Q4 2019 Earnings Call
Ladies and gentlemen, today's conference will begin in two minutes lease continues to stand by and thank you for your patience.
I can't today's conference will begin in two minutes leased continued to standby and thank you for your patience.
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This time, all participants are in listen only mode.
After the speakers presentation, there will be a question and answer session.
Who asked the question during that portion of the called you would need to press star one on your telephone and please be advised of today's conference is being recorded.
If you require any further assistance. Please press star Zero I will now have the conference over to your first speaker today I like the solid head of Investor Relations.
Welcome to clean give pharmaceuticals fourth quarter 2019 earnings conference call.
This is Alan it's all a head of Investor relations for Collegium.
I'm joined today by Joseph Phony, our Chief Executive Officer, Paul Brannelly, Our Chief Financial Officer, and Scott Dryer, our Chief commercial officer.
Well I'll begin today's call we watch for my participants that none of the information presented today is intensely promotional and the any forward looking statements made today are made pursuant to the safe Harbor provision of the private Securities Litigation Reform Act 1995.
You are cautioned that such forward looking statements involve risks and uncertainties, including without limitation. The risks that we may not be able to successfully commercialized xtampza yard and it takes a franchise.
And that we made significant expense and may not prevail in part for future opioid industry litigation and investigation.
Thank you that litigation or other litigation pertaining to our product.
These risks and other risks at the company are detailed in the Companys periodically 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 that's call well keep discussion of certain non-GAAP information you can find our earnings press release, including relevant non-GAAP reconciliation on our corporate website equity Jim pharma dotcom.
I will now turn the call Overtrick region CEO, Joe Shuffle me. Thank you Alex Good afternoon, and thank you everyone for joining the call. It 29 PM Collegium pharmaceutical made significant strides towards becoming the leader in responsible pain management.
They saw some quantitative market research conducted in the spring and fall 2019 with targeted health care providers weaker was ranked second only to bars or as a leader responsible claim management.
Testament to the quality and professionalism of Barclays.
We take great Pride in health care providers views of our organization business practices in pain portfolio, we made and we'll continue to make significant investments in our people processes and programs to strengthen our most important brand Collegium pharmaceuticals.
Key accomplishments in 29 P.M. include achieving nearly 1 million portfolio prescriptions up 70% versus 28 to.
Increasing your net revenue to $296.7 million versus $280.4 million in 2018, 86% increase.
Growing exams put your finger your net revenue to $105 million with total prescriptions, a 466378 up 51 person and 49% respectively versus 2018.
Enhancing expands <unk> already strong patent portfolio with the addition of a 15 Orange book listed patent.
Adding exclusively or Oxy code on form your word ones. They cover over 35 million predominantly commercial wide. So effective January 1st 2020.
Delivering new center franchise net revenue of $191.7 million and total prescriptions of 530569, representing a decline of 9% and 14% respectively versus 2018.
Generating non-GAAP adjusted income for three consecutive quarters and strengthening the executive team with the appointments with Dr., Richard Moammar embarked on to the walls of Chief Medical Officer, and Executive Vice President strategy in corporate development, both to play key roles in the execution of our mid term.
Strategy.
I want to recognize my colleagues at Collegium under many accomplishments in 2019 and thank them for their commitment to establishing Collegium as the leader in response to more pain management.
Looking ahead 2020 is off to a strong start and will be a transformative year for collegium.
The acquisition of the U.S. rights to the New Center franchise is a financially transformative event for our organization.
Along with strong expands your growth and continued financial discipline Collegium pharmaceutical be profitable beginning in Q1, 2020, and we expect full year non-GAAP adjusted income in the range of $125 million to $140 million Collegium How's the 40.
Andrew flexibility to pursue future business development transactions.
Exam city ours, Collegium growth driver and highest priority and 2020 NPRM.
Thanks, Dan front yard is poised for its next phase of accelerated growth in its on a path to market leadership no later than 2023.
The parents at all with a molecule, but we believe it's meaningfully differentiator and we're committed to maximizing the potential of the New center franchise.
New sensor franchise will be an important contributor Collegium bottom line through mid 2025.
Our priorities are the following.
Celebrate its they are 2020 priorities for the following accelerate xtampza yarn secure its path to market leadership.
Moderates the decline of the New center franchise in 2020 and take actions to position it for sequential revenue stability beginning in 2021.
Execute our portfolio market access strategy.
Generate and disseminate real World survey once in claims based data for our product portfolio.
Leverage not grow Collegium its cost structure.
Initiate our plan to reduce portfolio Cogs over the next three years.
Execute business development transactions, a wind to our midterm growth strategy.
And invest in people processes and programs to enable collegium to become the leader in responsible pain management.
2019 was a year and which collegium pharmaceutical made significant progress towards becoming the leader and responsible pain management led by Xtampza yard growth the acquisition of the new since the franchise.
Financial discipline and business development transactions 2020 will be a transformative year for the organization.
I'm confident that we have the right plan and more importantly people one place to make it happen.
I look forward to updating you on our progress throughout 2020, I'll now hand, the call over to Paul for a discussion of the financials.
Thanks, Joe Good afternoon, everyone.
Driven by Xtampza ER revenue growth and leveraging our current infrastructure 2019 was a strong year quickly Jim.
Xtampza yard net revenue was $105 million in 2019, which is an increase of 51% from 2018.
This was at the high end up our guidance range of $95 million to $105 million.
For the fourth quarter extend CEO revenue increased to $27.4 million, which is a 49% increase from Q4 2018.
The gross to net discount for Xtampza ER was 58.5% in 2019 compared to 62.6% in 2018.
That's a result of the new exclusive E. R. Oxy code on formulary wins, we expect gross to net discount to be in the low 60% range in 20 Twond.
You said to net revenue was $191.7 million in 2019, which isn't a decrease of 9% from 2018.
The decrease in weeks of to revenue was driven by lower prescription volume as well, it's a reduction in wholesaler inventory of approximately 10 days.
We expect to manage wholesaler inventory at this level for the foreseeable future.
Operating expenses, excluding costs or product revenues were $126.8 million for 2019, finishing the year near near the low end of our 2019 guidance range of 120 $535 million under 6% improvement.
Since 2018.
For the fourth quarter 2019, our net loss was $2.2 million, which includes approximately $4 million some stock based compensation expense and $3.7 million families Asian expense related to the new something tangible asset.
Non-GAAP adjusted income was $5.5 million from fourth quarter 2019.
Please see our press release issued earlier today for a reconciliation of GAAP to non-GAAP results.
As of December 31st 2019, our cash balance was $170 million, which is a 16.2 million dollar increase from our September thirtyth balance and a 23.4 million dollar increase from December 31st 2018.
On February six we announced the acquisition of U.S. rights to the extent to franchise.
This is a financially transformative transaction for collegian that we expect will significantly increase our profitability and operating cash flows while leveraging our current infrastructure.
Today, we are confirming our prior guidance, which was initially provided on January seven.
For 2020, we expect extends he he our revenues from the range of 150 $260 million.
You said to franchise revenue in the range of $170 million to $180 million and total operating expense expenses in the range of 130 $240 million.
In addition to our prior guidance, we expect 2020 non-GAAP adjusted income in the range of $125 million to $140 million.
Consistent with our prior practice non-GAAP adjusted income will exclude stock based compensation noncash interest and non cash amortization of doing something tangible asset.
I'll now hand, the call over to Scott for commercial update.
Thanks, Paul.
Next steps that you are finished 2019 with momentum and as a result of 20, new exclusive Youre Oxy code on formulary wins impacting over 35 million predominantly commercial lives is positioned for its next phase of accelerated growth in the first half of 2020.
Next steps that you are achieved all time highs for total prescriptions and market share in a quarter in the fourth quarter total prescriptions grew to 124067.
36.6% versus the fourth quarter of 2018.
<unk> E. R exited 2019, with a 19% share I'll be our oxy code on market.
Seven percentage points from December 2018.
In the fourth quarter. There were 13406 unique prescribers of Xtampza E. R. An increase of 31% versus the fourth quarter of 2018.
Importantly, the productivity of the prescriber base increased every quarter in 2019 in the fourth quarter. The average total prescriptions per prescriber increased to a new high of 9.3.
Its staff sticky our ended 2019 as the number one prescribed E. R. Oxy Codell and 22 of 29 accounts in which it was exclusive.
Within exclusive accounts ecstatic yours market share of the our Oxy code on market grew to 63% in the fourth quarter.
Based off of quantitative market research conducted in the fall of 2019, 51% of our targeted health care providers intensive prescribed more xtampza E. R. Over the next 12 months compared to 60% that intend to prescribe less oxycontin.
New Center franchise total prescriptions were 128383 in the fourth quarter of 2019, representing a sequential decline of 2%.
In the fourth quarter you since he he are new to brand share grew to 6% its highest level in 2019, and total prescription share with stable for the third consecutive quarter.
In 2020 or commercial priorities are clear growing staff to E R and moderate the decline of the new Synta franchise.
The market access position for Xtampza E.R. is strong and broad with extensively are being covered for 95% of commercial lives and 50% of part D loss.
And with 20, new exclusive formulary positions that are in place as of January 1st Act staff. CDR is the exclusive you are oxy code on for approximately 40% of commercial and part D covered lives.
Its staff see our has surpassed oxycontin in terms of both breath and strength of market access.
Our primary focus for the first half of 2020 will be on aggressively pulling through Xtampza yours 49 exclusive youre Oxycodone formulary positions 20 of which went into effect on January 1st 2020.
Concurrently will be fully through extensive yours overall broad market access.
Early on in 2020, we've seen strong growth in Xtampza E are new to brand volume and our oxy code on market share.
New to brand he oxy code on market share for Xtampza ER with 37% the week ending January 31st up from 23%. The last week of December in 2019.
In the month of January extends to Ers Trx share I'll be our oxy code on market grew by 2% to 21%.
We're encouraged by these early indicators, but recognize that we've a lot of work to do.
It depends it all as a molecule that our targeted health care providers, you favorably relative to all other branded he our opioids and new Sinti E.R. is differentiated as the only extended release opioid indicated for pain associated with diabetic peripheral neuropathy.
Although we aspire to grow business into franchise in 2020, we anticipate the total prescriptions will be pressure, our focus will be on driving brand awareness and pulling through new centers broad market access position.
2020 is going to be a transformative year for cleats, you I look forward to updating you on our progress as the year progresses with that I'll turn the call back to John Thanks, Scott I will now open the call up for questions.
Thank you, ladies and gentlemen, I, sorry, Minder to ask a question you will need to press star one on your telephone.
To withdraw your question press, the pound or <unk>.
Somebody will be compiled it cannot roster.
Our first question is from David Amsellem with Piper Sandler. Please go ahead.
Hi, everyone. This is back on for David. Thank you for taking my question I just have a couple on Xtampza ER.
So you've mentioned in the past that focus.
Stands and 2020 is to drive volumes.
Caucus contract.
Position, we're not contracted at all.
Although that transition will largely be natural to that extent that for switching drives more breakfast driving behavior for physicians and their non covered patients. What efforts are you, making on your end thats driving adoption.
And this population and also to what extent.
Back to drive additional exclusive access on the commercial front.
On Medicare part D to that'd be great. Thank you.
Okay. Great back this is Joe Allman, I hand, the first part of your question over to Scott and then I'll take the second piece yeah. Thanks for the question Zach. So when you look at there was other nonexclusive books of business. Our efforts there are exactly what we're doing an exclusive to disrupt oxy cotton and establish Xtampza ER.
You are oxy children of choice when we look at the business in those segments. What we see is we do have share growth. We've progressed a few share points over the last year and we expect to see that continue to grow as we move through the rest of this year, Joe and then as it pertains to our market access position as we move forward as we emphasize.
Size right now we have 40% of lives covered and an exclusive position or the new wins, taking effect. It's typically three to four month period of conversion and what we do Sac is after that period as when we start to engage.
With payers as we think about the additional exclusive access we may strive for for 2021, So we'll see how the beginning of the year goes and then when we move into the second quarter, we'll set our sights in terms of word is will be focused whether it be in commercial where Medicare part D in terms of achieving or stripes.
And do achieved new exclusive wins for 2021.
Okay Thats helpful. Thank you.
Okay.
Thank you. Our next question comes from David Steinberg with Jefferies. Please go ahead.
Okay. Thanks, My three questions.
The first one relates to the cadence in shape of the Rx curve. This year. So I guess the first thing is and the last couple of years. There was a really strong trajectory in the first and then second quarters. How how is how is the current trajectory fitting.
What's your expectations and you know how does it relate to the last couple of years and related to that is you had mentioned the possibility of some off cycle exclusive wins.
I imagine that if you're going to get them they have to be announced fairly soon what's your confidence level and those occurring and if they occur how would that shape the cadence, particularly in the second half of the year for the scrip curves and second question is [noise].
When you bought back the 100% rights to new Synta.
Mentioned that with the tech transfer Theres, an opportunity that substantially improved gross margin.
What sort of range of gross margin expansion could we expect and when do you think.
This this might occur and then finally I think you exited the year at about 18% share of Oxycodone E. R where do you think that share could go in the next couple of years. Thanks.
Okay. Thank you David This is Joe Omena past the first question on the Rx curve over to Scott Yep. Thanks, David So so yeah. When we look at early performance here as Joe said the first thing is our full assessment comes as these plans convert over a three to four month time period right. If we look early in the year where.
We're encouraged we've seen acceleration of the Trx is right out of the gate and what we're most encouraged by is new to brand market share and the movement from 23% to 37% in the first couple of weeks a January so we're looking at that closely we're encouraged by that but we'll be continuing to monitoring the full uptake over the.
To put them on tanker.
Great and David with regards to the potential for off cycle wins, what I would say as we continue to be in negotiations and discussions.
With several key payers as it pertains to off cycle wins those wins, if they were to occur could potentially either be exclusive or perhaps parity positions for xtampza E. R. From a timing perspective, yeah, we never know precisely when they will occur but depend.
That upon when they would be implemented it could have an impact on the curve to the back half of the year. Our commitment is if we achieve anything that is material that we would communicate those wins to the marketplace as it pertains to post the new since the transaction with regards to our focus on Cogs.
The one thing I want to emphasize is when we talk about Cogs were looking at it over a three year period, we think theres opportunity at the portfolio level to improve Cogs, because theres a lot of overlap across the supply chain and one of the drivers of our decision to do the transaction. In addition to we thought it.
It was really great value was timing so with the tech transfer of the new Synta line from JNJ, where we'll be moving that to thermo Fisher, which is in Cincinnati, Ohio, where we also manufacturer Xtampza, we think that represents an opportunity for us to improve our cost of goods.
Along with other parts of the supply chain, where there's overlap.
With regard to your final question in terms of peak market sure. How do we think of that we don't as you know give guidance beyond that given year and we never guided from a market share perspective. What we are confident then is that xtampza IAR will become the number one prescribed extended release Oxy code on no.
Later than 2023.
Oh.
Okay. Thanks.
Welcome.
Thank you. Our next question comes from search for longer with Needham <unk> Company.
Hi, good afternoon.
A couple of questions for me the first one following up on David's first question and you talk maybe about.
What is driving initial a.
Script growth and at the start of the or is it a forced conversion in every plan or these patients switching from I.R.T.E.R. and I think in the past you've talked about.
Having an opportunity with existing Medicare part D plans to capture additional patients since it started here I'm just wanted an update on on that.
And then the other question is on New Center.
You talked about moderating the decrease this year and then taking actions next year.
Can you just elaborate on what potential actions can be taken.
Yeah, So great question Sir surge.
With regard to I'll take the driver pass the part D question off the Scott and then come back and talk about a new center with regards to the curve early in the year surge, what we see as its conversion, which is atypical so there's very little at steady state ear to ear switching that occurred.
So in this marketplace. The majority at steady state as IR patients transitioning to an extended release product when a physician deems it's necessary. When this bolus of exclusive winds hits the marketplace. What we see is for that first three to four months period, a key contributor to the growth of extend.
So is the he already he are switching but I already he our conversion also will go up enough becomes the market position that we then grow from post the conversion.
Scott can talk about Medicare part D. Okay. Thanks for the question Sir So when we look at part D coming out of the gates here early in the year across all of our exclusive part D. Plans. We're seeing continued oxy cottone, our share progression so growth across all of them and if you remember we announced the 11 of our new wins will regional parties, we're seeing growth.
Right out of the gates on those as well, Joe and answered with regards to new centers. We moved beyond 2020, I would emphasize one this is a molecule. We believe deeply in it's aligned to the mission of the company. We now have two years of experience with it. So we think we have a really good handle.
On the new since the franchise, we anticipate as we move into this year or overall execution from a commercial perspective will improve and then my comment was as we move into 2021 and beyond we can achieve relative revenue stability now our focus to do that we will be.
Implementing one of the things from a timing perspective that we liked about this transaction is a lot of the contracts. We inherited begin to expire in 2021, 2022, which gives us an opportunity to either improve the discount rates associated with those con contracts in some cases.
As potentially to move away from them and will also be working to secure new access positions at rates that we believe makes sense for this franchise. So that would be from a topline perspective, we think from a cogs perspective over the next few years again timing of the tech transfer will give us an opportunity.
I'd to potentially up or we will improve the cost of goods and gross margin. We have an opportunity that will be executing from a publication perspective, a lot of the claims based utilization data to really supplements. The 10 years of experience and bring attention to how.
What is that this molecule has performed so we have a comprehensive approach that will be initiating this year that we think will put us in a position of being able to moderate prescription decline, but also to get to relative revenue stability on a sequential basis beginning in 2021.
Okay.
Let me squeezing more and more.
Probably for Scott.
As the acute and symphony data.
Accurately capturing scripts for a for both extends a and a new center.
Yeah. Thanks for the question, Sir So yes, we believe it accurately capturing data and just is there a reminder, the weeklys more projected so sometimes when you add up the week fluctuate with the month, but it's correct.
Thank you.
Thank you. Our next question comes from the line of team logo with William Blair.
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Todd.
Yes, so Tim your phone was going in and out a lot there, but I believe what I heard for question and please clarify if I got it wrong.
As is in terms of profitability, what's the cadence there.
And so so similar to prior years, we believe Weve operating expenses.
Under control, where we're leveraging we're not building, but they can be lumpy throughout the year, there's not a trend up or a trend down during the year. It's just lumpy gross to net similar fashion that gross and that is a little bit lumpy through the year, we don't expect that to us.
They had one number throughout the year.
So so the main driver profitability that is more predictable as revenue. So xtampza revenue growth and then modeling in what you expect for New Center.
So I think those are the key points there.
But first <unk> sorry.
And or can you talk a bit about taxes and talk through them and your I know for rollover.
Yes, so so certainly taxes or something that's becoming a lot more important here as we get to profitability. So we have about $290 million net operating losses Federal Leno wells.
Available. So we have you did a 382 study so in our 10-K that that was just filed there's some additional information on what limitation 382 limitations there may be on the.
Thank you very much.
Great. Thanks. Thanks.
Thank you, ladies and gentlemen, I feel reminder, to ask a question just press Star then one.
Our next question is from Brandon Folkes with Cantor Fitzgerald.
Hi, Thanks, taking my questions EM.
Given that you the excuses oxycodone from around 40% of commercial and party covered lives is that this sort of range if market share. We should think about you actually exiting twentytwenty with four xtampza.
Could you, maybe just from that or anything kind of some of the pushes and pulls in terms of getting to that and we should think about thank you.
Yes. So Brendan this is Joe that's an interesting question that you asked.
I don't know that we think of it is the 40% of lives would correlate to a 40% market share for Xtampza.
What I would emphasize to you as we're seeing very strong market share growth to start the year from an M.B. Rx perspective of course, the greatest major brand health is the gap of your and be Rx to your Trx and with that we're seeing share progression of our total prescription share in the thing that we are confident for.
Before we are looking perspective is by 2023 at the latest fixed MCR will become the number one product in the market.
Great. Thank you.
Okay.
Thank you.
And this concludes todays <unk> session for today I would like to turn the call back to John Forney CEO for his final remarks.
Thank you and 29 thing, we made meaningful progress towards becoming the leader and responsible pain management Collegium is well positioned and focused on making 2020, a transformative year for the company.
Before to providing you updates as the year progressive have a good evening.
And ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
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