Q2 2022 Harmony Biosciences Holdings Inc Earnings Call
Yes.
Operator: Good morning, my name is Katie, and I'll be your conference operator today.
Good morning, My name is Katie and I'll be your conference operator today.
Operator: At this time, I would like to welcome everyone to the Harmony Biosciences second quarter 2022 financial update conference call.
Operator: All participant lines have been placed on mute to prevent any background noise.
Operator: After the speaker's remarks, there will be a question and answer session.
Operator: If you would like to ask a question at that time, please press star one on your telephone keypad.
At this time I would like to welcome everyone to the Harmony Biosciences second quarter 2022 financial update conference call. All participant lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Operator: Please be advised that today's conference may be recorded.
Operator: Lastly, should you require any operator assistance, please press star zero.
Jeffrey Dierks: So when you're thinking about the, two different segments, the initial audience that are the OxyBay prescribers, writers of traditional scheduled medications, our initial target was about 8,000 healthcare professionals and they covered about 90 percent of the patient opportunity.
Sandeep Kapadia: So the natural point, if we decide to give guidance, would be the beginning of next year.
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 should you require any operator assistance. Please press star zero.
Operator: I would now like to turn the call over to Luis Sanay, head of investor relations.
I would now like to turn the call over to Lewis <unk> head of Investor Relations. Please go ahead Sir.
Luis Sanay: Please go ahead, sir.
Jeffrey Dierks: The additional 1,000 physicians that we added to our target universe that had picked up prescribing WACICs that were not prescribers of the other scheduled treatments, they managed about a 10 percent of the patient opportunity. So to give you a relative sense, it's about a 90-10 split if that helps.
Thank you operator, good morning, everyone and thank you for joining US today as we review Harmony Biosciences second quarter 2022 financial performance and provide a business update.
Before we start Anchorage, everyone to go to the investors section of our website to find the materials that accompany our discussion today, including a reconciliation of our GAAP to non-GAAP financial measures.
At this stage of our lifecycle, we believe non-GAAP financial results better represent the underlying business performance.
Our presenters on today's call are John Jacobs, President and CEO .
Dr. Jeffrey Dana Chief Medical Officer, Jeffrey Burks, Chief Commercial officer, and Sandy <unk> Chief Financial Officer.
Moving on to slide two as a reminder, we will be making forward looking statements today, which are based on our current expectations and beliefs. These.
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.
Luis Sanay: Thank you, operator.
Jeffrey Dierks: Thank you, Jeff.
Sandeep Kapadia: In the meanwhile, you know, we've tried to provide at least enough qualitative, as well as a couple of indicators to help you, at least from a modeling perspective.
John Jacobs: And then, Chris, on your second question, you know, this deal allows, us to focus on developing new innovative therapies based on Pitocin in partnership with Bioprojet to focus on narcolepsy.
I would now like to turn the call over to our CEO John Jacobs John .
Luis Sanay: Good morning, everyone.
John Jacobs: And, you know, if we choose to and align with Bioprojet, potentially other indications that are mutually agreed upon by the parties as well.
Sandeep Kapadia: But, you know, I think the natural point would be the start of next year.
Thank you Louis and thank you everyone for joining our conference call. Today, we are excited about the momentum we saw in our business as we continued to execute on our three pillar growth strategy during the second quarter.
Sandeep Kapadia: Thanks so much.
Greg Savanovich: It's great to be back out on the name.
We've made good progress in the first half of this year and are looking forward to making 2022, our best year yet for harmony.
Luis Sanay: And thank you for joining us today as we review Harmony Biosciences second quarter 2022 financial performance and provide a business update.
Greg Savanovich: Thank you, Graig.
I would now like to take a few minutes to highlight our progress on each of the three pillars of our growth strategy in the context of Q2 2022 performance, which you can see on slide three.
Luis Sanay: 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 gap to non-gap financial measures.
John Jacobs: You know, these efforts could expand our franchise in narcolepsy by yielding one or more new products with the potential to launch during the WACIC's life cycle should we succeed with them.
Greg Savanovich: Appreciate you.
John Jacobs: And regarding IEP, Chris, what I will say and can say is it's Harmony's policy to file patent applications alone or with our partners on all patentable inventions that strengthen our assets.
Starting with pillar, one which is to optimize the commercial performance of <unk> in Q2, 'twenty two we delivered a strong quarter for <unk> as we surpassed the $100 million Mark for the first time in quarterly revenue.
John Jacobs: And it's also our policy not to discuss any pending patent applications, of course, due to competitive reasons.
Luis Sanay: At this stage of our life cycle, we believe non-gap financial results better represent the underlying business performance.
John Jacobs: So hopefully that adds a little bit of extra color, Chris.
Greg Savanovich: Thank you.
<unk> net sales of $107 million.
45% year over year increase for the quarter.
Luis Sanay: Our presenters on today's call are John Jacobs, president and CEO, Dr. Jeffrey Dano, chief medical officer, Jeffrey Dirks, chief commercial officer, and Sandy Kapadia, chief financial officer.
Chris Houghton: Okay.
Operator: Our next question will come from Corinne Jenkins with Goldman Sachs.
<unk> business fundamentals remained strong with the second quarter, representing our best quarter of performance in topline prescription demand in over two years.
Luis Sanay: Moving on to slide two.
Chris Houghton: Yeah, no, very much.
Operator: Your line is now open.
For the remainder of the year, we continue to expect quarter on quarter growth for <unk> due to strong underlying demand and the significant unmet need that persists in the narcolepsy market.
Luis Sanay: 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.
Corinne Jenkins: Yeah, good morning.
Let's move on to pillar, two which is to expand the clinical utility of <unk> beyond narcolepsy.
Luis Sanay: 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.
Corinne Jenkins: So we've talked a little bit about net price and gross to net dynamics.
Corinne Jenkins: I just want to confirm, were there any one-time sort of impacts on the gross to net basis, like true ups, or any other inventory swings that might have impacted the top line this quarter?
Corinne Jenkins: Sandip, do you want to take a turn?
During the quarter, we made good initial progress on our phase III <unk> study for <unk> in idiopathic hypersomnia.
Sandeep Kapadia: Sure. I think just to sort of expand, what we saw in the second quarter were generally just a reversal of a lot of the gross to net, from, you know, impact, if you want to call it, from first quarter.
We were able to initiate multiple sites and have been actively enrolling patients.
Sandeep Kapadia: There were no major, you know, swings, at least in the quarter, regarding any major true ups or adjustments.
And product Willy we have completed enrollment in our phase II proof of concept study and are on track for top line results in the fourth quarter of this year.
Sandeep Kapadia: What we, you know, what we saw was rarely these normal dynamics.
We are excited with the continued advancement of our pipeline programs and are hopeful that these efforts if successful will lead to additional indications for <unk>, Dr. Jeff Dana will provide more details on our clinical programs later in the call.
Sandeep Kapadia: You know, I think, you know, Jeff, were there any sort of trade impacts or anything like that that we should discuss?
Jeffrey Dierks: No, I think, you know, looking at Q2, the trade inventory is relatively normalized for the quarter, and we anticipate that to remain relatively consistent through the balance of the year.
And finally pillar three.
Wiring new assets through business development to expand our portfolio beyond <unk>.
Corinne Jenkins: Great.
Corinne Jenkins: And then on the BioPerge deal, I'm just curious, because we've talked a lot about potential BD to supplement revenue, durability kind of beyond the WACG's patent life, and I'm curious if this is meant to be kind of instead of or as a supplement to potential BD, and then how quickly could the compound get into the clinic, and how does the Harmony contribution in terms of paying for that development work?
This morning, we announced a new agreement with <unk>, which is designed to leverage its drug discovery capabilities in combination with our proven commercial expertise in the U S market to develop innovative therapeutics based on patrol listened.
<unk> has significant scientific expertise as demonstrated by their discovery of <unk>.
The agreement will enable us to pursue new therapeutics for narcolepsy based on patrol listened. If successful these efforts could expand harmonies franchise in narcolepsy by yielding one or more new products with the potential to launch during the <unk> lifecycle.
Closing of the agreement is contingent on clearance under the Hart, Scott Rodino or HSR antitrust improvement Act of $19 76, and other customary closing conditions, which we expect to complete in the fall.
We look forward to providing additional updates as we advance these efforts.
As we have said before we began our business development efforts early in our company history. So we could take the time to be thoughtful and prudent in what we acquire and flexible in the types of deals we are able to consider.
Over time, our intention is to develop a broad portfolio of rare orphan neurology assets <unk> assets and other neurological diseases, where we can leverage our existing expertise and infrastructure.
To achieve this we intend to leverage our strong and growing financial position to acquire additional assets across a range of development stages, including both early and later stage with the potential to launch both during and after <unk> lifecycle.
Corinne Jenkins: Look, Corinne, what I'll say is the addition of HBS 102 last year and now the new agreement with BioPerge, they're important steps in our journey to building a diversified portfolio in neurology, but they're certainly just our first steps and not intended to be our last by any stretch.
The addition of <unk> 102 last year and the new agreement with buyer per Jay are important steps on our journey to building a diversified portfolio in neurology and it is our intention to continue adding additional assets to further strengthen our ability to help patients and to grow our business for long term sustainability.
John Jacobs: And it's our intention to continue adding additional assets to further strengthen our portfolio in rare orphan neurology, and also, as we've said, each time we've talked about this, right, in neurology, where we can leverage our infrastructure and expertise as a company.
John Jacobs: So these are just one more step on what we intend to be a long and fruitful journey to build out a portfolio.
Harmony is in a good position to execute on pillar three as our business fundamentals with <unk> remains strong we have approximately $260 million in cash cash equivalents and investments as of Q2, and we anticipate that we will continue to generate more cash each quarter from Waco sales.
Overall I am extremely pleased with the progress on our three pillar growth strategy. During Q2, and we are well positioned for the remainder of the year to continue delivering on our plans for growth.
We remain confident in <unk> being a potential $1 billion plus franchise in the coming years via narcolepsy and additional indications.
With that as a foundation I am truly excited about what we can achieve next at harmony.
Luis Sanay: I would now like to turn the call over to our CEO, John Jacobs.
Chris Houghton: I really appreciate it, John.
John Jacobs: We're not going to comment on timing in the clinic right now.
I would now like to turn the call over to Jeff Dirks harmonies, Chief Commercial officer, Jeff.
Okay.
John Jacobs: John?
Chris Houghton: And thanks again for taking the questions.
John Jacobs: These are early development phase, and so what we're going to do is as we hit key milestones, we'll be excited to share that with the investment community over time.
Thanks, John we made significant strides in advancing our narcolepsy business in the second quarter, both net revenue and underlying business fundamentals as seen on slide four.
Sandeep Kapadia: And I think Sandeep can comment on the pay structure, Sandeep, when it comes to sharing clinical expenses. Corinne was asking how will we pay for those expenses?
John Jacobs: Thank you, Louis.
Chris Houghton: Thank you, Chris.
Sandeep Kapadia: Are we sharing those costs with BioPerge as a partner?
Net revenue for the second quarter was $107 million.
Which represents an approximate 45% increase from the same quarter previous year.
John Jacobs: And thank you, everyone, for joining our conference call today.
Operator: Thank you.
Sandeep Kapadia: Yeah.
We're also pleased with the 25% growth over the first quarter, demonstrating strong momentum in our business coming out of Q1.
Operator: Our next question will come from Danielle Brill with Raymond James.
Our solid performance since launch continues to reflect not only the resilience and commitment of our team, but also speak to how the overall benefit risk profile of wake Alliance is a significant unmet need in the narcolepsy market.
John Jacobs: We are excited about the momentum we saw in our business as we continue to execute on our three-pillar growth strategy during the second quarter.
Danielle Brill: Your line, is now open.
Sandeep Kapadia: Generally, look, the terms are relatively similar to what we had in the prior agreement.
Moving on to slide five I'd like to highlight a few of our underlying business fundamentals that drove our continued growth in the second quarter of 2022.
John Jacobs: We've made good progress in the first half of this year and are looking forward to making 2022 our best year yet for Harmony.
Sandeep Kapadia: In terms of development costs, you know, they'd be rather minimal this year, so, you know, generally I would say to start picking up next year in terms of significant costs there.
Sandeep Kapadia: We have an agreement that we would share at least the first $40 million of costs as part of the development program, 50-50, and then after which we would cap promote those. So there is a component of early on in the development cycle.
John Jacobs: I would now like to take a few minutes to highlight our progress on each of the three pillars of our growth strategy in the context of Q2 2022 performance, which you can see on slide three. Starting with pillar one, which is to optimize the commercial performance of WACIX.
Danielle Brill: Hi, guys.
Corinne Jenkins: Thanks.
The average number of patients on <unk> increased to approximately 4300 in the second quarter.
John Jacobs: In Q2 2022, we delivered a strong quarter for WACIX as we surpassed the $100 million mark for the first time in quarterly revenue, achieving net sales of $107 million, a 45% year-over-year increase for the quarter. WACIX business fundamentals remain strong, with the second quarter representing our best quarter of performance in top-line prescription demand in over two years.
Danielle Brill: Good morning.
Corinne Jenkins: That's helpful.
The growth in Q2 reinforces the strong underlying organic demand for wafer.
John Jacobs: For the remainder of the year, we continue to expect quarter-on-quarter growth for WACIX due to strong underlying demand and the significant unmet need that persists in the narcolepsy market.
Danielle Brill: Thanks so much for the question.
Corinne Jenkins: Thanks, Corinne.
With Q2 performance building upon the momentum coming out of Q1 with respect to both topline prescription demand and new patient starts.
Q2 represented the strongest quarter of topline prescription demand in over two years and new patient starts in a year.
Corinne Jenkins: Thank you.
We also saw strong refill behavior in the second quarter.
John Jacobs: Let's move on to pillar two, which is to expand the clinical utility of WACIX beyond narcolepsy.
Operator: Our next question will come from David Amselum with Piper Sandler.
We are pleased with the continued growth of <unk> on our ability to help additional adult patients living with narcolepsy.
Danielle Brill: And my congrats on the strong quarter as well. So you mentioned that top line prescription demand was the strongest it's been in over two years, and new patients are the strongest in over a year.
Operator: Your line is now open.
Danielle Brill: And I think last quarter on your call, you said March was the strongest month you had for new patient ads in over a year.
Our strong Q2 performance with respect to net revenue and patient growth was driven by a number of factors.
Danielle Brill: So I'm just curious how that momentum evolved during the quarter.
David Amsellem: Hey, David.
We saw an increase in in person field sales engagement with health care professionals and their office staff in the second quarter versus Q1 2022.
Danielle Brill: Did you see a similar level of demand exiting, I'll stop there and then I have a follow-up.
David Amsellem: Hi, thanks for getting to me.
Approximately 75% of all field sales engagements where in person during the quarter.
John Jacobs: WACIX beyond narcolepsy.
Danielle Brill: Thanks.
David Amsellem: So, two questions.
The increase in Axa allowed for further education and engagement with health care professionals on the meaningfully differentiated profile of waking and provided an opportunity for our expanded sales team to drive <unk> growth in both new and existing prescribers.
Jeffrey Dierks: Jeff Dierks, you want to take Danielle's question on momentum?
David Amsellem: So, two questions.
We observed further broadening and meaningful clinical adoption of <unk>, among narcolepsy trading health care professionals.
Jeffrey Dierks: Sure.
We saw further growth in new prescribers of <unk> in the second quarter of 2022.
And writers of traditional narcolepsy treatment as well as health care professionals, who have been reluctant to prescribe the other available scheduled narcolepsy treatments.
We continue to see broad utilization of <unk> for both type, one narcolepsy and pipe to narcolepsy patients.
<unk> is being prescribed as monotherapy as well as concomitant Lee with all other narcolepsy treatment.
The majority of Blake as prescribers continue to become repeat writers, meaning they've written a prescription for <unk> for two or more of their adult narcolepsy patients since launch.
Continued growth in both the depth and breadth of our prescriber base demonstrates what we believe is a growing opportunity for wake extent adult narcolepsy.
We also continued to see strong and improving market access for wake X through the second quarter of 2022.
Helping to accelerate patient access to <unk>.
And lastly, we are extremely pleased with the progress of our field sales force expansion.
We successfully hired experienced award winning representatives with established relationships.
To add to our existing outstanding field sales team and that all new representatives trained and active in their territories by April one in line with what we communicated in our previous earnings call.
As we move into the second half of 2022, we anticipate beginning to see the benefits of this expansion.
The additional team effort and impact will help to partially offset the typical summer seasonality of more days out of the office for health care professionals and expected lower patient foot traffic due to vacations in Q3.
Jeffrey Dierks: Good morning, Danielle.
David Amsellem: First, a follow-up on the, BioPerge partnership.
In summary.
I'm excited about our continued strong performance.
Inspired by the exceptional work of our team and proud of the different weight, because making in the lives of people living with narcolepsy.
Jeffrey Dierks: Yeah, obviously, we're extremely pleased with the strength of our underlying business fundamentals, and you are correct.
David Amsellem: Is this in any way kind of a statement on the IP situation for WACIX?
The strong performance and solid underlying business fundamentals are awake affirm our confidence in <unk> being a potential $1 billion plus franchise opportunity in narcolepsy and additional indications.
David Amsellem: And you know, as a corollary to that is, should we think about this as primarily a lifecycle, management type of situation or, you know, you're potentially going to be looking, you know, more broadly with the idea that, yes, this is either, you know, these are molecular entities that are based on patolisant.
I would now like to turn the presentation over to Dr. Jeff <unk> for an update on our clinical development progress Jeff.
Jeffrey Dierks: You know, the Q2 growth really reinforces the underlying organic demand for Wacox.
David Amsellem: So, that's the first question.
Thank you, Jeff and good morning, everyone.
Jeffrey Dierks: We built on the momentum, as you noted, in March.
I will provide a brief update on pillar two of our company growth strategy to increase the clinical utility of <unk> towards potential new indications in additional patient populations living with rare neurological diseases.
Jeffrey Dierks: We had a very strong quarter, and I would say that the momentum leaving and exiting Q2, was as strong as coming out of Q1. We did reference on our earnings call that the second quarter, was our strongest quarter of top-line prescription demand in two years, and new patients start in the year, exceeding a little bit of what we saw in March.
We have made significant progress in our clinical development programs, which are shown on slide six.
John Jacobs: During the quarter, we made good initial progress on our Phase 3 in-tune study for WCAG and, idiopathic hypersomnia, where we were able to initiate multiple sites and have been actively enrolling patients.
David Amsellem: Second question, I don't know if you can comment on this, but in terms of idiopathic hypersomnia, are you, seeing any off-label usage?
Starting with our development program in idiopathic hypersomnia or IH, we continue to be very excited about this opportunity and are receiving a lot of interest from both patients and healthcare professionals, who manage patients with IH.
David Amsellem: And again, I know there's sensitivity here, but, you know, is there anything that you can add in terms of what you might be seeing in that setting?
After initiating our phase III Registrational trial in adult patients with IH in April known as the <unk> study, we held a live face to face investigator meeting in early June before the annual sleep conference.
David Amsellem: Thank you.
John Jacobs: Yeah, David, first, I mean, we remain confident in the strength of our IP and developing new, therapeutics in partnership with BioPerge is not a reflection of our current patent portfolio for WACIX. You know, as we stated before, we have patents expiring in 2029 and refactoring a patent term extension and our pursuit of pediatric exclusivity for WACIX has the potential to extend into 2031.
The investigator meeting was very well attended and generated excellent momentum during the startup phase of the trial.
The <unk> study is off to a good start and on track with regard to both site activation and patient enrollment.
If this phase III trial is successful it could represent the next new indication for <unk> in adult patients with IH.
John Jacobs: In Prader-Willi, we have completed enrollment in our Phase 2 proof-of-concept study and, are on track for top-line results in the fourth quarter of this year.
Moving on to our development program and product Willi syndrome or PWM.
We completed enrollment in our phase II proof of concept trial in patients with PWM Asia, 6% to 65.
With this we are on track for topline data readout from this study later this year in the fourth quarter.
As a reminder, this is a proof of concept trial with the objective being signal detection in this rare patient population.
It is not powered to demonstrate statistical significance.
The primary outcome is the evaluation of excessive daytime sleepiness or eds in patients with PWM.
Secondary outcomes include caregiver assessment of eds severity and clinical global impression of PWM symptom severity.
The full data set will also include other secondary outcomes of interest including behavioral symptoms.
Is it a function and hyperphagia.
John Jacobs: We are excited with the continued advancement of our pipeline programs and are hopeful that, these efforts, if successful, will lead to additional indications for WCAGs.
We look forward to sharing the top line data with you in Q4.
Turning to our development program and <unk> dystrophy or DM.
John Jacobs: Dr. Jeff Dayno will provide more details on our clinical programs later in the call.
Enrollment continues in our phase II proof of concept study in adult patients with type one my atonic dystrophy or <unk>.
We have activated sites in Canada in areas, where there is a large population of patients with DM one we.
We anticipate top line data from this phase II proof of concept study in 2023, and we will provide an update on the timing of this data readout later this year.
Finally, with regard to pediatric narcolepsy and a pediatric indication for <unk> you may recall that our partner bio <unk> completed a phase III trial in pediatric narcolepsy patients.
<unk> recently submitted the data to the EMA seeking approval for a pediatric narcolepsy indication.
Ema's decision on <unk> pediatric narcolepsy submission could help inform our strategy towards submitting the data to FDA.
In the meantime, we are committed to obtaining pediatric exclusivity for <unk> and plan to submit a request for a pediatric written request or <unk> later this year.
We will provide an update on these activities on future calls.
To conclude we have made significant progress in our clinical development programs as Harmeet clinical enterprise continues to grow.
We are excited about the early momentum in our <unk> study a phase III registrational trial in adult patients with IH.
In addition, we look forward to top line data readout from our phase II proof of concept trial in patients with PWM in Q4.
We continue to appreciate all the efforts of the clinical investigators and their teams who have partnered with us in conducting our clinical trials and are grateful for the patients and families who choose to participate in them.
I will now turn the call over to our CFO Sandeep <unk> for an update on our financial performance Sandeep.
Jeffrey Dierks: Extremely pleased with our business performance, and anticipate, you know, growth moving forward in some of these key metrics.
Thank you, Jeff and good morning, everyone. This morning, we issued our second quarter 2022 press release and filed our 10-Q, you'll find the details of our financial and operating results.
Danielle Brill: Great.
Danielle Brill: Thanks.
Danielle Brill: And then you mentioned, I think, in your prepared remarks, that you expect the contribution of the new reps and the new thousand prescriber targets to partially offset the typical Q3 seasonal impact.
Our second quarter performance, but also shown on slide seven eight and nine.
Danielle Brill: Can you maybe elaborate a little bit more on that, or quantify how we should be thinking about maybe seasonal headwinds next quarter?
We experienced continued strong performance in the quarter with year over year growth in both revenues and operating income while continuing to generate cash flow from operations.
Jeffrey Dierks: Thank you.
Jeffrey Dierks: Jeff, you want to comment on the seasonality in Q3?
We are pleased with our performance in the first half of the year and the momentum we're seeing for the remainder of the year.
Jeffrey Dierks: Yeah, Danielle, you're exactly correct with respect to seasonality.
For the second quarter of 2022 reported our strongest quarter to date with $107 million in net revenues for <unk> compared to $73 8 million in the prior year quarter.
Jeffrey Dierks: So, you know, we're not providing forward-looking guidance, certainly, but we are excited about the growth opportunities for WACIX moving forward.
Jeffrey Dierks: You know, and our growth is going to reflect the typical seasonal dynamics, that are consistent with every other branded specialty product in the industry. It creates an ebb and flow in our performance.
Jeffrey Dierks: So, as you've seen, Q1 has seasonal payer dynamics, insurance resets, reauthorizations, higher gross to nets.
This represents a growth of 45% and reflects the strong underlying demand for <unk>.
Jeffrey Dierks: Second quarter tends to be stronger with the payer dynamics behind us, and gross to net and trade inventory normalizing.
In the second quarter of 2022 operating expenses were $55 million compared to $37 8 million in the prior year quarter.
Jeffrey Dierks: In Q3, you do have summer seasonality, right? So there are fewer patient visits. There's more traditional vacation time for patients, healthcare professionals, and their office staff. And then usually that's followed by a stronger Q4, where more patients look to start and or refill their medicines before the end of the year and their insurance changes.
Jeffrey Dierks: So when we talk about our field team, we do anticipate beginning to see the benefits of the expansion.
Jeffrey Dierks: And we did mention in our comments that we hope that that effort and impact may offset, the typical seasonal dynamics.
The growth in operating expenses was primarily driven by our ongoing commercialization of <unk>. Our recent sales force expansion and the enrollment in our phase II proof of concept studies, AWS DM and our phase III Registrational trial NIH.
Jeffrey Dierks: It will be great to have additional representatives out there building relationships, educating our healthcare professionals.
Jeffrey Dierks: But we do anticipate those traditional Q3 seasonal dynamics with lower patient foot traffic, and more vacation out of the office.
Jeffrey Dierks: Yeah, thank you, Jeff.
<unk>.
As a result of our strong topline performance, we had improvements in operating profitability. We reported second quarter 2020 to operating income of $33 1 million.
John Jacobs: And, Danielle, to just add some additional color and context to that, I would say that there's a sales force, as you know, generates demand for a product.
John Jacobs: So they're going in, they're educating medical staff and getting new writers on, and reminding physicians of the benefits of weight gain.
John Jacobs: If you have less patients going in to fill their prescriptions due to vacation and holidays, and less patient-physician interaction, our reps cannot do anything to change that particular dynamic.
Compared to $23 3 million or 42% increase versus the prior year quarter.
non-GAAP adjusted net income for the second quarter was $34 7 million or <unk> 57 per diluted share compared to $21 9 million or <unk> 37 per diluted share in the prior year quarter.
We believe non-GAAP adjusted net income better reflects the underlying business performance.
Please see our press release for a reconciliation of this measure.
During the second quarter of 2022, we generated approximately $34 million of cash from operations and ended the quarter with $258 9 million of cash cash equivalents and investments as of June 30th.
John Jacobs: And finally, Pillar 3, acquiring new assets through business development to expand our, portfolio beyond WCAGs. This morning, we announced a new agreement with BioPerj, which is designed to leverage, its drug discovery capabilities in combination with our proven commercial expertise in the U.S. market, to develop innovative therapeutics based on patolisant.
John Jacobs: What they're doing is a more wide share of voice, a larger share of voice out there.
John Jacobs: We're excited about the deal with BioPerge, which allows us to focus on the development of new innovative therapeutics based on patolisant in a way lifecycle management, but also in other indications that are mutually agreed to by the parties.
John Jacobs: And so, as, you know, these are early in development, so as we learn more through those programs and our co-development with BioPerge, we'll be glad to share further thoughts on strategy and focus areas in the future on those things.
As John mentioned, we're excited about our new agreement with via <unk>.
John Jacobs: BioPerj has significant scientific expertise, as demonstrated by their discovery of patolisant, or WCAGs. The agreement will enable us to pursue new therapeutics for narcolepsy based on patolisant. If successful, these efforts could expand Harmony's franchise in narcolepsy by yielding, one or more new products with the potential to launch during the WCAGs life cycle.
John Jacobs: But that dynamic is separate from a sales rep's effort.
John Jacobs: And then I believe your question, your second question was on Jeff Dirks.
John Jacobs: Closing of the agreement is contingent on clearance under the Hart-Scott-Rodino or HSR, Antitrust Improvements Act of 1976 and other customary closing conditions, which we expect to complete in the fall.
Part of the agreement, we will pay via a $30 million upfront fee, which we expect to be incurred as an expense in the third quarter of 2022.
Along with the potential for future milestone payments and sales royalties.
Our strong cash position provides us with the flexibility to pursue this agreement while maintaining sufficient capital to continue to execute on our commercial clinical and business development priorities.
John Jacobs: What the reps can do is generate additional demand over the long run and as we get into Q4.
Looking ahead, we do expect typical headwinds from summer seasonality in Q3, followed by a strong Q4.
John Jacobs: But I would not assume that the new sales force addition will do much to mitigate the typical seasonal dynamics, because those are outside of the control of what Harmony does.
John Jacobs: It has to do with patient-physician visits, physician holidays through the summer months.
John Jacobs: And that's something we want you all to think about each year, the normal seasonality and ebb and flow of a chronic disease business in neurology where you see this Q1 insurance reset and the gross to net pressures that every company faces in this type of a space as you enter Q1 and then that summer seasonality in Q3.
We also expect an increase in R&D and SG&A expenses.
John Jacobs: We look forward to providing additional updates as we advance these efforts.
Jeffrey Dierks: On idiopathic hypersomnia, David.
In conclusion, our continued strong performance with the <unk> and the resulting cash generation is enabling harmony to make important investments in our business, while maintaining profitability and adding to our strong cash balance for business development activities to acquire additional assets.
John Jacobs: As we have said before, we began our business development efforts early in our company history, so we could take the time to be thoughtful and prudent in what we acquire and flexible in the types of deals we are able to consider.
Jeffrey Dierks: Off-label use.
Jeffrey Dierks: Yeah, David, what I can tell you is there's certainly excitement in the community, and, I think, you know, Jeff Dano can speak to this after me.
And with that I'd like to turn the call back to John for his closing remarks John .
Jeffrey Dierks: You know, again, it's limited in its use given, you know, WACIX is a higher price specialty product and does not have an FDA approval, so payers usually manage drugs to label.
Jeffrey Dierks: So, you know, if you're thinking about IH as an opportunity, it's definitely a creative opportunity to WACIX.
Thank you Sandeep. So in summary, our continued strong performance positions us well to execute on our three pillar growth strategy based on our first half results and demand trends, we are seeing for <unk> as we enter the second half we're confident that 2022 can be our best year, yet in company history.
John Jacobs: So I would just expect that normal typical type of ebb and flow to our business.
Jeffrey Dierks: We're not seeing a lot, but I do think that there is a very strong interest, and that likely is going to speak to a future opportunity.
Jeffrey Dierks: Yeah.
Jeffrey Dayno: Yeah, David, it's Jeff Dano.
Jeffrey Dayno: Thanks for the question.
Jeffrey Dayno: I think just at a high level, as Jeff mentioned, we have seen a lot of interest from both patients and, you know, the sleep medicine community with regards to propolisin for IH.
John Jacobs: But we do expect overall in the second half as a whole to see, as Jeff was saying, that impact of our sales representatives.
John Jacobs: Hopefully that adds a little extra color and context.
Danielle Brill: Yes, understood.
Our intent is to continue growing <unk> sales in narcolepsy via a good commercial execution and strong organic demand for this unique and meaningfully differentiated product to.
Danielle Brill: Thanks for the additional.
To continue to advance our clinical programs with the goal of expanding the utility of <unk> beyond narcolepsy to help bring this innovative therapy to new patient populations.
John Jacobs: Over time, our intention is to develop a broad portfolio of rare orphan neurology assets, and or assets in other neurological diseases where we can leverage our existing expertise and infrastructure. To achieve this, we intend to leverage our strong and growing financial position to acquire, additional assets across a range of development stages, including both early and later stage, with the potential to launch both during and after WCAG's life cycle.
And to continue to acquire new assets beyond <unk> to develop a broad portfolio of rare orphan neurology assets.
John Jacobs: The addition of HBS-102 last year and the new agreement with BioPerjet are important, steps in our journey to building a diversified portfolio in neurology, and it is our intention to continue adding additional assets to further strengthen our ability to help patients and to grow our business for long-term sustainability.
<unk> assets and other neurological diseases, where we can leverage our existing expertise and infrastructure.
John Jacobs: Harmony is in a good position to execute on Pillar 3 as our business fundamentals with, WCAG's remain strong. We have approximately $260 million in cash, cash equivalents, and investments as of Q2, and we anticipate that we will continue to generate more cash each quarter from WCAG sales.
John Jacobs: Overall, I am extremely pleased with the progress on our three-pillar growth strategy during, Q2, and we are well positioned for the remainder of the year to continue delivering on our plans for growth.
John Jacobs: We remain confident in WCAG's being a potential $1 billion-plus franchise in the coming years, via narcolepsy and additional indications, and with that as a foundation, I am truly excited about what we can achieve next at Harmony.
We look forward to updating you on our progress. This concludes our planned remarks today.
Danielle Brill: Contacts.
Jeffrey Dayno: I think some of it relates to mechanistically, you know, primary, you know, disorder of wakefulness and looking at wake-promoting agent, you know, versus other treatments with regards to consolidation of sleep and primary, you know, working through a mechanism as a primary CNS depressant.
John Jacobs: I would now like to turn the call over to Jeff Dierks, Harmony's Chief Commercial Officer.
Danielle Brill: Thank you.
You for joining our call and I will now turn things back over to the operator to facilitate the Q&A session. Operator can we please open the call to questions.
Jeffrey Dierks: Jeff.
Operator: Our next question will come from Ami Fadia with Needham.
Jeffrey Dayno: So I think mechanistically, it offers another approach.
Jeffrey Dierks: Thanks, John.
Jeffrey Dierks: We made significant strides in advancing our narcolepsy business in the second quarter, both in net revenue and underlying business fundamentals, as seen on slide four. Net revenue for the second quarter was $107 million, which represents an approximate 45% increase from the same quarter previous year.
Jeffrey Dierks: We were also pleased with the 25% growth over the first quarter, demonstrating strong momentum in our business coming out of Q1.
Thank you at this time, if you would like to ask a question. Please press star one on your telephone keypad.
Jeffrey Dierks: Our solid performance since launch continues to reflect not only the resilience and commitment of our team, but also speaks to how the overall benefit-risk profile of WACIX aligns to the significant unmet need in the narcolepsy market.
Jeffrey Dierks: Moving on to slide five, I'd like to highlight a few of our underlying business fundamentals that drove our continued growth in the second quarter of 2022. The average number of patients on WACIX increased to approximately 4,300 in the second quarter. The growth in Q2 reinforces the strong underlying organic demand for WACIX.
If you wish to remove yourself from the queue you may do so by pressing the pound key.
Mind, you to please pickup your handset and please limit yourself to one question and one follow up question we.
Jeffrey Dayno: I think that's what's generating, some of the interest.
We will take our first question from Chris Howerton with Jefferies. Your line is now open.
Operator: Your line, is now open.
Jeffrey Dayno: And obviously, we're excited about the Phase 3 in-tune trial, you know, looking at propolisin for adult patients with IH, and we'll continue to provide updates on that as we advance the trial.
Jeffrey Dierks: With Q2 performance building upon the momentum coming out of Q1 with respect to both top-line prescription demand and new patient starts, Q2 represented the strongest quarter of top-line prescription demand in over two years, and new patient starts in a year. We also saw strong refill behavior in the second quarter.
Ami Fadia: Hi, good morning.
David Amsellem: Okay, great.
Hey, good morning, and congratulations on the program, that's really awesome quarter.
Jeffrey Dierks: We are pleased with the continued growth of WACIX and our ability to help additional adult patients living with narcolepsy. Our strong Q2 performance with respect to net revenue and patient growth was driven by a number of factors. We saw an increase in in-person field sales engagements with healthcare professionals and their office staff in the second quarter versus Q1 2022. Approximately 75% of all field sales engagements were in person during the quarter.
David Amsellem: Thank you for your help.
Yes, two questions for me one would be from.
Jeffrey Dierks: The increase in access allowed for further education and engagement with healthcare professionals on the meaningfully differentiated profile of WACIX and provided an opportunity for our expanded sales team to drive WACIX growth in both new and existing prescribers.
John Jacobs: I think it's key to state that, you know, idiopathic, hypersomnia remains a true and unique opportunity for the product.
Thanks, Kevin.
Yes.
Well first from Jeb Terry would be could.
Jeffrey Dierks: We observed a further broadening and meaningful clinical adoption of WACIX among narcolepsy-treating healthcare professionals. We saw further growth in new prescribers of WACIX in the second quarter of 2022, both in writers of traditional narcolepsy treatments, as well as healthcare professionals who have been reluctant to prescribe the other available scheduled narcolepsy treatments. We continue to see broad utilization of WACIX for both type 1 narcolepsy and type 2 narcolepsy patients, and WACIX being prescribed as monotherapy as well as concomitantly with all other narcolepsy treatments.
Could you describe to us the relative impact of the two different.
Practices that you described that.
Jeffrey Dierks: The majority of WACIX prescribers continue to become repeat writers, meaning they've written a prescription for WACIX for two or more of their adult narcolepsy patients since launch. The continued growth in both the depth and breadth of our prescriber base demonstrates what we believe is a growing opportunity for WACIX in adult narcolepsy. We also continue to see strong and improving market access for WACIX through the second quarter of 2022, helping to accelerate patient access to WACIX.
Jeffrey Dierks: And lastly, we're extremely pleased with the progress of our field salesforce expansion. We successfully hired experienced, award-winning representatives with established relationships, to add to our existing outstanding field sales team, and had all new representatives trained and active in their territories by April 1st in line with what we communicated in our previous earnings call.
Traditionally prescribed narcolepsy therapies, and then those that were more hesitant to do so.
And then the second question that I have would be around the new relationship with <unk>. If we could just have a little more color in terms of what we can expect from that relationship and maybe how that might expand IP past. The current expected runway of around 2021.
John Jacobs: It's a unique diagnosis code.
Yes go ahead, if you want to handle the first question on the two different physician segments sure.
John Jacobs: It's a diagnosis of exclusion.
Chris Thanks for the question so when Youre thinking about the two different segments. The initial audience that are the occiput prescribers writers of traditional scheduled medications. Our initial target was about 8000 health care professionals and they covered about 90% of the patient opportunity. The additional thousand physicians that we added to.
Our target universe that.
And picked up prescribing wakes that were not prescribers of the other scheduled treatment they manage about 10% of the patient opportunity. So to give you a relative sense. It's about a 90 10 split if that helps.
That's perfect. Thank you, Jeff and then Chris on your second question. This deal allows us to focus on developing new innovative therapies based on <unk> in partnership with <unk> with a focus on narcolepsy and if we choose to and aligned with <unk> potentially other indications that are mutually agreed upon by the parties.
As well.
Efforts could expand our franchise in narcolepsy by yielding one or more new products with the potential to launch during the <unk> lifecycle should we succeed with them.
And regarding IP, Chris what I will say and can say is it's harmonies policy to to file patent applications alone or with our partners on all patentable inventions that strengthen our assets and it's also our policy not to discuss any pending patent applications of course due to competitive reasons. So hopefully that adds a little bit of extra color Chris.
Okay.
No very much I really appreciate it John and thanks again for taking my questions. Thank you Chris.
Yes.
Ami Fadia: This is Ethan Lee on for Ami.
Thank you. Our next question will come from Danielle Brill with Raymond James Your line is now open.
Ami Fadia: Congrats on the quarter and thanks for taking our question.
Hey, guys. Good morning. Thanks, so much for the question and my congrats on the strong quarter as well.
Ami Fadia: Thank you.
You mentioned that topline prescription demand was the strongest it's been in over two years, and new patient, sorry, or the Shanghai and over a year and I think.
Ami Fadia: Maybe two from us.
Ami Fadia: Just first, I know y'all kind of talked about kind of the 300 to 400 new patient ads per quarter.
Last quarter on your call you said March was.
This is John this month, you had for new patient adds a number of years. So I'm just curious how that momentum evolved during the quarter did you see a similar level of demand exiting <unk> entering it.
I'll stop there and then I have a follow up thanks.
Ami Fadia: Just wanted to confirm that's kind of how you're thinking about, you know, the increase in new patients over the rest of the year.
Yes, so I'll take Daniel's question on momentum sure. Good morning, Danielle, Yes, obviously, we're extremely pleased with the strength of our underlying business fundamentals and you are correct. The Q2 growth really reinforces the underlying organic demand for wafer we built on the momentum as you noted in March we had a very strong quarter and I would say.
Ami Fadia: And then maybe second, kind of on PWS, can you kind of remind us of the mechanistic rationale for PatelSense and EDS here?
Ami Fadia: And just quickly, like what magnitude of improvement on ESS would be considered clinically meaningful for these patients?
John Jacobs: Obviously, Harmony does not and cannot promote off-label.
Ami Fadia: Thank you.
John Jacobs: There may be some off-label use, but we don't believe it's a high volume of off-label use.
John Jacobs: And there's a large patient community who's already diagnosed in the tens of thousands, there who have significant unmet need and we believe could really benefit from a non-scheduled therapeutic option like WCAG should we succeed.
John Jacobs: So we see it as a true open and available opportunity should we have success in the clinic.
David Amsellem: Okay.
John Jacobs: Yeah, great, great questions and thank you for those.
David Amsellem: Well, thanks again.
John Jacobs: And number one, of course, we, have not and are currently still not providing any forward-looking guidance.
David Amsellem: Thank you, David.
The momentum, leaving and exiting Q2 was as strong as coming out of Q1, we did reference on our earnings call that the second quarter was our strongest quarter of topline prescription demand in two years in new patient starts in the year exceeds.
David Amsellem: Good to hear from you.
David Amsellem: Thank you.
Exceeding a little bit of what we saw in March extremely pleased with our business performance and anticipate growth moving forward and some of these key metrics.
Operator: Again, if you would like to ask a question, please press star 1 now to join, the queue.
Operator: Our next question will come from Francois Biswa with Oppenheimer.
Francois Biswa: Your line is now open.
Great. Thanks, and then you mentioned I think in your prepared remarks that you expect the contribution of the new reps and the new <unk> thousand.
Francois Biswa: Hey, guys.
Francois Biswa: Nice taking the question.
Francois Biswa: Just on that note on IH, can you just help us understand, you know, how the medical community feels about the diagnosis?
Francois Biswa: Is it difficult to differentiate even if it's by exclusion, just how that works since now there's the products that are approved for both narcolepsy and IH?
<unk> prescribers target to partially offset the.
Jeffrey Dayno: Go ahead, Dr. Dano.
The typical Q3 seasonal impact can you maybe elaborate a little bit more on that or quantify how we should be thinking about maybe seasonal headwind next quarter. Thank you.
Francois Biswa: Yeah, Frank.
Jeff you want to comment on the seasonality in Q3, yes Daniel.
Youre exactly correct with respect to seasonality. So we're not providing forward looking guidance certainly, but we are excited about the growth opportunities for weeks moving forward.
And our growth is going to reflect the typical seasonal dynamics that are consistent with every other branded specialty product in the industry that creates an ebb and flow and our performance. So as you've seen Q1 has seasonal payer dynamics insurance resets reauthorization has higher gross to nets second quarter tends to be stronger with the payer dynamics behind us.
And gross to net trade inventory normalizing Q3, you do have summer seasonality right. So there are fewer patient visits there's more traditional vacation time for patients health care professionals and their office staff and then usually that's followed by a stronger Q4, where more patients look to start and a refill their medicines before the end of the year and their insurance changes so.
When we talk about our field team, we do anticipate beginning to see the benefits of the expansion.
Jeffrey Dierks: As we move into the second half of 2022, we anticipate beginning to see the benefits of, this expansion. The additional team effort and impact will help to partially offset the typical summer, seasonality of more days out of the office for healthcare professionals, and expected lower patient foot traffic due to vacations in Q3.
Jeffrey Dierks: In summary, I'm excited about our continued strong performance, inspired by the exceptional, work of our team, and proud of the difference WACIX is making in the lives of people living with narcolepsy. The strong performance and solid underlying business fundamentals of WACIX affirm our, confidence in WACIX being a potential billion-dollar-plus franchise opportunity in narcolepsy and additional indications.
And we did mentioned in our comments that we hope that that effort and impact may offset and partially offset the typical seasonal dynamics it'll be great to have additional representatives out there building relationships educating our health care professionals, but we do anticipate those traditional Q3 seasonal dynamics with lower patient foot traffic and more vacation out of the office.
Jeffrey Dierks: I'd now like to turn the presentation over to Dr. Jeff Dano for an update on our clinical development programs.
Jeffrey Dayno: Jeff?
Thank you, Jeff and Danielle to just add some additional color and context to that I would say that there's a sales force as you know generates demand for our product. So theyre going in there educating medical staff and getting new riders on and reminding physicians of the benefits of <unk>.
If you have less patients going in to fill their prescriptions due to vacations and holidays and less patient physician interaction our reps cannot do anything to change that particular dynamic what theyre doing it up more wide share of voice a larger share of voice out there, but that dynamic is separate from our sales reps effort.
What the reps can do is generate additional demand over the long run and as we get into Q4, but I will.
Would not assume that the new sales Force addition will do much to mitigate the typical seasonal dynamics because those are outside of the control of what harmony does it has to do with patient physician visits physician holidays through the summer months.
And that's something we want you also to think about each year, the normal seasonality and ebb and flow of a chronic disease business in neurology, where you see this Q1 insurance reset and the gross to net pressures that every company faces in this type of a space as you enter Q1, and then that summer seasonality in Q3.
So I would just expect that normal typical type of ebb and flow ebb and flow to our business, but we do expect overall in the second half as a whole to see as Jeff was saying that impact of our sales representatives hopefully that adds a little extra color and context, yes understood. Thanks for the additional context.
Thank you. Our next question will come from Amit <unk> with Needham. Your line is now open.
Jeffrey Dayno: Thank you, Jeff, and good morning, everyone.
Jeffrey Dayno: Good morning.
Jeffrey Dayno: I will provide a brief update on Pillar 2 of our company growth strategy to increase, the clinical utility of Pitocin toward potential new indications in additional patient populations living with rare neurological diseases.
Hi, Good morning, this is rami.
Congrats on the quarter and thanks for taking our questions.
Jeffrey Dayno: Thanks for the question.
Jeffrey Dayno: So I think, you know, this IH is, a very active area in the sleep medicine community.
Jeffrey Dayno: A lot of, obviously, discussion about it and new learning with new treatment options that are out there.
Maybe two from two from us.
Just first I know you also kind of talked about kind of the 300 to 400, new patient adds per quarter I just wanted to.
Confirm that that's kind of how youre thinking about.
The increase in new patients over the rest of the year and then maybe second kind of.
PWM can you remind us of the mechanistic rationale for <unk>.
The eds here ends and just quickly like what magnitude of improvement on USS would be.
Be considered clinically meaningful for these patients. Thank you.
Jeffrey Dayno: So I think that, you know, it evolves along sort of the spectrum in terms of type 1 narcolepsy, type 2 narcolepsy, and then IH.
Yes, great great questions and thank you for those are number one of course, we have not and are currently still not providing any forward looking guidance.
So we are not going to comment on that what we did say is that we we strongly anticipate continued growth of wake effects due to the strong underlying demand of the product. The numbers you quoted are historical looking.
John Jacobs: So we're not going to comment on that.
John Jacobs: What we did say is that we strongly anticipate continued growth of WACIX due to the strong underlying demand of the product.
John Jacobs: The numbers you quoted are, historical.
Looking backwards you can see what has occurred but we're not going to provide forward looking guidance on that we're confident in our ability to continue to grow this business based on the significant unmet need in narcolepsy and the demand we're seeing organically from physicians, Jeff Berkes any other comments on on the question on momentum in the prescription that adds each quarter.
John Jacobs: Looking backwards, you can see what has occurred, but we're not going to provide forward-looking guidance on it.
John Jacobs: We're confident in our ability to continue to grow this business based on the significant unmet need in narcolepsy and the demand we're seeing organically from physicians.
Jeffrey Dierks: Jeff Dierks, any other comments on the question on momentum and prescription ads each quarter?
Jeffrey Dierks: No, I think you handled the question well, John.
I think you handled the question Welles, John and Ethan I again, I would just harking back to John's response to Daniela just considering the seasonal dynamics in the second half of the year as Youre thinking about our business and that ebb and flow we expect.
Jeffrey Dierks: And Ethan, again, I would just hearken back to John's response to Danielle's just, considering the seasonal dynamics in the second half of the year as you're thinking about our business and that ebb and flow we expect.
Jeffrey Dayno: And then Jeff Dano, I think the next question was on mechanism of action.
And then just saying I think the next question was on mechanism of action that I believe even our risk product Willy you asked about specifically for product Wheeling, yes. Good morning, Ethan So in terms of the mechanistic fit its wholesome for <unk> Willi or the reason to believe if you will so product Willi syndrome is fundamentally a disorder of hypothalamic dysfunction, where you have not just the <unk>.
Jeffrey Dayno: And I believe, Ethan, it was Prader-Willi you asked about specifically. Yeah, for Prader-Willi.
Jeffrey Dayno: Yeah, good morning, Ethan.
Jeffrey Dayno: So in terms of the mechanistic fit of the Tulsan for Prader-Willi or the reason, to believe, if you will, so Prader-Willi syndrome is fundamentally a disorder of hypothalamic dysfunction where you have not just the hunger-satiety switch in the hypothalamus, but right next to that, the sleep-wake switch.
<unk> tidy switched in the hypothalamus that right next to that the sleep wake switch. There is also evidence of Hypocretin deficiency in some patients with <unk> Willi syndrome, and as you probably know the prototypical disorder that hypocretin deficiency as patients with narcolepsy, so that results in over.
Jeffrey Dayno: There is also evidence of hypocretin deficiency in some patients with Prader-Willi syndrome.
Jeffrey Dayno: But as John alluded to, ultimately, it is a diagnosis of exclusion, ruling out patients with narcolepsy and other, you know, disorders that result in excessive daytime sleepiness, mainly related to sleep disorder, breathing, and other conditions.
Jeffrey Dayno: So I think there is more focus on it.
Jeffrey Dayno: There is more awareness and going through that diagnostic procedure with regards to ultimately, you know, landing on a diagnosis of IH.
Jeffrey Dayno: And as you probably know, the prototypical disorder of that hypocretin deficiency is patients with narcolepsy.
Jeffrey Dayno: So I think that's sort of the current state of affairs in the medical community.
Jeffrey Dayno: And, you know, we continue to follow that closely.
Jeffrey Dayno: And it's also driving a lot of interest in our phase 3 trial in IH.
Jeffrey Dayno: And, you know, we'll look forward to progressing that, you know, that clinical trial.
Jeffrey Dayno: So that results in overall sleep-wake state instability that leads to the excessive daytime sleepiness as a key symptom in patients with Prader-Willi, in addition to the cardinal symptom of hyperphagia.
Sleep wake state instability that leads to the excessive daytime sleepiness as a key symptom and patients with broader Willie in addition to the Cardinal symptom of hyperphagia.
Jeffrey Dayno: So that's a summary of sort of the mechanistic fit.
So that has some summary of sort of the mechanistic fit with regards to meaningful response on eds typically we look for a two to three point improvement in the Epworth sleepiness scale.
Jeffrey Dayno: With regards to a meaningful response on EDS, typically we look for a two- to three-point, improvement in the F-worth sleepiness scale.
Jeffrey Dayno: And that's what we'll be looking for in terms of signal detection from the top-line data.
And that's what we'll be looking for in terms of signal detection from the top line data.
Ami Fadia: Great.
Great. Thank you.
Ami Fadia: Thank you.
Francois Biswa: Okay, great.
Youre welcome.
Thank you. Our next question will come from Charles Duncan with Cantor Fitzgerald. Your line is now open.
Ami Fadia: You're welcome.
Francois Biswa: And if I sneak in a last one here, you talked about PWS and expectations, maybe and how it's not necessarily powered for STATS-SIG or proof of concept and what you would like to see for clinical meaningfulness.
Ami Fadia: Thank you.
Francois Biswa: But I was just wondering on the DM front, is that powered for STATS-SIG or is that a similar mindset as PWS?
Hey, good morning, John and team congratulations on a really nice quarter.
A couple of questions.
So one commercial one one pipeline.
Regarding the commercial question I guess I'm wondering it's Jeff can provide a little bit more color on the performance in terms of persistence of retails.
Versus new patient starts and kind of how do you feel about that dynamic and then can we assume no change in pricing in terms of the impact on topline.
Go ahead, Jeff.
Operator: Our next question will come from, Charles Duncan with Kantor Fitzgerald.
Jeffrey Dayno: That is a similar mindset.
Good morning Charles.
Operator: Your line is now open.
Jeffrey Dayno: Our phase 2 proof of concept in myotonic dystrophy, we are taking, a similar approach. So it is a similar approach as a proof of concept.
Question on performance of refills versus new patient starts. So obviously, new patient starts continue to be extremely strong and as we reported it was the strongest quarter. We've had in over a year, but we also saw strong refill behavior and so when youre thinking about refilling behavior. It obviously has a reflection on the average number of patients.
Charles Duncan: Hey.
Jeffrey Dayno: And, you know, we're looking at, we'd like to because the TULSAN has never been studied in patients with DM1.
We've talked a lot about within this category the average discontinuation rate of drugs for the narcolepsy market range between 30% and 50% at 12 months.
And then again you may have a smaller portion of discontinuation in year, two and three for chronic medications, which is consistent across the industry and although we havent shared specific discontinuation rate information with respect to <unk>. We're extremely pleased with how the product is being received it falls well within that range.
We continue to hear great feedback from health care professionals and patients. So we feel really good about the outlook in terms of the refill behavior as well as what we're seeing with respect to new patient starts and ads and that momentum in the second quarter and then with respect to pricing we were not anticipating any pricing changes moving forward.
Outside of the price increase that we took in January .
Very good.
One question regarding pipeline for Jeff.
Jeffrey Dayno: We have made significant progress in our clinical development programs, which are, shown on slide 6. Starting with our development program in idiopathic hypersomnia, or IH, we continue to be very, excited about this opportunity and are receiving a lot of interest from both patients and healthcare professionals who manage patients with IH. After initiating our phase 3 registrational trial in adult patients with IH in April, known as the Intune Study, we held a live face-to-face investigator meeting in early, June before the annual sleep conference. The investigator meeting was very well attended and generated excellent momentum during the, start-up phase of the trial.
Jess Congrats on getting that phase III started in April .
You mentioned that you had strong momentum in <unk> study and in terms of site activation and patient enrollment.
And it's too early to kind of quantify that but could you provide a little bit more color in terms of the sites and then any updated thoughts on timing to data or is that something you will you will discuss later on as you gain more experience in the study.
Jeffrey Dayno: The Intune Study is off to a good start and on track with regard to both site activations, and patient enrollment.
Charles Duncan: Good morning, John and team.
Jeffrey Dayno: So we feel it's prudent to generate data sooner rather than later, signal detection and get, to sort of, you know, a decision point with regards to a further development program.
Jeffrey Dayno: If this phase 3 trial is successful, it could represent the next new indication for WCAGS, in adult patients with IH.
Yes, good morning, Charles and Thanks for your question, Yes, I think it is early we are in startup mode, but we had great momentum coming out of the investigator meeting that we held in early June I think the sites are distributed across the U S. <unk> targeting 60 to 80 clinical trials.
Jeffrey Dayno: Moving on to our development program in Prader-Willi syndrome, or PWS, we completed enrollment, in our phase 2 proof-of-concept trial in patients with PWS ages 6 to 65. With this, we are on track for top-line data readout from this study later this year in, the fourth quarter. As a reminder, this is a proof-of-concept trial with the objective being signal detection, in this rare patient population. It is not powered to demonstrate statistical significance.
Jeffrey Dayno: So short answer, it is a very similar approach, phase 2 proof of concept.
Jeffrey Dayno: The primary outcome is the evaluation of excessive daytime sleepiness, or EDS, in patients with, PWS, and secondary outcomes include caregiver assessment of EDS severity and clinical global impression of PWS symptom severity.
Jeffrey Dayno: The full data set will also include other secondary outcomes of interest, including, behavioral symptoms, cognitive function, and hyperphasia.
Jeffrey Dayno: And we're building, some momentum.
Jeffrey Dayno: We look forward to sharing the top-line data with you in Q4.
Jeffrey Dayno: Turning to our, development program in myotonic dystrophy or DM, enrollment continues in our phase 2 proof-of-concept study in adult patients with type 1 myotonic dystrophy or DM1. We have activated sites in Canada in areas where there's a large population of patients with DM1.
Jeffrey Dayno: We've opened sites in Canada, Frank, where in Quebec region where there's a large founders population of patients with DM1.
Jeffrey Dayno: And as we've said, we are looking to top line data readout in 2023 next year.
Sites and with regards to our initial metrics.
Metrics that we followed a track performance.
We are on track and on target for both site activation and patient screening and enrollment.
Jeffrey Dayno: We anticipate top-line data from this phase 2 proof-of-concept study in 2023 and will provide an update on the timing of this data readout later this year.
Jeffrey Dayno: And we'll provide more color on that timing later this year.
Jeffrey Dayno: Finally, with regard to pediatric narcolepsy and a pediatric indication for WCAG, you may recall that our partner BioPerge completed a phase 3 trial in pediatric narcolepsy patients. BioPerge, recently submitted the data to the EMA seeking approval for a pediatric narcolepsy indication. EMA's decision on BioPerge's pediatric narcolepsy submission could help inform our strategy towards submitting the data to FDA.
Jeffrey Dayno: In the meantime, we are committed to obtaining pediatric exclusivity for WCAGs, and plan to submit a request for a pediatric written request or PWR later this year. We will provide an update on these activities on future calls.
With regards to overall timeline as Youll notice on clinical trials that Gov. We estimate about two years to complete the trial and towards top line data readout, we will provide updates as the trial advances.
Jeffrey Dayno: To conclude, we have made significant progress in our clinical development programs as Harmony's clinical enterprise continues to grow.
Jeffrey Dayno: We are excited about the early momentum in our Intune study, a phase 3 registrational trial in adult patients with IH.
Francois Biswa: Great.
Jeffrey Dayno: In addition, we look forward to top-line data readout from our phase 2 proof-of-concept trial in patients with PWS in Q4.
Francois Biswa: All right.
Further progress as we move along.
Perfect. Thanks for the added color congrats on a good quarter.
Charles Duncan: Congratulations on a really nice quarter.
Francois Biswa: Well, thank you very much and congrats on the quarter, guys.
Charles Thanks Charles.
Sure.
Jeffrey Dayno: We continue to appreciate all the efforts of the clinical, investigators and their teams who have partnered with us in conducting our clinical trials and are grateful for the patients and families who choose to
Francois Biswa: Thank you.
Thank you. Our next question will come from Greg <unk> with Mizuho. Your line is now open.
Charles Duncan: I have a couple, of questions.
Jeffrey Dayno: participate in them.
Charles Duncan: So one commercial, one pipeline.
Francois Biswa: Thanks, Frank.
Sandeep Kapadia: I will now turn the call over to our CFO, Sandeep Kapadia, for an update on our financial performance.
Sandeep Kapadia: Sandeep?
Francois Biswa: Thank you.
Hi, Greg.
Hi, John how are you. Good morning, Thanks for taking my question, Greg Good morning.
Sandeep Kapadia: Thank you, Jeff, and good morning everyone.
Operator: I am showing no further questions.
Sandeep Kapadia: This morning we issued our second quarter 2022 press release and filed our 10-Q, where you'll find the details of our financial and operating results.
Operator: This does conclude today's Harmony Biosciences second quarter 2022 financial update conference call.
Operator: You may now disconnect your line and have a wonderful day.
Thank you again.
Charles Duncan: Regarding the commercial question, I guess I'm wondering if Jeff can provide a little bit more color on the performance in terms, of persistence or refills versus new patient starts, and kind of how do you feel about that dynamic?
And just maybe a couple of questions for me just gotten a lot of questions. This morning on pricing and gross to net dynamics and so can you just remind us again and you may have commented. This on a previous question, but just could you just repeat kind of where we are in pricing.
Charles Duncan: And then can we assume no change in pricing in terms of the impact on top-line?
Sandeep Kapadia: Our second quarter performance is also shown on slides 7, 8, and 9.
Jeffrey Dierks: Go ahead, Jeff.
Thank you, everyone.
Jeffrey Dierks: Good morning, Charles.
What should the expectation be for perhaps the balance of the year and maybe into the second quarter, specifically if you could.
Provide any color if there were any unusual gross to net true ups that are worth mentioning. So that's my first question I will come back to the second question.
Sandeep Kapadia: We experienced continued strong performance in the quarter with year-over-year growth in both revenues and operating income while continuing to generate cash flow from operations.
Jeffrey Dierks: So, question on performance of refills versus new patient starts.
Okay. So first on pricing, we did take a price increase in Q1 that we announced in our last earnings call and then any other comments, Jeff dark so sandeep on pricing through the rest of the year, we usually don't comment further but there were no pricing changes in Q2.
Sandeep Kapadia: We're pleased with our performance in the first half of the year and the momentum we're seeing for the remainder of the year. For the second quarter of 2022, we reported our strongest quarter to date with 107 million in net revenues for weight kicks compared to 73.8 million in the prior year quarter. This represents a growth of 45% and reflects the strong underlying demand for weight kicks.
Jeffrey Dierks: So, obviously, new patient starts continue to be extremely strong, and as reported, it was the strongest quarter we've had in over a year. But we also saw strong refill behavior.
Sandeep Kapadia: In the second quarter of 2022, operating expenses were 55 million compared to 37.8 million in the prior year quarter. The growth in operating expenses is primarily driven by our ongoing commercialization of WACIX, our recent Salesforce expansion, and the enrollment in our Phase 2 proof-of-concept studies in PWSDM and our Phase 3 registrational trial in IH.
Jeffrey Dierks: And so, you know, when you're thinking about refilling behavior, it obviously has a reflection on the average number of patients.
Sandeep Kapadia: As a result of our strong top-line performance, we had improvements in operating profitability, as we reported second quarter 2022 operating income of $33.1 million. Compared to $23.3 million, a 42% increase versus the prior year quarter. Non-gap adjusted net income for the second quarter was $34.7 million or $0.57 per diluted share, compared to $21.9 million or $0.37 per diluted share in the prior year quarter.
Jeffrey Dierks: You know, we've talked a lot about, within this category, the average discontinuation rate of drugs for the narcolepsy market range between 30% and 50% at 12 months.
Sandeep Kapadia: We believe non-gap adjusted net income better reflects the underlying business performance. Please see our press release for a reconciliation of this measure.
Jeffrey Dierks: And then, again, you may have a smaller portion of discontinuation in year two and three for chronic medications, which is consistent across the industry.
Sandeep Kapadia: During the second quarter of 2022, we generated approximately $34 million of cash from operations, and ended the quarter with $258.9 million of cash equivalents and investments as of June 30th.
Jeffrey Dierks: And although we haven't shared specific discontinuation rate information with respect to WACIX, you know, we're extremely pleased with how the product's being received.
Jeffrey Dierks: It falls well within that range.
Jeffrey Dierks: We continue to hear great feedback from health care professionals and patients, so we feel really good about the outlook in terms of the refill behavior, as well as what we're seeing with respect to new patient starts and adds in that momentum in the second quarter.
Jeffrey Dierks: And then with respect to pricing, we're not anticipating any pricing changes moving forward, outside of the price increase that we took in January.
Yes.
Our sales number was all in Q1 that we took the price increase there, but I think to your comment on gross to net.
Jeffrey Dierks: Eric, that second question regarding pipeline for Jeff Dano.
Commented previously an increase in gross to net in the first quarter given.
Jeffrey Dayno: Jeff, congrats on getting that phase three started in April. You mentioned that you had strong momentum in the Intune study in terms of site activations, and patient enrollment.
The assistance that we provide.
Our government related.
Discount and that tends to reverse in the second quarter. So what you're really seeing in the second quarter is really related to the.
The change in gross to net.
And we would expect that to be relatively stable for the balance of the year, some fluctuations quarter over quarter, but generally I mean those are the key factors.
It's a big amount by the second quarter, you have worked through the insurance reset in Q1 and gross to net as normalized <unk> points. So those are that's that dynamic you see moving from Q4 through Q1 into Q2 correct.
Got you.
Sandeep Kapadia: As John mentioned, we're excited about our new agreement with BioPerget. As part of the agreement, we will pay BioPerget a $30 million upfront fee, which we expect to be incurred as an expense in the third quarter of 2022, along with the potential for future milestone payments and sales royalties.
Also congrats on the.
Sandeep Kapadia: Our strong cash position provides us with the flexibility to pursue this agreement, while maintaining sufficient capital to continue to execute on our commercial, clinical, and business development priorities.
<unk> deal and if I could just.
If I could revisit that.
In terms of.
Sandeep Kapadia: Looking ahead, we do expect typical headwinds from summer seasonality in Q3, followed by a strong Q4. We also expect an increase in R&D and SG&A expenses.
Jeffrey Dayno: I imagine it's too early to kind of quantify that, but could you provide a little bit more color in terms of the sites, and then any updated thoughts on timing to data, or is that something you'll discuss later on as you gain more experience in the study?
Sandeep Kapadia: In conclusion, our continued strong performance with WACGIS and the resulting cash generation, is enabling Harmony to make important investments in our business while maintaining profitability and adding to our strong cash balance for business development activities to acquire additional assets.
I guess, how we could think about.
Sandeep Kapadia: And with that, I'd like to turn the call back to John for his closing remarks.
When you might provide us more color on what those what I will consider the lifecycle management strategies might look like or additional fulfill the fund based formulations is there.
A view that we'll hear more about that in terms of specific candidates this year or next year.
And then my last question is.
I think many of US are interested in knowing at what point the company will be in a position to start providing forward looking guidance and just wanted to revisit that current thoughts. Thanks. So great. Great question. Gregg. Obviously these these programs are very early in development with <unk> and so as we as we reach future milestones.
Jeffrey Dayno: Yeah, good morning, Charles, and thanks for your question.
We are excited and looking forward to sharing details about that with the community, but it's premature to comment now on any additional color or provide necessarily timing at this stage for that commentary, but as we reach key milestones in the development of those programs and the advancement of this program will be excited to share with you and the rest of the investor.
Community on that when it comes to guidance Sandeep did you want to comment just on when we might contemplate providing forward looking guidance for the first time as a company sure sure John Thanks.
Jeffrey Dayno: Yeah, I think it is a bit early.
Jeffrey Dayno: You know, we are in startup mode, but we had great momentum coming out of the investigator meeting, you know, that we held in early June.
I think in generally.
Jeffrey Dayno: I think the sites are, you know, distributed across the U.S., targeting 60 to 80 clinical trial sites.
<unk>.
Wanted to see how things have progressed post COVID-19.
Jeffrey Dayno: And with regards to our initial metrics, you know, the metrics that we follow to track performance, you know, we are on track and on target for both site activations, patient screening, and enrollment.
The impact of sales force expansion and other things in order to give us confidence in terms of the guidance for the natural point.
Jeffrey Dayno: I think with regards to overall timeline, as you'll notice on clinicaltrials.gov, we estimate about two years to complete the trial and towards, you know, top line data readout.
Jeffrey Dayno: We'll provide updates as the trial advances and, you know, further progress, you know, as we move along.
We decided to give guidance would be the beginning of next year in the Meanwhile, we've tried to provide a qualitative as.
As well as a couple of indicators that help you at least from a modeling perspective.
I think the natural point would be.
It starts next year.
Thanks, so much it's great to be back out on the name.
Thank you Greg I appreciate you.
John Jacobs: John?
Charles Duncan: Perfect.
Thank you. Our next question will come from Karen Jenkins with Goldman Sachs. Your line is now open.
John Jacobs: Thank you, Sandeep.
Charles Duncan: Thanks for the added color.
Yes. Good morning, So we've talked a little bit about net price and gross to net dynamics I. Just wanted to confirm are there any one time sort of impacts on the gross to net basis like true ups or any other inventory things that might have impacted the top line this quarter.
John Jacobs: So in summary, our continued strong performance positions us well to execute, on our three-pillar growth strategy.
Charles Duncan: Congrats on a good course.
John Jacobs: Based on the first half results and demand trends we are seeing for WACGIS, as we enter the second half, we're confident that 2022 can be our best year yet in company history.
Charles Duncan: Back to Charles.
John Jacobs: Our intent is to continue growing WACGIS sales in narcolepsy via good commercial execution, and strong organic demand for this unique and meaningfully differentiated product.
Charles Duncan: Thanks, Charles.
Yes.
Charles Duncan: Thank you.
Sunday, if you wanted to make sure I think just.
What we saw in the second quarter were generally just a reversal of a lot of the growth.
Operator: Our next question will come from Greg Savanovich with Mizzouho.
Impact if you want to call. It from first quarter. There were no major swings at least in the quarter regarding any major true ups or.
Operator: Your line is now open.
Greg Savanovich: Hi, Greg.
Adjustments, what we will.
What we saw was a fairly normal.
Greg Savanovich: Hi, John.
Normal dynamics.
Thank you.
And as Jeff with earnings growth rate impact or anything like that.
Greg Savanovich: How are you?
Got it.
Greg Savanovich: Good morning.
I think looking at Q2, the trade inventories relatively normalized for the quarter and we anticipate that to remain relatively consistent through the balance of the year.
Greg Savanovich: Thank you again.
Greg Savanovich: And just maybe a couple questions for me.
Greg Savanovich: Just I've gotten a lot of questions this morning on pricing, and gross net dynamics.
Greg Savanovich: And so can you just remind us again, and you may have commented this on a previous question, but just could you just repeat kind of where we are in pricing?
Great and then on the bio appreciate deal I'm, just curious because we've talked a lot about potential BD to supplement revenue durability beyond patent life and I'm curious if this is meant to be kind of instead of or as a supplement to the supplement to potential BD and then how quickly could the compound get into the <unk>.
And how does the harmony contribution in terms of paying for that development work.
Greg Savanovich: You know, what should the expectation be for perhaps the balance of the year?
So looker and what I'll say, the addition of <unk>, one or two last year and now the new agreement with buyer. Appreciate they are important steps in our journey to building a diversified portfolio in neurology, but there is certainly just our first steps are not intended to be our last by any stretch and it's our intention to continue adding additional assets to further strengthen our <unk>.
John Jacobs: To continue to advance our clinical programs with the goal of expanding the utility of WACGIS, beyond narcolepsy to help bring this innovative therapy to new patient populations and to continue to acquire new assets beyond WACGIS to develop a broad portfolio of rare orphan neurology assets and or assets in other neurological diseases where we can leverage our existing expertise and infrastructure.
John Jacobs: We look forward to updating you on our progress.
John Jacobs: This concludes our planned remarks today.
Portfolio in railroad for Neurology and also as we've said each time, we've talked about this right in neurology, where we can leverage our infrastructure and expertise as a company. So these are just one more step on what we intend to be a long and fruitful journey to build out our portfolio.
John Jacobs: Thank you for joining our call, and I will now turn things back over to the operator, to facilitate the Q&A session.
We're not going to comment on timing in the clinic right. Now. These are early development phase and so what we're going to do is as we hit key milestones, we'll be excited to share that with the investment community over time.
Sandeep can comment on the pay structure sandeep when it comes to sharing clinical expenses <unk> was asking how will we pay for those expenses are we sharing those costs with buyer appreciate as a partner, yes generally the <unk> relatively similar to what we had.
Our agreement in terms of development costs.
Rather minimal this year, so generally I would say to start picking up next year.
<unk> costs there.
An agreement that we would share at least the first $40 million.
As part of the development program 50, 50, and then after which we would promote there as a competitor.
But it's early on in the development cycle.
Thanks, that's helpful.
Thanks Carl.
Operator: Operator, can we please open the call to questions?
Thank you. Our next question will come from David <unk> with Piper Sandler Your line is now open.
Operator: Thank you.
Operator: At this time, if you would like to ask a question, please press star 1 on, your telephone keypad.
Operator: If you wish to remove yourself from the queue, you may do so by pressing the pound key.
Operator: We remind you to please pick up your handset and please limit yourself to one question and one follow-up question.
Greg Savanovich: And maybe in two in the second quarter, specifically, if you could provide any color if there were any unusual gross to net true ups that are worth mentioning.
Hey, David.
Hi, Thanks for getting to me so two questions.
So two questions first on the a couple of follow up on the on the bio per day.
Operator: We will take our first question from Chris, Houghton with Jeffreys.
Greg Savanovich: So that's my first question.
Partnership.
Is this in any way kind of a statement on the IP situation for four wake effects.
Operator: Your line is now open.
Greg Savanovich: I'll come back to the second question.
And.
As a corollary to that is should.
Should we.
Think about this as primarily a lifecycle management type of situation or you're potentially going to be.
Chris Houghton: Hey, good morning, and congratulations on the progress.
Looking more broadly with the idea that yes. This is these are these are molecular entities that are based on consoles. So thats. The first question second question I don't know if you can comment on this but.
In terms of idiopathic hypersomnia are you seeing any off label usage.
Again, I know there's sensitivity here, but is there anything that you can add in terms of what you might be seeing in that setting. Thank you.
John Jacobs: Okay, so first on pricing, we did take a price increase in Q1 that we announced in our last, earnings call.
Yeah, David first I mean, we remain confident in the strength of our IP and.
Developing new therapeutics in partnership with <unk> is not a reflection of our current patent portfolio for weight mix. As we've stated before we have patents expiring in 2029 and factoring a patent term extension and our pursuit of pediatric exclusivity exclusivity for <unk> has the potential to extend into 2031, we're excited about.
Jeffrey Dierks: And any other comments, Jeff Dierks or Sandip on pricing through the rest of the year?
Jeffrey Dierks: Yeah, we usually don't comment further, but there were no pricing changes in Q2 that, you know, that affected our sales number.
Jeffrey Dierks: It was all in Q1 that we took the price increase there. And I think your comment on gross to net, you know, as we had commented previously, you know, you see an increase in gross to net in the first quarter, given copay assistance that we provide, you know, higher government-related discounts.
Sandeep Kapadia: And that tends to reverse in the second quarter.
Sandeep Kapadia: And so what you're really seeing in the second quarter is really related to the change in gross to net, you know, and we would expect that to be relatively stable for the balance of the year.
Sandeep Kapadia: Some fluctuations quarter over quarter, but generally, I mean, those are the key factors, you know, to think about.
John Jacobs: Yeah, and by the second quarter, you've worked through the insurance reset in Q1, and gross to net's normalized to Sandip's point. So that's that dynamic you see moving from Q4 through Q1 into Q2, Greg.
The deal with <unk>, which allows us to focus on the development of new innovative therapeutics based on <unk>.
In a way lifecycle management, but also in other indications that are mutually agreed to by the parties.
And so as these are early in development. So as we as we learn more through those programs and our co development with <unk>, we'll be glad to share further thoughts on strategy and focus areas in the future on those things.
And then I believe your question. Your second question was on.
<unk>.
Idiopathic hypersomnia, David off label use David what I can tell you theres certainly excitement in the community and I think Jeff can speak to this after after me.
Yes, again, it's limited in its use given <unk> is a higher price specialty product and does not have an FDA approval. So payers usually manage drugs to label. So if youre thinking about IHS an opportunity, it's definitely an accretive opportunity to wake X. We're not seeing a lot, but I do think that there is a very strong interest in that likely is going to speak.
To a future opportunity, yes, yes, David its Jeff.
Thanks for the question I think just at a high level as Jeff mentioned, we have seen a lot of interest from both patients and.
The sleep medicine community with regards to propulsion for IH I think some of it relates to Mechanistically.
Primary disorder of wakefulness, and looking at wake promoting agent versus.
Other treatments with regards to consolidation of sleep and primary.
Looking through a mechanism is it primary CNS depressant.
Mechanistically. It offers another approach I think thats whats generating some of the interest and obviously, we're excited about the phase III in tune trial.
Looking at the Tulsa and for adult patients with IH and we will continue to provide updates on that as we advance in the trial.
Okay, Great David Thats very helpful. Thank you need to just state that idiopathic hypersomnia remains a true and unique opportunity for the product. That's a unique diagnosis code, it's a diagnosis of exclusion.
Obviously harmony does not and cannot promote off label.
There may be some off label use but we don't believe it's a high volume of off label use and there is a large patient community use already diagnosed in the tens of thousands there who have significant unmet need and we believe could really benefit from a non scheduled therapeutic option lyke-wake should we succeed so we see it as a true open and available opportunities should.
We have success in the clinic.
Okay, well thanks again.
Thank you David good to hear from David.
Greg Savanovich: Thank you very much.
Thank you again, if you would like to ask a question. Please press star one now to join the queue.
Greg Savanovich: Also, congrats on the BioProjet deal.
Our next question will come from Francois This one.
With Oppenheimer. Your line is now open.
Greg Savanovich: Thank you.
Hey, guys. Thanks for taking my question just on that note IH can.
Can you just help us understand how the medical community feels about the diagnosis is it difficult to differentiate even if it's by exclusion just how that works.
Now there is the products that are approved for.
For both narcolepsy and IH.
Greg Savanovich: And if I could just revisit that in terms of, I guess, how we could think about when you might provide us more color on, what those, what I will consider as life cycle management strategies might look like, or additional total fund-based formulations.
Go ahead, Dr. Daniel.
Greg Savanovich: Is there a view that we'll hear more about that in terms of specific candidates this year or next year?
Yeah, Frank Good morning, Thanks for the question So I think.
Greg Savanovich: And then my last question is, I think many of us are interested in knowing at what point the company will be in a position to, start providing forward-looking guidance, and just wanted to revisit that and current thoughts.
<unk> is a very active area in the sleep medicine community a lot of obviously discussion about it and new learnings.
With new treatment options.
That are out there so I think that.
It evolves along sort of the spectrum in terms of type one narcolepsy type to narcolepsy, and then IH, but as John alluded to ultimately it is a diagnosis of exclusion ruling out patients with narcolepsy and other disorders that result in excessive daytime sleepiness.
It's mainly related to sleep disordered breathing and other conditions. So I think there is more.
<unk> focus on it there is more awareness and going through that diagnostic procedure with regard to ultimately.
Landing on a diagnosis of IH.
I think that the current state of affairs in the medical community and we continue to follow that closely.
And it's also driving a lot of interest in our phase III trial NIH.
And we'll look forward to progressing that that clinical trial.
Okay, great and if I could sneak in a last one here you talked about PWM and expectations, maybe and how it's not necessarily powered for stat, saying were proof of concept and what we would like to see for clinical meaningfulness, but I was just wondering on the DRAM front.
Is that powered first that CAGR is that a similar mindset as gws.
That is a similar mindset our phase II proof of concept in my Atonic dystrophy, we're taking a similar approach. So it is a similar approach as a proof of concept and we're looking at we'd like to be close to Tulsa and has never been studied in patients with <unk>. So we feel it's prudent to.
Generate data sooner rather than later signal detection and get to sort of a decision point with regards to a further development program.
So short answer it is a very similar approach phase II proof of concept.
And we are building some momentum we've opened sites in Canada, Frank where in Quebec region, where there is a large founders population of patients with <unk> and as we said we are looking to top line data readout in 2023 next year and we'll provide more color on that timing later this year.
Chris Houghton: Really awesome quarter.
Great Alright, thank you very much and congrats on the quarter guys.
Chris Houghton: I guess, two questions for me.
Chris Houghton: One would be from – oh, thanks, John.
Thank you thanks, Brian .
Chris Houghton: The first from Jeff Dierks would be, you know, could you describe to us the relative impact of the two different practices that you described, those that, you know, traditionally prescribed narcolepsy therapies and then those that were more hesitant to do so?
Chris Houghton: And then the second question that I have would be around the new relationship with Bioprojet, if we could just have a little more color in terms of what we can expect from that relationship and maybe how that might expand IP past the current expected runway of around 2031.
Chris Houghton: Thanks.
John Jacobs: Great, great question, Greg.
John Jacobs: Obviously, these programs are very early in development with, BioProjet.
Thank you I am showing no further questions. This does conclude today's harmony Biosciences second quarter 2022 financial update conference call. You May now disconnect your line and have a wonderful day.
John Jacobs: And so as we reach future milestones, we are excited and looking forward to sharing details about that with the community.
John Jacobs: But it's premature to comment now on any additional color or provide necessarily timing at this stage for that commentary.
John Jacobs: But as we reach key milestones in the development of those programs and the advancement of those programs, we'll be excited to share with you and the rest of the investor community on that.
Sandeep Kapadia: When it comes to guidance, Sandeep, did you want to comment just on when we might contemplate providing forward-looking, guidance for the first time as a company?
Sandeep Kapadia: Sure, sure, John.
Jeffrey Dierks: Jeff, go ahead if you want to handle the first question on the two different physician segments.
Sandeep Kapadia: Thanks.
Jeffrey Dierks: Sure.
Sandeep Kapadia: Yeah, I think, generally, we've wanted to see how things would progress post-COVID and, you know, with the impact of Salesforce expansion and other things in order to give us enough confidence in terms of the guidance.
Thank you everyone.
Jeffrey Dierks: Good morning, Chris.
Jeffrey Dierks: Thanks for the question.
Okay.
Yes.