Collegium Pharmaceutical, Inc.

Q1 2023 Earnings Conference Call


spk09: Greetings and welcome to the Collegium Pharmaceutical first quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow a formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference call is being recorded. I will now turn the call over to Christopher James. Vice President of Investor Relations at Collegium. Thank you. You may begin.
spk06: Welcome to Collegium Pharmaceuticals' first quarter 2023 earnings conference call. I'm joined today by Joe Schifoni, our Chief Executive Officer, Colleen Tupper, our Chief Financial Officer, and Scott Dreyer, our Chief Commercial Officer. 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. Your caution that such forward-looking statements involve risks and certainties, including, and without limitation, the risks that we may not be able to successfully commercialize our products, that we may incur significant expense, and that we may not prevail in current or future litigation pertaining to our business. 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 on 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 I will now turn the call over to our CEO, Joe Schifoni.
spk05: Thank you, Chris. Good afternoon and thank you everyone for joining the call. Today we will discuss our financial performance during the first quarter and provide an update on our progress towards achieving a banner year in 2023. At Collegium, we are focused on building a leading, diversified specialty pharmaceutical company committed to improving the lives of people living with serious medical conditions. Our commitment to improving lives extends to our communities And in support of that, during the first quarter, we made a charitable donation to Kids in Tech, a nonprofit organization leading STEM education initiatives for kids from low-income households, and we donated 1,000 hygiene and essential kits for people in need through Life Science Cares. I'd like to thank our team for their commitment to our mission and for making Collegium a great place to work. In the first quarter of 2023, we delivered strong financial results and made progress against our strategic priorities. Key accomplishments in the first quarter include we delivered record quarterly revenue and adjusted EBITDA. We generated record quarterly Belbuca and Xtamsa ER revenue. We achieved gross to net for Xtamsa ER of 55%. reflecting the immediate impact of the successful contract renegotiations completed last year. We presented four posters at the American Academy of Pain Medicine's annual meeting, and we increased our cash balance, leaving us well positioned to execute on our capital deployment strategy. With our strong performance in the first quarter, we are confident 2023 will be a banner year. As we move through 2023, we expect to recognize significant top and bottom line growth. Top line drivers include Xtamsa ER growth cement improvement, full year Belbuca revenues, and Belbuca and Xtamsa ER prescription growth on a full year basis. We believe our fully synergized cost structure and financial discipline will further fuel bottom line growth and enable us to deploy capital to create long-term value for our shareholders. Our 2023 financial guidance includes growing adjusted EBITDA by over one and a half times revenue and over two times adjusted operating expenses. We are confident in our ability to deliver on our financial and strategic goals and have already made progress in the first quarter of the year. We are dedicated to making 2023 a banner year by executing our two-pronged strategy, maximizing the potential of our paying portfolio and deploying capital. We plan to maximize the potential of our paying portfolio through strong commercial execution. During the first quarter, we saw an immediate acceleration of Xtamsa ER revenue to a record level with year-over-year growth of approximately 52%. primarily driven by gross-to-net improvement to 55%. We also delivered record quarterly Belbuco revenue and will recognize the benefit of owning Belbuco for the full year. We do expect Belbuco and Xtamsa ER prescription growth on a full-year basis, and we anticipate that the Nusenta franchise and Simproic will be steady contributors. Our capital deployment strategy is focused on creating long-term value for our shareholders. Our top priority is business development. We are focused, active, and engaged. We are looking for differentiated commercial stage assets that have the potential to generate over $150 million in annual revenues with exclusivity into the 2030s. We believe market conditions are conducive to potentially getting a deal done. We are in a strong financial position, which gives us the opportunity gives us the flexibility to evaluate a range of deals that could be a great strategic fit for Collegium. We will remain disciplined in our approach. We are committed to rapidly paying down debt and opportunistically utilizing our share repurchase program to return capital to our shareholders. We are encouraged by our first quarter performance and confident that we are on track to achieve our financial objectives. Our strategy is clear. and our organization is focused on execution. I will now hand the call over to Colleen to discuss the financials.
spk01: Thanks, Joe. Good afternoon, everyone. We had a strong first quarter in which we delivered record quarterly revenue and adjusted EBITDA, maintained financial discipline, and generated strong cash flows while paying down debt. Financial highlights for the first quarter include Net product revenues were a record $144.8 million for the first quarter compared to $83.8 million for the first quarter of 2022, an increase of 73%. Belbuco net revenue was a record $44.2 million in the first quarter. Extensa ER net revenue was a record $47.9 million in the first quarter, an increase of 52% over the first quarter of 2022, and extensa ER gross to net was 55% in the first quarter. The lower gross to net was primarily driven by the extensa ER contract renegotiations we completed last year. As a reminder, gross to net is generally more favorable in the first quarter of each year due to the lower coverage gap expense, also known as the donut hole in Medicare coverage. As we move through the year, gross to nets are expected to be less favorable in the second and third quarters, and improved sequentially in the fourth quarter, but remain less favorable than the first quarter level. This is consistent with what we have experienced in past years. We expect full year EXAMSA ER gross to net to be between 61 to 63% in 2023. NUSINSA franchise net revenue was 49 million in the first quarter, an increase of 1% over the first quarter of 2022. Gap operating expenses were $52.8 million in the first quarter, which decreased 10% compared to $58.5 million in the first quarter of 2022. Adjusted operating expenses were $38.2 million in the first quarter, which increased 52% compared to $25.2 million in the first quarter of 2022. Our operating expenses were front-loaded into the first quarter, reflecting investment in our growth initiatives for the year. We expect operating expenses will trend lower in the subsequent quarters of 2023. Net loss for the first quarter was $17.4 million compared to a net loss of $13.1 million in the first quarter of 2022. Included in GAAP net loss, among other items that do not represent our ongoing operations, is a $23.5 million loss on extinguishment of debt related to the repurchase of a portion of our 2026 convertible note. and an $8.5 million charge related to our settlement agreement with Equestive Therapeutics. Non-GAAP adjusted EBITDA was a record $87.6 million for the first quarter compared to $43.5 million in the first quarter of 2022, an increase of 101%. GAAP loss per share was 51 cents, basic and diluted, in the first quarter compared to Gap loss per share of $0.39, basic and diluted, in the first quarter of 2022. Non-gap adjusted earnings per share was $1.32 in the first quarter compared to $0.71 in the first quarter of 2022, an increase of 86%. Please see our press release issued earlier today for a reconciliation of gap to non-gap results. As of March 31, 2023, our cash balance increased to $269.5 million. During the quarter, we paid down $25 million in debt related to our term notes. We also completed a $241.5 million convertible note offering with a maturity in February 2029 as a matter of good corporate hygiene. The later maturity provides us with more financial flexibility in the management of our debt. We used $140.1 million of proceeds from the offering to repurchase a portion of our convertible senior notes due in 2026. After note issuance costs, we had approximately $97 million of net proceeds, which we intend to use for general corporate purposes, including the implementation of our capital deployment strategy. We ended the first quarter at one and a half times net debt to adjusted EBITDA and expect to the end of the year at approximately one time. We are pleased with our strong first quarter performance, which reflects the progress we are making as we execute our financial objectives for the year. We are reaffirming our financial guidance for 2023. We expect net product revenues in the range of $565 to $580 million, adjusted operating expenses in the range of $135 to $145 million, and adjusted EBITDA in the range of $355 to $370 million. Our capital deployment strategy is focused on creating long-term value for our shareholders. Our strong financial position allows us to execute our capital deployment strategy. Our top priority is business development, and we are committed to taking a disciplined approach in a market that we believe is conducive to potentially getting a transaction done. We are locked into rapidly deleveraging our balance sheet. We're on track to repay $162.5 million of debt in 2023. which would put us at approximately one times net debt to adjusted EBITDA at year end. Our ability to deliver quickly is a testament to our strong cash generation. Finally, we have the ability to return capital to our shareholders by strategically leveraging our share repurchase program. In January 2023, our board authorized a new share repurchase program for $100 million. We are very pleased with our first quarter performance and strong start to 2023 as we positively track against our key financial and strategic priorities. I will now turn it over to Scott.
spk08: Thanks, Colleen. As we look at performance in the first quarter, there are two key takeaways. First, the contract renegotiations for Extensa ER that we completed in 2022 have had an immediate positive impact. driving gross-to-net improvements and accelerating net revenue. This year, we have the opportunity to renegotiate contracts that represent 30 percent of prescriptions, and we've created room to opportunistically secure new payer wins while ensuring gross-to-net for Xtamsa ER remains below 65 percent forever. Second, as we look at Belbuca and Xtamsa ER, prescription performance was generally in line with our expectations. We believe the growth of Xtamsa and Belbuca were pressured by typical first quarter dynamics where deductibles reset and increase out-of-pocket costs for patients. Consistent with past years, we expect this to normalize in the second quarter. Additionally, Xtamsa ER prescription growth was pressured due to Xtamsa being removed from formulary on January 1st within plans we renegotiated last year that represented approximately 10% of Xtamsa ER prescriptions. We believe that on a full-year basis, we will see prescription volume growth for Belbuca and Xtamsa ER. This is our number one commercial priority. The fundamentals of both brands are strong, and we believe they are positioned for growth. Xtamsa ER and Belbuca are viewed favorably and are considered highly differentiated by healthcare professionals. These same HCPs have indicated a strong intent to increase prescribing of Xtamsa and Belbuca. The prescriber bases of both Xtamsa and Belbuca are large, with approximately 19,000 and 9,000 prescribers in the first quarter, respectively. This reflects the value these products bring to pain management. Both products have broad commercial coverage, and Xtamsa ER has strong coverage within Medicare Part D. Xtamsa and Belbuca grew market share in the first quarter compared to the fourth quarter of 2022, and Xtamsa, Belbuca, and Nusenta ER have a combined 49% share of the branded ER market. The commercial organization is taking specific actions to differentiate our portfolio and fuel growth. These actions include the following. Launching new promotional campaigns and educational resources for our sales team to use during interactions with HCPs and pharmacists. Launching new digital and non-personal promotional content, which reinforces the clinical differentiation of Xtamsa and Belbuca. Launching new personal and non-personal promotional tools and working with payers to pull through the strong access positions of Xtamsa ER and Belbuca. In March, we had a national sales meeting to reinforce the brand strategies and messaging for our differentiated products. Our commercial organization, a highly motivated group of people who believe deeply in our pain products, aligned on our priorities and participated in numerous workshops and practice sessions designed to strengthen the impact of their customer engagements. Every member of the commercial organization is focused on executing our plan. Our second commercial priority is winning in managed care. Our first step to winning is pulling through the strong access positions that we have for Xtamsa ER and Belbuca. Our second step is renegotiating Xtamsa ER contracts that expire this year, which represent an additional 30% of prescriptions. Our third step to winning in managed care is securing new access positions for Belbuca and Xtamsa in 2024. For Belbuca, our priority is improving access within Medicare Part D. We believe that the clinical differentiation of Belbuca warrants broader coverage within Medicare Part T, and we're actively engaged with payers to find a path to better access for patients. We're highly engaged with payers discussing the clinical value of Xtamsa ER and Belbuca and the difference both products can bring to patients. We're encouraged by the level of engagement. In closing, we're committed to achieving our commercial priorities in 2023 of growing Xtamsa ER and Belbuca prescriptions and achieving wins in managed care. I'll now turn the call back to Joe.
spk05: Thanks, Scott. We are encouraged by our performance in the first quarter, which demonstrates the progress we are making on our strategic priorities. We have a lot of work ahead of us, but we are confident that 2023 will be a banner year for Collegium. I will now open the call up for questions. Operator?
spk09: Thank you. And at this time, we will conduct a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. 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. Our first question comes from David Amselem with Piper Sandler. Please state your question.
spk03: Hey, thanks. So just a couple. First, Joe, I know you talked about Examsa and Bill Bucca volume growth or your expectations for volume growth. So I was wondering if you can elaborate more on what you're doing to drive renewed volume growth for Examsa and also what you're doing from a sales and marketing perspective on Bill Bucca. That's number one. And then number two is for Bill Buca, I think historically Medicare Part D access was a real challenge. So is there anything that's changed regarding your dialogue with payers in terms of Part D and what are your expectations on the Part D front? for Bell Buca as this year progresses and looking beyond this year. Thank you.
spk05: Okay. Thanks, David. I'm going to have Scott answer the first question around the actions we're taking to grow volume with Xtamps ER and Bell Buca, and then maybe I'll share some perspective on Medicare Part D. All right.
spk08: Yeah, thanks, David. Yeah, look, when you look at actions that we're taking, I put them into a couple of buckets. First, we're launching a lot of new resources to improve the engagement of our customers through the sales representatives. So I mentioned at the national sales meeting, we went through a lot of training and workshops and the critical piece is we're now a year into the acquisition of Belbuca. And I can see that people are comfortable with the product, comfortable with the resources and excited to continue to drive that product forward. Also from a non-personal digital standpoint, we continue to put new content into the marketplace and, to raise awareness around the profile of our product. So those are the primary actions that we're taking, David, to reinvigorate growth.
spk05: Okay. And then, David, with regards to Medicare Part D, I think what we've chosen to do, because we think it is a product that certainly merits availability to that patient population, is to take a blank canvas approach or assume that the payers knew nothing about Belbuca. And we started foundationally with clinical presentations, and we were surprised to learn that they actually didn't have high awareness in the knowledge set you would expect around Bell Buca. And those are the encouraging discussions that Scott referenced that we've had to this point. So we'll continue to work towards it. Our hope is, based off of those positive conversations, that we'll be able to unlock some opportunity in Medicare Part D, and that would have impact in 2024 if we were successful in doing so. And as we always do in our November call, we'll provide an update on the payer landscape and its evolution. That's helpful.
spk03: If I may just follow up. In terms of the bell lucre gross to net, I know it's early and this is fluid, but do you have a sense of, I guess, where you would take the gross to net up to for Bell Buca in exchange, essentially, for better party access?
spk05: Yeah. So what I would say, David, I don't want to give any specific perspective on that, but I would distinguish any approach that we take with Bell Buca would be much different than what it is we've historically done with Xtamsa ER where we were. Got it. Okay. Thank you.
spk09: Thank you. And our next question comes from Tim Lugo with William Blair. Please state your question.
spk07: I was talking about business development. It sounds like there are a couple deals that you're looking at. I think you mentioned $100 million in product revenue. Can you just talk about kind of profile of the deals you're looking for in terms of margins as well as overlap in the sales force?
spk05: Yeah, sure. So thanks, Tim. And let me apologize, everyone. Our systems here went down. So I appreciate you hanging in there with us. Look, from a business development perspective, because we believe the current market conditions are conducive to getting a deal done, we're being agile in terms of what potential therapeutic area and what we're focused on is number one, differentiated assets. We think that's critical. in order to be able to get reimbursement, which is critical to commercial success. From a peak sales perspective, we're looking for assets that have greater than $150 million of peak sales potential, and then assets that have runway into the 2030s. And you're correct, Tim. We are very focused and active right now with regards to our business development efforts and Colleen maybe can give a perspective in terms of how we think about it from a size and capacity perspective.
spk01: Yeah, thanks for the question, Tim. What I'd add on to that from a size and capacity perspective is we have flexibility with the strength of our balance sheet. As we've stated previously, we would be comfortable for a commercial stage asset to go up to four times net debt to adjusted EBITDA. And we're generally looking at assets with the market caps of a billion dollars or lower, and we would be looking for something that's potentially not accretive in the first year, but is very rapidly accretive in year two, definitely by year three.
spk07: Great to hear. Thank you.
spk01: Thank you.
spk09: Our next question comes from Brandon Folks with Cantor Fitzgerald. Please state your question.
spk02: All right, thanks for taking my question. So maybe just a few from me. Congratulations, firstly, on the gross net performance in the quarter. Can you just talk about that first quarter gross net performance, though, in light of your expectations and in light of the guidance? Obviously, you reiterated guidance on the gross net side today. Should we expect, you know, one or two quarters, maybe two Q, three Q sort of outside of that gross to net range and kind of averaging back into it? Or is it just sort of conservatism at this stage reiterating that guidance range? So maybe we'll stop there.
spk01: Thanks, Brandon. Great question. No, we're still expecting from a full year perspective to be in the 61 to the 63% range. With the portion of business for extensa that's weighted to Medicare Part D, we will see that greatest impact of coverage gap in the second and third quarter. And then we'll have that bit of sequential improvement in the fourth quarter, but it won't be as good. We wouldn't expect it to be as good as what we saw in the first quarter. And so what we see is the typical seasonality associated with the coverage gap. And for the full year, you'll see that net out in the 61 to 63 range.
spk02: Great. Thank you. And maybe just a high level one. So I appreciate all the color on the Extanza and Belbuco volume growth and the initiatives to drive growth in the back half of the year there um but how do you feel about bringing or how should we think about bringing in additional commercial assets at this stage while you still sort of execute on those initiatives and sort of try and get those two assets back to volume growth you know obviously um i'd imagine it's going to be an adjacent Peter, product, but just how do you think about it strategically in terms of focusing on volume growth versus business development and maybe kind of executing those two in parallel? Thank you.
spk05: Sure. Thanks for the question, Brandon. And I think that gets to our two-prong strategy. Prong one is maximizing the potential of the pain portfolio. When you think from a business development perspective, The types of things we're looking at will be lower synergy deals than what we've previously done. And that's really highlighting that we'll be pivoting to another therapeutic focus, which will set a second beachhead for the organization and have a separate field force and commercial infrastructure. And that's important to the type of question you're asking because it will have no disruption whatsoever. to the focus and the people who are dedicated to maximizing the potential of our pain portfolio, and it's something that we believe we'll be able to absorb, bring over the individuals, and be able to be successful with whatever it is we acquire to.
spk02: Great. Thank you very much, and congrats.
spk05: Thank you.
spk09: Our next question comes from Serge Belanger with Needham & Company. Please see your question.
spk04: Hi, good afternoon. Just wanted to dig in a little bit on the 1Q performance. Just curious if the usual early year impacts were more pronounced than usual this year. You talked about growth synapse on extanza, but what about the belbuca and new center growth synapse? And then maybe just comment on prescription volumes through the first quarter. Thank you.
spk05: Okay. Thanks, Sarge. I'll have Colleen start off and take the gross to net question.
spk01: Great. Thanks for the question, Sarge. So I would say overall, expectations on gross to nets were aligned with where we saw them come in for the first quarter. To give you a bit of additional context on what we saw by a product beyond extensa that I already mentioned, Bill Buca gross to nets in the first quarter were 47.8. Nusinta IR was was 41% and new since the ER was 40.7. And those are all in line with our expectations from in built into our guidance.
spk05: Yeah. And surge with regards to prescription trends in the first quarter, I don't think that there was anything out of the ordinary with the following caveat. This is the first time in the history of extamps, uh, where we didn't add any new payer wins. And so it was subjected to that first quarter dynamic. And although the team did an outstanding job, and you can see that in the revenue and gross to net performance of renegotiating, those contracts that represented 54% of all Stamps to ER prescriptions, we did come off formulary in 10% of those plans, which we think also in the first quarter put some pressure on prescriptions. With regards to Belbuca, I think it's in line to what you would historically see. Thank you.
spk09: Nice quarter. You got it. Thank you.
spk05: Appreciate it.
spk09: Our next question comes from Greg Frazier with Truist Securities. Please state your question.
spk10: Good afternoon, folks. Thanks for taking the questions. I have a question on the topic of Delbuca generics, and I'm curious if you have insight into the technical issues that Kenmore Research had with this and the filing and whether those challenges, if you know what they are, could potentially be faced by other generic filers.
spk05: Okay. Greg, thanks for the question. So unfortunately, that's not something that I'm going to be able to comment on on this call. What I would say is we believe that Belbuca is a very hard product to achieve all doses successfully without infringing upon the IP. And we will always continue to vigorously defend the intellectual property of Bell Buca. I'll also remind you that Chemo had attached themselves to the Albigen litigation from an invalidity perspective. So both from that perspective are barred from entering the market until 2032. Got it. Thank you.
spk10: Quick one on Nucenta ER. Sales were higher than expected given the RX trajectory. Was there anything to note in terms of inventory or gross net dynamics that benefited sales in the quarter?
spk01: Hi, Greg. No, nothing related to inventory, but in the beginning of every year, we typically have a bit of a profitability acceleration because as Nucenta being late in its life cycle, there are fewer contracts that are renewing. And so that led to the net sales that we had in the quarter for ER of 21 million.
spk10: Got it. Okay. And then, sorry if I missed this, but could you comment on whether you repurchased shares under the new program or are you holding off on buybacks pending visibility on a potential deal? Thanks.
spk05: So, Greg, we have not purchased any share. We did not purchase any shares in the first quarter of this year with the new share repurchase program. And we certainly, as I've commented on, are very active and engaged from a business development perspective, which will always be our top priority and a key consideration as you think about when we opportunistically utilize the share repurchase program. I would also emphasize over the history of the share repurchase programs we've had, we have acquired back $62 million worth. of our stock at an average price of $19.14. So I think we've been good stewards of capital from that perspective.
spk00: Thank you.
spk09: Thank you. Thank you. And a reminder to the audience, to ask a question at this time, press star 1 on your telephone keypad. To remove yourself from the queue, press star 2. Our next question comes from Glenn Santangelo with Jefferies. Please state your question.
spk07: Oh, yeah. Thanks for taking my questions. I just want to follow up on a couple of the previous questions. You know, first, you know, with respect to driving the Scripps and extamps in Bell Duca, I think Scott said, you know, it sort of sounds like they're going to be adding, you know, some resources. And Colleen, I'm trying to reconcile that to the SG&A reported this quarter, which was a little bit higher than what we're looking for. But I thought I heard you say, You expected that to sort of tail off as the year sort of progresses. So I was wondering if you could just sort of reconcile all those comments.
spk01: Yeah, absolutely, Glenn. So we did. We came into the year strong, and those investments that we set up in the fourth quarter and initiated in the first quarter impacted our overall adjusted operating expenses. So we had $38.2 million in the quarter of investments. which is higher than what you'll see in the next couple quarters. We're still projecting full year and guiding full year operating expenses between $135 and $145 million. Okay.
spk07: And maybe just following up to Greg's question on Bell Duca, I mean, what's your latest thoughts with respect to LOE? I don't know if you're willing to share, you know, your expectation at this point.
spk05: Yeah, Glenn, this is Joe. I appreciate the question. I would emphasize that there's no change to our thinking. What I can articulate for you is our base case when we did the BDSI acquisition was that there would be a generic entrant in January of 2027. That's because there was a settlement with Teva. So that's our base case. I would emphasize they do not have an approved product, and they also relinquished their first filer exclusivity. The remaining antifilers, Alvagen and Chemo, in their pursuit of trying to invalidate the Belbuca patents, there was a favorable ruling in support of Belbuca that was upheld on appeal. So they're held out of the market with that formulation until 2032. And then I think, as you know, recently Chemo who is pursuing non-infringement received another CRL on their product. They had communicated that last week. And as I said, in response to Greg's question, we do believe it is very challenging to achieve all doses of Belbuco without infringing upon the patents and we're committed to very strongly defending. the IP. The final thing is we have an authorized generic in the event there was a launch, if Teva were to launch, and that's an arrangement with PAR Pharmaceuticals. So, Belbuca would have a long tail in that scenario. And the final comment I would make, if you contrast it to what we're doing with Nusenta, where we're pulling back on our investment and managing the payer landscape accordingly. We are committed to investing through 2027 with Felbuca.
spk07: Perfect. Thanks for the time, Joe.
spk05: You got it. Thank you.
spk09: Thank you. And there are no further questions at this time. I'll hand the floor back to Joseph Schifoni for closing remarks. Thank you.
spk05: Thank you, everyone, for joining the call today. We look forward to updating you on our progress, and I hope that everybody has a great evening.
spk09: This concludes today's call. All parties may disconnect. Have a good evening.

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