Supernus Pharmaceuticals, Inc.

Financial Foundation. With that, I'll now turn the call over to him.

Thank you, Jack, and good morning, everyone. As I review our third quarter results, please refer to yesterday's press release. Total revenue for the third quarter 2020 was $155.1 million, an increase of 52% over $102.1 million in the same quarter last year. Total revenue was comprised of net product sales of Trokendi XR and Oxtella XR of $111.2 million, $40.9 million from the Parkinson's disease products, and royalty revenue of $3 million. In the third quarter of 2020, net product sales of Oxtella XR and Trokendi XR increased 11 percent compared to the same period in 2019. due to an 8 percent price increase taken in January for both products and volume expansion for our Stellar XR. Turning next to expenses, research and development expenses were $16.8 million for the third quarter of 2020, essentially unchanged from $16.9 million in the same quarter last year. SG&A expenses for the third quarter of 2020 were $54.7 million, compared to $39.3 million in the prior year period. This increase, $15.4 million, was primarily due to the expenses associated with the Parkinson's disease products acquired in the second quarter of this year. In addition, our ongoing preparations for the launch of SPNA-12 contributed to the year-over-year expense increase. As a result of the U.S. WorldMeds acquisition in the second quarter this year, Amortization expense for intangible assets in the third quarter of 2020 was $6.1 million compared to $1.3 million in the same quarter last year. Operating earnings for the third quarter of 2020 were $56.1 million compared to $39.7 million in the same period last year. Net earnings were $40 million for the third quarter of 2020, or 74 cents per diluted share, compared to $28.9 million, or $0.54 per diluted share, in the third quarter last year. As of September 30, 2020, the company had $740 million in cash, cash equivalents, marketable securities, and long-term marketable securities, compared to $939 million as of December 31, 2019. During the first nine months of 2020, the company generated $108 million of cash from operations. Offsetting this cash inflow, the company made upfront cash payments of approximately $300 million for the acquired Parkinson's disease products, inclusive of acquisition-related expenses, plus $25 million to Navator upon executing the development and option agreement for SPN 820. Before turning the call to Jim, I would like to express my appreciation to you, our investors, as well as to my colleagues at Sopernos and our board of directors for the opportunity to serve the company over the past nine years. Thank you.

All right. Well, hey, thank you, Greg, and congratulations on an amazing career and especially an incredibly impactful last nine years at Sopernos. I know the team will greatly miss your contribution and leadership. So now turning to financial guidance. We are raising our full-year 2020 financial guidance for net product sales and operating earnings while lowering full-year guidance for SG&A and R&D expenses. Recall this updated guidance reflects the acquisition of the Parkinson's disease products as of June 9, 2020. For the full year 2020, we expect net product sales to range from 500 million to 530 million, compared to the previously expected range of 460 million to 500 million. R&D expenses are expected to be approximately 75 million for the full year, compared to the previous expectation of 85 million. SG&A expenses are expected to range from approximately $215 million to $225 million compared to the previously expected range of $240 million to $160 million. SG&A expenses are anticipated to be higher in the fourth quarter of 2020 by at least $15 million as compared to the third quarter due to increased marketing spend to prepare for the market for the launch of SPNA-12 and to build out the sales force as Jack mentioned earlier on the call. Turning to amortization of intangible assets, we expect to incur approximately 16 million for the full year compared to the previous estimate of 15 million. We anticipate full year 2020 operating earnings to now range from $145 million to $160 million inclusive of amortization of intangible assets. So, with that said, we'll now turn the call over to the operator to take your questions.

Thank you. As a reminder, to ask a question, you will need to press star then 1 on your touch-tone telephone. To withdraw your question from the queue, please press the pound key. We request that you limit your questions to two at a time and then feel free to re-enter the queue if you have further questions. One moment while we compile the Q&A roster. Our first question comes from Ken Cacciatore with Talent & Company. Your line is now open.

Thanks so much. First, Greg, what an amazing run. Congratulations and all the best in your retirement. It's been really great working with you. My question is on how we should think about 8-12 next year, Jack. As we introduce that product, we've been seeing kind of elongated timeframe to get managed care on board for a lot of these launches. And I know the back-to-school season is going to be in the fall. You're launching in January. Can you just talk about the pacing? Are we going to work on managed care first before we go out and push the launch? So how we should be just thinking of that ramp? And then second question is around kind of balancing, as we get a little bit late in Trocandy's exclusivity, balancing how we look to maximize that product from a profitability standpoint versus investments in now A12 and apomorphine pump, hopefully, if that's approved, just kind of how we should be thinking about how the P&L will look as we balance these launches versus the end of the exclusivity for Trocandy. Thank you.

Yeah, hi, good morning, Ken. Regarding 8-12 first, as far as the launch and the elongated period that you mentioned as far as managed care coverage and so forth that we've seen with recent launches in our industry, we've been working with managed care and the key accounts and payers and so forth for about a year and a half now. And, of course, those discussions accelerated as we got the Phase 3 data and we started sharing all that with them. So we've been working pretty hard to have access and coverage as soon as possible, try to minimize that elongated, so to speak, period of lack of coverage or delayed coverage. So we are really working hard to do that across board to make sure the product can get off a good start right from the beginning. We are also, obviously, will be ready for the school season that you referred to. So in the first six months, we would expect that our coverage will continue to improve. So if we launch, assuming we launch, as we said, in January, we expect the coverage continue to improve so that as we get to the school season, we should be fully ready to have full access to the product overall. Regarding the Trochendi XR question, how do we balance exclusivity, profitability, allocation of resources, and so forth? Of course, we still have two solid years, hopefully, for Trochendi XR, and we still believe there is a great potential for the product. So we'll, again, continue to support the product. It still has tremendous potential out there, despite the CGRPs and the penetration by competition. This year's pandemic obviously had hurt the brand, obviously more than it did for Oxtelor XR, because it's very difficult to separate your brand from generics when you don't have the chance to have face-to-face interaction with the physicians and the sampling issues and so forth with patients. So we will balance all that for next year. Of course, our priorities are the future drivers of growth in this company, and Trucandy XR is not a future driver anymore. for our company. So naturally, you will see us doing a lot of resource allocation behind the most promising assets in the company and the portfolio, specifically SPNA-12, followed by the pump. Hopefully, if we end up launching that asset, which we believe is a great asset for us by the end of next year, So theoretically, in 12 months, we're looking at two product launches at Sopernos for two products that hold great promise for the future. And clearly, we will invest appropriately behind both of them, while at the same time continue to advance 820, which is a very exciting asset that we hope in the future, as time goes on, we'll be able to share more and more of that exciting data. Thank you.

Thank you. Our next question comes from David Steinberg with Jefferies. Your line is now open.

Thanks very much. A couple questions. First on Trican DXR, just for the quarter, was there any stocking? Did you change any changes in copay assistance? And can you give us the update on gross-to-net stocking? versus the prior two quarters. And then as far as 812 goes, you're getting pretty close to potential approval and launch. Jack, any updates you can share with us on some of the payer research you've done? And then just a more technical question, I know you're going to launch in January, but in your guidance, will there be any sales of 812 in December from stocking? Thanks.

Yeah, sure. The first question on Trocan DXR, we really didn't see anything regarding stocking. As far as the gross to net or co-pays or gross to net in general, what we've seen there in the third quarter is what you typically see in every normal year, which is slight improvement in gross to net from one quarter to the other after the first quarter, which we all know is normally the ugliest with gross to net, and then things improve over the year. So during the year, and specifically in the third quarter, that's exactly what we saw, you know, the continued regular improvement. Now, you might recall last quarter, we had a one-time adjustment to the gross to net, which we did emphasize last quarter. That was a one-time thing that we didn't expect it to repeat, so it did not repeat as a favorable adjustment in gross to net for the third quarter. So any improvement in the third quarter was your typical improvement versus the first quarter of the year as the time goes on. As far as 8-12 payer research and so forth, as I mentioned earlier in my comments, I mean, we are really striving and working very, very hard to have as much access as possible and coverage as early as possible, clearly. And the research and all the conversations we've had with the payers continue to point to the same profile that we have talked about, that A12 is differentiated. It's a new chemical entity. It's the first to be introduced, hopefully, if approved by the FDA, in more than a decade. I mean, we haven't seen anything new in this category, in this disease state, anything introduced since Vivance and Intunev as different molecules and different mechanisms of action. A12 has a very unique mechanism of action, is a very differentiated product as far as efficacy, tolerability, as far as onset of action. It's a broad spectrum type of product, meaning it's shown in its phase three that it works equally well in hyperactivity and in attention. So when you look at the totality of the profile, again, based on our Phase 3 data, clearly we don't have a label yet, so it's not proper for me to make any comments. We don't have approval. We don't have a label. But I'm talking regarding our data and the data we've seen in our Phase 3 program. And sharing this data with KOLs, with the payers, really have shown us nothing but excitement as they see this product, they look at it, versus what they've seen in the last 10 years or 11 years or so in reformulations of amphetamines or methylphenidate. So we continue to be extremely excited about the product and its differentiation in the marketplace, and we think it should become and end up being a major treatment option for patients out there. Do we expect any, you know, specifically any sales in December? I mean, We might ship something in December, but if there is anything, it won't be anything meaningful. So our guidance for this year doesn't really reflect much of an 812 sales. Thanks.

Thank you. Our next question comes from Annabelle Tamimi with Stifel. One moment. Your line is now open.

Hi. Thanks for taking my questions. Greg, congratulations on your retirement. We're all a little bit jealous. So just a few questions here. Now that you've had Avokind for a quarter, can you give us some more specifics around compliance and refill rates, what you can do there? And have you identified any other areas of growth to optimize sales? Like can you penetrate the population further? What are the barriers to uptake? Is there anything surprising about any of the WorldMed products? And on 8-12, You know, I'm sure you're very late in the game here with labeling discussions. Are there any points in the label that we should be thinking about in terms of what you're really looking for and what might resonate with physicians and prescribers in general? Thanks.

Yeah, regarding the APOCAN, well, first, the total portfolio on the Parkinson's side, no, there are no, you know, major surprises since we took the products over. you know, the one negative that has been is the Myoblock, which we talked about a couple times, which we also knew about, obviously, through our due diligence, and given that the pandemic at that time was at its highest bad moment, so to speak, when we did the transaction, so we were very well aware of the potential impact on Myoblock, given the brand and what it takes as far as initiation of patients and the necessity for patients to actually visit their doctors and get that injection. So, So overall, we're very pleased with the performance of the products given the circumstances. APO can continue to perform well, so we are very pleased with its performance and the continued compliance with the patients. Yes, there are some challenges in general within the Parkinson area because, again, given the COVID environment, patient initiation, new patient visits, you have to believe it has been adversely impacted. However, despite that, we're very pleased with how the brand has been performing and the stability of the brand, even showing actually some growth, not just stability. So we're very excited about APOCIN. We have been working very close with the team on the commercial side, on the Salesforce side as well, And we think we've identified a few areas where we potentially could optimize the way we are promoting the product. I don't want to be too specific, but we think there are some opportunities there. I can't really be specific about it. I don't want to make any promises until we see the impact of any optimization that we've done so far. But overall, again, we're very pleased with what we acquired. We're very pleased with how the products are performing. And the team is really doing a tremendous job on all of these products. The next part of the question on 812 and the label, I really cannot make any comments on the label given that we are in the midst of discussions with the FDA.

If you just follow up on Avacon, are you running that for growth or are you running that for cash?

We're on every product we can for growth, and clearly, I mean, we acquired the products not to just milk the products. Aprican has a huge potential, and we're working extremely hard to rejuvenate the brand and get it at a higher level, and more importantly, especially because of the pump that is coming next year. So we really, our plan is to grow the franchise, the Apokin product, the pen, the injection, as well as the pump together as an apomorphine franchise to be one of the leading franchises in Parkinson's. That is our plan, which basically includes, of course, having a successful launch on the pump, but also maintain and potentially even grow the Apokin pen injection.

Okay, great. Thank you.

Thank you. Our next question comes from David Amslem with Piper Sandler. Your line is now open.

Hey, thanks. Just a couple on my end. First, on apicin, and I apologize if I miss this commentary, but what's your sense of the long-term impact of the sublingual form of apomorphine on and what that could have on the franchise. Do you think that that's something that could cut into the franchise, or do you think that overall usage of apomorphine as a modality is low enough where, you know, multiple formulations can coexist? That's number one. And then secondly, on the pump, what are your thoughts on the AbbVie sub-Q continuous infusion of the levodopa prodrug on 951? the potential for competition there and the extent to which your product, your pump product and theirs can coexist. Love to get your thoughts on, you know, the competitive dynamics, market dynamics there.

Thanks. Yeah, sure. Starting with APOC and just apomorphine in general and, you know, your question about kinmobic. And it's really important to point, first of all, there are no head-to-head clinical trials, so this is not a fair kind of comparison. All I can talk about, of course, is our data, our phase three, and the data behind Apokin. And what you really see in our label, what you really see, the data that Apokin has been supported with is truly amazing product with reliable efficacy. that is not only reliable, it's also fast, and it's fairly robust. And what I'm specifically referring to, I mean, you can see that the product starts working as early as 10 minutes, actually, and about 90% within 20 minutes. I mean, patients get the relief within 20 minutes. That is really very, very strong efficacy. In addition to that, 95% of the off episodes are resolved. I mean, this is really robust efficacy. It is also something that obviously we know these patients, I mean, they have sometimes very difficult days in maintaining functionality, even getting dressed or getting out of bed. I mean, this is extremely important when you have data that strong. Also, the reliability of the efficacy, meaning from the time you take the first dose, If I remember the number, it's somewhere around 97% of patients, you know, benefit from the first dose. And that actually lasts even through the last dose they take during that day with about another 90% or 95%. A lot of 90% numbers here, but it really speaks to the robustness and the efficacy of this product. So we feel very strongly about Apokin. The position Apokin will occupy in this category because of the strong efficacy behind its profile. Apomorphine is a very good drug, obviously, but the delivery of Apokin in an injection pen is very, very different than a sublingual tablet. That's really all I can see. You guys can read the label on Kinmobi and the data behind that product. So we think we may end up with a very different patient profile for both products. So there is clearly room for both products to be in the marketplace. And we welcome the extra attention to apomorphine as a drug in general, as you have referred to, because I think more and more physicians will realize and will understand that apomorphine as a drug has a major place in therapy in this category, which will later help us against your next question, which is the AbbVie product, which is actually a levodopa-based product, not an apomorphine-based product. So a little bit hard to even talk more about the AbbVie, given that we don't have, obviously, a label to talk about to see what their profile is and so forth. But in general, we're very excited about the molecule itself, apomorphine, and specifically the way it is delivered in Apokene and the profile of APOCAN and the efficacy that comes with that product.

Okay, that's helpful. If I may just sneak in a follow-up on 812. Could we see any delay in the approval time, given you have some additional readouts coming around the corner? Would the FDA want to wait? And also, have you had your manufacturing inspections?

Yeah, as far as the data that is coming up, that's in the adult. The NDA, just as a reminder, was only for pediatrics. So it's a different patient population. So at this point, we haven't heard anything or haven't had any signal from the FDA that they might delay it because we have a readout on the adult study. So that's all that we can say at this point. As far as the inspections, manufacturing, again, we also haven't heard from the FDA or haven't seen any signals that leads us to believe there will be any delay because of inspections or anything like that. As I mentioned earlier, I think last earnings call or even before, we have some very good CMOs here that we are working with on the product from the API side as well as the final dosage form and the finished product. So we feel very good about our partners in that area from a supplier perspective. However, again, we don't know 100% sure, but all I can say is we haven't seen any signals that lead us to believe that that will be an area that could be a problem. But we're coming very close to the PDUFA date, so we'll see you very soon, I guess.

Okay. Thanks, Jack.

Sure.

Thank you, and as a reminder, to ask a question, you will need to press star then 1 on your touch-tone telephone. To withdraw your question from the queue, please press the pound key. Our next question comes from David Steinberg with Jefferies. Your line is now open.

Thanks. I just had two follow-up questions. The first one is, what led you to the thought process behind lowering operating expenses sort of this late in the year? And then secondly, you know, it looks like you generate, say, $100 million a year in cash flow, give or take, and have around three-quarters of a billion in cash, even after, you know, paying for world meds. So you could make a reasonably sizable acquisition. What's your current thinking in near term in terms of on-market assets, you know, and looking for a creation versus sort of earlier stage products at this point. And Greg, all the best to you in retirement. Thanks.

Thanks, David.

Yeah, I'll take a crack at the operating expenses for, you know, the remainder of the year. There are a lot of factors that play into that. And first of all, I'm sure everybody appreciates the fact that with a COVID environment, it's been very difficult to, manage in general an operation and never mind try to predict what happens next quarter or even the amount of promotion activity you may be able to do or may not be able to do because of the environment or certain trends that you might see in prescriptions that you may have to do more in operating expenses and now you may find out that you actually don't need that given that the extended units have done better. So there are a lot of factors that get into the operating expenses, clearly, that has impacted and led us to finally, you know, believe that we could lower it for the rest of the year. Similarly, on R&D, you know, we've had, obviously, to put one trial, you know, on hold, you know, the adult trial, then we had to restart the recruitment. It's very hard to predict, you know, how quickly the expenses will pick up or don't pick up. And not just the adult trial. We have so much going in R&D, so it's not just one trial. Obviously, there's a multiplicity of different trials, different, you know, activities that have been impacted also by COVID causing some delays and switching or shifting of certain activities potentially to next year and so forth. So that also impacted operating expenses. We had some estimates also on the integration and so forth of the U.S. World Med acquisition. on the Navitore program. So all these estimates ended up being favorable, which led in totality to the lowering of the operating expenses for this year.

David, let me just build on Jack's comments just for a second. The adjustment of our SD&A expenses for the year is really, it continues to recognize the secular acceleration in SD&A expenses between the second quarter, third quarter, and then the third into the fourth. What the adjustment really just does is it acknowledges exactly what Jack just said. The expenses came in later in the third quarter. We're still projecting a significant increase between the third and the fourth. And just if you push the map, you'll see that the run rate in the fourth quarter is right in line, perhaps a little bit down from what we projected and what we discussed last quarter. So there really isn't any change in thinking, change in philosophy, or change in strategy. It's just a matter of putting the favorability in the third quarter and then titrating the guidance for the year. That's it.

And regarding this, the second question, you know, the cash position and as far as M&A activity or business development activities, as I mentioned in my prepared remarks, we continue to be very active. So we haven't slowed down in looking at potential opportunities here, whether it's in licensing, whether it's acquisitions, whether it's a product deal or a company deal. So we continue to have the same focus, the same drive, the same intensity as far as utilizing our cash, putting it to use for future growth. And we're looking at assets that could be commercial, assets at a later stage. And, of course, we talked about that also a few times regarding our pipeline. Hopefully as 8-12 moves on, as the pump moves on and they get to the marketplace, hopefully in the next 12 months or so, both of them, clearly we'll have to reload the pipeline, and we're working pretty hard to get other assets in addition to 820 and 817, which are the two key assets at this point in the pipeline. So we're hard at work looking at other opportunities, and we're agnostic. It could be neurology, it could be psychiatry, and we're also open to other specialty areas if they do come across our desk and they are fairly opportunistic areas we could look at.

Thank you, and I'm showing no further questions in the queue at this time. I'd like to turn the call back to Jack Katar for any closing remarks.

Thank you. The year 2020 is shaping up to be one of the most successful years since our inception. We're looking at achieving a cornerstone milestone of 500 million or more in net sales and starting to establish another chapter of growth with a major presence in the psychiatry space. Our employees continue to execute well across many areas of our business. They have delivered solid operating results during the first three quarters of the year with a strong 29% growth in revenues and 21% growth in operating earnings compared to last year. Soon, we will be entering 2021 in a strong position to launch SPNA 12 in January and to potentially get approval and launch SPNA 30 by the end of the year. These two late-stage assets represent two important growth drivers for the company, and we are very focused on driving them towards commercialization and market success. Thank you for joining us this morning. We look forward to finishing strong in 2020 and to setting the stage for an exciting 2021.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude your program, and you may now disconnect. Thank you. Thank you. Thank you. Thank you. THE END Thank you. Thank you. Thank you. The Lone Ranger. Thank you. Thank you. you Thank you. Thank you. Bye. Thank you. you