Supernus Pharmaceuticals, Inc. (SUPN) Earnings Call Transcript

Good day, and welcome to the conference call and webcast to discuss the merger of Supernus Pharmaceuticals and Indivior Pharmaceuticals. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Peter Vozzo, Investor Relations representative for Supernus Pharmaceuticals. Please go ahead.

Good morning, everyone, and thank you for joining us to discuss the proposed merger of Supernus Pharmaceuticals and Indivior Pharmaceuticals. A press release announcing the proposed merger was issued earlier this morning. Additionally, this morning, both companies separately reported financial results for the 3- and 6-month periods ending June 30, 2026. As a result of the transaction announcement, Supernus and Indivior are hosting this joint conference call in lieu of their previously scheduled second quarter 2026 earnings calls. Note that today's conference call will focus on the transaction. Before we begin, I'd like to remind everyone that today's discussion regarding Supernus and Indivior includes forward-looking statements, including expectations regarding the proposed transaction. These statements are subject to risks and uncertainties, and we encourage you to review the related SEC filings for more detail. For the benefit of those of you who may be listening to the replay, this call is being held and recorded on August 3, 2026. Since then, the company may have made additional announcements related to the topics discussed. Now let's turn to Slide 4. I'm joined on the call today by Jack Khattar, President and Chief Executive Officer of Supernus; Joe Ciaffoni, Chief Executive Officer of Indivior; and Tim Dec, Chief Financial Officer of Supernus. Ryan Preblick, Chief Financial Officer of Indivior, is also available for Q&A. I will now turn the call over to Jack Khattar, President and Chief Executive Officer of Supernus.

Thank you, Peter. Good morning, everyone, and thanks for taking the time to join us on today's call. Let's start with the big picture on Slide 5. This transaction creates a CNS leader through the combination of 2 highly complementary businesses. The combined commercial portfolios will total 11 medicines with key growth products anticipated to grow well into the 2030s. The merger provides for 4 key commercial therapeutic areas in addiction, ADHD, depression and Parkinson's disease. It also accelerates profitability and cash flow generation with expected annual cost synergies of $125 million, which we expect to realize within the first 12 months following the merger. Our respective teams have spent a great deal of time together identifying and validating these synergies. These synergies are primarily general and administrative redundancies and operational efficiencies that should materialize after the 2 companies come together. The merger also gives us a strong balance sheet, which enhances our flexibility to pursue future business development and other growth opportunities. Put simply, this combination creates a CNS leader with a diversified portfolio of commercial products, a differentiated and innovative CNS pipeline and significant financial resources to accelerate growth opportunities. I would now like to turn it over to Joe Ciaffoni, who will provide his perspective on the transaction. But before I do that, I'll take a moment to recognize the dedicated employees of both Supernus and Indivior whose commitment and focus have made today's milestone possible. Joe?

Thanks, Jack, and good morning, everyone. I'm excited to be here with the Supernus team to announce the creation of a new leading diversified CNS biopharmaceutical company with significant scale. Bringing our 2 organizations together is intended to deliver greater value to the patients, health care communities and shareholders we serve. We are excited by the potential of combining our 2 complementary organizations. And importantly, we have a shared vision of improving the lives of people living with CNS and behavioral health diseases. For Indivior shareholders, our execution against the Indivior Action Agenda has dramatically strengthened the company by accelerating top line growth through strong commercial execution and sustained investment in SUBLOCADE and accelerated the bottom line at an even faster rate by focusing and simplifying the organization. We are pleased that Indivior shareholders will have the opportunity to participate in the upside we see from this combination under Jack's leadership. The combined company creates a leading CNS-focused biopharmaceutical company that generates over $2 billion in net revenue, comprised of meaningfully differentiated and durable commercial growth drivers, along with an innovative pipeline. We expect the combined company to realize significant cost synergy, which will create meaningful value for shareholders. As a merger of equals, we are able to preserve balance sheet strength that strongly positions the new company to execute on business development opportunities at a level that neither company could contemplate today on their own. I am optimistic about the future of Supernus, and I am confident that this combination will mark a new phase of growth and value creation. Upon closing of the transaction, all 3 phases of the Indivior Action Agenda will have been successfully completed. In closing, I want to thank the Indivior team for their contributions to our progress and most importantly, for their commitment to making a positive difference in the lives of people living with opioid use disorder in the communities we serve. Supernus' strength gives us an even greater ability to make a positive difference moving forward. I'll now turn the call back over to Jack.

Thanks, Joe. So let me provide some further detail. Let's turn to Slide 6. We have structured this merger as an all-stock, tax-free merger of equals, which we believe capitalizes on the strengths of both companies and presents the best value creation opportunities for both sets of shareholders. Under the terms of the agreement, Supernus shareholders would receive 1.5401 shares of Indivior common stock for each share of Supernus they own. In addition, prior to closing, Indivior will declare a dividend of $1 billion in the aggregate to pre-closing Indivior stockholders. Taking the cash distribution and exchange ratio together, we expect Indivior shareholders to own approximately 56.5% of the combined company at closing, with Supernus shareholders owning the remaining approximately 43.5% on a fully diluted basis. Our combined Board will include 4 directors from Supernus, including myself, and 4 directors from Indivior, including Tony Kingsley, who will serve as Non-Executive Chairman. Following the close, I will serve as Chief Executive Officer of the combined company with the support of an expanded current Supernus management team. The combined company will keep the Supernus name and will be headquartered in Rockville, Maryland. We expect the transaction to close in the fourth quarter of 2026, subject to the approval of both companies' shareholders and certain regulatory approvals and customary closing conditions. Turning now to Slide 7. Here, we lay out what that combined portfolio will look like. As of June 30, 2026, on a trailing 12-month basis, the combined company had approximately $2.2 billion of pro forma net revenue across 4 key therapeutic areas. Indivior brings the leading treatment for opioid use disorder, SUBLOCADE, buprenorphine extended-release injection and Suboxone sublingual film also for opioid use disorder. By revenue contribution, SUBLOCADE will be the largest single contributor at approximately 44% of pro forma combined net revenue. Rounding out the portfolio are Supernus neurology and psychiatry products anchored by its 4 growth products, Qelbree for ADHD, Zurzuvae for postpartum depression and GOCOVRI on ONAPGO for Parkinson's disease. Slide 8 speaks to why now. Both organizations are combining from a position of strength and demonstrated progress. Supernus' strategic focus has been expanding its portfolio through growth of its current commercial products, business development and advancement of its mid- to late-stage CNS pipeline of novel assets, and as such, has developed a successful track record of acquiring and integrating businesses. Against that focus, Supernus has strengthened its presence in neuropsychiatry through the acquisition of Sage Therapeutics in 2025, secured FDA approval and launched ONAPGO for Parkinson's disease and is generating significant free cash flow. Indivior's strategic focus has been implementing its 3-phase action agenda to grow SUBLOCADE, simplify the business and strengthen its financial position. It has become a leader in developing and commercializing treatments to help people achieve long-term recovery from opioid use disorder. Indivior has accelerated SUBLOCADE growth through improved commercial execution and its direct-to-consumer campaign, simplified the business to reduce operating expenses and generated significant operating leverage. Together, we believe the combined organization is well prepared to drive the next phase of value creation. Before I hand it to Tim, let me touch on our pipeline on Slide 9. We remain very excited about the innovation and differentiation of our product candidates in development and the opportunity to deliver sustained innovation and growth into the future. The combined company will continue to invest in R&D, completing the development of Supernus' current product candidates, replenishing the pipeline with innovating product candidates from our discovery programs and external collaborations. With that, let me turn it over to Tim to walk through more of the financial details.

Thank you, Jack, and good morning, everyone. Slide 10 lays out our pro forma key financial metrics for the combined company. For Supernus on a trailing 12-month basis as of June 30, 2026, total net revenue was $830 million and adjusted EBITDA was $150 million, which is an adjusted EBITDA margin of approximately 18%. As of June 30, 2026, Supernus had cash of approximately $372 million and no debt. For Indivior, the corresponding figures for net revenue, adjusted EBITDA and adjusted EBITDA margin were $1.3 billion, $613 million and 46%. As of June 30, 2026, net debt was $251 million and net leverage was approximately 0.4x. On a combined basis for the 12 months ended June 30, 2026, pro forma net revenue was approximately $2.2 billion, with pro forma adjusted EBITDA of $888 million and a margin of approximately 41%, net debt of $878 million and a net leverage ratio of approximately 1x. Note, the pro forma adjusted EBITDA figures include the impact of expected cost synergies of $125 million. As we mentioned earlier this morning, Supernus and Indivior reported their respective financial results for the 3- and 6-month periods ending June 30, 2026. With that, let me hand the call back to Jack.

Thank you, Tim. Let me bring this all together on Slide 11 because I think it's the clearest summary of why we're doing this. This transaction enhances and diversifies our growth profile. It gives us a differentiated portfolio with key growth products expected to grow well into the 2030s. It also establishes us in 4 key commercial therapeutic areas in addiction, ADHD, depression and Parkinson's disease. And it also provides increased scale and significant cost synergies. It gives us meaningfully greater flexibility and capacity to pursue growth initiatives, both organic and through business development opportunities that neither Indivior nor Supernus could contemplate on their own today. Turning now to Slide 12. Taken together, we see this as a value-creating transaction for shareholders of both companies to accelerate profitability and cash flow generation and provide the combined company greater financial flexibility and capacity to pursue growth opportunities. We see that flexibility supporting 3 key priorities: First, driving growth in our combined commercial portfolio, including continued investment behind the combined company's growth products, SUBLOCADE, Qelbree, Zurzuvae, GOCOVRI and ONAPGO; second, advancing our novel and innovative pipeline of product candidates; and third, pursuing future business development and other growth opportunities. With that, I will now turn it over for a question-and-answer period.

[Operator Instructions] And our first question will come from the line of Andrew Tsai with Jefferies.

Congratulations on the merger. So for the -- it looks like the transaction you said helps you guys do BD deals in the future that neither company could contemplate by yourself. So can you talk about what kind of firepower we're talking about and what kind of indication areas that companies jointly might be interested in now? And then secondly, what do you foresee the peak sales of SUBLOCADE to be? And why should it fundamentally outperform competitors in the space? And then maybe just on top of that, the consensus EBITDA estimates on the Indivior side, it seems like a material step-up in 2027. So how comfortable are you guys with that directionally speaking?

Andrew, thanks for the questions. I'll start with the first one and then Joe can step in on the SUBLOCADE questions. Regarding business development, our strategy will continue to be very focused and disciplined as we've always done over the years. Clearly, CNS is our mainstay, and that's what we continue to focus on from a therapeutic area. We've been always open to considering other areas. Of course, women's health is another vertical that we have, and these are the 2 areas we'll continue to focus on in general. As far as the capacity, as Tim walked you through the pro forma, and this is more on the pro forma basis, you'll see that the adjusted EBITDA is very, very healthy. And in general, our philosophy, we don't try to overleverage from a business perspective and taking on a lot of debt. So we're very comfortable typically with the 2.5x, maybe 3x adjusted EBITDA from a multiple perspective. And as I always say, I mean, it always depends on the quality of the assets that you're bringing to the table and the cash flows that are coming with that acquisition. A little bit more sustainability of cash flows, healthier, higher quality of cash flows, maybe you can go on the higher upper end of the multiple clearly. But that's really the guideline that we will continue to pursue as we move forward after the closing.

And Andrew, with regards to SUBLOCADE, I appreciate the question. I would emphasize SUBLOCADE is the first. It's the #1 prescribed and it's a meaningfully differentiated long-acting injectable. Importantly, I believe we're just beginning to scratch the surface of SUBLOCADE's potential. Now as a matter of policy at Indivior, we give no peak sales guidance. But what I would emphasize is we believe the runway for SUBLOCADE is durable. We believe the product will continue to grow. If you look at this quarter, every fundamental metric in support of SUBLOCADE is trending in a strong direction. And I would close with in the quarter, we had record new patient starts. We've seen stable market share at 76%, which has now been about 6 or 7 quarters where we see share stabilizing there. And the most important thing that we're focused on because there's such opportunity is driving long-acting injectable utilization. And so there's a long runway in front of it.

And our next question will come from the line of Glen Santangelo with Barclays.

Jack, I just had a couple of quick ones here. I was curious, could you guys give us the pro forma total shares outstanding and maybe pro forma debt and cash for the combined company? I think that would be helpful as we start to think about our models. And then, secondly, while the expense synergies obviously seem like they make sense given the combination, you talked a fair amount about the enhanced growth profile of the company. And I was curious, since you're not detailing any sort of revenue synergies, I was kind of curious, could you talk about why you think this will enhance the growth profile? I mean, can you leverage the 2 commercial sales forces that you have in place? And any enhancements you think the combination will create on the R&D side? Any sort of comments there would be helpful.

Yes, sure. Let me start first with the second part of the question, and then Tim can jump in on the other side. As far as the expenses, synergies and so forth. Now if you look historically, we've made several acquisitions. And obviously, we've been able to integrate them very well. And this is not going to be any difference. So this merger will certainly take advantage of certain redundancies that the 2 organizations naturally bring together. There are natural redundancies that will result in the $125 million cost synergies that we talked about. Now clearly, there is more as after we close and we look into the operation, we will, of course, focus on those because we are always driving for efficiency in the operations across all the groups. As far as revenue and growth profile, so what do we mean by enhancing the growth profile? Basically, what you have with the combination, you have now 5 or you will have 5 growth products across different therapeutic areas. All growth products have been supported very well by the separate companies, of course. But when you have much deeper and larger financial resources, you can continue to reexamine the portfolio, the growth potential of these products and try to maximize the potential of these products. So these will be the opportunities that we will look for to be able to enhance the growth profile in general. But then enhancing the growth profile of the total company could also mean -- that means we'll bring other products from the outside. And given the expanded capacity that I mentioned in my previous remarks, the flexibility that we would have from a financial perspective, that will give us tremendous firepower that otherwise we don't have. And that would allow us to bring even more products into the portfolio and enhance the growth of the total company in general. And that is really what is so unique about this combination. It's that firepower and the powerful advantages that it brings to the table, which, again, you'll hear us say that many times that otherwise, each of us separately won't be able to do. And it's really giving our shareholders combined a great opportunity to benefit from a profile that probably doesn't exist today in this space. If you look at the CNS space, I'll guarantee you there are not too many companies with a profile like the one we just gave you from a pro forma perspective, and that is a huge opportunity for people to participate with the upside of such a combined company.

Yes. And Glen, you had asked about the number of shares outstanding post deal. With the exchange ratio for the Supernus shares at 1.54, the aggregate number of shares will be about 215 million.

And can we get the total cash and debt numbers pro forma?

So on the financial slide, our pro forma EBITDA is roughly $888 million. We're not going to provide any guidance going forward other than the pro forma number. And our net debt number is $878 million.

One moment for our next question. And that will come from the line of David Amsellem with Piper Sandler.

So a couple for me. Jack, I wanted to come back to your comments on more business development flexibility. So you have a history of doing primarily commercial stage transactions. And just given where the organization will be, the combined organization, I wanted to get a sense from you regarding your appetite for late-stage assets, earlier development stage assets and further rounding out the pipeline? And how aggressive will you be given that you have additional firepower? So that's number one. And then number two, maybe more of a question for Joe is how you're thinking about the exclusivity runway for SUBLOCADE. So this is going to be the combined organization biggest selling product or should be. So the question is, given its profile, can you talk to barriers for potential generics in addition to just the IP? In other words, complexities, just given that it's an LAI product, I think that would be helpful in terms of teasing out what your assumptions are for the runway for that product.

Yes. David, I'll take the first question and Joe can jump in on the second one. As far as our priorities from a BD perspective, you're absolutely right. We've been prioritizing, of course, commercial stage assets to continue to diversify our revenue base. And clearly, this merger will do that, and we'll do that in a great amazing way because it really gives us not just diversification, but also gives us the scale. And the scale is going to be the factor that will allow us together with the financial resources on the R&D side to continue to invest in our current pipeline with the 2 assets that are mid- to late-stage accelerate some of them if we can. If we can, obviously, we will look into all that, but also continue to add to the pipeline. And that's what I tried to say when I said replenish our pipeline assets, add to the pipeline. Now adding the priority will be and will continue to be mid- to late stage. We do have a fairly significant discovery efforts at Supernus, which we used to have before the Sage acquisition, and then we augmented our capabilities with the platforms that came from Sage. And at the right moment, we will be disclosing at some point the fruits of those programs and the kind of molecules that we're working on and so forth. So most likely, again, we will be -- continue to focus on the mid- to late-stage assets from a pipeline perspective.

And David, as it pertains to SUBLOCADE, and I appreciate the question, we believe SUBLOCADE has a long durable runway in front of it and a very strong growth opportunity. From a manufacturing perspective, the only comment I'll make is a very complicated product to make as a sterile injectable -- sterile long-acting injectable in an aseptic manufacturing process. To this point, there have been no Paragraph IVs. And I think in part, that's due to the complexity associated with manufacturing SUBLOCADE. We have 12 Orange Book-listed patents that go from 2031 out to 2038. And we also have applied for and are pursuing additional patents anchored most commonly to the new label that we received in February of 2025 that if granted, would take IP out to 2042 to 2044. So we're very confident in both the growth profile of SUBLOCADE and the durability of the runway.

One moment for our next question, and that will come from the line of Dennis Ding with Jefferies.

I have 2. So number one, talk about the $125 million in annual synergies and where exactly that's coming from? And from my experience from covering Indivior, that tells me the number is very conservative. So I'm wondering if we should expect Indivior's OUS business to be further site down as another source of upside on EBITDA. So that's question number one. And question number two is just I'm curious around your views around some of the competitive threats over the next few years, whether it's GLP-1s in OUD or perhaps even orexins into ADHD. And just any kind of comments on how to frame some of those readouts and the potential impact to the underlying business would be helpful.

Yes. I'll take first the question on synergies. As I mentioned earlier, naturally, when you have 2 organizations coming together, there will be natural redundancies across -- we mentioned the G&A space clearly. And these are about synergies that come out of the combination. Clearly, Joe and his team have done a remarkable job for the last 12 months or more doing extremely as far as simplifying the organization, as Joe mentioned, making the operation as efficient as possible. So the synergies we are talking about is in the area of where we combine the 2 organizations and create additional opportunities that don't exist when the 2 companies are separate. So hopefully, that's a little bit more helpful as to the kind of synergies.

I think the only thing I'll add is that we mentioned in our prepared remarks that we've been very active in acquiring and integrating companies. And when we set a number, we guarantee we'll get to that number, and we've done that in the past.