While Harmony Biosciences (HRMY – Free Report) may not be a typical cannabis stock involved in cultivation, processing, or sales of marijuana products, it is among the few companies evaluating an investigational cannabidiol (CBD) drug in late-stage development.

This Pennsylvania-based company is developing a pharmaceutically manufactured synthetic CBD gel called ZYN-002 as a potential treatment for rare neuropsychiatric conditions.

Let’s take a closer look at the company’s prospects and challenges from an investor’s standpoint.

ZYN002 — HRMY’s Bold CBD Bet Against Rare Neurology Conditions

Harmony is making encouraging progress with ZYN002, which is also one of its lead pipeline assets. The drug, which was added to the company’s pipeline following its 2023 acquisition of Zynerba Pharmaceuticals, is currently being evaluated in the phase III RECONNECT study for a rare genetic disorder called Fragile X Syndrome (FXS). Top-line data from this study is expected before the end of September.

FXS causes intellectual disability and behavioral problems, such as social avoidance and irritability. Per HRMY, over 200,000 people across the United States and Europe are affected by this condition. If approved, ZYN002 could be the first approved therapy for FXS patients.

This experimental CBD gel is designed for transdermal delivery, which means it is applied to the skin to be absorbed into the bloodstream. This mode of delivery bypasses the liver’s first-pass metabolism, potentially leading to more consistent drug levels and lower dosages. ZYN002 is also formulated with a permeation enhancer to facilitate efficient skin absorption.

In April, HRMY shared encouraging interim data from an open-label extension (OLE) study on ZYN002, which showed sustained improvements in irritability-related symptoms prevalent in individuals with FXS. If the RECONNECT study results are positive, Harmony Biosciences intends to advance the drug to late-stage development for another rare neurobehavioral disorder called 22q11.2 deletion syndrome (22q) before this year’s end. Like FXS, there are no approved therapies for 22q.

Although cannabis remains federally prohibited in the United States, the FDA permits the approval of CBD-based drugs that meet rigorous safety and efficacy standards, such as Jazz Pharmaceuticals’ (JAZZ – Free Report) epilepsy drug Epidiolex. Like JAZZ’s Epidiolex, ZYN002 also does not contain the compound called THC that causes the psychoactive effects associated with cannabis.

Harmony Isn’t Just Riding the Cannabis Wave

While cannabis may be a focal point, HRMY isn’t a one-trick pony. The company markets its flagship drug Wakix, which is the only FDA-approved treatment for narcolepsy that is not scheduled as a controlled substance, offering a unique advantage in the market.

Harmony generates the entirety of its top line from this drug’s sales. The company’s first-quarter 2025 sales rose 20% year over year to about $185 million, driven by continued demand across narcolepsy patients. HRMY’s cash balance, as of March 2025-end, amounted to $610 million, up from $576 million as of 2024-end. It expects 2025 sales in the band of $820-$860 million, suggesting around 18% year-over-year growth at the midpoint.

Since Wakix is expected to lose exclusivity by the end of this decade, HRMY is also evaluating two next-generation formulations of Wakix — pitolisant Gastro-Resistant (pitolisant GR) and pitolisant High-Dose (pitolisant HD). Late-stage development on both versions is expected to start before this year’s end.

Apart from neuroscience and sleep disorders, HRMY further broadened its pipeline into rare epilepsy with last year’s acquisition of Epygenix Therapeutics. The buyout added EPX-100, which is being evaluated in separate phase III studies for Dravet Syndrome (DS) and Lennox-Gastaut Syndrome (LGS). Data from both these studies is expected next year.

HRMY Faces Stiff Competition in Targeted Markets

Coincidentally, there is significant overlap in the therapeutic focus areas of Harmony Biosciences and Jazz Pharmaceuticals, both of which are active in the neuroscience space. Beyond the cannabis space, both companies also market sleep disorder therapies — HRMY’s Wakix competes directly with JAZZ’s oxybate therapies, Xywav and Xyrem. Concerning epilepsy, Jazz markets Epidiolex while HRMY is developing EPX-100.

Axsome Therapeutics (AXSM – Free Report) also competes in the sleep disorder space, having entered the market via its 2022 acquisition of Sunosi from Jazz Pharma.

HRMY Stock Performance and Estimates

Shares of Harmony Biosciences have lost about 7% year to date compared with the industry’s 1% decline, as seen in the chart below.

Image Source: Zacks Investment Research

Movements in EPS estimates for 2025 and 2026 have been mixed in the last 60 days.

Image Source: Zacks Investment Research

Stay Invested in HRMY

Though the recent regulatory setback with Wakix in the idiopathic hypersomnia (IH) indication has raised a few eyebrows, the drug continues to show solid commercial momentum in the narcolepsy market.

Looking ahead, there’s plenty in the pipeline for this Zacks Rank #3 (Hold) company. The upcoming RECONNECT study results could serve as a major catalyst for the stock and expand Harmony’s footprint in the neurobehavioral space. In addition, data readouts from the epilepsy studies are expected next year.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.