On May 7, 2019 Supernus Pharmaceuticals, Inc. (NASDAQ: SUPN), a pharmaceutical company focused on developing and commercializing products for the treatment of central nervous system (CNS) diseases, reported financial results for the first quarter of 2019 and associated Company developments (Press release, Supernus, MAY 7, 2019, View Source [SID1234535883]).

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Commercial Update

First quarter 2019 product prescriptions for Trokendi XR and Oxtellar XR, as reported by IQVIA, totaled 199,520, an 11.0% increase over the first quarter of 2018.

In the fourth quarter of 2018, wholesalers, distributors, and pharmacies increased their inventory holdings as compared to the prevailing inventory levels in the third quarter of 2018. As previously disclosed, the Company estimated that this caused net product sales to be approximately $10 million higher in the fourth quarter of 2018 than it would have been otherwise, had inventory levels remained consistent quarter to quarter.

This process was effectively reversed in the first quarter of 2019, with net product sales decreasing in the first quarter of 2019 by an estimated $10 million, as compared both to the prior year as well as the prior quarter.

In addition, net product sales were impacted by the growing prevalence of high deductible patient plans, their seasonal effect on first quarter prescription trends, and the seasonal increase in our use of copay assistance. Consequently, gross to net deductions were higher by approximately $4 million, as compared to the first quarter of 2018.

Progress of Product Pipeline

During its Investor Day held on April 16, 2019, the Company provided a product pipeline update as set forth below.

SPN-812 – Novel non-stimulant for the treatment of ADHD

During March 2019, the Company announced data from the fourth and final Phase III study for SPN-812 (P304) that confirm positive results from the previous three Phase III studies on SPN-812, announced in December 2018.
The Company continues to expect to submit a New Drug Application (NDA) for SPN-812 in the second half of 2019, and to launch it, pending U.S. Food and Drug Administration (FDA) approval, in the second half of 2020.
A Phase III program in adult patients is anticipated to start in the second half of 2019.
SPN-810 – Novel treatment of Impulsive Aggression in patients with ADHD

Enrollment in the Phase III trials (P301 and P302) continues with data from both trials expected in the second half of 2019.
The Company continues to expect to submit an NDA for SPN-810 in the second half of 2020, and to launch it, pending FDA approval, in the second half of 2021.
Enrollment in the open label extension (OLE) study continues at 90% or higher. On average, a patient in the OLE study remains on SPN-810 treatment for approximately 10.5 months, which the Company believes is an encouraging sign of the tolerability and efficacy of SPN-810.
Patient dosing continues in the Phase III trial (P503) in adolescent patients.
SPN-604 – Novel treatment of bipolar disorder

The Company expects to start a pivotal Phase III program for the treatment of bipolar disorder in the fourth quarter of 2019.
Operating Expenses

Research and development expenses in the first quarter of 2019 were $15.4 million, as compared to $18.9 million in the same quarter last year. This decrease is due to the completion of the four Phase III clinical trials for SPN-812, three of which were completed in December 2018 and one completed in March 2019. The decrease was partially offset by the manufacture of validation and registration lots for SPN-812 to support the Company’s upcoming submission of its New Drug Application (NDA).

Selling, general and administrative expenses in the first quarter of 2019 were $41.0 million, as compared to $36.8 million in the same quarter last year. This increase was primarily due to the development and production of promotional materials and marketing programs associated with the launch of the monotherapy indication for Oxtellar XR.

Operating Earnings and Earnings Per Share

Operating earnings in the first quarter of 2019 were $25.4 million, compared to $31.4 million in the same quarter last year. The decrease in operating earnings was primarily due to decreased net product sales. Excluding the negative impact to net product sales from the aforementioned inventory drawdown in the first quarter, operating earnings would have been approximately $9.5 million higher than in 2018.

Net earnings (GAAP) in the first quarter of 2019 were $18.3 million, or $0.34 per diluted share, compared to $26.4 million, or $0.49 per diluted share, in the same period last year. In addition to the impact of lower operating earnings for the first quarter of 2019, net earnings (GAAP) were subject to a higher effective tax rate in the first quarter of 2019 relative to the first quarter of 2018. The tax rate in the first quarter of 2018 benefited from stock option exercises.

Weighted-average diluted common shares outstanding were approximately 54.0 million in the first quarter of 2019, as compared to approximately 53.8 million in the prior year period.

"Our financial results for the first quarter were adversely impacted by several factors, converging all at once: the fourth quarter 2018 inventory buildup impacting shipments in first quarter 2019: first quarter seasonal insurance plan dynamics putting pressure on prescription growth coupled with increased gross-to-net deductions through our copay assistance; and the increase in the effective tax rate compared to same period in 2018," said Jack Khattar, President and CEO of Supernus. "Aside from the effective tax rate, these one-time events are not expected to have a continuing effect in the subsequent quarters. We have already seen in the second quarter of 2019 a normalization of shipments and prescription trends"

Balance Sheet Highlights

As of March 31, 2019, the Company had $815.5 million in cash, cash equivalents, marketable securities, and long term marketable securities, compared to $774.8 million at December 31, 2018. This increase primarily reflects cash generated from operations in the first quarter of 2019.

Financial Guidance

For full year 2019, the Company reiterates its prior guidance for net product sales, research and development expenses, operating earnings, and effective tax rate as set forth below:

Net product sales in the range of $435 million to $455 million
Research and development expenses in the range of $70 million to $80 million
Operating earnings in the range of $160 million to $180 million
Effective tax rate of approximately 23% to 25%
Conference Call Details

The Company will hold a conference call hosted by Jack Khattar, President and Chief Executive Officer, and Greg Patrick, Senior Vice President and Chief Financial Officer, to discuss these results at 9:00 a.m. Eastern Time, on Wednesday, May 8, 2019. An accompanying webcast also will be provided.

Please refer to the information below for conference call dial-in information and webcast registration. Callers should dial in approximately 10 minutes prior to the start of the call.

Conference dial-in: (877) 288-1043
International dial-in: (970) 315-0267
Conference ID: 8139879
Conference Call Name: Supernus Pharmaceuticals First Quarter 2019 Earnings Conference Call
Following the live call, a replay will be available on the Company’s website, www.supernus.com, under "Investor Relations".