Good morning, my name is Katie and I'll be your conference operator today. At this time, I would like to welcome everyone to the Harmony Biosciences Second Quarter 2022 Financial Update Conference Call. All participant lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session. Please be advised that today's conference maybe recorded. I would now like to turn the call over to Luis Sanay, Head of Investor Relations. Please go ahead, sir..

Thank you, operator. Good morning everyone and thank you for joining us today as we review Harmony Biosciences second quarter 2022 financial performance and provide a business update.

Before we start, and encourage everyone to go to the Investors section of our website to find the materials that accompany our discussion today, including a reconciliation of our GAAP to non-GAAP financial measures. At this stage of our life cycle, we believe non-GAAP financial results better represent the underlying business performing.

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, 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 referenced in our SEC filings for additional details.

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

John?.

Thank you, Luis, and thank you everyone for joining our conference call today. We are excited about the momentum we saw in our business as we continue to execute on our three pillar growth strategy during the second quarter. We made good progress in the first half of this year and are looking forward to making 2022 our best year yet for Harmony.

I would now like to take a few minutes to highlight our progress on each of the three pillars of our growth strategy in the context of Q2 2022 performance, which you can see on slide three. Starting with pillar one, which is to optimize the commercial performance of WAKIX.

In Q2 ‘22 we delivered a strong quarter for WAKIX as we surpassed the $100 million mark for the first time in quarterly revenue, achieving net sales of $107 million, a 45% year-over-year increase for the quarter.

WAKIX business fundamentals remain strong with the second quarter representing our best quarter of performance in top-line prescription demand in over two years. For the remainder of the year we continue to expect quarter-on-quarter growth for WAKIX due to strong underlying demand and the significant unmet need that persists in the narcolepsy market.

Let's move on to pillar two, which is to expand the clinical utility of WAKIX beyond narcolepsy. During the quarter, we made good initial progress on our Phase III INTUNE Study for WAKIX in idiopathic hypersomnia where we were able to initiate multiple sites and have been actively enrolling patients.

In Prader-Willi we have completed enrollment in our Phase II proof-of-concept study and are on track for topline results in the fourth quarter of this year. We are excited with the continued advancement of our pipeline programs and are hopeful that these efforts if successful will lead to additional indications for WAKIX. Dr.

Jeff Dayno will provide more details on our clinical programs later in the call. And finally, pillar three. Acquiring new assets through business development to expand our portfolio beyond WAKIX.

This morning we announced a new agreement with Bioprojet, which is designed to leverage its drug discovery capabilities in combination with our proven commercial expertise in the US market to develop innovative therapeutics based on pitolisant. Bioprojet has significant scientific expertise as demonstrated by their discovery of pitolisant or WAKIX.

The agreement will enable us to pursue new therapeutics for narcolepsy based on pitolisant. If successful, these efforts could expand Harmony's franchise in narcolepsy by yielding one or more new products with the potential to launch during the WAKIX lifecycle.

Closing of the agreement is contingent on clearance under the Hart-Scott-Rodino or HSR Antitrust Improvements Act of 1976 and other customary closing conditions, which we expect to complete in the fall. We look forward to providing additional updates as we advance these efforts.

As we have said before, we began our business development efforts early in our company history so we can take the time to be thoughtful and prudent in what we acquire and flexible in the types of deals we are able to consider.

Over time, our intention is to develop a broad portfolio of rare orphan neurology assets and/or assets in other neurological diseases, where we can leverage our existing expertise and infrastructure.

To achieve this, we intend to leverage our strong and growing financial position to acquire additional assets across a range of development stages, including both early and later stage with the potential to launch both during and after WAKIX lifecycle.

The addition of HBS-102 last year and the new agreement with Bioprojet are important steps in our journey to building a diversified portfolio in neurology. And it is our intention to continue adding additional assets to further strengthen our ability to help patients and to grow our business for long-term sustainability.

Harmony is in a good position to execute on pillar three as our business fundamentals with WAKIX remains strong. We have approximately $260 million in cash, cash equivalents and investments as of Q2 and we anticipate that we will continue to generate more cash each quarter from WAKIX sales.

Overall, I'm extremely pleased with the progress on our three pillar growth strategy during Q2 and we are well positioned for the remainder of the year to continue delivering on our plans for growth. We remain confident in WAKIX being a potential $1 billion plus franchise in the coming years via narcolepsy and additional indications.

And with that as a foundation, I am truly excited about what we can achieve next at Harmony.

I would now like to turn the call over to Jeff Dierks, Harmony's Chief Commercial Officer, Jeff?.

Thanks, John. We made significant strides in advancing our narcolepsy business in the second quarter, both net revenue and underlying business fundamentals as seen on slide four. Net revenue for the second quarter was $107 million, which represents an approximate 45% increase from the same quarter previous year.

We are also pleased with the 25% growth over the first quarter demonstrating strong momentum in our business coming out of Q1.

Our solid performance since launch continues to reflect not only the resilience and commitment of our team, but also speaks to how the overall benefit risk profile of WAKIX aligns with the significant unmet need in the narcolepsy market. Moving on to slide five.

I'd like to highlight a few of our underlying business fundamentals that drove our continued growth in the second quarter of 2022. The average number of patients on WAKIX increased to approximately 4,300 in the second quarter. The growth in Q2 reinforces the strong underlying organic demand for WAKIX.

With Q2 performance building upon the momentum coming out of Q1 with respect to both topline prescription demand and new patient starts. Q2 represented the strongest quarter of topline prescription demand in over two years and new patient starts in a year. We also saw strong refill behavior in the second quarter.

We are pleased with the continued growth of WAKIX and our ability to help additional adult patients living with narcolepsy. Our strong Q2 performance with respect to net revenue and patient growth was driven by a number of factors.

We saw an increase in in-person field sales engagement with healthcare professionals and their office staff in the second quarter versus Q1 2022. Approximately 75% of all field sales engagements were in-person during the quarter.

The increase in access allowed for further education and engagement with healthcare professionals on the meaningfully differentiated profile of WAKIX and provided an opportunity for our expanded sales team to drive WAKIX growth in both new and existing prescribers.

We observed the further broadening and meaningful clinical adoption of WAKIX among narcolepsy trading healthcare professionals.

We saw further growth in new prescribers of WAKIX in the second quarter of 2022, both in writers of traditional narcolepsy treatments, as well as health care professionals who have been reluctant to prescribe the other available scheduled narcolepsy treatments.

We continue to see broad utilization of WAKIX for both Type 1 narcolepsy and Type 2 narcolepsy patients and WAKIX is been prescribed as monotherapy as well as concomitantly with all other narcolepsy treatment. The majority of WAKIX prescribers continue to become repeat writers.

I mean, they have written a prescription for WAKIX for two or more of their adult narcolepsy patients since launch. The continued growth in both the depth and breadth of our prescriber base demonstrates what we believe is a growing opportunity for WAKIX in adult narcolepsy.

We also continue to see strong and improving market access for WAKIX through the second quarter of 2022 helping to accelerate patients' access to WAKIX. And lastly, we are extremely pleased with the progress of our field sales force expansion.

We successfully hired experienced award winning representatives with established relationships to add to our existing outstanding field sales team and that all new representatives trained and active in their territories by April 1, in line with what we communicated in our previous earnings call.

As we move into the second half of 2022, we anticipate beginning to see the benefits of this expansion. The additional team effort and impact will help to partially offset the typical summer seasonality of more days out of the office for healthcare professionals and expected lower patient foot traffic due to vacations in Q3.

In summary, I'm excited about our continued strong performance. Inspired by the exceptional work of our team and proud of the different WAKIX is making in the lives of the people living with narcolepsy.

The strong performance and solid underlying business fundamentals in WAKIX affirm our confidence in WAKIX being a potential $1 billion plus franchise opportunity in narcolepsy and additional indication. I'd now like to turn the presentation over to Dr. Jeff Dayno for an update on our clinical development programs.

Jeff?.

Thank you, Jeff and good morning everyone. I will provide a brief update on pillar two of our company growth strategy to increase the clinical utility of pitolisant toward potential new indications in additional patient populations living with rare neurological diseases.

We have made significant progress in our clinical development programs, which are shown on slide six. Starting with our development program in idiopathic hypersomnia or IH, we continue to be very excited about this opportunity and are receiving a lot of interest from both patients and healthcare professionals who manage patients with IH.

After initiating our Phase III registrational trial in adult patients with IH in April, known as the INTUNE Study, we held a live face-to-face investigator meeting in early June before the Annual Sleep Conference The investigator meeting was very well attended and generated excellent momentum during the start-up phase of the trial.

The INTUNE Study is off to a good start and on track with regard to both site activations and patient enrollment. If this Phase III trial is successful, it could represent the next new indications for WAKIX in adult patients with IH. Moving on to our development program in Prader-Willi syndrome or PWS.

We completed enrollment in our Phase II proof of concept trial in patients with PWS ages 6 to 65. With this, we are on track for topline data readout from this study later this year in the fourth quarter. As a reminder, this is a proof of concept trial with the objective being signal detection in this rare patient population.

It is not powered to demonstrate statistical significance. The primary outcome is the evaluation of excessive daytime sleepiness or EDS in patients with PWS and secondary outcomes include caregiver assessment of EDS severity and Clinical Global Impression of PWS symptom severity.

The full dataset will also include other secondary outcomes of interest, including behavioral symptoms, cognitive function and hyperphagia. We look forward to sharing the topline data with you in Q4. Turning to our development program in Myotonic Dystrophy or DM.

Enrollment continues in our Phase II proof of concept study in adult patients with type one myotonic dystrophy or DM1. We have activated sites in Canada in areas where there is a large population of patients with DM1.

We anticipate top line data from this Phase II proof of concept study in 2023 and we'll provide an update on the timing of this data readout later this year. Finally, with regard to pediatric narcolepsy and a pediatric indication for WAKIX, you may recall that our partner Bioprojet completed a Phase III trial in pediatric narcolepsy patients.

Bioprojet recently submitted the data to the EMA seeking approval for a pediatric narcolepsy indication. EMA’s decision on Bioprojet's pediatric narcolepsy submission could help inform our strategy towards submitting the data to FDA.

In the meantime, we are committed to obtaining pediatric exclusivity for WAKIX and plan to submit a request for a pediatric written request or PWS later this year. We will provide an update on these activities on future calls.

To conclude, we have made significant progress in our clinical development programs as Harmony's clinical enterprise continues to grow. We are excited about the early momentum in our INTUNE Study, a Phase III registrational trial in adult patients with IH.

In addition, we look forward to top line data readout from our Phase II proof of concept trial in patients with PWS in Q4.

We continue to appreciate all the efforts of the clinical investigators and their teams who have partnered with us in conducting our clinical trials and are grateful for the patients and families who choose to participate in them. I will now turn the call over to our CFO, Sandip Kapadia for an update on our financial performance.

Sandip?.

Thank you, Jeff and good morning everyone. This morning we issued our second quarter 2022 press release and filed our 10-Q where you'll find the details of our financial and operating results. Our second quarter performance is also shown on slide seven, eight, and nine. We experienced continued strong performance in the quarter.

The year-over-year growth in both revenues and operating income were continuing to generate cash flow from operations. We're pleased with our performance in the first half of the year and the momentum we're seeing for the remainder of the year.

For the second quarter of 2022 we reported our strongest quarter-to-date with $107 million in net revenues for WAKIX compared to $73.8 million in the prior year quarter. This represents a growth of 45% and reflects the strong underlying demand for WAKIX.

In the second quarter of 2022 operating expenses were $55 million compared to $37.8 million in the prior year quarter.

The growth in operating expenses is primarily driven by our ongoing commercialization of WAKIX, our recent sales force expansion and the enrollment in our Phase II proof-of-concept studies in PWS, DM and our Phase III registrational trial in IH.

As a result of our strong top line performance we had improvements in operating profitability as we reported second quarter 2022 operating income of $33.1 million compared to $23.3 million, a 42% increase versus the prior year quarter.

Non-GAAP adjusted net income for the second quarter was $34.7 million or $0.57 per diluted share compared to $21.9 million or $0.37 per diluted share in the prior year quarter. We believe non-GAAP adjusted net income better reflects the underlying business performance. Please see our press release for a reconciliation of this measure.

During the second quarter of 2022, we generated approximately $34 million of cash from operation and ended the quarter with $258.9 million of cash, cash equivalents and investments as of June 30. As John mentioned, we're excited about our new agreement with Bioprojet.

As part of the agreement we will pay Bioprojet a $30 million upfront fee which we expect to be incurred as an expense in the third quarter of 2022 along with the potential for future milestone payments and sales royalties.

Our strong cash position provides us with the flexibility to pursue this agreement, while maintaining sufficient capital to continue to execute on our commercial clinical and business development priorities. Looking ahead, we do expect typical headwinds from summer seasonality in Q3 followed by a strong Q4.

We also expect an increase in R&D and SG&A expenses. In conclusion, our continued strong performance for the WAKIX and the resulting cash generation is enabling Harmony to make important investments in our business, while maintaining profitability and adding to our strong cash balance for business development activities to acquire additional assets.

And with that, I'd like to turn the call back to John for his closing remarks.

John?.

Thank you, Sandip. So in summary, our continued strong performance positions us well to execute on our three pillar growth strategy. Based on the first half results and demand trends we are seeing for WAKIX as we enter the second half, we're confident that 2022 can be our best year yet in company history.

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 advance our clinical programs with the goal of expanding the utility of WAKIX beyond narcolepsy to help bring this innovative therapy to new patient populations and to continue to acquire new assets beyond WAKIX to develop a broad portfolio of rare orphan neurology assets and/or assets in other neurological diseases where we can leverage our existing expertise and infrastructure.

We look forward to updating you on our progress. This concludes our planned remarks today. Thank you for joining our call and I will now turn things back over to the operator to facilitate the Q&A session. Operator, can we please open the call to questions..

Thank you. We will take our first question from Chris Howerton with Jefferies. Your line is now open..

Hey, good morning and congratulations on the progress. It's really awesome quarter. I guess two questions for me. One would be from -- I think could you describe to us the relative impact of the two different practices that you described, those traditionally prescribed a narcolepsy therapies and then those that were more hesitant to do so.

And then the second question that I have would be around the new relationship with Bioprojet. If we could just have a little more color in terms of what we can expect from that relationship and maybe how that might expand IP pass the current expected run way of around 2031..

Yeah, go ahead if you want to handle the first question on the two different physician segments..

Sure. Good morning, Chris. Thanks for the question. So when you're thinking about the two different segments, the initial audience that are the oxybate prescribers, writers of traditional scheduled medication. Our initial target was about 8,000 health care professionals and they covered about 90% of the patient opportunity.

The additional 1,000 physicians that we added to our target universe that had picked up prescribing WAKIX that were not prescribers of the other scheduled treatment, they manage about a 10% of the patient opportunity. So to give you a relative sense, it's about a 90-10 split, if that helps..

Thank you, Jeff. And then, Chris, on your second question, this deal allows us to focus on developing new innovative therapies based on pitolisant in partnership with Bioprojet with the focus on narcolepsy. And if we choose to and aligned with Bioprojet, potentially other indications that are mutually agreed upon by the parties as well.

These efforts could expand our franchise in narcolepsy by yielding one or more new products with the potential to launch during the WAKIX lifecycle should we succeed with them.

And regarding IP, Chris, what I will say and can say is, it's Harmony's policy to file patent applications alone or with our partners on all patentable inventions that strengthen our assets and it's also our policy not to discuss any pending patent applications, of course, due to competitive reasons.

So hopefully that adds a little bit of extra color, Chris..

Okay. Yeah, no, very much. I really appreciate it, John. And thanks again for taking the questions..

Thank you, Chris..

Thank you. Our next question will come from Danielle Brill with Raymond James. Your line is now open..

Hi guys, good morning. Thanks so much for the question. And my congrats on the strong quarter as well. So you mentioned that top-line prescription demand was the strongest it's been in over two years and new patient starts were the strongest in over a year.

And I think last quarter on your call you said March was the strongest month you had for new patient adds a number of years. So I'm just curious how that momentum evolved during the quarter? Did you see a similar level of demand exiting 2Q as you did entering it? I'll stop there and then I have a follow-up. Thanks..

Yeah. Jeff Dierks you want to take Danielle question on momentum..

Sure. Good morning, Danielle. Yeah, obviously, we're extremely pleased with the strength of our underlying business fundamentals. And you're correct, the Q2 growth really reinforces the underlying organic demand for WAKIX.

We built on the momentum, as you noted in March, we had a very strong quarter and I would say that the momentum leaving and exiting Q2 was as strong as coming out of Q1.

We did reference on our earnings call that the second quarter was our strongest quarter of topline prescription demand in two years and new patient starts in the year exceeding a little bit of what we saw in March. Extremely pleased with our business performance and anticipate growth moving forward in some of these key metrics..

Great, thanks. And then you mentioned I think in your prepared remarks that you expect the contribution of the new reps and the new 1000 prescriber target to partially offset the typical Q3 seasonal impact. Can you maybe elaborate a little bit more on that or quantify how we should be thinking about maybe seasonal headwinds next quarter? Thank you..

Jeff, you want to comment on the seasonality in Q3..

Yeah. Danielle, your you're exactly correct with respect to seasonality. So we're not providing forward-looking guidance certainly. But we are excited about the growth opportunities for WAKIX moving forward.

And our growth is going to reflect the typical seasonal dynamics that are consistent with every other branded specialty product in the industry that creates an ebb and flow in our performance. So as you seen, Q1 has seasonal payer dynamics, insurance resets, re-authorizations, higher gross to nets.

Second quarter tends to be stronger with the payer dynamics behind us and gross to net and trade inventory normalizing. In Q3 we do have summer seasonality, right? So there are fewer patient visits.

There is more traditional vacation time for patients health care professionals and their office staff and then usually that's followed by a stronger Q4 where more patients the start and/or refill their medicines before the end of the year when their insurance changes.

So when we talk about our field team, we do anticipate beginning to see the benefits of the expansion. And we did mentioned in our comments that we hope that that effort and impact may offset and partially offset the typical seasonal dynamics.

It will be great to have additional representatives out there building relationships, educating our health care professionals. But we do anticipate those traditional Q3 seasonal dynamics with lower patient foot traffic and more vacation out of the office..

Yeah. Thank you, Jeff. And Daniel, to just add some additional color and context to that. I would say that there is a sales force, as you know, generates demand for our product. So they're going in, they are educating medical staff and getting new writers on and reminding physicians of the benefits of WAKIX.

If you have less patients going in to fill their prescriptions due to vacation and holidays and less patient-physician interaction our reps cannot do anything to change that particular dynamic. What they're doing is a more wide share of voice, a larger share of voice out there, but that dynamic is separate from a sales reps effort.

What the reps can do is, generate additional demand over the long run and as we get into Q4. But I would not assume that the new sales force addition will do much to mitigate the typical seasonal dynamics, because those are outside of the control of what Harmony does.

It has to do with patient-physician visits, physician holidays through the summer months. And that's something we wanted to think about each year.

The normal seasonality an ebb and flow of a chronic disease business in neurology where you see this Q1 insurance resets and the gross to net pressures that every company faces in this type of a space as you enter Q1 and then that summer seasonality in Q3.

So I would just expect that normal typical type of ebb and flow -- ebb and flow to our business, but we do expect overall in the second half as a whole to see, as Jeff was saying, that impact of our sales representatives. Hopefully that adds a little extra color and context..

Danielle Brill:.

Thank you. Our next question will come from Ami Fadia with Needham. Your line is now open..

Hi, good morning. This is for Ami. Congrats on the quarter, and thanks for taking our question. Maybe two from us. Just first, I know you also kind of talked about kind of the 300 to 400 new patient adds per quarter.

I just wanted to confirm just kind of how you're thinking about the increase in new patients over the rest of the year? And then maybe seconds, kind of on PWS, can you kind of remind us of the mechanistic rationale for pitolisant and EDS hear? And just quickly like what magnitude of improvement on ESS would be considered clinically meaningful for these patients? Thank you..

Yeah. Great, great questions, and thank you for those. And number one, of course, we have not and are currently still not providing any forward-looking guidance. So we're not going to comment on that. What we did say is that we, we strongly anticipate continued growth of WAKIX due to the strong underlying demand of the product.

The numbers you quoted are historical. Looking backwards, you can see what has occurred, but we're not going to provide forward-looking guidance on it. We're confident in our ability to continue to grow this business based on the significant unmet need in narcolepsy and the demand we're seeing organically from physicians.

Jeff Dierks, any other comments on the question on momentum and prescription adds each quarter?.

I think you handle the question well, John. And again, I would just harking back to John's response to Danielle is just considering the seasonal dynamics in the second half of the year as you're thinking about our business in that ebb and flow we expect..

And then, Jeff Dayno, I think the next question was on mechanism of action. And I believe Prader-Willi you asked about specifically for Prader-Willi..

Yeah, good morning, Ethan. So in terms of the mechanistic fit of pitolisant for Prader-Willi or the reason to believe, if you will. So Prader-Willi syndrome is fundamentally a disorder of hypothalamic dysfunction where you have not just the hunger satiety switch in the hypothalamus but right next to that the sleep-wake switch.

There is also evidence of hypocretin deficiency in some patients with Prader-Willi syndrome. And as you probably know, the prototypical disorder of that hypocretin deficiency is patients with narcolepsy.

So that results in overall sleep-wake state instability, that leads to the excessive daytime sleepiness as a key symptom in patients with Prader-Willi in addition to the cardinal symptom of hyperphagia. So, that's a summary of sort of the mechanistic fit. With regards to meaningful response on EDS.

Typically we look for a two to three point improvement in the Epworth sleepiness scale and that's what we'll be looking for in terms of signal detection from the top line data..

Great, thank you..

You're welcome..

Thank you. Our next question will come from Charles Duncan with Cantor Fitzgerald. Your line is now open..

Hey, good morning, John and team. Congratulations on a really nice quarter. I’ have a couple of questions. So one commercial, one pipeline.

Regarding the commercial question, I guess, I'm wondering if Jeff can provide a little bit more color on the performance in terms of persistence or refills versus new patient starts and kind of how do you feel about that dynamic? And then, can we assume no change in pricing in terms of the impact on top line?.

Go ahead, Jeff..

Good morning, Charles. So question on performance of refills versus new patient starts. So obviously, new patient starts continue to be extremely strong. And as reported, it was the strongest quarter we've had in over a year, but we also saw strong refill behavior.

And so, when you're thinking about refilling behavior, it obviously has a reflection on the average number of patients. We've talked a lot about within this category the average discontinuation rate of drugs for the narcolepsy market range between 30% and 50% at 12 months.

And then again, you may have a smaller portion of discontinuation in year two and three for chronic medications, which is consistent across the industry.

And although we haven't shared specific discontinuation rate information with respect to WAKIX, we're extremely pleased with how the products being received, it falls well within that range, we continue to hear great feedback from healthcare professionals and patients.

So we feel really good about the outlook in terms of the refill behavior as well as what we're seeing with respect to new patient starts and adds in that momentum in the second quarter. And then with respect to pricing, we're not anticipating any pricing changes moving forward outside of the price increase that we took in January..

Very good. Second question regarding pipeline for Jeff Dayno. Jeff, congrats on getting that Phase III started in April. You mentioned that you had strong momentum in INTUNE Study in terms of site activations and patient enrollment.

I imagine it's too early to kind of quantify that, but could you provide a little bit more color in terms of the sites? And then any updated thoughts on timing to data or is that something you'll discuss later on as you gain more experience in the study?.

Yeah, good morning, Charles, and thanks for your question. Yeah, I think it is a bit early, we are in start-up mode, but we had great momentum coming out of the investigator meeting that we held in early June. I think the sites are distributed across the US targeting 60 to 80 clinical trial sites.

And with regards to our initial metrics, the metrics that we follow to track performance, we are on track and on target for both site activations, patient screening and enrollment. I think with regards to overall timeline, as you'll notice on clinicaltrials.gov, we estimate about two years to complete the trial and towards top line data readout.

We'll will provide updates as the trial advances and further progress as we move along..

Perfect. Thanks for the added color. Congrats on a good quarter..

Thank you, Charles..

Thanks, Charles..

Thank you. Our next question will come from Graig Suvannavejh with Mizuho. Your line is now open..

Hi, Greg..

Hi, John. How are you? Good morning. Thanks for taking questions..

I feel great. Good morning..

Thank you. Just maybe a couple of questions from me. Just -- I've gotten a lot of questions this morning on pricing and gross to net dynamics.

And so can you just remind us again, and you may have commented this on a previous question, but just -- could you just repeat kind of where we are in pricing, what should the expectation be for perhaps the balance of the year? And maybe into in the second quarter specifically if you could provide any color if there were any unusual gross to net true-ups that are worth mentioning? So that's my first question and I will come back with the second question..

Okay. So first on pricing. We did take a price increase in Q1 that we announced in our last earnings call. And then any other comments, Jeff Dierks or Sandip on pricing through the rest of the year..

Yeah. We usually don't comment further, but there were no pricing changes in Q2 that affected our sales number. It was all in Q1 the price increase there. But I think to your comment on growth in that.

If we didn't comment that previously you see an increase in gross to net in the first quarter, given that we provide, higher government-related discount and that tends to reverse in the second quarter.

And so what you are really seeing in the second quarter is really related to the change in gross to net and we would expect that to be relatively stable for the balance of the year, some fluctuations quarter-over-quarter, but generally, I mean those are the key factors ..

Yeah. By the second quarter you work through the insurance reset in Q1 and gross to nets normalize to Sandip’s point. So those are -- that dynamic you see moving from Q4 through Q1 into Q2, Graig..

Also, congrats on the bio Bioprojet deal, and if I could just -- if I could revisit that in terms of I guess how we could think about when you might provide us more color on what those were I will consider is lifecycle management strategies might look like or additional based formulations.

Is there a view that we'll hear more about that in terms of specific candidates this year or next year? And then my last question is, I think many of us are interested in knowing at what point the company will be in a position to start providing forward-looking guidance. And just wanted to revisit that and current thoughts. Thanks..

Great, great question, Greg. Obviously, these programs are very early in development with Bioprojet. And so, as we reach future milestones we are excited and looking forward to sharing details about that with the community.

But it's premature to comment now on any additional color or provide necessarily timing at this stage for that commentary, but as we reach key milestones in the development of those programs and the advancement of this program, we'll be excited to share with you and the rest of the investor community on that.

When it comes to guidance Sandip, did you want to comment just on when we might contemplate providing forward-looking guidance for the first time as a company..

Sure, John. Thanks. Yeah, I think generally we've -- we wanted to see how things will progressed post COVID and impact to sales force expansion and other things in order to give us enough confidence in terms of the guidance. But the natural to give guidance would be the beginning of next year.

In the meanwhile, we try to provide least enough qualitative as well as a couple of indicators that help you at least from a modeling perspective, but I think the natural point would be is start of next year..

Thanks so much. It's great to be back out on the name..

Thank you. Graig..

Thank you. Our next question will come from Corinne Jenkins with Goldman Sachs. Your line is now open..

Yeah, good morning. So we've talked a little bit about net price and gross to net dynamics. So I just want to confirm, were there any one-time sort of impacts on the gross to net basis like true ups or any other inventory things that might have impacted the top line this quarter..

Sandip, you want to take –.

Sure. I think just as we said, what we saw in the second quarter were generally just a reversal of a lot of the gross to net impact if you want to call it from first quarter, there were no major swings at least in the quarter regarding any major true ups or adjustments. What we saw is really the normal dynamic.

I think Jeff were there any sort of or anything like that that we can discuss?.

No, I think looking at Q2, the trade inventories relatively normalized for the quarter and we anticipate that to remain relatively consistent through the balance of the year..

Great. And then on the Bioprojet deal, I'm just curious because we've talked a lot about potential BD to supplement revenue durability beyond the WAKIX patent life.

And I'm curious if this is meant to be kind of instead of or as a supplement to potential BD? And then how quickly could the compound get into the clinic and how does the Harmony contribution in terms of paying for that development work?.

Look Corinne, what I'll say is the addition of HBS-102 last year and now the new agreement with Bioprojet, they are important steps in our journey to building a diversified portfolio in neurology. But there is certainly just our first steps and not intended to be our last by any stretch.

And it's our intention to continue adding additional assets to further strengthen our portfolio in rare orphan neurology and also as we've said each time we've talked about this right in neurology where we can leverage our infrastructure and expertise as a company.

So these are just one more step on what we intend to be a long and fruitful journey to build out a portfolio. We're not going to comment on timing in the clinic right now, these are early development phase. And so, what we're going to do is as we hit key milestones we'll be excited to share that with the investment community over time.

And I think Sandip can comment on the pay structure, Sandip when it comes to sharing clinical expenses Corinne was asking, how would we pay for those expenses, are we sharing those cost with Bioprojet as a partner?.

Yeah. Generally the terms are relatively similar to what we had in the prior agreement. In terms of development costs that would be rather minimal this year, so in generally, I would say, it will start picking up next year in terms of significant costs there.

We have an agreement that we would share at least the first $40 million of costs as part of the development program, 50-50 and after which we would. There is a sort of early on in this drop in cycle..

Thanks. That's helpful..

Thanks, Corinne..

Thank you. Our next question will come from David Amsellem with Piper Sandler. Your line is now open..

Hey, David..

Hi, thanks for getting to me. So two questions -- so two questions. First, on the -- a couple of -- a follow-up on the Bioprojet partnership.

Is this in any way kind of a statement on the IP situation for WAKIX? And as a corollary to that is, should we think about this as primarily a lifecycle management type of situation or you're potentially going to be looking more broadly with the idea that, yes, these are molecular entities that are based on pitolisant. So that's the first question.

Second question, I don't know if you can comment on this, but in terms of idiopathic hypersomnia, are you seeing any off-label usage? And again, I know there is sensitivity here, but is there anything that you can add in terms of what you might be seeing in that setting? Thank you..

Yeah. David. First, I mean, we remain confident in the strength of our IP and developing new therapeutics in partnership with Bioprojet is not a reflection of our current patent portfolio for WAKIX.

As we stated before, we have patents expiring in 2029 and factoring a patent term extension, and our pursuit of pediatric exclusivity for WAKIX has the potential to extend into 2031.

We're excited about the deal with Bioprojet, which allows us to focus on the development of new innovative therapeutics based on pitolisant in a way life cycle management, but also in other indications that are mutually agreed to by the parties.

And so, as these are early in development, so as we learn more through those programs in our co-development with Bioprojet we will be glad to share further thoughts on strategy and focus areas in the future on those things. And then I believe your question -- your second question was on Jeff Dierks..

On idiopathic hypersomnia, David. David, what I can tell you is, there's certainly excitement in the community. And I think Jeff Dayno can speak to this after me. Again it's limited in its use given WAKIX is a higher priced specialty product and does not have an FDA approval. So payers usually manage drugs to label.

So if you're thinking about IHS as an opportunity, it definitely an accretive opportunity to WAKIX. We're not seeing a lot, but I do think that there is a very strong interest in that. Likely it is going to speak to a future opportunity..

Yes, David, it's Jeff Dayno. Thanks for the question. I think just at a high level, as Jeff mentioned, we have seen a lot of interest from both patients and the sleep medicine community with regards to pitolisant for IH.

I think some of it relates to mechanistically primary disorder of wakefulness and looking at wake promoting agent versus other treatments with regards to consolidation of sleep and primary -- working through a mechanism as a primary CNS depressant. So I think mechanistically it offers another approach.

I think that's what's generating some of the interest. And obviously we're excited about Phase III INTUNE trial, looking at pitolisant for adult patients with IH and we will continue to provide updates on that as we advance the trial..

Okay, great..

David, to state that idiopathic hypersomnia remains a true and unique opportunity for the product. It's a unique diagnosis code, it's a diagnosis of exclusion, obviously, Harmony does not and cannot promote off label. There may be some off-label use, but we don't believe it's a high volume of off-label use.

And there is a large patient community who is already diagnosed in the 10s of thousands there who have significant unmet need. And we believe could really benefit from a non-scheduled therapeutic option like WAKIX should we succeed. So we see it as a true open and available opportunity should we have success in the clinic..

Okay. Well, thanks again..

Thank you, David. Good to hear from you..

Thank you. Our next question will come from Francois this one with Oppenheimer. Your line is now open..

Hey guys, thanks for taking my question. Just on the note on IH, can you just help us understand how the medical community feels about the diagnosis? Is it difficult to differentiate even if it's by exclusion, just how that works since now there are products that are approved for both narcolepsy and IH..

Go ahead Dr. Dayno..

Yeah, Frank. Good morning, thanks for the question. So I think this IH is a very active area in this Sleep Medicine community, a lot of, obviously, discussion about it and new learnings with new treatment options that are out there. So I think that it evolves along sort of the spectrum in terms of Type 1 narcolepsy, Type 2 narcolepsy and then IH.

But as John alluded to, ultimately it is a diagnosis of exclusion rolling out patients with narcolepsy and other disorders that result in excessive daytime sleepiness, mainly related to sleep disorder breathing and other conditions. So I think there is more focus on it.

There is more awareness and going through that diagnostic procedure with regard to ultimately landing on a diagnosis of IH. So I think that’s due to the current state of affairs in the medical community and we continue to follow that closely and it's also driving a lot of interest in our Phase III trial in IH.

And we'll look forward to progressing that clinical trial..

Okay, great. And if I sneak in a last one here.

Here you talked about PWS and expectations may be and how was not necessarily powered for stat sig or proof of concept and what we would like to see for clinical meaningfulness, but I was just wondering on the DM front, is that powered for stat sig or is that a similar mindset as PWS?.

That is a similar mindset, our Phase II proof of concept in myotonic dystrophy. We are taking a similar approach, so it is a similar approach as a proof of concept and we're looking at -- we like to, because has never been studied in patients with DM1.

So we feel it's prudent to generate data sooner rather than later, signal detection and get to sort of a decision point with regards to a further development program.

So short answer, it is a very similar approach, Phase 2 proof of concept and we are building some momentum, we've opened sites in Canada, Frank, we're in Quebec region where there's a large founders population of patients with DM1.

And as we’ve said, we are looking to top line data readout in 2023 next year and we'll provide more color on that timing later this year..

Great. Well, thank you very much and congrats on the quarter guys..

Thanks, Frank..

Thank you. I am showing no further questions. This does conclude today's Harmony Biosciences Second Quarter 2022 financial update conference call. You may now disconnect your line and have a wonderful day..

Thank you, everyone..