Harmony Biosciences Q3 2024 Earnings Call Transcript

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Provided by Quartr
October 29, 2024

Key Takeaways

  • Q3 net revenue was $186 million, surpassing $2 billion in cumulative Wakeix sales and reaffirming full-year guidance of $700–720 million, underlining strong commercial momentum.
  • On track to submit a sNDA for pitolisant in idiopathic hypersomnia by year-end, supported by long-term extension data showing sustained efficacy beyond one year.
  • Advancing two next-generation pitolisant formulations—GR (PDUFA 2026) to improve GI tolerability and HD (PDUFA 2028) to target fatigue—with patent protection into the 2040s.
  • EPX-100 (clemisol HCl) is in a Phase III registrational trial for Dravet syndrome (top-line data due 2026) and will initiate a pivotal Phase III study in Lennox–Gastaut syndrome before year-end.
  • Key catalysts in H1 2025 include FDA acceptance of the IH sNDA filing and top-line results from the pivotal Phase III RECONNECT trial of ZYN-002 in Fragile X syndrome.
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Earnings Conference Call
Harmony Biosciences Q3 2024
00:00 / 00:00

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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' third quarter 2024 financial results conference call. All participants have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question at that time, please press star one on your telephone keypad. Please be advised that today's conference may be recorded. Lastly, if you should require operator assistance, please press star zero. I will now turn the call over to Brennan Doyle, Head of Investor Relations. Please go ahead.

Brennan Doyle
Brennan Doyle
Head of Investor Relations at Harmony Biosciences

Thank you, operator. Good morning, everyone, and thank you for joining us today as we review Harmony Biosciences' third quarter 2024 financial results and provide a business update. Before we start, I encourage everyone to go to the investor section of our website to find the materials that accompany our discussion today, including a reconciliation of our GAAP to non-GAAP financial measures. At this stage of our life cycle, we believe non-GAAP financial results better represent the underlying business performance. Our speakers on today's call are Dr. Jeffrey Dayno, President and CEO, Jeffrey Dierks, Chief Commercial Officer, Dr. Kumar Budur, Chief Medical and Scientific Officer, and Sandip Kapadia, Chief Financial Officer and Chief Administrative Officer. As a reminder, we will be making forward-looking statements today, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties.

Brennan Doyle
Brennan Doyle
Head of Investor Relations at Harmony Biosciences

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 Dr. Jeffrey Dayno. Jeff.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Thank you, Brennan, and thanks, everyone, for joining our conference call today. Q3 was another quarter of strong momentum for the team at Harmony, driving significant revenue growth for WAKIX and advancing our late-stage clinical development programs. At our successful Investor Day event earlier this month, we were excited to share new data and outlined a clear path toward becoming the leading CNS company focused on developing and delivering innovative treatments to patients with unmet medical needs. As we shared during that presentation, our robust late-stage pipeline is poised to deliver one or more new product or indication launches each year over the next five years. With each catalyst, we are delivering on our promise to patients and generating long-term durable value creation for shareholders.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

In fact, with this team at Harmony that has driven our success thus far, our current pipeline, if successful, is poised to deliver over $3 billion in net revenue going forward. Also, during our Investor Day, I highlighted what we believe to be one of the strongest and most promising pipelines in the industry for people living with rare neurological diseases. Our pipeline now includes three orphan-rare CNS franchises, each with peak sales potential of $1-$2 billion, eight assets across 13 development programs, with three of them in pivotal phase 3 trials and a fourth to initiate before year-end. Given the tremendous growth in our pipeline, we will not be able to go into depth on all the development programs on this call, but the key points that I want you to take away from our call today regarding our robust pipeline are these.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

First, we continue to strengthen our leadership position in sleep/wake. We are preparing to submit our sNDA for pitolisant in idiopathic hypersomnia, or IH. We are advancing the pitolisant next-gen programs, and we are on track to submit an IND for our potential best-in-class orexin-2 agonist in mid-2025, and then enter the clinic the second half of next year. Second, with EPX-100, or clemizole hydrochloride, we have the most advanced and promising late-stage development program in the class of 5-HT2 receptor agonists to address the serious unmet medical need for the rare childhood-onset epilepsies known as developmental epileptic encephalopathies, or DEEs. EPX-100 is in an ongoing phase three registrational trial for patients with Dravet syndrome and on track for top-line data in 2026, and we will be initiating a pivotal phase three trial for EPX-100 in patients with Lennox-Gastaut syndrome before year-end.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

In addition, we have another asset in our epilepsy pipeline, EPX-200, or lorcaserin in a liquid formulation, which is a selective 5-HT2C receptor agonist. Both of these have significant upside potential, as the market has recently acknowledged with the acquisition of a 5-HT2C agonist asset that just recently initiated a phase 3 trial in Dravet syndrome. Third, there are exciting near-term catalysts coming in the first half of next year, including FDA's decision on file acceptance of our IH SNDA submission going in later this year, as well as top-line data for ZYN-002 from the pivotal phase 3 ReConnect trial in patients with Fragile X syndrome. If these data are positive, it could put us on a path toward bringing the first approved treatment to the market for patients living with Fragile X syndrome.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

I want to share some highlights with you on our development programs, and then Kumar will expand on these key points later in the call. First, on the strengthening of our leadership in sleep/wake, which is the foundation of our business, we shared new data at our Investor Day from the long-term extension trial of pitolisant in patients with IH. These data demonstrated robust efficacy and sustained response out beyond one year. As Kumar will show you, the majority of patients were maintained within the normal range on the Epworth Sleepiness Scale for over one year after coming into the trial at a moderate or severe level of sleepiness. This, along with real-world evidence and a strong overall benefit-risk proposition for pitolisant, is the reason for our strong conviction in pursuing an IH indication for pitolisant, and we are on track to submit an sNDA before year-end.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Building off of the innovation of the first-in-class molecule in pitolisant with its novel mechanism of action and the success of WAKIX in the market is our next-gen formulations of pitolisant. Both of these programs, pitolisant gastro-resistant, or GR, and pitolisant high dose, or HD, reflect patient-centric drug development with the goal to take a good drug and make it even better by addressing ongoing unmet medical needs in patients with narcolepsy. Pitolisant GR is on track for PDUFA in 2026, and pitolisant HD is on track for PDUFA in 2028, and Jeffrey Dierks will provide more color on the strategy behind those programs and how our unique commercial model positions us to optimize the opportunity to both grow and extend the pitolisant franchise into the 2040s. The next wave of innovation for the treatment of narcolepsy and other central disorders of hypersomnolence are the orexin-2 receptor agonists.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

As leaders in sleep/wake, we have followed this space closely over the past few years, diligenced several of the orexin- 2 agonist programs, and then earlier this year, licensed in BP1.15205 with our partner BioProjet, which we feel could be a potential best-in-class orexin- 2 agonist compound. This is based on several unique features of this compound, some of which we shared during our Investor Day, and Kumar will review them with you later in the call. We are on track toward filing an IND mid-2025 and then initiating first-in-human studies in the second half of 2025. Next, I would like to take a few moments to discuss and share our excitement with you regarding our rare epilepsy franchise that we recently brought in-house through the acquisition of Epygenix Therapeutics.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

This is relevant, particularly in light of some of the recent developments in the competitive landscape, which point to the significant value of new treatments for developmental epileptic encephalopathies. Many of the currently approved therapies face limitations in terms of efficacy, safety, and/or tolerability, leaving a treatment gap and serious unmet medical need that must be addressed for patients living with these rare and refractory seizure disorders and their caregivers. We view the recent interest in this space as validation of our approach, and Harmony is again proud to be at the forefront of innovation. To put it simply, this space involves compounds that act at the serotonin, or 5-HT, type 2 receptor and enhance serotonergic tone in the brain. We have two investigational products for DEEs: EPX-100, or clemizole hydrochloride, and EPX-200, a liquid formulation of lorcaserin.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Kumar will share with you more details regarding these compounds and their development programs, but what I want to highlight for you is the following. The mechanism of action for both EPX-100 and EPX-200, working through 5-HT2 receptors and serotonin modulation, has been validated in the zebrafish model developed by Scott Baraban, who shared his work at our Investor Day, which demonstrated 100% predictability, both 100% positive and 100% negative predictability on efficacy for compounds that were screened in his zebrafish model. We have the most advanced clinical development program of the 5-HT2 agonist compounds, with EPX-100 in an ongoing registrational trial for patients with Dravet syndrome, which is on track for top-line data in 2026, as well as a pivotal phase three trial for patients with Lennox-Gastaut syndrome, which is on track to initiate before year-end.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

What I want you to take away is that we believe that we have the most robust, most promising, and advanced portfolio of assets in the clinic for patients with DEEs and are confident that, if successful, our portfolio can offer new treatment options for patients and drive significant value creation for our shareholders. Lastly, on our pipeline, as you can see, we have strategically expanded our pipeline and diversified our portfolio across three orphan-rare CNS franchises and built what we believe is one of the most exciting and promising pipelines in the industry for patients living with rare neurological diseases. Importantly, I want to make sure that our near-term catalysts coming in the first half of next year are top of mind for investors.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

These include FDA's decision on file acceptance for our IH SNDA submission in the first quarter next year, followed by the highly anticipated top-line data readout of the pivotal phase 3 ReConnect study of ZYN-002 in patients with Fragile X syndrome, which is on track for readout mid-year. These are exciting catalysts as we continue to advance our pipeline and build long-term value creation. Switching gears, while we advance our late-stage development programs, we remain focused on execution across the company and delivered another solid quarter with WAKIX's net revenue of $186 million. This enabled Harmony to surpass $2 billion in cumulative net revenue for WAKIX generated in less than five years on the market, which is a significant accomplishment.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

With these strong results, we are once again reiterating our 2024 net revenue guidance of $700-$720 million and remain confident in WAKIX being a $1 billion-plus market opportunity in narcolepsy alone, and we are well on our way to achieving that. We remain active in business development with a dedicated team that has deep experience, and the goal is to expand our pipeline even further. With approximately $505 million in cash, cash equivalents, and investments as of September 30th, we are in a strong financial position to execute on additional business development opportunities. And if we do so, we'll apply the same strategic and thoughtful approach that we have demonstrated thus far. This is all to say that Harmony continues to be a growth story. And while I am proud of what we have built at Harmony in just our first seven years, we are just getting started.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

We have this outlook because we know that when we deliver on our promise to patients by developing and delivering innovative treatments to patients living with rare neurological diseases, we generate durable, long-term value creation for our shareholders. With that, I will now turn the call over to Jeffrey Dierks, our Chief Commercial Officer, for an update on our commercial performance. Jeff?

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

Thanks, Jeff. We saw another quarter of continued momentum and strength in our underlying business fundamentals for WAKIX in the third quarter. Net sales for the quarter were $186 million, and with these quarterly sales, WAKIX surpassed $2 billion in cumulative net sales since launch. The solid net sales performance in the third quarter reaffirms our confidence in our net sales guidance of $700-$720 million for the full year 2024 and WAKIX's $1 billion-plus potential in adult narcolepsy alone.

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

We saw continued growth in the average number of patients on WAKIX and in the WAKIX prescriber base, both facilitated by favorable market access, as seen on slides six and seven. The average number of patients on WAKIX increased to approximately 6,800 in the third quarter. We're extremely pleased with the approximately 250 sequential increase in average patients on WAKIX from what we reported last quarter. We saw contributions from the pediatric narcolepsy indication launch in our growth in Q3, but the vast majority of our growth in the third quarter was attributed to the continued expansion in our adult narcolepsy patient base, given the larger diagnosed patient opportunity. We are extremely pleased with our launch in pediatric narcolepsy.

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

In the first quarter since the FDA approval, we've seen strong interest from the healthcare professional and patient community in the unique product profile of WAKIX as the only non-scheduled treatment option and strong payer coverage to facilitate pediatric narcolepsy patients getting on product. The growth in average patients in the third quarter was in line with our expectations and reaffirms our confidence in our guidance of approximately 7,000 average patients by the end of the year. We saw growth in the WAKIX prescriber base in the third quarter as well. We saw solid growth in the WAKIX prescriber base beyond the OXYBATE REMS enrolled healthcare professionals, demonstrating that WAKIX continues to expand the Branded Oxybate segment of the market beyond the OXYBATEs.

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

We are now more than 40% penetrated in this segment of approximately 5,000 healthcare professionals at the end of the third quarter.

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

This segment of healthcare professionals continues to represent an insulated and durable opportunity for growth from the oxybates that we continue to tap into each quarter to drive performance. Coupled with the growth we're seeing beyond the Oxybate REMS enrolled healthcare professionals, we continue to see utilization of WAKIX among the approximately 4,000 Oxybate REMS enrolled healthcare professionals, even with the availability of new and generic oxybate options. We're highly penetrated within this prescriber audience and see WAKIX being prescribed to additional narcolepsy patients each quarter in this segment.

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

WAKIX provides a meaningfully differentiated product profile and one that offers broad clinical utility across the entire narcolepsy treating healthcare professional universe, allowing us to tap into the full diagnosed narcolepsy patient opportunity of approximately 80,000 patients, giving us confidence in future growth for WAKIX.

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

With WAKIX on track to achieve $1 billion-plus in narcolepsy alone, along with a strong commercial team and commercial model that we shared at our Investor Day on October 1st, we're making good progress on our lifecycle management plan with the new formulations of pitolisant. We're developing two new formulations of pitolisant, Pitolisant GR and Pitolisant HD, in a meaningful patient-focused way built around unmet needs to drive incremental benefits for patients. Both products offer new features and attributes to address existing patient unmet needs, are on target for PDUFA dates prior to WAKIX LOE, GR in 2026, and HD in 2028, and each has provisional patents filed out to 2044 to grow and extend the pitolisant franchise.

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

Pitolisant GR is a quick-to-market bioequivalence pathway with the additional benefits of a gastro-resistant coating, as we know up to 90% of narcolepsy patients have GI disturbances due to their underlying disease, and eliminates the titration dose, as all narcolepsy products have titration schedules, and some patients cannot and do not get a therapeutic dose to achieve clinical benefits, both allowing patients to start at a therapeutic dose and the potential to achieve clinical benefits sooner. The strategy for GR is to expand the Pitolisant patient base through new patient growth and, using our unique commercial model, activate previous WAKIX patients who have discontinued due to either GI side effects or did not achieve a clinical benefit. We see GR representing a potential $300-$500 million in incremental peak net sales to WAKIX.

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

A Pitolisant HD is an enhanced formulation of pitolisant with even more meaningful features to address untreated fatigue in narcolepsy, up to 60% of narcolepsy patients suffer from fatigue, and address the largest pressing need in the narcolepsy market, which is the need for enhanced efficacy. The HD development program is designed to deliver a higher dose, up to two times that of WAKIX, with an optimized PK profile to drive greater efficacy in EDS and cataplexy, targeting a unique indication of fatigue in narcolepsy with a gastro-resistant coating and no titration to start at a therapeutic dose. The strategy for HD is to grow the pitolisant patient base through new patients, current WAKIX patients, and previous WAKIX patients due to our unique commercial model and extend the durable patient revenue growth out to the mid-2040s.

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

We see potential peak net sales for HD of more than a billion-plus in narcolepsy alone and an even larger peak opportunity, with other indications being pursued in idiopathic hypersomnia and myotonic dystrophy. Preliminary market research with healthcare professionals and payers on the HD target product profile showed healthcare professionals see HD as a superior product profile given the greater efficacy addressing the most pressing need in the market, and the unique fatigue indication broadens its expected use. Healthcare professionals saw broad utility for HD and expected to transition the majority of current WAKIX patients, reengage previous WAKIX patients, and offer the product to all new start patients. Payers also saw value in the HD profile, both pre and post-WAKIX LOE, and expected favorable access for the vast majority of patients to HD without stepping through a generic pitolisant post-WAKIX LOE.

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

The pitolisant franchise strengthens our leadership position in sleep/wake and is poised to deliver durable patient growth and significant revenues into the mid-2040s. In summary, we're building an exciting sleep/wake franchise. We had another strong quarter of durable growth and performance in net sales, patient add, and growth in prescribers of WAKIX. Heading into the fourth quarter, we're confident in our full-year guidance, our path towards a $1 billion-plus in net sales, and our ability to continue to help patients living with narcolepsy. I would now like to turn the call over to our Chief Medical and Scientific Officer, Kumar Budur, to discuss the advancements of our clinical development program. Kumar?

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

Thank you, Jeff. Good day, everyone, and thank you for joining us today. In R&D, we continue to make great progress in advancing our pipeline program.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

As Jeff Dayno mentioned, we now have 13 development programs across eight assets under three franchises focused on rare neurological indications with high unmet medical needs. We will have four phase 3 registration studies ongoing in four distinct indications by the end of this year, with the potential to deliver one or more new products or new indication launches each year for the next five years. Our full clinical development pipeline is shown on slide number 10, and the clinical development highlights are on slide 11 through slide 17. Starting with our Sleep/Wake franchise, we are on track to submit an sNDA for idiopathic hypersomnia by the end of this year. Our submission will be based on the robust data from the phase 3 registration in two studies and several lines of additional evidence that consistently support the efficacy of pitolisant in patients with idiopathic hypersomnia.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

At our investor day on October 1st, we reported new data that showed strong and sustained efficacy of pitolisant in patients with idiopathic hypersomnia more than one year out in the long-term extension study. The mean improvement in Epworth Sleepiness Scale was approximately nine points from baseline out beyond one year, with the majority of patients in the normal range as measured by ESS score. We saw a similar, strong, and sustained maintenance of efficacy on idiopathic hypersomnia seen in scale and sleep inertia questionnaires in the long-term extension study. In addition, we also shared the data from a large sleep clinic in Europe in over 60 patients with IH. Data from this independent study shows that over 60% of patients with IH got better with pitolisant, and approximately 40% of these patients benefited and remained stable with pitolisant monotherapy.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

Similar efficacy was also observed in biopsy-based compassionate use programs for patients with IH. The totality of data for efficacy, alongside the established safety profile of pitolisant, a non-scheduled drug with simple dosing regimen, offers a unique benefit proposition for patients with IH, a condition with only one approved treatment that has triple attestation REMS with challenging nighttime dosing regimen and the widespread off-label use of controlled stimulants, which are associated with significant safety issues. Pitolisant has the potential to address a high unmet need with very favorable benefit risk profile. Moving on to next-gen pitolisant formulation, pitolisant GR, and pitolisant HD. Jeff Dierks described the unique value proposition each of these formulations are expected to deliver.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

With pitolisant GR program, we are on track to initiate the pivotal bioequivalence study and the dosing optimization study in the first quarter of 2025 with PDUFA date in 2026.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

With pitolisant HD, at our investor day earlier this month, we shared preliminary data establishing pitolisant safety up to five times the current highest labeled dose of WAKIX, thereby establishing safety margin for pitolisant HD development program. We are currently working on further optimizing the formulation and IND-related activities, and we are on track to initiate the pivotal phase 3 registration study in narcolepsy in the second half of 2025 with the target PDUFA in 2028. Provisional patents have been submitted for both pitolisant GR and pitolisant HD with a potential patent protection until 2044. Moving on to our orexin-2 receptor agonist program, BP1.15205, formerly known as TPM-1116. The in vitro pharmacology data demonstrated a potency that is much greater compared to all publicly disclosed data on orexin-2 agonists.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

As you know, with this class of compounds, potency is the most important parameter that gives us the ability and the dosing flexibility to target all central disorders of hypersomnolence and potentially other disorders based on the emerging evidence. The potency was consistent across species, and it also demonstrated an excellent selectivity of greater than 600-fold over orexin-1 receptors. This translates to over 100-fold margin at orexin-1 receptors at the anticipated maximum human dose. In addition, it also demonstrated over 1,000-fold selectivity over 150 other targets of interest and has a potential for once-a-day dosing.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

BP1.15205, with its novel chemical structure, highest potency, excellent selectivity, potential for once-a-day dosing, and robust preclinical data, has the potential to be the best-in-class orexin-2 receptor agonist. We are on track towards filing an IND in mid-2025 and initiating first-in-human studies in the second half of 2025.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

Today, we are very excited to highlight our epilepsy franchise, and as Jeff mentioned earlier in the presentation, we have the most advanced development programs in DEEs. We have two investigational candidates, EPX-100 and EPX-200, for the treatment of developmental epileptic encephalopathies. EPX-100, our clemizole hydrochloride, works via modulation of serotonin, that is, 5-HT2, and enhances the serotonin receptor. The serotonin receptor mechanism of action is a validated and well-known mechanism of action in developmental epileptic encephalopathies. EPX-100 showed efficacy in the zebrafish model that has 100% positive and 100% negative predictive values.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

In addition, EPX-100 mechanism of action is also validated in other DEEs, such as Syntaxin-binding protein 1 disorders, via preclinical experiments, suggesting a broad utility for EPX-100 in DEEs. When it comes to safety and tolerability, clemizole was on the market for approximately 20 years with no significant safety and/or tolerability signals from post-marketing exposures.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

In addition, EPX-100 demonstrates favorable preliminary safety and tolerability in the ongoing phase 3 registration study in Dravet syndrome compared to select approved drugs with no need for additional laboratory or special monitoring. EPX-100 is administered in a liquid formulation with BID dosing, a simple dosing regimen that is especially meaningful for patients living with DEEs and their caregivers. We are actively recruiting globally for our phase 3 registration study in Dravet syndrome, the ARGUS study, and we are on track to start a global phase 3 registration study in LGS by the end of this year. The strong evidence for efficacy, promising safety and tolerability profile, BID dosing, and on track for top line in 2026 makes EPX-100 the most promising and the most advanced investigational drug for DEEs. We have one more investigational product, EPX-200, our liquid formulation of lorcaserin in the pre-IND phase.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

Lorcaserin is a selective 5-HT2C agonist, and the mechanism of action is well established in DEEs via preclinical experiments in the zebrafish model and also in the clinic via a case series published by Tolete and Devinsky et al. in 2018 in Neurology, following which the FDA expressed interest in exploring lorcaserin in developmental and epileptic encephalopathies. We are currently in the pre-IND phase, and we plan to pursue all DEEs with EPX-200. It is important to note that the safety and tolerability of lorcaserin is also well established based on the short-term, long-term, and real-world outcome studies with lorcaserin. The regulatory agencies recognize the unmet need and the formulation EPX-100 and EPX-200 could potentially offer to patients with DEEs. Accordingly, EPX-100 has received both Orphan Drug Designation and Rare Pediatric Disease Designation for both DS and LGS by the FDA.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

EPX-200 has received Orphan Drug Designation for DS by the FDA and EMA, and it has received Orphan Drug Designation and Rare Pediatric Disease Designation for LGS by the FDA. Finally, with our neurobehavioral franchise, we remain on track to report top-line data from the phase three ReConnect registrational trial of ZYN-002 in Fragile X syndrome in mid-2025. If approved, this will be the first and only approved treatment for any symptoms in patients with Fragile X syndrome. We are also on track to initiate the phase three registration study in 22q deletion syndrome in 2025, another rare disorder with prominent neurobehavioral symptoms for which there are no approved treatments. In summary, we have made significant progress in advancing our late-stage pipeline across our three franchises and look forward to sharing more in the coming months and years as we continue to make progress.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

On behalf of Harmony, I would like to thank all the patients and their families who are participating in our clinical trials, as well as the clinical investigators and site personnel for their effort and commitment in helping us advance our development programs. I'll now turn the call over to our CFO, Sandip Kapadia, for an update on our financial performance. Sandip?

Sandip Kapadia
Sandip Kapadia
CFO at Harmony Biosciences

Thank you, Kumar, and good morning, everyone. This morning, we issued our third-quarter earnings release and filed our 10-Q, where you find the details of our third-quarter 2024 financial and operating results. Our financial performance is also shown on slides 18 through 20. Harmony continues to have a unique profile in the biotech community. We're a profitable, cash-generating company able to fund the growth and advancement of our pipeline fully off our balance sheet.

Sandip Kapadia
Sandip Kapadia
CFO at Harmony Biosciences

We delivered another quarter of strong double-digit top-line growth, maintained profitability, and achieved robust cash generation. Our financial performance and strong balance sheet position positions us well to continue advancing our industry-leading pipeline along with driving excellence in the commercialization of WAKIX and narcolepsy. We reported net revenues of $186 million for the third quarter of 2024, compared to $160.3 million in the prior year quarter. Performance in the quarter reflects the continued strong underlying demand for WAKIX. We also reported total operating expenses for the third quarter of $81.6 million, as compared to $63.5 million for the same quarter in 2023, representing a 29% increase. The growth in expenses was primarily driven by investments in our expanding late-stage pipeline, along with continued investments for the commercialization of WAKIX and narcolepsy.

Sandip Kapadia
Sandip Kapadia
CFO at Harmony Biosciences

Non-GAAP-adjusted net income for the third quarter of 2024 was 59.6 million or $1.03 per diluted share, compared to 58.8 million or $0.97 per diluted share in the prior year quarter. We believe non-GAAP-adjusted net income better reflects the underlying business performance. Please refer to our press release for a reconciliation of GAAP to non-GAAP results. We ended the third quarter with 504.7 million of cash, cash equivalents, and investments. The balance reflects strong cash generation of 70.5 million from operations, which provides us the financial flexibility to execute on our strategy of continuing to grow our pipeline. Looking ahead, we continue to expect quarter-over-quarter growth in net revenues in Q4 of this year. We also expect increases in R&D as we initiate our fourth phase 3 registrational trial during the fourth quarter.

Sandip Kapadia
Sandip Kapadia
CFO at Harmony Biosciences

We are once again reiterating our net revenue guidance for 2024 of $700 million-$720 million, highlighting our progress towards the $1 billion-plus opportunity in adult narcolepsy alone. And with that, I'd like to turn the call back to Jeff for his closing remarks. Jeff?

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Thank you, Sandip. As we wrap up our call, I want to emphasize that our momentum at Harmony has never been stronger. We continue to lead in sleep-wake, fueled by the strength of our foundational business of WAKIX and narcolepsy, and driven by a portfolio that represents the next wave of innovation in this space. We believe that our portfolio of assets in rare epilepsies is the most robust and advanced in the industry for DEEs, and we are committed to this area of serious unmet medical need.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

And finally, our catalyst-rich late-stage pipeline is poised to deliver one or more new product or indication launches each year over the next five years, with exciting catalysts in idiopathic hypersomnia and Fragile X syndrome coming in the first half of next year. We have the proven talent, resources, and conviction that will continue to fuel Harmony's growth story, and we are just getting started. Thank you, and I will now turn the call back over to the operator.

Operator

Thank you. At this time, if you would like to ask a question, please press the star one on your telephone keypad. If you wish to remove yourself from the queue, you may do so by pressing star two. We remind you to please pick up your handset and please limit yourself to one question. Again, that's star one to enter the queue.

Operator

Our first question will come from Graig Suvannavejh with Mizuho. Please go ahead.

Graig Suvannavejh
Graig Suvannavejh
Managing Director at Mizuho Securities

Thanks so much for taking my question. Congrats on the progress. Your pipeline is so deep, I don't know where to start, but maybe if I could ask just one on the Pitolisant GR and HD strategy. As we look out on the horizon, can you just give us a sense of how we should visualize how WAKIX and then GR, when it comes in potentially 2026, how you're going to manage kind of the coexistence of those two products, and then how is that going to evolve when HD launches, hopefully in 2028? Just trying to visualize what a switch strategy might look like, just the commercial kind of positioning if you are in a position to have three products basically on the market at the same time.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Yes. Good morning, Greg.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Thanks for your question. I think that I'm going to turn to Jeff Dierks to expand on that. A lot of it is based on our unique commercial model in terms of enabling us to how to handle that strategy, and Jeff can explain further. Go ahead, Jeff.

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

Sure. No, thanks for the question, Greg. So Pitolisant and WAKIX obviously is going to be our foundational business, and we see that as a billion-dollar-plus opportunity. From there in advancing these next-generation and lifecycle management opportunities, Pitolisant GR, if you're thinking about that asset, target PDUFA in 2026.

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

We see that as an accretive opportunity to expand the total addressable patient base, not necessarily where physicians are going to be converting established WAKIX patients to GR, but GR is likely going to be a product using our commercial model where we can actually activate patients who are formerly on WAKIX, who may have dropped off due to GI side effects or didn't achieve clinical benefit. We're going to look to tap into that audience, as well as any new patient coming into a physician's office, having the benefit of WAKIX with a gastro-resistant coating and the ability with no titration. We see GR growing in new patients as well as previous WAKIX patients, so not converting existing WAKIX patients.

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

Then when HD looks to come to market with a target PDUFA date in 2028, given the potential to deliver enhanced efficacy, the potential to treat idiopathic hypersomnia that doesn't have any products available today, that when we put that product profile in front of healthcare professionals, they saw that as a superior product profile. That is a product that they embraced, likely converting the vast majority of their WAKIX patients over to. They saw this as another opportunity to engage previous WAKIX patients, and they also saw this, obviously, as an opportunity for new existing patients. So that's kind of how we see these products. They are going to be able to coexist. GR and WAKIX are going to be incremental and accretive opportunities coexisting.

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

HD is likely the asset where we're going to end up seeing most patients end up, just given the potential and the meaningful enhancements and benefits that that product's going to be able to offer to patients with narcolepsy.

Graig Suvannavejh
Graig Suvannavejh
Managing Director at Mizuho Securities

Okay. Thank you. If I could just squeeze in one, just on the orexin program, very interesting. Lots of investors have been asking about it. Just I know that you have talked about the ability or the desire to present additional preclinical data on the assets, perhaps provide a fuller picture of what you see in that opportunity. Any further comments on when we might see that data and what exactly you're hoping to show when you're able to present additional data on the orexin program? Thanks.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

Yeah. Hey, Greg. Good morning. Thank you. Yes.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

At our investor day, we presented some data on our orexin receptor agonist, where we emphasized the novel chemical structure, the highest potency compared to anything that is publicly available on orexin-2 receptor agonist, great selectivity with over 600-fold, which translates into more than 140-fold margin at orexin-1 receptors, and also greater than 1,000-fold selectivity over other 150 targets of interest, and also potential for QD dosing. The intent is to disclose additional data at the upcoming scientific meetings. We haven't decided when and where, but we will be providing that information soon.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Yeah, Greg. And I think the target for that is we're working with our partner, BioProjet, and we're looking to next year at a scientific meeting to share sort of the full preclinical profile of that asset.

Graig Suvannavejh
Graig Suvannavejh
Managing Director at Mizuho Securities

Okay. Thank you. Thank you.

Operator

Our next question will come from Ami Fadia with Needham. Please go ahead.

Ami Fadia
Ami Fadia
Managing Director and Senior Biotech Equity Research Analyst at Needham & Co

Hi.

Ami Fadia
Ami Fadia
Managing Director and Senior Biotech Equity Research Analyst at Needham & Co

Good morning. Thanks for taking my question. Could you talk about EPX-100 and particularly what gets you excited in terms of differentiation on safety, not only versus Epidiolex and Fintepla but also versus bexicaserin? And as we've seen some of the development plans for bexicaserin, can you talk about your clinical development strategy for this asset beyond LGS and DS, and how you plan to approach the other DEEs space? Thank you.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Good morning, Ami. Thank you for your question. We will try to unpack that a little bit. Yeah, we are excited with regards to EPX-100, our advanced program. I'll turn to Kumar just high level in terms of the strategy, where we are, and some of the profile we're seeing now compared to what's in the market and some of the other investigational products. Kumar?

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

Yes, sure. Thank you, Jeff. Good morning, Ami.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

I know you asked several questions there. So let me start by saying that, look, the recent developments have validated our presence in developmental epileptic encephalopathies, high unmet need despite several drugs approved in the space, significant limitations in terms of efficacy, safety, and tolerability. So that's where EPX-100 comes in and has the ability to fill several gaps in this area. First and foremost, let me talk about safety. Clemizole hydrochloride has been on the market for over 20 years, and no safety signals were observed. It was supplanted with the introduction of second generation of antihistamines. Number two, the FDA asked us to develop this as a new chemical entity. So in support of that, we conducted a full battery of non-clinical tests that include six-month repeat dose study in rats, nine-month repeat dose study in beagle dogs, and also juvenile toxicity studies.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

No safety signals were observed. We also had a phase one study in healthy volunteers, which was where we saw acceptable safety and tolerability and supported further development of this product. This study is being recruited in the U.S. and also outside of the U.S. and EU. So the protocol went through FDA and also EMA, and none of these regulatory agencies asked us to do any additional monitoring. And lastly, we disclosed some preliminary safety data from the ongoing phase three study in Dravet syndrome and also from the long-term extension study, where we showed it offers significant benefits when it comes to a couple of approved drugs like Epidiolex in terms of not having to monitor liver function tests routinely, and Fintepla, not having to monitor cardiac functions like echocardiography to look at cardiac valvular disease or pulmonary arterial hypertension.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

In terms of how we differentiate specifically from bexicaserin perspective, EPX-100 safety profile is better established, while bexicaserin profile is still in early stages and evolving. Second, EPX-100 is administered BID versus bexicaserin TID, which is very clinically meaningful, especially in patients with developmental and epileptic encephalopathies because of the nature and the severity of the disorder. And the third thing is, this is important. EPX-100 is further along in clinical development. We have been actively recruiting for patients in Dravet syndrome study in the U.S. and in Europe, and we are about to start a phase 3 study in Lennox-Gastaut syndrome. And as we mentioned during the call earlier, the regulatory agencies have recognized the promise of EPX-100 and have given orphan drug designation and rare pediatric disease designation for both DS and LGS.

Ami Fadia
Ami Fadia
Managing Director and Senior Biotech Equity Research Analyst at Needham & Co

Thanks, Kumar.

Ami Fadia
Ami Fadia
Managing Director and Senior Biotech Equity Research Analyst at Needham & Co

Could you also address how you might approach other DEEs? Thank you.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

Okay. Thanks. Thank you, Ami. Yes. In the call earlier, I mentioned that we have preclinical data to show the utility of EPX-100 in other DEEs, for example, in syntaxin-binding protein 1 disorder, where we saw good evidence for efficacy. And similarly, we saw efficacy in CDD as well. Right now, our focus is to complete the phase three study in Dravet syndrome and focus on LGS. In terms of approaching the other DEEs, we are in the process of evaluating that opportunity because those are heterogeneous disorders in terms of the nature of the study. We have not determined how exactly to go forward, but we will be pursuing all developmental epileptic encephalopathies with EPX-100.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Yeah, Ami.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

And I would just add, I think that these development strategies sort of start more focused and then the opportunity to go broader in the DEEs, which I think is consistent with the program now. But the opportunity for broad DEEs, potential basket trial is absolutely there, but we are in line and late stage in the Dravet syndrome study and on track to initiate the phase three pivotal LGS study before year-end.

Ami Fadia
Ami Fadia
Managing Director and Senior Biotech Equity Research Analyst at Needham & Co

Thank you.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Thank you.

Operator

Thank you. Our next question comes from Charles Duncan with Cantor Fitzgerald. Please go ahead.

Charles C. Duncan
Charles C. Duncan
Managing Director at Cantor Fitzgerald

Hey. Morning, Jeff and team. Congrats on the progress in the quarter. I'll make the observation. It's tough to know where to start because of all the pipeline products.

Charles C. Duncan
Charles C. Duncan
Managing Director at Cantor Fitzgerald

But I will start with a commercial question, and that is regarding the percentage of patients, the new patients, the over 50 added, what percent come from oxybate versus non-oxybate writers? And then I'm kind of curious why you didn't narrow the guidance because it seems like the low end is quite attainable. And your perspective on what would have modulated that?

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Good morning, Charles. Thanks for your question. Jeff, comments on even in terms of where the patients are coming from?

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

Sure. No, great question, Charles. And so obviously, we're extremely pleased with the growth we saw in the third quarter. We added incrementally approximately 250 average patients from what we reported in the second quarter. And Charles, we're seeing patient growth from both segments of healthcare professionals. It's probably about maybe 60% of those new patients are being added in from the oxybate REMS-enrolled healthcare professionals.

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

About 40% are coming from the non-oxybate, and that's a lot of function in terms of there's more patients in the oxybate REMS-enrolled healthcare professionals group. They're larger sleep specialists. They tend to have larger patient practices. We continue to see growth in the depth of prescribing, meaning most of these physicians have experience with Wakix. They're finding a second, a fifth, a tenth, a twentieth patient in this area, but we're really excited that we continue to see new patients coming out of the non-oxybate REMS-enrolled healthcare professional audience. We know that we have an insulated group that we continue to tap into even with all the oxybate churn, and so we're extremely pleased. We see tremendous growth opportunities on the horizon, 80,000 diagnosed patients, and we're going to continue to tap into that audience moving forward.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Yeah, Charles.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

And I would just add, I think the pattern of broad clinical utility for WAKIX in patients with narcolepsy continues to hold true with regards to the HCP universe that we're calling on. Sandip, comments on the full-year guidance?

Sandip Kapadia
Sandip Kapadia
CFO at Harmony Biosciences

Sure. I mean, look, as I mentioned on the call, I mean, we continue to expect quarter-over-quarter growth going into Q4. What I'd say is our range, even right from the start, was relatively narrow, right? $700 million-$720 million in sales, which is really 2% sort of in overall range. So we feel good about the range. We continue to see good momentum, and we'll provide an update, obviously, once the year closes on where we ended up on there. We feel very good about the range right now, and we're comfortable.

Charles C. Duncan
Charles C. Duncan
Managing Director at Cantor Fitzgerald

Great.

Sandip Kapadia
Sandip Kapadia
CFO at Harmony Biosciences

Thanks, Charles.

Charles C. Duncan
Charles C. Duncan
Managing Director at Cantor Fitzgerald

If I may add, may I ask a question of Kumar with regard to the ongoing Dravet study phase three with 100? I'm really quite intrigued with the patient population. I mean, 2016 data is a little bit remote. So how is enrollment going? Are you able to enroll patients that are on Epidiolex and mTOR inhibitors? And can you characterize the seizure burden and then persistence into the OLE? Can you provide any additional color on how that trial is going? Thanks.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

Hey. Good morning, Charles. I mean, the trial is recruiting as per projection. We are recruiting patients actively in the U.S., Canada, and Europe.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

In terms of the study design and the patient population, Charles, it's a pretty standard study design, pretty standard inclusion-exclusion criteria compared to any other Dravet syndrome studies in terms of titration, the duration of the study, the inclusion-exclusion criteria, the number of seizure medicines. On an average, these patients, as you know, Charles, are in need of good medicines. Therefore, on average, they tend to be anywhere between three to six anti-seizure medications. That's pretty much what we are seeing in our clinical trial as well. We disclose some of the safety data, very promising and very supportive, benign tolerability profile as well. One of the things that we did not mention earlier is actually the impact on appetite as well. As you know, many of the drugs that are out there have appetite suppressant effects.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

It's pretty challenging given this patient population already has difficulties with feeding and has weight loss. What we saw with EPX-100 is it did not suppress appetite, and there were no other safety or tolerability signals. So overall, we are very pleased with how the recruitment is going. The target is 2026 top line. Obviously, our goal is to recruit the study as soon as possible and try to bring this medication to the patients as soon as possible.

Charles C. Duncan
Charles C. Duncan
Managing Director at Cantor Fitzgerald

Very good. Thank you.

Operator

Thank you. Our next question will come from David Amsellem with Piper Sandler. Please go ahead.

David Amsellem
David Amsellem
Managing Director and Senior Research Analyst at Piper Sandler

Hey, thanks. So first question is on the payer landscape and how you're thinking about that as we move through 2025, and particularly how you're thinking about net realized price in 2025 versus where it is now.

David Amsellem
David Amsellem
Managing Director and Senior Research Analyst at Piper Sandler

Just help us better understand how you're thinking about the landscape, particularly with more generics of sodium oxybate set to enter the market. So that's number one set to enter the market in the not-too-distant future. So that's number one. And then number two, just wanted to ask a clarification question on Pitolisant HD regarding dosing. I think at the R&D Day, you said that you could safely dose up to five times higher than the highest dose of WAKIX. I just want to make sure that I have that correct. And as I think earlier in the call, you talked about dosing that's two X higher. So just wanted to get a better sense of where you think you could realistically dose Pitolisant HD relative to the legacy formulation. Thanks.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Sure. Jeff, do you want to respond to the first question?

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

Sure.

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

David, with respect to the payer landscape and how we're thinking about 2025, a lot of the quote contracts have already started to be negotiated for next year. We see next year's landscape to be very similar to what we see right now for WAKIX. There's not a lot of incremental contracting that's necessary. Again, we have a very unique position as sort of the lowest branded product relative to the oxybates. We're less expensive on a WAC cost than the branded and generic oxybates. I think that position has afforded us an opportunity to not have to contract. We see a very favorable landscape moving forward in 2025. With respect to generic oxybates coming, we don't anticipate any new generic oxybates in the market in 2025. It's likely in 2026 that there may be additional opportunities in there.

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

But I think what we've seen and heard from the payers currently is, given the fact that WAKIX is the only non-scheduled treatment option for both EDS and cataplexy, payers are finding a place on their formularies for that product. There are no plans that require WAKIX to be stepped through an oxybate, either branded or generic. And based upon our negotiations and discussions with payers, we believe that that position is going to maintain moving forward, give us great opportunity for patients to have access to the product, and a lot of confidence for us to continue to grow the brand.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Yeah.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

David, in terms of just clarifying pitolisant HD, what we shared at investor day with regards to we did a small study in terms of with WAKIX and dosed up to five times the current label dose and established, excuse me, the safety margins for the development program for pitolisant HD. The target in the development program is to dose up to two times the maximum labeled dose of WAKIX in the pitolisant HD program. But safety margins have been established up to five X of the current maximum dose.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

Yeah. Just to add to what Jeff mentioned, up to two times the highest labeled dose of WAKIX, David, with the optimized formulation, which means that the exposure will be a lot higher, milligram to milligram, compared to WAKIX.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

And not only that, we also were able to accomplish some other things with the optimized formulation, like decreasing interindividual variability as well, which have meaningful clinical impact in patients.

David Amsellem
David Amsellem
Managing Director and Senior Research Analyst at Piper Sandler

All right. That's helpful. Thanks.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Thanks, David.

Operator

Thank you. Our next question will come from Danielle Brill with Raymond James. Please go ahead.

Danielle Brill
Danielle Brill
Biotechnology Research Analyst at Raymond James

Hi, guys. Good morning. Thanks for the questions. I guess, Sandip, your guidance for 7,000 patients on drug by year-end implies a sequential decline in that patient base. Is there any particular reason why we might be expecting a slight dip next quarter? And then I just have a clarification on the strategy with DEEs. Is there any reason to leave this as separate indications from LGS, or do you feel a basket study might be better suited for lorcaserin versus clemizole? I appreciate the clarity there. Thank you.

Sandip Kapadia
Sandip Kapadia
CFO at Harmony Biosciences

Yeah. Hi, Danielle. Thanks for the question.

Sandip Kapadia
Sandip Kapadia
CFO at Harmony Biosciences

I think our overall thought around there was we said approximately 7,000, we're not exactly guiding to exactly 7,000, so I think what we're seeing is good underlying demand, continued growth quarter over quarter, so we don't see any reason why there would be a significant change in terms of momentum going into the fourth quarter, so that's maybe Jeffrey Dierks. Is there anything else you want to add?

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

No, I would reiterate exactly what Sandip said. Guidance is an approximation. We've had very strong durable growth, double-digit growth. It's been very consistent, and so we have a lot of confidence, but yes, it's an approximation, and again, the average number of patients we round to the nearest 50, so Danielle, I would anticipate Q4 to look similar to what we've sort of seen in momentum in Q2 and Q3. Sure.

Sandip Kapadia
Sandip Kapadia
CFO at Harmony Biosciences

Yeah. Excellent.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

Danielle, in terms of your other question regarding the basket study, look, we know that the regulatory agency is open for a basket study approach. We are pursuing two programs, as we mentioned, with EPX-100, one in DS and one in LGS. We are taking a measured approach in that, look, LGS is already a heterogeneous disorder. So we want to keep the patient population as homogeneous as possible. But we are definitely exploring the opportunity of a basket study for the rest of the DEEs. And depending on the experience that we will have with EPX-100, that will be the clinical development plans for EPX-200.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

But we are also excited, very excited about EPX-200 liquid formulation of lorcaserin given the mechanism of action, the preclinical evidence for efficacy, and also the clinical evidence for efficacy that is published widely in literature in an article by Tolete and Devinsky et al. in 2018 in Neurology.

Danielle Brill
Danielle Brill
Biotechnology Research Analyst at Raymond James

Thank you. Understood.

Operator

Thank you so much. Thank you. Our next question will come from Ash Verma with UBS. Please go ahead.

Ashwani Verma
Ashwani Verma
Executive Director at UBS

Great. Thanks for doing my question. So I have to just for Zygel in the ReConnect study, so you have 80% of patients which have this complete methylation. I want to understand why you're studying the non-complete methylation patients as well. When you looked at the data previously, I think the complete methylation patients are the ones that are likely to show the benefit. And your primary endpoint is also on the complete methylation.

Ashwani Verma
Ashwani Verma
Executive Director at UBS

Do you have any understanding from the FDA that you could get a label irrespective of the methylation status if the study is positive? And just quickly on the quarter, so is there any inventory build here for WAKIX? So the average patient number added by 4%, increased 4% sequentially, but the net sales is up 8%. Thanks.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Yeah. Good morning, Ash. Thanks for your question. Kumar, do you want to address the question on the ZYN-002?

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

Yeah. Sure. Hey, good morning, Ash. Yeah. Great question, by the way. So you are right, Ash. The primary target population and the primary endpoint is on patients with complete methylation. There's a nominal number of partially methylated patients as well. And this came about during our discussion with the FDA.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

If we do see supporting data in partially methylated patients that's consistent with the data that we see in complete methylation patients, that does leave us an opportunity to discuss with the regulatory agency in terms of getting a broader label. But for now, the study primary target population and the primary endpoint is complete methylation patients. Sandip?

Sandip Kapadia
Sandip Kapadia
CFO at Harmony Biosciences

Yeah. Just a question in terms of trade inventory. I mean, we see normal fluctuations of trade inventory every quarter. Nothing significant that I would mention, at least for that has had an impact this quarter. Typically, what you do see in the second half of the year, you do see some improvement in gross net. The first quarter, as you know, as you go into the year, gross net tends to be higher, starts coming down in the second quarter, and the second half of the year tends to be.

Sandip Kapadia
Sandip Kapadia
CFO at Harmony Biosciences

So what you're probably seeing a little bit of improvement in gross net as well. So hopefully, that provides some context.

Ashwani Verma
Ashwani Verma
Executive Director at UBS

Great. Thanks.

Sandip Kapadia
Sandip Kapadia
CFO at Harmony Biosciences

Thanks, Ash.

Operator

Thank you. Our next question will come from Corinne Jenkins with Goldman Sachs. Please go ahead.

Corinne Jenkins
Corinne Jenkins
Managing Director at Goldman Sachs

Hi, good morning, guys. Maybe a couple from us. Could you just talk to us about how you're planning to measure fatigue in the clinical study of Pitolisant HD and narcolepsy and what would be clinically meaningful in terms of benefit on this patient population? And if you could just provide some context around how common fatigue is within a narcolepsy population, that would be helpful. Thanks.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Good morning, Corinne. Thanks for your question. Kumar, the plan for fatigue and HD?

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

Yeah. Thank you, Jeff. Hey, good morning, Corinne. Thanks for the question. Yeah.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

Fatigue is a symptom that is more prevalent than one would think in patients with narcolepsy. The literature has indicated that about 60%-70% of patients with narcolepsy have fatigue, and we are doing a longitudinal prevalence and impact of fatigue in patients with narcolepsy. That study is underway, and at least the preliminary data shows that prevalence of fatigue is very similar. About two-thirds of the patients with narcolepsy have significant fatigue. In terms of how do we measure, this is an indication for which there are no approved treatments, so we had an extensive leading-edge work to look at all the instruments that are out there to measure fatigue, and we are devising an instrument that specifically measures fatigue in patients with narcolepsy.

Kumar Budur
Kumar Budur
Chief Medical and Scientific Officer at Harmony Biosciences

A lot of work that is already done and will be discussing with the regulatory agencies in terms of the appropriateness of using that instrument specifically to measure fatigue, specifically in patients with narcolepsy, because that is what the regulatory agencies expect. Thank you.

Corinne Jenkins
Corinne Jenkins
Managing Director at Goldman Sachs

Okay. Awesome. And then in terms of the patents around the Pitolisant HD, could you just help expand on the kind of nature and number of those patents that you have into those early 40s?

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Sure, Corinne. I think the patents around HD are around the unique formulation with regards to that, along with the gastro-resistant coating and the improvement in the overall PK profile. So the clinical data will sort of support that with regards to what that PK profile will demonstrate. And that is the basis of the HD patents out to the 2044. Okay.

Corinne Jenkins
Corinne Jenkins
Managing Director at Goldman Sachs

Thank you.

Operator

Thank you.

Operator

Our next question will come from Jason Gerbery with Bank of America. Please go ahead. Hey, guys.

Jason Gerberry
Managing Director and Equity Research Analyst at BofA

Good morning. Thanks for taking my questions. Two for me. First is on EPX-100. Wondering, have you looked at EPX-100 relative to Longboard's Bexa in the zebrafish model? And is that something that's sensitive enough to tease out potential areas of differentiation or more of just a measure of more of a go, no, go viability of the molecule in that disease state? And then as we get into next year, just curious with respect to WAKIX IP litigation, there's a Markman hearing. And I'm just curious if you can kind of help frame what are some of the key kind of outcomes we'd be looking for with respect to the crystalline form patent?

Jason Gerberry
Managing Director and Equity Research Analyst at BofA

How important is it to get a broad claim construction to sort of box out generics and secure an infringement ruling ultimately when the case goes to trial in 2026? Thanks.

Sandip Kapadia
Sandip Kapadia
CFO at Harmony Biosciences

Thanks for your question. Sure. Hey, good morning, Jason. Look, EPX-100 was extensively studied in the zebrafish model, and it showed great efficacy. Similarly, EPX-200 was also studied in this model, which showed great efficacy, which was in turn confirmed by clinical experience. In terms of bexicaserin, obviously, it's not our compound, and we don't have access to that compound. But within the zebrafish model, there were some analogs that were studied that had some pure 5-HT2C agonistic properties. And that data is published in the literature by Griffin et al. in Brain Communications.

Jason Gerberry
Managing Director and Equity Research Analyst at BofA

Yeah.

Jason Gerberry
Managing Director and Equity Research Analyst at BofA

I think, Jason, in terms of your second question about the IP litigation, I think, first of all, we can't really comment on ongoing litigation. But I think the Markman hearing that's scheduled for next March, I mean, basically, what that does is it sets up the claims construction. I think it sets up the overall claims construction in the case and then informs the plan for the trial in 2026. So I think that is the purpose of that in terms of the next stage of that process in the IP litigation.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Yeah. And yeah. And I think that with regards to, as we said before, we're confident in the strength of the IP, the litigation, the patents. There were two potential challenges to the USPTO that were denied, and those decisions were final. So our position is strength in the overall IP and out to 2030.

Jason Gerberry
Managing Director and Equity Research Analyst at BofA

Thank you.

Operator

Thank you. Our last question will come from François Brisebois

François Brisebois
Managing Director and Senior Biotechnology Research Analyst at Oppenheimer & Co Inc

Hi. Thanks for the question. Can you help just elaborate on the percentage of patients that are both on oxybate and WAKIX? And has that changed with time? I'm just trying to gauge also the reimbursement response. Has that been the same? Is it more difficult? You just mentioned there's so much growth that comes from the REMS doctors. So I'm just wondering if reimbursement has changed. And do you foresee any changes if Erkexin come in the market in terms of reimbursing all these products in the polypharmacy market? Thank you.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Yeah. Good morning, Frank. Thanks for your question. Thanks for hanging in there. Jeff Dierks?

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

Sure. Frank, the percentage of patients that are on both WAKIX and an oxybate has been relatively consistent.

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

It's been low double digits, like in the teens, probably for about the last couple of years. And the reimbursement landscape has been modestly consistent with where we are. Obviously, with the introduction of more generic oxybates, it's going to be "easier" to potentially get concomitant use. Certain plans are obviously looking at this category and disease area. But again, remembering that this is a rare orphan space. There's not a lot of patients. It's not very high on a managed care's plan. For a lot of them, it's more costly to put in additional administrative steps given the limited number of patients. But obviously, moving forward, there's likely going to be a number of potential branded products that could be introduced later in the decade. Obviously, time will tell how managed care will look at this.

Jeffrey Dierks
Jeffrey Dierks
Chief Commercial Office at Harmony Biosciences

But overall, rare orphan categories tend to not be as highly managed as other categories. Given there's a limited number of patients, it's not a huge budget area. I think our goal is to continue to provide meaningful enhancements. Obviously, the GR and the HD program are really going to be able to hopefully provide some enhanced efficacy. Maybe that can end up helping to potentially reduce the amount of controlled substances patients take, reduce the amount of stimulants, potentially oxybate, which obviously would be extremely favorable not only for the patients but also the payers.

Operator

Thank you. At this time, I would like to turn the call back over to Jeff Dayno for any additional or closing remarks.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

Thanks, operator. Thanks, everyone, for joining our call today.

Jeffrey Dayno
Jeffrey Dayno
President and CEO at Harmony Biosciences

We were excited to share with you the progress we are making in our robust late-stage pipeline and look forward to providing future updates. Thanks, and have a great rest of your day.

Brennan Doyle
Brennan Doyle
Head of Investor Relations at Harmony Biosciences

This does conclude today's Harmony Biosciences Third Quarter 2024 Financial Results Conference Call. You may now disconnect your line and have a wonderful day.

Executives
Analysts
    • David Amsellem
      Managing Director and Senior Research Analyst at Piper Sandler
    • Charles C. Duncan
      Managing Director at Cantor Fitzgerald
    • François Brisebois
      Managing Director and Senior Biotechnology Research Analyst at Oppenheimer & Co Inc
    • Ami Fadia
      Managing Director and Senior Biotech Equity Research Analyst at Needham & Co
    • Corinne Jenkins
      Managing Director at Goldman Sachs
    • Ashwani Verma
      Executive Director at UBS
    • Graig Suvannavejh
      Managing Director at Mizuho Securities
    • Jason Gerberry
      Managing Director and Equity Research Analyst at BofA
    • Danielle Brill
      Biotechnology Research Analyst at Raymond James
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