SUPERNUS PHARMACEUTICALS, INC. quarterly report, Q1 FY2024

Supernus Pharmaceuticals, Inc. — Q1 2024 Form 10-Q

Reporting period: Three months ended March 31, 2024; unaudited. Supernus is a CNS-focused biopharmaceutical company with commercial products and a development pipeline. The filing was signed May 8, 2024.

Financial performance

Metric	Q1 2024	Q1 2023
Total revenue	$143.6 million	$153.8 million
Net product sales	$138.5 million	$140.6 million
Operating earnings (loss)	$(3.2) million	$5.2 million
Net earnings	$0.1 million	$16.9 million
Diluted EPS	$0.00	$0.29
Operating cash flow	$38.4 million	$49.1 million

• Revenue declined 7% year over year. Product sales fell 2%; royalty and licensing revenue fell 61% to $5.2 million, primarily because of lower royalties on generic Trokendi XR.
• Qelbree sales increased 75% to $45.1 million; total IQVIA prescriptions rose 31% year over year. Trokendi XR sales fell 54% to $16.0 million, reflecting generic erosion. Oxtellar XR sales declined 7%; GOCOVRI rose 2%.
• Cost of goods sold declined to $16.3 million from $23.5 million, primarily due to manufacturing efficiencies, mainly for Qelbree. R&D rose 18% to $24.9 million, principally on SPN-820 clinical and product-candidate manufacturing costs. SG&A increased 1% to $86.5 million.
• Operating margin was approximately (2.2)% versus 3.4% in Q1 2023; net margin was approximately 0.1% versus 11.0%. The prior-year quarter included a $7.9 million income tax benefit, compared with $0.1 million of tax expense in Q1 2024, contributing to the net earnings decline.

Financial position and cash flow

• At March 31, 2024, cash and cash equivalents were $63.4 million and marketable securities were $246.0 million, totaling $309.4 million. This was up $37.9 million from year-end, although cash alone declined $11.7 million.
• Current assets were $544.3 million and current liabilities $314.6 million. Total assets were $1.304 billion; total liabilities were $374.9 million and stockholders’ equity $929.2 million.
• No debt was outstanding. The company has an uncommitted UBS credit line of up to $150 million, secured by certain assets and callable by the lender.
• Operating cash flow was $38.4 million, down from $49.1 million, attributed to lower earnings and working-capital timing. Investing activities used $51.6 million, mainly reflecting purchases of marketable securities; financing activities provided $1.6 million.
• Management believes available cash, cash equivalents and unrestricted marketable securities, together with operating cash generation and debt-market access, will meet cash requirements for the next 12 months and beyond.

Material changes, outlook and risks

• SPN-830: In April 2024, after quarter-end, the FDA issued a Complete Response Letter (CRL) for the NDA. The cited areas concern product quality data and the infusion-device master file; the FDA did not identify clinical safety or efficacy issues requiring approval. Supernus was evaluating next steps and expected to discuss resubmission timing with the FDA. The company said potential impairment of the related in-process R&D asset and changes to contingent consideration could affect Q2 2024 results, but it could not estimate the impact.
• Pipeline: More than half of planned enrollment was complete in the SPN-820 Phase IIb treatment-resistant depression study; topline data was expected in the first half of 2025. The company also initiated an open-label SPN-820 study. SPN-817 interim data was expected in May 2024 and full-study topline results in the second half of 2024. A Phase I study for SPN-443 was planned for 2024.
• No specific numerical earnings or revenue guidance is provided in the filing. Management expects continued profitability in future years but noted potential variability from market and payer pressures, product exclusivity losses, R&D investment and potential SPN-830 launch costs.
• Generic competition is a significant headwind: Trokendi XR lost exclusivity in January 2023, and a third party may enter the Oxtellar XR market in September 2024 or earlier under certain conditions. Three wholesalers individually represented more than 20% each and collectively more than 70% of gross product sales.
• Contingent consideration totaled $52.4 million, including up to $55 million of remaining USWM regulatory and development milestones, including milestones tied to SPN-830. GOCOVRI sales-based milestones may also trigger payments.
• Legal matters include an APOKYN antitrust suit with discovery ongoing and trial scheduled for March 2025. A separate qui tam case alleges potentially more than $2.5 billion in damages relating to NAMENDA XR/Namzaric; the federal claim was dismissed, but the plaintiff’s appeal remained pending. The company stated it did not believe its significant legal matters would materially adversely affect its financial position, while acknowledging litigation uncertainty.
• Osmolex ER manufacturing had been discontinued and distribution was to cease by April 1, 2024.

Important facts for investors to verify

• FDA follow-up on SPN-830, the timing and requirements for resubmission, and any Q2 impairment or contingent-liability adjustments.
• Qelbree’s ability to sustain growth and the extent to which it offsets continuing Trokendi XR erosion and potential Oxtellar XR generic entry.
• Trends in royalty revenue, customer concentration, product rebate and return accruals, and operating cash flow.
• Progress and data timing for SPN-820 and SPN-817, and possible contingent milestone payments.
• Developments in the APOKYN antitrust litigation and the pending appeal in the NAMENDA XR/Namzaric matter.