HRMY Down 10.8% in Six Months: How Should You Play the Stock?

Core Viewpoint - Harmony Biosciences (HRMY) has faced challenges, including a 10.8% decline in stock price over the past six months, primarily due to a Refusal to File (RTF) letter from the FDA regarding pitolisant for excessive daytime sleepiness in idiopathic hypersomnia [1][20] Group 1: Company Performance - The stock has underperformed compared to the industry, which declined by 9.7%, and the S&P 500 index during the same period [1] - Despite the setback, the fourth-quarter results reported on February 25 were better than expected, leading to a slight recovery in shares [3] - The lead drug, Wakix, is a first-in-class therapy that has driven growth since its initial FDA approval in 2019, with expected net revenues between $820 million and $860 million for 2025 [7][8] Group 2: Drug Development and Pipeline - The company aimed to expand the label of pitolisant for excessive daytime sleepiness in adult patients with idiopathic hypersomnia, but the submission faced regulatory challenges [4][5] - Two next-generation formulations, pitolisant Gastro-Resistant and pitolisant High-Dose, are in development, with phase III studies planned for late 2025 [9][10] - The acquisition of Zynerba Pharmaceuticals added ZYN-002 to the portfolio, currently in a phase III trial for Fragile X Syndrome, with data expected in Q3 2025 [11][12] Group 3: Financial Position and Valuation - As of December 31, 2024, the company had cash, cash equivalents, and investments totaling $576.1 million, with long-term debt of $163 million, indicating a sound cash position [14] - HRMY's shares trade at a price/sales ratio of 2.27x forward sales, lower than its historical mean of 4.23x but higher than the industry average of 1.70x [15] - The estimate for 2025 earnings per share has decreased to $2.89 from $3.16 over the past 30 days, reflecting a downward trend in earnings expectations [17] Group 4: Market Outlook - The narcolepsy market in the U.S. had an approximate net sales value of $2.9 billion in 2023, with expectations for continued growth [19] - The company believes its pipeline has the potential to deliver more than $3 billion in net revenues in the coming years, driven by successful development of its candidates [19] - The company is advised to maintain investment in HRMY, with potential for value increase from favorable data readouts later in the year [20]