Supernus Pharmaceuticals Inc

NASDAQ:SUPN

Earnings Call Analysis

Supernus Pharmaceuticals Sees Strong Revenue Growth and Improved Earnings

In the third quarter of 2024, Supernus Pharmaceuticals reported total revenues of $175.7 million, driven by a 68% increase in net sales from Qelbree. Total revenues, excluding legacy products, rose by 26%. Operating earnings soared to $40.9 million, a significant increase from $8.1 million last year. GAAP net earnings reached $38.5 million, or $0.69 per diluted share, sharply rising from a loss in the same quarter last year. The company raised its 2024 revenue guidance to $630-$650 million. With continued demand for growth products and a solid cash position of $403.2 million, Supernus is well-positioned for future opportunities and pipeline advancements.

Strong Third Quarter Performance

Supernus Pharmaceuticals delivered a strong performance in the third quarter of 2024, achieving total revenues of $175.7 million, a 14% increase from the $153.9 million reported in the same period last year. The growth was driven primarily by net product sales of $170.3 million, which included notable contributions from their growth products, Qelbree and GOCOVRI. Excluding legacy products, Trokendi XR and Oxtellar XR, revenues surged 26% year-over-year.

Qelbree's Market Expansion

Qelbree showed remarkable momentum, with a 19% growth in prescriptions and a staggering 68% increase in net sales, reaching $62 million in the third quarter alone. This translates into an annualized run rate of approximately $250 million. The product also gained over 2,000 new prescribers, reflecting a total of approximately 30,854 prescribers, highlighting its expanding market presence and user acceptance.

GOCOVRI's Recovery

GOCOVRI continued its recovery from earlier declines, achieving net sales of $36 million in Q3 2024, which is an 8% increase compared to the same period in the previous year. This indicates a positive trajectory for this product amidst Supernus's broader growth strategies.

Challenges with Legacy Products

On the downside, legacy products Trokendi XR and Oxtellar XR faced challenges. Trokendi XR's sales fell 26% to $15 million, while Oxtellar XR's sales remained flat at $30 million. The introduction of generics for Oxtellar XR in September has sparked a decline in prescriptions, leading the company to lower expected combined net sales for these products to about $155 million for 2024.

Significant Earnings Increase

The operating earnings for the third quarter of 2024 climbed to $40.9 million from $8.1 million year-over-year, reflecting a $32.8 million improvement. This substantial increase is attributable to both heightened net product sales and reduced operating expenses. On a GAAP basis, net earnings reached $38.5 million, or $0.69 per diluted share, a remarkable turnaround from a net loss of $16 million, or $0.29 loss per share, in the same quarter last year.

R&D and Costs Management

Total R&D and SG&A expenses for the third quarter were reported at $98.8 million, a decrease from $105.4 million in the prior year. This reflects improved cost management alongside ongoing investments into clinical programs, primarily for SPN-817 and SPN-820, indicating the company’s commitment to developing its pipeline even in the face of declining legacy product revenues.

Guidance and Future Outlook

Looking ahead, Supernus raised its revenue guidance for the full year 2024 to a range of $630 million to $650 million, up from the previous estimate of $600 million to $625 million. They anticipate GAAP operating earnings of $50 million to $65 million and non-GAAP operating earnings between $150 million and $170 million. This positive outlook reinforces investor confidence in their growth trajectory.

Advancement in Pipeline and FDA Resubmission

The company is actively advancing its pipeline, with SPN-830's new drug application recently acknowledged by the FDA, setting a PDUFA date for February 1, 2025. Moreover, they are exploring opportunities for SPN-820 and SPN-817, with encouraging clinical trial data underscoring their potential. SPN-820 has shown a promising 80% reduction in suicidal ideation in its studies, and SPN-817 demonstrated significant seizure reduction rates, bolstering prospects for future product launches.

Strategic Focus on M&A

Supernus remains open to strategic opportunities for mergers and acquisitions, particularly targeting commercial-stage assets and later-stage pipeline candidates. The management emphasized a conservative approach to leverage, aiming to cap it at 2.5 to 3 times EBITDA when assessing potential acquisitions.

Conclusion: Growth Amidst Challenges

In conclusion, Supernus Pharmaceuticals is positioning itself for strong growth driven by its best-selling products, Qelbree and GOCOVRI, while adapting to challenges stemming from legacy products. Their solid balance sheet, with $403.2 million in cash and no debt, combined with a positive outlook on their pipeline and strategic M&A endeavors, provides a solid foundation for investors. The company's proactive management style and focus on enhancing product performance and market penetration illustrate their commitment to sustaining growth.

Earnings Call Transcript 2024-Q3

[Operator]

Good afternoon, and welcome to Supernus Pharmaceutical Third Quarter 2024 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Peter Vozzo of ICR Healthcare, Investor Relations representative of Supernus Pharmaceuticals. You may begin.

[Peter Vozzo]

Thank you, Marvin. Good afternoon, everyone, and thank you for joining us today for Supernus Pharmaceuticals Third Quarter 2024 Financial Results Conference Call. Today, after the close of the market, the company issued a press release announcing these results.

On the call with me today are Supernus's Chief Executive Officer, Jack Khattar; and Chief Financial Officer, Tim Dec. Today's call is being made available via the Investor Relations section of the company's website at ir.supernus.com.

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's current perspective on existing trends and information. 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 latest SEC filings. 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 4, 2024. Since then, the company may have made additional announcements related to the topics discussed. Please reference to 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'll now turn the call over to Jack.

[Jack Khattar, executive]

Thank you, Peter. Good afternoon, everyone, and thanks for taking the time to join us on today's call. The third quarter of 2024 was characterized by strong performance from the company's key growth drivers, Qelbree and GOCOVRI, significant operating earnings growth, and advancement of our product pipeline.

Total revenues excluding Trokendi XR and Oxtellar XR increased 26% in the third quarter. Driving this growth was Qelbree's robust performance with 19% growth in prescriptions as reported by IQVIA and 68% growth in net sales. Prescriptions reached another all-time quarterly high of 194,000 and net sales were $62 million, representing an approximate annualized run rate of $250 million.

Gross-to-net deductions during the third quarter of this year were slightly below our revised target range of 45% to 50%, but within expectation, based on fluctuations that you would typically expect on a quarterly basis.

During the third quarter, Qelbree further expanded its base of prescribers by more than 2,000 prescribers, ending the quarter with approximately 30,854, up from 28,326 in the second quarter of 2024. For the back-to-school season, Qelbree performed well with a prescription growth in September of 14% over June.

Finally, for the 9 -- first 9 months of this year, Qelbree's IQVIA prescriptions grew by 25% compared to the same period last year, outpacing the ADHD market growth of 9% for the same period. Regarding GOCOVRI, recovery from the first quarter continued with net sales increasing to $36 million in the third quarter of 2024, representing an 8% growth over the same period in 2023.

Switching now to our legacy products. Oxtellar XR net sales for third quarter 2024 were $30 million, essentially flat compared to the third quarter of last year. And for Trokendi XR, third quarter net sales were $15 million, down 26% from the same quarter last year. For the first 9 months of 2024, net sales of Trokendi XR were down 35%. We expect further erosion in Trokendi XR sales for the remainder of 2024 and into 2025.

The first generic for Oxtellar XR entered the market in early September of this year, resulting in a sequential decline in monthly prescriptions of 26% compared to August 2024. We expect further erosion in the brand's prescriptions in the fourth quarter.

Given the trends in the first 9 months of 2024 and our expectations for Oxtellar XR for the remainder of 2024, we are raising the target combined net sales of Trokendi XR and Oxtellar XR in 2024 to be approximately $155 million.

Regarding SPN-830, in August 2024, the FDA acknowledged the resubmission of our new drug application with a PDUFA date of February 1, 2025. We remain committed to Parkinson's patients who need this new treatment option and assuming timely FDA approval, look forward to launching the product in the first half of 2025.

Moving on to our CNS pipeline of novel product candidates, we announced exciting data recently, and we have several catalysts coming up in the near to midterm period.

On SPN-820, in October, we provided data from our exploratory open-label Phase IIa study in adults with major depressive disorder. In [ this ] study, SPN-820 demonstrated a rapid decrease in depression symptoms beginning within hours of the first dose as well as a substantial effect on depression symptoms observed in 2 depression scales, MADRS and HAM-D6. In addition, the data showed a substantial reduction of 80% in suicidal ideation and a well-tolerated safety profile with few adverse events and a low discontinuation rate. The company expects to provide data from its Phase IIb double-blind, placebo-controlled adjunctive study of SPN-820 in adults with treatment-resistant depression in the first half of 2025. Enrollment of approximately 236 subjects is expected to complete in November of this year.

Moving on to SPN-817. The company has been conducting an open-label Phase IIa study in patients with treatment-resistant seizures. In May 2024, the company announced data from a planned interim analysis from the initial stage of the study, or Stage A. The company has now completed enrollment of Stage A and is reporting top line data from all subjects with focal seizures who received the 3-milligram and 4-milligram twice daily doses, who completed the maintenance period and enrolled in the post-maintenance extension period.

In the maintenance period, SPN-817 showed a 56% median seizure reduction from baseline with 70% of subjects having 30% or more seizure reduction and 60% of subjects having 50% or more seizure reduction and 30% of subjects having 75% or more seizure reduction. In the post-maintenance extension period, SPN-817 showed a 66% median seizure reduction from baseline with 83% of subjects having 30% or more seizure reduction, 67% of subjects having 50% or more seizure reduction and 50% of subjects having 75% or more seizure reduction.

Regarding seizure freedom, we saw in the maintenance period, one subject out of 10, or 10%, who completed a post-baseline seizure diary had at least one 4-week seizure-free period. Similarly, in the post-maintenance extension period, one out of 6 subjects, or 17%, had at least one 4-week seizure-free period.

Assessment by EpiTrack, a validated cognitive screening tool designed for patients with epilepsy, indicated that 75% of 16 subjects was equally split between those who improved and those who had no change in cognitive function. SPN-817 was safe and had acceptable tolerability with 2 subjects out of the 26 subjects who entered the maintenance period discontinuing because of treatment-related adverse events.

Stage B of the Phase IIa study is ongoing and includes the concomitant use of an anti-emetic to reduce cholinergic adverse events observed in the study. A Phase IIb randomized, double-blind, placebo-controlled study in patients with treatment-resistant focal seizures is expected to start by the end of 2024, studying the 3-milligram and 4-milligram doses.

Also, the company-initiated dosing in a Phase I single-dose study of SPN-443 in healthy adults. SPN-443 is our new product candidate for CNS disorders.

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

With that, I will now turn the call over to Tim.

[Timothy Dec, executive]

Thank you, Jack. Good afternoon, everyone. As I review our third quarter 2024 results, please refer to today's press release and 10-Q that were filed earlier today.

Total revenue for the third quarter of 2024 was $175.7 million compared to $153.9 million in the same quarter last year. Total revenue in the third quarter of 2024 was comprised of net product sales of $170.3 million and royalty and other revenues of $5.4 million. The increase in net product sales was primarily due to the increase in net product sales of our growth products, Qelbree and GOCOVRI.

Excluding net product sales of Trokendi XR and Oxtellar XR, total revenues for the third quarter of 2024 increased 26% compared to the same quarter last year.

For the third quarter of 2024, combined R&D and SG&A expenses were $98.8 million as compared to $105.4 million for the same quarter last year. The slight decrease was primarily due to an insurance recovery for certain legal costs, offset by increased R&D expense associated with the clinical programs for SPN-817 and SPN-820 as we continue to [ progress ] our pipeline.

Operating earnings on a GAAP basis for the third quarter of 2024 were $40.9 million as compared to $8.1 million for the same quarter last year. This is a $32.8 million increase in operating earnings compared to the same quarter last year, driven primarily by an increase in net product sales, but also by a decrease in cost of goods sold and the aforementioned decrease in SG&A.

GAAP net earnings were $38.5 million for the third quarter of 2024 or $0.69 per diluted share compared to GAAP net loss of $16 million or $0.29 loss per diluted share in the same quarter last year. On a non-GAAP basis, which excludes amortization of intangibles, share-based compensation, contingent consideration and depreciation, adjusted operating earnings for the third quarter of 2024 were $67.7 million compared to $37.3 million in the same quarter of last year. This represents a $30.4 million increase.

Total revenue for the 9 months ended September 30, 2024, were $487.7 million compared to $443.2 million in the same period last year. Total revenues were comprised of net product sales of $471.3 million and royalties, licensing and other revenues of $16.4 million. The 13% increase in net product sales was primarily due to the increase in net product sales of our growth products, Qelbree and GOCOVRI. Excluding net product sales of Trokendi XR and Oxtellar XR, total revenues for the 9 months ended September 30, 2024, increased 23% compared to the same period last year.

Combined R&D and SG&A expenses for the 9 months ended September 30, 2024, were $322.3 million as compared to $323.3 million for the same period last year.

Operating earnings on a GAAP basis for the 9 months ended September 30, 2024, were $60.3 million as compared to an operating loss of $4.3 million for the same period last year. This is a $64.6 million increase in operating earnings compared to the same period last year.

GAAP net earnings were $58.5 million for the 9 months ended September 30, 2024, or $1.05 per diluted share compared to $141,000 or $0.00 per diluted share in the same period last year.

On a non-GAAP basis, which excludes amortization of intangibles, share-based compensation, contingent consideration and depreciation, adjusted operating earnings were $135.4 million compared to $77.9 million in the same period last year. This is an approximately 74% increase year-over-year.

As of September 30, 2024, the company had approximately $403.2 million in cash, cash equivalents and current and long-term marketable securities compared to $271.5 million as of December 30, 2023. This increase was primarily due to cash generated from operations. Based on the company -- based on that, the company has a strong balance sheet with no debt, with significant financial flexibility for potential M&A and other growth opportunities.

Now turning to guidance. For the full year 2024, the company is raising its financial guidance. As a result, we expect total revenues to range from $630 million to $650 million, up from the previous range of $600 million to $625 million, comprised of net product sales, royalties, licensing and other revenue.

For the full year 2024, we expect combined R&D and SG&A expenses to range from $430 million to $450 million from the previous range of $430 million to $460 million. Overall, we expect full year 2024 GAAP operating earnings to range from $50 million to $65 million and non-GAAP operating earnings to range from $150 million to $170 million.

Please refer to the earnings press release issued prior to this call that identifies the various ranges of reconciling items between GAAP and non-GAAP.

With that, I will now turn the call back over to the operator for Q&A.

[Operator]

[Operator Instructions] Our first question comes from the line of Andrew Tsai of Jefferies.

[Lin Tsai, analyst]

Congratulations on the quarter and thanks for the update. First question with this new data set, are we interpreting this correctly in that the overall seizure reduction for patients at 3 to 4 mg doses through the maintenance period is now 56% on 10 total patients, which would compare [ 55% ] [Technical Difficulty] last time? So, is the next batch of 4 patients performing in a way that decreased the overall seizure reduction from 75% to 58% -- or 56%? Sorry.

[Jack Khattar, executive]

Andrew, sorry, you were cutting off a little bit, but I think I got the gist of the question. On 817, as far as the seizure reduction, we continue to see very healthy levels of seizure reduction, very robust actually. And if you know, from the data we just announced today, you'll see that in the maintenance period where we had 10 subjects, and these are the 10 subjects that were on the 3-milligram and 4-milligram twice daily, 56% reduction. And then 6 of those ended up in the post-maintenance extension period. So they stayed through the maintenance period and then kept -- and [ the ] -- stayed in the study through the extension period and seizure reduction in that period went up to 66%.

Similarly, with the responder rates, you'll be -- you'll notice -- between the maintenance period and the post-maintenance period, you'll notice that the rates are going up. So it's interestingly -- again, this is an exploratory study, as we explained earlier. The numbers are fairly small in general.

But it's interesting to see that as subjects -- or what seems like happening here is that as subjects stayed longer on the drug, stayed in the study for longer.

And this is the first time we have enough number of weeks, so to speak, as far as reading data, because when we reported the interim analysis way back, we had only very few patients on few weeks treatment, not for a long period of time. It's really nice to see that 83% of the subjects had 30% or more seizure reduction. And even at 75% or more seizure reduction, not very nice to see that 50% of patients had that level of seizure reduction.

So in general, I mean, we think this really study at the end of the day, achieved [ their ] objective of leading us to believe that this can be a very strong product in the seizure area. We are improving and working on improving the tolerability, as we discussed way back in May. The study achieved its objective in helping us decide what is the dose that we need to study further in the Phase IIb, and that's why we picked the 3 and 4-milligram, because they seem to be the 2 appropriate doses based on the data we have so far. And that's what we're studying in the Phase IIb.

So all in all, we still feel pretty good about the drug. Absolutely, this is an open-label. Of course, it's exploratory. Again, smaller numbers. And as we segment the data more and more and cut it down, we end up with like 2 patients here and 3 patients there, it becomes even less meaningful. So that's why we're trying to stay focused on the main patient population that we're moving forward with, which is focal seizures and the doses that we're going to move forward with, which is 3 to 4 milligrams. Hopefully I answered most of your question.

[Lin Tsai, analyst]

Yes. And as for the apomorphine pump under review, I noticed AbbVie's pump was recently approved and they spoke highly of its own [Audio Gap] you thinking about -- read across to your own review? How might AbbVie's fast approval serve as a positive for you, if at all? Just curious.

[Jack Khattar, executive]

Yes. I mean, regarding the pump, we're pretty actually excited overall for patients in general for the category to see -- and hopefully, our pump will be approved in February -- to see these pumps eventually get to the marketplace. There's a lot of market education that has to occur, and we welcome another company to be doing that with us and educating patients on this specific treatment segment that we will be creating together in the market in the U.S.

Outside the U.S., that market segment [ have ] been around for a long time, and people have been using the pumps fairly well and are used to using them. So we welcome that opportunity. We think this is a great category. This is a very much needed treatment option for patients before they resort to invasive surgery of treatments.

And we think the pumps could be fairly differentiated. We'll see what our label look like and how they [ 2 ] compare. But there will be enough room for both products, no question about it. There is a lot of patients out there that are not really doing that well and they could do really better with products like this.

[Lin Tsai, analyst]

And then last question is SPN-820 for -- where you saw the 22-point or so MADRS reduction by day 10 in your recent MDD study. Do you expect that similar level of drug effect to be replicated in your TRD study with data in first half? And I'm just curious what you're assuming for drug and placebo at week 5 in that TRD study?

[Jack Khattar, executive]

Yes. I mean that's, of course, the big question, Andrew. Obviously, the study we reported on is open-label study, [ we're ] hopefully report on the first half of next year [ as ] a placebo controlled.

Now, simplistically, and I know you're not supposed to do that because these studies are open-label and what have you, but if you look at all depression -- or a lot of the depression trials out there and you look at the -- on an average what the placebo rates are on MADRS -- I think I saw one report by -- someone did research in this space looking at around 23 different studies. Placebo rates are in the 5 to 10-point reduction on MADRS. And if I apply that to our open-label, I still get a very, very meaningful reduction in MADRS with our open-label data. So, it's hard to predict clearly. Obviously, I would rather have an open-label study with this kind of data versus much lower reductions.

The other encouraging thing is the new data we just actually had a [ poster ] on in the Psych Congress -- the most recent Psych Congress, where we looked at remission data and responder type of data. I mean, within 4 hours, you're looking at remission of about 35%. I mean that's really powerful, or 50% response to MADRS, again, within 4 hours of the dose. And that goes up by day 10 to 63% on the remission and 84% with the response rate. I mean these are really fairly strong numbers. Again, we sure hope that a lot of these will continue to be the case with the Phase IIb. I mean, that's obviously the goal.

[Operator]

Our next question comes from the line of Stacy Ku of TD Cowen.

[Stacy Ku, analyst]

Congrats on a nice quarter. We have a few questions. So first, just on kind of the key Qelbree launch. How are you thinking about the current volumes that you're seeing and whether you're on the right trajectory for '25 Qelbree consensus? I think expectations are closer to $282 million, at least on FactSet. What are your views there?

And then, as we think about kind of the net pricing we saw this quarter, how should we be thinking about the remainder of the year? And how that might look as we go to '25 as we tie in that question around consensus? So just curious your views as we look to next year as much as you can comment? Just give us some understanding about kind of the growth dynamics into next year? That's the first kind of set of 2 questions.

And then a quick follow-up. For 820, the dosing strategy in the MDD trial was a touch different than TRD. Are you expecting the placebo response to be a touch more well controlled since you're not having the patients come in as frequently? There seems to be kind of a need for the patients in the open-label trial to come in very frequently. So just help us understand that dynamic as we think about placebo response? And what could be expectations for the TRD study?

[Jack Khattar, executive]

Yes. Regarding the first question on Qelbree as far as volume, I mean, we've been very pleased with the way the product is growing, has been growing and the kind of growth it's shown in 2024, year-to-date about 25% on prescriptions. There are a couple of dynamics that we've been seeing in the market and on the brand. One of them is we continue to see growth in the 90-day prescriptions. That is something which obviously -- when you read IQVIA data or IMS data, you may not see it firsthand unless you really dig into it deeper. And we're closing in somewhere around the -- 11% of the prescriptions for the brand are now 90-day prescriptions. So -- and that has grown from about 7% -- what used to be 7% of the prescriptions.

So if that continues, that really tells us also that every prescription is much bigger than your usual 30-day prescription. So on a capsule or pill basis, the brand is growing much faster than what you see in the [indiscernible].

So that also tells us that people are sticking to the brand. Otherwise, the physician will not give you a 90-day prescription if they don't think you're doing well on the product, clearly. It helps with compliance and retention. We do see also strong rates of retention and what's really very healthy levels in general on Qelbree compared to the ADHD market overall.

So we're very optimistic as to where the brand is today and how healthy and robust this -- the performance has been so far. And we sure hope that, that will continue in 2025. And clearly, in February next year, we'll talk a little bit more specifics as far as the sales or anything specific as far as growth rates and so forth.

Regarding the net pricing, I mean we continue to see very healthy net pricing as evident with this quarter, as the gross-to-net improvements continue over time. And the answer is, yes, we will expect that similar type of net pricing for the rest of the year in 2024. Again, for 2025, we'll reserve any comment on that until we have the fourth quarter behind us, then we can better discuss what 2025 might look like.

But overall, we're very pleased with Qelbree, the health of the product, its strong performance, compliance, retention. I mean, everything is pointing to the fact that the brand, the product really works. It really works and people stick to it. They are compliant and the physicians are happy with it once they tried with a lot of these patients. And I'm talking about both pediatric and adult, for both patient population.

As far as the second question which is more on the placebo response, and -- I mean, that's really a very hard question to speculate on at this point, [ Stacy ]. I mean, MDD versus TRD and whether the flexible dose versus the daily dose -- yes, I mean, the MDD trial had single dose given every 3 days versus the TRD was and is a daily dose, but a lower dose level, 800 to 1,600 milligrams versus a single dose of 2,400 milligram. It's really hard to predict and to see and speculate as to what the Phase IIb placebo response will end up being. So on that one, I think we'll just have to wait and see what the data will end up showing at the end of the [ tunnel ].

[Operator]

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

[David Amsellem, analyst]

So I have a couple. First, can you give us your latest thoughts on capital deployment and how you're thinking about M&A specifically, whether you're prioritizing commercial stage assets versus pipeline-focused assets? And just, how you're thinking about that, particularly in the context of the advancement of your internal pipeline? So that's number one.

Then secondly, regarding Qelbree, I wanted to pick your brain about how you're thinking about the competitive landscape longer term? We're going to get data for [ exome ], solriamfetol I believe, in adult patients in the near future. So as you're thinking about other non-stimulant entrants like that product, how are you thinking about the potential impact to Qelbree longer term, if at all?

[Jack Khattar, executive]

Regarding the first question on capital deployment and M&A, our priorities haven't really changed much. We continue to focus. Our top priority would be commercial products that bring us further revenue growth, cash flow and so forth. And the next priority would be pipeline assets that are at a later stage than our own pipeline.

So clearly, the pump -- hopefully, we'll launch the pump. But beyond the pump, our 2 other assets are in the Phase II or about to finish Phase IIb. So anything in Phase III or anything in NDA stage or whatever will be something of focus for us, so we can bring in other products and launch other products other than on pipeline.

So that's the focus of our activities and has been the case for a long time right now. And we continue to focus on CNS as our top priority. But I mentioned several times before that we're not shy about looking at other specific therapeutic areas there -- where we can make an impact and we can market our products efficiently and effectively, other specialty areas. But those situations will have to be a little bit more multi-asset type of situations, not just one product. But potentially a product with a pipeline or a couple of products that are commercial and that where we can build a very strong presence in that new area, whatever that new area might be.

In CNS, we're agnostic, whether it's neurology or psychiatry. So we continue to look at both areas given our presence fairly in both of these areas from a sales force, commercial infrastructure perspective.

As far as competition to Qelbree, I mean, at some point there will be competition, no question about it. You really have to see at the end of the day the profile of these 2 products for us to really make a comment one way or the other, how would they compare to Qelbree or what kind of patient profile would be ideal for these new products. So clearly, we're watching the situation and see -- as data comes out of the potential competitors, see how they fare against Qelbree or compared to Qelbree in general. So that remains to be seen. And then also whether there are stimulants or non-stimulants, I mean, that's another key factor, clearly.

[David Amsellem, analyst]

If I may just sneak in a quick follow-up just regarding M&A. Is there a pro forma net leverage target beyond which you would not be comfortable going in the context of a transaction, particularly for a commercial stage asset?

[Jack Khattar, executive]

We try to stay fundamental in how we run the business and also conservative as far as leverage. So we don't want to over leverage. We are comfortable in the 2.5 to 3x EBITDA maybe. I mean, that's as far as we would go.

And at the end of the day, it all depends -- as we all know. It really depends on the health of the assets that you're acquiring and how quickly you may be able to pay off the debt. And therefore, you might make different decisions on leverage depending on that situation. So if these assets are fairly -- have fairly strong cash flows with longevity clearly and high growth rates, you might be able to feel a little bit more comfortable and leverage a little bit higher. But overall, I mean, give or take, 2.5 to 3x will be the area where we'd be comfortable with. Above that, it gets a little bit -- especially if there is no longevity, or not ideal longevity, I should say, or ideal growth rates for these assets.

[Operator]

[Operator Instructions] I'm showing no further questions at this time. I'll now turn it back to Jack Khattar for closing remarks.

[Jack Khattar, executive]

Thank you. In concluding our call, this afternoon, we thank you for joining us to learn about our strong performance in the third quarter and first 9 months of this year. The company has executed remarkably well through a multiyear transition and the [ loss ] of exclusivity on 2 of its legacy products. Excluding our legacy products, Trokendi XR and Oxtellar XR, we continue to deliver robust double-digit growth in revenues. As a result, Trokendi XR represented only 9% of total revenues in the third quarter of 2024.

Moreover, the company continued to generate strong cash flows behind the strength of its portfolio, particularly its growth products and through the efficiency of its operations. In addition, we continue to advance our product pipeline, announcing positive top line data from our open-label Phase II studies on SPN-817 and SPN-820, and we look forward to the upcoming catalysts over the next several months.

Thanks again for joining us this afternoon. We look forward to updating you on our next call.

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.