Harmony Biosciences (HRMY): Assessing Valuation After Major Fragile X Trial Setback

Harmony Biosciences Holdings (HRMY) just dropped major news that has investors talking. The company revealed that its pivotal Phase 3 clinical trial of ZYN002 in Fragile X syndrome did not achieve its main goal, primarily because the placebo group’s response was stronger than anticipated. Given that Fragile X is a rare disorder with no approved therapies, this update is not just a blow for patients but also for Harmony’s pipeline ambitions. Investors now have to wrestle with what this setback means for Harmony’s future prospects, especially as ZYN002 was a leading late-stage candidate.

This announcement has come at a tough time for the stock. Shares of Harmony have tumbled recently, reflecting a sharp shift in sentiment and concerns about the company’s growth narrative. Over the past year, the stock is down nearly 30%, and losses have accelerated in the past month. While Harmony is still advancing other late-stage programs, including planned Phase 3 trials for pitolisant HD in narcolepsy and idiopathic hypersomnia later this year, the disappointment from the Fragile X study undoubtedly weighs on immediate momentum and raises the stakes for the rest of the pipeline.

After such a significant move lower, the big question is whether Harmony Biosciences is now attractively valued after this setback or if the market is already preparing for slower growth ahead.

Most Popular Narrative: 38% Undervalued

According to the most widely followed narrative, Harmony Biosciences Holdings is seen as significantly undervalued, with a fair value estimate about 38% higher than the current share price. This narrative reflects the consensus among analysts, who emphasize the company's robust long-term revenue and earnings growth outlook despite near-term setbacks.

*The large and growing patient populations affected by sleep disorders and rare neurodevelopmental conditions, driven by demographic aging and increased recognition and diagnosis, are expanding Harmony's total addressable market. This supports sustained long-term revenue growth for both existing and pipeline products. Harmony is positioned to capture new sources of revenue and reduce product concentration risk through near-term late-stage pipeline catalysts, including potential first-to-market launches for ZYN002 in Fragile X syndrome and additional pitolisant formulations (HD and GR), each aimed at high-unmet-need, orphan indications.*

Curious about the key assumptions behind this bullish valuation? The analysts’ consensus hinges on an ambitious growth plan, backed by bold forecasts for future revenues, margins, and market expansion. Want to see which specific numbers push the fair value so far above the market? Explore the full narrative to uncover the financial blueprint driving these projections.

Result: Fair Value of $44.55 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this outlook could change rapidly if competition for Wakix intensifies or if future clinical trial disappointments further erode confidence in Harmony’s pipeline.

Find out about the key risks to this Harmony Biosciences Holdings narrative.

Another View: What Does Our DCF Model Say?

Looking from another angle, our SWS DCF model also indicates the shares are undervalued, which reinforces the earlier valuation. However, will long-term cash flows materialize as expected, or are there hidden surprises ahead?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Harmony Biosciences Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Harmony Biosciences Holdings Narrative

If you think there’s more to the story, or you’re the type who likes to dig into the numbers yourself, you can craft your own in just a few minutes. Do it your way

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Harmony Biosciences Holdings.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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