Peter Vozzo – Westwicke Partners Jack Khattar – President and Chief Executive Officer Gregory Patrick – Chief Financial Officer.

David Amsellem – Piper Jaffray William Tanner – Guggenheim Securities David Buck – Northland Capital Markets.

Good morning, ladies and gentlemen and welcome to Supernus Pharmaceuticals Third Quarter 2015 Earnings 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 is being recorded.

I would now like to turn the call over to Peter Vozzo. You may begin..

Thank you, Roland. Good morning everyone and thank you for joining us today for Supernus Pharmaceuticals' 2015 third quarter financial results conference call. Results discussed today are for the quarter-ended September 30, 2015. Yesterday, after the market closed, the company issued a press release announcing these results.

On the call with me today are Supernus' Chief Executive Officer, Jack Khattar; and Chief Financial Officer, Greg Patrick. Today's call is being made available via the Investor Relations section of the company's website at ir.supernus.com. Following remarks by management, we will open the call to questions.

We expect the duration of the call to be about 45 minutes. 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 Supernus' current perspective on existing trends and information and can be identified by such words as expect, plan, will, may, anticipate, believe, should, intend and other words with similar meaning.

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 our most recent Annual Report on Form 10-K. 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 November 4, 2015, at approximately 9:00 AM Eastern Time. Since then, the company may have made additional announcements related to the topics discussed. Please reference the company's most recent press releases and current filings with the SEC.

Supernus 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 morning, everyone. I appreciate everyone taking the time to join us as we discuss our 2015 third quarter results. During the quarter we continued to generate strong prescription and product sales growth, while making significant progress in advancing the clinical development of our pipeline products.

Let me first focus on some of the key third quarter highlights. Prescription growth for our epilepsy portfolio continued a strong phase in the third quarter.

Total prescriptions for Trokendi XR and Oxtellar XR combined in the third quarter as reported by Symphony were 102,831, representing an increase of 78% over the third quarter of 2014, and 13% over the second quarter of 2015.

Trokendi XR prescriptions for third quarter totaled 77,331, which is a 96% increase over the third quarter of last year and a 14% increase over the second quarter of 2015. Oxtellar XR prescriptions for the third quarter totaled 25,500, representing an increase of 40% over the third quarter of last year and 9% increase over the second quarter of 2015.

Also total net product sales for the third quarter of 2015 were $38.6 million, an increase of 71% over $22.5 million for the same quarter last year and a 9% increase over the $34.3 million for the second quarter of 2015.

Looking at our performance for the first nine months of 2015, the total prescriptions for Trokendi XR and Oxtellar XR showed robust growth of 101% over the same period last year. And total net product sales increased by 71% or 114% when adjusted for the change in revenue recognition of $7 million in 2014 that we discussed last quarter.

During October 2015 the FDA accepted for review our supplemental new drug application requesting approval to expand the indication for TROKENDI XR beyond the current indication for the treatment of epilepsy to include treatment in adults for prophylaxis of migraine headache.

This is a very positive development as it potentially provides an important new treatment option for adult patients suffering from this condition and helps us maximize the Trokendi XR franchise. The FDA has set a target date in the second quarter of 2016 to complete its review.

Turning now to our pipeline; we’re pleased to report that we have reached another significant milestone with the initiation of two Phase III trials with SPN-810 during the third quarter of 2015.

The company filed with the FDA in September the special protocol assessment for SPN-810 and has been in discussions with the FDA expecting to finalize the SPA in this quarter prior to first patient dosing. As we stated previously the FDA has accepted the use of our scale and agreed with our proposed primary endpoint for the Phase III trials.

We have substantially progressed clinical site selection or the first two Phase III trials and we will be holding an investigator meeting later this month. We also expect to start patient recruitment later this month that is followed by 28 day waiting period for each patient prior to randomization.

The formal treatment period will be approximately 29 days and the trial will also include an open label extension period until we launch the product.

Regarding SPN-812 we started three trials in the past few months, a single-ascending dose SAD study and a multiple-ascending dose MAD study and adult healthy volunteers were initiated in the third quarter. And the Phase IIb trial was initiated in the fourth quarter.

The SAD and MAD trials are designed to better define and understand pharmacokinetic profile of the extended release formulation that is the subject of the Phase IIb trial. The results of the two studies are expected by the end of this quarter.

As we advance our pipeline products, we continue to be very excited about their significant commercial opportunity. SPN810 could be the first FDA approved treatment for impulsive aggression in ADHD.

We have conducted extensive market research, which shows that impulsive aggression in children and adolescents with ADHD is a significant concern for parents, caregivers and physicians and represents a large market opportunity.

This market research include a qualitative assessments of the target product profile with key opinion leaders, community physicians and payors, and more significantly we can complete quantitative market sizing and demand research that included 1,092 patient records that were provided by 182 physicians.

Based on our research we believe that SPN-810 has the potential of reaching 700,000 to 1.2 million prescriptions per year at peak for the treatment of impulsive-aggression in children and adolescents who have ADHD.

In addition there are several opportunities beyond the initial ADHD target market that we believe collectively represent additional potential peak prescriptions of 700,000 to 900,000 per year.

Overall the market opportunity for SPN-810 for the treatment of impulsive aggression is significant and spreads across many disorders making it potentially the first $1 billion product for Supernus. We continue to expect to submit a new drug application for SPN-810 in 2018.

Similarly based on the emerging clinical profile of SPN-812, we believe SPN-812 has the potential of being a well-differentiated product in the underserved non-stimulant market in ADHD offering a valuable alternative for treating ADHD patients. We expect to submit the NDA for SPN-812 in 2019.

Finally for Trokendi XR we’re pleased to have entered into a settlement agreement with Par, permitting Par to begin sending a generic version of Trokendi XR on April 1, 2025 or earlier under certain circumstances. As part of that settlement, Par agreed that it infringed Supernus patent position and that Supernus patents are valid.

Patent litigation continues against the other two ANDA file Actavis and Zydis. We remain confident in the strength of our intellectual property and continue to vigorously defend and the patent protection our innovative products deserve. Oxtellar XR has five patents and Trokendi XR has six patents that are all listed in the orange book.

All these patents provide patent protection that expires no earlier than 2027. With that I will now turn it over to Greg to walk you through the details on the financial results..

Thanks, Jack, and morning everyone. As I review our financial results I’d like to remind our listeners to refer to the third quarter 2015 earnings press release issued yesterday after the market closed. We expect to file our report on Form 10-Q for the quarter ended September 30, 2015 later this week.

Net product sales of Trokendi XR for the third quarter of 2015 were $29.9 million, which is 13.7% higher than $26.3 million in the second quarter of 2015, and 95% higher than $15.3 million in the third quarter of 2014.

Net product sales of Oxtellar XR in the third quarter of 2015 were $8.7 million, an 8.7% increase over $8 million in the second quarter of 2015 and a 20.8% increase over $7.2 million in the third quarter of 2014. Research and development expenses in the third quarter of 2015 were $9.1 million as compared to $4.7 million in the same quarter last year.

This increase is primarily due to the initiation of Phase III testing associated with SPN-810, manufacturing and packaging of clinical trial materials, selection of a CRO and the screening of clinical trial sites. Sequentially as compared to the second quarter of 2015 research and development expenses have increased by $2.3 million or 33%.

Going forward, we continue to expect research and development expenses to increase during the fourth quarter of 2015 and into 2016 as we continue the clinical advancement of both SPN-810 and SPN-812. Selling, general and administrative expenses were $22.9 million for the third quarter of 2015, as compared to $17.3 million in the same period of 2014.

This higher expense in 2015 reflects marketing, medical and promotional programs and supported the currently commercialized products. For the third quarter operating income totaled $4.3 million as compared to $29.2 million in the third quarter of 2014.

Excluding the previously mentioned one time $30 million royalty monetization payment there would have been an operating loss of $0.8 million in the third quarter of 2014.

Net income for the third quarter ended September 30, 2015 was $4.2 million or $0.08 per diluted share, as compared to net income of $27.9 million or $0.39 per diluted share in the third quarter of 2014. Again, excluding the impact of $30 million royalty monetization payment, third quarter 2014 net income would have been a loss of $2.1 million.

Approximately 51.6 million weighted average diluted common shares were outstanding in the third quarter of 2015, as compared to 50.8 million shares in the third quarter of 2014.

As of September 30, 2015, we had $101.7 million in cash, cash equivalents, marketable securities and long-term marketable securities as compared to $94.2 million at December 31, 2014, and $103.3 million at June 30, 2015.

Cash balance at September 30 was down slightly from June 30, 2015, primarily due to upfront payments for initiation of our Phase III clinical trials for SPN-810. As of November 3, 2015, approximately $8.5 million of our six year $90 million convertible notes remained outstanding.

We are updating full year 2015 financial guidance by increasing the range for both net product sales and operating income. We expect that net product sales will range from $143 million to $145 million with operating income ranging from $13 million to $15 million.

This compares to prior guidance of net product sales of $135 million to $140 million and operating income of $8 million to $10 million. In addition, we expect R&D expense for the full-year to exceed $30 million, more than 50% over the R&D expense of $19.6 million in 2014. I would now like to turn the call back to the operator for questions..

[Operator Instructions] Our first question comes from the line of Ken Cacciatore with Cowen and Company. Your line is open, your question please..

Hi guys, this is Sal in for Ken. Congrats on the great quarter.

So one question regarding the Trokendi XR, with the potential now indication for migraine prophylaxis, can you just talk a little bit about what that opportunity looks like and how that could potentially impact revenues for Trokendi moving forward? And then on also regarding the status of the litigation with Actavis, Allergan and Zydis, and just your outlook on what the recent settlement with Par could potentially mean for the duration of that asset? Thank you..

Hi good morning, this is Jack. Regarding the migraine indication clearly Trokendi XR has been pretty much – and we as a company have been constrained as far as our promotional effort, so all the Trokendi XR promotion of FX have been skewed towards epilepsy.

The next the physician audience that we go after as far as for getting for Trokendi XR, we’re meeting urologist and a lot of them prescribe for epilepsy. Now, some of them may use it for migraine on their own.

We have been getting some usage of Trokendi XR in migraine, but when we get the migraine on the label itself it will allow us clearly to talk to physicians about migraine to be able to speak to the benefits of Trokendi XR in migraine specifically, as well as in epilepsy. And we believe that should have some upside, we don't know what is that exactly.

We are going through the analysis at this point and see whether that will have an impact on our sales force or not from an expansion point of view. Regarding the litigation, I really can't make any comments on future litigation outcomes or potential settlements or anything like that.

The only point I would make actually and this would apply to Trokendi XR and Oxtellar XR is clearly given that we did settle with Par that gives people a couple of messages; one that the company is not opposed to settlement, if it is a settlement that makes sense obviously.

And then second that we stand very strong behind our IP and we know that a lot of these folks will file ANDAs, have infringed on our IP and we will protect our IP. Short of that I really can't make any specific comments on what will happen in next two weeks or three weeks or obviously next year or so. On Oxtellar XR the trial is coming up.

It will start on November 18 for Oxtellar XR and that will typically take a week or two weeks, and probably a ruling will be sometime early next year..

Great. Thank you guys..

Thank you. Our next question comes from the line of David Amsellem with Piper Jaffray. Your line is open, your question please..

Thanks.

Just a couple; so first, can you talk about how we should think about your acquisition capacity? In other words, how big of a transaction do you think you can execute on if you were to access additional capital? And then related to that what are your thoughts in terms of prioritizing commercial stage assets versus late stage development assets, how should we think about that? And then lastly, can you just walk us through how we should think about the gross to net on Oxtellar and Trokendi into 2016, as you get more and more access both on government and commercial plants? Thanks..

Yeah. David, I will take first the M&A priorities and strategy and then Greg will talk about the financing and other question on gross to net. As far as our M&A priorities or growth – external growth priorities, as we mentioned on previous calls, basically we are looking for assets in the urology psychiatry space, which is our focus.

Our priorities are on things that are later stage whether they are commercial assets NDA stage or even if they are in Phase III because anything that puts us ahead of the game as far as bringing a third product to the market, clearly would accelerate our story and elevate our importance and strategic value.

So in general we look forward to these type of assets in psychiatry overall.

Neurology maybe is a priority initially given that we are now completely focused on neurology until 2019, when we first launched SPN-810, but we also did say that we are not opposed at all bringing a product in the psychiatry space that will allow us to start establishing our presence in psychiatry about a year or two years before 2019, so we cannot get Supernus’s name out, physicians will become aware of who Supernus is and that we are a key player in psychiatry and that will allow us to prepare for the SPN-810 launch.

So I will let Greg make comments on the financing capacity and the gross to net..

Thanks Jack. With that platform that Jack laid out I’d bifurcate the discussion on acquisitions into two pieces. If we were looking at a product or a company in the range of, let’s say $250 million to $500 million or maybe even north of $500 million given that our market cap right now is about $900 million, that’s clearly an equity driven transaction.

It could be a combination of equity and something else, but I’d say primarily it’s not solely equity. Below the $250 million level there’s lots of opportunities and lots of options for us and we actively explore those and including convertible debt and straight debt.

Clearly $200 million, $250 million of straight debt, I think be at the upper end if not, probably on the upper end of what is reasonable and responsible, so if we were looking at something kind of in the $200 million range it’s probably some form of convertible debt and were straight debt, but leaning primary on convertible debt.

With respect then to the question about gross to net and how to think about that going forward, gross to net for Trokendi XR for the most recently completed quarter was in the low 30s and Oxtellar XR approximately 50%, and that’s a bit of a jump up from prior quarters and from where we’ve base discussions previously, and that's really driven by two factors.

The biggest one is Medicaid, as we continued to increase price that has a knock down effect in terms of Medicaid rebate, as you well know, the company increased price of both products at the very end of June and we’re seeing the impact of those price increases in terms of Medicaid rebates in the third quarter.

We also have experienced for the first time with expiry of our launched lots some real life experience with respect to returns. And so we will have to adjust our accounting estimate going forward in order to reflect that new information.

The level of returns actions was quite modest as compared to what I think other companies have experienced, but it did cause us to push that adjustment through in the third quarter. I think more importantly going forward, we’d expect those gross to net numbers that I just referenced David to be pretty stable over the next several quarters.

We’ve got new information on Medicaid, new information on returns; we don’t expect that to change appreciably over the next couple of quarters unless some other news presents itself. So my expectations would be both numbers will stay in that ballpark for the foreseeable future..

Okay. That’s helpful..

Good..

Thank you. Our next question comes from the line of Annabel Samimy with Stifel. Your line is open, your question please..

Hi this is Ester in for Annabel Samimy. I have a question on business development.

So we all read the recent news that leaked about Supernus bidding for [indiscernible]? What are your comments? You’re finding that most BD M&A opportunities have turned into bidding situations?.

Our policy is, we really don’t comment on news articles rumors whatever, so as I stated before we’re very focused on the key priorities that we stated many times, which is commercial assets NDA and/or Phase III type of assets in neurology and psychiatry, so that's all I can say really.

At this stage we continue to be very active and we’ve been very active for a while now looking for these kind of opportunities, because we realize we have a very, very strong footprint and presence in neurology. Our sales force has executed remarkably well and we’ve proved to everybody that we can truly launch products and be very successful.

So if we can add other assets to that footprint that will be great. And/or as I stated earlier if we can bring in a psychiatry asset that can really give us a head start in the psychiatry space that will also be very, very good for us prior or in preparation for a big presence in that space with SPN-810 launch in 2019..

Okay, great. Thank you. Congratulations on the quarter..

Thank you. Our next question comes from the line of Bill Tanner with Guggenheim Securities. Your line is now open, your question please..

Thanks for taking the questions.

Jack, I had one, just on the SBA, you mentioned that the FDA has accepted the scale and the endpoints, wondering if you know this is just sort of finalizing, if there are sticking points that you could speak to and if you could comment may be on the magnitude of the treatment effect that you would anticipate being needing to show?.

Yeah. I mean regarding the SBA nothing really, it’s more of a formality looking at the process with them, so we've been in constant communication with them, since we filed it actually and have been very, very interactive with us, so we don’t expect any issues there.

As you see already initiated the Phase III from site selection investigators and things and so forth, so with full speed ahead with that. As far as the size effect on the scale that, I don't recall it from memory specifically, but I know that we powered of the studies pretty well, and we’re pretty confident with the size of the studies.

If you remember we had every study basically around 300 patients with three arms placebo the 18 and 36 milligram, so each arm will have about 100 patients and we feel pretty good about the sizing and the power of the study. .

Okay. And then as it relates to the migraine opportunity, just so I understand obviously with the approval you’d have it in a label you'd be able to talk to physicians about it.

So I guess the notion here is that at least at the outset if you talk to physicians that are prescribing Trokendi to patient for epilepsy and you see some traction with it as it relates to preventing migraine that would maybe spark some discussion about expanding the sales force?.

Yeah. We will take a measured approach as we always have with these kind of situations. We will see all the data up to the launch, what does it indicate for us and then we will make a decision whether there is an expansion to occur and what size of expansion are we looking at that point.

So it will be a very measured step for us making sure we will get the return on that investment if we do decide to expand the sales force.

Currently in the marketplace and this adds to my answer before on that specific issue, we already – as far as to how we promote our product currently in epilepsy and any discussion that if a physician raises a discussion about migraine we just stop that discussion or walk out of that office.

And there are lot of physicians who are not even on our call list, so we’re very strict as to how we operate. So certainly getting that indication will allow us to appropriately be able to talk about migraine if the physician raises that subject.

In addition to that some managed care plans, not too many, but some of them don’t reimburse for migraine currently. So unless the prescription is for epilepsy they will not reimburse it for migraine. So that obviously will alleviate that issue as well..

Okay.

And then just a follow-up on the migraine indication, you know if you look in the literature obviously there are side effects associated with topiramate for prevention of migraines, and I'm just wondering if you have any thoughts as to the formulation for Trokendi what that might do in migraine patients to perhaps mitigate some of the side effects that might make the drug a little bit less desirable to take?.

I mean, actually we believe that the advantages of the once-a-day product will apply regardless whether it's epilepsy or migraine because the issue with the immediate released product, regardless what you’re taking it for is the quick update in the drug absorption so quickly with the immediate release product that causes a lot of these side effects.

In addition to that currently physicians are really compromising big time when actually treating epilepsy or migraine patients.

I try to give people immediate released products sometimes at night, so that they avoid the side effects, but what typically happens is by the time the patient wakes up in the morning their blood levels are not optimal at all if anything they’re very low and they put them at the risk of getting a seizure or a migraine headache.

So the product Topamax initially, it’s immediate release and is not really designed to be taken once-a-day at all, and physicians currently just try to work around their product and compromise and truly are not giving an offering to patients the best, best possible therapy here.

So the once-a-day Trokendi XR certainly will be a major, major benefit for either patient, whether it's epilepsy or migraine..

Got it. Okay. Thanks very much..

[Operator Instruction] We have time for one final question. This comes from the line of David Buck with Northland Capital Markets. Your line is open. Your question please..

Yes. Thanks for takin the question. Jack can you talk a little bit about the citizen petition that was filed for Oxtellar XR and the – basically asking the FDA to narrow the bioequivalent standard for generics.

Can you give a sense of what do you think the FDA might be open to that thought process, either with actual narrowing of the AUC, you're looking at partially you see as part of the approval process for generics? And I guess to follow up, what's your knowledge of the generics and whether they would apply to stricter standards, whether they would meet those? And then, one quick one for Greg, can you talk a little bit about just the decision tree for migraine of expanding the sales force organically versus looking to do it through some type of business development M&A? Thanks..

Yeah. Regarding the citizen petition, which David is referring to, this is the one that we filed the petition into the FDA, not to approve certain genetic products to Oxtellar XR, unless they meet what we believe are rigorous and very important scientific measures and technical bioequivalence standards.

This is pretty well known in the epilepsy space and in other areas that are called critical dose drugs, where fluctuations in the blood levels can really cause major issues for patients and it has been documented through a lot of surveys, studies, publications that in epilepsy genetic products have the tendency and could potentially cause breakthrough [indiscernible] because of the fluctuations.

And the fluctuation I’m referring to really are tied to the fact that bioequivalent standards are the 80% to 125% banned, which might be a wide band, specifically when it comes to drugs that are critical dose drugs, where variability in the blood levels can cause seizures or side effects and so forth.

And this is pretty much you know the core arguments that we present in our citizen petition regarding Oxtellar XR because specifically with oxcarbazepine we believe that these variabilities can cause issues for patients and you don’t want to put obviously patient safety at risk and/or even not getting the efficacy at all from products that could be conceived as being bioequivalent, but in fact they are not.

So that’s really the issue here, which is again a very well-known issue and actually the FDA had been looking for some time right now at potentially making the bioequivalence range much tighter than the 80% to 125% because of these issues that have surfaced for so many times, even with some other CNS drugs we’ve seen it where sometimes a genetic extended released products are not truly bioequivalent to the branded couple of examples come to mind like Wellbutrin XL and Concerta and so forth, where even generics after they became on the market or got approved they got pulled out or they were told that they are actually not truly bioequivalent to the ban.

So this is a very well-known issue in general and we hope that the FDA, and hopefully they will see the issue and side with us..

David, as regards to the question that you asked about expansion of the sales force. In the short term, there are really two things, I think that we’re going to monitor pretty closely. First of all as Jack pointed out, patients who were taken to right now for prophylaxis of migraine headache often take it in the evening to mitigate the side effects.

The problem with that is that migraines often happen in the morning, so at the time they wake up, when they need the protection and they don't have it.

So for the neurologist that we’re calling and calling on right now, so epilepsy also – and many of them also prescribe for migraine, we’re going to be monitoring carefully the impact that our detailing efforts will have once we get approval to add the migraine indication.

We will be monitoring the impact on those physicians to see what their prescribing behavior, are their prescribing behavior changes.

As Jack pointed out, we are getting prescriptions for our migraine right now even though we’re not able to detail that in the physician’s office, so clearly there is a big difference between being able to talk about it and not able to talk about it, and we’ll track that.

The other affect that we’re going to looking for is there are certain group of neurologist who are primarily, if you will team specialist that we’re not detailing to right now because it’s not appropriate for us to be in their offices.

So adding the migraine indication for those physicians, we’ll be monitoring what sort of uptick we get those will be [indiscernible] and we’ll see how that goes. Depending on how those track, we’ll then assess what makes sense in terms of adding additional sales reps.

We – our initial thinking is that the incremental expansion if any would be – in kind of the modest dimension maybe 10 to 30 something of that nature.

If we’re surprised by the impact, we can certainly take a look at – there is some form of co-promoter adding some additional sales and marketing resources, but I think that, that's not likely to happen.

I think we would almost – I can't imagine that we wouldn’t do this organically amongst ourselves within our existing structure and not look at complicating our lives with additional co-promotion arrangement or something of that sort..

Thank you, David. I'd like to now turn the call back over to Jack Khattar for any additional remarks..

Thanks. In summary, we delivered a very strong third quarter results with continued execution on growing Trokendi XR and Oxtellar XR, and our R&D team has made significant progress in advancing our pipeline by initiating numerous clinical trials including the two SPN-810 Phase III trials, and most recently the Phase IIb trial for SPN-812.

We look forward to finishing 2015 and marking it as another remarkable year for Supernus with significant accomplishments across all the aspects of our business. I want to thank everyone for participating in our call today, and have a good day..

Ladies and gentlemen, thank you for your participation. This does conclude the program. You may now disconnect..