Supernus: Earnings Yearnings (NASDAQ:SUPN) | Seeking Alpha

Supernus (NASDAQ:SUPN) is a mature CNS therapeutics company that has been working to freshen its offerings. I have followed it in several articles most recently, “Supernus: A Work In Progress”.

In this article, as I write on 02/09/2023, I am keenly focused on Supernus’ upcoming Q4, 2022 earnings, expected 02/24/2203.

Supernus has been doing the jitterbug as it heads into Q4 following a strong Q3.

Supernus reported its Q3, 2022 earnings on 11/08/2022. Its Q3 GAAP EPS of $0.03 reflected a miss by $0.33. As reflected by the chart below the market pretty much shrugged it off:

It dropped a couple of points then, as investors gradually reappraised the situation, it started to head back up in fits and starts.

Despite the EPS miss, there was much to like about the quarter. Its blockbuster-in waiting Qelbree (viloxazine extended-release capsules), with its recent its recent label expansion for adult ADHD patients, achieved 50% quarterly growth in prescriptions.

Supernus nudged its full year 2022 guidance upwards:

1. For operating earnings – to $35 million to $45 million, from $20 million to $40 million previously, and
2. For total revenues – to $650 million to $680 million, from $640 million to $680 million previously.

Supernus Q3, 10-Q table of disaggregated revenues below shows its full therapy lineup:

Supernus is expected to report Q4 2022 earnings on 02/24/2023. As shown on the price chart above Supernus is pulling back as investors wait to hear its Q4, 2022 earnings report.

An extensive review of Seeking Alpha’s Supernus related entries reveals no recent development as a plausible cause for this drop. Absent a better explanation, I have considered some combination of the following as causes for shareholders disappointment contributing to the drop:

1. Supernus’ failure to pre-announce favorable Q4 2022 earnings;
2. Lack of any business development initiatives;
3. Concern that Supernus’ December/January run-up was overblown.

Supernus’ Trokendi XR challenge is no longer just a future issue.

In 08/2021’s “Supernus: Well Prepared For Upcoming Challenges”, I hypothesized that Supernus was effectively addressing its future Trokendi XR patent cliff. The future I was imagining is now upon us. Trokendi XR which has long been Supernus’ top revenue producer as shown by the chart above is soon to see revenues drop precipitously.

When I write Supernus articles in 2025 and beyond, any disaggregated revenue table may well downgrade Trokendi XR to an asterisked basket of “Other”. If so it will be rubbing shoulders with distinguished Supernus has-been “others” like MYOBLOC, XADAGO and Osmolex ER.

No I am not just broiling in a stew of self-imagined pessimism. In response to a question during Supernus Q3, 2022 earnings call (the “Call”) as to the expected erosion of Trokendi XR revenues, CEO Khattar acknowledged:

As far as Trokendi XR and the erosion,…we’ll talk more about it hopefully in February, but we’re going to plan at this point and we ask people to look for as we said earlier erosion, probably around 90% erosion by December.

Wow, think of that, 90% erosion is a big figure. Check out the excerpt below from Supernus’ latest 10-K (p. 85):

Its net of $319,640 for 2020 was ~61% of Supernus’ revenues in 2020; Its net of $304,817 for 2021 was ~52% of Supernus’ revenues in 2020. Cutting 90% from such an important revenue driver is concerning.

For Q3, 2022 Supernus shaved Trokendi XR’s share of its total revenue pot down to ~39%. That’s the good news. The not so good news is that Trokendi XR’s revenues were tailing off, even in advance of its 2023 patent cliff. They dropped 5% between 2021 and 2020. The drop from Q3, 2021’s ~$80.9 million to Q3, 2021’s ~$69.6 million is a still steeper drop of ~14%.

Next quarter’s earnings should tell shareholders an important tale.

The midpoint of Supernus’ Q3, 2022 total revenue guidance of $650 million to $680 million is $665 million. Its actual total revenues for 2022 so far are:

1. Q1, 2022 totaling $152.5 million plus:
2. Q2, 2022 totaling $170.1 million plus;
3. Q3, 2022 totaling $177.3 million equal;
4. Total so far in 2022 is $499.9 million.

To reach the midpoint $665 million in total 2022 revenues as guided would take Q4, 2022 revenues of $165 million; to reach the $680 million top of the guided range would take $180 million in Q4 revenues.

After a careful review of Supernus Q3, I see three issues in play. These are the likely issues that will determine whether Supernus achieves CEO Khattar’s goal of finishing 2022 strong. The three issues I am pegging as most significant to Supernus overall Q4, 2022 performance are, beginning with the most significant:

1. The rate at which Trokendi XR revenues fall off; I am concerned about this one; management seems to have written Trokendi XR off; not only are they projecting 90% falloff by year end they, are also cutting back on sales efforts;
2. The rate at which Supernus is able to amp up interest and momentum in GOCOVRI, the Parkinson’s Disease (PD) therapy it bought in 10/2021, which both decreases dyskinesia and PD off-time;
3. Its progress in growing Qelbree.

Another issue which will likely be important, in how investors view Supernus’ Q4, 2022 earnings, will relate to how it addresses business development. During the Call Khattar gave it minor mention as follows:

…we continue to be active in corporate development, looking for strategic opportunities to further strengthen our future growth and leadership position in CNS.

If earnings are dicey coming in at the lower edge of guidance, the market might, and I will be, highly disappointed if there is not a more committed plan for business development.

Conclusion

I am an optimistic shareholder of Supernus as I have been for some years. I am not adding to my current (02/09/2023) stake. There are too many known unknowns at the moment. I am looking forward to its Q4, 2022 earnings which should add clarity and will likely change Supernus’ ongoing value proposition.