Harmony Biosciences Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
April 30, 2024

There are 13 speakers on the call.

Operator

Good morning. My name is Madison, and I will be your conference operator today. At this time, I would like to welcome everyone to Harmony Biosciences' First Quarter 2024 Financial Results Conference Call. All participant lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Please be advised that today's conference maybe recorded. I will now turn the call over to Louis Sinai, Head of Investor Relations. Please go ahead.

Speaker 1

Thank you, operator. Good morning, everyone, and thank you for joining us today as we review Harmony Biosciences' Q1 2024 financial results and provide a business update. Before we start, I encourage everyone to go to the Investors section of our website to find the materials that accompany our discussion today, including a reconciliation of our GAAP to non GAAP financial 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 Doctor. Jeffrey Dano, President and CEO Jeffrey Dierks, Chief Commercial Officer Doctor.

Speaker 1

Kumar Badur, Chief Medical Officer and Sandy Kapadia, Chief Financial Officer and Chief Administrative Officer. As a reminder, we will be making forward looking statements today, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties. Our actual results may differ materially, and we undertake no obligation to update these statements even if circumstances change. We encourage you to consult the risk factors referenced in our SEC filings for additional details.

Speaker 1

We have a lot to share this morning, so in order to allow ample time for Q and A, we will keep our prepared remarks brief this morning. I would now like to turn the call over to Doctor. Jeffrey Dano. Jeff?

Speaker 2

Thank you, Louis, and thanks, everyone, for joining our conference call today. Earlier this morning, we were excited to announce our 3rd business development deal in the past 8 months with the acquisition of Epigenix Therapeutics. As you may have seen in our earnings release, in addition to this news, we have accelerated our growth strategy and have transformed our business to position Harmony for long term value creation. Given all the exciting news and upcoming catalysts that we have to share today, we will not be able to go into depth on everything on this call. But the key points that I want you to take away from our call today regarding the Harmony story are the following.

Speaker 2

Our commercial business is strong and WAKIS continues to demonstrate durable growth now year 5 in the market. Wakeix is a $1,000,000,000 plus market opportunity in adult narcolepsy alone, and we are well on our way as we expect to continue to grow the brand through LOE in 2,030. We are growing organically by advancing our lifecycle management programs pettolacent with the next generation formulations designed to improve the patient experience and patient outcomes as well as generate new IP to extend the pettolacent franchise out beyond 2,040. We are also pursuing new indications for pettolacent, including near term catalysts in pediatric narcolepsy and idiopathic hypersomnia to help even more patients living with unmet medical needs and drive incremental revenue. We are making good progress toward pediatric exclusivity, which would provide an additional 6 months of regulatory protection on the back end of our longest patent, a commercial opportunity of upward around $1,000,000,000 and we are growing inorganically through business development.

Speaker 2

With our previous announcement regarding the licensing of TPM1116, a highly potent and selective orexin 2 receptor agonist to solidify and grow our sleep like franchise and today's announcement regarding the acquisition of Epigenics and their rare epilepsy portfolio. We now have 3 orphan rare CNS franchises in late stage development, each with potential opportunities of $1,000,000,000 to $2,000,000,000 and patent protection ranging from the late 2030s to mid-2040s. At Harmony, we believe we are well positioned to become the leading patient focused CNS Biotechnology company delivering innovative treatments to patients with unmet medical needs and while doing so drive significant and durable value creation. I want to take a minute to emphasize the value of our pipeline that we have been building. Across these 3 franchises, we are currently working with 8 assets being studied across 13 development programs.

Speaker 2

More importantly, we expect these programs to result in at least one new product or indication launch each year over the next 5 years. We have planned ahead, executed smart and strategic business development deals with low upfront costs and risk tied to the achievement of certain clinical regulatory and sales milestones that is successful are poised to generate significant near term and long term value creation. And we are not stopping here. While we have made significant progress on our business development goals, we continue to look to build out our pipeline even further. While we do a broad sweep of the BD landscape, our focus is on assets in the orphan rare CNF space consistent with the 3 deals we have done over the past 8 months.

Speaker 2

We feel there are other opportunities out there that would fit our growth strategy. And with approximately $454,000,000 in cash, cash equivalents and investments as of March 31, we are in a solid financial position to execute on additional BD opportunities have demonstrated our ability to do so. Let me share a few highlights with you from each of our 3 franchises that are in late stage development. First, building off our leadership position in sleepwake with Wakeix. We began working on extending the patellecin franchise several years ago by developing new formulations of pittolacin that are planned to come to the market both during and towards the end of the weightage lifecycle.

Speaker 2

Importantly, these products are designed to improve patient experience and patient outcomes and we'll have new IP that extends our durable growth and leadership in sleep wake out beyond 2,040. We remain committed to the idiopathic hypersomnia patient community and gaining an indication for patelcint in IH and plan to submit an sNDA to FDA in the second half of this year. After following the orexin space for the last few years and doing diligence on several of the assets, we licensed TPM1116, a highly potent selective oral orexin 2 receptor agonist with a potential best in class profile due to its unique chemical structure and preclinical data. This solidifies our leadership position in sleep medicine and demonstrates our long term commitment to the field. Our 2nd franchise in rare neurobehavioral disorders continues to make good progress and the lead program with ZYN-two is in a pivotal Phase 3 registrational trial for Fragile X syndrome and on track for top line data readout in mid-twenty 25.

Speaker 2

With approximately 80,000 patients living with Fragile X in the U. S, this is a sizable market opportunity and we also have global rights to this asset with even bigger market potential. And today, with the announcement of our latest BD deal, the acquisition of Epigenix Therapeutics, we established a rare epilepsy franchise and acquired 2 new assets to serve as the foundation of what could be a larger franchise. The lead program is with Clemasol Hydrochloride or EPX-one hundred, which has received both orphan drug designation and rare pediatric disease designation from the FDA for Dravet syndrome and Lennox Gastaut syndrome. It is currently in a pivotal registrational trial for Dravet syndrome with top line data expected in 2026.

Speaker 2

We also plan to start a pivotal Phase III trial with EPX-one hundred in patients with Lennox Gastaut syndrome in the second half of this year. Kumar will be providing more color on the growth of our development enterprise and our robust pipeline programs later in the call. The important takeaway is that we expect these programs to result in at least one new product or indication launch each year over the next 5 years with multibillion dollar revenue potential extending out beyond 2,040. While I have focused on the significant progress in our catalyst rich pipeline that has the ability to deliver durable growth out beyond 2,040, I don't want you to lose sight of the continued durable growth that WACIKS has demonstrated now year 5 in the market. We delivered another strong quarter with net revenues of $154,600,000 which represents 30% growth year over year.

Speaker 2

With these strong results, we are reiterating our 20 24 net revenue guidance of $700,000,000 to $720,000,000 We believe that we can continue to grow the franchise for years to come and remain confident that Wake Its represents a $1,000,000,000 plus opportunity in adult narcolepsy alone and we are well on our way. With that, I will turn the call over to Jeffrey Dirks, our Chief Commercial Officer for an update on our commercial performance in our SleepWake franchise. Jeff?

Speaker 3

Thanks, Jeff. The Q1 was another strong quarter for Wakeix and adult narcolepsy, highlighted by continued product adoption and growth in our underlying business fundamentals. Net sales for the quarter were $154,600,000 representing 30% growth from the same quarter previous year. The solid net sales performance in the Q1 reaffirms our confidence in our net sales guidance of $700,000,000 to $720,000,000 for the full year of 2020 4. Key drivers of our performance in the quarter were continued growth in the average patients on Wakeix, growth in the Wakeix prescriber base and continued strong favorable market access as seen on Slide 56.

Speaker 3

The average number of patients on Wakeix increased to approximately 6,300 in the first quarter. We are extremely pleased with the continued growth in patients on Wakeix and the durability we are seeing in that growth in year 5 of our rare orphan commercialization. We successfully navigated the traditional Q1 seasonal payer dynamics and changed healthcare cybersecurity impact and are seeing good leading indicators in our underlying business fundamentals heading into the Q2. We saw continued growth of the Waitage prescriber base beyond oxybate writers in the Q1 as well. We saw meaningful growth in new writers of Wakeix in the approximately 5,000 non oxybate REMS enrolled healthcare professional audience and are more than 33% writer penetrated in the segment at the end of the Q1.

Speaker 3

This audience represents an insulated group of prescribers and patients from the oxybates, and the continued growth of prescribers in this segment each quarter reaffirms Wakeix is growing the branded writer segment beyond the oxybates by providing a meaningfully differentiated product profile and one that offers broad clinical utility and across the entire narcolepsy treating healthcare professional universe. In addition to the growth in new prescribers, we continue to see growth in the depth of prescribing among the approximately 4,000 oxybate REMS enrolled healthcare professionals, even with the availability of new and generic oxybate options. Waygigs is highly penetrated within this prescriber audience and see growth in this segment each quarter as Waykix is being prescribed to additional narcolepsy patients. Our ability to call in the entire narcolepsy treating healthcare professional audience allows us to tap into the full diagnosed narcolepsy patient opportunity, giving us confidence in the long term future growth of LACIKS. The last driver of our performance in the Q1 was the continued strong and favorable market access coverage for Wakeix, even with the availability of new and generic oxybate options on the market.

Speaker 3

We've seen no changes to the overall payer coverage for Wakeix over the past year, and we believe we are well positioned to support future growth. In summary, we had another strong quarter of durable growth and performance in net sales, patient adds and growth in prescribers of Waykix. We're seeing good leading indicators in our underlying business fundamentals heading into the Q2. And the solid performance in Q1 reaffirms our confidence in our full year net sales guidance of $700,000,000 to $720,000,000 I'm excited about our performance and we are confident in Wakeix representing a potential $1,000,000,000 plus opportunity in adult narcolepsy alone and we are well on our way. I would like to now turn the call over to our Chief Medical Officer, Kumar Badur, to discuss the advancements on our clinical development programs.

Speaker 3

Kumar?

Speaker 4

Thank you, Jeff. Good morning, everyone, and thank you for joining us today. We are making great progress in advancing, expanding and diversifying our pipeline programs, several of which are in late stage development. As Jeff mentioned, we now have 13 different development programs ranging from preclinical to registration studies across 8 different assets and under 3 distinct franchises focused on rare orphan neuro indication with high unmet need. And with the ability to launch a number of these indications in the coming years.

Speaker 4

Our full clinical development pipeline is shown on Slide 7, and I think you can appreciate how much it has grown over the past year. Let me start by sharing some key updates in each of our franchises, starting with our growth in SleepWink franchise and our program in idiopathic hyposmia. We met with the FDA in March to discuss the next steps for our IH program. We were encouraged by the discussions we had with the agency on our data, the burden of the disease, limitations of current treatment options and the off label use of scheduled drugs. We feel the agency understands and appreciates the high unmet need in IH.

Speaker 4

While we understand the bar for approval is high, we are moving forward and plan to submit an sNDA in the second half of twenty twenty four. The submission will be based on the totality of the data generated from the INTUNE study, including data from the ongoing long term extension study, which strongly supports pfetolacens efficacy in patients with IH. We have also identified other supportive information that will be included in the sNDA to further strengthen our submission. We are optimistic and remain committed in bringing a new treatment option to patients living with IH that is not scheduled, has an established safety profile and a simple dosing regimen. Moving to pediatric narcolepsy, we are on track for the PDUFA date of June 21.

Speaker 4

We are pleased with the FDA's decision to grant priority review. This decision highlights the need for new treatment options for the approximately 4,000 pediatric patients living with narcolepsy. For Prader Willi syndrome, we initiated the Phase 3 TEMPO study in the 1st quarters. This is a global, multicenter, double blind, randomized, placebo controlled study that will randomize approximately 134 patients in either edolacent or placebo in a 1 is to 1 ratio. We are committed to obtaining pediatric exclusivity for pitalosant.

Speaker 4

We are making good progress on the two requirements, data in pediatric narcolepsy and data in PWS patient by submitting FEED's narcolepsy sNDA and initiating the Phase 3 study in PWS respectively. Opium pediatric exclusivity will add 6 months of regulatory exclusivity to the back end of the longest patent and this represents a significant commercial opportunity for Gay Cakes. An important element of our franchise growth strategy is to develop new psilocin based assets with the goal of generating new IP, extending the pitalacin franchise beyond 2,040 and bringing new and improved versions of pitalacin to the market for people living with narcolepsy and other sleep wake disorders. We are making good progress on these formulations, NextGen 1, NG1 and NextGen 2, NG2 with our partner BioCell A. We are pleased to report positive PK data in NG1 and enteric coated psilocence formulation designed to demonstrate bioequivalence to latex through an abbreviated development pathway.

Speaker 4

The NG1 formulation is designed to potentially decrease GI side effects and also have an important additional clinical differentiation compared to AKX, that is the ability to start dosing at 17.8 milligram at the beginning of the therapeutic dose range for pyrtozoent rather than the need to titrate up to the therapeutic range. This clinical differentiation will be supported by a dosing optimization study. As shown on Slide 9, the pilot D study showed similar rate and extent of absorption that is Cmax and AUC between NG1 and AKX demonstrating relative bioavailability. The next steps for NG1 include initiating the pivotal bio e. Coli and dosing optimization studies in the Q4 of this year.

Speaker 4

Based on the development timeline, we expect a PDUFA date in 2026. In addition, our provisional patent for NG1 has been filed and the potential for patent protection up to 2,044. Moving on to next gen 2, our NG2. This is an enhanced formulation of pidolafent designed to deliver an optimized PK profile and a higher dosage strength. This formulation will have a new IP, of full development program and is expected to launch towards the end of LASIK's life cycle.

Speaker 4

We are on track to report PK data from this formulation in the first half of this year. We are also very pleased to continue to strengthen our leadership position in Sleep Weight with licensing of PPM1116. Licensing an RSM asset was a natural next step for us as it leverages our established experience and expertise both in development and commercialization of treatments for sleep wake disorders. PPM1116, a novel orexin 2 receptor agonist, represents a potential best in class product profile amongst the current orexin II receptor agonists. It has a new chemical scaffold compared to the other orexin II receptor agonists potentially contributing to its unique product profile.

Speaker 4

CPM1116 will be evaluated for the treatment of narcolepsy and other sleep wake disorders. The preclinical data suggests its potential best in class profile based on its high potency, good selectivity, potential for once daily dosing and good safety profile. We look forward to sharing the preclinical data at an upcoming scientific conference. In terms of development milestones, we expect to file an IND in mid-twenty 25 and initiate 1st in human studies in second half of twenty twenty five. Moving on to our next franchise, the neurobehavioral to follow this franchise.

Speaker 4

ZYN-two, a pharmaceutically manufactured synthetic cannabidiol gel devoid of THC with a patent protected permeation enhanced gel for transferal delivery, which like Ligix could be a foundational asset in our growing neurobehavioral franchise. We are currently enrolling patients in the pivotal Phase 3 RECONNECT trial in Fraasyl X syndrome. With approximately 80,000 patients diagnosed with Fraasyl X syndrome in the U. S. Alone and no approved treatments, there is significant unmet medical need.

Speaker 4

We expect to complete patient enrollment in the first quarter of 2025 with top line data in mid-twenty 25. ZYWAN-two was also studied in an open label Phase II proof of concept study, the INSPIRE study, in patients with 22q deletion syndrome and generated positive signals in aberrant care checklist. This represents another opportunity to help approximately 80,000 patients with 22q deletion syndrome in the U. S. Alone.

Speaker 4

And we have been interacting with the FDA about a Phase 3 program in 22Q and expanding this franchise. It is worth noting ZYN-two is a global opportunity for Harmony and we look forward to exploring ex U. S. Opportunities to bring this novel treatment to patients living with TransAl X syndrome and 22Q dilution syndrome around the world. Finally, we announced today the establishment of our 3rd race orphan neuro franchise in epilepsy with the acquisition of Epigenics Therapeutics.

Speaker 4

This acquisition brings us 2 assets targeting great epilepsies, both global opportunities for us. The first asset, EPX-one hundred is climesole hydrochloride, a potent, colon, centrally acting serotonin agonist, which is currently in a pivotal registrational clinical trial for the treatment of Dravet syndrome in children and adults. Dravet syndrome is a rare and severe developmental epileptic encephalopathy with high unmet medical need. The proven mechanism of action of clinical trials via the serotonin 6 system could offer good efficacy and importantly a safer product profile than currently available treatment options and improve the quality of life and functioning in patients with DS. The schematic of the trial design for this registration study known as the Argus study is shown on Slide 11.

Speaker 4

We anticipate topline data from the ORCA study in 2026. EPX-one hundred is also poised to enter a Phase 3 registrational trial for the treatment of Lennox Gastaut syndrome, another rare and severe developmental epileptic encephalopathy with high unmet medical need. We anticipate starting this study in the second half of twenty twenty four. EPX-one hundred has received both the Parfums Drug Designations and AS pediatric disease designations from the FDA for both Dravet syndrome and Lennox Gastaut syndrome. A second investigational product, EPX-two hundred, is a potent oral centrally acting selective fibrosis IIc agonist that is currently in IND enabling studies.

Speaker 4

EPX-two hundred also received orphan drug designation for DALY syndrome and Lennox Gastaut syndrome as well as rare pediatric disease designation for Lennox Gastaut syndrome. To conclude, we have made tremendous progress in advancing our development programs, expanding our pipeline and diversifying our portfolio, resulting in multiple late stage development programs across 3 different franchises: sleep break, neurobehavioral and rare epilepsy. If successful, these programs could result in at least one new product or indication launch every year over the next 5 years along with the potential to help hundreds of thousands of patients across all the rare neurological disorders we are investigating. I'm proud of the hard work and dedication of our teams at Harmony and look forward to sharing additional updates as we continue to advance our clinical development programs. On behalf of Harmony, I would like to thank all the patients and their families for participating in our clinical trials as well as clinical investigators and site personnel for their efforts and commitment in helping us advance our development programs.

Speaker 4

I'll now turn the call over to our CFO, Sandeep Khakadia, for an update on our financial performance. Sandeep?

Speaker 5

Thank you, Kumar, and good morning, everyone. This morning, we issued our Q1 earnings release and filed our 10 Q, where you'll find the details of our Q1 2024 financial and operating results. Our financial performance is also shown on Slides 12 through 15. We're off to a great start to the year in 2024. We reported another strong quarter of growth in revenues and net income along with continued cash generation.

Speaker 5

Our unique financial performance and profile positions us well to continue advancing our growth strategy and look for opportunities to drive value for shareholders. We reported net revenues of $154,600,000 compared to $119,100,000 in the prior year quarter, representing a growth of 30%. Performance in the quarter reflects the continued strong underlying demand for WakeCakes coupled with the typical seasonality dynamics that the industry as a whole experiences each year in Q1 including a higher gross to net deduction along with a couple of days of drawdown in trade inventories. We also reported strong growth in net income and margin. Non GAAP adjusted net income for the Q1 of 2024 was $50,700,000 or $0.88 per diluted share compared to $40,700,000 or $0.67 per diluted share in the prior year quarter.

Speaker 5

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 Q1 with $453,600,000 of cash, cash equivalents and investments on the balance sheet. The balance reflects continued cash generation

Speaker 6

of our

Speaker 5

underlying business, which provides us the financial flexibility to continue executing on business development and opportunistically returning capital to shareholders via our share repurchase program. Looking ahead, we continue to expect strong quarter over quarter growth with a potential for trade inventory drawdown of a few days in Q2 as we head into the summer. We are reiterating our net revenue guidance of 2024 of $700,000,000 to $720,000,000 highlighting our progress towards the $1,000,000,000 plus opportunity in narcolepsy alone. With respect to expenses, we do expect to take IP R and D charges for the licensing of PPM1116 and the acquisition of Epigenics in the Q2. The charges will primarily consist of the upfront cost of $25,500,000 $35,000,000 respectively, offset by the value of net assets we have acquired.

Speaker 5

In addition, we expect ongoing operating As you saw from the terms of both transactions, we continue to be disciplined with capital deployment. We structured both transactions with low upfront payments with success driven regulatory and sales milestones. As a result of our recent efforts in business development, we now have multiple programs in late stage development with the potential to generate revenue in the coming years.

Speaker 2

So in conclusion,

Speaker 5

we're off to a great start to the year along with strong outlook for the balance of the year and well positioned to continue to drive value for shareholders. And with that, I'd like to turn the call back to Jeff for his closing remarks. Jeff?

Speaker 2

Thank you, Sandeep. As we have just highlighted for you, Harmony is a growth story and our growth is accelerating. We have strategically been executing on expanding our pipeline and diversifying our portfolio to drive near term revenue out to 2,030 and durable long term revenue growth out beyond 2,040. The key drivers of our catalyst rich pipeline and future revenue next gen formulations of betuliscent that can generate new IP and extend the betuliscent franchise and drive durable revenue out beyond 2,040 new indications for patellecine, including near term catalysts in pediatric narcolepsy and idiopathic hypersomnia. Gaining pediatric exclusivity and an additional 6 months of patent protection on the back end of our longest patent, which represents a significant commercial opportunity.

Speaker 2

Our 3 business development deals over the past 8 months that has resulted in 3 orphan rare CNS franchises in late stage development, each with potential peak sales opportunities $1,000,000,000 to $2,000,000,000 and patent protection ranging from the late 2030s to mid-2040s. And the growth of our development enterprise, which now includes 8 assets advancing across 13 development programs, resulting in the potential for at least one new product or indication launch each year over the next 5 years. At Harmony, we believe we are well positioned to become the leading patient focused CNS biotech company delivering innovative treatments to patients with unmet medical needs and while doing so drive significant and durable value creation. Thank you for your attention. And I will now turn the call over to the

Operator

We will take our first question from Charles Duncan with Cantor Fitzgerald.

Speaker 7

Hey, good morning, Jeff and team. Thanks for taking our questions and congratulations on good commercial quarter as well as the recent business development deals, impressive activity. Thank you, Charles. So I had a quick question for Jeff Dirks in terms of the commercial business. Nice growth year on year, appreciating the seasonal issues.

Speaker 7

But in terms of the number of patient adds, let me ask you about how you feel about that as well as one of the things that Kumar mentioned is in the next generation, an ability to titrate more rapidly. And I guess I'm wondering if you look at the current patient population taking Wake X, how do you feel that's impacting the use of Wake X? Will the improved titration rate make a difference in terms of persistence within Wakex? Thanks.

Speaker 2

Yes. Charles, thank you for your question. Jeff, you want to Sure. Thanks for

Speaker 3

the question, Charles. To answer your question on the average number of patient adds in the Q1, first off, I'll tell you we're extremely pleased with the durable growth that we're seeing in the average number of patients. It grew 150 patients sequentially from what we reported in Q4. We continue to see strong top line demand in new patient starts. And Charles, as you know, like the 150 average patient growth is well in line with our past 2 Q1 average patient growth in the last 2 years.

Speaker 3

And as you cited, we typically have the Q1 seasonal payer dynamics, the reauthorization, the prescriptions. And a reminder, coming into 2024, we had a larger established patient base. We had 6,150 average patients coming into 24, whereas a year ago we only had about 4,900. And all of those established patients are exposed to those reauthorizations that occur every January for specialty and branded products. And certainly, Charles, you know, those reauthorizations just simply add time.

Speaker 3

So about 25% more of our patients were exposed to that. And then on top of that, we did have the additional headwind of change healthcare. But as you know, we've got a great commercial model. We have a closed distribution network and the outstanding work of our team. We did a tremendous job in navigating those dynamics and we've continued to been able to demonstrate growth every single quarter in average patients.

Speaker 3

We're going to continue to tap into that large patient opportunity as the market allows each quarter. And we're confident as Sandeep shared in his prepared comments to see quarter over quarter growth for remainder of 2024 and beyond.

Speaker 7

That's helpful. If I could 1 development question that is regarding the new assets, Epigenics. Congratulations on that. Kumar, you mentioned 26 being data with EPX-one hundred. I guess I'm wondering what is really timing of 2026?

Speaker 7

I know these are difficult studies to enroll, but could that prove to be an overly conservative estimate of time to top line data on EPX-one hundred?

Speaker 4

Good morning, Charles. Thanks for the question. Look, we just acquired this asset. And right now, we believe 2026 is when we will be able to come out with the top line data. Obviously, as the study progresses, as we are able to bring in Harmony resources, the expertise in R and D and especially the advocacy support group that we have very well established here at Harmony who work with hand in glove with patient community.

Speaker 4

So all of these things will definitely help with the recruitment. And you're right, recruiting DS patients is not necessarily easy, but I think we have a really A plus team to recruit these patients. And as we make progress with the clinical trials, we will provide more granularity for the timeline.

Speaker 7

Okay. Thank you for taking our questions.

Speaker 8

Thank you. We will

Operator

take our next question from Francois Brisebois with Oppenheimer.

Speaker 6

Hi, I apologize if the question was already asked. I got dropped off the call for a second. But I was just wondering in terms of the acquisition, the Epigenetics acquisition, is there any data that shared that you intend to share soon about other past readouts just given it's a private company and people might not be familiar with the story?

Speaker 2

Good morning, Frank. Thank you for your question. I think, yes, Kumar can talk about data generated and what we'll be sharing going forward.

Speaker 4

Yes. Thank you, Frank. Yes, I mean, Clemethol Hydrochloride, Frank, is the 1st generation antihistamine that was introduced in 1950s and sunset in 1970s, introduction of 2nd and third generation antihistamines. There is some safety data from that period of time, which is very benign. And then the SCN1A mutation model of Zebra fish where clamsos hydrochloride was studied is published extensively by Scott Barabankos, professor at University of California in San Francisco.

Speaker 4

The mechanism of action, Frank, is a potent centrally acting serotonergic drug, and this is proven mechanism of action when it comes to developmental epileptic encephalopathy. So that, alongside with the robust data that we observed in SE1M mutation, Zebrafish model and safety data that we have from Clonazole, most of it is available in the public domain. And within the clinical trial, this is a Phase 3 registrational clinical trial, and we have access to the long term open label data that has not been published yet. Obviously, we don't know the double blind data. It is double blind, the open label long term study data is available, and we will be discussing on what will be the appropriate time to put those data in the public domain.

Speaker 6

Okay, perfect. And then just a question in terms of and again, sorry if you mentioned this, but the 150 new patient adds, is there any seasonality impact here on the number of patient adds? Or is it mostly the gross to net and that impact on the inventory also having an impact? Or does the number of patient adds also get impacted by seasonality in the Q1? Because we had seen it a few years ago.

Speaker 6

It was only 100 patients, I think, in Q1 'twenty two. So just wondering about that. And then you mentioned the 700 to 720 guidance, but you I don't think you mentioned the 7 1,000 patients on drug. Is that still something that we should expect or are we getting away from that 7,000 number here? Thank you.

Speaker 3

Sure. Frank, thanks for the question. And yes, from a Q1 perspective, we do see seasonal payer headwinds that do have an influence on the number of patient adds in the Q1. And you cited the 150 patient adds we had this quarter is in line with the last 2 years. We had 200 last year, we had 102 years ago.

Speaker 3

So very consistent as we get reauthorization headwinds on prescriptions. And the one thing taken into account this year, Frank, is we had a larger established patient base coming into 2024. We had about 6,150 average patients that were exposed to that reauthorization this year, whereas coming into 2023, we only had 4,900. So we had about 25% more patients exposed to that reauthorization of prescriptions that most specialty and branded products faced in January. And as you know, simply adds time to the process, which does have a little bit of influence on patient adds, but it's in line with our expectations.

Speaker 3

We're extremely pleased with what we saw in the Q1. And then leading into your questions about guiding towards approximately 7,000 patients at the end of the year, in addition to reiterating our guidance on net sales, I am reiterating the guidance that we're expecting to end the year at around 7,000 average patients.

Speaker 6

Thank you.

Speaker 2

Thanks, Frank.

Operator

We will take our next question from Ami Fadia with Needham.

Speaker 8

Hi, good morning. Congrats on all the progress at the company along with the recent deals. My first question is on idiopathic hyposmia. Could you share some of the details of the discussion that you had with the FDA and how they view some of the additional analysis that you're going to share with them? And did you specifically get clarity on whether these data would be adequate for approval or was that characterized as a review issue by the FDA?

Speaker 8

And then I have one more question.

Speaker 2

Good morning, Ami. Thank you for your question. It's Jeff. Yes, I think as you know, we had a good interaction with FDA regarding the IH program. And also as you're aware, it always comes down to a review issue.

Speaker 2

But based on the discussion and interaction and the strength of the data that we generated, we feel that there is a path forward. And Kumar can share some more of the color around the FDA interaction. Yes.

Speaker 4

Thank you, Jeff. Thank you, Ami, for the question. Yes, we had good discussions with the regulatory agency on the data, the unmet need, the lack of treatment options and especially around the off label use of controlled stimulants, we did feel that the FDA recognizes acknowledges and appreciates the lack of treatment options in patients with idiopathic hypersomnia. We are optimistic based on the totality of the data, I mean, not just the open label, but also the trends we saw in the randomized withdrawal period and especially the long term extension study, which I have mentioned earlier, where we still have approximately 90 patients in the long term extension study. All of those patients have completed 6 months of treatment and more than half of them have completed 12 months of treatment and about 10 of those patients have completed 18 months of treatment and we continue to see persistence of effectiveness and we are not just the safety data, but also the effectiveness data as well.

Speaker 4

So combined with all of these things, in addition, we are also planning on obtaining the real world data and other data that will not just strengthen the submission, but also contextualize the data that was generated from the INTEAL study. So based on all of this, we are optimistic. We do recognize the bar is high. But as Jeff has consistently mentioned, we are committed to patients with idiopathic hypersomnia to bring fetolacin to them as soon as possible, as efficiently as possible and giving them an option for a non scheduled with a simple dosing regimen and an established safety profile.

Speaker 8

Got it. That's very helpful. Just with regards to EPX-one hundred, the stock of drugs has had a history of some safety issues. And so could you comment on how you got comfortable with the safety profile of EPS-one hundred? And if you could give us some color around the dose that's being studied in the trial relative to the dose that has been approved in the market for all these years?

Speaker 8

And also if you could talk about the IT protection that you anticipate for the effort? Thank you.

Speaker 4

Yes. Sure, Rami. I mean, I guess you were referring to some of the cardiovascular ratios that FINTEPLA has, which also act via system in a strict mechanism of action. The system in a strict mechanism of action, Ami, with this particular indication set of indications like DEE is a proven mechanism of action, particularly with the fenfluramine, which is the active ID fintechpla, does show some cardiovascular effects like pulmonary arterial hypertension, which in turn results in thickening of the heart blouse. And that's why that particular product has a black box warming and is also subject to the REMS program.

Speaker 4

With the Clemsyl hydrochloride, there is a huge body of safety data, one from the time that it was introduced as a 1st generation antihistamine in 1950s, 60s and 70 days. And on top of it, we conducted a full battery of non clinical safety studies, including 6 month studies, repeat dose studies in drugs, 9 month repeat dose studies in dogs. And our senior dogs are extremely sensitive when it comes to the findings of cardiovascular issues. We did not see anything to suggest that the climesol hydrochloride has any cardiovascular impact, including QDC. And then these data were reviewed by the FDA, And they did not ask us to conduct any additional cardiovascular monitoring apart from protein EAC and the monitoring of pulse and blood pressure.

Speaker 4

And on top of it, Ami, earlier I mentioned that the patients who complete the double blind randomized study roll into open label extension study. And that's a 3 year open label extension study. And some of these patients have exposure past 1 year. And the safety profile looks pretty good in the sense none of them have had any cardiovascular issue and also we haven't seen any laboratory abnormalities as well. There are 2 tests that are often used in this indication.

Speaker 4

1 of them has significant GI issues and requests fewer function monitoring on a regular basis. And the other one, as we mentioned, had issues with cardiovascular system. And we haven't seen either of them, the safety profile is pretty benign and the efficacy data that we have seen in the open label parties pretty compelling, potential to offer a very unique benefit risk profile in this patient population.

Speaker 8

Thanks, Kumar. That was very helpful. And I just have that IP question as well, if that's okay.

Speaker 4

Yes. This is an old compound, so we don't have a composition of matter patent, but we do have a method of use patent. And of course, because both of these are orphan diseases, rare diseases, we will get 7 years of exclusivity, orphan drug exclusivity in U. S. For each of these indications.

Speaker 4

And this is a global opportunity for us. So we will get 10 years of exclusivity in Europe for each of these indications.

Speaker 2

And just to clarify, Kumar, method of use out to 2,034?

Speaker 4

2,034 and any other extension. Regulatory exclusivities. Perfect.

Speaker 8

Thanks very much.

Speaker 2

Thank you, Ami.

Operator

And we will take our next question from David Amsellem with Piper Sandler.

Speaker 9

Hey, thanks. So I have two questions, one on ClemiZole and then one on the Orexin. So on ClemiZole, so can you talk about how the product compares versus next generation options with serotonergic activity? I'm thinking specifically of longboard spexicasterin given its recent body of data. How do you think about how Clomazole stacks up?

Speaker 9

And I understand it's a polypharmacy based market, but do you think that there's room for these agents with some overlap mechanistically? So that's number 1. And then number 2, on the Orexin, and I know it's early, but can you talk to the development path here? You've got Alkermes and you've got Takeda advancing their orexin in NT1 and Alkermes also in NT2. Do you think more about yours potentially in IH or in other settings where hypersomnolence is a hallmark symptom?

Speaker 9

Or are you also looking at your garden variety path forward in terms of narcolepsy-1 and 2? Just help

Speaker 3

us better understand how you're thinking about it. Thank you.

Speaker 2

Thanks, David, for your questions. Kumar, you want to address on EPX-one hundred and then I'll respond to the ERP question.

Speaker 4

Thank you, Jeff. Hey, good morning, Dave David. Thanks for the question. Regarding pexicastrine, I guess you're referring to the data from the specific study, right, which was recently disclosed. Look, it's a small study, 52 patients.

Speaker 4

The efficacy data looks good, but it's also short study too, and we haven't seen the long term safety data yet as they continue to collect. So I see that as early stage still and you just need to see how it will pan out as it goes to the next stage of development. And in this particular space, David, as you know, or as we mentioned just now, it's a polypharmacy market, a significant unmet need. There is a place for different mechanism of action to coexist, even incremental differentiation in efficacy or safety is embraced by the providers and the patients alike.

Speaker 2

And David, with regard to your question about TPM1116 in our Orexin 2 agonist, while we recognize it's an early stage and the other development programs ahead, I think that we're still learning from. So I think that we are still learning from those data and those programs and as they are generated. So with regards to our development plan and approach, I think we have optionality. I think that there'll be optionality based on what we learn from some of these other development, orexin development programs ahead. The most logical approach, I think, as you're aware, going in through NT1, which is the prototypical disorder with orexin deficiency as opposed to NT2 and IH.

Speaker 2

But we will learn from some of the other programs and have the optionality with regards to what the best step forward will be as we advance TPM1116 for additional programs.

Speaker 4

Okay. Yes. Thank you, Jeff. Yes, just to add on. Look, I mean, the question regarding is it garden variety, AT1, AT2 or something else.

Speaker 4

David, this particular compound, TPM1116, has a real high potency, and that actually provides us optionality in terms of looking at other central disorders of hypersomnolins as well. I mean, as you know, Takeda had to limit the dose to 10 milligram and they decided to only pursue NT1, not NT2 or idiopathic hypersomnia this stage. The preclinical profile that we see with the TPM1116 looks pretty good. And based on that, we do see optionality here other than the European Central Disparters of high performance.

Speaker 10

Thanks, Kumar. Yes.

Speaker 9

All right. Thanks, guys.

Speaker 2

Thanks David.

Operator

We will take our next question from Gregg Svanovich with

Speaker 8

Mizuho.

Speaker 10

Great. Thank you. Can you hear me okay?

Speaker 2

Yes, we can, Greg. Good morning.

Speaker 10

Thanks, Jeff. Congrats on the great progress that we're seeing from the company. I've actually got a question for Sandeep. Sandeep, just so in light of the new BD deals that you've done and your plans to potentially continue adding to the pipeline, I think it's a 2 part question. 1st or maybe Jeff you can answer this first part of the question.

Speaker 10

Is the current plan on any next deal that you do to first prioritize on adding yet another or a 4th CNS franchise? Or is the current plan or your thoughts currently to build on the existing 3 SINA's franchises you have now? And then the second part of my question, maybe this is really more for Sandeep, is in light of kind of the added pipeline programs, which is I think we all think is in that positive. Just wondering if you've got any initial thoughts on what the P and L might look like the company both in terms of SG and A and R and D for Harmonia over the next 1 or 2, 3 years? Thanks.

Speaker 2

Sure, Greg. Let me address your first question. In terms of the sort of the BD, our growth strategy going forward, again, I think it's also optionality again. I'm very pleased with how we've been able to expand and grow the pipeline, diversify our portfolio and these 3 CNS franchises where we are now, each with potential peak sales opportunities of $1,000,000,000 to $2,000,000,000 We could either based on we continue to be active in BD and looking at the landscape. So we could go further in either of these franchises with additional assets or if we see another opportunity in another and S area that we could diversify the pipeline further, we are that would be another path forward.

Speaker 2

The other thing I want to comment on and to I think just bring light to, this approach also is important that it leverages our internal expertise in the CNS area as well as the commercial model, our internal synergies. So as we expand and diversify this portfolio in these CNS areas, then just our commercial model where we can thoughtfully apply that model to any new indications, any new products that would go to market. So I think that's how we're seeing the strategy going forward. Pleased with the progress to date, but we're not stopping there. Sandeep, you want to?

Speaker 5

Yes, sure. With respect to your question in terms of the financial impact overall, as you saw from both of these deals, look, we continue to be very disciplined in the capital deployment. Restructured them with low up runs relative to the base of the assets with more success driven milestones. These are all fairly late stage programs. So in terms of actual capital resources, we're really for the next couple of years, if you just think about it.

Speaker 5

And also we've growing revenues. We've got internal synergies overall that we can also bring and growing profitability that gives us the same capacity to continue to do additional business development opportunities, while still maintaining a relatively profitable business that's self sustaining and can continue to grow. So I think I feel good about what we've been able to acquire. These are again very late stage assets like I mentioned. For this year, it's about $35,000,000 more in terms of incremental cost and probably similarly as we go into next year and we'll get close to top line.

Speaker 5

So really a good smart investment upfront to hopefully unlock incremental value.

Speaker 3

Operator, next question?

Operator

We'll take our next question from Corinne Johnson with Goldman Sachs. Please go ahead. Your line is open, Corinne Johnson.

Speaker 11

Sorry, I was on mute. Good morning, guys. Can you just help us understand how you thought about the market opportunity and central value for these assets, EPX-one hundred and two hundred? And in particular, like how do you think about the path to differentiation there? And with that differentiation, what the peak sales opportunity could be for such an asset?

Speaker 2

Good morning, Corinne. So in terms of the market opportunity referring to the epigenetics and the rare epilepsy franchise. So I think obviously the epilepsy space is significant market opportunity beginning in this area of orphan rare and the developmental epileptic encephalopathies. We are in the registrational trial for Dravet is kind of a smaller patient population, but planning to initiate a Phase 3 study in Lennox Gastaut syndrome in the second half of this year, a larger market opportunity. But we also see this acquisition as sort of the foundation of a broader epilepsy franchise.

Speaker 2

So with regards to current market opportunity, with regards to what's currently available, I think as Kumar has been alluding to, we see the potential product profile of EPX-one hundred in terms of overall benefit risk compared to the current treatment options as a significant product offering in terms of therapeutic option in the near term. And then we look to draw on our internal sort of expertise in this area, look for potentially additional assets to build out a broader epilepsy franchise. And I think that's the current view on where we are on there. Kumar, any other thoughts?

Speaker 4

Yes. I mean, as I mentioned earlier, based on what we have seen, we believe that it will offer a compelling value proposition with a unique benefit risk profile for patients, especially from a safety profile given some of the significant limitations we see with some of the drugs that are currently approved in this space.

Speaker 8

Okay.

Speaker 9

Thank you.

Operator

And we will take our next question from Jason Gerberry with Bank of America.

Speaker 12

Hey guys, good morning. Thanks for taking my question. I guess one question on EPX-one hundred, is the base case here that you have the same class safety labeling around CV tox as FINTEPLA. And I'm seeing in the preclinical there's some affinity for 5 HT2B. So just wondering that coupled with its only 100 patient pivotal study, if you can or think you may be able to decouple that safety issue from a safety labeling perspective?

Speaker 12

And then from a development perspective, are you planning to run a second pivotal trial? Would that be done in parallel once you get the asset in house or would that be after you get data in 2026? Just wondering sort the timeline to market for EPX-one hundred? Thanks.

Speaker 2

Good morning, Jason. Yes, thank you for your question. Yes, I think Kumar can sort of unpack that with regards to the opportunity that we're seeing near term with regards to Dravet's. And then in terms of differentiated from a safety perspective with regard to FINTEPLA?

Speaker 4

Yes. Hey, Justin. Good morning and thanks for the question. I mean, the answer to your first question is no. We do not anticipate any cardiovascular liability with the climesole hydrochloride that is based on the large body of data from the 1st generation antihistamine and then all the preclinical data that we have generated for this particular compound, including repeat dose chronic tox studies in the preclinical clinical space.

Speaker 4

And also looking at the data, the FDA did not ask us to echo Cardiobrum or monitor for pulmonary arterial hypertension or cardiac valvular abnormality. So we do not believe that this will have any of the safety issues that we do see with SPRINTELPRO, which has a black box warning and is subjected to REMS program. And also based on the long term extension study open label data that we have seen so far, we are actually very pleased with the safety profile, both in terms of lack of any lab of normalities and also from the cardiovascular safety perspective and just safety and tolerability in general. And to your second question about the second study, the current study, Jason, I know that on clinicaltrials.gov, it still face it as Phase 2 study, but it's actually a registrational Phase 3 study. It started out as a Phase 2 II study and then the sample size was increased to 100 subjects, equally randomized 1:one between clonazole and placebo.

Speaker 4

And now this is a pivotal registration study and the top line data will be available in 2026. And typically, Jason, as we know, in rare disorders, one adequate and well controlled study is generally accepted as substantial evidence for effectiveness by the regulatory agencies. So we do plan to file based off of this study should the data look good.

Speaker 5

Got it. Okay. Thank you.

Speaker 2

Thanks, Jason.

Operator

And we will take our last question from Danielle Brill with Raymond James.

Speaker 6

Hi, guys. Good morning. Thanks for the question. I'm curious how you're gauging elasm 16 profile versus the other orexin agonists? And what type of data should we expect to be presented at the upcoming scientific meeting?

Speaker 6

And which conference are you targeting? Thank you.

Speaker 2

Thanks, Daniel, for your question. Kumar?

Speaker 4

Sure. Hey, good morning, Daniel. Thanks for the question. Yes, just some background information, Daniel, on PPM1116. This originated out of tayzin Pharma.

Speaker 4

This is a conglomerate with chief expertise in drug discovery. They actually worked very closely with Professor Anagisawa, who many of you know is the one who actually discovered oreson and their impact on sleep wake. They have been working on this series of compounds for a while and the advanced TPM1116 because that was the patch in the series that they found. TPM1116 has a very novel chemical scaffold compared to the other rhexan receptor agonists that are out there. And we believe this novel chemical scaffold offers certain unique features that we have seen in our preclinical studies.

Speaker 4

1st and foremost, high potency, good selectivity, potential for once a day dosing and good preclinical safety data. We are completing the rest of the IND enabling experiments and we plan to submit IND in mid-twenty 25

Operator

Thank you. I am showing no further questions. I would now like to turn the call back for any closing remarks.

Speaker 2

Thank you, Madison, and thanks, everyone, for joining our call today and for your interest in Harmony. As you heard from us this morning, the future is bright at Harmony. Based on the strength of our commercial business of Wakeix and narcolepsy and the value of our expanding pipeline, which will serve as the foundation for durable revenue generation out beyond 2,040. We look forward to providing updates as we continue to accelerate our strategy for long term growth. Thank you and have a great day.

Operator

This does conclude today's Harmony Biosciences Q1 2024 Financial Results Conference Call. You may now disconnect your line and have a wonderful day.

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Harmony Biosciences Q1 2024
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