Supernus Pharmaceuticals Q3 2023 Earnings Call Transcript

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November 8, 2023

There are 6 speakers on the call.

Operator

Afternoon, and welcome to Supernus Pharmaceuticals Third Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. Instructions will follow at that time. As a reminder, this conference call is being recorded.

Operator

I would now like to turn the conference over to Peter Faso of ICR Westwick, Investor Relations representative for Supernus Pharmaceuticals, you may begin.

Speaker 1

Thank you, Stephen. Good afternoon, everyone, and thank you for joining us today for Supernus Pharmaceuticals' Q3 2023 financial results conference call. Today, after the close of the market, the company issued a press release announcing these results. On the call with me today are Supernus' Chief Executive Officer, Jack Catar and Chief Financial Officer, Tim Deck. Today's call is being made available via the Investor Relations section of the company's website at ir.

Speaker 1

Supernus.com. During the course of this call, management may make certain forward looking statements regarding future events and the company's future performance. These forward looking statements reflect Supernus' current perspective on existing trends and information. Any such forward looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in the Risk Factors section of the company's latest SEC filings. Actual results may differ materially from those projected in these forward looking statements.

Speaker 1

For the benefit of those of you who may be listening to the replay, This call is being held and recorded on November 8, 2023. Since then, the company may have made additional announcements related to the topics discussed. Please reference the company's most recent press releases and current filings with the SEC. Supernus declines any obligation to update these forward looking statements except as required by applicable securities laws. I will now turn the call over to Jack.

Speaker 2

Thank you, Peter. Good afternoon, everyone, and thanks Thank you for taking the time to join us as we discuss our 2023 Q3 results. Supernus continues to execute well during a Strong execution with combined net sales of $70,000,000 for our growth products Calvary and GOCOVRI, representing an increase of 52% in the Q3 of 2023 compared to the same period last year. This $70,000,000 in net sales from Calvary and GOCOVRI far exceeded the $49,000,000 Decline in Trokendi XR net sales in the Q3 compared to the same period last year. Similarly for the 1st 9 months of 2023 combined net sales of Calvary and GOCOVRI grew by 61% reaching $182,000,000 far exceeding the $129,000,000 decline in net sales of Trokendi XR during the same period.

Speaker 2

In addition and excluding Trokendi XR, total year to date 2023 revenues For Supernus grew by 25% compared to the same period last year. Moving on to the ADHD market, This year's back to school season showed a decline of 3% in total U. S. ADHD prescriptions In the month of September 2023, when the new school year is mostly in full swing across the U. S.

Speaker 2

As compared to the month of June 2023 when the prior school year mainly ends. This contrasts with the 4% to 10% growth in the previous 4 years over the same time period. While the overall ADHD market had a soft back to school season, Calvary delivered robust Prescription growth of 16.6 percent in September 2023 compared to June 2023. In addition, Calbri accelerated its quarterly sequential prescription growth in the Q3 2023 to 12%, up from the 9% sequential growth in the Q2 of this year. During the Q3 of 2023, the average net price per prescription for Calvary was $2.27 an increase of 7% compared to the Q2 of 2023.

Speaker 2

This increase was primarily due to an improvement in gross to net, which was around 58.7%, the lowest since the launch of the product and a key step towards our year end target of 50% to 55%. As a result, Calvary net sales in the 3rd quarter grew by 20% and 100% compared to the Q2 of this year and the Q3 of last year respectively. Finally, during the Q3, Calvary expanded its base of prescribers to approximately 24,189, up from 21,291 prescribers from the Q2 of 2023. Switching now to GOCOVRI. Net sales increased to $33,000,000 in the Q3 of 2023, representing a healthy increase of 18% over the same period in 2022 and 14% over the Q2 of this here.

Speaker 2

We continue to be pleased with the performance of the brand, which is now at an annualized run rate of approximately $130,000,000 in net sales. Regarding Oxtellar XR, 3rd quarter net sales were $30,000,000 essentially stable compared to net sales in the same period last year. For Trokendi XR, net sales in the 3rd quarter were $21,000,000 up slightly from $19,000,000 in the 2nd quarter and down from $70,000,000 in the Q3 of last year. Given the performance of Trokendi XR in the 1st 9 months of this year, we are revising our financial guidance and now expect approximately $90,000,000 in net sales for full year 2023. Regarding SPN830, earlier this month, the FDA accepted the resubmission of the NDA and signed to it a PDUFA date of April 5, 2024.

Speaker 2

A few weeks ago, we held an R and D Day and shared an overview of our emerging CNS pipeline of novel product candidates. We highlighted an exciting Pipeline of new chemical entities, some of which are 1st in class mechanisms of action to treat multiple therapeutic areas in CNS. The company has a significant number of near term milestones. First, the initiation of a Phase 4 study with Calvary in ADHD patients with comorbid mood disorders such as depression and anxiety before year end 2023. 2nd, the initiation of a Phase 2 open label study with SPN-eight twenty in approximately 40 subjects with major depressive disorder also before year end 2023.

Speaker 2

3rd, Getting top line data in the first half of twenty twenty four from the Phase 2a study of SPN-eight seventeen for treatment resistant focal seizures. 4th, the initiation of a Phase 2b placebo controlled study with SPN-eight 17 in patients with treatment resistant focal seizures also in the first half of twenty twenty four. And 5th, the potential launch in the second half of twenty twenty four of SPN-eight thirty for the continuous treatment of motor fluctuations in Parkinson's disease if approved by the FDA. Finally, we remain active in corporate development looking for strategic opportunities to further strengthen our future growth and leadership position in CNS. With that, I will now turn the call over to Tim.

Speaker 3

Thank you, Jack. Good afternoon, everyone. As I review our Q3 2023 results, Please refer to today's press release and 10 Q that was filed earlier today. Total revenue for the Q3 of 2023 was $153,900,000 compared to $177,400,000 in the same quarter last year. Total revenue in the Q3 of 2023 was comprised of net product sales of $149,000,000 and royalty revenue of 4,900,000 The $23,700,000 decrease in net product sales was primarily due to a $49,000,000 decline in net product sales of takendi XR, offset by a $23,800,000 increase in net product sales of our growth products, Calvary and GOCOVRI.

Speaker 3

Excluding net product sales of takendi XR in both periods, total revenue for the Q3 2023 increased 24% compared to the same period last year. For the Q3 of 2023, combined R and D and SG and A expenses were $105,400,000 as compared to $131,900,000 for the same period last year. The decrease was primarily due to lower SG and A expenses in the Q3 of 2023 compared to the Q3 of 2022 as activities to support the launch of Calvary to the adult population and the direct to consumer campaign substantially occurred in the Q3 of 2022. Operating earnings on a GAAP basis for the Q3 2023 was $8,100,000 as compared to an operating loss of $1,500,000 for the same period last year. Income tax expense in the Q3 of 2023 was $25,900,000 as compared to an income tax benefit of $2,200,000 for the same period last year.

Speaker 3

GAAP net loss was $16,000,000 for the Q3 of 2023 or loss per diluted share of $0.29 compared to GAAP net earnings of $1,700,000 or earnings per diluted share of $0.03 in the same period last year. On a non GAAP basis, which excludes amortization of intangibles, share based compensation, Contingent consideration and depreciation adjusted operating earnings was $37,300,000 compared to $25,400,000 in the same period last year. Total revenue for the 9 months ended September 30, 2023 was $443,200,000 compared to $499,900,000 in the same period last year. Total revenues were comprised of net product sales of $417,900,000 and royalty revenue of 25,300,000 The $67,700,000 decrease in net product sales was primarily due to a $129,300,000 decline and net product sales to Trokendi XR, partially offset by a $68,600,000 increase and net product sales of our growth products, Calvary and GOCOVRI. Excluding net product sales of Trokendi XR in both periods, Total revenues for the 9 months ended September 30, 2023 increased 25% compared to the same period last year.

Speaker 3

Combined R and D and SG and A expenses for the 9 months ended September 30, 2023 were $323,300,000 as compared to $360,000,000 for the same period last year. Again, this decrease was primarily due to lower SG and A expenses in Direct to consumer campaign occurred in 2022. Operating loss on a GAAP basis for the 9 months ended September 30, 2023 was $4,300,000 as compared to operating earnings of $11,800,000 for the same period last year. Income tax expense for the 9 months ended September 30, 2023 was $1,600,000 as compared to an income tax benefit of $9,600,000 for the same period last year. GAAP net earnings was $141,000 for the 9 months ended September 30, 2023, or 0 point 0 $0 per diluted share compared to $35,200,000 or 0 point 6 $0.02 per diluted share in the same period last year.

Speaker 3

On a non GAAP basis, which again excludes amortization intangibles, Share based compensation, contingent consideration and depreciation, adjusted operating earnings was $77,900,000 compared to $91,100,000 in the same period last year. As of September 30, The company had approximately $225,300,000 in cash, cash equivalents and marketable securities compared to $555,200,000 as of December 31, 2022. The decrease was due to repayment of the convertible security notes in 2023, offset by cash generated from operations. The company has a strong balance sheet and significant financial flexibility for potential BD and other value creating opportunities. Now turning to guidance.

Speaker 3

For the full year 2023, the company is amending its financial guidance as follows. For total revenue, For the full year 2023, we expect combined R and D and SG and A expenses to range from $420,000,000 to 440,000,000 down from our prior guidance of $450,000,000 to $480,000,000 Overall, we expect 2023 GAAP operating loss to range from $5,000,000 to $15,000,000 an improvement from the previous guidance range of an operating loss of $10,000,000 to $30,000,000 We are also increasing our GAAP operating earnings non GAAP operating earnings for the full year 2023 and now expect a range of $95,000,000 to $110,000,000 compared to a range of $75,000,000 to $100,000,000 previously. Please refer to the earnings press release issued prior to the call that identifies the various ranges of reconciling items between GAAP at non GAAP. With that, I will now turn the call over to the operator for Q and A. Operator?

Operator

Thank you. At this time, we will conduct a question and answer session. First question comes from the line of Andrew Tsai of Jefferies. Your line is now open.

Speaker 4

Okay, good afternoon. Thanks for taking my questions. I thought I'd start this quarter by asking on pipeline questions after your R and D day. So maybe for the first one, for your full epilepsy data set later in first half 2024, remind us again what would be meaningful data to you on efficacy in terms of seizure reductions and seizure freedom rates, Understanding this is an open label study. And then secondly, for SPN 820, your depression asset, you are evaluating the pulsatile action of this dosed Every 3 days in 40 patients data, I believe also first half twenty twenty four.

Speaker 4

So what kind of MADRS, HAM D Separation, do you also want to see what's positive data to you and why? Thank you.

Speaker 2

Yes, I'll take this one. For Starting with SPN-eight seventeen, as we did share, as you mentioned in the R and D Day, the interim data, the First look at the data that we have from the I think it was 6 or 7 patients. Looks really promising and the profile that is emerging on this product so far is showing seizure reduction in the 60% or even up to 80% in certain situations. So that is extremely promising, yet it is early obviously. It is early in a Small set of number of patients.

Speaker 2

So what we hope to see obviously is consistent data with that trend, with that emerging data that we've seen early on that the full study will show very, very similar type of ranges in seizure reduction because that will clearly differentiate the product versus other products on the marketplace. Seizure Freedom, I mean, so far it's very small numbers of so Whatever we have, we have one patient that we talked about, I guess from the study in Australia, which had 3 patients and we Again, very small numbers early on, but very promising and very encouraging certainly. So we sure hope that the Study eventually will be very consistent with all these trends that we've seen so far. On SPN-eight twenty, the second study that We are starting before year end, which is the pulsatile dosing, as well as the other important point, it's in also the major depressive disorder in MDD instead of TRD. So we want to explore that, of TRD.

Speaker 2

So we want to explore that expanded type of potential use for the product. So it's not only for TRD. Clearly, we're looking for meaningful reductions that could be seen on Endpoints, we are looking at so many secondary endpoints in that study as well as we are in the Phase 2b study that is currently going on with TRD. So both studies will clearly inform us tremendously And looking forward and how to design the Phase 3, whether the pulsatile dosing will be better than the once a day dosing and so forth. So we're trying to explore as many different aspects of the study of the molecule as possible to give us better information as we start working on the design of the Phase 3 program.

Speaker 4

Got it. And one more is just for the Phase 2b ongoing with data 2025 A target of 268 subjects. I think a month ago, I think you had 87 patients in the screening phase or later. So where would you want to be on that number in, let's just say, 3 to 6 months? And how are you ensuring you get there on time?

Speaker 2

Yes, I mean, we're hoping we can really complete the enrollment in a significant way in the second half of twenty twenty four. And that's why we're saying top line data in 2025. Clearly, we're working very hard to make it early as possible in 2025. It's a little bit hard for us to guess right now because enrollment A lot of times you'd have like couple of weeks or very good strong enrollment, then it softens a little bit, then it picks up again. So it's not always a linear trend from a recruitment perspective, enrollment perspective.

Speaker 2

We're also and we continue to make different Revisions to the protocol, remember this is a 1st in class molecule mechanism of action. There is so much that we don't know about this class Yes, of drugs clearly, so it's not like somebody has been before us. So we've been very cautious from the beginning in designing The study, the different protocols we've had, we've had now 3 amendments to the protocol inclusion criteria and exclusion criteria and making adjustments there. So all this to say basically that The recruitment hasn't been always very predictable in a linear fashion, but we certainly looking at hopefully fully enroll the study in a meaningful way by the second half of twenty twenty four and therefore to get data, I mean as early as we can in 2025. As we get closer in time or as time goes on, we'll certainly update investors and be a little bit more specific As to when in 2025.

Speaker 4

Very good. Thank you very much.

Speaker 2

Sure. All

Operator

right. Thank you. One moment for our next question. The next question comes from the line of David Amsellem of Piper Sandler. Your line is now open.

Speaker 5

Hi, thanks. This is Skyler on for David. First, just looking at the script data for Calvary, how did the acceleration in volumes for back School season look versus your expectations. Can you speak to any dynamics regarding back to school that you think will be impactful in the 4th quarter? And then second, can you speak to the adult and pediatric patient mix for Calvary?

Speaker 5

How is adoption in the adult ADHD setting impacting or will it impact the average value of

Speaker 2

Yes. Regarding the back to school season, as I mentioned in the prepared remarks, this year It is softer and it was softer than previous years. We actually saw Significant acceleration in the back to school growth around COVID time continued a little bit for a couple of years and then started trending down and This year was the lowest point, which I mentioned was a minus 3 actually growth, a decline of 3%, which is the first time we see in several years Looking back at the ADHD market in total, now with even despite that Calvary actually grew by 16.6%. And the way we're measuring back to school season, just to clarify here, we're looking at the September month. That's when really the school is in full swing.

Speaker 2

Everybody is already in school and we're looking at June, which typically when everybody is out of school. So that's why you pick these 2 months as a surrogate measure, so to speak, for the back to school season. And that's these were the numbers that I Perdue that this past season there was a decline of 3% September from June. Calvary actually grew 16.6%. So we clearly did Extremely well and much better than the market itself.

Speaker 2

Can we do better? We always look for doing better clearly, I mean, overall. As far as the recent weeks, we have seen a little bit stronger weekly data. If you look at the 4th quarter sequential data versus the 3rd quarter, I mean so far we're trending more in the 20%, 24%, So clearly a little bit healthier than the Q3, but it remains to be seen how the full quarter ends up trending. Regarding your next question on the mix, adult is about 28% to 30% of the business.

Speaker 2

So it's been stable, Which you would expect because the Q3 was a major push for us on the pediatrics. So although adult is still in the launch mode, During the Q3, we clearly put a lot of effort and prioritization behind the pediatric business because of the back to school season. So as time goes on, we do expect adult to continue to grow. But however, we don't think it will mirror exactly like the market, which is 70% or 67% adult and 30% pediatric, I don't think we will get to that level, But it may settle on an ongoing in the future, maybe a fifty-fifty. Hopefully, that will be great if we get to that kind of mix.

Speaker 5

Great. Thank you.

Operator

All right. Thank you. I'm showing no further questions at this time. I would now like to turn it back to Jack Khattar for closing remarks.

Speaker 2

Thank you. In concluding our call this afternoon, our growth products, Calvary and GOCOVRI delivered Strong growth of 61% in net sales in the 1st 9 months of this year and far exceeded the loss of Trokendi XR net sales. We will continue to focus on making the 2023 transition as smooth as possible as we move away from the legacy products and set the stage for continued growth in 2024 and beyond. We are well positioned for continued growth with 3 key areas. First, the existing portfolio that we have today with Calvary and GOCOVRI driving significant growth and together with the rest of the portfolio generating strong cash flow allowing us to invest in our pipeline.

Speaker 2

2nd, an innovative R and D pipeline of differentiated 1st in class molecules and finally, continued execution on the corporate development side to augment our growth through external growth opportunities. Thanks for joining us this afternoon. We look forward to updating you on our next call.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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Earnings Conference Call
Supernus Pharmaceuticals Q3 2023
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