Q1 2020 Earnings Call

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Shadow, maybe 50, operator to be kind of effect is scheduled to begin moving tiny until that time. Your line is when they can be place in home. Thank you for your patience you were just having said that technical each thank you.

Ladies and gentlemen. This is the operators today's conference is scheduled to begin woman Kinda Lee I feel that time, you're right you will again be placed on <unk>. Thank you for your patience.

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Thank you and welcome to the Collegial Pharmaceuticals Inc. earnings Conference call I would note I tried to cost from Alex to salary me thinking.

Welcome to Collegian Pharmaceuticals first quarter 2020, earning conference call. This is Alex it's all a head of Investor Relations for Collegium I'm joined today by Joshi Phony, Our Chief Executive Officer, Paul Brannelly, Our Chief Financial Officer, and Scott Dryer, 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.

You are cautioned that such forward looking statements involve risks and uncertainties, including without limitation impacted the cold the 19th pandemic risks that we may not be able to successfully commercialize xtampza E R and there's going to franchise.

And that we may incur significant expense and may not prevail in current or future opioid industry litigation in investigation 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 art.

Future results may differ materially from our current expectations discussed today.

<unk> earnings press release in this call will include discussion of certain non-GAAP information you can find our earnings press release, including relevant non-GAAP reconciliation on our corporate website actually Jim Pharma Dotcom I will now turn the call over to Collegium CEO jokes your phony.

Thank you Alex good afternoon, and thank you everyone for joining us.

I want to still quite acknowledging the challenging situation. The cobot 19 pandemic has created for so many people or box in Hearts go off the everyone who has been impacted.

In April Collegium pharmaceutical, maybe $240000 donation to the wind farms care Cobras, 19 response fun, including $40000, which was raised floor for your mouth program.

One funds cares is a nonprofit organization focused on eliminating the impact of poverty on neighborhoods in the greater Boston area. We are committed to acting in a socially responsible manner.

Turning to the impact the pandemic has had on our organization I'm pleased to report that our people and their families are healthy and have been working remotely since March 16.

I've been amazed by how fast start team has been able to adapt and inspired by the end result.

Our home office pain transition than a seamless manner and is advancing all in central business activities.

Collegium field based teams are finding ways to increase the quantity of customer interactions each week and importantly, we're leveraging technology to improve the quality of those interactions too.

Due to the efforts of our supply chain pain and manufacturing part [noise].

We did not anticipate any disruption work issues in our ability to supply the market.

We are on track to achieve our broad priorities and we remain confident the 2020 will be a transformative year for Collegium pharmaceutical.

In the fourth quarter, we've made significant progress versus each of our broad priorities. Specifically example yard total prescription due to brown and total prescription market share immediately accelerated in January driven by new exclusive Youre Oxy code on formulary wins.

Representing 35 million lives that took effect on January 1st.

In the first quarter extensively our was the fastest growing extended release opioid and we remain confident that it will be the market leader no later than 2023.

In late February we began to see the growth trajectory of Xtampza E are being impacted by cobot 19.

Moving forward, we expect expansive yard to continue to grow but at a moderated rate due to cope with 19.

Moving to the New center franchise, we saw the rate of decline slow in Q1 versus Q1 20 versus Q1 19.

As a mature franchise, we expect new sensor to be less impacted by Cobas 19, as we're seeing signs in the market that the disruption to any person office visits is leading to continuity of care for patients whose pain is under control.

We are unrelenting and our commitment to leverage not grow our cost structure from the perspective of operating expenditures the impact of Cobras 19 will be favorable in 2020.

The acquisition of the new sent the franchise was a key component of our bid term growth strategy the financial benefits of that transaction are apparent.

We remain active in engaged in our pursuit of non opioid pain solutions that are in later stages of development.

We believe the impact of Cobot 19 is neutral to positive as it pertains to completing a business development transaction.

Collegium pharmaceutical was profitable in the first quarter and will be increasingly profitable throughout 2020.

We also expect to accumulate cash and pay down debt.

I would like to recognize and thank my colleagues that collegium pharmaceutical for their commitment to making a positive difference in the lives of people suffering from pain and in our communities I admire their ability to stay focused during this pandemic and propelled the organization forward and our quest to become the leader in responsible pain management.

In the face of unprecedented challenges Collegium pharmaceuticals is uniquely position and on track to make 2020, a transformative year. This is a testament to our product portfolio financial strength and most of all our people.

I'll now hand, the call over to Paul for a discussion of the financials. Okay. Thanks, Joe Good afternoon, everyone.

Glenn driven bulk standpoint, youre growth the acquisition of U.S. rights to the New Center franchise and continued financial discipline. We're confident the 2020 will be a financially transformative year for Collegium.

We expect to significantly increase our profitability and operating cash flow.

Total product revenue was 76.5 million for the first quarter 2020.

Xtampza ER revenue was 31.5 million, which is an increase of 25% from the first quarter of 2019, and an increase of 15% from the fourth quarter 2019.

Days on hand for extended see all remained stable from year end levels.

The gross net discount for extended CPR was 63% for the quarter.

As discussed on prior calls the gross to net discount may be lumpy throughout the year and is expected to be in the low 60% range for 2020.

He center revenue was 45 million for the first quarter of 2020, which has a decrease of 9% from the first quarter 2019, and a decrease of 4% from the fourth quarter of 2019.

The decrease in these tend to revenue was partially driven by a reduction in wholesaler inventory of approximately one and a half days.

With the acquisition of any sense of franchise during the first quarter 2020, we've updated our income statement presentation. The updated presentation includes sub totals from gross profit and operating expenses.

Additionally, amortization of the new Cynthia intangible asset is disclose separately from other Cogs.

We believe this updated income statement presentation will provide better use ability and considerations the financial guidance that we provide.

Even though that new center franchise purchase agreement eliminated royalties owed to 30, though things since the sales and 2020.

Accounting rules require us to include an adjustment of 14.2 million in Cogs for royalties that wouldn't have been paid according to the previous commercialization agreement.

Non-GAAP adjusted income has been adjusted to exclude this week center royalty to Jeff.

Operating expenses were 33.9 million for the first quarter 2020, which is a 4% decrease from the first quarter 2019.

Excluding stock based compensation operating expenses decreased by 7%.

Despite the accounting impact of the 14.2 million dollar you sensed a royalty adjustment we were profitable on a GAAP basis in the first quarter 2020.

Our GAAP net income was 450000 compared to a GAAP net loss of 9.7 million for the prior year quarter.

Our non-GAAP adjusted income was 31.2 million for the first quarter 2020, compared to a non-GAAP adjusted loss of $1.7 million for the prior year quarter.

As March 31st 2020, our cash balance was $116.2 million, which is a $53.8 million decrease from December 31st 2019 balance.

The first quarter Uncouth included cash outflows related to the acquisition of the New center franchise, including the repayment Novo ventured debt facility of 11, and a half million dollars and a 15 $50 million in cash used in the purchase of new simple.

For the remainder of 2020, we expect to generate significant quarterly cash flow and expect to end the year with at least $180 million in cash while repaying $37.5 million of our term notes.

With one quarter of 2020 behind us and better understanding of the potential impact of co. Good long team.

We are updating our guidance for 2020.

We are reducing our xtampza yell revenue guidance to a range of $130 million to $140 million from our prior guidance of 150 $260 million.

We are reaffirming our prior guidance from these new Synta franchise revenue in the range of 170 $280 million.

We are reducing our total operating expense guidance to a range of $120 million to $130 million from our prior guidance of 130 $240 million.

Please note that our operating expense guidance include stock based compensation expense of approximately $20 million.

We are and we're also tightening the range of our non-GAAP adjusted income guidance to $125 million to $135 million from our prior guidance of $125 million to $140 million.

Collegium is fortunate to be in a strong financial position that allows us to adapt to the realities of the code that 19 pandemic without changing our expectation of making 2020, a financially transformative year.

Ill now hand Carlo swap for commercial update.

Thanks, Paul.

Fueled by 20, new exclusive Youre oxy could on formulary wins Xtampza ER immediately accelerated in January in late February we began to see the impact of covert 19 on the growth trajectory. Despite this impact extends to E. R achieved all time highs for total prescriptions total and new to brand Mark.

That share total prescribers and total prescriptions per prescriber in the first quarter total prescriptions grew to 136736 up 30% first the first quarter 2019, and 10.2% there's the fourth quarter of 2019.

Stance that you are total prescription Oh, we our market share was 21.8% in the first quarter up 3.3% from the end of 2019.

New to brand that we our market share accelerated to 32.7% in the first quarter up from 24.3%.

They were 14600 unique prescribers of Xtampza in the first quarter, an increase of 18% versus the first quarter of 2019.

Importantly, the productivity of the prescriber base continues to improve and the average total prescription purpose driver increased to a new high of 9.4.

We saw strong market share performance across all 49, commercial and part D exclusive accounts and share acceleration within every one of the 20, new exclusive that went into effect on January 1st.

Aggregate, Oh, we aggregate Youre Oxy code our market share across all 49 exclusive accounts grew to 51% in March up from a baseline of 40% in December.

We expect continued market share growth with an exclusive accounts as a reference point Xtampza ER exited 2019, with 63% or we are market share within accounts that were exclusive prior to January onest.

Based on quantitative market research conducted in the first quarter of this year, 53% of our targeted health care providers intend to prescribe more extensive E. R. Over the next 12 months compared to 62%, who we intend to prescribed less oxycontin.

You since the franchise total prescriptions were 120576 in the first quarter, representing a sequential decline of 6.1% a significant improvement over the 11.3% decline in the first quarter of 2019.

After three quarters of stable total prescription share for new since the are you sit yard brandy our share grew from 5.8% to 6.1% in the first quarter. We're encouraged by the signs that the decline is slowing and by the results of market research conducted with our targeted health care providers in the first quarter were 42.

The percentage of prescribers stated their intend to increase prescribing of new Synta IAR.

As it pertains to the impact of Kogas 19 on the opioid market. The greatest impact has been on the decline of the new to brand market volume.

Disrupting are changing treatments for a chronic pain patients is a significant event, which takes time and consultation healthcare provider and location.

While some of this is still occurring virtually most pain specialists would prefer to make a treatment change via alive patient visit in that office.

As a growth product at Stansted E.R. is more dependent on new patient inflow, then a mature brand and we believe that the lower new to brand volume is having an impact on the ramp of growth for its staff to IAR.

As a mature franchise that is less dependent on new patient inflow, and which we have forecasted will decline through the year, New synta is less impacted by this dynamic.

Despite the impact of covert 19, we believe it staff that you are will continue to grow and we can slow the decline for that new Synta franchise.

Our salesforce has been working remotely since March 16th and we've taken actions to enable them to be effective working remotely.

These actions include the following we launched new easy detailing capabilities and remote selling training for all of our sales representatives.

We launched new processes for our sales representatives to be able to get Ahgps and patient resources like co pay cards and patient brochures to their customers upon request.

We improved our digital capabilities and increased our investment in non personal promotion.

We increased availability of digital resources for both healthcare professionals and patients on our brand websites.

And we continue to work closely with exclusive payer accounts to improve pull through and continue to accelerate market share.

In 2020, our commercial priorities are achievable growth standpoint, you are and slowed the decline of the new Synta franchise 2020 is going to be a transformative year for Collegium and I look forward to updating you on our progress throughout the year with that ill turn it back to Joe.

Thanks, Scott I will now open the call up for questions.

Thank you might do to asked a question new within the past Star one on your telephone do we Joe Your question. Please.

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We have a question from DC insulin your line is open.

Thanks, and policy does if I Miss this colors since I joined late but.

Wanted to get your.

It's on.

How force switching away from Oxy content has been.

Progressing or may be better term is delayed due to the.

Pandemic and are you seeing.

Patients that normally would have been forced off be allowed to stay on oxy for an extended period, if you will.

Because of all the dislocation so that's number one and the number two is on New center, Joe I think in the past you've alluded to.

Reworking contracts or ridding yourself of contracts that had poor economic so can you talk about the progress you've made there and what that implies for the profitability of our new center going forward either for this year or beyond 2020. Thanks.

Sure. Thanks, David I'm going to pass the first question off the Scott.

Talk about the four switches and then I'll come back and address the new since a market access question, yes. Thanks, David So yes, when we look at what's happening in the market and the impact of covert 19 kind of late in February yes, we see a delay in some of the switching and the primary driver of that is that patients aren't going to doctors.

Offices, so physicians really want to consult a patient when they're switching a patient and so that that decrease in overall visits is really having the most significant effect on on timing of switching intermodal.

And David You had also asked our plans with regards to the first question.

In some instances being a little bit more flexible even if they have.

Certain formulary positions, where expenses advantage and we do believe some of that's happening, but the primary driver that we think impacted is impacting the ramp is the in person visits as Scott headset.

In regards to new center.

As you know our goal and we believe on a going forward basis will be able to achieve relative revenue stability and also do some positive thing from an operating contribution perspective on the payer side, our strategy will be one we'll be looking to add new contracts.

That discount rates that we think makes sense for the franchise. The second thing and directly to the question. You had asked one of the things we liked about doing the new since the transaction. When we did is over the next couple of years contracts that we inherited will be going to expire and our approach there's going to be too far.

One if we can we're going to try to keep the contract and re negotiated at a better rate, but in some instances.

<unk> is patience not being able to visit their positions.

In person at the same rate so the assumption of our guidance is that we don't anticipate a return to normal prior to the end of the year, meaning across the country patience at the same rate. They were are visiting their physicians in the office and we also don't anticipate if we're fortunate enough to be able to bring.

Are feel forced back to in person customer interactions that it will be at the same level across the country as it was prior to the event and I don't know policy went out any yeah, <unk> think search for the costs. We only other thing I'd I'd just expand on that show said is how financially transform the the new since.

The deal is for Collegium. So we were profitable in the first quarter. Despite the the the new sent a royalty adjustment of $14.2 million, but will be profitable for the remainder of the year.

And and and generating meaningful cash flow throughout the year, which is why we getting the cash guidance as well. So we're one year with with the over $180 million, while paying down 37, and a half million dollars of turned out. So we still expect at the very strong year. Despite.

Having to bring down the extremes of revenue.

<unk> just a follow up on these seem to.

I mean, maybe talk about the market dynamics to that pronto.

Which would explain your success in growing market share over the last couple of quarters.

Okay. Scott you can take that yeah. Thanks to the question surge. So <unk> when we look at new since the he saw we believe that the stabilization is driven by the value proposition of the product and our commercial effectiveness being able to stabilize that product I I've shared before shared again when you talk what position they have a strong intent.

Describe the product and they see it is hardly favorable undifferentiated. So I think those things have come together to allow us before quarter still stabilizing out <unk>.

Yeah I think.

Okay.

Thanks.

I next question comes from the line of the.

Mm.

[noise] Hello.

Oh.

Oh right. Okay. Okay. Thanks, sorry about that and I apologize I think the three calls coming in at one time that I might have missed it but.

The question asked but in the in the past you know the last four or five months he talked about the possibility of sent off cycle wins.

Any update their I know that.

Next time, you have your call.

It'd be close to when you have denounced the.

The regular psycho wins.

So there'd be <unk>, what's the chance of something between now and then.

And then.

Given yeah, I know that in order to adjudicate the script with it forced conversion you you physically has to be just wanted clarification you physically has to be in the doctor's office with them cannot be can that not the achieved via zoom or some such methods literally have to be.

At their office with the Doctor I, just wanted to make sure isolated.

Right, Thanks day, but I'm going to let Scott start with the question around prescriptions and then I'll talk about the off cycle payer perfect. Yeah. Thank David Yeah. So first no from a legislative standpoint changes were made that a new patients can actually be started.

D a tele medicine and video conferencing, so that the challenge isn't the ability to challenge is the physician's one to make those changes in life patient visits and visits to positions offices by patients are down significantly since probing 19 kick them at the end of February so they can mechanically dude off.

Well.

Impacted by the fact that patients aren't the only the opposite where they want to see.

When they could change and David one other thing to that question pain specialist relative to other physician groups were low users of Tele medicine prior and so although that's increasing that's not been a common part of their practice, which is why we think the disruption to the patient flow.

It was important in as having impact to the shifting of patients from oxy caught in in these exclusive plans over two xtampza with regard soft cycle payer winds. We continue to be actively engaged I would say that we are encouraged and our commitment will be if we achieve any.

Material, we would communicate them and I would also emphasize we're looking to do three things now from an extensive perspective in terms of our payer strategy, a one and instances we're looking to get additional exclusive.

Certain situations, we are trying to do a parody so to get on equal status. As you know every pair position we have that it's not exclusive <unk> actually disadvantage doxie cotton. So we can achieve parody off cycle that would lead to a run into exclusive that's part of.

Strategy and then in certain instances, we will also try to achieve a parody position because we think with our commercial scale, our overall breath pay or position in terms of exclusive that we can meaningfully mood a market share for put on equal footing with boxy cotton so anything material.

Will communicate encourage both for the potential of out of cycle, but also as we look to 2021 based off of the discussions were having.

<unk> Okay. Thank you.

Thanks.

Very no question.

<unk>.

Okay, great. Thank you operator in the face of unprecedented challenges Collegium pharmaceuticals is uniquely positioned and on track to make 2020 to transform the beer I'm confident that we have the product portfolio financial strength and most important people to make it happen I look forward to update.

Eating you on our progress have a good evening stay healthy and be well.

Mhm.

Michigan's conference call you May now just.

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Oh.