Harmony Biosciences Holdings, Inc.

Good morning. My name is Katie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Harmony Biosciences second quarter 2022 financial update 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 1 on your telephone keypad. Please be advised that today's conference may be recorded. Lastly, should you require any operator assistance, please press star zero. I would now like to turn the call over to Louis Sine, Head of Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining us today as we review Harmony Biosciences' second quarter 2022 financial performance 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 presenters on today's call are John Jacobs, President and CEO, Dr. Jeffrey Dano, Chief Medical Officer, Jeffrey Dirks, Chief Commercial Officer, and Sandy Papadia, Chief Financial Officer. Moving on to slide two. 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, John Jacobs. John?

Thank you, Louis, and thank you, everyone, for joining our conference call today. We are excited about the momentum we saw in our business as we continue to execute on our three-pillar growth strategy during the second quarter. We've made good progress in the first half of this year and are looking forward to making 2022 our best year yet for Harmony. I would now like to take a few minutes to highlight our progress on each of the three pillars of our growth strategy in the context of Q2 2022 performance, which you can see on slide three. Starting with pillar one, which is to optimize the commercial performance of WCAG's. In Q2-22, we delivered a strong quarter for WCAG as we surpassed the $100 million mark for the first time in quarterly revenue, achieving net sales of $107 million, a 45% year-over-year increase for the quarter. WCAG's business fundamentals remain strong, with the second quarter representing our best quarter of performance in top-line prescription demand in over two years. For the remainder of the year, we continue to expect quarter-on-quarter growth for WAKIX due to strong underlying demand and the significant unmet need that persists in the narcolepsy market. Let's move on to Pillar 2, which is to expand the clinical utility of WAKIX beyond narcolepsy. During the quarter, we made good initial progress on our Phase 3 in-tune study for WAKIX in idiopathic hypersomnia. where we were able to initiate multiple sites and have been actively enrolling patients. In Prader-Willi, we have completed enrollment in our Phase II proof-of-concept study and are on track for top-line results in the fourth quarter of this year. We are excited with the continued advancement of our pipeline programs and are hopeful that these efforts, if successful, will lead to additional indications for WCAGS. Dr. Jeff Dana will provide more details on our clinical programs later in the call. And finally, Pillar 3, acquiring new assets through business development to expand our portfolio beyond WACICS. This morning, we announced a new agreement with BioPregé, which is designed to leverage its drug discovery capabilities in combination with our proven commercial expertise in the U.S. market to develop innovative therapeutics based on patolicent. Bioprojet has significant scientific expertise, as demonstrated by their discovery of Pitolisant or Wakeix. The agreement will enable us to pursue new therapeutics for narcolepsy based on Pitolisant. If successful, these efforts could expand Harmony's franchise in narcolepsy by yielding one or more new products with the potential to launch during the Wakeix lifecycle. Closing of the agreement is contingent on clearance under the Hart-Scott-Rodino, or HSR, Antitrust Improvements Act of 1976 and other customary closing conditions, which we expect to complete in the fall. We look forward to providing additional updates as we advance these efforts. As we have said before, we began our business development efforts early in our company history so we could take the time to be thoughtful and prudent in what we acquire and flexible in the types of deals we are able to consider. Over time, our intention is to develop a broad portfolio of rare orphan neurology assets and or assets in other neurological diseases where we can leverage our existing expertise and infrastructure. To achieve this, we intend to leverage our strong and growing financial position to acquire additional assets across a range of development stages, including both early and later stage, with the potential to launch both during and after WCAG's lifecycle. The addition of HBS-102 last year and the new agreement with Bioprojet are important steps in our journey to building a diversified portfolio in neurology. And it is our intention to continue adding additional assets to further strengthen our ability to help patients and to grow our business for long-term sustainability. Harmony is in a good position to execute on Pillar 3 as our business fundamentals with WCAG remain strong. We have approximately $260 million in cash, cash equivalents, and investments as of Q2, and we anticipate that we will continue to generate more cash each quarter from WCAG sales. Overall, I'm extremely pleased with the progress on our three-pillar growth strategy during Q2, and we are well-positioned for the remainder of the year to continue delivering on our plans for growth. We remain confident in WCAG being a potential $1 billion-plus franchise in the coming years via narcolepsy and additional indications, and with that as a foundation, I am truly excited about what we can achieve next at Harmony.

i would now like to turn the call over to jeff dirks harmony's chief commercial officer jeff thanks john we made significant strides in advancing our narcolepsy business in the second quarter both in net revenue and underlying business fundamentals as seen on slide four net revenue for the second quarter was 107 million dollars which represents an approximate 45 percent increase from the same quarter previous year We were also pleased with the 25% growth over the first quarter, demonstrating strong momentum in our business coming out of Q1. Our solid performance since launch continues to reflect not only the resilience and commitment of our team, but also speaks to how the overall benefit-risk profile of WCAG aligns to the significant unmet need in the narcolepsy market. Moving on to slide five, I'd like to highlight a few of our underlying business fundamentals that drove our continued growth in the second quarter of 2022. The average number of patients on WAKIX increased to approximately 4,300 in the second quarter. The growth in Q2 reinforces the strong underlying organic demand for WAKIX, with Q2 performance building upon the momentum coming out of Q1 with respect to both top-line prescription demand and new patient starts. Q2 represented the strongest quarter of top-line prescription demand in over two years, and new patient starts in a year. We also saw strong refill behavior in the second quarter. We are pleased with the continued growth of WCAG on our ability to help additional adult patients living with narcolepsy. Our strong Q2 performance with respect to net revenue and patient growth was driven by a number of factors. We saw an increase in in-person field sales engagements with healthcare professionals and their office staff in the second quarter versus Q1 2022. Approximately 75% of all field sales engagements were in person during the quarter. The increase in access allowed for further education and engagement with healthcare professionals on the meaningfully differentiated profile of WCAG and provided an opportunity for our expanded sales team to drive WCAG's growth in both new and existing prescribers. We observed the further broadening and meaningful clinical adoption of WCAG among narcolepsy treating healthcare professionals. We saw further growth in new prescribers of WAKIX in the second quarter of 2022, both in writers of traditional narcolepsy treatments, as well as healthcare professionals who've been reluctant to prescribe the other available scheduled narcolepsy treatments. We continue to see broad utilization of WAKIX for both type 1 narcolepsy and type 2 narcolepsy patients, and WAKIX being prescribed as monotherapy as well as concomitantly with all other narcolepsy treatments. The majority of WACIX prescribers continue to become repeat writers, meaning they've written a prescription for WACIX for two or more of their adult narcolepsy patients since launch. The continued growth in both the depth and breadth of our prescriber base demonstrates what we believe is a growing opportunity for WACIX in adult narcolepsy. We also continue to see strong and improving market access for WACIX through the second quarter of 2022, helping to accelerate patients' access to WACIX. And lastly, we're extremely pleased with the progress of our field Salesforce expansion. We successfully hired experienced award-winning representatives with established relationships to add to our existing outstanding field sales team and had all new representatives trained and active in their territories by April 1st, in line with what we communicated in our previous earnings call. As we move into the second half of 2022, we anticipate beginning to see the benefits of this expansion. The additional team effort and impact will help to partially offset the typical summer seasonality of more days out of the office for healthcare professionals and expected lower patient foot traffic due to vacations in Q3. In summary, I'm excited about our continued strong performance, inspired by the exceptional work of our team, and proud of the difference WACIC is making in the lives of people living with narcolepsies. The strong performance and solid underlying business fundamentals of WCAG affirm our confidence in WCAG being a potential billion-dollar-plus franchise opportunity in narcolepsy and additional indications. I'd now like to turn the presentation over to Dr. Jeff Dano for an update on our clinical development programs. Jeff?

Thank you, Jeff, and good morning, everyone. I will provide a brief update on Pillar 2 of our company growth strategy. to increase the clinical utility of Pitocin toward potential new indications in additional patient populations living with rare neurological diseases. We have made significant progress in our clinical development programs, which are shown on slide six. Starting with our development program in idiopathic hypersomnia, or IH, we continue to be very excited about this opportunity and are receiving a lot of interest from both patients and healthcare professionals who manage patients with IH. After initiating our phase three registrational trial in adult patients with IH in April, known as the InTune study, we held a live face-to-face investigator meeting in early June before the annual sleep conference. The investigator meeting was very well attended and generated excellent momentum during the startup phase of the trial. The in-tune study is off to a good start and on track with regard to both site activations and patient enrollment. If this phase three trial is successful, it could represent the next new indication for AWAKIX in adult patients with IH. Moving on to our development program in Prader-Willi syndrome, or PWS. We completed enrollment in our phase two proof of concept trial in patients with PWS ages six to 65. With this, we are on track for top line data readout from this study later this year in the fourth quarter. As a reminder, this is a proof of concept trial with the objective being signal detection in this rare patient population. It is not powered to demonstrate statistical significance. The primary outcome is the evaluation of excessive daytime sleepiness, or EDS, in patients with PWS, and secondary outcomes include caregiver assessment of EDS severity and clinical global impression of PWS symptom severity. The full data set will also include other secondary outcomes of interest, including behavioral symptoms, cognitive function, and hyperphasia. We look forward to sharing the top line data with you in Q4. Turning to our development program in myotonic dystrophy or DM. Enrollment continues in our phase two proof of concept study in adult patients with type one myotonic dystrophy or DM1. We have activated sites in Canada in areas where there's a large population of patients with DM1. We anticipate top-line data from this Phase II proof-of-concept study in 2023, and we'll provide an update on the timing of this data readout later this year. Finally, with regard to pediatric narcolepsy and a pediatric indication for WCAGS, you may recall that our partner, BioPregé, completed a Phase III trial in pediatric narcolepsy patients. Bioprojet recently submitted the data to the EMA seeking approval for a pediatric narcolepsy indication. EMA's decision on Bioprojet's pediatric narcolepsy submission could help inform our strategy towards submitting the data to FDA. In the meantime, we are committed to obtaining pediatric exclusivity for WCAGS and plan to submit a request for a pediatric written request, or PWR, later this year. We will provide an update on these activities on future calls. To conclude, we have made significant progress in our clinical development programs as Harmony's clinical enterprise continues to grow. We are excited about the early momentum in our Intune study, a phase three registrational trial in adult patients with IH. In addition, we look forward to top-line data readout from our Phase II proof-of-concept trial in patients with PWS in Q4. We continue to appreciate all the efforts of the clinical investigators and their teams who have partnered with us in conducting our clinical trials and are grateful for the patients and families who choose to participate in them. I will now turn the call over to our CFO, Sandeep Kapadia, for an update on our financial performance. Sandeep?

Thank you, Jeff, and good morning, everyone. This morning, we issued our second quarter 2022 press release and filed our 10-Q, where you'll find the details of our financial and operating results. Our second quarter performance is also shown on slides 7, 8, and 9. We experienced continued strong performance in the quarter, with year-over-year growth in both revenues and operating income, while continuing to generate cash flow from operations. We're pleased with our performance in the first half of the year and the momentum we're seeing for the remainder of the year. For the second quarter of 2022, we reported our strongest quarter to date, with $107 million in net revenues for WakeX. compared to $73.8 million in the prior year quarter. This represents a growth of 45% and reflects the strong underlying demand for WCAG. In the second quarter of 2022, operating expenses were $55 million, compared to $37.8 million in the prior year quarter. The growth in operating expenses is primarily driven by our ongoing commercialization of WCAG's our recent Salesforce expansion, and the enrollment in our phase two proof of concept studies in PWSDM and our phase three registrational trial in IH. As a result of our strong top line performance, we had improvements in operating profitability as we reported second quarter 2022 operating income of 33.1 million compared to 23.3 million, a 42% increase versus the prior year quarter. Non-GAAP adjusted net income for the second quarter was $34.7 million, or $0.57 per diluted share, compared to $21.9 million, or $0.37 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 this measure. During the second quarter of 2022, we generated approximately $34 million of cash from operations and ended the quarter with $258.9 million of cash equivalents and investments as of June 30th. As John mentioned, we're excited about our new agreement with BioPregé. As part of the agreement, we will pay BioPregé a $30 million upfront fee, which we expect to be incurred as an expense in the third quarter of 2022. along with the potential for future milestone payments and sales royalties. Our strong cash position provides us with the flexibility to pursue this agreement while maintaining sufficient capital to continue to execute on our commercial, clinical, and business development priorities. Looking ahead, we do expect typical headwinds from summer seasonality in Q3, followed by a strong Q4. We also expect an increase in R&D and SG&A expenses. In conclusion, our continued strong performance with WCAG and the resulting cash generation is enabling Harmony to make important investments in our business while maintaining profitability and adding to our strong cash balance for business development activities to acquire additional assets. And with that, I'd like to turn the call back to John for his closing remarks. John?

Thank you, Sandeep. So, in summary, our continued strong performance positions us well to execute on our three-pillar growth strategy. Based on the first half results and demand trends we are seeing for Wakex as we enter the second half, we're confident that 2022 can be our best year yet in company history. Our intent is to continue growing Wakex sales in NARCA levels via good commercial execution and strong organic demand for this unique and meaningfully differentiated product. to continue to advance our clinical programs with the goal of expanding the utility of WAKIX beyond narcolepsy to help bring this innovative therapy to new patient populations and to continue to acquire new assets beyond WAKIX to develop a broad portfolio of rare orphan neurology assets and or assets and other neurological diseases where we can leverage our existing expertise and infrastructure. We look forward to updating you on our progress This concludes our planned remarks today. Thank you for joining our call, and I will now turn things back over to the operator to facilitate the Q&A session. Operator, can we please open the call to questions?

Thank you. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, you may do so by pressing the pound key. 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 Chris Houghton with Jefferies. Your line is now open.

Hey, good morning, and congratulations on the progress. Really awesome quarter. I guess two questions for me. One would be from – oh, thanks, John. The first from Jeff Dirks would be, you know, could you describe to us the relative impact of the two different practices that you described, those that, you know, traditionally prescribed in narcolepsy therapies and then those that were more hesitant to do so? And then the second question that I have would be around the new relationship with BioProje. If we could just have a little more color in terms of what we can expect from that relationship and maybe how that might expand IP past the current expected runway of around 2031. Thanks.

Jeff, go ahead if you want to handle the first question on the two different physician segments.

Sure. Good morning, Chris. Thanks for the question. So when you're thinking about the two different segments, the initial audience that are the OxyVe prescribers, writers of traditional scheduled medications, Our initial target was about 8,000 healthcare professionals, and they covered about 90% of the patient opportunity. The additional 1,000 physicians that we added to our target universe that had picked up prescribing WACICs that were not prescribers of the other scheduled treatments, they managed about a 10% of the patient opportunity. So to give you a relative sense, it's about a 90-10 split, if that helps.

That's perfect. Thank you. Thank you, Jeff. And then, Chris, on your second question, you know, this deal allows us to focus on developing new innovative therapies based on pitulicin in partnership with Bioprojet, the focus on narcolepsy. And, you know, if we choose to and align with Bioprojet, potentially other indications that are mutually agreed upon by the parties as well. You know, these efforts could expand our franchise in narcolepsy by yielding one or more new products with the potential to launch during the WCAG lifecycle should we succeed with them. And regarding IEP, Chris, what I will say and can say is it's Harmony's policy to file patent applications alone or with our partners on all patentable inventions that strengthen our assets. And it's also our policy not to discuss any pending patent applications, of course, due to competitive reasons. So hopefully that adds a little bit of extra color, Chris.

Okay. Yeah, no, very much. I really appreciate it, John, and thanks again for taking the question.

Thank you, Chris.

Thank you. Our next question will come from Danielle Brill with Raymond James. Your line is now open.

Hi, guys. Good morning. Thanks so much for the question, and my congrats on the strong quarter as well. So you mentioned that top line prescription demand was the strongest. It's been in over two years, and new patient starts were the strongest in over a year. And I think last quarter on your call, you said March was the strongest month you had for new patient ads in over a year. I'm just curious how that momentum evolved during the quarter. Did you see a similar level of demand exiting 2Q as you did entering it? I'll stop there, and then I have a follow-up. Thanks.

Jeff Dirks, you want to take Danielle's question on momentum?

Sure. Good morning, Danielle. Obviously, we're extremely pleased with the strength of our underlying business fundamentals, and you are correct. The Q2 growth really reinforces the underlying organic demand for WACICs, We built on the momentum, as you noted, in March. We had a very strong quarter, and I would say that the momentum leaving and exiting Q2 was as strong as coming out of Q1. We did reference on our earnings call that the second quarter was our strongest quarter of top-line prescription demand in two years, and new patients starts in a year, exceeding a little bit of what we saw in March. Extremely pleased with our business performance and anticipate growth moving forward in some of these key metrics.

Great, thanks. And then you mentioned, I think, in your prepared remarks that you expect the contribution of the new reps and the new 1,000 prescriber targets to partially offset the typical Q3 seasonal impacts. Can you maybe elaborate a little bit more on that or quantify how we should be thinking about maybe seasonal headwinds next quarter? Thank you.

Jeff, you want to comment on the seasonality in Q3?

Yeah, Daniel, you're exactly correct with respect to seasonality. So, you know, we're not providing forward-looking guidance, certainly, but we are excited about the growth opportunities for WACICS moving forward. You know, and our growth is going to reflect the typical seasonal dynamics that are consistent with every other branded specialty product in the industry that creates an ebb and flow in our performance. So as you've seen, Q1 has seasonal payer dynamics, insurance resets, reauthorizations, higher gross to nets. Second quarter tends to be stronger with the payer dynamics behind this and gross to net and trade inventory normalizing. Q3, you do have summer seasonality, right? So there are fewer patient visits. There's more traditional vacation time for patients, healthcare professionals, and their office staff. And then usually that's followed by a stronger Q4 where more patients look to start and or refill their medicines before the end of the year and their insurance changes. So when we talk about our field team, we do anticipate beginning to see the benefits of the expansion. And we did mention in our comments that we hope that that effort and impact may offset and partially offset the typical seasonal dynamics. It'll be great to have additional representatives out there building relationships, educating our healthcare professionals. But we do anticipate those traditional Q3 seasonal dynamics with lower patient foot traffic and more vacation out of the office.

Yeah, thank you, Jeff. And, Danielle, to just add some additional color and context to that, I would say that there's a sales force, as you know, generates demand for a product. So they're going in, they're educating medical staff and getting new riders on and reminding physicians of the benefits of weight gain. If you have less patients going in to fill their prescriptions due to vacation and holidays and less patient-physician interaction, our reps cannot do anything to change that particular dynamic. What they're doing is a more wide share of voice, a larger share of voice out there, but that dynamic is separate from a sales rep's effort. What the reps can do is generate additional demand over the long run and as we get into Q4. But I would not assume that the new Salesforce edition will do much to mitigate the typical seasonal dynamics because those are outside of the control of what Harmony does. It has to do with patient physician visits, physician holidays through the summer months. And that's something we want you all to think about each year, the normal seasonality and ebb and flow of a chronic disease business in neurology, where you see this Q1 insurance reset. and the gross-to-net pressures that every company faces in this type of a space as you enter Q1, and then that summer seasonality in Q3. So I would just expect that normal, typical type of ebb and flow to our business, but we do expect overall in the second half as a whole to see, as Jeff was saying, that impact of our sales representatives. Hopefully that adds a little extra color and context.

Yes, understood. Thanks for the additional context.

Thank you. Our next question will come from Ami Sidiya with Needham. Your line is now open. Hi.

Good morning. This is Ethan Lee on for Ami. Congrats on the quarter, and thanks for taking our questions. Thank you. Maybe two from us. Just first, you know, I know, you know, y'all kind of talked about kind of the 300 to 400 new patient ads per quarter. Just wanted to You know, confirming that's kind of how you're thinking about, you know, the increase in new patients over the rest of the year. And then maybe second, kind of on PWS, can you kind of remind us of the mechanistic rationale for Pitocin and EDS here? And just quickly, like what magnitude of improvement on ESS would be considered clinically meaningful for these patients?

Thank you. Yeah, great questions, and thank you for those. And number one, of course, we have not and are currently still not providing any forward-looking guidance, so we're not going to comment on that. What we did say is that we strongly anticipate continued growth of WACICs due to the strong underlying demand of the product. The numbers you quoted are historical. Looking backwards, you can see what has occurred, but we're not going to provide forward-looking guidance on it. We're confident in our ability to continue to grow this business based on the significant unmet need in narcolepsy and the demand we're seeing organically from physicians. Jeff Dirks, any other comments on the question on momentum and prescription ads each quarter?

No, I think you handled the question well, John. And, Ethan, again, I would just hearken back to John's response to Danielle as just considering the seasonal dynamics in the second half of the year as you're thinking about our business and that ebb and flow we expect.

And then Jeff Dano, I think the next question was on mechanism of action, and I believe, Ethan, it was Prader-Willi you asked about specifically. Yeah, for Prader-Willi.

Yeah, good morning, Ethan. So in terms of the mechanistic fit of the Tolson for Prader-Willi or the reason to believe, if you will, so Prader-Willi syndrome is fundamentally a disorder of hypothalamic dysfunction where you have not just the hunger-satiety switch in the hypothalamus, but right next to that the sleep-wake switch. There is also evidence of hypocretin deficiency in some patients with Prader-Willi syndrome, and as you probably know, the prototypical disorder of that hypocretin deficiency is patients with narcolepsy. So that results in overall sleep-wake state instability that leads to the excessive daytime sleepiness as a key symptom in patients with Prader-Willi, in addition to the cardinal symptom of hyperphagia. So that's a summary of sort of the mechanistic fit. With regards to meaningful response on EDS, typically we look for a two to three point improvement in the Epworth sleepiness scale, and that's what we'll be looking for in terms of signal detection from the top line data.

Great, thank you.

You're welcome.

Thank you. Our next question will come from Charles Duncan with Kantor Fitzgerald. Your line is now open.

Hey, good morning, John and team. Congratulations on a really nice quarter. Had a couple of questions. Hi. So one commercial, one pipeline. Regarding the commercial question, I guess I'm wondering if Jeff can provide a little bit more color on the performance in terms of persistence or refills versus new patient starts and kind of how do you feel about that dynamic? And then can we assume no change in pricing in terms of the impact on top line?

Go ahead, Jeff.

Thank you.

Good morning, Charles. So question on performance of refills versus new patient starts. So obviously, new patient starts continue to be extremely strong. And as reported, it was the strongest quarter we've had in over a year. But we also saw strong refill behavior. And so when you're thinking about refilling behavior, it obviously has a reflection on the average number of patients. You know, we've talked a lot about within this category, the average discontinuation rate of drugs for the narcolepsy market range between 30% and 50% at 12 months. And then, again, you may have a smaller portion of discontinuation in year two and three for chronic medications, which is consistent across the industry. And although we haven't shared specific discontinuation rate information with respect to WACICs, We're extremely pleased with how the product's being received. It falls well within that range. We continue to hear great feedback from healthcare professionals and patients, so we feel really good about the outlook in terms of the refill behavior as well as what we're seeing with respect to new patient starts and ads and that momentum in the second quarter. And then with respect to pricing, we're not anticipating any pricing changes moving forward outside of the price increase that we took in January.

There we go. Second question regarding pipeline for Jeff Dano. Jeff, congrats on getting that phase three started in April. You mentioned that you had strong momentum in Intune study in terms of site activations and patient enrollment. I imagine it's too early to kind of quantify that, but could you provide a little bit more color in terms of the sites and And then any updated thoughts on timing to data, or is that something you'll discuss later on as you gain more experience in the study?

Yeah, good morning, Charles, and thanks for your question. Yeah, I think it is a bit early. We are in startup mode, but we had great momentum coming out of the investigator meeting that we held in early June. I think the sites are distributed across the U.S., targeting 60 to 80 clinical trial sites. And with regards to our initial metrics, the metrics that we follow to track performance, We are on track and on target for both site activations, patient screening, and enrollment. I think with regards to overall timeline, as you'll notice on clinicaltrials.gov, we estimate about two years to complete the trial and towards top-line data readout. We'll provide updates as the trial advances and further progress as we move along.

Perfect. Perfect. Thanks for the added color. Congrats on a good course. Thank you, Charles. Thanks, Charles.

Thank you. Our next question will come from Greg Savanovich with Mizuho. Your line is now open.

Hi, Greg. Hi, John. How are you? Good morning. Thanks for taking my question.

Doing great.

Good morning. Thank you again. And just maybe a couple of questions for me. Just I've gotten a lot of questions this morning on pricing and gross net dynamics. And so can you just remind us again, and you may have commented this on a previous question, but could you just repeat kind of where we are in pricing? You know, what should the expectation be for perhaps the balance of the year? And maybe in the second quarter specifically, if you could provide any color, if there were any unusual gross-to-net true-ups that are worth mentioning. So, that's my first question, and I'll come back to the second question.

Okay. So, first on pricing, we did take a price increase in Q1 that we announced in our last earnings call. And any other comments, Jeff Dirks or Sandeep, on pricing through the rest of the year?

Yeah, we usually don't comment further, but there were no pricing changes in Q2 that, you know, that affected our sales number. It was all in Q1 that we took the price increase there. And I think to your comment on gross than that, as we had commented previously, you see an increase in gross than that in the first quarter, given copay assistance that we provide, higher government-related discounts. And that tends to reverse in the second quarter. So what you're really seeing in the second quarter is really related to the change in gross than that. you know, and we would expect that to be relatively stable for the balance of the year. Some fluctuations quarter over quarter, but generally, I mean, those are the key factors, you know, to think about.

Yeah, by the second quarter, you've worked through the insurance reset in Q1, and gross to net's normalized to Sandeep's point. So that's that dynamic you see moving from Q4 through Q1 into Q2, Greg. Thank you very much.

Also, congrats on the bio-projet deal, and if I could just revisit that in terms of, I guess, how we could think about when you might provide us more color on what those, what I will consider as life cycle management strategies might look like or additional titulisant-based formulations. Is there a view that we'll hear more about that in terms of specific candidates this year or next year? And then my last question is I think many of us are interested in knowing at what point the company will be in a position to start providing forward-looking guidance and just wanted to revisit that and current thoughts. Thanks.

Great, great question, Greg. Obviously, these programs are very early in development with Bayer-Perget. And so as we reach future milestones, we are excited and looking forward to sharing details about that with the community. But it's premature to comment now on any additional color or provide necessarily timing at this stage for that commentary. But as we reach key milestones in the development of those programs and the advancement of those programs. We'll be excited to share with you and the rest of the investor community on that. When it comes to guidance, Sandeep, did you want to comment just on when we might contemplate providing forward-looking guidance for the first time as a company?

Sure. Sure, John. Thanks. Yeah, I think generally, you know, we've wanted to see how things would progress post-COVID and, you know, the impact of Salesforce expansion and other things in order to give us enough confidence in terms of the guidance. So the natural point, if we decide to give guidance, would be the beginning of next year. In the meanwhile, you know, we've tried to provide at least enough qualitative as well as a couple of indicators to help you at least from a modeling perspective. But, you know, I think the natural point would be start of next year.

Thanks so much. It's great to be back out on the name. Thank you, Greg. Appreciate you.

Thank you. Our next question will come from Corinne Jenkins with Goldman Sachs. Your line is now open.

Yeah, good morning. So we've talked a little bit about net price and gross-to-net dynamics. I just want to confirm, were there any one-time sort of impacts on the gross-to-net basis, like true-ups, or any other inventory swings that might have impacted the top line this quarter?

Sandeep, you want to take a turn?

Sure. I think just as you said, what we saw in the second quarter were generally just a reversal of a lot of the gross nets from impact, if you want to call it, from first quarter. There were no major swings, at least in the quarter, regarding any major true-ups or adjustments. What we saw was rarely the normal dynamics. I think, Jeff, were there any sort of trade impacts or anything like that that we could discuss?

No, I think looking at Q2, the trade inventory is relatively normalized for the quarter, and we anticipate that to remain relatively consistent through the balance of the year.

Great. And then on the BioPregé deal, I'm just curious because we've talked a lot about potential BD to supplement revenue durability beyond the wake expat in life. And I'm curious if this is meant to be kind of instead of or as a supplement to potential BD. And then how quickly could the compound get into the clinic and how does the Harmony contribution in terms of paying for that development work?

Look, Corinne, what I'll say is the addition of HBS 102 last year and now the new agreement with Bioprojet, they're important steps in our journey to building a diversified portfolio in neurology, but they're certainly just our first steps and not intended to be our last by any stretch. And it's our intention to continue adding additional assets. to further strengthen our portfolio in rare orphan neurology. And also, as we've said, each time we've talked about this, right, in neurology where we can leverage our infrastructure and expertise as a company. So these are just one more step on what we intend to be a long and fruitful journey to build out a portfolio. We're not going to comment on timing in the clinic right now. These are early development phase. And so what we're going to do is as we hit key milestones, we'll be excited to share that with the investment community over time. And I think Sandeep can comment on the pay structure, Sandeep, when it comes to sharing clinical expenses. Corinne was asking how will we pay for those expenses? Are we sharing those costs with Bioprojet as a partner?

Yeah, generally, the terms are relatively similar to what we had in the prior agreement. In terms of development costs, you know, they'd be rather minimal this year. So, you know, generally, I would say they would start picking up next year in terms of significant costs there. We have an agreement that we would share at least the first $40 million of costs as part of the development program, 50-50, and then after which we would capture most of it. There is a component of cost savings. early on in the development cycle.

Thanks. That's helpful.

Thanks, Karen.

Thank you. Our next question will come from David Amselem with Piper Sandler. Your line is now open.

Hey, David.

Hi. Thanks for getting to me. So two questions. So two questions. First, a follow-up on the BioPregé partnership. Is this in any way kind of a statement on the IP situation for WACICs? And, you know, as a corollary to that is, Should we think about this as primarily a life cycle management type of situation, or you're potentially going to be looking more broadly with the idea that, yes, these are molecular entities that are based on pitocin? So that's the first question. Second question, I don't know if you can comment on this, but in terms of idiopathic hypersomnia, Are you seeing any off-label usage? And again, I know there's sensitivity here, but is there anything that you can add in terms of what you might be seeing in that setting? Thank you.

Yeah, David, first, I mean, we remain confident in the strength of our IP, and developing new therapeutics in partnership with Bioprojet is not a reflection of our current patent portfolio for WAKIX. You know, as we stated before, we have patents expiring in 2029 and factoring a patent term extension, and our pursuit of pediatric exclusivity for WAKIX has the potential to extend into 2031. We're excited about the deal with Bioprojet, which allows us to focus on the development of new innovative therapeutics based on Pitocin, in a way, life cycle management, but also in other indications that are mutually agreed to by the parties. And so these are early in development, so as we learn more through those programs and our co-development with Bioprojet, we'll be glad to share further thoughts on strategy and focus areas in the future on those things. And then I believe your question, your second question was on Jeff Dirks.

On idiopathic hypersomnia, David.

Off-label use.

David, what I can tell you is there's certainly excitement in the community, and I think, you know, Jeff Dano can speak to this after me. You know, again, it's limited in its use given, you know, Wakex is a higher-priced specialty product and does not have an FDA approval, so payers usually manage drugs to label. So, If you're thinking about IH as an opportunity, it's definitely a creative opportunity to WCAG, so we're not seeing a lot. But I do think that there is a very strong interest, and that likely is going to speak to a future opportunity.

Yeah, David, it's Jeff. Thanks for the question. I think just at a high level, as Jeff mentioned, we have seen a lot of interest. from both patients and, you know, the sleep medicine community with regards to the policy for IH. I think some of it relates to mechanistically, you know, primary, you know, disorder of wakefulness and looking at wake-promoting agent, you know, versus other treatments with regards to consolidation of sleep and primary disorder. You know, working through a mechanism as a primary CNS depressant. So I think mechanistically it offers another approach. I think that's what's generating some of the interest. And obviously we're excited about the phase three in-tune trial, you know, looking at pitocin for adult patients with IH, and we'll continue to provide updates on that as we advance the trial. Okay, great. Super helpful. Thank you.

It's key to state that idiopathic hypersomnia remains a true and unique opportunity for the product. It's a unique diagnosis code. It's a diagnosis of exclusion. Obviously, Harmony does not and cannot promote off-label. There may be some off-label use, but we don't believe it's a high volume of off-label use. And there's a large patient community who's already diagnosed in the tens of thousands there who have significant unmet need and we believe could really benefit from a non-scheduled therapeutic option like WCAG should we succeed. So we see it as a true open and available opportunity should we have success in the clinic.

Okay. Well, thanks again.

Thank you, David. Good to hear from you.

Thank you. Again, if you would like to ask a question, please press star 1 now to join the queue. Our next question will come from Francois Biswa with Oppenheimer. Your line is now open.

Hey, guys. Nice taking the question. Just on that note on IH, can you just help us understand, you know, how the medical community feels about the diagnosis? Is it difficult to differentiate, even if it's by exclusion, just how that works since now there's products that are approved for both narcolepsy and IH? Go ahead, Dr. Dano.

Yeah, Frank. Good morning. Thanks for the question. So I think, you know, this IH is a very active area in the sleep medicine community. A lot of, obviously, discussion about it and new learnings with new treatment options that are out there. So I think that, you know, it evolves along sort of the spectrum in terms of type 1 narcolepsy, type 2 narcolepsy, and and then IH. But as John alluded to, ultimately, it is a diagnosis of exclusion, rolling out, patients with narcolepsy, and other disorders that result in excessive daytime sleepiness, mainly related to sleep disorder, breathing, and other conditions. So I think there is more... focus on it, there's more awareness and going through that diagnostic procedure with regard to ultimately, you know, landing on a diagnosis of IH. So I think that's sort of the current state of affairs in the medical community, and, you know, we continue to follow that closely, and it's also driving a lot of interest in our Phase 380 trial in IH. and we'll look forward to progressing that clinical trial.

Okay, great. And if I sneak in a last one here, you talked about PWS and expectations maybe and how it's not necessarily powered for STAT-SIG or proof of concept and what you would like to see for clinical meaningfulness, but I was just wondering on the DM front, is that powered for STAT-SIG or is that a similar mindset as PWS?

That is a similar mindset, our phase two proof of concept in myotonic dystrophy. We are taking a similar approach. So it is a similar approach as a proof of concept. And we're looking at, we'd like to, because the TOLSEN has never been studied in patients with DM1. So we feel it's prudent to generate data sooner rather than later, signal detection, and get to sort of a decision point with regards to a further development program. So short answer, it is a very similar approach, phase two proof of concept, and we're building some momentum. We've opened sites in Canada, Frank. We're in Quebec region where there's a large founders population of patients with DM1. And as we said, we are looking to top-line data readout in 2023 next year, and we'll provide more color on that timing later this year.

Great. All right. Well, thank you very much, and congrats on the quarter, guys.

Thank you. Thanks, Frank.

Thank you. I am showing no further questions. This does conclude today's Harmony Biosciences second quarter 2022 financial update conference call. You may now disconnect your line and have a wonderful day.