Supernus Pharmaceuticals, Inc.

Good afternoon and welcome to Super News Pharmaceuticals' fourth quarter and full year 2020 financial results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Peter Vazil of Westwick, Investor Relations Representative for Supernus Pharmaceuticals. You may begin.

Thank you, Alex. Good afternoon, everyone, and thank you for joining us today for Supernus Pharmaceuticals' fourth quarter and full year 2020 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 Katar, and Jim Kelly, Chief Financial Officer. Today's call is being made available via the investor relations section of the company's website at ir.sopernis.com. Following remarks from management, we will open the call to questions. 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 Sopernis' current perspective on existing trends and information. Any such forward-looking statements are not guarantees of future performance It involved risks and uncertainties, including those noted in the risk factor section of the company's latest SEC filings. Actual results may differ materially from those projected in these four looking statements. For the benefit of those of you who may be listening to the replay, this call is being held and recorded on February 25, 2021, at 4.30 p.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. Sopernos 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 afternoon, everyone, and thanks for taking the time to join us as we discuss our 2020 fourth quarter and full year results. Despite its numerous unprecedented challenges and uncertainties, the year 2020 ended up being a monumental year for Sopernos with significant accomplishments. The company surpassed the half a billion dollar sales level behind the continued growth of Chukendi XR and Oxtel XR and the recently acquired CNS products. We reported for the year 2020 record revenues of $520 million and record operating earnings of $174 million. More importantly, during the year we achieved significant strategic objectives that should position us well into the future. By executing two key strategic transactions, we diversified our revenue and profits base, strengthened our pipeline, and enhanced our long-term growth with two key programs, SPNA20 and SPNA30, and also expanded our commercial capabilities in CNS. The company is well-positioned to launch SPNA12, if approved by the FDA, as the next novel ADHD treatment for pediatric patients. As we indicated in our press releases earlier this month, we resubmitted the SPNA-12 NDA in pediatric patients and subsequently received from the FDA a new PDUFA action date in early April 2021. We are now preparing for a potential launch in the second quarter of this year with more than 175 sales representatives leveraging our internal expertise in ADHD and CNS. Finally, in December 2020, we announced positive results from a Phase III study for SPNA12 in adults with ADHD. We plan to submit a supplemental NDA to the FDA for SPNA12 for the treatment of ADHD in adult patients in the second half of 2021, assuming approval for pediatric patients. The adult indication is important to help expand the use of SPNA12 in the adult segment which represents approximately half of the total ADHD market in the U.S. Turning now to the Apomorphine Infusion Pump NDA, or SPN-830, we are scheduled to meet with the FDA in March 2021 in a Type A meeting to discuss the contents of the refusal to file letter we received in November 2020. In the letter, the FDA requested certain documents and reports to be submitted in support of the application. We believe additional testing of the device will be necessary to support the SPNA30 NDA resubmission. We plan to resubmit the NDA after completing our discussions with the FDA and all the required activities for filing. Regarding SPNA20, our first-in-class orally active mTORC1 activator, Development activities are ongoing, including a multiple ascending dose study in healthy volunteers. The program remains on track to enter Phase II clinical testing in treatment-resistant depression by the end of 2021. Moving on to the commercial products, we are pleased with the overall performance of our products in 2020, despite the adverse impact of the pandemic on Salesforce access to physicians, patient visits, and new patient initiations. Trucandy XR delivered in 2020 healthy growth of 8% in net sales over 2019, reaching an all-time high of $320 million in sales. Similarly, Oxteller XR had a great year, reaching $99 million in net sales, representing a 12% growth compared to last year. On a prescription basis, as reported by IMS and as compared to 2019, Oxtelar XR showed growth of 3.3% in 2020, while growing by 8.2% in extended units, as represented by the number of tablets. For Trukendi XR, while IMS prescriptions declined by 11.7% in 2020, the extended units declined by 5.1% compared to 2019. This trend in extended units for both products is due to the fact that the average size of a monthly prescription for Trocandy XR and Oxtelar XR has been trending upwards since the start of the pandemic, and such larger size of monthly prescription was sustained through the fourth quarter. For Apokene, net sales recorded by Sopernos in 2020 for a partial year since the acquisition were $74 million, with $31 million in the fourth quarter. Overall, the product fared well in 2020 However, the resurgence of COVID in the fourth quarter and resulting increased closure of physician offices, together with some increased competition in the segment, pressured the brand performance compared to the third quarter. For Zedago in the year 2020, IMS prescriptions declined by 1% versus last year, while extended units grew by 3.8%. Finally, Myobloc continues to be the most affected by the pandemic where physician visits are instrumental for patient initiation and therapy maintenance. Regarding corporate development, we continue to be active in 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 Jim.

All right. Thank you, Jack. Good afternoon, everyone. As I review our fourth quarter and full year results, please refer to today's press release. Total revenue for the full year 2020 was $520.4 million, an increase of 32% over $392.8 million in 2019. The total revenue was comprised of net product sales of Trekendi XR and Xtellar XR of $418.3 million, $91 million from Apikin, Zadago, and Myoblock, which were acquired late in the second quarter of 2020, and royalty revenue of $11 million. For the fourth quarter of 2020, total revenue was $143.6 million, an increase of 43% over $100.4 million in the same period for 2019. Total revenue was comprised of net product sales from Trekendi XR and Extellar XR, of $101.2 million, $39.5 million from Apekin, Zadago, and Myoblock, and royalty revenue of $2.8 million. Turning now to expenses, SG&A expenses for the full year 2020 were $200.7 million compared to $153.2 million in 2019. SG&A expenses for the fourth quarter of 2020 were $56.5 million compared to $34.5 million in the prior year period. Increase for both periods was primarily due to the expense-associated commercialization efforts for Apekin, Zadago, and Myobloc, and our ongoing preparations for the expected launch of SPNA-12. Amortization expense for intangible assets was $15.7 million for the full year 2020 and $5.9 million for the fourth quarter of 2020, compared to $5.2 million and $1.3 million, respectively, in the same periods of the prior year. A new expense category is contingent consideration expense, which reflects the incremental period amount for contingent purchase price consideration we expect to pay related to the U.S. WorldMed acquisition in addition to what we've already recognized as a liability. Of the $230 million in potential milestone payments associated with this transaction, we have recognized a $76.7 million liability as of year-end 2020. Research and development expenses were $76.0 million for the full year 2020, compared to $69.1 million for the full year 2019. This increase was primarily due to the $10 million milestone payment related to the Navitore Development and Option Agreement, an offset by a decline in our late-stage clinical program spend. R&D expenses for the fourth quarter of 2020 were $17.9 million. This was lower than the $19.8 million in the same period of 2019 due to a continuation of this decline in late stage spending trend. For the full year 2020 operating earnings were $173.7 million compared to $148.6 million in 2019. Operating earnings for the fourth quarter of 2020 were $43 million compared to $40.8 million in the same period of the previous year. Net earnings of $127 million for the full year 2020, or $2.36 per diluted share, compared to $113.1 million, or $2.10 per diluted share, for the full year 2019. Net earnings in the fourth quarter of 2020 were $30.8 million or $0.57 per diluted share compared to $33.1 million or $0.62 per diluted share in the same period the previous year. As of December 31st, 2020, the company had $772.9 million in cash, cash equivalents, and marketable securities. compared to $938.8 million as of December 31, 2019. During 2020, the company made cash payments of approximately $300 million related to the acquisition of the CNS portfolio of U.S. WorldMeds and $25 million to Navator upon executing the development and option agreement related to SPNA-20. Now turning to financial guidance for the full year 2021. We expect total revenues to range from 550 to 580 million, comprised of net product sales and royalty revenue, and including a preliminary 10 million of net product sales estimate for SPN 812, based on the expected launch later in Q2 2021, if approved by the FDA. For the full year 2021, we expect combined R&D and SG&A expenses in the range of $380 million to $410 million and operating earnings between $65 million and $90 million. In addition, we expect full year 2021 amortization of intangible assets of approximately $24 million. When viewing our operating earnings guidance in the context of 2020 performance, It is clear that 2021 is an important investment year for the company as we prepare for the expected launch of SBN 812 for pediatric patients with ADHD in the second quarter of 2021. With that, I'll turn the call back to the operator.

As a reminder, to ask a question, you will need to press star 1 on your telephone Again, that is star 1 on your telephone keypad. To withdraw your question, 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. Please stand by while we compile the Q&A roster. Your first question comes from the line up David Steinberg of Jefferies, your line is now open.

Okay, thanks very much. I have a couple questions on 8-12. First, congrats on the earlier designation by FDA so you can launch in Q2. I assume then you'll have lots of time before you hit back to school season, which is obviously when a lot of the switching goes on. So to that end... In your payer discussions, which I assume must be pretty red hot right now, what's your current thinking in terms of are they going to manage this area heavily? Obviously, the only major branded drug on the market is Vyvanse, which is still $2 billion, but everything else is generic. I'm just curious how heavily you think they're going to manage the category. Secondly, What are you thinking about pricing right now? I know you don't have a label, but you probably have some idea what the label looks like. And thirdly, given that so much prescribing goes on in the back-to-school season and you're going to have it on the market for over two quarters, I was curious about your $10 million in sales guidance. I would have thought with over six months of marketing that the number might be higher than that. And so the question is, are you being conservative, or is part of your strategy – to get as many patients as you can on it, and that means heavy copay assistance and other initiatives where the early price per script will be fairly low. Thanks.

Hi, David. I think I got most of the questions. I'll try to hit each one of them. As far as discussions with the payers, Of course, I mean, now it's at a much higher level of intensity because we have a much clearer site as to when potentially the launch is. I mean, so far the discussions have been very encouraging. That's really all I can say. I can't be too specific clearly with the strategy and where we might end up because nothing is finalized anyway, so it will be an estimate on my part regardless. But we are excited about the discussion so far and the fact that people understand that this is a completely new therapy. It's a novel treatment. It's an uncontrolled substance. And in more than a decade, we haven't seen anything really meaningful that has been launched in this whole market. And the options for the patients are fairly limited. You only have two stimulants. basically, and two non-stimulants that are heavily used in this market. So bringing a fifth compound molecule with the clinical profile that we have has been really exciting to see the reaction, not only payers, but also, and I mentioned that earlier several times, the KOLs and the excitement they have about having something else they can really use than just another formulation of amphetamine or methylphenidate. So, the level of intensity, as you said, obviously, is much higher as far as our discussions, and we are encouraged so far. At the end of the day, clearly, nothing is done until it's all signed and sealed, so we don't have any of those finals, so to speak, but things are moving pretty fast. Will the category be more managed than it was before? Typically, in general, when you have a category with new products launching, which we saw that in the migraine category, when all the new branded CGRPs came in, the market all of a sudden became in the spotlight and payers started paying more attention to it. That always brings attention when you have new products being launched in any market, and I would expect this to apply probably here as well. As far as our pricing, we don't disclose pricing or discuss pricing strategy, so for now, I'll just leave it that way. Everybody will know what the pricing is at the same time when we launch the product. And regarding the final question on the 10 million estimate, clearly, We try to put a lot of thought in this, as you might imagine, the specific date, exact date of launch. Yes, we have a better idea now than we had at the beginning of the year when we got the CRL and so forth. But clearly, that is why it is an estimate. Could it be higher? Yes, it could happen that we could do much better than that. We did mention many times before that clearly we will be investing heavily in this product. To us, this is a huge product opportunity for us. It's a huge market opportunity in general. We will be launching it commensurate with the opportunity itself, so our investment level will be heavy. Clearly, as you will see, as you notice in the guidance, obviously we are spending and we will be spending a lot of money behind this product. We do have, of course, the opportunity here to sample the product as well, given that it is an uncontrolled substance. whereas stimulants, of course, you cannot sample those products. So we certainly will deploy a lot of different programs, a lot of different spending around the product to make sure not only we build the demand, but also we have the access and we give patients the chance to try the product. And we are strong believers that If you give people the chance to try this product, they will very quickly appreciate the clinical and medical profile of this product, given what we've seen so far, obviously, from all the Phase III clinical data.

Okay, thanks.

Your next question comes from the line of David Amsalem of Piper Sandler. Your line is now open.

Thanks. So just a couple. So first on SPN830, and I apologize if I missed the commentary earlier and the call, I joined late, but can you just elaborate on, you know, some of the specific things that need to be hashed out with the device? And I guess where I'm sort of going with this is, you know, is there any, you know, human factor work that you have to do or, you know, anything along those lines that would be a gating item to your resubmission. Just help us understand, you know, some of the specifics. And then secondly, you know, I'll sort of ask, you know, the business development M&A question. You know, you obviously were acquisitive last year. You are building a psychiatry-focused sales force, so I guess with that in mind, Is that your top priority to bring in an asset where you can leverage that additional commercial infrastructure that you're going to be building, or are you looking at other things? Maybe help us understand your thinking there. Thanks.

Yeah, sure. Starting with the pump regarding the refusal to file, as we mentioned at the beginning when we got it and we got a little bit more clarity about what is really specifically in the list that is in the RTF, It's a list of a lot of different things, documents, reports, data to be presented in different formats, the more details on certain things and the file includes in it or less details in other areas. But it also requires some additional testing that I mentioned in my prepared remark. And what I'm referring to is not a human factor study. It's more of testing of the device itself. It's really environmental. There's a battery of environmental tests that typically you have with these type of products, you know, drug device combinations. And we are really seeking a lot of the clarity around all this in the March meeting. So I wish I can be more clear or specific on it. We actually ourselves need a little bit deeper clarity from the FDA, and that's why the March meeting will be extremely important for us to see out of the different tests that may be required or not required, and if they are required, are they required to be right from the beginning in the resubmission, or are there ones that we can do for the resubmission, but others that can stay later on can be followed on? So there is a lot of questions around different pieces that we really need good clarity before we try to give people any idea or estimate as to when we could potentially resubmit. We're really working pretty hard and very quickly in parallel. We're not waiting for the March meeting. We're already working on a lot of the other items that we do have clarity on, getting those pieces ready for the resubmission. But at the end of the day, the March meeting will be very crucial for us in moving forward. And then regarding the second question on the BD and the M&A, It's certainly a good point. Of course, we are building the psychiatry foundation. It's another leg of growth in the company, and we will be and we're very committed to psychiatry with SPNA-12, so naturally finding another product that could leverage our infrastructure will be a good fit for SPNA-12. very, very conscious about the fact that we want to give SBN 812 full attention, at least in the first full year of launch. So the sales force will be very, very committed for SBN 812 in pushing it as hard as we can. And therefore, you know, we don't have necessarily a top priority that says we have to get another psychology product for the sales force. If it does come in, as we all know in BD and M&A, You know, you could have your wish list, but in the end it's a factor and a function of availability and a willing seller. We will figure out how to, you know, resource the new opportunity, whether it is in psychiatry or neurology. But we continue to be very active on both ends, you know, with both areas, because at the end of the day you can be very, very choosy here. A lot of it is really a function of availability of good, high-quality assets at a reasonable price.

Again, if you would like to ask a question, please press star 1 on your telephone. Again, that is star 1 on your telephone keypad. Your next question comes from the line of Annabelle Samimi of Stifel. Your line is now open.

Hi, everyone. Thanks for taking our questions. This is Nick on for Annabelle. I just wanted to go back actually to, I guess, the adult data that came out last year. We haven't really had a chance to talk about it with you guys, but we definitely thought that that data was pretty impressive, especially even compared to Stratera in adults. I guess we're wondering what your thoughts around this data is and whether you thought it was particularly good and if that changes your thoughts on the potentials in that market or your strategy going forward. And then you mentioned some competitive headwinds for Aprican that you saw in the fourth quarter. We were wondering if you could elaborate on those competitive dynamics and how you see that franchise going forward without the pump in the near term. Thank you.

Sure. So on the first question with the adult data, I mean, we were equally impressed with the data on the product and very excited about, you know, the results in the phase three. Obviously, it's very unfair for me because it's not a head-to-head trial with atomoxetine or Stratera, but we really like what we saw, the profile that emerged from the product. not only on the clinical side from an efficacy perspective, but also the safety and the tolerability, discontinuation rates, and so forth. So we're really excited about it, and also excited about the fact it's also consistent with what we saw in the pediatric adolescents. So, I mean, the product remarkably has shown in now so many Phase III trials tremendous consistency in its efficacy and safety and tolerability across now three different patient populations. Not only that, it shows the consistency with a very large window as far as dosing and the flexibility in doses, you know, from 100 milligram all the way up to 600 milligram that we studied in adults. So that gives physicians also a tremendous flexibility from a dosing perspective. while not sacrificing really much as far as tolerability and safety. Speed of action. I mean, across all the different points, the consistency is truly remarkable across all the points that we studied in the phase three study. So we're extremely excited. We're very pleased with the consistency and how clean the data is. And hopefully we'll get the pediatric approval very, very soon. And then we're already in parallel working actually very diligently in preparing the SNDA for the adult so that once we get the approval we can quickly activate and become very active towards filing the SNDA for the adult. It is an important segment, as I mentioned, in the marketplace and we see a big place for 812 in that segment. Regarding Apokene and the competitive dynamics, many of you asked me last time about, and many of you know about Kinmobi, for example, which is the only other apomorphine product. So that's really what I was referring to. It's a new product that came in the market, was launched in September. Naturally, you're going to have people attracted to the product. It's a sublingual tablet. They're going to try it and see whether it's the right product for them or not. I will continue to say we believe the two products have very different profiles and will end up really appealing to very different patient profiles. Apokin's clinical profile is on its label, obviously, and you can look at the label of Kinmobi. Again, these are not head-to-head trials, so I will caution everybody when they compare the two, but the drug is the same drug and the efficacy is very obviously very different. So short term, you might get some headwinds because of that, naturally. But also, we do welcome, of course, extra attention to the molecule. I mean, the apomorphine molecule. Apokene for many, many years has been the only product that is an apomorphine-based. Apomorphine as a drug is a very good drug when it's used appropriately in the right setting for the right patient. And therefore, extra attention to the molecule actually could benefit all of us There are so many patients out there that experience of episodes and they're not even close as far as our patient population that we are treating. So there is tremendous area of growth for everybody and a big, large size of business here to be had by different players in the market. The other issues that we witness in the fourth quarter is really the typical COVID issues because of the resurgence, and that's what I tried to refer to. Patient initiations also, you know, felt some pressure there because of the resurgence in COVID because, again, with Apokene, you have to have nurse intervention, training of the patient to get them going, you know, with the injection and how they use the product so they learn how to use it appropriately and so forth. So all these factors, you know, resulted in the decline from the third quarter to the fourth quarter.

Very helpful. Thank you. Sure.

You don't have any further questions at this time. You may continue, presenters.

Thank you. We're very pleased with the conclusion of the year 2020 with record results for Sopernos. It's a year with great uncertainty and significant new challenges across so many facets of our business. Yet, our employees persevered and delivered growth on Trekendi XR and Oxtel XR, advanced our pipeline, and executed on transformative transactions that position us for success in the years to come. We're looking forward in 2021 to be a year of continued uncertainties with COVID, however, with much hope for a much more normal environment than last year. We will be launching SPN 812 if approved by the FDA for ADHD treatment in pediatric patients and continuing to advance SPN 830 along its regulatory path towards potential approval as well. We believe these two late stage assets represent two important growth drivers for the company and we are focused and committed to driving them towards commercialization and market success. Thank you very much for your time today and we look forward to updating you on our progress throughout the year.

Ladies and gentlemen, that concludes today's conference call. Thank you for participating. You may now disconnect.