We came across a bullish thesis on Harmony Biosciences Holdings, Inc. (HRMY) on Value Investing Subreddit Page by Long-Access-2143. In this article, we will summarize the bulls’ thesis on HRMY. Harmony Biosciences Holdings, Inc. (HRMY)’s share was trading at $30.97 as of April 3rd. HRMY’s trailing and forward P/E were 12.34 and 8.72 respectively according to Yahoo Finance.
Harmony Biosciences, a commercial-stage pharmaceutical company focused on rare neurological disorders, presents a compelling investment case built on a profitable and differentiated product, strong financial execution, and deep undervaluation. Its flagship product, WAKIX, is an FDA-approved treatment for excessive daytime sleepiness (EDS) and cataplexy in narcolepsy. Uniquely, WAKIX is not a controlled substance, unlike competitors such as Xyrem or Adderall, making it more accessible and safer for patients. The drug’s mechanism as a selective H3 receptor antagonist avoids addictive properties, enabling once-daily dosing that improves both patient experience and adherence. At a cost of $165,000 per patient annually—less than some competitors—WAKIX has demonstrated its commercial strength, with 2024 sales growing 23% to $715 million. Harmony’s impressive financial profile includes a 35% return on invested capital and 30% free cash flow margins, signaling disciplined capital allocation and strong operating leverage. Despite flat EBITDA and FCF in 2024 due to non-recurring expenses from licensing and M&A activity, margin expansion is expected to resume in 2025 as revenue continues to scale.
Yet, Harmony’s valuation fails to reflect its quality. The company trades at just 13.2x earnings and 8.7x free cash flow, while its FCF per share more than doubled from $0.60 in Q3 2023 to $1.30 in Q4 2024. This disconnect stems largely from two events. First, a March 2023 short-seller attack caused a temporary drop in the share price, which has yet to recover despite the FDA fully rejecting all related claims and expanding WAKIX’s approval to pediatric patients in mid-2024. Second, the failure of the INTUNE study targeting Idiopathic Hypersomnia (IH) weighed on sentiment, though such setbacks are common in biotech. Harmony quickly pivoted to a new approach with Pitolisant High Dose (HD), now advancing to Phase 3 trials. Importantly, none of these headwinds affected core revenue growth or the favorable risk profile of WAKIX.
Looking ahead, the upside potential is substantial. Management projects WAKIX sales of $820–$860 million in 2025 and over $1 billion by 2027. More significantly, six Phase 3 programs are expected to be in development by the end of 2025, and the company aims to launch a new product every year through 2030. This could drive total sales to over $3 billion by 2028. Of particular note is ZYN-002, targeting Fragile X Syndrome, which has no current treatment but affects over 80,000 patients. Fast-tracked by the FDA, ZYN-002 could launch as early as 2026 and—with full ownership—would provide high-margin revenue. Additionally, a new gastro-resistant formulation of Pitolisant (GR) is advancing with potential approval by 2026, possibly extending WAKIX exclusivity through 2044.
Even excluding pipeline contributions, Harmony’s intrinsic value is considerably higher. A conservative DCF model based solely on WAKIX, using management’s low-end guidance and a 13.58% WACC, implies a base-case share price of $74.81—well above current levels. Harmony outperforms peers such as Jazz, Takeda, and Avadel in both margins and growth while remaining significantly undervalued. As clinical milestones unfold and investor sentiment corrects, Harmony offers a high-quality, cash-generating asset with clear catalysts for a major rerating.
Harmony Biosciences Holdings, Inc. (HRMY) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 26 hedge fund portfolios held HRMY at the end of the fourth quarter which was 25 in the previous quarter. While we acknowledge the risk and potential of HRMY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HRMY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.