Super Results From Supernus

A chasm reminds us that there is a fine line between bravery and idiocy.” ― Veronica Roth, Divergent

We are seeing myriad small and mid-cap biotech and biopharma concerns advance in trading today on the back of better than expected Q4 results.  These include ANI Pharmaceuticals (ANIP), Clovis Oncology (CLVS) and GW Pharma (GWPH).

One company that had a particular better than expected fourth quarter was Supernus Pharmaceuticals (SUPN) which is one of the twenty stocks in the model portfolio of The Biotech Forum.  Given this, it seems a good time to revisit this 'Tier 2' name, highlight fourth quarter results and update the investment thesis on Supernus.


Company Overview:

Supernus Pharmaceuticals is a Marylandbased pharmaceutical company aimed at treating diseases that affect the central nervous system (NYSE:CNS). Supernus has two FDA approved drugs.  These are Oxtellar XR and Trokendi XR. Both medications are once daily antiepileptics, both approved in 2013. Supernus has recently begun expanding its portfolio to include medications to treat psychiatric conditions and has multiple drugs in the FDA approval pipeline.  Oxtellar XR® now has an expanded indication to include monotherapy for partial seizures as of last month. The company has a current stock market capitalization of approximately $2 billion and trades at $41.50 a share.


Fourth Quarter Highlights:

GAAP earnings per share in the fourth quarter, came in at 48 cents a share.  This was 22 cents a shares above the consensus.


Revenue rose over 30% on a year-over-year basis to just over $115 million, just over $10 million above the consensus.



As can be seen above, it was a strong quarter and year for both of Supernus' key compounds.


The company also continues to expect to submit a New Drug Application (NDA) for SPN-812 in the second half of 2019 for the treatment of ADHD.  If approval comes as expected, that new product should launch in the second half of 2020.


Supernus expects to start pivotal Phase III studies using another compound 'SPN-604' for the treatment of bipolar disorder in the second half of 2019.


Operating earnings in full year 2018 were $144.4 million, an over 45% increase over the $99.5 million produced in 2017.


For FY2019, the company has guided to operating earnings in the range of $160 million to $180 million on revenues in the $435 million to $455 million range.

For those that want to use simple option strategies to enhance returns and mitigate risk (which I highly recommend in the volatile biotech space), you can pick up a free report entitled '10 Simple Rules To Trade Options Like A Pro' from our friends at Investors Alley. It is now available free via download HERE

Analyst Commentary & Balance Sheet:

The company has seen some increased in investor confidence over the past month.  Janney Montgomery assumed new coverage on Supernus on January 31st with a Buy rating and $55 price target.  Yesterday, B Riley FBR reissued its Buy rating and $65 price target on SUPN, with this view of upcoming Q4 results.

We reiterate our Buy rating for Alpha Generator pick Supernus shares with our $65 PT ahead of 4Q18 results. Supernus is scheduled to report AMC a conference call on February 27 BMO. For 4Q18, we model total revenues of $110.5M up 25% Y/Y versus $105.4M consensus. Trokendi XR (migraine/epilepsy) revenues should grow 23% Y/Y growth to $85M moderately above $82.4M consensus and benefiting from 18.5% TRx growth. For Oxtellar XR, we model $22.7M in 4Q18 revenues up 31.4% Y/Y . We model $0.27 for 4Q18 EPS flat with $0.26 Y/Y including a one-time $15M R&D milestone payment accounting for a negative $0.22 per share impact. For 2018, we expect total revenues of $403.5M up 33% up sharply Y/Y from $1.07.”

Riley's Q4 outlook proved conservative, and I would not be surprised if they raised their price target somewhat in coming weeks.  


After earnings posted, Cantor Fitizerald reissued its Buy rating and $57 price with the following commentary.

We anticipate the core Trokendi XR and Oxtellar XR businesses will continue to perform well, particularly the former, with the ongoing roll-out for the migraine prevention indication. Over the next 12-24 months, with provision of positive clinical trial data, we believe investors will better appreciate the value of pipeline assets the bipolar indication opportunity for Oxtellar XR. $57 price target is based on DCF and SOP analyses that forecast peak Oxtellar XR and Trokendi XR sales of $170 million (by 2026) and $450 million (2021) respectively.

The company ended FY2018 with approximately $775 million in cash and marketable securities on its balance sheet.   It should be noted that Supernus raised $365 million from the issuance of convertible senior notes and warrants in March of last year.


Outlook:


It is hard to find much fault in the company's Q4 results.  Supernus looks poised for another year of solid growth and should advance its pipeline on a couple of fronts as well.  Despite a better than 10% rally in the shares today, the stock is significantly under recent analyst price targets.  Supernus is certainly not a 'home run' stock.  However, I could easily see the stock climbing 20% to 25% in 2019 which would just get it back to where the stock was trading at late in 2018.

Courage is being scared to death, but saddling up anyway.” ― John Wayne

Author's note: I present and update my best small-cap Busted IPO stock ideas only to subscribers of my exclusive marketplace, The Busted IPO Forum. Try a free 2-week trial today by clicking here! Sign up by the end of the trading week (03/01/2019) and also receive 20% off your first year of membership if you decide to extend beyond the free two-week trial period.

38 views

© 2023 by Bret Jensen.