SUPN
#Thank you, <UNK>.
Good morning, everyone, and thanks for taking the time to join us as we discuss our 2016 first-quarter results.
During the first quarter, we continued to generate strong year-over-year product prescription and net product sales growth, and we made further progress advancing our product candidates through clinical development.
Let me now focus on some of the key highlights for the first quarter.
Total prescriptions for Trokendi XR and Oxtellar XR combined in the first quarter as recorded by IMS were 114,773, representing an increase of 50% over the first quarter of 2015.
Trokendi XR prescriptions for the first quarter of 2016 totaled 85,987, which is a 56% increase over the same quarter last year, and Oxtellar XR prescriptions for the first quarter of 2016 totaled 28,786, representing an increase of 34% over the same quarter last year.
In March of this year, we reached an all-time high in IMS prescriptions for both Trokendi XR and Oxtellar XR.
For the first time, Trokendi XR exceeded 30,000 prescriptions per month, and Oxtellar XR exceeded 10,000 prescriptions per month.
In addition, based on the most recent weeks in the second quarter, we continued to see solid sequential weekly IMS prescription growth averaging about 7% for Trokendi XR and 5% for Oxtellar XR.
Total net product sales for the first quarter of 2016 were $43 million, an increase of [53%] over $28 million for the same quarter last year.
Regarding our supplemental new drug application requesting approval to expand the indication for Trokendi XR that includes treatment in adults for prophylaxis of migraine, we continue to prepare and be ready to launch the new migraine indication after receiving full FDA approval.
Turning now to our pipeline, we continue to enroll patients into both Phase 3 trials for SPN-810, which is currently in development for impulsive aggression in patients who have ADHD, and we continue to expect data from these Phase 3 trials by mid-2017.
The Phase 2b trial for SPN-812 currently in development for ADHD continues to enroll patients as well, and we continue to expect data from the SPN-812 Phase 2b trial to be available by early 2017.
During our last quarterly call, we shared data with you on the favorable emerging clinical profile of SPN-812 as it relates to adverse events.
In addition to those data, we completed the evaluation of the cardiac effects portion of the single ascending and multiple ascending dose study and are pleased to report that there was no clinical significant change in QT interval and other electrocardiograph ECG parameters.
We believe this additional safety data in adult healthy volunteers, which show a lack of cardiac effects, are very encouraging and further strengthened the depreciation of SPN-812.
Regarding current litigation on Oxtellar XR, in February a federal district court found that (inaudible) Oxtellar XR were valid and that Davis infringed two of them.
Since then, Davis has filed a notice of appeal to the US Court of Appeals for the Federal Circuit.
Regarding Trokendi XR, the court issued its Markman opinion on order in March 2016.
The court adopted Supernus definitions of five of the seven disputed terms and did not adopt any (technical difficulty) definitions.
No date has been set for the trial.
We remain confident in the strength of our intellectual property and continue to vigorously defend the patent protection our innovative products deserve.
Oxtellar XR has five patents and Trokendi XR has six patents that are listed in the orange book.
All these patents provide patent protection that expires no earlier than 2027.
Also, recently Shire announced positive Phase 3 top-line safety and efficacy results for SHP465 in children and adolescents with ADHD.
SHP465 is an oral stimulant medication being evaluated in the US as a potential treatment for ADHD.
The study addresses a key FDA requirement keeping SHP465 on track for resubmission in the fourth quarter of 2016 and a potential launch in the second half of 2017 if approved by the FDA.
SHP465 was originally developed by Shire Laboratories, the former division of Shire, that subsequently became Supernus Pharmaceuticals.
Based on the agreement between Supernus and Shire, Shire will pay single-digit royalties to Supernus on net sales of SHP465.
Finally, we continue to actively look for partnership and corporate development opportunities that strategically fit with our vision in building Supernus to become a leading pharma company.
With that, I will now turn it over to <UNK> to walk you through the details on the financial results.
Thanks, <UNK>, and good morning, everyone.
As I review our financial results, I would like to remind our listeners to refer to the first-quarter 2016 earnings press release issued yesterday after the market closed.
We expect to file a report on Form 10-Q for the three months ended March 31, 2016, by next week.
Net product sales for Trokendi XR for the first quarter of 2016 were $32.3 million, which is 54.5% higher than $20.9 million in the first quarter of 2015.
Net product sales for Oxtellar XR in the first quarter of 2016 were $10.7 million, a 49.3% increase over $7.2 million in the first quarter of 2015.
Product prescription and net product sales growth for Trokendi XR and Oxtellar XR in the first quarter of 2016 were unfavorably impacted by the reset of insurance coverage at the beginning of the year with high deductible and high co-pay programs.
This is consistent with industry trends and consistent with what we observed in the first quarter of last year.
In addition, (technical difficulty) 2016 changes in wholesaler inventory levels and ordering patterns had the effect of reducing net product sales by approximately $3 million.
Product gross margin for the first quarter of 2016 was 95.3% compared to 94.2% for the same quarter last year.
Research and development expenses in the first quarter of 2016 were $10.6 million, as compared to $3.7 million in the same quarter last year.
This increase is primarily due to our ongoing Phase 3 trials for SPN-810, both of which were initiated in the third quarter of 2015 and our ongoing Phase 2b trial of SPN-812, which was initiated in the third quarter of 2015.
We continue to expect research and development expenses to increase in 2016 as clinical (technical difficulty) of both SPN-810 and SPN-812 progresses.
Selling, general, and administrative expenses were $25.2 million for the first quarter of 2016, as compared to $19.4 million in the same period in 2015.
The higher expenses in 2016 reflect a continued increase in our sales and marketing efforts for both Trokendi XR and Oxtellar XR and the efforts in preparing for the launch of the migraine indication for Trokendi XR.
For the first quarter, operating income totaled $5.3 million, an increase of 55% over operating income of $3.4 million in the same period last year.
The improvement in operating income for the first quarter of 2016 compared to the year earlier period is primarily attributable to the 53% [increase] in net product sales.
Net income for the first quarter ended March 31, 2016, was $5 million or $0.08 per diluted share as compared to net income of $0.9 million or $0.02 per diluted share in the first quarter of 2015.
Approximately [51.2] million weighted average diluted common shares were outstanding in the first quarter of 2016 as compared to 44.9 million diluted shares in the same period last year.
As of March 31, 2016, we had $114 million in cash, cash equivalents, marketable securities, and long-term marketable securities as compared to $117.2 million as of December 31, 2015.
As of March 31, 2016, approximately $6.6 million of our six-year, $90 million convertible notes remain outstanding.
Financial guidance for 2016 remains unchanged as compared to guidance issued in March.
Specifically, net product sales will range from $200 million to $210 million, research and development expenses to range from $55 million to $65 million, and operating income to range from $28 million to $35 million.
I will now turn the call back to the operator for questions.
Regarding the migraine indication, as we mentioned before, the PDUFA date is this quarter and depending obviously getting the full approval from the FDA.
As far as the potential upside or potential market for Trokendi XR in migraine, again, as we mentioned before numerous times, that there is still (technical difficulty) for Trokendi XR in migraine.
Clearly, because neurologists know this product very well that (inaudible) molecules, and they have been using it for so many years in that indication.
We, ourselves, obviously, we don't promote for migraine.
We only promote for epilepsy.
However, doctors tend to use it regardless.
As we mentioned also earlier in previous quarters, this year, given that the launch potentially will be either mid this year or whenever it comes, we don't have a lot of upside reflected in our numbers or the results for 2016.
And, therefore, most of the upside, if it does come beyond where we are today, it will be mostly in 2017.
We will be launching for Trokendi XR in migraine as a potentially more or less like a new product launch.
We will be putting a lot of investment and effort behind it because we think there could be an upside that we are not aware or we couldn't even expand the market in the usage of migraine with the topiramate molecule, especially with a much better dosage form that is truly once today, that is truly helping with compliance, which is very important, specifically with topiramate being used on a prophylactic basis for the treatment of migraine.
So now, transferring to your next part of the question, which is regarding the sales force, given that our effort behind Trokendi XR in migraine will be a major effort.
It is fair to say it will be a little bit difficult to put on top of that right away the launch of another product that we could potentially bring from the outside.
So the timing of that, obviously, we will have to see how we can navigate to something like this if we were to execute on the business development transaction that could include a product in the neurology space.
But we will make that decision at that time commensurate with or at the same time when we look at the asset and what the requirement of that asset that we are potentially bringing in.
And if it does require expansion of the sales force, we certainly will be looking at that as well.
And then, finally, regarding some of the therapeutic areas or disease conditions that we would look for, in the neurology space, obviously, hopefully very soon or at some point in the next nine months, 12 months, whatever it is ---+ or quarter, we will become also a migraine company as well in addition to epilepsy.
So the natural fit, obviously, with that sales call point will be any products in their specific specialty and that would cover things that are in the movement disorder specialties such as Parkinson's, MS, obviously additional migraine products and so forth, so that it opens it up for us as far as in neurology.
We also have said before that we are not opposed to getting into the psychiatry space if we can bring an asset that could potentially be launched ahead of SPN-810 or SPN-812 as well by a year, year and a half that would get us into the psychiatry office, allow us to establish ourselves and really pave the way for -810 and -812 later on.
Nothing really that stands out because also, as most of you may remember, for many years, a lot of people kept telling us, how come you finished the Phase 2 study a long time ago, and it took you so long to even start the Phase 3 study.
And we kept saying, during that time, we have been doing a lot of the work for so many of the pieces that will end up going into the NDA.
Example, a lot of the preclinical work, the two-year carcinogenicity studies, a lot of the work on the API, on the CMC, on the scale up, all that work has been in progress, and actually we completed the two-year carcinogenicity study in both species of mice and rats.
So there is a lot of the pieces that are actually being completed while we also started the Phase 3 studies so that when we get the data on the Phase 3 studies, (technical difficulty) and it looks really good, our plan is to go as fast as we can to put the NDA together and file that NDA.
So that we don't have any critical path items that could hold us up.
So that is ---+ and that applies not only to -810, it also applies to -812 at the same time.
We have been doing a lot of work on the ATI, a lot of work on the preclinical toxicology type of work.
Again, as a reminder to a lot of the folks on the call, these two molecules, although they have been on the market either in the US or in Europe, but they are also very old molecules.
And, therefore, a lot of that preclinical type of work had to be updated, up to today's scientific standards, and that is why we have taken the time and the effort to bring all these pieces together up to today's scientific standards.
And all that work has been ongoing and on purpose so that once we get the Phase 3 data from both products, we don't have anything that will hold us up from filing the NDA.
Well, most of the ---+ when you look at the (technical difficulty) 10, nine, and eight, around 80% of them are neurologists, actually.
And a lot of the usage ---+ the heavy usage is in these 3 deciles, and these folks understand these issues very, very well and they know it.
I mean, they tell us themselves.
They compromise ---+ even for epilepsy, they compromise by giving topiramate at night once a day.
Because of the side effects, because a kid in the morning taking topiramate to go to school feeling dizzy, feeling foggy, dopey, and in Topamax ---+ Topamax, whatever they call it, because of these issues, is not ideal for a kid who is going to school to pass an exam or study and focus in class.
And, therefore, they try to compromise by not giving the product as it should be ---+ as it is designed.
I can't make any comments on that, <UNK>, because we haven't published what is our PDUFA date.
We haven't mentioned what that is, and there is really no need for us to say what the exact PDUFA date is at this point for competitive reasons.
So I will ---+ if you don't mind, I don't want to answer that question.
Yes and we have been ready to launch.
Yes.
The first answer is yes, we have evaluated the several areas, including some of the ones you have mentioned.
So the answer is, yes, we have been looking at that and continue to look at that.
I can't make any specific comments regarding discussions with the FDA or what our plans are yet.
Once they are concrete, if there are any specific plans, obviously, we will disclose that.
But the answer is yes.
We are very aware of the potential of oxcarbazepine and other potential indications.
And now that we have hopefully a much, much longer lifecycle for this product, certainly that is something that could warrant additional investment.
If there is anything concrete, absolutely.
We will disclose that.
All right, <UNK>.
The convert actually, when we push it through the fully diluted share calculation, actually has two impacts.
One obviously in terms of the denominator in terms of the fully diluted share count itself, but also in terms of the impact on the net income.
The way the calculation works is, you go back to the start of the quarter and, on a pro forma basis, we eliminate loss on extinguishment of debt and other components associated with the financing.
So it has both affected or reduced the top line or the numerator of the calculation as well as to increase the denominator.
Enhance ---+ and I have had some correspondence from investors, including yourself, that have calculated a different number.
I can assure you that we get our orders all over this number, and it is, in fact, $0.08 per share.
Yes.
I think what you have seen is slightly also a function of not just price increases.
So it is also a function of the slowdown that they have seen on prescriptions across the board for branded companies because of the reset in insurance covered.
So they also (inaudible) monitor prescriptions, and when they see and they expect typically in the first quarter because they have seen it also many times, they tried to adjust their inventory to anything they see in prescriptions.
And more often than not, the reverse doesn't happen quickly enough either.
In other words, they may adjust by, say, the first quarter, the first few weeks is going to be slow.
There is high deductibles.
There is reset in insurance.
We might see some slowdown or softness in the prescription numbers.
So let's make sure we don't over order or order too much.
And when the prescription start picking up again, they are a little bit slower in adjusting to that, and that is why I mentioned earlier, we actually have about a one week on one of the SKUs, and we look at average numbers.
One week that means probably some warehouses don't even have or they are even out of stock on certain SKUs because all these numbers we talk about are just averages.
Some of these wholesalers have more than 50 or 60 distribution centers across the country.
So it is really a function of not just when could a company take a price increase and anticipate that and try to adjust inventories because of that.
It is also a function of the softness of prescriptions in general, in the sector in the pharma industry in general that is happening across the board that they try to adjust their levels to.
I don't have anything to add versus what is public.
But yes, that is correct.
I mean we did mention that before that we have settled with people before, and we are willing to settle with anybody who is willing to work with us on a reasonable setup, and that is what we are working towards.
And if we don't enter into a settlement, we are also willing to go all the way to the court and beat them in the court, and we have very, very strong IP and we continue to build our IP on both products.
So, at this point, I really don't have any addition to that communication.
We will see what happens on May 18 or later than that.
But we are very working very diligently to hopefully take this risk off the table for everyone, including myself, and hopefully stop talking about it at some point.
Yes.
Sure.
And very good question, <UNK>, because you're absolutely right.
Although impulsive aggression is a very, very well known condition ---+ and I need to emphasize that ---+ this is not a new area that people are not aware of.
It is not a new condition that physicians don't (technical difficulty).
Although it is off label ---+ with off label products that don't work or have no data whatsoever to back it, that they actually have any impact on the patients.
Nevertheless, when you introduce a new product with a new indication, obviously for the first time ever to have a product approved for that condition, you have to do a lot of market preparation, education, among physicians, KOLs, and so forth.
And we actually had started that a long time ago and continue to do that.
And among some of the efforts, as data obviously comes up and as we produce more data on -810, the usual things that you will expect from any company preparing for launch of a major product in the market like this would be publications, conferences, KOL training, speaker training, and so forth.
So we are very active in that space, and we continue to do that through 2019 when we expect this product to be launched.
Yes.
As I mentioned earlier regarding the previous question, yes.
I mean, we are working very hard to make sure, once we get the data, if it is positive, that we go full speed ahead with the NDA filing.
And, therefore, we are trying to make sure the checklist for the NDA is really getting smaller and smaller by the day.
So we don't have any ---+ too many items left by the time we get the data.
And also, I will remind everyone, we do have a fast track designation for development of -810.
We don't have fast-track review, but if you have a fast-track development track, you have the opportunity to ask the FDA for a fast-track review.
And that will be something obviously we will look forward to.
The data is positive, and all the interactions with the FDA look pretty good.
We potentially also ask for a fast-track review of our NDA to get the product on the market as soon as possible.
So we have that avenue as well at our disposal and some time later after we see the Phase 3 data and have meetings with the FDA to confirm all that.
Yes.
Let me clarify.
When I meant psych, I don't mean depression.
I don't mean anxiety type of products that are primary care driven.
I mean things which are little bit more of a specialties psychiatry area where we can effectively have a salesforce in the 100 to 200 range.
I mean, we did say, for example, on SPN-810, initially when we launched the product, we are looking at this point to the way we have been sizing the product, the territories and so forth.
We are looking at potentially having 130 reps to launch SPN-810 with.
We will monitor how the launch goes, and we could potentially expand that.
And when we bring in SPN-812, we are looking at potentially adding another 170 reps on top of the 130 to manage both products.
So these are the kind of sales force sizing things that we are looking at from a disease point of view.
We are not looking at a huge area that will require thousands of salespeople to go after the primary care setting.
So definitely, we are not looking at depression or anxiety or things which will require more of a primary care push, but some things which are more driven by psychiatrists themselves.
Yes.
Sure.
I will take the partnership question, and then I will let great comment on the expenses.
Regarding partnerships, at this point, the ones that we talked about ---+ clearly, the new one is SHP465, which will have some royalties that will come through Supernus.
We haven't disclosed the specific royalty other than it is a single digit royalty.
And as Shire has mentioned and they expect if they get approval, clearly, they expect to launch the product in the second half of 2017.
Now, the other royalty that we have talked about historically has been the royalty on the Orenitram, which is the United Therapeutics product, and that royalty will come back to Supernus after investors get a certain predetermined, predefined return on their investment when we sold them a portion of the royalty stream, if you remember, back in 2014 when we sold about $30 million ---+ we got $30 million from these investors, and they bought a portion of that royalty stream.
So once they get their return on that investment, the royalties will start coming back to Supernus.
So, clearly, that is very fluid because it all depends on the performance of Orenitram in the marketplace with the United Therapeutics, but clearly we felt pretty strongly and continue to feel pretty strongly about the potential of that product.
Otherwise, we wouldn't have kept the upside potential for us and retained it for us in the future.
So, in a nutshell, these are the two royalty streams that potentially could come to Supernus at some point.
Great.
And, <UNK>, with respect to your question as regarding R&D, just want to remind everybody on the phone that when we have spoken about profitability on a quarterly basis, we have assiduously reminded everybody that it is going to be lumpy, and while, of course, it is our intent to be profitable every quarter, that level of profitability is going to fluctuate substantially depending on what is going on with respect to activities within the Company and primarily R&D driven.
Now, as far as R&D programs, we have worked hard to configure these into milestone-driven arrangements so that as trials progress, they trigger payments through our CROs and other service providers and that, therefore, depending on how progress goes with each trial, we have talked about in the three trials of one Phase 2 data and the two Phase 3 trials, but there will also be open-label extensions for all of those that they will trigger milestones on a quarterly basis.
Depending on the specific progress for each of those programs, including the open label extensions, it will drive variability in terms of R&D spending.
And I should just add, I missed the answer to your full question, you asked us about milestones.
The other thing ---+ so there are no specific milestones other than what could sometimes come out of the licensees we have across (inaudible).
As everyone knows, we do have some licensees outside the United States.
There might be some milestones sometimes that come in, and that is why sometimes you see in our P&L that they are amortized a lot of times.
At least, we don't talk about them too much.
They are important to us, as important to our partners, but given our revenue scale and so forth from a materiality point of view, they may not be anything that is really very significant.
But I should mention that, just for complete disclosure.
Yes.
Thank you.
In summary, our priorities for the remainder of 2016 are to continue to grow Trokendi XR and Oxtellar XR, advance our pipeline products with the clinical development and vigorously defend our intellectual property.
This (technical difficulty) continues to be active in business development looking for potential assets to strategically complement our portfolio.
We look forward to updating you through the year on our progress, and thanks for everyone joining us this morning.
