HARMONY BIOSCIENCES HOLDINGS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. We
intend such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All
statements other than statements of historical facts contained in this Quarterly
Report on Form 10-Q, including statements regarding our future results of
operations and financial position, the anticipated impact of the COVID-19
pandemic on our business, business strategy, products, prospective products,
product approvals, research and development costs, anticipated timing and
likelihood of success of clinical trials, expected timing of the release of
clinical trial data, the plans and objectives of management for future
operations and future results of anticipated products, are forward-looking
statements. These statements involve known and unknown risks, uncertainties and
other important factors that may cause our actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. Important
factors that could cause such differences include, but are not limited to,
statements about:

? our commercialization efforts and strategy for WAKIX;

the rate and degree of market acceptance and clinical utility of pitolisant in

? additional indications, if approved, and any other product candidates we may

develop or acquire, if approved;

? our research and development plans, including our plans to explore the

therapeutic potential of pitolisant in additional indications;

? our ongoing and planned clinical trials;

? our ability to expand the scope of our license agreement with Bioprojet Société

Civile de Recherche ("Bioprojet");

? the availability of favorable insurance coverage and reimbursement for WAKIX;

? the impact of the COVID-19 pandemic;

? the timing of, and our ability to obtain, regulatory approvals for pitolisant

for other indications as well as any other product candidates;

? our estimates regarding expenses, future revenue, capital requirements and

additional financing needs;

our ability to identify additional products or product candidates with

? significant commercial potential that are consistent with our commercial

objectives;

? our commercialization, marketing and manufacturing capabilities and strategy;

? significant competition in our industry;

? our intellectual property position;

? loss or retirement of key members of management;

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? failure to successfully execute our growth strategy, including any delays in

our planned future growth;

? our failure to maintain effective internal controls; and

? the impact of government laws and regulations.

In some cases, you can identify forward-looking statements by terms such as
"may," "will," "should," "expect," "plan," "anticipate," "could," "intend,"
"target," "project," "contemplate," "believe," "estimate," "predict,"
"potential", or "continue" or the negative of these terms or other similar
expressions. The forward-looking statements in this Quarterly Report on
Form 10-Q are only predictions. We have based these forward-looking statements
largely on our current expectations and projections about future events and
financial trends that we believe may affect our business, financial condition
and results of operations. These forward-looking statements speak only as of the
date of this Quarterly Report on Form 10-Q and are subject to a number of
important factors that could cause actual results to differ materially from
those in the forward-looking statements, including the factors described under
the section in our most recent Annual Report on Form 10-K entitled "Item 1A.
Risk Factors" and the sections in this Quarterly Report on Form 10-Q titled
"Risk Factors" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.

Unless otherwise indicated, information contained in this Quarterly Report on
Form 10-Q concerning our industry, including industry statistics and forecasts,
competitive position and the markets in which we operate is based on information
from independent industry and research organizations, other third-party sources
and management estimates. Management estimates are derived from publicly
available information released by independent industry analysts and other
third-party sources, as well as data from our internal research, and are based
on assumptions made by us upon reviewing such data, and our experience in, and
knowledge of, such industry and markets, which we believe to be reasonable. In
addition, projections, forecasts, assumptions and estimates of the future
performance of the industry in which we operate and our future performance are
necessarily subject to uncertainty and risk due to a variety of factors,
including those described in "Risk Factors" and "Cautionary Note Regarding
Forward-Looking Statements." These and other factors could cause results to
differ materially from those expressed and forecasts in the estimates made by
the independent parties and by us.

You should read this Quarterly Report on Form 10-Q and the documents that we
reference in this Quarterly Report on Form 10-Q completely and with the
understanding that our actual future results may be materially different from
what we expect. We qualify all of our forward-looking statements by these
cautionary statements. Except as required by applicable law, we do not plan to
publicly update or revise any forward-looking statements contained herein,
whether as a result of any new information, future events, changed circumstances
or otherwise.

As used herein, the terms "Harmony," "we," "us," "our" and "the Company" refer to Harmony Biosciences Holdings, Inc., a Delaware corporation.

Company Overview

We are a commercial-stage, rare disease pharmaceutical company focused on
developing and commercializing innovative therapies for patients living with
rare neurological diseases who have unmet medical needs. Our product, WAKIX
(pitolisant), is a first-in-class molecule with a novel mechanism of action
("MOA") specifically designed to increase histamine signaling in the brain by
binding to H3 receptors. In August 2019, WAKIX was approved by the U.S. Food and
Drug Administration (the "FDA") for the treatment of excessive daytime
sleepiness ("EDS") in adult patients with narcolepsy, and its U.S. commercial
launch was initiated in November 2019. On October 13, 2020, WAKIX was approved
by the FDA for the treatment of

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cataplexy in adult patients with narcolepsy. WAKIX is the first-and-only approved product for patients with narcolepsy that is not scheduled as a controlled substance by the Drug Enforcement Administration (the "DEA").

We plan to pursue label expansion for WAKIX in narcolepsy in pediatric patients
and engage with the FDA in pursuit of pediatric exclusivity. Our strategic
partner, Bioprojet is evaluating pitolisant in pediatric patients with
narcolepsy in a Phase 3 trial. Bioprojet amended the protocol and increased the
number of patients in the trial which has pushed out the timeline for trial
completion and read out of the data. We and Bioprojet have decided to wait for
the read out of the data to inform how best to advance the pediatric narcolepsy
program. We believe that our strategic decision to wait for this data before
advancing the pediatric program is the most prudent and thoughtful path forward
from a development and financial perspective. In the meantime, we are continuing
to evaluate regulatory strategies with regard to obtaining pediatric
exclusivity. We anticipate providing an update on the path forward in the
coming months.

We believe that pitolisant's ability to regulate histamine gives it the
potential to provide therapeutic benefit in other rare neurological diseases
that are mediated through H3 receptors and histamine signaling. Beyond
narcolepsy, we are initially focusing on the treatment of EDS associated with
Prader-Willi Syndrome ("PWS") and myotonic dystrophy, otherwise known as
dystrophia myotonica ("DM"). In December 2020, we initiated a Phase 2 clinical
trial to evaluate pitolisant for the treatment of EDS and other key symptoms in
patients with PWS and anticipate topline results from this trial in the first
half of 2022. In June 2021, we initiated a Phase 2 clinical trial to evaluate
pitolisant for the treatment of EDS, fatigue and cognitive dysfunction in adult
patients with DM1 and anticipate topline results in the second half of 2022. In
addition to these indications, we intend to further explore pitolisant in other
rare neurological diseases in which EDS, fatigue and/or cognitive impairment are
prominent symptoms with significant impact on daily functioning.

We also seek to expand our pipeline through the acquisition of additional assets
that focus on addressing the unmet needs of patients with rare neurological
diseases and are targeting assets that will allow us to further leverage the
expertise and infrastructure that we have successfully built at Harmony so we
can optimize the benefit of internal synergies. Consistent with this objective,
on August 4, 2021, we acquired HBS-102, a Melanin-concentrating hormone receptor
1 (MCHR1) antagonist previously developed as CSTI-100/ALB-127258(a)/ALB-127258
(the "Compound"), along with intellectual property and other assets related to
the development, manufacture, and commercialization of the Compound from
ConSynance Therapeutics, Inc. In connection with the acquisition, we made an
upfront payment of $3.5 million and will be required to make certain payments
upon the achievement of certain development milestones, regulatory milestones,
and sales milestones and pay ongoing royalties upon commercialization. We
acquired full development and commercialization rights globally, but we have
provided a grant-back license to ConSynance for the development and
commercialization of the Compound in Greater China. We are currently assessing
potential clinical targets for HBS-102 which will inform our development
strategy going forward.

Pitolisant was developed by Bioprojet and approved by the European Medicines
Agency ("EMA") in 2016 for the treatment of narcolepsy in adult patients with or
without cataplexy. We acquired an exclusive license to develop, manufacture and
commercialize pitolisant in the United States pursuant to our license agreement
with Bioprojet (as amended, the "Bioprojet License Agreement") in July 2017.
Pitolisant was granted Orphan Drug Designation for the treatment of narcolepsy
by the FDA in 2010. It received Breakthrough Therapy designation for the
treatment of cataplexy in patients with narcolepsy and Fast Track status for the
treatment of EDS and cataplexy in patients with narcolepsy in April 2018.

Our operating subsidiary, Harmony Biosciences, LLC, was formed in May 2017. We
were formed in July 2017 as Harmony Biosciences II, LLC, a Delaware limited
liability company, and we converted to a Delaware corporation named Harmony
Biosciences II, Inc. in September 2017. In February 2020, we changed our name to
Harmony Biosciences Holdings, Inc. Our operations to date have consisted of
building and staffing our organization, acquiring the rights to pitolisant,
raising capital, opening an investigational new drug applications ("IND") for
pitolisant in narcolepsy, conducting an Expanded Access Program ("EAP") for
pitolisant for appropriate patients with narcolepsy in the United States,
preparing and submitting our NDA for pitolisant, gaining NDA approval for WAKIX
for the treatment of EDS or cataplexy in adult patients with narcolepsy, and

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launching and commercializing WAKIX in the United States. In addition, we have
opened INDs for development programs in PWS and DM and have initiated clinical
trials in PWS and DM in pursuit of potential new indications in those rare
disease patient populations.

Liquidity and Sources of Funding

For the nine months ended September 30, 2021, we generated $214 million of net
product revenues. We have financed our operations primarily with (a) proceeds
from sales of our convertible preferred stock, (b) borrowings under (i) our
credit agreement (the "Credit Agreement") with OrbiMed Royalty & Credit
Opportunities III, LP ("OrbiMed"),  and (ii) our credit agreement (the
"Blackstone Credit Facility") with Blackstone Alternative Credit Advisors LP
("Blackstone"), (c) proceeds from our initial public offering ("IPO") in August
2020, and (d) proceeds from the sale of common stock to Blackstone.

We believe that our anticipated cash from operating and financing activities and
existing cash and cash equivalents will enable us to meet our operational
liquidity needs and fund planned investing activities for at least
twelve months. We have based this estimate on assumptions that may prove to be
incorrect, and we could use our capital resources sooner than we expect. See
"-Liquidity and Capital Resources."

Our revenues and expenses in future quarters may differ from our expectations as we:

? commercialize WAKIX in the United States for the treatment of EDS or cataplexy

in adult patients with narcolepsy;

? incur sales and marketing costs to support the commercialization of WAKIX and

any additional product candidates;

? pay royalties and make milestone payments to Bioprojet for the license of

pitolisant;

? incur manufacturing costs for WAKIX and any additional product candidates;

? conduct post-approval require studies for WAKIX required by the FDA;

? conduct clinical trials in PWS, DM, and other potential new indications for

pitolisant or any additional product candidates;

? conduct a pediatric narcolepsy program in pursuit of an indication and

extension of our patents based on pediatric exclusivity;

? conduct earlier stage research and development activities for pitolisant;

? conduct earlier stage research and development activities for HBS-102;

? support independent investigator-initiated research for which there is a valid

   scientific rationale;


 ? hire additional personnel;

? invest in measures to protect and expand our intellectual property;

? incur interest expenses in conjunction with our debt facility;

seek regulatory approvals for additional indications for pitolisant, HBS-102,

? or any additional product candidates that successfully complete clinical

   development;


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? acquire or in-license other assets and technologies; and

? incur additional costs associated with being a public company.

Commercial Launch Metrics

As of September 30, 2021, approximately 40% of unique healthcare professionals
("HCPs") (out of a total of approximately 8,000 HCPs who treat the majority of
the diagnosed narcolepsy patient population) have prescribed WAKIX since it
became available in November 2019. The average number of patients on WAKIX at
September 30, 2021 was approximately 3,500. Additionally, as of September 30,
2021, we have secured and maintained formulary access for approximately 80% of
all insured lives (Commercial, Medicare and Medicaid) in the United States.
Within these covered lives, we have continued to observe additional favorable
access to WAKIX for type 1 narcolepsy patients subsequent to the expanded
approval of WAKIX for the treatment of cataplexy in adult patients with
narcolepsy in October 2020.

COVID-19 Business Update

During the COVID-19 pandemic, we developed a response strategy that included establishing cross-functional response teams and implementing business continuity plans to manage the impact of the pandemic on our employees, patients, HCPs, and our business.

Despite our response strategy, the COVID-19 pandemic has had an effect on our
business and the pharmaceutical industry in general. Although the pandemic has
impacted the way stakeholders interact with one another, we have leveraged
technology and virtual engagement initiatives to offset our reduced in-person
access to HCPs. The COVID-19 pandemic also led to high unemployment and
corresponding loss of medical insurance for many patients, caused a change in
relationship dynamics between patients and their HCPs, and impacted the way
patients took, or did not take, their medication. As a result, we were not able
to adequately gauge our growth rate and believe that our growth may be adversely
impacted in the future if there is a reemergence or future outbreak of COVID-19,
including any COVID-19 variant.

We intend to maintain meaningful engagement, generate awareness and educate our patients, HCPs and payors to support our commercial launch performance.

Commercialization

With respect to our commercialization activities, we believe the COVID-19
pandemic has put pressure on top-line prescription demand for WAKIX, primarily
due to (i) our field sales team's reduced ability to access HCPs in person, and
(ii) fewer patients seeing HCPs for prescriptions or treatments. The impact on
demand for WAKIX may have also been related to a reduced ability of prescribers
to diagnose narcolepsy patients given the limitations in access to sleep
testing, the reduced ability to see patients due to (i) cancelled appointments
and (ii) the reprioritization of healthcare resources toward the treatment of
COVID-19, both of which lead to fewer prescriptions. Despite these challenges,
we continued to engage and educate HCPs virtually on the overall benefit/risk
profile of WAKIX and continued to provide support for people living with
narcolepsy. As offices, clinics and institutions have increased in-person
interactions pursuant to health authority and local government guidelines, our
field teams are re-initiating in-person interactions with HCPs and customers,
but the timing and level of engagement may vary by account and region and may be
adversely impacted in the future where reemergence or future outbreaks of
COVID-19, including the rise of variants, may occur. Although we are beginning
to see increased access to HCPs for our sales team and the economy is beginning
to open up, we are still in a transition phase and expect continued, but
decreasing, pressure on top line demand in future quarters as the challenges
presented by COVID-19 begin to subside.

During the pandemic, elevated unemployment and the corresponding loss of health
insurance caused some eligible patients to shift from commercial insurance to
free drug and patient assistance programs, which impacted our ability to convert
demand into revenue. Given the high unemployment rates and resulting loss of

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employer-sponsored insurance coverage, some patients also shifted from commercial payor coverage to government payor coverage, which may have impacted, and may continue to impact, our net revenue.

Supply Chain

We currently expect to have adequate supply of WAKIX through the fourth quarter
of 2022, with additional API on-hand inventory to support at least 24 months
beyond this time frame. We continue to work closely with our third-party
manufacturers, distributors and other partners to manage our supply chain
activities and mitigate potential disruptions to our product supplies as a
result of the COVID-19 pandemic. We believe that our access to the required
production lines to produce additional API and WAKIX finished product throughout
the next 12 to 18 months may not be directly impacted should there be a need to
reprioritize manufacturing resources for the production of materials utilized
for COVID-19 vaccines.

Our manufacturing partners in France and the United States continue to be
operational. If there is a subsequent outbreak of COVID-19, or if it reemerges
for an extended period of time and/or begins to impact essential distribution
systems such as transatlantic freight, FedEx, UPS and postal delivery, we may
experience disruptions to our supply chain and operations with associated delays
in the manufacturing and supply of our products.

Research and Development

The COVID-19 pandemic has negatively impacted the pharmaceutical industry's
ability to conduct clinical trials. As a result of some challenges that we have
experienced due to the COVID-19 pandemic, we have taken measures and put
contingency plans in place in order to advance our clinical development
programs. We implemented remote and virtual approaches to clinical trials,
including using telemedicine for remote clinic visits to perform efficacy
assessments and sending out licensed HCPs to each patient to collect safety
assessments (e.g. labs, electrocardiograms) as required by the protocols. We
performed and continue to perform remote site visits and data monitoring where
possible. These measures were instituted with the intent of maintaining patient
safety and trial continuity while preserving study integrity. One unique
challenge we continue to face is the ability to access sleep labs during the
COVID-19 pandemic in order to conduct objective sleep testing, which is required
for some of our clinical trials. In addition, we rely on contract research
organizations ("CROs") or other third parties to assist us with clinical trials,
and we cannot guarantee that they will continue to perform their contractual
duties in a timely and satisfactory manner as a result of the COVID-19 pandemic.
In addition, the COVID-19 pandemic has resulted in a significant increase in FDA
workload as well as the need to reprioritize the projects under review. As a
result, we may experience delays in FDA timelines along the course of the
regulatory process (e.g. milestone meetings) and PDUFA action dates. If there is
a subsequent outbreak of COVID-19 or any variant thereof or if it reemerges for
an extended period of time in the future, we may experience significant delays
in our clinical development timelines, which would. adversely affect our
business, financial condition, results of operations and growth prospects.

Corporate Development and Other Financial Impacts

The COVID-19 pandemic evolved rapidly and caused a significant disruption of
domestic and global financial markets. In addition, the pandemic limited our
ability to conduct in-person due diligence and other interactions to identify
new opportunities. If there is a subsequent outbreak of COVID-19 or any variant
thereof or if it reemerges for an extended period of time, we may be unable to
access additional capital, which could negatively affect our ability to execute
on certain corporate development transactions or other important investment
opportunities.

The COVID-19 pandemic has also affected, and may continue to affect, our
business operations and financial results. The extent of the impact of the
COVID-19 pandemic or the potential impact of a reemergence or outbreak of the
pandemic on our ability to generate sales of, and revenues from, our approved
products, our clinical development and regulatory efforts, our corporate
development objectives and the value of and market

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for our common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time.

Corporate Responsibility Impact

We have provided support with relief efforts to our local communities,
patient-focused organizations and other charitable organizations during the
COVID-19 pandemic, including corporate donations, food and medical supplies and
other resources. For the safety and well-being of our employees, consultants and
their families, we have abided by government-issued work-from-home orders during
the COVID-19 pandemic. As COVID-19 cases decrease and more individuals are
vaccinated, we intend to resume an in-office flexible work schedule. We will
continue to clean and sanitize our offices on a regular basis, and adhere to CDC
guidelines.

Financial Operations Overview

Revenue

We did not generate any revenue from inception until the fourth quarter of 2019.
Our current product, WAKIX, was approved by the FDA for the treatment of EDS in
adult patients with narcolepsy in August 2019, became commercially available in
November 2019 and was approved by the FDA for the treatment of cataplexy in
adult patients with narcolepsy in October 2020.

Total revenue consists of net sales of WAKIX. Net sales represent the gross
sales of WAKIX less provisions for product sales discounts and allowances. At
this time, these provisions include trade allowances, rebates to government and
commercial entities, and discounts. Although we expect net sales to increase
over time, the provisions for product sales discounts and allowances may
fluctuate based on the mix of sales to different customer segments and/or
changes in our accrual estimates.

Cost of Product Sales

Cost of product sales includes manufacturing and distribution costs, the cost of
the drug substance, FDA program fees, royalties due to third parties on net
product sales, freight, shipping, handling, storage costs and salaries of
employees involved with production. We began capitalizing inventory upon FDA
approval of WAKIX.

Previously expensed inventory that was manufactured in anticipation for
commercialization preapproval has not had a material impact on our historical
results of operations and is not expected to have a material impact on future
results of operations. Further, previously expensed inventory has not had a
material impact on our gross margin percentage historically, and we do not
anticipate a material impact on our gross margin percentage once our previously
expensed inventories have been exhausted. Our cost of product sales is
increasing moderately as we continue to ramp up production and sales
infrastructure to meet expected demand for WAKIX.

The shelf life of our product is three years from date of manufacture, with the
earliest expiration of current inventory expected to be May 2022. We regularly
review our inventory for obsolescence and expect write-offs from time to time.
We will continue to assess obsolescence in future periods as demand for WAKIX
and the rate of inventory turnover evolves.

Research and Development Expenses

Our research and development expenses have been applied toward the license of
the rights to pitolisant, the conduct of an Expanded Access Program ("EAP") to
provide appropriate patients with pitolisant at no cost as part of a clinical
trial to assess safety prior to the approval of WAKIX, the preparation of the
NDA, and the initiation of development programs for potential new indications
for pitolisant in patients with PWS and DM. We also have research and
development expenses related to our team of Medical Science Liaisons

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("MSLs") who interact with key opinion leaders, with a focus on the science, the
role of histamine in sleep-wake state stability and the novel mechanism of
action of pitolisant. In addition, our MSLs support our market access team with
clinical data presentations to payors upon request and our clinical development
team to identify potential clinical trial sites. Research and development costs
are expensed as incurred. We have significantly increased our research and
development efforts as we advance our clinical programs in PWS and DM and assess
other product candidates to expand our pipeline. Research and development
expenses include:

? employee-related expenses, such as salaries, share-based compensation, benefits

and travel expenses for our research and development personnel;

? direct third-party costs such as expenses incurred under agreements with CROs,

and contract manufacturing organizations ("CMOs");

? manufacturing costs in connection with producing materials for use in

conducting clinical trials;

? costs related to packaging and labeling clinical supplies;

? other third-party expenses directly attributable to the development of our

product candidates; and

? amortization expense for assets used in research and development activities.

Currently, we do not track research and development expenses on an indication-by-indication basis. A significant portion of our research and development costs are external costs, such as fees paid to CROs and CMOs, central laboratories, contractors, and consultants in connection with our clinical development programs. Internal expenses primarily relate to personnel who are deployed across multiple programs.

Product candidates in later stages of clinical development generally have higher
development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials,
milestone payments, and the cost of submitting an NDA to the FDA (and/or other
regulatory authorities). We expect our research and development expenses to be
significant over the next several years as we advance our current clinical
development programs and prepare to seek regulatory approval for additional
indications for pitolisant, HBS-102, as well as potential new product
candidates.

At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of any additional indications for pitolisant or other product candidates that we move forward for regulatory approval. There are numerous risks and uncertainties associated with developing product candidates, including uncertainty related to:

? the duration, costs and timing for clinical trials of our current development

programs and any further clinical trials related to new product candidates;

? the sufficiency of our financial and other resources to complete the necessary

preclinical studies and clinical trials;

the impact of the COVID-19 pandemic, including any future resurgence, on the

ability to initiate new clinical trials and/or maintain the continuity of

? ongoing clinical trials that could be impacted by future shelter-in-place

orders and needs of the health care system to focus on managing patients

affected by COVID-19;

? receiving Bioprojet's consent to pursue additional indications for pitolisant;

 ? the acceptance of INDs for our planned clinical trials or future clinical
   trials;


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? the successful and timely enrollment and completion of clinical trials;

? the successful completion of preclinical studies and clinical trials;

? successful data from our clinical programs that support an acceptable

risk-benefit profile of our product candidates in the intended populations;

? the receipt and maintenance of regulatory and marketing approvals from

applicable regulatory authorities;

establishing agreements with third-party manufacturers for clinical supply for

? our clinical trials and commercial manufacturing, if any new product candidate

is approved;

? entry into collaborations to further the development of our product candidates;

? obtaining and maintaining patent and trade secret protection or regulatory

exclusivity for our product candidates; and

? successfully launching any new product candidates and achieving commercial

sales, if and when approved.

A change in the outcome of any of these variables with respect to the development of any of our programs or any product candidate we develop would significantly change the costs, timing and viability associated with the development and/or regulatory approval of such programs or product candidates.

Sales and Marketing Expenses

Our sales and marketing expenses have primarily been limited to the market
development and launch activities of WAKIX for the treatment of EDS or cataplexy
in adult patients with narcolepsy.  Market development and commercial launch
activities account for a significant portion of the overall company operating
expenses and are expensed as they are incurred. Our sales and marketing expenses
are increasing in the near- and mid-term to support our indications for the
treatment of EDS or cataplexy in adult patients with narcolepsy and to expand
our portfolio with the anticipated growth from potential additional indications.

Sales and marketing expenses include:

? employee-related expenses, such as salaries, share-based compensation, benefits

and travel expenses for our sales and marketing personnel;

healthcare professional-related expenses, including marketing programs,

? healthcare professional promotional medical education, disease education,

conference exhibits and market research;

patient-related expenses, including patient awareness and education programs,

? disease awareness education, patient reimbursement programs, patient support

services and market research;

? market access expenses, including payor education, specialty pharmacy programs

and services to support the continued commercialization of WAKIX; and

? secondary data purchases (i.e. patient claims and prescription data), data

   warehouse development and data management.


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In addition, these expenses include external costs such as website development,
media placement fees, agency fees for patient, medical education and promotional
expenses, market research, analysis of secondary data, conference fees,
consulting fees and travel expenses.

General and Administrative Expenses

General and administrative expenses consist primarily of employee-related
expenses, such as salaries, share-based compensation, benefits and travel
expenses for our personnel in executive, legal, finance and accounting, human
resources, investor relations, and other administrative departments. General and
administrative expenses also consist of office leases, and professional fees,
including legal, tax and accounting and consulting fees.

We anticipate that our general and administrative expenses will increase in the
future to support our continued commercialization efforts, ongoing and future
potential research and development activities, and increased costs of operating
as a public company. These increases will likely include increased costs related
to the hiring of additional personnel and fees paid to outside consultants,
lawyers and accountants, among other expenses. Additionally, we anticipate
increased costs associated with being a public company, including expenses
related to services associated with maintaining compliance with the requirements
of Nasdaq and the SEC, insurance and investor relations costs. If any of our
current or future indication expansion programs or new product candidates obtain
U.S. regulatory approval, we expect that we would incur significantly increased
expenses associated with building a sales and marketing team.

Paragon Agreements

We were party to a management services agreement (the "Management Services
Agreement") with Paragon Biosciences, LLC ("Paragon"), effective on September
22, 2017 through the consummation of our IPO, pursuant to which Paragon provided
us with certain professional services. In exchange for services provided to us
under the Management Services Agreement, we paid Paragon a management fee of
$0.3 million per each calendar month.

We are also party to a right-of-use agreement with Paragon whereby we have access to and the right to use certain office space leased by Paragon in Chicago, Illinois. For the three months ended September 30, 2021, we paid de minimis fees pursuant to this agreement.

Loss on Debt Extinguishment

Loss on debt extinguishment consists primarily of costs of extinguishment of debt during the period related to the prepayment of our credit agreements.

Other Expense, Net

Other expense, net consists primarily of costs of the fair value of the warrants associated with the Credit Agreement we entered into with OrbiMed.

Interest Expense, net

Interest expense, net consists primarily of interest expense on debt facilities
and amortization of debt issuance costs offset by interest income earned on

our
cash balances.

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Results of Operations

The following table sets forth selected items in our unaudited condensed consolidated statements of operations for the periods presented:

                                          Three Months Ended September 30,           Nine Months Ended September 30,
                                             2021                   2020                2021                  2020

                                                   (In thousands)                             (In thousands)

Net product revenue                    $          80,732      $         45,609    $        214,227      $        103,454
Cost of product sales                             14,604                 7,890              37,701                17,820
Gross profit                                      66,128                37,719             176,526                85,634
Operating expenses:
Research and development                          11,739                 4,230              22,916                11,829
Sales and marketing                               16,480                12,601              49,009                38,297
General and administrative                        16,856                10,508              45,704                26,280
Total operating expenses                          45,075                27,339             117,629                76,406
Operating income                                  21,053                10,380              58,897                 9,228

Loss on debt extinguishment                     (26,146)                     -            (26,146)              (22,639)
Other expense, net                                     -               (1,525)                (15)               (3,071)
Interest expense, net                            (5,429)               (6,946)            (19,783)              (20,254)
Net (loss) income before provision
for income taxes                                (10,522)                 1,909              12,953              (36,736)
Income tax benefit (expense)                         902                   

 -             (1,070)                     -
Net (loss) income                      $         (9,620)      $          1,909    $         11,883      $       (36,736)




Net Product Revenue

Net product revenue increased by $35.1 million, or 77.0%, for the three months
ended September 30, 2021 and $110.8 million, or 107.1%, for the nine months
ended September 30, 2021 compared to the same periods in 2020. The increase for
both comparable periods was due to the growing commercial sales of WAKIX which
was launched on November 1, 2019 and the price increase of WAKIX in connection
with the cataplexy indication approval in the fourth quarter of 2020.

Cost of Product Sales

Cost of product sales increased by $6.7 million, or 85.1%, for the three months
ended September 30, 2021 and $19.9 million, or 111.6%, for the nine months ended
September 30, 2021 compared to the same periods in 2020. The increase was due to
the growing commercial sales of WAKIX, which was launched on November 1, 2019.
Cost of product sales is primarily comprised of the royalty payment to
Bioprojet.

Research and Development Expenses

Research and development expenses increased by $7.5 million, or 177.5%, for the
three months ended September 30, 2021 and $11.1 million, or 93.7%, for the
nine months ended September 30, 2021 as compared to the same periods in 2020.
The increase for both comparable periods was primarily due to $3.5 million asset
acquisition of HBS-102, clinical development work associated with PWS and DM and
an increase to stock compensation associated with new awards.

Sales and Marketing Expenses

Sales and marketing expenses increased by $3.9 million, or 30.8% for the three months ended September 30, 2021 and $10.7 million, or 28.0%, for the nine months ended September 30, 2021 as compared

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to the same periods in 2020. The increase for both comparable periods was primarily due to patient engagement and marketing activities and an increase to stock-compensation expense associated with new awards.

General and Administrative Expenses

General and administrative expenses increased by $6.3 million, or 60.4% for the
three months ended September 30, 2021 and $19.4 million, or 73.9%, for the
nine months ended September 30, 2021 as compared to the same periods in 2020.
This is primarily due to intangible asset amortization of the milestone payment
made in connection with the FDA's approval of WAKIX for the treatment of
cataplexy in adult patients with narcolepsy in October 2020, an increase to
stock compensation associated with new awards, and the additional cost of public
company insurance, offset by fees paid to Paragon. Additionally, general
expenses have increased due to an increase in headcount year-over-year as well
as additional spend in 2021 following the COVID-19 pandemic in 2020.

Loss on Debt Extinguishment

Loss on debt extinguishment increased $26.1 million, or 100%, for the three
months ended September 30, 2021 and increased $3.5 million, or 15.5%, for the
nine months ended September 30, 2021 as compared to the same period in 2020. The
three month increase was due to costs of extinguishment of debt during the
period related to the prepayment of the OrbiMed Loan Agreement. The nine month
increase was due increased costs relating to the OrbiMed debt extinguishment as
compared to the extinguishment of debt pertaining to the Loan Agreement with the
multi-draw loan with CRG Servicing LLC (the "CRG Loan"), which occurred in 2020.

Other Expense, Net

Other expense decreased by $1.5 million, or 100.0%, for the three months ended
September 30, 2021 and $3.1 million, or 99.5% for the nine months ended
September 30, 2021, as compared to the same periods in 2020. This is primarily
due to the change in the fair value of the warranty liability in 2020.

Interest Expense, Net

Interest expense decreased by $1.5 million, or 21.8%, or the three months ended
September 30, 2021 and $0.5 million, or 2.3%, for the nine months ended
September 30, 2021, as compared to the same period in 2020 primarily due to
lower interest rates as a result of entering into the Blackstone Credit
Agreement in August 2021, partially offset by an increase in amortization of
deferred financing costs.

Income Taxes

For interim periods, we estimate the annual effective income tax rate and apply
the estimated rate to the year-to-date income or loss before income taxes. The
effective income tax rate was 8.3% and 0.0% for the nine months ended
September 30, 2021 and 2020, respectively. Currently, we have recorded a full
valuation allowance against our net deferred tax assets, primarily related to
federal and state net operating losses.

Liquidity and Capital Resources

Overview

To date, we have financed our operations primarily with (a) proceeds from sales
of our convertible preferred stock; (b) borrowings under our (i) CRG Loan,
(ii) our Credit Agreement with OrbiMed and (iii) our Blackstone Credit
Agreement; (c) the proceeds from our IPO; and (v) the proceeds from the sale of
common stock to Blackstone. From our inception through September 30, 2021, we
have received aggregate proceeds of $345.0 million from sales of our convertible
preferred stock. On August 21, 2020, we completed the IPO of our common stock,
in which we sold 6,151,162 shares of our common stock, including 802,325 shares
of our common stock pursuant to the underwriters' over-allotment option. The
shares began trading on the Nasdaq

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Global Market on August 19, 2020. The shares were sold at a price of $24.00 per
share for net proceeds of approximately $135.4 million. As of September 30,
2021, we had cash, cash equivalents and restricted cash of $190.5 million and
accumulated deficit of $476.3 million. As of September 30, 2021, we had
outstanding debt, net of issuance costs, of $192.1 million.

The unaudited condensed consolidated financial statements have been prepared as
though we will continue as a going concern, which contemplates the realization
of assets and satisfaction of liabilities in the normal course of business.

We believe that our anticipated cash from operating and financing activities,
including as a result of potential availability under the DDTL (defined below),
and existing cash and cash equivalents will enable us to meet our operational
liquidity needs and fund our planned investing activities for the next
12 months. We have based this estimate on assumptions that may prove to be
incorrect, and we could use our capital resources sooner than we expect. See
"-Overview-Liquidity and Sources of Funding."

Blackstone Credit Agreement

On August 9, 2021, the Company entered into the Blackstone Credit Agreement that
provides for (i) a senior secured term loan facility in an aggregate original
principal amount of $200.0 million (the "Initial Term Loan") and (ii) a senior
secured delayed draw term loan facility in an aggregate principal amount up to
$100.0 million (the "DDTL" and, together with the Initial Term Loans, the
"Loans"). The DDTL will become available on August 9, 2022. We used
substantially all of the proceeds from the Blackstone Credit Agreement, and the
related sale of our common stock, to repay the balance of the OrbiMed Loan.

The repayment schedule for the Initial Loan consists of quarterly $0.5 million
principal payments commencing on December 31, 2021 and increasing to quarterly
$5 million payments beginning on March 31, 2024, with a $145.5 million payment
due on the maturity date of August 9, 2026 ("Maturity Date"). Interest is
payable quarterly commencing on November 9, 2021 and continuing through the
Maturity Date. The Initial Loan bears interest at a per annum rate equal to
LIBOR, subject to a 1.00% floor, plus 6.50%.The Loans are and will be guaranteed
by our subsidiary Harmony Biosciences, LLC and certain of our future
subsidiaries that are required to become a party thereto as guarantors.

The Blackstone Credit Agreement contains affirmative and negative covenants,
including limitations on our ability, among other things, to incur additional
debt, grant or permit additional liens, make investments and acquisitions, merge
or consolidate with others, dispose of assets, pay dividends and distributions
and enter into affiliate transactions, in each case, subject to certain
exceptions. In addition, the Blackstone Credit Agreement contains a financial
covenant that requires us to maintain at all times cash and cash equivalents in
certain deposit accounts in an amount at least equal to $10.0 million.

OrbiMed Credit Agreement

On February 28, 2019, we entered into the CRG Loan for an aggregate of $200.0
million of which $102.5 million was outstanding as of December 31, 2019. On
January 9, 2020, we entered into the Credit Agreement with OrbiMed for an
aggregate of $200.0 million and paid off all of our obligations under the CRG
Loan. Borrowings under the Credit Agreement are collateralized by all of the
Company's assets, excluding the intellectual property licensed through the
Bioprojet License Agreement. At the time of prepayment or repayment of all or
any portion of the principal of the OrbiMed Loan, the Company is required to pay
an exit fee of 7.0% of the principal amount of the OrbiMed Loan prepaid, repaid,
or required to be prepaid or repaid. The Credit Agreement matures on January 9,
2026 and bears an interest rate of the greater of (a) LIBOR or (b) 2.00% per
annum, plus 11.00% per annum. When the LIBOR rate is no longer used post-2021,
the Prime Rate will be used in the determination of the interest rate. The
Credit Agreement requires compliance with certain financial covenants, including
minimum net revenue thresholds and cash balance requirements (which include
maintaining minimum liquidity of $12.5 million), and financial reporting
requirements. We have been in compliance with the financial covenants under the
Credit Agreement since it was entered into on January 9,

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2020. The Credit Agreement also contains certain negative restrictive covenants
that either limit our ability to, or require a mandatory prepayment in the event
we, engage in new lines of business, incur additional indebtedness or liens,
make certain investments, make certain payments, pay cash dividends, merge with
other companies or consummate certain changes of control, acquire other
companies, transfer or dispose of certain assets, liquidate or dissolve, amend
certain material agreements, enter into sale and leaseback transactions, enter
into various other specified transactions, and change our name, location,
executive office or executive management without notice.

Agreement Related to Intellectual Property

In August 2021, the Company entered into an asset purchase agreement with
ConSynance Therapeutics, Inc. to acquire HBS-102 (formerly "CSTI-100"), a
potential first-in-class molecule with a novel mechanism of action. Under the
terms of the agreement, the Company acquired full development and
commercialization rights globally, with the exception of Greater China, for $3.5
million, which was recorded in research and development within the accompanying
unaudited condensed consolidated statement of operations and comprehensive loss
for the three and nine months ended September 30, 2021. Additionally, there are
payments due upon the achievement of certain milestones including $1.8 million
for preclinical milestones, $19 million for development milestones, $44 million
for regulatory milestones and $110 million for sales milestones.

Recent Milestone Payment

Upon FDA approval of WAKIX for the treatment of cataplexy in adult patients with
narcolepsy in October 2020 (the "Cataplexy Milestone Trigger Date"), we became
obligated to make the $100.0 million milestone payment (the "Cataplexy Milestone
Payment") to Bioprojet pursuant to the terms of the Bioprojet License Agreement.
Subsequently, in October 2020, we made a payment to Bioprojet of $2.0 million to
extend the Cataplexy Milestone Payment due date to within 90 days of the
Cataplexy Milestone Trigger Date. On January 6, 2021, we made the $100.0 million
Cataplexy Milestone Payment in full to Bioprojet.

Cash Flows

The following table sets forth a summary of our cash flows for the three months ended September 30, 2021 and 2020:

                                  Nine Months Ended September 30,
                                     2021                   2020

Selected cash flow data                    (In thousands)
Cash provided by (used in):
Operating activities           $          61,024      $       (13,032)
Investing activities                   (100,298)                   (2)
Financing activities                         347               210,317




Operating Activities

Net cash provided by operating activities for the nine months ended
September 30, 2021 consisted of our net income of $11.8 million adjusted for
non-cash items of $26.1 million related to loss on extinguishment of debt, $14.0
million related to intangible amortization and depreciation and $11.7 million
related to stock-based compensation expense. Net working capital excluding cash
decreased by $4.6 million.

Net cash used in operating activities for the nine months ended September 30,
2020 consisted of our net loss of $36.7 million adjusted for non-cash items of
$22.6 million associated with loss on extinguishment of debt and $8.7 million
related to intangible amortization and fair value of warrants. Net working
capital excluding cash decreased by $11.2 million due to company growth and

the
commercial launch of WAKIX.

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Investing Activities

Net cash used in investing activities for the nine months ended September 30,
2021 was $100.3 million, which was primarily attributable to the $100.0 million
milestone payment associated with the Bioprojet License Agreement.  There were
no significant investing activities for the nine months ended September 30,
2020.

Financing Activities

Net cash provided by financing activities for the nine months ended
September 30, 2021 was $0.3 million, which primarily consisted of $190.9 million
in proceeds associated with the Blackstone Credit Agreement, net of issuance
costs, and $29.7 million in proceeds associated with issuance of common stock to
Blackstone, net of issuance costs. These proceeds were partially offset by
$222.0 million in payments of principal and exit fees associated with the
extinguishment of the OrbiMed Credit Agreement.

Net cash provided by financing activities for the nine months ended September
30, 2020 was $210.3 million, which primarily consisted of $194.2 million
associated with the OrbiMed Credit Agreement net of issuance costs and net
proceeds from our IPO of $135.4 million, offset with $120.6 million of repayment
and exit fees associated with the CRG Loan.

Off-Balance Sheet Arrangements

For the nine months ended September 30, 2021 and 2020, we did not have any off-balance sheet arrangements, as defined under SEC rules.

Critical Accounting Policies and Significant Judgments and Estimates

Our management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America ("GAAP"). The preparation of these financial statements requires us to
make estimates, judgments and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities as of
the dates of the balance sheets and the reported amounts of expenses during the
reporting periods. In accordance with GAAP, we evaluate our estimates and
judgments on an ongoing basis.

Significant estimates include assumptions used in the determination of some of
our costs incurred under our services type agreements and which costs are
charged to research and development and general and administrative expense. We
base our estimates on historical experience and on various other factors that we
believe are reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

We define our critical accounting policies as those under GAAP that require us
to make subjective estimates and judgments about matters that are uncertain and
are likely to have a material impact on our financial condition and results of
operations, as well as the specific manner in which we apply those principles.
During the quarter covered by this report, there were no material changes to the
accounting policies and assumptions previously disclosed, except as disclosed in
Note 3 to the unaudited condensed consolidated financial statements contained
herein.

Recent Accounting Pronouncements

See Note 3 to our unaudited condensed consolidated financial statements for recent accounting pronouncements.

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The JOBS Act

We are an "emerging growth company", or EGC, as defined in the Jumpstart Our
Business Startups Act, or JOBS Act, of 2012. Under the JOBS Act, emerging growth
companies can delay adopting new or revised accounting standards issued
subsequent to the enactment of the JOBS Act until such time as those standards
apply to private companies.

We have elected to use this extended transition period for complying with new or
revised accounting standards that have different effective dates for public and
private companies until the earlier of the date we (i) are no longer an EGC or
(ii) affirmatively and irrevocably opt out of the extended transition period
provided in the JOBS Act. As a result, our financial statements may not be
comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates. If we were to subsequently
elect instead to comply with these public company effective dates, such election
would be irrevocable pursuant to the JOBS Act.

We will remain an EGC until the earliest of (i) the last day of our fiscal year
(a) following the fifth anniversary of the completion of the initial public
offering of our common stock, (b) in which we have total annual gross revenues
of at least $1.07 billion or (ii) in which we are deemed to be a large
accelerated filer, which means the market value of our common stock that is held
by non-affiliates exceeds $700.0 million as of the prior June 30th and (iii) the
date on which we have issued more than $1.0 billion in non-convertible debt
securities over a three-year period. We will no longer be an ECG as of December
31, 2021, after which we will not be able to take advantage of the reduced
disclosure requirements applicable to an ECG.

Non-GAAP Financial Measures

In addition to our GAAP results, we provide certain non-GAAP metrics including
adjusted net income and adjusted net income per share. We believe that the
presentation of these measures provides important supplemental information to
management and investors regarding our performance. These measurements are not a
substitute for GAAP measurements, and the manner in which we calculate adjusted
net income and adjusted net income per share may not be identical to the manner
in which other companies calculate adjusted net income and adjusted net income
per share. Management uses these non-GAAP measurements as an aid in monitoring
our on-going financial performance from quarter-to-quarter and year-to-year on a
regular basis and for benchmarking against comparable companies.

EBITDA is intended to provide a measure of the Company's operating performance as it eliminates the effects of financing and capital expenditures. EBITDA consists of GAAP net loss excluding: (i) interest expense, (ii) income tax provision, (iii) depreciation and (iv) amortization of intangibles.

Non-GAAP adjusted net income and non-GAAP adjusted net income (loss) per share
are intended to provide an enduring, normalized view of net income and our
broader business operations that we expect to experience on an ongoing basis by
removing items which may be irregular, one-time, or non-recurring from net
income. This enables us to identify underlying trends in our business that could
otherwise be masked by such items.

Non-GAAP adjusted net income consists of GAAP net loss excluding: (i) interest
expense, (ii) income tax provision, (iii) depreciation, (iv) amortization of
intangibles, (v) stock-based compensation, (vi) loss on debt extinguishment, and
(vii) warrant expense.

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A reconciliation of GAAP net loss to non-GAAP adjusted net income (loss) appears in the table below (in thousands except share and per share data):

                                         Three Months Ended September 30,           Nine Months Ended September 30,
                                            2021                  2020                 2021                  2020
Net (loss) income                     $         (9,620)     $           1,909    $          11,883     $        (36,736)
Non-GAAP Adjustments:
Interest expense                                  5,429                 6,946               19,783                20,254
Taxes                                             (902)                     -                1,070                     -
Depreciation                                         99                   100                  299                   294
Amortization                                      4,573                 1,867               13,781                 5,560
EBITDA                                            (421)                10,822               46,816              (10,628)
Additional Non-GAAP Adjustments:
Stock-based compensation expense                  4,664                 1,330               11,722                 2,266
Loss on debt extinguishment                      26,146                     -               26,146                22,639
Warrant expense                                       -                 1,525                    -                 3,109
Non-GAAP adjusted net income          $          30,389     $          13,677    $          84,684     $          17,386

Accumulation of yield on preferred
stock                                                 -               (6,013)                    -              (26,904)

Non-GAAP adjusted net income
(loss) available to common
stockholders                                     30,389                 7,664               84,684               (9,518)

GAAP reported net (loss) income
per diluted share                     $          (0.17)     $          (0.14)                 0.20     $          (4.15)
Non-GAAP adjusted net income
(loss) per diluted share              $            0.51     $            0.25                 1.44     $          (0.62)

Weighted average number of shares
of common stock used in non-GAAP
diluted per share (1)                        59,270,603            30,212,959           58,776,158            15,324,362

The difference in diluted shares compared to the US GAAP computation for the

three months ended September 30, 2021, is because all stock options and

(1) warrants have been excluded from the computation of diluted weighted-average

shares outstanding. See Note 14 to the unaudited condensed consolidated

financial statements.

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