Supernus Pharmaceuticals Inc (SUPN) 2018 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Supernus Pharmaceuticals' Third Quarter 2018 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the conference over to Peter Vozzo of Westwicke Partners, Investor Relations for Supernus Pharmaceuticals. You may begin.

Thank you, Gigi. Good morning, everyone, and thank you for joining us today for Supernus Pharmaceuticals' Third Quarter 2018 Financial Results Conference Call. Yesterday, 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 Khattar; and Chief Financial Officer, Greg Patrick. Today's call is being made available via the Investor Relations section of the company's website at ir.supernus.com. Following remarks by management, we will open the call to questions. We expect the duration of the call to be approximately 45 minutes.

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 and can be identified by such words as expect, plan, will, may, anticipate, believe, should, intend and other words of similar meaning. 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 our 2017 annual report on Form 10-K and the quarterly report on Form 10-Q for the quarter ended March 31, 2018. Actual results may differ materially from those projected in these forward-looking statements.

For the benefit of those of you who may be listening to the replay, this call is being held and recorded on November 7, 2018, at approximately 9:00 a.m. Eastern Time. Since then, the company may have made additional announcements related to the topics discussed. Please reference these company -- 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.

Thank you, Peter. Good morning, everyone, and thanks for taking the time to join us as we discuss our 2018 third quarter results. Supernus generated another strong quarter of growth, setting once again a new record for quarterly net product sales. Compared to the same period last year in the third quarter, we achieved solid growth in net product sales of 28% to $100.2 million. Operating income increased by 68% to $37.5 million and diluted earnings per share increased by 79%, reaching $0.52 per share.

Our financial performance is mainly driven by the solid prescription demand of our products. Total prescriptions for Trokendi XR and Oxtellar XR in the third quarter of 2018, as reported by IMS, increased to 221,855, a 23% increase over the same period last year. For Trokendi XR prescriptions in the third quarter of 2018 reached 182,268, which is a 25% increase over the same quarter last year and for Oxtellar XR prescriptions were 39,587, representing an increase of 13% over the same period last year.

Despite the increased competitive landscape in migraine and the loss of 3 anti-CGRP products, the topiramate market has shown great resiliency by holding steady instead of significant declines that many people were expecting. Total topiramate prescriptions, as reported by IMS, grew slightly at 1% during the 9 months ending September 2018 as compared to the same period last year. As we discussed in the last quarterly call, we believe that topiramate with its numerous mechanisms of action will remain as one of the most important foundational therapies in the prevention of migraine.

In fact, feedback from the field and physicians show that more than 50% of the anti-CGRP prescriptions are in the form of add-on therapy instead of a switch from current therapies. In addition, the majority of physicians who prescribe Trokendi XR reported they are using it in combination with other preventative treatments. Moreover, during the 9 months period ending September 2018, as reported by IMS, Trokendi XR has grown its share of the topiramate market by 39% compared to its share during the 9 months period ending September 2017. In August and September 2018, the last 2 months reported by IMS, Trokendi XR reached an all-time high share of the topiramate market that is above 5%.

Finally, Trokendi XR has shown that more than 50% of patients have their migraines cut in half and 24% of patients have complete migraine freedom. These data are not from a placebo-controlled clinical study but rather from a pragmatic clinical assessment or chart reviews, for patients who are on Trokendi XR, reflecting actual, real-life experience reported by patients and physicians. This level of efficacy compares very well to any other treatments, including the anti-CGRPs.

The company continues to be excited about the potential expansion of the label of Oxtellar XR in monotherapy for partial seizures that could represent a significant growth opportunity in the long term. As mentioned in the previous earnings call, the monotherapy market for partial seizures is between 13 million and 14 million prescriptions a year. This growth opportunity has become more relevant, especially after the U.S. Court of Appeals for the Federal Circuit affirmed the New Jersey District Court's decision that TWi infringed all 3 Oxtellar XR Orange Book patents that were the subject of litigation, and also that all these 3 patents are valid. This ruling follows a December 12, 2016 appellate decision affirming a decision by the same district court that Actavis also infringed Supernus' Oxtellar XR patents. As a reminder, Oxtellar XR is protected by 8 issued patents that expire no earlier than 2027.

Moving on to our pipeline. It's an exciting time for Supernus as we progress SPN-812, our novel nonstimulant for the treatment of ADHD and SPN-810, our novel treatment of impulsive aggression in patients with ADHD towards Phase III completion and NDA filing. Given the recently accelerated development time line for SPN-812 that positions its potential regulatory approval and commercial launch ahead of SPN-810, the company has directed its resources to prioritize filing of the NDA and potential commercial launch of SPN-812 in the U.S.

As a result, the following are the updated plans and time lines for both product candidates: for SPN-812 the Phase III program consists of 4 3-arm placebo-controlled trials, P301 and P303 trials in patients that are 6 to 11 years old, and P302 and P304 trials in patients 12 to 17 years old. The company expects to announce top line data from P301 and P303 pediatric trials concurrently in early December 2018. And from P302, the first adolescent Phase III trial by the end of December 2018. Top line data from the second adolescent Phase III trial, P304 are expected by the end of the first quarter of 2019.

Consequently, the company expects to submit an NDA for SPN-812 in the second half of 2019 and to launch it pending U.S. FDA approval in the second half of 2020. For SPN-810, as expected, the first Phase III trial, P301, has reached its original enrollment target. However, given the prioritization of SPN-812 and the top line data from the second Phase III trial, P302, is expected around mid-2019. The company has decided to keep P301 enrollment active until data from both trials can be released concurrently instead of sequentially. This change does not impact the timing of submission of the NDA for SPN-810, given that the NDA submission is dependent on the completion of the P302 trial and generation of some data in the adolescent patient population.

In addition, Supernus continues to observe enrollment in the open-label extension studies for SPN-810 at 90% or higher. On average, a patient in the open-label study remains on SPN-810 treatment for 9.5 months, which we believe is an encouraging sign of the tolerability and efficacy of SPN-810. Finally, we are pleased that patient dosing in SPN-810 adolescent Phase III trial has also commenced. Regarding the Oxtellar XR program for the treatment of bipolar disorder, we continue to plan and work towards a Phase III program that is expected to commence in the second half of 2019. Moving forward, this program will be referred to as SPN-604.

Finally, we continue to be active on the corporate development side looking for neurology and psychiatry assets that represent a strategic fit with our portfolio. To that end, in the fourth quarter, we acquired Biscayne Neurotherapeutics, a small privately held company, developing a novel treatment for epilepsy. This novel product now known as SPN-817 represents a novel mechanism of action for an anticonvulsant. We plan on studying SPN-817 initially in severe pediatric epilepsy disorder, such as Dravet Syndrome. A Phase I proof-of-concept trial is currently underway in adult patients with refractory complex partial seizures to study the safety and pharmacokinetics profile of a new extended-release formulation.

I will now turn the call over to Greg, who will provide more details on our third quarter financial performance.

Thanks, Jack, and good morning, everyone. As I review our third quarter 2018 financial results, I remind listeners to refer to the third quarter earnings press release issued yesterday after the market closed. Net product sales for Trokendi XR for the third quarter of 2018 were $79.8 million, a 34% increase as compared to the prior year period. Net product sales for Oxtellar XR in the third quarter of 2018 were $20.4 million, a 9% increase as compared to the third quarter of 2017. Total revenue for the third quarter of 2018 was $103 million, a 28% increase as compared to $80.4 million in the third quarter of 2017. Total revenue for the third quarter of 2018 included net product sales of $100.2 million and royalty revenue of $2.8 million as compared to net product sales of $78.1 million, royalty revenue of $2 million and licensing revenue of $0.3 million in the third quarter of 2017.

Turning now to expenses for the third quarter of 2018. Research and development expenses were $20.4 million as compared to $13 million in the same quarter in the prior year. Year-over-year, research and development expenses increased by 57% or $7.4 million, primarily due to the initiation of the 4 Phase III clinical trials for SPN-812 in the second half of 2017, and to a lesser extent, increased expenses for the open-label extension studies of SPN-812 and SPN-810. Selling, general and administrative expenses in the third quarter of 2018 were $40.9 million, essentially unchanged versus the $40.8 million incurred in the same quarter of the previous year.

Operating earnings in the third quarter of 2018 were $37.5 million or 68% higher than $22.3 million in the same period in 2017. The improvement in operating earnings was driven by increased net product sales, partially offset by year-over-year increases in research and development expenses. GAAP net earnings in the third quarter of 2018 were $28 million or $0.52 per diluted share as compared to $16 million or $0.29 per diluted share in the same period last year. Year-over-year earnings per share increased by 79%. GAAP net earnings and diluted earnings per share for the third quarter of 2018 reflected an effective tax rate of 23% as compared to 30.3% in the third quarter of 2017. The tax rate in the third quarter of 2018 benefited from tax reform legislation enacted in December 2017, and to a lesser extent, from employee exercises of stock options. Weighted average diluted common shares outstanding were approximately 54.2 million in the third quarter of 2018 as compared to approximately 53.6 million shares in the prior year period.

As of September 30, 2018, the company had $740.5 million in cash, cash equivalents, marketable securities and long-term marketable securities as compared to $273.7 million as of December 31, 2017. This increase, approximately $467 million, reflects net proceeds of approximately $365 million from the sale of convertible notes and warrants in March 2018, offset by purchases of convertible note hedges. Cash generated from operations contributed approximately $96.1 million during the 9-month period ended September 30, 2018.

Now turning to financial guidance for 2018. We are updating prior guidance as follows: we expect full year 2018 net product sales to range from $388 million to $395 million compared to the previously expected range of $385 million to $400 million. We continue to expect R&D expenses to total approximately $95 million, including the onetime upfront expense of $15 million incurred in the fourth quarter of 2018 in conjunction with the acquisition of Biscayne Neurotherapeutics. We expect operating income to range from $120 million to $125 million, higher than the previously expected range of $115 million to $125 million. We continue to expect that full year 2018 operating earnings will include approximately $7 million of licensing and royalty revenue. We expect an effective tax rate of approximately 23% to 25% for the fourth quarter of 2018.

I will now turn the call back to the operator for questions.

(Operator Instructions) Our first question is from David Steinberg from Jefferies.

Jack, on 812, the pending data, assuming that the effect size is in the range of Strattera and Intuniv, what would be some of the other variables where you think some of the shortcomings of this 2 products, where your profile that you'd seen so far, and what you think you might get in the Phase IIIs would be an advantage so -- has the most significant advantage? Adverse events, onset of action, any other?

Yes. We look at 812 as potentially a product that has several points of differentiation. Of course, whether we get all of them in the Phase III data or not that remains to be seen. But the things that we have seen so far in our clinical data and on this program, the potential benefits or differentiating factors are as follows: first one, compared to atomoxetine or Strattera, which is another nonstimulant, the onset of action, at least from what we have seen initially in the Phase IIb study on SPN-812, seems to be faster. What that means is, it works sometime between 1.5 to 3 or 2 to 3 weeks initially versus in Strattera a lot of the feedback we always used to get from patients and in other families, working at week 5, week 6, way into the school year. So that's one important factor. The second is potentially a higher effect size, back to your question, that could be an area where we might be able to show also another differentiating point. And if you remember from the Phase IIb study at the 400-milligram and the 300-milligram, we had around 0.6, 0.63 effect size, and we, actually, in the Phase III program pushed the dose even higher to 600 milligram in the adolescent trial, maybe we can see even a higher effect size. So we'll see what we get from the program.

As far as the remaining side effects, the highest side effect on SPN-812 was mainly somnolence, but even with somewhere around the 20% to 24% that we saw in the Phase IIb, that was actually closer to half of what you've seen on Intuniv, for example, which if I remember well, in the label it's somewhere in the 38% to 50% on the higher doses as compared to ours in the Phase IIb that we saw somewhere around 24% in our high dose. And then finally as far as the label itself, we hope to have some other differentiations, things like no liver damage, precautions or warnings or cardiac events that we haven't, again, seen any of those in our program as compared to Strattera, which have these kind of warnings or precautions on their label.

So we view 812 as potentially a very differentiated profile, a product that is effective. And again, I remind people, you cannot expect a nonstimulant to beat stimulants as far as effect size of efficacy, but if you have an effect size in the range that we saw in the Phase IIb study that is really a very good efficacious product. And if you have such a product as an nonstimulant with a fairly good tolerability and safety profile that actually could be a first-line treatment. So obviously, the proof will be, hopefully, next month, and we'll see what we get out of it. That's all.

Okay. And my follow-up question relates to spending. So this year you have 2 very expensive or relatively expensive broad Phase III programs that they are winding up or have already wound up. And so your R&D spend almost doubled between '17 and '18. I was just curious, I know you are not giving guidance on next year, but I assume that R&D will drop, and I was just curious, by how much, given that we don't really have any -- you have some studies, but not nearly what you had this year. And so going from $49 million in '17 to about $80 million in '18, would your R&D run rate then drop back to kind of the range it had in '16 and '17, which is in the $40 million range?

And then secondly, obviously, your SG&A will go up assuming you have 2 positive Phase III studies in advance of your launch. Would the decline in R&D be offset by the increase in SG&A, so that you would effectively have flat spending '18 to '19? So question on R&D drop, and then secondly, your aggregate level of spending in '19 versus '18 for those 2 countervailing line items?

Okay, David. This is Greg. Good question. Regarding R&D spending, we expect it to be in the range of our spending in 2018. You're absolutely correct that the 4 Phase III trials for SPN-812 are winding up this year or early next year. However, I'll point out that SPN-810 is continuing into next year. Our open-label extension spending for SPN-812 will actually grow significantly because all the patients who were graduating from the Phase IV/Phase III programs are going into the open-label extension. And that's north of 1,000 patients. So the spending for the open-label extension for 812 will greatly expand. I'll also point out that we've got an adolescent trial, as Jack mentioned earlier, for SPN-810, which really just started recruiting this year, so the bolus of spending is really going to be next year. And history has shown that those trials are not inexpensive to execute. And Jack also referenced the bipolar trials for SPN-604, which we will be fielding next year, toward the back end of the year. So I would say, the composite of all this and I'd add SPN-817, too, that will be picking up steam, and we'll be moving that program forward as well, the product that we acquired from Biscayne Neurotherapeutics.

So if you wrap all that together, I think R&D spending will be flattish. I don't expect it to go down to the range that you referenced. Will it be over $80 million? Probably not. It will be somewhere between $70 million and $80 million possibly. I think that's probably the most likely outcome. So as such, the prelaunch expenses for 812, would they kind of fill in the gap and spending would be flattish in 2019? That's probably a pretty good guess at this point.

Our next question comes from Annabel Samimy from Stifel.

Just following, again, on 812. What could we expect for the data release? Are you going to be reporting the pediatric studies in a pooled fashion or as separate studies? What are the clinical effect sizes you're shooting for, powering, p-value, et cetera? Maybe you can help us just frame that in terms of our expectations going into that data? And then on 812, clearly, you made a decision to keep the first study active as you complete the second study. So are you actually enrolling patients? Are they going into an extension? Does that improve the powering of the study? What are the implications for the trial's success or outcome? Or why you chose to do that?

Yes, sure. Taking 812 first, regarding your question about pooling the data or reporting separately. We can't really pool the data because these 2 studies have different doses in them. So the first study has 100 milligram and 200 milligram. The second pediatric study has 200 milligram and 400 milligram. So in a way, we will be reporting each study separately, but we will be reporting them together at the same time. And you would expect these studies, they are fully powered. So based on the Phase IIb trial, we powered these studies adequately to hopefully get an effect size similar or even higher than that.

As far as 810 and your question on the first pediatric trial, the P301, which we're keeping active, although enrollment has reached its initial target, that is correct. I mean, we will be getting a few more patients over the next 6 months. Remember, 810 and IA trials are slow to recruit. So it's not like all of a sudden, in the next 6 months, we're going to get another 200 patients or 100 patients, but we thought that was the best thing to do, given that we're going to be waiting for the 302 trial anyway, so might as well keep more patients active enrollment in the 810. And then these patients once enrollment is done with both trials, the 301 and 302, they will continue to roll into the open-label extension. So as we are doing with 812, the open-label extension will continue to be active on 810 as well, all the way till approval. So naturally, the additional patients that we will get in the next 6 months until we stop enrollment in P301, give or take, of course, they will help probably from a powering point of view and statistical significance.

Okay. And just if I could follow up, how does that -- you are not going to impact enrollment of the second study as you continue to enroll the first study. I just want to understand what we can expect?

Yes, I mean the plan at this point is once we get the second study done, we will stop enrollment, obviously, in both of them and analyze all the data. That's the plan at this point here.

Our next question is from Bill Tanner from Cantor.

Jack, I just had one quick one on Trokendi. You mentioned about 5% of the topiramate share. And I'm wondering, how you think that you might be able to grow that? What kind of investments you might be contemplating or willing to make with the understanding, obviously, that you're -- you probably maybe have 4 good years of sales before you get some generics coming in? Just trying to think where that could actually go. Or do you think you're just going to anticipate it growing, I guess, on a natural basis as it were?

Yes, I mean, given that now we're kind of not exiting is the right word to a kind of out of the launch, although our attitude is we're always launching the product, and we continue to launch it and push it in migraine. But clearly, it's been about 12 to 18 months where the launch is behind us. Clearly, I mean, the product will continue to grow as we expect it to be, and we continue to position Trokendi XR as the data has shown that Trokendi XR is not really immediate-release topiramate. I mean, this is a much different product, and the data has shown time after time the benefits of Trokendi XR and the differentiation of this product. And as I mentioned in the earlier remarks, prepared remarks, that Trokendi XR also continues to show very strong efficacy as well, even compares very favorably compared to the CGRP products or all the extra hype that is being built around these products. So we'll continue to promote Trokendi XR for all its benefits that we bring to the patients and optimize the topiramate therapy before you jump into something else because topiramate as a molecule works to treat migraine in 4 or 5 different ways instead of treating migraine in one way. That's a big difference of topiramate versus all these other new agents coming to the marketplace. So we think there is plenty of room for us to grow in the marketplace. As you referenced, we're at 5%. So clearly, we're focused on continuing to grow our market share of topiramate, in general.

And then the next piece of it, which really remains to be seen is, how will the market evolve in general as all these new launches come to market and the market noise increases over time in bringing so many patients to the physician's office. And when a lot of these patients come to the physician's office, we will be there, try to intervene clearly and presenting these patients with the best potential topiramate therapy with Trokendi XR. So we'll see how that evolves as far as expanding potentially the market over the long term.

Okay. And then just as it relates to the therapeutic category, looking at migraines, I mean, how do you think about that longer term from a business development standpoint? Obviously, the Biscayne is kind of going back to the roots in epilepsy, but just wondering if you have a foothold with -- in migraine treatments with Trokendi, is there merit in thinking about that as maybe an ancillary therapeutic area to go into longer term?

Yes -- no, absolutely. I mean anything in neurology, including migraine, although we might have 4 or 5 years or whatever is left on Trokendi XR it does not mean we will not seek to find other assets in migraine because migraine is very much synergistic with epilepsy from a point call perspective. So we will have and will continue to have that synergy with Oxtellar XR and SPN-817 in the long term. No, absolutely, we continue to be open for all products and potential assets in neurology overall.

Our next question is from Patrick Trucchio from Berenberg Capital.

I have a couple of follow-ups on SPN-812. So just, first, in terms of a potential launch in the second half of 2020, from a payer reimbursement perspective, should we anticipate 812 could be placed ahead of stimulants and other nonstimulants on formularies, depending on the robustness of the Phase III data? Or should we anticipate that no matter what, 812 is going to have step edits, where patients would have had to already have been treated with stimulants and/or at least one of the existing nonstimulants before they would be covered for 812? And is the 3% to 5% peak share that you anticipate including or excluding the impact from these potential step edits?

Yes, I mean, all the research that we've done so far in the managed care area and potential reimbursement of 812 has not pointed to any of these obstacles or potential barriers that you have pointed out to. Now -- which is obviously today. We continue to update our -- and continue our discussions with payers and so forth, and we'll find out what happens by the time we launch. However, I will continue to remind folks that SPN-812 is a new chemical entity. So this is not like we're launching into a viloxazine immediate-release market, such a thing does not exist. Viloxazine will be a new chemical entity. And exactly as you pointed out, depending on the strength of the data that we have in Phase III, clearly, that will obviously impact also some of the discussions with the payers. So our -- we see the market potential of SPN-812 in reference to the 3% to 5% that we have assumed in our penetration of the whole ADHD market. Clearly, we will be getting a lot of patients, who, at that time, have tried Strattera or tried Intuniv or other nonstimulants. And therefore, should there be a step edit to go through another nonstimulant, those patients would have already gone through that step.

And if also patients who have been on a stimulant and they are not happy with the stimulant or they have failed a stimulant and they want to try SPN-812, also that step edit will not really harm us. So I mean, we're going to go after both segments. Again, it all depends on the data we get in the Phase III program as to how we end up positioning the product, how the data allows us to have these kind of discussions with the payers and what kind of discussions we'll have with them. So it's a little bit early, Patrick, at this point to try to predict all that, but we think our 3% to 5% market share penetration is very conservative to say the least given the performance of historical products in this market and given the profile we've seen in SPN-812 at this point.

Yes, I have another follow-up here then on 812 as well. So 812 was prescribed for depression that you used for decades. Can you remind us what the context for that was? When it was on the market? Why it was pulled from the market? Why 812 but not Strattera is effective for depression or has been in the past? What the rate of comorbidity is for depression with ADHD in the pediatric versus adult patients? And to what extent, will you be able to discuss this history with depression, while commercializing 812 both before and after SPN-809 generates Phase II and Phase III clinical data?

Yes. Viloxazine, which is the drug in SPN-812 and the drug in SPN-809, it's the same drug, was on the market in Europe for many, many years. And this goes way back even preceding the SSRIs or Prozac, Zoloft and Paxil. So that was a mainstay therapy in depression for many years in Europe, a fairly effective antidepressant in Europe. And the new-generation SSRIs, so to speak, came in with Lilly first launching Prozac and then Zoloft and then Paxil. And viloxazine at that time was marketed by a very small pharmaceutical/chemical company called ICI chemicals, whose main business was not really pharmaceuticals, and its mainstay was not in the pharmaceutical market. So Lilly came in and basically changed the market and took over with the second-generation SSRIs. And over the years, the sales of viloxazine dwindled, and it stopped being available on the marketplace. So it wasn't like taken off the market for any safety reason or anything like that.

And during that period, ICI chemicals actually never introduced or developed the product in the U.S. market. And therefore, if you look at the depression market today, there is no such product that is norepinephrine reuptake inhibitor. It's a gap in therapy that is not available for physicians, which is available for physicians outside the U.S. So we think there is a potential in depression. But back to your specific question about how does that relate to SPN-812. Now clearly, in general, when you look at the ADHD market, we think comorbidity of ADHD and depression is somewhere in the 30% to 40% or could be a little bit even higher. So there is clearly a lot of comorbidity with the 2 diseases and a lot of these kids, especially more on the adolescent side, tend to suffer from depression, anxiety and many other things in addition to their ADHD.

As far as Supernus, clearly, we will not promote anything to that effect because we haven't studied 812 in ADHD and depression at the same time. So obviously, we cannot make any of these claims. However, it's been interesting that through all our discussions with many advisory boards as we prepare for the launch of 812, it came to our attention and it was really an eye-popping exercise for a lot of KOLs in realizing that, "Oh, wow, SPN-812, actually, historically, the molecule was a very successful antidepressant." And that is actually very different from Strattera that was a failed antidepressant. So thereby another separation between viloxazine and atomoxetine, although the mechanisms could be somewhat -- have similarities, but the drugs are very different because atomoxetine or Strattera was a failed antidepressant but viloxazine was a very successful antidepressant in Europe, and therefore, could have a different role in the treatment of ADHD.

Our next question is from John Boris from SunTrust Robinson.

Just first question on Oxtellar XR, Jack, and the ongoing interaction with the FDA on the monotherapy label. Apologize if this may have been asked, I got onto the call late. But just wondering, are you currently in label negotiations with the FDA over that use? And how you are thinking about prelaunch on that use? And then second, I'm not sure if anyone asked about the asset that you recently in-licensed for Dravet's, but it appears to be -- the levetiracetam appears to be much, much more potent than that asset, and it's targeting certainly an orphan-drug-type indication, very similar to what GW is doing in Lennox-Gastaut, where pricing is certainly very, very different than the current epilepsy market. So just wondered if you can just go through that.

Yes, on Oxtellar XR, I mean, the only comments we made is that we continue to expect a decision by the FDA in December. We're very excited about the potential of that expansion, and we're actually ready or -- for commercial launch in monotherapy. So we will be putting a lot of investment behind Oxtellar XR in monotherapy, try to really take advantage of that expansion opportunity and the growth opportunity for the product. So this is a very exciting growth opportunity for Oxtellar, so no question about it. And as I mentioned in our prepared remarks that actually it becomes even more relevant for us these days as we continue to see Oxtellar XR as a very long asset for us with the long longevity for the product given the appeal that we won recently in the federal court.

As far as SPN-817, the data that we talked about as far as the preclinical models, where we actually saw fairly exciting data as far as the potential of huperzine A, which was the active or would be the active ingredient in SPN-817 against partial seizures as well as Dravet Syndrome with potency that is 57 more times levetiracetam. So again, these are preclinical models, but actually some of these models are fairly predictive models. So that was very encouraging for us. The other thing that's encouraging in 817, it really has a very different mechanism of action in treating seizures. It is a fairly potent acetylcholinesterase inhibitor. And that also could prove in the future also usefulness in a lot of other areas, in CNS, not just necessarily seizures or Dravet Syndrome. So we are very excited about the program, overall.

And at this point where the program is, it's currently in Phase I, and objective of that Phase I is really to look more at the safety, the dose levels that we can push this drug forwards to get us these levels of seizure reductions that we've seen in the preclinical models, and do it in a fashion that is actually very tolerable for patients. Because if you go and buy huperzine A herbal supplements today and try to take those kind of levels, people will be vomiting everywhere, I mean, it's just, not even possible whatsoever. So that's really the uniqueness of our capability in trying to put this drug in a very tolerable formulation dose level and a clinical development program that can really bring tremendous benefit to these patients in Dravet as well as potentially Lennox-Gastaut or any other severe epilepsy conditions at least initially.

Thanks for that. Just one quick follow-up. Has the sales force been trained in Oxtellar XR for monotherapy?

Yes.

Our next question is from Stephen Ragard from Mizuho.

Just a follow-up question on 812. On the data release, do you plan to disclose data on onset of effect? And any other secondary endpoints or just top line data on primary endpoint and effect size?

Yes, I mean, of course, the primary endpoint is important. We'll see how many of the secondary endpoints we're going to be able to release all because we have a lot of data that's being produced. Remember, at the same time, we have the third trial also. So we're trying to generate as much as possible in the top line data, and the same thing on the tolerability and the safety as well. So we're going to try to have a comprehensive package of data, to the extent we can, in managing both trials and then the third one coming right after them, pretty much before year-end.

Our next question is from David Amsellem from Piper Jaffray.

Just a couple. So first, with the heavy sampling that's going on amongst the companies with anti-CGRPs, Lilly and Amgen, in particular, I wanted to get your thoughts on how -- the extent to which that could be disruptive to Trokendi later this year and in 2019? That's number one. Number two is, have you rethought your contracting strategy, given the price points for the CGRPs? And how should we think about the Trokendi net realized prices for next year? And then on Oxtellar monotherapy, you'd mentioned expanding the target audience and generating more awareness of Oxtellar and oxcarb, in particular. So I'm wondering, if you can quantify in any way the additional number of physicians you are planning to reach with this launch who you believe are not familiar or not yet familiar with the underlying molecule in Oxtellar?

Yes, sure. For Trokendi XR, regarding the heavy sampling, the heavy activity, obviously, by the anti-CGRP launches, I mean, we've been very pleased this year since the first one launched and then recently the second one in September and the third one. We've been very pleased obviously with what we've seen in Trokendi XR, and as I mentioned, with even the topiramate market overall. So as far as -- if you look at the fourth quarter, for example, and everybody who gets IMS data can see that actually the fourth quarter versus the third quarter, so far to date, quarter-to-date, we were still growing on Trokendi XR somewhere in the 3%, which is really robust. We were very happy. We will always be happy, with somewhere between 2% and 4% that's -- we will be very pleased with that if we continue to grow quarter-to-quarter. And again, we're happy to see that even at the end of this year or close to the end of this year having 3 new product launches already launched into the marketplace.

As far as contracting, strategy, pricing, I mean, we don't really make public comments on our pricing strategy for 2019, so I can't really address that directly. And the same thing with the contracting and gross-to-net and implications there. All I can tell you at this point, we haven't seen anything specific pressure from payers that is related to the CGRPs. That I can tell you that, but beyond that, I can't really comment on the 2019 and how is that evolving. Hopefully, in February, obviously, we'll give folks guidance for the rest of the year, for 2019.

Regarding the monotherapy for Oxtellar XR, we do expect and we're finalizing all that as we speak. We do expect that our physician universe will change once we get the monotherapy because we are going to be calling on physicians that are not necessarily currently in our universe, and therefore, our comments on -- and our excitement level behind the growth opportunity for Oxtellar XR because currently physicians who are using Oxtellar XR are very aware of it, and they have used it, and they have experienced it. Many of them are using it for monotherapy. So the extra incremental growth we expect to come actually from a lot of physicians who have never even considered oxcarbazepine as a molecule for monotherapy for many reasons, either because they've been in the space for many years and they know the nasty side effects that immediate release of generic oxcarbazepine brings to it and to the therapy to patients, and they shy away from prescribing oxcarbazepine.

Or many neurologists, who either just graduated or have been in the market for 10 years or 15 years, they never heard about oxcarbazepine because oxcarbazepine hasn't been promoted since 2007. And therefore, a lot of that, which is really very good solid data that oxcarbazepine has in monotherapy, many physicians are not even aware of, and they don't even know how good oxcarbazepine can be in monotherapy. So if you couple that data with very strong efficacy, and oxcarbazepine is one of the most studied anticonvulsants in monotherapy with a wealth of data that hopefully will be available to us, we'll see what we end up in the label on Oxtellar XR. Couple that with the tolerability of Oxtellar XR, which is very different than the immediate release oxcarbazepine, that's where we believe the story is for us in launching Oxtellar XR in monotherapy, and that's why we are excited about it.

Our next question is from David Buck from B. Riley FBR.

Just a couple of quick ones. First for Jack, do you think that it's possible still that you could have a companion product in time for a potential launch of SPN-812 in second half 2020 for business development? Secondly, on the Biscayne product that you in-licensed in, where are we on formulation work that needs to be done before going into full Phase I dosing studies? Is it the final formulation that you'd expect to go in? And then just remind us what type of sales force expansion you think might be necessary, if any, in 2019 to support monotherapy approval?

Okay. The first one as far as SPN-812 and looking for a companion product, I mean, we're always looking for products in both neurology and psychiatry. It all depends on the timing of these opportunities and when will the launch or potential launch or picking up a product that is already commercial as compared to the launch of 812. I mean, it would be very difficult for us to launch 2 different products at the same time. And actually, that's why we made the prioritization between 812 and 810 so we have a little space between the 2 products, so we can do a very good job on each product launch. So if BD opportunities line up other external products on top of 812, most likely we're not going to do that. If those BD opportunities come in way before SPN-812 but give us enough room to prepare for 812 and do a very good job on 812, we continue to have those discussions and we continue to be interested in these opportunities.

As far as SPN-817, the Phase I is still going on. And the purpose of the Phase I is actually to optimize formulation, optimize dose. It's a very early study at this point. So beyond that, we haven't really given any specific time line as to when to expect the Phase I to finish or when will we have a final formulation that we will take to move forward in a Phase II study. So stay tuned on all that. We will obviously come back to the market and give folks update on that program as we have more and more concrete information on it. And then finally, as far as the sales force expansion, I believe your question was related more to the monotherapy of Oxtellar XR. We don't have any specific plans at this point for any expansion specifically related to monotherapy.

(Operator Instructions) And our next question is from Ken Trbovich from Janney.

Jack, I noticed you started a couple of studies, one in 812 and the other one in healthy kids, I'm assuming as a comparator having to do with functional MRI and aggressive behaviors. Can you give us a sense as to how important that study is with regard to the NDA and being able to position the product, in terms of the mechanism of action or what the target and goal might be from that study?

Yes, I mean, that study is not necessarily a requirement from an NDA point of view, but we're trying to get a better understanding of the mechanism of 810. As we all know in this business, a lot of drugs end up on the marketplace, sometimes for years and years without people really understanding exact mechanism and how they truly work, not because of lack of effort, sometimes you just can't get a clear answer. So this was just one of our attempts to hopefully understand better how 810 is working and could potentially work and the mechanism in which it is affecting aggressive behavior through imaging on the brain and so forth. So we think it should really help us scientifically to bolster even the case for the unique mechanism of SPN-810 in treating such a unique condition for which there is nothing approved.

Makes sense. And then just a follow-up on the 4 pivotal studies for 812. Can you remind us as it relates to the agency and what they consider the minimum standard and how many of those do you need to hit? Do you need to hit the same population? Is this a situation where we have to see 2 studies at the same does? Or can we see multiple studies -- multiple doses across different studies that hit? How should we be thinking about that in light of the agency, and what they're expecting from a Phase III program like this for a new chemical entity?

Yes, I mean, as we all know, every case obviously is peculiar on its own. But overall, as a very general guideline, it's typically for a new chemical entity, the agency would like to see somewhere in the 1,000 to 1,500 -- data from 1,000 to 1,500 patients, somewhere in there. And the reason is -- it is a range because, for example, with viloxazine, that's a product that was on the market in Europe for many, many years. So there is obviously some weight to the safety, tolerability that's well established for a product like this that was in other markets for so many years with a lot of history behind it versus if you come in with a completely new, new chemical entity that's never been on the market, never been approved with any other agency. So that's why there is a range that we're normally looking for.

And we feel very comfortable with the data set that we are generating on SPN-812 as well as the fact that we're leaving the open-label extension open all the way through approval is also another attempt on our side to really collect as much as possible data, safety data, tolerability data among these kids and adolescents. So overall, as a package, we feel pretty good as to what we have been able to build as far as exposure, number of patients that have been exposed to the drug and so forth.

Sure. And I guess, what I was referring to more so as opposed to the total number of patients in the trial, the outcome of the trial and the efficacy, and whether or not the agency, for example, wants both studies in pediatric or both studies in adolescent to hit or would they accept one study in one, one study in the other? Has there been any specific communications from the agency as to how they would view mixed outcome across 4 studies?

Sorry I missed that. Yes, these are still open for discussion because it all depends on the data. If you go and ask the agency right now, they tell you what, "It depends on the data." Once I get the data, I can help you whether one in pediatric is good, and one in adolescent is good, because if the second study misses by, like, 0.06 instead of 0.05, that's one thing. If it misses by 0.1 versus 0.05 that's another different story. So it all depends on the strength of the data, clearly, of the second trial that missed that the agency will make that determination.

Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Jack Khattar for closing remarks.

Thank you. It's an exciting time at Supernus as we continue to focus on maximizing the Trokendi XR, Oxtellar XR brands, while advancing at the same time our late-stage pipeline towards commercialization. We delivered in the first 9 months of 2018, 38% growth in net product sales and 95% growth in net earnings compared to the same period last year. We also have several value-driving milestones coming up over the next 12 months. Next month, we will be releasing the top line data from 3 Phase III trials for SPN-812 and getting the decision from the FDA on the potential monotherapy indication for Oxtellar XR. And in 2019, we will be getting more data on SPN-812 from the last Phase III study and data on SPN-810, Phase III pediatric trials and also starting the Phase III bipolar program on SPN-604.

Thanks, again, for joining us this morning, and we look forward to sharing with you the upcoming updates before year-end.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.