Q4 2020 Harmony Biosciences Holdings Inc Earnings Call
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these accomplishments not only affirm our three pillars of growth strategy and highlight the opportunity that wakes represents as a treatment for narcolepsy, but also serve as the foundation from which we expect strong here on your performance that will drive future value for the patience. We serve and for our shareholders it goes without saying that 2020 was the most challenging year that many of us would ever faced in our lifetimes as we all navigated the complexities and constraints and an unprecedented Global pandemic despite these challenges and in the face of adversity the harmony team persevered to drive wake excels growth achieve regulatory Milestones Advanced clinical programs and migrate the company from private to public making twenty-twenty the most productive Years yet in our company's history with the additional gross proceeds of 147 point six million dollars from our IPO and subsequent listing on the NASDAQ Global Market and Russell to
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Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Harmony Biosciences fourth quarter and full year 2020 financial conference call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Lisa Caporelli. Thank you. Please go ahead, ma'am.
Two thousand and three thousand indices, we strengthened our financial position and increased visibility with investors laying the foundation for us to enter twenty Twenty-One. Well positioned to advance an execute upon all three pillars of our growth strategy.
Let me share with you the progress we've achieved in twenty-twenty on our three pillars of growth killer. Number one optimize the commercial launch of latex in twenty-twenty. We engage with health care providers and patients to expand the awareness and utilization of wakes in narcolepsy and drive demand which resulted in strong growth with Q4 2020 revenue of 56.3 million month and full-year revenue or approximately $160 million dollars late last year. We expanded the utility of waking by gaining approval of the cataplexy indication in adult patients with narcolepsy, which has been well received by both the health care providers and patient communities and as you'll hear during our commercial overview, we are seeing continued increases in the average number of patients on weight and the phone number of Health Care Professionals describing wickets, which is driven by the truly differentiated product profile that wakes offers.
Lisa Caporelli: Thank you, Operator. Good morning, everyone, and thank you for joining us today as we review Harmony Biosciences' fourth quarter and full year 2020 financial performance and provide business updates. Before we begin, I encourage everyone to go to the investor section of the Harmony Biosciences website to find the press release and slides that accompany our discussion today, including the reconciliation of the GAP to non-GAAP financial measures. At this stage of our company life cycle, we believe non-GAAP financial results better represent the economics of our business.
Lisa Caporelli: Our presenters on today's call are John Jacobs, CEO; Dr. Jeffrey Dayno, Chief Medical Officer; Jeffrey Dierks, Chief Commercial Officer; and Susan Drexler, CFO. 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, and our actual results may differ materially. I encourage you to consult the risk factors discussed in our SEC filings for additional details. At this time, I'd like to turn the call over to our CEO, John Dago. John?
Let's move on to pillar number to expand the clinical utility of latex based on the unique mechanism of action of pitocin. We believe we have a portfolio in a product opportunity and our club team is made extensive progress on the key clinical programs that represent new opportunities for us to help patients Beyond narcolepsy.
Late last year, we initiated an enrolled the first patient in our Phase 2 trial and patience with prader-willi syndrome. We are excited to collaborate with the prader-willi patient and medical community to explain treatment options that do not currently exist for these patients to address their unmet medical needs.
John Jacobs: Thank you, Lisa. Good morning, everyone, and thank you for joining us. At Harmony, we are focused on developing and commercializing treatments for patients living with rare neurological disorders who have unmet medical needs, with a differentiated product profile and unique attributes of our commercial product delivery system. We are providing an important new treatment option for adult narcolepsy patients and the healthcare professionals who treat them. I am very pleased with the market adoption of WACIX as indicated by our strong first full year of commercial sales, approximately $160 million, as well as the achievement of several clinical and regulatory milestones in our Life Cycle Management Program, all of which were possible due to the dedication, commitment, passion, and drive of the entire team at Harmony.
In addition our team submitted an IND for a clinical development program in myotonic dystrophy with the IND now open. We are on track to initiate a phase 2 trial in patients with DM on during the first half of this year.
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The year we highlighted the strong clinical data for wakes with the medical community Through the presentation of multiple posters at the annual sleep conference and other medical meetings and lastly our efforts are on track toward creating a phase 3 trial and pediatric patients with narcolepsy later this year based on this progress that told us and is poised to be evaluated in three late State trials during twenty Twenty-One years and finally our third pillar acquire new assets to expand our portfolio though wakes alone represents a significant growth opportunity for Harmony in line with our strategy for growing The Comeback and accelerating long-term value accretion for our shareholders. We intend to acquire additional assets to expand our portfolio. Beyond wakes are dedicated business development team is continuing to focus their efforts on pursuing the acquisition of additional assets code development and or Coke promotion opportunities, that would be complimentary to our existing commercial footprint and core areas of expertise.
John Jacobs: These accomplishments not only affirm our three pillars of growth strategy and highlight the opportunity that WACACS represents as a treatment for narcolepsy but also serve as the foundation from which we expect strong year-on-year performance that will drive future value for the patients we serve and for our sharers. It goes without saying that 2020 was the most challenging year that many of us will ever face in our lifetime, as we all navigated the complexities and constraints of an unprecedented global pandemic.
John Jacobs: Despite these challenges, and in the face of adversity, the Harmony team persevered to drive WACIC sales growth, achieve regulatory milestones, advance clinical programs, and migrate the company from private to public, making 2020 the most productive year yet in our company's history. With additional gross proceeds of $147.6 million from our IPO and subsequent listing on the Nasdaq Global Market and Russell 2000 and 3000 Indicators. We strengthened our financial position and increased visibility with investors, laying the foundation for us to enter 2021 well-positioned to advance and execute upon all three pillars of our growth strategy. Let me share with you the progress we've achieved in 2020 on our three pillars of growth. Tiller number one.
As we enter 2021 we believe that Harmony is very well positioned financially and strategically to continue to grow by executing on all three pillars of our growth strategy, which will enable us to achieve our objectives as an organization and ultimately to serve patients through the continued development and introduction of innovative therapies. And with that I'll turn the call over to Jeff Dierks to provide commercial update Jeff.
Thanks John. It's John mention twenty-twenty with an outstanding year for Harmony and fourth quarter results were strong as we continue to build on our successful launch performance from the first three quarters of 2028. And before I delve into our commercial performance, I'd like to spend a minute to touch on the narcolepsy Market opportunity for way kicks in 2020. You don't narcolepsy market value grew 16% with net sales of approximately 2.1 billion dollars. We expect the market to continue to grow through an increase in diagnosis investment in education and the introduction of new products. There are approximately 165000 people living with narcolepsy in the United States with about 72,000 of them currently diagnosed.
John Jacobs: Optimize the commercial launch of Wake. In 2020, we engaged with healthcare providers and patients to expand the awareness and utilization of WACIX in narcolepsy and drive demand, which resulted in strong growth. Q4 2020 revenue of $56.3 million and full year revenue of approximately $160 million. Late last year, we expanded the utility of WACIX by gaining approval of the cataplexy indication in adult patients with narcolepsy, which has been well-received by both healthcare providers and patient communities.
Of the seventy two thousand people diagnosed with narcolepsy approximately 44000 of them are currently on treatment and the other 28,000 are electing not to receive any type of treatment despite multiple narcolepsy drugs that were available on the market before we kicks many diagnosed patients either refused treatment or those who are on treatment experience residual symptoms and communicate low levels of satisfaction. We believe that wakes offers a meaningfully differentiated treatment option for the broad adult narcolepsy patient population both the undiagnosed population as well as the large existing diagnosed population. That is either untreated or not satisfied with their current treatment options.
John Jacobs: And as you'll hear during our commercial overview, we are seeing continued increases in the average number of patients on WACIX and the number of healthcare professionals prescribing WACIX, which is driven by the truly differentiated product profile that WACIX offers. Now, let's move on to pillar number two, expanding the clinical utility of weight. Based on the unique mechanism of action of patolisant, we believe we have a portfolio in a product operation
John Jacobs: And our clinical team has made extensive progress on the key clinical programs that represent new opportunities for us to help patients beyond NARC. Late last year, we initiated and enrolled the first patient in our Phase II trial in patients with Prader-Willi syndrome. We are excited to collaborate with the Prader-Willi patient and medical community to explore treatment options that do not currently exist for these patients to address their unmet medical needs. In addition, our team submitted an IND for a clinical development program in myotonic Yes. With the IND now open, we are on track to initiate a Phase II trial in patients with DM1 during the first half of this year.
The positive feedback that we are hearing about the difference. We are making and the narcolepsy community centers around the following key differentiating attributes of wakes that are both meaningful and aligned to the unmet needs of the market wage weeks is a first-in-class molecule of the novel MOA. The only selective H3 receptor antagonist inverse Agonist approved by the FDA. It is the first and only FDA-approved scheduled treatment indicated for excessive daytime sleepiness also known as EDS or cataplexy and narcolepsy weeks is not a stimulant with no evidence of drug tolerance or withdrawal symptoms in clinical studies.
John Jacobs: Throughout the year, we highlighted the strong clinical data for WCAG to the medical community through the presentation of multiple posters at the annual sleep conference and other medical meetings. And lastly, our efforts are on track toward initiating a phase 3 trial in pediatric patients with narcolepsy later this year. Based on this progress, Petolicin is poised to be evaluated in three late-stage trials during 2021. And finally, our third pillar, we acquire new assets to expand our portfolio.
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Fourth therapy or administered can commonly with other narcolepsy treatments with no clinically relevant pharmacokinetic interactions with either modafinil or sodium oxybate as demonstrated in clinical trials and lastly weeks offers convenient, patient-friendly once-daily oral tablet Administration in the morning upon wakening.
Now turning to our commercial performance net revenues for Q4 grew two fifty six point three million dollars this represents another quarter of greater than 20% growth in net sales despite continuing effects of the pandemic. Our growth is predominantly driven by demand as well as the price increase that was taken towards the end of last year following the approval of the cataplexy indication.
John Jacobs: Though WACIX alone represents a significant growth opportunity for Harmony, in line with our strategy for growing the company and accelerating long-term value accretion for our shareholders, we intend to acquire additional assets to expand our portfolio beyond. Our dedicated business development team is continuing to focus its efforts on pursuing the acquisition of additional assets, co-development, and or co-promotion opportunities that would be complementary to our existing commercial footprint and core areas of expertise.
2020 was our first full year of commercialization and we achieve recognizable first-year net revenues of approximately $160 million dollars with the majority of our customer interactions this year with Healthcare professionals patients and payers occurring virtually are strong performance reflects. Not only the resilience and commitment of our team and the overall benefit risk profile of weeks. But also highlights the certificate unmet need in the narcolepsy market and the value of week to the narcolepsy community.
John Jacobs: As we enter 2021, we believe that Harmony is very well positioned financially and strategically to continue to grow by executing on all three pillars of our growth strategy, which will enable us to achieve our objectives as an organization and, ultimately, we will serve patients through the continued development and introduction of innovative, And with that, I'll turn the call over to Jeff Dierks to provide a commercial update.
In line with pillar won an important goal for harmony is driving growth through our launch of wakes. I'd like to highlight three key performance metrics from Q4 first. We took you to increase the average number of weeks patients. The average number of patients on the lake and Q4 were approximately 2,500 this growth demonstrates continued adoption of waking a second the weekends prescriber base continued to increase with more than 2,400 unique Health Care Professionals having prescribed weight since launched through the end of 2025. This represents almost 30% of the approximately 8,000 Healthcare professionals who treat the diagnose narcolepsy population.
Jeffrey Dierks: Thanks, John. As John mentioned, 2020 was an outstanding year for Harmony, and fourth quarter results were strong as we continued to build on our successful launch performance in the first three quarters of 2020. And before I delve into our commercial performance, I'd like to spend a minute touching on the narcolepsy market opportunity for weight loss. In 2020, the adult narcolepsy market value grew 16%, with net sales of approximately $2.1 billion. We expect the market to continue to grow through an increase in diagnoses, investment in education, and the introduction of new products.
And third Market access for weeks continues to be strong. We have secured formulary access for Approximately 80% of all us insured lives across commercial Medicare and Medicaid wage and Within These covers lives. We have observed additional favorable Market access for wakes subsequent to the expanded approval of wakes for the treatment of cataplexy and adult patients with narcolepsy and October of 2020.
Jeffrey Dierks: There are approximately 165,000 people living with narcolepsy in the United States, with about 72,000 of them currently diagnosed. Of the 72,000 people diagnosed with narcolepsy, approximately 44,000 of them are currently on treatment, and the other 28,000 are electing not to receive any type of treatment. Despite the multiple narcolepsy drugs that were available on the market before WACACS, many diagnosed patients either refused treatment, or those who were on treatment experienced residual symptoms and reported low levels of satisfaction.
As a result of the cataplexy label expansion in Q4. We've seen an increase in the percentage and volume of prescription requests for narcolepsy patients with cataplexy or type one narcolepsy. In addition some managed care plans made positive formulary policy changes for patients accelerating a patient's ability to get access to weeks from the medical community. We're hearing positive feedback on the
Jeffrey Dierks: We believe that WACACS offers a meaningfully differentiated treatment option for the broad adult narcolepsy patient population, both the undiagnosed population as well as the large existing diagnosed population that is either untreated or not satisfied with their current treatment options. The positive feedback that we are hearing about the difference we are making in the narcolepsy community centers around the following key differentiating attributes of WACACs that are both meaningful and align to the unmet needs of the market.
Jeffrey Dierks: Wakex is the first-in-class molecule of the novel MOA, the only selective H3 receptor antagonist inverse agonist approved by the FDA. It is the first and only FDA-approved, non-scheduled treatment indicated for excessive daytime sleepiness, also known as EDS, or cataplexy, and narcolepsy. Wakex is not a stimulant, with no evidence of drug tolerance or withdrawal symptoms in clinical studies.
Jeffrey Dierks: Wakex can be used as monotherapy or administered concomitantly with other narcolepsy treatments. With no clinically relevant pharmacokinetic interactions with either modafinil or sodium oxibate, as demonstrated in clinical trials, Wacox offers convenient, patient-friendly, once-daily oral tablet administration in the morning upon waking. Now turning to our commercial performance, net revenues for Q4 grew to $56.3 million.
Jeffrey Dierks: This represents another quarter of greater than 20% growth in net sales despite the continuing effects of the pandemic. Our growth is predominantly driven by demand, as well as the price increase that was taken towards the end of last year following the approval of the Cataplexy Indicator. 2020 was our first full year of commercialization, and we achieved recognizable first-year net revenues of approximately $160 million.
Jeffrey Dierks: With the majority of our customer interactions this year with healthcare professionals, patients, and payers occurring virtually, our strong performance reflects not only the resilience and commitment of our team, and the overall benefit-risk profile of WCAG but also highlights the significant unmet need in the narcolepsy market and the value of WACC-X to the narcolepsy community. In line with Pillar 1, an important goal for Harmony is driving growth through our launch I'd like to highlight three key performance metrics from Q4.
Jeffrey Dierks: First, we continue to increase the average number of WACACS patients. The average number of patients on WACIX in Q4 was approximately 2,500. This growth demonstrates continued adoption of weight loss. Additionally, the Wacox prescriber base continued to increase, with more than 2,400 unique healthcare professionals having prescribed Wacox since launch through the end of 2020. This represents almost 30% of the approximately 8,000 healthcare professionals who treat the diagnosed narcolepsy population. And third, market access for WACIX continues to be strong.
Jeffrey Dierks: We have secured formulary access for approximately 80% of all U.S. insured lives across commercial, Medicare, and Medicaid. And within these covered lives, we have observed additional favorable market access for WACACS subsequent to the expanded approval of WACACS for the treatment of cataplexy in adult patients with narcolepsy in October of 2020. As a result of the cataplexy label expansion, in Q4, we saw an increase in the percentage and volume of prescription requests for narcolepsy patients with cataplexy or type 1 narcolepsy. In addition, some managed care plans made positive formulary policy changes for patients, accelerating a patient's ability to get access to WIC.
Jeffrey Dierks: From the medical community, we're hearing positive feedback on the cataplexy data and the preferred use of Wacax as a first-line treatment for cataplexy compared to other agents due to its safety profile. We are pleased with the early positive signs seen with the cataplexy label expansion and look forward to continuing to drive growth in narcolepsy patients suffering with EDS or cataplexy. In summary, I'm extremely proud of our 4th quarter and 4th year performance.
Jeffrey Dierks: We remain focused on supporting adult narcolepsy patients and delivering significant near and long-term growth as we continue to execute and build on our WACACS launch in 2021 and beyond. I will now turn the presentation over to Dr. Jeff Dayno for an update on our clinical development program. Thank you, Jeff, and good morning, everyone.
Jeffrey M. Dayno: I am pleased to share with you this morning the significant progress that we made during the fourth quarter of last year in our clinical development programs, including initiating and enrolling the first patient in a phase two clinical trial in patients with Prader-Willi syndrome, or PWS, and the submission of an IND for our myotonic dystrophy development program late last year, two milestones that we targeted and achieved in 2020. Both of these events represent the acceleration of Harmony's clinical development efforts and advancement of the life cycle management plan for pitolicin. Before I provide a little detail on these programs, I would first like to frame the opportunity in front of us.
Jeffrey M. Dayno: Based on its unique mechanism of action, we view pitolicin as a portfolio in a product opportunity and have taken a mechanism-based approach to drug development. These life cycle management programs with pitolicin have us active in several orphan rare neurological disease patient populations pursuing multiple potential new indications. As John mentioned in his opening remarks, we intend to have three, phase two or three trials in the clinic by year end, a goal that my team and I are excited about, focused on, and actively working towards. Let me start with our development program for Prader-Willi syndrome.
Jeffrey M. Dayno: PWS is a pediatric, orphan rare, CNS, and multisystem disorder due to hypothalamic dysfunction. It affects approximately 15,000 to 20,000 patients in the United States. In addition to the primary symptom of hyperphagia, which is defined as an abnormally increased appetite for and consumption of food, over half of PWS patients also experience excessive daytime sleepiness, or EDS, which is the primary focus of our development program with Ptolemy. Other than growth hormone, there are no approved treatments for the majority of symptoms of PWS, including excessive daytime sleepiness.
Jeffrey M. Dayno: We are taking a very different approach than other PWS development programs which have focused on hyperphagia as the primary outcome because we are studying the effects of pitolicin on EDS in patients with Prader-Willi syndrome. Our rationale is based on the following.
Jeffrey M. Dayno: First, like narcolepsy, PWS is a disorder of hypothalamic dysfunction. Therefore, some of the manifestations of sleep-wake state instability associated with PWS are similar to those in patients with narcolepsy. In fact, some patients with PWS have a narcoleptic phenotype. Second, some patients with PWS have decreased levels of hypocretin, also known as orexin, the main neuropeptide that mediates sleep-wake state stability, and decreased levels of hypocretin are one of the diagnostic features of type 1 narcolepsy.
Jeffrey M. Dayno: Third, Pitocin has already demonstrated efficacy in improving EDS in patients with narcolepsy. This is thought to be related to its unique mechanism of action of increasing histamine levels in the brain, a major wake-promoting neurotransmitter that also serves to help stabilize states of sleep and wakefulness, similar to hypocretin or orexin. And lastly, histamine is also felt to be an important neurotransmitter in the brain that helps support other key functions, including attention, vigilance, and cognitive function.
Jeffrey M. Dayno: Preliminary evidence from both animal and human studies suggests that Tulsan could have a positive effect on these functions as well. With that as a background, I will walk you through the design of the Phase 2 clinical trial in patients with PWS that we initiated last December, which has generated much interest in both the patient and medical communities. It is a randomized, double-blind, placebo-controlled trial designed to assess the safety and efficacy of pitolisin in patients with PWS ages 6 to 65.
Jeffrey M. Dayno: This trial is currently enrolling patients with a plan to randomize approximately 60 to 70 patients at 10 sites in the U.S. Patients are being screened, and then eligible patients are randomized to receive one of two doses of pitolicin or placebo. The treatment period in the randomized controlled phase is 11 weeks, consisting of a three-week titration period, followed by eight weeks of stable dosing.
Jeffrey M. Dayno: Patients who complete the randomized controlled phase of the trial will be eligible to participate in an open-label extension phase to assess the long-term safety and effectiveness of the toll assessment. The primary objective of the trial is to assess improvement in EDS as measured by the Multiple Sleep Latency Test, or MSLT. Secondary objectives include the following.
Jeffrey M. Dayno: Caregiver Assessment of Symptom Severity Based on EDS, Clinician-rated Assessment of Overall PWS Symptom Severity, Evaluation of Behavioral Scales, Assessment of Cognitive Function, and Overall Caregiver Burden.
Jeffrey M. Dayno: Top-line results from this trial are anticipated in the first half of 2022. Another development program that we have advanced is myotonic dystrophy. Myotonic dystrophy, or DM, is another rare CNS disorder and is the most common form of muscular dystrophy in adults. It affects approximately 150,000 patients in the U.S. There are two types of DM, also known as DM1 and DM2. DM1 is much more common than DM2, has an earlier onset of disease symptoms, and the symptoms are more severe in patients with DM1 compared to those with DM2. The primary symptom in patients with myotonic dystrophy is myotonia, which is an inability of the muscles to relax.
Jeffrey M. Dayno: However, beyond the muscular symptoms of DM, the most common symptom in these patients is EDS, which is experienced in 80 to 90% of DM patients and causes significant impairment in daily functioning. Two other common symptoms which are also thought to be the result of impaired CNS histamine signaling are fatigue and cognitive impairment. Patients with DM also report that these symptoms have a significant impact on their overall functioning. There are no approved treatments for patients with myotonic dystrophy, and this represents a significant unmet medical need.
Jeffrey M. Dayno: We believe that Pitolacin could be effective for the symptom of EDS in patients with D.M. based on its demonstrated efficacy in improving EDS in adult patients with narcolepsy. In addition, the triad of EDS, fatigue, and cognitive dysfunction in patients with DM is likely the result of impaired histaminergic signaling in the brain. The fundamental scientific rationale of why we believe pitolicin could have clinical utility for these symptoms is because pitolicin works to increase histamine signaling in the CNS.
Jeffrey M. Dayno: In line with our development milestones, we submitted an IND to FDA last December and received a study may proceed letter from the agency that opened the IND. Therefore, we are on track to initiate our Phase II clinical trial in patients with DM1 in the first half of this year. And lastly, the third development program that we plan to have in the clinic by year end is for pediatric narcolepsy.
Jeffrey M. Dayno: We will be engaging with FDA to discuss our pediatric study plan, and that interaction will inform the design of the trial. We look forward to sharing more detail about this program with you during the second half of this year. In closing, Q4 of 2020 marked the acceleration of our clinical development programs at Harmony and advancement of our lifecycle management efforts for pitolicin. Based on its unique mechanism of action, we view Patolisant as a portfolio and a product opportunity, and our goal is to optimize the lifecycle management plan for Patolisant.
Jeffrey M. Dayno: As I mentioned earlier, my team and I are excited about this unique opportunity and focused on the three development programs that we will have up and running by the end of this year. I look forward to sharing our progress on these programs with you on future calls. Thank you, and I will now turn the call over to Susan Drexler, who will provide an update on our financial performance.
Susan Drexler: Thank you, Jeff. I would like to join my colleagues in reiterating that we ended 2020 with a considerably strengthened financial position and are now poised to continue that momentum into 2021. Harmony demonstrated significant growth in commercial revenue for the full year of 2020 and reported sequential double-digit growth on a quarterly basis since its commercial launch in November of 2019. Earlier today, we posted our fourth quarter and year-end press release and Folder 10-K, which contains the detailed operational and financial results for the year. I will just highlight a few key points.
Susan Drexler: For the fourth quarter of 2020, Harmony reported $56.3 million of net product revenue and $159.7 million for the 2020 fiscal year. We are encouraged by the fact that, five quarters into the launch, we continue to see an increase in the average number of patients and prescribers of weight. This demonstrates that WCICS offers a unique treatment option to address the unmet medical needs of adult patients with narcolepsy. Harmony's total operating expenses for the full year 2020 totaled $115 million, versus $150.3 million in 2019.
Susan Drexler: The decrease was primarily driven by a decrease in R&D expenses related to the payment of a $50 million milestone to BioPerjé, partially offset by an increase in sales and marketing and general administrative expenses related to the commercial launch of Waken. As of December 31, 2020, bolstered by the $147.6 million in gross proceeds from our IPO, we had a cash-in-cash equivalence balance of $228.6 million This compares favorably with the $24.5 million we had at the end of 2019.
Susan Drexler: Of note, in early January 2021, we remitted the $100 million milestone payment to BioPerJ, leaving us with a substantial cash position with which to continue our development programs and to help fund the potential acquisition of assets to expand our product portfolio.
Susan Drexler: For the full year of 2020, Harmony posted a gap net loss of $36.9 million, or a loss of $2.48 per share. To the gap net loss of $36.9 million, we added interest expense of $28.2 million and depreciation and amortization of $10.2 million to arrive at a positive EBITDA of $1.5 million. EBITDA was impacted by several exclusionary items which were added to determine non-GAAP adjusted net income and included $22.6 million in losses on extinguishment of debt.
Susan Drexler: 5.2 million of expense related to stock-based compensation and 3.1 million of warrant expense. Therefore, our non-GAAP-adjusted net income was $32.5 million. After deducting the $26.9 million of accumulation of yield on preferred stock, the adjusted net income available to common stockholders was $5.5 million, or $0.21 per share.
Susan Drexler: Looking ahead in 2021, we expect to make value-added investments in our core operating business, focused on the commercialization of WACACS and the clinical support of pitolicin as we anticipate running three clinical trials. We expect strong year-over-year growth in sales with some normal quarter-to-quarter seasonality. In the first quarter, we will likely see the same payer-related dynamics that affect all specialty products early in the year. With a fortified balance sheet, growing revenues, and disciplined expense controls, we have the financial wherewithal to grow Harmony and deliver on the three pillars of growth detailed by my colleagues earlier in the call.
Susan Drexler: I will conclude by saying Harmony is on a very solid financial footing and prepared to continue the momentum into 2021 and beyond. I would now like to turn the call back to John for closing remarks before opening the call up for the Q&A session.
John Jacobs: Thank you, Susan, and thank you to Dr. Dayno, Jeff Dierks, and Lisa Caporelli. I would like to take a brief minute to recognize and thank Susan Drexler for her service to Harmony and wish her the best of luck in her future endeavors. Our new CFO, Sandip Kapadia, will be formally joining us on Monday, and he's looking forward to meeting with all of you in the near future. The team and I cannot stress enough how remarkable of a year 2020 was for Harmony. I am proud of what we have achieved so far, confident in our ongoing success, and excited about what lies ahead in our future. Operator. We will now take questions from the audience.
Operator: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Chris Howerton from Jeffreys. Your line is now open.
Chris Howerton: Hi, good morning everybody, and thanks so much for taking the questions and, of course, congratulations on a great last year despite all the challenges.
John Jacobs: Thanks Chris. Thank you, Chris.
Chris Howerton: All right, so I guess maybe just I can start off with a few questions and then, of course, hop back in the queue if any are remaining. So for the first one, maybe just thinking about the expectations for this year from a spending perspective. I think Susan, you gave a nice, I think, trends of what we could expect from the top line. But I guess a little more color on what we could expect on the spending side, particularly as it relates to SG&A.
Chris Howerton: And then the second question, or maybe a couple of questions, might be for Dr. Dayno. So with respect to the Prader-Willi Syndrome trial, if you could maybe give us a little information with respect to the inclusion criteria for that trial, I think that that would be helpful. And then it's striking to me that measuring EDS would probably be different in this patient population relative to narcolepsy. So maybe you could just help us understand some of the accommodations you've made in terms of measuring some of the symptomology of the disease as it relates to the specifics of this patient population. Thank you. Thank you, Chris. Just to answer your question.
Susan Drexler: Thank you, Chris. Just to answer the first two questions you have about sales and marketing and GNA, and you're correct; we haven't provided any guidance. But for sales and marketing in particular, we do expect that expense to increase as COVID lifts and our team begins to engage in person with physicians in the future. And obviously, we'll see that trend unfold as 2021 progresses. On the GNA side, we do expect those expenses to increase as well due to the fact that we're a public company, and there's also going to be an impact as COVID lifts on that expense as well.
Jeffrey M. Dayno: Okay, so Dr. Dayno, do you want to take the next question? Yeah.
Jeffrey M. Dayno: Yeah. Thanks, Chris.
Jeffrey M. Dayno: So in terms of, you know, the inclusion for the PWS trial, the main inclusion is a minimal amount of excessive daytime sleepiness. So let me start off by saying the reasons for excessive daytime sleepiness in patients with Prader-Willi are multifactorial. So there are similarities in that patient population. There's some overlap, you know, with narcolepsy in terms of sleep-wake state stability and the primary underlying disorder centered in the hypothalamus.
Jeffrey M. Dayno: So, you know, the main inclusion criteria is a minimal amount of excessive daytime sleepiness as measured by the Multiple Sleep Latency Test, or the MSLT. So that's the main inclusion criteria, along with, you know, the age range and, you know, other aspects with regard to, you know, managing sort of the safety, you know, component of the product. So that's, it's similar in terms of EDS measuring in clinical trials with both the objective endpoint as well as subjective endpoints looking at excessive daytime sleepiness.
Jeffrey M. Dayno: You know, as I mentioned, in addition, we're also looking at key secondary outcomes around behavioral symptoms as well as cognitive function. Okay, excellent. And maybe just as a very quick follow-up to that, could you give us any, maybe color on your thinking with respect to doses? You know, I think you said a low and a high dose. Maybe if you could just frame that a little bit for us.
Jeffrey M. Dayno: Sure, Chris. Yes, so the dosing strategy we're looking at, based on the pharmacokinetic profile of Pitocin and some of our dose modeling, we're looking at doses consistent with current doses in the label and then as applied to the three different age groups within the trial. So, as I mentioned, we're studying patients, you know, ages 6 to 65, which is, you know, a fairly broad range. So then, you know, children ages 6 to 11, then we have adolescents 12 to less than 18, and then the adult part of that cohort. So we have a low dose and a high dose sort of applicable to each of those age groups based on our PK modeling.
Chris Howerton: I see. Okay. Got it. And okay. All right. That's clear. Okay. Well, thanks for taking the questions. I appreciate it.
David A. Amsellem: Thank you. Our next question comes from the line of David Amsellem from Piper Sandler. Your line is now open.
David A. Amsellem: Hey, thanks. So just a few.
David A. Amsellem: So first, regarding... Pandemic-related headwinds. One of the things that you talked about last year is... I'm paying the full cost of the drug for patients, and that was having an impact in the third quarter. Can you talk about the extent to which that had an impact in the fourth quarter and how we should think about the impact of that dynamic in 2021. So that's number one.
David A. Amsellem: Number two, with the label expansion in cataplexy, can you talk about the mix between narcolepsy type 1 and narcolepsy type 2 these days and how you think that's going to evolve as the year progresses? And then thirdly, as far as, What are your thoughts regarding when we should be getting to sort of a normalization of in-office visits and ultimately how we should think about that in terms of cadence of sales?
David A. Amsellem: Do you expect, say, the second half of this year that we'll get sort of an uptick in sales and volumes as we see this normalization play out? Help us understand that a little bit better. Thank you. Jeff Dierks, do you want to take that first question?
Jeffrey Dierks: Sure. Thanks very much, David. I appreciate the question.
Jeffrey Dierks: So with respect to pandemic-related headwinds and the free goods impact, as we've shared in our prepared comments as well as in our last earnings call, since the beginning of the pandemic, we have seen a rise in unemployment and, obviously, the subsequent loss of health insurance for millions of Americans. And as a result of that, we have seen an increased demand for our patient assistance program. It's been relatively consistent, even into Q1 of this year.
Jeffrey Dierks: We certainly have a strong conviction to make sure we can support eligible patients through this program, knowing the difference that WACIX can make in patients' lives. But, I think looking forward, it's really difficult to speculate how long this elevated demand for our patient assistance program will continue. But what I will be able to say is that obviously, we've been able to demonstrate 20-plus percent growth in net revenue each quarter, even with this elevated demand.
Jeffrey Dierks: And I think we're really excited for 2021 and the difference we can continue to make for patients living with narcolepsy. Jeff, I think... David, does that answer your question there before we move on? Yeah, that's helpful. Thanks.
Jeffrey Dierks: And, John, I think the next question was for David to reply to you as well, about cataplexy, the mix of type 1 and 2 and the type of reaction we've been hearing from the market, and perhaps, after you, Dr. Dayno, could add some color from the medical community on that as well. Sure.
Jeffrey Dierks: So, with respect to cataplexy, obviously, we're very pleased with the early positive signs that we are seeing since the label expansion. We know and have communicated that securing the additional indication for cataplexy was certainly a key element to add to the overall benefit-risk profile of WCAG to support continued growth of the product. Now, we haven't provided, you know, specific guidance on what sales are being driven by cataplexy, but what I can say is that we have seen an increase in the percentage and the volume of prescription requests for narcolepsy patients with cataplexy. We know that the literature suggests that up to two-thirds of 70% of people living with narcolepsy may have cataplexy.
Jeffrey Dierks: Clinically, we're seeing about a 50-50 mix of type 1 and type 2 patients being diagnosed and treated, and David, what I would say is that our business looks to mirror that relatively closely. And the other exciting news that we've seen is that, in addition, some of the managed care plans have already started to make some positive formula or policy changes reducing or eliminating generic step edits for type 1 patients, which really allows the acceleration of patient ability to get access to WCAG.
Jeffrey Dierks: So I think across the board, we're very excited about the early signs that we've seen, and it speaks volumes, I think, to our future ability to continue to make a difference for adult patients living with EDS or cataplexy. Yeah, and David. Hi David. It's Jeff Dayno.
Jeffrey M. Dayno: I would just add from a medical perspective, I think, you know, the cataplexy indication just reinforces, in the minds of healthcare professionals, I think it reinforces the data that was in the literature with regard to the Harmony CTP trial and reduction in cataplexy that a lot of the sleep talks have been familiar with. And, you know, what we've heard is that it just kind of validates the data that they were familiar with. It strengthens the product profile.
Jeffrey M. Dayno: And, you know, with regard to clinical decision making, obviously, some HCPs are more comfortable when you have the indication. And, you know, those are some of the things that we've heard from the physician community and are consistent with the trends that, you know, Jeff Dierks alluded to. Thank you, Jeff. David, I believe your third question had to do with sales volumes and the headwinds of COVID and predicting when we might hit some stabilization there. So, Jeff Dierks, you had some comments to make there.
Jeffrey Dierks: Yes, certainly. So, David, for your third question, I think it's very hard to sort of speculate when, you know, quote-unquote COVID's going to lift and we'll get back to that normalization. But, you know, certainly, what I can say is we have not yet hit our normalization for WACIX.
Jeffrey Dierks: You know, we know that there are 72,000 diagnosed and eligible patients living with narcolepsy. That really represents the near-term opportunity for us, and I think we've barely scratched the surface in our ability to really help those patients, with having about 2,500 average number of patients in Q4. We're extremely optimistic about our opportunity because you certainly know that there is a significant unmet medical need in this marketplace. The unique product profile of WACIX very clearly aligns to that unmet need.
Jeffrey Dierks: And once this pandemic lifts, and patients have the ability to see their healthcare professional, and our field sales team has the ability to engage and educate the community, we know that these individuals are going to be living with a lifelong chronic neurologic disorder. Narcolepsy will still be there after COVID. And we're extremely optimistic about what 2021 looks like and beyond. Can I just sneak in a follow-up, you know, in terms of the free goods and just the sales, you know, cadence, and also the reimbursement landscape, you know, with all the comments you made. What does this imply in terms of gross-to-nets, and particularly gross-to-nets moderating as the year progresses?
Susan Drexler: So it's Susan. So for GrossConnect, as we've expressed previously, we're not sharing GrossConnect for competitive reasons. So that's something we're sharing at this time. And David, maybe what I can add with respect to just the
Susan Drexler: And, David, maybe what I can add with respect to just the commercial insight is, you know, one of the things we shared in our prepared remarks is that we're anticipating that we're going to face those same payer-related dynamics that we saw in 2020 in the first quarter that affect all branded and specialty products, correct? And those dynamics, as you're well aware, you've got insurance reauthorizations that occur for many prescriptions that require patients to get reapproved for continuing their medicines.
Susan Drexler: You've got the reset to all the coinsurance and the Medicare deductibles, which obviously requires patients to lean on manufacturers for support, you know, predominantly in the first quarter. And then, obviously, there are some increases to copays for a subset of commercial patients as formularies are changed each year. And as Susan said, we're not providing guidance related to net revenues or gross to net, but what I can say is we expect strong year-over-year sales growth, right?
Susan Drexler: We continue to expect to grow the average number of patients each quarter, but we are going to be expecting some normal quarter-over-quarter seasonality in Q1. And I think that that really speaks to, you know, not only the market opportunity but also the receptivity that we've seen from the physician and the patient community about the overall benefit-risk of weight gain. David, as the COVID pandemic lightens and we start vaccinating our population and getting back to more of a normal rhythm in life that all of us are hoping for in our society and our businesses, we do expect some of the pressure on that patient assistance program to lift because it tends to track with the unemployment rate and what we're facing in the U.S. So as that gets better, we expect that cost to go down.
Graig C. Suvannavejh: Thank you. Our next question comes from the line of Graig Suvannavejh from Goldman Sachs. Your line is now open.
Graig C. Suvannavejh: Hey, good morning everyone. Thanks for taking my question and congrats on the quarter. I want to thank you, Susan, for all of your help and good luck in your next endeavors. Maybe a couple of questions, if I could. Just one: is it possible to get any additional color?
Graig C. Suvannavejh: on TRX or NRX trends, particularly...
Graig C. Suvannavejh: What you saw in 4Q versus 3Q and maybe any comments you can make about what you're seeing here to date versus 4Q, particularly on the NRX side. And so that would be my first question.
Graig C. Suvannavejh: And my second question just has to do with the sales growth that you saw in the fourth quarter. Is it possible to tease out how much of that growth was specifically tied to price versus volume growth? And then my last question, do you want to provide any additional color on what you're seeing in terms of adherence or compliance right now with WCAG? Jeff Dirks, you want to handle a question from Greg? Yeah. So, you know, I'll take them kind of in order, as you shared.
Jeffrey Dierks: So, you know, with respect to just a little bit of color on demand and new patients, what I would say, Graig, is that we're extremely pleased with, obviously, the launch performance in Q4. And, you know, we saw a 15 percent increase in the average number of patients, quarter over quarter, and that, along with strong refill behavior, led to another quarter of net revenue growth of 20 percent. Solid growth in the average number of patients, and it was in line with our expectations given COVID.
Jeffrey Dierks: And we fully anticipate that we're going to continue to grow the average number of patients of WCAGS through each quarter, 2021 and beyond. I think the average number of patients really not only reflects the increase in the number of new patients but also speaks to the durability of the compliance and persistency of the existing patients. So, we're not providing specific guidance on new versus continuing patients, but the average number of patients represents both of those cohorts.
Jeffrey Dierks: And what you've seen is a 15 percent increase, which is really solid growth and in line with our expectations for Q4. So the second question you asked with respect to Q4 sales growth and what was driven by demand versus price. So Q4 net sales were $56.3 million. That represents a 23.4% increase from the third quarter. Demand or volume represents about 19% of that growth, with the remaining less than 5% driven by the price increase taken in November following the approval of the cataplexy indication.
Jeffrey Dierks: And I think importantly for us is that we believe that that demand growth demonstrates the unmet medical need that exists in the marketplace and how well the differentiated product profile of Wacax is being received by the narcolepsy community. And then third, you asked a little bit about some color on adherence and compliance. So we talked a little bit about the average number of patients being 2,500, and that obviously speaks to the durability of patient persistence and compliance.
Jeffrey Dierks: It's still early in our launch, and although we're not sharing specific information about discontinuation rate, compliance, and persistence, what I can say is that what we're seeing with the WCAG patient medication behavior observed to date is consistent with what's been seen with other oral narcolepsy products. It demonstrates that the overall benefit-risk profile is being received very well, and that's kind of really being reinforced by the feedback that we're hearing from the narcolepsy physician and patient care. So hopefully, that will help to respond to your questions.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
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