Pharmaceutical companies develop treatments for patients with serious diseases, and when one of these companies has a drug candidate nearing application for review (and, hopefully, approval), the excitement with each piece of news can drive investors toward the company's stock.
Harmony Biosciences Holdings (HRMY -4.36%) is one such drugmaker that has experienced its own share price growth. The company's success has hinged on its sole product, Wakix, which has been approved by the Food and Drug Administration (FDA) for treating people who suffer from excessive daytime sleepiness and cataplexy (muscle weakness) as a result of narcolepsy.
Now the company is looking to expand its portfolio, treating long-term investors with a potential boost to their portfolios.
Year to date, Harmony's stock price is up 13% versus the S&P 500's loss of 20%. And since first-quarter earnings were released in May, the stock has risen from $33 to $50. First-quarter net revenue rose 43% compared to the same period last year, growing to $85 million from demand for Wakix. The boost in revenue helped the company achieve $0.35 per share in net income compared to only $0.13 per share for the same quarter last year.
But what really got investors excited about Harmony was what could be coming, starting with expanded uses of Wakix.
People with narcolepsy suffer from difficulty concentrating, or could even fall asleep or suddenly lose muscular strength in the middle of an activity like driving, making the disease potentially fatal.
Wakix is a first-of-its-kind narcolepsy treatment in many respects: First, it increases specific histamine levels, which helps the body's wakefulness function. Second, it's the only once-daily tablet approved by the FDA for narcolepsy; and it's the first and only FDA-approved treatment for narcolepsy that is not a controlled substance, meaning it can be obtained via prescription, but is not government regulated.
Because narcolepsy is a lifelong problem and cannot be cured completely, the development of treatments has gained momentum over the past few years. Companies such as Harmony are working on therapies to treat the various symptoms associated with the disease, resulting in a market projected to grow by 9.6% annually for the next eight years, jumping from a market value of $2.6 billion to $6.5 billion by 2030.
In the company's efforts to increase its portion of that market, management has put together what it calls a three-pillar growth strategy. The first is to keep optimizing the commercial success of Wakix in its current use. The second is conducting clinical trials to expand the use of Wakix for diseases similar to narcolepsy, such as other sleep disorders, muscle weakness, and a wide range of symptoms associated with Prader-Willi syndrome (which causes insatiable hunger).
So far, that strategy is showing promise. The expanded use of Wakix for treatment of idiopathic hypersomnia (constant sleepiness) is in phase 3 trials, while trials for treatment of Prader-Willi syndrome, and myotonic dystrophy (progressive muscle wasting and weakness), are both in phase 2 with data results expected later this year and early 2023, respectively.
The third pillar of the company's strategy is to acquire assets that will help expand its product portfolio -- and with over $224 million in cash in its coffers at end of the quarter, Harmony is ready to do so. The surplus of cash on hand could be used to acquire a competitor, or a complementary business that would help bring products to market faster under Harmony's umbrella.
CEO John Jacobs is excited by the company's progress to move from dependence on a singular treatment to an expanded portfolio of products. He believes Wakix could become a $1 billion franchise in the coming years -- by comparison, the company ended 2021 at $305 million in revenue.
Another piece of good news is that last October, Harmony became part of the S&P 600 small-cap index, attracting more institutional investment, and helping set the stock on its current upward trajectory.
The primary risk with pharmaceutical stocks is that poor clinical trial results or similar setbacks can quickly send the shares down. So waiting on the sidelines for a bit more positive results from those trials might be a good plan for the more risk-averse investor.
Still with the growing success of Wakix, progression of clinical trials, and a cash reserve to support further expansion, long-term investors might agree that explosive potential is there, with now being as good a time as any to get on board.