Supernus Pharmaceuticals, Inc.

Good afternoon, and welcome to Sopernos Pharmaceuticals' first quarter 2022 financial results conference call. At this time, all participants are in the 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, and I would now like to turn the conference over to Peter Vasso of Westwick, Investor Relations Representative for Sopernos Pharmaceuticals. Sir, you may begin.

Thank you, Chris. Good afternoon, everyone, and thank you for joining us today for the Sopernos Pharmaceuticals first quarter 2022 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 Sopernos' 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.sopernos.com. Following remarks by management, we will open the call to questions. During the course of this call, management may make forward-looking statements regarding future events and the company's future performance. These forward-looking statements reflect Sopernos' 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 who may be listening to the replay, this call is being held and recorded on May 9, 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. Sopernis 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 2022 first quarter results. Following a productive year in 2021 in which we worked towards minimizing the impact of the 2023 Trochendi XR transition, we have continued to execute on our long-term growth strategy and focus on our strategic priorities. To quickly recap our overall performance in the first quarter of this year, Total revenues were $152.5 million, representing a 16% increase over the first quarter of last year. And adjusted non-GAAP operating earnings were 28 million and 11% increase over the first quarter of last year. The first quarter of 2022 represents the first full quarter we report on all products combined from the acquisitions in 2020 and 2021. Note that net sales of Trochendi XR as a percentage of total revenues was 41% in the first quarter of 2022, significantly down from 72% in the first quarter of 2020, which was the last full quarter before both acquisitions. This is the result of great execution and corporate development and commercial operations, diversifying our revenue base to minimize the impact of the 2023 Trochendi XR transition on our overall performance. Regarding Calvary, the product is off to a great start this year with continued momentum and prescription growth and shipments. We are actively preparing for the launch in the adult market after recently receiving approval from the FDA for the treatment of adults. For decades, adult patients had only one non-stimulant treatment option available to them. We are proud to be bringing innovation to the marketplace with the first novel non-stimulant in 20 years. Adult patients now have a new, safe, and effective treatment option that helps them stay away from controlled substances that have high potential of abuse and dependency. Sopernos expects to launch Calvary for adult patients by the end of this month. This represents a significant expansion opportunity in the largest segment of ADHD market. According to the recent IQV exponent 52-week data, the adult market now represents approximately 68% of the total market's prescriptions. Our launch of Calvary in the pediatric and adolescent market has been progressing very well. While we launched Calvary a year ago during a pandemic facing unprecedented headwinds, Calvary is on track to become the most successful ADHD launch in the past decade. Based on IQVIA prescription data aligning all recent ADHD launches on a monthly basis, Calvary has been consistently outperforming most of the products since its launch in June last year. and is well positioned to take the top ranking spot among all the recent ADHD launches. During the first quarter of 2022, total IQVIA prescriptions for Calgary reached 47,324 prescriptions, representing an increase of 38% compared to the fourth quarter of 2021. Prescriptions in the most recent month of March reached an all-time high of 18,380 prescriptions. In addition, Calgary continues to expand its base of prescribers with over 6,900 prescribers in the first quarter of 2022, up from 5,600 prescribers in the fourth quarter of 2021. We now have approximately 195 sales representatives promoting Calgary to pediatricians, child psychiatrists, and adult psychiatrists. The company will continue to support the launch of Kelvy in the pediatric and adult segments with heavy investment, which will significantly increase our commercial spend in the second and third quarters of this year. Regarding GoCoveri, we are pleased with the performance of GoCoveri during its first full quarter under Superness, with net sales for the product reaching $22.6 million this representing a 28% increase compared to the $17.7 million reported by Adamas in the first quarter in 2021. Also, total prescriptions reached 10,736 in the first quarter of 2022, growing by approximately 23% over the same period last year. After the first full quarter post the closing of the Adamas acquisitions, The integration has been substantially complete. Our Parkinson's sales force is fully trained in the field promoting recovery, and we are tracking towards the upper end of our goal of $60 to $80 million in synergies in the first 12 months of owning the business. Prokendi XR and Oxtelar XR continue to be promoted by a much smaller neurology sales force that is focusing its efforts on supporting the current prescriber base. For the first quarter of 2022, net product sales of Acstellar XR were $28 million, essentially unchanged compared to the same period last year, while net product sales of Trochendi XR were $63 million, down from $72 million last year. On APICN, the year-over-year decline in net product sales was mainly due to unfavorable changes at the beginning of the year and some Medicare plans and continued competitive dynamics. The company has been closely monitoring the situation surrounding the recently approved generic cartridge and to date has not seen a meaningful impact on our business. Moving on to the pipeline, we continue to work closely with the FDA as it reviews the NDA for SPN830, the infusion device for the continuous treatment of motor fluctuations and Parkinson's disease. The company is preparing for the commercial launch of SPN830 in the first quarter of 2023, assuming timely approval by the FDA. The PDUFA target action date for SPNA-30 is in early October of this year. For SPNA-20, our first-in-class orally active mTORC1 activator, we continue to enroll patients in a Phase II multicenter randomized double-blind placebo-controlled design study of SPNA-20 in adults with treatment-resistant depression. The study will examine the efficacy and safety of SPNA-20 over the course of five weeks of treatment in approximately 270 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 are on track to initiate an opt-in label phase two clinical study with SPN817 in the second half of 2022 in patients with treatment-resistant seizures. SPN817 represents a novel mechanism of action for an anticonvulsant and utilizes a synthetic form of buprozine A, which is a potent acetylcholinesterase inhibitor with pharmacological activities and CNS conditions such as epilepsy. 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.

Thank you, Jack. Good afternoon, everyone. As I review our first quarter 2022 results, please refer to today's press release. Total revenue for the first quarter of 2022 was $152.5 million, a 16 percent increase compared to $130.9 million in the same quarter last year. Total revenue in the first quarter of 2022 was comprised of net product sales of $147.5 million and royalty revenue of $5 million. The increase in net product sales was primarily due to net product sales of GoCovery from the acquisition of Adamas in November 2021 and growth in new product sales of Calvary, which was launched in the second quarter of 2021. For the first quarter of 2022, combined R&D and SG&A expenses were $111.3 million as compared to $95.7 million for the same period in 2021. The increase in expenses is primarily due to activities to support the launch of Calvary and integration costs associated with the Adamas acquisition. Amortization of intangible assets for the first quarter of 2022 was $20.6 million compared to $6 million for the same period in 2021. The increase is primarily due to the acquired intangible assets of Adamas. Other income for the first quarter of 2022 was $12.8 million compared to other expense of $2.3 million for the same period in 2021. The increase is primarily due to a gain recognized from the sale of a subsidiary of Navitur. Operating earnings on a GAAP basis for the first quarter of 2022 was $2 million as compared to $13.2 million for the same period in 2021. The decrease in GAAP operating earnings is primarily attributable to the aforementioned amortization of intangibles associated with Adamas and higher expenses to support the launch of Kelbree. On a non-GAAP basis, which excludes amortization of intangibles, share-based compensation, contingent consideration, and depreciation, adjusted operating earnings was $28 million, an increase of 11 percent compared to $25.2 million for the first quarter of 2021. Due to a corporate reorganization of the ADAMAS entities during the first quarter of 2022, certain state apportionment factors were favorably impacted. This favorable income tax benefit resulted in a net tax benefit of 10.9 million for the first quarter of 2022. Reflecting this tax benefit, GAAP net earnings were 25.6 million for the first quarter of 2022, or 43 cents per diluted share, compared to 5.7 million, or 11 cents per diluted share, in the same period last year. The company adopted a new accounting standard in January of this year using the modified retrospective approach. The company is now required to use the if-converted method for the convertible debt. Because of this new standard, there is now approximately 6.8 million additional shares in the diluted EPS calculation. As of March 31st, 2022, the company had approximately 437.5 million in cash, cash equivalents, and marketable securities. compared to $458.8 million as of December 31st, 2021. The decrease in the quarter is due primarily to a milestone payment associated with the 2020 U.S. WorldMeds acquisition and transition and integration expenses related to the acquisition of Adamas, which partially offset cash generated from operations. For the year ended 2022, the company reiterates its prior financial guidance for total revenue, combined R&D, and SG&A expenses, and GAAP and non-GAAP operating earnings. As such, we expect total revenues to be in the 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&A expenses to range from $460 to $490 million. This range includes the expected significant increase in marketing spend in the second and third quarters that Jack mentioned as they relate to the continued support of Calgary and its launch in the adult market. Overall, we expect full 2022 GAAP operating earnings to range from $20 million to $40 million and non-GAAP operating earnings to range from $130 to $165 million. With that, I will now call it back to the operator for Q&A.

Thank you. To ask a question, you will need to press Star 1 on your telephone. To withdraw your question, please press the pound key. Stand by as we compile the Q&A roster. Our first question comes from David Emselem of Piper Sandler. Your line is open.

Hey, thanks. So just have a couple. First on Calgary, Jack, you referenced progress in the managed care landscape. I wanted to get a sense for how the payer landscape will evolve with adults now in the label. Is access going to generally be the same, or how we should think about contracting as it is now and just the overall trend for gross to net, particularly, again, with adults in the label. So that's number one. Number two is on GoCoverie. Another pair-related question, maybe just on this one, you know, volumes are growing nicely, but as the footprint of the product grows, do you think any differently about how you interface with pairs in terms of contracting? Do you think you're going to need to contract historically that hasn't been a contracted product? So how do you think about that? And then lastly on APICN, is the decline year-over-year more from the generic, or can Moby or a bit of both? Thanks.

Yeah, sure. On the first question on Kelby and managed care and now with the recent approval for adults, Any contracting that we have done basically covers the product, whether it's pediatric or adults. So from that perspective, our discussions with managed care, with the payers, the PBMs and so forth, and the Medicaid in the different states is about all the patient populations. So the recent approval should not restart a lot of these discussions or negotiations that have already occurred. Now, we continue to work closely with some of the PBMs with whom we haven't concluded or executed any specific contracts. We've been very pleased with the first major one that we landed in the fall of last year. That was CVS, where we have a Tier 2 status. We are very happy with the partnership and appreciate the partnership with CVS. you know, the attitude that everybody here is actually trying to do something positive by making something which is a non-controlled substance available to 10 million adults or 16 million patients out there where most of the therapies are controlled substances. You know, 90% of the market is stimulants. So we're happy to do that and we're happy to partner with everybody else who's willing to really play a positive role here in trying to give people another alternative that is not a controlled substance that is not subject to high abuse potential and so forth. I mean, we also, the crisis that we just went over, obviously, in the pain area, and we're hoping to make a positive impact in ADHD with Calvary, which has an incredibly unique profile, and on top of that is a non-controlled substance. So we continue to have these discussions, you know, with all the PBMs, and hopefully we'll make some more progress as time goes on. As far as the gross net specifically, you may recall in the fourth quarter of last year, we were in the high 50s. It got a little bit worse, actually, with the first quarter, which is expected, as with all products, because of the high deductibles and so forth. So I would expect, moving forward, the gross net will continue to improve as time goes on. And, you know, our target hasn't really changed. As long as we hit somewhere in the 50% to 55%, you know, we should be in good shape. So we're not too far off, you know, against our target. Moving on to GoCoverry as far as the payer. I mean, similarly, I mean, we'll continue to have discussions with payers. And if there is an area or a common ground here that could make a lot of sense for us, That would be beneficial for our patients as well. It would be beneficial for the continued growth of the product. Absolutely. You know, we're always willing to have these discussions on Gokabri as well as all other products. So that really doesn't change much. And then on Apican, regarding the decline, a lot of it is because of the recent changes. There has been some recent changes on some Medicare plans where the product was moved from a preferred to a non-preferred status. So that really hurt us a little bit this year versus last year. And, of course, the continued Q1 dynamics with the gross net worsening in Q1 versus the rest of the year. I think I covered everything.

Yes, you did. Thanks, Jack.

Sure.

Thank you. As a reminder, to ask a question, please press star 1 on your telephone. To withdraw your question, please press the pound key. Our next question comes from Annabel Samimi of Stifel. Your line is open.

Hi. Thanks for taking our question. This is Jack calling in for Annabel. For GoCovri, acknowledging that prescription trends are positive, this isn't a new product. So in terms of messaging to physicians who should know the benefits here already, what was lacking and what more do you need to do to reach your target audience? And will you need to invest a lot more here or are you just going to leverage the infrastructure and the critical mass that you've already had in Parkinson's? And for BD, what are you seeing in that landscape? Obviously, the market conditions may make some sellers capitulate. Have conversations picked up, and can we see anything more this year given the upcoming Trocandy drop?

Yeah, regarding GoCoverry, we view GoCoverry as still a new product. So to us, this is a very important product for our future growth. And it is a future-growing asset, and we will continue to invest in it, really the short answer here. As far as the messaging or anything that has changed from before, I mean, the product was launched, you know, back in the 17-18 timeframe, but also was relaunched again in 2021, which is a fairly recent launch. when the label was expanded. So, again, we continue to see GoCoverty as a major product for us with future momentum, future growth, specifically with the expansion of the label, which was only recent, about 14 months ago, and we continue to invest with the product and message the product appropriately, positioning it, especially it's a very unique clinical profile. It's the only product approved for dyskinesia and the treatment of episodes. There is no other product in the marketplace with that unique label. And that message is resonating with physicians, and we continue to see, obviously, the results that we reported with continued future growth in prescriptions. Now, the product certainly does benefit, regarding your other portion of the question, does benefit from our existing infrastructure. and our existence in Parkinson's overall. So that's part of the rationale that why we made the acquisition and the unique synergies between the U.S. World Med acquisition and the Adamus acquisition, obviously, in general. So we'll continue to benefit from that over time. And then finally, regarding the second question on business development, I mean, valuations are getting hit, no question. We all see the tape in the marketplace. But typically, our experience in these kind of cycles, it really is dependent on a case-by-case scenario. If you have certain companies and they already have a long cash runway and they don't need to tap into the capital markets, typically their expectations of value don't change that quickly with the market. Others who may be a little bit in more of a desperate need to raise cash, their expectations might start becoming more closer to to the reasonable range, so to speak. So it's really a mixed bag, all dependent on case-by-case scenario of whoever the target is at that time. But we continue to look at different things that are available out there. We're very focused on trying to expand also our pipeline, as we mentioned a few times before, as we launch Calgary in the adult space. And hopefully we will launch the pump pending FDA approval in the first quarter of next year the latest asset in our pipeline is in Phase II. So if we can find something at a later stage, that will be ideal. And we're fairly agnostic, whether that is neurology or psychiatry.

Great. Thank you. And if I could have one more question. For Apikin, we've heard the comments about how the dynamics of the circle of care with the product will make it difficult for generics to penetrate. but it seems like most of the comments are geared to new onboarding patients. Are there still barriers for patients currently on APICN? Or, in other words, why can't the generic just be used for the refills?

The circle of care and the patient journey on APICN is not a very straightforward, simple one, so to speak. There is a lot of hand-holding. There is a lot of important services that we offer to the patients, not just later after they got the prescription, even at the beginning when the prescription is initiated with a new patient. With the nurse educators and the network that we have out there, they reach out to the patient. They set up appointments with them. They do training around the product. They follow up with the patient on a routine basis, so this is not just initiation of new patients, but also continuous maintenance of the patient, making sure they're doing well with the product, do they have any questions, any feedback. That feedback actually goes back to the prescribing physician, so there is a closed loop of feedback here surrounding the patient and the services we offer. And then in addition to all that, clearly the cartridge that was recently approved as a generic to our cartridge still has to be used with our device and our pen. So that will not be available for the generics, obviously. So we view that situation so far has been evolving in the right direction for us. As I mentioned in my prepared remarks, we haven't seen any significant impact of the business as of today. Great. Thank you so much. Sure.

Thank you. And again, to ask a question, please press star 1 on your telephone and stand by one moment as we compile the Q&A roster. Speakers, I do not see any further questions in the queue. I will turn the conference back over to Mr. Jack Attar for closing remarks.

Thank you. We are executing on our strategic priorities, focusing on our two key growth drivers for our future growth, Calgary and GoCovery. We're very pleased with the first quarter growth from these two products and look forward on building on the momentum for the rest of 2022. We will continue to work with the FDA to progress SBN 830 towards the potential approval by the FDA and to prepare for the potential launch in the first quarter of 2023. I would like to thank all our employees for delivering another solid quarter, which positions us well for the remainder of the year. 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 all for participating. You may now disconnect, and have a pleasant day.