Q2 2023 Harmony Biosciences Holdings Inc Earnings Call

Speaker 1: Good morning. My name is Todd and I will be your conference operator today.

At this time, I would like to welcome everyone to Harmony Biosciences' second quarter 2023 Financial Results Conference call.

All participant lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, please press star 1 on your telephone keypad. Please be advised that today's conference may be recorded.

Lastly, if you should require operator assistance, please press star zero. I will now turn the call over to Louis Cenet, Head of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us today as we review Harmony Bio Sciences, Second Quarter 2023 Financial Results and Provide a Business Update. Before we start, I encourage everyone to go to the Investor section of our website.

to find the materials that accompany our discussion today, including a reconciliation of our GAAP to non-GAAP financial measures.

At this stage of our lifecycle, we believe non-GAAP financial results better represent the underlying business performance.

Our speakers on today's call are Dr. Jeffrey Dano, President and CEO , Jeffrey Derfs, Chief Commercial Officer, Dr. Kumar Badoor, Chief Medical Officer, and Sandy Papadias, 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 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 reference in our SEC filings for additional details.

I would now like to turn the call over to Dr. Jeffrey Dano. Jeff?

Thank you, Louis, and thank you everyone for joining our conference call today and for your interest in Harmony.

Before I comment on our strong second quarter performance, which is reflective of our focus, execution, and operational excellence, I want to highlight why Harmony continues to be a growth story and outline the key elements driving our growth. We continue to drive growth in our core business for WAKIX and NARCLEPSE and based on this,

are confident that WAQX represents a $1 billion plus opportunity in adult narcolepsy alone. Our current life cycle management programs for pitollicin, notably our phase three program in idiopathic hypersomnia or IH, continue to demonstrate strong momentum. And if we are successful in IH and our other current life cycle management programs,

these indications could generate up to an additional $1 billion opportunity. Our work with our partner BioPrej on new formulations of Pitollicint is progressing with the goal to potentially extend the Pitollicint franchise with new IP out beyond 2040.

And with a profitable business and strong balance sheet, we are in a favorable position to bring in new assets through business development to build out a robust pipeline and portfolio of products.

In fact, it is the ongoing confidence in our core business and our conviction in the long-term growth potential for Harmony that is the reason behind this morning's announcement that our board of directors authorize a $125 million share repurchase program. This program reflects our confidence in the strength of the company and our commitment to the future.

For the second quarter of 2023, re-reported WAKIC's net revenue of $134.2 million, representing an increase of 25% year over year, driven by the continued underlying demand for WAKICs, topping into a large market opportunity of approximately 80,000 diagnosed patients with narcolepsy in the US. The momentum we highlighted last quarter carried into this quarter, during which time we saw the highest top line prescription demand since our first full quarter of launch in 2020.

and the strongest quarter of new patient starts in our history. This is unique, as it is not typical to see sustained growth in year four post launch for an orphan rare product.

With another strong quarter of growth behind us, we continue to be confident in Wacox being a $1 billion-plus market opportunity in adult narcolepsy alone, and Jeff Dirks will provide further insights into the reasons we remain confident in the future of this opportunity.

Our clinical teams have been very busy advancing all three programs with key catalysts coming from each of them later this year. Notably, we are on track for top-line data from our phase 3, registration in-tune study in adult patients with idiopathic hypersomnia in the fourth quarter. As a reminder, last quarter we announced completion of enrollment in this study nine months ahead of our base plan, reflective of the significant interest from patients and healthcare professionals in pitullicin as a potential treatment for IH. We are very excited about this opportunity, which, if successful, is a great opportunity.

could represent the next new indication for wake-ups. In follow-up to a positive end of phase two meeting with the FDA to discuss our Prader-Willi syndrome or PWS development program, we plan to initiate a pivotal phase three trial in patients with PWS six years of age and older in the fourth quarter.

And we are on track for top-line data from our phase two proof of concept signal detection study in type one myotonic dystrophy, also in Q4. All together, IH, PWS, and DM1 represent about 100,000 diagnosed patients in the US.

So if successful, our current life cycle management programs could contribute up to an additional $1 billion of revenue to the WAKX franchise.

In addition to our current life cycle management programs for Patolson, we are making progress on new formulations of Patolson that we are co-developing with our partner, Biopregé, with the goal to generate new IP and extend the Patolson franchise out beyond 2040.

Lastly, we've advanced our strategy in pediatric narcolepsy and plan on submitting a supplemental new drug application for pediatric narcolepsy indication in the fourth quarter.

and in addition are actively pursuing pediatric exclusivity for wake eggs.

As you can see, we have made major progress across all of our development programs, and Dr. Kumar Bedoor will provide you with more details on these later in the call. Another key component of our growth strategy is acquiring new assets through business development to expand our portfolio beyond WACIS.

To achieve this, we attend to leverage our strong financial position with approximately $430 million in cash, cash equivalents and investment securities at the end of the second quarter to acquire additional assets across a range of development stages, including both early and late stage, with the potential to launch both during and after the WAKIS life cycle.

Since taking on the CEO role at the beginning of the year, the team and I have been actively engaged in business development, evaluating a number of opportunities focused on rare orphan neurology assets and or assets and other neurological diseases where we can leverage our existing expertise and infrastructure.

This is a high priority for us as it is a key component of our long-term growth strategy. While we are disciplined in our approach, ensuring not only a strategic fit, but also appropriate valuation.

We are also working with a sense of urgency and understand the importance of having a robust portfolio in place. Overall, I am extremely proud of the outstanding progress that our team has made across every aspect of our business, which demonstrates that harmony continues to be a growth story.

I will now turn the call over to Jeffrey Dirk's our Chief Commercial Officer to provide more details on our commercial performance. Jeff? Steve Martinez.

Thanks Jeff.

The second quarter was another strong quarter for Wacox.

with continued growth and momentum in our underlying business fundamentals.

and top-line performance metrics that were the strongest we've seen since launch.

Net sales for the second quarter were $134.2 million, which represents 25% growth from the same quarter prior year.

The strong double-digit growth in net sales for Wacox in year 4 of our commercialization demonstrates the continued high interest and adoption of Wacox in the narcolepsy market.

and reinforces our long-term belief that Wacox is a billion dollar plus opportunity in adult narcolepsy alone.

I'd like to share a few key highlights from our performance in the second quarter on slide 5 and 6.

The average number of patients on wake-ups in the second quarter increased approximately 350 patients sequentially to approximately 5,450 patients. This impressive growth in average patients in the second quarter was driven by a strong performance in top-line demand and new patients starts.

In the second quarter, we saw the highest top-line prescription demand since our first full-core launch at the beginning of 2020.

And we also had the highest number of new patient starts in our history.

The growth in average patients on Wacox speaks to the continued product adoption and solid business fundamentals.

strong top line prescription demand, growth in new patient starts, along with continued patient refill behavior.

We exited the second quarter with approximately 5,600 patients on wake-ups, with strong momentum coming out of the second quarter.

We believe this metric of exiting patients helps to provide additional context for a strong performance leading into the third quarter.

strong patient interest, and continued

Continue to be key drivers of the growth in the average number of patients on Wacix.

The number of unique prescribers of WACIS increased again in the second quarter. And importantly, we continue to see the WACIS prescriber base expand beyond healthcare professionals enrolled in the Activate REMS program.

As we've shared in previous earnings calls, the meaningfully differentiated product profile of Wacix and the unique feature of being the only FDA-approved treatment for EDS and cataplexy that is not scheduled as a controlled substance offers broad clinical utility.

appeals to a broader narcolepsy healthcare professional audience and patient base.

which drives the continued growth in the depth and breadth of our prescribers.

across the nearly 9,000 narcolepsy treating healthcare professional prescriber base

We continue to see meaningful penetration and growth.

We see growth in the deaths of prescribing among the approximately 4,000 healthcare professionals enrolled in the Oxibate REMS program, an expanded breadth of new prescribers in the approximately 5,000 healthcare professionals not enrolled in the Oxibate REMS program.

The availability of a generic oxabate and the launch of a once nightly oxabate at the end of the second quarter hasn't impacted the continued growth of Wakes.

We continue to see meaningful growth in prescribing and patients on Wacox along with strong payer coverage.

Our ability to reach and educate the broad narcolepsy-trading healthcare professional universe.

and tap into the full diagnosed adult narcolepsy patient opportunity.

gives us confidence and continued growth and the long-term growth potential for wakings.

Recent market research conducted by Harmony supports our view of continued growth for wakens.

Research conducted in June of this year with approximately 70 healthcare professionals with and without experience with wake prescribing showed the following.

100% of the healthcare professionals surveyed with Wacox clinical experience stated they would prescribe the same or increase their prescribing of Wacox in the next six months.

Nearly 40% of those healthcare professionals surveyed who would not yet prescribe Wacox to date indicated the intent to prescribe Wacox in the next 6 months.

And consistent with previous waves of research, one of the highest performing drivers and differentiators for wake-ups was the unique feature as the only non-scheduled treatment option.

In summary, I continue to be excited by the strong commercial performance of Wacox in adult narcolepsy. I continue to be excited by the strong commercial performance of Wacox in adult narcolepsy.

In the second quarter, we saw the highest top line prescription demand since our first full quarter of launch in 2020, leading to the all-time high in new patient starts.

strong growth in the average number of patients on Wacox.

Continued expansion and strengthening of the WAQX prescriber base beyond the Oxabate REMS healthcare professionals.

And payer coverage remains strong even with the availability of newer versions of Oxibate.

These are tremendous achievements, and I appreciate the dedication and impact of the entire commercial team and the passion they have for our business.

This strong performance gives us confidence in the long-term growth potential for WACUS and reinforces our belief that WACUS is a billion dollar plus opportunity in adult narcolepsy.

I would like to now turn the presentation over to Kumar Badoor, our Chief Medical Officer, to provide an update on the clinical development and current lifecycle management programs for Harmony. Kumar? Thank you for having me.

Thank you, Jeff.

Thank you, Jeff. Good day, everyone.

Moving on to our clinical development pipeline to expand the clinical utility of pit holosanct towards potential new indications in patient populations living with rare urological diseases as shown on slide number seven.

Starting with our development program in IH.

We were extremely pleased to complete enrollment in our phase three registration trial in adult patients with IH, also known as the Intune Study, at an accelerated pace and nine months ahead of schedule.

The strong interest we have seen, both from the patient community and clinical investigators, resulted in this accelerated timeline, and we are now on track for top-end results in the fourth quarter of this year.

If this phase three trial is successful, it could represent the next new indication for wake-ups in other patients with IH.

Pitollascent could offer a new mechanism of action to treat patients with IH as Pitollascent works through histamine to promote wakefulness.

We view this as a significant market opportunity with approximately 40,000 patients diagnosed with IH.

In addition, this opportunity could have significant synergies with our existing commercial footprint as there is a significant overlap in the physicians who treat patients with narcolepsy and those who treat patients with IH.

For Prader-Willi syndrome, we recently had a positive end of phase two meeting with the FDA where we discussed the results from the phase two proof of concept trial and aligned on the phase three trial in patients with PWS.

We now plan to initiate a Phase III trial in patients with PWS, ages 6 and older, in the fourth quarter of this year. Moving on to myotonic dystrophy type 1, or DM1, we are on track for top-line data from the Phase II Proof-of-Concept Signal Detection Study.

in the fourth quarter of this year. In addition to our current lifecycle management programs for Pitolloscent, we continue to make progress on new formulations with our partner BioProject with the goal to generate new IP and extend the Pitolloscent franchise beyond 2040.

We will provide an update later this year on the status of these programs.

Regarding pediatric narcolepsy, we are working with BioPaget towards the submission of a supplemental new drug application to FDA for an indication in pediatric narcolepsy, which we expect to find in the fourth quarter of this year.

Regarding pediatric exclusivity, we have made progress with FDA in gaining alignment on the requirements for pediatric exclusivity for vehicles.

The Phase III study in PWS planned to be initiated in the fourth quarter is part of the requirements.

To conclude, we have made significant progress in advancing our clinical development programs with Pitolloscent and look forward to providing you with further updates later this year as we enter a catalyst-rich second half of 2023 regarding our development programs as highlighted on slide number 8.

All of our current LCM programs will reach an important milestone in the fourth quarter, and we look forward to sharing the news with you when that occurs.

I would like to take this opportunity to thank all the patients and their families who are participating in our clinical trials, as well as the clinical investigators and site personnel for their efforts and commitment in helping us to advance our clinical development programs for pitot-olophine. The patient hasOTT the clinical

I will now turn the call over to our CFO , Sandeep Kapadia, for an update on our financial performance. Sandeep?Are you online?

Thank you, Kumar, and good morning, everyone. This morning, we issued our second quarter press release and filed our 10-Q, where you'll find the details of our financial and operating results.

Our financial performance is shown on Slides 9, 10, and 11.

We're pleased to report growth across several of our key metrics, including strong revenue growth, improved profitability, and continued cash generation.

This quarter we also have several important updates with respect to the strength of our balance sheet and the additional opportunities to drive value for shareholders.

Our financial performance also gives us the confidence for the remainder of the year as we continue advancing our growth strategy.

So let me take a moment to take you through the details of our financial results.

For the second quarter of 2023, we reported net revenues of $134.2 million, compared to $107 million in the prior year quarter, representing a growth of 25%.

Performance in the quarter reflects the continued strong underlying demand for weight kicks.

In the second quarter of 2023, operating expenses were $62.3 million compared to $55 million in the prior year quarter. The higher operating expenses were primarily driven by ongoing commercialization of weight kicks and the advancement of our clinical development program. Operating income improved. The second quarter of 2023 operating income of $46.9 million compared to $33.1 million in the prior quarter, representing an increase of 42%. Non-GAHP adjusted net income for the second quarter of 2023 was $45.9 million.

or $0.76 per diluted share, compared to $34.7 million, or $0.57 per diluted share, in the prior year quarter, reflecting our strong revenue growth and prudent expense management.

We believe non-GAAP adjusted net income better reflects the underlying business performance.

Please see our press release for a reconciliation of gap to non-gap results.

During the second quarter of 2023, we ended the quarter with 429.6 million of cash, cash equivalent and investment securities on the balance sheet.

In addition, last week we entered into a new $185 million term loan facility led by JP Morgan, which further reduces our cost of capital, ensures its strong balance sheets, and provides us with greater financial flexibility. We used the net proceeds from the term loan and they...

$7 million in related fees and expenses.

The new facility has a lower interest rate, reducing our annual interest expense by approximately 6 million.

The financing is another step in the growth evolution of the company as we continue to optimize our balance sheet.

Looking ahead, for the remainder of the year, we expect continued quarter over quarter growth in revenues and average number of patients on weight gain.

We also expect to continue to invest in R&D and sGNA as we advance our clinical development program and support the commercialization of WAITX.

Overall, we remain confident in weight loss being a billion-plus opportunity in adult narcolepsy.

with the potential to contribute up to an additional billion if approved in idiopathic hypersomnia and other current life cycle management programs.

As you heard from Jeff, given our confidence in our core business and our conviction in the long-term growth potential of the company, this morning we announced that the Board authorized a $125 million share repurchase program.

Our strong balance sheet and cash generation allows us to be opportunistically return capital to shareholders, while still maintaining sufficient capital to advance our growth strategy.

In conclusion, we are very pleased with our strong financial performance and remain well positioned to continue growth.

And with that, I'd like to turn the call back to Jeff for his closing remarks. Jeff? Jeff, are you there?

Thank you, Sandeep. And thank you, Jeff and Kumar.

In summary, Harmony continues to be a growth story and we are making significant progress on advancing our growth strategy.

We will remain focused on growing our core business and helping even more adult patients living with narcolepsy with wake-ups.

Completing our Phase III registrational trial in idiopathic hypersomnia and delivering top-line data in the fourth quarter.

initiating our phase three pivotal trial in PWS in Q4.

Working with our partner BioPreG on new formulations to extend the Pitullicin franchise to help even more patients living with rare neurological diseases.

Delivering on our long-term growth strategy by acquiring new assets to build out a robust pipeline for which we are well positioned to execute on given our strong financial position.

and strategically deploying capital to maximize shareholder value.

This concludes our plan 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. Operator, can you please open the call to questions?

Thank you. 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 cue, you may do so by pressing star 2.

We remind you to please pick up your handset and please limit yourself to one question and one follow-up question.

We'll take our first question from Danielle Brill with Raymond James.

Hey guys, this is Alex on for Danielle. Thanks for taking our question. Just wondering if we could dive a little bit more into the 2Q wake X dynamics. Juggling the numbers a bit in a normal quarter, I think we would have expected a bit higher revenue than we saw considering the strong net patient ads. So firstly, what was the impact on the lower inventory purchasing this quarter on a quantitative basis?

wondering if you could share a little bit more color on the dynamics of potential impacts of gross net compliance and whether what we're seeing is patients were added late in the quarter. Thanks so much.

Sure, Alex. Good morning, Jeff. So I'll ask Jeff to comment on some of those two dynamics and that's on Deepak and also with Prosthanet to provide some color on that.

So Alex, what I would say with respect to starting with patient medication behavior compliance, discontinuation rate, persistency, it was relatively consistent with what we've seen in the previous quarters. We've got really strong patient feedback in terms of their satisfaction on the product and we continue to see a broadening of our prescriber base.

When you asked a question about trade inventory, I'll turn that over to Sandeep to talk a little bit about that and the implications on revenue. Yeah, sure, I mean, thanks Jeff. Trade inventory, as I mentioned, was down about a week compared to the beginning of the second quarter, so that gives you an estimate of at least the impact we were seeing on the top line.

But I think importantly, as Jeff mentioned, we've seen good, strong underlying demand. It was one of the strongest quarters in terms of top line demand. And what we've also seen, what I would also say is in the month of July , we've seen a partial recovery of that. So again, consistent overall with what we would typically expect.

And I think a question regarding grossed in that, really nothing to report there, except we did see what we expected. Generally, you see an improvement in the second quarter from the first quarter, and that's exactly what we saw. There was nothing there. It was primarily the impact during the quarter was really around trade inventories. And like I said, it's about a week.

Yes, so I think Alex, yeah, to summarize, really, you know, strong patient demand and as we mentioned, our strongest sort of top line patient demand since our first full quarter of launch and really just impacting the timing of inventory is really what you're seeing.

Thanks so much for the color. Sure.

Thanks so much for the color. Sure.

Thank you. I'm David Amsalem with Piper Sandler. Please go ahead.

Hey, thanks. So, just got a couple. So, first on the buyback, can you talk about how you're thinking about capital deployment beyond just the $125 million here? In other words, is this something that – buybacks is something that you may –

revisit down the road and is that going to be sort of recurring fixture of your overall capital deployment strategy? That's number one. And then number two, does this impact your ability?

to execute on a BD transaction of significant size. In other words, are you setting your sites smaller given that buybacks are something that you are now doing? And then just lastly on the new Patoliscent assets.

I know you're going to provide an update, so I've got to ask the question. Should we think of these as new molecular entities or new formulations or a bit of both? Thanks.

Sure David, good morning David. In terms of the buyback, I'll ask Sandeep to provide some perspective. But I think a high level, it provides us optionality in terms of optionality with regards to deployment of capital both in repurchase as well as gamer performance and often in wives bipedals sometimes related get hit or whatnot, I'd like to think about some GBADRAAP and and and and and and and and and and

Looking at you know business development deals and Sundeep can kind of expand on you know our thinking around that sure What I would say is look it's the natural evolution of the company right we have a very strong balance sheet Continued cash generation, so we have the opportunity to opportunistic return capital to shareholders while still maintaining I would say sufficient capital for other

important priorities, including business development. So this is not an either or or this is in addition I would say overall and you know certainly given our stock price right now it's really a great abuse of capital to execute to really drive maximum I shareholder value from that from that perspective. So hopefully that gives you a little bit of color in terms of you know we don't really see this as either or

business development as well. And to your other question, as you know, we also did a recent financing as well that we announced last week about $185 million, you know, led by very, you know, syndicated banks, which again, gives us continued access to capital if needed, you know, to

for potential business development in the future as well. So. Yeah. And David, just to reinforce in terms of business development, you know, as I've mentioned before, it continues to be a high priority for us. And, you know, obviously since I took on the CEO role at the beginning of the year, you know, we've been actively engaged, you know, the team in looking at opportunities. So, our initial feedback here is things like op or co-ed. Well, g still pretty tired.

we'll look at sort of deploying that in addition to the potential for share repurchase.

Good morning, David. Thank you for your question on the Pitollasent-based assets. We are working very closely with the BioProject on these efforts, and the formulation work is ongoing. These are Pitollasent-based assets with the potential for generating new IP.

and the potential to extend the PitoLocent franchise well beyond 2040. We do expect to provide an update later this year on these PitoLocent new PitoLocent based assets. Yeah, thanks for more. So they are, yeah, they are not new molecular entities that, you know, based new formulations, enhanced formulations of the Tulsa.

Okay, helpful. Thanks, guys. Thanks, Dave.

Thank you. We'll take our next question from Ami Fadia with Needham and Company.

Hi, this is Poonafar Amifadia. Thank you for taking my question. I guess just wanted to ask, if you can talk a little bit about where you are on your work in the lifecycle management for a bit, what needs to be completed before you're ready to give the chicken update by end of the year?

and if the new formulation that you mentioned could be used in any of the indications that you are pursuing. Sure. So, in terms of our lifecycle management updates, CUMOR can provide color in that. But I think as we shared, all of our current lifecycle management programs...

We're looking ahead to milestones later this year in the fourth quarter and advancing those leading with the IH, idiopathic hypersomnia and the Phase III Registrational trial there. Kumar can provide more color on each of those and with regards to where we are.

Good morning, thank you for the question. In terms of life cycle management, as we mentioned earlier, we have a catalyst rich second half of this year. Let's start with idiopathic hypersomnia. We are on track for top line results in idiopathic hypersomnia in the fourth quarter of this year.

On DM1, we are also on track for top-line results in the fourth quarter of this year. Just as a reminder, the DM1 study is a small signal detection proof of concept study that is not powered for statistical significance.

In terms of PWS, we had a good meeting with the FDA, the end of phase two meeting, and we aligned on the study design. We plan to initiate this study in the fourth quarter of this year. And also, we are planning to submit pediatric narcolepsy, SNDA, in the fourth quarter of this year.

this year in terms of life cycle management of

Thank you. We'll take our next question from Francois, Brazilis with Oppenheimer. All right. Thanks. Taking the question. Just a few here. So in terms of the exit numbers, is this something that we should, in terms of a metric, we should start expecting every quarter or is just a thing that we've seen in the past few quarters here? Yeah. Thanks, Frank. Good morning. Jeff Dorks, a comment on the exit number. Yeah, Frank, good morning. And so we provided exit number at the end of the first quarter, just given some of the pair seasonality and the headwinds. And I think.

just given the dynamics of the second quarter and really being able to quantify and be able to share with you the momentum coming out of Q2 and Q3 and the strength of our business. We provided it. As you know, I believe that average number of patients is the most meaningful metric that we can provide because it encapsulates all of the patient medication behavior into one number. It's new patients. It's...

refills that includes compliance, persistency, and discontinuation rates. And it most closely aligns to net revenue on a quarterly basis. So, I think from an exit number of patient perspective, it provides additional context in some quarters, but I think the number that really is most meaningful is average number of patients, Frank, and as we shared.

and are prepared to march. We saw sequential growth of approximately 350 patients from what we reported in the first quarter. We have approximately 5,450 patients on the product. And again, really tremendous results for year four of our rare orphan launch. And we're really excited about momentum that we're seeing coming into Q3.

and we're anticipating strong sequential growth through the remainder of the year and there on. And we have a lot of conviction that Wacox is going to represent a potential billion dollar plus opportunity in adult narcolepsy alone.

and weight kicks and can you just talk about maybe the evolution are you seeing more patients that are on both of the still pretty small percentage thank you. From a managed care perspective frankly continue to be extremely pleased with the favorable market access coverage for wakix. We haven't seen any changes to our formulae position with the introduction of a generic oxibate earlier this year or you know with the launch of the once nightly oxibate at the end of June . As a matter of fact we've actually seen some increases in improvement in some of the type one plans within managed care and.

Yeah, we have no knowledge of any plans or require wake-ups to be stepped through and oxibate. And more importantly, there are no plans where there's an NBC block or exclusionary decision made for wake-ups. So 100% of appropriate adult narcolepsy patients have access to wake-ups either through a positive formulary that's published or through some type of...

medical necessity or exceptions policy. With respect to wakex and oxybate, what we've seen has been relatively consistent. It's been a low double digit percentage of the wakex patients are also on an oxybate. You know, again, you're gonna see as this category evolves a little bit as you know within managed care.

There's likely going to be additional things that they're looking to do to manage the category. But in a rare orphan space with not a lot of these individuals, you don't see a lot of administrative steps with multiple products. Managed care acknowledges that this is a polypharmacy market. And so with a low percentage of wake-ex patients also on anoxibate, there's Olavatherapy Falls

We see really good access for patients on the product and we're really pleased with the strong payer coverage that really has remained unchanged even with the introduction of new products. And we believe we're really well positioned, Frank. You know, it's a differentiated product. It's the only non-scheduled treatment option and we're well positioned today as well as the evolving managed care landscape moving forward.

Great, thank you. Thanks Frank. Thank you, we'll take our next question from Greg Suvanovich with Mizzouho Security. Thanks, good morning. Congrats on the continued progress. I've got two questions. One just on how to think about the third quarter.

historically over the past several years, seeing you report in the second quarter 400 patients, and then they've kind of trickled down to 300. And I guess that does reflect a certain element of summer seasonality. So maybe Jeff Dirks, if I could just ask you kind of thoughts around.

the dynamic for the third quarter, any changes relative to what we've seen in the past. I know you've got some nice new momentum in terms of new prescription starts. So just wanted to get additional color there. And then my second question is just I was hoping to get the company's perspective on last week's Curious Patent Challenge by Scorpion Capital and kind of any

any response or any reply to that. Thanks. Sure, Greg. Good morning, Greg. Yeah. Jeff will answer the first question, and then I'll respond to your second question. Sure. So, Greg, for Q3 dynamics, I mean, I think you're thinking about Q3 the right way. We do anticipate the typical headwinds of the summer seasonality with fewer patient visits to healthcare professionals.

We've got, to your point, tremendous momentum coming out of Q2. Q2 is one of the strongest quarters in terms of top line prescription demand. We've seen in three years, highest number of new patients starts ever in our launch and adding 350 patients in year four of our commercial launch. I think it's really tremendous results.

Although we're not providing forward-looking guidance, I think you're thinking about Q3 correctly. We continue to see growth in new prescribers. We see growth in average number of patients. We do expect sequential growth for Wacox in average number of patients for the remainder of 23. And we have extreme confidence in the long-term growth opportunity for Wacox and being a potential billion dollar.

for re-examination of the patent for Waykix that was filed, I believe, on July 19th. I think, as we've said before, we're very confident in the strength of our IP. We believe strongly in terms of the enforceability and validity of the patent portfolio.

And it's our feeling, our position that the petition for reexamination is without merit. With regards to the timing of the reexamination, the PTAB has 90 days to either deny or grant the petition from the date of submission.

And the majority of times the petitions are granted, but that has no read through to the potential outcome of the reexamination by PTAB. And if the petition is granted, the reexamination is between PTAB and the patent holder. And the majority of times the patent status is off.

any challenges. That is why we have confidence in Waykix being a billion dollar plus opportunity in adult narcolepsy. And then obviously, a successful in our current life cycle management programs could also contribute an additional up to billion dollar revenue to the franchise.

Thanks very much.

Thanks very much. Thanks, Ray.

Thank you. We'll take our next question from Jason Gerberry with Bank of America.

Hey, good morning, guys. Thank you for taking my questions. First, just curious with the introduction of generic Oxabate, mindful that it's not impacting wake, but do you have any insights into what's going on? Is it expanding the market for pharmacotherapy peroxabate, taking to share from Xyrem?

or taking share from other products. And then as my follow up, I think it's to the Needham question. As you think about next gen Patolisant, I guess like the curiosity is, why develop Wacix for these following indications if the IP could be at risk towards the back end of this decade, why not prioritize?

the next-gen Patola stance so you could have visibility and sort of a product life cycle that lasts well into the 2030s. Thanks.

Good morning Jason, thanks for your question. In terms of, Jeff you want to expand in terms of the dynamics and the oxidation of the franchise and the new products? Sure. So Jason, what we're seeing and again the HICMA data is visible.

within Symphony Health claims. And it looks like it's simply just there's a churn that's exhibiting in the Oxibate marketplace. As I've shared in my prepared comments and one of my earlier responses, that we haven't seen any impact, obviously on the generic on our launch or even the early introduction of the once nightly Oxibate at the end of the second quarter on our business.

is that we've had a branded version of Oxabate available since our launch back in 2019, and we continue to see strong growth through that time period, and really strong growth in the first and second quarter this year, in average number of patients. We continue to add new prescribers, and I think...

Our ability to call on the approximate 9,000 narcolepsy treating healthcare professionals, approximately 5,000 of those are not enrolled in the Oxabay at REMS program, really provides our ability to tap into that broad diagnosed adult narcolepsy patient population. It gives us a little bit of insulation as newer forms of Oxabay come in.

Obviously, the overall benefit-risk profile of Wacix, the broad clinical utility, it appeals to a broader healthcare professional, treating audience as well as a broader patient base. So I think we have tremendous confidence in our business. There's a significant unmet medical need in here. There's a large diagnosed and even undiagnosed patient.

To answer your question on the generic oxabate, I haven't really seen it expanding the market. It's more so just a change within the oxabate vertical.

Yeah. And Jason, with regards to your second question about the IP run rate for WAKIX and the current lifecycle management programs and new formulation. So really good question. And I think what we've done today, we've generated good momentum, obviously, in our IH program and this strong momentum.

and the pace of enrollment in that program with Pitullosyn. And the same in terms of Prader-Willi syndrome in that program and where we are. But with regard to the longer term outlook, we do see the potential new formulations where we would have options potentially.

to take those development programs, obviously, with longer patent protection, longer runway, and shift some of those to the new formulations of betolacin, depending on what we see in the clinic and as those programs advance. So we see kind of optionality going forward.

for the longer-term outlook of our life-cycle management programs, while optimizing the current momentum we have now, obviously with the interest in IH and the completion of enrollment and looking forward to top-line data in the fourth quarter.

as well as interest in the Proctor-Willi syndrome program from that patient community that we've been kind of working with over a number of years now and interest in advancing into phase three at this point.

The track record on that could be a little bit more challenging versus like if you can get a reformulation out first it would seem like that would have a maybe a more competitive pathway in the market. Yeah, I mean I think that based on the new formulation programs we're working on that's a potential scenario as well.

And I think that's, we're looking at that potential sort of in the near term, along with a longer term outlook with some of the formulation work that we're doing. So we'll have more color on that as the new formulation programs.

progress later this year. Got it, thanks. Yep, thanks Jason. Thank you, we'll take our next question from Corinne Jenkins with Goldman Sachs.

Good morning. A couple from me, maybe first. You talked about the new patient growth in the corridor. What portion of these patients are coming through via the sleep specialist population versus the prescribing population you've described as not being enrolled in the OX pay rooms program? Morning, Corinne. Jeff, in terms of the patients and where are they coming from in terms of the prescriber base? Sure. Corinne, we're seeing patients come through both those that are healthcare professionals and those that are not.

There have been questions in the past looking at proportionality of what percentage of the patients reside more in the oxabay REMS enrolled doctors versus the non. What you would say is that the majority of the patients tend to be in the oxabay REMS enrolled healthcare professional audience. They tend to be more of the sleep specialists.

But there is a meaningful percentage of our new patients that are coming from that approximately 5,000 healthcare professionals outside the Oxibate REMS program. That's where we're seeing our new prescribers coming from. The depth of prescribing and the new patients are coming out of the other portion of the Oxibate REMS enrolled doctors.

Good morning, guys. First of all, congratulations on the market demand. And so, I had a question on the commercial side and then one on the pipeline. With regard to the commercial question, given our challenge in terms of projections, I guess I'm wondering when or if you're thinking about providing guidance, perhaps next year, if not yet this year. When would you be comfortable providing guidance and what would trigger that?