within managed care, there's likely going to be additional things that they're looking to do to manage The category, but in a real orphan space with not a lot of these individuals, you don't see a lot of administrative steps with multiple products. Managed Care acknowledges that this is a poly pharmacy market.

Speaker 3

And so with a low percentage of Wakeix patients also on an oxybate, We see really good access for patients on the product and we're really pleased with the strong payer coverage that really has remained unchanged even with the Even with the introduction of new products and we believe we're really well positioned Frank. It's a differentiated product. It's the only non scheduled treatment option and we're well positioned today as well as the evolving managed care landscape moving forward. Great. Thank you.

Speaker 2

Thanks Frank.

Operator

Thank you. We'll take our next question from Gregg Suvannavejh with Mizuho Securities.

Speaker 8

Thanks. Good morning. Congrats on the continued progress. I've got two questions. One just on how to think about the 3rd order.

Speaker 8

I know that coming out of 350 new patient adds, which is a nice number, we've historically over the past several years Seeing you report in the Q2, 400 patients and then they've kind of trickled down to 300. And I guess that does reflect a certain element of summer seasonality. So maybe Jeff Dirks, if I could just ask you kind of thoughts around The dynamic for the Q3, any changes relative to what we've seen in the past? I know you've got some nice new momentum in terms of new prescription starts. So just wanted to get additional color there.

Speaker 8

And then my second question is just, I was hoping to get The company's perspective on last week's curious patent challenge by Scorpion Capital and kind of any Any response or any reply to that? Thanks.

Speaker 2

Sure, Greg. Good morning, Greg. Yes, Jeff will answer the first question and then I'll respond to your second question.

Speaker 3

Sure. So Greg, for Q3 dynamics, I mean, I think you're thinking about Q3 the right way. We do anticipate The typical headwinds of the summer seasonality with fewer patient visits to healthcare professionals. We've got to your point Tremendous momentum coming out of Q2. Q2 was one of the strongest quarters in terms of top line prescription demand we've seen in 3 years, highest number of new patient starts ever in our launch and adding 350 patients in year 4 of our commercial launch, I think is really tremendous results.

Speaker 3

And Although we're not providing forward looking guidance, I think you're thinking about Q3 correctly. We continue to see growth in new prescribers. We see growth in average number of patients. We do expect sequential growth for Wakeix and average number of patients for the remainder of 20

Speaker 2

Thanks, Jeff. And Greg, with regards to your second And question regarding the petition for reexamination of the patent for Wakeix that was filed I believe on July 19. I think as we've said before, we're very confident in the strength of our IP. We believe strongly In terms of the enforceability and validity of the patent portfolio, and it's our feeling, our position that the petition for reexamination is without merit. With regards to the timing of the reexamination, so the PTAB has 90 days to either deny or grant the petition from the date of submission.

Speaker 2

And the majority of times, the petitions are granted, but that has no read through to the potential outcome of the reexamination by PTAB. And if the petition is granted, the reexamination is between PTAB and the patent holder. And majority of times, the patent status is often and usually upheld. So I think with our confidence in the strength of our IP, which we will vigorously defend any challenges, That is why we have confidence in Wakeix being a $1,000,000,000 plus opportunity in adult narcolepsy. And then obviously, a successful in our current Lifecycle Management Programs, could also contribute an additional up to $1,000,000,000 of revenue to the franchise.

Speaker 8

Thanks very much.

Speaker 2

Yes. Thanks, Greg.

Operator

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

Speaker 9

Hey, good morning guys. Thank you for taking my questions. First, just curious with the introduction of Generic oxybate mindful that it's not impacting Wakeix. But do you have any insights into what's going on? Is it expanding The market for pharmacotherapy peroxibate taking just share from Xyrem or taking share from other products.

Speaker 9

And then as my follow-up, I think to the Needham question. As you think about next gen ptoleasant, I guess like the curiosity is Why develop Wakeix for these follow on indications if the IP could be at risk towards the back end of this decade? Why not prioritize the next gen Solastant so you could have visibility and sort of a product life cycle that lasts well into the 2030s. Thanks.

Speaker 2

Good morning, Jason. Thanks for your questions. In terms of Jeff, you wanted to expand in terms of the dynamics in the Oxidate franchise and the new products?

Speaker 3

Sure. Yes. So Jason, what we're seeing and again, the Hikma data is visible within Symphony Health claims and it looks like it's Simply just there is a churn that's exhibiting in the oxybate marketplace. As I've shared in my prepared comments and one of my earlier responses that We haven't seen any impact obviously on the generic on our launch or even the early introduction of the once nightly oxybate at the end of the Q2 on our business. So what I'm observing in the data is simply just a little bit of a churn that we're seeing in the oxybate marketplace.

Speaker 3

I think what we see with Wakeix is that we've Add a branded version of OxiBate available since our launch back in 2019, and we continue to see strong growth through that time period and really Strong growth in the first and second quarter this year in average number of patients. We continue to add new prescribers and I think our ability to call on the approximate 9,000 narcolepsy treating healthcare professionals. Approximately 5,000 of those are not enrolled in the Oxivate REMS program really provides our ability to tap into that broad diagnosed adult narcolepsy patient population. It gives us a little bit of insulation as newer forms of oxybate come in. Obviously, the overall benefit risk profile of Wakeix, the broad clinical utility, it appeals to a broader healthcare professional Yes, treating audience as well as a broader patient base.

Speaker 3

So I think we have tremendous confidence in our business. There's a significant Unmet medical need in here. There's a large diagnosed and even undiagnosed patient population in here. And I think what we've observed over the last couple of years is there's plenty of room for multiple therapeutic options in here. So we feel really good about where Wakex is.

Speaker 3

But to answer your question on the generic oxibate, I haven't really seen it expanding the market. It's more so just A change within the oxybate vertical.

Speaker 2

Yes. And Jason, with regards to your second question about the IP runway for WAYKX and the current Lifecycle Management Programs and New Formulations. So really good question. And I think what we've done to date, we've generated good momentum, obviously, In our IH program and the strong momentum and the pace of enrollment in that program with pettolacin And the same in terms of Prader Willi syndrome in that program and where we are. But with regards to the longer term outlook, we do see the potentially new formulations where we would have options potentially to take those development programs, obviously, with longer patent protection longer runway and shift some of those to the new formulations of betulcine depending on what we see in Clinic and as those programs advance.

Speaker 2

So we see kind of optionality going forward for the longer term outlook of our Our lifecycle management programs, while optimizing the current momentum we have now, obviously, with the interest in IH and the completion of enrollment and looking forward to top line data in the Q4, as well as interest in the Prader Willi Syndrome program from that patient community that we've been kind of working with over a number of years now and interest in advancing into Phase 3 at this point.

Speaker 6

Can I just ask a quick follow-up on that?

Speaker 2

Sure.

Speaker 9

Would the thinking be to launch a next gen before going to market for PWS? Or IH, just thinking, if you had to launch a reformulation against the generic version of your own Wakeix, the track record on that could be a little bit more challenging So like if you can get a reformulation out first, it would seem like that would have a maybe a more competitive pathway in the market.

Speaker 2

Yes. I mean, I think that based on the new formulation programs we're working on, that's a potential scenario as well. And I think that's we're looking at that potential sort of in the near term along with a longer term outlook with some of the formulation work that we're doing. So we will have more Thanks, Jason.

Operator

Thank you. We'll take our next question from Corrine Jenkins with Goldman Sachs.

Speaker 10

Good morning. A couple from me. Maybe first, you talked about the new patient growth in the quarter. What portion of these patients are coming through via into sleep specialist population versus the prescribing population you've described as not being enrolled in the OXVI REMS program.

Speaker 2

Good morning, Corinne. Jeff, in terms of the patients and where they're coming from in terms of the prescriber base?

Speaker 3

Sure. Corinne, I mean, we're seeing patients come through both those that are healthcare professionals enrolled in the OXOBIATE REMS program, the sleep specialist, But we're also seeing patients come through in the approximate 5,000 healthcare professionals that are not enrolled in the OxoBate runs program. I know there have been questions in the past looking at proportionality of what percentage of the patients reside more in the oxybate REMS enrolled doctors versus the non. And what you would say is that the majority of the patients tend to be in the oxybate REMS enrolled healthcare professional audience. They tend to be more of the sleep specialists.

Speaker 3

But there is a meaningful percentage of our new patients that are coming from that approximately 5,000 healthcare professionals outside the Oxivate REMS program. That's where we're seeing our new prescribers coming from. The depth of prescribing and the new patients are coming out of the other portion of the oxybate REMS enrolled doctors.

Speaker 10

Okay. And then on the Phase 3 Prader Willi study, what assumptions can you share that underpin the size of that study and the powering decisions

Speaker 4

Good morning, Karim. Thanks for the question. We had a positive meeting with the FDA, And we aligned on the study design. And as we mentioned earlier, we plan to initiate this study in the Q4 of 2023. We plan to provide

Operator

Thank you. And our last question will come from Charles Duncan with Cantor Fitzgerald.

Speaker 11

Hey, Good morning, guys. First of all, congratulations on the end market demand. And So I had a question on the commercial side and then one on the pipeline. With regard to the commercial Question, given our challenge with in terms of projections, I guess I'm wondering when or if you're thinking about Providing guidance perhaps next year, if not yet this year. When would you be comfortable providing guidance and what would trigger that?

Speaker 2

Good morning, Charles. Sandeep, comments on providing guidance?

Speaker 1

Yes. No, thanks, Thanks, Charles, for the question on that. I think this year, at least we made the decision that there's sufficient And you saw from the launch and you continue to see this past quarter, good consistency in terms of top line demand for the product. And I think Overall, many of you have a good understanding of our business. So I think that's something that we would naturally revisit At the start of next year, but no promises right now.

Speaker 1

But again, certainly something we can take a look at. But right now, we feel good about Investors understanding of our business and the fundamentals there, and I think we'll provide continue to provide additional color on the business to give you More context as we did this quarter regarding the trade inventory and so forth. So we'll provide additional color to help guide future.

Speaker 11

Okay. Thanks, Sandeep. And then to Jack or Kumar, regarding the pipeline and the ongoing IH study with patelofen. Yes, congrats on the enrollment rates. But I guess the question that I have for you Do you think the rapid enrollment may have caused increased heterogeneity in the patient sample?

Speaker 11

And I guess, What gives you confidence in the readout? Could it be the blinded read on the patients enrolled or the randomized withdrawal design? Why are yes, help us think through that potential readout.

Speaker 2

Sure, Charles. Yes, I will turn it over to Kumar for thoughts on that as Head of our Development Programs. I think it starts also mechanistically. I think it starts mechanistically. And Charles, you know this well in terms And how it works as a wakefulness agent through histamine and a mechanistic fit in that disordered patient population and Kumar can expand on in terms of our thoughts on confidence in the readout.

Speaker 2

All right.

Speaker 4

Good morning, Charles. Thanks for the question. As we said, the study enrolled fast, And we were very pleased with it, in fact, 9 months ahead of schedule. And it's not just the mechanism of action, just as Jeff mentioned. Also the interest from the patients and the providers as well because of the significant unmet need in patients with idiopathic hypersomnia.

Speaker 4

In terms of heterogeneity, a specific question. As a clinical development We always want to make sure that the patients are homogeneous to the extent possible. So we have checks and balances within the study conduct and also in our protocol to make sure that the patients who come into this study meet the inclusion exclusion criteria and they're the right subject for our study. We have full confidence that we enrolled the right subjects, And we look forward for the top line data, which we anticipate in the Q4 of this year.

Speaker 11

Okay. And regarding the top line read, is that driven more by timelines within this study or is it driven by, call it data analysis and can you give us any further insights on that being October versus December?

Speaker 4

Yes. I mean, at this time, it's hard to speculate whether it will be early 4th Quarter of late Q4, what I can say at this point in time is we are on track for top line results in the 4th quarter.

Speaker 11

Okay, very good. Thanks for taking our questions. Congrats on the end market demand.

Speaker 2

Yes, sure, Charles. And we are very excited about for that top line data readout as well. So obviously, the team is we'll be working aggressively and focused on producing top line results and We look forward to sharing that with you when they come.

Operator

Thank you. And at this time, I will now turn the call back to management for any additional or closing remarks.

Speaker 2

Thank you, Todd, and thanks to everyone for joining our call today and for your interest in Harmony. I would also like to thank the talented team at Harmony Biosciences, who I have the pleasure of working with for their efforts every day to deliver on our mission to develop and commercialize innovative treatments for patients living with rare Diseases. As you heard from the team this morning, our business remains strong. Harmony continues to be a growth story And we have conviction in the long term growth potential of our company. We have built momentum during the first half of twenty twenty three and we are now looking forward to a catalyst rich second half of the year.

Speaker 2

Thank you, and have a great day.

Operator

Thank you. This does conclude today's Harmony Biosciences Second Quarter 2023 Financial Results Conference Call. You may now disconnect your line and have a wonderful day.

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Earnings Conference Call
Harmony Biosciences Q2 2023
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