Supernus Pharmaceuticals, Inc. — Q2 2012 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2012; financial statements are unaudited. Supernus is a CNS-focused specialty pharmaceutical company developing products for epilepsy and ADHD. It had no product sales; reported revenue was from development and milestone arrangements.
Financial results
| Metric | Q2 2012 | Six months 2012 | Comparable 2011 period |
|---|---|---|---|
| Revenue | $0.091 million | $0.299 million | $0.750 million in both periods |
| Research and development | $4.703 million | $10.061 million | $7.251 million; $14.702 million |
| Selling, general and administrative | $4.645 million | $7.374 million | $1.895 million; $3.642 million |
| Operating loss from continuing operations | $9.257 million | $17.136 million | $8.396 million; $17.594 million |
| Net loss | $10.013 million | $19.288 million | $7.377 million; $18.426 million |
| Net loss attributable to common stockholders | $10.299 million | $20.431 million | $8.235 million; $20.141 million |
| Basic and diluted loss per share | $0.61 | $2.21 | $5.17; $12.64 |
Margins are not meaningful given minimal collaboration revenue and no product sales. Q2 continuing-operations loss widened, while the six-month continuing loss also increased despite lower operating expenses, largely reflecting higher interest expense. Prior-year net loss included discontinued-operation income from TCD Royalty Sub; the company sold TCD in December 2011.
Cash, liquidity and debt
- At June 30, cash and cash equivalents were $47.242 million and marketable securities were $29.150 million, or approximately $76.4 million combined unrestricted liquidity. Total current assets were $77.805 million and current liabilities were $21.881 million.
- Six-month cash flows: $19.757 million used in operating activities, $29.310 million used in investing activities, and $47.765 million provided by financing activities. Cash declined $1.302 million to $47.242 million; investment purchases largely explain the investing outflow.
- The May 2012 IPO and full over-allotment generated approximately $47.6 million of net proceeds as described in the filing. Preferred shares converted into common shares upon the IPO.
- The company had drawn $30 million under secured notes bearing 11% interest. The balance sheet reported $27.808 million of notes payable, while the scheduled principal repayments totaled $28.229 million. Repayments are scheduled through 2015; the notes mature in 2014 and 2015.
Material changes and business developments
- Revenue fell because the 2011 comparison included a one-time United Therapeutics milestone payment; 2012 six-month revenue also included revenue under the Stendhal agreement.
- R&D expense declined 32% for the first half, mainly because SPN-804 Phase III trial costs had substantially ended by early 2011. SG&A more than doubled, reflecting launch preparation for SPN-804 and Trokendi XR.
- Interest expense more than doubled for the first half, primarily following the December 2011 drawdown of the second $15 million loan tranche.
- The IPO substantially increased common shares outstanding; the lower reported loss per share versus 2011 reflects the expanded share count and is not evidence of improved net loss.
- Trokendi XR received FDA tentative approval on June 25, 2012. SPN-804’s NDA was accepted for review, with a PDUFA date of October 19, 2012. No inventory had been capitalized as of June 30.
Outlook, risks and contingencies
- Management expected launches, subject to final FDA approvals, in Q1 2013 for SPN-804 and Q3 2013 for Trokendi XR. Trokendi XR’s final approval could not become effective before pediatric marketing exclusivity expired on June 22, 2013.
- Projected 2012 cash burn was $55–$60 million. Management said available liquidity should fund operations as planned into Q2 2013, but anticipated needing additional capital before then. The filing states financing may not be available on acceptable terms; the 2011 audit report included a substantial-doubt going-concern paragraph.
- Supernus expected continued operating losses and negative operating cash flow. Risks include FDA timing or requests for additional work, commercialization and manufacturing costs, access to financing, and development outcomes for its pipeline.
- Management reported disclosure controls were effective at the reasonable-assurance level and no significant material legal proceedings were pending.
Important facts for investors to verify
- Final FDA decisions and actual launch timing for Trokendi XR and SPN-804, including the effect of Trokendi XR’s exclusivity period.
- Cash burn, remaining liquidity, debt service requirements, and whether additional capital is raised before the stated Q2 2013 funding horizon.
- Commercialization spending and manufacturing readiness, including whether validation-batch costs are capitalized and whether supply is available.
- Progress and costs for SPN-810, SPN-812, and other development candidates, alongside the company’s limited collaboration revenue and continued operating losses.