Supernus
Pharmaceuticals, Inc. (SUPN, $27.10): “Super Potential with Supernus”
By: Mitch
Kamm, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
- Supernus Pharmaceuticals, Inc. (NASDAQ:SUPN) is a pharmaceutical company focused on developing and commercializing products for the treatment of central nervous system (CNS) diseases. The company currently offers Qelbree, Trokendi XR, Oxtellar XR, Apokyn, Xadago, and Myobloc products. Supernus has a market cap of 1,513 million and is headquartered in Rockville, MD.
- Supernus recently received great news as its Qelbree (SPN-812) drug offering. This offering was delayed due to an FDA investigation into Supernus’ decision to relocate their production facility. This win is twofold as it allows Qelbree, a first of its kind offering, to hit the market and paved the way for SPN-830’s NDA filing on September 14th.
- It is believed that SPN-830 could be Supernus’ most successful offering when it receives FDA approval. SPN-830 is an apomorphine continuous subcutaneous infusion pump to treat hypomobility in adults with Parkinson’s Disease (PD). Supernus was slated to release the drug in 4Q20 but needed to do more testing on the distribution device of the product and just recently filed with the NDA.
- Supernus has remained relatively flat since being added into the portfolio in February 2020. Momentum is finally starting to turn for the company with Qelbree’s approval and optimism surrounding SPN-830. Both of these offerings can be big drivers for the firm and patience is needed to see if they can pan out.
Key
points:
The recent approval of Qelbree was a big
win for Supernus as it will hopefully show that the FDA’s concerns with their
production relocation are all but settled. Qelbree is a first of its kind
extended release capsule for the treatment of attention-deficit disorder (ADHD)
in 6-17 year old patients. Qelbree is unique in that it is non-stimulant,
administered once a day and the side effects are less severe than the current
offerings. Only 10% of the current market for ADHD medication is made up of
non-stimulants giving Supernus a big opportunity. Despite being launched early
this year, Qelbree is already accessible for prescription to 60% of pediatric
patients with ADHD. Assuming the firm can prove the drug’s efficacy in treating
the disease while eliminating the side effects of insomnia, addiction, drug
abuse and loss of appetite can make this a big winner.
Management’s focus on
getting SPN-830 to a full launch took a big step on September 14th. The drug is used for the continuous treatment of ON-OFF
episodes in adults with Parkinson’s disease SPN-830 would allow for a less
invasive and a convenient option in the form of a continuous subcutaneous
infusion of apomorphine. Current offerings require infusion of a gastric tube
or surgery such as a deep brain stimulation. This less invasive surgery would
be much easier to administer, and management believes this offering could reach
~600M in sales per year once it is fully adopted by the market.
Going forward, patience is necessary to
see what happens. The outlook for Supernus is likely to be a boom or bust. The
firm currently has two more offerings in their pipeline. SPN-820 is in phase 1
trials for various treatments of depression. SPN-817 is also undergoing phase 1
trials for the treatment of severe epilepsy. Qelbree and SPN-830 could be big
winners for the firm but if they do not pan out then near-term the outlook appears
rather bleak. Supernus needs either or both drugs to take off and give revenues
the shot in the arm that is needed. Given the potential for growth within the
company it is recommended that Supernus Pharmaceuticals, Inc. continued to be
held by the AIM Small Cap portfolio.
What
has the stock done lately?
Supernus’ 1-month performance is up
2.61% to $27.10 and its performance over the last six months has been up 5.65%.
Since the AIM Equity Fund purchased shares of Supernus at $29.42 in February 2020,
the stock has decreased 7.1% in value.
Past
Year Performance: Over the last year, Supernus has seen a 29.91%
increase compared to the Russell 2000 Index benchmark return of 48.18%. 2021
year to date, Supernus has returned a 7.8% return miss the Russell 2000
benchmark of 14.59%.
My
Takeaway
The
future for Supernus could lead to superior growth and strong returns for the
stock. Depending on how Qelbree and SPN-830 turn out, the company could see
monumental increases in revenues which have been inconsistent year over year.
Management has a proven track record of getting successful drugs onto the
market and I am optimistic these and future offerings will have the same luck.
Supernus has not been a winner for the portfolio so far but I think it is too
early to give up. In the pharmaceutical space you oftentimes need just one big
win to make an investment more than worth it. I think that big win might be coming
soon in this case. Given that the investment thesis is still intact I think we
need to wait and see what happens. I recommended that we continue to hold and
monitor SUPN throughout their upcoming developments.
