Harmony Biosciences (HRMY) Q2 2023 Earnings Call Transcript

Harmony Biosciences (HRMY 1.35%)
Q2 2023 Earnings Call
Aug 01, 2023, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning. My name is Todd, and I will be your conference operator today. At this time, I would like to welcome everyone to Harmony Biosciences second quarter 2023 financial results conference call. [Operator instructions] Please be advised that today's conference may be recorded.

[Operator instructions] I will now turn the call over to Luis Sanay, head of investor relations. Please go ahead. 

Luis Sanay -- Head of Investor Relations

Thank you, operator. Good morning, everyone, and thank you for joining us today as we review Harmony Biosciences second quarter 2023 financial results and provide a business update. Before we start, I 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 performance.

Our speakers on today's call are Dr. Jeffrey Dayno, president and CEO; Jeffrey Dierks, chief commercial officer; Dr. Kumar Budur, chief medical 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. 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 Dr. Jeffrey Dayno. Jeff?

Jeff Dayno -- President and Chief Executive Officer

Thank you, Luis, and thank you, everyone, for joining our conference call today and for your interest in Harmony. Before I comment on our strong second quarter performance, which is reflective of our focus, execution, and operational excellence, I want to highlight why Harmony continues to be a growth story and outline the key elements driving our growth. We continue to drive growth in our core business for Wakix in narcolepsy and based on this are confident that Wakix represents a billion-plus opportunity in adult narcolepsy alone. Our current life cycle management programs for pitolisant, notably our Phase 3 program in idiopathic hypersomnia, or IH, continue to demonstrate strong momentum.

And if we are successful in IH and our other current life cycle management programs, these indications could generate up to an additional billion opportunity. Our work with our partner, Bioprojet, on new formulations of pitolisant is progressing with the goal to potentially extend the pitolisant franchise with new IP out beyond 2040. And with a profitable business and strong balance sheet, we are in a favorable position to bring in new assets through business development to build out a robust pipeline and portfolio of products. In fact, it is the ongoing confidence in our core business and our conviction in the long-term growth potential for Harmony that is the reason behind this morning's announcement that our board of directors authorized a $125 million share repurchase program.

This program reflects our confidence in the strength of the company and our commitment to deploy capital to maximize shareholder value. Starting with our core business, our strong commercial performance is a result of the unique and meaningfully differentiated product profile of Wakix in the proven excellence of our commercial organization. For the second quarter of 2023, we reported Wakix net revenue of $134.2 million, representing an increase of 25% year over year, driven by the continued underlying demand for Wakix, tapping into a large market opportunity of approximately 80,000 diagnosed patients with narcolepsy in the U.S. The momentum we highlighted last quarter carried into this quarter, during which time we saw the highest top-line prescription demand since our first full quarter of launch in 2020 and the strongest quarter of new patient starts in our history.

This is unique as it is not typical to see sustained growth in year four post launch for an orphan rare product. With another strong quarter of growth behind us, we continue to be confident in Wakix being a billion-plus market opportunity in adult narcolepsy alone. And Jeff Dierks will provide further insights into the reasons we remain confident in the future of this opportunity. In addition to our strong commercial performance in Q2, we are also extremely pleased with the progress that we've made across all of our current pitolisant life cycle management programs.

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

In follow-up to a positive end of Phase 2 meeting with the FDA to discuss our Prader-Willi syndrome, or PWS, development program, we plan to initiate a pivotal Phase 3 trial in patients with PWS six years of age and older in the fourth quarter. And we are on track for top-line data from our Phase 2 proof-of-concept signal detection study in type 1 myotonic dystrophy also in Q4. Altogether IH, PWS, and DM1 represent about 100,000 diagnosed patients in the U.S. So if successful, our current life cycle management programs could contribute up to an additional $1 billion of revenue to the Wakix franchise.

In addition to our current life cycle management programs for pitolisant, we are making progress on new formulations of pitolisant that we are co-developing with our partner, Bioprojet, with the goal to generate new IP and extend the pitolisant franchise out beyond 2040. Lastly, we've advanced our strategy in pediatric narcolepsy and plan on submitting a supplemental new drug application for a pediatric narcolepsy indication in the fourth quarter, and in addition, are actively pursuing pediatric exclusivity for Wakix. As you can see, we have made major progress across all of our development programs and Dr. Kumar Budur will provide you with more details on these later in the call.

Another key component of our growth strategy is acquiring new assets through business development to expand our portfolio beyond Wakix. To achieve this, we intend to leverage our strong financial position with approximately $430 million in cash, cash equivalents, and investment securities at the end of the second quarter to acquire additional assets across a range of development stages, including both early and late stage. With the potential to launch both during and after the Wakix life cycle. Since taking on the CEO role at the beginning of the year, the team and I have been actively engaged in business development, evaluating a number of opportunities focused on rare orphan neurology assets and/or assets in other neurological diseases where we can leverage our existing expertise and Infrastructure.

This is a high priority for us as it is a key component of our long-term growth strategy, but we are disciplined in our approach, ensuring not only a strategic fit but also appropriate valuation. We are also working with a sense of urgency and understand the importance of having a robust portfolio in place. Overall, I am extremely proud of the outstanding progress that our team has made across every aspect of our business, which demonstrates that Harmony continues to be a growth story. I will now turn the call over to Jeffrey Dierks, our chief commercial officer, to provide more details on our commercial performance.

Jeff?

Jeff Dierks -- Chief Commercial Officer

Thanks, Jeff. The second quarter was another strong quarter for Wakix with continued growth and momentum in our underlying business fundamentals and top-line performance metrics that were the strongest we've seen since launch. Net sales for the second quarter were $134.2 million, which represents 25% growth from the same quarter prior year. The strong double-digit growth in net sales for Wakix in year four of our commercialization demonstrates the continued high interest and adoption of Wakix for the narcolepsy market and reinforces our long-term belief that Wakix is a billion-plus opportunity in adult narcolepsy alone.

I'd like to share a few key highlights from our performance in the second quarter on Slide 5 and 6. The average number of patients on Wakix in the second quarter increased approximately 350 patients sequentially through approximately 5,450 patients. This impressive growth in average patients in the second quarter was driven by a strong performance in top-line demand and new patient starts. In the second quarter, we saw the highest top-line prescription demand since our first full quarter of launch at the beginning of 2020, and we also had the highest number of new patient starts in our history.

The growth in average patients on Wakix speaks to the continued product adoption and solid business fundamentals, strong top-line prescription demand, growth in new patient starts, along with continued patient refill behavior. We exited the second quarter with approximately 5,600 patients on Wakix with strong momentum coming out of the second quarter. We believe this metric of exiting patients helps to provide additional context to our strong performance leading into the third quarter. Strong patient interest and continued prescriber adoption continue to be key drivers of the growth in the average number of patients on Wakix.

The number of unique prescribers of Wakix increased again in the second quarter. And importantly, we continue to see the Wakix prescriber base expand beyond healthcare professionals enrolled in the oxybate REMS program. As we've shared in previous earnings calls, the meaningfully differentiated product profile of Wakix and the unique feature of being the only FDA-approved treatment for EDS and cataplexy that is not scheduled as a controlled substance offers broad clinical utility and appeals to a broader narcolepsy healthcare professional audience and patient base, which drives the continued growth in the depth and breadth of our prescribers. Across the nearly 9,000 narcolepsy-treating healthcare professional prescriber base, we continue to see meaningful penetration and growth.

We see growth in the depth of prescribing among the approximately 4,000 healthcare professionals enrolled in the oxybate REMS program, an expanded breadth of new prescribers in the approximately 5,000 healthcare professionals not enrolled in the oxybate REMS program. The availability of a generic oxybate and the launch of a once-nightly oxybate at the end of the second quarter hasn't impacted the continued growth of Wakix. We continue to see meaningful growth in prescribing and patients on Wakix, along with strong payer coverage. Our ability to reach and educate the broad narcolepsy-treating healthcare professional universe and tap into the full diagnosed adult narcolepsy patient opportunity gives us confidence in continued growth and the long-term growth potential for Wakix.

Recent market research conducted by Harmony supports our view of continued growth for Wakix. Research conducted in June of this year with approximately 70 healthcare professionals with and without experience with Wakix prescribing showed the following: 100% of the healthcare professionals surveyed with Wakix clinical experience stated they would prescribe the same or increase their prescribing of Wakix in the next six months; nearly 40% of those healthcare professionals surveyed would not yet prescribe Wakix to date indicated the intent to prescribe Wakix in the next six months; and consistent with previous waves of research, one of the highest-performing drivers and differentiators for Wakix was the unique feature as the only nonscheduled treatment option. In summary, I continue to be excited by the strong commercial performance of Wakix in adult narcolepsy. In the second quarter, we saw the highest top-line prescription demand since our first full quarter of launch in 2020, leading to the all-time high in new patient starts; strong growth in the average number of patients on Wakix; continued expansion and strengthening of the Wakix prescriber base beyond the oxybate REMS healthcare professionals; and payer coverage remains strong, even with the availability of newer versions of oxybate.

These are tremendous achievements, and I appreciate the dedication and impact of the entire commercial team and the passion they have for our business. This strong performance gives us confidence in the long-term growth potential for Wakix and reinforces our belief that Wakix is a billion-plus opportunity in adult narcolepsy. I would like to now turn the presentation over to Kumar Budur, our chief medical officer, to provide an update on the clinical development and current life cycle management programs for Harmony. Kumar?

Kumar Budur -- Chief Medical Officer

Thank you, Jeff. Good day, everyone. Moving on to our clinical development pipeline to expand the clinical utility of pitolisant toward potential new indications in patient populations living with rare neurological diseases, as shown on Slide 7. Starting with our development program in IH, we were extremely pleased to complete enrollment in our Phase 3 registration trial in adult patients with IH, also known as the INTUNE study, at an accelerated pace and nine months ahead of schedule.

The strong interest we have, both from the patient community and clinical investigators, resulted in this accelerated timeline, and we are now on track for top-line results in the fourth quarter of this year. If this Phase 3 trial is successful, it could represent the next new indication for Wakix in adult patients with IH. Pitolisant could offer a new mechanism of action to treat patients with IH as pitolisant works through histamine to promote wakefulness. We view this as a significant market opportunity with approximately 40,000 patients diagnosed with IH.

In addition, this opportunity could have significant synergies with our existing commercial footprint as there is a significant overlap in the physicians who treat patients with narcolepsy and those who treat patients with IH. For Prader-Willi syndrome, we recently had a positive end of Phase 2 meeting with the FDA where we discussed the results from the Phase 2 proof-of-concept trial and aligned on the Phase 3 trial in patients with PWS. We now plan to initiate a Phase 3 trial in patients with PWS ages six and older in the fourth quarter of this year. Moving on to myotonic dystrophy type 1, or DM1, we are on track for top-line data from the Phase 2 proof-of-concept signal detection study in the fourth quarter of this year.

In addition to our current life cycle management programs for pitolisant, we continue to make progress on new formulations with our partner, Bioprojet, with a goal to generate new IP and extend the pitolisant franchise beyond 2040. We will provide an update later this year on the status of this program. Regarding pediatric narcolepsy, we are working with Bioprojet toward the submission of a supplemental new drug application to the FDA for an indication in pediatric narcolepsy, which we expect to file in the fourth quarter of this year. Regarding pediatric exclusivity, we have made progress with FDA in gaining alignment on the requirements for pediatric exclusivity for Wakix.

The Phase 3 study in PWS, planned to be initiated in the fourth quarter, is part of the requirements. To conclude, we have made significant progress in advancing our clinical development programs with pitolisant and look forward to providing you with further updates later this year as we enter a catalyst-rich second half of 2023 regarding our development programs, as highlighted on Slide 8. On our current LCM program, we reached an important milestone in the fourth quarter, and we look forward to sharing the news with you when they occur. I would like to take this opportunity to thank all the patients and their families who are participating in our clinical trials, as well as the clinical investigators and site personnel for their efforts and commitment in helping us to advance our clinical development programs for pitolisant.

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

Sandip Kapadia -- Chief Financial Officer

Thank you, Kumar, and good morning, everyone. This morning, we issued our second quarter press release and filed our 10-Q, where you'll find the details of our financial and operating results. Our financial performance is shown on Slides 9, 10, and 11. We're pleased to report growth across several of our key metrics, including strong revenue growth, improved profitability, and continued cash generation.

This quarter, we also have several important updates with respect to the strength of our balance sheet and the additional opportunities to drive value for shareholders. Our financial performance also gives us the confidence for the remainder of the year as we continue advancing our growth strategy. But let me take a moment to take you through the details of our financial results. For the second quarter of 2023, we reported net revenues of $134.2 million, compared to $107 million in the prior-year quarter, representing a growth of 25%.

Performance in the quarter reflects the continued strong underlying demand for Wakix. In the second quarter, specialty pharmacy buying patterns resulted in a lower trade inventory levels at the end of the quarter as compared to the beginning of the second quarter. In the second quarter of 2023, operating expenses were $62.3 million, compared to $55 million in the prior-year quarter. The higher operating expenses were primarily driven by ongoing commercialization of Wakix and the advancement of our clinical development program.

Operating income improved with second quarter 2023 operating income of $46.9 million, compared to $33.1 million in the prior-year quarter, representing an increase of 42%. Non-GAAP adjusted net income for the second quarter of 2023 was $45.9 million or $0.76 per diluted share, compared to $34.7 million or $0.57 per diluted share in the prior-year quarter, reflecting our strong revenue growth and prudent expense management. We believe non-GAAP adjusted net income better reflects the underlying business performance. Please see our press release for a reconciliation of GAAP to non-GAAP results.

During the second quarter of 2023, we ended the quarter with $429.6 million of cash, cash equivalents, and investment securities on the balance sheet. In addition, last week, we entered into a new $185 million term loan facility led by J.P. Morgan, which further reduces our cost of capital, ensures a strong balance sheet, and provides us with greater financial flexibility. We use the net proceeds from the term loan and existing cash balance to repay our existing debt of approximately $197 million and related fees and expenses.

The new facility has a lower interest rate, reducing our annual interest expense by approximately $6 million. The financing is another step in the growth evolution of the company as we continue to optimize our balance sheet. So looking ahead for the remainder of the year, we expect continued quarter-over-quarter growth in revenues and average number of patients on Wakix. We also expect to continue to invest in R&D and SG&A as we advance our clinical development program and support the commercialization of Wakix.

Overall, we remain confident in Wakix being a billion-plus opportunity in adult narcolepsy with the potential to contribute up to an additional billion, if approved, in idiopathic hypersomnia and other current life cycle management programs. As you heard from Jeff, given our confidence in our core business and our conviction in the long-term growth potential of the company, this morning, we announced that the board authorized a $125 million share repurchase program. Our strong balance sheet and cash generation allows us to opportunistically return capital to shareholders while still maintaining sufficient capital to advance our growth strategy. In conclusion, we're very pleased with our strong financial performance and remain well-positioned to continued growth.

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

Jeff Dayno -- President and Chief Executive Officer

Thank you, Sandip, and thank you, Jeff and Kumar. In summary, Harmony continues to be a growth story, and we are making significant progress on advancing our growth strategy. We will remain focused on growing our core business and helping even more adult patients living with narcolepsy with Wakix, completing our Phase 3 registration trial in idiopathic hypersomnia and delivering top-line data in the fourth quarter; initiating our Phase 3 pivotal trial in PWS in Q4, working with our partner Bioprojet on new formulations to extend the pitolisant franchise to help even more patients living with rare neurological diseases, delivering on our long-term growth strategy by acquiring new assets to build out a robust pipeline for which we are well-positioned to execute on given our strong financial position, and strategically deploying capital to maximize shareholder value. This concludes our planned remarks for today.

Thank you for joining our call, and I will now turn the call back over to the operator to facilitate the Q&A session. Operator, can you please open the call to questions?

Questions & Answers:

Operator

Thank you. [Operator instructions] We'll take our first question from Danielle Brill with Raymond James. 

Alex Nackenoff -- Raymond James -- Analyst

Hey, guys. This is Alex on for Danielle. Thanks for taking our question. Just wondering if we could dive a little bit more into the 2Q Wakix dynamics.

Juggling the numbers a bit, in a normal quarter, I think we would have expected a bit higher revenue than we saw considering the strong net patient adds. So firstly, what was the impact on the lower inventory purchasing this quarter on a quantitative basis? And then wondering if you could share a little bit more color on the dynamics of potential impacts of gross to net, compliance, and whether what we're seeing is patients were added late in the quarter. Thanks so much.

Jeff Dayno -- President and Chief Executive Officer

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

Jeff Dierks -- Chief Commercial Officer

Yeah. So, Alex, what I would say with respect to starting with patient medication behavior, compliance, discontinuation rate, persistency, it was relatively consistent with what we've seen in the previous quarters. We've got really strong patient feedback in terms of their satisfaction on the product, and we continue to see a broadening of our prescriber base. When you ask a question about trade inventory, I'll turn that over to Sandip to talk a little bit about that and the implications on revenue.

Sandip Kapadia -- Chief Financial Officer

Yeah, sure. I mean, thanks, Jeff. Trade inventory, as I mentioned, was down about a week compared to the beginning of the second quarter. So that gives you an estimate of at least the impact that we would have seen on the top line.

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

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

Jeff Dayno -- President and Chief Executive Officer

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

Alex Nackenoff -- Raymond James -- Analyst

Great. Thanks so much for the color.

Jeff Dayno -- President and Chief Executive Officer

Sure.

Operator

Thank you. We'll take our next question from David Amsellem with Piper Sandler. Please go ahead.

David Amsellem -- Piper Sandler -- Analyst

Hey, thanks. So just got a couple. So first on the buyback, can you talk about how you're thinking about capital deployment beyond just the $125 million here? In other words, is this something that -- buyback is something that you may revisit down the road? And is that going to be sort of a recurring fixture of your overall capital deployment strategy? That's number one. And then number two, does this impact your ability to execute on a BD transaction of significant size? In other words, are you setting your sights smaller, given that buybacks or something that you are now doing? And then just lastly on the new pitolisant assets.

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

Jeff Dayno -- President and Chief Executive Officer

Sure, David. Good morning, David. In terms of the buyback, I'll ask Sandip to provide some perspective. But I think a high level, it provides us optionality in terms of optionality with regard to deployment of capital, both in repurchase as well as looking at business development deals.

And Sandip can kind of expand on our thinking around that.

Sandip Kapadia -- Chief Financial Officer

Sure. What I would say is, look, it's a natural evolution of the company, right? We have a very strong balance sheet, continued cash generation, so we have the opportunity to opportunistically return capital to shareholders while still maintaining, I would say, sufficient capital for other important priorities, including business development. So this is not an either or or. This is, in addition, I would say, overall, certainly given our stock price right now, it's really a creative use of capital to execute to really drive -- maximize shareholder value from that perspective.

So hopefully, that gives you a little bit of color in terms of we don't really see this as either-or-or type of thing. It's really just a natural evolution of the company where $430 million on the balance sheet, and we have capacity to do business development as well. And to your other question, as you know, we also did a recent financing as well that we announced last week, about $185 million led by very -- syndicate of banks, which, again, gives us a continued access to capital, if needed, to -- for potential business development in the future as well. So --

Jeff Dayno -- President and Chief Executive Officer

Yeah. And, David, just to reinforce in terms of business development, as I've mentioned before, it continues to be a high priority for us. And obviously, since I took on the CEO role at the beginning of the year, we've been actively engaged the team in looking at opportunities. We've gone deep on several.

So it continues to be a high priority. We have optionality and access to capital, and that's how we'll look at sort of deploying that, in addition to the potential for share repurchase.

Kumar Budur -- Chief Medical Officer

Good morning, David. On the pitolisant-based assets, we are working very closely with the Bioprojet on these efforts, and the formulation work is ongoing. These are pitolisant-based assets with the potential for generating new IP and the potential to extend the pitolisant franchise well beyond 2040. We do expect to provide an update later this year on these pitolisant -- new pitolisant-based assets.

Jeff Dayno -- President and Chief Executive Officer

Yeah. Thanks, Kumar. So they are -- yeah, they are not new molecular entities, basically new formulations, enhanced formulations of pitolisant. And as Kumar said, updates coming later this year on our progress on those programs.

David Amsellem -- Piper Sandler -- Analyst

OK. Helpful. Thanks, guys. 

Jeff Dayno -- President and Chief Executive Officer

Thanks, Dave.

Operator

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

Poorna Kannan -- Needham and Company -- Analyst

Hi. This is Poorna for Ami Fadia. Thank you for taking my question. I guess just wanted to ask if you can talk a little bit about where you are in your -- on your work in the life cycle management of Wakix, like what needs to be completed before you're ready to give the second update by the end of the year and if the new formulation that you mentioned could be used in any of the indications that you are pursuing.

Jeff Dayno -- President and Chief Executive Officer

Sure. So in terms of our life cycle management updates, Kumar can provide color on that. But I think as we shared, all of our current life cycle management programs, we're looking ahead to milestones later this year in the fourth quarter and advancing those, leading with the IH, idiopathic hypersomnia, and the Phase 3 registration trial there. Kumar can provide more color on each of those and with regards to where we are.

Kumar Budur -- Chief Medical Officer

Hey, good morning, Poorna. Thank you for the question. In terms of life cycle management, as we mentioned earlier, we have a catalyst-rich second half of this year. Let's start with idiopathic hypersomnia.

We are on track for top-line results in idiopathic hypersomnia in the fourth quarter of this year. On DM1, we are also on track for top-line results in the fourth quarter of this year. Just as a reminder, the DM1 study is a small signal detection proof-of-concept study that is not powered for statistical significance. In terms of PWS, we had a good meeting with the FDA, the end of Phase 2 meeting, and we aligned on the study design.

We plan to initiate this study in the fourth quarter of this year. And also, we are planning to submit pediatric narcolepsy as NDA in the fourth quarter of this year. So really, a lot of activities happening in the second quarter of -- second half of this year in terms of life cycle management of Wakix.

Jeff Dayno -- President and Chief Executive Officer

Yeah. Thank you, Kumar. So Poorna, I think really good progress, really good momentum, and we're excited for the catalyst coming later this year on our development programs.

Poorna Kannan -- Needham and Company -- Analyst

Thank you so much.

Operator

Thank you. We'll take our next question from Francois Brisebois with Oppenheimer.

Francois Brisebois -- Oppenheimer and Company -- Analyst

All right. Thanks for taking the question. Just a few here. So in terms of the exit numbers, is this something that we should -- in terms of a metric, we should start expecting every quarter, or is just a thing that we've seen in the past few quarters?

Jeff Dayno -- President and Chief Executive Officer

Yeah. Thanks, Frank. Good morning. Jeff Dierks, comments on the exit number?

Jeff Dierks -- Chief Commercial Officer

Yeah, Frank, good morning. So we provided exit number at the end of the first quarter, just given some of the pair seasonality and the headwinds. And I think just given the dynamics of the second quarter and really being able to quantify and be able to share with you the momentum coming out of Q2 and the Q3 and the strength of our business, we've provided it. As you know, I believe that average number of patients is the most meaningful metric that we can provide because it encapsulates all of the patient medication behavior into one number.

It's new patients, it's refills, it includes compliance, persistency, and discontinuation rates, and it most closely aligns to net revenue on a quarterly basis. So I think from an exit number of patient perspective, it provides additional context in some quarters. But I think the number that really is most meaningful is average number of patients, Frank. And as we shared in our prepared remarks, we saw sequential growth of approximately 350 patients from what we reported in the first quarter.

We have approximately 5,450 patients on the product and again really tremendous results for year four of a rare orphan launch, and we're really excited about momentum that we're seeing coming into Q3, and we're anticipating strong sequential growth through the remainder of the year and thereon. And we have a lot of conviction that Wakix is going to represent a potential billion-dollar-plus opportunity in adult narcolepsy alone.

Francois Brisebois -- Oppenheimer and Company -- Analyst

Great. And then if I can just follow up with -- so as you mentioned, there's been a new oxybate that's been launched on the market, and it seems to have no impact on Wakix so far. But can you just talk about reimbursement? Are -- is reimbursement going well if someone is on both an oxybate and Wakix? And can you just talk about maybe the evolution? Are you seeing more patients that are on both? Or is this still a pretty small percentage? Thank you.

Jeff Dayno -- President and Chief Executive Officer

Sure. Go ahead, Jeff.

Jeff Dierks -- Chief Commercial Officer

So from a managed care perspective, Frank, we continue to be extremely pleased with the favorable market access coverage for Wakix. We haven't seen any changes to our formulary position with the introduction of a generic oxybate earlier this year or with the launch of the once-nightly oxybate at the end of June. As a matter of fact, we've actually seen some increases in improvement in some of the type 1 plans within managed care. And we have no knowledge of any plans that require Wakix to be stepped through in oxybate.

And more importantly, there are no plans where there's an NDC block or exclusionary decision made for Wakix. So 100% of appropriate adult narcolepsy patients have access to Wakix, either through a positive formulary that's published or through some type of medical necessity or exceptions policy. With respect to Wakix and oxybate, what we've seen has been relatively consistent. It's been a low double-digit percentage of the Wakix patients are also on an oxybate.

Again, you're going to see, as this category evolves a little bit, as you know, within managed care, there's likely going to be additional things that they're looking to do to to manage the category. But in a rare orphan space with not a lot of these individuals, you don't see a lot of administrative steps with multiple products. Managed care acknowledges that this is a polypharmacy market. And so with a low percentage of Wakix patients also on an oxybate, we see really good access for patients on the product.

And we're really pleased with the strong payer coverage. That really has remained unchanged, even with the introduction of new products. And we believe we're really well-positioned, Frank. It's a differentiated product.

It's the only nonscheduled treatment option, and we're well-positioned today, as well as the evolving managed care landscape, moving forward.

Francois Brisebois -- Oppenheimer and Company -- Analyst

Great. Thank you. 

Jeff Dayno -- President and Chief Executive Officer

Thanks, Frank.

Operator

Thank you. We'll take our next question from Graig Suvannavejh with Mizuho Securities.

Graig Suvannavejh -- Mizuho Securities -- Analyst

Thanks. Good morning. Congrats on the continued progress. I've got two questions.

One, just on how to think about the third quarter and know that coming out of 350 new patient ads, which is a nice number, we've historically, over the past several years, seen you report in the second quarter 400 patients, and then they've kind of trickled down to 300. And I guess that does reflect a certain element of summer seasonality. So maybe, Jeff Dierks, if I could just ask you kind of thoughts around the dynamic for the third quarter, any changes relative to what we've seen in the past? I know you've got some nice new momentum in terms of new prescription starts, so just wanted to get additional color there. And then my second question is just was hoping to get the company's perspective on last week's curious patent challenge by Scorpion Capital and kind of any response or any reply to that? Thanks.

Jeff Dayno -- President and Chief Executive Officer

Sure, Graig. Good morning, Graig. Yeah, Jeff will answer the first question, and then I'll respond to your second question. 

Jeff Dierks -- Chief Commercial Officer

Sure. So, Graig, for Q3 dynamics, I mean, I think you're thinking about Q3 the right way. We do anticipate the typical headwinds of the summer seasonality with fewer patient visits to healthcare professionals. We've got, to your point, tremendous momentum coming out of Q2.

Q2 is one of the strongest quarters in terms of top-line prescription demand. We've seen in three years highest number of new patient starts ever in our launch and adding 350 patients in year four of our commercial launch I think is really tremendous results. And although we're not providing forward-looking guidance, I think you're thinking about Q3 correctly. We continue to see growth in new prescribers.

We see growth in average number of patients. We do expect sequential growth for Wakix and average number of patients for the remainder of '23., and we have extreme confidence in the long-term growth opportunity for Wakix and being a potential billion-dollar opportunity.

Jeff Dayno -- President and Chief Executive Officer

Thanks, Jeff. And, Graig, with regards to your second question regarding the petition for reexamination of the patent for Wakix that was filed, I believe, on July 19th. I think as we've said before, we're very confident in the strength of our IP. We believe strongly in terms of the enforceability and validity of the patent portfolio, and it's our feeling our position that the petition for reexamination is without merit.

With regards to the timing of the reexamination, so the PTAB has 90 days to either deny or grant the petition from the date of submission. And the majority of times, the petitions are granted, but that has no readthrough to the potential outcome of the reexamination by PTAB. And if the petition is granted, the reexamination is between PTAB and the patent holder. And majority of times, the patent status is often and usually upheld.

So I think with our confidence in the strength of our IP, which we will vigorously defend any challenges, that is why we have confidence in Wakix being a billion-plus opportunity in adult narcolepsy. And then obviously, if successful in our current life cycle management programs could also contribute an additional up to billion dollar revenue to the franchise.

Graig Suvannavejh -- Mizuho Securities -- Analyst

Thanks very much.

Jeff Dayno -- President and Chief Executive Officer

Yeah. Thanks, Graig. 

Operator

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

Jason Gerberry -- Bank of America Merrill Lynch -- Analyst

Hey, good morning, guys. Thank you for taking my questions. First, just curious with the introduction of generic oxybate, mindful that it's not impacting Wakix, but do you have any insights into what's going on? Is it expanding the market for pharmacotherapy for oxybate, taking just share from Xyrem, or taking share from other products? And then as my follow-up, I think it's to the Needham question. As you think about next-gen pitolisant, I guess the curiosity is why develop Wakix for these following indications if the IP could be at risk toward the back end of this decade? Why not prioritize the next-gen pitolisant, so you could have visibility in sort of a product life cycle that lasts well into the 2030s? Thanks.

Jeff Dayno -- President and Chief Executive Officer

Good morning, Jason. Thanks for your question. In terms of – Jeff, you want to expand in terms of the dynamics and the oxybate franchise and the new products?

Jeff Dierks -- Chief Commercial Officer

Sure, yeah. So, Jason, what we're seeing -- and again, the Hikma data is visible within Symphony Health claims. And it looks like it's simply just there's a churn that's exhibiting in the oxybate marketplace. As I've shared in my prepared comments in one of my earlier responses that we -- we haven't seen any impact obviously on the generic, on our launch, or even the early introduction of the once-nightly oxybate at the end of the second quarter on our business.

So what I'm observing in the data is simply just a little bit of a churn that we're seeing in the oxybate marketplace. I think what we see with Wakix is that we've had a branded version of oxybate available since our launch back in 2019, and we continue to see strong growth through that time period and really strong growth in the first and second quarter this year in average number of patients. We continue to add new prescribers. And I think our ability to call on the approximate 9,000 narcolepsy-treating healthcare professionals, approximately 5,000 of those are not enrolled in the oxybate REMS program really provides our ability to tap into that broad diagnosed adult narcolepsy patient population.

It gives us a little bit of insulation as newer forms of oxybate come in. Obviously, the overall benefit-risk profile of the broad clinical utility, it appeals to a broader healthcare professional treating audience as well as a broader patient base. So I think we have tremendous confidence in our business. There's a significant unmet medical need in here.

There's a large, diagnosed, and even undiagnosed patient population in here. And I think what we've observed over the last couple of years is there's plenty of room for multiple therapeutic options in here, and so we feel really good about where Wakix is. But to answer your question on the generic oxybate, I haven't really seen it expanding the market. It's more so just a change within the oxybate vertical.

Jeff Dayno -- President and Chief Executive Officer

Yeah. And, Jason, with regards to your -- on your second question about the IP runway for Wakix and the current life cycle management programs and new formulations, so a really good question. And I think what we've have done to date, we've generated good momentum, obviously, in our IH program and the strong momentum and the pace of enrollment in that program with pitolisant and the same in terms of Prader-Willi syndrome in that program and where we are. But with regards to the longer-term outlook, we do see the potential -- new formulations where we would have options potentially to take those development programs, obviously, with longer patent protection, longer runway and shift some of those to the new formulations of pitolisant, depending on what we see in the clinic and as those programs advance.

So we see kind of optionality going forward for the longer-term outlook of our life cycle management programs while optimizing the current momentum we have now obviously with the interest in IH and the completion of enrollment and looking forward to top-line data in the fourth quarter, as well as interest in the Prader-Willi syndrome program from that patient community that we've been kind of working with over a number of years now and interest in advancing into Phase 3 at this point.

Jason Gerberry -- Bank of America Merrill Lynch -- Analyst

Can I just ask a quick follow-up on that?

Jeff Dayno -- President and Chief Executive Officer

Sure.

Jason Gerberry -- Bank of America Merrill Lynch -- Analyst

Would the thinking be to launch a next gen before going to market for PWS? Or just thinking if you had to launch a reformulation against the generic version of your own Wakix, the track record on that could be a little bit more challenging versus if you can get a reformulation out first, it would seem like that would have a -- maybe a more competitive pathway in the market.

Jeff Dayno -- President and Chief Executive Officer

Yeah. I mean, I think that based on the new formulation programs we're working on, that's a potential scenario as well. And I think that's -- we're looking at that potential sort of in the near term, along with a longer-term outlook with some of the formulation work that we're doing. So we'll have more color on that as the new formulation programs progress later this year.

Jason Gerberry -- Bank of America Merrill Lynch -- Analyst

Got it. Thanks.

Jeff Dayno -- President and Chief Executive Officer

Thanks, Jason.

Operator

Thank you. We'll take our next question from Corinne Jenkins with Goldman Sachs.

Corinne Jenkins -- Goldman Sachs -- Analyst

Good morning. A couple from me. Maybe first, you talked about the new patient growth in the corridor. What portion of these patients are coming through via the sleep specialist population versus the prescribing population you've described as not being enrolled in the oxybate REMS programs?

Jeff Dayno -- President and Chief Executive Officer

Good morning, Corinne. Jeff, in terms of the patients and where are they coming from in terms of prescriber base?

Jeff Dierks -- Chief Commercial Officer

Sure. Corinne, I mean, we're seeing patients come through both those that are healthcare professionals enrolled in the oxybate REMS program, the sleep specialist, but we're also seeing patients come through in the approximate 5,000 healthcare professionals that are not enrolled in the oxybate REMS program. I know there have been questions in the past looking at proportionality of what percentage of the patients reside more in the oxybate Rems-enrolled doctors versus the non. And what you would see is that the majority of the patients tend to be in the oxybate REMS-enrolled healthcare professional audience.

They tend to be more of the sleep specialists, but there is a meaningful percentage of our new patients that are coming from that approximately 5,000 healthcare professionals outside the oxybate REMS program. That's where we're seeing our new prescribers coming from. The depth of prescribing and the new patients are coming out of the other portion of the oxybate REMS-enrolled doctors.

Corinne Jenkins -- Goldman Sachs -- Analyst

OK. And then on the Phase 3 Prader-Willi study, what assumptions can you share that underpin the size of that study and the powering decisions that went into its design?

Jeff Dayno -- President and Chief Executive Officer

Yeah. All right, Kumar.

Kumar Budur -- Chief Medical Officer

Good morning, Corinne. Thanks for the question. We had a positive meeting with the FDA, and we aligned on the study design. And as we mentioned earlier, we plan to initiate this study in the fourth quarter of 2023.

We plan to provide additional details on the study design at the time of study initiation.

Corinne Jenkins -- Goldman Sachs -- Analyst

OK. Thank you.

Kumar Budur -- Chief Medical Officer

Thank you.

Operator

Thank you. And our last question will come from Charles Duncan with Cantor Fitzgerald.

Charles Duncan -- Cantor Fitzgerald -- Analyst

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

Jeff Dayno -- President and Chief Executive Officer

Good morning, Charles. Sandip, comments on providing guidance?

Sandip Kapadia -- Chief Financial Officer

Yeah, no. Thanks, Charles, for the question on that. I think this year, at least, we made the decision that there's sufficient information. And you saw from the launch and you continue to see this past quarter, good consistency in terms of top-line demand for the product.

And I think, overall, many of you have a good understanding of our business. So I think that's something that we would naturally revisit at the start of next year, but no promises right now but certainly something we take a look at. But right now, we feel good about investors' understanding of our business and the fundamentals there. And I think we'll provide -- continue to provide additional color on the business to give you more context as we did this quarter regarding the trade inventory and so forth.

So we'll provide additional color to help guide future –

Charles Duncan -- Cantor Fitzgerald -- Analyst

OK. Thanks, Sandip. And then to Jeff or Kumar, regarding the pipeline and the ongoing IH study with pitolisant. Yeah, congrats on the enrollment rates.

But I guess the question that I have for you is do you think the rapid enrollment may have caused increased heterogeneity in the patient sample? And I guess what gives you confidence in the readout? Could it be the blinded read on the patients enrolled or the randomized withdrawal design? Why are -- yeah, help us think through that potential readout.

Jeff Dayno -- President and Chief Executive Officer

Sure, Charles. Yeah, I'll turn it over to Kumar for thoughts on that as head of our development programs. I think it starts also mechanistically. I think it starts mechanistically.

And, Charles, you know this well in terms of pitolisant and how it works as a wakefulness agent through histamine and a mechanistic fit in that this sort of that patient population. And Kumar can expand on -- in terms of our thoughts on confidence in the readout.

Kumar Budur -- Chief Medical Officer

All right. Good morning, Charles. Thanks for the question. As you said, the study enrolled fast, and we were very pleased with it, in fact nine months ahead of schedule.

And it's not just the mechanism of action, just as Jeff mentioned, also the interest from the patients and the providers as well because of the significant unmet need in patients with idiopathic hypersomnia. In terms of heterogeneity, that's a good question. As a clinical development specialist, we always want to make sure that the patients are homogeneous to the extent possible. So we have checks and balances within the study conduct and also in our protocol to make sure that the patients who come into the study meet the inclusion, exclusion criteria, and they're the right subjects for our study.

We have full confidence that we enrolled the right subjects, and we look forward for the top-line data, which we anticipate in the fourth quarter of this year.

Charles Duncan -- Cantor Fitzgerald -- Analyst

OK. And regarding that top-line lead, is that driven more by timelines within the study? Or is it driven by you know code data analysis? And can you give us any further insights on that being October versus December?

Kumar Budur -- Chief Medical Officer

Yeah. I mean, at this time, it's hard to speculate whether it will be early fourth quarter or late fourth quarter. What I can say at this point in time is we are on track for top-line results in the fourth quarter.

Charles Duncan -- Cantor Fitzgerald -- Analyst

OK. Very good. Thanks for taking our questions. Congrats on the market demand.

Jeff Dayno -- President and Chief Executive Officer

Yeah. Sure, Charles. And we are very excited about -- for that top-line data readout as well. So obviously, the team is -- will be working aggressively and focused on producing top-line results, and we look forward to sharing that with you when they come.

Charles Duncan -- Cantor Fitzgerald -- Analyst

OK. Cool.

Operator

Thank you. And at this time, I will now turn the call back to management for any additional or closing remarks.

Jeff Dayno -- President and Chief Executive Officer

Thank you, Todd, and thanks to everyone for joining our call today and for your interest in Harmony. I would also like to thank the talented team at Harmony Biosciences who I have the pleasure of working with for their efforts every day to deliver on our mission to develop and commercialize innovative treatments for patients living with rare neurological diseases. As you heard from the team this morning, our business remains strong. Harmony continues to be a growth story, and we have conviction in the long-term growth potential of our company.

We have built momentum during the first half of 2023, and we are now looking forward to a catalyst-rich second half of the year. Thank you, and have a great day.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Luis Sanay -- Head of Investor Relations

Jeff Dayno -- President and Chief Executive Officer

Jeff Dierks -- Chief Commercial Officer

Kumar Budur -- Chief Medical Officer

Sandip Kapadia -- Chief Financial Officer

Alex Nackenoff -- Raymond James -- Analyst

David Amsellem -- Piper Sandler -- Analyst

Poorna Kannan -- Needham and Company -- Analyst

Francois Brisebois -- Oppenheimer and Company -- Analyst

Graig Suvannavejh -- Mizuho Securities -- Analyst

Jason Gerberry -- Bank of America Merrill Lynch -- Analyst

Corinne Jenkins -- Goldman Sachs -- Analyst

Charles Duncan -- Cantor Fitzgerald -- Analyst

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