BioDelivery Sciences International, Inc.

Good day and welcome to the Biodelivery Sciences second quarter 2020 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Terry Coelho, Chief Financial Officer for Biodelivery Sciences. Please go ahead.

Thank you, and good morning, everyone. Welcome to our second quarter 2020 earnings conference call. Leading the call today is Jeff Bailey, Interim Chief Executive Officer. We are joined by Scott Flesha, President and Chief Commercial Officer. Following our prepared remarks, we will conduct a question and answer session. Earlier today, Biodelivery Sciences issued a press release announcing its financial results for the second quarter 2020. A copy of the release can be found on the investor relations page of the company's website. Before we begin, I would like to remind everyone that certain statements may be made during this call which may contain forward-looking statements. Such forward-looking statements are based upon current expectations, and there can be no assurances that the results contemplated in these statements will be realized. Actual results may differ materially from such statements due to a number of factors and risks, some of which are identified in our press release and our annual, quarterly, and other reports filed with the SEC. These forward-looking statements are based on information available to BDSI today, August 5, 2020, and the company assumes no obligation to update statements as circumstances change. An audio recording and broadcast replay for today's conference call will also be available online in the Investors section for the company's website. With that, I'd like to turn the call over to Jeff Bailey, Interim CEO. Jeff?

Thank you very much, Terry, and welcome, everyone, to our company's second quarter 2020 earnings call. This is my first earnings call with you as the interim CEO, and it takes place during a challenging time for the country and for the entire pharmaceutical industry. However, I'm really fortunate to have inherited a dynamic and growing pair of brands, a strong balance sheet, and an inspiring high-quality management team who are extremely focused on execution in this new environment. There are three things I really hope you'll take away from our quarterly earnings call. First, we mobilized the internal team very early in the COVID pandemic to ensure we are proactive and operate in the most effective way possible, reviewing in a very structured weekly venue the national and local data, listening to caregivers and employees while observing how other companies are approaching this new environment. This has really made a big difference. Second, our team performed very well in the second quarter with Belbuca continuing to take market share in the TRX long-acting opioid market, and Belbuca continuing to show strong growth year over year. The second quarter Belbuca performance also includes Belbuca hitting an all-time high in TRX volume and market share. We also saw Symproic hit an all-time high for TRX volume and market share as well. This is a real tribute to our differentiated products as well as our standing commercial execution for the BDS IT. Well, my title as interim CEO – and this is the third thing I'd like you to take away – I want to assure you that I plan to remain in a key leadership role for BDSI for the long term. I am very committed to working with my strong executive team and the BDSI board to take BDSI to the next level as we are hyper-focused on containing the strong growth of our products as well as concentrating on business development strategies that really bring value to the patients, caregivers, and shareholders that we serve. I am pleased to say that I've been working closely with the management team in my first three months, and they have made it easy for me to really get the ground running. Now let's start and get into some of the details. On the results front, the big positive for Belbuca is that we outperformed the TRX long-acting opioid market nicely by growing Belbuca TRX volume by 5.2% over Q1, while the market was down by 1.6%. Additionally, Belbuco's TRX market share hit another all-time high by growing to over 3.8% in Q2 compared to 3.6% in Q1. This growth highlights the momentum for the brand, which was also confirmed by the fact that revenue for Belbuco grew 34% year-over-year. It's important to stress that we are focusing on new tactics during this pandemic to drive new-to-brand market prescriptions. NVRX scripts were down in Q2, and we believe that this trend was driven by significant decline in patient and in-person visits to physician offices, which some estimate in the range of 30% to 40%. As a result, the NVRXs in both Delbuca and long-acting markets were down approximately 18%. We feel strongly that this change in market conditions requires some new tools to help boost new patient starts. The team has done a really nice job of focusing on this dynamic in the COVID environment. Scott will give you more details when he speaks shortly. Scott will also cover additional details on the new selling programs that we've implemented during the pandemic. Our sales team has adapted to a hybrid selling model where reps still have face-to-face customer interactions where possible, but also are effectively using virtual promotional and educational tools to support our work with caregivers. We also recognize that managing business during the pandemic is a moving target within local geographies. We therefore remain very vigilant and nimble and use our now well-established process with our weekly COVID dashboard and live weekly team meetings to really stay on top of our game. Now let's get into the slides. Getting back to our rapid response to the COVID pandemic, I'm extremely proud of how our employees have responded to this unprecedented challenge. We acted quickly and swiftly at three fronts. First, we focus on taking actions to ensure the safety and well-being of our employees, patients, and the communities we serve. Very early on, we proactively prepared additional materials to ensure constant supply of our products as they provide important clinical relief for patients suffering from chronic conditions. Secondly, we transitioned our customer engagement to virtual support and launched an array of new customer and patient support programs. And finally, The Internal COVID-19 Cross-Functional Committee we established, which I mentioned before, has been vigilantly assessing trends in market dynamics, benchmarking best practices across the industry, and ensuring we are highly focused to navigate through this unprecedented situation. We see that these actions are having a beneficial impact on our business based on the brand trends thus far and believe they will be important components for continued momentum as our customers return to more normal operations. Going to the next slide, you really see that the strong performance both year-to-date and in Q2 positions us advantageously for future growth. As I mentioned before, Bell Bupit really outperformed the market and also hit another all-time TRX share high of 3.8%. This continued momentum is so important, especially during a time when other products in our space are declining. Next, I want to mention that we have positioned ourselves well by further optimizing our sales force in Q1 by adding new territory managers in the field to grow incremental revenues. I am pleased to say these territories overall are gaining additional traction in Q2. Also important to our growth are our company's substantial progress with payers and realizing more opportunities that make financial sense for us. We continue to make good progress on this front, as Scott will share in more detail. We've begun to capitalize on some recently announced market access wins. In addition, we've expanded access within several prominent regional health systems, which offer both their own covered lives as well as potential influence on clinical practice within their metropolitan communities. And lastly, we began the year with a strong balance sheet and have been able to strengthen that and our cash with a very successful second quarter. Ensuring financial strength is a key strategic priority for BDSI, and we are prudently managing our spend during this period to protect and steer the business through its near-term disruption while continuing to invest towards sustained long-term growth. Our strong balance sheet allows me to spend a meaningful percentage of my time, along with other senior members of our team, exploring strategic business development opportunities and speaking with potential partners. To conclude, I'm very pleased by the success of the second quarter, as well as how the organization has responded to the challenges presented by the COVID-19 pandemic. We have therapeutically important products, a strong balance sheet, and a talented and committed team of employees. We remain poised to successfully navigate through the short-term uncertainty to achieve our ambition of long-term sustained growth. With that, I will turn the call over to Scott to provide more details of our performance during the second quarter. Scott?

Thank you, Jeff. As Jeff mentioned, during Q2, Belbuco prescriptions grew by 5,160 to a new high of more than 104,600 retail TRXs. This represents almost a 31% increase in Belbuco TRXs compared to the second quarter of 2019, and a 5.2% increase over the first quarter of 2020. This was accomplished despite a 1.6% decline in the overall long-acting opiate market during the second quarter. We were pleased with Belducas' continued growth, which led to its Q2 TRX market share increasing to over 3.8% from 3.6% in the first quarter of 2020. During the second quarter, Dalbuca's new-to-brand market share of 7.3% held steady from the first quarter, well above its TRX share of 3.8%, and there is still a significant opportunity to grow total prescription share as these metrics historically converge. New-to-brand prescriptions declined from the first quarter to the second quarter as stay-at-home orders were in effect. However, we were encouraged by the improvement in new patients being prescribed Dalbuca, as states began reopening in June. Dalbuca's prescriber base remained stable in the second quarter as the impact of the pandemic was most pronounced during this period. There were over 7,600 total unique prescribers in the quarter, and we're encouraged by the fact that Dalbuca reached a new monthly high of 6,170 new prescribers during June as patients began to return to offices. As of early July, our sales force has been redeployed across all territories, enabling in-person visits in addition to their continued virtual interactions. As we previously announced, in early Q2, we were able to improve Albuquerque coverage from non-formulary, not covered, to covered or preferred status in over 2 million Medicare Part B lives within Express Scripts, Select Health, and UPMC Health. It's still early since the addition of these wins, but we are encouraged by the growth we are seeing across these plans and would expect their uptake to increase in Q3 and Q4. We continue to believe that with additional work, we have the potential to add several million more Medicare lives as we head into 2021. On the commercial side, in Q2, we improved our coverage within two prominent regional commercial plans, Highmark Blue Cross Blue Shield and University of Pittsburgh Medical Center, or UPMC. These wins improve coverage for over 760,000 lives combined. Again, it's early news wins, and we anticipate growth in Q3 and Q4 from these plans. And Pro-X Q2 retail prescriptions reached a new high of over 17,200, representing an 11.1% increase year-over-year compared to Q2 2019, and a 6.7% increase over Q1 2020. We're also excited to share that Simproic enjoyed its largest quarter-over-quarter prescription growth since we relaunched it in Q2 of 2019. During Q2 2020, we generated a 13.4 NRX share and a 12.3% TRX share, representing the highest market shares to date. We expect continued TRX and revenue growth for Simproic, as its NREX share has consistently exceeded total RX share since May 2019 when BDSI began active promotion. In the second quarter, we successfully added 940 new prescribers for Semproic, maintaining our prescriber universe of approximately 5,000 healthcare providers. We've used Semproic as a highly complementary brand to Belbuco and continue to believe our early 2020 market access lens but Prime Therapeutics and CDS will be callous for growth for the remainder of 2020 and beyond. The BDSI sales force has done a strong job taking advantage of these wins and improved our TRXs within Prime Therapeutics by approximately 56% in Q1 and 38% in Q2 compared to the previous quarters. We've also seen consistent growth within CDS, where our market share in the Primora class has increased from 10.5% in Q4 2019 to 14.4% during Q2 of 2020. We're also excited to announce that we've recently enhanced some product access within Independence Blue Cross Blue Shield and Humana commercial lives. Over 1 million lives under Independence Blue Cross Blue Shield have moved from non-preferred status with a step edit required to a preferred unrestricted status. Within Humana, approximately 420,000 lives will now be covered at a non-preferred level without restrictions compared to a non-formulary, not covered status previously. We believe that the BDSI commercial team will be able to pull through these wins and build upon the brand's momentum. We're very proud of the results that the commercial team generated during Q2. especially within the environment and market dynamics that we faced through the COVID-19 pandemic. While the influx of new patients to our products and the markets they are in slow during the quarter, we are encouraged by the increase in patient visits and NVRXs as states have reopened over the past two months. As the impact of COVID-19 grew, our focus was on supporting our HCPs and their patients while ensuring the safety of our employees. We accomplished this by reinforcing the many resources we offer to patients and ACPs and the unique attributes our products possess. We also augmented our patient support by providing enhanced co-pay coverage for Belbuco and prior authorization assistance for both Belbuco and Symproic. As Jeff highlighted, our commercial team rapidly adapted to the new promotional environment. We have equipped our sales team with tools that facilitate effective discussions around the clinical value of our products, either in person or virtually. This includes a virtual customer engagement platform, a dedicated email portal, as well as the ability to ship samples and other resources directly to offices. During the quarter, we also adapted many of our marketing programs and amplified our digital marketing efforts. This resulted in an increased digital presence as we implemented new programs and magnified others. We have built a sales and marketing platform that will allow us to promote our products effectively and compliantly to HCPs and patients during a very unique time. Importantly, it also provides a foundation that will allow us to adapt as the selling environment evolves. We had a very successful Q2 that resulted in yet another record quarter for prescriptions and many other important growth metrics for both Dalbuca and Symproic. Our Q2 results support the effectiveness of our commercial team, and more importantly, the clinical value that our products provide to patients and HCPs. We continue to believe that with our high level of execution, incremental market access improvements, And with patients returning to offices, we are very well positioned for growth in the second half of 2020 and beyond. In concluding, I'm particularly proud of the dedication, nimbleness, and focus our commercial team exhibited to support our healthcare professionals and their patients during these challenging times. With that, I'll turn the call over to Carrie to provide an update on the financials. Carrie?

Thank you, Scott. As Jeff and Scott discussed, we are excited to report our second quarter results, which have remained strong despite the COVID-19 pandemic. Total net revenue for the second quarter 2020 was $36.6 million, an increase of 23% compared to $29.7 million in the second quarter of 2019. Year-to-date net revenue through June 30, 2020, of $74.9 million, grew 51% compared to the same period in 2019, driven by strong Belbuca growth and the impact of the symbolic acquisition, partially offset by lower sales of DunaVale. Belbuca net sales in the second quarter were $32.3 million, an increase of 34% compared to $24.1 million in the second quarter of 2019. While TRXs grew approximately 5% in the quarter, the net sales decline of 3% in the quarter versus the first quarter of 2020 was primarily due to the timing of shift orders and a tightening of wholesaler inventory in the second quarter of about four days compared to the first quarter and compared to the levels of inventory typically held. Year-to-date LB net sales through June 30, 2020 of $65.8 million grew 54% compared to the first half of 2019. Symproic, which was acquired during the second quarter of 2019, has been an ideal complementary product for BDSI as we were able to effectively integrate it into our product portfolio and take advantage of the substantial overlap in the target prescriber base. Net sales for Symproic in the second quarter of 2020 were $3.4 million. Similar to Belbuca, while PRXs grew close to 7% in the second quarter compared to the first quarter of 2020, The net sales decline of 18% in the same period was primarily due to the timing of shipped orders and a tightening of wholesaler inventory in the second quarter of about six days compared to the first quarter. Year-over-year net sales in the quarter grew 7%. As a reminder, the second quarter 2019 net sales results incorporated the benefit of a distribution agreement with Shinogi, which favorably impacted the second quarter 2019 net sales. BunaVale net sales for the second quarter were $700,000 compared to $800,000 in the second quarter of 2019. In March of this year, the company announced the planned discontinuation of marketing of BunaVale in 2020 and ceased X-Factory sales effective June 15, 2020. Royalty revenues for X-US sales of Painkill and Breakill totaled $137,000 for the second quarter. a decrease of $400,000 when compared to the first quarter of 2020. Total gross margin for the quarter was an attractive 85% as compared to 83% in the second quarter of 2019 and consistent with the 85% margin during the first quarter of 2020. As Jeff discussed, management swiftly took action when the pandemic first emerged to ensure we were protecting our cash position in light of the high degree of uncertainty at that time. A key area of focus was to evaluate our operating expenses across all functions to ensure prioritization of critical initiatives needed to support our continued growth, while making sometimes tough choices about deferring certain planned activities. As a result, excluding the one-time financial impact of costs associated with the transition of our CEO, we were able to reduce continuing operating expenses by $3.5 million in the second quarter as compared to the first quarter of 2020. With that said, total reported operating expenses in the second quarter of 2020 were $28.2 million compared to $22 million in the second quarter of 2019 and $26.7 million in the first quarter of 2020. The year-over-year and quarter-over-quarter increases are primarily driven by the one-time costs associated with the CEO transition in the quarter, partially offset by lower T&E spend. Gap net income for the second quarter was $1.2 million, or net income of one cent per share, compared to a gap net loss of $11.1 million in the second quarter of 2019, or a net loss of 13 cents per share. The year-over-year improvement in gap net income of $12.3 million is primarily driven by an $11.7 million decrease in non-operating expenses related to the CRG debt extinguishment incurred during Q2 2019. Year-to-date GAAP net income through June 30, 2020, was $6.1 million, an increase of $21.1 million compared to the same period in 2019. EBITDA in the second quarter of 2020 was $5.1 million, or 14% of net sales, compared with $4.8 million in the second quarter of 2019 and $7.8 million, or 20% of net sales, in the first quarter of 2020. This quarter marks the sixth consecutive quarter of positive EBITDA for BDSI. Year-to-date EBITDA through June 30th of 2020 is $12.9 million or 17% of net sales, compared with $4.9 million or 10% of net sales for the same period in 2019. Non-GAAP net income for the second quarter was $9.6 million and reflects GAAP net income, excluding stock-based compensation, non-cash amortization of intangible assets, the non-recurring financial impacts of the Buneville discontinuation, and the one-time expenses related to the CEO transition. This compares to non-GAAP net income of $8.3 million in the first quarter of 2020, excluding stock-based compensation and non-cash amortization of intangible assets. Year-to-date non-GAAP net income through June 30th of 2020 was $17.9 million compared to $3.2 million for the same period in 2019, an increase of $14.7 million year-over-year. As of June 30th, 2020, BDSI had cash and cash equivalents of $91 million as compared to $70.6 million at March 31st, 2020. The combination of continued strong revenue and attractive gross margins, together with cost reductions discussed earlier, and excluding the impact of CEO transition-related costs, resulted in positive operating cash flow year-to-date through June 30, 2020, of $6.7 million, or $5 million of positive operating cash flow including those costs. For the second quarter, Operating cash flows, also excluding the impact of the CEO transition costs, were essentially break-even. The overall $20.4 million increase in the cash position over the prior quarter includes the net proceeds of $19.6 million from the drawdown in May 2020 of $20 million from tranche V of our existing debt facilities. The decision to opportunistically draw down the expiring second tranche of the loan reflects our ongoing commitment to enhance our cash position while retaining the flexibility to support the company's important organic and business development growth opportunities. The company's total long-term debt position as of June 30, 2020, was $80 million. We are very pleased to have ended the first half of the year with revenue growth greater than 50% year-over-year. Continuing profitability reflected in our 17% EBITDA margin year-to-date and a strong cash position. Importantly, we are managing our expenditures prudently, ensuring prioritization and continuation of key initiatives. I will now turn the call back to Jeff for some concluding remarks before we open up the call for Q&A. Jeff?

Thank you, Carrie. Overall, as a company, we are very proud of our resilience and the team's ability to adapt very effectively over the past two quarters. We expect to see continued momentum from our early investments in our hybrid commercial efforts and our strategic actions to strengthen and broaden our customer relationships. Our high-quality depreciated products, coupled with our dedicated team, positions us well for a strong second half of 2020. We now like to take your questions. Operator?

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on the phone line will indicate when your line is open. Again, that's star 1 to ask a question. We pause for just a moment to allow everyone an opportunity to signal for questions. We will now take our first question from Brandon Fulkes from Cantor Fitzgerald. Please go ahead, your line is open.

Hi, thanks for taking my question and congratulations on the progress in the course of navigating a CUS backdrop. I wanted to just drill down a little bit into the funnel of new patients and what you saw in the quarter and maybe also what you are seeing in July. Granted, there's obviously a number of challenges within COVID, but could you just elaborate with it? Is the challenge patients staying on an IR opioid longer or the long action that they're on? Or is it even earlier in the funnel and their patients are not even going on IR opioids at the moment? Any color in terms of whether then this challenge around uterine may extend a little bit beyond lockdowns as we, you know, as we have patients entering the funnel? And then do you have any data on how long patients are actually on either an IR opioid or a different long-acting opioid before they are switched to Belbuter?

Scott, do you want to read off first and then that's it? You go first, Scott, please.

Yeah, Jeff, thank you. Hey, Brandon, it's Scott. Thank you for the question. I appreciate it. So a couple dynamics we're seeing, and I can give you some kind of round numbers, but in general, if you look at Q1 NBRX numbers for the long-acting market and where we are as well, we see about an 18% decline in NBRXs for the LAO market, and we're basically in line with that. If you were looking at what that means on a weekly basis for us, we did maintain our share. In my prior comments, we did maintain a 7.3 MBRX market share. But, in fact, that cost you about 300 new-to-brand scripts on average a week during April and May. What was encouraging to see is that that delta in the month of June, once states reopened, actually was cut in half, more than cut in half. So we started seeing patients coming back into office. So we really view the decline as more of a patient into offices. A lot of the pain management physicians want and mid-levels want to actually see a patient face-to-face before they make a change in therapy. We saw, based on the data that we have, and this is across all specialties, there was about a 30 to 40% reduction throughout Q2 in office visits. That was supplemented by about a 10% telemedicine. However, obviously that doesn't cover that delta completely. We believe that's the drop that we saw was really just patients not going into the office to be transitioned over to long-acting opiates. We don't have – it's obviously new data. We don't think we have enough data yet to make a determination if they're just staying on short actings longer. I think that's a good assumption in that. They're just not moving, not able to go into an office and have a change made. I imagine they're probably just playing around with different dosages, moving patients' dosages, titrating, whatever they need to do in short acting. So, and as a reminder, we don't see a lot of, in the class, whether it's to Balbuca or from Balbuca to other long actings, there's really not much movement. it is really about the short-acting patients being transitioned to long-acting, so it's where the primary growth is. So hopefully that answers your question.

Oh, Brandon, if I could just add to the shot, you did a really good job covering some things there. And also, I think another thing that we really learned during the pandemic so far is that we control a fair amount of some things. You know, we cannot control, you know, I mean, the patients, their frequency going to see their doctors to get in the office. But as Scott highlighted, we're seeing a trend to go back to the office. But I think really important to note is that we're finding that the hybrid activity by our sales team, where there's the combination of face-to-face and also their virtual interactions with customers, is correlating to total prescriptions and activity and results there. So I think it's, you know, with all the noise that's out there, we're really paying close attention to data. And we've mentioned that, you know, we're very focused every week with our weekly COVID-19 world and just we have a weekly venue and a dashboard where we really look very closely at all the data. And we're seeing that correlation, which to me is really important for all of us. I think there's a correlation between activity, both hybrid, as far as hybrid when it comes to virtual, and also face-to-face interaction by our team. And that means that, like at Delbuca, it's emotionally sensitive, and that always means something. So if you always want to feel like you're in control of some things going on around you, and while we can't control the patients in the back of the office, the NBRX that Scott was referencing, I think that's a key takeaway, key learning that we're seeing so far in the new environment. So, Brendan, we have to answer your question, okay?

You did very comprehensively. Thank you very much to both of you for that. One follow-up, if I may, for you, Jeff, maybe. I think I heard business development a few times mentioned today. So could you just talk about your business development priorities, what types of assets you may look at, and how do you see the opportunity set within the current environment? Thank you.

Yeah, so a few things. I think just stepping back and looking at, you know, much of my experience has been in the space of business development and really building larger product lines and companies. So I'm really focused right now working with the senior management team in that area. And you take a look at, first of all, we're starting off with a very strong commercial infrastructure. Of course, we want to make sure we leverage that. So that's the first thing, Brandon, that we want to see if there's a way we can leverage that in our business development activities. And there are a number of attractive assets that are out there that, you know, to look at. I've given before, but, you know, just as examples, because it's certainly not limited to neurology, the CNS, or areas that could be complementary to our focus. And also, you know, we're a company that makes us attractive. We have a history now with Albuquerque, taking assets, launching them, and, you know, relaunching them, and doing that successfully. And we're really beefed up in the area. I think something that, you know, earlier in the year we brought in the head of business development and something that will be focused on this next chapter with the company. And there's a lot of work going on, so we'll be very thoughtful, very judicious in what we're doing with that and really making sure we're focusing on the right things. As far as more specifics, you know, I can't go into too many details, but I can tell you that we're very much focused on meeting unmet medical needs, especially commercial products, but also late-stage products as well, and really making sure that we're looking at the different opportunities out there that could be really efficient in our operating model. So you can probably tell from my comments that this is a big area of focus, and we have a strong team to be able to really make sure we see some things through. That's what we're seeing right now, Brandon, okay? Okay.

Thank you very much. That was very helpful.

We will now move to our next question from Arne Wismut from HC Wainwright. Please go ahead. Your line is open.

Thanks for the question, and congrats on pretty strong execution despite a lot of challenges. I guess if we could just revisit the opportunities for switching Maybe even from other long-acting products. I know that's not a big part of your narrative, and you've been very clear that IR to ER drives most of your volume. But I get a lot of questions about all this volume out there in the market for both OxyContin and even Butrans, which I think combined with the generic or authorized generic is actually still larger than Belzica. And people ask me, why are you not – capturing more share from that market given challenges, you know, that may be back. And those products have, you know, obviously you have clear differentiation trends. I imagine the promotion there is flagging. So what opportunity do you have, you know, with or without COVID impacts to capture some of that massive volume sitting out there? And I do have a follow-up.

Thanks, Oren. It's Scott. I'll take that question. So first on buprenorphine side of things, to your point, we have not cannibalized much of the generic buprenorphine market. That's a fact. We really have expanded the marketplace. It's actually, I think it's a tribute to the molecule buprenorphine that it's really only molecule over the last couple of years that's actually been able to grow in the environment while the other long actings were falling off. We're actually up to approximately a 45% share now of the buprenorphine market. We do believe that we can continue to expand the marketplace. Just some color as to how the category has performed during the quarter. We did see Belbuco outperform the buprenorphine patch, Mutabrand, as well as TRXs during the quarter as well. They did not grow as much. We actually cannibalized some of their business. And to your point, though, it hasn't been our focus. There is – the product was promoted by Purdue, very wide-ranging primary care. There are a lot of physicians that were basically – writing one script here or there. It's kind of an inch deep, mile wide. So when we look at our core group of physicians, we're performing quite well, and we have territories even with 80% to 90% shares of the marketplace within our core targets. As far as the long-acting market, when we look at all the data, and this is not just us, what we see is pretty much every brand or molecule is getting patients from the short-acting. It's just the way that HCPs have learned to practice. And honestly, it's been the most effective way for us to gain business is to kind of step in, catch people. And we think it's the appropriate also is when patients are moving from a short-acting to a long-acting, that it's to Belbuca. So we've really focused our efforts there, and honestly, it's a lot larger opportunity. I know we can look at all the businesses out there, but there are a lot of patients that have been on OTSI, for example, that are doing quite well. Okay.

At the beginning of the pandemic – I don't mean to interrupt. Sorry.

No, that's fine. Go ahead, Oren. Sorry.

Well, you also highlighted some of the advantages you probably had versus other C2 opioids, whether they be IR or ER, early in this pandemic with regards to you know, your advantageous scheduling, being able to call in scripts, multiple prescriptions. I mean, clearly you've outperformed the market overall, but have you detected a major impact of those properties? Is that something that you are able to promote now and even going forward? I mean, obviously there's a lot of fear about resurgence of disruptions, and you would think that if I was a doc transitioning from band one to get them on something that I know I can maintain and reestablish, do refills and write new prescriptions much easier if we went into a lockdown again, you know, God forbid. Is that something that you're focused on?

Yeah, it's part of our messaging, definitely efficacy first, but some of these other attributes second. And we do feel that those messages, so to your point early on, we emphasize those messages. And it was about keeping patients safe. on therapy and making sure the HCPs and patients have the resources they needed to stay on therapy. We've really focused recently on the MBRX side of things and have put some programs in place to accelerate that. And, you know, part of our messaging going forward, to your point, Oren, the markets have opened up now and states have opened up. Those messages may not resonate the same. right now, but we are saying in case that they do close down again, here's an advantage.

Okay. Thanks. Appreciate it.

You're welcome.

Thanks. We will now move to our next question from Greg Frazier from True Security. Please go ahead.

Thank you. This is Greg Frazier on from Greg Gilbert. Good morning, everybody. Okay. Terry, you mentioned wholesaler inventory tightening. Where do inventories per bell beaker stand and what do you view as a normalized level? And can you comment on any material gross net changes during the quarter?

Yes, absolutely, Craig. So in terms of the inventory levels, what we have typically seen over as long as I've been with the company the last year and a half has been anywhere in the, you know, the 2.3 weeks to 2.5 weeks, right in that range. That's where we'd like it to be with our growth trajectory. We saw it drop down at the end of Q2 to under 2 weeks to about 1.9. A couple of the wholesalers in particular have really seemed to have tightened down in general. We think it's probably maybe a bit of them managing their own businesses across the board, but That's where we are right now. We personally, I mean, Scott and I watched this very carefully, and our ideal would be to be around two and a half weeks, I think, at least, to be able to manage the growth that we have. There were not any material movements in the grossness. Overall, pretty consistent quarter over quarter. As I typically do see, the second quarter inches up a little bit compared to the first quarter, and the third quarter will again as patients move into the donut hole. and the coverage gap, but I wouldn't call it a material shift. It was, you know, maybe a percent or so.

in the quarter, would you say are temporary versus more permanent in nature?

I'm sorry, you cut out at the beginning of your question. Could you repeat the beginning of it?

Yeah, how much of the SG&A savings in the quarter would you say are temporary versus more permanent?

That's a great question. I would say that most of it is, I guess, what you would call permanent in nature. We, you know, we've deferred some activities. So, there are some investments or initiatives that we'd like to pursue that maybe we come back to at a later time. Some of it is, I would say, is potentially temporary. It's related to T&E savings as reps and others of us are not traveling as much. So if and when the world gets back to traveling as it did before, I think we'll see that pick up some. But we did take a hard look across a number of areas to make some savings in terms of potential new hires and other activities.

Got it. And then just kind of a bigger question, bigger picture question on the long-acting opioid market. As you think about the size of the market and how big it is, used to be and how they got to at its peak and how it's been shrinking for a number of years. What do you view as sort of a normalized baseline level for long-acting opioid prescribing? And when do you think the market could reach that point?

Hi, Greg. It's Scott. Appreciate the question. So when we're modeling kind of where the market will be, it depends on what products, obviously, you're throwing into the market. Ours is pretty inclusive. But We're looking at somewhere, you know, north of 875,000, closer to 900,000 TRXs on a monthly basis.

Got it. And just a quick last one for Jeff. Are you considering dropping the interim title? Thank you.

I hope everybody can hear me. I understand my connectivity is not great. We had a power outage around here last night, so hopefully they can hear me okay. As far as the intro and title goes, as I mentioned in my remarks before, I plan to very much remain in a key leadership role here at B5 for the long term and very committed to working with the executive leadership team, which I found to be excellent, but also with the board. And this is all about taking B5 to the next level. It's a space I know well, a pharmaceutical sector I know well, and we're very much focused on continuing the strong growth and really focusing on differentiated products and also on business development, as I mentioned before, and really a key area for us as well. So when you take a look at it, I've done the CEO role quite a number of times, and I really like the challenge. Right now, I'm going to be in the interim role. I'm continuing forward indefinitely. There's really no plan to change that at this point. But just the main thing I want you to take away is look at, We've got a strong team. We've got great products. We're committed to making sure we take things to the next level. And, you know, microenergies are focused on delivering great execution results. So no change in status at this point. That's for sure.

Got it. Thank you.

We will now move to our next question from Scott Henry from Roth Capital. Please go ahead. Your line is open.

Thank you, and good morning. I guess just for starting, do you have any thoughts on revenue guidance? I know you had it out there before and then kind of pulled it back. Do you want to make any comments on it at this point, or would you consider it after the next quarter? Just wanted to get that out there.

Hey, Scott. So it's a good question. I think at this point in time, We have a lot of confidence in our brands. We're really pleased with how this quarter has progressed and how the business continues to progress through this period of uncertainty. But we really do feel it's important to provide guidance when there is more certainty about the future. And if anything, some of the recent trends with the pandemic don't give us that full set of confidence. So we'd love to be able to come back and give it as soon as we feel it would be appropriate to do so.

Okay, fair enough. Second question, severance, $5 million seems like a large number. Any comments on why that number was of that magnitude?

So that was the number. It's a combination of cash and stock compensation. It is associated with the contract that Herm had in place.

Okay. I guess staying on the income statement, the operating expense savings significant, I know you've mentioned that before, roughly the $3.5 million, how much of that do you think was in G&A versus selling expenses?

So, yeah, so I would say – Probably about half and half. Obviously, T&E is a component of spending both parts of the business. And as I mentioned before with the other question that came in, you know, we did see lower travel with both, but obviously we have a bigger sales force than management. But there were savings across both areas. I think we typically, you know, early in the year you – you know, to kick off some of the marketing initiatives, you tend to spend a little bit heavier in the first quarter. And so that, you know, wouldn't have come in as much in the second quarter. And we, you know, delayed some initiatives, as I said before. So it's probably a mixture. It's a mixture.

Okay. Terry, the final question for you, as I was just getting through the income statement, you're starting to stack together a lot of positive earnings quarters. At some point, the accountants will tell you to expense for taxes, whether you're paying them or not. When would you expect to start reporting on a fully taxed basis?

So we have well over $250 million of NOLs out there. So I think you – wouldn't see us having to pay taxes for, federal taxes certainly, for quite some period of time.

Yeah, but if I recall, on the accounting side, won't you have to, at one time you'll book a one-time gain for that, and then you'll report on a continuing ops basis tax. Perhaps we can take that offline, but I believe that's the problem.

Yeah, we can first follow up on that offline.

Okay. Shifting over to Scott. Scott, it sounds like in 2Q, The sales reps were running at about a 60% to 70% relative productivity rate based on the numbers you gave. Where do you think that is in real time? I mean, obviously, they're not going to be back up to 100% yet, but are they making gains sequentially from 2Q to Q3? I imagine they are, and I'm just curious the magnitude of that.

Yeah, no, I appreciate the question, Scott. So we were – very thoughtful as part of our COVID committee in evaluating when to kind of stagger the release, reopening of territories. So it was very gradual through May and June, actually June. And then in early July was the first time we were 100% all territories open. I guess, you know, in my opening comments, we talked, I talked a lot about the hybrid role and Jeff mentioned as well. I think what we've done here is we realize we're not in this environment and forever long it lasts. We're probably not going to have the same number of face-to-face visits as we once had. We're really encouraged that that number's gone up each week, except for the holiday week, you know, Fourth of July week. But we've seen it go up, and it's now well over 50% of the face-to-face visits we had pre-COVID. But with all the other systems we've built, we have the ability to present to HCPs virtually over WebEx where we can share materials in a compliant manner. We have a dedicated email portal with information we can send and then text messages. We've done virtual speaker programs. There are a lot of different ways we're educating. So our thought process was if we're not going to get the same number of face-to-face, we need to build a platform that can pivot. And it's different across each territory, and each office has different protocols even than maybe how often we can go in. So we're encouraged by the fact that we blend together everything our sales force is doing. We actually are getting more touch points than we were previously. Now, we do believe face-to-face matters. We've seen that. Jeff touched on we had a small expansion early in early in Q1, and that group actually grew at twice our national average from Q1 to Q2. So, you know, plugging in some new individuals into territories that were a little bit underserved, we saw a nice return. So, you know, I think going forward it's going to be a blend. We feel we have, besides just what the reps are doing, we've also augmented with marketing programs also, a lot of digital work as well. whether it's banner ads, where HCPs are located. We have a Facebook page now for patient access, things like that. So all these things kind of blend together to be able to adapt depending on what's going on in the world and each individual territory. Hopefully that helps.

We will now move to our next question from David Anselm from Piper Sandler. Please go ahead. Your line is open.

Hi, everyone. This is Zach on for David. Thank you for taking my question. Just a quick one for me on some pro again. Sorry if I missed this. But we were just hoping to get some color on what you guys kind of need to do to gain share for the product specifically to gain share on Movantic. Thank you.

Hi, Zach. It's Scott. Appreciate the question. And one of the key things, I believe, and we announced a couple small wins today, but Since we got the product back, one of the things early on was, you know, we had market access that was average. You know, we did have access in certain plans, but we've done a really nice job in Q1, actually end of last year and early this year, of adding some really large payers with CVS. We were disadvantaged within CVS, and now we're basically on equal status as Movantic, and you see our market share grow significantly. Literally, it's up over 40% since that change in early 2020. Same with Prime Therapeutics where, you know, we've basically more than doubled our business in two quarters. So we're going to keep chipping away at the market access side of things there. I think it's a marketplace that's very sensitive to market access. and we'll also look to implement some different marketing programs here over the next quarter or two as well to accelerate the growth. Again, in my opening comments, it's meant to be a complementary product. We believe we can continue to grow it, but we also are mindful that Albuquerque will be first and Simproic is second, and we don't want to – you know, lose Belbuco momentum or a Belbuco call at the expense of a Subproact call as well. So trying to balance those two things. But I believe based on some of the things I mentioned earlier, we'll keep moving the ball forward and continue to take market share.

Great. That makes sense. Thank you. You're welcome. Thanks, Zach.

We will now move to our next question from Tim Lugo from William Blair. Please go ahead. Your line is open.

Thank you for getting the question. Can you broadly talk about price? It seems like the industry has settled into a pretty regular pricing dynamic. However, there's obviously been costly disturbances around the pandemic, which everyone is dealing with. There's also been inventory fluctuations. What's your current thinking around price and maybe being more aggressive there, or maybe even just less predictable?

So it's difficult, obviously, to discuss price. I think it's one where, you know, we look at it on a regular basis and what's appropriate for the market and where the broader landscape is. So I really don't have any other comment to take beyond that. I don't know, Terry, if you have any additional comment that you'd like to add as well.

Sorry, I was... I was on mute. So I think on pricing, what we've tended to look at, we feel like, you know, there's a balance that you're considering every time. And when you go, you know, if you take a higher price increase, you run into price protection on different contracts, you run onto Medicaid impacts, you know, best price, things like that. So we tend to say, let's make sure we're pricing appropriately and, you know, basically being able to take advantage on a net basis as much of the price increase as we can. But I think you've seen us now typically once a year doing the price increase. And, Scott, I think you would agree that we feel that that's appropriate.

That's correct. I think our price increase we took earlier this year was 5%. We're able to realize most of that based on the contracts we have in place.

Okay. Fair enough. And, you know, maybe for Scott, you know, the Sun Belt is obviously an important region for most of the class. Can you talk about just kind of what is – what does the region look like on the ground right now? You know, we obviously have some weather down in Florida, and, you know, are we seeing any compounding effects? And was anything more kind of sensitive during the quarter than – Maybe, you know, the March timeframe.

Are you referencing, like, the different market dynamics involving during the pandemic and with the weather? That's what you're referencing, I assume.

Yeah, yeah. You know, obviously, COVID has been impacting the Sun Belt during the quarter, and now we have some weather, so I was kind of hoping for maybe, you know, some real-time comments.

Yeah, so let me go first, Scott, and then you jump in. But, you know, obviously, it's going to be a venue we have where we assess and get field input, customer input every week, and also with other companies as far as benchmarking what's going on in different regions of the country. So it's not one-size-fits-all, which I think you're referencing, and also, you know, how – We're approaching the market in a different area. It can vary from week to week based on how the experience in general. But I hope it's true. I know it's something that would be repetitive from what I said before, but people do make a difference. And what we're finding is no matter if we're able to fix the face of the customer or not, what we're finding is that virtual or face-to-face, the combination between the two and the activity is It does make a difference. So that's why we're so very focused on making sure we understand the racial differences, to your point, which is a really good point. It's one where we recognize that early on, that it's not one size fits all. The power of playing the game as far as locally, it varies. And it's something that we have to stay on top of, and we will continue to stay on top of going forward. with the different dashboard metrics we have in place, but also the regular weekly venue if people didn't put up to their foot to make sure we're on top of that. Scott, do you have anything else you want to add to that?

I think it's well covered, Jeff. It is variable from territory to territory, and I think I'm going to go back to I think we've built a platform that allows our reps to pivot based on the needs, not just territory level, but HCP level, and it you know, one of our marketing goals is to have something, a different venue, a different touchpoint that we can provide almost on a monthly basis, especially if it's going to happen at a distance, to interact with HCP. So something different to grab their attention and interact with them, you know, even if it's a minor change or a point to share. So we're working closely as a complete commercial team to make sure we have the right tools in the reps' hands.

Thank you. Thanks, Tim.

We're going to take our last question from Matt Kaplan from Ladenburg-Calman. Please go ahead. Your line is open.

Hi, guys. Good morning. Thanks for taking the questions. And just wanted to follow up on a couple of the other prior questions in terms of – looks like you successfully kind of, you know, entered into, um, you know, addressing the pandemic and the issues that caused the dislocation there. And, but can you help us understand in terms of when we should expect kind of return to growth of revenues with respect to, um, Belbuca and, and, and to Coral Coast, um, given, given the kind of the pandemic dynamic that we're seeing right now and, uh, and what you're seeing on the ground right now.

Thanks for the question, Matt. It's Scott. So, you know, we talked a lot about the patients returning and new to brand, and I shared earlier, to be more specific on the numbers, we were seeing just under 1,200 new patients a week for the four weeks in February. You know, that fell down to about 900 in April and May. And we're encouraged that June, the MBRX is there, averaged 1,073. So already kind of bouncing back. And the market looked like that as well. You know, last data point we have, it's one data point, but, you know, MBRX share was 7.8%. So it was a nice bump up for us. We're not going to just rely on the market, though, to recover completely. We realize we're going to need to grab more share. We're implementing, we've implemented already, you know, three different things I think will help impact MBRXs. First is a prior authorization hub. So we want to help patients get through the prior authorization process if necessary, especially if the offices are understaffed. And then we've enhanced our copay card program, which reduces the maximum out-of-pocket for patients. And we think As patients are financially stressed during this time, it may help them, first off, stay on the product if they're a current user, but also may make it easier for people to start. And we actually have heard many examples of that. And then we've also literally just kicked off this week a new-to-brand program whereby we're reducing or eliminating financial burden commitment by the patient on their first prescription. And this is meant to augment what we're doing, and it's not going to be for every new patient, but I do think obviously it has to be commercially only and compliant. But I do think literally what we've demonstrated with the levels we were at, we still had growth. If we want to accelerate that growth, we need to raise the NBRXs in the coming quarters. And we believe we have the plan in place to do that.

Okay. Thanks, Scott. That's very helpful. And then a question for Jeff in terms of you mentioned that you've got the BD element of the business. Can you maybe detail for some of us your BD goals for the remainder of 2020 and looking into the first half of 2021? Jeff?

Jeff.

I don't know. Jeff may have dropped.

He may have. He's been having some connectivity problems. Maybe we can follow up on that in our follow-up call.

Yeah, that would be great. Okay. Thanks, guys. Thanks a lot, Scott. Yep.

Thanks, Matt. Appreciate it.

Thanks. Thank you. That will conclude our Q&A session, and that will conclude the call. Thank you for your participation. You may now disconnect.