Q2 2020 Collegium Pharmaceutical Inc Earnings Call
Greetings and welcome to the clean Jim Pharmaceuticals second quarter 2020 earnings conference call at this time over at the same Sarnia listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Alex to follow manager Investor Relations in corporate Communications thinking you may begin.
Welcome to Collegium Pharmaceuticals second quarter 2020, <unk> earnings Conference call. This is Alan this all a head of Investor Relations strictly Jim I'm joined today by Joshi Phony, Our Chief Executive Officer, Paul Brannelly, Our Chief Financial Officer, and Scott Dryer, our Chief commercial officer.
I'll 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 the impact of the cold. The 19 pandemic. The risks that we may not successfully commercialize Xtampza E. R. And then is such a franchise and that we may incur significant expense and may not prevail in current or future opioid industry.
Education, and investigations patent infringement litigation or other litigation pertaining to our products. These risks and other risks up 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 web site at Collegium pharma Dot com.
Ill now turn the call over to clean Jim CEO Joshi phony.
Thank you Alex good afternoon, everyone joining us.
Like Sam So youre.
In the impact of the new since the acquisition Collegium delivered strong financial results in the second quarter and made progress versus our strategic objectives.
This is a testament to the resilience and adaptability of our people in operations and their commitment to making 2020, a transformative year for Collegium pharmaceutical.
Although the pandemic has four so people to work differently, there's been no disruption to our central operations and ability to supply the market.
During this time, we have also been able to serve health care providers and patients.
Today, most of our home office based employees are working on site and the majority of our field forces engaging in some level of in person customer interactions.
Although the productivity of our field force is steadily improving as is the quality of customer interactions. It continues to lag pre kobin levels.
As states began to open we saw signs that in person patient visits were increasing but we believe that that momentum has been adversely impacted as infections increase in many states.
We do not anticipate a return to normal for the remainder of 2020.
Business highlights from the second quarter include increased profitability accumulated cash and paid down debt.
Grew expands to your total prescriptions to 141678 up 22% versus the second quarter of 29 thing.
Strengthens expands to yours formulary position on the Optum Rx National commercial formulary, which covers over 17 million lives effective July 16, Xtampza yard moved from being nonprofit from being non preferred to a preferred brand. This is the first major.
Hi, Brian and which extends to E ours that parity with oxy cotton.
We continue to strengthen our patent estate with the addition of two new formulation patents covering Xtampza E. R. One with the next three in 2030 and the other and 2036 Xtampza Youre now has 19 Orange book listed patents.
We announced a manuscript describing certain real world evidence with respect to abuse and misuse and diversion of Xtampza IAR was accepted for publication in pain medicine.
We slowed the decline of the New center franchise in the second quarter of 2020 versus the same period in 2019 and in comparison to the first quarter of 2020, and we remained unwavering and our commitment to leverage not grow our cost structure.
I would like to recognize and thank my colleagues for their commitment to making a positive difference in the lives of people suffering from paying and in our communities I.
I appreciate their ability to focus adapt and propel the organization forward and our quest to become the leader in responsible pain management.
For the remainder of 2020, the organization will be focused on achieving our strategic priorities. They are growing xtampza yar and securing a pathway to market leadership.
Well when the decline of the New center franchise.
Leveraging not growing our cost structure and executing our midterm growth strategy.
Concurrently we will be taking the necessary actions to prepare for success in 2021.
Even in the face of Cobot 19, Collegium pharmaceutical is on track to make 2020, a transformative year.
We expect the increased profit accumulate cash and pay down debt the remainder of the year.
Our organization is healthy financially strong and uniquely positioned to succeed I'm confident that we have the products and most important the people to make it happen.
I'll now hand, the call over to Paul for a discussion of the financials.
Thanks, Joe Good afternoon, everyone.
With the closing of the new since the acquisition in the middle of the first quarter. This is the first full quarter that shows the impact of the new sent acquisition as well as our continued focus on financial discipline.
During the second quarter, we generated 43.9 million in cash from operations and repaid 12, and a half million of our term loan.
Our June Thirtyth cash balance increased by 29.5 million to 145.7 million from the March 30 Onest balance.
Total product revenue was 78.1 million for the second quarter 2020.
Xtampza Yahr revenue was 33 point Sixmillion, which is an increase of 29% from the second quarter of 2019, and an increase of 7% from the first quarter of 2020 [noise].
The gross to net discount for Xtampza Yahr was 59.0% for the quarter.
As discussed on prior calls gross to net discount may be lumpy throughout the year and is expected to be in the low 60% range for 2020.
New Center revenue was 44.5 million for the second quarter of 2020, which has a decrease of 1% from the first quarter of 2020.
The decrease in New center revenue was partially offset by an increase in wholesaler inventory of approximately one day.
Excluding amortization of the new since intangible asset total cost of product revenues were 12.9 million for the second quarter of 2020.
Which is approximately 17% of revenue.
This includes a 14% royalty to Grnenthal on New center revenue.
Operating expenses were 31.8 million for the second quarter of this year, which is a 6% decrease from the first quarter of this year.
Our GAAP net income was 8.1 million for the second quarter of 2020.
Compared to a GAAP net loss of 4.7 million for the prior year quarter.
Our non-GAAP adjusted income was 33.2 million for the second quarter of 2020 compared to 3.1 million for the prior year quarter.
As you know our historical practice is to provide annual guidance and there and we're not committed to updating guidance on a quarterly basis.
However in light of the uncertainty in the market due to the potential impact of coven 19, and given the visibility we have in our business. We are reaffirming our 2020 guidance that was provided on our Q1 earnings call.
We expect Xtampza ER revenue in the range of 130 to 140 million.
Center revenue in the range of 170 to 180 million.
Total operating expenses in the range of 120 to 130 million, which include stock based compensation expense of approximately 20 million.
Non-GAAP adjusted income in the range of 125 to 135 million.
And we expect to end the year with at least $180 million and cash while repaying 37, and a half million of our term notes.
Midway through 2020, we've made substantial progress towards making 2020 financially transformative year for Collegium.
I will now hand, the call over to Scott for commercial update.
Thanks, Paul in the second quarter, having adapted to the Cobot 19 pandemic, we made progress against our commercial priorities of growing extends to E. R and slowing the decline of the New center franchise extends to E. R achieved all time highs for total prescriptions market share and total prescriptions per prescriber.
Total prescriptions for Xtampza E. R grew to 141678 up 22% versus the second quarter of 2019, and 4% first the first quarter of 2020, Xtampza Yahr extended release Oxycodone market share grew to 23.5% in the second quarter up from two.
21.8% in the first quarter that prescribing base for Xtampza IAR was stable with 14300 unique prescribers in the second quarter and we achieved an all time high of 10 total prescriptions per prescriber.
We saw market share progression within exclusive accounts as you are oxy code on market share grew to 52% in June up from a baseline a 40% at the end of 2019, we expect continued market share growth within exclusive accounts and as a point of reference Xtampza ER exited 2019 with 63.
Percent OE, our market share within exclusive accounts.
Since a franchise total prescriptions were 117162 in the second quarter, representing a sequential decline of 2.8% a significant improvement over the 6.1% decline in the first quarter of 2020.
New since the our branded E. Our share grew to 6.2% in the second quarter and new since the our has now had stable or growing market share for five straight quarters.
<unk> was 19 has had an impact on our business in two significant ways. The decrease in live in office visits that patients are making to their doctors and the decrease in accessibility of our sales representatives to their customers first regarding patient visits as states began reopening in the second quarter, we saw in office patient visits in.
Greece and corresponding increases in new to brand prescription volume.
That said as cases have begun to spike in some states. This return has been interrupted and is inconsistent and it's not returned to pre covert levels.
In office patient visits are important to our business as most pain specialists would prefer to make a treatment change the alive patient visit the decrease in in office patient visits has a negative impact on the growth trajectory of Xtampza, which is more dependent on new patient inflow. Conversely, as a mature franchise, new synta is less impacted and.
Benefit from continuity of care.
Cobot 19 has also impacted the ability of our sales representatives to access health care professionals in person initially their productivity was negatively impacted but through the actions. We've taken we've seen an increase in quantity and quality of customer interactions as states of reopened most of our sales representatives have made a return to some low.
Level of in office customer interactions, we expect our sales representatives will be executing a mix of in office and remote customer interactions for the rest of the year with the majority being virtual.
To help enhance the effectiveness of our sales representatives in these remote interactions weve taken the following actions, we launched new E detailing capabilities and remote selling training, we launched a new E mail capability, which allows our representatives to send customize branded communications to their customers we implemented on demand.
And resource shipping capabilities. So they can send resources like copay cards and patient brochures to health care professionals, we increased availability of digital resources on our brand websites and we've increased our investments in non personal promotion.
On the payer front for Xtampza E. R. Our market access team is working with exclusive payer accounts to improve pull through and accelerate market share. There also working diligently to strengthen existing payer positions and secure a new exclusively are oxycodone formulary wins for 2021.
We're focused on pulling through the new co preferred position for Xtampza E are on the Optum national commercial formulary covering 17 million lives. This is the first major parity position for Xtampza Yar and we don't expect uptake to mirror, what we see an exclusive accounts it will be more protracted and will set a foundation for growth in 2020.
You want.
We don't anticipate a return to normal in 2020, but through the actions that we've taken and focusing on operational execution. We believe we can achieve our commercial priorities of growing its stamps CR and slowing the decline of the new center franchise with that I'll turn the call back to Joe.
Thanks, Scott I will now open the call up for questions.
Thank you, ladies and gentlemen will now be conducting the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
For me she comes to indicate that your line is in the question Q you May Press Star Q, if he would like to move your question from the Q.
All participants season speaker equipment and may be necessary to pick up your handset before pressing the star Keane one moment. Please let me pull for questions.
Thank you. Our first question comes from the line of David Amsellem with Piper Jaffray. Please proceed with your question.
Thanks, just a few so first on me they sent a I wanted.
Latest thoughts on what.
What you're doing to a moderate the spread between gross and net sales you talk to.
Some contracts rolling off that you are renew in the past. So I'm wondering if you can comment.
Regarding how gross to nets are going to trend.
Later, this year and really beyond this year. So that's number one.
And then secondly on on Xtampza can't talk a little more qualitatively on on the extent to which the pandemic that's sort of sirona wrench into your ability to.
Take even more share.
With all the with the exclusive contracts that were onboarded and beginning of the year and help us understand.
How.
Impactful and is in the or maybe where you'd be with extends a without the the realities of the pandemic in terms of in terms of share. Thanks.
Okay, Hey, David This is Joe Thanks for the questions I'm going to share or tag team with Paul on the New Center question and then Scott will take the question on the impact of the pandemic on Xtampza IAR growth. So with New center, it's probably early to give you a granular information there and to.
In terms of what 2021 will look like what I will emphasize is our strategy with new sent a is essentially the try to accomplish three things, where we can we want to improve.
New centers access if possible and if we can do it in a way that we feel was reasonable the second thing that would have that we're focused on that would have an impact to your question on gross to net is where contracts are expiring, we would love to be able to keep the product on those formularies, but in some instances would only do so if.
We're able to negotiate a lower rate and if we are in a position where we have two because of some of the contracts. We inherited we would in fact walk away from formulary positions. If it didn't work or make sense for the franchise and maybe Paul can speak to how to think about trending for the rest of this year.
Great. Thanks, Thanks, Joan Thanks, David for the question for the rest of this year, we expect new center to remain in the mid 50% range 50, 455% in that range for a gross to net discount.
For the rest of this year and I would anticipate that that on our year end color Q3 is where through the contracting season that maybe we'd provide updated guidance on a go forward basis at that point.
And David Thanks for the question on unit growth for Xtampza, and how it's kind of a pandemic is impacting that so so the primary driver of the impact is on patient visits and what we're seeing is still if you look at patient visits they kind of bottomed out in the April may time period, while there has been a little bit of improvements still there down 30.
40% versus pro pre Kobe time period, so that's the significant impact and what it means is it still effects basically new to brand capture period and what we're seeing there is also new to brand market volume in the our market bottomed out in April may it's come back a little bit in the month of June, but still nowhere near pre covert level.
So we're fighting for market share and as patients come back to the office will continue to see some new to brand kind of rebound.
And really until patient visits are fully back we wouldn't expect to be back to what we call pre go free carbon capture.
And David I would just yeah, I'm sorry, David I would also just emphasize our expectation is that expands so we'll continue to grow on a sequential basis and the impact of the disruption in patient visits is ear to ear switching with the exception of when we have these exclusives.
Isn't typical and Thats, a very difficult thing its doesn't seem like it would be but that's something physicians want to do in person and that's where we've seen the impact on the ramp and Scott gave you some of the stats around that.
Now that's that's very helpful. I may just sneak in a.
A follow up.
On Medicare part D. In contracting there any any significant updates or any updates on progress regarding getting better positioning overall on the part D. Plans for example.
Yes, so great question, David up the way I would answer that is right now we're in the midst of negotiation waiting for final decisions as we look forward to 2021, both and commercial and Medicare part D. I would say that we're encouraged I would expect to be giving an update on our Nova.
MBR call whenever we're doing Q3, our Q3 call.
So I think that's when we'll really be able to answer the questions, but I think look we're we have demonstrated an ability to move market share when given.
Those opportunities the profile of the product is strong in terms of the clinical differentiation and so we're encouraged and look forward to providing an update.
Our next call.
Great. Thanks so.
Thanks, David.
Thank you. Our next question comes from the line of Gregg Gilbert with Suntrust. Please proceed with your question [noise].
Thanks. Good afternoon. Other couple I'll start with started one of the time. So when you are excluded from a formulary should we assume that you were offered something that was not acceptable or something else. There's obviously a lot of attention paid recently and such an example, I realize every case is different than what would you like to say about that.
So that people can put into proper context.
Yeah, Greg so.
First thing I appreciate the question.
Certainly we take a lot of pride and trying to as a leader responsible pain management removed nonclinical barriers I think when you look at the gross to net Onyx stamp. So you can see that were being reasonable with a differentiated product, but we're also not going to give the product away and I think if you I believe.
If you're referencing the change at express scripts that took effect July 1st.
And the couple of comments that I would make as it pertains to that situation is the following number one that was an unprecedented decision and that no payer has ever removed xtampza IAR from their formulary.
The second thing is from a business perspective, it will be modestly positive.
For us in 2020, and the reason for that his extensive was never on.
Or was never preferred on the side National formulary. It was covered in a non preferred position of which we were paying a discount for.
For the past five quarters to put it into perspective Xtampza average was flat averaged about 420 trx is per week.
And in making the decision the ESI communicated because of Cove at 19, there will be grandfathering those patients. So we do not anticipate that it will have a meaningful impact on prescriptions, but we won't be paying discounts on it on what we anticipate will be a relatively steady base.
That being said as a leader in responsible pain management, we're committed to continuing to work with all payers to remove nonclinical barriers. We are an active discussions with the ESI as recently as the end of June we gave an updated clinical presentation.
To their clinical team and we'll see how things evolve moving forward.
Thanks, that's helpful color on a different subjectivity made any more progress and getting removed from some of the opioid cases, but what's your part perhaps in correctly in your view.
Yes. So look another really good question when you look at where it is that we're at and this would be I suspect a positive there's actually really no change so as of today. There is over 2600 ongoing lawsuits.
We are aware as of today that Collegium pharmaceuticals is named in 27.
Eight out of the 27 are in the MTL, but none of them or track or bellwether cases, and then just for completeness with regards to new sent though we don't assume any liability for promotion or sales that occurred prior to January of 2018.
Great and my last question is on this stuff you don't need to repeat what you've done in the past you've been very clear about your criteria.
My question is whether you.
Flex that at all to include other areas that you think the company could be good at leveraging your existing infrastructure.
That are not specific to the pain areas that you've highlighted in the past.
Great question, Greg So one there's no change.
We feel there are opportunities out there we know what it is that we're focused on we want to leverage the capabilities and the cost structure of the organization.
And we believe there's opportunity to do that and then the final point I would emphasize is look we are active we're engaged but we're also very confident in the in line business the strength of it in the growth that we anticipate moving forward. So we're also looking for value, we're not going to do a deal.
Just to be able to say that we did.
Thanks, a lot.
Got it thank you.
Thank you. Our next question comes from the line of Serge Belanger with Needham and company. Please proceed with your question.
Hi, Good afternoon first question is about a D or the new Optumrx.
Larry addition announced in your I guess, a new strategy of coal preferred positioning.
Can you just talk about how.
That will drive it sends a growth is still a yard yours switch strategy.
And should we think of this as a.
Eliminate every right to potentially exclusive positioning in the future.
Yes.
Yes. Thanks for the question surge so I'll start by just a reiteration of things you alluded to there which is our overall strategy. So as we've stated in the past when you think that our payer strategy Theres really three legs to it we haven't changed our strategy of driving exclusive formulary wins, so thats still one of our primary strategic objectives, but we also have a strategy where we.
I would add parity with an eye towards running into exclusive as you just alluded to or for some accounts large national ones like this maybe a parity access for the longer duration. So we're still looking at those three strategic levers as we March forward now specific to Optum. We view this is a great opportunity mid year.
Our debt to parity. It's the first large parity position, we have with oxy cotton and so we'll get a good understanding of our how we can perform there and grow there we expect growth, but as we as I said in my prepared remarks, it'll be protract there'll be a longer run in of growth and then a clear running and set a good foundation for 2021 as well so.
We know it won't be like an exclusive but were excited to see what we can accomplish here and we'll see if it leads to other changes at Optum or we continued to perform and grow at parity from here forward.
Okay.
And then taken of.
Second half 2020 growth.
Clearly coded as you mentioned.
Led to a significant decrease in patient visits.
As you've seen an increase of the.
Well it is telemedicine usage from this physician base and could that be an avenue to.
Where we could see.
It could drive additional xtampza gross.
Corporate sticks around.
Yes surge. This is Joe I'll take that question I think what we're seeing and Tele medicine and this is supported by research that others are doing across almost all categories.
You it generates less new to brand in changing of prescriptions. So we think thats a great vehicle for physicians to be able to talk to take care of their patient, but when you get to that switch.
Otherwise stable oxy cotton patient and that physician then changing their medication, that's not something we're seeing happening anywhere near the rate that it does.
And it's the in person visit.
Thank you.
Hello.
Thank you. Our next question comes from Brandon Folkes with Cantor Fitzgerald. Please proceed with your question.
Hi can you hear me.
Yes, Hey, Brandon.
Hey, everyone. Congratulations I know the progress in the quarter and apologies. If you did mention Michigan hopping between a few calls but could you just elaborate in terms of that I know a patient's you're seeing.
Post the quarter ends in July and then maybe sort of some of the positive shifts that kind of it has had on your business, which could be longer Chan tailwind as we mentioned thank you.
Okay.
Brendan I'm going to hand, though those two questions off the Scott, Yes, So brand and when you talk about kind of the funnel and what we're seeing with the with the market. Yes. So so when you talk about the bundling kind of new to brand basically what we're seeing is as coded hit and the primary driver of the decrease was decreased patient visits the new to brand market.
Opportunity went down pretty significantly to the tune of 30% to 40% from a new to brand market standpoint, and that flows right through to the product, especially xtampza as a growth product. What we've seen is that kind of bottomed out in April and May and then in June theres been a little bit of a growth back nowhere near pre covert levels in early.
Early July it's in line with what we're seeing in June so from your standpoint of the funnel of new to brand it's down since pre co bid, but there is some rebound from kind of the heart of the co about kobin season, and that's what we'll be looking at as we go forward for the second half of the year.
And Brandon one thing to just for Comport folio completeness.
New synta benefits from that dynamic as it leads to continuity of care. The other thing we saw in the second quarter is in person visits and procedure started the increase not to the same degree of the IR market, but new since the IR benefited now remember with new sent the IR.
Far higher percentages use in the treatment of chronic pain patients, so thats, where as we talk about new synta moving forward that may be where there is a little bit of a tailwind pack.
When things do returned to normal so that's why we say we continue to focus on slowing the decline even though in some instances, we're seeing trends a bit stronger than that.
No.
Thank you as a reminder, ladies and gentlemen, if he would like to ask a question at this time. Please press star one on your telephone keypad. Our next question comes from the line of Dana Flanders with Guggenheim. Please proceed with your question.
Great. Thank you very much for further questions and Joe I, just wanted to circle back to.
To your prior comments on the decision by expressed to put it stands on the ICSC exclusion list and I guess, that's just surprising to me given extends abuse deterrent properties and what seems to be clear benefits over oxy and so I guess the question is.
It did express come to a different conclusion on kind of the real world abuse deterrence of Xtampza and its value or was this just really around price and maybe if you could also provide some context on kind of what you're seeing on real world abuse deterrence up xtampza any.
Color there.
You could probably would be helpful. Thank you.
Yes. So thanks for the question Dana I'm not inclined to get into.
The discussions that we're having with express scripts I think what I can tell you is people are very aware of the clinical profile of Xtampza supported by a differentiated label inclusive of the clinical decision makers at express scripts and at the end of the day, there's a level of which.
We're willing to go to secure formulary positions and sometimes there's going to be disagreements between us and a particular payer and I would just emphasize the decision that ESI made in this moment of time is unprecedented and that it has never happened since we've brought extend.
So we are to the market, but we continue to be in discussions with them because to the degree there is a reasonable path forward. We don't want physicians to have to even though it's positive to our business deal with that Nonclinical barrier.
And book with regards to real World data, what I would say is look we're excited about the manuscript and it being publish we're committed to continuing across the portfolio and away that's appropriate bring focus to the real world data, both with extensive and the new center for.
And tries and I think that the data is actually really encouraging.
Thanks.
Youre welcome.
Thank you. Our next question comes from David Steinberg with Jefferies. Please proceed with your question.
Thanks a.
A couple of questions for Paul when you.
We purchased a full rights from associates for a new sent a.
Your gross margin improved substantially but certainly is not at the same level as a xtampza and one of those things. The company was talking about was improving the margins to changes in supplies and and other other factors tech transfer.
Where's that now in the process and when could we see some meaningful improvements in gross margin and and then secondly, it for the price increase you recently took what percent went through a which is what percentage you receive out of that you know what what percent do you plan to the bottom line turn today.
Did you benefits on the price increase and have a solid thanks.
Okay, great. Thanks, David I appreciate the questions so for.
Trying to improve gross margin on our belief that we can bring down Cogs, we spoke about that for the first time in relation to the new since the deal.
We have a belief that we can do that across the portfolio as well, but that's that's it.
A longer term horizon, we're in the early stages of developing that plan and believe that maybe you've talked about and next year, but it's over the course of the next three years or so but that will actually have a piano one path.
And as far as price increase as you know we took a 9.9% price increase at the beginning of the year, we realized a 5% of that.
Okay and then.
And then and business development and the beginning of the are you talked about.
More actively looking for assets are either on market assets, where you.
Indicated that the barrier has to be quite high in terms of what you had ring and then person development stage assets. There just curious given that the pandemic has there been a slowdown in activity because you can't have face to face meetings and that sort of thing or are you very knee deep in lots of discussions with lots of.
Companies for lots of different products and you know how should we think about BD unfolding over the next 12 months.
Yes, David This is Joe certainly appreciate the question.
Look we as you articulated we're focused into areas that mid term window development stage assets and Opportunistically, if there's a commercial stage asset where we could leverage the infrastructure, but the bar as high because of how bullish we are on the inline business I would say.
19 hasn't had an impact in terms of our engagement and activity.
We know what it is that we're focused on I think we're active in engaged and we'll see how it progresses over the next many months.
Okay. Thanks.
Alright, thank you.
Thank you we have reached the end of our question and answer session. So I'd like to pass the floor back over to Mr. funny for any additional closing comments.
Okay. Thank you. Thank you for participating on our call. This afternoon Collegium pharmaceutical was on track to make 2020, a transformative year I look forward to updating you on our progress have a good evening be well.
Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation and you may disconnect your lines at this time.