Q2 2020 Supernus Pharmaceuticals Inc Earnings Call

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Operator: Good morning, and welcome to Supernus Pharmaceuticals' second quarter 2020 financial results conference call. At this time, all participants are in a listen-only mode.

Good morning, and welcome to support its pharmaceuticals second quarter 2020 financial results Conference call.

This time, all participants are in listen only mode.

Operator: Later we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this conference is being recorded. I would now like to turn the conference over to Peter Vozzo of Westwick, the Investor Relations Representative for Supernus Pharmaceuticals. You may begin. Thank you, Sarah.

Later, well conduct the question and answer session and instructions will follow at that time.

As a reminder, this conference is being recorded.

I'd now like to turn the conference or whatever Peter while though a Westlake Investor Relations representative that's up harness pharmaceuticals, you may begin.

Thank you Sarah good morning, everyone and thank you for joining us today for Supernus Pharmaceuticals second quarter 2020 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, our Supernus as Chief Executive Officer, Jack Qatar, and Chief Financial Officer, Greg Patrick.

Peter Vozzo: Good morning, everyone, and thank you for joining us today for Supernus Pharmaceuticals' second quarter 2020 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.

Peter Vozzo: Today's call is being made available via the Investor Relations section of the company's website at ir.supernus.com. 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. However, 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 the company's 2019 Annual Report on Form 10-K and update on the Quarterly Report on Form 10-Q for the six months ended June 30, 2020. For the benefit of those of you who may be listening to the replay, this call will be held and recorded on August 19, 2020, at approximately 9 a.m. Eastern Standard Time.

Today's call is being made available via the Investor Relations section of the company's website at <unk> Dot Supernus dotcom.

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. His current perspective on existing trends and information any such forward looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in the risk factor section.

The Companys 2019 annual report on form 10-K, and update on a quarterly reports on form 10-Q for the six months ended June Thirtyth 2020, actual results may differ materially from those projected in these forward looking statements for the benefit of those of you who maybe listening to the replay is called is being held and recorded on.

I guess 19th 2020 at approximately 90 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 releases and current filings with the FCC Supernus declines any obligation to update these forward looking statements, except as required by applicable securities laws.

Jack A. Khattar: 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 does not assume any obligation to update these forward-looking statements, except as required by applicable securities laws. I will now turn the call over to Jack. Thank you, Peter. Good morning, everyone.

I 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 2022nd quarter results and the recent developments.

Jack A. Khattar: And thanks for taking the time to join us as we discuss our 2020 second quarter results and recent developments. During the quarter, we delivered solid financial results and closed two significant corporate development transactions. On June 9, we completed the acquisition of CNS products from U.S. World Meds.

During the quarter, we delivered solid financial results and closed two significant corporate development transactions on June nine we completed the acquisition of the CNS products from U.S. World Mens This acquisition, how supposed to diversify our revenue and earnings base and enhances our long term growth with three marketed products and it.

Jack A. Khattar: This acquisition helps us diversify our revenue and earnings base and enhances our long-term growth with three marketed products and a product candidate in late-stage development. The integration of the CNS products has been progressing well, and we expect all integration activities to be significantly completed by year end. Regarding the apomorphine infusion pump or SPN 830, we expect to submit an NDA in the fourth quarter of this year and, if approved by the FDA, to launch the product in the second half of 2021. The second corporate development opportunity announced in the quarter is the development and option agreement with Navitor Pharmaceuticals for its mTORC1 activator NV5138 or SPN820. SPNA20 is a first-in-class, orally active small molecule that directly activates brain mTORC1, the gatekeeper of cellular metabolism and renewal, which is often suppressed in people suffering from depression.

Product candidate in late stage development.

The integration of the CNS products has been progressing well and we expect all integration activities to be significantly completed by year end.

Regarding the April morphine infusion pump or SP, and 830, you expect to submit and India in the fourth quarter of this year and if approved by the FDA to launch the product in the second half of 2021.

The second corporate development opportunity announced in the quarter is the development an option agreement with Navistar pharmaceuticals for its m. torque, one activator, nvfive 138, or SP and a 20.

ESPN Eighttwenty as a first in class orally active small molecule that directly activates brain m. torque won the gatekeeper of cellular metabolism and renewal, which is often suppressed in people suffering from depression.

Jack A. Khattar: Phase 1 data demonstrated early proof-of-concept in which a single dose of spna20 showed rapid and sustained improvement in core symptoms of depression with favorable safety and tolerability in patients with treatment-resistant depression. Preclinical and development activities are currently ongoing, with the initiation of the Phase II clinical program in depression targeted for the second half of 2021. Turning to SPNA 12, we remain engaged with the FDA regarding the NDA, which has a PDUFA target action date of November 8, 2020. We continue to prepare for the commercial launch of SPNA-12, with shipments to the trade targeted for December 2020. Recruitment has resumed for the SVNA 12 Phase 3 program in adult patients after being put on hold in March due to the impact of the COVID pandemic.

Phase one data demonstrated early proof of concept in which a single dose SP in a 20 show the rapid and sustained improvement in core symptoms of depression with favorable safety and tolerability in patients with treatment resistant depression.

Preclinical and development activities are currently ongoing with the initiation of the phase two clinical program in depression targeted for the second half of 2021.

Turning to ask DNA 12, we remain engaged with the FDA regarding the end D.A., which has a PDUFA target action date of November eight 2020.

We continue to prepare for the commercial launch of SP in a 12 with shipments to the trade targeted for December 2020.

Recruitment has resumed in the SDN a 12 phase three program in adult patients after being put on hold and March due to the impact of the cobot pandemic. This trial is expected to complete enrollment by year end with topline data in the first quarter of 2021.

Jack A. Khattar: This trial is expected to complete enrollment by year-end, and top-line data will be released in the first quarter of 2021. This is an important trial that will help us expand the use of SPNA-12, if approved by the FDA, in the adult market, which represents half of the total ADHD market in the U.S. Moving on to Chokendi XR and Oxtaler XR, total prescriptions in the second quarter continued to reflect the adverse impact of restricted sales force access to physicians, reduced patient visits, and new patient initiations due to the COVID pande Overall, looking at the first six months of the year in total, prescriptions as reported by IMS for Xtellurex R showed strong resiliency despite the pandemic environment, with a 7.7% growth, whereas Trochandiax R declined by 5.8% compared to the same period last year.

This was an important trial that will help us expand the use of SDMA 12, if approved by the FDA and the adult market, which represents half of the total eight each new market in the U.S.

Moving on to Trokendi XR on Oxtellar XR total prescriptions in the second quarter continue to reflect the adverse impact of restricted salesforce access the physicians reduce patient visits and new patient initiations due to the Covance pandemic.

Overall looking at the first six months of the year in total prescriptions as reported by RMS for Oxtellar XR showed strong resiliency. Despite the pandemic environment with a 7.7% growth where it has trokendi XR declined by 5.8% compared to the same period last year.

Jack A. Khattar: Despite this pressure on prescriptions for the first six months of 2020, the trends in extended units, as represented by the number of capsules or tablets, show oxtalerics are growing by 12% and trochandiacs are essentially flat in the first half of the year compared to the same period last year. This is due to the COVID pandemic and the fact that the average size of a monthly prescription for Tocandy XR and Oxtheller XR has been trending upwards in the past six months. Taken together with the annual price increase, this resulted in a higher average wholesale acquisition cost per prescription for both products. Added to that, some of the favorability in gross to net deductions in the second quarter led to an overall growth in net sales for each, Trockandy XR, and Oxteller XR, of 11% in the first half compared to last year. Regarding Apokin, Zadago, and Myoblock, we recorded sales in the second quarter from the closing date of the acquisition on June 9 through the end of the quarter.

Despite this pressure on prescriptions for the first six months in 2020.

Trends in extended the units as represented by number of capsules or tablets show Oxtellar XR growing by 12% and Trokendi XR essentially flat in the first half of the year compared to the same period last year.

This is due to the covert pandemic and the fact that the average size of their monthly prescription for Trokendi XR and Oxtellar XR has been trending upwards in the past six months.

Taken together with the annual price increase this resulted in a higher average wholesale acquisition cost per prescription for both products.

Adding to that some of their favorite ability in gross to net deductions in the second quarter led to an overall growth in net sales for each trokendi XR and Oxtellar XR of 11% in the first half compared to last here.

Regarding April Ken's, a drag on Myobloc, we recorded sales in the second quarter from the closing date of the acquisition of June nine through the end of the quarter. The products have been fairly stable with the exception of Myobloc that has seen the most impacted by the covert endemic where physician visits are instrumental in patient initiation and therapy.

Jack A. Khattar: The products have been fairly stable with the exception of Myoblock, which has seen the most impact from the COVID pandemic, where physician visits are instrumental in patient initiation and therapy maintenance. For the remainder of the year, the company assumes that the COVID pandemic will continue to impact our operations with restricted access to physicians, a reduced number of patient visits, and new patient initiations on all our products. Finally, we continue to look for strategic opportunities to further strengthen our future growth and leadership position in CNS. I'll now turn the call over to Greg, who will provide more details on our second quarter financial performance. Thank you, Jack. Good morning, everyone.

Maintenance.

For the remainder of the year the company assumes that the covert pandemic will continue to impact our operations with restricted access to physicians reduced number of patient visits and new patient initiations on all our products.

Finally, we continue to look for strategic opportunities to further strengthen our future growth and either ship position in CNS I'll now turn the call over to Greg who will provide more details on our second quarter financial performance. Thank you Jack good morning, everyone.

So I review, our second quarter results. Please refer to yesterday's press release as well as to the company's second quarter report filed on form 10-Q on Monday afternoon.

Total revenue for the second quarter, 2020 was $126.7 million, an increase of 21% over $104.7 million in the same quarter last year.

Greg Patrick: As I review our second quarter results, please refer to yesterday's press release as well as to the company's second quarter report filed on Form 10-Q on Monday afternoon. Total revenue for the second quarter of 2020 was $126.7 million, an increase of 21% over $104.7 million in the same quarter last year. Total revenue, $126.7 million, which is comprised of net product sales of Jokendi XR and Oxtella XR of $113.4 million, royalty revenue of $2.7 million, and $10.6 million from the acquired Parkinson's disease product. Net sales of the Parkinson's disease products reflect activity from the date of acquisition, June 9th through the end of the quarter. In the second quarter of 2019, net product sales of Turkandy XR and Xtelo XR were $102.4 million, and royalty revenue was $2.3 million. Net product sales of Trokendi XR and Xtellar XR increased 11% compared to the same period in 2019 due to the beneficial impact of lower gross-to-net sales deductions in the second quarter of 2020 and an 8% price increase taken in January 2020. The year-over-year impact of volume, as measured by the number of capsules or tablets, was essentially neutral.

Total revenue $126.7 million.

Comprise of net product sales of Trokendi, XR, and Oxtellar XR of $113.4 million.

Royalty revenue of $2.7 million and $10.6 million from the inquired Parkinson's disease products.

Net sales of the Parkinson's disease products reflect activity from the date of acquisition June nine through the end of the quarter.

In the second quarter of 2019 net product sales of Trokendi, XR and Oxtellar XR were $102.4 million and royalty revenue was $2.3 million.

Net product sales of Trokendi, XR and accelerates our increased 11% compared to the same period in 2019 due to the beneficial impact of lower gross to net sales deductions in the second quarter of 2020, and an 8% price increase taken in January 2020.

Year over year impact of volume as measured by the number of capsules or tablets was essentially neutral.

Turning now to expenses research and development expenses were $22.2 million for the second quarter of 2020.

Approximately $5 million higher than the $17 million recorded in the prior year period.

This increase was primarily due to the $10 million option fee paid to NAV a tour pharmaceuticals as part of the collaboration agreement for SP and a 20, coupled with expenses associated with the ESPN 812 phase three program for adults.

Increased expenses were partially offset by reduced spending for the ESPN 810 phase III trials.

Greg Patrick: Turning now to expenses, research and development expenses were $22.2 million for the second quarter of 2020, or approximately $5 million higher than the $17 million recorded in the prior year period. This increase was primarily due to the $10 million option fee paid to Navator Pharmaceuticals as part of the collaboration agreement for SPN A-20, coupled with expenses associated with the SPN A-12 Phase III program for adults. However, increased expenses were partially offset by reduced spending for the SPN 810 phase 3 trials.

As DNA expenses for the second quarter of 2020 were $48.1 million compared to $39.8 million and the prior year period.

This increase is primarily due to expenses of $7.4 million associated with the acquisition of the Parkinson's disease products and the second quarter of 2020, partially offset by $3.1 million and PDUFA fee refunds from the FDA.

Operating earnings for the second quarter of 2020 were $45.5 million compared to $42.6 million in 2019.

Greg Patrick: SG&A expenses for the second quarter of 2020 were $48.1 million, compared to $39.8 million in the prior year period. This increase is primarily due to expenses of $7.4 million associated with the acquisition of Parkinson's disease products in the second quarter of 2020, partially offset by $3.1 million in PDUFA fee refunds from the FDA. Operating earnings for the second quarter of 2020 were $45.5 million, compared to $42.6 million in 2019. The increase in operating earnings was attributable to increased net product sales, partially offset by the option fee paid to Navator and the acquisition-related expenses associated with the acquired Parkinson's disease product. Net earnings were $34.7 million for the second quarter of 2020, or $0.65 per diluted share, compared to $32.7 million or $0.61 per diluted share for the second quarter of last year.

The increase in operating earnings was attributable to increased net product sales, partially offset by the option fee paid to the avatar and the acquisition related expenses associated with the acquired Parkinson's disease products.

Net earnings were $34.7 million for the second quarter, 2020, or 65 cents per diluted share compared to $32.7 million were 61 cents per diluted share for the second quarter last year.

Net earnings were subject to a higher effective tax rate in the second quarter of 2020 relative to the same quarter last year because of the transaction related expenses are only partially deductible for income tax purposes.

In addition, the number of states in which Supernus pays state income tax has also increased.

As of June Thirtyth 2020, the company had $733 million in cash cash equivalent marketable securities and long term marketable securities compared to $939 million as of December 30, Onest 2019.

Greg Patrick: Net earnings were subject to a higher effective tax rate in the second quarter of 2020 relative to the same quarter last year because the transaction-related expenses are only partially deductible for income tax purposes. In addition, the number of states in which Supernus pays state income tax has also increased. As of June 30, 2020, the company had $733 million in cash, cash equivalents, marketable securities, and long-term marketable securities, compared to $939 million as of December 31, 2019. During the first six months of 2020, the company generated $100.9 million of cash from operations, inclusive of net changes and working capital.

During the first six months of 2020.

The company generated $100.9 million of cash from operations inclusive of net changes in working capital.

Offsetting this cash inflow the company made upfront cash payment of approximately $300 million for the acquired Parkinson's disease products inclusive of acquisition related expenses.

Plus the 10 million dollar payment to NAV a tour as part of the development agreement for Sps and a 20.

Turning now to financial guidance, we are reinstating and updating full year 2020 guidance. After suspending it in May 2020, due to uncertainty caused by the pandemic.

The second quarter 2020 acquisition of the PD products and the impact of the partnership with laboratory.

Note that this updated guidance reflects the acquisition of the Parkinson's disease products as of June Thirtyth June 9th Twentytwenty.

Greg Patrick: Offsetting this cash inflow, the company made upfront cash payments of approximately $300 million for the acquired Parkinson's disease products, inclusive of acquisition-related expenses, plus the $10 million payment to Navator as part of the development agreement for SPN 820. Turning now to financial guidance, we are reinstating and updating full year 2020 guidance after suspending it in May 2020 due to uncertainty caused by the pandemic. The second quarter 2020 acquisition of the PD products and the impact of the partnership with Navitore. Note that this updated guidance reflects the acquisition of the Parkinson's disease products as of June 9, 2020. For full year 2020, we expect net product sales to range from $460 million to $500 million, which includes approximately $80 million in net product sales from the acquired Parkinson's disease product. We anticipate gross margin of approximately 90% for our portfolio of products. R&D expenses are expected to be approximately $85 million for the full year, and SG&A expenses are expected to range from approximately $240 million to $250 million for the full year.

For full year 2020, we expect net product sales to range from $460 million to $500 million, which includes approximately $80 million and net product sales from the acquired Parkinson's disease products.

We anticipate gross margin of approximately 90% for our portfolio of products.

R&D expenses are expected to be approximately $85 million for the full year.

And as DNA expenses are expected to range from approximately $240 million to $250 million for the full year.

SGN expenses are anticipated to be higher in the second half for 2020 as compared to the first half for three reasons first the cost to support the acquired PD products, including the 45 sales representatives and the nurse network, who primarily support sales of the eight began pen.

Second increased marketing spend to prepare the market for the launch of SP in a 12.

And third the build out of our Salesforce, including sales Representatives, a management infrastructure, which will occur in the fourth quarter.

This also is in support of the launch of Sps a 12.

We expect the cadence of SGN, a spending to intensify from one quarter to the next.

Turning to amortization of intangible asset, we expect to incur approximately $15 million.

For the full year.

We anticipate full year 2020 operating earnings to range from $90 million to $110 million inclusive of amortization of intangible assets.

I'll now turn the call back to the operator for questions. Thank you.

Thank you.

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We request that you limit your question. So two questions at a time then feel free to reenter the queue. If you have further question.

Greg Patrick: SG&A expenses are anticipated to be higher in the second half of 2020 as compared to the first half for three reasons. First, the cost to support the acquired PD products, including the 45 sales representatives and the nurse network, who primarily support sales of the APIC and PEN. Second, increased marketing spend to prepare the market for the launch of SPN 812. And third, the build out of our sales force, including sales representatives and management infrastructure, which will occur in the fourth quarter. This is also in support of the launch of SPN 812. We expect the cadence of SG&A spending to intensify from one quarter to the next. Turning to amortization of intangible assets, we expect to incur approximately $15 million for the full year.

Our first question comes on the line of David Amsellem with Piper Sandler Your line is now open.

Hey, thanks so.

So here's my two I wanted to drill down more on the strength.

In terms of dollars for Trokendi and Oxtellar do you think the the larger prescription.

Sizes.

It was a function of anything.

Colford related and I apologize if I missed the commentary here, but is there anything.

Covert related is that something that could reverse or is this something thats under normal regarding.

Regarding total number of units in a in a prescription. So that's number one and then secondly, toggling to April time.

Operator: We anticipate full year 2020 operating earnings to range from $90 million to $110 million, inclusive of amortization of intangible assets. I will now turn the call back to the operator for questions. Thank you. Thank you. To ask a question, please press star, then 1 on your telephone.

Can you just talking about the reimbursement landscape for that product in and what you plan to do differently to the extent you need to do anything differently.

Regarding access for that product. Thanks.

Yes, Hi, David I'll I'll take the first couple of quick regarding the Rx size over the years, specifically on Trokendi XR, especially since the migraine launch we we've noticed an increase in the Rx size over time.

Operator: To withdraw your question, please press the pound key. We request that you limit your questions to two at a time, then feel free to re-enter the queue if you have further questions. Our first question comes from the line of David Amsellem with Piper Sandler. Your line is now open. Hey, thanks. So, here's my two.

However, we've noticed that the slope of decoder tremendously accelerated in the last three months. So we definitely attribute a lot of the growth three of the reason the growth in the Rx sizes because of the cold with pandemic. So.

Your question is right on I mean, what what is really going to happen in the second half. We don't know at this point, what we do expect it will probably stay around that level. It may not continue to increase.

David A. Amsellem: I wanted to drill down more on the strength in terms of dollars for Trichondria and Oxdellar. Do you think that the larger prescription sizes are a function of anything COVID-related? And I apologize if I missed the commentary here, but is there anything COVID-related here, or is that something that could reverse, or is this something that's a new normal regarding the total number of units in a prescription? So, that's number one.

It will probably stay stabilize at wet weather it as at this point.

And as far as the gross to net than I can get that can jump in here, but I mean this was one of the.

One time fluctuations, we typically have quarter to quarter of this time was more on the favorable side, specifically with Trokendi XR.

Over the years, you know we've mentioned that actually starting with Q1 typically is the worst when it comes the good Austin at and during the year, there's always a gradual improvement. However, this slime into Q2, we had a stronger improvement and Trokendi XR and we don't expect that same improvement to come in in Q3 or.

Jack A. Khattar: And then secondly, toggling to Apokine, can you just talk about the reimbursement landscape for that product and what you plan to do differently to the extent that you need to do anything differently regarding access to that product? Thanks. Hi David.

Jack A. Khattar: Yeah, I'll take the first couple of questions. Regarding the Rx size, over the years, specifically on Trocandex R, especially since the migraine launch, we've noticed an increase in the Rx size over time. However, we've noticed that the slope of the curve has tremendously accelerated in the last three months, so we definitely attribute a lot of the recent growth in the Rx size to the COVID pandemic. So, your question is right on. I mean, what is really going to happen in the second half?

Q4.

As far as the reimbursement on a book in.

The access I mean, we.

We are looking at all different angles to.

Continue the growth behind the products or rejuvenated growth will accelerate growth whichever way you want to characterize it but basically we're looking at all.

The aspects of the business and see where it or a lot of points of synergies with our products or whether it's on their managed care, whether it's on the promotional aspect side of it from a sales force perspective, and so forth. So we're working pretty hard actually as you might imagine putting the plans for next year and so forth and continue to execute on for them.

Remainder of the year so.

Jack A. Khattar: We don't know at this point, but we do expect it to probably stay around that level. It may not continue to increase, but it will probably stabilize at where it is at this point. And as far as the gross net, and I can, you know, Greg can jump in here, but I mean, this is one of the one-time fluctuations we typically have quarter to quarter. This time, it was more on the favorable side, specifically with Trocandex-R. Over the years, you know, we've mentioned that actually, starting with Q1 typically is the worst when it comes to gross net, and during the year, there is always a However, this time in Q2, we had a stronger improvement in Trocandex-R, and we don't expect that same improvement to come in in Q3 or Q4.

Although it does have fairly good access right now so it's not like it is lagging access.

Reimbursement, but should there would be any areas of improvement definitely we'll be looking at that.

Okay helpful. Thank you.

Yeah.

Thank you. Our next question comes from the line of David Steinberg with Jefferies. Your line is now open.

Okay, Thanks, and good morning so.

My question is.

The revenue range guidance, you gave seems pretty wide. It for this point of the year.

Just curious why does this relate to I think you said, you're anticipating shipments to the trade in December for 812, assuming approval is is.

Is the why is the fairly wide guidance because unit because of that and actually is.

Jack A. Khattar: We are looking at all different angles to continue the growth behind the products or rejuvenate growth or accelerate growth, whichever way you want to characterize it, but basically, we're looking at all the aspects of the business and see where there are a lot of points of synergies with our products, whether it's on the managed care side of it from a sales force perspective and so forth. So we're working pretty hard, actually, as you might imagine, making the plans for next year and so forth, and continuing to execute for the remainder of the year. So although it does have fairly good access right now, so it's not like it is lagging behind access or reimbursement, but should there be any areas of improvement, definitely, we'll be looking at that. Okay. Helpful. Thank you. Thank you. Our next question comes from the line David Steinberg with Jeffries. Your line is now open.

As any a 12 shipments included in the guidance.

My second.

Second question is put trendy XR, they've been scripts have been a bit week weaker more than usual in the past six or seven weeks beyond cobot do you think that's due to the launch of the New Orleans, CG Rps and if so when do you think prescriptions will stabilize into you managing the franchise now for cash.

Cash flow rather than for Rx growth. Thanks.

Okay, Hi, David This is Greg.

We take the first question first so the revenue range.

For 6500, he has probably a bit wider than we would.

We typically have these kind of mid year.

It's really related to several factors first of all the general uncertainty around the whole pandemic situation.

The number of units in prescriptions has increased over time.

The.

New Rx trends, which everybody sees those have softened a bit. So there was concerned about what the cobot environment continues to do or with our business going forward.

David Steinberg: Okay, thanks, and good morning. The revenue range guidance you gave seems pretty wide for this point in the year. I'm just curious, why does this relate to, I think you said you're anticipating shipments to the trade in December for 8-12, assuming approval. Is the fairly wide guidance because of that? And actually, is any 8-12 shipment included in the guidance?

Secondly, the.

Parkinson's disease products. You know these are new for us and the company is getting onboard with running these and managing these going forward and we recognize though that there is going to be some uncertainty with respect to how these progress during the course of the year there were a little bit less impacted by by covert, but nevertheless, there's a covert impact.

There was well and then third you're quite right on the launch of SP and a 12 also plays into the range.

We are not.

David Steinberg: My second question is, for Trekendi XR, scripts have been a bit weaker than usual in the past 6 or 7 weeks beyond COVID. Do you think that's due to the launch of the new oral CGRPs? And if so, when do you think the prescriptions will stabilize? And are you managing the franchise now for cash flow rather than for RxGrowth? Thank you.

Anticipating in the guidance, we gave much in a way of revenue recognition for the fourth quarter. This is all going to be very heavily.

I mean related and driven by the actual timing of the shipments which of course very hard to forecast based on the uncertainty in terms of actual approval dates and why we can get product shipped to the trade assuming we have approval.

I think.

And the second question to Jack Thanks, David.

Regarding the a question on Trokendi, XR and the prescriptions or you're absolutely right. The second if you look at their first quarter to the second quarter versus last year.

Greg Patrick: Why don't we take the first question first? So the revenue range, 460 to 500, is probably a bit wider than we would typically have had this time of year. It's really related to several factors. First of all, the general uncertainty around the whole pandemic situation. The number of units and prescriptions has increased over time. But the new Rx trends, which everybody sees, those have softened a bit.

First quarter was more flattish, but that was an artificial.

That trend typically first quarter for Trokendi XR is actually down versus for example, you know.

The last quarter of 2000, the previous year like 2019 in this case.

Of course March was all is higher than actually in this case this year because of the cobot pandemic, which many companies notice the uptick in March so what we're seeing in the second quarter is absorption of that increase in prescription that happened in March and regulating the at the back in April and May we saw declines.

Greg Patrick: So there's concern about what the COVID environment continues to do with our business going forward. Secondly, the Parkinson's disease products, you know; these are new for us. And the company is getting on board with running these and managing these going forward. And we recognize, though, that there's going to be some uncertainty with respect to how these progress during the course of the year. They're a little bit less impacted by COVID, but nevertheless, there's a COVID impact there as well. And then third, you're quite right.

Because of the increase in March.

Overall, yes, I mean as I mentioned in my remarks before the first half in total the fuel and that's why I made my comments, mainly about the first half of it goes over these quarterly fluctuations on the tough environment we're living in.

It's down minus 5.8% in the first half on Trokendi XR versus last year.

We continue to see dynamics as far as competitive pressures. In addition to the co bid a situation I was just give you more granularity I mean, these sort of products, although at a very promotion sensitive and in our case, we ought not competing with the other products on TV with millions of dollars in TV advertising most of our.

Greg Patrick: The launch of SPN A12 also plays into this range. We are not anticipating, in the guidance we gave, much in the way of revenue recognition for the fourth quarter. This is all going to be very heavily timing-related and driven by the actual timing of the shipments, which, of course, is very hard to forecast based on the uncertainty in terms of the actual approval dates and when we can get product shipped to the trade, assuming we have approval. I think I'll hand the second question to Jack. Thanks, David.

Effort, if you used to be and selling with the salesforce and so forth. So the restricted access to physicians have obviously hindered our ability to be able to promote trokendi XR as much as we would like to or at the same levels as we would like to as well as you have logistics issues with samples and so forth so that will.

Jack A. Khattar: Yeah, regarding the question on Trucandi XR and the prescriptions, you're absolutely right. If you look at the first quarter, the second quarter versus last year, the first quarter was more flattish, but that was an artificial flat trend. Typically, the first quarter for Trucandi XR is actually down versus, for example, the last quarter of 2000, the previous year, like 2019 in this case.

Continue to probably pressure to the product for the rest of for the second half of this year.

Thank you.

As a reminder to ask a question you will need to press Star then one on your telephone.

We have time for one more question.

Our last question comes on the line of Annabel Samimy, what's painful your line is now open.

Hi, guys. Thanks for taking my question.

I was wondering if you could talk about some of the prelaunch activities that you're going to be doing with 812 than what you might have to modify given the situation that we're in with co that with schools closing are going online again.

Jack A. Khattar: Of course, March was always higher, and actually, in this case, this year, because of the COVID pandemic, which many companies noticed the uptick in March. So what we're seeing in the second quarter is absorption of that increase in prescriptions that happened in March, and regulating that back in April and May, we saw declines because of the increase in March. Overall, yes, I mean, as I mentioned in my remarks, for the first half in total, that's why I made my comments mainly about the first half, because of these quarterly fluctuations and the tough environment we're living in, it's down minus 5.8% in the first half on Trucandi XR versus last year. We continue to see dynamics as far as competitive pressures are concerned in addition to the COVID situation. I'll just give you more granularity. These are products that are very promotion sensitive, and in our case, we are not competing with other products on TV with millions of dollars in TV advertising.

Change anything in the way you're approaching the market isn't helping or hurting you and is there anything it really change at the sampling program and then more broadly speaking I was wondering if you talk about your capital allocation. This crime.

We see what needs to get it to actually nay how's that going to break down in terms of investment in each franchise. So you know pulling more from epilepsy, putting it psychiatry leveraging world meds, adding to it.

And do you continue to maintain capacity to build on that thanks.

Yeah sure we're going to pre launch activities actually we've been doing a lot of that since last year. So.

Behind a 12 point of the preparation point of view and the as you would expect the majority of these activities are around the data that we've been able to generate to make sure.

Operator: Most of our effort used to be in selling with the sales force and so forth. So the restricted access to physicians has obviously hindered our ability to be able to promote Trucandi XR as much as we would like to or at the same levels as we would like to, as well as having logistics issues with samples and so forth. So that will probably continue to pressure the product for the rest of, you know, the second half of this year. Thank you. As a reminder, to ask a question, you would need to press star, then 1 on your telephone.

The scientific medical community out there understands the data that are aware of the data and what is SP in a 12, how it differentiates oh versus other products on the marketplace and where does the.

Unmet medical need and how a 12 can actually solve a lot of the issues out there and treating HD.

So we've been focusing focusing tremendously on that and we've been actually focusing on the virtual aspect of today's environment by doing a lot of online teaching or whether it's you want to quoted conferences symposium speaker programs and so forth. So we've been able to reach a lot of physicians that way.

Operator: We have time for one more question. Our last question comes from the line of Annabel Samimy with FIFO. Your line is now open.

And regarding the actual launch plan I.

I never thought it might go to your I'll have to different launch plans in modem, although on a regular one and it cope with one so.

Annabel Eva Samimy: Hi guys, thanks for taking my question. I was wondering if you could talk about some of the pre-launch activities that you're going to be doing with 8-12 and what you might have to modify given the situation that we're in with COVID with schools closing or going online again. Does that change anything in the way you're approaching the market? Is it helping or hurting you, and is there anything that you're going to change with the sampling program?

We're planning on potentially the pandemic continue to.

Exist around the time of launch and we'll be ready with.

Semi virtual worlds semi physical kind of launch hybrid type of launch plan.

And we'll continue to adjust depending on how the environment evolves over time so.

It is challenging of course, but we've been able to now use all the virtual tools of many other companies are very effectively and efficiently, but at the end of today, obviously nothing that replaces face to face interaction between a sales.

Jack A. Khattar: And then more broadly speaking, I was wondering if you could talk about your capital allocation at this time. We see what you've devoted to SG&A. How is that going to break down in terms of investment in each franchise? Are you now pulling more from epilepsy, putting it into psychiatry, leveraging world meds, adding to it, and do you continue to maintain capacity to build on this thing? Yeah, sure.

Representatives and the physician and explaining the data and so forth.

But I think we were being as effective as you could expect in this environment and the regarding sampling and so forth with exploring a lot of different ways, where we can potentially either send samples directly to patients.

Jack A. Khattar: Regarding the pre-launch activities, actually, you know, we've been doing a lot of that since last year. So, behind A12, from a preparation point of view, and as you would expect, the majority of these activities are around the data that we've been able to generate to make sure the scientific, you know, medical community out there understands the data, they're aware of the data, what SPNA-12 is, how it differentiates versus other products on the marketplace, and what the unmet medical need is, and how A12 can actually solve a So, we've been focusing tremendously on that, and we've been actually focusing on the virtual aspect of today's environment by doing a lot of online teaching, whether it's conferences, symposiums, speaker programs, and so forth. So, we've been able to reach a lot of physicians that way.

I would facilitate a you know the distribution of samples what really helps in this scenario is clearly the fact of the product is not a controlled substance. So that will allow us to explore different avenues that to hopefully be able to reach as many patients as possible.

And finally as far as capital allocations I mean first of all we continue to be committed and we are very committed to the existing neurology a portfolio. So this is not a scenario where.

We're going to take off the support from neurology to be able to launch in psychiatry.

Having said that definitely we are exploring many different ways you have to optimize the use of our resources across what is now a portfolio of actually six or will it be hopefully a portfolio of six marketed products.

Jack A. Khattar: And regarding the actual launch plan, I never thought in my career I'd have two different launch plans, a normal one or a regular one and a COVID one. So, we're planning on the potential pandemic continuing to exist around the time of launch, and we'll be ready with a semi-virtual, semi-physical kind of launch, a hybrid type of launch plan, and we'll continue to adjust depending on how So, it is challenging, of course, but we've been able to now use all the virtual tools that many other companies use very effectively and efficiently. But at the end of the day, obviously, nothing replaces face-to-face interaction between a sales representative and a physician in explaining the data and so forth.

Between the five new oncology focused products and of course SP and a 12. So we're looking at how can we optimize the use of the sales forces.

In new Salesforce, which will support the launch of a 12 and of course all these decisions in the past few months have changed a little bit or evolves over time, because we didn't know initially the cohen pre covert impulse goal that you would expect our plans also will shift over time as well so it's a continually fluid situation.

But certainly we want to make sure SP on a 12 gets all the investment that it requires to be a successful product and in parallel we will have adequate support for all the other neurologic products as well.

Jack A. Khattar: But I think we're being as effective as you could expect in this environment. And regarding sampling and so forth, we're exploring a lot of different ways where we can potentially either send samples directly to patients or facilitate, you know, the distribution of samples. What really helps in this scenario is clearly the fact that the product is not a controlled substance.

That's good and.

And about this is Greg it's just like to add the Jack's comments, what you're exactly right of course spot on.

In terms of SG in a.

Progression through the year, there will be a discernible impact in the third quarter simply because weve added the M&A expenses associated with supporting the.

Parkinson disease products, including the sales reps network net nursing network et cetera.

Jack A. Khattar: So, that will allow us to explore different avenues there to hopefully be able to reach as many patients as possible. And then finally, as far as capital allocations are concerned, I mean, first of all, we continue to be committed, and we are very committed to the existing neurology portfolio. So this is not a scenario where we're going to take off the support from neurology to be able to launch in psychiatry.

But there will also be a additional step up between the third and fourth quarter for spending this will be primarily driven by.

The addition of the Salesforce.

To support a 12 in the marketplace, but also a pickup in marketing spend as we get closer to the launch marketing spend is going to intensify two which well coincidently include sampling expense as well for the fourth quarter. So.

Jack A. Khattar: Having said that, definitely, we are exploring many different ways here to optimize the use of our resources across what is now a portfolio of actually six or will hopefully be a portfolio of six marketed products between the five neurology-focused products and, of course, SPNA-12. So we're looking at how we can optimize the use of the sales forces, a new sales force which will support the launch of 812. And of course, all these decisions in the past few months have changed a little bit or evolved over time because we didn't know initially when pre-COVID and post-COVID. You would expect our plans also to shift over time as well. So it's a continually fluid situation, but certainly we want to make sure SPNA-12 gets all the investment that it requires to be a successful product. And in parallel, we will have adequate support for all the other neurology products as well. Annabel, this is Greg.

When you think about spending for were.

The year, Richard progress like that and obviously, there's a in their implications here for spending in 2021 as well.

Okay, great. Thanks for the for the details.

Thank you we do have a follow up question from the line of David Feinberg with Jefferies. Your line is now open.

Thanks, Ted one more question.

On the relates to business development capital allocation so.

Greg you generated 100 million cash.

In the first half this year any ended Q2 is that 730 million cash even ask you paid.

300 million for U.S. World minutes. So what are your views on cash utilization and anymore D E slashed acquisitions, perhaps for the into the year.

And if that.

Greg Patrick: I'd just like to add to Jack's comments, which are, of course, spot on. In terms of SG&A progression through the year, there will be a discernible impact in the third quarter simply because we've added the SG&A expenses associated with supporting the Parkinson's disease products, including the sales reps, nursing network, et cetera. But there will also be an additional step-up between the third and the fourth quarter for spending. This will be primarily driven by the addition of the sales force to support 812 in the marketplace, but also a pickup in marketing spend as we get closer to the launch. Marketing spend is going to intensify too, which will coincidentally include sampling expense as well for the fourth quarter. So when you think about spending for the year, it should progress like that. And obviously, there are implications here for spending in 2021 as well. Great, thanks for the details. You're welcome.

Okay.

Yes.

Great.

Okay.

Yes.

Oh.

So sorry, David the you're cutting off.

Let me see if I can.

Lisa the rest of the majority of that first portion of the question. So.

As far as the past.

As far as the business development differently, we continue to look for.

Other opportunities here.

Exactly because as you mentioned you know we have generated a significant amount of cash.

We still have a strong balance sheet. So we are continuing to look at different opportunities within the CNS neurology or psychiatry, either either case.

Regarding the cash flow generation and Greg can add to that.

The second half is going to be a little bit more difficult to generate a similar level of cash because of the.

Frontloading of a lot of the expenses also from a working capital perspective, you know the building of the inventory of SP on a 12. So there's a lot of activity that will consume cash and the second half.

Operator: Thank you. We do have a follow-up question from the line of David Steinberg with Jeffries. Your line is now open.

So we had a conscious about that as well to make sure. We continue to have a strong balance sheet, but the bottom line as we will continue to look we Arkansas still engage in a lot of different opportunities to continue to add to both neurology and of course psychiatry, though synergistic with our current products right. So.

David Steinberg: Thanks. I had one more question. Um, on the, uh, relates to business development and capital allocation. So, um, Jack and Greg, you generated a hundred million in cash. In the first half of this year and the end of Q2, we had about $730 million in cash, even after you paid about $300 million for U.S. World Med. So what are your views on cash utilization? Any more BDD slash acquisitions? perhaps for the end of the year, and if so, what sort of assets are to be invested in? So sorry, David, you're cutting off.

Thanks, Jack So David just to add to jacks.

Thoughts.

[noise] generation of course is is going to move in the direction that Jack referenced.

Our guidance for the year 90, $200 million inclusive of amortization of intangibles.

Got it if we look at what we've accomplished for the first six months, we're about 70 $576 million towards that objective. So just by Didnt have the guidance, which also couples up with but my comments previous show an increase cadence, especially in a spending the cash generation for the back end year is going to be positive, but clearly it's not.

Jack A. Khattar: Well, let me see if I can at least address the majority of the first portion of the question. So as far as business development is concerned, definitely we continue to look for other opportunities here precisely because, as you mentioned, we have generated a significant amount of cash. We still have a strong balance sheet, so we are continuing to look at different opportunities within CNS neurology or psychiatry, either case regarding cash flow generation, and Greg can add to that. The second half is going to be a little bit more difficult to generate a similar level of cash because of the front-loading of a lot of the expenses and, also, from a working capital perspective, you know, the building of the inventory of SPNA 12.

To be as robust as it was in the first six months.

[noise] exited.

Thank you we have no further questions in the queue. At this time I would now like to turn the call back to Jack could talk for closing remarks.

Thank you despite a very challenging environment than the first half of this year, our employees continue to execute well across many areas of our operations. They have delivered solid operating results was 17% growth in revenues and 10% growth in operating earnings and net earnings compared to last.

Jack A. Khattar: So there is a lot of activity that will consume cash in the second half, so we are conscious about that as well to make sure we continue to have a strong balance sheet. But the bottom line is we will continue to look. We are still engaged in a lot of different opportunities to continue to add to both neurology and, of course, psychiatry that are synergistic with our current products. Thanks, Jack.

Here.

In addition, our employees executed on two very important corporate development transactions and made significant progress in integrating the acquired Parkinsons products.

As we move into the second half of 2020, we remain focused on preparing for the launch of SP and a 12 and submitting the NDA to the FDA for less than 830. These two late stage assets represent two very important growth drivers for the company, we are focused on driving them towards commercialization.

Greg Patrick: So, David, just to add to Jack's thoughts, cash generation, of course, is going to move in the direction that Jack referenced. Our guidance for the year, $9,200 million, inclusive of amortization of intangibles, if we look at what we have accomplished for the first six months, we are about $75, $76 million toward that objective. So just by dint of the guidance, which also couples up with my comments previously on the increased cadence of SPNA spending, the cash generation for the back-end year is going to be positive, but clearly it is not going to be as robust as it was in the first six. Thank you. We have no further questions in the queue at this time. I would now like to turn the call back to Jack Khattar for his closing remarks. Thank you.

To accelerate our growth mode moving forward.

We will also continue to support our marketed products and urology, providing us with a diversified revenues earnings and continue to cash flow.

Thank you very much for joining us. This morning, we look forward to updating you during the rest of the.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

[music].

Jack A. Khattar: Despite a very challenging environment in the first half of this year, our employees continue to execute well across many areas of our operations. They have delivered solid operating results with 17% growth in revenues and 10% growth in operating earnings and net earnings compared to last year. In addition, our employees executed on two very important corporate development transactions and made significant progress in integrating the acquired Parkinson's product. As we move into the second half of 2020, we remain focused on preparing for the launch of SPN 812 and submitting the NDA to the FDA for SPN 830. These two late-stage assets represent two very important growth drivers for the company, and we are focused on driving them towards commercialization to accelerate our growth moving forward.

Oh.

[music].

Operator: We will also continue to support our marketed products and neurology, providing us with diversified revenues, earnings, and continued cash flow. Thank you very much for joining us this morning. We look forward to updating you during the rest of the year. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

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