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Edited Transcript of SUPN earnings conference call or presentation 6-Nov-19 2:00pm GMT

Q3 2019 Supernus Pharmaceuticals Inc Earnings Call

ROCKVILLE Nov 9, 2019 (Thomson StreetEvents) -- Edited Transcript of Supernus Pharmaceuticals Inc earnings conference call or presentation Wednesday, November 6, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Gregory S. Patrick

Supernus Pharmaceuticals, Inc. - Senior VP & CFO

* Jack A. Khattar

Supernus Pharmaceuticals, Inc. - Founder, President, CEO, Secretary & Director

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Conference Call Participants

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* Annabel Eva Samimy

Stifel, Nicolaus & Company, Incorporated, Research Division - MD

* David A. Amsellem

Piper Jaffray Companies, Research Division - MD and Senior Research Analyst

* David Michael Steinberg

Jefferies LLC, Research Division - Equity Analyst

* Esther Lannie Hong

Janney Montgomery Scott LLC, Research Division - Director of Biotechnology

* Kenneth Charles Cacciatore

Cowen and Company, LLC, Research Division - MD & Senior Research Analyst

* Patrick Ralph Trucchio

Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst

* Peter Vozzo

Westwicke Partners, LLC - MD

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and welcome to Supernus Pharmaceuticals' Third Quarter 2019 Financial Results Conference Call. (Operator Instructions)

I would now like to turn the conference over to Peter Vozzo of Westwicke, Investor Relations representative for Supernus Pharmaceuticals. Sir, you may begin.

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Peter Vozzo, Westwicke Partners, LLC - MD [2]

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Thank you, Towanda. Good morning, everyone, and thank you for joining us today for Supernus Pharmaceuticals' Third Quarter 2019 Financial Results Conference Call. Yesterday, 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, Greg Patrick. Today's call is being made available via the Investor Relations section of the company's website at ir.supernus.com. Following remarks from management, we'll open the call to questions.

During the course of this call, 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 and can be identified by such words as expect, plan, will, may, anticipate, believe, should, intend and other words of similar meaning. 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 2018 annual report on Form 10-K. 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 November 6, 2019 at approximately 9:00 a.m. Eastern Time. 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.

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Jack A. Khattar, Supernus Pharmaceuticals, Inc. - Founder, President, CEO, Secretary & Director [3]

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Thank you, Peter. Good morning, everyone, and thanks for taking the time to join us as we discuss our 2019 third quarter results. In our press release yesterday, we announced the results of the P301 first Phase III study for SPN-810 for the treatment of impulsive aggression in ADHD patients 6 to 11 years old.

The study was a randomized, double-blind, placebo controlled, multicenter, parallel group clinical trial in patients diagnosed with ADHD. Patients receiving SPN-810 36 milligrams showed a median percent reduction of 58.6% in the average weekly frequency of impulsive aggression episodes from the baseline that was not statistically significant with the p-value of 0.092 compared to placebo.

These results are based on the combined analysis of data from Stages 1 and 2 in the study. In Stage 1, which was the stage right before the interim analysis, the median percent reduction was 60%, which was statistically significant with the p-value of 0.029 compared to placebo.

However, post the interim analysis in Stage 2 of the study, the increase in variability in the 36 milligram treatment arm seems to have adversely impacted the results in the combined analysis.

Clearly, we are disappointed with the lack of statistical significance given that the magnitude of reduction and the frequency of episodes we believe is clinically meaningful reduction for many patients. In addition, the median percent reduction and frequency of IA behavior in this Phase III study is consistent with the range of 58% to 62% improvement in the Retrospective Modified Aggression Scale that we saw in the 2 treatment arms that were statistically significant versus placebo in the Phase IIb study. The company will continue its analysis of the results to better understand the reasons behind the increased variability in the 36 milligram treatment arm in the P301 Phase III study.

Overall, the trial exhibited favorable tolerability and safety profiles with low incidence of adverse events across all doses. AEs were mild, leading to low discontinuation rates of 0%, 7% and 5% for the 18 milligram, 36 milligram and both treatment arms combined respectively.

Enrollment in the second Phase III P302 trial in patients 6 to 11 years old is at about 98% of the target. The company will stop enrollment and analyze the data, which are expected to be available by the end of 2019.

In the meantime, enrollment in the 503 Phase III trial for adolescent patients will be on hold until data from the 302 study are available and a final decision is reached regarding the SPN-810 program in impulsive aggression.

Regarding SPN-812, we expect to submit the NDA this month. Our plans and preparations for a potential launch of SPN-812 in the second half of 2020, if approved by the FDA, continued to progress well. In addition, a Phase III program in adult patients with SPN-812 was initiated during the third quarter.

For SPN-604 for the treatment of bipolar disorder, we commenced the Phase III monotherapy study in the fourth quarter of 2019.

Moving on to the existing neurology business. Total prescriptions for Trokendi XR and Oxtellar XR in the third quarter of 2019, as reported by IMS, increased to 215,033 prescriptions, representing a 6% increase over the same period last year.

For Trokendi XR, prescriptions in the third quarter of 2019 were 172,981, which is a 5% increase over the third quarter of last year. For the first 9 months of 2019, prescriptions for Trokendi XR increased 7% over the same period last year. Despite this volume growth as well as the price increase in early 2019, net product sales for Trokendi XR were essentially flat over the both time periods due to continued pressure from gross to net sales deductions.

For Oxtellar XR, prescriptions in the third quarter were 42,052 prescriptions, representing an increase of 12% over the same period last year, and year-to-date prescriptions increased 12% year-over-year. Net product sales for Oxtellar XR increased 11% in the third quarter and 10% in the first 9 months of 2019 compared to the same periods in 2018.

Going forward, given the continued pressure from gross to net deductions and that prescription growth for Trokendi XR is trending in the single digits, we expect net sales growth to be essentially flat. As a result, we are revising full year 2019 guidance for net product sales and to a lesser extent operating earnings as we're able to continue to leverage our infrastructure and manage our operating expenses.

Finally, our activity in corporate development continues in 2019 as we look for neurology and psychiatry assets that represent a strategic fit with our current portfolio.

I'll now turn the call over to Greg, who will provide more details on our third quarter financial performance.

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Gregory S. Patrick, Supernus Pharmaceuticals, Inc. - Senior VP & CFO [4]

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Thank you, and good morning, everyone. As I review our third quarter 2019 financial results, I'll remind listeners to refer to the third quarter results issued in yesterday's press release after the market closed.

Total revenue for the third quarter of 2019 was $102 million, essentially unchanged from $103 million in the third quarter of 2018. Net product sales for Trokendi XR for the third quarter of 2019 were $77 million, modestly down from $80 million in the third quarter of 2018. Year-over-year growth in prescriptions of 5% and the year-over-year impact of price increase were offset by higher gross to net deductions.

Net product sales for Oxtellar XR in the third quarter of 2019 were $22.7 million, an 11.3% increase as compared to the third quarter of 2018. Growth in prescriptions of 12% and the year-over-year impact of price increases were partially mitigated by the impact of higher gross to net deductions.

Total revenue for the third quarter of 2019 was comprised of net product sales of $100 million and royalty revenue of $2.1 million as compared to net product sales of $100.2 million and royalty revenue of $2.8 million in the third quarter of 2018.

Turning now to expenses. Research and development expenses were $17 million in the third quarter of 2019, modestly lower than $20 million in the same quarter of the prior year. This decrease is primarily attributable to the completion of the 4 Phase III clinical trials for SPN-812 in late 2018 and early 2019, partially offset by the cost to manufacture SPN-812 to support our NDA filing.

Selling, general and administrative expenses in the third quarter of 2019 were $41 million, essentially unchanged from the same quarter last year.

For the third quarter of 2019, operating earnings totaled $40 million, a 6% increase over $37.5 million in the same period last year. This improvement was primarily driven by lower R&D expenses. The company continues to demonstrate its ability to astutely manage operating expenses as SG&A remained virtually unchanged compared to the same quarter last year as well as to the second quarter of 2019.

Net earnings in the third quarter of 2019 were $28.9 million or $0.54 per diluted share as compared to $28 million or $0.52 per diluted share in the same period last year.

Growth in operating earnings was offset by a modestly higher effective tax rate in the third quarter of 2019. Specifically, the tax rate increased from 23% in 2018 to 27.1% in 2019. As a result, net earnings in the third quarter of 2019 were comparable to net earnings in the third quarter of 2018.

The third quarter ended with $893.1 million in cash, cash equivalents, marketable securities and long term marketable securities, an increase of $118.3 million as compared to $774.8 million as of December 31, 2018.

Turning to financial guidance for full year 2019. We are revising our guidance for net product sales, R&D expenses and operating earnings, while reaffirming expectations for the effective tax rate. We now expect net product sales to range from $390 million to $395 million as compared to the previously expected range of $400 million to $410 million. We expect R&D expenses of approximately $70 million compared to the previously expected range of $70 million to $80 million. We now expect operating earnings to range from $150 million to $155 million as compared to the previously expected range of $150 million to $160 million.

Looking forward to 2020, we anticipate that the combined impact of product, unit volume growth and price increases will be offset by continued pressure and product-related gross to net sales reductions.

In addition, as we prepare for the launch of SPN-812 in the second half of 2020, we anticipate that SG&A expenses will exceed $200 million next year driven by pre-launch and launch marketing expenses as well as the impact of fielding the psychiatry salesforce in the second half of next year. Finally, R&D expenses in 2020 are expected to be comparable to the level in 2019.

I will now turn the call back to the operator for questions. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Ken Cacciatore with Cowen.

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Kenneth Charles Cacciatore, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [2]

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I'm sorry to hear the news on 810. Jack, over the last couple of years, you've been incredibly prudent on BD. Really only done a early stage asset. You do have plenty of cash and obviously feel very profitable. But can you just talk about business development now that you've had this 810 setback and does it change things?

And then on H12 -- on 812, just maybe your view again on the market opportunity and how this product could be positioned? There clearly is a big debate on the street about its effectiveness and the need for it. So maybe I'll give you another chance to just talk about how you think it will fit into the treatment paradigm.

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Jack A. Khattar, Supernus Pharmaceuticals, Inc. - Founder, President, CEO, Secretary & Director [3]

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Yes. Sure. Starting with business development. As far as our strategy, there's really not much of a change regarding our priorities, the assets, the kind of assets we're looking for in neurology and psychiatry and the quality of the assets that we have been looking for as well. So this doesn't really change as much because we have been aggressive all these years. We have been intensely involved in the BD side.

And the only reason we haven't done anything from a commercial point of view or late stage point of view is because we haven't found anything that we believe at that time when we assessed those kind of assets that they actually fit or that they actually add and create value to our story and our shareholders. So everything we've been doing in BD will continue to be consistent as it has been over the years.

And one important thing that I would like to remind folks because I get this question all the time and people say -- and I've read in some people's notes that we've been saying we want to do something for the last several years and we haven't done anything. Well, an important point to remind people is that we actually became profitable in 2015 and we haven't been sitting on $800 million in cash since 2015.

So our cash position in '16 and '17 was still building up over the years, and only until the last year that we actually raised $400 million in a convertible debt deal that got us to this position. So it's not like we have been sitting on a pile of cash for 3, 4 years and we haven't been active doing anything.

And the other important thing is: I'm sure everybody remembers in the last 2, 3 years, especially the '16, '17 and '18 period, a lot of our peers in the space were very aggressive in business development, and we saw what happened to them and we saw what happened to their balance sheets and how they over leveraged. And many of them today are struggling with the heavy debt that they put on their balance sheets, and/or with assets that didn't turn out to be as good as everybody else thought.

So the key message I guess I'm trying to communicate here is we've been very active in business development. It will continue to be one of our top priorities in the company. But it doesn't mean we're going to all of a sudden reduce the quality of assets that we will be looking at or we're going to exorbitantly go and pay and overpay for assets that are not really a good fit for the company. Again, our priorities continue to be the same as far as neurology. If we can find something that is commercial, that is late stage, absolutely; if not, we will continue to also look at Phase II or Phase I assets.

Regarding 812, nothing really has changed in the story and actually the more research we do, the more we believe in the product and the market opportunity that is really in front of us. This is a very large market with about 75 million prescriptions a year, and a small penetration into this market of 5% to 10% at peak will represent a huge market opportunity or product opportunity for us.

The data that is behind this product continues to resonate extremely well with KOL and physicians, specifically the efficacy, and on top of that, the flexibility in the dosing range, giving patients and physicians a fairly wide range of doses that they can use, where they can titrate even to high doses without much sacrifice on the tolerability and the safety, as we all saw the safety and tolerability profile of this product is really nice and clean, especially in this space.

So we continue to believe especially in today's environment that a non-controlled substance, a non-stimulant with good efficacy and a very good safety and tolerability profile is very much needed in today's market. It will be a great treatment option for a lot of our patients, and specifically for those who want to actually try a non-stimulant that could work pretty quickly and they will know very quickly whether it works or it doesn't work instead of having to wait 4, 5 or 6 weeks to know whether it actually works or it doesn't work and then they have to start again if it didn't work for them.

So this is a very easy product to use. It doesn't even perhaps need titration for a lot of patients, because a 100 milligram from week one we will know and the patient will know and the parents will know whether it will work for them or not.

So the downside for a parent to give their child a non-stimulant, a non-controlled substance is really nothing here because in a week they will know whether it will work or not, and the safety and tolerability is really nice and clean. And similarly for the physicians, also it is very easy for them to prescribe and it will be very easy for them to manage the patient case as they progress through the treatment.

And finally, of course we believe that the broad spectrum nature of SPN-812 that it works as well in inattention and hyperactivity also seems to be a real big plus for the product given that the current non-stimulants one of them either works on one versus the other.

So overall, in totality, we think we have a very well rounded product with very beneficial advantages to the patient as well as the physician and with a very good compatible efficacy. So we're very excited and continue to be excited about the product. It does represent a novel mechanism of action. This is the -- an innovative therapy in ADHD that we haven't seen anything in the last probably 10 years to 15 years coming into this category. And it will be coming into a category that is not necessarily overcrowded, with only 4 molecules that are today used to treat ADHD. So I'm sure it will be a welcome option by a lot of patients who are not satisfied with the current treatments.

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Operator [4]

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Our next question comes from the line of Annabel Samimy with Stifel.

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Annabel Eva Samimy, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [5]

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I have a couple. First on 810. Sorry to see that outcome. I guess my question is what is the logic in ending enrollment at 98%? Should we assume that the extra 2% enrollment would not have provided any further statistical benefit? And what are your suspicions regarding the variability? Is there anything you could do to address that in 302 at this point?

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Jack A. Khattar, Supernus Pharmaceuticals, Inc. - Founder, President, CEO, Secretary & Director [6]

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Yes, regarding the -- our decision on the 302 study to stop enrollment at this point. As all of you know and we know it pretty well, it was pretty slow as far as recruitment in these studies in general. So for us even to finish the other 2% -- as you remember, our timeline was to get data basically in the first quarter of next year. So we don't think that extra 2% or 3% enrollment is going to change the picture for us. And especially, what we saw in the 301 is that more patients didn't really help the case for some reason. And we are trying to obviously understand the reasons behind it.

So therefore, we're pretty comfortable that whether you are at 98% or 100% as far as enrollment, the picture doesn't change much. And we would rather get the data earlier. And therefore, if we stop it now, stop enrollment and open up the data and analyze it as quickly as we can, we should be able to have an understanding of the project overall and what it means for the program moving forward. So we chose to make that decision at this point so that we can get the data earlier than waiting another 5 or 6 months for it to come in because we have to enroll another 5 or 6 patients.

As far as the variability itself, it was really very surprising given that it doesn't look like there is -- there is no variability or similar variability in the placebo arm. So it was very puzzling for us. It was very surprising. It is one of the main factors obviously that impacted the statistical analysis and calculations yielding a p-value of 0.09. So clearly, you would expect us -- at this point, we will be digging very deep into the data to understand what is behind such variability only in the treatment arm, the 36 milligram arm, which we find to be very, very unusual. Because typically, if you have a variability that is due to the sites or the staff or the way the study is being conducted, it should really apply for all the treatment -- all the arms, whether placebo or treatment arm.

So for the variability to go from 34%, which was similar to what is in the 18 milligram and the placebo, to go all the way up to about 43% in Stage 2 on the 36 milligram something really must have happened. And that's why this has been very surprising for us to see that kind of jump in the variability.

So I wish we have all the answers at this point. Obviously, this data is very fresh, very new that we needed to obviously share it with everybody. And as we gain more insight as to what's behind it, clearly that would help us also in the analysis on the 302 study. And then we would look at the whole -- collectively at the whole package as to what we have with both studies.

So the key question I'm sure on everybody's mind and our mind as well: Is it likely the 302 study will be positive or is it likely to be negative? I wish I can really predict. This is psychiatry, this is CNS development, and a lot of products on the market today -- actually, a lot of them would do 3 Phase III studies to get 2 positive, or some of them even have done 5 Phase III studies to get 2 positive studies. So we've all have seen this dynamics, especially in psychiatry.

So is it likely that 302 study? Yes, there is a possibility. What is really the probability there we really don't know for sure. But that's why we want to get the data as quickly as possible.

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Annabel Eva Samimy, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [7]

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Okay. And if I could have a follow up. There's a picture -- in the payer landscape there's clearly a lot of changes going on in reimbursement. And I don't think it's necessarily unique too. But it does seem unique to products that are maybe reformulations during launch to markets. So is there anything you can point to in terms of key systemic issues going on that are directly impacting you? And what does that mean for the possibility of successfully launching 812, not from the clinical side, but more from the reimbursement side? I think that's where there's a lot of concern.

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Jack A. Khattar, Supernus Pharmaceuticals, Inc. - Founder, President, CEO, Secretary & Director [8]

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Yes. Generally speaking, what we're seeing on the payer side is not really peculiar to Supernus or Supernus products per se. Now SPN-812 is not just a reformulation. It's actually a whole new chemical entity. It doesn't exist in the United States in the market. So there is no immediate release of ofloxacin. So clearly, just by that, it will be a very different scenario versus a reformulation of an existing molecule in an existing generic market. So there is no generic market of ofloxacin.

And the other thing, as I mentioned, is a completely -- totally novel mechanism of action as well, not just a new molecule, but also the mechanism within which we believe it treats ADHD is also very different than Strattera and any other drug in the marketplace that is prescribed for ADHD.

So we think it should be a little bit different. But as far as what we know today, we believe it will be welcomed because a lot of folks what they've seen in the last decade or so is exactly what you are mentioning and referring to, are just reformulations of amphetamines or methylphenidates and so forth.

So we think this will be given a very different, a new fresh look and examined and looking at it and the value it brings to the category as far as a novel and totally new mechanism of action in treating this condition.

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Operator [9]

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Our next question comes from the line of David Steinberg with Jefferies.

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David Michael Steinberg, Jefferies LLC, Research Division - Equity Analyst [10]

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A couple of questions. On Oxtellar, you correctly predicted that the launch will be very measured and I think scripts are growing about 10%, 11%, 12% year-over-year basis, which is a modest increase from prior to the launch, the recent launch. So I was curious. Do you expect this sort of gain to continue? Or would you start to see an acceleration from monotherapy in the next year or 2?

And then secondly, Jack, I think you indicated that you expect to launch an NDA -- to file the NDA for 812 this month. What would be a realistic actual launch date for 812 assuming approval?

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Jack A. Khattar, Supernus Pharmaceuticals, Inc. - Founder, President, CEO, Secretary & Director [11]

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Yes. On Oxtellar XR and the monotherapy, as you said, I mean we have said and we'll continue to expect that to be the case as far as measured growth behind Oxtellar XR and the monotherapy indication. And we think it's actually a major reason why the franchise is doing pretty good, we believe, given that it's already 6 years old and will be 7 coming up in February -- this coming February as far as a brand and in its lifecycle. So we've been very excited about it. We'll continue to be excited about it. It is epilepsy. Epilepsy is always a much slower, steady kind of build and growth.

So certainly, we would hope to be able to continue to achieve 11% to 12%. That is our goal, that is our target, or even more than that. So this is a product that we have till 2027 as far as the patent expiry. So we're very excited about it and we will continue to view it as a growth asset for us, no question about that.

As far as the 812, the NDA this month, it really all depends on the PDUFA date that the FDA will assign to the submission and also whether they will end up reviewing it within 10 months or 12 months. So that is still to be determined. So we clearly won't know till the end whether they're going to take 10 months or they're going to take 12 months. So depending on that, obviously our launch date will be correlated with that.

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Operator [12]

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Our next question comes from the line of Patrick Trucchio with Berenberg Capital Markets.

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Patrick Ralph Trucchio, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [13]

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Sorry about that. So just first a follow up question on Trokendi. With the understanding that there's some incremental pressure from payers, I'm wondering if we should expect a new step down in price next year. Or if you feel comfortable with the visibility that you have for the business, that sort of the outlook as you see it now is going to be consistent next year?

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Jack A. Khattar, Supernus Pharmaceuticals, Inc. - Founder, President, CEO, Secretary & Director [14]

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Well, I mean it's really what we communicated in the press release. As far as the growth in the net product sales, we expect it to be more on the flat side, because any price increases we take, if we take any next year -- we don't make comments on the future pricing strategy. But any price increases we've taken especially this year and unit growth has been pretty much offset with a wider spread on the gross to net deductions.

So we think at this point that's the only thing we can go by, and we will assume that's probably what will prevail next year as well. And that's why we gave a kind of draft guidance, so to speak, regarding 2020 and what to expect as far as net sales growth moving forward on Trokendi XR.

I mean really what's happening there is when the unit growth becomes more in the single digit, as I mentioned earlier in my comments, it becomes difficult for the overall volume to really overcome the fluctuations and the increase in the spread on the gross to net deductions. And that's basically an issue that clearly we didn't face as much of last year because we grew last year by 29%. So when you are growing in the double digit, you're still able to weather some of these fluctuations, some of these increases in the gross to net deductions.

And many of you have asked us this question on gross to net for many years actually and we always said it never gets better, it always gets worse. And as time goes on, it will always increase because managed care is always asking for more rebates, more admin fees, more this and more that. And that's a phenomenon again not as peculiar or special to Supernus. It's wide among where we're all living in. And therefore, as these unit growths become more in the single digit, as in the case of Trokendi XR, it will become very hard to show higher net sales growth.

And actually, you have another example in our case with Oxtellar XR. It is still growing in the double digit and we still continue to manage to grow the net sales so far given that it is growing in the 11% to 12%. The payer coverage for Oxtellar XR, Trokendi XR, we don't vary that much. So a lot of the contracts we have are very similar, give or take, on both products.

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Patrick Ralph Trucchio, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [15]

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And then I just have if I may a few follow ups on SPN-812. So just, first, when should we anticipate the ramp up in sales and marketing and building the salesforce in 2020? And then, secondly, can you provide some context around the payer environment in terms of what we should be anticipating from a price perspective compared to other branded products in the market? And how we should anticipate 812 positioning versus generics both on the stimulant and on the non-stimulant side? And then just lastly if I could, is there an update on the potential for an international collaboration partner on 812?

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Jack A. Khattar, Supernus Pharmaceuticals, Inc. - Founder, President, CEO, Secretary & Director [16]

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Yes. Okay. Let me start with the first one as far as the ramp up on salesforce and commercial infrastructure behind 812. Specifically, the salesforce, we typically get the salesforce up and running right after the approval and around the launch time. So that's going to be obviously in the second half of next year. When exactly, I mean which quarter, it's still a little bit hard for us to predict at this point until we have a better visibility on the PDUFA date and the expected launch date.

So -- but given that we are filing in November, obviously I don't believe it will be like in the late second quarter or early third quarter. It probably will be a little bit later than that. And that's when we will build the salesforce for the psychiatry and to launch SPN-812. Again, we've said so far our plans are somewhere around the 125-150 reps as far as launching SPN-812.

Regarding the payer coverage. As I said earlier in my previous comments, I mean we expect the product to have a decent coverage. We're working pretty hard right now and starting to discuss with the payers and sharing with them our data and so forth and the positioning of the product and the additional benefits it brings to the patients versus generics or even branded stimulants and non-stimulants. So that is still in the works as we speak and will continue through 2020. So we really don't have a final position obviously and we won't know until right before the launch as to where we stand on the formulary.

And similarly with the pricing, specific pricing of the product, I think what we -- all we did give you at the Investor Day was basically the bracket prices for the branded products in both segments, non-stimulant and stimulants. Again, we will not make comments on the specific price obviously, but when we will be launching the product, at this point.

And then finally, I think your question on international. Our strategy so far has been to out-license our products internationally. So that applies to the existing products as well as the pipeline. So we will continue to look for potential partners overseas for 812, for our pipeline and for the existing products.

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Operator [17]

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Our next question comes from the line of David Amsellem with Piper Jaffray.

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David A. Amsellem, Piper Jaffray Companies, Research Division - MD and Senior Research Analyst [18]

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So I wanted to get a sense from you and maybe some more specifics on the extent to which the landscape for both Trokendi and Oxtellar is restrictive. How difficult is it to get a prescription filled? How difficult or onerous is the documentation step throughs? So I know you talked a lot about the gross to net, but what I'm getting at here is the extent to which doctors may just not want to write it because of headaches or patients may not want to fill the scripts because of hurdles on their end. So if you can talk to that, that would be helpful.

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Jack A. Khattar, Supernus Pharmaceuticals, Inc. - Founder, President, CEO, Secretary & Director [19]

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Yes. Sure. The hurdles that we have today are the same hurdles we've had before as far as whether a physician might not be willing to be aggressive and push for the patient and fight for a prior authorization or a step through or whatever. So there is really nothing new in that situation versus what we faced last year or the year before and so forth.

And we continue to have the same programs in assisting the physicians and going through PAs or any of this -- the paperwork and so forth. So there is really nothing meaningfully that has changed as far as mechanistically trying to get the prescription through from the time a physician writes it, or if they're willing to write it, until the patient gets the prescription.

A lot of the gross to net issues are more whether it's higher rebates and which co-pay program that we have to do in Q1 or a lot of the factors that go into the gross to net reductions that have impacted the wider spread that we are talking about. So as far as the physician dynamics, the patient dynamics, as far as the story around the 2 products and the benefits they bring to the patients, there is really no fundamental change here on both products. So it's not like we're facing additional hurdles from that perspective.

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Gregory S. Patrick, Supernus Pharmaceuticals, Inc. - Senior VP & CFO [20]

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Yes. David, this is Greg. If I can just add on to Jack's comments. The overwhelming dynamic in terms of getting a script authorized is really driven by an automated process that can be adjudicated at the pharmacy. And for both products, it largely rests on their having been on generic topiramate or generic oxcarbazepine beforehand. There is a really minimum -- I would say almost no paperwork required. And as I mentioned, all this can be adjudicated at the pharmacy in an automated fashion.

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David A. Amsellem, Piper Jaffray Companies, Research Division - MD and Senior Research Analyst [21]

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Okay. Do you think that, that -- mechanistically any of that could change going forward, particularly in migraine, where there is more competition? I mean as you look to 2020 and even beyond, do you expect largely status quo, as you described? Or do you think there could be meaningful change?

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Jack A. Khattar, Supernus Pharmaceuticals, Inc. - Founder, President, CEO, Secretary & Director [22]

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It could change. I mean we really don't know for sure. It could change. And that's why we're trying to be cautious and trying to give people as to what 2020 or the things we could face. 2020 will also see potentially oral CGRPs. So even that environment might change on all the CGRPs and how they are treated by payers. So there is a lot in 2020 that could really keep the environment fluid overall. So it's really very hard for us to predict how will that pan out.

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Gregory S. Patrick, Supernus Pharmaceuticals, Inc. - Senior VP & CFO [23]

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That's right, David. That being said, I'm not aware of anything specifically regarding additional mechanistic hurdles that we would have to go through that have presented themselves for next year.

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Operator [24]

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Ladies and gentlemen, we have time for one more question. Our final question comes from the line of Esther Hong with Janney.

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Esther Lannie Hong, Janney Montgomery Scott LLC, Research Division - Director of Biotechnology [25]

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So my question is on SPN-812. So apparently assuming approval, what are expectations around a launch trajectory? Can we expect a quicker uptake in launch based on the quicker onset of action and the fact that it's a non-stimulant and of course taking into account that reimbursement will play a role?

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Jack A. Khattar, Supernus Pharmaceuticals, Inc. - Founder, President, CEO, Secretary & Director [26]

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Yes. I mean at this point what I would say, expect launch to be consistent with a lot of the launches you've seen. So it's going to be a hockey stick -- I don't think it will be a hockey stick kind of an effect. So we will expect it to be very commensurate with other launches in this space. The good news here: obviously, this is a non-stimulant, so there is also other ways for us that we have at our disposal where we can get patients to restart on this product and get the experience with it through sampling. Where, on the other hand, if it were a stimulant, you can't really sample stimulants.

So we have at least a lot of tactics that we can employ to get patients on the product, let them try it, let them really see for themselves that this could work within a week given the data we have seen so far. And hopefully, that will translate and it should translate into the marketplace with real experience.

And then maybe the uptake will be very quick. So it remains to be seen. But at this point, we will just be a little bit cautious and try not to model this really too crazy as far as the hockey stick kind of effect in general so we have the right expectations out there.

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Operator [27]

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I will now like to turn the call over to Jack Khattar for closing remarks.

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Jack A. Khattar, Supernus Pharmaceuticals, Inc. - Founder, President, CEO, Secretary & Director [28]

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Thank you. While we are disappointed with the top line results from the first Phase III study, we look forward to conducting further analysis on the data and to getting the results from the second study. In the meantime, we're working diligently towards the submission of the NDA for SPN-812, which we expect to happen soon. For the remainder of 2019 and into 2020, we're preparing to launch SPN-812, if approved, in the second half of 2020. Thanks again for joining us this morning.

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Operator [29]

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Ladies and gentlemen, that concludes today's conference. Thank you for participating. You may now disconnect. Everyone have a wonderful day.