Good morning, and welcome to the Supernus Pharmaceuticals First Quarter 2020 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 Vozzo of Westwicke Investor Relations representative for Supernus Pharmaceuticals. You may begin.

Thank you, Lisa. Good morning, everyone, and thank you for joining us today for Supernus Pharmaceuticals first quarter 2020 financial results conference call. Yesterday, after the close of the market, the company issued a press release announcing these results.On the call with me today are Supernus’ Chief Executive Officer, Jack Khattar; and Chief Financial Officer, Greg Patrick. Today’s call is being made available via the Investor Relations section of the company’s website at ir.supernus.com. Following remarks by management, we will open the call to questions.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 Supernus’ 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 2019 Annual Report on Form 10-K. 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 6, 2020 at approximately 9:00 A.M. Eastern Time. 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. Supernus disclaims any obligation to update these forward-looking statements, except as required by applicable securities laws.I will now turn the call over to Jack.

Thank you, Peter. Good morning, everyone, and thanks for taking the time to join us as we discuss our 2020 first quarter results and recent developments.Before I discuss our first quarter results, I want to take a moment to highlight the two corporate development transactions we announced over the last couple of weeks. These transactions meet many, if not, all of the strategic criteria and priorities we have for an ideal corporate deal.As you might recall, our priorities were to get commercial assets that could diversify our revenue and earnings base, then followed by a late-stage asset that could be launched in time and could bring future growth to help us with the transition once Trokendi XR goes generic. We also have to replenish our pipeline after we launched SPN-812 and the setback we had with SPN-810.And finally, we wanted to accomplish all this with a transaction that can be done with a reasonable and fair terms that don’t deplete or weaken our balance sheet. We are very pleased that we were able to accomplish all this with the acquisition of the CNS portfolio of US WorldMeds that is targeted to close in this quarter and the Navitor partnership.First, starting with the acquisition of the CNS portfolio for US WorldMeds. This transaction brings to Supernus a robust portfolio in neurology that is synergistic to our current portfolio, including three established and marketed products and a product candidate in late-stage development.In 2019, these products generated net sales and operating earnings of approximately $150 million and $45 million, respectively. The deal structure consists of an upfront payment of $300 million and up to $230 million in regulatory and commercial milestones that are aligned with the future upside of the business.This upside is primarily driven by the Apomorphine Infusion Pump, a late-stage product…

Thank you, Jack, and good morning, everyone. As I review our first quarter results, please refer to yesterday’s press release.Total revenue for first quarter 2020 was $95 million, an increase of 11% over $85 million in the same quarter last year. Total revenue was comprised of net product sales of $93 million and royalty revenue of $2 million, as compared to net product sales of $83 million and royalty revenue of $2 million in the first quarter of 2019.As previously disclosed, wholesalers, distributors and pharmacies decreased their inventory levels of our products in the first quarter of 2019. At that time, we estimated that this inventory draw down cause net product sales in the first quarter of 2019 could be approximately $10 million lower than had inventory levels remained constant. This phenomena favorably impacted the year-over-year net product sales comparison for the first quarter of 2020, as compared to the first quarter of 2019.For the first quarter of 2020, net product sales for Trokendi XR was $69 million, compared to $64 million in the prior year period. Net product sales for Oxtellar XR were $24 million, compared to $19 million in the prior year period.Turning now to expenses. Research and development expenses were $19 million for the first quarter of 2020, or $4 million higher than $15 million in the prior year period. This increase was primarily driven by enrollment in the SPN-812 Phase III program for adult, which was initiated in late 2019.SG&A expenses for the first quarter of 2020 were $43 million, compared to $41 million in the prior year period. The increase in SG&A expenses is primarily due to prelaunch activities associated with SPN-812, partially offset by a decrease in marketing expenses for commercial products and a decrease in employee-related expenses.Operating expenses for the first quarter of 2020 were $29 million, compared to $25 million in 2019. The increase was primarily due to higher net product sales, partially offset by modestly higher operating expenses.Net earnings were $22 million for the first quarter of 2020, or $0.40 per diluted share, an 18% increase on a diluted share basis, as compared to $18 million, or $0.34 per diluted share for the first quarter of 2019.As of March 31, 2020, the company had $396 million in cash, cash equivalents, marketable securities, and long-term marketable securities, compared to $939 million as of December 31, 2019. This decrease was primarily attributable to unrealized losses on long-term marketable securities, resulting from market volatility in the first quarter of 2020.I will now turn the call back to the operator for questions.

[Operator Instructions] And your first question comes from the line of Ken Cacciatore of Cowen and Company.

Good morning, guys. I just had a couple of questions actually about the newly acquired or soon to be acquired assets. So first on APOKYN, just wondering it’s been a very durable product and doing very well over the years. As you look at it and analyze how US WorldMeds has been marketing. Is there anything that you can talk about that maybe you would do differently? Is there an opportunity here to inflect the growth? And if so, why?And then on your pipeline program, the Apomorphine Pump, can you just talk about the end-stage of Parkinson’s? What are the options for patients? It’s my understanding, it’s either deep brain stimulation or Duopa. I’m wondering if you could describe both? And my question is a little bit more simple. Why wouldn’t a patient want to try this along the way? Could you just kind of frame for us the opportunity? And maybe within that, why Apomorphine as opposed to continuous use levodopa? Thank you.

Yes. Hi, Ken. Regarding the APOKYN franchise, the franchise has been around for a while. It’s been a mainstay in the therapy for Parkinson’s disease. Apomorphine as a molecule actually is a very good drug as far as treating of episodes.And US WorldMeds has done a phenomenal job in building the franchise actually way back, where it’s used to be a single-digit product and – as far as sales are concerned and bring it to the level that it is at today, really phenomenal job building the business with somewhat constrained resources and so forth.And therefore, with our portfolio and hopefully with additional resources that we could potentially put behind this product, we would look forward to potentially expanding the use of the product. There is a lot of what we call the whitespace out there, meaning a lot of patients who do experience of episodes and really are not in the market for treatments, either because the knowledge, the awareness, the experience with this molecule is – hasn’t really matured to the point it could with a product like this.So we see a lot of areas of potential growth here. As I mentioned, also the salesforce is about 46 sales representatives, whether there is an opportunity to expand that a little bit and add more firepower behind the product, that is a potential as well.So you can definitely bet on the fact that we’re looking at every potential aspect here, where we can grow these businesses, build on them, and also take advantage of the synergies between the Parkinson’s portfolio and the neurology portfolio that we have in epilepsy and migraine and so forth. So certainly, we will be looking for many ways to really grow the franchise.And then in addition to that, of course, we’re very excited about…

Thank you.

And your next question comes from the line of David Steinberg of Jefferies.

Thanks and good morning. A couple of questions on the pending launch of 812. A lot of the physician groups during the COVID crisis have a lot less patients to see and therefore, more time to interact virtually with sales reps and company managements. Just curious whether it’s afforded you an opportunity to engage in more extensive prelaunch activities? And then related to that, any updates on your payer research on 812? And if so, what are some of the highlights? Thanks.

Yes. Regarding the – unfortunately, the situation we’re living in, you’re absolutely right. Actually, all the data points to the fact that many physicians, because they are also not going and don’t have a very active practice these days. They do have a little bit more time and we’ve been able to engage them through prelaunch activities education.So we’ve been very, very active in the digital space, not only to educate physicians about the molecule, the program, our data and so forth, but we also have a major outreach program, as well as a website for consumers, for patients themselves, education, a lot of educational materials that we have on our website, more to ADHD, which is really educating parents, caretakers, physicians, about the disease, and about what to really to look for in a good treatment and so forth, preparing for the launch of SPN-812.So we have these plans in place before the COVID situation. But as you pointed out, given the COVID situation, it really even made them more important and we were able to take advantage of that, so to speak, in a good way to really reach out to all these constituencies that will be very important for our launch.As far as the payer research, that was ongoing and our discussions continue to be ongoing with the payers. And we will have a much, much clearer idea of, obviously, as we get close to launch about the coverage from day one, or the kind of contracts we may have for – before we launch.So it’s a little bit premature for me to give you a very definitive. But nothing really surprising versus all the statements that we’ve made historically about the product, its positioning, the uniqueness of the data, especially also in light of the new scientific data that we published regarding its mechanism of action that it is truly almost a class of drugs on its own. It’s not atomoxetine, it’s not another atomoxetine or norepinephrine reuptake inhibitor.The serotonin component of this mechanism is very, very important, and it plays a very different role in its clinical profile. And that’s why we got the data with SPN-812, which was very different than atomoxetine.So all of this has played extremely well in favor of the product and its differentiation, not only with the payers, but also with the physicians as far as they understand now why the profile is, what it is, and why the Phase III data came out the way we did it.

And your next question comes from the line of Nick Rubino of Stifel.

Hey, everyone. This is Nick Rubino on for Annabel. In the second-half of the year, what plans are you guys making to prepare the salesforces for SPN-812 and then WorldMeds? What the salesforce integration look like? Is there going to be any overlap as you develop them, or are you thinking about them kind of wholly separately?And then we jumped on just a minute late, so apologies if you went over this. But what caused the improvement in gross-to-net this one quarter? We figured those would kind of steadily erode year-over-year, and there was kind of a tick up. Was it mostly due to the month of March in those 90-day prescriptions? And especially in March, did you notice the same kind of trend throughout the markets for Oxtellar and Trokendi? Thank you.

Yes. Regarding the salesforce activities and plans, our plans at this point are still the same as far as building the psychiatry salesforce behind SPN-812. So those plans have been in place and will continue to in place. The salesforce that will come to us and join us from US WorldMeds will continue to focus on the Parkinson’s products.As I mentioned earlier, there are ways potentially to augment that salesforce at some point, when exactly we will do that, and how do we do that within the launch of SPN-812 and so forth, obviously, we’re putting all that together to see how things will settle. But this is a transaction that really augments our capabilities. It’s not to create process synergies or anything like this.So we feel with a portfolio of five marketed products and, of course, with SPN-812, you now have six marketed products. We have plenty to do on all of these products. Specifically, of course, with 812, but also specifically with the Parkinson’s portfolio that we are acquiring, because we will be exploring every potential growth opportunity here that we can from a salesforce perspective, marketing perspective, every other angle as far as the business to make sure it grows.So there are synergies and overlap potentially also from a physician call perspective. So we might be able to allocate the resources a little bit differently across the different brands. So all this is in the works, as we speak, clearly, preparing for closing the acquisition and the transaction, as well as continuing to prepare for the psychiatry here, which is really where we’re looking forward as a major foundation for us in psychiatry.Regarding gross-to-net, I’ll let Greg respond to that.

Right. So Nick, I’m not clear in terms of exactly what you’re looking at. So maybe we might be better off just taking this discussion offline. But, in general, on a sequential basis from the fourth quarter of last year to the first quarter of this year, we do see increasing gross-to-net deductions, particularly for Trokendi XR.The basic theme around that has not changed from what the company has observed and communicated to investors over the past year, which is that. For Trokendi XR, the combined effect of price increases got an 8% price increase year-over-year, plus volume increases, is largely, if not, wholly being offset by the intensification of gross-to-net deductions.For Oxtellar XR, it’s a little bit different. The combination of volume increases, which have clearly been a little bit more than those on a percentage basis for Trokendi XR, plus price increases has been somewhat higher than the intensification of the gross-to-net deductions. But at the same underlying phenomena, you do have one-time impacts versus continuing impacts in gross-to-net and that makes it a little harder to discern what’s going on sequentially or year-over-year.The headwinds that we continue to face with both products are the same. Co-pay payments we continue, which is really driven by the company’s programs, to continue to enrich that to drive patients to fill and then refill their prescriptions.And then as regards, gross-to-net deductions for the managed care programs, we have very consistently seen an intensification of the ask either for admin fees, or fee-for-service or combination of the two from the gross-to-net – from, excuse me, the managed care companies with which the company works. So glad to talk to you about this offline. I think, that might be a little bit more efficient. Thanks.

Sounds good. Thank you.

Your next question comes from the line of David Amsellem with Piper Sandler.

Thanks. So just a couple of questions on Apomorphine. So number one, on the infusion pump and it might be too early to address this, but I thought I’d give it a go. Can you talk about what the best way to – how to – what’s the best way to think about a pricing? Should we think about it more in lines of Duopa, or what the cost of the DVS would be? And what’s the best way to think about that? That’s number one.Number two is, I think, we talked about this in the past, but can you talk about the extent to which you think the infusion pump could cannibalize the self-injection? And what is the extent of overlap? And what was your diligence telling you in terms of the extent of overlapping? Thanks.

Yes, sure. Yes, regarding the pump, David, and as you would expect, I mean, a lot is going to depend on the final label, if approved by the FDA as to what kind of label we will get and the positioning we will be able to go after as far as launching the product and where do we positioning within the paradigm of different therapies out there.I mentioned in response to the earlier question on the call regarding the deep brain stimulation and the gastric – the surgical gastric tube. So as far as pricing specifically, I mean, you have to take all that into account clearly within the realm of the Phase III data as well and so forth. So it’s a little bit hard for me at this point.I mean, first of all, we haven’t done the work yet, so it’s a little bit – it will be irresponsible for me to make any specific comments. I don’t want to mislead anybody one way or the other. And we will only talk about pricing and people will know what the price is when we actually launch the products. So on that one, I’ll have to a little bit push to that question to later when we can really answer it when we launch the product.As far as cannibalization, which was also related to the first question, on the positioning, on the label we get and all that clearly will be the determining factor on whether we will have a minor cannibalization to the pen or a significant cannibalization to the pen. Because clearly, given the indication and what the indication says on the label and what you can promote the product for, it will impact how far on the spectrum as far as the different stages at which…

Okay. That’s helpful. Let me sneak in a quick follow-up. Apomorphine causes pretty high rates of nausea. Can you talk about what your data on nausea and emesis looks like for the pump? And does the continuous infusion confer a better profile on that front?

Yes. I mean, Apomorphine side effects are pretty well known has been – have been established for a long, long time. As far as the pen, I mean, we – if you are a new patient, this is the first time you’re using Apomorphine, clearly, you will be impacted a little bit more by the side effects. But over time, patients do get used to it and the effect becomes less and less over time.And that’s why actually, it has a very good actually loyalty. The product wants people to use it and they see it through benefits. I mean, really becoming active in such a quick period of time and the reduction in the UPDRS is really amazing for these patients.So when you have that efficacy and initially trying to put up with some of the side effects, I think, over time, patients get used to it and they become pretty loyal to the franchise. And with the infusion pump, I mean, you’re continuously infusing the Apomorphine, so the drug is the same. Naturally, you’re going to expect a very similar type of side effects and very similar build up for tolerance over time.So we don’t expect it to be remarkably very, very different overall because of the drug itself. But it is continuous flow, that is not obviously a quick bolus injection like the pen is. So you would expect people to get used to it and tolerated potentially a little bit more, although, I don’t have really solid data to speak from a head-to-head comparison and so on. [ph]

Thank you.

I’m now showing no further questions at this time. I would now like to turn the conference back over – I do apologize. We just had a question come into queue as a follow-up from [indiscernible] Securities.

Thanks for taking my questions. Just really back on the S WorldMeds deal. You mentioned the APOKYN did $119 million last year. I was just wondering, what were the sounds of MYOBLOC last year? And also, what’s your strategy for growing the dargo? [ph]

Yes. The total business is about $150 million approximately in APOKYN. We said, in 2019, it was approximately $118 or $119 million. So naturally, the remaining is between MYOBLOC and XADAGO.As far as the XADAGO business, it’s actually – it’s a fairly new product. It was launched in 2017, so it’s fairly new. Unfortunately, the timing was a little bit not perfect for the entry of that molecule, because as elected that time went to generic is a little bit before or about the same time. So that created an issue for a new product, such as XADAGO with a mechanism of action, which is a monoamine oxidase inhibitor.Now, XADAGO safinamide, which is the drug, actually, is a dual action mechanism. It does have activity on the glutamatergic activity in addition to the monoamine oxidase inhibition. However, that did not end up on the label. And that’s why it limited from a promotional perspective what you can say about the product and potentially differentiating it from other monoamine oxidase inhibitor.So we certainly like with the other products. We certainly would be looking for ways to potentially rejuvenate the product, put – push – extra push behind that. There has been some limitations from a payer perspective, given the situation I mentioned, where other monoamine oxidase inhibitors are basically generics. So you are – you would expect that kind of pushback anyway from the payers. So we will be working to see how we can actually improve the traction behind the product and potentially grow it significantly.

Can I just make a follow-up? That – does that include maybe doing an additional study to explore whether it could reduce dyskinesias?

It will include all. We look at everything, not just promotional. If there is another opportunity clinically to generate new data, we have to work with our partner. Obviously, this is not a product that we would fully own. So we have to work with our partners, Zambon, as far as to when they may already have plans. We really don’t know at this point and not able to speak about anything specifically at this point.

Great. Thanks very much.

And I’m showing no further questions at this time. I’ll now turn the conference back to Mr. Khattar.

Thank you. After the completion of the acquisition of the CNS portfolio of US WorldMeds, which is expected in the second quarter of this year, we will have a neurology portfolio of five marketed products, diversifying our revenues, earnings and our cash flow.In addition, we are very excited about the level of preparation by our commercial team and the quality of our launch plans for SPN-812. As we get closer to the year-end when we expect to launch the product, if approved by the FDA.Finally, we are waiting for the closing of the acquisition to start our planning for what could be another exciting second launch in the second-half of 2021 of the Apomorphine Infusion Pump. And finally, in addition to all that, we will continue to look for strategic opportunities to further strengthen our future growth and leadership position in CNS. Thank you for joining us this morning, and we look forward to updating you throughout the year.

And ladies and gentlemen, this concludes today’s conference. Thank you for participation, and have a wonderful day. You may all disconnect.