Good morning. My name is Ashley and I will be your conference operator today. At this time, I would like to welcome everyone to the Harmony Biosciences First Quarter 2022 Financial Update Conference Call. All participant lines have been placed on mute to prevent any background noise. After the speaker’s presentation, there will be a question-and-answer session. . Please be advised that today's conference may be recorded. . I will now turn the call over to Luis Sanay, Head of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone and thank you for joining us today as we review Harmony Biosciences first quarter 2022 financial performance and provide a business update. Before we start, I encourage everyone to go to the Investors section of our 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 better represent the underlying business performance. 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 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 our CEO, John Jacobs. John?

Thank you Luis and thank you everyone for joining our conference call today. During the first quarter we continued to execute on our three pillar growth strategy with progress across all three pillars and achieving two key milestones. We are excited about the momentum we see in the business and as you have heard me say previously, we are looking forward to making 2022 our best year yet. Now I would like to take a few minutes to highlight our progress on each of the three pillars of our growth strategy in the context of quarter one 2022 performance. Starting with pillar one which is to optimize the commercial performance of WAKIX. In Q1 2022 we delivered a strong quarter for WAKIX with revenues of $85.3 million, a 43% year-over-year increase on the quarter. We also reached an important milestone surpassing $500 million in cumulative net revenue for WAKIX since our launch in November of 2019. The first quarter performance reflects the anticipated seasonal payer dynamics which our Chief Commercial Officer Jeff Dierks will discuss in further detail later in the call. WAKIX underlying business fundamentals remain strong during the quarter with March representing our strongest month of performance in topline prescription demand and new patient starts in over a year. For the remainder of the year, we expect quarter-on-quarter growth for WAKIX due to strong underlying demand and the large and growing opportunity in narcolepsy. Let's move on to pillar two which is to expand the clinical utility of WAKIX beyond narcolepsy. This quarter we reached yet another milestone towards delivering innovative therapies that improve the health of people living with rare neurological diseases. Last week we were pleased to announce the initiation of our Phase 3 registrational trial for Pitolisant in idiopathic hypersomnia or IH. We're excited to…

Thanks John. We made significant strides in advancing our narcolepsy business in the first quarter both in net revenue and underlying business fundamentals. Net revenue for the first quarter was $85.3 million, representing approximately 43% increase from Q1 2021. In the first quarter of 2022 we surpassed $500 million of cumulative net revenue, a milestone that was achieved in less than 2.5 years since our launch. Our strong 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 aligned with a significant unmet medical needs in the narcolepsy market. Now moving on to Slide 5, I'd like to highlight a few of our underlying business fundamentals that drove our continued growth in the first quarter of 2022. The average number of patients on WAKIX increased to approximately 3,900 in the first quarter which is reflective of the anticipated once yearly seasonal dynamic of managed care reauthorization and patient assistance program reverification, typical for branded specialty products in the first quarter each year. We experienced the same seasonal payor dynamics the previous two years of our launch in the first quarter. As we're now in our third year of commercialization and the majority of our patients are continuing patients versus new patient starts, a larger percentage of our patients are subject to payor reauthorizations and reverification than in previous years. Due to our strong market access coverage, the vast majority of patients sought immediate approvals although some patients experienced delays in their prescription approvals. A smaller group of patients, mostly government insured patients did not continue on treatment due to not meeting financial criteria through a third party support. Additionally, some patient assistance program patients did not meet program eligibility requirements and no longer…

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. First off, as we announced last week we are excited about the initiation of our Phase 3 registrational trial in adult patients with idiopathic hypersomnia or IH also known as the INTUNE Study. Highlights of this trial can be found on Slide 6. The primary objective of this trial is to assess the efficacy and safety of Pitolisant compared with placebo in treating excessive daytime sleepiness or EDS in adult patients with IH as measured by the Epworth Sleepiness Scale or ESS. Key secondary endpoints include assessment of the symptom complex of IH utilizing the idiopathic hypersomnia severity scale and patient global impression of change. The trial will also assess the impact of Pitolisant on what is commonly referred to as brain fog by measuring cognitive function at baseline and after treatment with Pitolisant in patients with IH. The trial design is a double blind placebo controlled randomized withdrawal study with a target enrollment of about 200 patients. Approximately 60 to 80 sites in the U.S. will be participating and over 100 clinical trial sites have been evaluated for this trial. There's been much interest from both the patient and sleep medicine communities in investigating Pitolisant in patients with IH and we are pleased with the pace of study start up activities. We appreciate the efforts of our clinical investigators and the participation from the patients and families in the IH community that we are actively working with. We are excited about the INTUNE Study and if positive could lead to the next new potential indications for WAKIX for another rare neurological disease patient population with…

Thank you Jeff and good morning everyone. This morning we issued our first quarter 2022 press release and filed our 10-Q where you will find the details of our financial and operating results. Our first quarter performance is also shown on Slides 9, 10, and 11. We continued to show strong year-over-year revenue growth and operating income while continuing to generate cash flow from operations. I'm pleased with how we started 2022 and the momentum we're seeing and the outlook for the balance of the year. For the first quarter of 2022 we reported 85.3 million in net revenues for WAKIX compared to 59.7 million in the prior year quarter. This represents a growth of 43% and reflect the continued growing demand for WAKIX. As expected we did see the impact of seasonal payor dynamics in the early part of the first quarter resulting in higher gross to net deductions as well as the typical reduction in trade inventories during the quarter. We expect these dynamics to normalize throughout the balance of the year. During the first quarter 2022 operating expenses were 43 million compared to 34.7 million in the prior year quarter. The growth in operating expenses continues to be driven by our commercialization of WAKIX and the advancement of our pipeline programs. As a result, we had operating profitability improvement as we reported first quarter 2022 operating income of 27.6 million compared to 14.5 million in the prior year quarter. Non-GAAP adjusted net income for the first quarter was 31.1 million or $0.51 per diluted share compared to 16 million or $0.27 per diluted share in the prior year quarter. Starting in 2022 we have updated our GAAP to non-GAAP reconciliations to better align with other commercial stage biotech companies. We believe the updated measure better reflects the…

Thank you Sandip. In summary our business fundamentals continue to be strong, putting us in a good position to execute our three pillar growth strategy and make 2022 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 acquire new assets beyond WAKIX to expand our portfolio with the vision 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 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. . And we'll take our first question from the Danielle Brill with Raymond James. Please go ahead, your line is open.

Hi guys, good morning and thanks so much for the question. I just have a couple clarifying questions on the outlook for WAKIX and what you said on March being so strong. Was this driven by patients with reauthorization delays coming back on line or was this an increase in new prescriptions? And then should we be anticipating that patient adds increasing back to the historical 300 to 400 range moving forward? Thank you.

Danielle, this is John. Thank you for your question. Q1 organic demand for our product was actually very strong and stronger than what we experienced in Q4 actually. But as we predicted we have seasonal dynamics in Q1 so why don’t I hand your question over to Jeff Dierks to add a little bit more color to that. Jeff.

Good morning Danielle. So with respect to March, March represented the strongest month in terms of top line prescription demand and new patient starts. So this is new organic demand versus the reauthorization. And your second question about net patient adds moving forward, although we're not providing forward-looking guidance, we do anticipate returning to the prior quarterly growth in average patients moving forward in 2022. I hope that answers your question.

Yeah, thank you.

Okay, and we will take our next question from Chris Howerton with Jeffries. Please go ahead. Your line is open.

Hi, great. Hey, thanks so much for taking the questions. I guess similar vein of questioning from me. I'd be curious to know if you could provide some information of durability of patients on WAKIX maybe average time on drugs or maybe something around the refill rate would be useful? And then in terms of kind of the dynamics moving forward, I just -- I guess the clarification from me, Jeff you said that the headwinds were from government payers and patients not meeting assistance for payment. I guess I was wondering if you could add a little more clarification on that in terms of the relative demand that you guys just articulated?

Go ahead Jeff, you want to take that question from Chris?

Yes, sure. Thanks for the question, Chris. So with respect to durability in terms of the average time on drug, what we're seeing, and we've communicated publicly that the average discontinuation rate for products in this category at 12-months range is between 30% and 50%. And, what we're seeing, although it's still very early enrolling on our third year of commercialization is WAKIX is falling right in the middle of that range and it's consistent with what the expectations are from patients from health care professionals. So we're very pleased with how well the product is being received by the narcolepsy community. With respect to your second question on the dynamics with respect to the government pay patient, right, so one context is government pays about 15% of the overall payor mix. So just to help kind of characterize the size of that opportunity. But I'm sure as you were some government insured Medicare patients seek third party assistance programs to provide financial assistance with insurance premiums with their copay or coinsurance diagnostic test assistance. And through independent data on the annual reauthorization process, because this is an annual reauthorization process, some of the patients didn't meet those independent financial need criteria or didn't receive enough eligible funding to continue on treatment, which ultimately resulted in fewer patients on drug. Then this is anticipated every year. Obviously, it's reflective in our average number of patients on WAKIX for the first quarter, but absent that, and the Patient Assistance Reauthorization, we're very confident we would experience similar patient growth in terms of average number of patients from prior quarters. And as I kind of shared in my response to Danielle, we're extremely pleased and excited about the performance that we've seen. March was the strongest month we've had in over a year in terms of new patient starts and top line demand. And we're really optimistic about looking to return to prior quarterly growth. And we remain confident that WAKIX is that potential billion dollar plus franchise. And one thing, Chris, I also wanted to add into, we talk about average number of patients and they were about 3,900. But we exited the first quarter with approximately 4,100 active patients on WAKIX and I think exiting patients is likely a better metric for the true demand in Q1, given the anticipated seasonal payor dynamics that we experienced. Right, we have a stronger base of continuing patients and so some of those reauthorizations on refills and new patient starts get pushed into February and March. So the rate of average patient growth in the first quarter is slightly less due to these anticipated Q1 dynamics. So just to kind of give you a sense that we're really very, very pleased with our performance, we've got great momentum heading into Q2, these one-time events are behind us and we've got a great outlook for the rest of the year.

Right Jeff, and one of the best lead indicators is the organic demand for our drug was higher in Q1 than it was in Q4. So these are anticipated seasonal dynamics and the strength of our business is really robust as we move forward into 2022.

That's really helpful. And I don't know if you're able to tell us, Jeff, but what was the exit number at the end of 4Q in terms of patients -- active patients?

Yeah, Chris, we haven't disclosed that information and honestly, we haven't even looked at that data. But circle back with you and Brian, in a follow up call.

No problem. I really appreciate it. Thanks again, and great pride, everyone.

Thanks, Chris.

And we'll take our next question from Charles Duncan with Cantor Fitzgerald. Please go ahead. Your line is open.

Yeah. Good morning, John and team. Thanks for taking the question. And congrats on the commercial and development progress in the quarter. Let's see, quick question regarding yeah, we talked a little bit about the first quarter, I guess I'm wondering if you can provide guideposts for the full year 2022, given the learnings from the first quarter? And then secondarily, maybe for Jeff Dierks, sales force expansion, you mentioned second half of the year impact at earliest I guess, I'm kind of wondering why you say at earliest and how would you best measure that impact?

Sandip, Charles was asking about full year guideposts, did you want to answer that question first?

Yeah, sure. Charles, as you know we're not providing more forward-looking guidance, but what I can say about the business is we have got good strong fundamentals, Jeff will get through some of the details. We would expect, quarter-over-quarter growth for the balance of the year, both in terms of patients and net sales growth. So we expect, continued momentum that we're seeing certainly coming out of March and going forward. So hopefully that gives you a little bit of context in terms of our expectations for the year. And I think Charles, your second question was about sales force impact of our expansion. Jeff Dierks, do you want to handle that?

Yeah, absolutely. Thanks for the question, Charles, it's great to hear from you. So as we shared, we've expanded our sales team by about 10% and obviously, we completed the expansion with all the positions hired, trained, and in their territories by April 1. We're expecting to see the benefit of this expansion in the second half of the year, simply because we know it takes time to build relationships. And obviously, in sort of a COVID depressed environment, it's difficult for us to be able to reach all of our targets. So, what we've shared is about 70% of our interactions are in person. So you would anticipate it likely may take six, seven, eight calls for an individual to change a behavior from a prescriber through education. So we're simply just allowing that opportunity and we're expecting the second quarter to build those relationships, learn their geographies, really start to get out and educate those healthcare professionals with the impact of likely new prescription uptake and new patient starts in the second half of the year at the earliest if that helps.

Got it. I'm sorry. Go ahead.

No, go ahead please.

Yeah, one quick commercial follow-up and that is regarding market dynamics, given the change with regard to competitive landscape on SUNOSI company I cover has acquired that product, and they don't currently have commercial effort but do you see anything changing with regard to narcolepsy market dynamics, given SUNOSI marketing and then the positioning of WAKIX versus SUNOSI? Thanks.

Thanks for the question, Charles. In my perspective, I don't see any changes in the narcolepsy market. SUNOSI has been around since July of 2019. It's an active treatment option. We believe WAKIX is growing the branded segment of the market by offering a meaningfully differentiated product profile, the only non-scheduled treatment option available, a novel mechanism working for histamine. And so given the large undiagnosed patient population, the significant unmet need, and really a differentiated product profile for WAKIX, we believe there's plenty of room for multiple branded products. We're really excited about the strong demand that we're seeing with WAKIX in Q1 and really supports our belief in the long-term opportunity for the brand.

Cool. Thanks for taking my questions.

And Charles just wanted to welcome you aboard as a covering analyst. And thank you for joining us. It's great to have you here today.

Yeah, thanks. Excited to be here.

And we'll take our next question from David Amsellem with Piper Sandler. Please go ahead. Your line is open.

Hey, thanks. So just a couple. First, apologize if I missed this, but can you talk about generally speaking, the time it takes to get a script filled, what did that look like in the first quarter and what does that typically look like if you take away the seasonal dynamics and I guess what I'm getting at here is that, are you getting any sort of dynamics where you've got patients that are just walking away from a prescription because of previous repair hurdles, whether they're seasonal or just more ongoing? So that's the first question. And then secondly, can you just give us a refresher on the mix between type one and type two narcolepsy and actually, with idiopathic hypersomnia in mind are you even seeing any evidence of a little bit of off label use in NIH? Thanks.

David, when it when it comes to time to fill, I mean, obviously, since launch in 2019, we've seen significant improvement in the efficiency of being able to convert a prescription request into an actual patient on product. And that's to be anticipated in a rare orphan launch. And I think Jeff Dierks you may want to add some additional color to that. But we've seen since launch in 2019, a remarkable improvement in that efficiency over time.

Yeah, John, thanks Dave with your point the time to getting a prescription filled to your point, we have seen some efficiencies in there. And, the rates that we're seeing are relatively better than other industry benchmarks when you look at other rare orphan specialty pharmacy products and the time to fill. So we don't believe at the time the fill has any impact on abandonment. There is some level of abandonment with every single prescription whether it's an oral oncology product or a chronic disease, and what we're seeing in our abandonment rates is consistent with that for industry standards. With second question on mixed for type one and type two. So we're seeing about 50% of our new prescriptions coming in for type one narcolepsy, about 50% for type two, which mirrors what we're seeing in sort of clinical presentation in the physician's office. They're telling us about half of their patients are presenting with type one and type two. So WAKIX really is eligible and able to be tapping into that broad narcolepsy opportunity. We continue to hear that from healthcare professionals that WAKIX is an appropriate treatment option for all adult patients living with narcolepsy. And so the data is vetting out in there. And maybe I can, ask Dr. Dayno to kind of assist in terms of interest in IH, and maybe what we're seeing from the KOL community.

Yeah, sure. Hey, David, thanks for the question. In terms of we know that in terms of idiopathic hypersomnia, and WAKIX or Pitolisant, there's been a lot of interest from the patient community and the sleep medicine community. We do see prescription requests in terms of IH coming into the hub. But obviously, our focus now is on the Phase 3 registrational trial, and doing that study and working towards a potential new indication for IH. So we've been aware of the growing interest in Pitolisant for IH, and we are focused on the INTUNE Study and doing that registrational trial.

Okay, great. Thanks, guys.

Thank you, David.

And we'll take our next question from Corinne Jenkins with Goldman Sachs. Please go ahead. Your line is open.

Yeah. Good morning, everybody. I was just hoping that you could expand a bit on the drivers that you saw for new patient growth in March, as you spoke about the strong organic growth, if you have any visibility on what are some of the dynamics that are driving that?

Jeff, any commentary on that because we saw some really strong organic demand for the product in Q1, and you mentioned March. So we have a question about some of the drivers a little more color and context on that if you can.

Sure. Thanks for the question Corinne. I mean, what we saw is the increase in the number of in person engagements with our field sales team increased to more than 70% in March. So it was greater in March than it was in February and January. And we know, we're still kind of early in our launch per se in terms of the education given that we've been dealing with sort of this COVID headwind and our ability to access healthcare professionals. So I think that in person engagement, educating the healthcare professional and their staff was likely a driver. We started to see some increases in patient foot traffic in March following lower foot traffic that we saw in January and February. So those are really the drivers, I think this is very much an educational opportunity for us and we continue to see growth in new prescribers, as well as increasing the depth of our prescriber base, meaning patients starting a second or third patient on WAKIX with a prescription. But I think the engagement process with our representatives getting able to be back in the office and educating the entire staff, obviously, as a specialty pharmacy product, there's a healthcare professional decision. There's the nurse counseling portion of it, there's the billing coordinator and the reimbursement specialist in the office, that all need to be educated on this to make sure they have that optimal experience. So we're really pleased with the momentum that we saw Corinne in March, and I think we're going to -- we're very optimistic in terms of looking forward for the remainder of the year and continuing to make a difference in the narcolepsy community.

Jeff we're very strongly and consistently adding additional prescribers as well, new prescribers to the drug each month and each quarter on top of base who continue to prescribe and many of the vast majority of whom become repeat prescribers, correct.

Correct.

And then to the last point around kind of the whole office engagement you need in order to have a smooth process for prescriptions, is there anything you expect to change with respect to the number of visits or the amount of hand holding you need to do as you expand your sales force to target maybe primary care and psychiatrists who aren't writing as much narcolepsy prescriptions or may not have the same experiences with the specialty pharmas?

Yeah, Corinne and I think with a new product, obviously, it's a novel mechanism. There's education within every office. And you're right, if you've got someone that's familiar with a specialty pharmacy distribution model, there's likely less education necessary for that and more education on the product. But we have a great educated field sales team that's been expanded, we have a field reimbursement manager team that is out there and able to help support offices, going through the reimbursement. We have a fully staffed and dedicated patient hub. So we really have a very sophisticated white glove service that can really sort of surround that office and make sure that we have all the appropriate touch points. We know that likely there may be some additional investment in time in some of these offices, but we have the right resources to be able to do it. We've seen great success in educating existing psychiatrists and primary care doctors and we're anticipating a very similar journey with some of these new writers that we continue to bring on board in future quarters.

Great, thank you.

. And we'll take our next question from Francois Brisebois with Oppenheimer. Please go ahead.

Hey, thanks for taking the questions. So I was just wondering, just trying to get a better feel for the prevalence of IH, and it seems like the true IH patients, the 18 to 20 hours of sleep are a little more rare. But there seems to be commingling of indication. So it seems hard to, there's just a lot of patients with IH without the long sleep time. And then there's a narcolepsy type two patients that seem hard to distinguish. So I'm just trying to get a feel for how you segment this 30,000 to 40,000. diagnosed patients in IH that you discuss?

Jeff Dayno why don’t you to take that question from Francois.

Yeah, good morning Franc, thanks for the question. Yeah, so in terms of IH I think in terms of epidemiology, it starts with so the claims data and the number of diagnosed patients. Based on ICSD criteria in the range of 30,000 to 40,000 patients. Going through the literature in terms of the broader epidemiology, it's potentially up to 70,000 to 80,000 patients in the U.S. And you raise a good point, it obviously and in sleep medicine community, it's an active discussion, idiopathic hypersomnia exists along a continuum or a spectrum in terms of patients with type one narcolepsy, type two, and then IH. And I think IH as another central disorder of hypersomnolence, there is some of that overlap you're alluding to, especially within T2. However, you lean on the clinical diagnosis, and the clinicians making the diagnosis supported by sleep studies. And, they're -- ICSD too differentiate it between IH patients with long sleep time, and those without. Actually the ICSD, three criteria sort of took that away. So there is some of that difference in terms of the clinical phenotype, but ultimately it's how the clinicians make the diagnosis. Obviously, in our clinical trials, we lean on the formal diagnosis of IH for patients to be eligible. And, then they're managed in terms of by the sleep medicine community. What's also interesting is when speaking to the KOLs, they say that a lot of them have as many patients with IH per ICSD criteria in their clinics, as they do with narcolepsy. So we think it's obviously a significant opportunity for Pitolisant going forward. And as I mentioned before, we're focused on the execution of the INTUNE trial in pursuit of the indication.

Okay, thank you. That's extremely helpful. And then maybe lastly, in terms of the times for the script to be in the patient's hand. Has Harmony ever thought or has ever given out free samples for the first 30 days, the first 60 days of use or is that not something that's necessary based on it not seeming to really be a problem at this point?

Go ahead Jeff.

Yeah, Franc, thanks for the question. So most were from products do not sample the product. And again, we haven't seen any challenges with abandonment or patients that are walking away for not having a sample. I mean, this is obviously a chronic lifelong neurologic disorder where there is no cure. Patients have been waiting for over a decade for WAKIX and so the time that they're waiting for their prescription is well within industry norms. And as I was saying earlier to another question that I believe David asked versus benchmarks, we are actually more expeditious in getting patients on product and a lot of other companies. So we're really pleased about the results and the enhancements that we're making within our patient hub and SP network. And we're really excited about our ability to continue to help patients get on WAKIX.

Okay, great. That's it for me. Thanks and congrats on the progress.

Thank you Franc.

Alright, thank you and I am showing there are no further questions. This does conclude today's Harmony Bioscience first quarter 2022 financial update conference call. You may now disconnect your line and have a wonderful day.

Thank you, everyone.