Good morning, ladies and gentlemen, and welcome to Supernus Pharmaceuticals Fourth Quarter and Full Year 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will follow at that time.

As a reminder, this conference call is being recorded.I would now like to turn the conference over to Peter Vozzo of Westwicke Investor Relations, representative for Supernus Pharmaceuticals. You may begin..

Thank you, Jonathon. Good morning, everyone and thank you for joining us today for Supernus Pharmaceuticals fourth quarter and full year 2019 financial results conference call.

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 from the management, we will open the call to questions.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 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 Factors section of the company's 2018 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 February 26, 2020 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, and thanks for taking the time to join us as we discuss our 2019 fourth quarter and full year results.

In our press release yesterday, we announced the results of the P302 study which was the second Phase III study of SPN-810 for the treatment of impulsive aggression in ADHD patients six to 11 years old.The study was similar in design to the first P301 Phase III study.

It was a randomized double-blind, placebo-controlled, multi-center, parallel-group clinical trial in patients diagnosed with ADHD. The study missed the primary endpoint showing that patients receiving the 36 milligram dose had a reduction of 51% in the average weekly frequency of impulsive aggression episodes compared to 54% in the placebo arm.

These results differ from the first Phase III trial where the drug effect was much higher at 59% reduction in the frequency of episodes and the placebo effect was much lower at 47% reduction.As in the P301 trial the drug was safe and well tolerated.

Given the results of the P302 trial and the results we announced last year from the P301 trial all development activities related to SPN-810 in impulsive aggression have been put on hold.Regarding SPN-812, the FDA accepted for review our NDA with the PDUFA target action date of November 8, 2020.

We remained focus on preparing for the potential commercial launch with SPN-812 by year-end.In addition, we expect the complete enrollment in the ongoing Phase III program with SPN-812 in adult patients by the end of 2020.

This is an important trial that would potentially help us expand the use of SPN-812, if approved by the FDA in the adult market.Our launch plans in preparation for the introduction of SPN-812 are well underway. We have initiated several programs that focus on disease awareness and education, and that have broad reach to parents and patients.

We have also made progress in our discussions with managed care plans regarding the importance of SPN-812 in the current treatment paradigm for ADHD.In addition, we have completed important award on the novel mechanism of action of SPN-812, highlighting its activity as a serotonin and norepinephrine modulating agent, and scientifically proven that it is much different from existing therapies in the marketplace.

We plan on presenting and publishing this scientific work throughout the year at various conferencing, starting with a poster and presentation next week at the ASENT 2020 Neurotherapeutics neuro meeting in Bethesda, Maryland.For SPN-604 for the treatment of bipolar disorder, we expect enrollment in the ongoing pivotal Phase III monotherapy trial for the treatment of bipolar disorders to continue through 2021.Moving onto the existing neurology business, total prescriptions for Trokendi XR and Oxtellar XR for full year 2019, as reported by IMS, reached 836,399 prescriptions, representing a 6.4% increase over 2018.

For Trokendi XR Supernus managed to grow prescriptions to 672,485 for the full year 2019, representing a 5.3% increase compared to 2018, despite the intensified competition by CGRPs and the slight decline in the topiramate market.

However, due to the inventory build in 2018 and continued pressure from managed care, net product sales for Trokendi XR in 2019 were down by 6.4% as compared to 2018.For Oxtellar XR prescriptions for the full year 2019 were 163,914, representing an increase of 11.1% over 2018.

This compares favorably to the 3% prescription growth in the oxcarbazepine market and is due to the launch of the monotherapy indication for Oxtellar XR in 2019.As with Trokendi XR, but to a lesser degree, net sales of Oxtellar XR and the comparison towards 2019 were impacted by the inventory build and managed care pressure, yielding a net increase of 4.3% in net sales in 2019 compared to 2018.As we mentioned on our last quarterly earnings call any positive impact of volume growth and price increases in 2020 are likely to be offset by continued pressure from gross to net sales deductions.

For 2020, we expect a continuation of competitive pressure in the migraine market due to the introduction of additional CGRP treatments and headwinds from managed care.Finally, our activity in corporate development continues in 2020, as we look for neurology and psychiatry assets that represent a strategic fit with our current portfolio.I'll now turn the call over to Greg who will provide more details on our fourth quarter and full year financial performance..

Net product sales to range from $360 million to $390 million, and operating income to range from $70 million to $100 million.Regarding SG&A expenses, other than the impact of the addition of the salesforce personnel in anticipation of the 2020 launch of SPN-812, SG&A expenses are expected to be consistent quarter-to-quarter in 2020.

Higher expenses year-over-year reflect primary the pre-launch activities for SPN-812.I will now turn the call back to the operator for questions. Thank you..

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

Hey, good morning, guys.

As we now think forward to the 812 introduction, maybe Jack, you could just give us a sense of the pricing of the current branded ADHD products and maybe talk about their coverage and why would that be materially different than what you can accomplish with 812?And then second question on business development, are you still thinking about CNS and movement disorders, or would you be thinking about maybe venturing into different therapeutic classes? Thank you..

Yeah. Sure.

Regarding the current market and the current pricing, as far as brands are concerned and this covers stimulants and non-stimulants, the whole market actually in ADHD, its ranges somewhere between the $350 to $550 or $600 for a 30-day prescription on a branded basis.And as far as contracting and so forth and our discussions with managed care, it's really becoming very important to highlight to them, as I mentioned in my remarks, the fact that SPN-812 is such a novel compound.

And we've been able actually to prove that scientifically through some very interesting work as far as the activity of the product, the receptor activity and where it's really modulating and what neurotransmitters is impacting, and relating that actually to the clinical data that we have, which supports all the data we've been able to generate on the activity side and the mechanism of action side.So, we're very excited about all this new data that, as I mentioned, we're going to first reveal it publicly next week, and hopefully with more posters and presentations later through the year.

And that has become very important to differentiate SPN-812 from every other product that currently is on the marketplace, including the non-stimulants and everybody else continues to say you are very similar to them, and we are not.

And actually, that's where SPN-812 differentiates itself, starting with the mechanism all the way to showing very different clinical data that we've talked about numerous times in our Phase III programs across all four Phase III programs, even the Phase II programs where the data is so consistent and predictable in helping patients and improving the symptoms in the ADHD market.So, we're very excited about -- there is acceptance of that data, the way it came out, the strength of that data, and also very excited about all the discussions we've had so far with the managed care plans as they start understanding and seeing that this is truly a novel mechanism, a novel product that this market has not seen for the last decade or even more.

So, it's really a very important therapy that they're looking at, and they're seeing it as something that could really benefit a lot of patients in a much differentiated way.Regarding business development, we continue to be very intensely involved with many opportunities that we're looking at and that does cover the whole CNS domain, neurology and psychiatry.

We continue to emphasize later stage commercial assets if we can find them and/or assets that are in late stage development.

In addition to that, we are looking at some of the earlier stuff as well, because we are very conscious about the fact that we really need to reload the pipeline.So, as I said, in the past, we've been very active and continue to be very active, we hope to do something this year.

Obviously, our goal is to utilize the significant cash balance that we have on our balance sheet. Certainly, we raise the money and we continue to generate very strong cash flows.

And our intention is to use those proceeds and that cash position to bring in new external growth opportunities through acquisitions or licensing and we are very, very active in that space..

Does that answer your question? Thank you. Our next question comes in line of David Steinberg from Jefferies. Your question, please..

Thanks. Just wanted to follow-up Ken's question on business development, now that your other ADHD asset is no longer going to be marketed -- your pathway is pretty clear you have new assets to launch before Trokendi the IP expires and with the settlement generics come in.

So, I just wondering, is there a -- with just one asset to launch going forward, is there a greater urgency to do an on-market product versus a development stage asset?And then secondly, Jack, I think, you said you -- it sounds like there's a very good chance you're going to actually in-license or buy something this year.

I know in the past one of the reasons you have not acquired anything, as you said, 90% of the transactions, the value goes to the seller, not to the buyer i.e. valuation too high. So, you're dovetailing your comments, does that mean you're seeing more attractive valuations in the marketplace? Thank you..

Yeah. Regarding the -- whether we have a higher level of urgency now or not, I mean, I'll tell you and I'm -- and I know many people have heard me say that. I mean, the urgency level was always there, because nobody -- everybody who understands this business, pharmaceutical business, we all know at any time a project may die for one reason or another.

So, we never really banked on the fact that 812 will make it all the way or 810 will make it all the way.

So, we've been really lucky actually for our existence to have such a low, low attrition rate in our R&D program since even our inception.As I mentioned to our employees about -- few months ago when we first got the first data on 810, actually this was the first ever Phase III data efficacy, safety data that didn't work for us over the past 20 some years.

So, actually -- yeah, I mean, we always bank on the fact that it's never a straight line. You never can guarantee that any of your products in the pipeline would work, and therefore, you always work with an urgency level.

Given, the situation we have with Trokendi XR to make sure that we have a transition that is as smooth as possible as far as the revenue and the potential reduction in the revenue when the generics come in. Is that urgency level any higher? Not really. It continues to be very high level, anyway.

Yes, we are focused on promotional products, if we can get them.As far as the valuations, they continue to be challenging out there. But we think we should be able to get something done, and we hope that we will be able -- can I promise finding? No. Unfortunately, we can’t.

We can promise that we're putting the effort and we're working pretty hard to make it happen. That's all what we can really control clearly. As far as the certainty around the date as to when something like this happens is very difficult to predict.

But we're certainly very much involved and a lot of different things we're looking at, and we've been looking at, and we hope to get something done..

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

Hi, guys. Thanks for taking my question. Just want to go back to the comments you made about how to start a conversation with managed care. I know what you are pitching to them in terms of SPN-812 differentiation efficacy.

But maybe you can talk about what kind of feedback you've been getting back from them in those initial conversations.And then secondly, I was hoping for a little bit of clarity on the EBITDA guidance.

It is fairly significantly down, so I imagine that that SG&A is going up as of the SPN-812 launch, so that SG&A is going to be consistent through the year, but consistent from where at a new stepped up level or from fourth quarter, and then it steps up towards the end of the year with the sales? Thank you..

Yeah. Regarding the first portion of the question which is on managed care and the feedback we have been getting, the more we have discussions with them and the more data we share with them, we started our initial discussions with them clearly on the Phase III data as we started getting the data.

Explaining it to them, putting it in perspective with the current therapies out in the marketplace. And the initial discussions, I'll tell you, they were saying, well, the market is already satisfied.

So, how is 812 different? And as we took the time to explain to them and walk them through the data and showing to them the real clear points of differences, we're having very different discussions recently with them.And specifically, as we show them also the mechanism of action and the data behind 812 and how truly different it is from everything they've seen.

They do also acknowledge that yes, in the last 10 years or 15 years or whatever, all they saw were different formulations of the same drugs. And they have that attitude, of course, that please don't come to me with another reformulation of amphetamine or methylphenidate or whatever the case might be.

So, they like the fact that this is a new treatment, completely new treatment even different than Strattera or any other non-stimulants.

They like the fact that it's really presents the patients a true novel treatment option.And they acknowledge the fact also that this is a category where you only have four molecules that are really options to patients, versus when you look at other conditions, where you have potentially 10 products or 15 different antidepressants or schizophrenia or product in different CNS conditions.

So, they're really starting to realize the value of 812 and the benefit it can -- we've been very encouraged with these discussions.I'll let Greg take over on the second part of the question..

Thank you, Jack. Thanks for the question, Annabel. As we commented in our last call, we did note and I think Jack is continuing noted that the company's completed a major effort behind the launch of SPN-812 later this year.

The precursor to that is a very much stepped up level of marketing activities, pre-marketing activities as regards to the launch and the preparation for that launch.So, the way to, I guess, think about our operating income guidance, would be to -- first, we'll start with R&D expenses and think about them more or less consistent with where we've been over the past couple of years, particularly if you pull out the Biscayne acquisition in 2018.

There's an ongoing run rate there in kind of $70 million to $80 million range, so let's use that as a basis for comparison. And that would suggest, as we have mentioned in last call, and I'll reiterate in this call, SG&A expenses north of $200 million is a pretty reasonable expectation for this year.

And the math would suggest that -- and that is in contrast with $160 million in 2018.You asked about the -- question about consistent, that's very consistent quarter-to-quarter.

So, looking at the base of being in the range of $200 million or perhaps a little bit north of that, thinking about them being relatively flat over the course of the year, because that reflects the pre-marketing activities and like as I just mentioned.And the one exception to that would be the addition of salesforce, largely that's going to be a fourth quarter activity.

And we've mentioned, the numbers of reps, which the company would anticipate adding, which is north of 100. So, I think that, that math will help you back into how to annualize those expenses.Hope that helps..

That's perfect. Thank you..

Welcome..

Thank you. Our next question comes from the line of Patrick Trucchio from Berenberg Capital. Your question, please..

Thanks and good morning. I have a follow-up on commercial launch on SPN-812.

Can you talk about the timing for the launch for 812 being later in the fourth quarter relative to the start of the 2020 school year, that would be well underway at that time? And should we therefore think of an uptick as being more modest in the first couple of quarters -- two or three quarters of the lunch before picking up at the start of the school year in 2021?And then secondly, can you also discuss your level of engagement with KOLs on SPN-812? What the view of KOLs is on this compound?And finally, when would you anticipate commercial launch expenses to start to build, given the late 2020 launch?.

Okay. Yeah. Patrick, I'll start with as far as the timing of the launch. As we said the PDUFA is November 8. So, basically, we will -- and we've been working pretty hard that the moment we get the approval our, obviously, plan is to launch as quickly as we can.

So, depending how ready we can be with the label and expecting what the label is before November 8, and how quickly we can get the product done and into the warehouse. You can estimate it's a few weeks from then, basically. So, our intent is to launch it as soon as possible.

Every day will count even if it is December 31 or whatever it is, we're going to launch it, whenever quickly we can do that.As far as the comment, launching it during that time of the year versus the back to school, is it ideal to launch an ADHD product around the back to school season? Absolutely.

And we've said that, even way back a couple years ago that we would love to be able to do that. But we are where we are at this point. And our, obviously, plans are to optimize the launch and maximize the potential of 812 regardless when we launch it.

And if it is year-end then be it and we'll make the best out of that.Now, having said all that, that doesn't mean there will be no demand in December or January or whatever. Because if you really think about it from a patient perspective and the parents, there's a lot of kids during the school year, start seeing [ph] problems surfacing.

So not all the problems, ADHD symptoms and issues surface only at the beginning of the school year.

Actually, many of those problems do surface later in the year, as some of these patients or kids are getting report cards, start really struggling in the class, start getting suspension letters later on, these issues don't surface from day one.So, clearly, we will have the demand.

Will the uptake be slower? Most likely, yes, it will be slower than it would have been -- launched around the school year and the window during summer or September/October timeframe.

So, yes, the uptake, we expect it to be a little bit slower, but in the long-term, the potential of the product really does not change at all whether you launch it in January, December, or you launch it in the summertime before school.As far as the KOLs, I mean, I have to really tell you, I mean, KOLs, obviously, were the first people to see the data from SPN-812 not even see it, but also experienced, because some of them, although, they were blinded, of course, in our Phase III studies.

And they didn't know whether the kids are on placebo, the drug but the results that they were seeing firsthand from these patients as they tell us were truly remarkable, that they always felt the drug should work, should be successful and so forth.

And as we shared with them the actual data, it just confirmed everything they saw firsthand in the Phase III study that we've done.And it's very exciting for them to know that they potentially could have an option out there as a non-stimulant, non-controlled substance that could work as early as week one, and with an effect that they saw firsthand again in the studies that lasted through the whole study and that could also work in both inattention and hyperactivity equally as the data have shown improvement.And finally, at the same time giving them -- and this is important to physicians, giving them a wide therapeutic window and dose range that they can work with, 100 milligram, all the way to 400 milligram without sacrificing any tolerability or safety, and having the assurance that this product is going to be very well tolerated, given the profile we talked about numerous times and the very low discontinuation rates behind this product.So, they're really excited about having that option.

Many of them don't even see a downside for trying it. It's like what do they have to lose? It's a non-controlled substance, so easy-to-use. On top of that, we may not even need titration for many kids. The 100 milligram worked extremely well in our clinical studies. So, it is so easy-to-use.

You will know pretty quickly whether it is going to work for these kids or not. And worst case, you can always add a stimulant if you would like to.

So, it's really been very, very positively received by the KOLs, and they can't wait for us to have the product on the marketplace.So, that's really the summation of where we are at this point on 812 and how excited. I mean, our excitement level just keeps going up and up every day, as we get closer to the launch date hopefully..

And then, just when would you anticipate the commercial launch expenses to start to build this year?.

Patrick, as I mentioned previously to Annabel's question, the launch expenses are building -- actually, they've been building in 2019. And since there is a stepped up -- a very significant step up between 2019 and 2020 in terms of SG&A expenses, they are embedded in the full year of 2020.

So, we've been spending in anticipation of launch, and that spending is going to really ramp up this year. So, the answer to your question is, now.The other component of the launch expenses is that which is related to the salesforce, and as I mentioned, in response to Annabel's question, that's largely going to be a fourth quarter expense.

We are going to tweak that so that those reps are added just prior to the anticipated approval date. So, I think, from an expense forecasting standpoint, you would anticipate that expense to be essentially a fourth quarter affair..

So, really the only back loaded expenses are the salesforce expense, but the marketing launch expenses are fairly spread out across all the quarters. That's that point we really want to make folks understand. So, it's not like all the launch expenses are going to be back loaded in the second half of this year.

It's going to be fairly spread out across the quarters, with the exception of the cost of the salesforce itself..

That's helpful. Thank you very much..

Welcome..

Thank you. [Operator Instructions]Our next question comes from the line of David Amsellem from Piper Sandler. Your question, please..

Hi, everyone. This is Zach on for David. Thank you for taking my question. Just a few quick ones from me on SPN-812.

We're hoping to -- I am sorry if you've already said this, but we were hoping to get a sense of what you're initially thinking in terms of payer contracting and specifically what your views are in regard to the potential for the patients to maybe going through a step-through of a generic version of Strattera or Intuniv in order to gain access to 812.And secondly, I think you've already alluded to this, but what you're thinking on in terms of pricing address to that -- for the product? Thank you..

Yeah. Sure. As I mentioned earlier, as far as the payers, it's an ongoing discussion at this point. So, it's not like we have a final position that they have taken one way or the other. So, those will continue through -- all the way through before the launch.

And our aim is clearly to have as much coverage as possible from day one.But all the discussions so far, and as we continue to have more and more discussions and share with them the data that I referred to as far as the mechanism and the novelty of the product, I think they're truly starting to understand that this is not like a generic Strattera or a generic Intuniv.

And therefore, it does -- it is worth considering it as a very different product than these products. Having said that, that doesn't mean, they're going to welcome you with an open arm and make it easy for you. So, I don't want people also to misunderstand my comments.

It will be challenging, of course, but we will work through it, and we have a lot of data to help us separate SPN-812 from these products.Regarding pricing, we don't make any specific comments on what our pricing strategy will be or what the price will be.

But a question before was asked about the range of branded products in the marketplace, and I mentioned somewhere in the $350 to $550 is the range of branded products currently in the marketplace, and that covers from non-stimulants all the way to stimulants..

Okay. Thank you..

Sure..

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Jack Khattar for any further remarks..

Thank you. We're focused on getting approval for SPN-812. And if approved, the launch of what would be the first novel treatment to be introduced in the ADHD market in more than a decade. While the results from our SPN-810 program are disappointing, we continue to invest in our R&D pipeline and plan on providing an R&D update later in the year.

We will also continue to pursue external growth opportunities through corporate development.Thank you for joining us this morning. We look forward to updating you throughout the year..

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does include the program. You may now disconnect. Good day..