Good afternoon, and welcome to Supernus Pharmaceuticals' Third Quarter 2021 Financial Results Conference Call . 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, Nika. Good afternoon, everyone, and thank you for joining us today for Supernus Pharmaceuticals' Third Quarter 2021 Financial Results Conference Call. Today, 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, Tim Dec. Today's call is being made available via the Investor Relations section of the company's Web site 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 latest SEC filings. 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 November 3, 2021. 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 declines 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 afternoon, everyone, and thanks for taking the time to join us as we discuss our 2021 third quarter results and recent developments. During the third quarter, we continued to execute on our long term growth strategy and the 2023 Trokendi XR transition, as highlighted by the announcement in October of the proposed acquisition of Adamas Pharmaceuticals. This acquisition represents a significant step in further building a strong and diverse Parkinson's disease portfolio and aligns with our focus of acquiring value enhancing, clinically differentiated products to treat CNS diseases. The acquisition will increase our revenue base and cash flow and reduce our dependency on Trokendi XR. The transaction is also expected to be accretive in 2022. Regarding Qelbree, the launch is progressing well in line with our forecast. As expected, prescription growth accelerated as we entered the back-to-school season. For the month of September, total prescriptions were 7,132, an increase of 37% compared to the month of August and an increase of 118% compared to the monthly average during the three months period to September. In addition, the latest weekly prescriptions data shows total prescriptions of 2,248, an increase of 51% compared to the weekly average over the prior 12 week period. We also saw a significant increase of 340% in Qelbree's base of prescribers during the third quarter of 2021 compared to the second quarter of 2021 with more than 3,470 physicians prescribing the product. On the managed care front, we have made great progress by securing coverage with one of the key PBMs and advancing discussions with the others. Also in Medicaid, Qelbree is now covered as Tier 2 or better for 48% of all Medicaid lives versus 7% in the second quarter. During the third quarter, we received acknowledgment by the FDA that they…

Thank you, Jack. Good afternoon, everyone. As I review our third quarter and year-to-date results, please refer to today's press release. Total revenue for the third quarter 2021 was $148.5 million, a 4% decrease compared to $155.1 million in the same quarter last year. Total revenue in the current period was comprised of net product sales of and royalty revenue of $2.9 million. The decrease in net product sales in the third quarter was due to a decrease in net product sales of Apokyn and Trokendi XR. This decrease was partially offset by an increase in net product sales from our other products. Qelbree was launched in late May of this year and we are very happy to report $2.4 million of net product sales in the first quarter of launch. Qelbree net sales included temporarily high commercial co-pay deduction as we support patients during the early launch period, while we continue our commercial contracting efforts to establish access for patients. For SG&A, third quarter 2021 expenses were $72 million compared to $54.5 million in the same period last year. This increase was primarily due to activities to support the launch of Qelbree. Research and development expenses were $19.7 million for the third quarter of 2021 compared to $16.8 million in the same period last year. The increase was due to higher regulatory costs related to the acquired products and costs associated with MyBlock post market commitment studies. Operating earnings were $32.6 million for the third quarter of 2021 compared to $56.1 million in the same period last year. Net earnings were $21.6 million for the third quarter of 2021 or $0.40 per diluted share compared to $40 million or $0.74 per diluted share in the same period last year. For the first nine months of 2021, total revenue was…

Your first question comes from the line of David Steinberg from Jefferies.

I have a couple of questions. Just generally, Jack, first off, how’s Qelbree doing versus your expectations during the all important back-to-school season? And then just a little granularity on some of the metrics you might use in terms of sampling payer access? I know that, for example, in sampling you indicated that you're putting 25,000 samples into the field. Is that still the same that they've been used up, have you put any more samples and where are you in coverage? And then I have a follow-up after that.

As we mentioned and we said the same thing basically last quarter, it is actually tracking exactly per our forecast even on shipments and prescriptions. So, so far, we're pretty pleased with the performance of the launch. Specifically regarding sampling, yes, we continue to sample and there will be and will continue to be an ongoing activity for us. Of course, at the beginning of the launch, and we are still in the launch mode, obviously, that will continue to be on the heavier side. But as time goes on, on an ongoing basis, it will become more measured in line with, obviously, the uptake and the physicians' activities. As far as the payer access, as I mentioned in my remarks, we're really pleased with the progress that we've made in the last quarter. We've signed up one of the very important key PBMs. So they're on board and the product is now covered, and we're already seeing tremendous traction because of that. And also, we've made similar progress on the Medicaid. So we have now about 50% of the Medicaid lives approximately with a Tier 2 or even better coverage. So we're pretty pleased with that. It's taking time but we expected that and that's why, obviously, for this year, our guidance on Qelbree is where it is as far as the net sales. But again, back to the initial question you had, I mean, gross sales are tracking exactly as we expected at this time of the year in the launch.

And then just a follow-up on the sampling. You mentioned, Jack, it's heavy. When do you -- so therefore, the actual scripts are understated. At what point in time in the coming months or quarters, do you think we'll be able to get a more accurate read on true demand, i.e., what we see script-wise, is what you're saying and actual usage by patients? And then just secondly, you mentioned the adult approval is expected in next April. I'm just curious, are you seeing any off-label use? And I guess we would see that in the pill size. It's about $300 WACC for the 100 to 200 milligram dose, but above 200 milligram, which I assume would be all the adults or older children. It's almost $600 WACC. So what are you seeing in terms of percent of the pills either the 100 to 200 mgs versus above 200 mgs?

On the conversion, I mean, this is more of a rule of thumb, you would expect maybe 25% to 50% of the samples to work through in the first six months or so. It's a little bit slower than we expected initially with the conversion. So we're really watching it very closely. And then regarding the activity as time goes on, again, it really depends on how quickly the physicians are going with the samples. Now obviously, what a lot of times screws up the tracking and these numbers as physicians giving more than one sample to the same patient or giving it either at the same time or a few times in a row, and you do have that kind of behavior. We don't want necessarily to discourage physicians from using the samples, especially with the coverage. As coverage is coming online, we want to make sure patients continue to be on the medication until the coverage comes online. So we try to be sensitive from that perspective. And therefore, the numbers are not always clean as far as reading the exact conversion rate for the samples. Regarding your question on the adults, we're not seeing really too much at all because clearly, we don't call on adult psychiatrists. So we are completely focused on child psychiatry and the pediatricians. So other than some folks hearing about it, we might get one or two requests here or there. So it's really minimum at this point, if there is anything. And the dose, regarding your question on the daily dose, it is still a little bit on the lower side than we think it will end up. We have published data from our open label extension and we saw the dose actually with the children and the adolescent creeping up over time, somewhere between the 300 and 400 milligrams. So we expect that over time, it will go up to the higher total daily dose. But initially, you will expect physicians to be cautious with it, see how kids respond because even the 100 milligram, I mean, was fairly effective, if you remember from our Phase III clinical study. So we're seeing very good response from the product on the clinical side. But that will take time for them to migrate a little bit more towards the higher doses. And certainly, as the adult comes on board, hopefully next year, we expect, again, that to be more in the probably 400 milligram range and maybe closer to the 600, because we did test all the way up to 600 milligram.

And just a final quick question. You've given us your target long term gross to net. Could you help us with what the gross to net will shake out in the next couple of quarters?

I mean, we said that we would love to be where we are today with our current portfolio. So we'll be pretty happy if we end up somewhere in the 45% to 55%, give or take, gross to net. And actually, we've moved pretty well in the third quarter from the second quarter. We moved about 10 points. And we hope to move another 10 to 20 points. So we should be -- I mean, it's a little bit hard for me to give you a target date as to when I'm going to hit the 50% or the 55%. But I mean, definitely in the first half of next year, we sure hope to get there. And we're working pretty hard to get there as early as possible. Obviously, that's probably the best way of putting it.

Your Next question comes from the line of Ken Cacciatore from Cowen.

Just a couple of questions. You've had now a little bit of experience with Qelbree and you've seen quite a bit of products and how they've launched, and you've been able to get feedback on those launches from clinicians and understand the experience. So as you kind of are getting this initial experience with Qelbree, can you frame for us your conviction and kind of the ultimate size? Do you think this could be bigger than Strattera, which was around $0.5 billion, maybe bigger than intinib? Can you try to give us some kind of comparison as you take all these different disparate data points that you're getting and try to help us understand and frame out what you see and what you think in terms of the direction it's going? And then on the acomorphine pump, you've been very conservative in how you talk about it, which is understandable given the regulatory process has to play out. But when we have discussions with our clinician consultants, they're really enthusiastic and talk about the need in these late stage patients, obviously, it could get good pricing. So could you help us understand a little bit of your little bit of cautious optimism versus their more enthusiasm and what we should be thinking about that? And then lastly, just would love it if you would touch upon BD and weather. It's a great deal that you're doing with the whether you're going to be able to reload and be in a position to do something like that again in the short term? And if there's things that you see that maybe we don't see that could be acted upon a little bit quicker than we think.

Regarding the first question as far as Qelbree. You may recall and some folks on the call might recall, when Strattera first launched, they actually reached up to about 19%, if I'm not mistaken, market share penetration of the whole ADHD market. And they did that fairly quickly because they were the first non-stimulant product to ever enter the marketplace. Before that, it was always stimulants and the only products available that controlled substances. But then the changes in the label came on board. People started getting also a little bit disappointment as far as the performance of the product, how quickly it works and so forth. And the product settled somewhere in the -- from a market share perspective, somewhere around the 7%, 6%, give or take that's where it really ended up settling. Intuniv also when they launched, they peaked somewhere in the 4% to 5%. And that's why actually the whole category ended up being around the 10% of the ADHD market. What we hope to accomplish with Qelbree is hopefully perform way better than where Strattera and Intuniv have settled as far as the market share. And we're starting to see some of the early signs actually that Qelbree is not being reserved only for use for people who are dissatisfied with nonstimulants. Actually, some physicians are using it on a lot of patients who are on stimulants and dissatisfied with the stimulants, or where the parents don't want to give their kids stimulants or controlled substances or products that could be abused. And we're very encouraged with that, especially early on because, of course, the easy positioning that physicians could see this or the perception would be -- well, let me see, I'll just put patients who are on nonstimulants today and they're not happy,…

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

So just have a few. I wanted to come back to Qelbree and regarding the PBM win. Can you talk about the formulary tiering for that product, is it totally unrestricted? And then secondly, more broadly regarding the payer landscape for Qelbree. Are you seeing or are you negotiating, I should say, with payers such that you can eliminate any step throughs or at least avoid a nonstimulant step through? Just talk about philosophically what you're trying to accomplish with your contracting discussions. And then I also had a question on Apokyn with the decline in sales. I'm assuming a lot of that is the availability of Kynmobi. I guess the question there is do you expect further pressure or do you see sort of a bottoming out of that product anytime soon?

On the coverage, I mean, in line with a lot of the comments we've made historically, clearly, getting complete open access, a lot of the PBMs and a lot of the plans, they come to you with ridiculous high rebates that they're looking for as far as what would it take to give you open access. So what takes the time in these negotiations is clearly something that is more reasonable that we could work with them to make sure, first of all, patients get access to this, what we believe is an incredible treatment option for a lot of patients out there, but with reasonable rebates that we can work with to give us the right coverage. So ideally, yes, of course, you want these patients to get access to this medication without a lot of these step edits. But realistically, there will probably be some step edits we're trying to work our way through those step edits through our negotiations and continued discussions. And we've made a lot of progress there and that's why we're pleased with at least landing the first contract here and improving the coverage on the product. And as far as where do we land? I mean it is conceivable that you're going to land in different plans, different status or different tiers or different coverage. I mean there is no one way that this product that's going to be covered across all the plans. So there will be a variety of step throughs or PAs or whatever the case might be that different plans will put in place. And we expected that even from the beginning. I mean we knew that will end up being the case in this category, especially and we're seeing that in a lot of other categories, not just in ADHD. Regarding Apokyn, I mean, we had the third quarter last year, as briefly I mentioned in my remarks, we had a little bit unusually high third quarter last year. So that's why this quarter was a tough comparison, so to speak. I think if you remember in the second quarter, we did about $27 million, if I'm not mistaken, on net sales. So this quarter was about $25 million. I mean we see the product settling somewhere in the mid-20s, probably on a quarterly basis, that's where we hope to be. Now the competitive pressures continue with Kynmobi has been in the market for about a year now. So we've seen that pressure. We continue to see some of those pressures on it as well. And like every category also you see pressures on the managed care and continued pressure on the managed care, because the more activity in any category you start seeing more pressures on the managed care as well. So we're seeing some signs of that also.

Your next question comes from the line of Annabel Samimy from Stifel.

Just to go back to the restrictions that you're seeing on the coverage side as far as step throughs. Are they requesting that patients step through stimulants or just the non-stimulants? So I guess that's the first question. And do you have a sense of what percent of the population or the prescriptions are from switching from stimulants or other stimulants versus patients who are new to treatment? And then I guess on the conversion rate of patients going from the starter kits to actual prescriptions. Can you just remind us how large the starter kits are? Is it just a couple of weeks of treatment? And if that's the case, then, I guess, why does it take six months to see what a true conversion rate is from starter kits to actual prescriptions?

Regarding the step-through, it's really a mix, as I mentioned earlier. I mean the different plans will have different coverage, different schemes, so to speak, some through nonstimulants, some through stimulants. So it's really a mixed bag, so to speak. As far as the percent of patients who are nonstimulants or stimulants. The only thing I can point to is we recently completed a survey as far as to where these patients among our prescribers as to where these patients are coming from or what type of patients physicians are starting Qelbree on. And we're really encouraged, as I mentioned earlier to the earlier question on the potential of Qelbree eventually. We're very encouraged with the early signs that actually a good portion of these patients are coming from the stimulant side. They're dissatisfied with the stimulants and their side effects and tolerability issues and so forth. Another good chunk of patients is coming from current non-stimulants. And also interestingly, a good portion, about a quarter of the patients, physicians reported are are putting really patients who have what they characterize as complex ADHD as well, so ADHD with a lot of other comorbidities, because as many of you may know, stimulants also are not contraindicated in a lot of areas where you might have mood disorders or other conditions associated with ADHD. So it's really a mixed bag, but we're seeing a good healthy number that is coming from the stimulant side. As far as the starter kit, it's initially it's two weeks sample size. And therefore, that's why we're seeing potentially, in a lot of ways, we're seeing physicians giving more than one starter kit and therefore pushing out a little bit the conversion into real prescriptions. So we continue to monitor that. I mean we have our reps. Obviously, they do monitor how quickly physicians go through samples, but also at the same time, how many prescriptions they've written or not written. So we can tell in a way. But at the same time, as I mentioned earlier, we're trying to strike a balance here. We want people to be happy and trying to use the product and encourage them and enthusiastic about it. So we'll try to manage that in a smooth manner as possible without disrupting physicians' excitement about the product and so forth.

And if I could just ask one more question on . Strictly Kynmobi or is it still the COVID restrictions mixed with Kynmobi being a very easy access type of treatment?

I mean access to physicians, and I'm sure you're probably hearing that from a lot of companies hasn't gone back to what it used to be pre-COVID. So there is no question about that as far as access, reach to physicians is impacting and has impacted everyone's business, including us, including even the Qelbree launch, including the Apokyn business as well. But yes, I mean, the impact on Apokyn is a combined effect of many things, including, yes, COVID, including the increased competition from Kynmobi.

I guess my point was they needed a nurse to be able to start that with the treatment. So is that the rate limiting step for you? And at some point, Kynmobi has got, I guess, some high levels of irritation. So is there a point where patients wash through Kynmobi and then they move on to, say, go back to Apokyn or move on to Apokine or do they just move on to the next level of care whatever that drug is?

We've seen and we've heard about examples across all these examples, so to speak, all these categories. So we've heard about patients who have tried Kynmobi, having been satisfied different efficacy profile and physicians put them back on Apokyn. We've heard people who says, well, Kynmobi is more convenient, so I can just take a sublingual tablet and instead of an injection. So I mean you're going to see a lot of flow of patients back and forth across these products until they settle with the product that is more suitable for them. Yes, in our case, of course, it's a little bit more complicated. The initiation because you have the nurse, the involvement of the nurse and training the patient on using the injectable, the pen itself, the titration, all that. But that's also part of the service that we offer our patients. I mean it's for some patients actually like that. They like that handholding, the training, a nurse who really follows up with them, see how they're doing on the medication, the compliance and also reporting back to their physicians. So it's really part of what we call our circle of care for the patient. It's not just here as a prescription and good luck with it and see what happens to you. No, we like to really service these patients and help them, and that's part of it as far as the whole Apokyn experience.

There are no further questions at this time. I'll turn it over back to Jack Khattar.

Thank you. We remain focused on the launch of Qelbree and look forward to closing the acquisition of Adamas by the end of this year or early 2022. In addition, we look forward to submitting the NDA for SPN-830 this month and get back on the regulatory path towards potential approval next year. With the Adamas acquisition, Qelbree's growth and the launch of SPN-830, our dependency on Trokendi XR will be much reduced by the time generics enter the market. We look forward to updating you on our progress, and thanks again for joining us today.

This concludes today's conference call. Thank you for participating. You may now disconnect.