Harmony Biosciences, Tuesday's IBD 50 Stocks to Watch pick, is a leading health stock hitting a buy point in a cup-with-handle base.
The company ranks fourth in the Medical-Biomed/Biotech industry group, which is sixth out of the 197 IBD groups, holding a solid 97 Group Relative Strength Rating.
The pharmaceutical juggernaut specializes in therapies for people with neurological conditions, focusing on narcolepsy, a rare sleep disorder. This condition affects just 165,000 people in the U.S.
The company received FDA approval in August 2019 for pitolisant, its first narcolepsy drug, sold under the Wakix brand name. More than 4,000 patients currently take the drug, according to the Q2 earnings release.
Wakix will be eligible for patent challenges in August 2023, according to drugpatentwatch.com. This date may be extended up to six months, but the drug won't go on the generic market until 2029 at the earliest.
Pitolisant is currently in clinical trials for pediatric use and potency in other neurological disorders, as part of the company's growth strategy.
Health Stock Hit A Buy Point In A Base
HRMY shares rose Tuesday and broke out of a cup-with handle base, hitting the 52.62 buy point on the MarketSmith chart, but the health stock has pulled back.
The stock jumped 7.2% on Oct. 14 after Jefferies upgraded shares to a buy rating and raised the price target to 61. Goldman Sachs recently cut the target to 51 but maintained its neutral rating.
The stock is trading above support of its 21-day exponential moving average and has earned a 93 Relative Strength Rating. This means it has outperformed 93% of the stocks in the IBD database.
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Health Stock's Double-Digit Growth
Harmony beat Q2 top- and bottom-line estimates on Aug. 2, which sent shares up 12.6% in heavy volume. HRMY stock sold off 17.6% after the company beat Q1 earnings but missed on sales, so the turnaround was impressive.
President and CEO John C. Jacobs crowed about the strong quarter, noting "our continued momentum helped deliver another quarter of strong growth in both WAKIX net revenue and average number of patients on WAKIX. The second quarter represented our best quarter of performance in top-line prescription demand in over two years."
Q3 earnings are set for release on Nov. 1, so be ready for a volatile day and don't get caught in whipsaws.
Analysts are expecting Q3 earnings of 14 cents per share on sales of $113.6 million, according to FactSet. Annual consensus now stands at $1.33 per share, down from $1.96 in 2021. More important, earnings per share are expected to surge to $2.82 in 2023.
Sales growth has been impressive as well, ranging from 43% to 62% in the last three quarters.
Harmony has earned a high 97 Composite Rating and an acceptable 80 EPS Rating. It holds an A SMR Rating, which combines sales growth, profit margins and ROE. The rating ranges from A to E, with A being the best.
This IPO Could Be Big Winner
The health stock came public on Aug. 19, 2020.
According to "How To Make Money In Stocks'' by William O'Neil, many big winners had their IPO in the past decade because this marks an early growth stage. With this in mind, recent IPOs may be something to keep on your radar.
Harmony was recently featured in IBD's IPO Stock Of The Week.
Mutual funds own 90% of the stock, with 435 owning shares in September, up from 404 in June and 369 in March. Increasing institutional ownership shows conviction by big money managers, which can move the stock in big volume trades. Management owns 9% of shares.
