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spk08: Greetings and welcome to the Collegium Pharmaceutical, Inc. first quarter 2022 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, please press star 1 on your telephone keypad. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Alex de Sala, thank you. Please go ahead.
spk06: Thank you, operator. Welcome to Collegium Pharmaceutical's first quarter 2022 earnings conference call. This is Alex de Sala, head of investor relations at Collegium Pharmaceutical. I am joined today by Joe Schifoni, our chief executive officer, Colleen Tupper, our chief financial officer, and Scott Dreyer, our chief commercial officer. They will share some prepared remarks, and then we will take your questions. Before we begin today's call, we want to remind participants that none of the information presented today is intended to be promotional and that any forward-looking statements made today are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. You are cautioned that such forward-looking statements involve risks and uncertainties, including and without limitation the risks that we may not be able to derive the expected benefits of our recently completed acquisition of Biodelivery Sciences International on the proposed schedule or at all, that we may not be able to successfully renegotiate our contracts related to Xtamsa ER prescriptions on desired terms, that we may not be able to successfully commercialize our products, and that we may incur significant expense and may not prevail in current or future patent infringement litigation or other litigation pertaining to our products. These risks and other risks of the company are detailed in the company's periodic reports filed with the Securities and Exchange Commission. Our future results may differ materially from our current expectations discussed today. Our earnings press release and this call will include discussion of certain non-GAAP information. You can find our earnings press release, including relevant non-GAAP reconciliations, on our corporate website at collegiumpharma.com. I will now turn the call over to Collegium CEO, Joe Schifoni.
spk03: Thank you, Alex. Good afternoon, and thank you everyone for joining the call. At Collegium, our mission is to build a leading, diversified specialty pharmaceutical company committed to improving the lives of people living with serious medical conditions. We are dedicated to delivering on our mission, upholding our strong corporate culture, and supporting the communities where we live and work including through our partnerships with Life Sciences Cares and Science from Scientists, two organizations with missions that we are passionate about, STEM education and eliminating the impact of poverty. In the first quarter, Collegium was recognized by our employees for the second year in a row as a top workplace in the USA. I want to acknowledge my colleagues for their hard work and thank them for their dedication to people living with serious medical conditions and the communities we serve. 2022 is a pivotal year for Collegium as we embark on a period of growth and value creation. In the first quarter, we made meaningful progress against our strategic priorities. Key accomplishments include we completed the acquisition of BDSI, which is strategically and financially transformative, solidifies our leadership and responsible pain management, and gives us a strategic foothold in neurology. We are on track to exceed targeted run rate synergies of at least $75 million. We integrated BDSI seamlessly and achieved day one field force readiness. We grew Belbuca and Xtamsa ER total prescriptions 4% and 3% respectively over the first quarter of 2021. We received FDA approval. We received approval from the FDA for the prior approval supplement for a new Nuscenta ER manufacturing site, which is expected to have a positive impact on Nuscenta gross margins in the second half of 2022 and be fully realized in 2023. We executed a master settlement agreement resolving all 27 pending opioid-related lawsuits brought against the company by cities, counties, and other subdivisions in the United States. We appointed Dr. Tom Smith as chief medical officer and we strengthened the Board of Directors with the appointment of Neal McFarland, former Chief Executive Officer and Director of Adamas Pharmaceuticals. The first quarter was a strong start to the year, and we expect to deliver record revenue and adjusted EBITDA in 2022. We are focused on executing a three-phase action agenda that will position us to achieve our financial objectives in 2022 and accelerate top and bottom line growth in 2023. Phase one is to ensure seamless integration of the acquisition through the end of the second quarter. Operational integration was immediate with no disruption to our core operations. Our team achieved day one commercial readiness and we are on track to exceed our targeted run rate synergies of at least $75 million. Phase two is generate momentum and will be the focus for the second half of 2022. Our priorities are to grow Belbuca and Xtamsa ER total prescriptions and complete contract renegotiations that account for 50% of all Xtamsa ER prescriptions. We remain absolutely committed to gross the net for Xtamsa ER of less than 65% beginning in January 2023. Additionally, as part of phase two, we will achieve the remaining acquisition synergy targets and execute a focused and phased launch of Elixib. Where we choose to play with Elixib, we will play to win and we will be synthesizing learnings and assessing uptake throughout the year. Any expansion of the neurology footprint in support of Elixib will be success gated. Phase three is Accelerate and will be the focus of 2023. Extamsa ER grossed a net of less than 65% beginning in January, along with prescription growth of Belbuca and Extamsa ER will drive acceleration. We will further bolster the bottom line by realizing the full benefit of our synergized cost structure. Our priorities for the remainder of the year are crystal clear. We are focused on growing the top line, accelerating the bottom line, strategically deploying capital to create shareholder value, and renegotiating Xtamsa ER contracts to achieve gross to net impact of less than 65% beginning in January 2023. As it pertains to capital allocation, business development is our number one priority, and we are focusing on commercial stage neurology assets with $150 million peak sales potential that will expand our presence in neurology. We also plan to rapidly deleverage our balance sheet by paying down debt, and we have more than $50 million remaining from our $100 million authorized share repurchase program that we can use to opportunistically buy back shares. 2022 is off to a strong start. We are on track to achieve record revenue and adjusted EBITDA for the year. We completed a strategically and financially transformative acquisition, seamlessly integrated BDSI into our business, and are on track to achieve our synergy target. Our balance sheet is strong, and we will accelerate operating cash flow through the remainder of this year. We are well positioned to continue to strategically invest in the growth of our business and create value for our shareholders. I will now turn the call over to Colleen for a discussion of the financials.
spk07: Thanks, Joe. Good afternoon, everyone. We entered the year in a strong financial position. In the quarter, we seamlessly integrated BDSI into our organization while managing operating expenses. We generated positive operating cash flow, excluding one-time acquisition related expenses, and driven by the financially transformative BDSI acquisition, we exited Q1 even stronger. Total net product revenues for the quarter were $83.8 million, down 4.5% over the $87.7 million in the first quarter of 2021. Revenues include eight days of BDSI sales. Xamsa ER gross to nets in Q1 was 71.4%, which is in line with our expectations. For the full year, we expect gross to net around 73% with some lumpiness from quarter to quarter. Operating expenses, which include stock-based compensation, were $58.5 million in the quarter. Adjusted operating expenses, which exclude stock-based compensation and acquisition-related expenses, were $25.2 million, down 8.4% compared to $27.5 million in the first quarter of 2021. We achieved significant leverage in the quarter as a result of the synergies realized from the acquisition of BDSI. More on that later. We remain committed to managing expenses and leveraging, not growing, our cost structure. Our goal is to grow revenue approximately two times the rate of operating expenses in 2022. Net loss for the first quarter was $13.1 million compared to net income of $15.7 million in the first quarter of 2021. Income from operations excluding acquisition-related expenses was $17.2 million. Non-GAAP adjusted EBITDA was $43.5 million in the first quarter, down 4% compared to $45.3 million in the first quarter of 2021. Before I cover the balance sheet, let me share more on the synergies achieved to date following the acquisition of BDSI. As a reminder, we closed the deal on March 22nd. I'm pleased to say that we implemented operational changes on closing that are providing immediate synergies post-close. We are also on track to exceed targeted run rate synergies of at least $75 million. As a result of the transaction, we estimate that our net leverage will be below 3x by the end of this year, based on estimated fiscal year 2022 pro forma combined EBITDA, including run rate synergies. We also expect significant cash flow generation post-transaction that will enable us to quickly deleverage and maintain a strong balance sheet to fund our growth going forward. Moving to the balance sheet, we exited the quarter with a cash balance of $106.7 million. We expect operating cash flow to accelerate from here, which will further strengthen our already strong financial position. This gives us optionality in deploying our capital. Our number one priority for capital deployment remains business development, and we have flexibility to fund or finance additional transactions near term. In addition, we will rapidly deleverage the balance sheet by paying down $100 million in debt by March of 2023 and the remaining balance over the next three years. In this regard, we expect to have debt to EBITDA ratio of less than 3x by year end. We also have the option to opportunistically return capital to shareholders with the $52 million remaining on the $100 million share repurchase program authorized by the Board last year. Today, we are reaffirming our full year 2022 financial guidance originally provided on April 5th. For the full year we expect, total product revenues in the range of $450 to $465 million up approximately 65% at the midpoint compared to net product revenue of $276.9 million in 2021. Total adjusted operating expenses, which excludes stock-based compensation and acquisition-related expenses, are expected in the range of $130 to $140 million. In 2022, we expect to grow revenue at approximately two times the rate of operating expenses. Total adjusted EBITDA, which excludes stock-based compensation and acquisition-related expenses, is expected in the range of $235 to $250 million. This is up approximately 105% at the midpoint compared to adjusted EBITDA excluding stock-based compensation of $118.3 million in 2021. 2022 is a pivotal year for Collegium. We have started the year off strong and are executing well against our plan. We are entering an exciting phase of growth and value creation for the company, and I am looking forward to the year ahead. I will now turn the call over to Scott.
spk09: Thanks, Colleen. I want to start by recognizing the hard work of our people, which enabled us to be operational on day one after closing the BDSI transaction. Collegium is firmly established as the leader in responsible pain management. Our pain portfolio consisting of Belbuca, Xtamsa ER, Nucenta ER, and Nucenta IR is diversified and durable. The Collegium Pain Portfolio spans the continuum of care from acute to chronic pain and includes both Schedule III and Schedule II products. All four products are highly differentiated and viewed favorably by healthcare providers. Each product is distinctly positioned in sources differently. Together, Belbuca, Xtamsa ER, and Nucinta ER have approximately 50% share of the branded ER market. Belbuca and Xtamsa ER are growth drivers, and in market research, healthcare professionals articulate a high future intent to prescribe. Nucinta and Symproic are key contributors. Symproic is a differentiated opioid-induced constipation product with a complimentary pain specialist call point. In the first quarter, we saw total prescription growth and market share gains for Belbuca and Xtamsa ER. Compared to the first quarter of 2021, Belbuca total prescriptions were up 4%, and share of the branded ER market was up 2 percentage points to 17.4%. Belbuca's broad prescriber base grew approximately 8% to nearly 9,000 prescribers. Compared to the first quarter of 2021, Xtamsa ER prescriptions were up 3%, and oxycodone ER market share grew to 34.2%, up 3.6 percentage points. Xtamsa's large and growing prescriber base was up nearly 4% to approximately 18,700 prescribers. The Nuscenta franchise is a strong contributor, and Nuscenta ER maintained a stable 5.6% market share of the branded ER market in the first quarter. Symproic prescriptions grew approximately 13.7% over the first quarter of 2021. Elixib represents a launch opportunity and gives us a strategic foothold in neurology. Elixib is Celecoxib oral solution indicated for the acute treatment of migraine. We're taking a focused and phased approach to the Elixib launch and where we choose to play, we'll play to win. Initially, we will have 25 territories calling on approximately 3,500 doctors that represent about 15% of the acute migraine market in the US. We'll be assessing receptivity and uptake throughout 2022. Any expansion of the neurology footprint in support of Elixib will be success-gated. To close, we're in a strong position. Belbuca and Xtamsa ER are growing volume in market share, which we expect to continue for the remainder of the year. We're actively renegotiating contracts that represent 50% of all Xtamsa ER prescriptions and are absolutely committed to managing gross to net to less than 65% beginning in January 2023 and beyond. For the remainder of 2022, We're laser-focused on growing Belbuca and Xtamsa ER prescriptions and maximizing the potential of the new Sinta franchise and Symproic. We'll be closely assessing the Elixib launch. I'm excited about our leadership position in the pain market and the strategic foothold we now have in neurology. With that, I'll turn it back to Joe. Thanks, Scott. I will now open the call up for questions.
spk08: Thank you. The floor is now open for questions. If you would like to ask a question, you may press star 1 on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star 1 to register a question at this time. The first question is coming from David Anselm of Piper Sandler. Please go ahead.
spk04: Hey, thanks. So just have a few. First, on Bill Bucca, can you talk about anything you may be doing differently from bio-delivery regarding commercial support of the product? And, you know, what I mean by that is anything differently in terms of physician targeting or how you're approaching the payer landscape? So that's number one. Number two, on Xtamsa, Just more of a refresher on getting to that 65% or below target. Can you talk about the extent to which you can at least get closer to that this year? Or should we think about the gross to net essentially being stable this year versus last year? What's the right way to think about that? Just remind me there. And then lastly on Elixib, you talk about a targeted launch. I guess what do you need to see in order to expand that? you know, commercial support of that product? You know, what kind of metrics are you looking for, targets, et cetera? Thank you.
spk03: Great. Thanks, David. David, I'll take the Xtamsa question, and then Scott will take Bell Buick and Elixir. With regards to Xtamsa, the way to think of gross to net in 2022 is factored into our guidance. We're assuming approximately a 73% gross to net. So the impact of the contract renegotiations will all have effect beginning in January 2023. And Scott, Belbuca, Alexa?
spk09: Thanks. Yeah, thanks, David. So first, starting with Belbuca, when it comes to targeting and commercialization, one of the main drivers of the synergies related to this deal was the unbelievably high overlap of targets with Xtamsa and Nusenda targets. So our targeting is the same. We still are deploying 91 representatives to about 12,000 targets. And from a marketing standpoint, leveraging the same things we do on the rest of our brands, kind of broad non-personal promotion and enhancing our resources for our sales representatives. When it comes to the payer, so first and foremost for all our brands, we're always looking for opportunities to expand coverage. Right now, Bill Buca has broad commercial access, over 85%. As we have for the rest of our portfolio, as those contracts come due, we'll be always looking for opportunities to win, and we'll be assessing what we can do with those contracts as they're up for renewal. Now on to your question about Elixip. We're just getting going. We're excited about the opportunity in the foothold in neurology. As we said, 25 territories, 3,500 targets. As we get going here, the kind of first stage of our evaluation in terms of anything that would inform future expansion, when we see a level of performance that drives profitability at the territory level, from there we would make decisions on whether we wanted to expand or not.
spk04: Okay, helpful. Thank you.
spk03: Thanks, David.
spk08: Thank you. The next question is coming from Tim Lugo of William Blair. Please go ahead.
spk01: Hey, guys. This is Lachlan. I'm Tim. Thanks for taking the questions, and congratulations on the integration. On the topic of the integration, Scott, I think you may have just touched on this, but can you maybe talk on what the sales force looks like now relative to the two companies when they were standalone? I mean, has it grown at all, or maybe the mix of reps from BDSI that has that are still in the field. And then a second question, just given the timing of the deal close, is it fair to say that the synergies you've already realized are mostly going to be hitting in the second quarter and aren't reflecting first quarter numbers?
spk03: Great. Thanks, Lachlan. So Scott will take the question on field force and then Colleen on synergies.
spk09: Yeah. Yeah. Thanks, Lachlan. So first looking at our pain sales force. So right in pain, 91%. dedicated territories, 12,000 targets. And what's important there that's a bit of differentiation from where BDSI was, those people are 100% focused to our pain portfolio and not having anything to do with the Elixib launch. Then targeting and deployment for Elixib, 25 territories focused to about 3,500 targets that represent about 15% of the migraine market opportunity.
spk07: Hi, Lachlan. Thanks for the question. To date with the integration, it has been seamless, and as a result, we've achieved significant leverage in the first quarter realized from that. The majority of those synergies come from a rationalization of headcount across the functions, especially G&A and commercial roles. There are certain items that are contractual in nature and will take a little bit longer, but you're absolutely right. With only a few days left in the first quarter when the deal concluded, most of that synergy capture is in the second quarter and beyond.
spk01: Thanks. Thanks, Lachlan.
spk08: Thank you. The next question is coming from Serge Belanger of Needham & Co. Please go ahead.
spk05: Hi, good afternoon. Just a couple questions for me. The first one, just around market trends for the first quarter. I'm curious if the continuity of care headwinds that have been impacting extams are continued and whether those same headwinds, what impact they have on Belbuca. And then secondly, in terms of the contract renegotiations, I think you've been pretty clear about bringing down gross to net to 65% or less. But curious if you can change the terms of the contracts and impact the pull through going forward in January. Thank you.
spk03: Hey, Serge. So this is Joe. I'll take the market trend and then the hand contract renegotiations off to Scott. I would say early in the year, and let me step back. I think in our financial guidance, we were clear that, in previous discussions that we're not factoring in any improvement or assumption of improvement to the markets. We more or less are trending the prescriptions over the course of the year. The second thing I'd emphasize, this is a different year, in particular with Xtamsa, where we're not hitting the market with a bunch of new payer wins. And then to your question directly, At this point in the year, and the surrogate we would use is looking at the overall IR opioid market along with the NBRX market, I don't think that we've seen recovery to this point that you would expect to see in a post-COVID environment. So we'll see how the year progresses. What we're encouraged by is the fact that both Xtamsa and Belbuca are growth drivers, are growing market share. and are growing volume on a year-on-year basis, but we think that that continuity of care dynamic is persistent.
spk09: Yeah, Serge, thanks for the question on the renegotiation. So, yeah, we're in the throes of those renegotiations, and nothing new to report, but what I'll reinforce is our goal is for the life cycle of XAMSA is to maintain access while improving economics. That's what our focus is. And ultimately we're committed to being less than 65% gross to net immediately up on January 1st of 2023.
spk05: So would you look to switch from a exclusive position to a non-exclusive parity position or you expect those to stay put?
spk03: Yeah, Serge, this is Joe. I think the key thing with the high market shares, and that's the thing that needs to be appreciated within these exclusive accounts, we have exceptionally high market shares. So at this point, whether it's exclusive, whether it's maintaining a preferred position, I don't think in terms of brand performance matters at this point in time. And in the one plan that we talked about previously where we've had, it's really the first and only opportunity we've had to do so, we were able to reduce the discount rate while maintaining the exclusive access position. So we'll see where it ultimately nets out on the year, but we are absolutely committed to be less than 65 on January 1 of 2023. Great. Thank you. Got it. Thanks, Serge.
spk08: Once again, ladies and gentlemen, that is star one to register a question at this time. The next question is coming from Greg Frazier of Truist Securities. Please go ahead.
spk10: Thank you, and congrats on the progress. Just following up on Bill, do you think that the expanded commercial effort that you have behind the product could lead to an acceleration in demand growth at some point this year? Second question, on the returns issue, have you made any progress with your efforts to get reimbursement from the wholesalers? And then I'm not sure if I missed this, but on share buyback, if you could speak to your appetite for buying back shares at these levels, that would be helpful. Thank you.
spk03: Great. Hey, thanks, Greg. Look, Scott and I maybe will tag team on Bell Buca. Colleen can take returns and share buyback. I think when you look at Bell Buca and when you look at our presence in pain, the first thing I would emphasize is we are sized correctly for the opportunity that this portfolio represents. I would also share with you we're doing this call from our national sales meeting here in Las Vegas. And what I can tell you is that we have a highly motivated group of people who believe deeply in these pain products, along with physicians who view them as highly differentiated, view them favorably with a high intent to prescribe more. in the future. So I expect to see us get momentum coming out of this meeting. And as I outlined in the three-phased action agenda, our expectation for the second half of the year is to generate momentum. And that is anchored to a belief that we will see growth with Xtamsa and Belbuca setting up acceleration in 2023, driven by further prescription growth of both of those brands. And Scott, if there's anything more to add, Joe, you got it.
spk07: Great. Thanks for the question, Greg. Let me touch on returns first. So as far as where we are, we continue to pursue and engage with all of the wholesalers. We are committed to recouping as much cash as possible, and we'll update you folks accordingly when we've made some significant progress there. On the share buyback, to date we have used approximately half of the authorized amount, leaving a little over $50 million remaining for us. We are actively engaged in a business development search, and that is our top capital allocation priority, as noted in our prepared remarks. We do, however, look to the Share Repurchase Program, giving us the ability and the option to repurchase shares, as in when the time's right.
spk10: Thank you.
spk08: Thank you. Once again, ladies and gentlemen, that is Star 1 to register a question at this time. Our next question is coming from Brandon Folks of Cantor Fitzgerald. Please go ahead.
spk02: Hi, thanks so much for taking my question and congratulations on the progress. Maybe just one for me and I apologize if you covered this. Can you just remind me how large your Medicaid business is? And as you renegotiate these contracts over the next two years, how should we think about maybe the reset in Medicaid best price and the rebate there affecting gross to net? Thank you.
spk09: Yep. Thanks, Brandon. Scott, we'll take that question. Yeah, thanks for the question, Brandon. So across our portfolio, our Medicaid percentage is about 8% of our overall business. And by all means, the way Medicaid best price resets, as we renegotiate these contracts, the highest contracts we have are some of the ones that are expiring. And so we would expect it's a delay, usually of over six months, but a reset of the Medicaid best price if we're successfully able to renegotiate to lower levels.
spk02: Great, thank you very much.
spk03: Thanks, Brandon.
spk08: Thank you. At this time, I'd like to turn the floor back over to Mr. Schifoni for closing comments.
spk03: Thank you. We are building a leading diversified specialty pharmaceutical company committed to improving the lives of people living with serious medical conditions. We are the leader in responsible pain management, and we now have a strategic foothold in neurology that we intend to build upon. 2022 is off to a strong start and our priorities for the remainder of the year are clear. We will diligently focus on executing against our three-phase action agenda. Collegium is well positioned to embark upon a period of growth and value creation. I look forward to updating you on our progress. Thank you and have a good evening.
spk08: Ladies and gentlemen, thank you for your participation. You may disconnect your lines or log off the webcast at this time. And enjoy the rest of your day.
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