This text was initially revealed for ROTY subscribers on June 14th and sports activities a 15% achieve within the Core Biotech portfolio. It has been up to date the place needed.
Shares of CNS-disease specialist Supernus Prescribed drugs (NASDAQ:SUPN) have fallen by 30% over the previous 5 years and have risen +12% thus far for 2022.
The title popped up on my radar for numerous causes, together with:
- Profitable alternative in ADHD for key drug Qelbree in ADHD and constructive developments in prescription development
- Revered biotech investor O’Neil Dealer’s suggestion to tune into Jefferies presentation
- Prior commentary from Dr. Kenneth Pittman together with revisit of his prior work
I had regarded in on this title a number of occasions up to now, however by no means discovered it overly engaging. Fairly, it gave the impression to be extra of a “regular eddy” versus having that top upside potential we search for (additionally a probably crowded market in ADHD).
That modified after I tuned into Jefferies presentation, which revealed a profitable area of interest to fill for Qelbree in grownup ADHD, steady development in Parkinson’s portfolio and deep early stage behind these together with a first-in-class molecule for treatment-resistant melancholy (all backed by administration’s 30+ years of experience in ailments of CNS or central nervous system). Stability sheet additionally regarded remarkably steady to climate such turbulent occasions in biotech.
Thus, I selected to prioritize this title for the Core Biotech portfolio and produce it to the eye of my readers.
Determine 1: SUPN weekly chart (Supply: Finviz)
When taking a look at charts, readability typically comes from having a look at distinct time frames to be able to decide vital technical ranges and get a really feel for what is going on on. Within the weekly chart above, we will see shares march up from mid-teen lows to a excessive within the mid-thirties over the previous couple years. From there, the inventory corrected to mid-twenties which was the chance we would have liked to provoke a long-term place within the firm. Submit Q2 report, shares have rebounded to new 52-week highs and I count on additional continuation.
Jefferies Presentation Notes (Hyperlink)
CEO Jack Khattar begins by reminding listeners that the corporate has been round for 30+ years (1997 to 2005 as a part of Shire) with sturdy expertise in CNS (particularly, in ADHD). Traditionally, they’ve developed 4 merchandise within the ADHD area and presently they’ve 8 merchandise available on the market
Determine 2: Present and prior accredited merchandise, together with deep pipeline in CNS (Supply: company slides)
They’ve very vital R&D capabilities as could be anticipated for the period of time the corporate has been round (together with CMC and drug supply applied sciences).
Shifting onto Qelbree in grownup ADHD, they simply obtained approval on the finish of April and launched the product in grownup market two weeks earlier than Jefferies presentation. Qelbree is a novel non-stimulant, non-controlled substance and was launched in 2021 for sufferers aged 6 to 17 years of age. They’ve a 195 consultant salesforce selling the product and robust scientific suggestions confirms knowledge noticed in section 3 program. The product works early within the remedy (as early as week 1 noticed in kids, week 2 in adults) and works in each inattention and hyperactivity. Comfort is one other profit, as it is easy to make use of with simple titration together with encouraging tolerability (discontinuation charges of two% to 4%). Firm does a survey on month-to-month foundation and it is fascinating to notice that 3 of the highest causes for physicians to place their sufferers on Qelbree are stimulants (drawing sufferers in from stimulant market to non-stimulant).
Determine 3: High causes ADHD sufferers attempt Qelbree (Supply: company slides)
90% of prescriptions are stimulants and 10% non-stimulants, so once more we will simply see the chance to alter the remedy paradigm right here.
IP place is robust (to 2033) and market is important (80M prescriptions on annual foundation and continues to develop). 67% of the market is in adults (double the scale of the pediatric alternative). Even small market penetration 5% to 10% would equate to a billion-dollar alternative for Supernus.
Determine 4: ADHD launch-aligned month-to-month prescriptions (Supply: company slides)
Qelbree is the second greatest most-successful launch up to now decade on this area. Of notice, Qelbree was the one product on the above chart launched throughout Covid pandemic (distinctive circumstances, lack of doctor entry, and many others).
Under, we will see that month-to-month prescriptions in March and April closed in above the 18,000 degree (hopefully touching 20,000 or greater in for Could). A lot greater momentum ought to come on account of grownup launch within the close to to medium time period.
Determine 5: Qelbree month-to-month prescriptions since launch (Supply: company slides)
Shifting onto Parkinson’s, they’ve glorious presence with 3 merchandise available on the market (Xadago, Apokyn and Gocovri). Gocovri is exclusive in that it is the solely product indicated for remedy of dyskinesia and “off” episodes (a variety of merchandise on the market in Parkinson’s indicated to deal with solely the latter). Additionally, for a lot of merchandise as illness progresses and dose must be elevated, they trigger extra dyskinesia.
Determine 6: Three key advantages of Gocovri remedy in Parkinson’s illness (Supply: company slides)
Improve in “good on time” is high quality time that they will operate with out the muscle twitching and weak spot related to dyskinesia. Internet gross sales of Gocovri in 2021 was $88M (owned the product for partial 12 months as Supernus purchased out Adamas Prescribed drugs for $400M). Q1 2022 outcomes confirmed 23% development versus Q1 2021 which ought to proceed to development properly (big addressable inhabitants, “we’ve not even scratched the floor but”). 1 million sufferers within the US and 200,000 that get dyskinesia, additionally 200k to 300k sufferers that get the OFF episodes.
Shifting onto SPN-830, it is a novel infusion machine of apomorphine with PDUFA date in early October ($100M-175M estimated peak gross sales). It is a non-invasive, dopaminergic stimulation remedy offering steady remedy of ON-OFF episodes in Parkinson’s. That is designed for sufferers who get so many OFF episodes in the course of the day that they can not do a variety of injections of apomorphine. This might change into a key possibility for sufferers who in any other case would resort to deep mind stimulation or GI surgically implanted levodopa/carbidop infusion. Plan is to launch the product in Q1 2023 if all goes effectively.
Determine 7: TOLEDO section 3 knowledge for SPN-830 achieved excessive statistical significance (Supply: company slides)
Pivotal knowledge above exhibits virtually 2.5-hour discount in OFF time and offers sufferers extra high quality ON time with out troublesome dyskinesia.
As for SPN-820, CEO believes it is a main asset that’s underappreciated by the investor neighborhood. This can be a first-in-class mTORC1 activator with distinctive mechanism of motion for the remedy of treatment-resistant melancholy or TRD. It enhances synaptic exercise and improves mobile metabolism within the mind. This drug candidate stems from a 2020 codevelop cope with privately-held Navitor Prescribed drugs (Supernus pays for section 2 improvement as much as $50M, acquired choice to license international rights ex-China previous to initiation of section 3 research). Deal phrases concerned cost to Navitor of $25M upfront (possibility payment and purchased 13% possession stake) and Supernus is on the hook for as much as $450M in milestone funds). Preliminary knowledge in TRD confirmed encouraging efficacy sign on the HAMD-6 scale with speedy onset of motion at 2 hours (very significant impact when it comes to treating signs of melancholy). MAD (a number of ascending dose) research demonstrated drug penetration and goal engagement (strong security & tolerability profile besides). They checked out plasma focus and CSF (cerebrospinal fluid) focus to find out whether or not there may be correlation between the 2 with biomarker focus. Correlation between CSF focus and three biomarkers is noticed, giving them reassurance that drug is getting the place it must go and fascinating goal.
Section 2 trial was initiated 6 or so months in the past (scientific trials gov exhibits Could 2023 main completion date). As for market alternative, there are 17 million folks with melancholy within the US with one-third of them being remedy resistant.
SPN-817 is an thrilling program in epilepsy coming into section 2 trials this 12 months (additionally a novel mechanism of motion). They nominated a pair new molecules final 12 months in Fall as scientific candidates for additional improvement (together with SPN-443 for ADHD and SPN-446).
Firm is positioned for long run development, has a diversified portfolio in CNS, neurology and psychiatry. They presently have 3 completely different salesforces, from ADHD to Parkinson’s to neurology (Oxtellar XR and Trokendi XR). Remember that Trokendi loses exclusivity subsequent 12 months.
As for Q&A, Vyvanse was a $2 billion product that Shire did a superb job of launching and differentiating versus competitors (has a 14-hour profile). Strattera was the primary non-stimulant peaked round $720M international gross sales (very long time in the past). They consider Qelbree will be larger than these medicine given scientific profile. A number of the newer medicine on market are reformulations of amphetamines and methylphenidates (chewables and liquids) that are extra niche-type merchandise (extra in $50M to $100M vary). Takeda’s Mydayis is a bit larger but additionally has much less promotional effort behind it at this level. For Qelbree, they are going to proceed with heavy sampling (they’re the one firm who can do that as a result of it is non-controlled substance) to get sufferers began on the product and see for themselves its advantages. The corporate is upfront that it is spending closely on advertising and affected person schooling together with direct-to-consumer efforts. As for development trajectory, they count on linear to proceed and an inflection as grownup section is double measurement of pediatric (no again to high school seasonality both).
For Q2, the corporate reported money and equivalents of $508M as in comparison with anticipated full 12 months 2022 constructive working earnings of $20M to $40M (not burning money).
Full 12 months 2022 revenues are anticipated to complete $640M to $680M versus mixed R&D and SG&A bills of $460M to $490M (uncommon for us to have the ability to discover such fiscally accountable corporations).
As for the highlights, Q2 revenues rose 20% to $170.1M.
Qelbree prescriptions grew 33% over Q1 2022 to 62,938 prescriptions. Qelbree web product gross sales of $11.1M elevated 34% in comparison with Q1 2022. Take note grownup ADHD launch simply obtained underway in Could (early innings).
As for the Parkinson portfolio, Gocovri prescriptions grew 16% to 10,929 in comparison with Q1 2021.
Shifting onto the convention name, administration states that Qelbree was launched into grownup ADHD market (largest section) in Could and represents the primary novel nonstimulant to be launched in 20 years. Grownup market represents 68% of complete market’s prescriptions and is rising at sooner charge than pediatric market and tends to be much less seasonal. June prescriptions reached highest month-to-month complete because the launch of the product, with prescriber base growing from over 9,200 (up from 6,900 in Q1 2022). Business spend will enhance as Qelbree momentum grows in grownup market and again to high school season approaches. ADHD market is rising far more than they thought, and even 5% to 10% market share is billion-dollar alternative. Traditionally, Strattera was round 7% market share and administration feels Qelbree’s profile deserves this sort of quantity if no more.
SPN-830 launch in Parkinson illness might come Q1 2023 assuming FDA approval.
For SPN-820 in treatment-resistant melancholy, section 2 multi-center research continues to enroll sufferers (n=270).
They’re additionally on observe to provoke open label section 2 research with SPN-817 in This autumn in sufferers with remedy resistant seizures.
Oxtellar XR continues to carry out effectively (web product gross sales of $30M, 20% enhance in comparison with identical interval final 12 months). Trokendi XR web product gross sales have been $72M, down from $79M final 12 months.
They proceed to be energetic in enterprise improvement (on the lookout for excessive worth CNS property to scoop up).
For Trokendi generic competitors, they’re taking a look at 90% erosion over the following 12 months (might weigh on shares). This may be thought-about to be the bottom case state of affairs, and hopefully higher readability might be given in January and February when it comes to quantity and timing of generics.
I additionally counsel readers revisit Kenneth Pittman’s older article titled “Supernus Is As soon as Once more A Tremendous Worth” because it helps to supply some context as to the place the corporate has come from (additionally viewpoint of a training doctor on this space, which I’m not).
As for institutional buyers of notice, Armistice Capital owns a 7.8% stake. As for insiders, Founder, President and CEO Jack Khattar definitely has pores and skin within the sport (owns over 1M shares or $26M value).
As for government compensation, I believed CEO’s pay for 2021 was a bit on the excessive facet ($870k money part, ~$2.9M inventory awards, ~$3.4M possibility awards, $887k non-equity incentive plan compensation). To be honest, they don’t seem to be the standard money burning biotech given constructive quarterly earnings because of presently accredited medicine.
As for caliber of administration staff, CEO Jack Khattar served prior as Board member, President and CEO of Shire Laboratories (drug supply subsidiary of Shire). A number of different executives additionally served collectively prior at Shire. For the board of administrators, chairman Charles Newhall is the co-founder of enterprise capital agency NEA.
Shifting onto IP, ten issued Trokendi XR patents expire no sooner than 2027 per the 10-Okay submitting. Supernus entered into settlement agreements with third events allowing sale of generic model January 1, 2023 or earlier underneath sure circumstances. Oxtellar XR 9 issued US patents expire no sooner than 2027. Qelbree pending patents, if issued, might lengthen safety from 2029 to 2033. Gocovri issued patents expire via 2038 (settlement agreements by way of Adamas predecessor allowing generic gross sales for March 2030).
As for useful nuggets from the ROTY neighborhood, Dr. Kenneth Pittman (Little one & Adolescent Psychiatry Specialist) added the next commentary in Chat after our pilot buy:
Good to see each Jonathan Faison and Oneil Dealer on the SUPN boat concurrently me. I do know Oneil has been there fairly a bit with me up to now. It has been my largest holding for a very long time and nothing they’ve performed not too long ago (together with damaging advertising by rivals) has satisfied me to alter that. I’m very pleased with Qelbree general because it crammed a giant want, however their portfolio is far more than Qelbree now. They’ll in all probability have a down 12 months or two revenue smart as they transition from Oxtellar/Trokendi to Qelbree and their different newer medicine, however I nonetheless consider the long run is vivid for them. Qelbree has a really excellent shot at being the #1 branded ADHD drug available on the market by 2024 (Vyvanse might be generic at that time and the opposite 4 stimulant contenders are combating over market share with one another).
Qelbree scripts at my workplace have been very sturdy in comparison with most ADHD meds. I’ve an honest quantity, however a few of my NPs are utilizing it much more than I’m. We’re having someplace round 10 new begins each week and about 70% of those are staying on Qelbree so far as I can inform. Fairly heavy with the decrease dose/youthful child factor, however some adolescent and grownup utilization as effectively (if counting the follow that I work with that sees adults). Azstarys from KemPharm is doing pretty effectively, however not almost in addition to Qelbree when it comes to variety of new begins.
ONeil Dealer additionally gives the next readability on generic competitors:
It’s value mentioning that, whereas Trokendi goes generic in 2023, solely the businesses that settled with SUPN can launch a generic subsequent 12 months. Others have to attend till the final patent expires in 2027 (or attempt their luck in court docket and sure lose as they did with Oxtellar the place the identical tech was used to develop Trokendi and patents are related). And SUPN will get royalties on gross sales of those generics via 2027 (phrases not disclosed). This can not at all save Trokendi from a decline subsequent 12 months, however the firm will nonetheless have a pleasant income tail via 2027 (some branded and declining Trokendi gross sales and royalties on generic Trokendi).
As for accrued deficit since inception, as of December 31 2021 the corporate had retained earnings of $379.9M.
As for satan’s advocate case, the primary one I see is a state of affairs the place declining gross sales from present merchandise approaching patent expiration (i.e., Trokendi) fail to be offset by development from Parkinson’s portfolio and Qelbree launch right into a closely crowded ADHD area. I see substantial differentiation for the drug and recognize that the corporate’s advertising efforts can do heavy sampling for sufferers to attempt (resulting from being non-controlled substance). I’ve learn guardian commentaries the place they’re fed up with present ADHD therapies resulting from unintended effects or different attributes and like a non-controlled substance that works effectively and shortly (think about the identical is relevant to grownup section). For instance, as I perceive it Strattera tends to work at week 5 or later versus Qelbree onset as talked about above week 1 in kids and week 2 in adults.
Pursuit of a market closely dominated by generics is commonly a “deal-breaker” for me in biotech, however there are exceptions resembling prior ROTY winner Xenon Prescribed drugs (XENE) the place excessive efficacy, comfort and tolerability for XEN1101 ought to give it a leg up over generic antiseizure medicines.
Because the CEO famous, market alternative for SPN-820 in treatment-resistant melancholy is extensively unappreciated by Wall Road as effectively (conservatively 5M addressable sufferers within the US).
To conclude, the worth proposition for Qelbree right here is obvious because the ADHD drug attracts sufferers from stimulant market (majority) to non-stimulant (offering sufferers a strong possibility in a non-controlled substance). The holy grail for this indication is a non-stimulant drug that basically works, and that is what we seem to have right here (dad and mom or sufferers do not run out of persistence and revert again to prior such therapies). Moreover, as we have realized the exhausting method with my prior losers, promising science shouldn’t be sufficient and it issues who’s on the helm of the corporate in query.
Administration’s huge CNS expertise of 30+ years together with prior at Shire offers me a measure of confidence, as does the confirmed execution noticed in profitable Qelbree launch to this point regardless of being the one medication on this area doing so throughout a pandemic. I additionally like how administration is “all in” on this product relating to advertising efforts resulting from perception in worth proposition for sufferers and worth creation for shareholders. Parkinson’s portfolio of property gives extra development drivers within the close to to medium time period, whereas deep early-stage pipeline presents us optionality in indications of excessive unmet want resembling TRD. On the identical time, I cannot decrease the challenges of launching an ADHD drug right into a closely crowded market.
For readers who’re within the story and have performed their due diligence, SUPN is a Purchase and I counsel making the most of market & sector volatility so as to add publicity on dips within the close to time period.
Once more, this concept is most applicable for long-term buyers, which is why we personal it within the Core Biotech portfolio.
As for danger score (1=low, 5= excessive), I’ll maintain this center of the vary at 3. Regardless of the strong stability sheet and constructive earnings, ADHD area is sort of crowded and administration has their work reduce out for them in gaining share from rivals. Declining gross sales from merchandise the place they are going to lose patent manufacturing is a headwind that needs to be thought-about, as is the upper danger general of drug improvement in CNS indications versus different areas much less susceptible to placebo impact. Whereas they do not essentially want it, additional dilution is at all times doable to boost extra funds for aggressive advertising and pipeline enlargement. Whereas I do not consider that is such a case, it is vital to recollect case research resembling Kala Prescribed drugs (KALA) launching an undifferentiated drug right into a closely crowded dry eye market (David going up in opposition to large pharma big Goliath).
For our functions in Core Biotech, I personal a full measurement place with intention to remain affected person for multi-year time-frame.
OTHER LINKS OF INTEREST
Qelbree’s current approval for adults with ADHD highlights want for non-stimulant remedy choices