Harmony Biosciences Holdings Inc. – August 11, 2022

Imagine something as simple as sitting for a long period makes you tired. Or not being able to visit family because a long drive could result in a car accident. For the hundreds of thousands of sufferers of narcolepsy, these are just some of the daily struggles they must endure.

In addition to daytime sleepiness, symptoms can include hallucinations, sleep disruption, sleep paralysis, and cataplexy, where all the muscles suddenly lose their tension and stiffness, leading to the loss of voluntary muscle control. These frustrating and potentially dangerous symptoms ultimately have a devastating impact on people’s lives at school, work, and as everyday tasks are dramatically disrupted.

Harmony Biosciences is a commercial-stage pharmaceutical company dedicated to developing and commercializing innovative therapies for people living with narcolepsy and other rare neurological disorders. In 2019, Harmony received FDA approval for its first commercial product, WAKIX.

The tablet is a first-in-class molecule with a novel mechanism of action (MOA) specifically designed to increase histamine signaling in the brain by binding to H3 receptors for the treatment of excessive daytime sleepiness (EDS) in adult patients with narcolepsy. Subsequently, in 2020, WAKIX was approved by the FDA for the treatment of cataplexy. WAKIX is the first-and-only approved product for patients with narcolepsy that is not scheduled as a controlled substance by the U.S. Drug Enforcement Administration.

In addition to continuing to optimize the performance of WAKIX across its currently approved indications, Harmony is focused on expanding the clinical use of WAKIX across pediatric applications, broader use in neurological disorders that may be mediated by the H3 receptor, whilst also looking to acquire new assets to expand the company’s portfolio.

In 2017, Paragon Biosciences, a life science innovator that creates, invests in, and builds companies, founded Harmony. Paragon identified a debilitating unmet need in neurology disorders of wakefulness, isolated a possible scientific solution, and then created Harmony around it.

The company was established with a vision to provide novel treatment options for people living with rare and orphan diseases, with an emphasis on central nervous system disorders, starting with patients living with narcolepsy.

In August 2020, Harmony completed its initial public offering after raising approximately $135.4 million.

Jeff Aronin is Harmony’s founder and chairman, as well as the chairman and chief executive officer of Paragon Biosciences. Aronin has decades of experience developing innovative global biotech and healthcare companies. His keen ability to identify ideas and scientific innovations with the highest potential to change lives and improve the world has made Mr. Aronin one of the most impactful and successful leaders in the life science sector. As an entrepreneur and scientific visionary, with a focus on addressing unmet patient and societal needs, Mr. Aronin has received FDA approval for nearly a dozen new medicines and technologies.

John Jacobs is president and chief executive officer for Harmony, joining the company from Teva Pharmaceuticals, where he held several leadership roles. Prior to Teva, he held positions with Cephalon, Wyeth, and Pfizer. With over 25 years of commercial experience across multiple therapeutic areas, as well as rare diseases and other specialty markets, he has demonstrated expertise in developing market-leading commercial strategies, and major product launches.

Harmony’s chief medical officer is Jeffrey Dayno, M.D., a nationally recognized expert in neuroscience, currently responsible for managing research, development, and medical and regulatory affairs for the company. He is a neurologist with 10 years of experience in clinical and academic medicine followed by over 20 years of experience in leadership roles at Merck & Co., Cephalon, and ViroPharma, building and leading teams toward multiple New Drug Application approvals and medical support of successful product launches. In addition, Dayno has served as principal investigator on numerous clinical trials and published and lectured extensively on various topics in the field of neurology.

It is estimated that narcolepsy affects approximately 165,000 Americans, with fewer than 50% diagnosed. The U.S. narcolepsy market had an approximate net sales value of $2.1 billion in 2020. Yet it is expected to continue to grow based on new innovative therapies that offer improved safety and tolerability profiles while delivering clinically meaningful efficacy. Coupled with additional investment in education, increased rates of diagnosis, and population growth.

The disorder affects men and women equally, with typical symptom onset in adolescence or young adulthood, however, it can take up to a decade after the onset of symptoms to be properly diagnosed. Characterized by EDS, which causes an inability to stay awake or alert throughout the day, including an irrepressible need for sleep, with lapses into drowsiness or sleep, it has a significant impact on a patient’s ability to function.

Before the FDA approved WAKIX in 2019, there were six approved medications to treat patients with narcolepsy, all of which are controlled substances. Despite the benefits provided by the available medications, traditional stimulants, and wake-promoting agents, provide only moderate improvement in narcolepsy symptoms. Furthermore, some of the current therapies have significant side effects such as increased heart rate and blood pressure. These therapies also have the potential for rebound and withdrawal symptoms.

WAKIX represents a novel approach to narcolepsy treatment as the only selective H3 receptor antagonist/inverse agonist approved by the FDA. It is also the first-and-only FDA-approved treatment for narcolepsy that is not scheduled as a controlled substance. In a clinical trial, WAKIX demonstrated statistically significantly lower abuse potential compared to the stimulant-based narcolepsy treatment, Phentermine.

WAKIX can also be used as monotherapy or administered simultaneously with other treatments. Narcolepsy is a difficult disorder to manage, and the majority of patients often require multiple medications to treat their symptoms. WAKIX has been studied in combination with common treatments for narcolepsy affording HCPs the flexibility to better manage their patients. Furthermore, as a once-daily oral tablet administered in the morning upon wakening, WAKIX helps improve patient compliance with treatment, as many seek those that are easier to take and are dosed less frequently.

Harmony’s goal is to become a leading pharmaceutical company dedicated to treatment options for patients with rare neurological diseases. To achieve this, its strategy is focused on several pillars of growth. First, it will continue to optimize the performance of WAKIX for adult patients by leveraging its team of approximately 180 professionals who work with over 8,000 HCPs that treat the vast majority of narcolepsy patients in the United States.

Expanding the clinical utility and treatable labels of WAKIX is also of major focus, with Harmony building upon the EDS and cataplexy indications in adult patients. The company is working with its partner Bioprojet in pursuit of gaining a pediatric indication for both EDS and cataplexy. Bioprojet is evaluating the drug in pediatric patients and has completed a phase 3 trial. Both companies are now looking to assess the data from this trial to inform how best to advance the pediatric program. It has also engaged with the FDA about pursuing pediatric exclusivity and anticipates providing an update on the path forward later in 2022.

Pursuing new indications beyond narcolepsy is also being undertaken as it is expected that WAKIX’s novel MOA offers a “portfolio in a product opportunity” with therapeutic potential in several other patient populations living with rare neurological diseases. In 2019, Harmony opened an Investigational New Drug (IND) application for WAKIX for the treatment of Prader-Willi Syndrome (PWS) and has since completed several clinical trials. Top-line results from a phase 2 proof of concept trial are anticipated in the second half of 2022. While results from a second phase 2 trial relating to treatment in patients with myotonic dystrophy are expected in 2023. In addition to these potential indications, Harmony has also opened an IND for the treatment of idiopathic hypersomnia and plans to initiate a phase 3 trial in the first half of 2022.

Harmony will also explore the expansion of its product portfolio by acquiring new assets. As it continues commercial growth and advances its own clinical development programs with WAKIX, it will seek opportunities to partner, co-develop, or acquire assets focused on neurological diseases that are complementary to the company’s existing research and development expertise and commercial footprint. Most recently in 2021, Harmony acquired HBS-102, a melanin-concentrating hormone receptor for which the company is currently assessing potential clinical targets going forward.

Harmony has an exceptional record of growing revenue, exceeding its prior quarter in all but one of the last 11 financial periods. Ongoing momentum saw this trend continue in the last quarter with strong growth in both WAKIX net revenue and the average number of patients on the treatment.

This latest period represented the company’s best quarter of performance in top-line prescription demand in over two years. Net product revenues came in at $107.0 million, compared to $73.8 million for the same period in 2021. The impressive 45.0% growth is primarily attributed to strong commercial sales of WAKIX driven by continued organic demand. The average number of patients on WAKIX increased to approximately 4,300 for the period.

While R&D, sales and marketing, and general admin expenses all also increased, adjusted net income of $34.7 million was also up almost 60% when compared to income of $21.9 million for the same period in 2021.

Looking ahead, it is expected the strong momentum will continue as consensus estimates have full-year sales reaching almost $430 million, representing year-over-year growth of over 40%. While earnings per share estimates are forecasted to surge a further 130% to $1.33 per share, up from $0.58 in 2021.

Harmony face potential competition from multiple sources, including large pharmaceutical, biotechnology, and specialty pharmaceutical companies. WAKIX competes with several FDA-approved products for the treatment of EDS or cataplexy, although all of which are controlled substances. These include Jazz Pharmaceuticals’ Xyrem, a lower sodium formulation called Xywav, and Sunosi, which are used for various indications of cataplexy and EDS. Albeit some are only available through the FDA’s Risk Evaluation and Mitigation Strategy drug safety program. Jazz also has Provigil and Nuvigil which are wake-promoting agents along with other stimulants such as methylphenidate and amphetamine that are approved for the treatment of EDS.

Additionally, Avadel Pharmaceuticals is working on a once-nightly formulation version of sodium oxybate, with approval expected in 2023. While beyond 2023, there are other potential future competitive products in development, including Axsome Therapeutics’ AXS-12 and Takeda’s orexin 2 receptor agonist product candidates.

However, Harmony believes WAKIX offers a differentiated product profile that is competitive with each of the products listed above, some of which are approved for limited indications. Additionally, WAKIX is priced lower than Xyrem and Xywav, which may contribute to third-party payor preferences for the drug.

Despite a short history, Harmony has steadily improved shareholder value by bringing a successful drug to the market and selling it well. With solid plans to further expand its market through new indications and assets, there appears to be little not to like about Harmony’s prospects looking ahead.