Supernus Pharma: A Recent IPO Awaiting Pair Of FDA Decisions

Supernus Pharma (NASDAQ:SUPN) is a specialty pharmaceutical company focused on the treatment of central nervous system disorders that recently completed an initial public offering (NYSEARCA:IPO) and formerly existed as a US subsidiary of Shire (SHPGY).

Below is a summary of the clinical development pipeline for Supernus, which includes two wholly-owned product candidates with pending FDA decisions as novel formulations of approved seizure drugs.

In addition, the Company's drug delivery technology is currently used in the following marketed extended-release drugs: Carbatrol (carbamazepine), Adderall XR (mixed amphetamine salts), Intuniv (guanfacine), Sanctura XR (trospium chloride), and Oracea (doxycycline).

1.) SPN-538 (extended-release oral once-daily topiramate)--FDA Decision 505(b)(2) NDA

Supernus has a PDUFA decision goal date in July 2012 (exact date not disclosed) for a novel formulation of approved seizure and migraine drug TOPAMAX (also available in generic formulations) under a standard 10-month review. Upsher-Smith has filed a Citizen's Petition w/ FDA to require a randomized Phase 3 clinical trial which it is conducting for a rival once-daily formulation of the same drug ( ID NCT01142193).

2.) SPN-804 (extended-release oral once-daily oxcarbazepine)--FDA Decision 505(b)(2) NDA

Supernus has a PDUFA decision goal date in October 2012 (exact date not disclosed) for a novel formulation of approved seizure drug TRILEPTAL under a standard 10-month review. Both SPN-538 and SPN-804 are designed to delivery lower peak concentrations of the drug (to decrease potential side effects) along with more consistent drug levels in the blood compared to the standard immediate-release formulations which are typically dosed twice daily.

3.) Oral Treprostinil--FDA Decision (NDA)

United Therapeutics (NASDAQ:UTHR) has a PDUFA decision goal date of 10/27/12 under a standard 10-month review seeking FDA approval for a novel oral formulation (currently approved for use via inhalation or injection) of treprostinil to treatment pulmonary (lung) arterial hypertension (high blood pressure).

Supernus is eligible for $6 million in additional potential milestone payments (including $2M for PAH plus $4M for development of drug for other uses) and single-digit royalties on global net sales for use of its drug delivery technology.

4.) Molindone Hydrochloride XR Tablets (SPN-810)--Phase 2b Clinical Trial ( ID NCT01364662)

Supernus expects to report results during 2H12 from an ongoing Phase 2b clinical trial evaluating this non-stimulant drug candidate for the treatment of impulsive aggression in patients w/ attention deficit hyperactivity disorder (NASDAQ:ADHD).

Below is a summary of the financial highlights for Supernus:

- In early May announced closing of IPO for sale of 10M shares of common stock @$5 for net proceeds of $47.6M

- In December 2011, Supernus closed a pair of transactions which raised $42M in non-dilutive financing through the sale of its TCD Royalty subsidiary (SANCTURA XR and ORACEA royalties) for $27M along with the issuance of $15M in venture capital debt

- As of 3/31/12 reported cash and equivalents of $37.4M and subsequently received net proceeds of $47.6M from IPO in May with a projected cash burn rate for 2012 of $65-70M and adequate liquidity to fund planned operations into 2Q13

- As of 3/31/12 reported total debt (notes payable) of $29.1M with 24.4M shares of common stock outstanding as of 5/31/12

- Supernus has raised over $165M through five non-dilutive financing transactions since its inception six years ago to fund development of the pipeline outlined above in addition to another compound (SPN-812), which is a non-stimulant drug candidate (a selective norepinephrine re-uptake inhibitor ) for ADHD that has successfully completed a Phase 2a clinical trial

I believe shares of Supernus are poised for a run-up back to the $6-7 range, which represents the upper end of the Company's stock price trading range since the IPO last month with a pair of catalysts in the form of pending FDA decisions and a strong balance sheet thanks to net proceeds from the IPO and the royalty / debt financing transactions completed late last year.

I purchased shares of SUPN on its recent drop below $5/share as the Company was trading over $6 a few weeks ago and should gain interest from traders as a low-priced stock with near-term pending FDA decisions. Since the Company has adequate liquidity for another year, the near-term risk of dilution is minimal, with the primary risk of trading the stock being a low float due to a higher percentage of insider and institutional ownership, resulting in low average trading volumes and high volatility in the stock price. 10% daily stock price swings are common for the stock which has a very limited trading history and no options available yet.

In addition, I believe the 505(b)(2) NDA route is appropriate for both drugs and believe the Citizen's Petition filed by Upsher-Smith for SPN-538 is without merit since there is no reason to require a full slate of randomize Phase 3 clinical trials for a new formulation of an approved drug; although that represents another risk factor for the pending FDA decision expected in July.

Finally, another bullish factor for the Company is a validated extended-release drug delivery technology that is utilized in multiple approved products and is also the subject of a pending FDA decision for UTHR, which represents another source of potential milestone payments and royalties for Supernus.

Disclosure: I am long SUPN.

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