Q4 2023 Supernus Pharmaceuticals Inc Earnings Call
Unnamed Speaker: Excluding net product sales and Tritendi XR in both periods, total revenues for the fourth quarter of 2023 increased 31% compared to the prior year quarter. For the fourth quarter of 2023, combined R&D and SG&A expenses were $104.6 million as compared to $91.7 million for the same period in 2022. The increase was primarily due to R&D spend associated with the clinical programs for SPN-817 and SPN-820 as we continue to progress our pipeline, and an increase in selling and marketing expenses due to the increase in the ADHD sales personnel and other Kelby marketing initiatives. In the fourth quarter of 2023, we booked a $20.2 million intangible asset impairment charge, mainly related to Zadogno. This non-cash charge reflects the forthcoming loss of explosives capability of Zadogno in December of 2027.
Unnamed Speaker: As a result of the impairment charge, operating loss for the fourth quarter of 2023 was approximately $1 million as compared to operating earnings of $34.35 million for the same period in 2022, income tax benefit in the fourth quarter of 2023 was $185,000 as compared to income tax expense of $9.7 million in the same period of 2022. Net earnings was $1.79 for the fourth quarter of 2023, or earnings per diluted share of two cents, compared to net earnings of $25.5 million or earnings per diluted share of $0.43 in the same prior year quarter, on a non-GAAP basis, which excludes amortization of intangibles, impairment charges, share-based compensation, contingent consideration, and depreciation, adjusted operating earnings for the fourth quarter of 2023 was $47.1 million, compared to $57.6 million in the same quarter of 2022.
Unnamed Speaker: Total revenue for the full year 2023 was $607.5 million, compared to $667.2 million in 2022. Total revenue was comprised of net product sales of $573.9 million and royalty and licensing revenues of $33.6 million. The $75.5 million decrease in net product sales was primarily due to a $166.9 million decline in net product sales of Tritendi XR, partially offset by a $94.1 million increase in net product sales or growth product.
Unnamed Speaker: Calvary, and Bill Crosby, excluding net product sales for Kikendi XR in both periods. Total revenues for the full year 2023 increased 26% compared to full year 2022; combined R&D and SG&A expenses for the full year 2023 were $428 million as compared to $451.8 million for the prior year. The decrease was primarily due to higher sales and marketing expenses in 2022 to support the launch of Calgary in the adult population, partially offset by an increase in R&D expenses associated with the clinical programs for SBN 817 and SBN 820 as we continue to progress our pipeline. In addition to the items above, full year 2023 includes the aforementioned non-cash impairment charge of $20.2 million, resulting in an operating loss for full year 2023 of $5.3 million, as compared to operating earnings of $46.1 million for the prior year. Income tax expense for full year 2023 was $1.5 million as compared to income tax expense of $32,000 for full year 2022.
Unnamed Speaker: Net earnings were $1.3 million for the full year 2023, or $0.02 per diluted share, compared to $60.7 million, or $1.04 per diluted share, for the full year 2022. On a non-gap basis, Adjusted Operating Earnings was $125.1 million for the full year 2023 compared to $148.8 million, projected. As of December 31, 2023, the company had approximately $271.5 million in cash, cash equivalents, and marketable securities, compared to $555.2 million as of December 31, 2022. The decrease was due to the repayment of the convertible security notes due in 2023, offset by approximately $120 million of cash generated from operations.
Unnamed Speaker: The company has a strong balance sheet and significant financial flexibility for potential M&A and other value-creating opportunities. Now, turning to you guys. For the year 2024, we expect total revenue to range from $580 million to $620 million, comprised of net product sales and royalty and relationship revenue. Note the total revenue guidance for full year 2024 assumes approximately $125,000 million to $135 million of combined net sales of Trependi XR and Axtellar XR. We anticipate the increase in net sales of our growth products in 2024 will substantially offset the expected decline in combined net sales of Turkendi XR and Oxtelerate. For the full year 2024, we expect combined R&D and SG&A expenses to range from $430 million to $460 million. This reflects an increased level of R&D spend in 2024 as our pipeline progresses, especially for the Phase II programs for SBN 817 and SBN 820. Overall, we expect full-year 2024 operating losses in the range of $30 million to break even.
Operator: And finally, we expect non-GAAP operating earnings to range from $80 million to $110 billion; please refer to the press release issued prior to this call that identifies the various ranges of reconciling items between GAP and non-GAAP. We expect 2024 will be the year we substantially transition from our legacy products to our growth products. Despite the anticipated erosion of sales on Trucchemi XR and Axtellar XR, we expect our growth products to help drive this anticipated level of non-GAAP earnings in 2024. With that, I 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. To ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced.
Operator: To withdraw your questions, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Andrew Tsai of Jeffries. Your line is now open. Hey, good afternoon.
Andrew Tsai: Thanks for taking my questions and congrats on the quarter. Maybe two questions on my side. The first one on overall guidance and Calgary. So in terms of the total revenue guidance, just curious, what dynamics are you guys specifically assuming for you to guide to the low end as well as the high end of your total revenue guidance? And secondly, if we backed out the individual products other than Calgary from your total revenue guidance for 2024, is it reasonable to assume your guidance might imply Calgary sales could come in above the consensus of around 210 currently? Thanks. Hi Andrew, this is Jack.
Jack A. Khattar: I mean, when we try to build the guidance, we try to accomplish a couple of things. First, to help folks with the trochandics or oxtalics or situation and the potential impact of genetics. So that's why we try to isolate these two components. What's really left is, of course, as the main drivers are GoCovri and Calvary. So with GoCovri, if you try to assume growth rates that are, you know, pretty much in line with the last couple of years, I think you can get to a, you know, reasonable estimate there of what that product could end up being or doing in 2024. You also back out something similar on Apigen and the other products.
Jack A. Khattar: So yes, I mean, Calvary. Could Calvary be in the 200 to 220 range or somewhere in that range? I mean, that is a possibility, and it's not, you know, out of reach or an unreasonable level. So hopefully, that will address both questions. Perfect. Thanks.
Jack A. Khattar: And then maybe a follow-up question is the FTN817 epilepsy top-line interim data, Phase 2 data coming up. Will that be a distinct press release in May, or will that be shared in conjunction with your Q1 EPS? And then, secondly, could you give us a flavor of what you plan to share that day?
Jack A. Khattar: Should we expect efficacy curves, safety AE breakdowns, and other detailed information? So basically, I'm just curious how much detail you're planning to provide. Thank you.
Jack A. Khattar: Yeah, the plan is, and hopefully all the data will be available for that timing, is to really issue the data due, you know, with our earnings goal. So the earnings goal typically is like the first week or early second week of May. So that's typically, and that's what the plan is to issue the data as part of the earnings goal. What would the data include?
Jack A. Khattar: Certainly, it will include efficacy, you know, seizure reductions, you know, some of the key endpoints that we're looking at in the study, as well as, of course, safety, AEs, and so forth. So, yeah, absolutely. I mean, we're trying to give as much of a full picture as possible for the first 50% of the patients, you know, which is the target by May. And then, ideally, I know we did say on the call that, you know, the full study will be given in the second half. I mean, clearly, we will work hard to try to do it maybe in August, which would be our next earnings goal where we can report for the full study. I mean, that would be great if we could do that. But for now, until we know the flow of the data, you know, how quickly these patients will finish the maintenance period, and when will the data be available?
Jack A. Khattar: We can't say for sure now August; we're saying second half, but certainly in May, we will be able to update you on that. Great. Thanks for the color.
Jack A. Khattar: Appreciate the update. One moment for our next question. Our next question comes from the line of David Amsellem from Piper Sandler. Your line is now open.
David A. Amsellem: Hey, thanks. So I wanted to dig a little deeper on Calbary. So looking at the prescription trends recently and also in the fourth quarter, it looks a little softer than what we had been seeing.
David A. Amsellem: So I wanted to get some perspective on the different moving parts in both the ped and adult ADHD market and what might be driving the volume trajectory currently and also how that ties into your commentary regarding copay assistance. I think, Jack, you had mentioned recently that you were paring back some of that copay assistance. So how should we think about the impact there and what does that mean for the prescription directory of Calgary going forward? And then just another question about the guide: do you have any risk-adjusted contribution for 830 in there? Just wanted to clarify what you may or may not have on that product as it relates to the overall top line guidance. Thank you. Yes, sir, I'll take the second one first.
Jack A. Khattar: I mean, the pump or SPNA 30, we really don't have much in the guidance, or nothing meaningful, so the guidance doesn't include much there. As far as your question on Calgary, I'll start by going back to the third quarter, back to school season. Some of you may remember, you know, at that time and throughout the year, we kept saying our target for gross net was 50 to 55%. And we obviously didn't want to do anything significant as far as any changes to the copay card and the features of the copay card, and the levels of benefits that that card offered during the back-to-school season.
Jack A. Khattar: Because we don't want to impact the momentum behind the prescription growth during that very important season for the brand, we instituted a lot of these changes more at the tail end of the third quarter and beginning during the fourth quarter. And that's why actually, you know, we've been able to achieve our goal or even surpass that goal by getting around 49.5% gross net in Calgary. Now, clearly, that always comes at the cost or, you know, sacrificing certain things on the prescription tracks. I mean, you always put more pressure on the prescriptions when you make changes like this. But basically, you're setting the stage, and you're setting the baseline.
Jack A. Khattar: So you want to have that pressure every single quarter moving forward. But when you first make these changes to the copay, you're going to get the biggest impact from a prescription trend perspective and momentum. And that's why, you know, alluding to your question, yes, in the fourth quarter, we saw sequential growth of about, if I'm not mistaken, 5% or 6%. And then in 1Q of 2024, it is a little bit even softer because, of course, in 1Q, you always have the additional pressures of high deductibles, insurance resets, and so forth. So all these factors are converging as far as 1Q is concerned, and that's why you're seeing the softness that we're all looking at, you know, with the prescription. So that's pretty much, you know, the trend.
Jack A. Khattar: So we're very happy that this is behind us, more or less. You know, this is behind us, meaning the major changes in the copay are now behind us. I think we've been able to really manage it extremely well. The team did an amazing job in the fourth quarter, despite the pressures on the prescriptions and so forth. From a net sales perspective, you know, we had a very, very strong quarter despite the pressure on prescriptions. And as I mentioned in my prepared remarks, the average net price went up to $268. So that's a very healthy increase and improvement, clearly showing the value of the prescription. And we'll continue to do that, you know, throughout 2024. Any other opportunities we see, any other areas we see to continue that improvement, again, without hurting too much the prescription momentum.
Jack A. Khattar: Now as far as prescriptions and the underlying business, I mean, we continue to really be very happy with the performance of Calgary. The survey that I referenced a little bit in my remarks, prescribers who actually use Calgary, especially heavy prescribers, their satisfaction level with Calgary is equivalent to their satisfaction level with stimulants. If you really just pause for a second and think about that, I mean, that is truly remarkable for a non-stimulant to be delivering and really, you know, performing in physicians' minds as well as extended-release stimulants, because extended-release stimulants are the gold standard in treating ADHD.
Jack A. Khattar: And for Kelby to be performing around that same level and to deliver satisfaction among prescribers that is really equivalent to XR stimulants, that is very remarkable for the product and continues to give us confidence that the product will continue to grow. I mean, we still have so much room to grow in a 93 million prescriptions-a-year market where we did 617,000 prescriptions last year. So, clearly, we have a lot of room to go, and we look to 2024 for even further growth on all the momentum that we built in 2023. The other thing we also should have in 2024 is the full impact of our expansion of the sales force, which started in mid-last year. So, 2024 should have that impact with, you know, beyond extra reach among physicians or higher frequency among certain physicians that are more important for us who are heavy prescribers of ADHD. So, all in all, we're very much looking forward to another strong year for Kelby in 2024. That's very helpful, Jack.
Jack A. Khattar: Just one quick follow-up. What do you expect the mix between adults and peds to look like as we move through the latter part of this year? Yeah, we closed the year in 2023 a little bit above 30%, somewhere in the 31%, 31.5%. And as I mentioned in my remarks, our goal is to continue to push in the adult segment because, obviously, the adult segment is very important to us. We're finding out, you know, interestingly, in that attitude and usage study we did, that about 40% of the usage of Calgary in adults is in combination with stimulants. And that has a lot of ramifications, a lot of dynamics around it.
Jack A. Khattar: It looks like, you know, that is really good, you know, 40%. But also, that could mean initially that they're using lower doses than we would like them to be. So from a total daily dose, we would hope, as time goes on, and we're seeing that, but it's marginal, we see, you know, a creep up in the daily dose into what should be the total daily dose for adults. So as time goes on, we'll see them building up to the right levels, which should be in the 400 to 500 milligram total daily dose for adults. But given that initially a lot of folks are using it in combination with stimulants, most of them are starting with much lower doses than they really should.
Jack A. Khattar: And we are working on that to encourage them to continue to push towards the target total daily dose because that also helps us in the, from an efficacy perspective, perception of efficacy, and so forth. Very helpful, thank you.
Operator: One moment for our next question. Our next question comes from the line of Stacy Koo of T.G. Cowan.
Stacy Koo: Your line is now open. Thanks for taking our questions. We have a few.
Stacy Koo: So, first, this. On payer access reimbursement, do you have any remaining overall goals for this year and any guidance around any additional formulary wins? So just wondering if you expect any additional contracting this year for CalBRE. And related to that, what do you think will be gross nets this year?
Jack A. Khattar: Are you providing any guidance for how it might settle over the year? Just curious, since you're saying that right now the adult doses are a touch lower but might be driving the net pricing as we drive that adult growth. And that's my question for now. Yeah, you don't need to pay for access.
Jack A. Khattar: We have contracts now with two major PBMs out of the three major ones. So, I mean, we'll continue. The door is always open. We talk to everybody all the time.
Jack A. Khattar: And within the states, we continue to, you know, renew contracts, and improve our position as time goes on. And we've made a lot of progress actually across several states, especially on the Medicaid side. And we're improving our position, you know. So we're pretty happy with the commercial coverage as well as the Medicaid coverage in Calgary at this point. It's actually, especially on the commercial side, it's pretty much at par with some of the other products or most of the products, the branded products in ADHD in the marketplace, as well as at par with what we used to have for years on the XR and XR Plus.
Jack A. Khattar: So we're very happy there, but there is always room for improvement, of course, as different cycles come up and the renewal of certain contracts. And therefore, leading to the Grosvenor question, as we mentioned, the target will still be in the 50 to 55%, but of course, you're gonna have the fluctuation that you typically see in the quarterly, one quarter to the next. So Q1 will always be the worst, as always is the case across our industry, across all products. And then it will improve in the second quarter, improve a little bit better in the third quarter, and then it will be the best in the fourth quarter.
Jack A. Khattar: So you're gonna follow the same natural trend that we've seen with Trekendi XR or Roxpella XR as time goes on. But at this point, it looks like the 50 to 55 is still a good target and we'll try to be, I mean, below it, if we can, of course, but for the whole year combined, it will be in the 50 to 55. So when you look actually at 2023, the total year across the net was around 58, just to give you a benchmark for the full year. So for us to continue to target 50 to 55 for the full year 2024, that is still a significant improvement. And then finally, I'm sorry, go ahead.
Jack A. Khattar: So I can follow up with my third question. No, I mean, the other part was the total daily dose question. I mean, as I mentioned earlier, that actually applies to both pediatric and adult patients, as you would typically expect with a new product still in its, you know, embryonic kind of stages with the launch. It's only been two and a half or three years.
Jack A. Khattar: It takes time, you know, for physicians to finally get to the total average daily dose that you would expect them to get there earlier than others. But as they gain more and more experience with the product, as we continue to educate them on how they should titrate and how they should target which total daily dose, eventually, they will get there. And the target daily dose for kids is in the 300 milligram range, and for adults it is in the 400 to 500 milligram range.
Jack A. Khattar: Perfect. You just answered my last question. Thank you.
Operator: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. One moment for our next question. Our next question comes from the line of Annabel Samimy of Seichel. Your line is now open. Hi, this is Jack. I'm on behalf of Annabel.
Annabel Eva Samimy: Thanks for taking our questions. So kind of on the topic of the previous quarter's call, I know you had mentioned that the start of the 2023 back-to-school season was relatively tempered and that the ADHD market might be normalizing to pre-COVID levels. Have you already kind of seen a rebound there?
Annabel Eva Samimy: Or is Calgary just performing particularly well in relation to a weaker market? Yeah, I'm in the. The total ADHD market in 2023 grew by about 3%. But if you compare that to 2022-2021, that's much lower.
Jack A. Khattar: In the previous couple of years, the market grew by 7-9%. So, clearly, we did see that burst of increased demand for medications, you know, for ADHD in the 2021-2022 timeframe, and even a little bit in the 2020 timeframe. And then, in 2023, it took a little breather and started to normalize. And that's what, as you rightfully pointed out, that's what we referred to back when we talked about the back-to-school season in November of last year. So, for the full year, it's about 33%, and we expect this year the market to probably, you know, deliver something in line. I mean, whether it's 3%, 4%, maybe 5%, I really don't know. But it will be in the single digits, probably more in the 5% and lower in that zip code.
Jack A. Khattar: Now, as far as Calgary is concerned, I mean, last year, the market grew by 3%, but we grew by 91%. So, obviously, we're outpacing the market, and we continue to do that. And that's really what we need to continue to do to continue to increase our market share and penetration of both segments, not just the adult that I talked about, but also pediatric. I mean, pediatric will continue to be a very important segment for us as well. Great
Annabel Eva Samimy: And so, building off that, are you considering doing any DTC campaigns to kind of maximize the opportunity for Calibri, or is that something that you're already doing? I know this category is particularly sensitive to promotion, so is there any way that you can kind of take advantage of that further? Yeah, I mean, on DTC, we have been doing and will continue to do. So direct-to-consumer is extremely important. The difference is always the channel that you use to reach the consumer. And it's heavily digital, as you would expect in today's, you know, times. I mean, people don't sit in front of TV and watch prime TV anymore like they used to a long time ago.
Jack A. Khattar: So we clearly use different channels to reach our audience. A lot of it is digital. The majority of it is digital.
Jack A. Khattar: And we are very much in touch with, you know, patient advocacy groups, patient programs. We have a significant number of programs to get to the patients from an education perspective, as well as within the office, you know, the physician's office, and so forth. So we have several programs and many efforts in the digital space, which are all DTC. We also have, you know, different influencers who are, as well as folks, people who speak on behalf of the product because they have direct experience with the product. And they have a strong influence among consumers as well. Very helpful, thank you.
Jack A. Khattar: I have no further questions at this time. I would now like to turn it back to Jack Khattar for closing remarks. In concluding our call this afternoon, we're very pleased with our performance in 2023. We finished the year in a position of strength, with both Calgary and Montgomery achieving record sales with strong prescription growth.
Jack A. Khattar: In addition, as mentioned earlier, 2023 was a year of significant progress in our pipeline, with numerous clinical milestones and catalysts over the next 12 to 18 months. We believe that we are well-positioned for continued growth beyond the current transition and are focused on three key strategic areas. First, driving significant growth with Calgary in recovery, and together with the rest of the portfolio, generating strong cash flow, allowing us to continue our investments in our pipeline. Excluding our legacy products, Topendixor and Oxtelerixor, our guidance for 2024 represents a healthy growth rate of approximately 22% in net sales. Third, advancing our innovative R&D portfolio of differentiated first-in-class molecules that have several exciting and upcoming Finally, we will continue to be focused on corporate development to augment our growth through external opportunities.
Operator: Thanks for joining us this afternoon. We look forward to updating you on our next call. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Copyright 2021 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent.