hrmy-10q_20200930.htm

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended September 30, 2020

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to

Commission File Number: 1-39450

HARMONY BIOSCIENCES HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

 

82-2279923

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

630 W. Germantown Pike, Plymouth Meeting, PA

 

19462

(Address of Principal Executive Offices)

 

(Zip Code)

 

(484) 539-9800

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, par value $0.00001 value per share

 

HRMY

 

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes ☐     No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Yes ☒     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes ☐     No

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Number of Shares of Common Stock, par value $0.00001 value per share, outstanding on November 9, 2020 was 56,889,111.

 

 

 

 

 


 

TABLE OF CONTENTS

 

 

 

Page

Part I. Financial Information

 

1

Item 1. Financial Statements

 

1

Condensed Consolidated Balance Sheets (Unaudited)

 

1

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

 

2

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Unaudited)

 

3

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

5

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

19

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

32

Item 4. Controls and Procedures

 

32

Part II. Other Information

 

33

Item 1. Legal Proceedings

 

33

Item 1A. Risk Factors

 

33

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

77

Item 3. Defaults upon Senior Securities

 

77

Item 4. Mine Safety Disclosures

 

77

Item 5. Other Information

 

77

Item 6. Exhibits

 

78

Signatures

 

79

 

 


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

 

 

September 30,

2020

 

 

December 31,

2019

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

221,740

 

 

$

24,457

 

Trade receivables, net

 

 

16,326

 

 

 

4,255

 

Inventory, net

 

 

2,311

 

 

 

1,088

 

Prepaid expenses

 

 

4,240

 

 

 

1,436

 

Other current assets

 

 

5,625

 

 

 

261

 

Total current assets

 

 

250,242

 

 

 

31,497

 

NONCURRENT ASSETS:

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

1,038

 

 

 

1,330

 

Restricted cash

 

 

750

 

 

 

750

 

Intangible asset, net

 

 

66,625

 

 

 

72,185

 

Other noncurrent assets

 

 

1,418

 

 

 

941

 

Total noncurrent assets

 

 

69,831

 

 

 

75,206

 

TOTAL ASSETS

 

$

320,073

 

 

$

106,703

 

LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Trade payables

 

$

9,347

 

 

$

6,360

 

Accrued compensation

 

 

5,243

 

 

 

7,917

 

Accrued expenses

 

 

17,200

 

 

 

5,500

 

Other current liabilities

 

 

 

 

 

115

 

Total current liabilities

 

 

31,790

 

 

 

19,892

 

NONCURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Deferred rent

 

 

305

 

 

 

287

 

Long term debt, net

 

 

192,858

 

 

 

97,946

 

Other noncurrent liabilities

 

 

571

 

 

 

163

 

Total noncurrent liabilities

 

 

193,734

 

 

 

98,396

 

TOTAL LIABILITIES

 

 

225,524

 

 

 

118,288

 

COMMITMENTS AND CONTINGENCIES (Note 9)

 

 

 

 

 

 

 

 

CONVERTIBLE PREFERRED STOCK

 

 

 

 

 

 

 

 

Convertible preferred stock, net of placement costs

 

 

 

 

 

 

 

 

Series A convertible preferred stock - $1.00 stated value; 0 shares and 286,000,000 shares authorized at September 30, 2020 and December 31, 2019, respectively; 0 shares and 285,000,000 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

 

 

 

 

 

348,203

 

Series B convertible preferred stock - $1.25 stated value; 0 shares and 8,030,000 shares authorized at September 30, 2020 and December 31, 2019, respectively; 0 shares and 8,000,000 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

 

 

 

 

 

12,023

 

Series C convertible preferred stock - $1.96 stated value; 0 shares and 25,600,000 shares authorized at September 30, 2020 and December 31, 2019, respectively; 0 shares and 25,510,205 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

 

 

 

 

 

51,051

 

STOCKHOLDERS’ EQUITY (DEFICIT):

 

 

 

 

 

 

 

 

Preferred stock - $0.00001 par value; 10,000,000 shares and 0 shares authorized at September 30, 2020 and December 31, 2019, respectively; 0 shares issued and outstanding at September 30

   2020 and December 31, 2019

 

 

 

 

 

 

Common stock—$0.00001 par value; 500,000,000 shares and 423,630,000 shares authorized at September 30, 2020 and December 31, 2019, respectively; 56,888,625 shares and 7,787,470 issued and outstanding at September 30, 2020 and December 31, 2019, respectively

 

 

1

 

 

 

 

Additional paid in capital

 

 

582,535

 

 

 

 

Accumulated deficit

 

 

(487,987

)

 

 

(422,862

)

TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

94,549

 

 

 

(422,862

)

TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’

   EQUITY (DEFICIT)

 

$

320,073

 

 

$

106,703

 

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

1


 

HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except share and per share data)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net product revenues

 

$

45,609

 

 

$

 

 

$

103,454

 

 

$

 

Cost of product sold

 

 

7,890

 

 

 

 

 

 

17,820

 

 

 

 

Gross profit

 

 

37,719

 

 

 

 

 

 

85,634

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

4,230

 

 

 

4,336

 

 

 

11,829

 

 

 

62,319

 

Sales and marketing

 

 

12,601

 

 

 

12,908

 

 

 

38,297

 

 

 

27,477

 

General and administrative

 

 

10,508

 

 

 

12,560

 

 

 

26,280

 

 

 

22,415

 

Total operating expenses

 

 

27,339

 

 

 

29,804

 

 

 

76,406

 

 

 

112,211

 

Operating income (loss)

 

 

10,380

 

 

 

(29,804

)

 

 

9,228

 

 

 

(112,211

)

Loss on debt extinguishment

 

 

 

 

 

 

 

 

(22,639

)

 

 

 

Other expense, net

 

 

(1,525

)

 

 

 

 

 

(3,071

)

 

 

 

Interest expense, net

 

 

(6,946

)

 

 

(2,095

)

 

 

(20,254

)

 

 

(3,326

)

Income (loss) before income taxes

 

 

1,909

 

 

 

(31,899

)

 

 

(36,736

)

 

 

(115,537

)

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) and comprehensive income (loss)

 

$

1,909

 

 

$

(31,899

)

 

$

(36,736

)

 

$

(115,537

)

Accumulation of dividends on preferred stock

 

 

(6,013

)

 

 

(9,027

)

 

 

(26,904

)

 

 

(25,656

)

Net loss available to common stockholders

 

$

(4,104

)

 

$

(40,926

)

 

$

(63,640

)

 

$

(141,193

)

NET LOSS PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.14

)

 

$

(5.26

)

 

$

(4.15

)

 

$

(18.15

)

Diluted

 

$

(0.14

)

 

$

(5.26

)

 

$

(4.15

)

 

$

(18.15

)

Weighted average number of shares of common stock - basic

 

 

30,212,959

 

 

 

7,777,100

 

 

 

15,324,362

 

 

 

7,777,100

 

Weighted average number of shares of common stock - diluted

 

 

30,212,959

 

 

 

7,777,100

 

 

 

15,324,362

 

 

 

7,777,100

 

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

2


 

HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share and per share data)

 

 

 

Convertible Preferred

Stock

Series A, B, & C

 

 

 

Common Stock

 

 

Additional

paid-in

 

 

Accumulated

 

 

Total

stockholders’ equity

 

 

 

Shares

 

 

Amount

 

 

 

Shares (1)

 

 

Amount

 

 

capital

 

 

deficit

 

 

(deficit)

 

Balance as of December 31, 2019

 

 

318,510,205

 

 

$

411,275

 

 

 

 

7,787,470

 

 

$

 

 

$

 

 

$

(422,862

)

 

$

(422,862

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(36,736

)

 

 

(36,736

)

Preferred stock dividend, Series A

 

 

 

 

 

22,780

 

 

 

 

 

 

 

 

 

 

(1,048

)

 

 

(21,732

)

 

 

(22,780

)

Preferred stock accretion, Series A

 

 

 

 

 

5,562

 

 

 

 

 

 

 

 

 

 

(3,572

)

 

 

(1,990

)

 

 

(5,562

)

Preferred stock dividend, Series B

 

 

 

 

 

777

 

 

 

 

 

 

 

 

 

 

1

 

 

 

(778

)

 

 

(777

)

Preferred stock accretion, Series B

 

 

 

 

 

53

 

 

 

 

 

 

 

 

 

 

(37

)

 

 

(16

)

 

 

(53

)

Preferred stock dividend, Series C

 

 

 

 

 

3,347

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,347

)

 

 

(3,347

)

Preferred stock accretion, Series C

 

 

 

 

 

921

 

 

 

 

 

 

 

 

 

 

(563

)

 

 

(359

)

 

 

(922

)

Issuance of stock upon initial public offering, net of issuance costs

 

 

 

 

 

 

 

 

 

6,151,162

 

 

 

 

 

 

135,435

 

 

 

 

 

 

135,435

 

Conversion of Series A, B, C convertible stock to common stock

 

 

(318,510,205

)

 

 

(444,715

)

 

 

 

42,926,630

 

 

 

1

 

 

 

444,715

 

 

 

 

 

 

444,716

 

Reclassification of warrant liability to equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,468

 

 

 

 

 

 

5,468

 

Exercise of options

 

 

 

 

 

 

 

 

 

36,003

 

 

 

 

 

 

283

 

 

 

 

 

 

283

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,870

 

 

 

 

 

 

1,870

 

Repurchase and cancellation of common units

 

 

 

 

 

 

 

 

 

(12,175

)

 

 

 

 

 

 

 

 

(167

)

 

 

(167

)

Repurchase and cancellation of common units withheld for taxes

 

 

 

 

 

 

 

 

 

(465

)

 

 

 

 

 

(17

)

 

 

 

 

 

(17

)

Balance as of September 30, 2020

 

 

 

 

$

 

 

 

 

56,888,625

 

 

$

1

 

 

$

582,535

 

 

$

(487,987

)

 

$

94,549

 

 

 

 

Convertible Preferred

Stock

Series A, B, & C

 

 

 

Common Stock

 

 

Additional

paid-in

 

 

Accumulated

 

 

Total

stockholders’ equity

 

 

 

Shares

 

 

Amount

 

 

 

Shares (1)

 

 

Amount

 

 

capital

 

 

deficit

 

 

(deficit)

 

Balance as of June 30, 2020

 

 

318,510,205

 

 

$

434,009

 

 

 

 

7,805,848

 

 

$

 

 

$

 

 

$

(483,362

)

 

$

(483,362

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,909

 

 

 

1,909

 

Preferred stock dividend, Series A

 

 

 

 

 

5,091

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,091

)

 

 

(5,091

)

Preferred stock accretion, Series A

 

 

 

 

 

4,010

 

 

 

 

 

 

 

 

 

 

(3,572

)

 

 

(438

)

 

 

(4,010

)

Preferred stock dividend, Series B

 

 

 

 

 

174

 

 

 

 

 

 

 

 

 

 

 

 

 

(174

)

 

 

(174

)

Preferred stock accretion, Series B

 

 

 

 

 

41

 

 

 

 

 

 

 

 

 

 

(37

)

 

 

(4

)

 

 

(41

)

Preferred stock dividend, Series C

 

 

 

 

 

748

 

 

 

 

 

 

 

 

 

 

 

 

 

(748

)

 

 

(748

)

Preferred stock accretion, Series C

 

 

 

 

 

642

 

 

 

 

 

 

 

 

 

 

(563

)

 

 

(79

)

 

 

(642

)

Issuance of stock upon initial public offering, net of issuance costs

 

 

 

 

 

 

 

 

 

6,151,162

 

 

 

 

 

 

135,435

 

 

 

 

 

 

135,435

 

Conversion of Series A, B, C convertible stock to common stock

 

 

(318,510,205

)

 

 

(444,715

)

 

 

 

42,926,630

 

 

 

1

 

 

 

444,715

 

 

 

 

 

 

444,716

 

Reclassification of warrant liability to equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,468

 

 

 

 

 

 

5,468

 

Exercise of options

 

 

 

 

 

 

 

 

 

5,450

 

 

 

 

 

 

33

 

 

 

 

 

 

33

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,073

 

 

 

 

 

 

1,073

 

Repurchase and cancellation of common units withheld for taxes

 

 

 

 

 

 

 

 

 

(465

)

 

 

 

 

 

(17

)

 

 

 

 

 

(17

)

Balance as of September 30, 2020

 

 

 

 

$

 

 

 

 

56,888,625

 

 

$

1

 

 

$

582,535

 

 

$

(487,987

)

 

$

94,549

 

 

(1)Common stock of Harmony Biosciences Holdings, Inc.

 

 

3


 

HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) - CONTINUED

(In thousands, except share and per share data)

 

 

 

Convertible Preferred

Stock

Series A, B, & C

 

 

 

Common Stock

 

 

Additional

paid-in

 

 

Accumulated

 

 

Total

stockholders’ equity

 

 

 

Shares

 

 

Amount

 

 

 

Shares (1)

 

 

Amount

 

 

capital

 

 

deficit

 

 

(deficit)

 

Balance as of December 31, 2018

 

 

293,000,000

 

 

$

324,201

 

 

 

 

7,777,100

 

 

$

 

 

$

 

 

$

(242,673

)

 

$

(242,673

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(115,537

)

 

 

(115,537

)

Issuance of Series C convertible preferred stock, net of issuance costs

 

 

25,510,205

 

 

 

48,868

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividend, Series A

 

 

 

 

 

24,120

 

 

 

 

 

 

 

 

 

 

(1,104

)

 

 

(23,016

)

 

 

(24,120

)

Preferred stock accretion, Series A

 

 

 

 

 

2,059

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,059

)

 

 

(2,059

)

Preferred stock dividend, Series B

 

 

 

 

 

823

 

 

 

 

 

 

 

 

 

 

 

 

 

(823

)

 

 

(823

)

Preferred stock accretion, Series B

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

 

 

 

 

(17

)

 

 

(17

)

Preferred stock dividend, Series C

 

 

 

 

 

712

 

 

 

 

 

 

 

 

 

 

 

 

 

(712

)

 

 

(712

)

Preferred stock accretion, Series C

 

 

 

 

 

76

 

 

 

 

 

 

 

 

 

 

 

 

 

(76

)

 

 

(76

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,104

 

 

 

 

 

 

1,104

 

Balance as of September 30, 2019

 

 

318,510,205

 

 

$

400,876

 

 

 

 

7,777,100

 

 

$

 

 

$

 

 

$

(384,913

)

 

$

(384,913

)

 

 

 

 

Convertible Preferred

Stock

Series A, B, & C

 

 

 

Common Stock

 

 

Additional

paid-in

 

 

Accumulated

 

 

Total

stockholders’ equity

 

 

 

Shares

 

 

Amount

 

 

 

Shares (1)

 

 

Amount

 

 

capital

 

 

deficit

 

 

(deficit)

 

Balance as of June 30, 2019

 

 

293,000,000

 

 

$

342,213

 

 

 

 

7,777,100

 

 

$

 

 

$

 

 

$

(343,626

)

 

$

(343,626

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(31,899

)

 

 

(31,899

)

Issuance of Series C convertible preferred stock, net of issuance costs

 

 

 

 

 

48,868

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividend, Series A

 

 

25,510,205

 

 

 

8,040

 

 

 

 

 

 

 

 

 

 

(407

)

 

 

(7,633

)

 

 

(8,040

)

Preferred stock accretion, Series A

 

 

 

 

 

687

 

 

 

 

 

 

 

 

 

 

 

 

 

(687

)

 

 

(687

)

Preferred stock dividend, Series B

 

 

 

 

 

274

 

 

 

 

 

 

 

 

 

 

 

 

 

(274

)

 

 

(274

)

Preferred stock accretion, Series B

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

(6

)

 

 

(6

)

Preferred stock dividend, Series C

 

 

 

 

 

712

 

 

 

 

 

 

 

 

 

 

 

 

 

(712

)

 

 

(712

)

Preferred stock accretion, Series C

 

 

 

 

 

76

 

 

 

 

 

 

 

 

 

 

 

 

 

(76

)

 

 

(76

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

407

 

 

 

 

 

 

407

 

Balance as of September 30, 2019

 

 

318,510,205

 

 

$

400,876

 

 

 

 

7,777,100

 

 

$

 

 

$

 

 

$

(384,913

)

 

$

(384,913

)

 

(1)Common stock of Harmony Biosciences Holdings, Inc.

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

4


 

HARMONY BIOSCIENCES HOLDINGS, INC. AND SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, except share and per share data)

 

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES