Why Supernus Pharmaceuticals Inc. Is Having a Rather Non-Super Day

What happened

Shares of Supernus Pharmaceuticals (NASDAQ:SUPN), a developer of drugs that target diseases of the central nervous system, plunged as much as 19% during Tuesday’s trading session following the release of its third-quarter operating results after the closing bell on Monday. While the company’s third-quarter report looked stellar on paper, cost concerns and a possible guidance misunderstanding appears to be the root cause of today’s damage.

So what

For the quarter, Supernus reported $78.1 million in net product and sales, representing a 40% increase from the prior-year period. Trokendi XR, a treatment for migraine and epilepsy, did most of the heavy lifting with a 48.4% increase in total prescriptions written, while Oxtellar XR delivered a 10.1% increase in prescriptions written during the third quarter. Total sales, which included $2 million in royalty revenue and $0.3 million in licensing revenue, were $80.4 million.

An investor pressing the quartery report tab on a digital screen.
Image source: Getty Images.

With regard to the bottom line, the company recorded operating income of $22.3 million, which represents a 13% year-over-year increase. In terms of adjusted earnings per share (EPS), the company generated $0.29 per share, which was down from the $1.18 in EPS reported last year. It should be noted that a valuation allowance was responsible for the bulk of last year’s third-quarter profits.

Comparably, Supernus’ total sales were $1.7 million ahead of expectations, and its adjusted EPS came in $0.02 higher than forecast. So what’s wrong?

The first issue appears to be the rapid increase in operating expenses, which, as noted above, led to just a 13% increase in operating income despite a 40% jump in sales. Research and development expenses jumped to $13 million from $7.9 million in the year-ago period, while selling, general, and administrative expenses soared to $40.8 million from $25.7 million. There’s apparent concern that the company’s bottom line could suffer as the company expands its salesforce…