Peter Vozzo - Investor Relations Jack Khattar - Chief Executive Officer Gregory Patrick - Chief Financial Officer.

Ken Cacciatore - Cowen and Company David Amsellem - Piper Jaffray Annabel Samimy - Stifel John Boris - SunTrust Bill Tanner - Guggenheim Securities.

Good morning, ladies and gentlemen and welcome to the Supernus Pharmaceuticals First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this call is being recorded.

I would now like to turn the conference over to Mr. Peter Vozzo of Westwicke Partners, Investor Relations for Supernus Pharmaceuticals. You may begin sir..

Thank you, Ranya. Good morning everyone and thank you for joining us today for Supernus Pharmaceuticals' first quarter 2016 financial results conference call. Results discussed today are for the quarter ended March 31, 2016. Yesterday, after the close of the market, the company issued a press release announcing these results.

On the call with me today are Supernus’ Chief Executive Officer, Jack 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 approximately 45 minutes. During the course of this call, management may make certain forward-looking statements regarding future events in 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 of 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 Annual Report on Form 10-K and most recent of which we will file on March 9, 2016. Actual results may differ materially from those projected in those forward-looking statements.

For the benefit of those who may be listening to the replay, this call is being held and recorded on May 4, 2016, at 9:00 a.m. Eastern Time. Since then, the company may have made additional announcements related to the topics discussed. Please reference the company's most recent press release and current filings with the SEC.

Supernus declines any obligation to update these forward-looking statements except as required by applicable securities laws. And now, I will turn the call over to Jack..

Thank you, Peter. Good morning everyone and thanks for taking the time to join us as we discuss our 2016 first quarter results. During the first quarter, we continue to generate strong year-over-year product prescription and net product sales growth and we may further process advancing our product candidates to clinical development.

Let me now focus on some of the key highlights for the first quarter. Total prescriptions for Trokendi XR and Oxtellar XR combined in the first quarter as reported by IMS were 114,773, representing an increase of 50% over the first quarter 2015.

Trokendi XR prescriptions for the first quarter 2016 totaled 85,987, which is a 56% increase over the same quarter last year. At Oxtellar XR, prescriptions for the first quarter of 2016 totaled 28,786, representing an increase of 34% over the same quarter last year.

In March of this year, we reached an all time high in IMS prescriptions for both Trokendi XR and Oxtellar XR. For the first time Trokendi XR exceeded 30,000 prescriptions per month and Oxtellar XR exceeded 10,000 prescriptions per month.

In addition, based on the most recent weeks in the second quarter, we continue to see solid sequential weekly IMS prescription growth, averaging about 7% for Trokendi XR and 5% for Oxtellar XR. Total net product sales for the first quarter 2016 were $43 million, an increase of 53% over $28 million for the same quarter last year.

Regarding our supplemental new drug application requesting approval to expand the indication for Trokendi XR to include treatment in adults for prophylaxis of migraine, we continue to prepare and be ready to launch the new migraine indication after receiving full FDA approval.

Turning now to our pipeline, we continue to enrol patients into both Phase 3 trials for SPN-810, which is currently in development for Impulsive Aggression in patients who have ADHD, and we continue to expect data from these phase 3 trials by mid 2017.

The Phase 2b trial for SPN-812 currently in development for ADHD continues to enrol patients as well and we continue to expect data from the SPN-812 Phase 2b trial to be available by early 2017. During our last quarterly call, we shared data with you on the favorable emerging clinical profile of SPN-812 as it relates to adverse events.

In addition to those data, we completed the evaluation of the cardiac effects portion of the single ascending and multiple ascending dose study and I’m pleased to report that there was no clinical significant change in QT interval and other Electro Cardio Graph, ECG parameters.

We believe these additional safety data in adult healthy volunteers, which show a lack of cardiac effects, are very encouraging and further strengthen the differentiation of SPN-812.

Regarding current litigation on Oxtellar XR in February, a Federal District Court found that three patents covering Oxtellar XR were valid and that Actavis infringed two of them, since then Octavius has filed a notice of that deal for the U.S. Court for Appeals for the Federal Circuit.

Regarding Trokendi XR, the court issued its Markman opinion on order. In March 2016, the court adopted Supernus definitions of five of the seven disputed terms and did not adopt any of Actavis or Zydus definitions. No date has been set for the trial.

We remain confident in the strength of our intellectual property and continue to vigorously defend the pattern protection our innovative products deserve. Oxtellar XR has five patterns and Trokendi XR has six patterns that are listed in the orange book. All these patterns provide pattern protection that expires no earlier than 2027.

Also recently Shire announced positive Phase 3 top line safety and efficacy results for SHP465 in children and adolescents with ADHD. SHP465 is an oral stimulant medication being evaluated in the U.S. as a potential treatment for ADHD.

The study addresses a key FDA requirement keeping SHP465 on track for resubmission in the fourth quarter of 2016 and a potential launch in the second half of 2017, if approved by the FDA.

SHP465 was originally developed by Shire Laboratories, the former division of Shire that subsequently became Supernus Pharmaceuticals, based on the agreement between Supernus and Shire with a single digit royalty to Supernus on net sales of SHP465.

Finally, we continue to actively look for partnership and corporate development opportunities that strategically fit with our vision in building Supernus to become a leading pharma company. With that, I will now turn it over to Greg to walk you through the details on the financial results. .

Thanks, Jack and good morning everyone. As I review our financial results, I would like to remind our listeners to refer to the first quarter 2016 earningspress release issued yesterday after the market close. We expect to file a report on Form 10-Q for the three months ended March 31, 2016 by next week.

Net product sales for Trokendi XR for the first quarter of 2016 was $32.3 million, which is 54.5% higher than $20.9 million in the first quarter of 2015. Net product sales for Oxtellar XR in the first quarter of 2016 were $10.7 million, a 49.3% increase over $7.2 million in the first quarter of 2015.

Product prescription and net product sales growth for Trokendi XR and Oxtellar XR in the first quarter of 2016 were unfavorably impacted by the re-set of insurance coverage at the beginning of the year with high deductible and high co-pay programs.

This is consistent with industry trends and consistent with what we observed in the first quarter of last year. In addition, during the first quarter of 2016 changes in wholesaler inventory levels and ordering patterns had the effect of producing net product sales by approximately $3 million.

Product gross margin for the first quarter of 2016 was 95.3%, compared to 94.2% for the same quarter last year. Research and development expenses in the first quarter of 2016 were $10.6 million, as compared to $3.7 million in the same quarter last year.

This increase is primarily due to our ongoing Phase 3 trials for SPN-810, both of which were initiated in the third quarter of 2015 and our ongoing Phase 2b trial of SPN-812, which was initiated in the third quarter of 2015.

We continue to expect research and development expenses to increase in 2016 as clinical advancement of both SPN-810 and SPN-812 progresses. Selling, general and administrative expenses were $25.2 million for the first quarter of 2016, as compared to $19.4 million in the same period in 2015.

The higher expenses in 2016 reflect the continued increase on our sales and marketing efforts for both Trokendi XR and Oxtellar XR and the efforts in preparing for the launch of the migraine indication for Trokendi XR.

For the first quarter operating income totaled $5.3 million an increase of 55% over operating income of $3.4 million in the same period last year. The improvement in operating income for the first quarter of 2016 compared to the year earlier period is primarily attributable to the 53% increase and net product sales.

Net income for the first quarter ended March 31, 2016 was $5 million or $0.08 per diluted share as compared to net income of $0.9 million or $0.02 per diluted share in the first quarter of 2015.

Approximately $51.2 million weighted average diluted common shares were outstanding in the first quarter of 2016, as compared to $44.9 million diluted shares in the same period last year.

As of March 31, 2016 we had $114 million in cash, cash equivalents, marketable securities and long-term marketable securities as compared to $117.2 million as of December 31, 2015. As of March 31, 2016 approximately $6.6 million of our six year $90 million convertible notes remain outstanding.

Financial guidance for 2016 remains unchanged as compared to guidance issued in March. Specifically, net product sales will range from $200 million to $210 million; research and development expenses to range from $55 million to $65 million; and operating income to range from $28 million to $35 million.

I will now turn the call back to the operator for questions..

Thank you. [Operator Instructions] And our first question comes from the line of Ken Cacciatore form Cowen and Company. Your line is now open..

Thanks and good morning guys.

Just had a couple of quick questions, just first as we look forward to the Trokendi migraine launch, wanted to see if you could put some context around expectations for that, maybe how that opens the market or current utilization already in migraine and then also in terms of business development, with that launch almost being like a new product introduction, just talking about the sales force and the ability if you were able to add a product or portfolio what kind of room your sales force has now in terms of business development and whether you would be interested in expanding a bit within the neurology class, can you talk about maybe other therapeutic areas besides epilepsy and maybe that are available to you or what you are seeing out there in the marketplace? Thank you..

Hi good morning Ken. Regarding the migraine indication as we mentioned before, the PDUFA date is this quarter and pending obviously getting the full approval from the FDA.

As far as the potential upside or the potential of the market for Trokendi XR and migraine, again as we mentioned before numerous signs that there is [indiscernible] for Trokendi XR and migraine clearly because neurologists know this product very well, the topiramate molecule and they’ve been using it for so many years in that indication.

We ourselves obviously we don’t promote for migraine, we only promote for epilepsy, however doctors tend to use it regardless.

As we mentioned also earlier in previous quarters, this year, given that the launch potentially will be either mid this year or whenever it comes, we don’t have a lot of upside reflected in our numbers or the results for 2016. And therefore most of the upside if it does come beyond where we are today it will be mostly in 2017.

We will be launching Trokendi XR and migraine as a potentially more or less like a new product launch, we will be putting a lot of investment and effort behind it because I think there could be an upside that we’re not aware or we could even expand the market and the usage of migraine with the topiramate molecule especially with a much better dosage form that is truly once a day, that is truly helping with compliance which is very important, specifically, with topiramate being used on a prophylaxis basis for the treatment of migraine.

So now transferring to your next part of the question, which is regarding the sales force given that our effort behind Trokendi XR and migraine will be a major effort. It’s far to say it will be a little bit difficult to put on top of that right away a launch of another product that we could potentially bring from the outside.

So, the timing of that obviously will have to see how we can navigate through something like this if we were to execute on a business development transaction that could include a product in the neurology space, but we will make that decision at that time commensurate will or at the same time when we look at the asset and what the requirement of that asset that we are potentially bringing in and if it does require expansion of the sales force we certainly will be looking at that as well.

And then finally, regarding some of the therapeutic areas or disease conditions that we will look for in the neurology space, obviously, hopefully very soon or at some point in the next 9 months, 12 months whatever it is or a quarter. We will become also a migraine company as well in addition to epilepsy.

So the natural fit obviously with that sales call point will be any products in that specific specialty and that would cover things that are in the movement disorder, specialty such as Parkinson's and that’s obviously additional migraine products and so it opens it up for us as far as the neurology.

But we also have said before that we are not opposed to getting into the psychiatry space if we can bring an asset that could potentially be launched ahead of SPN-810 or SPN-812 as well by a year, year and a half that will get into the psychiatry office allows to establish ourselves and really pave the way for 810 and 812 later on..

Great, thank you..

And our next question comes from the line of David Amsellem from Piper Jaffray. Your line is now open..

Thanks. Just a couple.

So, first on the managed care landscape, obviously you’ve heard from a number of companies regarding a more restricted environment for Marian products and we’ve seen headwinds in the space, so can you talk to what changes or more restrictions to the extent are you seeing any regarding Trokendi and Oxtellar both on commercial and government plans? So that’s one, and the number two is, can you just tell us what is the number of weeks of inventory on hand right now and how you expect that to move if at all during the second quarter? Thanks..

Yeah, sure. Regarding the managed care overall, I mean one thing actually that has been changing over the last few years and you may have heard that from other folks as well, if you look actually around mid, around 2005, 2006 the estimate used to be that around maybe 1 million lives in the U.S. had high deductible plans.

These high deductible plans that we are seeing more and more being offered by insurance companies and adopted by employers and so forth. An estimate for today is at close to 20 million patients or lives have these kinds of plans. So, clearly that has changed dramatically from the last decade into this decade.

And that has played a major role in some of what you have been seeing across many companies in our sector, where the first quarter tends to be lighter because of the resets in insurance coverage’s.

Especially with patients for the first time they present their first prescription of the year and it happens to be our product or any other companies product they get hit with these high deductibles and just naturally, physiologically patients may reverse that prescription or say I’ll get it later or whatever and that’s why you see these kind of impacts typically in the first quarter.

And we’ve seen this and I have to say this year, it looks although that we expected, we planned for it, it was a little bit more than we thought it would be based on the experience we had last year.

So that’s one of the thing that we see happening from a managed care insurance coverage point of view, as far as Oxtellar XR, Trokendi XR we have really no major changes and coverage on our products nothing really specific.

However, we do see rumblings and we hear rumours and we see talk and things regarding price protection where some of the PBM’s maybe incorporating some of those aspects and some of their contracts and more of that might be coming and that’s obviously a natural reaction to some of the outrages price increases we saw in our sector and they’re trying to manage that and not be hit with certain surprises every other year.

So, we are seeing some of that as far as people talking about these concepts or trying to push these kind of concepts on the pharmaceutical companies.

Regarding inventory again, what we saw this quarter is not unusual and we’re not talking about months or weeks or weeks of differences here, even in our case, even few number of days could make an impact specifically on Trokendi XR. So by no means we have any abnormal levels of inventory. It normally ranges, David in the two weeks to three weeks most.

Actually on some skews were down to even a week. So, these shifts in inventory are typical fourth quarter, first quarter shifts by wholesalers..

Okay, that’s helpful and just one additional question if I may just on 810, beyond the Phase 3 and all the work you are doing, as we get into data, are there any other gating factors to the NDA filing that we should be aware of that you haven’t talked about?.

Nothing really that stands out because also as most of you may remember for many years, a lot of people kept telling us, how come you finished the Phase 2 study long time ago and it took you so long to even start the Phase 3 study.

And we kept saying, during that time we’ve been a lot of the work for so many of the pieces that will end up going into the NDA.

Example, a lot the preclinical work, the two-year carcinogenicity studies, a lot of the work on the API on the CMC on the scale of all that work has been in progress and actually we completed the two year carcinogenicity study in both species mice and rat.

So there was a lot of the pieces that are actually being completed, while we are also started the Phase 3 study. So that we get the data on the Phase 3 studies it is positive and looks really good. Our plan is to go as fast as we can to put the NDA together and file that NDA. So, that we don’t have any critical path items that could hold us up.

So that’s - and that applies not only to 810, it also applies to 812. At the same time, we’ve been doing a lot of work on the API, a lot of work on the preclinical toxicology type of work. Again as a remainder to lot of the folks on the call, these two molecules although they’ve been on the market either in the U.S.

or in Europe, but they are also very old molecules and therefore, a lot of that preclinical type of work have to be updated up to today’s scientific standards and that’s why we’ve taken the time and the effort to bring all these pieces together up to today’s scientific standards and all that work has been on going on purpose.

So that once we get the Phase 3 data in more products, we don’t have anything that will hold us from filing the NDA..

Okay. Thank you. .

Our next question comes from the line of Annabel Samimy from Stifel. Your line is now open. .

Hi, guys. Thanks for taking my question.

Just continuing on the point that David brought up, with regard to the deductibles given, how high they seem to have been this year? How much do you expect that to - I guess flow into second quarter, I mean, if the deductibles were initially high and they walk away in the first quarter is it possible that could lead into the second quarter? And also when you think about the migraine indication, do you expect even it’s a much larger indication then do you expect any changes to the plan to the reimbursement to pricing to any of that that might affect growth net going forward? And also, we noticed that Upsher-Smith, [indiscernible], can you help us understand whether that dynamic between you and Upsher-Smith is going to play out similarly and remind us when the exclusivity is up on the prophylactic migraine component for Topamax? Thanks..

Yeah, sure. Let me take each piece on its own.

So the first question regarding the high deductibles and potentially any affect of bleeding through to the second quarter, we really don’t know for sure obviously how’s that going to end up, working out and the reason we say that think about at this way, let’s say a patient in the first quarter presents their first prescription for that year.

If that happen to be their blood pressure medication versus epilepsy medication or vice versa, it could really impact which prescription gets filled first or which prescription gets reversed first versus the other one. So, it’s a little bit hard for us to say that this could really bleed through the second quarter.

Now, we think it will a little bit, but if you actually look at the four week average and sequential growth from a week-to-week on prescription basis and IMS. If you look at the sequential last four weeks, specifically in April, you’re seeing really an uptick growth from a week-to-week basis versus the first quarter.

So we think that effect is actually working its way out already and that there is some acceleration specifically on Trokendi XR. We see some acceleration in this sequential growth from a week-to-week basis. As far as the change on migraine coverage and so forth with this epilepsy.

Again, migraine is still a serious issue and specifically for those patients who are taking it on a prophylactic basis. The reason they’re taking it on prophylactic basis is because potentially these people have serious episodes and it’s not just a onetime episode that they get in one month and they can work through it and everything is fine.

The reason they are on prophylactic treatment is because potentially they are more on the serious side as far as getting these episodes or the frequency of these episodes. And therefore, coverage is still very important.

As far as migraine today, currently in the marketplace, we have some plans that don’t reimburse the prescription is not for epilepsy and therefore, once the migraine becomes part of our label, we expect that at some point to be included in that reimbursement. However, I will caution folks that changes in formulary status thus take time.

So it’s not going to happen immediately right at the time we get the migraine indication in south, it might take three to six months for [indiscernible] to make thesechanges. And the finally, regarding Upsher-Smith, yes I mean we did see the news regarding their application that they did get a tentative approval, not a full approval.

It’s a little bit hard for us to make any specific judgement as to why they got that from the reading of the level, which is public information. It looks like the exclusivity which actually ends in the March of 2017 for a specific patient population looks likes that was the hold-up, instead of giving them full approval.

All I can tell you today is that we have not had any communication with the FDA that conflicts with any communication we’ve had with them before that made us plan to launch the migraine in 2016 and that’s really where I have to stop because I don’t know what’s in the application for Upsher-Smith and officially formally, we have not got any communication from the FDA regarding our application that tells us otherwise whether what happens to Upsher will apply to us as well.

We really don’t know, is it possible, yes anything is possible. FDA approvals were never guaranteed, but the communication we’ve had with the FDA so far on our application made us plan for a migraine launch in the second quarter of this year and we haven’t had any communication that is conflicting with that so far.

So that’s all really what I can add at this point, but again as I mentioned also as response to the first question earlier on the call, migraine launch or no migraine launch and if you remember, many people have asked us in 2016 is there a major upside behind the migraine launch in 2016 and we maintain and continue to say if there is an upside, it’s probably a slight upside.

Most of the upside is in 2017 and therefore, we don’t anticipate the migraine to really impact our financial numbers in any significant manner, whatsoever..

Okay. Great, thank you..

And our next question comes from the line of John Boris from SunTrust. Your line is now open..

Thanks for taking the questions and congrats on the results Jack.

First question on migraine, when you’ve done blinded testing with physicians, what is the intend to prescribe that you’re seeing from physicians and what are the features of Trokendi XR that they like most it would cost them to potentially prescribe the asset?.

Yeah. I mean, the key and main benefits of Trokendi XR in migraine, and this is not just physicians well also patients and our knowledge about the market and so forth is again as to defect how topiramate is actually used for migraine. It is used for prevention of prophylactic use.

And therefore the importance of compliance, the importance of once a day is crucial here in therapy and what today physicians are trying to use and compromise with topiramate twice a day [indiscernible] or Topamax.

They try to compromise by telling patients currently, you know uptake Topamax or twice a day to permit that is designed to be twice a day or three times a day, take it once a day and take it at night.

And by the time you wake up, you won’t have to go through the nasty side effects, which is fogginess, cognitive, the issues loss of searching for words and so forth. So by the time you wake up in the morning you shouldn’t have these side effects.

The issue that patients face with that and we know that also from our research is that by the time they wake up their blood levels are very low or they are not, let me say, at any optimal level from an efficacy point of view.

And, therefore, they tend to get a migraine in the morning whether they get up an hour later or whatever right in the morning when it’s really the worse time of the day starting their day, their job, going to school, whatever it is.

So what’s happening today is that physicians and patients are trying to compromise with a therapy that is not designed to be a true once-a-day to give you full 24-hour coverage for appropriate prophylactic or prevention of migraine throughout the whole day and that’s where Trokendi XR comes in.

It comes in because it is actually designed to give you 24-hour coverage. So you have full 24 coverage whether you take it at night or you take it during the day, whichever is more convenient for you. And therefore, you will be assured that you have that enough drug level in your system to avoid the migraine effects.

And in addition to that and this is enough data we have from any Phase 3 studies or we can come up promote that kind of data, but also we’ve been getting a lot of feedback from physicians and patients over the last two years since this product has been in the market.

They actually do experience much better side effects from Trokendi XR versus topiramate IR immediate release once-a-day or twice-a-day, whichever way it is used because of the uniqueness and innovative PK profile that Trokendi XR has been able to deliver again over the 24-hour period.

So that’s where we see the main differentiation of Trokendi XR in the marketplace for migraine for prophylactic treatment..

So, with high-decile physicians what’s their intent to prescribe, is it high, low, medium? How do you characterize it based on that profile?.

Well, I mean most of the – when you look at the high-decline 10, 9, and 8, about 80% of them are neurologists actually and a lot of the usage, the heavy usage is in these three deciles and these folks understand these issues very, very well and they know it.

I mean they tell us themselves, they compromise even for epilepsy, they compromise by giving topiramate at night once a day because of the side effects, because a kid in the morning taking topiramate to go to school, feeling dizzy, feeling foggy, dopey, I mean, Topamax, Dopamax whatever they call because of these issues it’s not ideal for a kid who is going to school to pass an exam or study and focus in class.

And therefore, they try to compromise by not giving the product as it is designed..

So, linking who then intent to prescribe with a label, are you currently in active label discussions with the FDA?.

I can’t make any comments on that John because we haven’t published what is our PDUFA data. We haven’t mentioned what that is and there is really no need for us to say what the exact PDUFA date is at this point for competitive reasons. So I will – if you don’t mind, I don’t want to answer that question..

Okay.

Is the sales force trained on migraine?.

Yes, and we’ve been ready to launch..

And they’ve been trained on the product concept too?.

Yes..

So, they’re all prepared to launch. Okay.

Next question on Oxtellar, obviously with the win in the courts, you have some very, very long patent life there, epilepsy is only a small fraction of the drugs you use, if you look at the published literature, there’s a fairly extensive amount of off-label use, trigeminal neuralgia, for example, neuropathic pain, these are study that can be done very quickly.

Have you had an opportunity to evaluate the lifecycle of that asset and whether you consider allocating some moneys towards doing one or two neuropathic type pain trials that could certainly accelerate, if successful accelerate prescriptions, if you’re able to file for that indication and have you had any discussion with the FDA about that?.

The first answer is, yes, we have evaluated the several areas including some of the ones you have mentioned. So the answer is, yes, we’ve been looking at that and continue to look at that.

I can’t make any specific comments regarding discussions with the FDA or what our plans are yet, once they are concrete if there are specific plans, obviously we will disclose that.

But the answer is, yes, we are very aware of the potential of oxcarbazepine and other potential indications and now that we have hopefully a much, much longer lifecycle for this product certainly there is something that could warrant additional investment..

So, in the future we’ll hear more from you on that?.

If there is anything concrete, absolutely we will disclose that..

Okay.

And then, Greg, just to reconcile net income and the share count relative to the convert, can you reconcile that?.

Right, John. The convert actually when we push it through the fully diluted share calculation actually has two impact. One, obviously, in terms of the denominator, in terms of the fully diluted share count itself, but also in terms of the impact on the net income.

The way the calculation works if you go back to start of the quarter and on a pro-forma basis, we eliminate loss on extinguishment of debt and other components associated with the financing.

So it has both in fact reduced the top line – the numerator of the calculation as well as to increase the denominator, enhance and I’ve had some correspondence from investors including yourself that have calculated a different number. I can assure you that we are over this number and it is in fact $0.08 per share..

Okay. Very good.

And then last question Jack, do you have inventory management agreements in place with wholesalers and then one will think that, I think, you took price increase across the two assets that would have led to an anticipatory buy-in, why would wholesalers destock versus wanting to collect potentially 9% on an asset like Trokendi or Oxtellar?.

Yeah. I think what you’ve seen is slightly also a function of not just price increases. So, it’s also a function of that slowdown that they have seen on prescriptions across board for branded companies because of the reset in insurance coverage.

So, they also clearly monitor prescriptions and when they see and they expect typically in the first quarter because they’ve seen it also many times, they try to adjust their inventory to anything they see in prescriptions and more often they’re not – the reverse doesn’t happen quick enough either.

In other words, they may adjust by the first quarter, the first few weeks is going to be slow, there is high deductibles, there is reset in insurance. We might see some slowdown or softness in the prescription numbers. So let’s make sure we don’t over order too much.

And when the prescription start picking up again, they are a little bit slower in adjusting to that and that’s why I mentioned earlier, we actually have about 1 week on one of the SKUs and we look at average numbers.

One week that means probably some warehouses don’t even have or they’re even out of stock on certain SKUs because all these numbers we talk about are just averages and some of these wholesalers have more than 50 or 60 distribution centres across the country.

So it’s really a function of not just – when could a company take a price increase and anticipate that and try to adjust inventories because of that, it’s also a function of the softness of prescriptions in general in the sector in the pharma industry in general that’s happening across board that they trying to adjust their levels too..

Last – sorry, just if I could slip one last one in on Trokendi XR, I think you petitioned to judge on her next conference May 18 to consider discussions around Trokendi XR settlement discussions with Elegant [ph] and Zydus.

Did she agree to add that to the agenda on May 18?.

I don’t have anything to add versus what’s publically, but yes that is correct. I mean we did mention that before that we have settled with people before and we are willing to settle with anybody who is willing to work with us on a reasonable setup and that what we are working towards.

And if we don’t enter into a settlement, we are also willing to go all the way to the court and beat them in the court and we are very, very strong IP and we continue to build our IP on both products. So, at this point, I really don’t have any new addition to that communication.

We’ll see what’s happens on May 18 or later than that, but we’re working very diligently to hopefully take this risk off the table for everyone including myself and hopefully stop talking about it..

Yeah. Thanks for taking our questions, Jack..

Sure..

[Operator Instructions] And our next question comes from the line of Bill Tanner from Guggenheim Securities. Your line is now open..

Thanks for taking my question.

Jack, I had one for you on 810, just wondering looking for some commentary on what kind of activities the company might need to engage in terms of disease awareness? I mean everything, if you’re looking at migraine or obviously looking at epilepsy pretty established markets, and it seems like you’re going to create new therapeutic for Impulsive Aggression ADHD.

So maybe speak, if could a little bit to what do you think the company needs to do? And then I have a follow-up please..

Yeah, sure, and very good question Bill because you’re absolutely right. Although, Impulsive Aggression is a very, very well known condition and I need to emphasize that.

This is not a new area that people are not aware of, it’s not a new condition that physicians don’t [indiscernible] approve off-label – with off-label products that don’t work or have no data whatsoever to back it that they actually have any impact on the patients.

Nevertheless when we introduce a new product with a new indication obviously for the first time ever we have a product approved for that condition. You have to do a lot of market preparation, education among physicians, KOLs and so forth. And we actually have started that long time ago and continue to do that.

And among some of the efforts is as data obviously comes up and as we produce more data on 810, the usual things that you will expect from any company preparing for launch of a major product in the market like this would be publications, conferences, KOL training, speaker training and so forth.

So we are very active in that space and we continue to do that through 2019 when we expect this product to be launched..

And so then would – I’m assuming that once you reveal the data in mid 2017 [ph] timeframe, assuming that’s positive, you’d have obviously a better since as the approvability, this would be something that you might think about accelerating a bit or?.

Yeah, I mean, as I mentioned earlier, regarding the previous question, yeah, we’re working very hard to make sure, once we get the data and if it is positive that we go full speed ahead with the NDA filing. And therefore, we’re trying to make sure the checklist for the NDA; it’s really getting small and small – smaller by the day.

So we don’t have too many items left by the time we get the data. And also I’ll remind everyone, we do have a fast track designation for development of 810.

We don’t have fast track review, but if you have a fast track development track, you have the opportunity to ask the FDA for a fast track review and that will be something obviously we will look forward too.

If the data is positive and all the interactions with the FDA look pretty good, we generally also ask for a fast track review of our NDA to get the product on the market as soon as possible. So we have that avenue as well at our disposal, at sometime later after we see the Phase 3 data and have meetings with the FDA to confirm all that. .

And then the last question, when you were discussing maybe some thoughts on BD, you mentioned psychic and I was curious about that in terms of the addressability if you could put – I don’t know if there is any meat you could put on the bone there, but the addressability of the markets for psychic would seem to be a little bit different scale perhaps and I guess maybe the company is thinking about some of the other products?.

Yeah. Let me clarify. When I meant psychic I don’t mean depression, I don’t mean anxiety type of products, a lot of primary care driven, I mean things which are a little bit more of a specialty psychiatry area where we can effectively have a sales force in the 100 to 200 range.

I mean we did say for example on SPN-810 initially when we launched the product, we’re looking at this point for the way we’ve been sizing the product, the territories and so forth, we’re looking at potentially having 130 reps to launch SPN-810. We’ll monitor how the launch goes and we could potentially expand that.

And when we bring in SPN-812, we’re looking at potentially adding another 170 reps on top of the 130 to manage both products. So, these are the kind of sales force sizing, things that we’re looking at from a diseases point of view. We’re not looking at a huge area that’s going to require 1000s of sales people to go after the primary care setting.

So definitely we’re not looking at depression or anxiety or things, which will require more of a primary care push, but something which is more driven by physiatrists themselves..

Got it, okay. Thanks very much..

Sure..

We do have time for one more questions. Our question comes from David Buck from Northland Capital. Your line is now open..

Hi, guys. Thanks for taking my question. It’s Mike on for David.

I was wondering it’s not the core business, but for partner products are there any milestones associated with SHP465 or just royalties and can you provide us with any remaining products that may trigger royalties over the next couple of years? And secondly, on R&D, can you talk a little bit about [indiscernible] spent throughout the year was a little lower than we are forecasting?.

Yeah, sure. I’ll take the partnership question and then I’ll let Greg comment on the R&D expenses. Regarding partnerships I mean at this point the ones that we’ve talked about clearly the new one SHP465, which will have some royalties that will come to Supernus. We haven’t disclosed the specific royalty other than it’s a single-digit royalty.

And as Shire has mentioned that they expect if they get approval clearly, they expect to launch the product in the second half of 2017.

The other royalty that we have talked about historically has been the royalty on Orenitram, which is the United Therapeutics product and that royalty will come back to Supernus after investors get a certain predetermine, predefined return on their investment when we sold them a portion of the royalty stream if you remember back in 2014, when we sold about – we got $30 million from these investors and they bought a portion of that royalty stream.

So once they get the return on that investment, the royalties will start coming back to Supernus.

So clearly that is very fluid, because it all depends on the performance of Orenitram in the marketplace with the United Therapeutics, but clearly we felt pretty strongly and continue to feel pretty strongly about the potential of that product otherwise we will kept the upside potential for us and retain it for us in the future.

So in a nutshell, these are the two royalty streams that potentially could come to Supernus at some point..

Great. And David with respect to your question as regarding R&D, just want to remind everybody on the phone that when we’ve spoken about profitability on a quarterly basis, we have prestigiously reminded everybody that it’s going to be lumpy and whilst of course or it can’t to be profitable every quarter.

The level of profitability is going to fluctuate substantially depending on what’s going on with respect to activities within the company and primarily R&D driven.

Now that we’ve got the R&D programs, we have worked hard to configure these into milestone driven arrangements so that as trials progress, they trigger payments to our CROs and other service providers and that therefore depending on how progress goes with each trial, we’ve talked about the three trials one Phase 2b and the two Phase 3 trials, but there also be open label extensions for all of those that they will trigger milestones on a quarterly basis depending on the specific progress for each of those programs including the open label expansions, it will drive variability in terms of R&D spending..

And I should just add, I missed to answer your full question, you asked also about milestones. The other thing – so there are no specific milestones other than what could sometimes come out of the licensees we have outside of the U.S., so as everyone knows we do have some licensees outside the United States.

There might be some milestones sometimes that come in and that’s why sometimes you see in our P&L that they’re amortized a lot of times. And these, we don’t talk about them too much.

They are important to us, it’s important to our partners, but given our revenue scale and so forth from a materiality point of view, they may not be anything that is really very significant, but I should mention that just to complete the disclosure we have..

Thank you..

And I would now like to turn the call back to Mr. Jack Khattar for any further remarks..

Yeah, thank you. In summary, our priorities for the remainder of 2016 are to continue to grow Trokendi XR and Oxtellar XR, advance our pipeline products through the clinical development and vigorously defend our intellectual property.

In addition, we continue to be active in business development, looking for potential assets to strategically compliment our portfolio. We look forward to updating you through the year on our progress and thanks for everyone joining us this morning..

Ladies and gentlemen, thank you for participating in today’s conference. This conclude today’s program. You may all disconnect. Everyone have a wonderful day..