Supernus Pharmaceuticals Inc (SUPN) 2018 Q4 法說會逐字稿

Welcome to Supernus Pharmaceuticals' Fourth Quarter and Full Year 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, Joel. Good morning, everyone. And thank you for joining us today for Supernus Pharmaceuticals' Fourth Quarter and Full Year 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 it 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 quarterly report on Form 10-Q for the quarter ended September 30, 2018.

Actual results may differ materially from those projected in these forward-looking statements. For the benefit of those who may be listening to the replay, this call is being held and recorded on February 27, 2019, at approximately 9 a.m. Eastern Time. 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.

Thank you, Peter. Good morning, everyone, and thanks for taking the time to join us as we discuss our 2018 fourth quarter and full year results. Supernus reported another year of strong operating results with significant achievements in 2018. The first achievement is the continued strong commercial execution on Trokendi XR and Oxtellar XR. Following double-digit robust growth and total prescriptions in 2017 the company delivered another 29% in total prescription growth in 2018 for 2 brands that are now in their sixth year on the market. This solid growth in prescriptions enabled us to deliver a record year in financial performance.

We delivered total revenues of $409 million, operating earnings of $144 million and diluted earnings per share that grew by 90% compared to 2017, reaching $2.05. It is important to highlight that our solid growth was achieved in a year that saw intense competition from 3 new launches in the migraine market with a heavily promoted new class of drugs. For Trokendi XR prescriptions increased 34% in 2018 despite the increased competition. While the total topiramate market held up steady at around 14.6 million prescriptions. Trokendi XR has grown its share of topiramate market by 16% reaching an all-time high market share of 5.13% at year-end 2018.

For Oxtellar XR prescription increased 12% for the full year 2018 despite another year of suboptimal level or promotion compared to competitions. The second major achievement in 2018 is the FDA approval of label expansion to include monotherapy of partial seizures for Oxtellar XR.

Early in this quarter we launched Oxtellar XR with its expanded label to include monotherapy for partial seizures and we believe that monotherapy can represent a significant growth opportunity in the long term for Oxtellar XR. As an anticonvulsant oxcarbazepine has a wealth of data that prove its efficacy and safety in monotherapy. The drug has been studied extensively in monotherapy with eight studies generating significant data proving its strong efficacy.

The general monotherapy partial seizure market is estimated at approximately 15 million prescriptions a year, a much larger markets than the epilepsy oxcarbazepine market of about 1.5 million prescriptions a year.

The third major achievement is the successful completion of three Phase III trials in ADHD with our lead novel pipeline product candidate SPA-812. The top line results we announced in December 2018 from these trails point to a well-differentiated product with strong efficacy, fast onset of action and a good safety profile across all trials. Each trial met its primary end point with robust statistical significance. In addition to that, the trials showed strong efficacy on the hyperactivity and the inattention subscales, an aspect which is very important for any nonstimulant. We are looking forward to disclosing topline results from the second and final adolescent trial by the end of March. We continue to be on track to file the NDA in the second half of 2019 for SPN-812 and pending FDA approval to launch the product in the second half of 2020.

We are also planning to start a Phase III program in adult patients in the second half of this year. We have now derisked one of our late-stage pipeline products with what we believe is a well-differentiated clinical profile and remain enthusiastic about the potential of SPN-812 to offer patients an important new nonstimulant therapeutic for ADHD. In addition to these significant achievements we have made good progress on SPN-810, our novel treatment of impulsive aggression in patients with ADHD. Enrollment is nearing completion and we expect to report results on this unique and novel program in the second half of this year. Supernus continues to observe enrollment in the open-label extension study for SPN-810 at 90% or higher. On average a patient in the open-label study remains on SPN-810 treatment for 10 months which we believe is an encouraging sign of the tolerability and efficacy profile of SPN-810.

We continue to expect to submit an NDA for SPN-810 in the second half of 2020 and to launch the drug pending approval by the FDA in the second half of 2021. Regarding SPN-604 for the treatment of bipolar disorder the Phase III program is expected to commence in the second half of 2019. In addition to the above progress on our late-stage pipeline programs we completed in 2018 the acquisition of Biscayne Neurotherapeutics adding SPN-817 an exciting pipeline opportunity for severe epilepsy. Our activity on the corporate development side will continue in 2019 looking for neurology and psychiatry assets that represent a strategic fit with our portfolio.

Finally as we announced in our fourth quarter and full year results press release issued last night, we will be hosting an Investor Day in New York City on April 16, 2019, where we will share with you an overview of our company including a detailed discussion of our clinical programs, specially SPN-812 and an assessment of the associated market opportunities. I will now turn the call over to Greg who will provide more details on our fourth quarter and full year financial performance.

Thanks, Jack, and good morning everyone. As I review our fourth quarter and full year 2018 financial results I remind listeners to refer to the fourth quarter and full year earnings press release issued yesterday after the market closed. Net product sales for Trokendi XR for the fourth quarter of 2018 were $88.4 million, a 28% increase as compared to the fourth quarter of 2017.

Net product sales for Oxtellar XR in the fourth quarter of 2018 were $25.1 million, a 46% increase as compared to the fourth quarter of 2017. Increased wholesaler and pharmacy channel inventory in the fourth quarter of 2018 as compared to channel inventory levels prevailing in the third quarter of 2018 increased net product sales by approximately $10 million. We believe this increase to be temporary and expect that inventory levels will return to historical levels in 2019. Total revenue for the fourth quarter of 2018 was $115.9 million, a 31% increase as compared to $88.4 million in the fourth quarter of 2017. Total revenue for the fourth quarter of 2018 was comprised of net product sales of $113.5 million and royalty revenue of $2.4 million as compared to net product sales of $86.3 million, royalty revenue of $2 million and licensing revenue of $0.7 million in the fourth quarter of 2017.

Turning to full year results. Net product sales for Trokendi XR were $315.3 million, a 39% increase as compared to 2017. Net product sales for Oxtellar XR for full year 2018 were $84.6 million, a 25% increase as compared to 2017.

Total revenue for full year 2018 was $408.9 million, a 35.3% increase as compared to $302.2 million in 2017. Total Revenue for full year 2018 included net product sales of $399.9 million, royalty revenue of $8.3 million, and licensing revenue of $0.8 million, as compared to $294.1 million, $6.4 million and $1.8 million respectively for 2017.

Turning now to expenses for the fourth quarter of 2018. Research and development expenses were $29.8 million, as compared to $16.2 million in the same quarter the prior year. In the fourth quarter of 2018, the company acquired Biscayne Neurotherapeutics. We made a one-time upfront payment of $15 million, $14 million of which was charged to research and development expense. Excluding the one-time upfront expense of $14 million in the fourth quarter of 2018 for the acquisition of Biscayne Neurotherapeutics, research and development expenses in the fourth quarter were essentially flat, as compared to the fourth quarter of 2017.

For full year 2018 research and development expenses were $89.2 million, as compared to $49.6 million for 2017. This increase, approximately $40 million was due primarily to the initiation of the four Phase III clinical trials for SPN-812 in the second half of 2017 with those trials continuing through full year 2018. Also affecting year-over-year expenses were the open-label extension trials for both SPN-812 and SPN-810 and the one-time upfront expense of $40 million for the acquisition of Biscayne.

Selling, general and administrative expenses in the fourth quarter of 2018 were $42.1 million, as compared to $33.8 million in the same quarter of the previous year. This increase was due primarily to the development and production of promotional materials and marketing programs associated with the launch of the monotherapy indication for Oxtellar XR and to an increase in share-based compensation expense.

Full year 2018, selling, general and administrative expenses were $159.9 million as compared to $137.9 million in 2017. This increase was due primarily to the full year impact of the expansion of the sales force by 40 representatives in 2017, increased marketing spend to support Trokendi XR as well as the factors I just mentioned that impacted the fourth quarter.

Operating earnings in the fourth quarter of 2018 were $39.9 million, or 16% higher than $34.3 million in the same period of 2017. Operating earnings for full year 2017 were $144.4 million, a 45.1% increase over 2017. The improvement in operating earnings for fourth quarter and full year 2018 was primarily driven by increased net product sales.

GAAP net earnings in the fourth quarter of 2018 were $25.9 million, or $0.48 per diluted share as compared to $13.7 million or $0.26 per diluted share in the same period last year. GAAP net earnings were $111 million in 2018 or $2.05 per diluted share as compared to $57.3 million or $1.08 per diluted share in 2017.

In addition to higher operating income for the fourth quarter and full year 2018, GAAP net earnings benefited from the reduction in the statutory U.S. federal income tax rate and to a lesser extent from stock option exercises. The effective income tax rate in the fourth quarter of 2018 was unfavorably impacted by the $14 million nontax deductible, research and development expense associated with the acquisition of Biscayne.

Weighted average diluted common per shares outstanding were approximately 54.1 million in both the fourth quarter and full year 2018 respectively as compared to approximately 53.5 million and 53.3 million in each of the respective prior year period.

As of December 30, 2018, the company had $774.8 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 $500 million reflects net proceeds of approximately $365 million from the sale of convertible senior notes and warrants, offset by purchases of convertible note hedges in March 2018. In addition, approximately $129 million in cash was generated from operations.

Finally, turning to financial guidance for 2019, the company is providing the following. Net product sales in the range of $435 million to $455 million. Net product sales guidance assumes that the higher levels of inventory held by wholesalers and pharmacies as of the fourth quarter of 2018 will revert to historical levels in 2019. Accordingly, we anticipate that this will affect 2019 net product sales by approximately $10 million.

Research and development expenses in the range of $70 million to $80 million. Operating earnings in the range of $160 million to $180 million. Effective tax rate in the range of 23% to 25%.

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

(Operator Instructions) Our first question comes from Ken Cacciatore with Cowen and Company.

Just wanted to ask a couple questions. First on the CGRP, Jack, you gave a little bit in your prepared remarks, but maybe a little more nuance in terms of what you're hearing and seeing in terms of patients being pushed in and any pressure, I know you alluded to not seeing much pressure, but maybe the dynamics that you're seeing in the market in terms of volumes going into the clinician, how that may ultimately benefit you or not? And then on BD, if there's any more nuance you can give us about potential areas in CNS that you're finding more or less attractive there, certainly are both private assets out there, but also a lot of different smaller public assets in CNS that seem to be kind of lingering and depressed a lot of different sales forces. So can you just talk about the balance of looking at maybe earlier stage versus public companies?

Regarding the CGRPs, I mean, so far we haven't seen any specific dynamics that are very different than what we've seen or experienced in 2018. Specifically, of course, initial rush into trying the CGRPs and then as time goes on patients experiencing that the drug doesn't really work for everybody. So we've seen also patients will try some of these products and then come back to use other products that existed before the CGRP. So the dynamics have been fairly stable. Obviously, there is increased competition between the CGRPs with the 2 newer entrants that came into the market in the fall versus initially way back in May when the first one launched. As far as the market expansion, we do expect 2019 and '20 to benefit from such expansion if such expansion were to occur, which I think we have seen some initial signs that the market is expanding as far as volume. Of course that will come with the time and will come also with the increased heavy activity from a promotional perspective by the competitors in that space. So theoretically, practically we will expect to benefit absolutely from that increased volume over time that Trokendi XR will be there, especially that the efficacy of Trokendi XR is really, really good. And it has some of the best data out there as far as responders rate and creating and resulting in migraine freedom for patients. It has some of the highest numbers that we've seen. So we do expect for Trokendi XR get a fair share over that market expansion. Regarding the second question on the BD side, our priorities continue to be fairly consistent, and looking at neurology and psychiatry we're really agnostic as to which area we could get our hands on, what kind of assets. It is a mix of private and public opportunity that we're looking at. So we look at everything basically in that domain, in that space or universe, which really makes a lot of strategic fit for us. And the priorities are always commercial assets, later-stage products and then down to much earlier stage assets. I mean, these are pretty much the same criteria priority that we've had for a long time and we strive to stay disciplined, stick to that strategy. And especially that now we're working full speed into getting 812 into the market and hopefully in few months from now or later this year we will have 810 as well positive moving forward, then that certainly will allow us to take on a little bit more earlier stage kind of assets because we have -- we will have many, many years of growth to come in the company that will allow us the time to develop these early assets.

And our next question comes from David Steinberg with Jefferies.

Two questions. So just to follow up on Ken's question on BD, you were talking about neurology versus psychology and public versus private, but just to clarify. So that you're assuming 812 reaches the market next year, does that pretty much shut the window on on-market more accretive acquisitions because you need to get your sales force focused on 812? Or is still the window open for on-market assets that your sales force can deploy right away versus earlier stage assets? And then now that you've had your 812 data out there for a couple months have you had any further discussion with payers about reimbursement down the road? And if so could you share any color with that?

Yes, sure. Regarding 812, that's a good question, David, as far as, as we get closer to launching 812 clearly it will make less sense for us to get a on-market or commercial asset in psychiatry. But not necessarily in neurology because we will have 2 different sales forces one which will be dedicated to the launch of 812 and establishing our presence in psychiatry, but we have the current sales force for neurology. So certainly on the neurology side that does not stop us from continuing to look at commercial assets or about to be commercialized kind of assets in neurology. As far as payers, KOLs and so forth, you're exactly right as you would expect, as we got the Phase III data in December we've been fairly busy in January and February sharing a lot of that data with influencers out there, KOLs, lead thought -- thought leaders in the ADHD space. The excitement levels continue to get higher and higher as we explain to people and as we walk them through the data. At the same time we are fielding research with payers as well, the results of which we don't have yet, but that is occurring as well now that we have a very good feel as to what that profile looks like and what the potential label might look like. So we have a much better way of measuring the acceptance of the product profile from a market point of view. Payers as well as KOLs and physicians.

And our next question comes from Annabel Samimy with Stifel.

I just want to turn to 810, it seems to be continuing to enroll and we're going to see something by mid-year and I don't know that many people are paying attention to it, but maybe you can frame what expected outcome could be? Is there certain reduction in the sense that you're looking for reduction in the score? Is there a specific separation that you need to see over placebo? So in terms of how it might be powered going forward. Maybe you can give us some color around that. And can you give us some of the points that give you confidence around how they move forward with the right dose, outside the interim analysis that (inaudible) 36 milligram dose as being the right dose. Is there anything that -- else that could give comfort in what you've seen either in prior studies or in the open-label study?

Yeah, sure. Regarding the Phase III studies, just as a refresher for everybody, the primary endpoint and what we're really looking for is the change in the frequency of episodes during the treatment period. Of course, comparing the treatment arm versus the placebo and getting statistical significance versus that placebo arm. As far as the powering of the study, I mean we base all the powering based on our experience with the Phase IIb trial and the Phase IIa trial. Now that the studies might end up having a little bit more patients, specifically 301, obviously that will help with the power. And regarding the question on that dose, after the interim analysis, as everybody might remember, we scaled it down to only the 36 milligrams as the treatment arm. And all the future patients after the interim analysis ended up being randomized on placebo or 36 milligrams. And actually what we have been seeing in the open-label extension is a trend towards the 36 milligrams. In the open-label extension when people get enrolled in the open-label everybody starts on 18 milligram so that you don't break the blind on the initial study. So everybody starts with 18 milligrams and then the physicians will probably trade up or down or keep it at 18 milligram as they see fit given the specific patient and their experience with the drug. And we've been seeing over time actually a trend towards the 36 milligram which gives us a very good comfort level that what the decision that was made back on the interim analysis seems to be very consistent with the experience we're seeing in real life clinical practice in the open-label where a lot of the patients actually are trading up. Some patients are, there is still a good number of patients staying on the 18, but a bigger portion of the patients are going to 24 or 36 milligram. So that is actually very encouraging and very consistent with what the action that we took way back in 2017 on the interim analysis. We continue to be extremely excited about this program and hopefully the data is positive and we think the potential of those drugs could be in the multibillion dollar as far as the opportunity out there and as we talked about several times because it really spans across so many other psychiatric disorders not only ADHD, but also in PTSD, autism, Alzheimer's and other forms of dementia. We continue to hear about the problems out there for which there are no drugs that are approved to really treat them in the right way. So we continue to be extremely excited about this program.

Okay. And If I could just follow up on one question, in the open-label patients that stayed on average 10 months on drug, can you just put that into context? Is that a lot for these patients, is that a little given that they are very difficult patients to treat and if the drug is working you imagine that they would want to stay on? So just put that in context for us, please?

Yes, sure. Yes, I mean there is really no like published data that really speaks to what is a good number of months for, or what's a good indicator or number of months that if patients are staying in an open label is a good sign or a bad sign. There is no such thing to really say on an average in CNS in general that's what you experienced versus what we're seeing in 810. But to your point given the demographics and the difficulties these patients really have on a day-to-day basis, not just the patients, but also the caretakers, the family members who deal with this situation this is not an easy situation for them to continue to be in a controlled study where they have to go and continue with the visits, checkups and so forth. So if the drug is not really working for them or for their kid, they really have no motivation whatsoever to even stay with the study, never mind 1 month, 2 months, but never mind like 10 months into the study. And similarly, if they were to be experiencing really nasty side effects or the drug is not really well tolerated, similarly why would they even stay with the study and specifically for 10 months. I mean we view the 10 months as a really long period for that patient population to stay with this drug and stick to it. At a time if it weren't really working for them, they really have no incentive whatsoever to do so, so that's why we keep saying, looking at it and continue to experience that long stay on the drug 10 months into it is really a good encouraging sign on both sides, efficacy as well as the safety and tolerability.

And our next question comes from Patrick Trucchio with Berenberg Capital.

I have a few follow-ups on SPN-810, can you tell us if you can file an NDA on 810 without the adolescent data? Or do you need a complete dataset before you can file the NDA? And then regarding the adolescence study, can you tell us where enrollment is presently and should we expect the enrollment in the study to be more efficient than in the child patients? And then separately, if this program is successful in ADHD, how soon do you intend to bring 810 forward to pivotal studies and other indications or other comorbid indications, which indications? And what should we anticipate could be next and how soon could you initiate those studies?

Yes, regarding the NDA, the initial discussions we've had with the FDA and our intent was to really go after pediatric and adolescence as an initial patient population. And that discussion led to the FDA to tell us, look we're not opposed to that. However, we will need to see some data in adolescent patients in the NDA. And we went as far as saying, okay, fine, and that's why we initiated the Phase III study in the adolescent trial. But the extent of that data and the kind of that data what we think the FDA is really looking for is more on the safety side to make sure as you go up in dose, if you're treating older kids with that same kind of disease, there are no other safety issues of tolerability or unforeseen issues that they have to deal with. So we always believe that if we start the adolescent trial as time goes on and as we get to the completion of the pediatric trials and as we get closer to the filing of the NDA, if we have enough safety information, tolerability from the Phase III adolescent trial, we have a good chance of filing the NDA with the pediatric data as well as the safety and tolerability data from the adolescent Phase III trial. And we may not have to wait for the full adolescent trial to complete. So that's really our understanding at this point. And that's really the strategy that we're marching forward. Of course as we continue to have discussions with the FDA, we'll seek to get more clarification. Now we do have the opportunity also to just file four pediatrics and therefore restrict the whole NDA and confine it to only pediatric data with the label only being for pediatric, so that's also an option for us and that's clearly something that would be fulfilled. You will fulfill all the requirements for the NDA with the 2 Phase III trials you have going on right now in pediatrics. So we still have different options available to us. And we haven't really finalized anything specific. But as far as the adolescent file itself, we would hope that the enrolment in the adolescent will be a little bit quicker than we have had in the pediatric because again in the pediatric we were the first people ever to even conduct trials in this area, so there was a learning curve. Now the diary is the same whether pediatric or adolescence, so that issue of screening failures that we have experienced on the pediatric we will probably continue to experience that with the adolescent because that's just the nature of the dairy, the nature of the demographics we were talking about as far as people and their ability to follow instructions. A lot of these folks don't follow instructions pretty well unfortunately and therefore they are not compliant with the diary during the screening period and they end up failing the requirements to enter the study. That we cannot relax that and that doesn't really change. But if you have a kid also that was in the Phase III study in the pediatric trials and maybe they are at an age now that it's been 2, 3 years in the Phase III they may have become an adolescent. I mean those people could roll into the adolescent trial. So we are hoping to really -- we'll continue to monitor it, we continue -- I mean we're really watching it very closely. And at this time we are still committed to delivering the dates we promised which is filing the NDA in the second half of 2020 and launching in the second half of 2021. And again, our ideal filing of that NDA, we are hoping to include both, pediatric and adolescent at that time and launch with the label that has both. As time goes on, if we learn anything that is really different, we'll certainly clarify (inaudible) the program changes slightly the direction. As far as how soon we can start in other areas, clearly I mean the moment we get positive data on the pediatric trials and get the reassurance that our, believe in the program for so long (inaudible) it should work and what we are seeing in the open label. If that gets confirmed with the Phase III data pediatric, we will be looking to really start the program, I mean as soon as possible. The other areas most likely will be more autism, PTSD as the initial areas we've been doing some research and talking to KOLs about. That could change as time goes on, but that's the initial thinking at this point that these are potentially the areas that will be natural second or third area for us to do additional studies in. How many areas do we need to do studies in? We think at most 2 other areas, maybe you do 1 Phase III in 2 other areas for us to hopefully get a much broader label that really treats impulsive aggression in every disorder, not just ADHD.

And our next question comes from Irina Koffler with Mizuho.

Can you give us an update, I know it's early, as to how Oxtellar is doing commercially in the expanded monotherapy indication and when we can expect some inflection in prescription trends? And then maybe just touch on expected gross to net in the Trokendi business.

Yes, regarding the monotherapy, as I mentioned, we just launched this quarter, early in the quarter. So we were ready for it with the training of the sales force and so forth. So we hit really the street from day 1 right after we -- shortly after we got the approval. So we're very excited about the momentum. And so far we are very excited about what we've been reading and the feedback we've been getting from physicians. It is very clear and it really confirms what we've said all along before we launched it, that a lot of physicians out there do not remember and some of them have never seen any monotherapy data about oxcarbazepine as a drug and as a molecule. And as we share some of that data and as we remind people of the efficacy of oxcarbazepine and now it's availability in Oxtellar XR as a much better improved profile potentially for their patients, there is really a whole different level of excitement about the brand versus initially when we only could talk about adjunctive therapy. So we are really excited about the initial feedback. You're absolutely right, it is a little bit early for us to really make any specific comments on any inflection point in the growth rate of the product. I do remind folks that in epilepsy in general even if you look 20 years of IMS data, you will see that all new products when they launch they do hold and gain market share, but it's a much slower build than it would be in migraine or any other areas, so certainly we're not necessarily looking for a trajectory or an inflection point in the growth curves as we have seen in Trokendi or it will be much slower over time, yet it will be very steady. And eventually this is a long-term franchise for us given the vast space out there and how big the market is of about 15 million prescriptions a year. We think we have a long way for us and a lot of quarters to come and years to come of significant growth behind Oxtellar XR. As far as the gross to net, we really don't like to make any specific comments on a quarter-to-quarter or year-over-year, I mean we maintain to say over the years, yes, these do get a little bit worse, you will have fluctuations one quarter over the other and actually some people may probably notice those fluctuations because there are so many different factors in that gross to net. A lot of it is out of our control and it is what it is. And whenever it happens we have to report it and we have to include it in the gross to net and therefore it's out of our control. But we actually -- after 6 years on the market we are really pleased as to where we are on both products from a gross to net prospective where actually a lot of products today when they launch from year one they are at the same levels that we are now after six year in the market place. So we are pretty pleased with where we are but we don't know and we don't have a crystal ball what the future holds obviously in how that whole universe and how that whole domain changes, if there will be any structural changes given what's going on with the administration and the healthcare policies out there. But we'll remain to monitor it and work as hard as we can to continue to have good coverage for both products.

And our next question comes from David Amsellem with Piper Jaffray.

Just a couple. So just following up on the Oxtellar questions and traction in epilepsy monotherapy. So I guess what I am struggling with is how are you seeing this wider physician audience for the product in the context of monotherapy where physicians who are familiar with Oxtellar have been using it as monotherapy over the last year. So just help us understand the extent to which this audience is wider now that you have that in the label. And then secondly regarding bipolar, can you just remind us what portion of underlying oxcarb Trileptal volumes are written in the psychiatry setting off label. And of the sodium channel blockers available, what are the most widely used? And how do you see -- how do psychiatrist perceive oxcarbazepine as a mood stabilizer in the psychiatry setting? Just trying to get a handle on what kind of opportunity that could be.

Yes, sure. Regarding the first question on the monotherapy. You are absolutely correct, some of the physicians that we've had over the years prescribing Oxtellar XR have used that in monotherapy. But that is not all of our physicians, no question about it. There are a lot of them who have been using only for adjunctive because our message has been very consistent for 6 years now, doctor, if you need extra efficacy, if you need to add on, Oxtellar XR should be your first choice as an adjunctive therapy as an add-on. And that -- we've been pounding this message for 6 years. So naturally you would expect a lot of physicians to just use it that way and reserving it only for extreme patients who need that add-on extra efficacy and therefore excluding us completely from that monotherapy market for newly diagnosed patients or patients who have been on other monotherapy and need to be switched to a much better more efficacious drug. What really changes here as far as the launch of our monotherapy is how we prioritize, how we changed the P1 position and P2 position, meaning the first call position between the 2 brands that we have on Trokendi XR and Oxtellar XR. So Oxtellar XOR is now receiving a much, much higher position in P1 as a call in the sales call among a lot of physicians where historically it was the P2 position where a rep may have a chance to talk about Oxtellar XR into the sales call or may never even get to it in the sales call. So there is a big change and big shift. And we're talking about few thousand doctors who will make a very -- who will get a very different message and will get much more emphasis with the recent effort and the recent launch in monotherapy. And some of these physicians also may be as well new physicians that we didn't talk to before because of their heavy prescribing in monotherapy. That is not necessarily molecule specific, just oxcarbazepine. So our target is not just the oxcarbazepine market anymore, it is the monotherapy market, which will bring in potentially newer physicians to the universe and definitely I can tell you will bring in much more emphasis on Oxtellar XR in a P1 position versus it used to be always in the P2 position. And of course the message, the data everything is very different than what we have. Regarding the bipolar question, currently the market, about 50% of the oxcarbazepine market a little bit more is in psychiatry. And the majority of that is bipolar or for mood stabilization, for mood disorders. And if you look at the whole bipolar market, about 34% of the prescriptions to treat bipolar are coming actually from antiepileptic drugs most of which are exactly what you mention are sodium channel blocker. The majority are on Lamictal, Lamotrigine which had that indication actually for many years, so it is the biggest one. And then of course you have carbamazepine like Carbatrol which is the predecessor of oxcarbazepine, oxcarbazepine even topiramate is widely used also in bipolar. So a lot of the antiepileptics. And that segment is about 34% of the total bipolar market. Today as far as Oxtellar XR there is really negligible, negligible, if any, use in bipolar because we don't call on psychiatrists naturally. So if a psychiatrist heard about it from the outside or through a publication maybe but it's really very, very low single-digit if any use of bipolar Oxtellar XR.

And our next question comes from David Buck with B. Riley FBR.

Just a couple of follow-ups maybe for Jack. Can you talk about what your expected IP position would be in bipolar for your Oxtellar when you move into? An indication there. Secondly, do you expect some of the payer research you talked about to be available by mid-April for SPN-812. And finally for Greg, fourth quarter typically had a bit of inventory that increased in the channel. You pulled out $10 million, which is helpful, but what was the comparator last year in terms of the inventory change?

Yes, David, regarding the IP position for bipolar, I'm not really in a good position at this point to make a specific comment on that because we are doing a lot of things that we haven't disclosed necessarily publicly as to what that program and what is the exact product for that bipolar program. I will tell you one thing, we are planning for very long-term IP protections, that I can say. But what is it exactly and how long is it going to go and how far is it going to go we're not in the position to be able to say that at this point. As far as the payer research, we're working pretty hard on that on SPN-812 to really get meaningful feedback that we can share. We are really hoping actually be able to do that in the April 16 Investor Day if we have it at that time. I can't promise for sure. But if we definitely have it and have something that is meaningful we certainly will be looking forward to share anything that is meaningful around that day. Greg?

Right. And David, with respect to your question about inventory levels, this is a tough area because getting very precise data is challenging. But to directly respond to your question, in our estimate and our calculations show that inventory accumulation the prior year, so that would be 2017 fourth quarter was negligible if not nil. So there was clearly a discernible change in ordering pattern in this fourth quarter. And that is why we called it out.

And just a follow-up. Was it more one product versus the other? Was it more Oxtellar versus Trokendi?

No, it wasn't, it wasn't more Oxtellar than Trokendi XR. Actually they were pretty much proportionate with one another probably even maybe a little bit heavier on Trokendi XR than Oxtellar XR.

And our next question comes from Esther Hong with Janney.

So staying on Oxtellar for bipolar disorder. Can you talk about what a potential trial design would look like? I know that the trial is expected to begin second half of this year. So when could we expect to see data? How quickly could we see label expansion?

Yes, as far as the design, we will discuss that at more length when we have it all nailed down and share with the FDA and get their blessing on the design. So I will feel more comfortable sharing that at that time. As far as the timing, I mean if we start the program in the fall of this year, I mean these trials will have to take about a good year from beginning all the way till the end, a year, maybe a few months later. So you will be then into around end of 2020 maybe to get data. Again this is now really guesswork. We don't have any specific timeline until we nail down the design and know exactly when we start the studies. But that's a very, very rough timeline if I were to give you anything today.

And we have time for 1 more question. A question comes from David Steinberg with Jefferies.

I just had 1 follow-up regarding the stocking in Q4. Was there a destock in the previous quarter? And then I was curious why the $10 million is -- was almost 10% of your revenue, so it's pretty big stock. And I was just curious, you mentioned a little more with Trokendi and Oxtellar, but Trokendi is growing nicely but still decelerating from the rapid growth post the migraine launch. And Oxtellar growth has been kind of inline, so just curious why were the wholesalers buying so much ahead if there was not a destock in the previous quarter?

So there was not a destocking near as we can determine in the third quarter, number one. Number two, I think the wholesalers and also the pharmacies we noticed the same behavior for certain pharmacies, certain large-chain pharmacies. We're also probably ordering more than they had in the prior months. So it was in both segments of the channel both products. And we think what happened here is that the company does have a -- has a practice of increasing prices in the early part of the year. We think that the wholesalers and pharmacies noticed that and they tried to get in front of that by ordering product ahead of time, price increase is announced, and that increase in price drops directly into their pocket. So going forward we're going to be -- we've set up some additional reconnaissance and additional procedures that will allows us to I think control this much, much better. You noticed that in our guidance we are not anticipating an additional stocking in the fourth quarter of 2018, because -- fourth quarter 2019, excuse me, because of these procedures and practices that we're going to be setting up in terms of dealing with our wholesalers and the pharmacy chain. So we don't expect a repetition but we think it was really driven by the timing and the anticipation of price increases in the early part of the year, and they were right.

But don't you have inventory management agreements? I mean those types of movements happened in the old days, but with IMAs they shouldn't be happening anymore or no?

Well, we do, but they happened.

Thank you. I would now like to turn the call back over to Jack Khattar for any closing remarks.

It is an exciting time at Supernus. In 2019 we look forward to achieving significant milestones, including the release of the top line results for the fourth and final Phase III study for SPN-812, submitting the NDA on SPN-812, completing the Phase III trials for SPN-810 and releasing top line results from these trials later this year and also initiating a Phase III bipolar program for SPN-604. In addition, we continue to be focused on maximizing the Trokendi XR and Oxtellar XR brands through continued commercial execution. Thanks again for joining us this morning, and we look forward to sharing with you the upcoming updates throughout the year.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. And you may all disconnect. Everyone have a great day.