Shares of Harmony Biosciences (NASDAQ:HRMY) stock are plunging lower by about 25% following a short report from Scorpion Capital. The activist short seller spent four months researching the report, which included interviews with former executives and employees, physicians and senior scientists. Scorpion also reached out to a pharmacy consultant with vast experience in pharmacokinetic studies.
The short report primarily focuses on Harmony’s pitolisant drug, with the brand name Wakix. Wakix is used to treat narcolepsy, which can cause excessive daytime sleepiness (EDS) or cataplexy. Through Freedom of Information Act (FOIA) requests, Scorpion uncovered several adverse events when taking the drug, even for young, healthy users. In one example of an adverse event, a physician stated that a healthy 42-year-old was taken to the emergency room shortly after using Wakix. The physician noted that the cause was “drug-induced arrhythmia.”
Scorpion Capital Releases Short Report on HRMY Stock
Scorpion also alleges that it found details of 12 deaths in Wakix’s foreign clinical trials, of which none were linked to the placebo trials. This added to the “explosive information” hidden from the Food and Drug Administration (FDA) when Wakix was approved in 2019.
“Histamine receptor antagonists like pitolisant have a uniquely risky molecular structure with a long history of cardiotoxicity and FDA recalls, due to hERG channel blockade and the potential to cause sudden death via QT prolongation and arrhythmia,” explains Scorpion. “Of nine drugs withdrawn by the FDA for cardiotoxicity, two were in this class and the rest share binding and other similarities with pitolisant.”
Meanwhile, the short seller “uncovered buried evidence” from other big pharmacy companies which concluded that pitolisant “suffers from cardiotoxicity and other fatal flaws.”
There are a total of 612 Wakix case reports on the FDA Adverse Events Reporting System (FAERS). Scorpion believes that lags in the system and “reporting games by Harmony” suggest that the number of cases should be several-fold higher. Of the cases, a large number was related to cardiac arrests, myocarditis, palpitations, vertigo, and more.
Scorpion has noted that it will file a citizen’s petition with the FDA to withdraw Wakix’s approval.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.