Q2 2023 Supernus Pharmaceuticals Inc Earnings Call
Yeah.
Good afternoon, and welcome to <unk> Pharmaceuticals, second quarter 2023 financial results Conference call.
At this time, all participants are in 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.
Now I'd like to turn the conference over to Peter Bustle of ice CR Westwick Investor Relations representative for Supernovas Pharmaceuticals, you may begin.
Thank you Steven good afternoon, everyone and thank you for joining us today for <unk> Pharmaceuticals second quarter 2023 financial results conference call today. After the close of market. The company issued a press release announcing these results on the call with me today are some furnaces, Chief Executive Officer, Jackatar, and Chief Financial Officer, Tim Dec.
Today's call is being made available via the Investor Relations section of the company's website at IR got superb dot 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 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 factors section of the company's latest SEC filings.
Actual results may differ materially from these projected 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 August eight 2023.
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. So pernice declines any obligation to update these forward looking statements, except as required by applicable securities laws I will now hand, the call over to Jack.
Thank you Peter good afternoon, everyone and thanks for taking the time to join US as we discuss our 2023 second quarter results.
So upon us continues to execute well during a transition year with the loss of exclusivity on its flagship brand Trokendi XR.
In the second quarter of this year, our growth products continue to deliver robust growth with calibration go coverage, achieving combined net sales of $60 million.
This represents 67% growth compared to the same period last year and by far exceeds the $52 million decline in Trokendi XR net sales in the second quarter compared to 2022.
Similarly for the first half of 2023 so furnace generated $112 million in net sales from Calgary and go Calvary, which significantly exceeded the $180 million lost from Trokendi XR in the same period.
Finally, excluding Trokendi XR total revenues for supporting US grew by 25% in the first half of 2023 compared to the same period last year.
Moving on to more specifics about calories strong performance in the second quarter. Despite the beginning of the week summer season, and the ADHD market.
For IQ via prescription data the ADHD market was essentially flat in the second quarter compared to the first quarter of this year, while the calories prescriptions grew by 9%, reaching an all time high of 146344 and quarterly prescriptions.
In addition categories net sales grew by 20% in the second quarter compared to the first quarter of 2023, showing the resiliency of the brand and its continued growth potential despite the seasonality in the ADHD market.
Moreover, the 146344 quarterly prescriptions represent 133% increase compared to the second quarter last year.
As we approach mid August several of the metrics have now started signaling the return of the back to school season.
For instance, pharmacy orders from wholesalers that are typically a good leading indicator for product demand have significantly increase in the first week of August compared to June and July setting a new high since the launch of the product. Consequently, the factory shipments are starting to ramp up to satisfy demand.
The pharmacies.
Moreover caliber continues to capitalize on several dynamics, including a 12% increase in average total daily dose in the second quarter of 2023 compared to the second quarter of 2022.
Leading to one third of calories prescriptions now being more than 300 milligram per day compared to 24% a year ago.
Together with an improvement in the gross to net this resulted in an average net price per prescription of $212, an increase of 20% compared to <unk> 2022, and 10% increase compared to the first quarter of 2023.
In addition, during the second quarter calibrate expanded its base of prescribers to approximately 21291 up from 19917 prescribers from the first quarter of 2023.
We expect <unk> growth to continue with our increased capacity and broader reach behind the sales force expansion as well as the back to school season.
Finally, we are very excited about our recent research article that was published last month in CNS drugs by the authors doctors and actual price and Richard price.
The peer reviewed research article with the headline excel.
Extended release of Alloxazine compared with eight amoxapine for attention deficit hyperactivity disorder describes an independent retrospective chart review of 50 patients with ADHD and routine clinical practice by the two physicians.
Patients adult and pediatric received after four weeks of Atomoxetine per their required insurance prior authorization.
We're then washed out for five days and then switched over to four weeks of calibrate treatment.
Approximately half of the patients were also maintained on a stable dose of psychostimulants that they were on prior to receiving atomoxetine or calibrate with a sub optimal response.
The ADHD rating scale five in adult investigators symptom rating scale, where administered during the study.
At baseline at the end of the four week Atomoxetine trial or earlier, if the skinny disciplined tenured for Aes and at the end of the subsequent four week calibrate trial.
Briefly the results are as reported in the article out as follows first caliber.
Calibers showed highly statistically significant improvements with a P value of less than 0.00001 on the two ADHD scales compared to a <unk> setting.
Second 96% of patients preferred calibrated over atomoxetine.
Third 85% of patients receiving stimulants chose to taper off the adjunctive stimulant once they are stable on calibrating.
486% reported positive response by the second week of taking calibrate and.
And finally, 4% discontinued calorie versus 36% discontinued <unk> due to aes.
In summary on Iqos, the author's conclusion as published in the article.
Pediatric and adult ADHD patients, who have experienced less than optimal response to atomoxetine demonstrate rapid improvement in inattention and hyperactivity impulsivity with a greater tolerability on extended release of Alloxazine.
Please note that support us did not provide any support or funding for this research.
We remain confident in the potential for calibrate given its unique and differentiated clinical profile of a non stimulant that works works fast works in both subscales of ADHD and has shown great tolerability.
Switching now to go cover net product sales increased $29 million in the second quarter of 2023 visceral.
This represents a healthy increase of 17% over the same period in 2022.
We continue to be pleased with the performance of the brand, which is now at an annualized run rate of approximately $115 million to $120 million and net product sales.
Regarding our stellar XR net product sales were 24 million compared to $30 million in the same period last year. The decline was primarily due to destocking by wholesalers impacting gross sales and higher rebates that are head all hit in the same quarter.
For Trokendi XR net product sales in the second quarter were $19 million down sequentially from $35 million in the first quarter of 2023.
And down from $72 million in the second quarter of last year.
There are now three generics in the market on Trokendi XR and we expect further decline in quarterly sales on the brand.
Given the performance of Trokendi XR in the first half of the year, we have revised the guidance slightly with the midpoint of the range now at approximately $75 million for full year 2023.
Regarding the pipeline, we will be hosting an R&D day in New York City on October 18, 2023, where do we will share with you an overview of our product pipeline with an emphasis on SPN 817 in the open label Phase II clinical study in adult patients with treatment resistance seizures.
SPN eight 'twenty, our first in class orally active <unk> activator, which is in a phase II study in adults with treatment resistant depression as well as new clinical candidates from the company's discovery program.
In addition, key thought leaders, who will share their perspectives on the current treatment paradigms unmet medical needs and the company's clinical development programs.
Our team in collaboration with our partners continues to work hard towards the planned resubmission of the NDA for SPN 830, our April morphine and fusion device in the fourth quarter of this year.
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 over the call to Tim.
Thank you Jack good afternoon, everyone.
As I review, our second quarter 2023 results. Please refer to today's press release and 10-Q that were filed earlier today.
Total revenue for the second quarter, 2023 was $135 5 million compared to $170 1 million in the same quarter last year.
Total revenue in the second quarter of 2023 was comprised of net product sales of $128 3 million and royalty revenue of $7 2 million.
The $37 $2 million decrease in net product sales was primarily due to a $52 $3 million decline in net product sales of Trokendi XR.
Partially offset by $24 million increase in net product sales of our growth products Calgary NGO covering.
Excluding net product sales of Trokendi XR in both periods total revenues for the second quarter of 2023 increased 18% compared to the same period last year.
For the second quarter of 2023, combined R&D and SG&A expenses were $111 2 million as compared to $116 9 million for the same period last year.
Yeah.
While second quarter 2023, SG&A expense expenses declined year over year, R&D expenses increased $8 million over the same period due to increased investment and advancement, but the clinical programs in our pipeline.
Operating loss on a GAAP basis for the second quarter of 2023 was $17 6 million as compared to operating earnings of $11 3 million for the same period last year.
In the second quarter of 2023, we recorded an income tax benefit of $16 3 million as compared to income tax expense of $3 5 million for the same period last year.
GAAP net loss was 800000 for the second quarter of 2023 loss per diluted share of <unk> <unk> compared to GAAP net earnings of $7 9 million or earnings per diluted share a 14th in the same period last year.
On a non-GAAP basis, which excludes amortization of intangibles and share based compensation contingent consideration and depreciation adjusted operating earnings was $10 million compared to $37 6 million in the same period last year.
Now turning to the six month numbers.
Total revenue for the six months ended June 32023 was $289 3 million compared to $322 6 million in the same period last year.
Total revenues were comprised of net product sales of $268 9 million and royalty revenue of $20 4 million.
Similar to the second quarter of 2023 results the $44 million decrease in net product sales.
We're primarily due to an $83 million decline in net product sales for Trokendi XR, partially offset by $44 $9 million increase in net product sales of our growth products Calgary and go covering.
Excluding net product sales for Trokendi XR in both periods total revenues for the six months ended June 32023 increased 25% compared to the same period last year.
Combined R&D and SG&A expenses for the six months ended June 32023, or $218 million as compared to $228 2 million for the same period last year.
The second quarter 2023, SG&A expenses decreased while R&D expenses increased $8 4 million over the same period due to our investment in our current pipeline.
As Jack mentioned earlier, we will be holding an R&D day on October 18th which will provide more insight into our R&D and clinical development portfolio to deliver growth for our business.
Operating loss on a GAAP basis for the six months ended June 2023 was $12 $4 million as compared to operating earnings of $13 3 million for the same period last year.
For the six months ended June 2023, we reported an income tax benefit of $24 2 million as compared to income tax benefit of $7 4 million for the same period last year.
GAAP net earnings were $16 1 million for the six months ended June 32023, or 29 cents per diluted share compared to $33 5 million or <unk> 57 per diluted share in the same period last year.
On a non-GAAP basis, which again excludes amortization of intangibles and share based compensation contingent consideration and depreciation adjusted operating earnings were $40 5 million compared to $65 7 million in the same period last year.
As of June 32023, the company had approximately $189 1 million in cash cash equivalents in marketable securities compared to $555 2 million as of December 31, 2022.
The decrease was primarily due to repayment of the convertible senior notes.
Partially offset by cash generated from operations.
On April one 2023, the company paid the total principal amount of $402 $5 million due under its 2023 convertible notes.
In addition to payment of the remaining outstanding interest of $1 3 million.
Following the repayment of 2023 convertible notes are no longer outstanding.
In addition, as of June 32023, the company has fully repaid borrowings against the credit line.
As a result of paying off these two different instruments as of June 32023. The company has a strong balance sheet and significant financial flexibility for potential M&A and other value creating opportunities.
Now turning to guidance.
For the full year 2023, the company reiterate its prior financial guidance for total revenue combined R&D and SG&A expenses, and GAAP and non-GAAP operating earnings.
As such we expect total revenues to range from $580 million to $620 million comprised of net product sales and royalty revenue.
For the full year 2023, we expect combined R&D and SG&A expenses to range from $450 million to $480 million and full year GAAP GAAP operating loss in the range of $10 million to $30 million.
And finally, we expect non-GAAP operating earnings to range from $75 million to $100 million.
Please refer to the press release issued prior to this call that identifies the various ranges 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 we will now conduct the question and answer session.
As a reminder to ask a question. Please press star 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 Andrew Tsai.
Of Jefferies.
Hi, Thanks. Good afternoon appreciate all the update thanks for the questions. So maybe the first question on Calvary the net price did seem favorable in Q2. It did sound as if gross to net also improved so.
Is were there any inventory fluctuations are de stocking.
And in Q2, and then it sounds like factory shipments are wrapping up in Q3 ahead of the back to school season, which you said is a positive leading indicator. So shall we assume some inventory build in Q3.
Yes, Hi, Andrew.
Regarding the inventory it has been light on calibrate in general all along it did get a little bit lighter in the second quarter, but nothing really significant.
Certainly with the back to school season, as I mentioned in my remarks, and as you rightfully said now kicking into high gear, we would expect the wholesaler so sort of reacting to the orders from the pharmacy. So the orders from the pharmacies are already showing a very healthy increase.
That's typically the lead indicator because pharmacies are seeing obviously the increase in the prescriptions. They react to that with increased orders and then wholesalers react to those orders by increasing their orders from us. So its really its a cascading effect and we're already seeing the first few steps occurring with.
Growth there and then of course, we will hopefully see that also obviously in the weekly prescriptions.
As time goes on specifically in mid August moving on through September and October .
Perfect and speaking of.
Scripts.
We are in the financial community think about.
What Calgary sales trajectory needs to be in Q3, and Q4 to reach some somewhere closer to consensus of $1 60 for 2023, assuming youre comfortable with that number then is it fair to assume.
Can expect CRX to inflect in both.
Third quarter and fourth quarter, rather than just third quarter.
So basically how are you thinking about the quarter over quarter sales growth cadence.
Is it going to be a strong growth in Q3 alone or equally strong in Q2, Q3 Q4 and beyond thank you.
Yes sure.
Prescriptions will start really picking up again in the third quarter and will continue through the fourth quarter as well because the back to school season.
It's a little bit funny is not a purely on a calendar basis clearly right. So half of the summer time as June which falls in the second quarter July is normally also soft which is in the third quarter, but the back to school season is really mid August even through October , which bleeds into the fourth quarter. So it's not purely <unk>.
<unk> clearly the seasonality and therefore the growth is expected to happen in the third quarter and again in the fourth quarter as well and therefore, we expect sales to continue to grow in the fourth quarter as well on top of what growth we get in the third quarter.
Perfect. Thank you very much.
Alright. Thank you one moment for our next question.
Okay.
Alright.
Next question comes from Stacy <unk> of television.
TV Cowen.
Alright.
Uh huh.
Hi, This is based on the line for Stacy and congratulations on the quarter and thank you so much for taking our questions.
Could you please comment on the calibrate traction in adult versus pediatric population. So what is the breakdown for the Calgary prescription growth for adult and pediatric segment in Q2, and the expectation for the adult ADHD launch. So what is the level of awareness among the clinician group as we think about future growth.
Prospects and should there be less seasonality for the adult population. Thank you.
Yes regarding adults versus pediatric what we so and.
Second quarter growth in the adult segment by approximately around 16% growth.
Versus in pediatric it was in the 5% to 6%. So clearly as the kids went into summer time out of school adult what's still picking up obviously the growth in the brand.
And obviously adult is also we're only about a year until the launch of adult so we're still trying to get much deeper reach within the adult physician audience and get more people to be adopters of the brand.
As far as our mix of the business, it's still in the probably.
30 around the 30%, 33% as adult and the rest is pediatrics. So we still have a long way to go as far as our growth in the adult segment.
Now with the back to school season now in high gear, you would expect us to be pushing more on the pediatric side clearly to take the most advantage of the back to school season, and then later maybe later in the year, we balance it out with another push on the adult side. So we do these different.
Strategies, obviously execute different strategy on a quarterly basis, depending on seasonality, depending on what did you launch and awareness and different physician audience the rate of adoption the growth rates and so forth.
Perfect and.
Lastly, so last quarter on the call you had mentioned some deepening prescriptions from top desktop discreet prescribers, but also expanding to new prescribers. So how is that expansion and deepening progressing and how do you see the prescriber base growing moving forward.
Yes, I mean, the the sales force expansion has been completed everybody has been trained everybody in the field has been in the field for a while now.
Timing of the expansion was by design clearly that's why we did it in the.
April may timeframe, so that we are.
Fully ready for the back to school season so.
Clearly the timing of all that was by design.
And therefore, the most impact we will see is in the back to school season, and the rest of the year out of that expansion.
That expansion of about $45 46 reps clearly was designed to do two things of course to expand the reach.
As well as to increase the frequency among.
The physicians.
This is a category which is.
Sensitive to promotion.
It takes numerous calls to turn a physician into an adopter. So frequency is extremely important.
And we are hyper focused of course on the top decile.
<unk>.
Who see a lot of patients who are from a volume perspective. They give you the best return on that sales call.
Perfect. Thank you so much.
Sure.
Alright. Thank you one moment for our next question.
Our next question comes from David <unk> of Piper Sandler.
Hey, Thanks, So just got a few.
First sorry, if I missed this but can you talk about underlying volume trends for co coverage.
Don't know if youre.
In a position to give prescription data.
But that would be helpful. Maybe I'll, just ask a different way or underlying sale.
Sales and volumes essentially.
And alignment.
So that's number one.
Then number two is.
How are you thinking.
These days.
<unk>.
<unk>.
Biz Dev and.
And youre going to have an R&D day, so I guess that sort of <unk>.
That's an interesting question is do you.
Are you looking at.
Additional pipeline assets.
Or.
Are you continuing to prioritize.
Commercial stage assets.
And.
Just help us understand your latest thought process there.
And then lastly, an accelerant.
I wanted to get your thoughts on.
Why you settled for next year. When you had a couple of other cases that you actually won and your entry for our stellar was 27 for generics now.
That pulls up to 24, just help us understand your thinking there and is it tied to.
Broader strategy regarding the assets Youre prioritizing.
Yes, yes.
Yes, starting with the first question on recovery.
We estimate.
<unk>.
Prescription growth to be around 6% like in the first half of this year on cocoa reversals last year. So it's still a healthy growth in prescriptions.
And the reason I say, we estimate because we're the go cauvery, it's a specialty pharmacy, but we also have several accounts institutions what have you that direct.
Actually buy from us so, it's a little bit and they don't report prescriptions to us.
So thats why there was always an estimate that is included its not like Youre reading IQ via prescriptions and because of the fluctuations from quarter to quarter.
Stop reporting it necessarily but we focus on sales.
And this is a very important point because when you have a specialty pharmacy or only accounts, who are buying the product theyre certainly not buying it.
There are no prescription is going on so the correlation between sales and the growth of the brand on a unit basis is pretty high.
Because these folks that tend to sit on inventory, obviously, especially like institutions.
And so forth.
So I would look at sales as a very very good marker and surrogate to the health of the product and the growth behind the product.
Regarding the second question on business development, we continue to prioritize.
The commercial assets, if we can get opportunities.
That have commercial assets that could bring further revenue and cash flow into the company.
As a next level priority as is our pipeline asset that could be potentially launched ahead of what we already have in our pipeline so our pipeline.
Clearly the most advanced one is the infusion device the April morphine infusion device, but right behind that the two main assets SPN 807, SPN a 'twenty are at this point in phase II. So if we can find other pipeline assets from the outside that are.
Have completed phase III Midland in the middle of phase III or even completed phase III.
Those will be ideal for us so that we can launch these assets in two to three years from now.
So priority wise, we continue to focus on on these specific criteria.
Again, we're agnostic, whether those are psychiatry or neurology, we're pretty flexible from an operational perspective, we can really address either.
Market very comfortably.
And finally the final question. The third one that you have that are not <unk> regarding the paragraph four situations in the most recent settlement.
Looking at the trial, which was or would have happened in July this year.
Early August looking at the allocation of our resources.
Legal fees at management attention and so forth, we felt that the best optimum situation for us with apex is really to settle with them.
A certain date get that risk off the table.
And we're very happy to say that we were able to manage so that the.
Downside on 'twenty 'twenty four is a very small partial downside so to speak so date, which was September one 2020, Florida will make the adverse impact on 2024, a little bit.
More palatable benefit where the full year, clearly or even a half a year hit on 2024. So.
That was really the strategy behind it is to get that certainty take the risk off the table on apex situation and be able to allocate more of their resources.
On the more important brands clearly with just calibrate <unk> covering.
Okay. That's helpful. Thanks, Jack.
Okay.
Alright, Thank you very much.
As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.
Our next question.
Our next question is from Annabel <unk> of Stifel.
Okay.
Hi, This is Jack on for Annabel, Thanks for taking my question.
But they didn't really get a good response, I mean people forget not everybody actually their response to stimulants, even if they have tried two different stimulants that exists on the marketplace.
Specifically with parents you know they just don't like to give their kids stimulant. So they may have tried them there weren't too happy really with the experience.
And so forth. So the bulk of the switches are coming from stimulus now having said that about 30% the remaining 30% of their business that we're getting or patients that were getting are actually a de novo patients. So these are patients that haven't tried anything before and caliber has it become the medication that has to go to medical.
<unk>, it's a first line treatment for a lot of physicians out there and that's really very encouraging for us.
Because it's.
Encouraging because now we can say that physicians for a lot of physicians.
They are thinking of calories as a first line treatment.
And it's really.
Based on the experience that either they have had with <unk> all heard about other physicians, who have tried to calibrate and really the remarkable efficacy, which I mentioned, especially with the study that I mentioned recently in our Calgary is really if you want to summarize it it's a non stimulant that really.
<unk>.
It works fast.
It works in both inattention, and hyperactivity and has great Pollard ability and that's exactly what we've been looking for decades now and this ADHD market. Yes, we have had other non stimulants, but unfortunately, they have disappointed patients for so many years and that's why the market has been split up with only 10%.
Of the ADHD market being a non stimulant.
So clearly we have been looking for a non stimulant that works and also works fast and caliber has been delivering on that as evidenced by the research.
Mentioned today, but also with all the surveys that we have on calibration.
And which is also corroborating reinforcing everything we saw in the phase III program.
Fast onset of action patterns don't have to wait forever.
When the school starts and waiting and waiting a week two weeks three weeks four weeks five weeks six weeks, sometimes that there are eight months' athene and the product may or may not work, even after waiting you don't know whether its going to work or not.
So Calgary is short.
And all along.
Winded answered about the short answer is it is really exciting to see that California has become for a lot of physicians that go to Prague.
Product, even from the beginning and even if they are forced to.
Go through a step edit like the article or the research that I mentioned through an eighth amoxapine.
The research that I, just mentioned with 50 patients it shows that the four week treatment with Atomoxetine.
Hasnt really done much for these patients.
They are still dissatisfied and therefore, they switched to calibrate after that and they get it.
Credible response.
Again, although this is not a head to head trial, but its actually clinical practice and these two physicians.
They conducted the study because they were forced by insurance and the prior authorizations and they generated data to prove that actually calibrate or extended release of Alloxazine is a whole different unique drug. Unlike any other non stimulant that ever existed in the marketplace.
Got it.
So just telling off that a little bit for all of those Calgary patients.
Have been converted from stimulant.
I know, you've previously mentioned that stimulant shortages werent necessarily tailwind for you.
Could you explain a bit more as to why that is.
Yes.
Sure. It is when you think about a patient who has been prescribed a stimulant and that patient went through the pharmacy and couldnt find it.
So from a medical clinical perspective, the first important point is the Doctor is made up.
And made the decision that that's really what's necessary and what's important and what's the right treatment for that specific patients, it's either an amphetamine and methylphenidate or what have you.
So if the patient reports value that they can find that that physician pretty much has probably 20 other options within the amphetamine and methylphenidate. So most likely because they've already made up their mind clinically most likely they're going to prescribe another similar.
Stimulant.
That is maybe a different formulation of a chewable or a tablet or extended release versus immediate release or whatever.
So thats why we don't think calibrate necessarily.
Is going to be the option that the physician will first think off when the patient reports to them that they can't find it now if the patient continues to have issues from a shortage perspective that may.
Make the physician rethink the therapy.
And maybe if that physician has a good experience with another patient.
Whom they felt that the non stimulant in Calgary is appropriate they may try caliber.
But we can't really.
Say that the shortages necessarily are really a good.
Good dynamic for us in general they might help but it would be probably not too significant.
Okay.
That makes sense. Thank you.
Sure.
Okay. Thank you I'm showing no further questions at this time I would now like to turn the conference back to Jack Qatar for closing comments.
Thank you and concluding our call. This afternoon I would like to emphasize that returning to strong growth as our top priority.
Our growth products calibrate and recovery delivered significant growth of 67% of net sales in the first half of this year.
Reaching $112 million that by far exceeded the decline of $80 million and Trokendi XR.
We'll continue to be focused on making the 2023 transition as smooth as possible as we move away from the legacy products and set the stage for continued growth in 2024 and beyond.
Thanks for joining us. This afternoon, we look forward to seeing you on October 18 at our R&D day in New York City and to updating you on our next call.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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Yeah.
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