Supernus Pharmaceuticals, Inc. — Q1 2012 Form 10-Q
Reporting period: Three months ended March 31, 2012; comparative period is Q1 2011. Supernus is a development-stage specialty pharmaceutical company focused on CNS disorders, including epilepsy and ADHD. It reported no product-sales revenue.
Financial performance
Amounts below are in millions except per-share data. Margins are not meaningful given minimal collaboration revenue and continuing operating losses.
| Metric | Q1 2011 | Q1 2012 |
|---|---|---|
| Revenue | $0 | $0.208 |
| Research and development expense | $7.451 | $5.358 |
| General and administrative expense | $1.747 | $2.728 |
| Operating loss | $9.198 | $7.878 |
| Net loss | $11.049 | $9.277 |
| Net loss attributable to common stockholders | $11.907 | $10.135 |
| Basic and diluted loss per share | $7.48 | $6.05 |
| Operating cash used | $9.801 | $10.068 |
- Q1 2012 revenue included a one-time $150,000 milestone payment under the Daewoong license agreement; total revenue was $208,000.
- R&D expense fell 28%, principally because SPN-804 Phase III trial costs had substantially wound down; increased SPN-810 trial spending partly offset the decrease. G&A rose about 56%, mainly reflecting launch preparation.
- Interest expense increased to $0.962 million from $0.360 million, primarily following the second $15 million secured-loan draw in December 2011. Other expense included a $0.328 million increase in the warrant liability’s fair value.
Financial position and liquidity
- At March 31, 2012, cash and cash equivalents were $15.866 million and marketable securities were $21.513 million, totaling $37.379 million in unrestricted liquid assets. This was down about $11.2 million from $48.544 million at December 31, 2011; cash alone declined partly because funds were shifted into marketable securities.
- Total assets were $43.202 million; total liabilities were $42.928 million; stockholders’ equity was $0.274 million, versus $9.443 million at year-end 2011. Accumulated deficit was $49.247 million.
- Secured notes had a carrying value of $29.097 million, with $9.171 million current and $19.926 million long-term. The $30 million facility bears 11% interest, is secured by substantially all assets other than intellectual property, and has maturities in 2014 and 2015. Scheduled principal repayments total $29.564 million.
- Operating cash use was $10.068 million. Investing activities used $21.553 million, principally for marketable-security purchases; financing activities used $1.057 million. Cash and cash equivalents decreased $32.678 million during the quarter.
Material developments, outlook, and risks
- After quarter-end, the May 1, 2012 IPO and full over-allotment raised $50.9 million gross and $47.6 million net. Preferred stock converted into common stock; 24,382,779 common shares were outstanding on May 31, 2012.
- Management estimated that existing resources together with IPO proceeds should fund operations as planned into Q2 2013, while anticipating a 2012 cash burn of $65–70 million. The company expects substantial losses and negative operating cash flow to continue and expects additional capital will be needed. Financing may not be available on acceptable terms; the 2011 auditor’s report included a going-concern explanatory paragraph.
- SPN-538 and SPN-804 NDAs had been accepted for FDA review; their PDUFA dates were July 2012 and October 2012, respectively. Management anticipated potential launches in the second half of 2012 and first half of 2013, respectively, subject to approval. SPN-810 was in a fully recruited Phase IIb trial; SPN-812 had completed Phase IIa.
- Key uncertainties include FDA decisions or requests for additional trials, launch and manufacturing costs, clinical-program outcomes, and the availability and terms of additional financing. Contractual obligations totaled $48.044 million, including debt principal and interest, leases, and purchase obligations; potential license milestones and royalties were excluded because timing and amounts were uncertain.
- The company reported no material legal proceedings and no significant changes to its previously disclosed risk factors. It did not hedge currency exposure; a hypothetical 10% Euro appreciation would have increased Q1 2012 net loss by approximately $503,000.
Important facts for investors to verify
- FDA review outcomes and timing for SPN-538 and SPN-804, including any requests for additional studies or manufacturing work.
- Actual cash burn, runway, and financing needs against management’s Q2 2013 funding estimate and 2012 burn forecast.
- Whether product approvals, launches, and revenue materialize on the anticipated schedule, and the resulting commercial and manufacturing costs.
- Debt repayment requirements, 11% interest burden, and the terms and availability of any further financing.
- Ongoing R&D progress and spending for SPN-810, SPN-812, and other pipeline candidates.