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HRMY Down 10.8% in Six Months: How Should You Play the Stock?
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Shares of Harmony Biosciences (HRMY - Free Report) have lost 10.8% in the past six months compared with the industry’s decline of 9.7%. The stock has also underperformed the S&P 500 index during this timeframe.
The stock was hit last month after the company announced that it received a Refusal to File (RTF) letter from the FDA for pitolisant for the treatment of excessive daytime sleepiness (EDS) in adult patients with idiopathic hypersomnia (IH).
Image Source: Zacks Investment Research
Nonetheless, the fourth-quarter results reported on Feb. 25 were better-than-expected and shares recovered a bit.
Let’s dig deeper and understand the company’s strengths and weaknesses in detail to understand how to play the stock in such a scenario.
HRMY’s Efforts to Expand Wakix’s Label Suffer Setback
We note that pitolisant is already marketed as Wakix in the United States for the treatment of EDS or cataplexy in adult patients with narcolepsy and for the treatment of EDS in pediatric patients six years of age and older with narcolepsy.
The company was looking to expand the drug’s label for EDS in adult patients with IH. The supplemental new drug application (sNDA) for pitolisant in IH was submitted in the fourth quarter based on data from the INTUNE study and additional sources.
While the INTUNE study did not meet the primary endpoint during the four-week randomized withdrawal phase, the company decided to proceed with the submission considering the overall benefit-risk profile of pitolisant in IH based on the totality of the data and the unmet medical need in IH based on limited treatment options, among others.
Wakix Continues to Drive Growth for HRMY
Harmony Biosciences’ lead drug, Wakix, is a first-in-class therapy with a novel mechanism of action designed to enhance histamine signaling in the brain by binding to H3 receptors.
The drug continues to drive growth for the company since its initial FDA approval in 2019 for EDS in adult patients with narcolepsy and subsequent approvals for cataplexy in adult patients in 2020 and EDS in pediatric patients six years and older in 2024.
Per HRMY, Wakix is the only FDA-approved treatment for narcolepsy that is not scheduled as a controlled substance by the U.S. Drug Enforcement Administration.
HRMY expects net revenues to be between $820 million and $860 million for Wakix in 2025. The company continues to target more than a billion dollars in sales for Wakix in narcolepsy alone.
The company has also granted a license to Novugen Pharma to sell its generic product beginning January 2030, or earlier under certain circumstances.
HRMY Efforts to Strengthen Sleep/Wake Franchise
Two of the next-generation formulations, pitolisant Gastro-Resistant (pitolisant GR) and pitolisant High-Dose (pitolisant HD), are currently in development.
The company targets to initiate a phase III registrational study on pitolisant HD in the fourth quarter of 2025 to include endpoint on narcolepsy-related fatigue.
A phase III registrational trial in IH on pitolisant HD to include an endpoint on sleep inertia is planned to be initiated in the fourth quarter of 2025 (data readout anticipated in 2027).
The company is also on track to initiate a pivotal bioequivalence study on pitolisant GR in the first quarter of 2025. Data readout is anticipated in the third quarter of 2025.
HRMY Looking to Diversifying Portfolio
Harmony Biosciences is also looking to diversify its portfolio beyond the sleep/wake franchise.
In October 2023, HRMY acquired Zynerba Pharmaceuticals and added ZYN-002 to its neurobehavioral franchise. ZYN-002 is a pharmaceutically manufactured 100% synthetic, patent protected permeation enhanced cannabidiol gel.
ZYN-002 is currently in a phase III registrational trial, the RECONNECT study, designed to evaluate the safety and efficacy of ZYN002 in Fragile X Syndrome (FXS). Topline data from this study is expected in the third quarter of 2025. ZYN002 has patent protection for the treatment of FXS until 2038.
HRMY further broadened its pipeline into rare epilepsy with the acquisition of Epygenix Therapeutics, Inc.
The acquisition added EPX-100, a serotonin (5HT-2) receptor agonist, and EPX-200, a selective 5HT2C agonist, to its pipeline. EPX-100 is in phase III registrational trials for Dravet Syndrome and Lennox-Gastaut Syndrome. EPX-200 is in the pre-IND phase for developmental and epileptic encephalopathies.
HRMY’s Sound Cash Position
As of Dec. 31, 2024, Harmony Biosciences had cash, cash equivalents and investments of $576.1 million and long-term debt of $163 million. The company’s decent cash balance should allow it to fund operations and ongoing development programs.
HRMY’s Valuation and Estimates
Going by the price/sales ratio, HRMY is trading at a premium. Its shares currently trade at 2.27x forward sales, lower than its mean of 4.23x but higher than the industry’s 1.70x.
Image Source: Zacks Investment Research
The estimate for 2025 earnings per share has decreased to $2.89 from $3.16 over the past 30 days, and the same for 2025 has declined 28 cents.
Image Source: Zacks Investment Research
Stay Invested in HRMY
Harmony Biosciences’ Sleep/Wake franchise is performing well and should capture further market share in this arena, which also has other players like Jazz Pharmaceuticals (JAZZ - Free Report) and Axsome Therapeutics (AXSM - Free Report) . A potential label expansion of pitolisant in other indications should strengthen this franchise further.
The narcolepsy market in the United States had an approximate net sales value of $2.9 billion in 2023 and this market is expected to continue to grow further based on several factors. HRMY is also making good progress with its neurobehavioral and rare epilepsy candidates. The successful development of any of these candidates will boost the top line. The company believes its pipeline has the potential to deliver more than $3 billion in net revenues in the coming years.
We recommend existing shareholders to stay invested in the stock. A favorable data read out later in the year should boost shareholders’ value.
However, the recent regulatory setback is a concern and prospective investors should wait for a while before turning positive.
Image: Bigstock
HRMY Down 10.8% in Six Months: How Should You Play the Stock?
Shares of Harmony Biosciences (HRMY - Free Report) have lost 10.8% in the past six months compared with the industry’s decline of 9.7%. The stock has also underperformed the S&P 500 index during this timeframe.
The stock was hit last month after the company announced that it received a Refusal to File (RTF) letter from the FDA for pitolisant for the treatment of excessive daytime sleepiness (EDS) in adult patients with idiopathic hypersomnia (IH).
Image Source: Zacks Investment Research
Nonetheless, the fourth-quarter results reported on Feb. 25 were better-than-expected and shares recovered a bit.
Let’s dig deeper and understand the company’s strengths and weaknesses in detail to understand how to play the stock in such a scenario.
HRMY’s Efforts to Expand Wakix’s Label Suffer Setback
We note that pitolisant is already marketed as Wakix in the United States for the treatment of EDS or cataplexy in adult patients with narcolepsy and for the treatment of EDS in pediatric patients six years of age and older with narcolepsy.
The company was looking to expand the drug’s label for EDS in adult patients with IH. The supplemental new drug application (sNDA) for pitolisant in IH was submitted in the fourth quarter based on data from the INTUNE study and additional sources.
While the INTUNE study did not meet the primary endpoint during the four-week randomized withdrawal phase, the company decided to proceed with the submission considering the overall benefit-risk profile of pitolisant in IH based on the totality of the data and the unmet medical need in IH based on limited treatment options, among others.
Wakix Continues to Drive Growth for HRMY
Harmony Biosciences’ lead drug, Wakix, is a first-in-class therapy with a novel mechanism of action designed to enhance histamine signaling in the brain by binding to H3 receptors.
The drug continues to drive growth for the company since its initial FDA approval in 2019 for EDS in adult patients with narcolepsy and subsequent approvals for cataplexy in adult patients in 2020 and EDS in pediatric patients six years and older in 2024.
Per HRMY, Wakix is the only FDA-approved treatment for narcolepsy that is not scheduled as a controlled substance by the U.S. Drug Enforcement Administration.
HRMY expects net revenues to be between $820 million and $860 million for Wakix in 2025. The company continues to target more than a billion dollars in sales for Wakix in narcolepsy alone.
The company has also granted a license to Novugen Pharma to sell its generic product beginning January 2030, or earlier under certain circumstances.
HRMY Efforts to Strengthen Sleep/Wake Franchise
Two of the next-generation formulations, pitolisant Gastro-Resistant (pitolisant GR) and pitolisant High-Dose (pitolisant HD), are currently in development.
The company targets to initiate a phase III registrational study on pitolisant HD in the fourth quarter of 2025 to include endpoint on narcolepsy-related fatigue.
A phase III registrational trial in IH on pitolisant HD to include an endpoint on sleep inertia is planned to be initiated in the fourth quarter of 2025 (data readout anticipated in 2027).
The company is also on track to initiate a pivotal bioequivalence study on pitolisant GR in the first quarter of 2025. Data readout is anticipated in the third quarter of 2025.
HRMY Looking to Diversifying Portfolio
Harmony Biosciences is also looking to diversify its portfolio beyond the sleep/wake franchise.
In October 2023, HRMY acquired Zynerba Pharmaceuticals and added ZYN-002 to its neurobehavioral franchise. ZYN-002 is a pharmaceutically manufactured 100% synthetic, patent protected permeation enhanced cannabidiol gel.
ZYN-002 is currently in a phase III registrational trial, the RECONNECT study, designed to evaluate the safety and efficacy of ZYN002 in Fragile X Syndrome (FXS). Topline data from this study is expected in the third quarter of 2025. ZYN002 has patent protection for the treatment of FXS until 2038.
HRMY further broadened its pipeline into rare epilepsy with the acquisition of Epygenix Therapeutics, Inc.
The acquisition added EPX-100, a serotonin (5HT-2) receptor agonist, and EPX-200, a selective 5HT2C agonist, to its pipeline. EPX-100 is in phase III registrational trials for Dravet Syndrome and Lennox-Gastaut Syndrome. EPX-200 is in the pre-IND phase for developmental and epileptic encephalopathies.
HRMY’s Sound Cash Position
As of Dec. 31, 2024, Harmony Biosciences had cash, cash equivalents and investments of $576.1 million and long-term debt of $163 million. The company’s decent cash balance should allow it to fund operations and ongoing development programs.
HRMY’s Valuation and Estimates
Going by the price/sales ratio, HRMY is trading at a premium. Its shares currently trade at 2.27x forward sales, lower than its mean of 4.23x but higher than the industry’s 1.70x.
Image Source: Zacks Investment Research
The estimate for 2025 earnings per share has decreased to $2.89 from $3.16 over the past 30 days, and the same for 2025 has declined 28 cents.
Image Source: Zacks Investment Research
Stay Invested in HRMY
Harmony Biosciences’ Sleep/Wake franchise is performing well and should capture further market share in this arena, which also has other players like Jazz Pharmaceuticals (JAZZ - Free Report) and Axsome Therapeutics (AXSM - Free Report) . A potential label expansion of pitolisant in other indications should strengthen this franchise further.
The narcolepsy market in the United States had an approximate net sales value of $2.9 billion in 2023 and this market is expected to continue to grow further based on several factors. HRMY is also making good progress with its neurobehavioral and rare epilepsy candidates. The successful development of any of these candidates will boost the top line. The company believes its pipeline has the potential to deliver more than $3 billion in net revenues in the coming years.
We recommend existing shareholders to stay invested in the stock. A favorable data read out later in the year should boost shareholders’ value.
However, the recent regulatory setback is a concern and prospective investors should wait for a while before turning positive.
HRMY currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.