Q1 2024 Supernus Pharmaceuticals Inc Earnings Call

Participants

Peter Vozzo; Investor Relations; ICR Westwicke

Jack Khattar; President, Chief Executive Officer, Secretary, Director; Supernus Pharmaceuticals Inc

Timothy Dec; Chief Financial Officer, Senior Vice President; Supernus Pharmaceuticals Inc

Presentation

Operator

Good afternoon and welcome to the Supernus Pharmaceuticals First Quarter 2024 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. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Peter Vozzo of ICR Westwicke, Investor Relations Representative super and U.S. pharmaceuticals. You may now begin.

Peter Vozzo

Thank you, Mark, and good afternoon, everyone, and thank you for joining us today versus host Pharmaceuticals First Quarter 2024 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 six furnaces Chief Executive Officer, Jack Khattar, and Chief Financial Officer, Tim Dec.
Today's call is being made available via the Investor Relations section of the company's website at ir dot supernus.com. During the course of this call, management may make certain forward-looking statements regarding regarding future events and the company's future performance. These forward-looking statements reflect some sciences current perspective on existing trends and information. Any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in the Risk Factors section of the company's latest SEC filings and 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 eighth, 2024. Since then, the Company may have made additional announcements related to the topics discussed, so please reference the company's most recent press releases and current filings with the SEC to purchase declines any obligation to update these forward-looking statements, except as required by applicable securities laws.
And I'll now turn the call over to Jeff.

Jack Khattar

Thank you, Peter. And good afternoon, everyone, and thanks for taking the time to join us on today's call following a productive year in 2023, in which we successfully minimized the impact of the Trokendi XR loss of exclusivity and positioned the Company to mitigate the potential impact from the first generic on Oxtellar XR, we have continued to execute on our long-term growth strategy and have delivered another quarter with double-digit growth in total revenues, excluding Trokendi XR and Oxtellar XR. Driving this growth is Calgary's strong performance with 31% growth in prescriptions as reported by IQVIA and 75% growth in net sales. Prescriptions reached an all-time quarterly high of 176,503. Net sales were at $45 million. Growth in net sales in the first quarter of 2024 benefited from Bulgarian prescription growth and gross-to-net improvement compared to the same period last year. Gross-to-net during the first quarter of this year was well within our targeted range of 50% to 55%, which is encouraging for the first quarter. Considering the typical beginning of year pressure from high deductibles and insurance resets that are seen across the pharmaceutical industry. For the remainder of 2024, we expect the gross-to-net for TLB to remain in the range of 50% to 55%, with fluctuations that you would typically expect on a quarterly basis.
During the first quarter, we further expanded its base of prescribers ending the quarter with approximately 27,138, up from 25,938 from the fourth quarter of 2023 disconnections from adult patients.
Now account for approximately 32% of calories total prescriptions.
Switching now to our Parkinson's franchise, we saw increased pressure on our brands in the first quarter with higher Medicare rebates, patient out-of-pocket costs and the closing of the nation assistant funds to new and existing patients. These dynamics contributed to increased gross-to-net deductions for our brands, leading, for example, to lower growth of 2% on net sales of recovery compared to the same period in 2023. During the quarter, we also saw a significant 42% increase in sample distribution by physicians to patients. This increased sample usage as many patients to stay on recovery while waiting to hit their maximum out of pocket costs, we have already seen a bounce back in the recovery business in the second quarter as we believe patients started transitioning from their samples to refilling their prescriptions.
Switching to our legacy products, Oxtellar XR net sales for first quarter of 2024 were $26.9 million compared to $28.9 million in the first quarter of last year. We expect the introduction of the first generic of Oxtellar XR in September 2024. For Trokendi XR, first quarter net sales were $16 million, down by 54% from the same quarter last year, with expected further erosion for candidates, R. and MP. on Oxtellar XR generic later this year, we continue to anticipate combined net sales of Trokendi XR and Oxtellar XR in 2024 to be in the range of $125 million to $135 million regarding SBNA. 30. As we disclosed in April, the FDA issued a complete response letter in response to the Company's NDA, indicating that the review cycle for the applications complete. But the application is not ready for approval and its present for the Company will announce the findings for its release of Mission after meeting with the FDA later this month, we are committed to Parkinson's patients who need this potential new treatment option and to bringing SBNY. 30 for the marketplace.
Moving on to our emerging CNS pipeline of novel product candidates, we have exciting catalysts coming up in the next 12 months. Regarding SG&A 20, the company expects to provide data from its Phase IIb study in adults with treatment-resistant depression in the first half of 2025. The Phase IIb study recently achieved more than 50% enrollment of the total 268 targeted number of patients. The Phase two open label study is currently enrolling and targeting a total of about 50% of patients with major depressive disorder.
Regarding the Phase IIa study of SPN eight one seven for treatment resistant seizures, the Company now expects to report interim data from approximately 40 patients greater than the one half of total randomized patients originally targeted. As such, we plan to hold a conference call on May 23rd to report these interim data for this study is examining the safety, tolerability and efficacy of SPN eight one seven as adjunctive therapy in adult patients with treatment resistant seizures. Top line results for the full study are expected in the second half of 2024. In addition, we plan to initiate a Phase one single dose study of SPM. four four three in healthy adults following submission of an investigational new drug application. Sdn for cohort three is our new stimulants life product candidate for ADHD and other CNS disorders. Finally, we remain 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.

Timothy Dec

Thank you, Jack. Good afternoon, everyone. As I review our first quarter 2024 results. Please refer to today's press release and 10 Q that was filed earlier today.
Total revenue for the first quarter of 2024 was $143.6 million compared to $153.8 million in the prior year quarter. Total revenue in the first quarter of 2024 was comprised of net product sales of $138.4 million and royalty and licensing revenues of $5.2 million. The $2.2 million decrease in net product sales was primarily due to a $20.8 million decline in net product sales of Trokendi XR and Oxtellar XR, partially offset by a $19.3 million increase in net product sales of Calgary. Excluding net product sales of Trokendi XR and Oxtellar XR in both periods, total revenues for the first quarter of 2024 increased 12% compared to the prior year quarter. For the first quarter of 2024 combined R&D and SG&A expenses were $111.4 million as compared to $106.8 million for the prior year quarter. The increase was primarily due to R&D spend associated with the clinical programs for SPN eight, 17 and SP. and A. 20 as we continued to progress, our pipeline. Operating loss on a GAAP basis for the first quarter of 2024 was $3.2 million as compared to an operating earnings of $5.2 million for the prior year period. Income tax expense in the first quarter of 2024 was $119,000 as compared to an income tax benefit of $7.9 million for the same period in 2023. Gaap net earnings was $124,000 for the first quarter of 2024 or earnings per diluted share of $0 compared to GAAP net earnings of $16.9 million, or earnings per diluted share of $0.29 in the prior year quarter on a non-GAAP basis, which excludes amortization of intangibles, share-based compensation and contingent consideration and depreciation. Adjusted operating earnings for the first quarter of 2024 was $22.3 million compared to $30.5 million in the same quarter of the prior year. As of March 31st, 2024, the Company had approximately $309.4 million in cash, cash equivalents and marketable securities compared to $271.5 million as of December 31st, 2023. The increase was primarily due to cash generated from operations. The Company continues to have a strong balance sheet with significant financial flexibility for potential M&A, our other value-creating opportunities.
Now turning to guidance. For full year 2024, the Company reiterates its financial guidance for total revenue, combined R&D and SG&A expenses and non GAAP operating earnings. As such, we expect total revenues to range from $580 million to $620 million, comprised of net product sales, royalties and licensing revenues for the full year 2024, we expect combined R&D and SG&A expenses to range from $430 million to $460 million, reflecting increased level of R&D spend as our pipeline progresses. Overall, we expect full year 2024 GAAP operating loss in the range of $30 million to breakeven and non-GAAP operating earnings to range from $80 million to $110 million. Please refer to the earnings press release issued prior to this call that identifies the various ranges of reconciling items between GAAP and non-GAAP.
With that, I will now turn the call back to the operator for Q&A.

Question and Answer Session

Operator

(Operator Instructions) Andrew, Jefferies.

Hey, thanks. Good afternoon. Thanks for taking my questions. So congrats on the progress to a first one is on Calgary. We're one month into Q2. Would you expect the acceleration in TRx scripts this quarter? Or should the quarter-over-quarter growth be relatively similar to what we saw in Q1 and then Q3 is when we see the real acceleration. And I'm just curious where you got Have you guys been impacted by the Change Healthcare cybersecurity attacks as well.

Jack Khattar

Yes. Hi, Andrew. If you look at the first quarter of 2024 sequentially versus the end of the fourth quarter of last year of prescriptions grew by about 2%, if I'm not mistaken, 2.5% we are already seeing in the second quarter. If you look at sequential growth quarter to date, the second quarter versus the first quarter sequential growth is about 11% or 10%. So to answer your question, yes, it looks like it is starting to pick up the Q1 kind of phenomena which typically maybe in all metals down a lot of activity and so forth and insurance issues and so forth. So we're looking at acceleration in the second quarter already, certainly with the back-to-school season, we expect that to be healthier. And I mean that remains to be seen. But clearly as to how strong the back-to-school season third quarter versus second quarter or third quarter versus the year before?
Regarding the second question, the answer is no, we were not impacted by the change healthcare issue. We had other providers that could step in and continue to provide service for our customers.

Okay. And then on SPNA. one seven with <unk> later this month, we'll have the interim data set. How much follow-up data should we be expecting on all 40 patients? And maybe talk to us what kind of seizure freedom rates existing epilepsy drug show and whether you think eight one seven can surpass or be higher than those?

Jack Khattar

Yes. I mean, the first question, as far as how much more data follow-up, I mean, as we said in our press release, we're going to be bored with my remarks, we're going to report on somewhere around 40 patients. We still have few patients still in the study. So one in the second half of this year when we report the full study, we would have a handful of more patients to report on, so we can finalize all the full dataset to report on.
And regarding the second question, as far as receiver Freedom rates. And there's so many different definitions that people use regarding seizure freedom. But I mean, typically, I'll give you one example on Oxtellar XR, if I remember some of the data we have at one point around 11% seizure freedom, which was very solid in affordable product, for example, Oxtellar XR, there are so many agents out there with a whole host of ranges of seizure freedom. Clearly anything above the 10% typically is a good number, especially for those who are refractory patients and in the space 33% to 40% of patients are refractory or so depends on are you getting seizure freedom within one patient population if you're taking a patient from those who are refractory and you're turning them to be seizure free. That is incredible, even if it's 5%. But if you're taking people hard from the beginning, started getting treated with epilepsy drug and then you turn them seizure-free early on in their disease and they had not forgive aspects of Adlea that probably is not as impressive. So so there's a lot of variety of how people measure them and in what patient population.

Got it. Got it. And then last quick question is just bigger picture in general, how much firepower do you guys think you have in terms of BD or M&A?

Jack Khattar

Thank you.
It is a very simplistic way. I mean, we could probably do some transactions in the $500 million to $1 billion. It could get higher if we use equity. So it all depends on the situation itself.
As far as the acquisition candidates, what profile of that company has this company come with assets that generate significant cash flows that you're able to leverage against these cash flows and maybe it will allow you to go to a bigger size transaction. And if it is transformative kind of transaction that equity could become part of the mix as well as for paying for that acquisition. So I think a $500 million to $1 billion to $2 billion, there's a fair range. I know it's a wide range, but it all depends on the situation we're dealing with.

Operator

One moment for our next question. And our next question comes from David with Piper Sandler. Go ahead, David.

Thanks. So just have a couple on first on Calgary. So you seem like you're doing nicely in terms of getting to the gross to net our target in the low to mid 50%s. I guess just given where the already is in 1Q02, given that it's seasonally tougher, is it possible that the gross to net it could dip below 50% as the year progresses. I just wanted you to talk to that, if you can.
And then secondly, on SPNA. 30, can you elaborate on the issue in the CRL or maybe not issue what was raised in the CRL regarding the master file for the infusion device? And is there anything that you've learned since the CRL is you and interfaced with the manufacturer that you can share with us. And so that's number two.
And then lastly on eight 17, can you just remind us of the path forward and beyond this Phase IIa, I believe the Phase IIb it is in the works. So talk to the design of that study.

Jack Khattar

Thanks.
Yes, sure. On the first question on Calgary at the gross-to-net. I mean, the reason we said, you know, for the full year, we remain to target 50% to 55% is because quarter to quarter, you're absolutely right. Typically gross-to-net improves. And if in the first quarter we had a little bit better or we are in a good place to start with. There is nothing but to improve from here the only caveat to this, sometimes we see quarter to quarter fluctuations, some of which are unexpected or unknown like a high return or something that could come in. So that's not anything we're trying to be guarded against steel, everything else being equal. Let me put it this way. Yes, there is a potential that we may end the year on the shorter end or the lower end of that range, if that makes sense.
As far as being a duty, I mean, as we when we announced the CRL we did mention there are a couple of areas, one around the quality and one around the master file, which we are learning more and more now as we're having discussions directly with the manufacturer around that. And we think these are areas that can be addressed and we already secured a meeting with the FDA later this month. So we're really moving pretty fast as fast as we can to hopefully address all these issues and wanting to make sure it also there are no new issues pop up later on. So we're trying to make sure we have everything we need before resubmission, and that's why we would like to have that meeting first before we communicate any time line for the resubmission.
And then the last question on eight one seven. Just as a reminder, the current study we are reporting on, which was intended to interim data is on an open label exploratory study where we looked at several types of see those. We looked at so many different doses and it was meant to help us as on as time goes on as the study continues to enroll all help us in designing the Phase IIb study, which typically would be our next step. So clearly, that is the next natural step after the Phase IIa open-label study and we will share the details with you guys on May 23rd.

And if I may just sneak in a follow up on on a 30. There was also the of the other issue raised was on product quality. And I believe you said that you submitted that, that data to the FDA. Is it possible to elaborate on what was meant by product quality?

Jack Khattar

Yes.
I mean, I don't want to get into all the details at all. It's regarding the formulation itself. So it's not a device issue. So that's when we say product quality. It was more related to the product, the formulation, the April morphine solution, so to speak. That's as far as we can share at this point. And yes, we have submitted some data at that time that the FDA didn't have the time to review or didn't review. So clearly, the meeting upcoming hearing will be very important for us to clarify, do they need anything else on top of that or whether it would be submitted could be sufficient. So that's really the purpose of that meeting.

Operator

And our next question comes from Stacy with TD Cowen. Go ahead, Stacy.

Hey, congratulations on the quarter and thanks so much for taking your questions. So we do have a few follow-ups. And just one more on Calgary, that strong net pricing that we're seeing in Q1, what's driving that is at higher doses because more adult patients are being added because of the price increase, is it still kind of that pulling back the co-pay assistance program?
And then as we look forward as we consider these kind of growth mix fluctuations that you kind of alluded to? Are you going to be making investments as we think about back-to-school season this year just quarter to quarter or just and should we expect a more stable net price for the year? That's the first question.
And then the second question is going to be on SPN eight, 17. It sounds like enrollment went a bit faster than expectations. So can you just broadly talk about steady demand among the patients? And then just set expectations, what you expect will be competitive seizure reduction through forward understanding this is an open label and you're going to give this data in late May, but just curious, the decision to move into late May and and help set expectations for the Street. Thank you.

Jack Khattar

Regarding Calgary and on, we've talked about that actually several quarters regarding what are the key drivers for Calgary to continue to grow and to continue to really perform well and obviously continue to grow the net price at the end of the day, clearly higher the doses and we can get there through different avenues high daily doses that patients are taking on a daily basis, whether it's pediatric or adult. And that is typically a function of physicians getting more and more comfortable with the medication and titrating up to the real dose that they need to use actually for the product will be very well, not effective in treating symptoms, and that was in line with the Phase three data. And based on the Phase three data, as you know, we did continue to communicate to our physicians going to what are the target total daily dose that they should be working up to in both patient populations. So clearly, as time goes on, we ought to get we are getting there the speed by which we get. There's always you know, it's hard to predict, obviously, because you always have new prescribers that are completely new to the product. And these new prescribers will always stated low and slow, so to speak. From a penetration perspective. It also depends on how they're using it. They're using it in combination with stimulants. Sometimes they go much lower and much lower because they're adding it to the stimulants that day a patient is already on. And as they tried to take the stimulant of from the therapeutic regimen for that patient and adding Calgary, they will reduce the stimulant and increase the Calgary, though. So that's a function of that patient on a case-by-case basis. And then the final dynamic that will impact higher doses is for the adult population and as our mix of the business continues to grow in our evolves and becomes a bigger piece of our total franchise on a blended basis, clearly that is going to increase the total daily dose and gives us the benefit of a higher price per prescription. So the net price in the first quarter of this year was about 255. I guess if you divide the net sales by the quarterly prescriptions, which is down versus to 67, which was the number in the fourth quarter of last year, and that's because the gross-to-net always gets a little bit worse in the first quarter versus the end of the previous quarter, kind of as far as as the year goes on our investments and so forth.
Now at this moment, we continue to push and evolve so that we were neglecting pediatric, absolutely not, but we continue to push in those specialty and female adult. We've signed up some really great influencers and have partnership with busy Philipps, which we announced very recently on. I'm talking about HD. and our experience in ADHD and our experience with Kelway as a product that has helped us helped our tremendous with. So we hope to continue the market education and encourage patients to step forward and talk about the disease about their conditions of the things that they struggle with every single day and let them know that there are options out there and these actions don't have to be stimulants so they don't have to be controlled substances and they can be a very good well tolerated nonstimulant that can be very effective, which is the case with gallery and every metric we look at KLD as time goes on, we have more and more data and more evidence that the product really works and it really works fast and it works well with kids and adults. So we will continue to invest in these areas. And clearly, as we get closer to the back-to-school season, we'll make more investments and more prioritization of resources around the back-to-school season regarding eight one seven and the profile again, I mean, we will review, of course, the data on May 24th, 2020 sort of May. I mean, clearly, you want a product that works. I mean, at the end of the day, when you look at epilepsy and the landscape, there are so many agents out there and we've been in that space for so many years before with Oxtellar XR, Trokendi XR or even Carbatrol way back and many patients alive I referred to earlier, they become refractory unfortunately, and they don't respond to as many vacations. And these patients end up on weighing more than one or two drugs eventually. And therefore, you need a drug that really works and works well and hopefully works well so that you avoid having the patients who progressed and even become refractory. And clearly, that's been of the gold standard that you're looking for. There's still tried to treat patients early and you make them to be responsive to these medications that are responsive. And the progress for the worsening of their condition is delayed as time goes on so eight, one seven from what we've seen so far looks like as an effective medication. You know, from the data we've shared earlier back in October, our R&D Day as well as some of the patients we have in Australia are weighing that in the early early study. So we hope to have a profile of a drug that actually works well. And again and to present a given its mode of action and so forth. If it does also have some pro cognitive attributes that would be huge, that would be huge specifically in this patient population. So so we will see as the analysis, we're literally completing a lot of that analysis as we speak, even though we had a little bit more patients than we initially expected and we've shared all that on May 20th. So.

Operator

And our next question comes from Annabel with Stifel. Go ahead, Annabel.

Hi, this is Jack on for Annabel. Thanks for taking our question. And so I know you've mentioned previously that about 30% of Calibrin patients are treatment-naive and the other 70% are switches from existing therapies. Are there any differences in the responses that these two patient populations have to calibrate when it comes to things like speed of effect onset essentially trying to ask here, is there a better onboarding strategy or new both populations from identically once they initiate calibration?

Jack Khattar

I'm not really. I mean, it's a pretty remarkable. The consistency of the feedback we get from the field on whether you have the patient, first of all is pediatric or is it all or where the patient has come from to the KLD franchise.
As far as the efficacy of galleries, it works fast, as I mentioned earlier, I mean, between a week to two weeks, depending on whether you need to titrate that you have an older patient get unlike an adolescent? Or do you have an adult obviously you have to titrate and whether the physician despite writing has on the label on it by trading a little bit slower just because they choose to do that, right? But nevertheless, patients feel and they start seeing the improvements, as you know, during the titration. And during January and February, the onset of action is fairly quick actually, and some of the survey results that we have seen over time since we launched this product. The physicians will use calibrate and have used that data for many years. They value Calgary works within a week to two weeks and on an average per bed that is at least four or five weeks on. And even in Europe, you know, they've known it themselves and they see them given the experience they've had with their. So we know that the product is working really well on regardless of whether you a switch or you are completely naive new patients will ban on Calgary from the beginning.

Got it. And then just kind of ask one more on speaking about physician feedback. So I know that you're looking at Calgary in the co-morbid mood symptoms more formally in the Phase four, and we're going to see that data eventually. But in the meantime, have you heard any anecdotal real-world reports from physicians maybe not involved in the trial and about how Calgary might be performing in these kind of patients insulation.

Jack Khattar

We actually first started hearing about it and saying we are even way back when we were doing the studies from some investigators who at that time again, anecdotally, this was nothing like portable data collection or anything anecdotally telling us, you know, we see that aligns us even on top of it. So we don't know whether the patient they're talking about is taking calorie or taking placebo at that time. But they were telling us it looks like the patient is not just getting better because they can pay more attention or focus or whatever, they're just feeling better overall in general. So it's more about the whole mood of the patient's overall well-being of the patient, not just focus attention for every impulsivity or hyperactivity or anything specific to ADHD, and we would have these investigators on that's a European or why do you have an idea then again, not knowing what that patient wherever they are referring to. We don't even know they have to be on placebo, but not knowing it clearly, we would tell them what the background of the molecule is being an anti-depressant and so forth. And then of course, they say, okay, the molecule works on serotonin and so forth. So then they we speculate, of course, in their mind, that.
Yes, maybe that's why it is working better across different mood disorders that these patients may have because we know each deal does come with a lot of co-morbidity with things like anxiety, depression, bipolar or other mood disorders. And clearly, it looks like again anecdotally that probably it was happening across different areas, not just ADHD.

Operator

Thank you. This concludes our question and answer session. I would now like to turn it back over to Jack for closing remarks.

Jack Khattar

Thank you, and we've been building our call this afternoon. We remain focused on first, driving the long-term growth of the Company by continuing to drive significant growth with Calgary and together with the recovery and the rest of the portfolio generates strong cash flows, allowing us to continue our investments in our pipeline. And second, progressing our innovative oral deep portfolio of differentiated first-in-class molecules that have several exciting and upcoming clinical milestones and catalysts. Thanks for joining us this afternoon, and we look forward to updating you on our next call.

Operator

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