~~Table of Contents~~Business Combinations and Contingent Consideration

The Company completed the USWM Acquisition on June 9, 2020. Refer to Note 2 for discussion regarding the accounting policy for business combinations and contingent consideration and to Note 3 for discussion regarding the USWM Acquisition.

Research and Development Expenses and Related Accrued Research and Development Expenses

Research and development expenditures are expensed as incurred. We estimate preclinical and clinical trial expenses based on services performed pursuant to contracts with research institutions, clinical investigators, clinical research organizations (CROs) and other service providers that conduct activities on the Company’s behalf. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust our accrued expenses or our deferred advance payments accordingly. For a complete description of our research and development expense, preclinical trial, and clinical trial accrual policies, see Part I, Item 1, Financial Statements, Note 2, Summary of Significant Accounting Policies—Research and Development Expense and Related Accrued Research and Development Expenses, in the Notes to Condensed Consolidated Financial Statements.

Preclinical and clinical trials are inherently complex and often involve multiple service providers. Because billing for services often lags by a month or several months, we are often required to estimate, and therefore accrue, a significant portion of the incurred expenses. This process involves reviewing open contracts and communicating with our subject matter expert personnel, as well as with the appropriate service provider personnel, to identify services that have been performed on our behalf but for which no invoice has been received. This includes services provided by CROs, as well as services provided by clinical

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investigators and other service providers. We accrue the cost for unbilled services performed, whether partially or fully completed.

Payments to service providers can either be based on hourly rates for service, or based on achievement of performance driven milestones. We work with each service provider to obtain an estimate for services provided but are unbilled as of the end of the calendar quarter, including estimates for payments to site investigators. When accruing clinical trial expenses, we estimate the time period over which services will be performed during the life of the entire clinical program, the total cost of the program, and the level of effort to be expended in each intervening period.

We work diligently to minimize, if not eliminate, estimates based solely on Company generated calculations by relying primarily on estimates provided by our vendors. If we and/or the service provider underestimates or overestimates the costs associated with a service at any given point in time, adjustments to research and development expenses would be necessary in the following periods. Historically, our estimated accrued clinical expenses have closely approximated the actual expenses incurred, with minimal adjustments to expense in the subsequent periods.

Results of Operations

Comparison of the Three and Six Months ended ~~March 31,~~June 30, 2020 and 2019

Revenues

Revenues consist primarily of net product sales of Trokendi XR and Oxtellar XR in the U.S., ~~and~~supplemented by royalty ~~and licensing~~ revenues from our collaborative licensing arrangements. The following table provides information regarding our revenues during the three and six month periods ~~indicated,~~ended June 30, 2020, (dollars in thousands):

Three Months ended
March 31, Change
2020 2019 Amount Percent
Net product sales
Trokendi XR $ 68,551 $ 63,693 $ 4,858 8%
Oxtellar XR 23,939 19,406 4,533 23%
Total net product sales $ 92,490 $ 83,099 $ 9,391 11%
Royalty revenues 2,486 2,375 111 5%
Total revenues $ 94,976 $ 85,474 $ 9,502 11%


	Three Months ended June 30,						Change					Six Months ended June 30,			Change
	2020		2019		Amount		Percent	2020		2019		Dollar		Percent
Net product sales
Trokendi XR	$	89,674	$	78,964	$	10,710	14%	$	158,225	$	142,657	$	15,568	11%
Oxtellar XR	23,680		23,394		286		1%	47,619		42,800		4,819		11%
APOKYN	8,600		—		8,600		100%	8,600		—		8,600		100%
XADAGO	801		—		801		100%	801		—		801		100%
MYOBLOC	1,229		—		1,229		100%	1,229		—		1,229		100%
Total net product sales	$	123,984	$	102,358	$	21,626	21%	$	216,474	$	185,457	$	31,017	17%
Royalty revenues	2,745		2,337		408		17%	5,231		4,712		519		11%
Total revenues	$	126,729	$	104,695	$	22,034	21%	$	221,705	$	190,169	$	31,536	17%

Basis for Net ~~product sales~~Product Sales

Net product sales are computed as gross revenue generated from our product shipments to our customers, ~~which are~~ primarily pharmaceutical wholesalers, specialty pharmacies, and distributors, less various forms of variable consideration, including: estimated liability

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for rebates; estimated liability for ~~future~~ product returns; and estimated allowance for discounts. These are collectively considered "sales deductions."

Total Net Product Sales

The increase in net product sales for the three months ended ~~March 31,~~June 30, 2020, as compared to the prior year, is primarily due to the favorable impact of the 8% price increase for Trokendi XR and Oxtellar XR taken in January 1, 2020, favorable unit prescription growth for Oxtellar XR, and favorable changes in sales deductions for Trokendi XR. In addition, for both Trokendi XR and Oxtellar XR, we have seen a shift in prescription mix from 30-count prescriptions to 90-count prescriptions. The Company believes this has been an effect of the COVID-19 pandemic, primarily due to patients have reduced the frequency of office visits with physicians. This shift towards 90-count prescriptions has caused our net product sales growth to outpace the

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growth in prescriptions. Finally, the Company completed the USWM Acquisition on June 9, 2020. Accordingly, we recognized $10.6 million, collectively, for the three acquired products for the period June 9, 2020 through June 30, 2020.

The increase in net product sales for the six months ended June 30, 2020, as compared to the prior year, is primarily due to the aforementioned favorable impact of the January 2020 price increase, the newly acquired products, coupled with prescription unit growth for Oxtellar XR. In addition, the adverse impact of the pipeline inventory reduction in ~~2019. These effects were partially offset by unfavorable changes~~the first quarter of 2019 contributed to the increase in net product sales ~~deductions.~~

for the six months ended June 30, 2020. In the fourth quarter of 2018, wholesalers, distributors and pharmacies increased their inventory holdings, as compared to the prevailing inventory levels in the preceding quarter. This action was effectively reversed in the first quarter of 2019. As a result, both gross sales and net product sales in the first quarter of 2019 were adversely impacted, ~~with the impact on~~reducing net product sales ofby approximately $10 million.

~~As regards to~~These favorable effects were partially offset by deteriorating sales deductions ~~patient~~on a year over year comparative basis. Patient reimbursement challenges and increased contracting pressure from managed care providers resulted in higher patient program participation rates, increased per patient costs for our co-pay programs, and higher per patient rebate payments to managed care providers. As a result, this increased the provision for sales deductions, ~~and reduced~~thereby reducing net product ~~sales.~~sales for the six months ended June 30, 2020 as compared to the prior year.

Trokendi XR

Trokendi XR net product sales increased by ~~$4.9~~$10.7 million, or 8%14%, for the three months ended ~~March 31,~~June 30, 2020, as compared to the same period in 2019. This increase was driven by the aforementioned favorable impact of an 8% price increase in ~~2020. The adverse impact in~~January 2020 coupled with reduced sales deductions ~~year over year~~resultant from co-pay program enhancements. While prescription volume was ~~essentially offset~~down sequentially for the three months ended June 30, 2020 as compared to the same period in 2019, volume measured in units (i.e., number of capsules) was relatively flat due to the aforementioned shift to 90-count prescriptions.

For the six months ended June 30, 2020 Trokendi XR net product sales increased by $15.6 million, or 11%, as compared to the same period in 2019. This increases was driven by the ~~negative~~favorable impact of the aforementioned price increase in January 2020, the growth in prescription volume, and coupled with the impact in the first quarter of 2019 of the ~~aforementioned channel~~pipeline inventory reduction. These favorable effects were partially offset by an increase in sales deductions. In the first quarter of 2020, product returns for discontinued Trokendi XR blister pack configurations exceeded our forecast, resulting in an increase in the provision for returns.

Oxtellar XR

Oxtellar XR net product sales increased by ~~$4.5~~$0.3 million, or ~~23%~~1%, and $4.8 million, or 11%, for the three and six months ended ~~March 31,~~June 30, 2020, as compared to the same ~~period~~periods in 2019. The increase was primarily attributable to growth in prescription unit volume and the favorable impact ~~from~~of the aforementioned January 2020 price increase of 8%. These ~~effects~~favorable impacts were partially offset by increased ~~net product~~ sales deductions due to higher per patient payments under both Medicaid and managed care programs, as well as higher co-payment program expenditures.

Sales ~~deductions~~Deductions and ~~related accruals~~Related Accruals

The Company records accrued product rebates and accrued product returns as current liabilities in Accrued product returns and rebates, ~~as current liabilities~~ on our condensed consolidated balance sheets. We record sales discounts as a valuation allowance against Accounts receivable on the condensed consolidated balance sheets. ~~These outstanding~~Both amounts are generally affected by changes in ~~the level of~~ gross product sales, changes in the provision for net product sales deductions, and the timing of payments/credits.

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The following table provides a summary of ~~activities~~activity with respect to sales deductions and related accruals during the periods indicated (dollars in thousands):


		Accrued Product Returns and Rebates											Accrued Product Returns and Rebates
		Product Rebates		Product Returns		Allowance for Sales Discounts		Total			Product Rebates		Product Returns		Allowance for Sales Discounts		Total
Balance at December 31, 2019	Balance at December 31, 2019	$	88,811	$	18,818	$	11,013	$	118,642	Balance at December 31, 2019	$	88,811	$	18,818	$	11,013	$	118,642
USWM Acquisition liabilities assumed										USWM Acquisition liabilities assumed	5,112		3,072		293		8,477
Provision	Provision									Provision
Provision for sales in current year	Provision for sales in current year	87,114		2,681		15,524		105,319		Provision for sales in current year	168,506		5,463		32,449		206,418
Adjustments relating to prior year sales	Adjustments relating to prior year sales	3,716		7,951		147		11,814		Adjustments relating to prior year sales	3,633		7,468		147		11,248
Total provision	Total provision	$	90,830	$	10,632	$	15,671	$	117,133	Total provision	$	172,139	$	12,931	$	32,596	$	217,666
Less: Actual payments/credits	Less: Actual payments/credits	(85,029)		(4,609)		(16,398)		(106,036)		Less: Actual payments/credits	(147,727)		(9,051)		(31,535)		(188,313)
Balance at March 31, 2020		$	94,612	$	24,841	$	10,286	$	129,739
Balance at June 30, 2020										Balance at June 30, 2020	$	118,335	$	25,770	$	12,367	$	156,472

Table of ~~$10 million and $15 million for preferred equity shares, representing approximately 13% ownership in Navitor. The Company will also bear all development costs incurred up to a maximum of $50 million.~~Contents

On April 28, 2020, the Company entered into a definitive Sales and Purchase Agreement with US WorldMeds Partners, LLC, pursuant to which the Company will purchase all of the outstanding equity of USWM Enterprises, LLC (USWM Enterprises), comprising the entire issued share capital of USWM Enterprises, for total consideration of $530 million, consisting of an upfront cash payment of $300 million and additional cash payments of up to $230 million upon the achievement of certain commercial milestones. With the acquisition, the Company will add three established, marketed products and a product candidate in late-stage development to its CNS portfolio. The transaction is expected to close in the second quarter of 2020, subject to certain conditions, including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and other customary conditions.

Off-Balance Sheet Arrangements

WeOther than the unconsolidated variable interest entities discussed in Part I, Item 1 of this Quarterly Report on Form 10-Q, we do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial partnerships, such entities often referred to as structured finance or special purpose entities. These would have been established for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes.

In addition, we do not engage in trading activities involving non-exchange traded contracts.

Recently Issued Accounting Pronouncements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to certain risks that may affect our results of operations, cash flows and fair value of assets and liabilities, including market risk, interest rate risk, foreign exchange risk, credit risk and liquidity risk. The primary objective of our investment activities is to preserve our capital so as to be able 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. We do not enter into financial instruments for trading or speculative purposes.

Our exposure to market risk is confined to investments in cash, cash equivalents, marketable securities and long term marketable securities. As of ~~March 31,~~June 30, 2020 and December 31, 2019, we had unrestricted cash, cash equivalents, marketable securities and long term marketable securities of ~~$935.6~~$733.5 million and $938.8 million, respectively. Our cash and cash equivalents consist primarily of cash held at banks, certificates of deposit and money market funds, all of which have short-term maturities.

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Our marketable securities consist of investments in commercial paper, investment grade corporate debt securities, ~~and~~investment in U.S. government agency and municipal debt securities, all of which are reported at fair value. The fair value of our marketable securities ~~is subject to change~~can be volatile as a result of potential changes in market interest rates and liquidity conditions in the financial markets, including volatility in trading prices resulting from the impact of the COVID-19 pandemic.

In addition, we generally hold our marketable securities to maturity ~~within~~in four ~~years.~~years or less. 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 a significant impact on the realizable value of our investments.

In connection with the 2023 Notes, we have separately entered into Convertible Note Hedge Transactions and Warrant Transactions to reduce the potential dilution of the Company’s common stock upon conversion of the 2023 Notes. ~~Issuance of warrants was intended~~Warrants were issued to ~~partially offset~~mitigate the cost to purchase the Convertible Note Hedge Transactions.

We do not have any currency or other derivative financial instruments, other than the outstanding warrants to purchase common stock and the convertible note hedges.

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, marketable securities and accounts receivable. The counterparties are various corporations, governmental institutions and financial institutions of high credit standing. Substantially all of the Company's cash, cash equivalents and marketable securities are maintained in U.S. government agency debt, and debt of ~~well-known,~~ investment grade corporations. Deposits held with banks may exceed the amount of governmental insurance provided on such deposits. Generally,

these deposits may be redeemed upon demand and, therefore, these bear minimal default risk.

Credit risk from our accounts receivable ~~is related to~~arises from our product sales. Three wholesale pharmaceutical distributors, AmerisourceBergen Drug Corporation, Cardinal Health, Inc. and McKesson Corporation, each individually accounted for more than 20% of our total ~~net~~gross product sales and accounts receivable, ~~respectively.~~respectively for the six months ended June 30, 2020. They also collectively accounted for more than 90% of our total net product sales and accounts receivable.

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We monitor the financial performance and creditworthiness of our customers so that we can properly assess and respond to changes in their credit profile. Weakness in economic conditions in the U.S., including the impact of the COVID-19 pandemic, can result in extended collection periods. We continue to monitor these conditions, including volatility of the financial markets, and continually assess their possible impact on our business. To date, we have not experienced any significant losses with respect to the collection of our accounts receivable.

We may contract with CROs and investigational sites globally. Currently, we have only one ongoing trial, for SPN-817, 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 ~~March 31,~~June 30, 2020 and December 31, 2019, substantially all of our liabilities were ~~denominated in the~~ U.S. ~~dollar.~~dollar denominated.

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 ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019 had a significant impact on our condensed consolidated results of operations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures over financial reporting, as defined in Rule 13a-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. Moreover, such information is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure.

As discussed in Note 3 in the Notes to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, the Company completed its acquisition of USWM Enterprises, LLC, a privately-held biopharmaceutical company (USWM Acquisition). Accordingly, pursuant to the Securities and Exchange Commission's general guidance that an assessment of a recently acquired business may be omitted from the scope of an assessment in the year of acquisition, the scope of our assessment of the effectiveness of disclosure controls and procedures does not include internal control over financial reporting related to the recent acquisition. Since the date of acquisition, financial results of the acquired business have been included in the Company's condensed consolidated financial statements. The acquired business contributed 36.7% of the total assets as of June 30, 2020 and 4.8% and 3.1% of total revenues and net earnings, respectively, for the six months ended June 30, 2020.

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures over financial reporting as of ~~March 31,~~June 30, 2020, 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 were effective as of ~~March 31,~~June 30, 2020.

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Changes in Internal Control over Financial Reporting

~~There were~~

Other than the implementation of controls related to the accounting of the USWM Acquisition, and the related financial statement reporting, there has been no ~~changes~~change in our internal control over financial reporting ~~that occurred~~ during the most recent fiscal quarter ~~ended March 31, 2020~~ that ~~have~~has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting. We are currently in the process of evaluating MDD US Enterprises, LLC’s (formerly USWM Enterprises, LLC) internal control over financial reporting as part of the ongoing integration of the acquired business. Any changes resulting from this evaluation and ongoing integration activities that materially affect or are reasonably likely to materially affect our internal control over financial ~~reporting.~~reporting will be disclosed as required by applicable law.

As a result of the COVID-19 pandemic, certain employees of the Company began working remotely in March ~~2020, but these~~2020. These changes to the working environment have not had a material impact on our internal controls over financial reporting. We are continually monitoring and assessing the COVID-19 situation for possible impact on our internal controls, in order to assess and to minimize the pandemic's impact on their design and operating effectiveness.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

From time to time and in the ordinary course of business, we may be subject to various claims, charges and litigation. We may be required to file infringement claims against third parties for the infringement of our patents.

~~On May 14, 2020, the~~The Company received a Paragraph IV Notice Letter from generic drug makers Apotex Inc. and Apotex ~~Corp advising Supernus~~Corp. (collectively “Apotex”) dated May 13, 2020 directed to nine of its Oxtellar XR Orange Book patents. Supernus’s U.S. Patent Nos. 7,722,898, 7,910,131, 8,617,600, 8,821,930, 9,119,791, 9,351,975, 9,370,525, 9,855,278, and 10,220,042 generally cover once-a-day oxcarbazepine formulation and methods of treating seizures using those formulations. The FDA Orange Book lists all nine of our Oxtellar XR patents as expiring on April 13, 2027.

On June 26, 2020, the Company filed a lawsuit against Apotex alleging infringement of the ~~submission~~Company’s nine patents. The Complaint—filed in the U.S. District Court for the District of New Jersey—alleges, inter alia, that Apotex infringed our Oxtellar XR patents by ~~Apotex of~~submitting to the FDA an Abbreviated New Drug Application (ANDA), seeking to market a generic version of Oxtellar XR prior to the ~~U.S. Food and Drug Administration (FDA) seeking approval~~expiration of its patents. Filing its June 26, 2020 Complaint within 45 days of receiving Apotex’s Paragraph IV certification notice entitles Supernus to an automatic stay, preventing the FDA from approving Apotex’s ANDA for ~~oxcarbazepine extended-release tablets. The Company is currently reviewing~~30 months from the ~~details~~date of the Company's receipt of the Paragraph IV Notice Letter. Apotex has not responded to Supernus’s Complaint as of the date of this ~~Notice Letter and intends to vigorously enforce its intellectual property rights relating to Oxtellar XR.~~filing.

Item 1A. Risk Factors

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, 2019. These risks may result in material harm to our business and our financial condition and results of operations. If a material, adverse event were to occur, the market price of our common stock may decline and you could lose part or all of your investment.

The risks described below reflect substantive changes from, or additions to, the risks described in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~

~~The Company’s financial condition~~2019 and ~~results of operations~~our Quarterly Report on Form 10-Q for ~~fiscal year 2020 and beyond may be materially and adversely affected by~~ the ~~ongoing COVID-19 outbreak.~~quarter ended March 31, 2020.

~~The Company is currently following~~If other products including generics containing apomorphine hydrochloride for the ~~recommendations~~treatment of ~~local~~Parkinson’s Disease are approved and ~~federal health authorities to minimize exposure risk for its various stakeholders, including employees. The full extent of the impact of COVID-19 on~~are successfully commercialized, our business ~~and operating results will depend on future developments that are highly uncertain and cannot~~could be ~~accurately predicted, including new information that may emerge concerning COVID-19 and the actions required to contain COVID-19, or treat its impact, among others.~~materially harmed.

~~Although~~Third parties have and in the ~~Company currently continues~~future may receive approval to ~~have uninterrupted wholesale~~manufacture and ~~retail distribution~~market their own products, including generics, containing apomorphine hydrochloride or for the treatment of ~~its~~Parkinson’s Disease in the U.S. For example, Acorda Therapeutics, Inc. launched Inbrija, an inhalable form of levodopa in 2019. Additionally, the FDA approved Sunovion/Sumitomo Daniappon Pharma’s Kynmobi, a sublingual film formulation of apomorphine, in May 2020. The success of these products and ~~the Company does not anticipate a shortage~~entry of ~~its commercial~~new products due to COVID-19 at this time, disruptions may occur for the Company’s customers or suppliers that may materially affect the Company’s ability to obtain supplies or components for its products, manufacture additional product, or deliver inventory in a timely manner. This would result in lost sales, additional costs, penalties, or damage to the Company’s reputation.

Workforce limitations and travel restrictions resulting from related government actions taken to contain spread of the disease may impact many aspects of our business. If a significant percentage of our workforce is unable to work, including because of illness or travel or government restrictions in connection with the COVID-19 outbreak, our operations may be negatively impacted. As a result of government restrictions and social distancing guidelines in the United States, there is an increased reliance on working from home for our employees. For example, the Company’s sales force is currently functioning largely utilizing digital engagement tools, tactics and virtual detailing, which may be less effective than the Company’s ordinary course sales and marketing programs. In addition, patients may not be able to get their prescriptions, or visit their physicians which in turn could adversely impact the ~~prescription volumes~~sales of prescriptions for APOKYN.

We are subject to uncertainty relating to payment or managed care reimbursement policies which, if not favorable for our products or product candidates, could hinder or prevent our commercial success.

Our business is operating in an ever more challenging environment, with significant economic pressures exerted by federal and state governments, insurers and private payors on the pricing of our ~~marketed~~ products, ~~Oxtellar XR~~affecting our ability to obtain and/or maintain satisfactory rates of reimbursement for our products. The U.S. federal and ~~Trokendi XR. Similarly, investigative sites, subjects~~state governments and private payors are under intense pressure to control healthcare spending even more tightly than in ~~clinical trials,~~the past. These pressures are further compounded by consolidation among distributors, retailers, private insurers, managed care organizations and ~~vendors that include~~other private payors, resulting in an increase in their negotiating power, particularly with respect to our ~~contract research~~products. In addition, these pressures are intensified by intense, negative publicity about pricing for pharmaceuticals. These prices are sometimes characterized as excessive, leading to government investigations and legal proceedings regarding pharmaceutical pricing practices.

Our ability, or our collaborators' ability, to successfully commercialize our product and our product candidates, including SPN-812, will depend in part on the coverage and reimbursement levels set by governmental authorities, private health insurers, managed care organizations ~~may be~~and other third-party payors.

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~~subject to the same workforce limitations and travel restrictions.~~

As a ~~result, we may experience delays~~threshold for coverage and reimbursement, third-party payors require that drug products be approved for marketing by the FDA. Third-party payors are increasingly challenging the effectiveness of and prices charged for medical products and services. Government authorities and third-party payors have attempted to control costs, in some instances, by limiting coverage, by limiting the amount of reimbursement for particular medications, or ~~disruptions in our preclinical studies, clinical studies, and non-clinical experiments due to unforeseen circumstances including but not limited to, interruption~~by encouraging the use of ~~key clinical trial activities, such as clinical trial site data monitoring, and interruption of clinical trial subject visits and study procedures.~~lower-cost generic products.

~~The Company may also experience other unknown impacts from COVID-19 that~~We cannot be ~~predicted. While there has been no specific notice of delay from the federal authorities, potential interruptions, delay or changes to the operations~~sure that reimbursement will be available for any of the ~~U.S. Food~~products that we develop and, ~~Drug Administration may impact~~if reimbursement is available, the approval of SPN-812. We may also experience delays in receiving supplies of our product candidates from our contract manufacturing organizations due to staffing shortages, production slowdowns, stoppages, disruptions in delivery systems.

~~The Company may also require an increased~~ level of ~~working capital if it experiences extended billing and collection cycles~~reimbursement. Moreover, that level of reimbursement may change over time, as a result of ~~displaced employees~~requests from payors for higher levels of fees. Reduced or partial payment, or reduced reimbursement coverage, could make our products or product candidates, including Oxtellar XR, Trokendi XR and APOKYN, less attractive to patients and prescribing physicians. We also may be required to sell our products or product candidates at a significant discount, which would adversely affect our ability to realize an appropriate return on our investment in our products or product candidates or to maintain profitability.

We expect that private insurers and managed care organizations will consider the ~~Company, payors, revenue cycle management contractors,~~efficacy, cost effectiveness and safety of our products or ~~otherwise.~~product candidates, including Oxtellar XR, Trokendi XR and APOKYN, in determining whether to approve reimbursement for such products or product candidates, and to what extent they will provide reimbursement. Moreover, they will consider the efficacy and cost effectiveness of comparable or competitive products, including generic products, in making reimbursement decisions for our products. Because each third-party payor individually approves payment or reimbursement, obtaining these approvals can be a time consuming and expensive process, requiring us to provide scientific or clinical support for the use of each of our products or product candidates separately to each third-party payor. In some cases, it could take months or years before a particular private insurer or managed care organization reviews a particular product. Prior to that time, reimbursement may be negligible. We may ultimately be unsuccessful in obtaining coverage. In addition, ~~the disease outbreak could result in a widespread health crisis~~our competitors may have more extensive existing business relationships with third-party payors that could adversely ~~affect~~impact the ~~U.S. economy~~coverage for our products.

Our business would be materially and ~~financial markets, resulting in an economic downturn that could affect customers’ demand~~adversely affected if we do not receive reimbursement for our products or product candidates from private insurers in a timely fashion or on a satisfactory basis. Our products and product candidates may not be considered cost-effective, and coverage and reimbursement may not be available or economically sufficient to allow us to sell our ~~ability to raise additional capital~~products or ~~obtain financing~~product candidates on ~~favorable terms.~~a profitable basis.

~~The Company may experience delays in receipt of financial information,~~Our business would also be adversely affected if private insurers, managed care organizations, the Medicare program, or other reimbursing bodies or payors limit the indications for which ~~may preclude timely reporting of financial results to investors and to the U.S. Securities and Exchange Commission.~~our products or product candidates will be reimbursed.

~~Accordingly, disruptions~~Moreover, increasing efforts by governmental and third-party payors in the U.S. to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products. As a result, they may not cover or provide adequate reimbursement for our products or product candidates.

There has been increasing legislative and enforcement interest in the U.S. with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed federal and state legislative initiatives designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under the Medicare program, to review the relationship between pricing and manufacturer patient programs, and to reform government reimbursement methodologies for drugs. We expect to experience pricing pressures in connection with the sale of any of our products and product candidates due to the ~~Company’s~~trend toward managed healthcare, the increasing influence of health maintenance organizations, additional cost containment initiatives and additional legislative changes.

In some foreign jurisdictions, particularly Canada and Europe, the pricing of prescription pharmaceuticals is subject to strict governmental control. In these countries, pricing negotiations with governmental authorities can take 6 to 12 months, or longer, after the receipt of regulatory approval and product launch. To obtain favorable reimbursement for the indications sought, or to obtain pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our products or product candidates, if approved, to other available therapies. If reimbursement for our products or product candidates is unavailable in any country in which reimbursement is sought, or is limited in scope or amount, or if pricing is set at unsatisfactory levels, our business ascould be materially harmed, and could be unprofitable.

In addition, many managed care organizations negotiate the reimbursement price of products through the use of formularies, which establish reimbursement levels. Exclusion of a ~~result~~product from a formulary can lead to sharply reduced usage in the managed care organization's patient population, because reimbursement is limited, and/or negligible. If our products or product candidates are not included within an adequate number of ~~COVID-19~~managed care formularies, or reimbursed at adequate levels, or

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if those policies increasingly favor generic products, our market share and gross margins could ~~result in~~be negatively affected. This would have a material adverse effect on our overall business and financial condition.

We expect these challenges to continue and to potentially intensify in 2020 and following years, as political pressures mount, and healthcare payors, including government-controlled health authorities, insurance companies and managed care organizations, step up initiatives to reduce the ~~Company’s~~overall cost of healthcare, restrict access to higher-priced new medicines, increase the use of generic products and impose overall price cuts. Such pressures could have a material adverse impact on our business, financial condition, and results of operations, as well as on our reputation.

We depend on wholesalers, distributors and specialty pharmacies for retail distribution of our products. If we lose any of our significant wholesalers, distributors or specialty pharmacies, our business could be harmed.

The majority of the sales of Oxtellar XR, Trokendi XR and XADAGO are made to wholesalers and distributors who, in turn, sell our products to pharmacies, hospitals and other customers. For the year ended December 31, 2019, three wholesale pharmaceutical distributors, AmerisourceBergen Drug Corporation, Cardinal Health, Inc. and McKesson Corporation, each individually accounted for more than 30% of our total revenue from sales of Oxtellar XR and Trokendi XR in 2019, and collectively accounted for more than 90% of our total revenue from sales of these products in 2019.

The majority of the sales of APOKYN and MYOBLOC are made to distributors, including McKesson Corporation and Cardinal Health, Inc., and to specialty pharmacies. The loss of any of these wholesale pharmaceutical distributors or wholesale and specialty pharmacy accounts, or a material reduction in their purchases, could have a material adverse effect on our business, results of operations, financial condition, and ~~prospects~~prospects. In addition, these wholesale customers comprise a significant part of the distribution network for pharmaceutical products in the ~~near-term~~U.S.. This distribution network has undergone, and ~~beyond 2020.~~may continue to undergo, significant consolidation marked by mergers and acquisitions. As a result, a small number of large wholesale distributors control a significant share of the market.

~~While the Company~~Consolidation of drug wholesalers has ~~developed a comprehensive COVID-19 contingency plan designed~~increased. This may result in increased competitive and pricing pressures on pharmaceutical products. We cannot assure you that we can manage these pricing pressures, or that wholesaler purchases will not fluctuate unexpectedly from period to ~~potentially address the challenges and risks presented by this pandemic, there~~period.

Sales of our products can be ~~no assurance~~greatly affected by the inventory levels that our respective wholesalers and distributors carry. We monitor wholesaler and distributor inventory of our products, using a combination of methods. Pursuant to distribution service agreements with our three largest wholesale customers, we receive product inventory reports. For other wholesalers where we do not receive inventory reports, our estimates of wholesaler inventories may differ significantly from actual inventory levels. Significant differences between actual and estimated inventory levels may result in excessive stocking, resulting in our holding substantial quantities of unsold inventory, or, alternatively, inadequate supplies of product in the distribution channels. This could result in our inability to support sales at the retail level. These changes may cause our revenues to fluctuate significantly from quarter to quarter, and, in some cases, may cause our operating results for a particular quarter to be below our expectations, the expectations of securities analysts, and/or the expectations of investors.

At times, wholesalers and distributors may increase inventory levels in response to anticipated price increases, resulting in both greater wholesaler purchases prior to the anticipated price increase and in reduced wholesaler purchases in later quarters. Accordingly, this may cause substantial fluctuations in our results of operations from period to period. If our financial results are below expectations for a particular period, the market price of our common stock may drop significantly.

We may not be able to effectively market and sell our product candidates, if approved, in the U.S.

We plan on building or expanding our sales and marketing capabilities in the U.S. to commercialize our product candidates, if approved. This will require investing significant amounts of financial and management resources. If we are unable to establish and maintain adequate sales and marketing capabilities for our product candidates, or do so in a timely manner, we may not be able to generate sufficient product revenues from our product candidates to be profitable. The cost of establishing and maintaining such ~~plan will~~marketing and sales capabilities may not be ~~effective~~economically justifiable, in ~~mitigating the effects~~light of the ~~COVID-19 pandemic~~revenues generated by any of our product candidates.

In addition, we intend to complete the development of an infusion-pump delivery system containing apomorphine and to submit the NDA to the FDA. We are investing significant amounts of resources into the development of the infusion-pump delivery system. If we are unable to gain FDA approval for the infusion-pump delivery system, or are unable to successfully commercialize the infusion-pump delivery system, we may not be able to generate revenue from the infusion-pump delivery

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system to justify the cost of invested company resources. In addition, as discussed further below, failure to gain FDA approval could have an adverse effect on the infusion-pump product’s commercial potential, or could require additional costly studies.

Final marketing approval of any of our product candidates, or approval of additional indications for existing products by the FDA or by other regulatory authorities may be delayed, limited, or denied, any of which would adversely affect our ability to generate operating revenues.

We are dependent on obtaining regulatory approval of our product candidates and approval for additional indications for existing products. Our business depends on the successful clinical development; i.e., successful completion of clinical trials and completion of requisite manufacturing information. We are not permitted to market any of our product candidates in the U.S. until we receive approval of an NDA from the FDA, or to market in any foreign jurisdiction, until we receive approval from the requisite authority. Satisfaction of regulatory requirements typically takes many years, is dependent upon the type, complexity and novelty of the product, and requires the expenditure of substantial resources. We cannot predict whether or when we will obtain regulatory approval to commercialize our product candidates. We cannot, therefore, predict the timing of any future revenues from these product candidates.

The FDA has substantial discretion in the drug approval process, including the ability to delay, limit or deny approval of a product candidate or deny a prior approval supplement⁽¹⁾ for many reasons. For example, the FDA:

•Could reject or delay the marketing application for an NCE;

•Could determine that we cannot rely on Section 505(b)(2) for any approval of our product candidates;

•Could determine that the information provided by us was inadequate, contained clinical deficiencies, or otherwise failed to demonstrate the safety and effectiveness of any of our product candidates for a specific indication;

•May not find the data from bioequivalence studies and/or clinical trials sufficient to support the submission of an NDA, or to obtain marketing approval in the U.S.. They may find the clinical and other benefits of our product candidates do not outweigh their safety risks;

•May disagree with our trial design or our interpretation of data from preclinical studies, bioequivalence studies and/or clinical trials, or may change the requirements for approval even after they have reviewed and commented on the design for our trials; the outcome and measurement scale used in the trials; or the clinical protocols whether with or without a special protocol assessment process;

•May determine that we have identified the wrong reference listed drug or drugs, or that approval of our Section 505(b)(2) application of our product candidate is blocked by patent or non-patent exclusivity of the reference listed drug or drugs;

•May identify deficiencies in the manufacturing processes or facilities of third-party manufacturers with which we enter into agreements for the supply of raw materials, including the active pharmaceutical ingredient (API) or formulated product used in our product candidates, wherein those deficiencies may result in interruption in the ability to supply product;

•May approve our product candidates for fewer or more limited indications than we request, or may grant approval contingent on the performance of costly post-approval clinical trials;

•May change their approval policies or adopt new regulations;

•May not approve the labeling claims that we believe are necessary or desirable for the successful commercialization of our product candidates, or may approve them with warnings and precautions that could limit the acceptance of our product candidates and their commercial success; or

•May not approve the addition of new indications to the label of our existing products.

______________________

⁽¹⁾Changes that have a substantial potential to have an adverse effect on product quality, identity strength, purity or potency (i.e., major changes) require submission of a "prior approval supplement" and approval by the FDA prior to distribution of the drug product made using the change.

Notwithstanding the approval of many products by the FDA pursuant to Sections 505(b)(1) and 505(b)(2), over the last few years, some pharmaceutical companies and others have objected to the FDA's interpretation of Section 505(b)(2). If the FDA changes its interpretation of Section 505(b)(2), or if the FDA's interpretation is successfully challenged in court, this could delay or even prevent the FDA from approving any Section 505(b)(2) application that we submit. Any failure to obtain regulatory approval of our product candidates would eliminate our ability to generate revenues for that candidate. Any failure to obtain such approval for all of the indications and labeling claims we deem desirable could reduce our potential revenues.

The process of obtaining regulatory clearances or approvals to market a medical device can be costly and time consuming. We may not be able to obtain these clearances or approvals on a timely basis, if at all. The FDA exercises significant discretion over the regulation of combination products, including drug and device components in a combination product.

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The FDA could in the future require additional regulation under the medical device provisions of the Federal Food, Drug and Cosmetic Act, or FDCA. We must comply with the Quality Systems Regulation, or QSR, which sets forth the FDA’s current good manufacturing practice, (cGMP), requirements for medical devices, and other applicable government regulations and corresponding foreign standards for drug cGMPs. If we fail to comply with these regulations, it could have a material adverse effect on our business and financial condition.

We depend on collaborators to work with us to develop, manufacture and commercialize their and our products and product candidates.

We have a license agreement with United Therapeutics Corporation to use one of our proprietary technologies in an oral formulation of treprostinil diethanolamine, or treprostinil, for the treatment of pulmonary arterial hypertension, and for other indications. United Therapeutics Corporation launched Orenitram (treprostinil) in 2014, which triggered payment of a milestone payment to us of $2.0 million. In the third quarter of 2014, we received a cash payment of $30.0 million from HealthCare Royalty Partners III, L.P.'s (HC Royalty), for the purchase of certain of our rights under our license agreement with United Therapeutics Corporation related to the commercialization of Orenitram. Ownership of the royalty rights will return to us if/when a certain cumulative threshold payment to HC Royalty is reached.

We are entitled to receive milestones and royalties for use of this formulation in indications other than arterial hypertension. If we materially breach any of our obligations under the license agreement, we could lose the right to receive any future royalty payments thereunder, which could be financially significant to us.

We have a Distribution, Development, Commercialization and Supply Agreement (Supply Agreement) with Britannia Pharmaceuticals Limited (Britannia) that grants us certain intellectual property and product rights in relation to APOKYN, including the right to use and market APOKYN in the United States. Additionally, the Supply Agreement grants Britannia certain intellectual property and product rights in relation to the APOKYN, including the right to use and market APOKYN in the rest of the world, excluding the United States. Per the Agreement, Britannia has an obligation to supply us with the APOKYN for our marketing and sale.

Britannia may terminate its obligation to supply APOKYN for cause, or at any time, by giving at least twenty-four (24) months’ written notice. The Supply Agreement does not provide for technology transfer assistance from Britannia to any new suppliers we might engage following termination. In addition, the Supply Agreement is silent in providing us with an explicit license grant to any intellectual property, or to access know-how necessary or useful for manufacturing APOKYN. If we materially breach the Supply Agreement, or Britannia chooses to terminate the Supply Agreement for convenience, we could lose the right and resources necessary for the manufacture of APOKYN, or could incur significant costs implementing technology transfer assistance.

We intend to rely on third-party collaborators to market and commercialize our products and product candidates outside the U.S.. We utilize strategic partners outside the U.S., where appropriate, to assist in the commercialization of our products and product candidates. We currently possess limited resources, and may not be successful in establishing collaborations or licensing arrangements on acceptable terms, if at all. We also face competition in our search for collaborators and licensing partners. By entering into strategic collaborations or similar arrangements, we rely on third parties to financially support their local operations, including support required for development, commercialization, sales, marketing and ~~consequently~~regulatory activities, as well as expertise in each of those subject areas.

Our future collaboration agreements may limit the areas of research and development that we may pursue, either alone or in collaboration with third parties. Much of the potential revenues from these future collaborations may consist of contingent payments, such as payments for achieving certain development milestones, and royalties payable on product sales. The milestones and royalty revenues that we may receive under these collaborations will depend upon our collaborators' ability to successfully develop, introduce, market and sell new products. Future collaboration partners may fail to develop or effectively commercialize products, product candidates or technologies because they, among other things, may:

•Change the focus of their development and commercialization efforts, or may have insufficient resources to effectively develop our product candidates;

•Pharmaceutical and biotechnology companies historically have re-evaluated their development and commercialization priorities following mergers and consolidations, which have been common in recent years. The ability of some of our product candidates to reach their potential could be limited if our future collaborators fail to apply sufficient development or commercialization efforts related to those product candidates;

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•Decide not to devote the necessary resources due to internal constraints, such as limited personnel with the requisite scientific expertise, limited cash resources, or in the belief that other internal drug development programs may have a higher likelihood of obtaining marketing approval, or may potentially generate a greater return on investment;

•Develop and commercialize, either alone or with others, drugs that are similar to or competitive with the product candidates that are the subject of their collaboration with us;

•Not have necessary and sufficient resources to develop the product candidate through clinical development, marketing approval and commercialization;

•Fail to comply with applicable regulatory requirements;

•Are unable to obtain the necessary marketing approvals; or

•Breach or terminate their arrangement with us.

If collaboration partners fail to develop or fail to effectively commercialize our products for any of these reasons, we may not be able to replace the collaboration partner with another partner to develop and commercialize the product under the terms of the collaboration, if at all. Further, even if we are able to replace the collaboration partner, we may not be able to do so on commercially favorable terms. As a result, the development and commercialization of the affected product or product candidate could be delayed, impaired, or terminated because we may not have sufficient financial resources or capabilities to continue development and commercialization of the product candidate on our own. Failure of our third-party collaborators to successfully market and commercialize our products or product candidates within and outside the U.S. could materially diminish our revenues and harm our results of operations.

Our products and product candidates may cause undesirable side effects or have other characteristics that limit their commercial potential, delay, or prevent their regulatory approval.

Undesirable side effects caused by any of our product candidates could cause us or regulatory authorities to interrupt, delay or halt development. This could result in the denial of regulatory approval by the FDA or other regulatory authorities, and result in potential product liability claims. Undesirable side effects caused by any of our products could cause regulatory authorities to temporarily or permanently halt product sales, which could have a material adverse ~~impact~~effect on our ~~anticipated revenue, earnings~~business.

Immediate release oxcarbazepine and ~~liquidity.~~topiramate products, which use the same APIs as Oxtellar XR and Trokendi XR, are known to cause various side effects, including but not limited to: dizziness; paresthesia; headaches and cognitive deficiencies such as memory loss and speech impediment; digestive problems; somnolence; double vision; gingival enlargement; nausea; weight gain; oral malformation birth defects; visual field defects; infants small for gestational age; and fatigue. The use of Oxtellar XR and Trokendi XR may cause similar side effects as compared to their reference products, or may cause additional or different side effects.

Products that were or are currently on the market and use the same API as our product candidates, including SPN-812, and SPN-817 (dietary supplements) were known to cause various side effects, including but not limited to: drowsiness; depression; hyperactivity; euphoria; extrapyramidal reactions; nausea; headache; diarrhea; vomiting; sleep difficulties; agitation; exacerbation of anxiety; sleepiness; mouth dryness; tachycardia; constipation and urinary difficulties. The labels for those products also included precautions and warnings about, among other things: tardive dyskinesia; neuroleptic malignant syndrome; elevation of prolactin levels; convulsive events in patients that are treated for or have a prior history of epilepsy; inhibition of hepatic metabolism of certain drugs; risk of suicide before antidepressant clinical improvement; need for monitoring patients with cardiac, hepatic or renal insufficiency; or patients at risk for angle-closure glaucoma. The use of SPN-812, and SPN-817 may cause similar side effects as compared to these reference products, or may cause additional or different side effects.

Botulinum toxin products, which use the same API as MYOBLOC, are known to cause various side effects due to spread of botulinum toxins from the area of injections. These may include: asthenia; generalized muscle weakness; diplopia; blurred vision; ptosis; dysphagia; dysphonia; dysarthria; urinary incontinence; and breathing difficulties. These symptoms have been reported hours to weeks after injection. Swallowing and breathing difficulties can be life threatening. There have been reports of death. The use of MYOBLOC may cause similar side effects as compared to its reference products, or may cause additional or different side effects.

If our products cause side effects, or if any of our product candidates receive marketing approval, and we or others later identify undesirable side effects caused by our products or product candidates, a number of potentially significant negative consequences could result, including:

•Regulatory authorities may withdraw approval of the product candidate or otherwise require us to take the approved product off the market;

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•Regulatory authorities may require additional warnings, or a narrowing of the indication on the product label;

•We may be required to create a medication guide outlining the proper use of the medication and the risks of side effects, for distribution to patients;

•We may be required to modify the product in some way;

•Regulatory authorities may require us to conduct additional clinical trials, or costly post-marketing testing and surveillance, to monitor the safety or efficacy of the product;

•Sales of approved products may decrease significantly;

•We could be sued and be held liable for harm caused to patients; or

•Our reputation may suffer.

Any of these events could prevent us from achieving or maintaining the commercial success of our products and product candidates, and could substantially increase commercialization costs.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Sales of Unregistered Securities.

During the three months ended ~~March 31,~~June 30, 2020, the Company granted options to employees to purchase an aggregate of ~~1,105,925~~20,600 shares of common stock at a weighted-average exercise price of ~~$23.99~~$23.22 per share. Once vested, the options are exercisable for a period of ten years from the grant date. In addition, the Company granted ~~restricted~~performance stock units of ~~26,055~~15,625 shares at a weighted-average fair value grant date of ~~$23.99 per share and performance stock units of 31,250 shares at a weighted-average fair value grant date of $23.70~~$18.70 per share. These issuances are exempt from registration in reliance on Section 4(a)(2) of the Securities Act as transactions not involving a public offering.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

None

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Item 6. Exhibits

The following exhibits are filed or furnished as part of this Quarterly Report on Form 10-Q:


~~31.1~~ 2.1	^†*		~~Certification of Chief Executive Officer pursuant~~Sale and Purchase Agreement Relating to ~~Rule 13a-14(a).~~USWM Enterprises, LLC, dated April 28, 2020, by and between US WorldMeds Partners, LLC and Supernus Pharmaceuticals, Inc.

~~31.2~~ 10.1	^†*		~~Certification of Chief Financial Officer pursuant to Rule 13a-14(a).~~Development and Option Agreement, dated April 21, 2020, by and between Navitor Pharmaceuticals, Inc. and Supernus Pharmaceuticals, Inc.

~~32.1~~ 10.2	^†*		~~Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~Amended and Restated Distribution, Development, Commercialization and Supply Agreement, dated January 15, 2016, by and between Britannia Pharmaceuticals Limited and US WorldMeds, LLC.

~~32.2~~ 10.3	^†		~~Certification of Chief Financial Officer pursuant~~First Amendment to ~~18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~Amended and Restated Distribution, Development, Commercialization and Supply Agreement, dated February 19, 2020, by and between Britannia Pharmaceuticals Limited and US Wor ld Meds, LLC.

~~101~~10.4^†*		~~The following financial information from the Company’s Quarterly Report on Form 10-Q~~ Letter Agreement Re: Memorandum of Understanding for the ~~quarter ended March 31, 2020, formatted in Inline XBRL: (i) Cover Page, (ii) Consolidated Condensed Statements~~Supply of Income, (iii) Consolidated Condensed Statements of Comprehensive Income, (iv) Consolidated Condensed Balance Sheets, (v) Consolidated Condensed Statements of Shareholders' Equity, (vi) Consolidated Condensed Statements of Cash Flows, and (vii) the Notes to Consolidated Condensed Financial Statements, tagged in summary and detail.Pens, effective February 25, 2019.

~~104~~10.5^†		~~The cover page~~ Letter Agreement Re: Exclusive Supply of ~~the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in Inline XBRL (included with the Exhibit 101 attachments).~~

Pens, effective September 23, 2019.

~~EXHIBIT INDEX~~


~~Number~~						~~Description~~

31.1						Certification of Chief Executive Officer pursuant to Rule 13a-14(a).

31.2						Certification of Chief Financial Officer pursuant to Rule 13a-14(a).

32.1						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101						The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~June 30, 2020, formatted in Inline XBRL: (i) Cover Page, (ii) Consolidated Condensed Statements of Income, (iii) Consolidated Condensed Statements of Comprehensive Income, (iv) Consolidated Condensed Balance Sheets, (v) Consolidated Condensed Statements of Shareholders' Equity, (vi) Consolidated Condensed Statements of Cash Flows, and (vii) the Notes to Consolidated Condensed Financial Statements, tagged in summary and detail.

104						The cover page of the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~June 30, 2020, formatted in Inline XBRL (included with the Exhibit 101 attachments).

						^† Certain portions of this exhibit that constitute confidential information have been omitted in accordance with Regulation S-K, Item 601(b)(10)(iv) because it (i) is not material and (ii) would be competitively harmful if publicly disclosed.
						* Exhibits and schedules have been omitted pursuant to Regulation S-K Item 601(a)(5) and will be furnished on a supplemental basis to the Securities and Exchange Commission upon request.

4255

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	SUPERNUS PHARMACEUTICALS, INC.

DATED: ~~May 15,~~August 17, 2020	By:	/s/ Jack A. Khattar
		Jack A. Khattar President, Secretary and Chief Executive Officer

DATED: ~~May 15,~~August 17, 2020	By:	/s/ Gregory S. Patrick
		Gregory S. Patrick Senior Vice President and Chief Financial Officer

4356


			Page No.
PART I — FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets			3
Condensed Consolidated Statements of Earnings			4
Condensed Consolidated Statements of Comprehensive Earnings			5
Condensed Consolidated Statements of Changes in Stockholders' Equity			6
Condensed Consolidated Statements of Cash Flows			7
Notes to Condensed Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2630
Item 3. Quantitative and Qualitative Disclosures about Market Risk			3846
Item 4. Controls and Procedures			3947
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			4048
Item 1A. Risk Factors			4048
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4154
Item 3. Defaults Upon Senior Securities			4154
Item 4. Mine Safety Disclosures			4154
Item 5. Other Information			4154
Item 6. Exhibits			4255
SIGNATURES			4356


	March 31,		December 31,
	2020		2019
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	225,767	$	181,381
Marketable securities	175,104		165,692
Accounts receivable, net	119,195		87,332
Inventories, net	24,418		26,628
Prepaid expenses and other current assets	12,564		11,611
Total current assets	557,048		472,644
Long term marketable securities	534,712		591,773
Property and equipment, net	18,011		17,068
Intangible assets, net	23,579		24,840
Lease assets	21,911		21,279
Deferred income taxes	34,067		32,063
Other assets	538		615

Total assets	$	1,189,866	$	1,160,282

Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	3,124	$	10,141
Accrued product returns and rebates	119,453		107,629
Accrued expenses and other current liabilities	33,003		37,130
Income taxes payable	9,097		2,443
Nonrecourse liability related to sale of future royalties, current portion	3,658		3,244
Total current liabilities	168,335		160,587
Convertible notes, net	349,232		345,170
Nonrecourse liability related to sale of future royalties, long term	18,369		19,248
Lease liabilities, long term	30,804		30,440
Other liabilities	9,743		9,409
Total liabilities	576,483		564,854

Stockholders’ equity
Common stock, $0.001 par value; 130,000,000 shares authorized; 52,537,159 and 52,533,348 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively	53		53
Additional paid-in capital	392,430		388,410
Accumulated other comprehensive earnings (loss), net of tax	(166)		7,417
Retained earnings	221,066		199,548
Total stockholders’ equity	613,383		595,428

Total liabilities and stockholders’ equity	$	1,189,866	$	1,160,282


	June 30,		December 31,
	2020		2019
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	210,975	$	181,381
Marketable securities	163,839		165,692
Accounts receivable, net	126,559		87,332
Inventories, net	35,338		26,628
Prepaid expenses and other current assets	20,442		11,611
Total current assets	557,153		472,644
Long term marketable securities	358,673		591,773
Property and equipment, net	17,941		17,068
Operating lease assets	21,289		21,279
Finance lease asset	22,479		—
Intangible assets, net	408,272		24,840
Goodwill	88,095		—
Deferred income tax assets	—		32,063
Other assets	17,118		615
Total assets	$	1,491,020	$	1,160,282

Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	5,515	$	10,141
Accrued product returns and rebates	144,105		107,629
Accrued expenses and other current liabilities	58,818		34,305
Contingent consideration, current portion	23,500		—
Income taxes payable	25,052		2,443
Operating lease liabilities, current portion	3,560		2,825
Finance lease liability, current portion	4,201		—
Nonrecourse liability related to sale of future royalties, current portion	4,525		3,244
Total current liabilities	269,276		160,587
Convertible notes, net	353,349		345,170
Contingent consideration, long term	92,200		—
Nonrecourse liability related to sale of future royalties, long term	16,455		19,248
Operating lease liabilities, long term	30,108		30,440
Finance lease liability, long term	18,382		—
Deferred income tax liabilities	35,716		—
Other liabilities	9,560		9,409
Total liabilities	825,046		564,854

Stockholders’ equity
Common stock, $0.001 par value; 130,000,000 shares authorized; 52,624,084 and 52,533,348 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively	53		53
Additional paid-in capital	398,829		388,410
Accumulated other comprehensive earnings, net of tax	11,359		7,417
Retained earnings	255,733		199,548
Total stockholders’ equity	665,974		595,428

Total liabilities and stockholders’ equity	$	1,491,020	$	1,160,282


	Three Months ended March 31,
	2020		2019
	(unaudited)
Revenues
Net product sales	$	92,490	$	83,099
Royalty revenues	2,486		2,375
Total revenues	94,976		85,474

Costs and expenses
Cost of goods sold	4,152		3,684
Research and development	18,937		15,394
Selling, general and administrative	42,875		40,968

Total costs and expenses	65,964		60,046

Operating earnings	29,012		25,428

Other income (expense)
Interest expense	(5,755)		(5,870)
Interest income, net	5,777		4,681
Total other income (expense)	22		(1,189)

Earnings before income taxes	29,034		24,239

Income tax expense	7,516		5,899
Net earnings	$	21,518	$	18,340

Earnings per share
Basic	$	0.41	$	0.35
Diluted	$	0.40	$	0.34

Weighted-average shares outstanding
Basic	52,534,787		52,336,443
Diluted	53,581,051		53,985,385


	Three Months ended June 30,						Six Months ended June 30,
	2020		2019		2020		2019
	(unaudited)						(unaudited)
Revenues
Net product sales	$	123,984	$	102,358	$	216,474	$	185,457
Royalty revenues	2,745		2,337		5,231		4,712
Total revenues	126,729		104,695		221,705		190,169

Costs and expenses
Cost of goods sold^(a)	8,386		4,044		12,538		7,728
Research and development	22,247		16,970		41,184		32,364
Selling, general and administrative	48,103		39,777		89,717		79,439
Amortization of intangible assets	2,445		1,306		3,706		2,612

Total costs and expenses	81,181		62,097		147,145		122,143

Operating earnings	45,548		42,598		74,560		68,026

Other income (expense)
Interest income	4,151		5,448		9,726		10,137
Interest expense	(5,815)		(5,389)		(11,570)		(11,268)
Other income, net	3,326		89		3,528		90
Total other income (expense)	1,662		148		1,684		(1,041)

Earnings before income taxes	47,210		42,746		76,244		66,985

Income tax expense	12,543		10,019		20,059		15,918
Net earnings	$	34,667	$	32,727	$	56,185	$	51,067

Earnings per share
Basic	$	0.66	$	0.62	$	1.07	$	0.98
Diluted	$	0.65	$	0.61	$	1.05	$	0.95

Weighted-average shares outstanding
Basic	52,557,035		52,385,590		52,545,910		52,361,149
Diluted	53,645,828		53,912,977		53,611,418		53,947,834


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


j	Common Stock					Additional Paid-in Capital		Accumulated Other Comprehensive Earnings (Loss)		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance, December 31, 2019	52,533,348	$	53	$	388,410	$	7,417	$	199,548	$	595,428
Share-based compensation	—	—		3,988		—		—		3,988
Exercise of stock options	3,811	—		32		—		—		32
Net earnings	—	—		—		—		21,518		21,518
Unrealized loss on marketable securities, net of tax	—	—		—		(7,583)		—		(7,583)
Balance, March 31, 2020	52,537,159	$	53	$	392,430	$	(166)	$	221,066	$	613,383


	Six Months ended June 30,
	2020		2019
	(unaudited)
Cash flows from operating activities
Net earnings	$	56,185	$	51,067
Adjustments to reconcile net earnings to net cash provided by operating activities:
Share-based compensation expense	8,950		7,309
Depreciation and amortization	5,044		3,355
Amortization of premium/discount on marketable securities	984		(1,625)
Amortization of deferred financing costs and debt discount	8,179		7,748
Realized gains from sales of marketable securities	(3,316)		(93)
Noncash interest expense	2,870		2,851
Noncash royalty revenue	(3,918)		(3,368)
Noncash operating lease cost	1,842		1,230
Deferred income tax benefit	(3,062)		861
Changes in operating assets and liabilities:
Accounts receivable	(20,431)		18,439
Inventories	1,689		(365)
Prepaid expenses and other current assets	(4,767)		(3,581)
Other noncurrent assets	(1,176)		(140)
Accounts payable	(7,199)		886
Accrued product returns and rebates	28,298		(11,129)
Accrued expenses and other current liabilities	10,913		(1,307)
Income taxes payable	22,513		(9,703)
Other liabilities	(2,731)		(755)
Net cash provided by operating activities	100,867		61,680

Cash flows from investing activities
Acquisition of USWM, net of cash acquired	(297,200)		—
Investment in Navitor Pharmaceuticals, Inc.	(15,000)		—
Purchases of marketable securities	(15,382)		(264,926)
Sales and maturities of marketable securities	257,936		96,165
Purchases of property and equipment	(3,072)		(245)
Deferred legal fees	(24)		(1)
Net cash used in investing activities	(72,742)		(169,007)

Cash flows from financing activities
Proceeds from issuance of common stock	1,469		2,423
Net cash provided by financing activities	1,469		2,423

Net change in cash and cash equivalents	29,594		(104,904)
Cash and cash equivalents at beginning of year	181,381		192,248
Cash and cash equivalents at end of period	$	210,975	$	87,344

Supplemental cash flow information
Cash paid for interest on convertible notes	$	1,258	$	1,258
Income taxes paid	607		24,795

Noncash investing and financing activities
Contingent consideration liability accrued in USWM Acquisition	$	115,700	$	—
Deferred legal fees and fixed assets included in accounts payable and accrued expenses	365		280
Property and equipment additions from utilization of tenant improvement allowance	—		431
Lease assets and tenant receivable obtained for new leases	24,738		31,727


Cash and cash equivalents	$	6,994
Accounts receivable	18,474
Inventories	10,400
Prepaid expenses and other current assets	3,564
Property and equipment	454
Finance lease asset⁽¹⁾	22,747
Intangible assets	387,000
Other assets	340
Total fair value of assets acquired	449,973
Accounts payable	(2,573)
Accrued expenses and other current liabilities	(23,339)
Finance lease liability⁽¹⁾	(22,747)
Deferred income tax liabilities	(69,515)
Total fair value of liabilities assumed	(118,174)
Total identifiable net assets	$	331,799
Goodwill	88,095
Total purchase price	$	419,894

Cash consideration paid⁽²⁾	$	297,200


	Estimated Fair Value		Estimated Useful Lives (in years)
Acquired In-process Research & Development	$	150,000	n/a
Acquired Developed Technology and Product Rights	237,000		10.5 - 12.5
Total intangible assets	$	387,000


				Fair Value Measurements at March 31, 2020 (unaudited)									Fair Value Measurements at June 30, 2020 (unaudited)
		Total Fair Value at March 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Total Fair Value at June 30, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:	Assets:							Assets:
Cash and cash equivalents	Cash and cash equivalents							Cash and cash equivalents
Cash	Cash	$	19,911	$	19,911	$	—	Cash	$	183,703	$	183,703	$	—
Money market funds	Money market funds	205,856		205,856				Money market funds	27,272		27,272		—
Marketable securities	Marketable securities							Marketable securities
Corporate debt securities	Corporate debt securities	174,939		—		174,939		Corporate debt securities	163,839		—		163,839
Municipal debt securities	Municipal debt securities	165		—		165		Municipal debt securities	—		—		—
Long term marketable securities	Long term marketable securities							Long term marketable securities
Corporate debt securities	Corporate debt securities	524,683		255		524,428		Corporate debt securities	353,659		259		353,400
U.S. government agency debt securities	U.S. government agency debt securities	10,029		—		10,029		U.S. government agency debt securities	5,014		—		5,014
Other noncurrent assets	Other noncurrent assets							Other noncurrent assets
Marketable securities - restricted (SERP)	Marketable securities - restricted (SERP)	342		8		334		Marketable securities - restricted (SERP)	431		1		430
Total assets at fair value	Total assets at fair value	$	935,925	$	226,030	$	709,895	Total assets at fair value	$	733,918	$	211,235	$	522,683


			Fair Value Measurements at December 31, 2019 (unaudited)
	Total Fair Value at December 31, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:
Cash and cash equivalents
Cash	$	78,912	$	78,912	$	—
Money market funds	102,469		102,469		—
Marketable securities
Corporate debt securities	165,527		—		165,527
Municipal debt securities	165		—		165
Long term marketable securities
Corporate debt securities	571,828		254		571,574
U.S. government agency and municipal debt securities	19,945		—		19,945
Other noncurrent assets
Marketable securities - restricted (SERP)	418		3		415
Total assets at fair value	$	939,264	$	181,638	$	757,626


	March 31, 2020		December 31, 2019
	(unaudited)
Corporate and U.S. government agency and municipal debt securities
Amortized cost	$	710,072	$	747,598
Gross unrealized gains	5,362		10,031
Gross unrealized losses	(5,618)		(164)
Total fair value	$	709,816	$	757,465


	June 30, 2020		December 31, 2019
	(unaudited)
Corporate and U.S. government agency and municipal debt securities
Amortized cost	$	507,375	$	747,598
Gross unrealized gains	15,525		10,031
Gross unrealized losses	(388)		(164)
Total fair value	$	522,512	$	757,465


		Number of Options	Weighted- Average Exercise Price (per share)		Weighted- Average Remaining Contractual Term (in years)		Number of Options	Weighted- Average Exercise Price (per share)		Weighted- Average Remaining Contractual Term (in years)
Outstanding, December 31, 2019	Outstanding, December 31, 2019	4,606,559	$	23.05	6.66	Outstanding, December 31, 2019	4,606,559	$	23.05	6.66
Granted	Granted	1,105,925	$	23.99		Granted	1,126,525	$	23.98
Exercised	Exercised	(3,811)	$	8.33		Exercised	(42,086)	$	11.58
Forfeited	Forfeited	(25,275)	$	28.12		Forfeited	(41,800)	$	26.66
Outstanding, March 31, 2020 (unaudited)		5,683,398	$	23.22	7.08
Outstanding, June 30, 2020 (unaudited)						Outstanding, June 30, 2020 (unaudited)	5,649,198	$	23.30	6.86

As of December 31, 2019:	As of December 31, 2019:					As of December 31, 2019:
Vested and expected to vest	Vested and expected to vest	4,606,559	$	23.05	6.66	Vested and expected to vest	4,606,559	$	23.05	6.66
Exercisable	Exercisable	2,598,112	$	15.68	5.48	Exercisable	2,598,112	$	15.68	5.48

As of March 31, 2020:
As of June 30, 2020:						As of June 30, 2020:
Vested and expected to vest	Vested and expected to vest	5,683,398	$	23.22	7.08	Vested and expected to vest	5,649,198	$	23.30	6.86
Exercisable	Exercisable	3,394,315	$	18.71	5.75	Exercisable	3,354,282	$	18.85	5.53


	~~March 31,~~June 30, 2020
	(unaudited)
Less than 1 year	$	~~175,104~~163,839
1 year to 2 years	~~181,141~~143,987
2 years to 3 years	~~199,207~~149,688
3 years to 4 years	~~154,364~~64,998
Greater than 4 years	—
Total	$	~~709,816~~522,512


	March 31, 2020						December 31, 2019
	(unaudited)
	Carrying Value		Fair Value (Level 2)		Carrying Value		Fair Value (Level 2)
2023 Notes	$	349,232	$	328,038	$	345,170	$	366,023


	June 30, 2020						December 31, 2019
	(unaudited)
	Carrying Value		Fair Value (Level 2)		Carrying Value		Fair Value (Level 2)
Convertible notes, net	$	353,349	$	356,213	$	345,170	$	366,023


		March 31, 2020		December 31, 2019			June 30, 2020		December 31, 2019
		(unaudited)					(unaudited)
2023 Notes	2023 Notes	$	402,500	$	402,500	2023 Notes	$	402,500	$	402,500
Unamortized debt discount and deferred financing costs	Unamortized debt discount and deferred financing costs	(53,268)		(57,330)		Unamortized debt discount and deferred financing costs	(49,151)		(57,330)
Total carrying value	Total carrying value	$	349,232	$	345,170	Total carrying value	$	353,349	$	345,170


		Three Months ended March 31,							Three Months ended June 30,						Six Months ended June 30,
		2020		2019			2020		2019		2020		2019
		(unaudited)							(unaudited)						(unaudited)
Research and development	Research and development	$	681	$	574	Research and development	$	818	$	700	$	1,499	$	1,274
Selling, general and administrative	Selling, general and administrative	3,307		2,713		Selling, general and administrative	4,144		3,322		7,451		6,035
Total	Total	$	3,988	$	3,287	Total	$	4,962	$	4,022	$	8,950	$	7,309


2020 (remaining)	$	3,672
2021	4,760
2022	4,226
2023	2,537
2024	2,587
Thereafter	26,784
Total future minimum lease payments	$	44,566
Less: Imputed interest ⁽¹⁾	(10,306)
Present value of lease liabilities	$	34,260


		Weighted- Average Life (Years)	March 31, 2020		December 31, 2019			Weighted- Average Life (Years)	June 30, 2020		December 31, 2019
		(unaudited)									(unaudited)
Goodwill							Goodwill		$	88,095	$	—
Acquired In-process Research & Development							Acquired In-process Research & Development		150,000		—
Intangible assets subject to amortization:							Intangible assets subject to amortization:
Acquired Developed Technology and Product Rights							Acquired Developed Technology and Product Rights	10.50 - 12.50	$	237,000	$	—
Capitalized patent defense costs	Capitalized patent defense costs	2.76 - 7.01 years	$	43,375	$	43,375	Capitalized patent defense costs	2.50 - 6.80	43,514		43,375
Less accumulated amortization	Less accumulated amortization		(19,796)		(18,535)		Less accumulated amortization		(22,242)		(18,535)
Total			$	23,579	$	24,840
Total intangible assets, net							Total intangible assets, net		$	408,272	$	24,840


Balance at December 31, 2018	$	85,003	$	22,060	$	11,548	$	118,611
Provision
Provision for sales in current year	139,376		4,068		27,394		170,838
Adjustments relating to prior year sales	(888)		(730)		(43)		(1,661)
Total provision	$	138,488	$	3,338	$	27,351	$	169,177
Less: Actual payments/credits	(149,129)		(3,826)		(26,940)		(179,895)
Balance at June 30, 2019	$	74,362	$	21,572	$	11,959	$	107,893


		March 31		December 31		Change						June 30		December 31		Change
		2020		2019		Amount		Percent		2020		2019		Amount		Percent

Cash and cash equivalents	Cash and cash equivalents	$	225,767	$	181,381	$	44,386	24%	Cash and cash equivalents	$	210,975	$	181,381	$	29,594	16%
Marketable securities	Marketable securities	175,104		165,692		9,412		6%	Marketable securities	163,839		165,692		(1,853)		(1)%
Long term marketable securities	Long term marketable securities	534,712		591,773		(57,061)		(10)%	Long term marketable securities	358,673		591,773		(233,100)		(39)%
Total	Total	$	935,583	$	938,846	$	(3,263)	—%	Total	$	733,487	$	938,846	$	(205,359)	(22)%

Working capital	Working capital	388,713		312,057		76,656		25%	Working capital	287,877		312,057		(24,180)		(8)%

Convertible notes, net (2023 Notes)	Convertible notes, net (2023 Notes)	349,232		345,170		4,062		1%	Convertible notes, net (2023 Notes)	353,349		345,170		8,179		2%

Total stockholder's equity	Total stockholder's equity	613,383		595,428		17,955		3%	Total stockholder's equity	665,974		595,428		70,546		12%