Harmony Biosciences Holdings, Inc.

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

Thank you, Operator. Good morning, everyone, and thank you for joining us today as we review Harmony Bioscience's second quarter 2024 financial results and provide a business update. Before we start, I encourage everyone to go to the investor section of our website to find the materials that accompany our discussion today, including a reconciliation of our GAAP to non-GAAP financial measures. At this stage in our life cycle, we believe non-GAAP financial results better represent the underlying business performance. Our speakers today on the call are Dr. Jeff Dano, President and CEO, Jeffrey Dirks, Chief Commercial Officer, Dr. Kumar Budur, Chief Medical and Scientific Officer, and Sandeep 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 Dr. Jeffrey Dano. Jeff?

Thank you, Brennan, and thanks, everyone, for joining our conference call today. Q2 was another very productive quarter for the team at Harmony, delivering another quarter of strong revenue growth for WACICs and continued advancement in our late-stage clinical development programs, highlighted by the significant progress made on our next-generation pitocin high dose or Pitocin HD development program, formerly referred to as NG2. During our Q1 earnings call, we shared the initial pilot PK data for the Pitocin Gaster Resistant or Pitocin GR program, formerly referred to as NG1, along with the development plan as the first part of our Pitocin life cycle management activities. This quarter, we are excited to provide an update on our Catolysant HD program with a targeted PDUFA date in 2028 and a provisional patent filed out to 2044, providing us the opportunity to extend the Catolysant franchise to the mid-2040s with durable long-term revenue generation. Let me provide some color regarding the reasons why we are excited about advancing this program because of the unmet medical needs in the narcolepsy community that Pitocin HD is designed to address. Later in the call, Kumar will share some of the initial pilot PK data and a few other details from the Pitocin HD development program. WAKES offers a strong overall benefit-risk profile for patients living with narcolepsy. has brought a meaningful enhancement to the market as the first and only non-scheduled treatment indicated for both excessive daytime sleepiness, or EDS, and cataplexy, and has been extremely successful in the market. But given the nature of narcolepsy as a chronic neurological disorder with difficult-to-treat symptoms, there still remain unmet needs and opportunities for continued innovation. For Pitocin, GR, and HD, the innovation is more focused on the continued unmet needs in the narcolepsy market and what we can do to address those needs. First, we know that greater than 75% of narcolepsy patients experience residual symptoms while on treatment and could benefit from a treatment with greater efficacy. This is why we are pursuing a high-dose Pitocin formulation but also has an optimized PK profile to drive greater efficacy to address this need in the market. Second, about 60% of patients living with narcolepsy experience fatigue, which is a different symptom than EDS and a common symptom in chronic neurological diseases. With a higher dose of pitocin and based on the positive signals that we saw in both EDS and fatigue with pitocin, In our phase two proof-of-concept study in type 1 myotonic dystrophy, or DM1, we plan to pursue a fatigue indication for pitotin HD in patients with narcolepsy as well as other neurological diseases such as DM1. Next, as we explained for our pitotin GR program, a driving force behind the gastro-resistant coding is the fact that about 90% of patients with narcolepsy experience GI symptoms, such as nausea, dyspepsia, and abdominal discomfort. There is a mechanistic rationale for this, especially in patients with NT1 or type 1 narcolepsy, related to the orexin deficiency, since orexin has effects on the vagus nerve in the brain, which is the central controller of gut motility. In addition to the underlying disease mechanism, One out of five patients on narcolepsy medications experience GI side effects related to the common narcolepsy treatments that are used. WAKIX is well tolerated with a low incidence of nausea, but the gastro-resistant coating feature is designed to address the predisposition to GI symptoms in patients with narcolepsy, as well as the GI tolerability issues patients have experienced with other narcolepsy treatments. Taken together, the higher dose, optimized PK profile, gas or resistance feature, and our plan to pursue additional indications would address significant unmet needs in patients with narcolepsy and position Pitocin HD as a meaningfully differentiated product and result in a differentiated label compared to WAKIX. With a provisional patent filed and potential IP out to 2044, and a target to due to date in 2028, this gives us an opportunity to introduce the differentiated product prior to WCAG LOE in 2030 to extend the Pitollison franchise to the mid-2040s and drive durable long-term revenue generation. Our commercial team conducted preliminary market research based on the target product profile for Pitollison HD. and initial results suggest that the features I described to you would be of real interest to patients, be viewed as offering meaningful benefits by healthcare professionals, and perceived as clinically superior compared to WACICS by payers. To round out our sleepwalk franchise, we were very pleased with the FDA approval of WACICS for EDS in pediatric narcolepsy patients ages six years and older And we're excited to launch this new indication into the market on July 1st. As a reminder, the pediatric narcolepsy data, along with data from the ongoing phase three tempo study in Prader-Willi syndrome, keeps us on track toward obtaining pediatric exclusivity and an additional six months of regulatory protection on the back end of our longest patent, which would take us to September 2030. We are on track to submit an SNDA for idiopathic hypersomnia later this year and are very excited about our potential best-in-class orexin-2 agonist program for TPM 1116. We are working with our partner BioPregé and are on track toward filing an IND mid-2025 and then initiating first in human studies second half of 2025. Beyond our strong sleep weight franchise, we are also advancing late stage programs in our other two franchises, neurobehavioral and rare epilepsy. Harmony has expanded its pipeline and diversified its portfolio that now includes three orphan rare CNS franchises, each one of which has peak sales opportunities of $1 to $2 billion. I want to highlight that our pipeline now has eight assets, advancing across 13 development programs, and three of them are in phase three, with a fourth phase three trial to begin later this year. Importantly, this pipeline is poised to deliver at least one new product or indication launch each year over the next five years. This, along with the Tolson HD PDUFA date targeted for 2028, translates into the potential for significant, durable, long-term value creation out beyond 2040. Kumar will be providing you updates on our development programs later in the call. While we advance our pipeline programs, we remain focused on execution across the company and delivered another solid quarter with WCAG's net revenue of $172.8 million representing 29% growth year over year. With these strong results, we are once again reiterating our 2024 net revenue guidance of $700 to $720 million and remain confident that WACIX represents a $1 billion-plus market opportunity in narcolepsy alone, and we are well on our way. What reinforces our confidence in the durability of the WACIX franchise is is the news we shared earlier this morning regarding the WACIX polymorph patent being upheld once again after the second and final attempt to challenge the patent. Late last week, the U.S. Patent and Trademark Office, or USPTO, issued its final denial of the petition for reexamination of the WACIX patent, which was filed by a short seller. We have always stood by WACIX, and our intellectual property. This reexamination request represented the second attempt to challenge the WACIX patent. And in its decision, the USPTO stated, and I quote, this decision is final and non-appealable, end quote. We remain very confident in the strength of our patents. the validity of the patent portfolio, and our ability to rigorously enforce the intellectual property rights protecting WCAG. This bolsters our confidence in the durability of the Pitocin franchise, with the PDUFA date for Pitocin-GR in 2026, the target PDUFA date for Pitocin-HD in 2028, the IP for WCAG-SELFA 2030, and provisional patents filed for Pitocin GR and HD out to 2044. This puts us in a solid position to extend the Pitocin franchise out to the mid-2040s. We also remain active in business development with the goal of building out our pipeline even further. With approximately $434 million in cash, cash equivalents and investments as of June 30th, we are in a solid financial position to execute on additional BD opportunities that are consistent with our growth strategy and offer the potential to drive further value in our overall business. Lastly, we look forward to hosting our inaugural Investor Day on October 1st in New York City, where we will have an opportunity to highlight our robust late-stage pipeline and share some new data with you. With that, I will turn the call over to Jeffrey Dirks, our Chief Commercial Officer, for an update on our commercial performance.

Jeff?

Thanks, Jeff. We saw another solid quarter of continued commercial progress for WACICS in the second quarter, highlighted by continued product adoption and growth in our underlying business fundamentals. Net sales for the quarter were $172.8 million, representing 29% growth from the same quarter prior year. The solid net sales performance in Q2 reaffirms our confidence in our net sales guidance of $700 to $720 million for the full year 2024. We saw continued growth in the average number of patients on WACIX and in the WACIX prescriber base. both facilitated by favorable market access as seen on slide four and five. The average number of patients on WACIX increased to approximately 6,550 in the second quarter. We're extremely pleased with the sequential increase of approximately 250 patients from what we reported last quarter and the durable growth in year five of our rare orphan commercialization. The growth in average patients in Q2 was in line with our expectations. and reaffirms our confidence in our guidance of approximately 7,000 average patients by the end of the year. We also saw the WCAG's prescriber base increase again in the second quarter. We're seeing continued growth in the WCAG's prescriber base beyond the OxyBait REMS-enrolled healthcare professionals, and we're approaching 40% penetration in this segment of approximately 5,000 healthcare professionals at the end of the second quarter. This segment of healthcare professionals represents an insulated group of prescribers and patients from the OxyBates that we continue to tap into each quarter to drive performance. The growth in this segment demonstrates WAKIX is broadening the branded writer segment beyond the OxyBates by providing a meaningfully differentiated product profile and one that offers broad clinical utility across the entire narcolepsy treating healthcare professional universe. Coupled with the growth we're seeing beyond the OxyBait REMs enrolled healthcare professionals, we continue to see utilization of WAKIX among the approximately 4,000 OxyBait REMs enrolled healthcare professionals, even with the availability of new and generic OxyBait options. We're highly penetrated within this prescriber audience and see WAKIX being prescribed to additional narcolepsy patients each quarter in this segment. As we've shared during previous earnings calls, our ability to call on the broad approximately 9,000 narcolepsy treating healthcare professional audience allows us to tap into the full diagnosed narcolepsy patient opportunity, giving us confidence in the billion-dollar-plus opportunity for WACICS and narcolepsy. Supporting the growth in patients and prescribers is our favorable market access and formulary coverage for WACICS. We've seen no changes to the overall broad payer coverage for WACIX over the past year with the introduction of new branded and generic options, and we believe we are well positioned to support future growth. As we are closing out another solid quarter of performance, we are excited to receive the news of the approval of WACIX for the treatment of excessive daytime sleepiness in pediatric narcolepsy patients six years and older on June 21st. WAKETON now represents the first and only non-scheduled treatment option for pediatric narcolepsy patients. And importantly, all narcolepsy patients have EDS. So with its approval, we have the opportunity to access the full diagnosed pediatric narcolepsy patient opportunity. The pediatric narcolepsy opportunity is a small but meaningful opportunity. It represents approximately 5% of the diagnosed narcolepsy opportunity or approximately 4,000 patients. And this approval was contemplated in our full year 2024 net sales guidance. Our commercial team was prepared for this approval and started our now-approved outreach the week following the approval. Our field sales team was trained later that week and without educating healthcare professionals about the new indication starting July 1st. Although it's still early, we are seeing positive indicators from the launch. We're getting very positive feedback and interest from the patient and healthcare professional community, The payers have begun to add WACICs for pediatric narcolepsy to their formularies within the first 30 days from approval. In summary, we had another strong quarter of durable growth and performance in net sales, patient ads, and growth in prescribers of WACICs, reaffirming our full-year net sales guidance and average patient guidance that we issued earlier this year. With the addition of the pediatric narcolepsy approval for the treatment of EDS, coupled with the strong fundamental business in our adult narcolepsy, we're seeing good leading indicators in our underlying business fundamentals. Heading into the third quarter, we anticipate the typical summer seasonality of fewer patient visits, lower foot traffic, and offsets consistent with previous years and other chronically managed conditions. And we remain confident in continued growth in average patients and prescribers of WCAGs moving forward. I'm excited about our performance and confidence in WACICS representing a potential billion-dollar-plus opportunity in narcolepsy alone, and we're well on our way. I would like to now turn the call over to our Chief Medical and Scientific Officer, Kumar Badur, to discuss the advancements in our clinical development programs.

Kumar? Thank you, Jeff. Good morning, everyone, and thank you for joining us today. We continue to make great progress in advancing our pipeline programs several of which are in late stage development. As just mentioned, we now have 13 different development programs ranging from preclinical to registration studies across eight different assets and under three distinct franchises focused on race neuroindications with high unmet medical need. Our full clinical development pipeline is shown on slide number six. It is important to note that we currently have three ongoing Phase III registration studies that are actively recruiting patients for three distinct indications and plan to start a fourth Phase III registration study in patients with LZF during this half of 2024. Starting with our sleep-break franchise, the Pitilofent High Dose or Pitilofent HD program It is an enhanced formulation of pitolacent designed to deliver an optimized PK profile along with a higher dose, GR coating, and target unique symptoms. We conducted a pilot PK study with four different prototype formulations in a five-way crossover study, comparing the four prototype formulations with VACIX as a reference formulation at a dose strength of 35.6 milligrams, the highest labeled dose for VACIX. Based on the pilot PK data, we are pleased to advance this program forward. The preliminary data from the prototype formulation showed a meaningful differentiation with at least approximately 20% increase in relative bioavailability and a decrease in the variability compared to . Alongside further work on formulation optimization, we will progress this program and study up to two times the current highest labeled dose of vacuums where we expect to demonstrate a further increase in palliative bioavailability and decrease in variability in the PK profile. In addition, the GI coding is designed to address the predisposition to GI tolerability issue in patients with narcolepsy and enable to start at the beginning of the therapeutic dose range. An optimized PK profile, along with a higher dose, GR coating, and targeting unique symptoms, such as fatigue and narcolepsy, is expected to provide a differentiated level and product profile. We will pursue an abbreviated clinical development program based on the leading edge work, including establishing safety margins per patella sent up to 180 milligrams in a repeat dose study, and qualitative research study on fatigue and narcolepsy, that were completed over the past couple of years to support Pitocin-HV program. We are targeting a QDUFA date in 2028. Provision patterns have been submitted with the potential for pattern protection until 2044. Moving on to Pitocin-Gastro-Resistant or GR program, we are on track to initiate the dosing optimization study in the fourth quarter of this year and a pure-term bioequivalence study in the first quarter of 2025 with BDUFO in 2026. For the idiopathic hypostomia, or IH, program, we are on track to submit an S&DA in the fourth quarter of this year. The submission will be based on the totality of the data generated from the immune study, including data from the ongoing long-term extension study, which strongly supports retinophen efficacy in patients with IH. We have also identified other supportive information that will be included in the SNTA, including real-world evidence from petonacent use in idiopathic hypersomnia in Europe to further strengthen our submission. We are optimistic and remain committed in bringing a new treatment option to patients living with IH. In our neurobehavioral franchise, restriction trial of Z1-002 in Fragile X syndrome in mid-2025. In the rare epilepsy franchise, patient enrollment continues in the EPS100 phase 3 Arcus trial for Duvet syndrome with the top-end data expected in 2026. We are also preparing to initiate a phase 3 study with high unmet medical need later this year. In summary, we have made significant progress in advancing our late-stage pipeline across three distinct franchises. If successful, these programs could result in at least one new product or indication launch each year over the next five years, along with the potential to help hundreds of thousands of patients across all the rare neurological disorders we are investigating. On behalf of Harmony, I would like to thank all the patients and their families who are participating in our clinical trials, as well as the clinical investigators and site personnel for their efforts and commitment in helping us to advance our development programs. I now turn the call over to our CFO, Sandeep Kapadia, for an update on our financial performance. Sandeep?

Thank you, Kumar, and good morning, everyone. This morning, we issued our second quarter earnings release and file their 10-Q, where you'll find the details of our second quarter 2024 financial and operating results. Our financial performance is also shown on slides 10 through 13. We delivered another quarter of solid financial performance with continued double-digit top-line growth, profitability, and strong cash generations. Our financial performance and profile positions us well to continue advancing our growth strategy for the remainder of the year and beyond. We reported net revenues of $172.8 million compared to $134.2 million in the prior year quarter, representing a growth of 29%. Performance in the second quarter reflects the continued strong underlying demand for Wacom. We also reported growth in income and margin. Non-GAAP-adjusted net income for the second quarter of 2024 was $60.6 million or $1.05 per diluted share compared to $45.9 million or $0.76 per diluted share in the prior year quarter. We believe non-GAAP-adjusted net income better reflects the underlying business performance. Please see our press release for a reconciliation of GAAP to non-GAAP results. With respect to expenses during the second quarter of 2024, we incurred two one-time charges related to business development transactions in the quarter, which impacted the R&D expense line. We incurred a $25.5 million charge related to the upfront licensing fee paid as part of the 2024 BioPregé sub-licensing agreement for PTM 1116. and a $17.1 million IPR&D charge related to the acquisition of Epigenix. The IPR&D charge related to Epigenix reflects the upfront payment of $35 million offset by assets acquired in the transactions primarily composed of a deferred tax of approximately $18 million. We structured both transactions with low upfront and success-driven milestones. This allows us to efficiently use shareholder capital and focus future investments on advancing the development program and reaching value inflection points. We ended the second quarter with $434.1 million of cash, cash equivalents, and investments on the balance sheet. The balance reflects continued strong cash generation, which provided financial flexibility to execute on business development and to opportunistically return capital to shareholders via our share repurchase program. Looking ahead, we continue to expect quarter-over-quarter growth per balance of the year. We do expect an impact of summer seasonality we typically experience in the third quarter. We are once again reiterating our net revenue guidance for 2024 of $700 to $720 million. highlighting our progress towards the $1 billion plus opportunity in North Galaxia alone. And with that, I'd like to turn the call back to Jeff for his closing remarks. Jeff? Thank you, Sandeep. In closing, I am very proud of the accomplishments that were made by the Harmony team during Q2, including... significant progress and continued advancement of the Pitocin HD development program toward an expected PDUFA date in 2028. This, along with the USPTO's final decision upholding the validity of the WACIX patent, after two failed attempts to challenge the patent, with IP out to 2030, puts us in a solid position to extend the Pitocin franchise out to the mid-2040s. Continued strong revenue generation for WACICS with 29% growth year-on-year. The approval and launch of the pediatric narcolepsy indication for WACICS. Advancement of our Phase III clinical trials for ZYN002 in Fragile X syndrome, EPX100 in Dravet syndrome, and Pitocin in Prader-Willi syndrome. along with a fourth phase three trial of EPX100 on track to initiate later this year in Lennox-Gasso syndrome. And two business development deals, including the in-licensing of the orexin-2 agonist TPM1116 with our partner Bioprojet, and the acquisition of Epigenics Therapeutics that brought in EPX100 and established an exciting rare epilepsy franchise for Harmony. We remain focused on execution, driven in the advancement of our late-stage pipeline, strategic in our approach to further build out our pipeline, and committed to creating durable long-term value for our shareholders while bringing innovative treatments to market to help even more patients living with rare neurological diseases and unmet medical needs. This concludes our plan remarks for this morning. Thank you for joining our call, and I will now turn the call back over to the operator to facilitate the Q&A session. Operator, can you please open the call to questions? 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 star 2. We remind you to please pick up your handset and please limit yourself to one question and one follow-up question. We'll take our first question from Francois with Oppenheimer. Please go ahead.

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

Good morning, Frank, and thanks for the question. I'll turn it over to Jeff Dirks to respond.

Sure. Yeah, so, Frank, when we talk about typical summer seasonality, it really relates to fewer patient visits in the lower foot traffic, and that's more of a reflection on new patients versus existing patients. So we do anticipate typically a little bit lower in terms of the new patient starts. It happens with most chronically managed medications. Most patients don't schedule their medication visits during the summer when they're on vacation and holiday. But we do anticipate continued growth, as you've seen in the last four or five years of our commercialization. We are obviously reiterating our guidance at approximately 7,000 average patients by the end of the year. And obviously with the addition of the pediatric narcolepsy indication, that's going to help us support future growth as we continue to tap into this opportunity as the market allows around the typical seasonal dynamics.

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

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

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

Thank you.

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

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

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

Sure. So, Charles, we know there are about 1,100 healthcare professionals that manage that, approximately 4,000 diagnosed pediatric narcolepsy patients. It probably skews a little more heavily to the Oxybit-REMS-enrolled healthcare professionals because, as you know, this is a very difficult lifelong neurologic disorder to treat, and ultimately these patients end up And some of those larger sleep centers. But the great news is of those 1,100 doctors, a good amount of those were already in our existing call plan. They already have familiarity with WACIC. So a lot of that is simply just getting in touch with the parents, caregivers, and patients and bringing them in the office. And I think, again, it's very early, but I would probably assume that, you know, we've seen very good persistency rates with WAKIX in adults. So I would assume that the pediatric population may have the potential for equivalent or better persistence. As you know, WAKIX, as Jeff shared, is a very ideally suited product profile for pediatric patients. It's a once-daily oral tablet you take in the morning upon awakening, so you don't have to worry about patients having to, you know, maybe go to the nurse during the day at school or have to, you know, schedule med visits for parents to drop off medicine. And being a non-scheduled treatment option, certainly that profile really appeals to the doctors but also the parents of these individuals.

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

Hey, good morning, Charles. Thanks for the question. First of all, we are on track to submit the S&DA by the end of this year. In terms of the evidence, as we have discussed in the past, the totality of the data from the in-tune study, the open-label part, randomized withdrawal period, and also the long-term extension study chart, it's almost close to a year since the study was completed. We still have about two-thirds of the patients who entered into the long-term extension study still participating in the study. Almost all of them have completed 12 months. About one-third of them have completed 18 months and some of them are approaching two years. So this speaks to the persistence of efficacy and persistence on treatment and also the benign safety profile. In terms of the additional data, we are leveraging some real-world evidence data from HERO. The pitolacent was prescribed in patients with idiopathic hypersomnia, and we'll be leveraging this data to make a stronger submission. But at the end of the day, Charles, we strongly believe in the unique benefit-risk proposition pitolacent offers in patients with idiopathic hypersomnia. The currently available treatment option is a scheduled 3. Controlled substance or off-label off-controlled substance versus Pitonacent, which has a profile of a non-scheduled drug with a very simple dosing regimen of taking once a day in the morning.

Assistance information, very helpful. Thanks for taking the questions. Thank you.

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

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

Hey, good morning, Ami. Thank you for the question. Yeah, first of all, Ami, we are really excited with the data that we saw. It almost means high-dose formulation. We saw both an increase in relative bioavailability and also decrease in inter-intuition variables. And also, as we had discussed earlier in the press release, we will be studying up to two times the highest difficulty dose of AK. We have a body of evidence on me to show a dose response in increasing the dose. Results increase, the effect size boosts sleepiness. And also some of the symptoms that we plan to target with Pitocin HD program, fatigue in narcolepsy, which is a higher . So the composition of an optimized PK profile the higher dose, the gastro-resistant formulation, which is designed widely prevalent with GI symptoms patients with narcolepsy. The ability to start at the therapeutic dose range and finally targeting the symptoms for which there are no approved treatments offers a very unique product profile for our patients. And this product profile was very well received when Jeff Durst and his team did market research. Jeff, do you want to add anything?

Sure. So just from a commercial perspective, we did do some preliminary market research across about 100 narcolepsy patients, 25 sleep specialists and healthcare professionals, and seven pharmacy directors of payers, just to get some feedback with the initial target product profile. And I think as Kumar stated, looking across those three audiences, what was coming out of the research was that this is a very meaningfully differentiated product profile, and one that looks to be clinically superior than WAKIX, simply because the biggest unmet need that's in the marketplace is enhanced efficacy. About 75% of patients that are on treatment still report residual symptoms that impact their daily life. And so we know in a polypharmacy market, you know, physicians and patients are looking for enhanced efficacy. Then the other second unmet need was really the untreated fatigue, which, you know, no product currently is approved for right now, and data suggests that up to 60% of narcolepsy patients also have untreated fatigue, which is very distinct and different from excessive daytime sleepiness. And then lastly, what we've seen in the literature as well as in research is more than 90% of people living with narcolepsy have GI disturbances, mostly attributed to their pathophysiology of their disease. But up to 20% of them also experience GI issues such as nausea on their medication. So the combination of this profile addressing enhanced efficacy, untreated fatigue, and the GI symptom with the gas-resistant coating really seems to present a very clinically superior product. one that payers are going to be broadly covering and one that physicians really see as a very attractive treatment option for the vast majority of their patients.

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

Sure. I mean, thanks for the question. I mean, business development continues, as Jeff mentioned, a priority for the company. You know, we've done several transactions, as you saw from the last year or so. We've done three transactions.

And, Steve, we've done them in a financial discipline manner. You know, we've looked at them all as low upfront, you know, success-driven milestones. for all, and the filters for us continue to be rare, or in CNS, looking at, you know, things that can help leverage a lot of capabilities that we've already built as a company, and I think we have more programs in-house, you know, we're building better and better capabilities that we can leverage both on the clinical side as well as commercial.

I don't know, Jeff, any thoughts further?

Yeah, no, good morning, Ami. Excuse me. I would just add that I think that The strategy that we've taken thus far in regards to business development with the strategic focus in Orphan Rare Neuro, how we build out the three franchises that we have now with our main franchise in SleepWake, the Neurobehavioral franchise, and the rare epilepsy franchise we bought in. I mean, we see that strategy and opportunities in a similar vein going forward. And where we are now, you know, with regard to, you know, the three CNS franchises and doing it in a thoughtful and a prudent manner has set us up, you know, for each of those with, you know, potential peak sales opportunities, of $1 billion to $2 billion. We can potentially add, you know, to each of those franchises, or if we see an opportunity sort of in an adjacent area in, you know, in neuro or neuropsych disorders, then we would contemplate that as well. You know, we like our profile. We like the way we've approached it thus far, and we continue to take a similar approach going forward.

All right. Thank you so much.

Thanks, Ami. Thank you. Our next question will come from David Amsalem with Piper Sandler. Please go ahead.

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

Yeah, good morning, David. Thanks for your questions. Let me address, you know, part of the first one, and then I'll turn it over to Kumar after this. With regards to the potential for changing the abuse potential of Pitocin HD, David, this is Pitocin. So in terms of mechanistically, the short answer is no. The higher dose does not change the mechanism with regards to the lack of abuse potential or abuse liability. So the program will not require further abuse liability studies. And then in terms of, you know, the dosing and with regards to pitocin, you know, GR, you know, that is based on the demonstration of bioequivalence, you know, at equivalent doses to WACICs within the current labeled range of 17.8 to 35.6. I'll turn it over to Kumar to comment on the plan with regards to the opportunity in the Propulse and HD program and what the thinking is there.

Thank you, Jeff. Hey, good morning, Dave. Thanks for the question. Yes, there were like several parts to your question, so let me address one after the other, starting with the dosing regimen. Dave, the dosing regimen here will be different compared to the legacy VACIX program. And we will provide those details at a later point in time for the dosage strength that we'll be pursuing. But as we said earlier, we'll be studying up to two times the highest VACIX label to dose. And the second question was around safety and the height. The safety profile, we have studied already. as part of the leading-edge work that we did in preparation for the Pitocin-HD program. We did a multiple ascending dose study up to 180 milligrams of Pitocin-HD dose study, and we established safety margins. The safety profile is very similar to the safety profile of Blakett, including the impact on cardiovascular system, so there was no QPC impact, even at 180 milligram repeat dose. And in terms of abuse, as Jeff mentioned, in no way that's not a concern because most That is the one that usually results in abuse potential and we haven't seen that and human abuse potential studies were done up to 6x times of the dolophins and we did not see anything. In fact, the dolophins were very similar to placebo.

And the second part of the question to Jeff.

Sure. So, David, I believe you were inquiring about the penetration within the non-oxidate REMs enrolled healthcare professionals. And so within that audience, there's about 5,000 of those healthcare professionals. And what we saw in the second quarter, that we're approaching about 40% penetration within that audience. It's been a regular rhythm that we've been able to tap in and see growth within the segment. With respect to a goal for penetration, I don't necessarily have a goal per se in mind, but I do believe there is still ample room to grow in this area. We know that all 5,000 of these healthcare professionals have at least a couple of narcolepsy patients under their care. And our representatives are out educating the entire 5,000 network. So I would say we continue to tap in. We've seen growth from 30% to 33% to north of 35%. We're now approaching 40%. So I think there's a regular rhythm of continuing to add to this base, and we're anticipating continued growth in this segment. And I do believe that there's ample room to grow for unique prescribers. And then the second phase of that, David, is they start their first patient on WACIX. The next phase of growth in this audience is growing the depth of their prescribing, and we are starting to see that as well. So it's a very unique audience, insulated from the OXA base, both branded and generic, certainly is a catalyst for future growth moving forward.

Thank you. Thanks, David. Thank you. Our next question will come from Greg Suvenovich with Nazoho Securities. Please go ahead.

Good morning. Thanks for taking my questions, and congratulations also from me on the progress in the quarter. My first question is on the commercial business and WCAG, and I might have missed this detail before, but as we think about the second half in terms of net patient ads, I think that historically we've seen over the past several years net patient ads for the second half around 600 to even 700. And I think based on what I had heard earlier from Jeff Dirks that you had planned to end the year at $7,000, I just wanted to revisit what the second half implies if you ended at $6,550, I think, by my math. And, again, if I have my math correct, that only implies $450 in additional net patient adds for the balance of the second half. So if you could just provide some commentary on that. around what our expectations should be for the second half on net patient ads and appreciating that the revenue guidance has remained the same. And then my second question just on the HD formulation, knowing that you're going to be testing higher doses to improve on efficacy, I'm just wondering what the expectation on safety should be. I realize you've got a GR formulation. Are you anticipating that with the higher doses that you're going to be evaluating versus the Legacy WAKIX product that the side effect profile relatively will be the same or perhaps even less than Legacy WAKIX? Any comments around what you're anticipating to see on safety relative to WAKIX with HD formulation would be appreciated. Thanks so much.

Yeah, thanks, Greg, for your questions. First one over to Jeff Durst on the commercial side.

Sure. So, Greg, with respect to thinking about full year 2024 and patient ads, so, yes, we did add about 250 average patients sequentially from the first quarter in the second quarter and reported approximately 6,550 average patients. We are reiterating our guidance of approximately 7,000 at the end of the year, so your math is correct. And And I think it's important that, yes, you know, historically when you're looking at year two, year three, and even year four, we're now in year five of a rare orphan commercialization. And, you know, we feel extremely confident and good about the growth we're seeing. We expect continued growth through the balance of the year. As we shared a little bit earlier, we do expect the typical, you know, summer seasonality that impacts new patient starts. You tend to have some patients who are chronically managed scheduling their appointments in the fourth quarter for med management appointments. So we do anticipate strong refill behavior in the fourth quarter. Typically, patients like to fill their new and refill medicines before the end of the year. Insurance resets, insurance changes next year. We're seeing good underlying business fundamentals. We recently added the pediatric narcolepsy indication approval that ultimately helps support future growth, and we'll continue to tap into that diagnosed patient opportunity as those seasonal market dynamics allow each year. But we're continued, as Sandy alluded earlier, we're confident in continued growth for the balance of the year and quarter-over-quarter growth. I think as you're looking at where we anticipate ending the year, our guidance of about 7,000 should kind of help you think about the third and fourth quarter moving forward.

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

Hey, good morning, Greg. The only other thing that I would like to add is, Greg, as I mentioned earlier, we plan to accelerate this program with a due date in 2028, and we did some leading-edge work where we looked at the higher doses of Pitocin. About 18 months ago, we started this study, looked at multiple doses of Pitocin and studied up to 118 milligrams in the repeat dose study. and the safety and tolerability profile was very similar to the highest labeled dose of vagate, which is 35.6 milligrams. So, we did not see any change in the safety and tolerability profile. And you mentioned about the gastro-resistant coating. Gastro-resistant coating, if anything, should actually result in a more positive patient experience.

Thank you. Our next question will come from David Wong with Citigroup.

Please go ahead. Hi there. Good morning, and thanks for taking my question. So, for the first one, I just wanted to ask about your level of confidence here in meeting the projected PDUPA dates of 2026 and 2028 for the TOLST and GR and HD formulations, respectively, and what are the key gating factors to get to in terms of data packages for filing with the agency? And then second question, in terms of the CCM116 molecule, which you're taking forward to IND filing, are there any features there which you believe could differentiate from other arrested agonists that are currently in development, and how do you think about developing for various indications, such as narcolepsy versus IH? Thank you.

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

Kumar? Hey, good morning, Dave. Thanks for the question. Regarding the gastro-resistant formulation, as we disclosed earlier during the call, we are on track to start the dosing optimization study in the fourth quarter of this year, and we will start the pure bioequivalent study in the first quarter. And we are on track for in 2026. We are confident about it. In terms of the HD formulation, we just disclosed the initial PK data from the pilot study, and I also mentioned earlier some of the leading edge work that we have already done to accelerate this program, like establishing safety margins. We conducted a qualitative research study in patients with narcolepsy who have fatigue, identify the right instrument to study fatigue in the patient population. We anticipate this to be in the next stage of the clinical development in 2025, and we will provide more color to this as we solidify some of our plants. Regarding your last question about TTM 1116, our orange receptor agonist, some of the differentiating features, David, are, I mean, first of all, this belongs to a novel chemical material. It has a different chemical scaffold. and it's different than any other orexin receptor agonist that we know of. And what we have seen in our preclinical experiment is this is the most potent orexin receptor agonist based on the information that is available in the public domain on various orexin receptor agonists The fact that this is the most potent oracin-2 receptor agonist does give a chance to play around with the dose for NT1, NT2, mediopathic hyperplasia. Based on the information on other compounds, you may have noticed that typically NT2 requires a higher dose than NT1, IS requires a higher dose than NT2. So from that perspective, in terms of avoiding the off-target side effects that give us some. And also the preclinical safety data that we have seen is actually very interesting, and that makes us believe that TPM1116 could be the potential best in class compound when it comes to orexin receptor agonists.

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

Yeah, good morning. Maybe from suggester, you've talked about the $1 billion target for sales. I guess maybe you can just talk a little bit more about the path from here where we are today to there, particularly with respect to the patient growth you need to see to get that target. And then on maybe like a little bit more just clarification, can you just provide some color around growth for that through the first half of this year? I think sales are relatively flat versus second half, 23, but obviously you took price and patients have continued to grow. So I'm curious what you're seeing there and how we should think about growth for that through the balance of the year. Thanks.

Yeah, sure, Corinne. Good morning. Jeff?

Yeah, so great question, Corinne. So path to a billion dollars, I mean, based obviously on our net average price per patient, you know, achieving a billion dollars basically is looking at getting north of about 9,000 average patients on product. We just, you know, finished the quarter and reported approximately 6,550 patients. So, you know, our goal to achieve a billion dollars is simply looking at adding another 2,500 average patients between now, mid-2024, and mid-2030, so over the next six years. And I think, obviously, based upon our four years of history and what we believe in continued growth, the path to a billion dollars is very clear. We obviously have a very good analog in the OxyBates, which was able to achieve a billion dollars on its path with a much smaller ability to tap into only about 4,000 healthcare professionals. It didn't have, obviously, the access to the full diagnosed patient opportunity. So we believe accessing 9,000 healthcare professionals with a goal of having to achieve another 2,500 average patients in the next six years, I think is absolutely achievable. And that's why we look at this as a billion dollar plus opportunity. And I think we're very excited about the ability to enhance the Pitocin franchise by adding both GR and HD along that time period and really building out this franchise and being able to help thousands of patients living with narcolepsy.

Sandeep, comments on that? Sure, yeah, thanks for the question. You know, the resident generally, I would say, behave in line with what we've seen in the past. You know, typically it's lower in the first quarter of the year, and then as you go into the second quarter, it tends to improve, and that's what we've seen. You know, roughly, you know, our average per patient is about that. We took a price increase earlier this year. So, you know, I think generally it's in line with our expectations on how the evolution and sort of stabilizes and improves within the second half of the year.

Thank you.

Thanks, Craig.

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

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

Sure. Thanks for the question. I think Kumar can address. I think it's the The Pitocin-GR, the design is, it's really the predisposition. So it's not related to the tolerability profile or the weight mix and the incidence of nausea. But as we said, patients with narcolepsy, the vast majority have GI symptoms related to underlying mechanisms of disease. So a lot of them experience the potential of for nausea, vomiting, and abdominal discomfort. And they see that also with other common narcolepsy treatments. So the predisposition to what is likely sort of comorbid symptomatology, the GR feature can potentially reduce that potential. And then especially in the HD program, as we go up on the dose, that GR feature could be beneficial in that regard. Two more additional questions.

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

Thanks, Shail. And then my second question is related to your pipeline. On EPX100, the 5HT2 mechanism is similar to UCB's commercial-stage Contepla and Longboard's development-stage BEXA capturing. So I guess how can EPX100 differentiate itself in the landscape? Is it efficacy or safety improvement that we're looking for in Dravet syndrome with the top line data in 2026? And maybe if you can help us understand where you see this fitting into the current treatment landscape. Thank you.

Yes, that's a great question. Look, as you mentioned, the serotonergic mechanism of action in developmental epileptic encephalopathy is well-established, right? And we also saw that with the Z-PROFISH model with clemisol hydrosol very well. And this has a pretty good predictive ability when it comes to efficacy in developmental epileptic encephalopathy. The question about differentiation is a very good one. we differentiate. As we know, the drugs that are currently used in developmental epileptic disorder, like DS and BLGS, they have significant limitations in terms of safety and tolerability. For example, epidermics have significant incidence of nausea, abdominal discomfort, and diarrhea in up to 30% of patients, and patients also is to monitor liver function test before starting treatment and the regular intervals thereafter. For example, we mentioned about UCP's finteplon. Finteplon has the rems at the stipulate and on top of it, the patients have to get echocardiogram before starting the treatment and because of the risk of cardiogram and pulmonary arterial hypertension. What we have seen with EPS100, which, by the way, we are developing as a new chemical entity, as requested by the FDA, the battery of non-clinical stock studies did not show any concern about any cardiovascular issue or hepatic issue, and neither did we see anything in our Phase 1 healthy volunteer studies as well, anything of concern. So the differentiation really is safety and tolerability, and in our clinical trials, we haven't seen any dose-emitting tolerability issues, any laboratory abnormalities. So we believe the efficacy will be somewhere in the range that will be meaningful to the patient, but from a safety profile, it will offer a distinct safety profile that will be beneficial to the patient.

Thank you.

Thank you at this time. I show no further questions. I would like to turn the call back to Jeff Dano for any closing remarks. Thank you, Todd, and thanks to everyone for joining our call today and for your interest in Harmony. We look forward to our investor day on October 1st in New York City, when we'll have the opportunity to showcase and highlight the value of our late-stage pipeline, as well as providing you updates later this year as we execute on our long-term growth strategy. Thank you, and have a great day.

Thank you. This does conclude Harmony Bioscience's second quarter 2024 Financial Results Conference call.

You may now disconnect your line and have a wonderful day.