Supernus Pharmaceuticals, Inc. (NASDAQ:SUPN) Q4 2023 Earnings Call Transcript February 27, 2024
Supernus Pharmaceuticals, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: 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.
Peter Vozzo: 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.
Jack Khattar: 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 $201, respectively in the same period last year. For the year 2024, we expect the gross-to-net for Qelbree to be in the range of 50% to 55%, with fluctuations that you would typically expect on a quarterly basis. In 2023, Qelbree also expanded its base of prescribers, ending the fourth quarter with approximately 25,938 prescribers, up from 16,822 in the fourth quarter of 2022. We continue to be encouraged by the high level of satisfaction by Qelbree's prescribers. Satisfaction with Qelbree among the heavy prescribers is as high as their satisfaction with extended-release stimulants and is significantly higher than their satisfaction with Strattera.
In 2024, we will be placing more emphasis on the adult segment that represents approximately 67% of the total ADHD market. We expect the ADHD market to have a nominal prescription growth rate in line with the 3% growth rate it had in 2023, when it reached an all-time high of 93.4 million annual prescriptions. Switching now to GOCOVRI for full year 2023, prescriptions increased by 10% compared to 2022 and net sales increased by 15%, reaching a record of 120 million. We continue to be pleased with the performance of the brand based on its unique position in the marketplace, treating both off episodes and dyskinesia. The 2023 fourth quarter net sales were $32 million, up 10% compared to last year and flat compared to the third quarter as they were impacted by the timing of orders at year-end.
Switching to our legacy products, Oxtellar XR net sales were $113 million for full year 2023, essentially stable compared to 2022. In September 2024, we expect the introduction of the first generic of Oxtellar XR. For Trokendi XR, full year net sales were $94 million, down by 64% from the $261 million in 2022. In 2024, we don't expect an increase in the number of generic players in the market, but expect further erosion in Trokendi XR sales. We anticipate combined net sales of Trokendi XR and Oxtellar XR in 2024 to be in the range of $125 million to $135 million. Regarding SPN-830, the FDA has scheduled a pre-approval manufacturing facility inspection, which will take place in Europe this month, and the FDA's review of the NDA remains ongoing with a PDUFA date of April 5, 2024.
Assuming FDA approval, the company plans to launch SPN-830 in the second half of 2024, capitalizing on its existing infrastructure including the sales force, nurse educators hub, and patient services. Moving on to our CNS pipeline of novel product candidates, we made great progress in 2023, setting the stage for a rich calendar of clinical milestones and data releases over the next 12 months to 18 months across several programs. First, the company initiated a Phase 4 study with Qelbree in ADHD patients with comorbid mood disorders such as depression and anxiety. This trial is expected to include approximately 500 patients, with data expected in the first half of 2025. Second, the company also initiated a Phase 2 open-label study with SPN-820 and approximately 40 subjects with major depressive disorder.
This study has the potential of providing data on this first-in-class molecule by the end of this year. Third, our ongoing Phase 2b multi-center randomized double-blind placebo-controlled study of SPN-820 in adults with treatment-resistant depression has now enrolled approximately 120 patients. We expect top-line data from this trial in the first half of 2025. Fourth, the company expects to report interim results from approximately one-half of the targeted randomized patients from its Phase 2a study on SPN-817 in treatment-resistant seizures in May 2024. This study is examining the safety, tolerability, and efficacy of SPN-817 as adjunctive therapy in adult patients with treatment-resistant seizures. Topline results for the full study are expected in the second half of 2024.
A lab technician analyzing a sample in a laboratory, showing the rigorous research conducted by the biopharmaceutical company.
Fifth, the initiation of a Phase 2b placebo-controlled study with SPN-817 in patients with treatment-resistant focal seizures in the second half of this year. And finally, initiation of a Phase 1 single-dose study of SPN-443 in healthy adults following the submission of an IND. SPN-443 is our new stimulant-like product candidate for ADHD and other CNS disorders. Regarding corporate development, the company continues to be active looking for strategic opportunities to further strengthen our future growth and leadership position in CNS. With that, I will now turn the call over to Tim.
Tim Dec: 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 the same period of 2022. Net earnings was $1.7 million for the fourth quarter of 2023 or earnings per diluted share of $0.02, compared to net earnings of $25.5 million or earnings per diluted share of $0.43 in the same prior-year quarter. On a non-GAAP basis, which excludes amortization of intangibles, impairment charges, share-based compensation, contingent consideration and depreciation, adjusted operating earnings for the fourth quarter of 2023 was $47.1 million, compared to $57.6 million in the same quarter of 2022. Total revenue for the full year 2023 was $607.5 million, compared to $667.2 million in 2022. Total revenue was comprised of net product sales of $573.9 million and royalty and licensing revenues of $33.6 million.
The $75.5 million decrease in net product sales was primarily due to $166.9 million decline in net product sales of Trokendi XR, partially offset by a $94.1 million increase in net product sales of our growth products, Qelbree and GOCOVRI. Excluding net product sales for Trokendi XR in both periods, total revenues for full 2023 increased 26% compared to full year 2022. Combined R&D and SG&A expenses for the full year 2023 was $428 million, as compared to $451.8 million for the prior year. The decrease was primarily due to higher -- sales and marketing expenses in 2022 to support the launch of Qelbree in the adult population, partially offset by an increase in R&D expenses associated with the clinical programs for SPN-817 and SPN-820, as we continue to progress our pipeline.
In addition to the items above, full year 2023 include the aforementioned non-cash impairment charge of $20.2 million, resulting in an operating loss for full year 2023 of $5.3 million, as compared to operating earnings of $46.1 million for the prior year. Income tax expense for full year 2023 was $1.5 million as compared to income tax expense of 32,000 for full year 2022. Net earnings were $1.3 million for the full year 2023, or $0.02 per diluted share, compared to $60.7 million or $1.04 per diluted share for the full year 2022. On a non-GAAP basis, adjusted operating earnings was $125.1 million for the full year 2023, compared to $148.8 million in the prior year. As of December 31, 2023, the company had approximately $271.5 million in cash, cash equivalents and marketable securities, compared to $555.2 million as of December 31, 2022.
The decrease was due to the repayment of the convertible security notes due 2023, offset by approximately $120 million of cash generated from operations. The company has a strong balance sheet and significant financial flexibility for potential M&A and other value-creating opportunities. Now turning to guidance. For full-year 2024, we expect total revenue to range from $580 million to $620 million, comprised of net product sales and royalty and licensing revenues. Note the total revenue guidance for full year 2024 assumes approximately $125 million to $135 million of combined net sales of Trokendi XR and Oxtellar XR. We anticipate the increase in net sales of our growth products in 2024 will substantially offset the expected decline in combined net sales of Trokendi XR and Oxtellar XR.
For the full year 2024, we expect combined R&D and SG&A expenses to range from $430 million to $460 million. This reflects an increased level of R&D spend in 2024 as our pipeline progresses, especially for the Phase 2 programs for SPN-817 and SPN-820. Overall, we expect full year 2024 operating loss in the range of $30 million to break even. And finally, we expect non-GAAP operating earnings to range from $80 million to $110 million. Please refer to the press release issued prior to this call that identifies the various ranges of reconciling items between GAAP and non-GAAP. We expect 2024 will be the year we substantially transition from our legacy products to our growth products. Despite the anticipated erosion of sales on Trokendi XR and Oxtellar XR, we expect our growth products to help drive this anticipated level of non-GAAP earnings in 2024.
With that, I now turn the call back over to the operator for Q&A.
Operator: [Operator Instructions] Our first question comes from the line of Andrew Tsai of Jefferies. Your line is now open.
