Supernus Pharmaceuticals, Inc.

Good afternoon and welcome to Super News Pharmaceuticals Preliminary Fourth Quarter and Full Year 2021 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 call over to Peter Vozzo of Westwick Pharmaceuticals. investor relations representative for Supernus Pharmaceuticals. You may begin.

Thank you, May. Good afternoon, everyone, and thank you for joining us today for Supernus Pharmaceuticals' preliminary fourth quarter and full year 2021 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 Chief Financial Officer, Tim Deck. Today's call is being made available via the investor relations section of the company's website at ir.sopernis.com. Following remarks by 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 and involve 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 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 February 28, 2022. 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'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 preliminary 2021 fourth quarter and full year results. I would like to first make a few comments about the year 2021 as a whole, and then get into more details about specific corporate accomplishments. 2021 was another outstanding year for Sopernos, during which we continued to execute on our long-term growth strategy and to work towards minimizing the impact of the 2023 Trocandy XR transition. During 2021, we launched Calvary, the first novel non-stimulant ADHD treatment to be launched in over a decade. We also closed on the acquisition of Adamas, adding GoCoveri as another key growth asset. And we resubmitted the NDA for SPN830, the apomorphine infusion device, which represents our third future growth driver. In addition, we closed the year with record revenues for Sopernos of approximately $580 million, up 11% compared to 2020. Finally, we advanced to Phase II, the clinical development of SPN820, our novel product candidate for treatment-resistant depression, and nominated SPN443 and SPN446, two internally discovered novel CNS drug candidates for development in CNS indications. Moving on to specific corporate accomplishments and starting with the Adamus acquisition, we made significant progress with the integration of the business with our Parkinson's sales force that is now fully trained in the field promoting GoCoveri. GoCoveri recorded a total of 3,330 prescriptions in the month of January the product's first full month under Superness in 2022, representing a 30% increase compared to the month of January in 2021. The Adamas transaction contributed approximately $10 million in revenues in the fourth quarter, and we are on track regarding our goal of $60 to $80 million in synergies over the first 12 months of owning the business. As mentioned earlier, we resubmitted the NDA for SPN830 infusion device for the continuous treatment of motor fluctuations in Parkinson's disease in the fourth quarter. And since then, we have received FDA acceptance of the submission with a PDUFA date in early October 2022. The company is preparing for the potential commercial launch of SPN830 in the first quarter of 2023, assuming timely approval by the FDA. Regarding Calgary, the launch is progressing well, continuing its growth trajectory with total IQVIA prescriptions in the fourth quarter reaching 34,328, an increase of 122% compared to total prescriptions of 15,453 in the third quarter of 2021. In January 2022, the most recent month available, total prescriptions reached 14,177. Moreover, in the first quarter of 2022, total prescriptions are showing a quarter to date during the first seven weeks, sequential growth rate of 42% versus the corresponding same seven-week period in the fourth quarter of 2021. In addition, Calvary continues to expand its base of prescribers with over 5,600 prescribers in the fourth quarter of 2021, up from 3,470 prescribers in the third quarter of 2021. And finally, preparations for the potential launch in the adult market are well underway, assuming timely approval by the FDA of the supplemental NDA for the adult indication. Sopranos will continue its heavy investment in Calgary's launch activities in 2022 as it enters the adult segment of the ADHD market, which represents about 50% to 60% of the total market. On the managed care side, we have made good progress in managed care coverage with continued improvement in gross-to-net deductions. For SPNA20, our first-in-class orally active mTORC1 activator, we initiated a Phase II multicenter randomized double-blind placebo-controlled parallel design study in adults with treatment-resistant depression. The Phase II study will examine the efficacy and safety of SPNA20 over a course of five weeks of treatment in approximately 400 patients. The primary outcome measure is the change from baseline to end of treatment period on the Montgomery-Asberg Depression Rating Scale Total Score which is a standard depression rating scale. We continue to expect to start a Phase II program with SPN817 in the second half of 2022 for the treatment of focal seizures in adults. If you recall, SPN817 represents a novel mechanism of action for an anticonvulsant and utilizes synthetic form fuprazine A, which is a potent acetylcholinesterase inhibitor with pharmacological activities and CNS conditions such as epilepsy. Moving on to the commercial products, Oxtelar XR finished another year with strong performance, reaching net sales of $111 million, up 12% compared to 2020. Also, Trocandy XR continues to hold up well despite the increased competition in the migraine prevention market, finishing the year with approximately $305 million in net sales. For full year 2021, the two products combined delivered net product sales of $416 million, essentially flat compared to $418 million in 2020. Apokin closed out the year with sales close to $100 million, given the competitive headwinds it faced during the year. Recently, the company became aware of an approval of a generic to the Apokin injection cartridge. The timing of availability of such a product is still largely unknown, and the generic cartridge will still need to be paired with the Apocon pen to administer the apomorphine injection. Finally, we will 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.

Tim Stenzel- Thank you, Jack. Good afternoon, everyone. As I review our preliminary fourth quarter and full year 2021 results, please refer to today's press release. As noted in that press release, the company currently anticipates it will require additional time to finalize the financial statements for the year ended December 31st, 2021, due to the following reasons. As discussed in November 2021, the company was a target of a ransomware attack. While the attack had no significant impact on the business or caused any long-term disruption to the company's operations, it did impact the long-term viability of our accounting system. The attack required us to restore securely backed up data into its legacy ERP system, manually process certain functions which were previously automated in its legacy ERP system, and simultaneously accelerate its planned transition to upgrade to a more modern ERP system. Also in November 2021, the company completed its acquisition of Adamas Pharmaceuticals. The integration of Adamas is well underway and is expected to be complete by the end of Q2 of this year. As a result of having to restore our legacy ERP system, running a parallel ERP implementation, and the integration of Adamas operations, the company will be unable to file the 10-K timely. We will be filing a 10-B25 tomorrow after market close. The challenges over the past several months have been significant. I am very proud of the progress that has been made. Realistically, a new ERP implementation can generally take between 9 and 15 months, depending on its complexity. The implementation of our new ERP system is expected to take 6 to 8 months and should be completed during Q2 of this year. Therefore, we hope to be able to file our 10-K on or before the end of the two-week race period ending March 16th. Before I go over the numbers for the fourth quarter and full year 2021, I want to remind everybody that the financial information is preliminary and therefore subject to change. Preliminary total revenue for the fourth quarter of 2021 will be approximately $159.1 million, an 11 percent increase compared to $143.6 million in the same quarter last year. Total revenue in the current period was comprised of net product sales of $155 million and royalty revenue of $4.1 million. The increase was primarily due to net product sales of GoCoverie from the acquisition of Adamas in November 2021 and the launch of Kelbree in the second quarter of 2022. For the fourth quarter of 2021, combined research and development and SG&A expenses are expected to range between $105 million and $110 million as compared to $74.4 million for the same period in 2020. The increase in expenses is primarily due to activities support the launch of Calgary and transition costs associated with the Adamas acquisition. Amortization of intangible assets for the fourth quarter of 2021 are expected to range between $11 million and $12 million, compared to $5.6 million for the same period in 2020. The increase is primarily due to the acquired intangible assets of Adamas. Operating earnings for the fourth quarter of 2021 are expected to range between $20 million and $25 million, as compared to $40 million for the same period in 2020. A decrease in operating earnings is primarily attributable to higher expenses to support the launch of Calgary and transition and other costs associated with the Adamas acquisition. For the full year 2021, total revenue was $579.8 million, an 11 percent increase over $520.4 million in 2020. Total revenue was comprised of net product sales of $567.5 million and royalty revenue of $12.3 million. The increase was primarily due to the acquisition of the CNS portfolio of U.S. WorldMeds in June of 2020, growth in net product sales of Oxtelor XR, the launch of Calgary in the second quarter of 2021, and net product sales of recovery from the acquisition of Adamas in November of 2021. For the full year 2021, combined R&D and SG expenses are expected to range between $377 million and $382 million, as compared to $276.6 million for full year 2020. Again, the increase in expenses is primarily due to activities to support the launch of Calgary, as well as timing of both the Adamas and U.S. WorldMed acquisitions. Amortization of intangible assets for the full year 2021 are expected to range between $29 million and $30 million, compared to $15.7 million for the full year 2020. The increase is primarily due to the timing of the U.S. WorldMed's and ADAMAS acquisition. Operating earnings for the full year 2021 are expected to range between $100 million and $105 million, as compared to $173.7 million for the full year 2020. The decrease in operating earnings is primarily due to increase in expenses to support the launch of Calgary and the timing of the U.S. WorldMed acquisition. As of December 31st, 2021, the company had approximately $458.8 million in cash, cash equivalents, and marketable securities, compared to $772.9 million as of December 31st, 2020. The decrease is due to the acquisition of Adamas offset by cash flow from operations. As discussed on our last call and giving the magnitude of the growing number of acquisition-related items, starting in 2022, we'll be adding non-GAAP financial measures to our quarterly earnings releases as we believe they provide greater transparency and can assist in understanding and assessing Sopernos' business, as well as reflect how we manage the business internally and set operational goals. These non-GAAP adjustments will be amortization of intangible assets, share-based compensation, changes in contingent consideration, and depreciation. Now, turning to our GAAP financial guidance for the full year 2022, we expect total revenue to range from $640 million to $680 million, comprised of net product sales and royalty revenue. For the full year 2022, we expect combined R&D and SG expenses to range from $460 million to $490 million. Overall, we expect full year 2022 GAAP operating earnings to range from $20 million to $40 million. We expect an effective tax rate of 25 to 28 percent. And finally, turning to our non-GAAP financial guidance for full year 2022. We expect our non-GAAP operating earnings to range from $130 million to $165 million. It is important to note, as Jack mentioned earlier, we will continue to invest heavily in the Calgary launch activities in 2022 as we enter the adult segment of the ADHD market. 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 turn the call over to the operator for Q&A.

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

Thanks, and good afternoon. I have a couple questions. First, Jack, you gave a total revenue guide number, but can you break it down for us a little more specifically guidance for Apokine, Calvary, and GoCovery? And I ask that in particular because you mentioned Apokine just had a generic. You've obviously had competition the last year from Kinmobi, but what is in your guidance particularly for Apokine given the generic? I know that Previously, you talked about a mid-20s quarterly run rate. And then secondly, on the adult pending approval, what's the average dose of Calvary so far? I know that if it's below 200 milligrams, the WAC is $300, and if it's above 200 milligrams, it's 600 WAC. And related to that, would the, you know, once it gets approved in adults, would effectively the revenue per script be double the adult versus the pediatric given the weight-based dosing? Thanks.

Yeah, sure. First, on the revenue side, I mean, some of the key dynamics around the portfolio and the different products, I will just note some of the most important points, you know, to talk about. Clearly, The growth is going to be coming from Calgary, mainly, GoCurvery. Oxtelrexor to a very minor degree, so to speak. I mean, Oxtelrexor grew last year by about 12%. I don't know if it will grow by exactly the same amount, but it's still holding very nicely. The brands that will face pressure are going to be Trochendix or Apican, as you mentioned in the question. And for Kendi XR, it obviously has been a major surprise for us. We've been, you know, kudos and credit to all our employees in managing the business and maintaining it in a much healthier situation as we, you know, much healthier than we ever all expected. And it's really holding up extremely well. So the question will always remain in 2022. Will it continue to hold up as well? It's going to decline a little bit, but to what extent and how far it will decline. So Between APICN and Trucandy XR, that's where you see most of the pressure from a competitive point of view. As far as the generic to APICN and its impact on the brand, I mean, it's really still so early for us at this point to make a deep assessment and very detailed assessment as to what the impact on the brand will be. This is very recent news that just came in within the last 48 hours or 24 hours. As I noted in my remarks, the cartridge will require the use of our pen, so it's not going to be a similar situation as if this were an oral tablet or capsule that is quickly substitutable. So the impact for this year may be limited. Again, it all depends on the timing and the availability of that product to start with. And then secondly, depending on all the logistics and the tactics surrounding an availability of a generic product I will remind everyone that we have a very strong support network around the product, starting with the nurse educators, the importance of the intervention of the nurse in initiating new patients on apomorphine, as well as very significant hub services surrounding the patient to help them to get on therapy and stay on therapy. So we always felt these are important services. that are important to the patients and they value these services in being on the product and getting that help, you know, through these hub and clinical educators. So I hope that gives you at least a framework as to where the pressure points are, you know, within the products in the portfolio. In Calvary, as I mentioned, since we're talking about the revenue, I mean, we will be investing heavily behind the product and we will continue to invest heavily I mean, we just launched pediatrics, so we're not like even done with the launch in pediatrics. And clearly, we're very excited about also launching in the adult segment, which is about half the market or a little bit more than half of the market. So very exciting times for us with Calvary. We're going to go all in on the product. We think this is a huge, huge product for Sopernos, and we're going to invest appropriately behind the product. And then in relation to that, regarding the average dose from the adult perspective, we think it will be probably somewhere between around the 500 milligram daily dose, 500 to 600, more probably on the 500. Initially, it always starts lower as physicians start using the product, getting more comfortable with it, and then they titrate a little bit up. So it certainly will be much higher than it is currently with the pediatric and adolescent, which we project to be more in the 300 to 400 range. Adult will be probably more on the 500 to 600 in the long term.

Thanks. But just to follow up, Jack, you did give overall revenue guidance, and the generic was approved Friday. and you had said previously that you should expect apokine to be in the mid-20s on a quarterly run rate. So in your overall guidance, is that still the case that, you know, apokine will be averaging about $25 million a quarter? Can you give us some view there? And then just a final question, how much sampling are you doing on Calvary, and how much understated would the actual scripts be if you stopped sampling?

Yeah, on APICN, I mean, we are factoring potentially some impact on genetics, but again, it's so difficult for us to quantify it for folks at this point. So back to your number, you know, which we had said the 25, you know, per quarter. Well, obviously with the news, you know, we would plan on maybe being it, you know, much lower than that, than the 25. And So, again, I know you're looking for a number or more of a real framework from a quantitative perspective, but it's really hard for us to give a specific, and we try to shy away from giving guidance per product, so to speak. Maybe by next quarter we'll have more visibility on the status of the generic, and we can be a little bit more specific. We'll be more than happy to do that. As far as the samples for Calgary, we will continue with a very similar level of activity, and we'll do the same with the adults. So that continues to be. And as far as, you know, is there a gross-up factor or a discount factor that you can apply, you know, to the prescriptions because of the sampling? You know, we've talked about historically something in the 15 to 20 percent maybe, but potentially as the conversion that we would hope to be getting from the samples. that otherwise would be real prescriptions.

Okay, thanks, Jack.

Sure.

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

Thanks. So I have a few, and I wanted to switch gears and ask you some questions on GoCovery as a starting point. So, you know, Adam has provided a number of of metrics regarding volumes and new starts. Is that something that you're going to do in some way going forward? And can you talk to what volumes were like in 4Q, where new starts are trending? So that's number one on GoCoverry. And then number two, and I know you haven't provided product-specific sales guidance, but in thinking about GoCoverry, What's your take on how new starts are going to trend as 2022 progresses? I know that there were some pandemic-related headwinds cited by Adonis. Can you talk to how the pandemic or the easing of the pandemic might provide something of a lift for the product? And just your overall impressions in terms of where GoCovery is going to trend in 2022. Thanks.

Yeah, I mean, regarding the brand overall, I mean, one of the metrics I mentioned were obviously the prescriptions in January versus the previous year, same period last, you know, 2020, which was about 30% growth in January of 2022 versus January 2021 from a prescription basis. We'll be happy, you know, to dig deeper and give you guys more, you know, various metrics if necessary. if you find some of these are really helpful. But we think, I mean, the brand will continue on its growth trajectory as we've experienced in last year, perhaps with some enhancement as we take more control of the product and have more effect on the way it is being promoted and positioned and so forth as time goes on. Now, clearly, you have a lot of other factors. One of them you mentioned is the pandemic, and we hope that it is easing up off completely, not just on GoCoverry, on all our products or even Calvary as far as access to physicians and so forth. So we hope that actually does go away as time goes on on all the products, not just the GoCoverry franchise. So certainly, as time goes on, again, back to probably next quarter, we will have a much better feel to all these dynamics. Also, the Q1 will be behind us, so to speak. As we all know, Q1 is always a difficult quarter anyway in our business because of the high deductibles, insurance, and so forth. And therefore, we'll be able to, you know, give you guys a little bit better, much more educated numbers around many metrics, not just new patients or volumes or things like this, but also we will have a better feel on how the pandemic is is gone or not gone by then.

Okay. Can you talk to New Starts, or is that something that you're not going to provide on co-covery?

I mean, we can. I don't have it with me. I wasn't prepared to talk about it today, but we're happy to, you know, look at those numbers and provide them.

Okay. And then just overall on the guide, on the top-line guide, I mean, you know, obviously... um it's it's hard to you know it's a hard question to ask in terms of you know where you guided relative to uh to consensus but it is lower than consensus or where where where the street is so i guess with that in mind um you know is is that a function of some conservatism or reality on apican is it a function of you know perhaps um you know, some channel destocking on Trochendi ahead of the generic. I'm just trying to get a sense of, you know, some of the assumptions underlying the 640 to 680.

Yeah. The main differences are Trochendi XR and Apoken, which are the pressure points that I mentioned, you know, versus consensus, for example. So we are assuming PXR. probably a little bit, you know, worse case on both products than what consensus have. So that's where the pressure points are. It's not about growth and recovery or growth on Calvary. So it's more about the legacy mature products like Apican and Tricandix. So are we more conservative? Yeah, I mean, we might end up being actually proven to be very conservative in that guidance, but At this point, not knowing a lot of things that could happen this year, so we're trying to be on the safe side, especially on these two products. So a lot of the difference between our guidance and the consensus is really on these two products.

Okay, that's helpful. And then the last question, if I may, just on biz dev, and I apologize if I missed this, but with the closing of Adonis and integrating that asset, and also advancing some internal products through the pipeline. How are you thinking about acquisitions these days in terms of your lean? Are you leaning more into a commercial stage or development stage assets, or maybe ideally you want something like world modes where you get the best of both worlds? How are you thinking about that?

Yeah, I mean, ideally, probably a similar acquisition like U.S. World Net gives you a commercial product and gives you a really nice quality late-stage pipeline product that, of course, will be hitting both goals or achieving both goals. We always would favor commercial if we can find it and find it in a reasonable manner and it's a quality asset. But short of that, we are very focused on really building the pipeline specifically where it comes in the area of mid-stage to late stage. Because if you really think about Calgary and the launch in adult, you think about hopefully the launch of the pump also, you know, sooner than later. Then you look at our pipeline, the rest of our pipeline is phase two or earlier. So ideally, and we are focused right now on trying to find pipeline assets that could be later than phase two or between phase two and phase three or in phase three, those would be, you know, very nice assets that we would look for and would be in either case, neurology or psychiatry. So we're fairly agnostic as to what, you know, which area in CNS those assets could be.

Okay. Thanks, Jack.

Yeah. Again, to ask a question, you will need to press star 1 on your telephone keypad. Again, that is star 1 on your telephone keypad. Your next question comes from the line of Jack Paduvano of Stifo. Your line is open.

Hi, this is Jack calling in for Annabelle Stimini. Thanks for taking our question. We had some questions on guidance. What is the assumption baked in for the timing on the normalization of the Calgary growth to net? Is that going to be more of a second half event rather than a first half one? And if that comes later than expected, will that have any impact on the SPN 830 opportunity?

Yeah, as far as the gross to net improvement. I did hint to it a little bit in my remarks that we are improving the gross to net on Calgary. Actually, it's been moving along much better than we expected and had planned and hopefully it will stay that course. Some of you might remember that in my previous remarks, I specified the goal that probably by the time we launch the adult, we would like to be in the somewhere 50 to 55, which is in line with typical portfolio that you normally have on current products. Actually, we're approaching that much quicker. Now, Q1 is always going to be an anomaly and is going to screw up any trend you start with in the fourth quarter. So the Q1 will always go up a little bit because of the obvious reasons we all know. But it looks like we should be able to hit that goal that around the adult launch, we should be somewhere in that neighborhood of 50 to 55 in gross to net. And I missed the relationship between that and the SPN 830 part of your question.

Oh, that was... That was just if that happened to come later than expected, would that have any impact on that opportunity? But if it's going to become as expected, then that should be.

Well, yeah. No, I mean, the two opportunities are fairly separate from that perspective. I mean, we view both products extremely important, and we will launch as soon as we can on any of them, whether it's the adult Calvary or it's the SBN 830 pump. I mean, those products, you can bet that we'll do everything possible to get them to the market as soon as possible once we can. Great. Thank you. Sure.

There are no questions at this time. Please continue.

Okay, thank you. We closed our 2021 as a banner year for Sopernos with significant corporate achievements that will prepare us for the next phase in our history as a growth company. We look forward to driving growth behind Calvary, GoCovery, and SPN830, as well as continuing to manage our legacy products and significantly reduce our dependency on Trocan DXR. I would like to thank all our employees for delivering another strong performance in 2021 and positioning us well to have a great year in 2022. Thanks again for joining us today. We look forward to updating you on our progress throughout the year.

This concludes today's conference call. Thank you for participating. You may now disconnect.