# Supernus Pharmaceuticals, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Supernus Pharmaceuticals, Inc.](/companies/supn.md) (CIK 1356576)
- Form: 10-Q
- Filed: 2024-11-04
- Accepted by EDGAR: Nov 4, 2024, 16:19 ET
- Period: 2024-09-30
- Accession: 0001356576-24-000067
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1356576/000135657624000067/supn-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1356576/000135657624000067/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $175.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $487.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $17.6m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $51.8m | us-gaap:CostOfGoodsAndServicesSold |
| Research and development | 3 months, 2024-07-01 to 2024-09-30 | $29.0m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-01-01 to 2024-09-30 | $80.1m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $69.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $242.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $40.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | $60.3m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $0 | us-gaap:InterestExpenseNonoperating |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $0 | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $6.4m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $13.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $38.5m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $58.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.69 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $1.05 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.70 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $1.06 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 56,016,350 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 55,791,185 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $127.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $512.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-09-30 | $31.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $640.0m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $1.34bn | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $291.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $335.6m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-09-30 | $1.01bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 30,415 characters.

*Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and the financial condition of Supernus Pharmaceuticals, Inc. The interim condensed consolidated financial statements included in this report and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 27, 2024.*

*In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. These forward-looking statements may include declarations regarding the Company’s belief or current expectations of management, such as statements including the words “budgeted,” “anticipate,” “project,” “forecast,” “estimate,” “expect,” “may,” “believe,” “potential,” and similar statements or expressions, which are intended to be among the statements that are forward-looking statements, as such statements reflect the reality of risk and uncertainty that is inherent in our business. Actual results may differ materially from those expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which are made as of the date this report was filed with the Securities and Exchange Commission. Our actual results and the timing of events could differ materially from those discussed in our forward-looking statements because of many factors, including those set forth under the “Risk Factors” section of our Annual Report on Form 10-K and elsewhere in this report as well as in other reports and documents we file with the Securities and Exchange Commission from time to time. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.*

*Unless the content requires otherwise, the words "Supernus," "we," "our" and "the Company" refer to Supernus Pharmaceuticals, Inc. and/or one or more of its subsidiaries, as the case may be. These terms are used solely for the convenience of the reader. Supernus Pharmaceuticals, Inc. and each of its subsidiaries are distinct legal entities. For example, MDD US Operations, LLC, a wholly-owned indirect subsidiary of Supernus Pharmaceuticals, Inc., is the exclusive licensee and distributor of APOKYN in the United States and its territories. Adamas Operations, LLC, a wholly-owned indirect subsidiary of Supernus Pharmaceuticals, Inc., wholly owns the patents and patent applications related to GOCOVRI and Osmolex ER and has a license agreement with Supernus Pharmaceuticals, Inc., granting Supernus Pharmaceuticals, Inc. rights to market and sell GOCOVRI and Osmolex ER.*

*Solely for convenience, in this Quarterly Report on Form 10-Q, the trade names are referred to without the TM symbols and the trademark registrations are referred to without the circled R, but such references should not be construed as any indicator that the Company will not assert, to the fullest extent under applicable law, our rights thereto.*

### Overview

We are a biopharmaceutical company focused on developing and commercializing products for the treatment of central nervous system (CNS) diseases. Our diverse neuroscience portfolio includes approved treatments for epilepsy, migraine, attention-deficit hyperactivity disorder (ADHD), hypomobility in Parkinson’s Disease (PD), cervical dystonia, chronic sialorrhea, and dyskinesia in PD patients receiving levodopa-based therapy. We are developing a broad range of novel CNS product candidates including new potential treatments for hypomobility in PD, epilepsy, depression, and other CNS disorders.

We have a portfolio of commercial products and product candidates.

#### Commercial Products

- Qelbree® (viloxazine) extended-release capsules is a novel non-stimulant product indicated for the treatment of ADHD in adults and pediatric patients 6 years and older. The United States Food and Drug Administration (FDA) approved Qelbree for the treatment of ADHD in pediatric patients 6 to 17 years of age in April 2021, and in adult patients in April 2022. The Company launched Qelbree for pediatric patients in May 2021 and for adult patients in May 2022 in the United States (U.S.).
- GOCOVRI® (amantadine) extended-release capsules is the first and only FDA approved medicine indicated for the treatment of dyskinesia in patients with PD receiving levodopa-based therapy, with or without concomitant dopaminergic medications, and as an adjunctive treatment to levodopa/carbidopa with PD experiencing "OFF" episodes.
- Oxtellar XR® (oxcarbazepine) is indicated as therapy for the treatment of partial onset seizures in patients 6 years of age and older. It is also the first once-daily extended-release oxcarbazepine product indicated for the treatment of epilepsy in the U.S. market.
- Trokendi XR® (topiramate) is the first once-daily extended-release topiramate product indicated for the treatment of epilepsy in patients 6 years of age and older in the U.S. market. It is also indicated for the prophylaxis of migraine headache in adults and adolescents 12 years and older.
- APOKYN® (apomorphine hydrochloride injection) is a product indicated for the acute, intermittent treatment of hypomobility, "OFF" episodes ("end-of-dose wearing off" and unpredictable "ON/OFF" episodes) in patients with advanced PD.
- XADAGO® (safinamide) is a once-daily product indicated as adjunctive treatment to levodopa/carbidopa in patients with PD experiencing "OFF" episodes.
- MYOBLOC® (rimabotulinumtoxinB injection) is a product indicated for the treatment of cervical dystonia and chronic sialorrhea in adults. It is the only botulinum toxin type B available on the market.

### Research and Development

We are committed to the development of innovative product candidates in neurology and psychiatry, including the following:

#### SPN-830 (apomorphine infusion device)

SPN-830 is a late-stage drug/device combination product candidate for the continuous treatment of motor fluctuations ("OFF" episodes) in PD patients that are not adequately controlled with oral levodopa and one or more adjunct PD medications. If approved, it would be the only continuous infusion of apomorphine available in the U.S. and an important step for PD patients that would have otherwise been candidates for potentially invasive surgical procedures, such as deep brain stimulation. Continuous slow infusion may also limit some of the side effects of a bolus injection of apomorphine.

In April 2024, the FDA issued a Complete Response Letter regarding the NDA for SPN-830. In August 2024, we resubmitted the New Drug Application (NDA) for SPN-830 to the FDA. For further discussion, see *Operational Highlights* section below.

#### SPN-820 (NV-5138)

SPN-820 is a first-in-class, orally active small molecule that increases the brain mechanistic target of rapamycin complex 1 (mTORC1) mediated synaptic function intracellularly. SPN-820 does not bind to or modulate any cell surface receptors and therefore is unlikely to have abuse potential given lack of binding to targets implicated in drug abuse. In addition, unlike leucine, it is not incorporated into proteins during protein synthesis, and therefore, it is more available at the target site in the brain than leucine.

#### SPN-817 (huperzine A)

SPN-817 represents a novel mechanism of action (MOA) for an anticonvulsant. SPN-817 is a novel synthetic form of huperzine A, whose MOA includes potent acetylcholinesterase inhibition, with pharmacological activities in CNS conditions such as epilepsy. The development will initially focus on the drug's anticonvulsant activity, which has been shown in preclinical models to be effective for the treatment of partial seizures and Dravet Syndrome. SPN-817 is in clinical development and has received Orphan Drug designation for several epilepsy indications from the FDA.

### Operational Highlights

- Total IQVIA prescriptions for Qelbree were 194,025 in the third quarter 2024, an increase of 19% compared to the prior year period.
- In August 2024, the Company resubmitted to the FDA the NDA for apomorphine infusion device (SPN-830) for the continuous treatment of motor fluctuations ("OFF" episodes) in Parkinson’s disease. On August 16, 2024, the FDA

acknowledged the resubmission of the NDA for the apomorphine infusion device (SPN-830). The resubmission is considered filed, with a user fee goal date (PDUFA date) of February 1, 2025.

### Product Pipeline Update

#### SPN-820 – Novel first-in-class molecule that increases mTORC1 mediated synaptic function for depression

- In October 2024, the Company announced and discussed the data from its exploratory open-label Phase 2a clinical study of SPN-820 in adults with major depressive disorder (MDD). The data were based on 40 enrolled subjects, of which 38 completed the 10-day treatment period. The primary objective of the study was to assess efficacy in MDD, as well as the onset of efficacy. The Phase 2a study demonstrated rapid and substantial decrease in depressive symptoms, and 80% decrease in suicidal ideation. SPN-820 was well-tolerated with few adverse events.
- In addition, the Company presented new data at the 2024 Psych Congress in October 2024 that demonstrate a rapid Montgomery–Asberg Depression Rating Scale (MADRS) response rate (≥50% reduction) and remission (MADRS ≤10), reaching 50.0% and 35.0% of participants, respectively, at 4 hours, with additional improvement to 84.2% and 63.2% of participants by Day 10.
- The Company expects to complete enrollment in the ongoing Phase 2b multi-center randomized double-blind placebo-controlled parallel design study of SPN-820 in adults with treatment-resistant depression in November 2024. The study will examine the efficacy and safety of SPN-820 over a course of five weeks of treatment in approximately 236 patients in approximately 50 clinical sites. The primary outcome measure is the change from baseline to end of treatment period on the MADRS Total Score. Topline data from the Phase 2b trial are expected in the first half of 2025.

#### SPN-817 – Novel first-in-class highly selective AChE inhibitor for epilepsy

- The Company is conducting an open label Phase 2a 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 (Stage A). The Company has now completed enrollment of Stage A and is reporting topline data from all subjects with focal seizures who received the 3mg and 4mg twice daily doses, completed the maintenance period (n=10), and enrolled in the post-maintenance extension period (n=6).
- Maintenance period:
- 56% median seizure reduction from baseline.
- 70% of subjects had 30% or more seizure reduction.
- 60% of subjects had 50% or more seizure reduction.
- 30% of subjects had 75% or more seizure reduction.
- Post-maintenance extension period:
- 66% median seizure reduction from baseline.
- 83% of subjects had 30% or more seizure reduction.
- 67% of subjects had 50% or more seizure reduction.
- 50% of subjects had 75% or more seizure reduction.
- Seizure Freedom:
- Maintenance period: 1 out of 10 subjects (10%) who completed a post-baseline seizure diary had at least one four-week seizure free period.
- Post-maintenance extension period: 1 out of 6 subjects (17%) had at least one four-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 discontinuing because of treatment related adverse events out of the 26 subjects who entered the maintenance period. Stage B of the study is on-going and includes the concomitant use of an anti-emetic to reduce cholinergic adverse events observed in the study.
- A Phase 2b randomized, double-blind, placebo-controlled study in patients with treatment resistant focal seizures is expected to start by the end of 2024 studying 3mg and 4mg twice daily doses.

#### SPN-443 – Novel stimulant for ADHD/CNS

- The Company initiated a Phase 1 single dose study in healthy adults in the third quarter of 2024. The primary objective of the study is to assess safety and tolerability.

### Critical Accounting Policies and the Use of Estimates

A summary of our significant accounting policies is included in Note 2, *Summary of Significant Accounting Policies* of our audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2023. There were no significant changes to the disclosures with respect to our critical accounting policies in our Annual Report on Form 10-K for the year ended December 31, 2023.

### Results of Operations

### Comparison of the Three and Nine Months ended September 30, 2024 and 2023

### Revenues

Revenues consist primarily of net product sales of our commercial products in the U.S., supplemented by royalty and licensing revenues from our collaborative licensing arrangements. The following table provides information regarding our revenues during the three and nine months ended September 30, 2024 (dollars in thousands):

| Net product sales | Three Months Ended September 30, 2024 | 2023 | Change Amount | Percent | Nine Months Ended September 30, 2024 | 2023 | Change Amount | Percent |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Qelbree | $62,359 | $37,081 | $25,278 | 68% | $166,857 | $93,840 | $73,017 | 78% |
| GOCOVRI | 35,657 | 32,889 | 2,768 | 8% | 93,922 | 87,650 | 6,272 | 7% |
| Oxtellar XR | 29,805 | 29,644 | 161 | 1% | 86,265 | 82,359 | 3,906 | 5% |
| APOKYN | 19,867 | 21,510 | (1,643) | (8)% | 53,811 | 56,324 | (2,513) | (4)% |
| Trokendi XR | 15,318 | 20,625 | (5,307) | (26)% | 48,393 | 74,734 | (26,341) | (35)% |
| Other(1) | 7,296 | 7,255 | 41 | —% | 22,053 | 23,008 | (955) | (4)% |
| Total net product sales | 170,302 | 149,004 | 21,298 | 14% | 471,301 | 417,915 | 53,386 | 13% |
| Royalty, licensing and other revenues | 5,387 | 4,876 | 511 | 10% | 16,357 | 25,292 | (8,935) | (35)% |
| Total revenues | $175,689 | $153,880 | $21,809 | 14% | $487,658 | $443,207 | $44,451 | 10% |

(1) Includes net product sales of MYOBLOC, XADAGO and Osmolex ER.

#### Net Product Sales

Net product sales were $170.3 million and $149.0 million for the three months ended September 30, 2024 and 2023, respectively. The increase was primarily due to increases in net product sales from Qelbree and GOCOVRI partially offset by the decline in net product sales of Trokendi XR due to generic erosion.

Net product sales were $471.3 million and $417.9 million for the nine months ended September 30, 2024 and 2023, respectively. The increase was primarily due to increases in net product sales from Qelbree and GOCOVRI, partially offset by the decline in net product sales of Trokendi XR due to generic erosion.

#### Sales Deductions and Related Accruals

We record accrued product returns and accrued product rebates as current liabilities in *Accrued product returns and rebates,* on our condensed consolidated balance sheets. We record sales discounts as a reduction against *Accounts receivable, net* on the unaudited condensed consolidated balance sheets. Both amounts are generally affected by changes in gross product sales, changes in the provision for net product sales deductions, and the timing of payments/credits.

The following table provides a summary of activity with respect to accrued product returns and rebates during the periods indicated (dollars in thousands):

|  | Accrued Product Returns and Rebates Product Returns | Product Rebates | Sales Discounts | Total |
| --- | ---: | ---: | ---: | ---: |
| Balance at December 31, 2023 | $57,290 | $96,984 | $10,719 | $164,993 |
| Provision |  |  |  |  |
| Provision for current year sales | 15,615 | 295,831 | 52,372 | 363,818 |
| Adjustments relating to prior year sales | (7,345) | (2,244) | (6) | (9,595) |
| Total provision | 8,270 | 293,587 | 52,366 | 354,223 |
| Less: Actual payments/credits | (8,131) | (278,876) | (52,097) | (339,104) |
| Balance at September 30, 2024 | $57,429 | $111,695 | $10,988 | $180,112 |

|  | Accrued Product Returns and Rebates Product Returns | Product Rebates | Sales Discounts | Total |
| --- | ---: | ---: | ---: | ---: |
| Balance at December 31, 2022 | $45,008 | $106,657 | $12,995 | $164,660 |
| Provision |  |  |  |  |
| Provision for current year sales | 17,484 | 310,166 | 48,766 | 376,416 |
| Adjustments relating to prior year sales | (52) | 1,657 | 32 | 1,637 |
| Total provision | 17,432 | 311,823 | 48,798 | 378,053 |
| Less: Actual payments/credits | (8,096) | (310,351) | (50,960) | (369,407) |
| Balance at September 30, 2023 | $54,344 | $108,129 | $10,833 | $173,306 |

#### Accrued Product Returns and Rebates

The accrued product returns balance increased to $57.4 million as of September 30, 2024 from $54.3 million as of September 30, 2023. This increase was primarily due to higher net product sales and timing of related return activity offset by the $7.3 million adjustment in the estimated provision for product returns related to prior year sales. The majority of this adjustment is attributable to Qelbree, reflecting favorable actual returns experienced in 2024 for Qelbree. As a result, the Company changed its estimated provision for product returns based on the most recent experience.

The accrued product rebates balance increased to $111.7 million as of September 30, 2024 from $108.1 million as of September 30, 2023 due to timing of payments associated with government programs.

#### Provision for Product Returns and Rebates

The provision for product returns decreased to $8.3 million for the nine months ended September 30, 2024 from $17.4 million for the nine months ended September 30, 2023. The decrease was primarily due to the aforementioned $7.3 million adjustment in the estimated provision for product returns related to prior year sales.

The provision for product rebates decreased to $293.6 million for nine months ended September 30, 2024 from $311.8 million for the nine months ended September 30, 2023. The decrease was primarily attributable to lower Trokendi XR sales, partially offset by higher Qelbree sales and favorability in commercial programs.

#### Royalty, Licensing and Other Revenues

Royalty, licensing and other revenues were $5.4 million and $4.9 million for the three months ended September 30, 2024 and 2023, respectively. The increase was due to increase in royalty revenues from royalty arrangements with third parties.

Royalty, licensing and other revenues were $16.4 million and $25.3 million for the nine months ended September 30, 2024 and 2023, respectively. The decrease was primarily due to lower royalties on generic Trokendi XR due to the increased number of generic entrants.

#### Cost of Goods Sold

Cost of goods sold was $17.6 million and $19.6 million for the three months ended September 30, 2024 and 2023, respectively. Cost of goods sold was $51.8 million and $64.2 million for the nine months ended September 30, 2024 and 2023, respectively. The decrease in both periods was primarily driven by manufacturing efficiencies of Qelbree and a decline in net product sales of Trokendi XR due to generic erosion.

#### Research and Development Expenses

R&D expenses were $29.0 million and $22.7 million for the three months ended September 30, 2024 and 2023, respectively. R&D expenses were $80.1 million and $68.2 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in both periods was primarily due to increased clinical program costs on SPN-817, SPN-820 and on the open-label study of Qelbree, and increased manufacturing costs of our product candidates.

#### Selling, General and Administrative Expenses

The following table provides information regarding our selling, general and administrative (SG&A) expenses during the periods indicated (dollars in thousands):

|  | Three Months Ended September 30, 2024 | 2023 | Change Amount | Percent | Nine Months Ended September 30, 2024 | 2023 | Change Amount | Percent |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Selling and marketing | $54,329 | $56,785 | $(2,456) | (4)% | $172,700 | $173,909 | $(1,209) | (1)% |
| General and administrative | 15,424 | 25,915 | (10,491) | (40)% | 69,473 | 81,170 | (11,697) | (14)% |
| Total | $69,753 | $82,700 | $(12,947) | (16)% | $242,173 | $255,079 | $(12,906) | (5)% |

During the three and nine months ended September 30, 2024, the Company recorded $11.5 million and $12.0 million of insurance recoveries for certain legal costs, respectively. Legal costs were recorded under general and administrative expense as incurred. Correspondingly, the insurance recoveries were recorded as a reduction to general and administrative expenses. There were no insurance recoveries recorded in 2023.

#### Amortization of Intangible Assets

Amortization of intangible assets was $19.5 million and $21.2 million for the three months ended September 30, 2024 and 2023, respectively. Amortization of intangible assets was $59.7 million and $61.3 million for the nine months ended September 30, 2024 and 2023, respectively. The decrease is primarily due to impairment charges on certain acquired intangible assets in the fourth quarter of 2023 which reduced amortization expense in fiscal year 2024.

#### Contingent Consideration Gain

Contingent consideration was a gain of $1.0 million and a gain of $0.5 million for the three months ended September 30, 2024 and 2023, respectively. Contingent consideration was a gain of $6.5 million and a gain of $1.3 million for the nine months ended September 30, 2024 and 2023, respectively. The change for both periods was primarily driven by the passage of time for the sales-based milestones associated with the Adamas Acquisition and change in the estimated timeline of achievement of the regulatory and development milestones associated with the USWM Acquisition. See Item 2. *Management’s Discussion and Analysis of Financial Condition and Results of Operations-Operational Highlights-Product Pipeline Update-SPN-830 (apomorphine infusion device) for treatment of Parkinson's disease (PD).*

#### Other Income (Expense)

Other income (expense) was an income of $4.1 million and $1.8 million for the three months ended September 30, 2024 and 2023, respectively. Other income (expense) was an income of $11.2 million and $6.1 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in both periods was due to higher interest income on marketable securities largely driven by an overall higher investment balance in 2024 and no debt outstanding in 2024. The interest expense recognized in 2023 was related to the 2023 Notes which were paid off in April 2023.

#### Income Tax Expense

Income tax expense was $6.4 million (14.3% effective tax rate) and $13.0 million (18.1% effective tax rate) for the three and nine months ended September 30, 2024, as compared to an income tax expense of $25.9 million (261.6% effective tax rate) and $1.6 million (92.1% effective tax rate) for the three and nine months ended September 30, 2023. The change in both periods was primarily due to higher forecasted earnings before taxes for the three and nine months ended September 30, 2024 as compared to the near break-even forecasted earnings before taxes in 2023.

The Company's effective income tax rates for the three and nine months ended September 30, 2024 vary from the statutory federal tax rate in United States (U.S. federal tax rate) of 21% primarily due to increased tax benefits related to current and prior years research and development tax credits. The Company's effective income tax rates for the three and nine months ended September 30, 2023 vary from the statutory U.S. federal tax rate primarily due to near break-even forecasted earnings before taxes.

The annual forecasted earnings represent the Company's best estimate as of September 30, 2024 and 2023, are subject to change and could have a material impact on the effective tax rate in subsequent periods. Accounting Standard Codification 740, *Income Taxes* (ASC 740), requires the Company to estimate the annual effective income tax rate for the full year and apply it to pre-tax income (loss) for each interim period, taking into account year-to-date amounts and projected results for the full year.

### Financial Condition, Liquidity and Capital Resources

### Cash and Cash Equivalents and Marketable Securities

Cash and cash equivalents, marketable securities, and long-term marketable securities are comprised of the following (dollars in thousands):

|  | September 30 2024 | December 31 2023 | Change Amount | Percent |
| --- | ---: | ---: | ---: | ---: |
| Cash and cash equivalents | $31,673 | $75,054 | $(43,381) | (58)% |
| Marketable securities | 371,537 | 179,820 | 191,717 | 107% |
| Long-term marketable securities | — | 16,617 | (16,617) | (100)% |
| Total | $403,210 | $271,491 | $131,719 | 49% |

We have financed our operations primarily with cash generated from product sales, supplemented by revenues from royalty and licensing arrangements, as well as proceeds from the sale of equity and debt securities. Continued cash generation is highly dependent on the success of our commercial products, as well as the success of our product candidates if approved by the FDA. While we expect continued profitability in future years, we anticipate there may be significant variability from year to year in the level of our profits particularly due to the following: continued market and payor pressures for our commercial products; the unfavorable impact of the loss of patent exclusivity for Trokendi XR in January 2023; the potential unfavorable impact of the loss of exclusivity of Oxtellar XR and XADAGO; funding for research and development of our product candidates; and the additional funding to launch SPN-830, if approved by the FDA.

The Company believes its balances of cash, cash equivalents, and unrestricted marketable securities, which totaled $403.2 million as of September 30, 2024, along with cash generated from ongoing operations and continued access to debt markets, will be sufficient to satisfy its cash requirements over the next 12 months and beyond.

We may, from time to time, consider raising additional capital through: new collaborative arrangements; strategic alliances; additional equity and/or financings from debt or other sources, especially in conjunction with opportunistic business development initiatives. We will continue to actively manage our capital structure and to consider all financing opportunities that could strengthen our long-term financial profile. Any such capital raises may or may not be similar to transactions in which we have engaged in the past. There can be no assurance that any such financing opportunities will be available on acceptable terms, if at all.

### Cash Flows

Cash flows are comprised of the following (dollars in thousands):

| Net cash provided by (used in): | Nine Months Ended September 30, 2024 | 2023 | Change Amount |
| --- | ---: | ---: | ---: |
| Operating activities | $127,545 | $66,127 | $61,418 |
| Investing activities | (177,229) | 334,710 | (511,939) |
| Financing activities | 6,303 | (398,972) | 405,275 |
| Net change in cash and cash equivalents | (43,381) | 1,865 | (45,246) |
| Cash and cash equivalents at beginning of year | 75,054 | 93,120 | (18,066) |
| Cash and cash equivalents at end of period | $31,673 | $94,985 | $(63,312) |

#### Operating Activities

Net cash provided by operating activities was $127.5 million and $66.1 million for the nine months ended September 30, 2024, and 2023, respectively. The increase in cash flows provided by operating activities is primarily due to higher net income for the nine months ended September 30, 2024 compared to the same period in prior year, and changes in working capital which reflects the timing impacts of cash collections on receivables and settlement of payables.

#### Investing Activities

Net cash used in investing activities was $177.2 million for the nine months ended September 30, 2024 compared to $334.7 million cash provided by investing activities during the same period in 2023. The change was primarily due to an increase in cash outflows from purchases of marketable securities, partially offset by higher cash inflows from the maturities of marketable securities.

#### Financing Activities

Net cash provided by financing activities was $6.3 million for the nine months ended September 30, 2024 compared to $399.0 million used during the same period in 2023. The change was primarily due to the payment of the total principal amounts and remaining outstanding interest due on the 0.625% Convertible Senior Notes in April 2023.

### Material Cash Requirements

Refer to “Part II, Item 7 — Management’s Discussion and Analysis of Liquidity and Capital Resources” of our Annual Report on Form 10-K for the year ended December 31, 2023, and Note 14, *Commitments and Contingencies*, in the Notes to the Condensed Consolidated Financial Statements in Part I, Item 1, Unaudited Condensed Consolidated Financial Statements, of this Quarterly Report on Form 10-Q for the discussion of our contractual obligations.

### Recently Issued Accounting Pronouncements

For a discussion of new accounting pronouncements, see Note 2 *Summary of Significant Accounting Policies,* in the Notes to the Condensed Consolidated Financial Statements in Part I, Item 1, Unaudited Condensed Consolidated Financial Statements, of this Quarterly Report on Form 10-Q.

## Market risk

As filed, 3,910 characters.

The primary objective of our investment activities is to preserve our capital to fund operations and to facilitate business development activities. We also seek to maximize income from our investments without assuming significant interest rate risk, liquidity risk, or risk of default by investing in investment grade securities with maturities of four years or less. Our exposure to market risk is confined to investments in cash and cash equivalents, marketable securities, and long-term marketable securities. As of September 30, 2024, we had cash and cash equivalents, marketable securities, and long-term marketable securities of $403.2 million.

The Company has a credit line agreement with UBS (the Credit Line) which provides a revolving line of credit of up to $150 million and can be drawn at any time. As of September 30, 2024, there was no outstanding debt under the Credit Line. In the future, we may borrow funds under the Credit Line. Variable rate borrowing, which may occur under the Credit Line, exposes us to interest rate risk as increases in interest rates would increase our borrowing costs.

Any borrowed funds pursuant to our Credit Line are subject to a collateral maintenance requirement. The Credit Line is secured primarily by our portfolio of marketable securities, which is primarily comprised of corporate and U.S. government agency and municipal debt securities and may fluctuate in value. The fluctuations may be driven by, among other things, changes in interest rates, economic conditions, and other financial conditions as well as idiosyncratic factors related to a security’s issuer. To the extent a fluctuation in value results in the value of the collateral decreasing below the required collateral maintenance requirements we may be required to promptly post additional collateral. Additionally, our Credit Line is an uncommitted facility that may be terminated by the lender at any time. During periods of rapidly changing interest rates, economic conditions or other financial conditions, the Credit Line may be terminated by the lender and/or the lender may declare that all borrowings thereunder are immediately due.

Our cash and cash equivalents consist primarily of cash held at banks and investments in highly liquid financial instruments with an original maturity of three months or less. Our marketable securities, which are reported at fair value, consist of investments in U.S. Treasury bills and notes; bank certificates of deposit; various U.S. governmental agency debt securities; and corporate and municipal debt securities. We place all investments with governmental, industrial, or financial institutions whose debt is rated as investment grade. We generally hold these securities to maturities of one to four years. Because of the relatively short period that we hold our investments and because we generally hold these securities to maturity, we do not believe that an increase in interest rates would have any significant impact on the realizable value of our investments.

We do not have any currency or derivative financial instruments.

We may contract with clinical research organizations (CROs) and investigational sites globally. Currently, we have ongoing clinical trials being conducted outside the U.S. We do not hedge our foreign currency exchange rate risk. Transactions denominated in currencies other than the U.S. dollar are recorded based on exchange rates at the time such transactions arise. As of September 30, 2024 and December 31, 2023, substantially all of our liabilities were denominated in the U.S. dollar.

Inflation generally affects us by increasing our cost of labor and the cost of services provided by our vendors. We do not believe that inflation and changing prices over the year ended December 31, 2023, and the nine months ended September 30, 2024 had a significant impact on our consolidated results of operations.

## Controls and procedures

As filed, 1,597 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures required by Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Exchange Act has been appropriately recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure. We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2024, the end of the period covered by this report. Based on that evaluation, under the supervision and with the participation of our management, including our CEO and CFO, we concluded that our disclosure controls and procedures are effective as of September 30, 2024.

### Changes in Internal Control over Financial Reporting

Our management, including our CEO and CFO, evaluated changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2024.

During the quarter ended September 30, 2024, no changes occurred in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 799 characters.

Any investment in our business involves a high degree of risk. Before making an investment decision, you should carefully consider the information we include in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes; the additional information in the other reports we file with the Securities and Exchange Commission; and the risks described in our Annual Report on Form 10-K for the year ended December 31, 2023 and quarterly report on Form 10-Q for the period ended September 30, 2024. These risks may result in material harm to our business and our financial condition and results of operations. If a material, adverse event was to occur, the market price of our common stock may decline, and you could lose part or all of your investment.

Filed Nov 4, 2024.
Source: SEC EDGAR, the filing index for accession 0001356576-24-000067. Last ingested by Listed: Nov 4, 2026, 18:21 ET. No prices; not investment advice.