Good day, and thank you for standing by. Welcome to Harmony Biosciences Fourth Quarter 2021 Financial Update Conference Call. At this time all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. . Please be advised that today's conference may be recorded. .

I would now like to hand the conference over to your host today, Patti Bank, Investor Relations. Please go ahead..

Thank you, operator. Good morning, everyone, and thank you for joining us today as we review Harmony Biosciences fourth quarter and full-year 2021 financial performance and provide a business update.

Before we start, I encourage everyone to go to the Investors section of the Harmony Biosciences website to find the press release and slides that accompany our discussion today, including a reconciliation of our GAAP to non-GAAP financial measures.

At this stage of our life cycle, we believe non-GAAP financial results are a useful measure in understanding the underlying economics of our business. Our presenters on today's call are John Jacobs, President and CEO; Dr. Jeffrey Dayno, Chief Medical Officer; Jeffrey Dierks, Chief Commercial Officer; and Sandip Kapadia, CFO. 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. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors referenced in our SEC filings for additional details.

I would now like to turn the call over to Harmony Biosciences CEO, John Jacobs.

John?.

Thank you, Patti, and thank you, everyone, for joining our conference call today. I am proud to say that 2021 was a very successful year for Harmony as we continue to execute on our three pillar growth strategy and help patients who are living with rare neurological diseases.

As we enter this year, we are confident that we can build upon our momentum from 2021 and make 2022 our best year yet.

This year, we expect to deliver continued growth with WAKIX and to make significant progress on our vision to evolve Harmony into a leading rare orphan neurology company with a robust multiproduct portfolio and significant long-term growth potential.

Now I'd like to take a few minutes to highlight our progress on each of the three pillars of our growth strategy in the context of Q4 2021 performance. Let's start with pillar one, which is to optimize the commercial performance of WAKIX.

In Q4 '21, we delivered another solid quarter of sequential growth for WAKIX with revenues of $91.2 million, which represents a 13% quarter-on-quarter increase.

The average number of patients on WAKIX is now approximately 3,800, and we expect continued growth and performance with WAKIX this year due to strong underlying demand, positive feedback from both the health care provider and patient communities and the large and growing opportunity in narcolepsy, which is currently a $2 billion-plus market segment.

Let's move on to pillar two, which is to expand the clinical utility of WAKIX beyond Narcolepsy. During Q4 '21, we had our IND accepted for Idiopathic Hypersomnia, for which we intend to start a Phase 3 registrational trial during the first half of this year.

With IH now added as part of our strategy to expand the utility of WAKIX into new patient populations, we are proud to say that this year, we should now have three clinical programs underway with Pitolisant, including Prader-Willi Syndrome, Myotonic Dystrophy and Idiopathic Hypersomnia.

And that brings us to pillar three, acquiring new assets through business development to expand our portfolio beyond WAKIX. Over time, our intention is to develop a broad portfolio of rare orphan neurology assets and/or assets and other neurological diseases where we can leverage our existing expertise and infrastructure.

And we are seeking assets across a range of development stages, including both early and later stage with the potential to launch both during and after the WAKIX life cycle.

HBS-102 was our first example of this last year, and while I can't speak to the exact timing of bringing in additional assets, it's important to note that we are beginning this journey early in our company history so we can take the time to be thoughtful and prudent in what we acquire and flexible in the types of deals we're able to consider.

Even though we may be a newer organization, we have a deeply experienced and dedicated business development team, and our backgrounds in clinical development, regulatory affairs, and commercial launch execution give Harmony the internal capabilities to develop assets from very early stage all the way through to commercialization in the rare orphan neurology arena.

The consistent growth of WAKIX since launch has put Harmony in a strong financial position and provides us with a stable foundation to build upon for a bright future.

WAKIX is obviously at the core of our business today, and we are confident in its longevity as well as our ability to grow this unique portfolio and a product asset to become a potential $1 billion-plus franchise in the coming years via narcolepsy and additional indications.

And we believe that our strong patent suite and layers of regulatory exclusivity, which we intend to strengthen and expand, will help us optimize WAKIX potential over the long-term.

Our vision is to evolve into a leading rare neurology company with a broad portfolio of innovative assets, building upon our success and the strong performance of WAKIX to help even more patients who are living with rare neurological diseases. I would now like to turn the call over to Jeff Dierks, Harmony's Chief Commercial Officer.

Jeff?.

Thanks, John. Q4 represented another strong quarter of performance for WAKIX in line with our expectations as measured by the key performance metrics noted on Slide 4. Net revenue for the fourth quarter was $91.2 million, representing an approximate 13% increase from Q3 2021 and a 62% increase from the same quarter prior year.

Full-year 2021 net revenue was $305.4 million, which represented a 91% increase from full-year 2020. Our strong performance reflects not only the resilience and commitment of our team, but also speaks to how the overall benefit risk profile of WAKIX aligns to the significant unmet needs in the narcolepsy market.

Moving on to Slide 5 and looking at Q4 2021 key performance metrics. The average number of patients on WAKIX increased to approximately 3,800, which represents an approximate 9% increase from what we reported last quarter.

We continue to see consistent strong underlying demand for WAKIX, speaking to how the meaningfully differentiated product profile aligns well to the unmet needs of the narcolepsy market.

Consistent with previous quarters, we saw approximately two-thirds of all field sales engagements with health care professionals conducted in-person in their offices in Q4, with the other one-third of our engagements leveraging virtual technology.

We anticipate this level of access to continue into 2022 given the ongoing Omicron variant and the evolution of telemedicine as an element of health care professional practices.

Through the pandemic, we've seen many HCPs adopt telemedicine in their practice, and anticipate it will continue in the future to help offices with medication management visits and managing patients with chronic conditions such as narcolepsy.

Harmony's business model and people have been resilient, nimble, and adaptable during the pandemic to meet the needs of the narcolepsy community and the evolution of patient care during this time. And we've seen the product profile of WAKIX fit well into this environment, a non-scheduled product that can be written with refills through telemedicine.

A product that's processed through a patient hub in specialty pharmacy network that sent directly to a patient's home for delivery without a signature needed.

Through the reduced access and increase in use of telemedicine, we've continued to be effective in educating the narcolepsy treating health care professional community on the overall benefit risk profile of WAKIX and are extremely pleased with our progress to date. Market access for WAKIX continues to be strong. Over 80% of all U.S.

covered lives have favorable published policy access to WAKIX. Within the majority of managed care plans, we've seen additional positive formulary decisions for type 1 patients, building on prior decisions since the Cataplexy indication approval in October of 2020.

These decisions either reduce or eliminate generic step at its prior to wake for adult patients with Cataplexy, and these decisions also help take friction out of the managed care workflow, helping to accelerate a patient's ability to get access to WAKIX. Lastly, we continue to see broad and meaningful clinical adoption of WAKIX.

We saw further growth in new prescribers for WAKIX in the fourth quarter of 2021. The majority of these new prescribers have become repeat writer, mean they have started two or more of their narcolepsy patients on WAKIX since launch.

We continue to see broad utilization of WAKIX across the adult narcolepsy patient population with about half of new prescriptions written for WAKIX being for type 1 narcolepsy and half for type 2 narcolepsy patients.

WAKIX is being prescribed as monotherapy as well as concomitantly with all other narcolepsy treatments, which speaks to the effectiveness of WAKIX for both EDS and Cataplexy and the broad clinical utility of the product.

Now a little over two years since our launch, we continue to see strong prescriber uptake and a broadening of the health care professional prescriber opportunity.

The overall benefit profile of WAKIX and the broad clinical utility is demonstrating a broadening of the health care professional prescriber base beyond those who have prescribed the traditional narcolepsy treatment.

We are not only seeing experience narcolepsy treating health care professionals prescribe WAKIX, but also HCPs, who have been reluctant to prescribe scheduled medicine, adopting the product for their narcolepsy patients.

Health care professionals point to the novel mechanism of action, WAKIX being the only non-scheduled treatment option, no REMS program, the ability to prescribe refills and prescribe via telemedicine as reasons why some who have not prescribed other traditional medications have begun to prescribe WAKIX for their adult narcolepsy patients.

As a result of this growing opportunity, we are in the process of expanding our field sales team by approximately 10% to scale our team for this broader opportunity and ensure we can provide this larger health care professional prescriber base with the education and resources necessary for an optimal patient experience.

The work done in this expansion was thoughtful and was done to minimize disruptions and maintain as many field sales health care professional relationships as possible.

We're currently filling these positions with strong qualified candidates in the first quarter and anticipate having all of the new field team members trained and in their territories by the beginning of the second quarter. We would anticipate to start to see the benefit of this expansion in the second half of 2022 at the earliest.

This expansion gives us added confidence in our ability to continue to grow WAKIX in the future, and more importantly, help additional adult patients living with narcolepsy. In summary, I'm extremely encouraged by the continued strong performance of WAKIX in the narcolepsy market.

I'm pleased with the strong adoption of WAKIX from the narcolepsy trading health care professional community with our future growth opportunity coming from both a growing number of new prescribers as well as our existing prescriber base.

Most importantly, I'm excited about the difference that WAKIX is making in the lives of people living with narcolepsy. I'll now turn the presentation over to Dr. Jeff Dayno for an update on our clinical development program.

Jeff?.

Thanks, Jeff, and good morning, everyone. I am pleased to provide an update on our clinical development programs and pillar two of our three pillar growth strategy to expand the clinical utility of Pitolisant.

There has been a lot of hard work toward advancing our current clinical trials, and there continues to be much interest from both health care professionals and patients in these trials.

We appreciate the efforts of our clinical investigators and the participation from the patients and families of the rare disease communities that we are actively working with. Before I provide a clinical update, I first want to highlight two post-hoc analyses for WAKIX that were published in the journal CNS Drug during Q4, as shown on Slide number 6.

One publication sheds light on the time course of response to WAKIX for both excessive daytime sleepiness and Cataplexy, which occurs in the first two to three weeks after initiating treatment.

The other publication presents the results of an analysis of the pivotal data expressed as effect size and number needed to treat, or NNT, both of which are clinically relevant indicators of efficacy.

The results demonstrate large effect sizes and low NNTs for both excessive daytime sleepiness and cataplexy, which further supports the robust efficacy profile of WAKIX. Turning to Slide 7 and our clinical development programs.

I am happy to share that we are on track to initiate our Phase 3 clinical trial in adult patients with Idiopathic Hypersomnia, or IH, in the first half of this year. This trial is a double-blind, placebo-controlled, randomized withdrawal design with a target enrollment of about 200 patients.

We are preparing for up to 80 clinical trial sites in the U.S. and have identified even more sites with interest in participating. The primary objective of this Phase 3 trial is to assess the safety and efficacy of Pitolisant compared with placebo in treating excessive daytime sleepiness in adult patients with IH.

Key secondary endpoints include assessment of the symptom complex of IH, utilizing the idiopathic hypersomnia severity scale and patient global impression of change.

We are excited about this trial, which accelerates our life cycle management programs for Pitolisant into late-phase development toward a potential new indication for another patient population living with a rare neurological disease with significant unmet medical need.

With regard to our ongoing clinical development programs, it is well known that the clinical development enterprise across our industry has been impacted by the COVID pandemic, especially recently with the emergence of the Omicron variant.

This has had a specific impact on our Phase 2 clinical trials in Prader-Willi Syndrome, or PWS, and type 1 Myotonic Dystrophy, or DM1, because of the need to have access to sleep labs to do objective sleep testing.

In addition, many of the trial sites are at academic medical centers, which have either been closed down to clinical trials due to COVID or have diverted a lot of resources towards caring for COVID patients, resulting in staffing shortages for clinical trials.

To address these challenges, our clinical development teams have been working extremely hard to find solutions that would keep these trials moving forward while not compromising patient safety or the quality of the data being generated.

A few examples of the approaches we have taken are outlined on Slide 8 and include mechanisms have been put in place that allow for electronic signatures for e-consent on Informed Consent Forms. This then allows for remote screening.

Protocol amendments have been executed that allow for some of the study visits to take place remotely, utilizing telemedicine to conduct efficacy assessments and visiting nurses going to where the patients are to draw labs and do ECGs for safety assessments.

This reduces the amount of travel that patients and families would normally need to do and reduces the overall burden of the trial.

Clinical trial sites have been connected with additional or alternate sleep labs to perform objective sleep testing when their institution sleep lab is not available due to resources and personnel being prioritized for COVID patients, and additional clinical trial sites have been added to support the enrollment efforts for these programs.

We have learned a lot through this experience and our contingency efforts have had a positive impact overall, helping to keep the clinical trials up and running. With that as background, I would like to provide an update on the timelines of our two Phase 2 clinical trials, as shown on our pipeline slide, or Slide 9.

For our PWS Phase 2 proof-of-concept trial, we now anticipate top-line data in the second half of this year. For our DM1 Phase 2 trial, top-line data is now anticipated in 2023, and we will provide an update later in the year to better inform this timeline.

We remain committed to the PWS and DM1 development programs and to both of these rare disease patient communities for which there is significant unmet medical need. We look forward to updating you on our progress on future calls. Lastly, a few words on our other development programs.

With regard to pediatric narcolepsy, our partner, Bioprojet, has completed its Phase 3 trial. We will look to the data as a key input to help inform our strategy related to pediatric exclusivity and a potential pediatric narcolepsy indication.

For HBS-102, our early-stage assets, we are exploring potential clinical targets within the realm of rare neurological diseases and plan to begin preclinical proof-of-concept studies on one or two of those targets in the second half of this year. We will provide more color on this program later in the year.

Finally, I am proud of the efforts and perseverance to the Harmony team, which has enabled us to keep our trials moving forward in these rare disease patient populations. We appreciate the collaboration with our clinical investigators and the commitment of the patients and families who are participating in our PWS and DM1 clinical trials.

And I am excited about our Phase 3 trial in Idiopathic Hypersomnia, which is on track to initiate first half of this year. Thank you. And I will now turn the call over to our CFO, Sandip Kapadia, for an update on our financial performance.

Sandip?.

Thank you, Jeff, and good morning, everyone. This morning, we issued our fourth quarter 2021 earnings press release and filed our 10-K, where you'll find the details of our financial and operating results. Our fourth quarter and full-year 2021 performance is also shown on Slides 11, 12, and 13.

We once again achieved our highest quarterly net revenues to-date, posting year-over-year growth in both sales and operating income, while continuing to generate strong cash flow from operations. I'm pleased with how we closed out 2021 and the momentum we're seeing going into 2022.

For the fourth quarter of 2021, we've reported $91.2 million in net revenues for WAKIX compared to $56.3 million in the prior year quarter. This represents a growth of 62% compared to the prior year quarter. And on a full year basis, we closed 2021 with $305.4 million in net sales, a 91% increase over 2020.

We're pleased to see the continued growth in average number of patients throughout 2021, further demonstrating the unique treatment options that WAKIX offers for adult narcolepsy patients. For the fourth quarter of 2021, operating expenses were $44.8 million compared to $38.6 million in the prior year quarter.

With full year 2021 operating expenses of $162.4 million, a growth of 41% over 2020. The growth in operating expenses continues to be driven by our commercialization of WAKIX and the advancement of our pipeline programs. Operating profitability improved on both a quarterly and yearly basis.

We posted fourth quarter 2021 operating income of $28.6 million compared to $7.8 million in the prior year quarter. On a full year basis, operating income was $87.5 million, an increase of over $70 million compared to 2020.

Non-GAAP adjusted net income for the fourth quarter were $37.8 million or $0.63 per diluted share compared to $15.1 million or $0.25 per diluted share in the prior year quarter. For the full year, diluted EPS of $2.07 reflects the positive sales growth and the prudent expense management we have shown over the past year.

And as a reminder, non-GAAP adjusted net income excludes interest expense, amortization, depreciation, stock-based compensation and other non-operating items. Please see our press release for a reconciliation of this measure.

During the fourth quarter, we generated $44.6 million in cash, closing with $234.3 million in cash and cash equivalents at December 31. As we move into 2022, we will likely see the same seasonal pair dynamic that affects specialty products early in the year.

However, we expect continued full-year revenue growth with increased investment in R&D and SG&A as we continue to successfully execute on our three pillar growth strategy.

As a reminder, we have crossed the cumulative $500 million sales since launch threshold after year-end 2021, and we'll be making the final milestone payment to our partner, Bioprojet, of $40 million in Q1 of 2022.

So in conclusion, we continue to operate from a position of strength with growing revenues, prudent expense control, a solid balance sheet, and access to additional capital. As John mentioned, we believe that the WAKIX has the potential to be a $1 billion-plus franchise on narcolepsy and additional indications in the coming years.

We look forward to reinvesting our capital to fund our ongoing development program and acquiring additional assets. And with that, I'd like to turn the call back over to John for his closing remarks.

John?.

Thank you, Sandip. So in summary, as we look ahead at 2022, we expect to build on the momentum we generated last year, and we are excited about our potential to make 2022 our best year yet through continued execution on our three pillar growth strategy.

Our intent is to continue growing WAKIX sales in narcolepsy via good commercial execution and strong organic demand for this unique and meaningfully differentiated product.

To continue to move our clinical programs forward with the eventual goal of expanding the utility of WAKIX beyond narcolepsy to help bring this innovative therapy to new patient populations and to acquire new assets beyond WAKIX to expand our portfolio with the goal of evolving Harmony into a leading rare neurology company with sustainable long-term growth potential.

We look forward to updating you on our progress throughout the year. This concludes our planned remarks for today. Thank you so much for joining our call, and I will now turn things back over to the operator to facilitate questions-and-answer.

Operator, can we please open the call to questions?.

Thank you. . Our first question comes from the line of Danielle Brill with Raymond James. Your line is open. Please go ahead..

Hi guys, good morning. Thanks so much for the question.

I guess, first, I wanted to ask about how we should think about 1Q, given the deductible reset and the general seasonality? Should we be expecting growth sequentially? Or could it be flat to down versus 4Q? And then as a follow-up, just curious when you may be comfortable providing financial guidance for investors? And are you comfortable with where 2022 consensus estimates are for the year? Thank you..

Good question. Good to hear from you, Danielle. Thanks for joining the call. Jeff Dierks will handle the opening question first about the Q1 seasonality and dynamics, followed by Sandip, and then we'll address the guidance question after that.

Jeff?.

Good morning, Danielle.

So obviously, we're extremely pleased with the continued commercial performance with WAKIX, and we continue to see strong demand for the brand, and we're consistently adding average number of patients, new prescribers and growth in net sales each quarter, which we believe is speaking to the meaningfully differentiated product profile and how well it aligns with the unmet needs.

And although we're not providing guidance moving forward, what I can do is point you back to our performance in the previous six quarters. We have been able to demonstrate strong sequential growth quarter-over-quarter and a lot of the key metrics, and we do anticipate that growth moving forward.

Now to talk a little bit about some of the payer dynamics in gross to net, I'll turn it over to Sandip..

Thanks, Jeff. Hi, Danielle, in terms of Q1 -- as Jeff mentioned, I mean we continue to see good dynamics in terms of we'll see patient growth going into Q1. I think in terms of the payer dynamics, we'll experience higher gross to net deductions in the first quarter just as it is across most specialty products in general.

And we'll see, obviously a normalization of gross to nets starting in Q2 overall and then -- and probably, relatively stable for the balance of the year..

Thank you, Sandip and Jeff. And Danielle, I believe it did. We hear you correctly, your second question is related to our contemplating the potential of providing guidance.

Did we hear you correctly?.

That is correct..

Yes.

Sandip, did you want to handle that one?.

Yes. I think I'll just build upon what Jeff mentioned. I mean in terms of we've got good consistent growth overall, a good history of last two years, consistent growth that we feel is a good basis for investors to at least make forecast for the future. We expect quarter-over-quarter growth for this year.

In terms of consensus, I mean that's generally -- obviously moves around generally overall, but I think many of you have built in a similar dynamic for the balance of the year. And I think we'll have to see what Omicron -- the variant and the pandemic.

Although, obviously, we're seeing a bit more of a normalization, but we'll have to see how that plays out in the balance of the year..

Thank you, Sandip. Thank you, Danielle..

Okay, thank you..

Thank you. And our next question comes from the line of Chris Howerton with Jefferies. Your line is open. Please go ahead..

Hi, good morning. Really congratulations on the quarter, and great to hear from you all..

Hi, Chris. Thank you so much..

Absolutely, so I guess obviously, Danielle asked a big question in terms of what it's going to look like for this next year. But I guess one of the questions that I have was just with respect to the clinical development of the ongoing Phase 2 trials.

Can you tell us at all where you're at in terms of enrollment at this point, and maybe some of the pushes and pulls that you're considering in terms of changing the timing of the readouts of those trials? And then the second question that I had is more of a clarification because I think Jeff said and I just didn't hear it, you were describing a new set of physicians maybe -- and again, I think I heard this right, was that physicians that have not prescribed other narcolepsy medications for whatever reason that you're trying to tap into those physicians.

So I guess if you could just -- sorry, muted myself. Tell us a little bit more about how you identified those and how you're thinking of attracting them to prescribe WAKIX? Thank you..

Thank you, Chris. Two excellent questions. Why don't we start with the clinical question to Dr.

Dayno?.

Yes, good morning, Chris. Thanks for the question. Yes, with regards to our development programs, I think as you're all aware, most companies in our industry have been facing challenges in conducting clinical trials due to the COVID headwinds, especially more recently with the emergence of the Omicron variant.

So as these challenges surface, I think our teams and I think all sponsors quickly pivoted and put mitigation efforts in place and the contingency plans to keep the trials going. I think I spoke to that on the call some of the specifics that we did.

A lot of it was to design in flexibility into the trials, a lot of sort of the remote visits, contingency plans and trying to reduce overall burden.

So we're not providing specifics in terms of enrollment numbers, but what I will say is, based on what I've seen from the changes that we've made, amendments that have been written into the protocols, I'm confident that the plans we put in place have resulted in improved momentum in the Phase 2 trials, and I'm proud of the perseverance of the team.

So we've seen improvement in the pace of enrollment and especially on the DM1 trial, Academic Medical Centers where a lot of the sites are starting to open up more. Sleep labs are starting to open up more. So we've seen improvement in activation of sites in that program.

So overall, the trends, there's been response to the contingency efforts and confident that we'll be able to move forward, and we'll provide updates on those programs as the year goes forward..

Thank you, Dr. Dayno. And Chris, I believe your second question related to the breadth and depth of the prescriber universe that we're seeing for WAKIX. Are we adding patients from physicians who haven't prescribed some of the traditional therapies before.

Did we hear you correctly on that?.

Yes. Basically, yes..

Jeff Dierks, comment..

Good morning, Chris.

So we originally targeted about 8,000 health care professionals that have responsibility for 90% of the diagnosed patient population, and the other 10% of patients that were managed by the other physicians were thought to have been simply physicians that are refilling medicines as they only have really had written wake promoting agents.

And what we're finding from that approximate additional 1,000 physicians is that they do have a strong interest in starting new patients.

And obviously, the novelness of the product, the fact that it's not scheduled working through histamine as a new MOA, really has sort of expanded the opportunity for us to think about a larger physician universe and that is really one of the driving factors behind expanding our sales team.

We do look at patient claims data as a way to be able to identify some of those physicians, Chris, but the big thing we've seen is, these are physicians that do not prescribe stimulants, do not prescribe oxybate, that have only been prescribing wake-promoting agents and originally have thought to be only refills.

And this really represents a pretty unique untapped opportunity for us and a growing opportunity within the physician universe, and we're really excited about our ability to reach this additional group of physicians, most importantly, to help additional adult patients living with narcolepsy..

And Dr.

Dayno, did you want to comment from a medical perspective on that?.

Yes. Thanks, John. Yes, and Chris, from a medical perspective, I think that pattern would be expected in terms of as you get more experience with a product in the marketplace and sort of more physicians and especially talking to peers and colleagues and understanding the product profile.

So I think the pattern that Jeff spoke to would be sort of is not uncommon from a medical perspective and new treatments that are out in the marketplace over time..

Yes, that totally makes sense to me. And I know I'm only allowed one clarification. You can say no, if you don't want to.

But Jeff Dierks, would it be fair to assume that those physicians maybe are averse to setting up a REMS? Might that be a fair statement?.

So I think there's obviously a lot of different reasons why a physician may or may not enroll on a REMS program. But I do believe, as Dr. Dayno and Jeff always talks about the threshold to treat, WAKIX's overall benefit risk profile may just fit better into their practice as being a product that's on schedule with no REMS.

You can write a refill -- fill via telemedicine. So I think there's lots of attributes about the overall benefit risk profile for WAKIX that makes it attractive for that physician and maybe other traditional therapies may not work for that group..

Okay, all right. Well, very good. Well, again, congrats everybody and thanks for taking the multitude of questions..

Thank you, Chris..

Thank you. And our next question comes from the line of Ami Fadia with Needham. Your line is open. Please go ahead..

Hi, good morning everyone. Congrats in the good quarter,.

Hi, Ami..

Hi, good morning. I have two questions. Firstly, just with regards to the existing indication for WAKIX. You commented earlier in the year that a 300 to 400 station ad per quarter was very much doable. And with what we're seeing with Omicron, it seems like things are beginning to settle back into a normal market.

With that, could you give us any color on what your expectation would be if that trend continues? And then just with regards to the Phase 2 studies in PWS and DM, some of the changes you're making, especially using other sleep labs are adding more sites, can you talk about how you're consulting for invariability that might get introduced in these trials because of just expanding the number of sites and centers that are evaluating patients? Thanks..

Outstanding, Ami. And then though we aren't providing forward-looking guidance, I will ask Jeff Dierks just to comment on the strong underlying demand that we're experiencing for both health care providers and the patient community and our feelings about the forward look without providing guidance.

Jeff?.

Sure. Good morning, Ami, and thanks for the question. And so to reiterate what I shared earlier for Danielle's question, I think we continue to be really pleased with our strong performance.

Q4 represented our eighth consecutive quarter of growth and all the key performance metrics looking at net sales and average number of patients and unique prescribers of the product. And quite honestly, we haven't really known a time during our launch without COVID.

So it's really difficult to sort of speculate moving forward, thinking about growth, but as we shared before, we're not providing guidance, but I think we can kind of look back at the six previous quarters as a public company to be able to provide you a little bit of insight thinking forward.

We continue to see a very consistent level of access for our field sales team in terms of in-person engagements with health care professionals over the last couple of quarters into early 2022, and foot traffic for patients seems to be relatively consistent.

Offices are leveraging telemedicine very effectively, and we know how well WAKIX fits within that profile as well. And we have a lot of confidence we're going to continue to be able to grow as we have grown historically in terms of the key performance metrics without being able to really kind of give you any forward-looking guidance if that helps..

And Ami, one additional comment. It's John. Just to think about how vast the opportunity is in narcolepsy alone for any of these therapies. I mean we've got a $2 billion plus marketplace as a whole in narcolepsy that's growing.

Even as new products get added, those products continue to grow and expand that marketplace with 72,000 diagnosed patients and a total, including those 72,000, about 165,000 ought to be living with this disease. So plenty of opportunity for growth in the future.

As Jeff Dierks said, we hardly know a time without COVID in our launch, so it's hard to predict as that does start to lift. And I share your optimism and hope that it does as we move into the future what might be possible for WAKIX there, but thank you for that question.

And your second question, I believe, related to our clinical trials, controlling for variability based on the adjustments Dr. Dayno and his team have been making.

Jeff?.

Yes. Sure, John. Good morning, Ami. And a really excellent question regarding sort of the potential for variability in the trials based on the sort of mitigation efforts, and I think it comes down to a balance.

I think it's a balance of some of the efforts and the strategies we need to take to keep the clinical trials moving forward amid some of the COVID headwinds. In general, the increase in trial sites is, it's not a big increase.

We're just trying to sort of complement some of the existing sites, and it is also opening sites in areas of the country that was a bit more open, where sites -- existing sites were -- had some of the restrictions due to COVID.

With regards to the sleep labs and the need to have additional or alternate sleep labs, they are operating under standard protocols.

So you're right, there is always that risk in a lot of these mitigation efforts, even telemedicine, some of the remote visits, but with regards to the sleep labs, there are standard protocols that we would expect to minimize the variability in that data being generated. I think that the FDA has acknowledged the challenges of COVID.

They've provided the sort of insight on types of flexibility, all of which could contribute to variability, but we're taking a careful, thoughtful approach in terms of the mitigation strategies, and we'll be mindful of that in the trials. But really good question, something that we've been sort of following closely..

Thank you..

Thank you, Ami..

Thank you. And our next question comes from the line of David Amsellem with Piper Sandler. Your line is open. Please go ahead..

Hey, thanks. So just a few. So first, on the sales force expansion.

I can't say I'm surprised, but what I wanted to get a sense of is, what's the extent to which further headcount expansion could be in the cards as you work to reach a wider audience, particularly an audience that doesn't have experience with oxybate? So I wanted to get your thoughts there.

Secondly, how do you think about DTC and expansion of DTC, whether it's unbranded or brand specific? I know that going back to oxybate, there's been some -- there is heavy investment in DTC.

So how do you think about that and the need for it? And then lastly, as you think about the sales force and as it gets bigger, does that enter into your biz dev calculus regarding your willingness to acquire a commercial stage asset.

In other words, the sales force is a leverageable asset, so does that make it more likely to the extent you do something, it would be something that is market-ready or already on the market? Thanks..

Why don't we take your first question with Jeff Dierks about -- and I believe, David, when you said headcount expansion, you are referring to the sales organization, correct?.

That's correct, yes..

Go ahead, Jeff Dierks..

Yes. Thanks for the question, David. So we believe that we're skilled for the opportunity within narcolepsy with this expansion of 10%. We're going to be reaching approximately 9,000 health care professionals that are managing almost the large broad base of the diagnosed eligible adult narcolepsy patients.

So I'm not anticipating a further expansion in the future. Obviously, we'll see what transpires with our growth uptake, but I think that we're scaled for the opportunity in adult narcolepsy with this expansion..

Yes. And David, your second question along commercial lines that you have, I will refer that to Jeff as well..

Yes. So David, the question on DTC is a potential vehicle for promotion. It's not something that we're anticipating doing. As John shared, we've got an audience of 72,000 diagnosed eligible patients for WAKIX. We have about 3,800 average number of patients on product. We really very scratched the surface for the opportunity here.

We think that with additional products in the marketplace, additional investments in education, we're going to see growth in diagnosis rates. We're going to see patients come back into physician offices. We've been very selective in our investments.

I think we've really made some prudent choices in terms of our ability to reach patients and reaching health care professionals. So I don't foresee us looking at a broad-based DTC in terms of an investment as part of our promotional mix.

I think we're extremely pleased with how we've been able to continue to grow the brand and leveraging our existing infrastructure and tactics..

Yes. Thank you, Jeff. And if you refer to DTC, David, as a broad-based television commercial campaign, that's probably not an area we would pursue, right? Because it's such a narrow orphan disease. As you know, David, television goes to millions of Americans. It's quite expensive.

But we do have Jeff Dierks some direct-to-consumer efforts through the Internet, through the website. So we know when narcolepsy patients are online in the evening, for instance, and we have ads and pull-through there.

So the team has been engaging consumers, David, all along through the Internet and more effective lower cost options that have had a good return for us in this space.

So we do not anticipate, Jeff Dierks, any kind of broad-based expensive television type campaign?.

Correct. Yes. We've kind of looked at nomenclature direct-to-patient versus direct-to-consumer because we've been able to sort of identify who are eligible patients and investing those dollars in those individuals.

But yes, so direct-to-patient, we've been doing even earlier launch, but direct-to-consumer broad-based television advertising is something that just who we are and the audience that we're looking to reach, we will not look to invest..

Thanks for that question, David. Okay, David, your third question related to business development.

The expansion of about 10% of our sales team does not change our perspective on business development because we've had all along the intent to build out a broad portfolio of assets that are both early and later stage that have the potential to launch both during and after the WAKIX life cycle.

So though our first acquisition in HBS-102 last year was an early stage asset, a very early-stage asset, that does not signal our only intent, right? So that intent, I'll say again, is to have that broad-based portfolio in neurology, rare orphan neuro or in neurology, where we can leverage our expertise and infrastructure.

Yes, we do have a little bit more infrastructure now, which makes it helpful, but certainly, our intent is to acquire across that stage of development so we can shore up a robust portfolio over time, both during and after WAKIX life cycle. David, hopefully, that answer your question clearly..

Yes, that's super helpful. Thanks guys..

Thanks, David. Good to hear from you..

Thank you. And our next question comes from the line of Corinne Jenkins with Goldman Sachs. Your line is open. Please go ahead..

Hi, Corinne..

Hey, good morning.

Maybe just what portion of narcolepsy patients are currently being treated by that additional 1,000 or so health care providers that you're not going to be able to target? And I'm curious, are we talking about prescribers that have a handful of narcolepsy patients or prescribers where it is a significant portion of their practice?.

Jeff Dierks, do you want to take that question from Corinne?.

Sure and good morning, Corinne. So about 10% of the patient opportunity is going to reside within that additional 1,000 health care professionals that we're looking at.

So it is meaningful when you're thinking about growth potential for the brand, and these are going to be physicians that probably have between three and five narcolepsy patients within their care.

But again, I think that there is opportunity in terms of growth upside, understanding that these physicians are no longer simply refilling medicines, but they do have the ability to better diagnose and treat these individuals. So hopefully, those two pieces of information help with your question..

Yes, very helpful.

And then maybe on the BD front, I'm just curious how the current market backdrop is impacting conversations you're having with potential targets and if there's anything quality to highlight there?.

What I will say, Corinne, is there's been, in our opinion, a bit of a renaissance in neuroscience and in neurology in general.

And I believe even Goldman put out some perspective on that more recently, right? But we've seen our renewed interest at least in our experience in neurology in this arena, and I do think that the backdrop of the market is facilitating energy toward deals.

So very interesting opportunity, but we had a dedicated team here with our nose to the grindstone. We're starting early in our company history, as we said before.

So we can take the appropriate amount of time to be thoughtful and choiceful in what we do and to build that portfolio across a broad spectrum of opportunities that have the potential to launch both during and after the WAKIX life cycle, as we've said before. Thank you, Corinne for your questions. We appreciate it..

Great, thank you..

Thank you. Our next question comes from the line of François Brisebois with Oppenheimer. Your line is open. Please go ahead..

Hi, thanks for taking the questions. Congrats on the progress. I was wondering -- yes, of course.

I was wondering in terms of the pediatric narcolepsy on the Bioprojet front, when you say we will look to the data, I just wondered any clarification on is the data out? Have you seen it? And then just the second half of that question, maybe discuss how that can help your -- with the exclusivity, how that can help the IP situation? And just maybe remind us of the current IP situation.

Thanks..

Jeff Dayno, would you address the pediatric question?.

Yes. Sure. Good morning, Franc. Yes, with regards to Bioprojet's Phase 3 trial, so Bioprojet is the sponsor of that trial. So they will be disclosing the trial results according to their timeline and the plans they have for presenting the data as the sponsor of the trial and sort of working with that time line.

Also as our partner, as we get a look at the data and sort of work with them, then we will -- that will understanding the data in terms of -- from an FDA and a regulatory perspective, inform the strategy with regards to the potential opportunity around pediatric exclusivity and a potential pediatric indication.

So as they just completed the Phase 3 trial, we're in the process of that and looking at the data, working with them in terms of their timeline for disclosing the data as the sponsor of the trial. So we'll provide further updates this year as we get more insight on that..

Thank you, Jeff. And Franc, your second question, just reminding you about our patents. We have -- our core patents carry into 2029, and we're expecting approximately one year of patent term extension that we would get to apply to one of those core patents, which would carry us out into 2030.

WAKIX also has layers of protection from a regulatory standpoint, including orphan exclusivity for orphan indications from the time of launch of that indication and we intend to continue to strengthen that position over time. Thank you, Franc. Great to hear from you..

Thanks..

Thank you. And I'm showing no further questions, and this is going to conclude today's question-and-answer session. Also, ladies and gentlemen, this does conclude today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day..

Thank you everyone..