Good afternoon, and welcome to Supernus Pharmaceuticals First Quarter 2023 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 ICR Westwicke, Investor Relations representative for Supernus Pharmaceuticals. You may begin.

Thank you, Steven. Good afternoon, everyone, and thank you for joining us today for Supernus Pharmaceuticals' first quarter 2023 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 website at ir.supernus.com. 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 May 9, 2023. 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'll 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 2023 first quarter results. Despite the generic entry on Trokendi XR and the typical insurance headwind in our industry in the first quarter, Supernus delivered strong first quarter results and set the stage for solid performance for the rest of the year. In the first quarter, Supernus achieved total revenues of $154 million, essentially flat compared to $153 million in the same period a year ago. This was achieved despite a significant 45% decline or $28 million decline in net sales of Trokendi XR. In addition, the first quarter of 2023 adjusted or non-GAAP operating earnings were $31 million, compared to $28 million in the same period last year. Excluding Trokendi XR first quarter of 2023 net product sales increased to 25% year-over-year, driven by continued adoption of Qelbree across both pediatric and adult patients and growth by GOCOVRI. We remain well positioned as we manage through the loss of exclusivity of Trokendi XR and transition to our growth brands setting the stage to deliver double-digit growth in 2024 and beyond. Qelbree continues to perform well with total IQVIA prescriptions in the first quarter of this year, reaching 134,530, representing a sequential increase of 14% compared to the fourth quarter of 2022. Prescriptions in the most recent month of March reached 49,789, the highest monthly total since the launch. This represents an annual run rate for Qelbree of more than 0.5 million prescriptions. Qelbree also continues to capitalize on several dynamics that we elaborated on last quarter including the underlying growth in the overall U.S. ADHD market an increase in the average wholesale acquisition cost per prescription, improvement in managed care coverage, and the continued growth in Qelbree's base of prescribers.…

Thank you, Jack. Good afternoon everyone. As I review our first quarter 2023 results, please refer to today's press release and 10-Q that were filed earlier today. Total revenue for the first quarter 2023 was $153.8 million compared to $152.5 million in the same quarter last year. Total revenue in the first quarter of 2023 was comprised of net product sales of $140.6 million and royalty revenue of $13.2 million. The increase in total revenues was due to higher net product sales of Qelbree, GOCOVRI, and royalty revenue, partially offset by the decrease in net product sales of Trokendi XR. For the first quarter of 2023, combined R&D and SG&A expenses were $106.8 million as compared to $111.3 million for the same period last year. The decrease was primarily due to Adamas integration cost, which were included in Q1 2022 that resulted in operational efficiencies. Operating earnings on a GAAP basis for the first quarter 2023 was $5.2 million as compared to operating earnings of $2 million for the same period last year. Total other income for the first quarter 2023 was $3.8 million as compared to $12.8 million for the first quarter of 2022. The change is primarily due to a gain recognized in the first quarter of 2022 on the sale of a subsidiary of Navitor. In the first quarter of 2023, we reported an income tax benefit of $7.9 million as compared to an income tax benefit of $10.9 million for the same period last year. The income tax benefit in the first quarter of 2023 was primarily due to a lower pre-tax loss forecasted for 2023. The income tax benefit in the year-earlier period, as noted on our prior calls, was due to a corporate reorganization of the Adamas entities in the first quarter of 2022.…

[Operator Instructions]. Our first question comes from the line of Andrew Tsai of Jefferies. Your line is now open.

Thanks, everyone. Great quarter. I appreciate you taking my question. So, the first one is that congratulations on logging in that major PBM contract, I think effective January, 2023. So maybe remind us of the latest and greatest thinking on when we can expect that target of 50%, 55% gross in net to occur. Basically, is it fair to assume that range could happen this year or could it take a little bit longer than that? Thanks.

Yeah, Andrew, regarding the second contract, it became effective in the first quarter of 2023. Now, we didn't see the full effect of that contract or a lot of the effect of the contract because also you always have opposing factors within the Q1 because of the high deductibles, insurance, higher co-pays, and so forth. So, we certainly expect the full impact of this second PBM contract more in the second quarter and obviously even better in the third quarter and the fourth quarter. So, to answer the question clearly, as we progress through the year, we expect the gross-to-net to improve. And definitely get us closer to the 50%, 55% by year-end. So, it's going to be -- is it linear most likely? I mean, that's typically what we see in our business improvement in the gross-to-net with Q1 typically at the worst level, and then improvement throughout the year. So certainly, that's what we expect on Qelbree moving along from the early 60% gross to net towards the 55% or even 50% hopefully by year-end.

Right, very clear. And then maybe just one more then is, would you agree based on your guidance if we backed out all of your products with reasonable assumptions including Trokendi, which you've guided to Oxtellar and so forth? Would you agree that Qelbree resales could maybe more than double and if not almost triple this year? And if that's the case, I know it's -- you are not trying to provide guidance. But directionally speaking, if that's the case, then, is it fair to assume Qelbree's sales should accelerate on a quarterly basis going forward? That's just the root of my question. Thank you.

Yes. The short answer is, yes. I mean, we do expect Qelbree to accelerate as the year goes on, and especially course as we also get closer to the back-to-school season on top of all that. Yes. It is more than double that last year, that's an easy answer actually given last year's performance. And we have made several comments this quarter and even the last quarter, obviously, about the different dynamics in the marketplace that are helping us, and are expected to continue to fuel the growth behind the brand from the market itself being a very healthy market, the ADHD market, then clearly from a managed care perspective, continued improvement on the coverage, continued increase in the WACC, average wholesale acquisition cost. And of course, the expansion in our sales force and so forth and the improved coverage from an ADHD market perspective. So, all these are pointing and aligned in one direction, which has really continued to push Qelbree and increase the momentum and the growth behind the product.

Thank you, Jack.

Okay. [Operator Instructions]. Next question comes from David Amsellem of Piper Sandler. Your line is now open.

Thanks. So, on Qelbree, can you talk about, Jack, where you see the mix between adults and pediatric evolving overtime? And I may have missed on your prepared remarks what you said on the current mix between adults impedes. But just talk about where you think that mix is going to go over time. Secondly, can you provide point more specifics on where you need to improve upon in terms of managed care access? And then third, just real quick on Oxtellar XR, I believe you have a generic filing -- a trial on a generic filing pending. So just wanted to get your thoughts on that and the relative risk of potentially an earlier-than-expected loss of exclusivity Oxtellar. Thank you.

Sure. On the first question for Calgary in the mix of the business. I mean, where we are right now, we are about somewhere between 28%, 30% adult and the rest being pediatric. The market itself, if you remember, it's basically almost the other way around, where the bulk of it is adult around 67%, and pediatric around 33%. So clearly as time goes on, we continue to expect to grow our business in the adult market. And will it eventually mimic exactly the market? We don't know for sure. Obviously, we're still early in the adult launch. Certainly, we've done extremely well and we're very happy with the adult launch. And also, right now looking at the mix right now versus looking at it in the fall with the back-to-school season, but the mix may flip a little bit because you have a little bit more momentum behind the pediatric business in the back-to-school season. So, these ratios are going to shift over time and continue to shift, but at some point, we will find ourselves probably closer to the market, but may not mimic it exactly. Regarding the next question on the managed care improvement, I mean, that is always an ongoing process. I mean, we will continue our discussions with other PBMs and continue to add contracts where it makes sense and where it is reasonable for us to enter these contracts. Same thing with the Medicaid and the different states. It's an ongoing process where we always look for improving our position over time. And clearly, as time goes on, as utilization goes up, as we continue to be successful, as we've been in the last couple of years, improving the -- and growing the prescriptions in a really solid way that even gives us further ammunition to go back and renegotiate contracts or try to improve our position as time goes on. Regarding Oxtellar XR and the generic situation, we basically have three generic companies where we are -- we have sued these three generic entrants that wanted to come in on Oxtellar XR. We are in the middle of litigations. I can't really comment one way or the other, but there is certainly a risk on Oxtellar XR that we may be able to maintain exclusivity till the end of the patent expiration, which is 2027, or we may not. So, we really don't know. We will certainly update the street on how things progress or don't progress or whether any settlements occur if they do occur. So certainly, at this moment there is nothing really, I can report, but we will definitely report or announce anything if anything comes up. But certainly, there is a risk for us on Oxtellar XR as time goes on. And I don't know if I missed -- was there a question on Trokendi XR?

No, that's it. Just on Oxtellar. I may have just follow up real quick. I mean, I believe you had prior litigation that you did win if I'm not mistaken. Is that, I just a quick refresher on that.

The first two generics that filed on Oxtellar XR, TWI and ACTAVIS, which is now Teva. We actually went to court on these two cases, and we won in both cases all the way through appeal. So that is correct. That was back in 2016, the ‘2017 timeframe when those cases were resolved actually in our favor. So, this is a second wave of generics that have filed in the last two to three years, and we are in litigation with the second wave of the generics.

Okay. That’s helpful. Thank you, Jack.

Okay. Thank you for the question. [Operator Instructions]. Our next question comes from Annabel Samimy of Stifel. Your line is now open.

Hi. This is Jack on for Annabelle. Thanks for taking our questions. Could you talk a little bit about the GOCOVRI launch and how that's going relative to your expectations? You seem to have a pretty refined message that you can treat both the off episodes and the dyskinesia. Are physicians receptive to that or do they only want to talk about how to maximize treatment of the off period? Is there any friction there?

Yes. Sure. I mean, we have been very pleased with the GOCOVRI and the response we have been getting from the market from physicians regarding the unique positioning of the product. It's a unique profile, which is -- it's the only product in Parkinson's that is approved to treat dyskinesia and of episodes. And obviously, this quarter also was fairly solid given again it's the first quarter, which typically we have the headwinds of insurance and everything else that goes on in our business in the first quarter. We are very happy with GOCOVRI delivering 15% growth versus last year. And that's on top of the 19% growth that it delivered last year. And as far as the message itself and the positioning, it really depends on the physician, their practice, and how they treat Parkinson's. Are they actually movement disorder specialists or are there general neurologists? So, the discussion in the physician’s office sometimes is a little bit different depending on the specialty. But overall, there is a lot of education that has to occur and that we continue to do that from a market education perspective, really helping physicians to discuss the real issues bring up the issue of dyskinesia. Patients sometimes on their own, they are not aware that actually dyskinesia is caused by a lot of the medications they are on. They might think actually dyskinesia is part of the disease and therefore they don't raise it, they don't talk about it, they don't ask physicians about it, physicians don't ask the patients about it. So, we try to improve the education in the marketplace to make sure that is brought up in the conversation between the patient and the physician. So that people can be aware of the fact that it is an issue. It can be dealt with, there is a product that actually treats it and not only treat dyskinesia but also treat the off episode, and there is really no need to have a tradeoff here between the efficacy of a lot of these Parkinson's agents specifically levodopa/carbidopa, what we're talking about here, there is really no need for the physician to taper off or reduce the dose of levodopa/carbidopa to get rid of dyskinesia. You can always add GOCOVRI to treat the dyskinesia, but even also get the efficacy of episodes at the same time. So, it's a beautiful solution that people if they really understand the situation, they can have great results with the GOCOVRI. So, it's just a matter of continued education, and continued push that unique positioning that GOCOVRI holds in the market. And I think so far, the results speak for themselves, as far as the uniqueness of the product and its continued benefit in the marketplace.

Got it. And then if I could just ask one more on Qelbree. Do you have a granular breakdown of where those prescriptions are coming from in terms of naive patients versus switches from stimulants or non-stimulants? And now with the increasing volumes that you're getting are payers becoming more permissive with prescribing or are they still requiring step edits?

Yeah, regarding the source of the business on Calgary, it really cuts in so many different ways. But basically about 29% of the business is from new patients. And the remaining 71%, it's switching patients from existing medications or adding Calgary to the existing medication. And when you look at the switches themselves, 65% of the switching is coming from the stimulants, and 35% of the switching is coming from non-stimulants. And that is actually a very, very encouraging fact. In looking at the source of the business, we are actually drawing a lot of patients from the stimulant side. A lot of it is due to the AEs that people side AEs mainly as one of the major driver and actually behind it. And of course, in kids or pediatrics, it's also the parents not willing to put their kids on controlled substances on top of all that. So, we are very encouraged by this trend and it continues to be that way even from the time we started launching the product in peas and in adults. And then as far as the payers and the step edit and so forth, I mean, it's a really mixed bag. The first PVM contract we had, it's actually tier two preferred, so there is no step through. The second one has a minor step through. But again, if you think about the market, let's say 90% of it is stimulants. So, if you have to go through a stimulant, that's really not much of an issue. If you have to go through a non-stimulant, it might just delay your initiation on Calgary by three weeks, four weeks or whatever, until when you are dissatisfied with the first non-stimulant clearly. So, it is a mixed bag of different plans, different formularies, different step-throughs or Pas, and so forth. And we can back to my previous answer on the previous question that is some of the things that we continue to work on and to keep to improve on the coverage and minimize this step-thoroughwort different medications patients have to go through before getting Calgary.

Very, helpful. Thank you.

Seeing no further questions, I would now like to turn it back to Jack Khattar for closing comments.

In concluding our call this afternoon, I would like to emphasize that returning to strong growth is our top priority. We are very pleased with our performance in the first quarter, despite the significant erosion of Trokendi XR due to the entry of generics and the typical insurance headwinds. We are confident that our growth products will allow us to offset the impact coming from the loss of exclusivity of Trokendi XR, and to return to revenue and operating income growth in 2024 and beyond. Thanks so much for joining us this afternoon. We look forward to updating you on our next call.

All right. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.