Supernus Pharmaceuticals Inc

NASDAQ:SUPN

Earnings Call Transcript 2018-Q4

[Operator]

Good morning, ladies and gentlemen and welcome to the Supernus Pharmaceuticals Fourth Quarter and Full Year 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Peter Vozzo of Westwicke Partners, Investor Relations for Supernus Pharmaceuticals. You may begin.

[Peter Vozzo, Investor Relations]

Thank you, Joel. Good morning, everyone and thank you for joining us today for Supernus Pharmaceuticals fourth quarter and full year 2018 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 by management, we will open the call to questions. We expect the duration of the call to be approximately 45 minutes.

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 our 2017 annual report on Form 10-K and quarterly report on Form 10-Q for the quarter ended September 30, 2018. Actual results may differ materially from those projected in these forward-looking statements.

For the benefit of those of you who maybe listening to the replay, this call is being held and recorded on February 27, 2019 at approximately 9:00 am 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.

[Jack Khattar, Chief Executive Officer]

Thank you, Peter. Good morning, everyone and thanks for taking the time to join us as we discuss our 2018 fourth quarter and full year results. Supernus reported another year of strong operating results with significant achievements in 2018. The first achievement is the continued strong commercial execution on Trokendi XR and Oxtellar XR. Following double-digit robust growth in total prescriptions in 2017, the company delivered another 29% in total prescription growth in 2018 for two brands that are now in their sixth year on the market. This solid growth in prescriptions enabled us to deliver a record year in financial performance. We delivered total revenues of $409 million, operating earnings of $144 million and diluted earnings per share that grew by 90% compared to 2017 reaching $2.05. It is important to highlight that our solid growth was achieved in a year that saw intense competition from three new launches in the migraine market with a heavily promoted new class of drugs.

For Trokendi XR, prescriptions increased 34% in 2018 despite increased competition, while the total topiramate market held up steady at around 14.6 million prescriptions. Trokendi XR has grown its share of the topiramate market by 16% reaching an all-time high market share of 5.13% at year end 2018. For Oxtellar XR, prescriptions increased 12% for the full year 2018 despite another year of suboptimal level of promotion compared to competition. The second major achievement in 2018 is the FDA approval of label expansion to include monotherapy of partial seizures for Oxtellar XR. Early in this quarter, we launched Oxtellar XR with its expanded label to include monotherapy for partial seizures and we believe that monotherapy can represent a significant growth opportunity in the long-term for Oxtellar XR.

As an anticonvulsant, oxcarbazepine has a wealth of data that prove its efficacy and safety in monotherapy. The drug has been studied extensively in monotherapy with eight studies generating significant data proving its strong efficacy. The general monotherapy partial seizure market is estimated at approximately 15 million prescriptions a year, a much larger market than the epilepsy oxcarbazepine market of about 1.5 million prescriptions a year.

The third major achievement is the successful completion of three Phase 3 trials in ADHD with our lead novel pipeline product candidate SPN-812. The top line results we announced in December 2018 from these trials point to a well differentiated product with strong efficacy, fast onset of action and a good safety profile across all trials. Each trial met its primary end point with a robust statistical significance. In addition to that, the trials showed strong efficacy on the hyperactivity and the inattention sub-scales, an aspect which is very important for any non-stimulant. We are looking forward to disclosing top line results from the second and final adolescent trial by the end of March.

We continue to be on track to file the NDA in the second half of 2019 for SPN-812 and pending FDA approval for the launch of the product in the second half of 2020. We are also planning to start a Phase 3 program in adult patients in the second half of this year. We have now de-risked one of our late stage pipeline products with what we believe as a well differentiated clinical profile and remain enthusiastic about the potential of SPN-812 to offer patients an important new non-stimulant therapeutic for ADHD. In addition to these significant achievements, we have made good progress on SPN-810, our novel treatment of impulsive aggression in patients with ADHD. Enrollment is nearing completion and we expect to report results on this unique and novel program in the second half of this year.

Supernus continues to observe enrollment in the open label extension study for SPN-810 at 90% or higher. On average a patient in the open label study remains on SPN-810 treatment for 10 months which we believe is an encouraging sign of the tolerability and efficacy profile of SPN-810. We continue to expect to submit an NDA for SPN-810 in the second half of 2020 and to launch the drug pending approval by the FDA in the second half of 2021. Regarding SPN-604 for the treatment of bipolar disorder the Phase 3 program is expected to commence in the second half of 2019.

In addition to the above progress on our late stage pipeline programs we completed in 2018 the acquisition of Biscayne Neurotherapeutics adding SPN-817 an exciting pipeline opportunity for severe epilepsy. Our activity on the corporate development side will continue in 2019 looking for neurology and psychiatry assets that represent a strategic fit with our portfolio. Finally, as we announced in our fourth quarter and full year results press release issued last night, we will be hosting an Investor Day in New York on April 16, 2019, where we will share with you an overview of our company including a detailed discussion of our clinical programs especially SPN-812 and an assessment of the associated market opportunities.

I will now turn the call over to Greg, who will provide more details on our fourth quarter and full year financial performance.

[Greg Patrick, Chief Financial Officer]

Thanks Jack and good morning everyone. As I review our fourth quarter and full year 2018 financial results, I will remind listeners to refer to the fourth quarter and full year earnings press release issued yesterday after the market closed. Net product sales for Trokendi XR for the fourth quarter of 2018 were $88.4 million, a 28% increase as compared to the fourth quarter of 2017. Net product sales for Oxtellar XR in the fourth quarter of 2018 were $25.1 million, a 46% increase as compared to the fourth quarter of 2017. Increased wholesaler and pharmacy channel inventory in the fourth quarter of 2018 as compared to channel inventory levels prevailing in the third quarter of 2018 increased net product sales by approximately $10 million. We believe this increase to be temporary and expect that inventory levels will return to historical levels in 2019.

Total revenue for the fourth quarter of 2018 was $115.9 million, a 31% increase as compared to $88.4 million in the fourth quarter of 2017. Total revenue for the fourth quarter of 2018 was comprised of net product sales of $113.5 million and royalty revenue of $2.4 million as compared to net product sales of $86.3 million, royalty revenue of $2 million and licensing revenue of $0.7 million in the fourth quarter of 2017.

Turning to full year results, net product sales for Trokendi XR were $315.3 million, a 39% increase as compared to 2017. Net product sales for Oxtellar XR for full year 2018 were $84.6 million, a 25% increase as compared to 2017. Total revenue for full year 2018 was $408.9 million, a 35.3% increase as compared to $302.2 million in 2017. Total revenue for full year 2018 included net product sales of $399.9 million, royalty revenue of $8.3 million and licensing revenue of $0.8 million as compared to $294.1 million, $6.4 million and $1.8 million respectively for 2017.

Turning now to expenses for the fourth quarter of 2018, research and development expenses were $29.8 million as compared to $16.2 million in the same quarter the prior year. In the fourth quarter of 2018, the company acquired Biscayne Neurotherapeutics. We made a one-time upfront payment of $15 million, $14 million of which was charged to research and development expense. Excluding the one-time upfront expense of $14 million in the fourth quarter of 2018 for the acquisition of Biscayne Neurotherapeutics, research and development expenses in the fourth quarter, were essentially flat as compared to the fourth quarter of 2017.

For full year 2018, research and development expenses were $89.2 million as compared to $49.6 million for 2017. This increase, approximately $40 million, was due primarily to the initiation of the 4 Phase 3 clinical trials for SPN-812 in the second half of 2017 with those trials continuing through full year 2018. Also affecting year-over-year expenses were the open label extension trials for both SPN-812 and SPN-810 and the one-time upfront expense of $40 million for the acquisition of Biscayne.

Selling, general and administrative expenses in the fourth quarter of 2018 were $42.1 million as compared to $33.8 million in the same quarter of the previous year. This increase was due primarily to the development and production of promotional materials and marketing programs associated with the launch of the monotherapy indication for Oxtellar XR and to an increase in share-based compensation expense. Full year 2018 selling, general and administrative expenses were $159.9 million as compared to $137.9 million in 2017. This increase was due primarily to the full year impact of the expansion of the sales force by 40 representatives in 2017, increased marketing spend to Trokendi XR as well as the factors I just mentioned that impacted the fourth quarter.

Operating earnings in the fourth quarter of 2018 were $39.9 million or 16% higher than $34.3 million in the same period of 2017. Operating earnings for full year 2017 were $144.4 million, a 45.1% increase over 2017. The improvement in operating earnings for fourth quarter and full year 2018 was primarily driven by increased net product sales.

GAAP net earnings in the fourth quarter of 2018 were $25.9 million or $0.48 per diluted share as compared to $13.7 million or $0.26 per diluted share in the same period last year. GAAP net earnings were $111 million in 2018 or $2.05 per diluted share as compared to $57.3 million or $1.08 per diluted share in 2017. In addition to higher operating income for the fourth quarter and full year 2018, GAAP net earnings benefited from the reduction in the statutory U.S. Federal income tax rate and to a lesser extent from stock option exercises.

The effective income tax rate in the fourth quarter of 2018 was unfavorably impacted by the $14 million non-tax deductible research and development expense associated with the acquisition of Biscayne. Weighted average diluted common per – shares outstanding were approximately 54.1 million in both the fourth quarter and full year 2018 respectively as compared to approximately $53.5 million and $53.3 million in each of the respective prior year period.

As of December 30, 2018, the company had $774.8 million in cash, cash equivalents, marketable securities and long-term marketable securities as compared to $273.7 million as of December 31, 2017. This increase of approximately $500 million reflects net proceeds of approximately $365 million from the sale of convertible senior notes and warrants offset by purchases of convertible note hedges in March 2018. In addition, approximately $129 million in cash was generated from operations.

Finally, turning to financial guidance for 2019, the company is providing the following. Net product sales in the range of $435 million to $455 million, net product sales guidance assumes that the higher levels of inventory held by wholesalers and pharmacies as of the fourth quarter of 2018 will revert to historical levels in 2019. Accordingly, we anticipate that this will affect 2019 net product sales by approximately $10 million. Research and development expenses in the range of $70 million to $80 million, operating earnings in the range of $160 million to $180 million, effective tax rate in the range of 23% to 25%.

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

[Operator]

Thank you. [Operator Instructions] Our first question comes from Ken Cacciatore with Cowen & Company. Your line is now open.

[Ken Cacciatore, Cowen & Company]

Hi guys, good morning. Congrats on all the progress. Just wanted to ask a couple of question, first on the CGRP, Jack you gave a little bit in your prepared remarks, but maybe a little more nuance in terms of what you are hearing and seeing in terms of patients being pushed in and any pressure I know you alluded to not seeing much pressure, but maybe the dynamics that you are seeing in the market in terms of volumes going into the clinician, how that may ultimately benefit you or not. And then on BD, if there is anymore nuance you can give us about potential areas in CNS that you are finding more or less attractive there, certainly both private assets helped there, but also lot of different smaller public assets in CNS that seemed to be kind of lingering and depressed in a lot of different sales forces, so can you just talk about the balance of looking at maybe earlier stage versus public companies? Thank you.

[Jack Khattar, Chief Executive Officer]

Yes, good morning. Regarding the CGRPs, I mean so far we haven’t seen any specific dynamics that are very different than what we have seen or experienced in 2018, specifically of course initial rush into trying the CGRPs and then as time goes on patients experiencing that the drug doesn’t really work for everybody. So we have seen also patients who will provide some of these products and then come back to use other products that existed before the CGRP. So the dynamics have been fairly stable. Obviously, there is increased competition between the CGRPs with the two newer entrants that came into the market in the fall versus initially way back in May when the first one launched. As far as the market expansion, we do expect 2019 and ‘20 to benefit from such expansion if such expansion were to occur, which I think we have seen some initial signs that the market is expanding as far as volume. Of course, that will come with time and it will come also with the increased heavy activity from a promotional perspective by the competitors in that space. So theoretically, practically we will expect to benefit absolutely from that increased volume over time that Trokendi XR will be there, especially that the efficacy of Trokendi XR is really, really good and it has some of the best data out there as far as responders rate and creating and resulting in migraine freedom for patients. It has some of the highest numbers that we have seen. So we do expect Trokendi XR to get a fair share of that market expansion.

Regarding the second question on BD side, our priorities continue to be fairly consistent in looking at neurology and psychiatry were really agnostic as to which area we could get our hands on, what kind of asset. It is a mix of private and public opportunities that we are looking at. So we look at everything basically in that domain in that space or universe which really makes a lot of strategic fit for us and the priorities are always commercial assets, later stage products and then down to much earlier stage assets. I mean, these are pretty much the same criteria priorities that we have had for a long time and we try to stay disciplined and stick to that strategy especially that now we are working full speed into getting 812 into the market and hopefully in few months from now, later this year we will have 810 as well positive moving forward, then that certainly will allow us to take on a little bit more earlier stage kind of assets, because we will have many, many years of growth to come in the company that will allow us the time to develop these early assets.

[Ken Cacciatore, Cowen & Company]

Great. Thank you.

[Operator]

Thank you. And our next question comes from David Steinberg with Jefferies. Your line is now open.

[David Steinberg, Jefferies]

Thanks. Good morning. Two questions. So just to follow-up on Ken’s question on BD you were talking about neurology versus psychology and public versus private, but just to clarify, so assuming 812 leads us to market next year, does that pretty much shut the window on market more accretive acquisitions, because you need to get your sales force focused on 812 or is still the window open for on-market assets that your sales force can deploy right away versus earlier stage assets? And then now that you had your 812 data out there for a coupe of months, have you had any further discussions with payers about reimbursement down the road and if so, could you share any color over there? Thank you.

[Jack Khattar, Chief Executive Officer]

Yes, sure. Regarding 812, that’s a good question, David, as far as – as we get closer to launching 812 it will make less sense for us to get a on-market or commercial asset in psychiatry, but not necessarily in neurology, because we will have two different sales forces, one which will be dedicated to the launch of 812 and establishing our presence in psychiatry, but we had current sales force for neurology, so certainly on the neurology side that does not stop us from continuing to look at commercial assets or adapt to be commercialized kind of assets in neurology. As far as the payers, KOLs and so forth, you are exactly right as you would expect as we got Phase 3 data in December, we have been fairly busy in January and February sharing a lot of that data with influencers out there KOLs, thought leaders in the ADHD space. The excitement levels continue to get higher and higher as we explain to people and as we walk them through the data. At the same time, we are fielding research with payers as well, the results of which we don’t have yet, but that is occurring as well. Now that we have a very good feel as to what that profile looks like and what the potential label might look like so we have a much better way of measuring the acceptance of the product profile from a market point of view payers as well as KOLs and physicians.

[Operator]

Thank you. And our next question comes from Annabel Samimy with Stifel. Your line is now open.

[Annabel Samimy, Stifel]

Hi. Thanks for taking my question. I just wanted to turn to 810 that seems to be continuing to enroll and we are going to see something by mid-year and I don’t know any that many people are paying attention to it, but maybe you can frame what expected outcome could be, is there a certain reduction in a sense that you are looking for reduction before, is there a specific separation you need to see over placebo, so in terms of how it might be powered going forward, maybe you can give us some color on that and can you give us some of the points that give you confidence around having to move forward with the right dose outside the interim analysis that [indiscernible] 36 milligram dose being the right dose, is there anything that also gives you comfort in what you have seen, are they in prior studies or in open label studies? Thanks.

[Jack Khattar, Chief Executive Officer]

Yes. Sure. Regarding the Phase 3 studies just as I refreshed for everybody, the primary end points and what we are really looking for is the change in the frequency of episodes during the treatment period of course comparing the treatment arm versus the placebo and getting statistical significance versus that placebo arm. As far as the powering of the study, I mean we base all the powering based on our experience with the Phase 2b trial and the Phase 2a trial. Now that the studies might end up having a little bit more patients specifically three or one obviously that will help with the power. And regarding the question on the dose, after the interim analysis as everybody might remember, we scaled it down to only 36 milligram as of the treatment arm and all the future patients after the interim analysis ended up being randomized on placebo or 36 milligram. And actually what we have been seeing in the open label extension is a trend towards the 36 milligram. In open label extension when people get enrolled in the open label everybody starts on 18 milligram so that you don’t break the blind on the initial study. So everybody start with 18 milligram and then the physicians will titrate it up or down or keep it at 18 milligram as they see fit given the specific patient under experience over the drug. And we have been seeing over time actually a trend towards the 36 milligram which gives us a very good comfort level that what the decision that was made back on the interim analysis seems to be very consistent with the experience we are seeing and we like clinical practice in the open label where a lot of the patients actually are titrating up some patients are there is still a good number of patients staying on the 18 milligram, but a bigger portion of the patients are going to 24 milligram or 36 milligram. So that is actually very encouraging and very consistent with the action that we took way back in 2017 on the interim analysis. We continue to be extremely excited about this program and hopefully the data is positive and we think the potential of this drug could be in the multi-billion dollar as far as the opportunity out there as we talked about several times, because it really stands across so many other psychiatric disorders not only ADHD, but also in PTSD, autism, Alzheimer’s and other forms of dementia we continue to hear about the problems out there for which there are no drugs that are approved to really treat them in the right way. So we continue to be extremely excited about this program.

[Annabel Samimy, Stifel]

Okay. And if I could just follow-up on one question, in open label patients that stayed on average 10 months on drug, can you just put that into context, is that a lot for these patients, but a little given that they are very difficult patients treatment if the drug is working you imagine they would want to stay on just put that in context for us? Thanks.

[Jack Khattar, Chief Executive Officer]

Yes. Sure. I mean there is really no like published data that really speaks to what is a good number of months or what’s a good indicator or number of months that if patients are staying on an open label is a good sign or a bad sign. There is no such thing to really say on an average in CNS in general that’s what you experience versus what we are seeing in 810, but to your point given the demographics and the difficulties these patients really have on a day-to-day basis not just the patients, but also the caretakers, the family members who deal with this situation, this is not an easy situation for them to continue to be in a controlled study where they have to go and continue the visits checkups and so forth so if the drug is not really working for them or for the kid they really have no more [indiscernible] never mind one months two months will never mind like ten months into the study and similarly if they were to be experiencing really nasty side effects or the drug is not really well [indiscernible] similarly why would they even stay with the study and specifically for 10 months I mean we view the 10 months as a really long period for that patient population to stay with this drug and stick to it at a time if it’s weren’t really working for them they really have no incentive what’s so ever to do so that’s why we keep saying looking at it and continuing to experience that long stay on the drug 10 months into it is really good encouraging side on both sides efficacy as well as the safety and tolerability.

[Annabel Samimy, Stifel]

Great. Thank you.

[Operator]

Thank you and our next question comes from Patrick Trucchio with Berenberg Capital. Your line is now open.

[Patrick Trucchio, Berenberg Capital]

Hi good morning I have few follow-ups on SPNA 10 can you tell us if you can file an NDA on [indiscernible] do you need a complete data set before you can file the NDA and then regarding the [indiscernible] study can you tell us where enrollment is presently into expect the enrollment in the study to be more efficient then in the child patience and then separately a [indiscernible] program is successful in ADHD how soon do you intend to bring [indiscernible] other indications [indiscernible] could you initiate those studies?

[Jack Khattar, Chief Executive Officer]

Yes, regarding the NDA initial discussions we have had with the FDA and our intend was to really go after pediatric and [indiscernible] patient population in that discussion let [indiscernible] we are not apposed to that however we will need to see some data in [indiscernible] in the NDA and we went thus far as saying okay fine and that’s why we initiated the [indiscernible] but that extent of that data and the kind of that data what we if think the FDA is really looking for as more on the safety side to make sure as we go up in those [indiscernible] with that same kind of disease [indiscernible] no other safety issues [indiscernible] that they have to deal with so we always believe that if we start to [indiscernible] as we get to the completion of the pediatric trials and as we get closer to the filing of the NDA if we have enough safety information tolerability from the Phase 3 [indiscernible] we have a good chance of filing the NDA with the pediatric data as well as the state the [indiscernible] Phase 3 trial and we may not have to wait for the full [indiscernible] file to complete so that’s really our understanding at this point and that’s really the strategy that we [indiscernible] as we continue to have discussions with the FDA will seek the get more clarification now we do have the opportunity also to just file pediatrics and therefore restrict the whole NDA and confine it to only pediatric data with the label [indiscernible] so that’s also an option for us and that’s clearly something that would be fulfilled you will fulfill all the requirements [indiscernible] going on right now in pediatrics so we still have different options available to us and we haven’t really finalize anything specific but as far as the [indiscernible] we would hope that the enrollment in the [indiscernible] will be little bit quicker than we have had in the pediatric because again in the pediatric we were the first people [indiscernible] trials in this area so there was a learning curve now the [indiscernible] is the same whether pediatric [indiscernible] so that issue of screening failures that we have experienced on the pediatric we will probably continue to experience that with the adolescent, because that’s just the nature of [indiscernible], the nature of the demographics we were talking about as far as people and their ability to follow instructions. A lot of these folks don’t follow instructions pretty well unfortunately, and therefore, they’re not compliant with the [indiscernible] during the screening period and they end up failing the requirements to enter the site. That we cannot relax that and that doesn’t really change, but if you have a kid also that was in the Phase 3 study in the pediatric trials and maybe they already at an age now that has been 2 years, 3 years in the Phase 3, they may have become an adolescent, I mean, those people could roll into the adolescent front.

So, we’re hoping to really – we’ll continue monitor it, we’ll continue, I mean, we’re really watching it very closely. And at this time, we’re still committed to delivering the dates we promised, which is filing the NDA in the second half of 2020 and launching in the second half of 2021. And again, our ideal filing of that NDA we’re hoping to include both pediatric and adolescent at that time and launch with the label that has both. As time goes on, if we learn anything that is really different, we’ll certainly clarify to the street if the program changes slightly the direction.

As far as how soon we can start in other areas, clearly, I mean, the moment we get positive data on the pediatric trials and get the reassurance that – our belief in that program for so long have been that it should work and what we’re seeing in the Open Label, if that gets confirmed over the Phase 3 data on pediatric, we will be looking to really start the program, I mean, as soon as possible. The other areas most likely will be more Autism and PTSD as the initial areas we’ve been doing some research and talking to KOLs about. That could change as time goes on, but that’s the initial thinking at this point that these are potentially the areas that will be the natural second or third area for us to do additional studies in. How many areas do we need to do studies in, we think at most two other areas maybe you do one Phase 3 in two other areas for us to hopefully get a much broader label that really tweaks impulsive aggression in every disorder not just ADHD.

[Patrick Trucchio, Berenberg Capital]

That’s helpful. Thank you.

[Jack Khattar, Chief Executive Officer]

Sure.

[Operator]

Thank you. And our next question comes from Irina Koffler with Mizuho. Your line is now open.

[Irina Koffler, Mizuho]

Hi, thanks for taking the questions. Can you give us an update, I know it’s early as to how Oxtellar is doing commercially in the expanded monotherapy indication and when can we expect some inflection in prescription trends? And then maybe just touch on expected gross to net in the Trokendi business? Thank you.

[Jack Khattar, Chief Executive Officer]

Yes. Regarding the monotherapy as I mentioned, we just launched it this quarter, early in the quarter. So, we already [indiscernible] with the training of the salesforce and so forth, so we hit really the street from day one right after we – shortly after we got the approval. So, we’re very excited about the momentum and so far, we’re very excited about what we’ve been reading and the feedback we’ve been getting from physicians. It is very clear and it really confirms what we’ve said all along before we launched it that a lot of physicians out there do not remember and some of them have never seen any monotherapy data about oxcarbazepine as a drug and as a molecule.

And as we share some of that data and as we remind people of the efficacy of oxcarbazepine and now its availability in Oxtellar XR as a much better improved profile potentially for the patients, there is really a whole different level of excitement about the brand versus initially when we only could talk about a junk of therapy. So, we’re really excited about the initial feedback. You’re absolutely right, it is a little bit early for us to really make any specific comments on any inflection point and the growth rate of the product. I do remind folks that in epilepsy in general, even if you look 20 years of IMS data, you’ll see that all new products when they launch, they do hold and gain market share, but it’s a much slower build than it would be in migraine or any other areas.

So certainly, we’re not necessarily looking for a trajectory or an inflection point in the growth curves as we have seen in Trokendi XR, it will be much slower over time yet it will be very steady. And eventually this is a long-term franchise for us given the vast space out there and how big the market is of about 15 million prescriptions a year, we think we have a long way for us and a lot of quarters to come and years to come of significant growth behind Oxtellar XR.

As far as the gross to net, we really don’t like to make any specific comments on a quarter-to-quarter or year-over-year, I mean, we maintain to say over the years we have these do get a little bit worse, you will have fluctuation one quarter over the other and actually some people may probably notice those fluctuations, because there are so many different factors in that gross to net, a lot of it is out of our control and it is what it is and whenever it happens, we have to report and we have to include it in the gross to net and therefore it’s out of our control. But we actually after 6 years on the market, we are really pleased as to where we are on both products from a gross to net perspective, where actually a lot of products today when they launch from year 1, they are at the same levels that we are now after 6 year in the marketplace. So, we’re pretty pleased with where we are, but we don’t know and we don’t have a crystal ball what the future hold obviously and how that whole universe and how that whole domain changes, if there will be any structural changes given what’s going on with the administration and the healthcare policies out there, but we remain to monitor it and work as hard as we can to continue to have this coverage for both products.

[Irina Koffler, Mizuho]

Thank you.

[Operator]

Thank you. And our next question comes from David Amsellem with Piper Jaffray. Your line is now open.

[David Amsellem, Piper Jaffray]

Thanks. Just a couple, so, just following up on the Oxtellar questions and traction in epilepsy monotherapy. So, I guess, what I’m struggling with is, how are you seeing this wider physician audience for the product in the context of monotherapy, where physicians were familiar with Oxtellar have been using it as monotherapy over the last few years. So, just help us understand the extent to which this audience is wider now that you have that in the label? And then secondly regarding bipolar, can you just remind us what portion of underlying Oxcarb, Trileptal volumes are written in the psychiatry setting off-label, and of the sodium channel blockers available, what are the most widely used and how do you see – how do psychiatrists perceive oxcarbazepine as a mood stabilizer in the psychiatry setting. Just trying to get a handle on what kind of opportunity that could be? Thank you.

[Jack Khattar, Chief Executive Officer]

Yes, sure. Regarding the first question on the monotherapy, you’re absolutely correct. Some of the physicians that we’ve had over the years prescribing Oxtellar XR have used that in monotherapy, but that is not all of our physicians, no question about it. There are lot of them who have been using only for a junk, because our message has been very consistent for 6 years now, doctor if you need extra efficacy, if you need to add on Oxtellar XR should be a first choice as an junk of therapy as an add-on and that’s we’ve been pounding this message for 6 years, so, naturally you would expect a lot of physicians to just use it that way and reserving it only for extreme patients, who need that add-on extra efficacy and therefore excluding us completely from that monotherapy market for newly diagnosed patients or patients who have been on other monotherapy and need to be switched to a much better more efficacious drug. What really changes here as far as the launch of our monotherapy is how we prioritize, how we change the P1 physician and P2 physician meaning the first call physician between the two brands that we have on Trokendi XR and Oxtellar XR. So, Oxtellar XR is now receiving a much, much higher physician in P1 as a call in the sales call among a lot of physicians where historically it was the P2 physician, where a rep may have a chance to talk about Oxtellar XR into the sales call or may never even get to it in the sales call. So, there is a big change and big shift and we’re talking about a few 1,000 doctors, who will make a very – who will get a very different message and will get much more emphasis with the recent effort and the recent launch in monotherapy. And some of these physicians also maybe as well new physicians that we didn’t talk to before because of their heavy prescribing in monotherapy that is not necessarily molecule-specific just oxcarbazepine. So, our target is not just the oxcarbazepine market anymore, it is the monotherapy market, which will bring in potentially newer physicians to the universe and definitely I can tell you will bring in much more emphasis on Oxtellar XR in a P1 physician versus it used to be always in the P2 physician. And, of course, the message, the data everything is very different than what we have.

Regarding the bipolar question, currently the market about 50% of the oxcarbazepine market a little bit more is in psychiatry and the majority of that is bipolar or for mood stabilization for mood disorders. And if you look at the whole bipolar market about 34% of the prescriptions to treat bipolar are coming actually from anti-epileptic drugs, most of which are exactly what you mentioned are sodium channel blocker. The majority are on Lamictal, lamotrigine, which had that indication actually for many years, so it is the biggest one. And then, of course, you have carbamazepine like Carbatrol, which is the predecessor of oxcarbazepine.

Oxcarbazepine even for pyramid is widely used also in bipolar, so a lot of the anti-epileptics and that segment is about 34% of the total bipolar market. Today, as far as Oxtellar XR, there is really negligible, negligible if any use in bipolar because we don’t call on psychiatrists naturally. So, if a psychiatrist heard about it from the outside or through a publication maybe, but it’s really very, very low single-digit if any use of bipolar Oxtellar XR.

[David Amsellem, Piper Jaffray]

Yes, that’s helpful. Thank you.

[Jack Khattar, Chief Executive Officer]

Sure.

[Operator]

Thank you. And our next question comes from David Buck with B. Riley FBR. Your line is now open.

[David Buck, B. Riley FBR]

Yes, thanks. Just a couple of follow-ups maybe for Jack. Can you talk about what your expected IP position would be in bipolar for your Oxtellar when you move into an indication there? Secondly, do you expect some of the payer research you talked about to be available by mid-April for SPN-812? And finally, for Greg, fourth quarter typically had a bit of inventory that increased in the channel. Can you – you called out $10 million, which is helpful, but what was the comparator last year in terms of the inventory change? Thanks.

[Jack Khattar, Chief Executive Officer]

Yes, David, regarding the IP position for bipolar, I’m not really in a good position at this point to make a specific comment on that, because we’re doing a lot of things that we haven’t disclosed necessarily publicly as to what that program and what is the exact product for that bipolar program. I’ll tell you one thing, we’re planning for very long-term IP protection that I can say, but what is it exactly and how long is it going to go and how far is it going to go, we’re not in the position to be able to say that at this point.

As far as the payer research, we’re working pretty hard on that on SPN-812 to really get meaningful feedback that we can share. We are really hoping actually to be able to do that in the April 16 Investor Day if we have it at that time, I can’t promise for sure, but if we definitely have it and have something that is meaningful, we certainly will be looking forward to share anything that is meaningful around that day. And Greg?

[Greg Patrick, Chief Financial Officer]

Right. And David with respect to your question about inventory levels, this is a tough area because getting very precise data is challenging. But to directly respond to your question in our estimate, in our OR [ph] 10 calculations show that inventory accumulation in the prior year, so that would be 2017 fourth quarter was negligible, if not nil. So, there was clearly a discernible change in ordering pattern in this fourth quarter and that’s why we called it out.

[David Buck, B. Riley FBR]

And just a follow-up, was it more one product versus the other, was it more Oxtellar versus Trokendi?

[Greg Patrick, Chief Financial Officer]

No, it wasn’t more Oxtellar than Trokendi XR, actually, they were pretty much proportionate with one another, probably even maybe a little bit heavier on Trokendi XR than Oxtellar XR.

[David Buck, B. Riley FBR]

Okay, that’s great. Thank you.

[Operator]

Thank you. And our next question comes from Esther Hong with Janney. Your line is now open.

[Esther Hong, Janney]

Thanks. So, staying on Oxtellar for bipolar disorder, can you talk about what a potential trial design would look like, I know that the trial is expected to begin in the second half of this year, so when could we expect to see data, how quickly could we see label expansion? Thanks.

[Jack Khattar, Chief Executive Officer]

Yes. As far as the design, we will discuss that at more length when we have it all nailed down and share with FDA and get their blessing on the designs, I feel more comfortable sharing that at that time. As far as the timing I mean if we start the program in the fall of this year, I mean these trials would have to take a good year from beginning all the way till the end a year, maybe a few months later. So you will be then into around end of 2020 maybe to get data. Again this is now really gets for we do not have any specific timeline until we nail down the design and know exactly when we start the studies. But that’s very, very rough timeline if I were to give you anything today.

[Esther Hong, Janney]

Okay. Thanks.

[Jack Khattar, Chief Executive Officer]

Sure.

[Operator]

Thank you. And we have time for one more question, that question comes from David Steinberg with Jefferies. Your line is now open.

[David Steinberg, Jefferies]

Yes. Thanks. I just had one follow-up regarding the stocking in that Q4, was there a de-stock in the previous quarter and then I am just curious why $10 million was almost 10% of your revenue, so it’s a pretty big stock and I am just curious you mentioned a little more was to [indiscernible] Trokendi is scoring nicely, but still decelerating from the rapid growth post the migraine launch in Oxtellar, growth has been kind of in line, so just curious why were the wholesalers buying so much ahead if there was not a de-stock in the previous quarters? Thanks.

[Jack Khattar, Chief Executive Officer]

There was not a de-stocking as we can determine in the third quarter, number one. Number two, I think the wholesalers and also the pharmacies we noticed the same behavior for certain pharmacies, certain large chain pharmacies were also ordering more than they had in the prior months. So it was in both segments of the channel, both products and we think what happened here is that the company does have a – has a practice of increasing prices in the early part of the year. We think that wholesalers and pharmacies noticed that and they tried to get in front of that by ordering products ahead of time, price increases in that as announced in that increasing price drops directly into their pocket. So going forward we are going to be – we have set up some additional reconnaissance and additional procedures that will allow us to I think control this much, much better. You notice that in our guidance we are not anticipating an additional stocking in the fourth quarter of 2018 because – our fourth quarter 2019, excuse me because of these procedures and practices that we are going to be setting up in terms of dealing with our wholesalers and the pharmacy chain. So we don’t expect the reputation but we think it was really driven by the timing in the anticipation of price increases in the early part of the year and they were right.

[David Steinberg, Jefferies]

But though you have inventory management agreements, I mean those types of movements happened in the old days, but with IMS it shouldn’t be happening anymore or no?

[Jack Khattar, Chief Executive Officer]

Well, we do, but they happened.

[Operator]

Thank you. I would now like to turn the call back over to Jack Khattar for any closing remarks.

[Jack Khattar, Chief Executive Officer]

It is an exciting time at Supernus. In 2019 we look forward to achieving significant milestones including the release of the top line results for the fourth and final Phase 3 study for SPN-812, submitting the NDA on SPN-812, completing the Phase 3 trials for SPN-810 and releasing top line results form these trials later this year and also initiating a Phase 3 bipolar program for SPN-604. In addition, we continue to be focused on maximizing the Trokendi XR and Oxtellar XR brands to continue with commercial execution. Thanks again for joining us this morning and we look forward to sharing with you the upcoming updates throughout the year.

[Operator]

Ladies and gentlemen, gentlemen, thank you for participating in today’s conference. This does conclude today’s program. And you may all disconnect. Everyone have a great day.