Take Long View

What: A bit more than a week after reporting earnings and ahead of an investor conference next week, shares in Supernus Pharmaceuticals (NASDAQ:SUPN) fell by 13% earlier today.

Let's take a closer look at this company and whether or not investors ought to consider picking up its shares on this drop. 

SUPN Chart

So what: Supernus Pharmaceuticals is developing and markets drugs for the treatment of central nervous diseases. In 2013, it launched its first two products, Trokendi XR and Oxtellar XR, both of which treat epilepsy.

In the third quarter, those two drugs combined to lift Supernus Pharmaceuticals' revenue by 72% to $38.6 million. Driving that sales increase was a 95.7% lift in Trokendi XR prescriptions that resulted in sales of $29.9 million and a 39.7% increase in Oxtellar XR prescriptions that resulted in sales of $8.7 million.

Because the company was able to leverage sales growth against fixed costs, it delivered operating income of $4.3 million last quarter, up from a loss of $0.8 million a year ago.

Those positive figures and an update on its R&D progress will likely be highlighted at the Stifel Healthcare Conference on November 17.

Gw Pharma Growing Facility

Source: GW Pharmaceuticals

Now what: Supernus Pharmaceuticals expects to report total full year sales of between $143 million and $145 million and operating income of between $13 million and $15 million this year.

Those are solid results that investors ought to cheer, but investors should also keep a close eye on clinical research under way at GW Pharmaceuticals (NASDAQ:GWPH).

GW Pharmceuticals is studying the use of a marijuana cannabinoid known as CBD as a treatment rare forms of epilepsy, and insight into GW Pharmaceuticals progress in Dravet syndrome and Lennox-Gastaut syndrome is expected soon. If GW Pharmaceuticals' Epidiolex succeeds, then the marketplace could become more competitive and that could put pressure on Supernus Pharmaceuticals' revenue in the future.

As a result, investors may want to focus their attention on Supernus Pharmaceuticals' drug pipeline, which includes SPN-810 for impulse aggression in patients with ADHD and autism and SPN-812 for the treatment of ADHD.

In November, Supernus Pharmaceuticals estimated that SPN-810's peak sales potential could exceed $1 billion per year and that SPN-812 could eventually compete for share in a market it values at $2.5 billion. SPN-810 is entering phase 3 trials, and a phase 2 study of SPN-812 should begin this quarter. 

If those two drugs prove to be safe and effective, then Supernus Pharmaceuticals could end up with two new top sellers, and that potential could make it worth considering today's drop as a buy opportunity. 

 

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.