Peter Vozzo – Investor Relations Jack Khattar – Chief Executive Officer Greg Patrick – Chief Financial Officer.

Ken Cacciatore – Cowen and Company Annabel Samimy – Stifel Nicolaus David Amsellem – Piper Jaffray & Co. John Boris – SunTrust Robinson Humphrey.

Good morning ladies and gentlemen, and welcome to the Supernus Pharmaceuticals’ Third Quarter 2016 Business Update 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 conference call is being recorded.

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

Thank you, Shannon. Good morning everyone, and thank you for joining us today for Supernus Pharmaceuticals’ third quarter 2016 business update conference call. The update discussed today is for the three months ended September 30, 2016. The company issued a press release this morning announcing this update.

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. 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 of this call is being held and recorded on November 14, 2016, at approximately 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 including the company’s 8-K that was filed this morning. 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, and thanks for taking the time to join us as we discuss our 2016 third quarter business update. Strong growth in product prescriptions and net product sales continue to reflect the solid underlying demand for our commercial products.

We’re pleased with the progress we’ve made towards meeting our 2016 goals, reaching year-to-date net product sales of $149 million, a 48% increase over the same period last year.

Total prescriptions for Trokendi XR and Oxtellar XR combined in the third quarter, as reported by IMS, were 131,308 representing an increase of 30% over the third quarter of 2015.

Trokendi XR prescriptions for third quarter 2016 totaled 9,949 prescriptions, which is a 32% increase over the same quarter last year and Oxtellar XR prescriptions for the third quarter of 2016 totaled 32,259 prescriptions representing an increase of 26% over the same quarter last year.

In addition, total net product sales for the third quarter of 2016 were $55.6 million, representing solid growth of 44% over the same period last year.

As previously disclosed during the third quarter of 2016, the FDA granted a tentative approval to our supplemental new drug application requesting a label expansion for Trokendi XR to include prophylaxis of migraine headache in adults. We continue to prepare, and will be ready to launch the migraine indication soon after receiving full FDA approval.

Regarding our pipeline, and starting with SPN-810, enrollment continues in both Phase 3 trials for SPN-810, which is currently in development for impulsive aggression in patients age 6 through 12 years, who have ADHD. As we discussed in our last quarterly call, steps were taken this year to improve patient enrollment and retention.

Preliminary results indicate that improvement has been made. We recently partnered with an enrollment and retention agency to facilitate identifying, contacting, and pre-screening appropriate patients for both Phase 3 trials, and to assist in scheduling patients with appointments and follow-up visits.

These steps already had a positive impact on patient referrals. In addition, the patient screening period for the Phase 3 trials has been lengthened to make it easier for caregivers and patients to comply with the trial protocol. We’ve also provided increased education for site coordinators and caregivers, on the amended trial protocol.

We expect recruitment and retention to continue to improve, as these steps become fully implemented. Enrollment is expected to continue into 2017, and we remain encouraged by the fact that to date, enrollment into the open label extension by those who completed the trial remains high.

Regarding SPN-812, currently in development for patients aged 6 through 12 years with ADHD, we announced in October positive top line results from our Phase 2-B clinical trial in children with ADHD.

This trial met its primary endpoint, demonstrating that SPN-812 at daily doses of 400 mg, 300 mg, and 200 mg achieved statistically significant improvement in the symptoms of ADHD from baseline to end of study, as measured by the ADHD rating scale forward. All SPN-812 doses tested in the trial were well-tolerated.

These Phase 2b results exhibit a strong efficacy profile for SPN-812 with effect sizes typically not seen with non-stimulus. We believe SPN-812 has the potential of being a well-differentiated treatment for ADHD, that sets it apart from current treatment options.

We plan to have an end of Phase 2 meeting with the FDA, after which we will initiate Phase 3 clinical testing. Regarding IP litigation, we remain confident in the strength of our intellectual property and continue to vigorously defend the patent protection that our innovative products deserve.

Finally, we remain focused on business development activities, and continue to look for opportunities that strategically fit with our vision in building Supernus to become a leading pharma company.

We continue to look for commercial assets first, followed by the assets that could reach commercial state within a reasonable timeframe of one to two years. After that, from a priority point of view, we would look for assets which are already in or about to enter Phase 3, also in neurology and psychiatry continue to be our primary focus.

I will now turn the call over to Greg who will provide more details on our third quarter operating performance. .

First, the $30 million proceeds of the transaction will now be recorded in the third quarter of 2014 as non-recourse debt, rather than revenue. It is important to note that Supernus has no obligation to repay the $30 million of debt associated with the royalty monetization transaction.

Revenue and operating income in the third quarter of 2014 will be reduced by approximately $30 million.

Royalties received by the counterparty to the royalty monetization transaction will now be recognized by Supernus as non-cash royalty revenue, and the $30 million of non-recourse debt will be reduced by the same amount, less non-cash implied interest expense to be recognized.

Supernus does not expect the restatement to impact the Company’s net product sales or operating expenses for the periods ended December 31, 2014 and December 31, 2015.

Accordingly, fiscal year 2014 net product sales will remain $89.6 million, fiscal year 2015 net product sales will remain $143.5 million, and net product sales for the nine months ended September 30, 2016 are $149 million.

The Company currently intends to file its quarterly report and reports for the non-reliance periods by the end of 2016, but there can be no assurance that this will be the case.

In light of the restatement, the Company will also undertake an assessment to determine the specific circumstances that caused this material weakness in internal control, over financial reporting and disclosure controls. The Company will disclose such matters in the applicable amended filings.

Turning to the third quarter of 2016, net product sales of Trokendi XR were $41.7 million, which is 39.4% higher than $29.9 million in the third quarter of 2015. Net product sales of our Oxtellar XR in the third quarter of 2016 were $13.6 million, a 60.1% increase over $8.7 million in the third quarter of 2015.

Gross to net deductions for the third quarter for Trokendi XR and Oxtellar XR were in line with the gross to net deductions for the second quarter.

Specifically, the gross to net deduction for Trokendi XR expressed as a percentage was approximately 33%, and the gross-to-net deduction for Oxtellar XR, also expressed as a percentage, was approximately 43%. Research and development expenses in the third quarter of 2016 were $7.9 million, as compared to $9.1 million in the same quarter last year.

This decrease is primarily due to the completion of enrollment in the Phase 2b trial for SPN-812. Research and development expenses are expected to increase in the fourth quarter of 2016, as compared to third quarter 2016.

Total R&D expenses in 2017 are expected to range from approximately $50 million to $60 million, and will depend on the timing of key research and development initiatives, such as the initiation of two Phase 3 studies for SPN-812, and patient recruitment in the Phase 3 trials for SPN-810.

We will provide further updates on 2017 research and development expense once we have more clarity on the timing of these key projects. Selling, general, and administrative expenses were $25.7 million for the third quarter of 2016, compared to $22.9 million in the same period in 2015.

The higher expenses in 2016 reflect our continued efforts to support the growth of our commercial products. Taking into consideration the anticipated effects of the restatement which is approximately $1 million and approximately $4 million for the three and nine-month periods ended September 30, 2016 respectively.

Operating income for the three- and nine-month periods ended September 30, 2016 was approximately $20 million, and $38.9 million respectively. Excluding the effect of the restatement, operating income for the three- and nine-months period ended September 30, 2016 was $19 million and $34.9 million respectively.

The improvement in operating income for the three- and nine-month periods ended September 30, 2016 compared to the year earlier periods, primarily due to the increase in net product sales.

As of September 30, 2016, we had $147.4 million in cash, cash equivalents, marketable securities, and long-term marketable securities, as compared to $117.2 million at December 31, 2015. The restatement has no impact on the Company’s cash position.

Cash generated from operations in nine months ended September 30, 2016 was $37.6 million, as compared to $12.1 million in the same period last year. Now, turning to 2016 guidance, we are adjusting guidance for net product sales, research and development expenses, and operating income.

We expect full-year 2016 net product sales to be in the range of $205 million to $210 million, compared to the previous range of $200 million to $210 million. We expect R&D expenses to be in the range of $40 million to $44 million, compared to the previous range of $50 million to $55 million.

This reduction in R&D expense guidance is due primarily to the slower than expected enrollment of the Phase 3 trials for SPN-810. And taking into consideration the anticipated effects of the restatement, which is approximately $4 million to $6 million for the full year 2016. Operating income would range from $46 million to $51 million.

Excluding the anticipated effect of the restatement, operating income would range from $42 million to $47 million, compared to the previous expected range of $32 million to $37 million. I will now turn the call back to the operator for questions..

Thank you. [Operator Instructions] Our question is from Ken Cacciatore with Cowen and Company. You may begin..

Hey good morning, guys. Congratulations on all of the operating progress. Just a question on Trokendi XR, maybe just an update on the litigation, anything you can nuance around discussions with the challengers? Maybe just an update there would be helpful. Thanks. .

Yes. Sure. Again, regarding the litigation, we still dont have a specific trial date yet as far as the court is concerned for Trokendi XR. We had several conference status calls; they were postponed a couple of times, and at this point, we don’t have a specific date. So if I were to guess, most likely a trial date may shift to next year.

Again I don’t have 100% certainty of that yet, but that is more likely today than we were a couple of months ago, given the progress or the sequence of certain events that have to happen for the trial date to occur. As far as our confidence in the IP is still the same. We continue and will continue to vigorously defend our IP.

We have had, as we mentioned in the past, discussions with the other side, but there is nothing really specific that I can make a comment on regarding settlement or no settlement at this point..

Okay. Then also, just wondering, you talked a little bit more about potential business development.

Does sound like the sales force is ready to take on more? Can you give us a sense of where you would be comfortable taking leverage, or maybe size? Maybe try to frame for us, also in that context, you talk about potential development deals? How far away would they have to be to market, just putting a little bit more context around what you might be looking at?.

Yes, sure. Starting from my priority point of view, our top priority, if you will, would be to find neurology products that are either commercial or about to be commercialized. The word about, meaning within a year, let’s say, give or take, to be commercialized.

As implied, that would be perfect for our very strong footprint in the neurology space that currently supports Oxtellar XR and Trokendi XR. So that would be typically, and that is, and has been for a while, our primary focus.

Next to that would be a product that could be in neurology or psychiatry that could be perhaps in Phase 3 or about to complete Phase 3. In that case, again, from a timeframe point of view, that would be very ideal for us, from a strategic point of view to launch a third product potentially in a 12 to 16-month period from now.

And as I mentioned before, on the psychiatry side, we are looking for things that will come in, potentially could come in before 812 and 810. That would be a very important strategic entry for us in that new space because currently we are not in the psychiatry space.

So if we launched something in the physician’s office in psychiatry, that will help us tremendously, as we bring in later on 810 or 812, to strengthen our position in psychiatry. So these are pretty much the things we’re looking for.

We are not looking for products that are real early stage Phase 1, clearly, or Phase 2, given that we still have planning on our plate to finish 812 and 810.

However, having said that, as 810 and 812 get closer to the finish line, clearly we will always reload the pipeline, so we have a very continued long-term strategy of strong R&D, strong growth behind our business..

Thank you..

Thank you. [Operator Instructions] Our next question comes from Annabel Samimy with Stifel. You may begin..

Hi guys, thanks for taking my question.

I was just wondering if you could help us understand, with the improvement in the enrollment, and the changes you made to the screening period, do you have any sense that the type or the severity of patient that you’ve gotten into the 810 trial has changed at all? And just can you talk about the retention rates, as well, with these changes? Thanks..

Yes, sure. No, I mean we don’t expect, a lot of these, all of these efforts that we have talked about are basically to bring in, increase the flow of patients into the clinical sites that are part of this study.

So it’s really making sure people are aware that there is potentially something like this, there are studies that are being conducted, and if they would like to enroll. So just to bring these patients into the clinical sites.

Also, we had mentioned earlier before, we had certain challenges as far as enrolling these patients because of the diary itself, the nature of the diary.

So now we’ve overcome a lot of that, actually, through extra training, through some changes to make sure the caregiver, who is a key part of these trials, understands how to input the data into the diary, because we are very strict as far as making sure the caretaker who is putting that input in the diary is very compliant with the diary, and has to prove to us during the screening period before they even enter the study, that they are actually compliant at a very high rate, because we want to make sure the integrity of the data is very consistent, once they are randomized, the patients are randomized, and that there is a high rate of compliance within that diary outcome.

So we’re trying to be cautious and make sure that the trial, the integrity of the trial, all that, we would rather have a slower enrollment but a high quality trial than try to finish very, very early, and then the data is really not good.

So, but as far as the severity of the patient, or we don’t expect any of these efforts to impact the profile of the patient, or impact anything specific. It’s not like we’re recruiting specific patients. At the end of the day, they either qualify for the trial, for the current protocol, or they don’t.

So we’re pretty encouraged so far with all the data that we seen as far as really increasing the flow of patients into all of these sites..

Okay. Just to clarify, so I’m understanding correctly, that was more about compliance of the caregiver, able to fill out the diary, as opposed to compliance of the patient on the drug; is that correct.

That’s right. Because the caregiver is the one who’s inputting into the diary, the electronic diary, as to how many episodes, what are the nature of these episodes that occurred during that specific day, and they have to enter that data on a daily basis.

We didn’t want caretakers to try to remember at the end of the week what happened for the previous four or five days. Again, back to the accuracy and try to be as close as possible to the episodes themselves when they do happen, we want accurate registration or recording of these events in the diary..

Okay, so where does that put the potential enrollment completion then? And the potential timing of data?.

Yes, I mean at this point we expect the enrollment to continue through 2017. It’s a little bit, it’s fairly hard for us to predict specific dates for now. So what we’d like to do is just continue to update it on a quarterly basis, because these things could shift very quickly for us.

Once we have a huge inflow of referrals the curve recruitment could really shift very, very quickly on us. So we’re a little hesitant right now to say, to give you a specific date on the data. Most likely, of course, the data would be in 2018, but we don’t want to be now, mention a specific quarter because these dates will shift.

So we’ll watch it very closely, and as we get closer to it, certainly we’ll let folks know..

Okay. Can I just ask a follow-up on 812? On 812, you had shown us that there was clearly a dose response, and that there was a very high tolerability and low adverse event profile.

Is there any reason to try a higher dose, given that tolerability, and push that efficacy fully into the range of the stimulants?.

That is certainly a possibility we are looking at now very, very carefully, absolutely. We are looking at an end of Phase 2 meeting, we’re trying to set that up as soon as we can with the FDA, and clearly that would be part of the topics that we will be discussing with the FDA, including the design of the Phase 3, the doses and so forth.

Clearly, that is a clear advantage that we see at this point, given all the data that we’ve generated so far. This drug has a great potential even if we push it higher, that it will give us a very nice efficacy.

Having said that, just as a reminder for folks, the efficacy we saw on the Phase 2B is truly remarkable for a non-stimulant, with the effect sizes that are actually close to some of the stimulants on the market today, and again, at the doses we tested.

So to your point, clearly, even if we push the dose up, with the tolerability profile that we’ve seen so far on this product, there is even a potential, even we get closer or even surpass, but if we don’t want to make any promises right now, until we discuss all that with the FDA..

All right. Thank you..

Thank you. Our next question is from David Amsellem with Piper Jaffray. You may begin..

Thanks. Just a couple.

So first can you talk about, and I apologize if I missed this, how you’re thinking about gross to nets for Oxtellar and Trokendi next year? Not just seasonality, but just in terms of whether we should think about them being higher next year versus this year, or similar? And then secondly, just coming back to the BD question, what’s your level of interest in acquiring another development stage asset? And does the enrollment issues that you cited change your calculus as it relates to adding an asset that is pipelined today by M&A? Thanks..

Okay, David. This is Greg. Thanks for the question. In terms of gross to net deductions for next year, and you mentioned a very important caveat, which is excluding seasonality, I would think that we’ll see gross to net deductions which will be very similar to what we’re looking at this quarter and the past quarter.

Of course, depending on what the Company’s product increase capacity looks like next year, that will feed through the gross to net calculation, and we haven’t quite settled on what that strategy might be.

But I would say for planning purposes, I think the numbers that we’ve been at the past couple of quarters are very representative for what I’d expect to happen next year..

Yes. And regarding the BD question, David, that’s a very good point, actually, as far as our strategy on development assets, and will that change given where 810 is. Actually, given the fact that we have 812 and 810 really gives us a lot of flexibility on the pipeline side.

And what I mean by that is, given the strength of the data on 812, it’s a potential. We don’t know for sure yet if it’s really a possibility that 812 may actually accelerate before 810. So we will continue to monitor the timing. If you remember, originally they were about 9 months to 12 months apart, meaning 810 ahead of 812 by 9 to 12 months.

Now, given the great data we got from 812, the trial was a little bit – we got the data a little bit ahead than we expected initially. There is a potential here that 812 may be a little bit moving faster than 810, and therefore, that could come in before 810. So a lot has to happen, clearly, but that is a possibility.

It doesn’t really change our calculus in general about bringing in something else, unless it is in Phase 3. So if we bring something in Phase 3 that could finish ahead of 810 or 812, absolutely we would look at it, and that was the case even before. So that hasn’t really changed much.

So we will continue to always look at things that could accelerate our story, and accelerate a potential launch of a third product. That we will always be open to..

Thank you..

Thank you. We have time for one more question. Our last question is from John Boris with SunTrust. You may begin..

Thanks for taking the question. Congratulations on the results. First question has to do with the Orenitram’s ramp – royalty you collected $30 million, which now goes to the balance sheet.

Can you just give us some guidance, at least going forward for 2017 that at some point in time, based on Orenitram’s run rate, you’re going to exhaust that $30 million.

On a quarterly basis, what should we be assuming as a percent of revenue we’d reporting in our number quarterly going forward? Second question has to do with the accounting for the long-acting 16-hour Adderall XR-like product that Shire will launch.

What’s the royalty rate that we should be assuming on that front? And then third and final question has to do with wholesalers. They have clearly indicated that they’re anticipating less pricing going forward, leading to less pricing as the de-stock from wholesalers that occurred sometime in the fourth quarter.

Are you assuming that could happen in the fourth quarter of this year?.

John, your comments unfortunately were cutting in and out, I don’t know whether it’s your cell phone or some other technical issue. I think the first question that you asked regarded the quarterly royalty rate for Orenitram. Of course were not providing guidance for Orenitram royalties and the like.

In fact, if you looked at the past three quarters, revenue for Orenitram overall has actually dipped, and then came back up a bit, but it’s been more or less flat. I would say that the complete set of adjustments which will be attended to this is really all wrapped around the re-class.

And so I’d rather not describe that, because my fear is I’ll describe it only partially, and therefore you won’t get a full picture. So I think I’d like to table that discussion until a further point in time. I think your other two questions regarded royalty rates for the Shire drug.

Jack, would you like to?.

Yes, we had communicated that it’s a low single digit at that time. So you’re right. Shire did communicate recently that they really they are progressing on potentially launching the product in the second half of 2017, so hopefully that will continue to be the case, and look forward for them to launch it successfully..

And then your third question, John, I think had to do with wholesalers and de-stocking and the like. To my knowledge, we haven’t seen anything in the quarter so far. I’m certainly not aware of anything in that regard.

I just remind you that two years ago there was actually an inventory shift in the fourth quarter, and then the reversal of that shift in the first quarter the following year.

Last year, we saw relatively little seasonal perturbations in terms of inventory level, so we’ve got an N of two and the data, based on the past two years, would suggest that it could be either/ or of those.

So I guess it’s anybody guess at this juncture, but as far as I’m aware, and I believe as far as Jack’s aware, we’re not aware of any significant changes upwards or downwards in terms of wholesale or inventory patterns..

Thanks..

Thank you. I’d now like to turn the call back over Jack Khattar for closing remark..

Thanks, Shannon. We’re excited about the growth in our business, and in new data from SPN-81. We remain focused on continuing to grow Trokendi XR and Oxtellar XR, and to advance our pipeline of products through the clinical development, and clearly to vigorously defend our intellectual property.

In addition, we continue to be active, as we mentioned on the call, in business development, looking for potential assets to strategically complement our portfolio. So thank you, everyone, this morning for joining us and we look forward to updating you through the year..

Ladies and gentlemen, this concludes today’s conference. Thanks for your participation. Have a wonderful day..