Harmony Biosciences - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 revenue was $200.5M (+16% YoY), with GAAP diluted EPS of $0.68 and non‑GAAP diluted EPS of $0.92; management reaffirmed FY25 net product revenue guidance of $820–$860M.
• Versus S&P Global consensus, revenue modestly missed ($200.5M vs $204.1M*), while EPS beat on a non‑GAAP basis ($0.92 vs $0.73*), helped by lower OpEx and underlying demand; management cited a “few days” trade inventory drawdown as a headwind to reported sales in Q2.
• Average WAKIX patients increased by ~400 sequentially to ~7,600 in Q2, underscoring durable demand and positioning for 2H sequential growth; CFO expects quarter‑over‑quarter net revenue growth in H2 and noted ~$79M cash from operations in Q2.
• Patent estate strengthened via June settlement with Lupin (no generic launch before Jan 2030, or July 2030 with pediatric exclusivity), while next‑gen pitolisant and ZYN002 catalysts remain on track (RECONNECT topline data in Q3 2025).
• Near‑term stock catalysts: Fragile X (ZYN002) Phase 3 RECONNECT topline in Q3 2025; clarity on pitolisant GR BE readout (Q4 2025) and initiation of pitolisant HD Phase 3 trials in narcolepsy & IH (Q4 2025).

What Went Well and What Went Wrong

• What Went Well

  • Non‑GAAP EPS beat vs consensus ($0.92 vs $0.73*), reflecting tight OpEx and robust underlying demand despite channel headwinds.
  • Continued patient growth: average WAKIX patients rose by ~400 to ~7,600 in Q2, supporting durable top‑line trajectory and 2H growth commentary.
  • Strategic/IP momentum: Lupin settlement (no generic launch before Jan/Jul 2030) and reaffirmed multi‑year lifecycle/LCM strategy (pitolisant HD/GR; potential exclusivity to 2044).

• What Went Wrong

  • Top‑line modest miss vs consensus ($200.5M vs $204.1M*), with management pointing to a few‑days trade inventory drawdown despite strong demand.
  • GAAP EPS ($0.68) below non‑GAAP figure due to $15M IPR&D charge tied to CiRC collaboration; OpEx mix remains elevated with pipeline build.
  • Sequential revenue increase was smaller than underlying demand would imply (inventory and seasonality effects), temporarily muting QoQ optics heading into H2.

Transcript

Speaker 7

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' second quarter 2025 financial results conference call. All participants have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, please press star one on your telephone keypad. Please be advised that today's conference may be recorded. Lastly, if you should require operator assistance, please press star zero. I will now turn the call over to Brennan Doyle, Head of Investor Relations. Please go ahead.

Speaker 6

Thank you, operator. Good morning, everyone, and thank you for joining us today as we review Harmony Biosciences' second quarter 2025 financial results and provide a business update. Before we start, I encourage everyone to go to the investor section of our website to find the materials that accompany our discussion today, including a reconciliation of our GAAP to non-GAAP financial measures. At this stage of our lifecycle, we believe non-GAAP financial results better represent the underlying business performance. Our speakers on today's call are Dr. Jeffrey Dayno, President and CEO, Adam Zaeske, Chief Commercial Officer, Dr. Kumar Budur, Chief Medical and Scientific Officer, and Sandip Kapadia, Chief Financial Officer and Chief Administrative Officer. As a reminder, we will be making forward-looking statements today, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties.

Our actual results may differ materially, and we undertake no obligation to update these statements, even if circumstances change. We encourage you to consult the risk factors referenced in our SEC filings for additional details. I would now like to turn the call over to our CEO, Dr. Jeffrey Dayno. Jeff?

Speaker 0

Thank you, Brennan. Good morning, everyone, and thank you for joining our call today. I want to begin today's call by reaffirming something we believe is becoming increasingly clear: Harmony Biosciences is a growth story. We have built something rare in our industry: a profitable, self-funding biotech company with an innovative, late-stage pipeline poised to deliver meaningful value for both patients and shareholders. Because of this unique profile, we continue to execute from a position of strength. Our foundational business, anchored by WakeX and narcolepsy, has now delivered another quarter of double-digit revenue growth. We reported $202.5 million in second quarter net revenue, representing a 16% increase year over year. This performance extends our four-year streak of profitability and reinforces WakeX's strong momentum in its sixth year on the market, as reflected by the addition of 400 average patients during the second quarter.

WakeX remains the first and only non-scheduled treatment for narcolepsy, leading to broad clinical utility that is meaningful to both patients and prescribers. As demonstrated by the sustained momentum, we believe WakeX will achieve $1 billion plus blockbuster status in narcolepsy alone, well ahead of loss of exclusivity in 2030. Our story doesn't end with the success of WakeX, because we are just getting started. What excites us most is what lies ahead. Today, Harmony is a multi-franchise company with three core areas of focus: sleep/wake, neurobehavioral, and rare epilepsies. Each of these franchises includes late-stage development programs with $1 to $2 billion in peak sales potential across multiple indications. Let me walk you through what lies ahead in our pipeline, starting with our next major clinical catalyst coming from our neurobehavioral franchise and its innovative investigational product, ZYN-002.

This is a 100% synthetic, pharmaceutically manufactured cannabidiol, devoid of THC, delivered through a unique, proprietary, patent-protected, permeation-enhanced transdermal gel formulation. Our phase 3 registrational trial in patients with Fragile X syndrome completed enrollment in Q2, and we are on track to report top-line data later this quarter. This study, the RE-CONNECT study, was designed to confirm the positive findings of the primary outcome from the phase 2/3 CONNECT study in the pre-specified group of patients with complete methylation of the FMR1 gene, the underlying genetic defect in patients with Fragile X syndrome. In fact, Fragile X is the most common known inherited cause of intellectual impairment and autism spectrum disorders. Stepping back a moment, in order to understand the potential significance of our phase 3 RE-CONNECT study, there are roughly 80,000 people living with Fragile X in the U.S., similar in size to the diagnosed narcolepsy market.

However, unlike that market, there are currently no FDA-approved treatments for Fragile X syndrome. A positive readout from the RE-CONNECT study could represent a major breakthrough, the potential for the first and only approved therapy for Fragile X syndrome, and a transformational moment for people living with Fragile X syndrome and their families who have waited far too long for a therapy designed to address their needs. Kumar will be sharing more detail with you on the reasons for our strong conviction in the upcoming top-line data readout. In our sleep/wake franchise, as I mentioned, WakeX continues to grow, and our Pitocin lifecycle management programs are designed to both expand and extend this franchise well into the mid-2040s.

We have major catalysts ahead for the two next-generation formulations of Pitocin: high-dose Pitocin or Pitocin HD and a gastro-resistant formulation of Pitocin or Pitocin GR, and we are on track to initiate phase 3 registrational trials in both narcolepsy and idiopathic hypersomnia with Pitocin HD in the fourth quarter of this year. We are also advancing a novel orexin-2 receptor agonist with a potentially best-in-class profile and remain on track to enter the clinic and initiate first-in-human studies later this year, with clinical data anticipated in 2026. Our third franchise in rare epilepsy is also making steady progress. EPX-100 or clemenzol hydrochloride is one of the most advanced 5HC2 agonist compounds with a well-characterized mechanism of action and a strong safety record. It is now in phase 3 registrational trials for both Dravet syndrome and Lennox-Gastaut syndrome, with pivotal data expected in 2026.

Our commitment to patients with serious rare neurological disorders does not end here. To that end, we recently entered into a research collaboration with Cirque Biosciences, a regenerative medicine company discovering novel therapies based on cellular reprogramming and focused on developing novel regenerative cellular therapies to replace and restore function in patients with advanced neurological disorders. Our collaboration with Cirque is strategically aligned with our current pipeline and focused on treatments for refractory epilepsy and treatment-resistant narcolepsy. This research could potentially result in the next generation of innovative disease-modifying therapies for these advanced chronic neurological disorders. Sandip will be commenting further on the terms of this deal. When you look at Harmony Biosciences today, it should be evident that what we are building is one of the most robust pipelines in the industry for patients with rare neurological disorders.

We now have eight innovative assets across 13 development programs, including up to six phase 3 trials by the end of this year. This pipeline is poised to deliver one or more new product or indication launches every year for the next several years. With more than $670 million in cash and cash equivalents on the balance sheet and a disciplined approach to capital deployment, we have the flexibility to continue to strategically expand our pipeline through targeted business development efforts in this favorable environment. What does all this mean? It means that in an industry where sustainable success remains elusive, Harmony Biosciences has built something different and something unique: a commercially durable business with a robust late-stage pipeline and a clear path to delivering long-term value for patients, providers, and shareholders alike. That is what makes Harmony Biosciences one of the most compelling growth stories in biotech today.

With that, I'll turn the call over to Adam Zaeske, our Chief Commercial Officer, for an update on our commercial performance. Adam?

Speaker 6

Thanks, Jeff. Harmony's Q2 2025 results demonstrate the enduring strength of our commercial business. WakeX delivered $202.5 million in net sales for the quarter, representing 16% year-over-year growth in its sixth year on the market. WakeX achieved 7,600 average patients in Q2, representing an increase of approximately 400 average patients for the quarter. This represents among the strongest quarterly results we've seen since launch and continues the steady, reliable growth we've seen for the past several years. This sustained performance is driven by WakeX's unique position as the only non-scheduled treatment option, with its broad clinical utility for the more than 80,000 patients with narcolepsy, as well as the strong focus and execution of our commercial teams with the support of the entire Harmony Biosciences organization. We have a great deal of confidence in the continued growth, potential, and performance of WakeX.

In addition to its unique position as the only non-scheduled treatment option, WakeX has among the highest brand awareness in the market, is perceived as efficacious and well-tolerated, and is supported by broad payer coverage that has remained consistent for years. We see continued increases in prescribing among the approximately 4,000 oxybutynin REMS-enrolled prescribing clinicians, as well as an increase in prescribing and addition of new prescribers with the approximately 5,000 non-oxybutynin REMS-enrolled clinicians, where WakeX is the only branded option. This dual expansion, deepening usage within our core base while broadening our prescriber footprint, demonstrates WakeX's resilient position and reinforces our confidence in its continued growth trajectory. As we look to the second half of 2025, these strong WakeX fundamentals support our confidence in maintaining its growth momentum.

We are confirming our full-year revenue guidance of $820 to $860 million, and we remain on track to achieve $1 billion plus in annual revenue in narcolepsy alone. Looking to the future, the Pitocin GR and HD formulations each target significant unmet patient needs while extending our growth potential with utility patents filed through 2044. Early feedback from physicians and payers on the HD formulation has been particularly encouraging, and we'll be able to fully leverage our commercial infrastructure to drive the next phase of growth through our Pitocin franchise formulation. We're also excited for the opportunity to expand beyond the sleep/wake franchise and are eagerly anticipating the top-line data readout for ZYN-002 in our neurobehavioral franchise next quarter. Kumar will provide a progress update on these programs in a moment. In summary, the fundamentals of our business remain robust.

Our strong second-quarter performance reflects the continued execution of our strategic priorities, and we are well-positioned to capitalize on the substantial opportunities before us. I'd 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?

Speaker 2

Thank you, Adam. Good morning, everyone, and thank you for joining us today. Please refer to slide number five for our pipeline chart, and the clinical development highlights are on slides six through slide 11. In R&D, we are on track for our next major catalyst, the top-line data for ZYN-002 in Fragile X syndrome in Q3. We have a high degree of confidence and conviction in the success of the phase 3 registrational trial, the RE-CONNECT study, as it builds upon the data and insights from the large phase 2/3 CONNECT study. The efficacy data from the CONNECT study, especially in patients with complete methylation, who accounted for approximately 80% of the patients, is one of the strongest efficacy data sets generated in patients with Fragile X syndrome.

We saw over 50% of patients demonstrating clinically meaningful improvements in social avoidance, the primary endpoint, and irritability, disruptive behaviors, other core symptoms in patients with Fragile X. The RE-CONNECT study essentially seeks to replicate the statistically significant efficacy signals observed in patients with complete methylation in the CONNECT study, with several enhancements to further bolster the probability of success. We have completed enrollment, and we are on track for the top-line data later this quarter. If positive, the RE-CONNECT study is expected to support regulatory approvals in both the U.S. and EU, and Harmony Biosciences holds global rights. ZYN-002 has the potential to be the first and only approved treatment for any symptom domains in patients living with Fragile X.

Moving on to the scientific rationale for ZYN-002 in this condition, Fragile X syndrome is a rare genetic disorder caused by the mutation of the FMR1 gene on the X chromosome, and it is the most common known inherited cause of intellectual impairment and autism spectrum disorders. Fragile X syndrome is characterized by FMR protein deficiency resulting in endocannabinoid dysfunction. ZYN-002 interacts with the CB1 receptors, modulates the system, and restores the endocannabinoid homeostasis, thereby improving the neurobehavioral symptoms. With ZYN-002, we also remain on schedule to initiate a phase 3 registrational trial in 22q deletion syndrome later this year, pending the results from the Fragile X program. This rare disorder, with significant neurobehavioral symptoms similar to Fragile X, has no approved therapies and also affects approximately 80,000 individuals each in the U.S. and Europe.

Moving on to our sleep/wake franchise, we have made significant progress across our next-generation Pitocin programs. The Pitocin HD program, a higher dose Pitocin formulation with an optimized PK profile targeting enhanced efficacy for excessive daytime sleepiness and pursuing a differentiated label with an indication for fatigue in narcolepsy, is on track for the phase 3 initiation in Q4 2025. Similarly, the phase 3 study with Pitocin HD in patients with idiopathic hypersomnia is also pursuing a differentiated label with an indication for sleep inertia and is also on track for initiation in Q4 2025. The target PDUFA dates for both programs are in 2028. Over to the Pitocin GR formulation, it is designed to address the potential for treatment-related GI side effects, especially since almost 90% of patients with narcolepsy experience GI symptoms. In addition, it also provides an ability to start at the therapeutic dose range, eliminating titration.

This is a fast-to-market strategy. We are demonstrating bioequivalence to WakeX formulation. The top-line data from the pivotal BE study is expected in Q4 with a potential PDUFA in 2026. Utility patents have been filed for both Pitocin GR and Pitocin HD, with potential exclusivity to 2044, securing long-term franchise value. Beyond Pitocin, our sleep/wake portfolio continues to advance with BP1.15205, a highly potent orexin-2 receptor agonist demonstrating best-in-class potential in preclinical studies. At the recent sleep meeting, we presented comprehensive preclinical safety and efficacy data that demonstrated efficacy at very low doses across all parameters of interest in a standard transgenic mouse model. The program remains on schedule for IMPD submission and first-in-human studies later this year, and we anticipate sharing clinical data in 2026.

In our epilepsy franchise, we continue to actively enroll patients in two global phase 3 registrational trials with EPX-100: the Argus study in Dravet syndrome and the Lighthouse study in Lennox-Gastaut syndrome. In conclusion, our late-stage rare neurology portfolio is advancing with exceptional momentum, positioning us to potentially introduce multiple new products or indications every year over the next several years. Beyond the clinical and regulatory milestones, what truly drives us is the opportunity to transform care for hundreds of thousands of patients living with rare neurological disorders, many of whom currently have either no treatment options or therapies with suboptimal efficacy and/or significant safety tolerability limitations.

As always, on behalf of Harmony Biosciences, 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 all 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?

Speaker 3

Thank you, Kumar, and good morning, everyone. This morning, we issued our second quarter 2025 earnings release and filed our 10-Q. You'll find the details of our financial and operating results. We had a great first half of the year. We delivered another quarter of solid financial performance with continued double-digit top-line growth, sustained profitability, and robust cash generation. Our financial performance and profile positions us well to continue advancing our growth strategy for the remainder of the year and beyond. For the second quarter of 2025, we reported net revenues of $202.5 million compared to $172.8 million in the prior year quarter, representing a growth of 16%. Performance in the quarter reflects the strong underlying demand for WakeX, offset by a reduction in trade inventories of a few days as we head into the summer months.

We reported total operating expenses for the second quarter of $114.2 million compared to $119.3 million for the same quarter in 2024. The expenses during the second quarter of 2025 include investments in advancing our late-stage pipeline and the commercialization of WakeX in narcolepsy. We also recognized the $15 million IP R&D charge related to the Cirque Biosciences research collaboration which Jeff mentioned. We have an option to acquire an exclusive license for each program. The agreement includes customary milestones and royalties based on continued development and potential commercialization. We continue to show solid net income and margins. Non-GAAP adjusted net income for the second quarter of 2025 was $53.8 million or $0.92 per diluted share, compared to $24.5 million or $0.43 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 and non-GAAP results. Harmony Biosciences ended the second quarter with $672 million in cash equivalents and investments on the balance sheet. The balance reflects strong cash generation from operations of approximately $79 million during the second quarter. Our cash position provides us the financial flexibility to execute on business development as well as continue investments in our growing pipeline. Looking ahead to the balance of 2025, our strong first half results give us increasing confidence in our full-year outlook. We are reiterating our revenue guidance of $820 to $860 million, highlighting our progress towards a $1 billion plus opportunity with WakeX in narcolepsy alone. We expect continued quarter-over-quarter net revenue growth for the balance of the year.

With respect to expenses, we expect continued investment in R&D as we advance our late-stage pipeline with multiple programs in phase 3 registrational trials. As previously noted, we expect to potentially incur $29 million in R&D milestone payments in 2025, including milestones for the completion of the phase 3 trial for ZYN-002 in Fragile X syndrome, $15 million, on track for Q3, along with a potential milestone of $10 million for positive top-line data from this trial. In addition, we expect a milestone of approximately $4 million in Q4 related to the initiation of a phase 1 trial in our orexin-2 program. In summary, we're having a very successful first half of the year and have confidence in the continued growth of WakeX along with the advancement of our late-stage pipeline in the second half. I'd like to turn the call back over to Jeff for his closing remarks. Jeff?

Speaker 0

Thank you, Sandip. My thanks to everyone for joining our call today and for your interest in Harmony Biosciences. At this juncture of our company's journey, I have never been more proud of the Harmony team or more excited about what lies ahead. The reasons for my excitement are many, to highlight a few: WakeX is on its way to a $1 billion plus opportunity in narcolepsy alone. Our robust, catalyst-rich late-stage pipeline is poised to deliver one or more new product or indication launches every year over the next several years, with peak sales potential of $3 to $6 billion in total. We have a high degree of conviction and are very excited about our next major clinical catalyst coming later this quarter: the top-line data readout from our phase 3 trial of ZYN-002 in Fragile X syndrome.

If positive, this could represent a transformational moment for both the Fragile X community and for Harmony Biosciences. We have built something rare in our industry: a profitable, self-funding biotech company with an innovative late-stage pipeline poised to deliver meaningful value for both patients and shareholders alike. Because of this unique profile, we continue to execute from a position of strength. That is what makes Harmony one of the most compelling growth stories in biotech today. Thanks, everyone, I will now turn the call back over to the operator for Q&A. Operator?

Speaker 7

Thank you. 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 will take our first question from Jay Olson with Oppenheimer. Please go ahead.

Oh, hey, congrats on all the progress. I wanted to focus on the RE-CONNECT top-line data readout, which I think you mentioned is still on track for this quarter. Could you please provide any additional color on the timing of when to expect that readout? It sounds like maybe it could be after Labor Day. In terms of framing the expectations, can you just describe what would be clinically meaningful and what is your target for a successful outcome in this registrational Fragile X syndrome study? Finally, if you could just remind us the evidence that supports your confidence in ZYN-002 achieving your target profile. Thank you.

Speaker 0

Yeah, good morning, Jay. Thank you for your questions and thanks for your coverage of Harmony Biosciences. Welcome. Appreciate your initiation of coverage. I will allow Dr. Kumar Budur to address your questions about the RE-CONNECT study and the opportunity in Fragile X syndrome.

Speaker 2

Thank you, Jeff. Good morning, Jay. Thanks for the question. Yes, we are on track for top-line data in Q3, and we are very excited about this opportunity, not just because it's a major milestone for Harmony Biosciences, but for patients with Fragile X syndrome and their caregivers in general. Regarding the level of confidence, we have a high level of confidence and conviction in the phase 3 RE-CONNECT study because we are essentially trying to replicate the statistically significant findings that we saw in the large phase 2/3 CONNECT study on the primary endpoint of social avoidance in patients with complete methylation. In terms of how we will define success, a successful outcome will be defined by demonstrating a statistically significant outcome in the primary endpoint, which is social avoidance in patients with complete methylation, and the study is more than adequately powered to detect that difference.

If positive, we have an opportunity here to bring the first and only approved treatment for any symptom domains in patients with Fragile X syndrome, and that's what we are really excited about. Super helpful. Thanks for taking the question.

Speaker 0

Yeah, thank you, Jay.

Speaker 7

Thank you. Our next question comes from David Huang with Deutsche Bank. Please go ahead.

Hi there. Good morning. Congrats on the progress and thanks for taking my question. First, I also wanted to ask on Fragile X in terms of, I guess, the top-line readout. Could you just outline for us the data, the types of data you expect to disclose in the top line? At that time, would we have visibility on the results in the fully methylated versus partially methylated patients? When might we know, I guess, how you plan to approach your filing strategy with the FDA if you would be pursuing fully methylated or all-comers? Just quickly on WakeX, as we are now in the back half of the year, I was wondering if you could just talk a little bit about the pushes and pulls that get you to the upper versus the lower end of the guidance range. Thanks a lot.

Speaker 0

Good morning, David. I'll ask Dr. Kumar Budur to comment further on the strategy for Fragile X syndrome and the ZYN-002 readout, and Adam Zaeske can address the question about WakeX. Kumar?

Speaker 2

Yeah. Hey, good morning, David. Thanks for the question. In terms of what we disclose at the top-line data for Fragile X syndrome, it will be a standard top-line data readout, which is the demographics data, safety and tolerability data, the efficacy on the primary endpoint, and the key secondary endpoints. In terms of how we will proceed next, if the study shows a statistically significant outcome on the primary endpoint, we will move rapidly to have a pre-NDA meeting and submit an NDA. In an indication like Fragile X syndrome, where there are no approved treatments, I think it's fair to expect a priority review. If everything goes according to plan, hopefully, we will have an approved product by the end of next year.

Speaker 0

Thanks, Kumar. Adam?

Speaker 6

Yes, thanks for the question on WakeX. We're really pleased with the performance that we're seeing on WakeX at this stage. We're now in our sixth year on the market. We achieved $200.5 million in net revenue for the second quarter. That's a 16% year-over-year increase in year six, which is fantastic. We also achieved 7,600 average patients in the quarter. That's an increase of 400 average patients in Q2, and that is among the highest increases we have seen in any quarter since launch. The performance steady drumbeat continues. In terms of puts and takes, I would say that WakeX is the highly differentiated product, the first and only non-scheduled treatment option for patients. We're supported by broad payer coverage with 80% of lives covered, and that's been the case for years. We don't expect any changes in payer coverage. We have a very experienced team.

Many of our team members actually started at the launch of WakeX. We have a unique commercial model that provides really high levels of service to HCPs, office staff, as well as patients. I would highlight that in terms of HCP prescribers, we continue to see increased preference share in the 4,000 oxybutynin REMS-enrolled clinicians, and we see increased preference share and the addition of new prescribers in the 5,000 non-oxybutynin REMS-enrolled HCP group as well. Those are probably the key drivers of that continued performance. Sandip, I don't know if you want to add anything.

Speaker 0

No, I think, as you said, really a strong start to the year and really gives us increased confidence, certainly in our guidance range. Look, we're very comfortable with where things are right now. It's really, at the end of the day, it's the underlying demand that really drives overall net sales. In terms of the pushes and pulls, it's the typical factors that will typically impact where we end up in the range, everything from, obviously, this continued net patient adds, certainly have an impact, any potential gross net impact, as well as trade inventory impacts as well. As you know, we have a fairly concentrated customer base overall, so just order patterns overall. However, look, we're very confident in the guidance range. Consensus currently falls right within the range, and that seems a very reasonable place.

Speaker 6

Thanks, David.

Speaker 7

Thank you. Our next question comes from Ash Verma with UBS. Please go ahead.

Hi, thanks for the question. I just wanted to ask on Fragile X. I want to understand the implications of full methylation. Does choosing full methylation versus partial mean a haircut to the patient population? If you can give us a sense of what is the full methylation Fragile X patients in the U.S. versus the 80,000 that you mentioned. Secondly, can you talk about any kind of regulatory or clinical trial conduct analogs here? Has FDA accepted applications for these types of rare pediatric conditions with the data showing efficacy only in a fully turned-off gene? Thanks.

Speaker 2

Hey, good morning, Ash. Thank you for the question. In terms of this split between complete methylation versus partial methylation, approximately 60% to 70% of patients with Fragile X syndrome have complete methylation, and the rest have partial methylation. In terms of us choosing the complete methylation as the target population, this was a data-driven approach based on the findings that we saw in the CONNECT study, and this fits into the etiology, the pathophysiology of Fragile X syndrome that we know about. Basically, what happens in patients with complete methylation is they have more than 200 primucleotide repeats of CTG, which results in almost complete silencing of the gene, which means that they are hardly able to produce any FMR protein, which causes significant dysfunction of the endocannabinoid system. ZYN-002 interacts with CB1 receptors, resets the endocannabinoid system. These patients have a higher burden of symptoms.

The mechanism of action fits nicely well in treating the symptoms in these patients. In terms of the FDA, yes, we actually have had extensive discussions with the FDA, and we have full alignment with the FDA on the study design, the target patient population, the primary endpoint. In fact, the study is designed not just to meet the requirements of the FDA, but EMA as well. Should the study be positive, we will be pursuing an indication both in the U.S. and in Europe.

Speaker 0

Yeah, Ash, I would just add that I think this strategy sort of follows the science as well as the data, and the phase 3 RE-CONNECT trial is designed to replicate the positive findings in the phase 2/3 CONNECT study in patients with complete methylation. In addition, obviously, with no approved therapies with regards to where the bar would be set with a high unmet need in this patient population.

Thank you.

Thanks, Ash.

Speaker 7

Thank you. Our next question comes from Greg Suvanavich with Mizuho. Please go ahead.

Thank you. Good morning. Thanks for taking my question. I was curious about your new Cirque Biosciences collaboration. I'm just wondering, can you walk us through the thoughts, especially from a BD and corporate strategy perspective? The cell therapy approach is interesting for sure, but I don't think it's been a proven area, and just wanted to get your thoughts on the collaboration, but also maybe future BD directions. Thank you.

Speaker 0

Yeah, sure, Greg. Good morning. Thanks for your question. I think in terms of the Cirque Biosciences collaboration, we see it as an exciting opportunity, obviously a very early sort of discovery phase opportunity, but one that reflects our overall commitment to patients with serious rare neurologic disorders in an advanced stage. It's strategically aligned with our pipeline and potential cellular therapies for refractory epilepsy in one of the discovery programs and the other treatment-resistant narcolepsy based on sort of reprogramming this cellular platform. While it's still early, we see this as potentially resolving in kind of the next generation of innovative disease-modifying therapies for patients with advanced neurologic disorders. With that, Kumar can comment a little further on the platform and what we saw in the opportunity.

Speaker 2

Sure. Hey, good morning, Greg. Thanks for the question. Look, with Cirque, what really attracted and really fascinated us was the novel cellular reprogramming platform that Cirque utilizes that offers significant competitive and manufacturing advantages compared to embryonic or induced pluripotent stem cells. It overcomes many challenges, like, for example, the consistency and the reliability of readily sourced GMP-grade cell lines because these are fibroblast-derived cells that are induced to transform into progenitor cells of interest based on small molecule epigenetic modifiers and growth factors. Also, this particular platform could potentially enable allogeneic cryocrytolytic therapies that require no manipulation at the point of care. Obviously, because we are not using the stem cells, there is less risk of tumorigenicity and manufacturing inefficiencies that are seen with the stem cells.

We are very excited about the collaboration both in epilepsy and in narcolepsy, and look forward to data generation from Cirque, and we will provide more information as we make progress.

Speaker 0

Yep. Greg, I would add, I think we see this as kind of an opportunistic play, if you will. Very early discovery phase, strategically aligned. With regards to our other BD efforts, as you asked, obviously, our strategy is to continue to grow and build out our pipeline, and with a very strong balance sheet, we see in terms of we're always looking for opportunities to deploy our cash and drive value for shareholders. We continue to actively evaluate different opportunities across the spectrum: development phase from early to late, potentially on-market opportunities. Obviously, we're in a good position to execute on our growth strategy. As always, we take a disciplined approach, thoughtful, strategic to how we have built out the pipeline thus far and some of the opportunities we see ahead. We feel that we're just getting started with regards to some of the opportunities ahead of us.

Sandip, any further comments on the capacity?

Speaker 6

Yeah, look, I mean, this quarter was a really strong quarter in terms of cash generation. We generated from operations $79 million, closing the quarter with over $670 million in cash. I think we're in a highly strong position to be able to transact. We continue to look for opportunities, as you mentioned, Jeff, across the spectrum overall. We'll continue to be disciplined in terms of how we deploy our capital, but our filters continue to be the same. I think it's hard to predict timing at the end of the day on these types of things, but I think we really continue to be in a strong position. We have a very unique profile as a company, highly profitable, generating positive cash flow, and the ability to deploy it in a market that is an attractive market at this point.

Speaker 0

Yeah, thanks, Sandip.

Speaker 7

Thank you. Our next question comes from David Amsalem with Piper Sandler. Please go ahead.

Thanks. Had some questions on the orexin, and sorry if I missed this, but with the data that you're anticipating next year, is that in healthy, sleep-deprived volunteers, or is that going to be in actual narcolepsy patients? Please help us understand what to expect for next year, and to the extent you're not yet testing narcolepsy in idiopathic hypersomnia patients, when do you expect to do so? That's number one. Number two, in terms of differentiation, I know you've talked about it as potentially being best in class, but we've got a number of more advanced orexins that have shown MWT improvements well north of 20 minutes, and we've seen real validation here. What do you need to see in order to legitimately make that claim that your orexin is indeed best in class? Thanks.

Morning, David. Thanks for your question. Kumar, our position on the orexin programs?

Speaker 2

Yeah, thank you, Jeff. Good morning, David. Thank you for the question. Regarding our orexin program, yes, David, actually, you did not miss anything because we have not talked about how we are going to approach the first-in-human studies. We are on track for IMPD submission and commence first-in-human studies later this year. The way we are approaching this is to start with the single ascending dose study in healthy volunteers and in parallel also conduct a healthy volunteer sleep deprivation study because, as you know, BP1.15205 is the most potent orexin-2 receptor agonist that is out there based on the data that is disclosed in the public domain. We do want to get a better idea in terms of the dose range before we progress this into patients.

What you can expect next year is data from healthy volunteers from single ascending dose study and healthy volunteer sleep deprivation study as well. How we are going to proceed after that is something that we are still thinking through, depending on what we are learning from others as well in this field. In terms of how do we differentiate, David, I think it's too early to comment. Based on the preclinical data, which we presented at the sleep meeting, we showed that potency is important, and potency translated to efficacy at very low doses. In fact, at 0.03 micrograms per kilogram in the narcolepsy mice model, we showed a statistically significant difference in wakefulness time, the lowest dose that is ever studied in this particular model.

We anticipate the high potency and therefore low dose gives us the flexibility, the dosing flexibility to target all three central disorders of hypersomnolence, not just NT1, but also NT2 and idiopathic hypersomnia without having the safety or tolerability concerns. This is our strategy right now.

Thank you.

Speaker 0

Thanks, David.

Speaker 7

Thank you. Our next question comes from Danielle Brill with Truist. Please go ahead.

Hey, good morning. Thanks so much for the questions. As a follow-up to the prior question, I wanted to ask in general how we should think about the potential impact of Takeda's orexin-2 entering the market and how confident you are that the WakeX franchise can continue to grow with orexin-2s in the market. Just on the quarter, I wanted to clarify, it looks like the quarter-over-quarter growth was lower than what you typically observed in the past despite the high number of new patient ads in the quarter. Was this just an inventory drawdown, or can you speak to the dynamics that were at play here, such as growth to net compliance and any other factors? Thank you.

Speaker 0

Good morning, Danielle. Thanks for your questions. In terms of the impact of orexins, how we see as we follow these programs closely, I'll ask Adam Zaeske in regards to we still continue to see this market as a polypharmacy market with multiple mechanisms, and how you're seeing that from a commercial perspective going forward?

Speaker 6

Yeah, thanks, Jeff, and thank you for the question. We're excited about orexins as a potential new treatment option for patients. As Kumar mentioned, we're very confident in the molecule that we have in our pipeline. There are still some questions to be addressed as a class, I think: dosing, label, long-term safety and tolerability, not to mention pricing and access. With WakeX, this is the only non-scheduled treatment option. It's been on the market for now more than six years. Really steady performance quarter over quarter over that period, and that's despite new brand and generic entrants coming in. I think that's because physicians see WakeX as highly differentiated. They perceive it to be well tolerated and has broad clinical utility, and we expect that to continue. At the time of orexins launch, HCPs will have more than eight years of clinical experience. It's a very familiar therapeutic option.

With the, Jeff mentioned, with the polypharmacy approach to treatment, we expect WakeX will continue to be added to therapy for patients broadly. There is evidence to suggest that orexin and histamine actually have a synergistic effect. We're very confident in the continued growth and performance of WakeX.

Speaker 0

Yeah, thanks, Adam. With regards to the quarter's performance, Sandip, if you could comment on that.

Speaker 6

Sure, happy to comment on that. I think, as I mentioned, generally, look, our results so far give us increased confidence in the revenue guide of $820 million to $860 million. The fundamentals are strong. We had strong growth even in the quarter of 16% versus prior year. In fact, in Q2, getting to your point, it's really underlying performance is probably even stronger than I would say the net revenues would indicate. As I mentioned in my Q1 call, we did anticipate and we did see a trade inventory drawdown of approximately a few days as we head into the summer month. Typically, what happens with trade inventory, as you know, Q4, Q1 tends to be a little bit higher. Q2, Q3 tends to be a bit lower generally.

The more important point is really looking at the fundamentals of our business and the forward demand of one of the strongest quarters that we've had in terms of net patient adds. Generally, again, it gives us really strong confidence in the balance of the year, and we expect very strong quarter-over-quarter growth for the next two quarters to finish out the.

Speaker 0

Yeah, I think just to reiterate, I think underlying business fundamentals remain strong. I think some variability in inventory from quarter to quarter, as Sandip alluded to, obviously as the base of patients increases. Also, with only three specialty pharmacies in terms of the ordering pattern, I think a couple of days of inventory with regards to that fluctuation. Overall, we are confident in reaffirming guidance for the year. We're comfortable with the street kind of estimates of where we are. This business continues to grow and I'm excited as our pipeline advances and the opportunities ahead.

Speaker 7

Very helpful. Thank you so much.

Speaker 0

Thanks, Danielle.

Speaker 7

Thank you. Our next question comes from Corinne Johnson with Goldman Sachs. Please go ahead.

Good morning. This is Eric Ahn for Corinne Johnson. I just wanted to ask a question elaborating on the last little bit. Specifically, how should we think about net price for WakeX this quarter, and specifically moving towards the back half of 2025 and beyond? To what extent are you using price as a lever to improve volume or drive broader adoption? Thanks.

Speaker 0

Thanks for your question. Sandip?

Speaker 6

Yeah, I think in terms of net price evolution, it would be very similar to what we've seen in past years. Typically, the first quarter is the lowest, just as we have higher gross to net deductions. Typically, that happens with the insurance plans reset and typically improves in the balance of the year. We did see some improvement as we went into Q2, but obviously, as we go into the further quarters, we'll continue to see improvement that will help realize a good portion of the price increase that we took earlier this year.

Speaker 0

Thanks, Sandip.

Speaker 7

Thank you. Our next question comes from Pete Stavropoulos with Cantor Fitzgerald. Please go ahead.

Hi, yeah, thank you for taking my question and congrats on the quarter. I get two questions. The primary endpoint for RE-CONNECT, the social avoidance, a domain for the ABC checklist for Fragile X, it's an observer scale, either parents or caregivers score. Can you just talk about this outcome, potential variability, the expected placebo response, and what measures you've taken to mitigate the placebo response? Are there any other major differences between CONNECT and RE-CONNECT? The second question is for Adam. You joined Harmony over 1.5 quarters ago. I'm curious to hear your views on what levers you may be able to pull to accelerate growth and build up what is already a successful franchise and also plans for lifecycle management. Thank you.

Speaker 0

Yeah, Pete, thanks for your questions. Thanks for taking coverage on Harmony Biosciences. Appreciate that. Kumar?

Speaker 2

Yeah, good morning, Pete. Thanks for the question. Regarding the social avoidance subscale within the broader aberrant behavior checklist, you're absolutely right. This is an observer assessment scale. As you know, ABC has been used extensively, a very well-validated scale. We have a lot of experience with this particular scale. In terms of variability and placebo, great question. In any neuropsych trial, these are some things that we carefully watch for. In this particular study, we have multiple checks and balances to manage, including rigorous inclusion-exclusion criteria. These are the patients that are biologically identified based on full mutation, complete methylation with a significant base level of symptoms. We know the standard deviation for this particular instrument, not just in general, but in patients with Fragile X syndrome. We are obviously monitoring in the blinded data that we have. Thus far, where we are, we feel good about it.

In terms of differences between CONNECT and RE-CONNECT study, the primary endpoint, Pete, is still the same, which is social avoidance subscale within the broader ABC scale. The target population is patients with complete methylation only. We made some other enhancements, like for example, we increased the duration of treatment by four weeks. We increased the dose in patients who weigh more than 50 kilograms. These were done based on the learnings from the CONNECT study to enhance the probability of success. As I mentioned earlier, a high level of confidence and conviction in this program and really the opportunity that's in front of us. If the study is positive, we have an opportunity to bring the first and only achievement for patients with Fragile X syndrome.

Speaker 0

Yeah, thanks, Kumar. Adam, your thoughts on levers for growth in the WakeX business?

Speaker 6

Yeah, thanks for the question, Pete. Levers of opportunity is a term that we talk about so frequently at Harmony Biosciences, and it's a big focus. I have to give credit to the team. The team here really does have a history of growth mindset, looking for continued improvement opportunities. What we've been discussing is how can we continue to improve our top-line demand growth, so average referrals per day, and then conversion of those referrals into dispensing events. How can we make sure that our process is efficient and effective for patients to secure a dispense and then retention over time? How can we provide the service that supports HCPs, the office staff, and the patient to ensure that they maintain or remain on therapy over time? We've identified levers that we're going after.

The work has started, and I'm confident that the work of the team is going to continue to help drive that performance.

Speaker 0

Great. Thanks, Adam.

Thank you very much for taking my questions, and congrats again.

Thanks.

Speaker 7

Thank you. Our next question comes from Patrick Truchillo with H.C. Wainwright. Please go ahead.

Hi, good morning. Just a couple of follow-up questions from us in the pipeline. The first is on Pitocin HD. I'm just wondering, with the expectation to initiate phase 3 trials in the fourth quarter, can you talk to potential trial design or differentiation goals with this program? Separately, regarding Fragile X, assuming a positive RE-CONNECT readout, how are you thinking about the commercial build for ZYN-002? Specifically, I'm wondering if you can discuss more about the engagement with KOLs, advocacy groups, and payers, and what does this suggest about market receptivity and launch planning? Based on that engagement, would you anticipate a more gradual build, or could you see a very rapid uptake if it's approved?

Speaker 0

Thank you, Patrick. Kumar on Pitocin HD.

Speaker 2

Hey, good morning, Patrick. On Pitocin HD, we are on track to initiate two phase 3 studies, one in narcolepsy and one in idiopathic hypersomnia in the fourth quarter of this year. At this stage, what I can say, Patrick, is that it's going to be a standard randomized double-blind placebo-controlled parallel arm study. We are going to provide more information on the endpoints, the recruitment rate, and all of the other things as we approach the study initiation.

Speaker 0

I would say standard trial designs and then also in addition looking at sort of novel endpoints, fatigue in narcolepsy, sleep inertia, and idiopathic hypersomnia to pursue a differentiated label in that regard. With regards to opportunities for ZYN-002 go-to-market, a lot of work has started. Adam, a few thoughts on that?

Speaker 6

Yeah, actually, thanks for the question. I'll just go straight to the community, and I think you mentioned receptiveness to new therapies. This is a very close-knit and tight community, typically what you see in rare disease, but especially so here because these are kids that are suffering from a range of symptoms across several domains: physical manifestations, cognitive impairment, as well as behavioral symptoms. They're very well aware of any treatment that's being developed that could potentially benefit their kids. We would expect very high awareness and high receptivity when we come to market. In terms of go-to-market model, yes, as Jeff said, our plans are underway. We're continuing to have discussions across the community with different stakeholders and really ensure that we are prepared for a success.

Speaker 0

Yeah, I would just add, you know, I think this is what we do at Harmony Biosciences, engaging with rare disease communities. We really have a, I think, a best-in-class, a world-class patient advocacy team and a cross-functional team working on our go-to-market strategy and that opportunity. Thanks.

Great, thanks so much.

Speaker 7

Thank you. We will take our next question from Jason Gerberi with Bank of America. Please go ahead.

Hey, guys. This is Bobin Patel on for Jason Gerberi. A couple of questions from us focused on ZYN-002 for Fragile X syndrome. First, based on prior CONNECT data, how are you modeling patient adherence to therapy if the drug replicates the subgroup data with FMR1 gene methylation? Specifically, what % of patients do you expect to stay on drug given response rates versus what % of patients might be expected to discontinue due to lack of response? My second question is, beyond achieving statistical significance on the social avoidance primary endpoint, what specific results from the key secondary endpoints like the irritability subscale or the caregiver global impression would give you the highest conviction in the data package for filing? Thank you.

Speaker 2

Yes. Hey, good morning. Thank you for those questions. There were several questions in there. Probably I'll start with the last one in terms of beyond social avoidance, what else we anticipate or what else we are monitoring. As we have disclosed, we are looking at several other behavioral symptoms. Obviously, social avoidance is the primary endpoint, but we are also looking at irritability behaviors, another core symptom in patients with Fragile X syndrome. We saw a pretty good response on this domain of symptoms from the CONNECT study. In fact, we recently presented data on irritability at the American Association of Neurology meeting in April this year, which was a podium presentation where patients exposed to three years for ZYN-002 showed sustained and clinically meaningful response in the irritability domain.

In terms of the safety, tolerability, discontinuation, and persistence on treatment, the ZYN-002 product has very unique attributes, and we have discussed this in many forums in the past. The adherence rate is very high, and in fact, over 90% of the patients who completed the randomized double-blind study in the RE-CONNECT study and also in the CONNECT study elected to participate in the long-term extension study. In those patients, we have data last week for more than eight years still continuing to use ZYN-002, gaining efficacy, good benefit with the accessible safety and tolerability profile. I don't think I understood your very first question on the modeling between CONNECT and RE-CONNECT.

Speaker 0

Yeah, just asking about adherence rates and discontinuation rates. What is expected based on the prior CONNECT data?

Speaker 2

Sorry, I don't think I still understood that question. Apologies.

Speaker 0

What % of patients might be expected to discontinue the drug versus remain on the drug based on response rates that you saw in the prior published CONNECT data?

Speaker 2

Okay, got it. Sorry, I don't have that data off the top of my head, but I can certainly provide you that data. Sorry about that. Thank you.

Speaker 0

Yeah, no worries. I just think overall very well tolerated. Again, this is an innovative product, a little different than the oral cannabis. Know

Speaker 7

That's certainly in the market for other indications as a transdermal gel. In terms of the GI side effects and others, I think overall well tolerated. Kumar will get back with that information. Next question.

Speaker 6

Thank you. Our next question comes from Amy Fadia with NEDM. Please go ahead.

Speaker 0

Hi, good morning. Thanks for taking my question. Maybe two follow-ups on prior comments. Firstly, with regards to the RE-CONNECT study, if Kumar, you could sort of remind us what was the placebo response in the CONNECT study and what assumptions you've made for the RE-CONNECT study. You mentioned that there's a standard deviation that you're sort of watching for within which, as long as the response stays, you feel good about it. If you could sort of elaborate what that range is. With regards to the orexin space and the potential implication on WakeX, we've heard from physicians that with the orexins bringing patients to normalized levels, it might actually allow patients to move from polypharmacy to monotherapy, in that context and maybe increasing their scrutiny on just cost of medicines.

Have you thought about potentially looking at some sort of a prospective study evaluating the complementary mechanisms between orexins and WakeX? Thank you.

Speaker 7

Yeah. Amy, good morning. Thanks for your questions. Kumar, in terms of the CONNECT study and the findings,

Speaker 2

Yeah. Amy, great questions. Good morning. Thank you. In terms of the placebo response for the CONNECT study, the data is published by Barry Travis et al. in the Journal of Neurodevelopmental Disorders. Happy to share that paper. What we saw, the placebo response in the overall patient population was around 2.29 points on the placebo arm. In patients with greater than 90% methylation, we saw a lower placebo response, around 1.99. Similarly, we saw also an increase in the magnitude of efficacy in patients with complete methylation. This, again, goes to the earlier point that I was making. In patients with complete methylation, they have a higher burden of symptoms. The mechanism of action of ZYN-002 fits very well in interaction with the endocannabinoid system and the greater magnitude of response.

In terms of your question about the orexin and WakeX prospective study, there is some early preclinical data to show synergistic effect between orexin and orexin receptor agonists and H3 inverse agonists. We haven't shared that information. Just one final point I wanted to make is the study is over 90% powered to detect a one-point placebo-adjusted difference between the active and the placebo arms.

Speaker 7

Yeah. Amy, I think, in terms of your question about the orexin landscape, obviously, we're following the programs closely and looking at, ultimately, its overall kind of risk-benefit. I think durability of response and understanding, obviously, orexins working through kind of wakefulness and how the mechanism of action of WakeX, working through histamine. We have contemplated the opportunity of a synergistic mechanism and the opportunity of even a combination type of approach further down in our pipeline. That is something that we have contemplated to possibly address the opportunity of lower doses of orexin agonist supported by Pitocin, working through a synergistic mechanism. In the meantime, we focus on advancing the next-gen Pitocin products and continuing to grow the WakeX-based business.

Speaker 0

Thank you.

Speaker 7

Thanks, Amy.

Speaker 6

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

Speaker 7

Thank you, Madison, and thanks everyone for joining our call this morning and for your interest in Harmony Biosciences. Have a great rest of your day.

Speaker 6

This does conclude today's Harmony Biosciences second quarter 2025 financial results conference call. You may now disconnect your line and have a wonderful day.