Supernus Pharmaceuticals, Inc. (SUPN) Earnings Call Transcript & Summary

Great. Good afternoon, everyone, and thanks for joining our session with Supernus. I need to -- my name is Dave Risinger, and I cover both U.S. and major specialty pharmaceuticals at Morgan Stanley. I do need to read a disclaimer. Please note that this webcast is for Morgan Stanley's clients and appropriate Morgan Stanley employees only. It's not for members of the press. If you're a member of the press, please disconnect and reach out separately. For important disclosures, please see www.morganstanley.com/researchdisclosures. And if you have any questions, please feel free to reach out to your Morgan Stanley sales representative. So it's very much my pleasure to welcome Jack Khattar. He's the company's founder and CEO; and also, Greg Patrick, the company's CFO, may be joining as well later. But I'm sure Jack can handle any and all questions. So we're pleased to have him with us. So Jack, why don't we maybe just have you start with some opening comments, and then we'll go into the discussion.

Sure. Good afternoon, everyone, and thanks so much, David. Really appreciate having us. Before I go into the details, I'll just remind everyone that I will be making forward-looking statements, so please check our SEC filings for all the risk factors associated with the business. So very briefly, for those of you who may not be familiar with us, Supernus Pharmaceuticals has a focus on the CNS diseases. The company has operated for many years, actually more than 30 years now, but for several years operated under the Shire organization and split up from Shire at the end of 2005. So the company has tremendous experience in the central nervous system area, with several products that have been developed over the years, primarily in ADHD. Actually, we have developed 4 different ADHD programs, including one of the programs that we have here at Supernus, which is awaiting FDA approval. As far as the portfolio that we have currently, we have a portfolio of several products, primarily in epilepsy, migraine and Parkinson's disease. These existing products account, and that's pretty much in line with the guidance that we gave recently in August, about $460 million to $500 million in net product sales for 2020 and producing an operating income somewhere in the range of $90 million to $110 million. So that's the existing business. Again, it's all in the CNS space. We have a very exciting pipeline, which hopefully we'll have a little bit more time to talk about later with SPN-812, which is the ADHD medication I referred to earlier. It's a novel non-stimulant. We're very excited about the product, has a PDUFA date of November 8, so it's coming up soon. We are well with our preparations for launching the product, hopefully, before year-end or around the beginning of next year. In addition to that, we're very excited about the fact we just filed another NDA, which was for an apomorphine infusion pump. So if all goes well with that application, we expect -- would expect launch in the second half of next year. So we have a lot of things going on as well as future growth for the company. And behind these 2 assets, we have 2 novel programs, 1 in depression, which is SPN-820 with a new chemical entity and a novel mechanism to treat depression; and also SPN-817, which is a novel mechanism for the treatment of epilepsy, and we're very focused on rare forms or severe forms of epilepsy on that program. So that's pretty much in a nutshell. We have a fairly strong balance sheet. As of the end of the second quarter, we had about $730 million in cash or marketable securities on the balance sheet and about $400 million in debt. So with that, I'll turn it back to you, David, for the question, Q&A.

Great. So that was a very helpful framework, so thank you. And could you just talk about your longer-term vision for Supernus?

Yes, absolutely. We continue to be focused in CNS. We are looking at building a fairly good presence across neurology and psychiatry. We're very much long-term-oriented in everything we do, so we're already thinking beyond SPN-812 and beyond the pump and the NDA, and that's why I mentioned our excitement on 820 and 817. In addition to that and in line with that, we will continue to be active on the business development side to continue to build the company and bring in external growth opportunities. The company has also -- and we're fortunate, given our background, we have a fairly strong R&D capability to develop products on our own as well. So we're not fully dependent on M&A, but clearly, we're active on both sides of the equation to continue to fuel the growth for the long term.

Excellent. And the acquisition of US WorldMeds Parkinson's business seems to obviously fit extremely well with Supernus. Could you speak to that opportunity, talk about the current annual revenue run rate, the durability of the existing franchise and that portfolio's potential?

Yes, sure. As you stated, clearly, the portfolio, we felt and we believe, has a strong strategic fit with what we've been doing historically and where we're going as a company in the future. Parkinson's, obviously, is a mainstay in the neurology space, so that's very complementary to our existence and presence in neurology, with epilepsy and migraine behind Oxtellar XR and Trokendi XR. In addition to that, it really diversifies significantly our revenue base, our earnings potential as well as the cash flow that comes into the business. That is extremely important for us as we diversify the business, given that in the next couple of years, we face, of course, as everyone knows, Trokendi XR losing exclusivity. So we've been working pretty hard to try to diversify our business. And the other exciting portion is what I just mentioned, which is really SPN-830, which came with that acquisition, and that's the apomorphine infusion pump, which we believe have a very significant potential and could really contribute very nicely to our future growth moving forward. As far as the current run rate on the business, APOKYN Pen is actually the biggest product of the 3 products in the portfolio. And back in 2019, it did somewhere in the neighborhood of $118 million to $120 million as far as a run rate.

Excellent. And we'll get into the pump opportunity later. But just at a high level, how should one think about how the 830 launch would impact the APOKYN pen? Would there be some cannibalization or how should one think about that?

Yes. As far as the landscape in Parkinson's, as most people probably know, patients go through a journey, unfortunately, from beginnings where the symptoms are fairly mild, the disease is early and then they progress through different stages in the disease where things become fairly severe, and they are experiencing a numerous number of off-episodes during the day. Off-episodes, just for clarity, that's when patients, unfortunately, they lose their ability to even do basic things like getting dressed, or getting up, moving around, eating and things like that, so it becomes very difficult for them to function on a daily basis. And where we see the APOKYN Pen franchise that we have currently, it really helps a tremendous amount of patients in the mild to moderate spectrum of the disease. It is for acute treatment, and therefore, people will use it as needed, according to the label, of course, to treat off-episodes. It can work within minutes. The data is fairly pretty good about the product. It works pretty well. But then as you get into more of the severe spectrum of the disease, patients may not choose to do 4, 5 or 6 injections a day, and they may end up -- choose to have another option, which the pump would represent, and that will be an option where they'll have a continuous subcutaneous injection of apomorphine throughout the day, therefore, helping them throughout their day. And the data from our Phase III program shows, actually, a fairly good, meaningful improvement in treating off-episodes, giving patients about 2.5 hours, which is really a nice time period during the day where they can be normal, function where they are on, so to speak. So we see the 2 very complementary, clearly. Would there be an area where there will be some overlap? Potentially, of course, there could be some overlap maybe in the moderate space between the pen and the pump. But all that, clearly, will depend on the label. If the product is approved, what kind of label we get, how will we be able to position the product.

Excellent. So could you talk about some of those variables and how they play into the potential commercial sales opportunity for 830?

What we communicated initially when, actually, we did the -- announced the acquisition that was back in April and then we closed the acquisition in June, we think the pump could have a potential somewhere around the $125 million to $175 million as far as peak sales. Again, it all depends on the kind of label we get. Of course, as to whether we can do better than that or in the middle of that kind of range, we sure hope and we will definitely be shooting to do much better than that, but at least all the research we've done and the diligence we've done behind the opportunity leads us to believe that's a reasonable estimate to go with, at least initially before we even have a label in front of us.

Excellent. Okay. Thank you. So then maybe we could just transition to 812. Obviously, that has a tremendous potential. If you could just start by reminding us about the differentiated profile versus other non-stimulant ADHD drugs and then frame the opportunity and sales potential as you see it.

Yes, sure. The ADHD market is a fairly large market. Give or take, it's around 75 million prescriptions on an annual basis in the last year or so. So it's a fairly big market. It's been dominated by stimulants. About 90% of the business of prescriptions is stimulants. And primarily, these are methylphenidate and amphetamine, which have been around for decades, actually, for a long time. And then on the non-simulant side, you have atomoxetine, which is the brand being Strattera and Intuniv, which is actually the product we had developed way back for Shire when we were part of Shire organization. So the non-stimulant segment has stayed and remained around 10% for quite a bit of time, and our position on this is not because people don't need non-stimulants, not because parents wouldn't prefer to have a non-stimulant, which is really more of a noncontrolled substance for their child, it's because the options today that existed perhaps are not really fulfilling all the needs for the patients. And therefore, we believe SPN-812, as a novel non-stimulant, noncontrolled substance, can play a major role in offering patients an option where the product, and this is based on our Phase III data, a product could potentially work within a week, 2 weeks even, as early as a week to 2 weeks where the parents will -- can tell whether this medication is helping the child during the school, is it helping the child in any other social setting as well. And also, the tolerability and the safety, again, based on our Phase III data, looks really good with discontinuation rates that we've seen in all our Phase III programs collectively, somewhere around 3% to 3.5% discontinuation because of AEs. So the profile of the product seems to be -- we have good efficacy, the onset of action seems to be a really nice, giving parents an early indication whether the product is going to work early enough so they don't have to wait 4, 5 or even sometimes 6 weeks into the school, and the medication is still not working or they're not sure whether it will ever work, which is very important, of course. As a parent, I can tell. I mean waiting for 4, 5, 6 weeks, could feel like eternity when your child is being suspended or getting bad grades and so forth. So clearly, the onset is very important, and we sure hope to be able to have a label that differentiates us, again, based on the Phase III data that we've seen from our program. The other thing, the drug seems to work very well on both subscales, inattention and hyperactivity. It is easy to use. The 100-milligram, which is the initial dose, actually, on its own, has shown very good efficacy on its own. So you may not even need to titrate for the product, and it's very simple for the patients to get on the medication. So overall, in a nutshell, it's really a very novel product. A unique mechanism separates it from the current non-stimulants as well as, of course, the stimulants. And I always look at the patient. I always look at the customer at the end of the day. So I, as a parent, as a patient, if I'm presented with this kind of option, why should I jump into a controlled substance and give my kid something that could be abusable, controlled substance and everything else that comes with that? Why wouldn't I try something that could be a non-stimulant, noncontrolled substance, could work as early as a week, 1.5 weeks, 2 weeks, whatever the period might be, a very reasonable time frame, and looks like it's really safe and tolerable compared -- and looking at the data we've seen so far. So these are really the attributes that we think will translate well into the marketplace, and we see no reason why the product wouldn't perform according to the Phase III program that we have, which is a fairly extensive program, 900-plus patients. So all this data has been generated based on a fairly big database from actual patients in our clinical trials.

Excellent. That's very helpful. And could you talk about your commercial launch plans and anticipated formulary positioning?