Supernus Pharmaceuticals Inc (SUPN) 2023 Q1 法說會逐字稿

Good afternoon, and welcome to Supernus Pharmaceuticals' First Quarter 2023 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 ICR Westwicke, Investor Relations representative for Supernus Pharmaceuticals. You may begin.

Thank you, Stephen. Good afternoon, everyone, and thank you for joining us today for Supernus Pharmaceuticals' First Quarter 2023 Financial Results Conference Call. Today, after the close of the market, the company issued a press release announcing these results. On the call with me today are Supernus' Chief Executive Officer, Jack khattar; and Chief Financial Officer, Tim Dec. Today's call is being made available via the Investor Relations section of the company's website at ir.supernus.com.

During the course of this call, management may make certain forward-looking statements regarding future events and the company's future performance. These forward-looking statements reflect Supernus' current perspective on existing trends and information. Any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in the Risk Factors section of the company's latest SEC filings. Actual results may differ materially from those projected in these forward-looking statements. For the benefit of those of you who may be listening to the replay, this call is being held and recorded on May 9, 2023. Since then, the company may have made additional announcements related to the topics discussed. Please reference the company's most recent press releases and current filings with the SEC. Supernus declines any obligation to update these forward-looking statements, except as required by applicable securities laws.

I'll now turn the call over to Jack.

Thank you, Peter. Good afternoon, everyone, and thanks for taking the time to join us as we discuss our 2023 first-quarter results. Despite the generic entry on Trokendi XR and the typical insurance headwinds in our industry in the first quarter, Supernus delivered strong first-quarter results and set the stage for solid performance for the rest of the year. In the first quarter, Supernus achieved total revenues of $154 million, essentially flat compared to $153 million in the same period a year ago. This was achieved despite a significant 45% decline or $28 million decline in net sales of Trokendi XR.

In addition, the first quarter 2023 adjusted or non-GAAP operating earnings were $31 million compared to $28 million in the same period last year. Excluding Trokendi XR first quarter 2023 net product sales increased 25% year-over-year, driven by continued adoption of Calgary across both pediatric and adult patients and growth by GOCOVRI. We remain well positioned as we manage through the loss of exclusivity of Trokendi XR and transition to our growth brands, setting the stage to deliver double-digit growth in 2024 and beyond. Calgary continues to perform well with total IQVIA prescriptions in the first quarter of this year, reaching 134,530, representing a sequential increase of 14% compared to the fourth quarter of 2022.

Prescriptions in the most recent month of March reached 49,789, the highest monthly total since the launch. This represents an annual run rate for Calgary of more than 0.5 million prescriptions. Calgary also continues to capitalize on several dynamics that we elaborated on last quarter, including the underlying growth in the overall U.S. ADHD market, an increase in average wholesale acquisition cost per prescription improvement in managed care coverage, and the continued growth in Calgary's base of prescribers. In the first quarter of 2023, Calgary expanded its base of prescribers of approximately 19,297 up from 16,822 prescribers in the fourth quarter of 2022.

We initiated the expansion of our sales force by approximately 45 sales representatives to give us broader reach and increased capacity to deliver higher frequency on high decile prescribers. This expansion is substantially complete, allowing us to cover more than 50% of the ADHD more. In summary, Calgary continues to perform across several important growth metrics, giving us confidence in its growth potential in 2023 and more importantly, in 2024 and beyond. Switching now to GOCOVRI and Oxtellar XR net product sales increased to $26 million and $29 million, respectively. This represents an increase of 15% for GOCOVRI and 5% for Oxtellar XR compared to the same period last year. Regarding Trokendi XR, net product sales in the first quarter were $35 million, down sequentially from $57 million in the fourth quarter of 2022 and down year-over-year from $63 million in the first quarter of 2022.

In January 2023, the first generic to 3 out of the 4 product strengths of Trokendi XR was introduced. Total prescriptions for the first quarter of 2023 declined by 48% compared to the same period last year. Later in the quarter, a generic to the fourth product strength entered the market. At this point, we are maintaining our guidance for net sales between $60 million and $80 million for Trokendi XR for the year. Moving on to the pipeline. We had a constructive meeting with the FDA in April this year regarding the resubmission of the NDA for SPN-830, our apomorphine infusion device.

Based on the meeting, we expect to resubmit the NDA in the fourth quarter of 2023. Enrollment is progressing in the open-label Phase II clinical study for SPN-817 in adult patients with treatment-resistant seizures and we continue to expect top-line data in the first half of 2024. For SPN-820, our first-in-class orally active mTORC1 activator, the Phase II randomized double-blind placebo-controlled study in adults with treatment-resistant depression is ongoing with 33 sites activated. The study will examine the efficacy and safety of SPN-820 over the course of 5 weeks of treatment and approximately 270 patients.

We're planning on holding an R&D Day in the fall of this year to discuss and further detail our lead pipeline programs and new chemical clinical candidates that were generated through our discovery program and nominated for clinical development. Finally, we continue to be active in corporate development, looking for strategic opportunities to further strengthen our future growth and leadership position in CNS. With that, I will now turn the call over to Tim.

Thank you, Jack. Good afternoon, everyone. As I review our first quarter 2023 results, please refer to today's press release and 10-Q that were filed earlier today. Total revenue for the first quarter 2023 was $153.8 million compared to $152.5 million in the same quarter last year. Total revenue in the first quarter of 2023 was comprised of net product sales of $14.6 million and royalty revenue of $13.2 million. The increase in total revenues was due to higher net product sales of Calgary, GOCOVRI and royalty revenue, partially offset by the decrease in net product sales of Trokendi XR.

For the first quarter of 2023, combined R&D and SG&A expenses were $106.8 million as compared to $111.3 million for the same period last year. The decrease was primarily due to Adami's integration cost, which were included in Q1 2022 that resulted in operational efficiencies. We Operating earnings on a GAAP basis for the first quarter 2023 was $5.2 million as compared to operating earnings of $2 million for the same period last year. Total other income for the first quarter of 2023 was $3.8 million as compared to $12.8 million for the first quarter of 2022. The change is primarily due to a gain recognized in the first quarter of 2022 on the sale of a subsidiary of Navitor.

In the first quarter of 2023, we reported an income tax benefit of $7.9 million as compared to an income tax benefit of $10.9 million for the same period last year. The income tax benefit in the first quarter of 2023 was primarily due to a lower pretax loss forecasted for 2023. The income tax benefit in the year-earlier period, as noted on our prior calls, was due to a corporate reorganization of the Adami's entities in the first quarter of 2022. GAAP net earnings were $16.9 million for the first quarter of 2023 or $0.29 per diluted share compared to $25.6 million or $0.43 per diluted share in the same period last year.

On a non-GAAP basis, which excludes amortization of intangible assets, share-based compensation, contingent consideration, expense gain, and depreciation, adjusted operating earnings was $30.5 million compared to $28 million in the same period the previous year. As of March 31, 2023, the company had approximately $686.5 million in cash, cash equivalents, restricted cash, and marketable securities compared to $555.2 million as of December 31, 2022. The increase was primarily due to cash generated from operations and the net amount drawn on the line of credit to fund the convertible note payout.

In November 2023, the company paid the total principal amount of $402.5 million due under its convertible senior notes, in addition to payment of the remaining outstanding interest due of $1.3 million. Following the repayment, the 2023 notes are no longer outstanding. The repayment of the 2023 notes at maturity was financed primarily with available cash on hand and to a lesser extent, through our borrowing under the company's existing credit line agreement. We expect to fully repay the borrowing from the credit line by the end of the second quarter of this year.

Now turning to guidance. For full-year 2023, the company is raising the expected ranges of full-year GAAP and non-GAAP operating earnings and lowering the expected range of combined R&D and G&A expenses. For the year ended 2023, the company reiterates its prior financial guidance for total revenue. As such, we expect total revenue to range from $580 million to $620 million, comprised of net product sales and royalty revenue. As Jack mentioned, we continue to expect net product sales of Trokendi XR in the range of approximately $60 million to $80 million. For the full year 2023, we now expect combined R&D and SG&A expenses to range from $450 million to $480 million compared to the prior guidance of $460 million to $490 million.

As we mentioned previously, the sales force expansion to support the growth of Calgary was initiated in 2023, with most of the expense related to extensions starting in the second quarter of this year. We expect to further invest in commercial initiatives for Calgary during the back-to-school season, along with investments for other growth products. We now expect full-year GAAP operating loss in the range of $10 million to $30 million compared to previous guidance of an operating loss of $25 million to $50 million. And finally, we expect non-GAAP operating earnings to range from $75 million to $100 million compared to the previous guidance of $65 million to $95 million. Please refer to the earnings press release issued prior to this call that identifies the various ranges of reconciling items between GAAP and non-GAAP. With that, I will now turn the call back over to the operator for Q&A.

(Operator Instructions) Our first question comes from the line of Andrew Tsai of Jefferies.

So the first one is that congratulations on locking in that major PBM contract, I think, effective January 2023. So maybe remind us the latest and greatest thinking on when we can expect that target of 50% to 55% gross to net to occur? Basically, is it fair to assume that range could happen this year or could it take a little bit longer than that?

Yes. Andrew, regarding the second one, it became effective in the first quarter of 2023. Now we didn't see the full effect of that contract or a lot of the effect of the contract because also you always have proposing factors within because of the high deductibles insurance, higher co-pays, and so forth. So we certainly expect the full impact of this second PBM contract more in the second quarter and obviously even better in the third quarter and the fourth quarter. So to answer the question, clearly, as we progress through the year, we expect the gross-to-net to improve and definitely get us closer to the 50 55% by year-end.

So it's going to be, is it linear, most likely. I mean, that's typically what we see in our business improvement in the gross to net with Q1 typically at the worst level and then improvement throughout of the year. So certainly, that's what we expect on Calgary moving along from the early 60% gross to net towards the 55% or even 50%, hopefully by year-end.

Great. Very clear. And then maybe just one more then would you agree based on your guidance, if we backed out all of your products with reasonable assumptions, including Trokendi, which you've guided to Oxtellar and so forth, would you agree that Calgary sales could maybe more than double if not almost triple this year? And if that's the case, I know you're not trying to provide guidance, but directionally speaking, if that's the case, then is it fair to assume Calgary sales should accelerate on a quarterly basis going forward? That's just the root of my question.

Yes, the short answer is yes. I mean we do expect Calgary to accelerate as the year goes on and especially, of course, as we also get closer to the back-to-school season on top of all that, Yes, it is more than double than last year. That's an easy answer, actually, given last year's performance. And we've made several comments this quarter and even in the last quarter, obviously, about the different dynamics in the marketplace that are helping us and are expected to continue to fuel the growth behind the brand from the market itself being a very healthy market, the HD market, then clearly, from a managed care perspective, continued improvement on the coverage. The continued increase in the WACC average wholesale acquisition cost, and of course, the expansion in our sales force and so forth, and the improved coverage from an ADHD market perspective. So all these are pointing and aligned in one direction, which has really continued to push calgary and increase the momentum and the growth behind the product.

Next question comes from David Amsellem of Piper Sandler.

On Calgary, can you talk about, Jack, where you see the mix between adults and peds evolving over time? And I may have missed on your prepared remarks, what you said on the current mix between adults impedes, but just talk about where you think that mix is going to go over time. Secondly, can you provide more specifics on where you need to improve upon in terms of managed care access? And then third, just real quick on Oxtellar. I believe you have a generic filing a trial on the generic filing pending. So I just wanted to get your thoughts on that and the relative risk of potentially an earlier than expected loss of exclusivity on Excel?

Yes, sure. On the first question for Calgary and the mix of the business. I mean, where we are right now, we are about somewhere between 28%, 30% adult and the rest being pediatric. The market itself, if you remember, it's basically almost the other way around where the bulk of it is about around 67% and pediatric around 33%. So clearly, as time goes on, we continue to expect to grow our business in the adult market. And will it eventually mimic exactly the market? We don't know for sure. Obviously, we're still early in the adult launch. Certainly, we've done extremely well, and we're very happy with the adult launch.

And also right now, looking at the mix right now versus looking at it in the fall with the back-to-school season, but the mix may flip a little bit because you have a little bit more momentum behind the pediatric business in the back-to-school season. So these ratios are going to shift over time and continue to shift. But at some point, we will find ourselves probably closer to the market but may not mimic it exactly.

Regarding the next question on the managed care improvement, I mean, that is always an ongoing process. I mean we will continue our discussions with other PBMs and continue to add contracts where it makes sense and where it is reasonable for us to enter these contracts. Same thing with the Medicaid and the different states. It's an ongoing process where we always look for improving our position over time. And clearly, as time goes on, as utilization goes up, as we continue to be successful as we've been in the last couple of years, improving and growing the prescriptions in a really solid way that even gives us further ammunition to go back and renegotiate contracts or try to improve our position as time goes on. Regarding Oxtellar XR and the generic situation, we basically have genetic companies where we are we have sued these 3 generic entrants that wanted to come in on Oxtellar XR. We are in the middle of litigation.

I can't really comment one way or the other, but there is certainly a risk on Oxtellar XR that we may be able to maintain exclusivity until the end of the patent expiration, which is 2027 or we may not. So we really don't know. We will certainly update the Street on how things progress or don't progress or whether any settlements occur if they do occur. So certainly, at this moment, there is nothing really I can report, but we will definitely report or announce anything, if anything comes up. But certainly, there is a risk for us on Oxtellar XR as time goes on. And I don't know if I missed was that a question on Trokendi?

No, that's it. Just on Axel if I may just follow up real quickly. I mean I believe you had prior litigation that you did when if I'm not mistaken. Is that just a quick refresher on that.

Yes, sure. The first 2 generics that filed on Oxtellar XR TWI and Actavis, which is now Teva. We actually went to court on these 2 cases, and we won in both cases, all the way through appeal. So that is correct. That was back in the 2016, '17 time frame when those cases were resolved actually in our favor. So this is the second wave of generics that have filed in the last 2 to 3 years, and we are in litigation with the second wave of the generics.

(Operator Instructions) Our next question comes from Annabel Samimy of Stifel.

Could you talk a little bit about the GOCOVRI launch and how that's going relative to your expectations? You seem to have a pretty refined message that you can treat both the off episodes and the dyskinesia. Are physicians receptive to that? Or do they only want to talk about how to maximize treatment of the OFF periods. Is there any friction there?

Yes, sure. Yes, I mean, we've been very pleased with the GOCOVRI and the response we've been getting from the market from physicians regarding the unique positioning of the product, its unique profile, which is it's the only product in Parkinson's that is approved to treat dyskinesia and off episodes. And obviously, this quarter also was fairly solid, given, again, it's the first quarter, which typically we have the headwinds of insurance and everything else that goes on in our business in the first quarter, we're very happy with Recovery delivering 15% growth versus last year.

And that's on top of the 19% growth that it delivered last year. And as far as the message itself and the positioning, it really depends on the physician, their practice, how they treat Parkinson's are they actually movement disorder specialists or other general neurologists. So the discussion in the physician's office sometimes is a little bit different depending on the specialty. But overall, there is a lot of education that has to occur and we continue to do that from a market education perspective, really helping physicians discuss the real issues, bring up the issue of dyskinesia. Patients sometimes on their own, they're not aware that actually dyskinesia is caused by a lot of the medications they're on, they might think, actually, dyskinesia is part of the disease and therefore, they don't raise it. They don't talk about it. They don't ask physicians about it. Physicians don't ask the patients about it.

So we try to improve the education in the marketplace to make sure that is brought up in the conversation between the patient and the physician so that people can be aware of the fact that it is an issue. It can be dealt with. There is a product that actually treats it and not only treat dyskinesia, but also treat the off episode. And there is really no need to have a trade-off here between the efficacy of a lot of these Parkinson's agents, specifically levodopa carbidopa, what we're talking about here, there is really no need for the physician to taper off or reduce the dose of levodopa-carbidopa to get rid of dyskinesia, you can always add GOCOVRI treat the dyskinesia, but even also get efficacy of episodes at the same time. It's a beautiful solution that people if they really understand the situation, they can have a great results with GOCOVRI. So it's just a matter of continued education, continued to push that unique positioning that GOCOVRI holds in the market. And I think so far, the results speak for themselves as far as the uniqueness of the product, and it's a continued benefit in the marketplace.

Got it. And then if I could just ask one more on Calibre. Do you have a granular breakdown of where those prescriptions are coming from in terms of naive patients versus switches from stimulants or nonstimulants. And now with the increasing volumes that you're getting, are payers becoming more permissive with prescribing? Or are they still requiring step at it?

Yes. Regarding the source of the business on Calgary, it really cuts in so many different ways. But basically, about 29% of the business is from new patients. And the remaining 71% is switching patients from existing medications or adding calibre to the existing medication. And when you look at the switches themselves, 65% of the switching is coming from the stimulants and 35% of the switching is coming from nonstimulants. And that is actually a very, very encouraging fact in looking at the source of the business, we are actually drawing a lot of patients from the stimulant side. A lot of it is due to the AEs that people cite AEs mainly as one of the major driver actually behind it. And of course, in kids or pediatric, it's also the parents not willing to put their kids on controlled substances on top of all that.

So we're very encouraged by this trend, and it continues to be that way even from the time we started launching the product in Pason in adults. And then as far as the payers and the step edit and so forth, I mean, it's a really mixed bag. The first PBM contract we had, it's actually Tier 2 preferred. So there is no step through. The second one has a minor step through. But again, if you think about the market, let's say, 90% of it is stimulant. So if you have to go through a stimulant, that's really not much of an issue. If you have to go to a nonstimulant, it might just delay your initiation on Calgary by 3 weeks, 4 weeks or whatever, until when you are dissatisfied with the first non-stimulant clearly.

So it is a mixed bag. Different plans have different formularies, different step-throughs or PAs and so forth. And we can back to my previous answer on the previous question, that is some of the things that we continue to work on and to keep to improve on the coverage and minimize these step-throughs or the different medications patients have to go through before getting Calgary.

Okay. Seeing no further questions. I would now like to turn it back to Jack khattar for closing comments.

Yes. In concluding our call this afternoon, I would like to emphasize that returning to strong growth as our top priority. We are very pleased with our performance in the first quarter despite the significant erosion of Trokendi XR due to the entry of generics and the typical insurance headwinds, we are confident that our growth products will allow us to offset the impact coming from the loss of exclusivity of Trokendi XR and to return to revenue and operating income growth in 2024 and beyond. Thanks so much for joining us this afternoon. We look forward to updating you on our next call.

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