Harmony Biosciences - Q2 2024

Transcript

Operator (participant)

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' Second Quarter 2024 Financial Results Conference Call. All participant lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. 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 Brendan Doyle, Head of Investor Relations. Please go ahead.

Brendan Doyle (Head of Investor Relations)

Thank you, operator. Good morning, everyone, and thank you for joining us today as we review Harmony Biosciences' second 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 in our life cycle, we believe non-GAAP financial results better represent the underlying business performance. Our speakers today on the 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'll 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. I would like—I would now like to turn the call over to Dr. Jeffrey Dayno. Jeff?

Jeffrey Dayno (President and CEO)

Thank you, Brendan, and thanks, everyone, for joining our conference call today. Q2 was another very productive quarter for the team at Harmony, delivering another quarter of strong revenue growth for WAKIX and continued advancement in our late-stage clinical development programs, highlighted by the significant progress made on our next-generation pitolisant high dose, or pitolisant HD, development program, formerly referred to as NG2. During our Q1 earnings call, we shared the initial pilot PK data for the pitolisant gastroresistant, or pitolisant GR, program, formerly referred to as NG1, along with the development plan as the first part of our pitolisant lifecycle management activities.

This quarter, we are excited to provide an update on our Pitolisant HD program, with a targeted PDUFA date in 2028 and a provisional patent filed out to 2044, providing us the opportunity to extend the pitolisant franchise to the mid-2040s with durable, long-term revenue generation. First, let me provide some color regarding the reasons why we are excited about advancing this program, because of the unmet medical needs in the narcolepsy community that Pitolisant HD is designed to address. Later in the call, Kumar will share some of the initial pilot PK data and a few other details from the Pitolisant HD development program.

WAKIX offers a strong overall benefit risk profile for patients living with narcolepsy, has brought a meaningful enhancement to the market as the first and only non-scheduled treatment indicated for both excessive daytime sleepiness, or EDS, and cataplexy, and has been extremely successful in the market. But given the nature of narcolepsy as a chronic neurological disorder with difficult-to-treat symptoms, there still remain unmet needs and opportunities for continued innovation. For Pitolisant GR and HD, the innovation is more focused on the continued unmet needs in the narcolepsy market and what we can do to address those needs. First, we know that greater than 75% of narcolepsy patients experience residual symptoms while on treatment and could benefit from a treatment with greater efficacy.

This is why we are pursuing a high-dose pitolisant formulation that also has an optimized PK profile to drive greater efficacy to address this need in the market. Second, about 60% of patients living with narcolepsy experience fatigue, which is a different symptom than EDS and a common symptom in chronic neurological diseases. With a higher dose of pitolisant, and based on the positive signals that we saw in both EDS and fatigue with pitolisant in our phase 2 proof of concept study in Type 1 myotonic dystrophy, or DM1, we plan to pursue a fatigue indication for pitolisant HD in patients with narcolepsy, as well as other neurological diseases such as DM1.

Next, as we explained for our Pitolisant GR program, a driving force behind the gastro-resistant coating is the fact that about 90% of patients with narcolepsy experience GI symptoms such as nausea, dyspepsia, and abdominal discomfort. There is a mechanistic rationale for this, especially in patients with NT1 or type 1 narcolepsy, related to the orexin deficiency, since orexin has effects on the vagus nerve in the brain, which is the central controller of gut motility.... In addition to the underlying disease mechanism, one out of five patients on narcolepsy medications experience GI side effects related to the common narcolepsy treatments that are used. WAKIX is well-tolerated, with a low incidence of nausea, but the gastro-resistant coating feature is designed to address the predisposition to GI symptoms in patients with narcolepsy, as well as the GI tolerability issues patients have experienced with other narcolepsy treatments.

Taken together, the higher dose, optimized PK profile, gastro-resistant feature, and our plan to pursue additional indications would address significant unmet needs in patients with narcolepsy and position pitolisant HD as a meaningfully differentiated product and result in a differentiated label compared to WAKIX. With a provisional patent filed, a potential IP out to 2044, and a target PDUFA date in 2028, this gives us an opportunity to introduce a differentiated product prior to WAKIX LOE in 2030 to extend the pitolisant franchise to the mid-2040s and drive durable, long-term revenue generation. Our commercial team conducted preliminary market research based on the target product profile for pitolisant HD. Initial results suggest that the features I described to you would be of real interest to patients, be viewed as offering meaningful benefits by healthcare professionals, and perceived as clinically superior compared to WAKIX by payers.

To round out our sleep-wake franchise, we were very pleased with the FDA approval of WAKIX for EDS in pediatric narcolepsy patients ages 6 years and older, and we're excited to launch this new indication into the market on July 1. As a reminder, the pediatric narcolepsy data, along with data from the ongoing phase 3 TEMPO study in Prader-Willi syndrome, keeps us on track toward obtaining pediatric exclusivity and an additional 6 months of regulatory protection on the back end of our longest patent, which would take us to September 2030. We are on track to submit an sNDA for idiopathic hypersomnia later this year and are very excited about our potential best-in-class orexin-2 agonist program for TPM-1116. We are working with our partner, Bioprojet, and are on track toward filing an IND mid-2025 and then initiating first-in-human studies second half of 2025.

Beyond our strong sleep-wake franchise, we are also advancing late-stage programs in our other two franchises, neurobehavioral and rare epilepsy. Harmony has expanded its pipeline and diversified its portfolio that now includes three orphan rare CNS franchises, each one of which has peak sales opportunities of $1-$2 billion. I want to highlight that our pipeline now has 8 assets advancing across 13 development programs, and 3 of them are in phase 3, with a fourth phase 3 trial to begin later this year. Importantly, this pipeline is poised to deliver at least one new product or indication launch each year over the next 5 years. This, along with pitolisant HD PDUFA date targeted for 2028, translates into the potential for significant, durable, long-term value creation out beyond 2040. Kumar will be providing you updates on our development programs later in the call.

While we advance our pipeline programs, we remain focused on execution across the company and delivered another solid quarter with WAKIX net revenue of $172.8 million, representing 29% growth year-over-year. With these strong results, we are once again reiterating our 2024 net revenue guidance of $700 million-$720 million, and remain confident that WAKIX represents a $1 billion+ market opportunity in narcolepsy alone, and we are well on our way. What reinforces our confidence in the durability of the WAKIX franchise is the news we shared earlier this morning regarding the WAKIX polymorph patent being upheld once again after the second and final attempt to challenge the patent.

Late last week, the U.S. Patent and Trademark Office, or USPTO, issued its final denial of the petition for reexamination of the WAKIX patent, which was filed by a short seller. We have always stood by WAKIX and our intellectual property. This reexamination request represented the second attempt to challenge the WAKIX patent, and in its decision, the USPTO stated, and I quote, "This decision is final and non-appealable." End quote. We remain very confident in the strength of our patents, the validity of the patent portfolio, and our ability to rigorously enforce the intellectual property rights protecting WAKIX. This bolsters our confidence in the durability of the Pitolisant franchise with a PDUFA date for Pitolisant GR in 2026, a target PDUFA date for Pitolisant HD in 2028.... The IP for WAKIX out to 2030, and provisional patents filed for Pitolisant GR and HD out to 2044.

This puts us in a solid position to extend the pitolisant franchise out to the mid-2040s. We also remain active in business development, with the goal of building out our pipeline even further. With approximately $434 million in cash, cash equivalents, and investments as of June 30th, we are in a solid financial position to execute on additional BD opportunities that are consistent with our growth strategy and offer the potential to drive further value in our overall business. Lastly, we look forward to hosting our inaugural Investor Day on October 1st in New York City, where we will have an opportunity to highlight our robust late-stage pipeline and share some new data with you. With that, I will turn the call over to Jeffrey Dierks, our Chief Commercial Officer, for an update on our commercial performance. Jeff?

Jeffrey Dierks (Chief Commercial Officer)

Thanks, Jeff. We saw another solid quarter of continued commercial progress for WAKIX in the second quarter, highlighted by continued product adoption and growth in our underlying business fundamentals. Net sales for the quarter were $172.8 million, representing 29% growth from the same quarter prior year. The solid net sales performance in Q2 reaffirms our confidence in our net sales guidance of $700 million-$720 million for the full year 2024. 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 slide 4 and 5. The average number of patients on WAKIX increased to approximately 6,550 in the second quarter.

We're extremely pleased with the sequential increase of approximately 250 patients from what we reported last quarter and the durable growth in year five of our rare orphan commercialization. The growth in average patients in Q2 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 also saw the WAKIX prescriber base increase again in the second quarter. We're seeing continued growth in the WAKIX prescriber base beyond the oxybate REMS-enrolled healthcare professionals, and we're approaching 40% penetration in this segment of approximately 5,000 healthcare professionals at the end of the second quarter. This segment of healthcare professionals represents an insulated group of prescribers and patients from the oxybates that we continue to tap into each quarter to drive performance.

The growth in this segment demonstrates WAKIX is broadening the branded wake-promoting segment beyond the oxybates by providing a meaningfully differentiated product profile and one that offers broad clinical utility across the entire narcolepsy-treating healthcare professional universe. 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. As we've shared during previous earnings calls, our ability to call on the broad, approximately 9,000 narcolepsy-treating healthcare professional audience allows us to tap into the full diagnosed narcolepsy patient opportunity, giving us confidence in the billion-dollar-plus opportunity for WAKIX and narcolepsy.

Supporting the growth in patients and prescribers is our favorable market access and formulary coverage for WAKIX. We've seen no changes to the overall broad payer coverage for WAKIX over the past year with the introduction of new branded and generic options, and we believe we are well positioned to support future growth. And as we are closing out another solid quarter of performance, we are excited to receive the news of the approval of WAKIX for the treatment of excessive daytime sleepiness in pediatric narcolepsy patients six years and older on June twenty-first. WAKIX now represents the first and only non-scheduled treatment option for pediatric narcolepsy patients, and importantly, all narcolepsy patients have EDS. So with this approval, we have the opportunity to access the full diagnosed pediatric narcolepsy patient opportunity. The pediatric narcolepsy opportunity is a small but meaningful opportunity.

It represents approximately 5% of the diagnosed narcolepsy opportunity or approximately 4,000 patients, and this approval was contemplated in our full year 2024 net sales guidance. Our commercial team was prepared for this approval and started our now approved outreach the week following the approval. Our field sales team was trained later that week and was out educating healthcare professionals about the new indication starting July first. Although it's still early, we are seeing positive indicators from the launch. We're getting very positive feedback and interest from the patient and healthcare professional community, and payers have begun to add WAKIX for pediatric narcolepsy to their formularies within the first 30 days from approval.

In summary, we had another strong quarter of durable growth and performance in net sales, patient adds, and growth in prescribers of WAKIX, reaffirming our full-year net sales guidance and average patient guidance that we issued earlier this year. With the addition of the pediatric narcolepsy approval for the treatment of EDS, coupled with the strong fundamental business in our adult narcolepsy, we're seeing good leading indicators in our underlying business fundamentals. Heading into the third quarter, we anticipate the typical summer seasonality of fewer patient visits, lower foot traffic in offices, consistent with previous years and other chronically managed conditions. We remain confident in continued growth in average patients and prescribers of WAKIX moving forward.... I'm excited about our performance and confidence in WAKIX, representing a potential billion-dollar-plus opportunity in narcolepsy alone, and we're well on our way.

I would like to now turn the call over to our Chief Medical and Scientific Officer, Kumar Budur, to discuss the advancements in our clinical development programs. Kumar?

Kumar Budur (Chief Medical and Scientific Officer)

Thank you, Jeff. Good morning, everyone, and thank you for joining us today. We continue to make great progress in advancing our pipeline programs, several of which are in late-stage development. As Jeff mentioned, we now have 13 different development programs, ranging from preclinical to registrational studies across 8 different assets and under three distinct franchises focused on rare neurological indications with high unmet medical need. Our full clinical development pipeline is shown on slide number 6. It is important to note that we currently have three ongoing phase III registrational studies that are actively recruiting patients for three distinct indications and plan to start a fourth phase III registration study in patients with LGS during this half of 2024. Starting with our sleep-wake franchise, the pitolisant high dose, our pitolisant HD program.

It is an enhanced formulation of pitolisant, designed to deliver an optimized PK profile along with a higher dose GR coating and target unique symptoms. We conducted a pilot PK study with four different prototype formulations in a five-way crossover study, comparing the four prototype formulations with WAKIX as a reference formulation at a dose strength of 35.6 milligrams, the highest labeled dose for WAKIX. Based on the pilot PK data, we are pleased to advance this program forward. The preliminary data from the prototype formulations showed a meaningful differentiation with at least approximately 20% increase in relative bioavailability and a decrease in the variability compared to WAKIX.

Alongside further work on formulation optimization, we will progress this program and study up to 2 times the current highest labeled dose of WAKIX, where we expect to demonstrate a further increase in relative bioavailability and decrease in variability in the PK profile. In addition, the GR coating is designed to address the predisposition to GI tolerability issues in patients with narcolepsy and enable to start at the beginning of the therapeutic dose range. Therefore, an optimized PK profile, along with a higher dose, GR coating, and targeting unique symptoms such as fatigue in narcolepsy, is expected to provide a differentiated label and product profile.

We will pursue an abbreviated clinical development program based on the leading-edge work, including establishing safety margin for pitolisant up to 180 milligrams in a repeat dose study and qualitative research study on fatigue in narcolepsy that were completed over the past couple of years to support pitolisant HD program. We are targeting a PDUFA date in 2028. Provisional patents have been submitted, with the potential for patent protection until 2044. Moving on to pitolisant gastro-resistant, or GR program, we are on track to initiate the dosing optimization study in the fourth quarter of this year and a pivotal bioequivalent study in the first quarter of 2025, with PDUFA in 2026. For the idiopathic hypersomnia, or IH program, we are on track to submit an sNDA in the fourth quarter of this year.

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 pitolisant efficacy in patients with IH. We have also identified other supporting information that will be included in the sNDA, including real-world evidence from pitolisant use in idiopathic hypersomnia in Europe, to further strengthen our submission. We are optimistic and remain committed in bringing a new treatment option to patients living with IH. In our neurobehavioral franchise, we remain on track to report top-line data from the phase III RECONNECT registrational trial of ZYN002 in Fragile X syndrome in mid-2025. In the rare epilepsy franchise, patient enrollment continues in the EPX-100 phase III ARCADES trial for Dravet syndrome, with the top-line data expected in 2026.

We are also preparing to initiate a phase III study in LGS, another rare and severe developmental epileptic encephalopathy, with high unmet medical need later this year. In summary, we have made significant progress in advancing our late-stage pipeline across three distinct franchises. If successful, these programs could result in at least one new product or indication launch each year over the next five years, along with the potential to help hundreds of thousands of patients across all the rare neurological disorders we are investigating. 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 efforts and commitment in helping us to 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 (CFO and Chief Administrative Officer)

Thank you, Kumar, and good morning, everyone. This morning, we issued our second quarter earnings release and filed our 10-Q, where you'll find the details of our second quarter 2024 financials and operating results. Our financial performance is also shown on slides 10 through 13. We delivered another quarter of solid financial performance with continued double-digit top-line growth, profitability, and strong cash generation. Our financial performance and profile positions us well to continue advancing our growth strategy for the remainder of the year and beyond. We reported net revenues of $172.8 million, compared to $134.2 million in the prior year quarter, representing a growth of 29%. Performance in the second quarter reflects the continued strong underlying demand for WAKIX. We also reported growth in income and margin.

Non-GAAP adjusted net income for the second quarter of 2024 was $60.6 million, or $1.05 per diluted share, compared to $45.9 million or $0.76 per diluted share in the prior year quarter. We believe non-GAAP adjusted net income better reflects the underlying business performance. Please see our press release for a reconciliation of GAAP to non-GAAP results. With respect to expenses during the second quarter of 2024, we incurred two one-time charges related to business development transactions in the quarter, which impacted the R&D expense line. We incurred a $25.5 million charge related to the upfront licensing fee paid as part of the 2024 Bioprojet sub-licensing agreement for TPM-1116, and a $17.1 million IPR&D charge related to the acquisition of Epygenix.

The IP R&D charge related to Epygenix reflects the upfront payment of $35 million, offset by assets acquired in the transactions, primarily composed of a deferred tax of approximately $18 million. We structured both transactions with low upfront and success-driven milestones. This allows us to efficiently use shareholder capital and focus future investments on advancing the development program and reaching value inflection points. We ended the second quarter with $434.1 million of cash, cash equivalents, and investments on the balance sheet. The balance reflects continued strong cash generation, which provide us the financial flexibility to execute on business development and to opportunistically return capital to shareholders via our share repurchase program. Looking ahead, we continue to expect quarter-over-quarter growth for the balance of the year. We do expect an impact of summer seasonality we typically experience in the third quarter.

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

Jeffrey Dayno (President and CEO)

Thank you, Sandip. In closing, I am very proud of the accomplishments that were made by the Harmony team during Q2, including significant progress and continued advancement of the Pitolisant HD development program toward an expected PDUFA date in 2028. This, along with the USPTO's final decision upholding the validity of the WAKIX patent after two failed attempts to challenge the patent with IP out to 2030, puts us in a solid position to extend the Pitolisant franchise out to the mid-2040s. Continued strong revenue generation for WAKIX, with 29% growth year-over-year. The approval and launch of the pediatric narcolepsy indication for WAKIX.

Advancement of our phase 3 clinical trials for ZYN002 in Fragile X syndrome, EPX-100 in Dravet syndrome, and pitolisant in Prader-Willi syndrome, along with a fourth phase 3 trial of EPX-100 on track to initiate later this year in Lennox-Gastaut syndrome. Two business development deals, including the in-licensing of the orexin-2 agonist, TPM-1116, with our partner, Bioprojet, and the acquisition of Epygenix Therapeutics that brought in EPX-100 and established an exciting rare epilepsy franchise for Harmony. We remain focused on execution, driven in the advancement of our late-stage pipeline, strategic in our approach to further build out our pipeline, and committed to creating durable, long-term value for our shareholders while bringing innovative treatments to market to help even more patients living with rare neurological diseases and unmet medical needs. This concludes our planned remarks for this morning.

Thank you for joining our call, and I will now turn the call back over to the operator to facilitate the Q&A session. Operator, can you please open the call to questions?

Operator (participant)

At this time, if you would like to ask a question, please press 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 and one follow-up question. We'll take our first question from François Brisebois with Oppenheimer. Please go ahead.

François Brisebois (Analyst)

Hey, guys. Thanks for the questions, and congrats on, on the quarter. In terms of seasonality, you talked about the summer, the third quarter months, to be kind of similar to what we've seen in the past. I think, I think last year, you know, the patient add average was actually very solid and strong and kind of kept going in the third quarter. In the past, we had seen some drops. So is it, is it something that, that could be, you know, downward from the second quarter? Or just help us understand a little bit more what you mean by saying that it's normal seasonality that you've kind of seen in terms of patient adds in the past years.

Jeffrey Dayno (President and CEO)

Yeah. Good morning, Frank, and thanks for the question. Turning it over to Jeff Dierks to respond.

Jeffrey Dierks (Chief Commercial Officer)

Sure. Yeah, so Frank, when we talk about typical summer seasonality, it really relates to fewer patient visits and the lower foot traffic, and that's more of a reflection on new patients versus existing patients. So we do anticipate, you know, typically, a little bit lower, in terms of the new patient starts. It happens with most chronically managed, managed medications. Most patients don't schedule their medication visits during the summer when they're on vacation and holiday. But we do anticipate continued growth, as you've seen in the last 4 or 5 years of our commercialization. You know, we are obviously reiterating our guidance at approximately 7,000 average patients by the end of the year.

Obviously, with the addition of the pediatric narcolepsy indication, that's going to help us support future growth as we continue to tap into this opportunity, as the market allows around the typical seasonal dynamics.

François Brisebois (Analyst)

That's helpful. And then, you know, on that note, you talked about it's about 4,000 patients on the pediatric side. Do you expect penetration in that, you know, specifically in the pediatric population to be better or, or more difficult than the adult penetration?

Jeffrey Dierks (Chief Commercial Officer)

So Frank, what I, what I would say is that what we're seeing within the pediatric market is I would expect the pediatric patients to be added over a couple of years versus a bolus of patients, right? This is a brand-new audience for us, although there are WAKIX prescribers with knowledge of, you know, the product and its profile. You know, we have to go out and look at educating not only patients, but more importantly, the parents and the caregivers about the profile. So a little bit different than the adult population when we launched, where there was sort of a bolus of patients looking for a new option. We're going to look to tap into this opportunity. I would anticipate probably a very similar patient penetration over time.

But we're going to be looking to add these patients every single quarter as opposed to, you know, a large bolus that you anticipate in the third quarter or fourth quarter this year.

Jeffrey Dayno (President and CEO)

Yeah, and Frank, I would just add, you know, as the first and only nonscheduled product approved for, you know, patients with narcolepsy, I think WAKIX is a strong product offering for pediatric narcolepsy patients.

François Brisebois (Analyst)

Thank you.

Jeffrey Dayno (President and CEO)

Thanks, Frank.

Operator (participant)

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

Charles Duncan (Analyst)

Morning, Jeff and team. Congrats on a great quarter and appreciate taking the questions. I actually had a follow-up to that last question regarding pediatric patient population. I'm wondering, when you consider the prescriber base of the 4,000 oxybate patient prescribers versus the 5,000 non-oxybate registered prescribers, where do you think the pediatric patient population exists more? And then secondarily, in addition to penetration, what do you think about persistence? It would seem to me that persistence could be even greater in the pediatric patient population.

Jeffrey Dayno (President and CEO)

Good morning, Charles. Thank you for your question. Jeff, thoughts on, you know, where these patients are coming from?

Jeffrey Dierks (Chief Commercial Officer)

Sure. So Charles, we know there are about 1,100 healthcare professionals that manage that approximately 4,000 diagnosed pediatric narcolepsy patients. It probably skews a little more heavily to the oxybate REMS-enrolled healthcare professionals because, as you know, you know, this is a very difficult, you know, lifelong neurologic disorder to treat, and ultimately, these patients end up in some of those larger sleep centers. But the great news is, of those 1,100 doctors that... you know, a good amount of those were already in our existing call plan. They already have familiarity with WAKIX, so a lot of that is simply just getting in touch with the parents, caregivers, and patients and bringing them in the office.

I think, again, it's very early, but I would probably assume that, you know, we've seen very good persistency rates with WAKIX in adults, so I would assume that the pediatric population may have the potential for equivalent or better persistence. As you know, WAKIX, as Jeff shared, is a very ideally suited product profile for pediatric patients. It's a once-daily oral tablet you take in the morning upon wakening, so you don't have to worry about patients having to, you know, maybe go to the nurse during the day at school or have to, you know, schedule med visits for parents to drop off medicine. And being a nonscheduled treatment option, certainly that profile really appeals to the doctors, but also the parents of these individuals.

Charles Duncan (Analyst)

Excellent. Can I ask one quick pipeline question of Kumar? And that is regarding the IH SNDA filing this year. Are you waiting for any additional, you know, call it, clinical data or experimental results to enable that filing? And perhaps, can you describe a little more the real-world use that you're thinking about including it? And finally, would you anticipate that to be a relatively quick turnaround, so maybe enabling an approval and launch by second half of next year?

Kumar Budur (Chief Medical and Scientific Officer)

Hey, good morning, Charles. Thanks for the question. First of all, we are on track to submit the sNDA by the end of this year. In terms of the evidence, as we have discussed in the past, the totality of the data from the INTUNE study, the open label part, randomized withdrawal period, and also the long-term extension study, Charles, now it's almost close to a year since the study was completed. We still have over two-thirds of the patients who entered into the long-term extension study still participating in the study. Almost all of them have completed 12 months. About one-third of them have completed 18 months, and some of them are approaching 2 years. So this speaks to the persistence of efficacy and persistence on treatment and also the benign safety profile.

In terms of the additional data, we are leveraging some real-world evidence data from HERO. Pitolisant was prescribed in patients with idiopathic hypersomnia, and we'll be leveraging this data to make a stronger submission. But at the end of the day, Charles, we strongly believe in the unique benefit-risk proposition pitolisant offers in patients with idiopathic hypersomnia, where the currently available treatment option is a Schedule III controlled substance or off-label, off-controlled substance. Whereas pitolisant, which has a profile of a non-scheduled drug, with a very simple dosing regimen of taking once a day in the morning.

Charles Duncan (Analyst)

Persistence information, very helpful. Thanks for taking the questions.

Operator (participant)

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

Ami Fadia (Analyst)

Hi, good morning. Congratulations on all the progress across the pipeline. My first question is for Kumar, regarding the pitolisant high-dose formulation. Can you help us better understand how the increased exposure rate could translate into higher efficacy and maybe more from a mechanistic rationale and maybe the occupancy that you know, and sort of how much— You know, what is sort of the unmet need there, and how do you see a patient benefit during the course of a day with the higher dose formulation?

Kumar Budur (Chief Medical and Scientific Officer)

Hey, good morning, Ami. Thank you for the question. Yeah, first of all, Ami, we are really excited with the data that we saw with pitolisant high-dose formulation. We saw both an increase in relative bioavailability and also decrease in interindividual variability. Also, as we had discussed earlier in the press release, we will be studying up to two times the highest labeled dose of WAKIX. We have a body of evidence, Ami, to show a dose response, where increasing the dose results in increased effect size, both daytime sleepiness, and also some of the symptoms that we plan to target with pitolisant HD program, like fatigue in narcolepsy, which is a higher unmet need, there are no treatments.

So the combination of an optimized PK profile, the higher dose, the gastro-resistant formulation, which is designed for the widely prevalent GI symptoms in patients with narcolepsy, the ability to start at the therapeutic dose range, and finally, targeting the symptom for which there are no approved treatments, offers a very unique product profile for our patients. And this product profile was very well received when Jeff Dierks and his team did market research. Jeff, do you want to add anything?

Jeffrey Dierks (Chief Commercial Officer)

Sure. So, Ami, just from a commercial perspective, we did do some preliminary market research across about 100 narcolepsy patients, twenty-five sleep specialists and healthcare professionals, and 7 pharmacy directors of payers, just to get some feedback with the initial target product profile. And I think as Kumar stated, looking across those three audiences, what was coming out of the research was that this is a very meaningfully differentiated product profile and one that looks to be clinically superior than WAKIX, simply because the biggest unmet need that's in the marketplace is enhanced efficacy. About 75% of patients that are on treatment still report residual symptoms that impact their daily life. And so we know in a polypharmacy market, you know, physicians and patients are looking for enhanced efficacy.

Then the other second unmet need was really the untreated fatigue, which, you know, no product currently is approved for right now, and data suggests that up to 60% of narcolepsy patients also have untreated fatigue, which is very distinct and different from excessive daytime sleepiness. And then lastly, what we've seen in the literature as well as in research is, you know, more than 90% of people living with narcolepsy have GI disturbances, mostly attributed to their, you know, pathophysiology of their disease. But up to 20% of them also experience GI issues, such as nausea on their medication.

So the combination of this profile, addressing enhanced efficacy, untreated fatigue, and the GI, you know, symptom with the gastro-resistant coating, really seems to present a very clinically superior product, one that payers are going to be broadly covering and one that physicians really see as a very attractive treatment option for the vast majority of their patients.

Ami Fadia (Analyst)

Great. Thank you. The second question is for Sandip. With, you know, all of these different programs underway, there is obviously, you know, going to be a fair amount of investment from the R&D front as these assets progress. Where is business development in terms of the company's priorities and... What type of assets do you think would make sense to bring on? Would it be later stage assets as opposed to in-market assets—I'm sorry, early stage assets as opposed to in-market assets? If you can give us some color there. Thank you.

Sandip Kapadia (CFO and Chief Administrative Officer)

Sure, Ami, thanks, thanks for the question. I mean, business development continues, as Jeff mentioned, a priority for the company. You know, we've done several transactions as you saw from the last year or so. We've done three transactions. And see, we've done them in a financial disciplined manner. You know, we've looked at them all as low up front, you know, success-driven milestones overall. And the filters for us continue to be rare orphan-based in CNS. Looking at, you know, things that can help leverage a lot of capabilities that we've already built as a company. And since we have more programs in-house, you know, we're building better and better capabilities that we can leverage both on the clinical side as well as commercial. I don't know, Jeff, any thoughts further?

Jeffrey Dayno (President and CEO)

Yeah. No, good morning, Ami. Excuse me. I would just add that I think that, you know, the strategy that we've taken thus far, you know, in regards to business development, with the strategic focus in orphan rare neuro, how we, you know, build out sort of the three franchises that we have now. You know, with, you know, our main franchise in sleep wake, you know, the neurobehavioral franchise and the rare epilepsy franchise we bought in. I mean, we see that strategy and opportunities in a similar vein going forward.

Where we are now, you know, with regards to, you know, the three CNS franchises and doing it in a thoughtful and a prudent manner has set us up, you know, for each of those with, you know, potential peak sales opportunities of $1 billion-$2 billion. We can potentially add, you know, to each of those franchises or if we see an opportunity sort of in an adjacent area in neuro or neuropsych disorders, then we would contemplate that as well. You know, we like our profile, we like the way we've approached it thus far, and we continue to take a similar approach going forward.

Ami Fadia (Analyst)

All right. Thank you so much.

Jeffrey Dayno (President and CEO)

Thanks, Ami.

Operator (participant)

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

David Amsellem (Analyst)

Thanks. Just a couple. So, first, on the high dose formulation, can you talk through the dosing in contrast to both the legacy formulation and GR? And what I'm wondering in particular is, you know, with the greater potency, is there any risk at all that it could cross into controlled substance territory in terms of scheduling? And what kind of... You know, are you going to do the full suite of human abuse liability work there? So that's number one. And then number two, might have missed this earlier, but you talked more about the doctors who are not enrolled in the oxybate REMS.

Can you talk about your penetration, there, and you know, what your expectation is over time in terms of penetration into that portion of the physician audience? Thank you.

Jeffrey Dayno (President and CEO)

Yeah. Good morning, David. Thanks for your questions. Let me address, you know, part of the first one, then I'll turn it over to Kumar and Jeff Dierks. With regards to the potential for changing, you know, the abuse potential, you know, Pitolisant HD, David. You know, this is Pitolisant. So in terms of mechanistically, I mean, the short answer is no. You know, the higher dose does not change the mechanism with regards to the lack of abuse potential or abuse liability. So the program, you know, will not require, you know, further abuse liability studies.

And then in terms of, you know, the dosing and, with regards to pitolisant, you know, GR, you know, that is, based on the demonstration of bioequivalence, you know, at equivalent, doses to WAKIX within the current labeled range of 17.8-35.6. I'll turn it over to Kumar to comment on the plan with regards to the opportunity in the pitolisant HD program and what the thinking is there.

Kumar Budur (Chief Medical and Scientific Officer)

Sure. Thank you, Jeff. Hey, good morning, Dave. Thanks for the question. Yes, there were, like, several parts to your question, so let me address one after the other. Starting with the dosing regimen. Dave, the dosing regimen here will be different compared to the legacy WAKIX program, and we will provide those details at a later point in time in terms of the dosage strength that we'll be pursuing. But as we said earlier, we'll be studying up to two times the highest WAKIX label to dose. And the second question was around safety and the high. The safety profile, we have studied already as part of the leading-edge work that we did in preparation for the pitolisant HD program. We did a multiple ascending dose study up to 180 milligrams of pitolisant, and we established safety margins.

The safety profile is very similar to the safety profile of WAKIX, including the impact on cardiovascular system. So there was no QTc impact, even at 180 milligram, repeat dose. And in terms of abuse, as Jeff mentioned, you know, that's not a concern because multiple studies in the preclinical arena have not shown any release of dopamine in nucleus accumbens. That is the one that usually results in abuse potential, and we haven't seen that, and human abuse potential studies were done up to 6x times of pitolisant, and we did not see anything. In fact, pitolisant was very similar to placebo. One other question for Jeff, though.

Jeffrey Dayno (President and CEO)

Yeah, and the second part of the question to Jeff.

Jeffrey Dierks (Chief Commercial Officer)

Sure. So David, I believe you were inquiring about the penetration within the non-oxybate REMS-enrolled healthcare professionals. And so within that audience, there's about 5,000 of those healthcare professionals. And what we saw in the second quarter, that we're approaching about 40% penetration within that audience. It's been a regular rhythm that we've been able to tap in and see growth within the segment. With respect to a goal for penetration, I don't necessarily have a goal per se in mind, but I do believe there is still ample room to grow in this area. We know that all 5,000 of these healthcare professionals have at least a couple of narcolepsy patients under their care, and you know, our representatives are out educating the entire 5,000 network. So I would say we continue to tap in.

We've seen growth from 30% to 33% to north of 35%. We're now approaching 40%. So I think there's a regular rhythm of continuing to add to this space, and we're anticipating continued growth in this segment. And I do believe that there's ample room to grow for unique prescribers. And then the second phase of that, David, is as they start their first patient on WAKIX, the next phase of growth in this audience is growing the, the depth of their prescribing. And we are starting to see that as well. So it's a very unique audience, insulated from the oxybates, both branded and generic. Certainly is a catalyst for future growth moving forward.

David Amsellem (Analyst)

Thank you.

Jeffrey Dayno (President and CEO)

Thanks, David.

Operator (participant)

Thank you. Our next question will come from Graig Suvannavejh with Mizuho Securities. Please go ahead.

Graig Suvannavejh (Analyst)

Hi, good morning. Thanks, for taking my questions, and congratulations also from me on the progress in the quarter. My first question is on the commercial business and WAKIX, and I might have missed this detail before, but as we think about the second half in terms of net patient adds, I think that, historically, we've seen over the past several years, net patient adds for the second half around 600 to even 700. And I think based on what I had heard earlier from Jeffrey Dierks, that you had planned to end the year at 7,000.

Just wanted to revisit what the second half implies if you ended at $65.50, I think, by my math, and again, if I have my math correct, that only implies 450 in additional net patient adds for the balance of the second half. So if you could just provide some commentary around what our expectations should be for the second half on net patient adds, and appreciating that the revenue guidance has remained the same. Then my second question, just on the HD formulation. Knowing that you're going to be testing higher doses to improve on efficacy, I'm just wondering what the expectation on safety should be.

I realize you've got a GR formulation, but are you anticipating that with the higher doses that you're going to be evaluating versus the legacy WAKIX product, that the side effect profile relatively will be the same or perhaps even less than legacy WAKIX? Any comments around what you're anticipating to see on safety relative to WAKIX with the HD formulation would be appreciated. Thanks so much.

Jeffrey Dayno (President and CEO)

Yeah. Thanks, Graig, for your questions. First one over to Jeff Dierks on the commercial side.

Jeffrey Dierks (Chief Commercial Officer)

Sure. So Greg, with respect to thinking about full year 2024 and patient adds, so yes, we did add about 250 average patients sequentially from the first quarter and the second quarter, and reported approximately 6,550 average patients. We are reiterating our guidance of approximately 7,000 at the end of the year, so your math is correct. And I think it's important that, yes, you know, historically, when you're looking at year two, year three, and even year four, we're now in year five of a rare orphan commercialization, and you know, we feel extremely confident and good about the growth we're seeing. We expect continued growth for the balance of the year. As we shared a little bit earlier, we do expect the typical, you know, summer seasonality that impacts new patient starts.

You tend to have some patients who are chronically managed, scheduling their appointments in the fourth quarter for med management. So we do anticipate strong refill behavior in the fourth quarter. Typically, patients like to fill their new and refill medicines before the end of the year, insurance resets, insurance changes next year. We're seeing good underlying business fundamentals, right? We recently added the pediatric narcolepsy indication approval that, you know, ultimately helps support future growth, and, you know, we'll continue to tap into that diagnosed patient opportunity as those seasonal market dynamics allow each year. As you know, Sandip alluded earlier, we're confident in continued growth for the balance of the year and quarter-over-quarter growth.

I think as you're looking at where we anticipate ending the year, our guidance of about 7,000 should kind of help you think about the third and fourth quarter moving forward.

Jeffrey Dayno (President and CEO)

Yeah, and, and Graig, I would say in terms of, you know, the overall, you know, the benefit risk profile with regards to pitolisant HD and our expectation, you know, based on what we've previously seen on, on dose response and other data in the pivotal program, you know, we, we expect that same profile to be maintained, you know, with regards to, you know, the opportunity for improved efficacy with, with no change in overall safety tolerability. And Kumar, any added color on that?

Kumar Budur (Chief Medical and Scientific Officer)

I think, Jeff, you covered everything. Hey, good morning, Greg. The only other thing that I would like to add is, Greg, as I mentioned earlier, we plan to accelerate this program with a proof of concept in 2028, and we did some leading-edge work where we looked at higher doses of pitolisant. About 18 months ago, we started this study, looked at multiple doses of pitolisant, and studied up to 180 milligrams in the high dose level. And the safety and tolerability profile was very similar to the highest label dose of WAKIX, which is 35.6 milligrams... So we did not see any change in the safety and tolerability profile. And you mentioned about the gastro-resistant coating. Gastro-resistant coating, if anything, should actually result in a more positive patient experience.

Operator (participant)

Thank you. Our next question will come from David Hoang with Citigroup. Please go ahead.

David Hoang (Analyst)

Hi there. Good morning, and thanks for taking my questions. So for first one, I just wanted to ask about your level of confidence here in meeting the projected PDUFA dates of 2026 and 2028 for the pitolisant GR and HD formulations respectively. What are the key gating factors to get to in terms of data packages for filing with the agency? Then second question, in terms of the TPM-1116 molecule, which you're taking forward to IND filing, are there any features there which you believe could differentiate from other orexin agonists that are currently in development? How do you think about developing for various indications, such as narcolepsy versus IH? Thank you.

Jeffrey Dayno (President and CEO)

Yes. David, good morning. Thanks for your question. With regards to, you know, our confidence in the, projected PDUFA dates for Pitolisant GR and HD programs, I think, you know, we are, you know, we're, we're confident in terms of the development plan that's laid out and our ability to, to hit those dates. I can have Kumar provide further, you know, color on that and what some of the, you know, the key major milestones are, you know, towards that. Kumar?

Kumar Budur (Chief Medical and Scientific Officer)

Hey, good morning, Dave. Thanks for the question. Regarding the gastro-resistant formulation, as we disclosed earlier during the call, we are on track to start the dosing optimization study in the fourth quarter of this year, and we will start the pure bioequivalent study in the first quarter. We are on track for PDUFA in 2026. We are confident about it. In terms of the HD formulation, we just disclosed the initial PK data from the pilot study, and I also mentioned earlier during the call some of the leading-edge work that we have already done to accelerate this program, like establishing safety margins. We conducted a qualitative research study in patients with narcolepsy who have fatigue, identify the right instrument to study fatigue in this patient population.

We anticipate this to be in the next stage of the clinical development in mid-2025, and we will provide more color to this as we solidify some of our plans. Regarding your last question about TPM-1116, our orexin receptor agonist, some of the differentiating features, David, are—I mean, first of all, this belongs to a novel chemical series. It has a different chemical scaffold, and it's different than any other orexin receptor agonist that we know of. And, what we have seen in our preclinical experiment is this is the most potent orexin receptor agonist based on the information that is available in the public domain on various orexin receptor agonists. The fact that this is the most potent orexin receptor agonist does give us confidence. It opens the door for NT1, NT2, idiopathic hypersomnia.

Based on the information on other compounds, you may have noticed that, typically NT2 requires a higher dose than NT1. IH requires a higher dose than NT2. So from that perspective, in terms of avoiding the off-target side effects, that gives us some. And also the preclinical safety data that we have seen, is actually very encouraging and just makes us believe that TPM-1116 could be the potential best-in-class compound when it comes to orexin receptor agonist.

Operator (participant)

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

Corinne Jenkins (Analyst)

Yeah, good morning. Maybe from Jeff Dierks, you've talked about the $1 billion target for sales. Like, if maybe you could just talk a little bit more about the path from here, where we are today to there, particularly with respect to the patient growth you'd need to see to get to that target. And then on maybe, like, a little bit more just clarification, can you just provide some color around gross-to-net through the first half of this year? I think sales are relatively flat versus second half of 2023, but obviously you raised price and patients have continued to grow. So curious what you're seeing there and how we should think about gross-to-net through the balance of the year. Thanks.

Jeffrey Dayno (President and CEO)

Yeah, sure, Corinne. Good morning. Jeff?

Jeffrey Dierks (Chief Commercial Officer)

Yeah, so, great question, Corinne. So path to $1 billion, I mean, based obviously on our, our net average price per patient, you know, achieving $1 billion basically is looking, getting north of about 9,000 average patients on product. We just, you know, finished the quarter and reported approximately 6,550. So, you know, our, our goal to achieve $1 billion is, is simply looking at adding another 2,500 average patients between now, mid-2024, and mid-2030, so over the next 6 years. And, and I think obviously based upon our 4 years of history and what we believe in continued growth, the path to $1 billion is, is very clear.

We obviously have a very good analog in the oxybates, which was able to achieve $1 billion on its path, with a much smaller ability to tap into only about 4,000 healthcare professionals. It didn't have, obviously, the access to the full diagnosed patient opportunity. So we believe accessing 9,000 healthcare professionals with a goal of having to achieve another 2,500 average patients in the next six years, I think is absolutely achievable, and that's why we look at this as a billion-dollar-plus.

Opportunity, and I think we're very excited about the ability to enhance the Pitolisant franchise by adding both GR and HD along that time period, and really building out this franchise and being able to help, you know, thousands of patients living with narcolepsy. Sandip, comments on gross-to-net?

Sandip Kapadia (CFO and Chief Administrative Officer)

Sure. Yeah, thanks, Corinne, for the question. You know, gross-to-net generally, I would say, behaved in line with what we've seen in the past. You know, typically, it's lower in the first quarter of the year, and then as you go into the second quarter, it tends to improve, and that's what we've seen. You know, roughly, you know, our average, for patients up about 7.5%, last quarter from this quarter. We took a price increase earlier this year, so, you know, I think generally it's in line with our expectations on how it will evolve. And sort of stabilizes and improves, bit in the second half of the year.

Corinne Jenkins (Analyst)

Okay. Thank you.

Jeffrey Dayno (President and CEO)

Thanks, Corinne.

Operator (participant)

Thank you. Our last question will come from Jason Gerberry with Bank of America. Please go ahead.

Pavan Patel (Analyst)

Hey, Jeff and team. This is Pavan Patel on for Jason Gerberry. The first question is that you flagged improved GI side effects, that pitolisant gastroresistant has the potential to address. So given rates are only 6% in phase 3 and presumably mitigated by titration, is there a higher real-world dropout rate with WAKIX? And then I have a follow-up question, if I may.

Jeffrey Dayno (President and CEO)

Sure. Thanks for the question. You know, I think Kumar can address. I think it's, you know, the pitolisant GR, the design is, it's really the predisposition, so it's not with a look, you know, related to the tolerability profile with the WAKIX and the incidence of nausea. But as we said, patients with narcolepsy, you know, the vast majority have GI symptoms related to underlying, you know, mechanism disease. So a lot of them experience the potential, you know, for nausea, vomiting, and abdominal discomfort, and they see that also, you know, with other common narcolepsy treatments. So the predisposition to, you know, what is likely sort of comorbid symptomatology, the GR feature can potentially, you know, reduce that potential.

And then especially in the HD program, as we go up on the dose, you know, that GR feature, you know, could be beneficial in that regard. Kumar, additional thoughts?

Kumar Budur (Chief Medical and Scientific Officer)

Yeah, I think you covered it, Jeff. So the only other thing I may want to add is, look, with the GR formulation, apart from the gastro-resistant positive attribute, not just in general for patients with narcolepsy, it also enables us to start at the therapeutic dose range. I mean, as you know, pretty much all the medications that are used by this patient require some kind of titration, and this enables us to start at the beginning of the therapeutic dose range so that the patients don't have to wait until they realize the efficacy. The faster efficacy, better compliance, and better patient experience overall.

Pavan Patel (Analyst)

Thanks, guys. And then my second question is related to your pipeline. On EPX-100, the 5-HT2 mechanism is similar to UCB's commercial stage Fintepla and Longboard, development stage Bexicaserin, for which the phase 3 study is expected to start by year-end 2024. So I guess how can EPX-100 differentiate itself in the landscape? Is it efficacy or safety improvement that we're looking for in Dravet Syndrome, with the top-line data in 2026? And maybe if you can help us understand where you see this fitting into the current treatment landscape. Thank you.

Kumar Budur (Chief Medical and Scientific Officer)

Yeah. No, that, that's a great question. Look, as you mentioned, the serotonergic mechanism of action in developmental epileptic encephalopathies is well established, right? And we also saw that with a zebrafish model, where clemizole hydrochloride worked very well, and this model has a pretty good predictive ability when it comes to efficacy in developmental epileptic encephalopathies. The question about differentiation is a very good one. How do we differentiate? I mean, as you know, the drugs that are currently used in developmental epileptic encephalopathies, like DS and LGS, they have significant limitations in terms of safety and tolerability. For example, Epidiolex has significant incidence of nausea, abdominal discomfort, and diarrhea in up to 30% of patients. And, patients also need to monitor liver function tests before starting treatment and at regular intervals thereafter. For example, you mentioned about UCB, Fintepla.

Fintepla has a REMS attached to it, and on top of it, the patients have to get echocardiogram before starting the treatment and until six months because of the risk of cardiac valvulopathy and pulmonary arterial hypertension. What we have seen with EPX-100, which by the way, we are developing as a new chemical entity, as requested by the FDA. The battery of non-clinical toxic studies did not show any concern about any cardiac issue or hepatic issue, and neither we did see anything in our phase 1 healthy volunteer studies as well, anything of concern. So the differentiation really is safety and tolerability. And our clinical trial. In our clinical trials, we haven't seen any dose-limiting tolerable, tolerability issues, any laboratory abnormalities.

We believe the efficacy will be somewhere in the range that will be meaningful to the patient, but from a safety profile, it will offer a distinct safety profile that will be patient.

Pavan Patel (Analyst)

Thank you.

Operator (participant)

Thank you. At this time, I show no further questions. I would like to turn the call back to Jeff Dayno for any closing remarks.

Jeffrey Dayno (President and CEO)

Thank you, Todd, and thanks to everyone for joining our call today and for your interest in Harmony. We look forward to our Investor Day on October first in New York City, when we'll have the opportunity to showcase and highlight the value of our late-stage pipeline, as well as providing you updates later this year as we execute on our long-term growth strategy. Thank you, and have a great day.

Operator (participant)

Thank you. This does conclude Harmony Biosciences' Second Quarter 2024 Financial Results Conference Call. You may now disconnect your line, and have a wonderful day.