Supernus Pharmaceuticals Inc. Q1 2023 Earnings Call
Good afternoon, and welcome to <unk> Pharmaceuticals, first quarter 2023 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 <unk>.
Though of ICR Westwick Investor Relations representative for <unk> Pharmaceuticals, you may begin.
Thank you Steven good afternoon, everyone and thank you for joining us today for <unk> Pharmaceuticals first quarter 2023 financial results conference call today. After the close of the market. The company issued a press release announcing these results on the call with me today are so pernicious Chief Executive Officer, Jackatar and cheap Atlanta.
Financial Officer, Tim deck, today's call is being made available via the Investor Relations section of the company's website at IR Dot site permits the Pernis dot com.
During the course of this call management may make certain forward looking statements regarding future events and the Companys future performance. These forward looking statements reflect some furnaces 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 fact.
<unk> section of the company's latest SEC filings 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 May 19, 2023. Since then the company may have made additional announcements related to the topics discussed please <unk>.
Reference the company's most recent press releases and current filings with the SEC.
Furnace declines any obligation to update these forward looking statements, except as required by applicable securities laws I'll now turn the call over to Jack.
Thank you Peter and good afternoon, everyone and thanks for taking the time to join US as we discuss our 2023 first quarter results.
Despite the generic entry on Trokendi XR in the typical insurance headwinds in our industry in the first quarter. So partners delivered strong first quarter results and set the stage for solid performance for the rest of the year.
In the first quarter Separateness achieved total revenues of $154 million essentially flat compared to 153 million in the same period a year ago.
This was achieved despite a significant 45% decline or $28 million decline in net sales of Trokendi XR.
In addition, the first quarter 'twenty to 'twenty, three adjusted or non-GAAP operating earnings were $31 million compared to $28 million in the same period last year.
Excluding trokendi XR first quarter of 2023, and net product sales increased 25% year over year.
Driven by continued adoption of category across both pediatric and adult patients and grow somebody go covering.
We remain well positioned as we manage through the loss of exclusivity of Trokendi XR and transition to our growth brands setting the stage to deliver double digit growth in 'twenty 'twenty four and beyond.
Category continues to perform well with total I can give you a prescription in the first quarter of this year, reaching 134530, representing a sequential increase of 14% compared to the fourth quarter of 'twenty to 'twenty two.
Prescriptions in the most recent month of March reached 49789, the highest monthly total since the launch this represents an annual run rate for a category of more than half a million prescriptions.
Category also continues to capitalize on several dynamics that we elaborated on last quarter, including the underlying growth in the overall U S. ADHD market an increase in the average wholesale acquisition cost per prescription.
Improvement in managed care coverage and the continued growth in calories base of prescribers in the first quarter of 2023 category expanded its base of prescribers of approximately 19197 up from 16822 of prescribers in the fourth quarter of 2022.
We initiated the expansion of our sales force by approximately 45 sales representatives to give us broader reach and increased capacity to deliver higher frequency on high decile prescribers.
This expansion is substantially complete, allowing us to cover more than 50% of the ADHD market.
In summary caliber continues to perform across several important growth metrics, giving us confidence in its growth potential in 2023, and more importantly in 'twenty 'twenty four and beyond.
Switching now to go covering <unk> stellar XR net product sales increased to 26 million and 29 million respectively.
This represents an increase of 15% for a go cauvery and 5% for <unk> are compared to the same period last year.
Regarding trokendi XR net product sales in the first quarter were $35 million down sequentially from $57 million in the fourth quarter of 2022 and down year over year from 63 million in the first quarter of 2022.
In January 20th 23, the first generic to three out of four product strengths of Trokendi XR was introduced totaled.
Total prescriptions for the first quarter of 2023 declined by 48% compared to the same period last year.
Later in the quarter, a generic to the forest product strength entered the market.
At this point, we are maintaining our guidance for net sales between 60 and $80 million for Trokendi XR for the year.
Moving onto the pipeline, we had a constructive meeting with the FDA in April this year regarding the Resubmission of the NDA for SPN 830, our April morphine infusion device based on the meeting we expect to resubmit the NDA in the fourth quarter of 2023.
Enrollment is progressing in the open label Phase II clinical study for SPN 817 in adult patients with treatment resistance seizures, and we continue to expect top line data in the first half of 'twenty 'twenty four.
Yeah.
For SPN eight 'twenty, our first in class orally active M. Tor Quanta activated the phase two randomized double blind placebo controlled study in adults with treatment resistant depression is ongoing with 33 sites activated.
This study will examine the efficacy and safety of SPN 820 over the course of five weeks of treatment and approximately 270 patients.
We're planning on holding an R&D day in the fall of this year to discuss in further detail our lead pipeline programs and new chemical clinical candidates that were generated through our discovery program and nominated for clinical development.
Finally, we continue to be active in corporate development looking for strategic opportunities to further strengthen our future growth and leadership position in CNS.
With that I will now turn the call over to Tim.
Thank you Jack and good afternoon, everyone.
As I review, our first quarter 2023 results. Please refer to today's press release and 10-Q that were filed earlier today.
Total revenue for the first quarter 2023 was $153 8 million compared to $152 5 million in the same quarter last year.
Total revenue in the first quarter of 2023 was comprised of net product sales of $140 6 million and royalty revenue of $13 2 million.
The increase in total revenues was due to higher net product sales of Calgary go coverage and royalty revenue.
Partially offset by the decrease in net product sales of Trokendi XR.
For the first quarter of 2023, combined R&D and SG&A expenses were $106 8 million as compared to $111 3 million for the same period last year.
The decrease was primarily due to autonomous integration costs, which were included in Q1 2022 that resulted in operational efficiencies.
Operating earnings on a GAAP basis for the first quarter 2023 was $5 2 million as compared to operating earnings of $2 million for the same period last year.
Okay.
Total other income for the first quarter 2023 was $3 8 million as compared to $12 8 million for the first quarter of 2022.
The change is primarily due to a gain recognized in the first quarter of 2022 on the sale of a subsidiary of <unk>.
In the first quarter of 2023, we reported an income tax benefit of $7 9 million as compared to an income tax benefit of $10 9 million for the same period last year.
The income the income tax benefit in the first quarter of 2023 was primarily due to a lower pre tax loss forecasted for 2023.
The income tax benefit in the year earlier period as noted on our prior calls was due to our corporate reorganization of the enormous entities in the first quarter of 2022.
GAAP net earnings were $16 9 million for the first quarter of 2023, or 29 cents per diluted share compared to $25 6 million or <unk> 43 per diluted share in the same period last year.
On a non-GAAP basis, which excludes amortization of intangible assets share based compensation contingent consideration expense gain and depreciation adjusted operating earnings was $30 5 million compared to $28 million in the same period the previous year.
As of March 31, 2023, the company had approximately $686 5 million in cash cash equivalents restricted cash and marketable securities compared to $555 2 million as of December 31, 2022.
The increase was primarily due to cash generated from operations and the net amount drawn on our line of credit to fund the convertible note payoff.
In November 2023, the company paid the total principal amount of $400 million to $5 million due under its convertible senior notes. In addition to payment of the remaining outstanding interest due of $1 3 million.
Following the repayment that 2023 notes are no longer outstanding.
The repayment of the 2023 notes at maturity was financed primarily with available cash on hand and to a lesser extent through a borrowing under the company's existing credit line agreement.
We expect to fully repay the borrowing from the credit line by the end of the second quarter of this year.
Okay.
Now turning to guidance for full year 2023, the company is raising the expected ranges of full year, GAAP and non-GAAP operating earnings and lowering the expected range of combined R&D and SG&A G&A expenses.
For the year ended 2023, the company reiterates its prior financial guidance for total revenue.
As such we expect total revenue to range from $580 million to $620 million comprised of net product sales and royalty revenue.
As Jack mentioned, we continue to expect net product sales of Trokendi XR in the range of approximately 60 million to $80 million.
For the full year 2023, we now expect combined R&D and SG&A expenses to range from 450 million to $480 million compared to the prior guidance of $460 million to $490 million.
As we mentioned previously the sales force the sales force expansion to support the growth of calibrate was initiated in 2023 with most of the expense related to the expansion starting in the second quarter of this year.
We expect to further invest in commercial initiatives for Calgary during the back to school season, along with investments for other growth products.
We now expect full year GAAP operating loss in the range of 10 million to $30 million compared to previous guidance of an operating loss of 25 million to 50.
And finally, we expect non-GAAP operating earnings to range from $75 million to $100 million compared to the previous guidance of $65 million to $95 million.
Please refer to the earnings press release issued prior to this call that identifies the various range of reconciling items between GAAP and non-GAAP .
With that I will now.
Turn the call back over to the operator for Q&A.
Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced.
To withdraw your question.
Please press star one again.
Please stand by while we compile the Q&A roster.
Our first question comes from the line of Andrew <unk>.
Hi.
Of Jefferies. Your line is now open.
Okay, great. Thanks, everyone great quarter I appreciate you taking my questions. So the first one is that.
Congratulations on locking in that major PVM contract I think effective January 2023, so maybe remind us the latest and greatest thinking on.
When we can expect that target of 50% to 50%, 55% gross and net to occur basically is it fair to assume.
That that range could happen this year or could it take a little bit longer than that thanks.
Sure Hi, Andrew regarding the.
Second car.
It became effective in the first quarter of 2023 now you we didn't see the full effect of that contract or a lot of the effect of the contract. Because also you all those opposing factors within the Q1 beat.
Because of the high deductibles insurance higher co pays and so forth. So we certainly expect the full impact of this second PVM contract more in the second quarter, and obviously, even better in the third quarter and the fourth quarter.
To answer the question clearly as we progress through the year, we expect the gross to net to improve and definitely get us closer to the $50 55 by year end.
So it's going to be is it linear or most likely I mean, that's typically what we see in our business improvement in the gross to net.
With Q1 typically at the worst level and then improvement throughout the year.
So certainly thats, what we expect on caliber moving along from the early 60% gross to net towards the 55 or even 50% hopefully by year end.
Great very clear and then maybe just one more then.
Okay.
Would you agree based on your guidance, if we backed out all of your products.
With reasonable assumptions, including Trokendi, which you've guided to stellar and so forth would you agree that Calgary sales.
Maybe more.
More than double if not almost triple this year and if that's the case I know you are not.
Not trying to provide guidance, but directionally speaking if that's the case.
Then is it fair to assume Calgary sales should accelerate on a quarterly basis going forward. That's just the root of my question. Thank you.
Yes. The short answer is yes, I mean, we do expect the category to accelerate.
As the year goes on and especially of course as we also get closer to the back to school season on top of all that.
Yes. It is it is more than double than last year, that's an easy answer actually given last years performance.
We've made several comments this quarter and even the last quarter, obviously about the different dynamics in the marketplace that are helping us.
And are expected to continue to fuel the growth behind the brand from the market itself being a very healthy market the ADHD market.
And then clearly.
From a managed care perspective continued improvement on the coverage.
<unk>.
Continued increase in the whack average wholesale acquisition cost and of course, the expansion in our sales force and so forth and the improved coverage from an ADHD market perspective. So all of these are pointing and aligned in one direction, which is really continue to push calibrate.
And the increase the momentum and the growth behind the product.
Thank you Jack.
Sure.
Okay, one moment for our next question.
Next question comes from David and sell them.
Piper Sandler your line is now open.
Hey, thanks.
Calgary can can you talk about Jack where you see the mix between adults and peds evolving overtime and I may have missed on.
On your prepared remarks, what you'd said on the current mix between adults.
In peds, but just talk about where you think that mix is going to go.
Overtime, Secondly, can you provide some more specifics on.
Where you need to improve upon in terms of managed care access.
And then third just real quick on <unk> I believe you have a.
Generic.
Filing a trial on a generic filing.
Pending so just wanted to get your thoughts on.
That and the relative risk of potentially an earlier than expected loss of exclusivity on X seller. Thank you.
Yes sure on the first question for caliber and the mix of the business I mean, where we are right now we are about somewhere between 28, 30%.
Adult and the rest being pediatric.
The market itself. If you remember, it's basically almost the other way around where the bulk of it is about around 67% in pediatric around 33%. So clearly as time goes on.
We continue to expect to grow our business in the adult market and will it eventually mimic exactly the market. We don't know for sure. Obviously, we're still early in the adult launch.
Certainly we've done extremely well and we're very happy with the adult launch and also rate right now looking at the mix right now versus looking at it in the fall with the back to school season, but the mix made flip a little bit because you have a little bit more momentum behind the pediatric business in their back to school season. So these ratios are going to shift over time.
<unk> continued to shift.
But at some point, we will find ourselves probably closer to the market, but may not make it exactly.
Regarding the next question on the managed care improvement I mean that is an all is an ongoing process. I mean, we will continue our discussions with other pbms and continue to add contracts, where it makes sense and what it is reasonable for us to enter these contracts same thing with the Medicaid in the different states.
Ongoing process, where we always look for improving our position overtime.
And clearly as time goes on as utilization goes up as we continue to be successful as we've been in the last couple of years, improving and growing the prescriptions and a really solid way.
Even gives us further ammunition to go back and renegotiate contracts or try to improve our position.
Time goes on.
Regarding <unk> stellar XR and the genetic situation, we basically have three <unk>.
<unk> companies, where we are.
We have sued these three generic entrants that wanted to come in on <unk> XR. We are in the middle of Litigations I can't really comment one way or the other but that is certainly a risk on ox stellar XR that we may be able to.
Maintain exclusivity till the end of their patent exploration, which is 22007 or we may not so we really don't know we will certainly update the street on how things progress or don't progress or whether any settlements occur if they do occur.
So certainly at this moment there is nothing really I can report, but we will definitely report or announce anything if anything comes up.
But certainly there is a risk for us on <unk> XR as time goes on.
And I don't know if I missed was that a question on Trokendi XR no no no thats just.
On <unk> I may have just follow up real quick I mean, I believe you had prior litigation that you did win if I'm not mistaken is that just.
Just a quick refresher on that.
Yes sure.
The first two genetics that filed on August <unk>, RTW, I, Nx Davis, which is now <unk>.
We actually went to court on these two cases and we won in both cases, all the way through <unk>. So that is correct that was back in the <unk>.
2016, 17 timeframe when those cases, where.
Resolved actually in our favor.
So this is a second wave of genetics that are filed in the last two to three years and we are in litigation with the second wave of the genetics. Okay. That's helpful. Thank you Jack.
Yes.
Sure.
Okay.
Further question again as a reminder to ask a question you will need to press star one one on your telephone.
Our next question comes from Annabel <unk> of Stifel. Your line is now open.
Hi, This is Jack on for Annabel, Thanks for taking our questions.
Could you talk a little bit about the <unk> launch and how that's growing relative to your expectations.
You seem to have a pretty refined message that you can treat both the off episodes and the dyskinesia or physicians receptive to that or do they only want to talk about how to maximize treatment of the off period is there any friction there.
Yes, sure, yes, I mean, we've been very pleased with the <unk> and the <unk>.
Response, we've been getting from the market from physicians regarding the unique positioning of the product that's unique profile.
Which is the only product in Parkinson's that is approved to treat dyskinesia and off episodes.
And obviously this quarter also was fairly solid given again, it's a first quarter, which typically we have the headwinds of insurance and everything else that goes on in our business in the first quarter, we're very happy with recovery delivering 15% growth versus last year.
And that's on top of the 19% growth that delivered last year.
And as far as the message itself and the positioning it really depends on.
The physician practice, how they treat Parkinson's are they actually.
<unk> disorder specialists or are they a general neurologist. So the discussion in the physician's office, sometimes is a little bit different depending on the specialty.
But overall there is a lot of education that has to occur and that we continue to do that from a market education perspective, really helping physicians discuss the real issues bring up the issue of dyskinesia patients sometimes on their own they are not aware.
That actually dyskinesia.
Caused by a lot of the medications that on they might think actually dyskinesia as part of the disease and therefore, they don't raise it they don't talk about it they don't ask physicians about it positions.
Ask the patients about it so we try to improve the education in the marketplace to make sure that is brought up in the conversation between the patient and the physician.
So that people can be aware of the fact that it is an issue. It can be dealt with there is a product that actually treats it and not only treat dyskinesia, but also treat the off episodes and there is really no need to have a tradeoff here between the efficacy of a lot of these Parkinson's agents, specifically live adult broke out a bit.
But what we're talking about here there is really no need for the physician to taper off or reduce the dose of levodopa Carr with open to get rid of dyskinesia you can always add go Calvary.
Treat the dyskinesia, but even also get efficacy on off episodes at the same time.
It's a beautiful solution that people really understand the situation again.
Have a great results with a go coverage so.
It's just a matter of continued education continue to push that unique positioning that <unk> holds in the market and.
I think so far the results speak for themselves as far as the uniqueness of the product.
Continued benefit in the marketplace.
Got it and then if I could just ask one more on calibration.
Do you have a granular breakdown of where those prescriptions are coming from in terms of naive patients versus switches from stimulants or non stimulant.
And now the increasing volumes that youre getting.
Are payers, becoming more permissive with prescribing or are they still requiring step edit.
Yeah regarding the source of the business.
On <unk>.
It really cuts in so many different ways, but basically about 29% of the business is from new patients.
And the remaining 71% switching.
Patients from existing medications or adding calibrate to the existing medication and when you look at the switches themselves 65% of the switching is coming from the stimulants and 35% of the switching is coming from non stimulants.
And that is actually a very very encouraging fact.
And looking at the source of the business, we are actually drawing a lot of patients from the stimulant side a lot of it is due to the aes that people side Aes, mainly as one of the major driver actually behind it and of course in kids or pediatric. It's also the patents not willing to put their kids on controlled substances.
On top of all that.
So we're very encouraged by this trend and it continues to be that way even from the time, we started launching the product in pes and in adults.
And then as far as the payers and the step edits and so forth I mean, it's really a mixed bag.
The first PVM contract, we had its actually a tier two preferred so there is no steps through the second one has a minor step through but again, if you think about the market, let's say 90% of it is <unk>.
So if you have to go through a stimulant that's really not much of an issue.
If you have to go through a non stimulant that might just delay your initiation on calibrating by three weeks four weeks or whatever until when you are dissatisfied with the first non stimulant clearly so.
It is a mixed bag of different plans have different formularies different step throughs at <unk> and so forth and we can back to my previous answer on the previous question and that is some of the things that we continue to work on and to keep to improve.
On the coverage and minimize the step throughs or the different medications patients have to go through before getting calibrate.
Very helpful. Thank you.
Sure.
Okay seeing no further questions I would now like to turn it back to Jack <unk> for closing comments.
In concluding our call. This afternoon I would like to emphasize that returning to strong growth as our top priority. We are very pleased with our performance in the first quarter. Despite the significant erosion of Trokendi XR due to the entry of generics in the typical insurance headwinds we are confident that our.
Growth products will allow us to offset the impact coming from the loss of exclusivity of Trokendi XR and to return to revenue and operating income growth in 2024 and beyond.
Thanks, so much for joining us. This afternoon, we look forward to updating you on our next call.
Alright. Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Okay.
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