Good afternoon, and welcome to the Supernus Pharmaceuticals' Fourth Quarter and Full Year 2023 Financial Results Conference Call. [Operator Instructions] 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, Ripka. Good afternoon, everyone, and thank you for joining us today for Supernus Pharmaceuticals' fourth quarter and full year 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, the 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 February 27, 2024. 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 on today's call. Our performance in 2023 underscored our strong execution and emphasis on growing our revenue base despite the loss of exclusivity on Trokendi XR. Excluding Trokendi XR, Supernus delivered strong growth of 26% in total revenues in 2023, compared to 2022. Specifically, our growth products, Qelbree and GOCOVRI delivered robust 57% growth in combined net sales compared to last year. In addition, combined full year 2023 net sales for Qelbree and GOCOVRI reached approximately $260 million, which significantly exceeded the $167 million decline in net sales of Trokendi XR. As a result of our emphasis on growing the rest of our portfolio throughout 2023, Trokendi XR closed the year representing only 13% of total revenues in the last quarter of 2023. Regarding Qelbree, the year 2023 was the first full year with both pediatric and adult indications. For the full year, Qelbree's prescriptions, as reported by IQVIA reached 617,192 prescriptions, representing a growth rate of 91% compared to 2022. Net sales for 2023 recorded an even stronger growth rate of 129%, benefiting from the prescription growth and the steady improvement in gross to net throughout the year. Moreover, Qelbree finished the year with a strong fourth quarter, reaching net sales of $46.4 million, that represents a 97% increase over the growth quarter -- of the fourth quarter of 2022 and a 25% sequential quarter-to-quarter increase from the third quarter of 2023. In the fourth quarter, prescriptions grew by 47% compared to 2022 and we exceeded our goal of lowering the gross-to-net deductions to the 50% to 55% range. Actual gross to net for the fourth quarter 2023 was 49.5%, resulting in an average net price per prescription of $268, compared to 61% and…

Thank you, Jack. Good afternoon, everyone. As I review our fourth quarter and full year 2023 results, please refer to today's press release and 10-K that was filed earlier today. Total revenue for the fourth quarter of 2023 was $164.3 million, compared to $167.3 million in the prior year quarter. Total revenue in the fourth quarter of 2023 was comprised of net product sales of $156 million and royalty and licensing revenues of $8.3 million. The $7.8 million decrease in net product sales was primarily due to a $37.6 million decline in net product sales of Trokendi XR, partially offset by a $25.6 million increase in net product sales of our growth products, Qelbree and GOCOVRI. Excluding net product sales of Trokendi XR in both periods, total revenues for the fourth quarter of 2023 increased 31% compared to the prior-year quarter. For the fourth quarter of 2023, combined R&D and SG&A expenses were $104.6 million as compared to $91.7 million for the same period in 2022. The increase was primarily due to R&D spend associated with the clinical programs for SPN-817 and SPN-820, as we continue to progress our pipeline and an increase in selling and marketing expenses due to the increase in the ADHD sales personnel and other Qelbree marketing initiatives. During the fourth quarter of 2023, we booked a $20.2 million intangible asset impairment charge mainly related to XADAGO. This non-cash charge reflects the forthcoming loss of exclusivity of XADAGO in December of 2027. As a result of the impairment charge, operating loss for the fourth quarter of 2023 was approximately $1 million, as compared to operating earnings of $34.3 million for the same period in 2022. Income tax benefit in the fourth quarter of 2023 was 185,000, as compared to income tax expense of $9.7 million in…

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

Hi, good afternoon. Thanks for taking my questions and congrats on the quarter. Maybe two questions on my side, the first one on overall guidance and Qelbree. So in terms of the total revenue guidance, just curious, what dynamics are you guys specifically assuming for you to guide to the low end, as well as the high end of your total revenue guidance? And secondly, if we backed out the individual products other than Qelbree from your total revenue guidance for 2024, is it reasonable to assume your guidance might imply Qelbree sales could come in above consensus of around 210 currently? Thanks.

Yes. Hi Andrew, this is Jack. I mean, when we try to build the guidance, we try to accomplish a couple things. First, to help folks with the Trokendi XR, Oxtellar XR situation and the potential impact of the genetics. So that's why we try to isolate these two components. What's really left is, of course, as the main drivers are GOCOVRI and Qelbree. So with GOCOVRI, if you try to assume growth rates that are pretty much in line with the last couple of years, I think you can get to a reasonable estimate there on what that product could end up being or doing in 2024. You back out also something similar on ApoGen and the other products. So, yes, I mean, could Qelbree be in the 200 to 220 or somewhere in that range? And that is a possibility, and it's not out of reach or an unreasonable level. So hopefully that will address both questions.

Perfect. Thanks. And then maybe a follow-up question is the SPN-817 epilepsy top-line interim data, Phase 2 data coming up. Will that be a distinct press release in May, or will that be shared in conjunction with your Q1 EPS? And then secondly, could you give us a flavor of what you plan to share that day? Should we expect efficacy curves, safety, AEs, breakdowns, and other detailed information? So, basically, just curious how much detail you're planning to provide. Thank you.

Yes, the plan is, and hopefully, all the data will be available for that timing is to really issue the data due -- with our earnings call. So the earnings call typically is like the first week or early second week of May. So that's typically, and that's what the plan is, to issue the data as part of the earnings call. What would the data include? Certainly, it will include efficacy, seizure reductions, some of the key endpoints that we're looking at in the study, as well as, of course, safety, AES, and so forth. So absolute, I mean, we're trying to give as much of a full picture as possible for the first 50% of the patients, which is the target by May. And then ideally, I know we did say on the call that the full study will be given in the second half. I mean, clearly, we will work hard to try to do it maybe in August, which would be our next earnings call, where we can report for the full study. I mean, that would be great if we can do that. But for now, until we know the flow of the data, how quickly these patients will finish the maintenance period and when would the data be available? We can't say for sure now. August, we're saying second half, but certainly in May, we will be able to update you at that time.

Great. Thanks for the color. Appreciate the updates.

One moment for our next question. Our next question comes from the line of David Amsellem of Piper Sandler. Your line is now open.

Hi, thanks. So wanted to dig a little deeper on Qelbree. So looking at the prescription trends recently and also in the fourth quarter, it looks a little softer than what we had been seeing. So I wanted to get some perspective on the different moving parts in both the PED and adult ADHD market? And what might be driving the volume trajectory currently and also how that ties into your commentary regarding copay assistance. I think, Jack, you had mentioned recently that you were paring back some of that copay assistance. So how should we think about the impact there and what does that mean for the prescription directory of Qelbree going forward? And then just another question on the guide. Do you have any risk-adjusted contribution for 830 in there? Just wanted to clarify what you may or may not have on that product as it relates to the overall top-line guidance. Thank you.

Yes, I'll take the second one first. I mean the pump or SPN-830, we really don't have much in the guidance or nothing meaningful. So the guidance doesn't include really much there. As far as your question on Qelbree, so I'll start by going back to really the third quarter, back to school season. Some of you may remember at that time and throughout the year we kept saying, our target for gross to net is 50% to 55%. And we obviously didn't want to do anything significant as far as any changes in the copay card and the features of the copay card and the levels of benefits that, that card offers during the back-to-school season because we didn't want to impact the momentum behind the prescription growth during that very important season for the brand. And therefore, we instituted a lot of these changes more at the tail end of the third quarter and beginning during the fourth quarter. And that's why actually we've been able to achieve our goal or even surpass that goal by getting around 49.5% gross to net on Qelbree. Now clearly that always comes at the cost or sacrificing certain things on the prescription trends. I mean, you always put more pressure on the prescriptions when you make changes like this, but basically, you're resetting the stage and you're resetting the baseline, so you won't have that pressure every single quarter moving forward. But when you first make these changes on the copay, you're going to get that biggest impact from a prescription trend perspective and momentum. And that's why, alluding to your question, yes, in the fourth quarter, we saw a sequential growth of about, if I'm not mistaken, 5% or 6%. And then in 1Q of 2024, it is a little…

Okay. That's very helpful, Jack. Just one quick follow-up. What do you expect the mix between adults and PEDs will look like as we move through the latter part of this year?

Yes, we closed the year in 2023 a little bit above 30%, somewhere in the 31%, 31.5%. And as I mentioned in my remarks, our goal is to continue to push in the adult segment because obviously, the adult segment is very important to us. We're finding out, interestingly, in that attitude and usage study we did is that about 40% of the usage of Qelbree in adult is in combination with stimulants. And that has a lot of ramifications, a lot of dynamics around it. It looks like that is really good, 40%. But also that could mean initially they're using lower doses than what we would like them to be. So from a total daily dose, we would hope as time goes on and we're seeing that, but it's marginal. We see a creep-up in the daily dose into what should be the total daily dose for adults. So as time goes on, we'll see them building up to the right levels, which should be in the 400 milligram to 500 milligram total daily dose in adult. But given that initially, a lot of folks are using it in combination with stimulants, most of them are starting with much lower doses than they really should. And we are working on that to encourage them to continue to push towards the target total daily dose because that also helps us in the -- from an efficacy perspective, perception of efficacy, and so forth.

Okay, very helpful. Thank you.

One moment for our next question. Our next question comes from the line of Stacy Ku of TD Cowen. Your line is now open.

Thanks for taking our questions. We have a few. So first, just on payer access reimbursement, do you have any remaining overall goals this year and any guidance around any additional formulary wins? So just wondering if you expect any additional contracting this year for Qelbree? And related to that, what do you think will be gross to nets this year? Are you providing any guidance for how it might settle over the year? Just curious, since you're saying that right now the adult doses are -- is a touch lower, but might be driving kind of the net pricing as we kind of drive that adult growth. And that's my questions for now. Thanks.

Yes. Regarding the payer access, we have contracts now with two major PBMs out of the three major ones. So we continue, the door is always open. We always are talking to everybody all the time. And within the states, we continue to renew contracts, improve our position as time goes on. And we've made a lot of progress actually across several states, especially on the Medicaid side in improving our physicians as time goes on. So we're pretty happy with the commercial coverage, as well as the Medicaid coverage on Qelbree at this point. It's actually, especially on the commercial side, it's pretty much at par with some of the other products or most of the products, the branded products in ADHD in the marketplace, as well as at par with what we used to have for years on Trokendi XR and Oxtellar XR. So we're very happy there. But there is always room for improvement, of course, as different cycles come up and renewal of certain contracts. And therefore, leading to the gross-to-net question, as we mentioned, I mean, the target will still be in the 50% to 55%, but, of course, you're going to have the fluctuations that you typically see in the quarterly one quarter to the another. So Q1 will always be the worst, as always is the case across our industry, across all products. And then it will improve in the second quarter, improve a little bit better in the third quarter, and then will be the best one in the fourth quarter. So you're going to follow the same natural trend that we've seen with Trokendi XR or Oxtellar XR as time goes on. But at this point, it looks like the 50% to 55% is still a good target and we'll stay. We'll try to be, I mean, below it if we can, of course. But for the whole year combined, it will be in the 50% to 55%. So when you look actually at 2023, the total year gross to net was around 58%, just to give you a benchmark for the full year. So for us to continue to target 50% to 55% for full year 2024, that still is a significant improvement.

Got it. And then...

And then finally the - I'm sorry. Go ahead.

Go ahead. I can follow up with my third question. Go ahead.

No, I mean, the other part was the total daily dose question. I mean, as I mentioned earlier, I mean, that actually applies to both pediatric and adult, as you will typically expect with a new product still in its embryonic kind of stages of -- with the launch, it's only been 2.5 years or 3 years. It takes time for physicians to finally get to the total average daily dose that you would expect them. Some get there earlier than others. But as they gain more and more experience with the product, as we continue to educate them on how they should titrate and how they should target which total daily dose, eventually we will get there. And the target daily dose for kids is in the 300-milligram range and for the adults is in the 400-milligram to 500-milligram range.

Perfect. You just answered my last question. Thank you.

[Operator Instructions] One moment for our next question. Our next question comes from the line of Annabel Samimy of Stifel. Your line is now open.

Hi, this is Jack on for Annabel. Thanks for taking our questions. So kind of on the topic of the previous quarter's call, I know you had mentioned that the start of the 2023 back-to-school season was relatively tempered and the ADHD market might be normalizing to pre-COVID levels. Have you already kind of seen a rebound there, or is Qelbree just performing particularly well in relation to a weaker market?

Yes. I mean, the total ADHD market in 2023 in total grew by about 3%. If you compare that to 2022, 2021, that's much lower. In the previous couple of years, the market grew in the 7% to 9%. So clearly, we did see that burst of increased demand in medications for ADHD in the 2021, 2022, even a little bit in the 2020 frame. And then in 2023, it took a little breather and started to normalize. And that's what we -- as you rightfully pointed out, that's what we referred to back when we talked about the back-to-school season in November of last year. So, for the full year, it's about 3%. And we expect this year for the market to probably deliver something in line. I mean, whether it's 3%, 4%, maybe 5%, I really don't know. But it will be in the single digit, probably more in the 5% and lower in that zip code. Now, as far as Qelbree, of course, I mean, we -- last year, the market grew by 3%, but we grew by 91%. So obviously, we're outpacing the market and we'll continue to do that. And that's really what we need to continue to do to continue to increase our market share and penetration of both segments, not just the adult that I talked about, but also pediatric. I mean, pediatric will continue to be a very important segment for us as well.

Great. And so, building off that, are you considering doing any DTC campaigns to kind of maximize the opportunity for Qelbree or is that something that you're already doing? I know this category is particularly sensitive to promotion, so is there any way that you can kind of take advantage of that further?

Yes. I mean, on DTC we have been doing and will continue to do. So, direct to consumer is extremely important. The difference is always is the channels that you use in reaching the consumer and it's heavily digital, as you would expect in today's times. I mean, people don't sit in front of TV and watch Prime TV anymore as they used to a long time ago. So, we clearly use different channels to reach our audience. A lot of it is digital, the majority of it is digital. And we are very much in touch with patient advocacy groups, patient programs. We have significant amount of programs to get to the patients from an education perspective, as well as even within the office, the physician's office, and so forth. So we have several programs and many efforts in the digital space, which are all DTC. We also have different influencers who are -- as well spokespeople who speak on behalf of the product because they had direct experience with the product and they have a strong influence among consumers as well.

Great. Helpful. Thank you.

I am showing no further questions at this time. I would now like to turn it back to Jack Khattar for closing remarks.

In concluding our call this afternoon, we're very pleased with our performance in 2023. We finished the year in a position of strength with both Qelbree and GOCOVRI, achieving record sales with strong prescription growth. In addition, as mentioned earlier, 2023 was a year of significant progress on our pipeline with numerous clinical milestones and catalysts over the next 12 months to 18 months. We believe that we are well-positioned for continued growth beyond the current transition and are focused on three key strategic areas. First, driving significant growth with Qelbree and GOCOVRI and together with the rest of the portfolio, generating strong cash flow, allowing us to continue our investments in our pipeline. Excluding our legacy products, Trokendi XR and Oxtellar XR, our guidance for 2024 represents a healthy growth rate of approximately 22% in net sales. Second, the potential launch of a third growth product in our portfolio, assuming the FDA approval of SPN-830 NDA in April. And third, advancing our innovative R&D portfolio of differentiated first-in-class molecules that have several exciting and upcoming clinical milestones. Finally, we will continue to be focused on corporate development to augment our growth to external opportunities. Thanks for joining us this afternoon. We look forward to updating you on our next call.

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