Q4 2022 Harmony Biosciences Holdings Inc Earnings Call
Speaker 1: I.
Speaker 1: V few.
Speaker 2: Good morning everyone. My name is Todd and I will be your conference operator today.
Speaker 2: At this time, I would like to welcome everyone to Harmony Biosciences' 4th Quarter and Full Year 2022 Financial Results Conference Call.
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Speaker 2: After the speaker's remarks, there will be a question and answer session.
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Speaker 2: Please be advised that today's conference may be recorded.
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Speaker 2: I will now turn the call over to Phouis Sennai, Head of Investor Relations. Please go ahead.
Speaker 2: Thank you, operator. Good morning, everyone, and thank you for joining us today as we review Harmony Biosciences 4th Quarter and Full Year 2022 Financial Results and provide a business update.
Speaker 2: 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- GAAP financial measures.
Speaker 2: At this stage of our lifecycle, we believe non-GAAP financial results better represent the underlying business performance.
Speaker 2: Our presenters on today's call are Dr. Jeffrey Dano, interim CEO and Chief Medical Officer, Jeffrey Dirk's Chief Commercial Officer, and Sandy Kapadia Chief Financial Officer.
Speaker 2: Moving on to slide 2, as a reminder, we will be making forward-looking statements today, which are based on our current expectations and beliefs.
Speaker 2: 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.
Speaker 2: We encourage you to consult the risk factors referenced in our FEC filing for additional details.
Speaker 2: I would now like to turn the call over to Dr. Jeffrey Dana. Jeff?
Speaker 2: Thank you, Louis, and thank you everyone for joining our conference call today.
Speaker 2: We delivered another strong quarter in Q4 finishing the year with continued momentum in our commercial business for WAKIX as well as in the advancement of our clinical development programs for Patolicin.
Speaker 2: We are excited for 2023 and remain confident in the ongoing execution of our three-pillar growth strategy to further evolve Harmony into a leading rare disease company focused on delivering innovative therapies for patients living with rare neurological diseases.
Speaker 2: Harmony remains a growth story with the focus on advancement of our lifecycle management programs for Pitollicent, and acquisition of new assets to build out our pipeline to drive additional growth.
Speaker 2: With that as our focus, I am excited to lead the company forward.
Speaker 2: After 12 years of the practicing neurologist taking care of patients.
Speaker 2: followed by 25 years in the industry touching every aspect of the business, I bring a unique perspective to the development and commercialization of innovative treatments that address major unmet medical need.
Speaker 2: I have seen the impact that these treatments can have on patients and their families, and I'm proud of the progress we have made.
Speaker 2: I also know that Harmony is poised for continued growth with our goal to help even more patients living with rare neurological diseases.
Speaker 2: I will now briefly highlight our progress on each of the three pillars of our growth strategy in the context of Q4 2022 performance.
Speaker 2: starting with pillar one, which is to optimize the commercial performance of wake-ix.
Speaker 2: We delivered WAKIC's net revenue for the fourth quarter and full year 2022 of 128.3 million and 437.9 million respectively, representing an increase of 41% and 43% year over year.
Speaker 2: Our performance reflects the strong commercial execution by our team, the underlying demand for wake-ups.
Speaker 2: and the significant unmet need that remains in the narcolepsy market.
Speaker 2: For 2023, we expect continued growth for WAGIX and believe that the vast market opportunity which remains in narcolepsy.
Speaker 2: along with a differentiated product profile of WakeX.
Speaker 2: provide us with the ability to grow wake-ex for years to come.
Speaker 2: At Harmony, this also translates into an opportunity to help even more adult patients living with narcolepsy.
Speaker 2: Moving to pillar two, which is to expand the clinical utility of pitullicin beyond narcolepsy.
Speaker 2: We are extremely pleased with the progress that we have made across all our pipeline and lifecycle management programs, and I will provide more details on these during the clinical update later in the call.
Speaker 2: Briefly, in idiopathic hypersomnia or IH, we continue to see strong momentum in our Phase III Intune Study.
Speaker 2: This opportunity, if successful, could be the next potential new indication for pitullicin.
Speaker 2: In Prader-Willi syndrome, or PWS, we are analyzing the full data set from our phase two proof of concept study in preparation for an end of phase two meeting with the FDA.
Speaker 2: It is our intent to advance the PWS program to a Phase III trial.
Speaker 2: Overall, our life cycle management programs for pitollicin, in total, could address unmet medical needs in up to 100,000 diagnosed patients.
Speaker 2: living with IH, PWS, and myotonic dystrophy.
Speaker 2: An opportunity that is successful would more than double our diagnosed patient opportunity.
Speaker 2: We are committed to advancing these development programs and are hopeful that these efforts could lead to additional new indications for pitullicin and address the unmet medical needs in these patient populations.
Speaker 2: And finally, Pillar 3, acquiring new assets through business development to expand our portfolio beyond Wacix.
Speaker 2: Our dedicated business development team has been actively assessing the landscape as it is our intent to build out a broad pipeline of rare orphan neurology assets and or assets in other neurological diseases where we can leverage our existing expertise and infrastructure.
Speaker 2: To achieve this, we intend to leverage our strong 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 the WACoX lifecycle.
Speaker 2: We are in a solid position to execute on pillar 3 as our business fundamentals with WAKETs remain strong and we ended the year with approximately 346 million in cash, cash equivalents and investment securities.
Speaker 2: Overall, I'm extremely pleased with the progress that our team has made on our three-pillar growth strategy.
Speaker 2: We remain very confident in Wacox being a potential $1 billion-plus franchise in the coming years by a narcolepsy and additional indications.
Speaker 2: and are truly excited for 2023, during which our team will remain focused on executional excellence.
Speaker 2: I will now turn the call over to Jeffrey Dirks, our Chief Commercial Officer, to provide more details on our commercial performance. Jeff?
Speaker 3: Thanks, Jeff.
Speaker 4: Q4 represented another strong quarter of performance for Wacix, and 2022 full-year performance demonstrated strong overall growth and momentum in our underlying business fundamentals.
Speaker 4: Net revenue for the fourth quarter was $128.3 million, representing a 41% increase from the same quarter prior year.
Speaker 4: Full year 2022 net revenue was $437.9 million, which represented a 43% increase from full year 2021.
Speaker 4: Our strong performance reflects not only the resilience and commitment of our team, but also speaks to the strong underlying demand for Waykix.
Speaker 4: I'd like to take a moment to highlight a few of our underlying business fundamentals on 5.5 that drove our performance in the fourth quarter of 2022.
Speaker 4: The average number of patients on Wacox increased to approximately 4,900 in the fourth quarter of 2022.
Speaker 4: The growth in Q4 continues to reflect how the meaningfully differentiated product profile aligns to the unmet needs in an R-collepsy market.
Speaker 4: Growth in the average number of patients on wake-ups was driven by the following factors.
Speaker 4: Harmony Field Sale's in-person engagement with healthcare professionals and their office staff remains strong in the fourth quarter.
Speaker 4: Approximately 85% of all Harmony field sales engagement with healthcare professionals and their office staff were in person in the fourth quarter.
Speaker 4: The accessibility of our field sales team with healthcare professionals and their office staff allowed for further education and engagement.
Speaker 4: helping to drive growth in the depth and breadth of the Wacox prescriber base.
Speaker 4: We saw further growth in the number of new writers of WACCS, as well as growth in prescribing from existing writers in the fourth quarter of 2022.
Speaker 4: Growth in new prescribers is driven by both writers of traditional narcolepsy treatments, as well as healthcare professionals who have been reluctant to prescribe other available narcolepsy treatments that are scheduled as controlled substances.
Speaker 4: including the approximate 1,000 prescribers we added to our call plan earlier in 2022.
Speaker 4: Existing prescribers of WAQUS continue to find new adult patients with narcolepsy in their practices.
Speaker 4: Both naive patients, as well as the existing patients, currently on other treatments with residual symptoms of excessive daytime sleepiness or cataplexia.
Speaker 4: The continued growth in both the depth and breadth of our prescriber base demonstrates the broad clinical utility of Wacox and the broad narcolepsy patient opportunity for the brand.
Speaker 4: Our performance in Q4 reflects the contribution of our field Salesforce expansion from earlier in 2022.
Speaker 4: Our expanded team was able to reach more narcolepsy-treating healthcare professionals with greater frequency to educate them on the meaningfully differentiated product profile of Wacix, helping to drive the growth that we saw in new and existing riders in Q4.
Speaker 4: Now in the third quarter of our expansion, the benefits of our expanded field sales team are now reflected in our base business, and we are excited about the impact we've seen from our entire award-winning sales team.
Speaker 4: Looking ahead, we believe there is still a significant opportunity for growth in the years to come for wake-ups and adult narcolepsy.
Speaker 4: And recent market research commissioned by Harmony reinforces our belief.
Speaker 4: Research conducted with 70 healthcare professionals with and without experience with Wacix showed that more than 95% of healthcare professionals with Wacix experience stated they would rate the same or increase prescribing of Wacix in the next six months.
Speaker 4: and nearly half of those who had not prescribed wake-ups to date stayed intent to prescribe wake-ups in the next six months.
Speaker 4: We believe our growth will persist as we enter our fourth year of commercialization in this rare orphan patient population in 2023.
Speaker 4: We will continue to tap into the large remaining opportunity in narcolepsy as the market allows around the typical seasonal dynamics that the pharmaceutical industry as a whole experience each year.
Speaker 4: We expect typical seasonal pair dynamics and normalization of trade inventory in Q1.
Speaker 4: followed by stronger prescription demand in the second quarter.
Speaker 4: summer seasonality with fewer patient visits in Q3, and a stronger Q4 as patients look to fill their prescriptions before the end of the year.
Speaker 4: In summary, we are extremely pleased at the growth of Wacix, and we believe our strong performance highlights the need for the meaningfully differentiated product profile of Wacix and affirms our confidence in the future growth opportunity for Wacix in adult narcolepsy.
Speaker 4: We continue to believe that weight-gaze is a potential billion dollar plus franchise opportunity in narcolepsy and additional indications and are excited about our ability to help additional adult patients living with narcolepsy and other rare diseases in the future.
Speaker 4: I'll now turn the presentation back over to Jeff Dano for an update on our clinical development programs. Jeff?
Speaker 2: Thank you, Jeff.
Speaker 2: Moving to pillar two of our company growth strategy.
Speaker 2: to expand the clinical utility of pitollicin toward potential new indications in additional patient populations living with rare neurological diseases as shown on slide six which depicts our development pipeline.
Speaker 2: Starting with our development program in idiopathic hypersomnia, which we are very
Speaker 2: We continue to see strong momentum in our phase three registrational trial in adult patients with IH, known as the Intune Study.
Speaker 2: We now have approximately 85% of our clinical trial sites active and patient enrollment is progressing well.
Speaker 2: If this phase three trial is successful, it could represent the next new indication for wake-ups in adult patients with IH.
Speaker 2: We plan to provide an enrollment update later in the year.
Speaker 2: For PWS, as I mentioned in my opening comments,
Speaker 2: We received a full data set from our Phase II proof of concept trial at the end of last year.
Speaker 2: As you may recall, last November we announced that the top line data showed a positive signal on the primary outcome of excessive daytime sleepiness in this trial.
Speaker 2: We are currently analyzing the full data set in preparation for an end-of-phase two meeting with the FDA to discuss the trial results.
Speaker 2: It is our intent to advance the PWS program to a Phase III trial, and we will provide an update on our progress later this year.
Speaker 2: In addition, our plan is to present the findings of the Phase II Proof of Concept trial at a future medical meeting and submit the full results for publication to a scientific journal.
Speaker 2: Moving on to our development program in myotonic dystrophy, or DM.
Speaker 2: Enrollment continues in our Phase II Proof of Concept study in adult patients with Type 1 Myotonic Dystrophy, or DM1. We anticipate top-line data from this Phase II Proof of Concept study in the fourth quarter of 2023.
Speaker 2: Regarding pediatric narcolepsy and a pediatric indication for wake-ups,
Speaker 2: Our partner, BioPriget, received a positive opinion from the European Medicine's Agency's or EMA Committee for Medicinal Products for Human Use, or CHMP last month, with an approval for a pediatric narcolepsy indication expected by the EMA.
Speaker 2: within 60 days of the positive CHMP opinion.
Speaker 2: We will now work with Biopregé on a path forward towards the submission of a supplemental NDA for pediatric narcolepsy to the FDA.
Speaker 2: Finally, regarding our efforts in pursuit of pediatric exclusivity, which represents a different regulatory pathway compared to gaining a pediatric indication, we are also
Speaker 2: We received feedback from the FDA and additional guidance based on that request for a pediatric written request, which we submitted in the third quarter of 2022.
Speaker 2: Based on this feedback, we will now prepare a proposed Pediatric Study request.
Speaker 2: submit it to FDA to gain alignment with the agency in our pursuit of pediatric
Speaker 2: We will provide an update on our interactions with the FDA later this year.
Speaker 2: To conclude, we have made significant progress in advancing our clinical development programs with pitullicin and look forward to providing you with further updates later this year.
Speaker 2: I also want to take a moment to thank all the patients and their families who are participating in our clinical trials, as well as the clinical investigators for all of their efforts and commitment in helping us to advance our development programs for pitollicin.
Speaker 2: I will now turn the call over to our CFO , Sandeep Kapadia, for an update on our financial performance. Sandeep?
Speaker 5: Thank you Jeff and good morning everyone. This morning we issued our fourth quarter press release and filed our 10K while you'll find the details of our fourth quarter in Bowie Year 2022 financial and operating results.
Speaker 5: Our financial performance is also shown on slide 7, 8, and 9.
Speaker 5: We finished the year strong and delivered growth across several of our key metrics.
Speaker 5: We reported strong net revenue growth for the quarter and full year, as well as achieved our second full year of profitability.
Speaker 5: In addition, we continue to generate cash from operations and remain well positioned to execute on our three-filler growth strategy.
Speaker 5: Let me take a moment to take you through our results in detail.
Speaker 5: For the fourth quarter of 2022, we reported net revenues of $128.3 million, compared to $91.2 million in the prior year quarter, representing a growth of 41%.
Speaker 5: On a full year basis, we delivered net revenues of $437.9 million.
Speaker 5: a 43% increase over 2021.
Speaker 5: Our performance reflects the strong underlying demand for weight gain.
Speaker 5: In the fourth quarter of 2022, operating expenses were 53.8 million compared to 44.8 million in the prior year quarter. With full year 2022, operating expenses of 234.2 million.
Speaker 5: The higher operating expenses were primarily driven by our ongoing commercialization of wake-ups and advancement of our clinical development programs.
Speaker 5: Operating income improved both on a quarterly and yearly basis.
Speaker 5: We report a fourth quarter of 2022 operating income of $47.6 million compared to $28.6 million in the prior year quarter, representing an increase of 66%.
Speaker 5: On a full year basis, operating income was $120.2 million.
Speaker 5: compared to 87.5 million in 2021, representing a year-over-year increase of 37%.
Speaker 5: non-GAAP adjusted net income for the fourth quarter of 2022 was $61.9 million, or $1.01 per diluted share, compared to $30.4 million, or $0.50 per diluted share, in the prior year quarter.
Speaker 5: non-GAAP adjusted net income for the full year of 2022 was $183.5 million, or $3 per deluge share, reflecting our strong revenue growth and prudent expense management. We believe non-GAAP adjusted net income better reflects the underlying business performance.
Speaker 5: Please see our press release for a reconciliation of GAP to non-GAP results.
Speaker 5: During the fourth quarter of 2022, we generated approximately $27 million of cash from operations and end of the year with $345.7 million of cash equivalents and investment securities.
Speaker 5: On a full year basis, we generated approximately $145 million of cash from operations.
Speaker 5: Excluding the $30 million licensing fee part of the 2022 LCA with 5 Rige, that was paid in the fourth quarter. Cash from operations for the fourth quarter and full year were approximately 57 million and 175 million respectively.
Speaker 5: Regarding the outlook of our business, we have demonstrated consistent performance for the past three years across several of our key metrics and feel this is efficient to appropriately model our business.
Speaker 5: With a full year of 2023, we expect another strong year of revenue growth for WAKICs and remain confident in WAKICs being a potential 1 billion plus franchise in the years to come, along with narcolepsy and other indications.
Speaker 5: With respect to Q1, we expect the typical industry-wide headwinds from higher gross to net deductions and normalization of trade inventories. However, we do expect strong year-over-year net revenue growth for Q1.
Speaker 5: With respect to expenses, we expect to continue to invest in R&D and FDNA as we advance our clinical development programs and support the strong commercialization of WASIC.
Speaker 5: And finally, a comment on our tax rate.
Speaker 5: We have used up the majority of our net operating losses, and thus we expect our go-forward tax rate to be in the mid to high 20% range. In conclusion, we are very pleased with our strong financial performance, which further strengthens our company profile of growth and profitability, enabling us to execute on our three-pillar growth strategy.
Speaker 5: And with that, I'd like to turn the call back to Jeff for his closing remarks. Jeff?
Speaker 2: Thank you, Sandeep.
Speaker 2: In summary, our strong performance in 2022 positions us well to execute on our strategy.
Speaker 2: With a strong commercial performance and anticipated future growth of WAKIX and NARCO-FC, serving as our foundation,
Speaker 2: We look to our life cycle management programs to drive additional growth for Harmony in the coming years.
Speaker 2: With active pitullicin development programs in idiopathic hypersomnia, Prader-Willi syndrome, and myotonic
Speaker 2: along with HBS-102.
Speaker 2: Harmony is poised to extend our value proposition beyond narcolepsy into other rare diseases with diagnosed patient populations collectively that exceed 100,000 patients.
Speaker 2: which would more than double our diagnosed patient opportunity.
Speaker 2: Couple this with development programs for our new Patelison-based assets.
Speaker 2: and an opportunity to introduce new treatment options for people living with narcolepsy and potentially other rare neurological diseases, we are excited about the future growth potential for the organization.
Speaker 2: And, we have deep talent across our organization and a solid balance sheet and are effectively positioned to achieve the next level of growth.
Speaker 2: This concludes our planned remarks for today. Thank you for joining our call, and I will now turn the call back over to the operator to facilitate the Q&A session.
Speaker 2: Operator, can you please open the call to questions?
Speaker 5: Yes, sir, at this time, if you would like to ask a question, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, you may do so by pressing star 2.
Speaker 5: We remind you to please pick up your handset and please limit yourself to one question and one follow-up question.
Speaker 5: Again, to ask a question, please press star 1.
Speaker 5: We'll take our first question from Francois Risbois with Oppenheimer.
Speaker 6: All right, thanks for taking the questions and congrats on the quarter. Just a couple here. I was just wondering, any thoughts going forward? I know we've talked about the growth of the revenue and the commercial opportunity here has been pretty linear, but I was just wondering, any thoughts about, at this point it's been launched for a while.
Speaker 2: As you heard in our remarks, for this year, we expect continued growth for Wacix and believe that the large market opportunity remains in narcolepsy. And along with the differentiated product profile of Wacix, it provides us with the ability to grow the brand for years to come. And with that, I'll ask Sandeep to comment a little further around your questions.
Speaker 5: Yeah, thanks, Chef. You know, look, overall we've demonstrated, as you mentioned, pretty consistent performance of the past three years. And we feel that that's sufficient in terms of, you know, at least for modeling purposes going forward. And again, we continue to believe there's a large untapped opportunity. So there's certainly growth for many years to come.
Speaker 5: And I think we're continuing to remain confident in the outlook for wake-ups. We think it's a potential plus franchise in the coming years with narcolepsy and other indications.
Speaker 6: Okay, thank you very much. And then, just on the seasonality of first quarter, I know it's kind of a normal thing in this space that happens, but I think last year there might have been a little different aspect to it that affected the number of patients added on, not just the gross to net, but on the number of patients maybe related to the COVID-19 pandemic.
Speaker 4: Frank. Yes, so to answer your question, we do expect the face of same seasonal payer dynamics that you expect to see in Q1 every year, the higher growth in that, the higher copay Medicare out of pocket support, inventory normalization, and the traditional typical prescription reauthorization headwinds. We did have a couple of one-time events last year, which we do not anticipate this .
Speaker 4: three years and we're really excited about the growth opportunity in 23 and for years to come and I think our current performance really affirms our long-term growth outlook for the brand.
Speaker 6: Okay, great. I'll just cheat here and sneak a quick one here. I just feel like I have to. Any color on the CO search guidance for a permanent CO, or is this potentially an interim turning into a permanent for Jessica?
Speaker 2: Yeah, Frank, let me let me respond to that. Thanks for the question. So obviously, with regards to the CEO position, this is a board decision and I won't speak on behalf of the board and we'll provide an update as appropriate once the board shares their plan on this issue.
Speaker 2: But that being said, the board has expressed their confidence in myself and the full management team. And we're all focused on the business at hand and executing on our three-pillar growth strategy. And as I've shared, harmony remains a growth story.
Speaker 2: and our focus on the advancement of our life cycle management programs for Pitollasen, acquisition of new assets and business development to build out our pipeline, in addition to our strong underlying business fundamentals of Wacix and Narcolepsy. So with that as our focus, I'm well positioned to lead the company forward.
Speaker 2: And I'm really excited to work with a very talented management team and the broad talent across our organization.
Speaker 6: Perfect. Thank you very much. Congrats on the quarter again.
Speaker 7: Thanks Frank.
Speaker 5: Thank you. Our next question comes from David Amselin with Piper Sandler.
Speaker 8: Thanks guys, just had a couple.
Speaker 8: I was curious if you can...
Speaker 8: talk about how many of the WakeX prescribers are actually enrolled in the Oxabate REMS. And what I'm trying to get at here is the extent to which you're capturing docs and patients.
Speaker 8: who are occipate resistant or occipate hesitant. So can you talk about that mix? That's number one. And then number two is a longer term question. As you think about the potential availability way down the road of erects and agonists.
Speaker 8: or a product like Axome's Roboxetine, how do you think that impacts the longer term trajectory of Wacox, if at all? Thank you.
Speaker 2: Sure, David, thanks for your questions. With regards to the...
Speaker 2: and the HCPs in the REMS. It's a really interesting dynamic, and I'll let Jeff Derp comment on that. Really interesting dynamic, but we, our physician universe that we're covering is much broader compared to the number of docs in the Oxibate REMS. And Jeff, you wanna.
Speaker 4: but to Jeff Dano's point, we're also penetrating into that 5,500 other healthcare professionals that are not REMS enrolled. And that really allows us to tap into a broader patient opportunity, and that really speaks to the differentiated product profile, the fact that it's non-scheduled, you can write the product with a refill, so.
Speaker 4: We believe that even with what's going on in the Oxibate marketplace with generics and potential launch of Avid Els FT-218 in the future, we're well positioned for continued growth. And we're really excited about the growth opportunity that we're seeing within the Oxibate REMS enrolled doctors, as well as those that are beyond that space. And from a patient population, we've disclosed publicly that there are
Speaker 4: in that treatment algorithm, whether you've had experience with those traditionally scheduled products that are controlled substances or naive to weight kicks.
Speaker 4: Thinking about the future landscape, David, I think given the uniqueness of WAQX, we're well positioned both in the short term and the long term for continued sustainable growth. I think the fact that it's a non-scheduled treatment option, as we talked about, it's the only non-scheduled treatment option approved for both EDS and cataplexy.
Speaker 4: We have pharmacokinetic data that can show it can be used, can commonly with weight promoting agent, medicinal and oxybate. So the profile is well positioned for healthcare professionals. And lastly, as you know that this is a very difficult disease to manage. This is very much a polypharmacy market. And I do believe that
Speaker 4: from what I understand that the synergistic benefits of looking through, you know, within hypercreet and in histamine, I think WAKIX is well positioned as future potential products come into the marketplace. The big opportunity, lots of brands, and I think what you see every day of it is all both rise, all brands are growing, and we're really excited about the difference that we're making in their lives. The people...
Speaker 2: Those programs are early and obviously there are connections between histamine neurons and hypocretin neurons, mechanistically to what Jeff was saying. Not necessarily a novel mechanism in terms of how that operates, but...
Speaker 2: We will keep a close eye on those programs and WAKIFT will continue to be a differentiated product profile in this market. And I think able to use other as monotherapy or can commonly with other treatments now and in the future.
Speaker 8: Okay, helpful. Thank you.
Speaker 5: Thank you. Our next question comes from Chris Howarton with Jefferies.
Speaker 8: Good morning. Hey, good morning. Hey, good morning. Thanks so much for taking the questions. I guess I had two. One was on kind of the, I know we talked a little bit around the first quarter dynamics, but I guess I was wondering, you know, with respect to plan resets, would you expect that to impact existing patients?
Speaker 8: or the addition of new patients in terms of the first quarter numbers. So that's question one. And then question two is if you could just give us a little more color around the status of the pediatric narcolepsy package, can you remind us, you know, are you going to do any clinical work or is it just sufficient to take the...
Speaker 4: or existing. Typically what you see across all pharma and across the industry, typical headwinds are with the reauthorizations. So is insurance reset and you're a chronic patient on medication year over year, that resets whether you're taking a proton pump inhibitor, cholesterol, diabetes, antidepressant, narcolepsy. So.
Speaker 4: What you see is you do get some headwinds in January , you know, one in four Americans changes insurance every year, so there's going to be paperwork turned. As reauthorizations come up, you also have a subset of existing patients. That's something traditionally felt in January . You get beyond it in February . We traditionally start to see a very strong March coming out of the first quarter leading into a stronger Q2.
Speaker 2: pediatric indication. Let me provide some clarity on this and I think as we shared on the call, you know, our partner BioPreG received a positive opinion from the CHMP, you know, last month and they're expecting an approval for a pediatric indication in Europe within about the next month or two.
Speaker 2: So with that, we're working with Biopregé on a path forward to prepare a supplemental NDA to submit to FDA for a pediatric indication. That will not require any additional development work with regards to potential indication.
Speaker 2: But we will need to take sort of the European filing and prepare a submission that's appropriate for the FDA. But while that's happening, I also want to comment on...
Speaker 2: a parallel path with regards to pursuing pediatric exclusivity, which is a different regulatory pathway. And for that, we have been engaged in FDA have gotten feedback last month on what that would require. And that would require additional clinical development work, which is...
Speaker 2: what needs to be done to get pediatric exclusivity. There's discussion about what trial or trials is needed. So we've had that engagement and based on that feedback, the clinical team is preparing the regulatory team, what's called proposed pediatric study requests.
Speaker 2: We submit that to the FDA to gain alignment of what needs to be done to gain pediatric exclusivity for wake-ups. So we'll provide an update on those interactions later in the year. But as a reminder, the main commercial opportunity is in obtaining pediatric exclusivity.
Speaker 2: which would afford us, if we're successful there, an additional six months of patent protection on the back end of the IP.
Speaker 8: Yep, no, that's extremely helpful. Thank you to both the Jeffs.
Speaker 8: Yep, that's extremely helpful. Thank you to both of you. Thanks Chris.
Speaker 5: Thank you. Our next question comes from Charles Duncan with Cantor Fitzgerald.
Speaker 6: Hey, good morning, Jeff and team. Thanks for taking the questions and congrats on a great quarter. Had a quick commercial question and then a pipeline. Yeah, excuse me. Regarding the commercial question, average patience on, I guess I'm wondering if you can provide any questions.
Speaker 2: I'm just starting on average number of patients and where they're coming from.
Speaker 4: Sure, and thank you for the question, Charles. I would say I'm equally impressed with the continued addition of new patients. Again, we're entering into year four, and we continue to see strong top-line prescription demand, but we're also seeing very good retention on patients, right, consistent within the category. For those patients that are staying on Wacix, we're looking at 90-plus percent compliance rates, which is a huge deal.
Speaker 4: When patients really find the right treatment in this category, you do see patients take their medication as prescribed by their doctor. So we're just finishing up year three. Personally for me, I'm really impressed with both of those metrics. I think our award-winning sales team continues to deliver quarter over quarter. As Jeff shared, we have an extremely talented team here. We've got 200 plus strong that are all...
Speaker 6: I guess I'm wondering if you think about idiopathic hypersomnia versus PWS, what are you most interested in? It seems like idiopathic hypersomnia in a phase three should be top of mind, but can we look to PDFs?
Speaker 6: PWS timeline here in the actual presentation of the data and articulation of next steps to kind of raise the profile of that particular program versus IH for the potential for Patolis and going forward. And then also the next step in hosting you can be seeing the vs. And the for all of that
Speaker 2: Yes, sir, Charles. No, great question. So, first of all, I would say that obviously both of those patient populations are important because they both have a significant unmet medical need, number one. Of the two, obviously idiopathic hypersomnia is the near-term opportunity for us.
Speaker 2: and also the larger market opportunity, about 40,000 patients diagnosed. So we're really excited about that program. We see significant interest from both the patient community and the physician community and our clinical trial sites. So we'll provide an update later in the year on enrollment progress, but significant momentum.
Speaker 2: near-term opportunity, significant market size. But with regards to Prader-Willi syndrome, a pediatric rare neurodevelopmental disorder, also an important development program for us, about 15 to 20,000 patients diagnosed with PWS in the US.
Speaker 2: And we're actively engaged in preparing and the Phase II briefing document. We'll put in a meeting request and look forward to good productive interactions with FDA on advancing that development program to a Phase III trial. So both are important.
Speaker 2: and to address unmet needs in those patient populations, as well as in advancement of our development programs.
Speaker 6: Okay, thanks for taking the questions, Jeff.
Speaker 5: Thank you. Our next question comes from Karen Jenkins with Goldman Sachs.
Speaker 9: Good morning, two for me. Maybe first, can you just share more color on the market research you cited? Particularly, I'm interested in what these physicians looked like, whether they were primarily sleep specialists or general psychiatrists, and what their average patient volume was. And then the other question separately, as you think about business development and your capacity as a patient, what are some of the things that you think about as a patient?
Speaker 4: and without experience, so there was no patient criteria to be eligible because we did want to look into both those who had not yet prescribed wake-ups as well as those that had prescribed wake-ups. Specialties included sleep specialists, neurologists, pulmonologists, psychiatrists, and some primary care doctors. And some of the specific questions that we asked them that I cited in our prepared remarks is we asked healthcare professionals...
Speaker 4: how they saw their prescribing of wake exchanging in the next six months. And as I shared, the results demonstrated of those individuals with waking experience, more than 95% of them stated that they would increase or stay the same with their prescribing, and of those individuals, a subset that had not yet prescribed.
Speaker 4: almost 50% of those healthcare professionals stated an intent to prescribe wake-ix in the next six months. And so, you know, we're really excited about what these data affirm in our belief in the future growth opportunity for wake-ix in adult narcolepsy. So Jeff, maybe I'll go back to you for the second question. Thanks, Jeff. And Corinne, your question about business development. So first off, a few comments and then I'll turn it over to Sandeep for his thoughts.
Speaker 2: So, you know, we have a dedicated business development team and continues to, you know, the really active evaluating the ED landscape and potential opportunities. Importantly, you know, we're in a solid financial position to execute on business development. We have a strong cash position, as we said, approximately $346 million.
Speaker 2: at year end, you know, last year. And also, you know, BD continues to be an important priority for us. It's a target rich environment, but we're also remaining disciplined in our approach to business development. We want to be strategic in our approach, in our decision making.
Speaker 5: So when we do announce a deal, it'll make sense and be a good fit for Harmony. In terms of our capacity, and I'll turn it over to Sundeep, some thoughts there. Sure, Jeff. You know, as you mentioned, we have 346 million approximately of cash equivalents. I think the other thing is we continue to generate positive cash flow from operations.
Speaker 5: opportunity to look at leverage and I think the way I think about it is look we also have in addition We also have the hundred million dollar you know delayed draw from black down that we could also draw on which would which would also be additional Death capital and and generally as I think about it, you know I think much as an asset is much closer to market, you know, there's I'd be more comfortable
Speaker 5: the cash flow to be able to look at multiple different options. So not only just leverage, but there are many other options that we could certainly consider as a company.
Speaker 10: me thanks honey...]
Speaker 10: Thanks, Andy.
Speaker 5: Thank you. Our next question comes from Ami Fadia with Needham.
Speaker 11: Good morning. I'm wrapping the nice quarter and I've got two questions. Firstly, can you talk about where you see some?
Speaker 11: For the kids in the upcoming quarters and.
Speaker 11: Can you give us some type of qualitative color on how many patients per quarter you might be able to add?
Speaker 11: in 2023. In the past, you've talked about about 300 to 400 patient-at-per-quarters.
Speaker 11: comment on that that would be helpful. And then secondly, if you think about life cycle management for weightics, you've expanded your partnership with Baja4J. Can you talk about what type of...
Speaker 11: that would be helpful. And then secondly, as you think about life cycle management for WAKIX, you've expanded your partnership with BAS4J. Can you talk about what type of life cycle?
Speaker 11: You might have in mind and where might be the unmet need in the now-kelettes for a different type of formulation of wicket that would be helpful.
Speaker 6: Sure, Ami, thanks for the question. Can you repeat the first one we lost you for a few seconds there on your first question? Sure. The first question is if you could sort of qualitatively give us a sense of where growth will come from for decades. You'd expanded your reach for your Salesforce last year. And in time.
Speaker 4: Okay, sure. I mean, all right. All right. Jeff starts, um, when I respond to that. Sure. So I mean, for your first question, just in terms of looking at, you know, where we see growth coming from in the future, I think as we've shared, there is still a large patient opportunity remaining. And I think where we see growth coming from, we anticipate we're still going to be
Speaker 4: to have a discussion with their healthcare professional about Wake-ix. So, you know, with our expanded field sales team, we can now reach the target group of about 9,500 narcolepsy treating healthcare professionals. So we see growth coming from both new as well as existing writers. So continued growth in depth and breadth of our prescriber base.
Speaker 4: So with respect to average patient growth, obviously we're not providing guidance looking forward, but as Sandeep shared, if you look backwards three years, we've been relatively consistently delivering, and I think that's probably a good thing to point back to. We still are very bullish on our ability to continue to grow. We're going to continue to tap into that opportunity.
Speaker 4: with a little bit of summer seasonality for chronic conditions where most patients take vacations, they're not in their offices. But then in the fourth quarter, you get a lot of those patients coming back in. So you should expect that traditional rhythm that we've seen in the last three years, and we anticipate that in 2023 moving on if that helps.
Speaker 2: Thanks, Jeff. And Ami, with regards to your second question and our partnership with BioPreG and the licensing agreement for new catolocin-based assets, so our thinking around that, our strategy is obviously the catolocin as...
Speaker 2: a novel molecule with a novel mechanism of action and wake-ups performing well in the marketplace. We're looking at opportunities and currently working with BioPreché in new enhanced formulations, which will give us an opportunity potentially for.
Speaker 2: new IP around some of the innovation in the formulation aspect of that, an opportunity to explore the dose of range more, and obviously extend the runway for further development. Thoughts there where we could initially extend the narcolepsy franchise.
Speaker 2: out further with new IP using the new Patelosent-based assets. We could take the current development programs that we're working on now, and then eventually move them to new formulations with a longer runway and longer opportunity in the market.
Speaker 2: as well as pitoticin continues to be an interesting molecule and the potential is to develop in programs in additional and new patient populations based on its mechanism of action, working through histamine, not just...
Speaker 2: around EDS, but other symptoms we're exploring in our current programs, you know fatigue as an outcome as well as the potential impact on cognition. So if with more time in new propulsion based assets that is the strategy and that's the current thinking.
Speaker 12: That's very helpful. Thank you.
Speaker 12: That's very helpful. Thank you. Thanks, Ami.
Speaker 8: Thank you. Our next question comes from Greg Svivanovic with Mizzouho Securities. Hey, thank you very much. Congrats on a great 2022. I've got two questions. My first is just on the op-backs. The op-backs came in a bit later than we were looking for.
Speaker 13: company philosophy around providing guidance. You had mentioned that you feel that you've got a good understanding of the rhythmicity of the business. Drug will be going into its fourth year of launch. So just wondering why at this point in time you're not comfortable providing.
Speaker 13: forward-looking guidance, at least on revenue. Thanks. I'm going to address great questions.
Speaker 5: So, first of all, the op-ax? Oh, yes, right. Yeah. Just regarding the op-ax. I think there was nothing unusual, I would say, in the fourth quarter. Generally, it ebbs and flows with our activity overall. As we think about 2023, we'll see an evolution in our expense base growing, for example, on the SGA side through additional commercialization.
Speaker 5: the tax rate overall. We've given our success and profitability, we've generated nice profitability, which obviously meant that we used up most of our NOLs, so we would expect go forward tax rate too, to be in the 20 mid to upper 20% rate. And I think finally, just operating margin, we would expect that to improve as well as our top line.
Speaker 5: are provided and when Jeff Dork talks about the commercial performance. So I think that's the feeling at this time and Sunday further thoughts on guidance. Yeah, look, we've shown a nice consistent history. So we thought that that was appropriate in terms of being able to model the future. And I think, look, historically, we've seen even the analyst community, even this past quarter, pretty close. ... ??? Opps,
Speaker 5: to be a billion plus franchise in the coming years in our philosophy. And I think we'll continue to evolve that over time and certainly we could in the future look at more formally providing guidance.
Speaker 10: Thank you very much. Take my questions. Go right to the gap. Thanks. Thank you. Our next question comes from Danielle Brill with Raymond James.
Speaker 14: Hi guys, good morning. Thanks for the questions. I guess first is a follow up to the last one. Are you comfortable then with 2023 estimates? They think it's around 580 million for the year. And then just to get a bit more granularity on how we should be thinking about our models.
Speaker 14: What are your expected trends in average revenue per patient and discontinuation rates in 2023? Thank you. How is the monitoring process different from other
Speaker 5: I think Jeff can sort of provide more color on your second question, Daniel. Sure. I won't specifically comment obviously on 2023 consensus, but I think as I mentioned uh to crack the book historically.
Speaker 5: Consensus has, for the last many quarters, has been pretty close to, you know, our vicinity of our sales. So, you know, I believe the investment community can really model our business, so we feel good about, you know, the work that you and others are doing to help inform investors overall and continue to look at opportunities, and certainly we'll evaluate that as we go forward.
Speaker 4: Okay, Jeff, you want to on Danielle's second question? Sure. So Danielle with respect to average revenue per patient. So it's kind of a function of our patient assistance program and percentage of patients on free goods. And you know, one of the things that we've seen is a relatively consistent demand for our patient assistance program throughout 2022. And as we continue to grow the average number of patients
Speaker 4: with a consistent PAP demand, you're going to see potentially some slight increases in average revenue per patient. As PAP is going to represent a smaller percentage of the overall patients on wake X now, obviously in the first quarter there are some other factors as we talked about higher gross to net that you might not see, but as we continue to grow the average number of patients over time and we have a relatively...
Speaker 4: 50% of all patients on all treatment options by the end of 12 months tend to discontinue any of the medicines in this category. Wakeyx has traditionally, and we've seen over the past three years, being in that range. Obviously, the chronic condition when patients are out 12 plus months, you might see a small percentage of those patients fall off in any chronic condition.
Speaker 4: But I would anticipate what you've seen historical in our patient base were anticipating similar patient medication behavior moving forward.
Speaker 4: anticipate what you've seen historically in our patient base, we're anticipating similar patient medication behavior moving forward. That's helpful. Thank you.
Speaker 10: Thanks, Danielle. Thank you. At this time, I show no further questions in queue. I would now like to turn the call back to Jeff Dano for any additional or closing remarks.
Speaker 2: Thank you, Todd, and thanks to everyone for your interest in Harmony. We finished 2022 on a strong note and look to build on that momentum in 2023 as we execute on our three-pillar growth strategy. We look forward to updating you on our progress on future calls. Thank you and have a great day.
Speaker 10: This concludes today's Harmony Biosciences fourth quarter and full year 2022 Financial Results Conference call. You may now disconnect your line and have a wonderful day.
Speaker 1: And.
I'll see you next time.