Q4 2020 BioDelivery Sciences International Inc Earnings Call
Greetings and welcome to the bio delivery Sciences fourth quarter and full year 2000, and 'twenty earnings Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If you would like to ask a question. Please press star one on your tele.
Phone keypad.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder of this conference is being recorded and is now my pleasure to introduce your host Ms. Terri Coelho Executive Vice President and Chief Financial Officer. Thank you. Please go ahead.
Thank you and good morning, everyone welcome to our fourth quarter, 2020 earnings Conference call.
Leading the call today is Jeff Bailey Chief Executive Officer, we are joined by Scott <unk>, President and Chief Commercial Officer.
Following our prepared remarks, we will conduct a question and answer session.
Earlier today by the delivery Sciences issued a press release announcing its financial results for the fourth quarter and full year 2020 a copy of the release can be found on the Investor Relations page of the company's website.
Before we begin I would like to remind everyone that certain statements may be made during this call which may contain forward looking statements such forward looking statements are based upon current expectations and there can be no assurances that the results contemplated in these statements will be realized.
Actual results may differ materially from such statements due to a number of factors and risks some of which are identified in our press release and our annual quarterly and other reports filed with the SEC.
These forward looking statements are based on information available to BDSI today March 10, 2021, and the company assumes no obligation to update the statements as circumstances change.
Our 10-K will be filed with the SEC by Friday March 12th.
An audio recording and broadcast replay for today's conference will also be available online and the investors section of the company's website.
With that I'd like to turn the call over to Jeff Bailey, our CEO Jeff.
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Thanks, very much Terry and welcome everyone to our company's fourth quarter, 2020 earnings call I'm pleased to report that BDSI finished the year strong, including both our fourth quarter as well as our full year, 2020 results and <unk>.
2020, our team focused on responding rapidly to the evolving pandemic selling the environment and developed a number of commercial tools to help prescribers and patients while continuing to ensure patient access through solid formulary coverage.
We also realigned resources to ensure continued prioritization of customer facing resources pursuit of operational excellence and further strength strengthened our balance sheet through a combination of healthy operational cash flow and just like the borrowing.
Year over year sales for the company grew 40% for the full year 2020 in spite of the multiple headwinds we faced we generated over $40 million of EBITDA or 26% of net sales.
Our business is healthy with strong cash generation and we are beginning 2021 and well positioned for continued growth.
I was like you said, a three day takeaways from today's call first prescription growth trends and the fourth quarter of highly encouraging and momentum for both BELBUCA and Shapiro of total prescriptions and new to brand prescriptions remained strong.
So far of 2021, we are reassured to see demand seasonality trends that are aligned with prior years.
And there have been no unusual disruptions associated with the pandemic, we did see some impact from the severe winter storms in February of the south central part of the country and everywhere. We have a strong presence both part of its continued achieved all time highs and market share and volume.
Second our agile commercial team was able to rapidly adapt to the pandemic selling environment. The patient visits were down by implementing virtual tactics and communicate with physicians and developing a number of creative programs.
As I had mentioned and our prior earnings call. We have rolled out BELBUCA first start program on the national basis. The first start allows health care professionals, the easily prescribed BELBUCA to appropriate commercial patients for the first time, providing convenient access to BELBUCA, while the health care provider staff the security prior authorization approval.
We believe that this program is having a positive impact and we are optimistic that it can generate incremental growth and 2021, Scott will provide more details.
Third our company has a strong balance sheet and <unk>.
Ended the year with approximately $112 million and cash.
Cash provides us with strategic optionality to maximize shareholder value.
As a reminder, BDSI is highly profitable and the <unk>.
Fourth quarter, we generated $14 $3 billion EBITDA was 34% EBITDA margins. This was accompanied by over $11 million of operating cash flow generation.
Taken together.
The optimistic and our ability to deliver continued growth and 2021.
The Covid pandemic is now one year old, but our performance remained strong and we are well positioned and our respective markets and both of our high performing brands continue to grow market share.
I wanted to share a few key updates about our business BELBUCA generated outstanding growth and the fourth quarter BELBUCA T. Rx volume grew three 7% sequentially and 26% year over year. Additionally, BELBUCA CRM market share and another all time high by growing to four 5% and Q4 as compared to.
The four 1% from Q3.
Now the second straight quarter of what appears to be the recovery, probably the low point and the second quarter of 2020 as the result of the pandemic, which led to a reduced number of patient visits to physician offices.
Similarly, we also saw some product rebound and hit an all time high for Trs volume and market share and the Tabora class, which declined 6%.
These results reflect the outstanding execution by our sales team is of products payroll product profile.
Lastly, our balance sheet has never looked better with one of her $12 million of cash we focused on prioritizing our investments are the disruptive times.
And the focus on preserving and growing our customer base and the longer term health of our brands our balance sheet gives a significant optionality to expand our business organically, where see complementary opportunities at the right time and invest in our business.
2020 was a challenging year for the industry and I am proud to see how the BDSI and really pulled together and all sorts of thrived.
Standard performance both of the fourth quarter and for all of 2020 positions us to remain on the strong growth trajectory.
Of differentiated and growing products, a strong balance sheet.
And the high performing senior management team, we already and.
And our mission to help patients with chronic diseases, and we're focusing as well and delivering increased shareholder value.
With that I'll turn the call over to Scott.
More details of our performance during the fourth quarter Scott.
Thank you, Jeff as Jeff mentioned during Q4, BELBUCA prescriptions grew by 4202 of new high of more than 118800 retail mail order and long term care Trs assets combined.
This represents a 26% increase and BELBUCA tier of Rx as compared to the fourth quarter of 2019, and the three 7% increase over the third quarter of 2020.
This was accomplished despite the continued decline and the overall long acting opioid market.
We are pleased with BELBUCA is continued growth, which led led to its Q4 Trs market share increasing to over four 5% from four 1% and the third quarter of 2020.
During the fourth quarter of BELBUCA is new to brand market share of seven 8% grew from seven 4% and the third quarter significantly above its tiara and share of four 5%, which means there is still a meaningful opportunity to grow total prescription shares as these metrics historically converge.
New to brand prescriptions continued to rebound and the fourth quarter.
We believe that to accelerate current and future growth. It is important that we have robust and be Rx growth.
As Jeff mentioned, we implemented our first start the MD Rx program on a national basis and October after conducting a successful pilot and select territories during the prior quarter and.
Now lets us from the pilot groups adjusted of 31% lift and MBR of X volume and a 20% lift and terex volume and participate participating prescribers and provided us with confidence to expand the program across all territories on October 20th.
We believe that this program contributed to the new quarterly high for <unk> share of seven 8% during Q4, and so the 2% increase and MPLX count from Q3 to Q4 and a L O market the declined 2%.
And we're pleased to report the BELBUCA prescribers prescriber base grew and the fourth quarter. After rebounding in Q3 and was up 9% year over year. We reached an all time high of over 8000 total unique prescribers and the quarter up from the third quarter.
With the introduction of the vaccine and we're optimistic the physician's office offices will begin to gradually reopen and in person promotion may begin to normalize.
Our market access work with BELBUCA has improved greatly over time has been important to our success.
BELBUCA currently enjoy strong commercial coverage with over 90% of lives covered of.
Which almost 59% are covered out of preferred level.
While and Medicare BELBUCA is covered and 33% of lives with 10% of them being at the preferred level.
We believe our current level of coverage provides a significant opportunity for growth, which is supported by our consistent <unk> growth across all payer types and we continue to be committed to improving access to BELBUCA, well balanced balancing payer coverage and rebate levels, especially in Medicare.
And some Q4 prescriptions reached a new high of over 18700, representing a solid nine 6% increase year over year compared to Q4 2019 and of three 4% increase over Q3 2020.
During the fourth quarter, we generated a 13, 5% share share up from 11, 1% and Q4 2019, representing the highest market share share to date.
Additionally, we reached a 14% <unk> share up from 12, 7% a year ago.
We expect continued growth and revenues and total prescriptions for some product as its new Rx share has consistently exceeded total Rx share since may 2019, when PDSA BDSI began active promotion.
And the fourth quarter, our prescriber count for some product increased slightly from Q3 and over 4800 physicians, while also improving the productivity per prescriber.
Like BELBUCA of some product is well positioned with both covered status for 89% of commercial lives with 60% of preferred status.
We believe our early 2020 market access wins with Prime Therapeutics, and Cvs will continue to drive additional growth and 2021.
The BDSI sales force has done an outstanding job pulling through these wins as <unk> have improved with the prime therapeutics by approximately 152% from Q4 2019 to Q4, 2020. We've also seen consistent growth within Cvs for <unk> have increased 37% over Q4 2009.
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Our 2020 <unk> market share growth from 12, 4% to 24, 1% within these plans has been robust we believe there remains room for growth in 2020, one and beyond.
A testament to the focus and effectiveness of our commercial team is how our brands performed and the respective markets.
We note that both BELBUCA and some product retail T Rx growth outperformed in both the fourth quarter and full year 2020.
For example, BELBUCA retail prescriptions grew 32% and 2020 versus 2019, and three 3% sequentially in Q4 compared to declines of nine 7% year over year, and five 9% quarter over quarter, no long acting opioid market.
Similarly, some PERC retail prescriptions grew 13, 1% and 2020 versus 2019, and three 8% sequentially in Q4 compared to declines of five 9% year over year, and three 7% quarter per quarter and the <unk> market.
I am extremely proud of our team who has persevered and succeed during the difficult times of the pandemic.
As of in person access the physician offices continues to improve and <unk>.
And visits increase I believe that our high performing commercial team will build upon our strong growth trajectory.
With that I'll turn the call over to Terry to provide and update on the financials Teri.
Thank you Scott.
And Jeff and Scott discussed we are excited to report our fourth quarter and full year results, which have remained strong despite the continuation of the COVID-19 pandemic.
2020 was the transformational year from a financial perspective, as we reached.
Record level sales and profitability and operating cash flows.
Emanating and closing the year with and increased cash position and a strong balance sheet.
Total company net revenue for the full year, 2020 was $156 $5 million up 40% when compared to 111 $4 million for full year 2019.
The increase in 2020 is primarily driven by BELBUCA, which accounted for 87% of total sales for the year.
And the continued success of some pro Inc, which was added to our product portfolio and the second quarter of 2019.
Full year, 2020 net sales of BELBUCA were $136 $1 million up 40% compared to $97 $5 million and 2019.
Some product net sales for 2020 were $14 $7 million and its first full year of commercialization by Bdsi's team.
Royalty revenues for ex U S sales, the painkiller and brachial totaled one $9 million for 2020 compared to $3 $5 million and the prior year.
Yeah, the Val was discontinued and mid 2020 and generated net revenue of $3 $7 million, which included the release of $2 $4 million of sales returns reserves.
Total company gross margin for full year 2020 was <unk> 84 per cent compared to 81 per cent for 2019.
The increase in gross margins was driven primarily by the favorable gross to net deductions as compared to 2019, largely due to the onetime impact of the channel refreshed for BELBUCA and Q3 of 2020, along with the nonrecurring negative impact of the BUNAVAIL sales returns reserves taken in Q4 of 2019.
Total operating expenses for 'twenty, and 'twenty were $98 $8 million compared to $86 $1 million for 2019, comprising 63% and 77% of total revenues and the respective years.
The year over year increase and spend is primarily driven by increased legal costs and the onetime impact of the CEO transition and Q2 of 2020.
GAAP net income for the full year 2020 was a record $25 $7 million or net income of 26 cents per share compared to a GAAP net loss of $15 $3 million for 2019, or a net loss of <unk> 18 per share.
2020, full year, EBITDA was $45 million or 26% of net sales as compared to EBITDA of $12 $5 million or 11% of net sales in 2019. This marks the second straight year of positive EBITDA for BDSI.
Non-GAAP net income for full year, 'twenty, and 'twenty was $44 $2 million of substantial increase compared to $13 $2 million and 2019 and reflects GAAP net income excluding stock based compensation and non cash amortization of intangible assets.
Certain warrant discount cost and 2019, one time expenses related to the CEO transition incurred and the second quarter of 2020 and the nonrecurring costs and 2019 related to the discontinuation of marketing of BUNAVAIL.
Let's turn to the fourth quarter of 2020 total net revenue for the fourth quarter was $42 $2 million and increase of 33% compared to $31 $6 million and the fourth quarter of 2019.
BELBUCA net sales and the fourth quarter of 2020 were $35 $6 million and increase of 26% compared to $28 $3 million and the fourth quarter of 2019, and an increase of $800000 or two 3% compared to $34 $8 million and the third quarter of 2020.
Gross to net deduction did increase and the quarter as expected and discussed on the Q3 call of based primarily on typical increases seen in the Medicare coverage gap often referred to as the donut hole along with increased Medicaid costs.
Net sales first and probably in the fourth quarter of 2020 were $3 $7 million, which reflects 35% growth year over year, and 6% growth compared to the third quarter of 2020.
BUNAVAIL net revenue for the fourth quarter was $2 $4 million compared to net revenue of negative $500000 in the fourth quarter of 2019, and $600000 and the third quarter of 2020.
Total gross margin for the fourth quarter was 80% as compared to 77% and the fourth quarter of 2019 and below the 86% margin during the third quarter of 2020.
The primary drivers for the quarter over quarter decline included the expected increase in gross to net deductions following the favorable channel refresh impact experienced in Q3 and increased BELBUCA inventory reserves.
Total operating expenses and the fourth quarter of 'twenty, and 'twenty were $21 $4 million compared to $23 $8 million, and Q4, 2019, and $22 $5 million and Q3, 2020.
GAAP net income for the fourth quarter was $10 $2 million or <unk> 10 per share compared to the GAAP net loss of $700000 and the fourth quarter of 2019 the.
The year over year improvement and GAAP net income of approximately $11 million is primarily driven by the continued growth of our top line improved gross margins and a decrease and overall operating expenses.
EBITDA in Q4, 2020 was $14 $3 million or 34% of net sales compared with $4 $1 million or 13% of net sales in Q4 2019.
This quarter marks the eighth consecutive quarter of positive EBITDA for BDSI.
Non-GAAP net income for the fourth quarter was $13 $7 million and reflects GAAP net income excluding stock based compensation and noncash amortization of intangible assets.
The company has a strong balance sheet with cash and cash equivalents as of December 31, 2020 of $111 $6 million as compared to $63 $9 million at year end 2019.
The combination of continued strong revenue growth and attractive gross margins together with prudent spend management and working capital improvements resulted in positive operating cash flow of $11 million and the fourth quarter and a total of $25 million over the course of 2020.
$47 7 million dollar increase and the total cash position from 2019 to 2020 reflects our positive operating cash flow. In addition to the net proceeds of $19 $6 million from the draw down in May 2020 of $20 million from our existing debt facility and $3 4 million and pro.
The states from the exercise of stock options.
The offset by $200000 used to repurchase shares and the quarter.
The Companys total long term debt position as of December 31, 2020 remains at $80 million.
Our share buyback program initiated late in the fourth quarter and resulted in the repurchase of approximately 48000 shares in 2020.
The program has continued to execute purchases in 2020, one with close to 660000 shares repurchased thus far and the corridor.
The $2 $9 million and share repurchases to date represents more than 11% of the authorized amount.
This reflects the continued confidence of the board and the management team and the strength and value of our business.
We are very pleased with our year to date business and record financial performance, having delivered 40% year over year revenue growth continuing profitability reflected and our 26% EBITDA margin of $25 million of the operating cash flow generation and a strong balance sheet.
The impact of the of pandemic for almost the full year on patient visit physicians offices, and our limited ability to market and person to health care providers 2020 was the successful year for BDSI.
We once again achieved record level of sales performance for BELBUCA, providing us with confidence and the sustainability of this growth momentum into 2021 and beyond.
In addition, some pro it has been and attractive add on for our sales force and fits well with our targeted physician group.
Given the solid market demand for our products, we expect net sales in 2020, one for BELBUCA of $155 million to $165 million and 'twenty 'twenty, One total company net sales and the range of $170 million to $180 million.
These estimates incorporate the expected impact in quarter, one from the winter storms, which affected some of our most productive territories as.
And as well as an expectation that there will be of continuing improvement and live access the physician's offices and a more gradual increase of in person patient visits.
We estimate our total operating expenses to be and the range of $115 million to $120 million as we continue to invest to support the growth of our brands and we expect EBITDA to be and the range of $40 million to $50 million in 2020 one.
Finally, we anticipate continuing to be operating cash flow positive throughout 2021.
On the final note the three day bench trial against the Allergan was conducted commencing on March one 2021 related to their parents craft for patent challenge.
Or it has requested the parties to submit post trial briefs over the coming two months and a decision from the court is expected subsequent to the filing of the post trial briefings.
And you would expect we are not and are positioned to comment any further regarding ongoing litigation.
And we'll now turn the call back to Jeff for some concluding remarks before we open up the call for Q&A Jeff.
I wanted to take a moment and thank our employees got really performed when faced with the pandemic last year.
The spirit of and empowered culture.
Really deliver the 2020 strong results. We highlighted this would not have been possible. If we did not have great people.
As a result of the hard work BDSI and our brands are on solid footing and we.
We are thrilled to introduce our 2020 one guidance the reflects our expectation for continued growth of our business.
We're looking forward to greater interaction between our sales force and health care professionals, and 2021, especially in person as the pandemic wanes and.
Starting with what will hopefully be and even stronger year ahead for our customers our patients and our employees.
And I will take your questions.
Thank you, ladies and gentlemen, and the floor is now open for question and if he would like to ask a question. Please press star one on your telephone keypad at the time.
A confirmation tone will indicate your line is and the question queue. You May press star two if that's true.
One of your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before.
Pressing the star keys, once again Thats Star one to register the questions at this time.
Our first question is coming from Brandon Folkes of Cantor Fitzgerald. Please go ahead.
Hi, Thanks for taking my questions and congratulations on that.
Solid quarter of execution and.
Jeff You mentioned the balance sheet has never been stronger.
And just following on given that we can't speak about the sort of litigation, but I think with the litigation and it really kind of it just really highlights and product concentration risk.
Smaller companies what is your urgency to expand the portfolio and.
For the coming months, and maybe sort of the rest of the year as well, but kind of prior to this decision and sort of two types of Matt.
And then secondly, and.
Some of <unk> implied guidance, if I'm calculating this correctly it seems to imply sort of marginal growth to very significant growth.
And just talk about some of the pushes and pulls around from product growth in 2020 one thank you.
Okay.
Well thanks for the question Brandon Hope you're doing well.
First of all and the urgency to expand the portfolio.
Consistent with what we've talked about before as far as just really making sure that we're looking for the right assets. The right time, we have a very thorough and complete process from the comes to looking at different assets and really focus on bringing home shareholder value. So when you do take a look at the right now.
And the outlook the spaces, we could typically you walk in and all of that stuff out and some really good stuff going on behind the sales, but it's also one where to your point relative to the litigation and all of that debt, we will make sure of that.
The we really are in the position to be able to leverage our our balance sheet the cash position the EBITDA of the continued growth.
We see the momentum that we have going on and we're really positioned super well on that and we're also being really careful to make sure of that it's one where it's the right deal at the right time as far as making sure that it's all of that brings shareholder value home. So.
And I think you are connecting the right thoughts there and just footwear.
Yes.
We're really looking forward to expanding the portfolio, but it's one where we're being very prudent with that so as far as the urgency of thought something that we see the specialty you have to do and the next few months that's for sure.
There was the right deal of the lifetime value.
We're ready to make that move as far as the growth of some progress I Gotta go and let Scott go ahead and weigh in on that as far as some of the growth drivers on some products like that and we're very optimistic about what we see there Scott which by the way.
Yes, Brendan and thanks for the thanks for the question.
We're actually really happy with where some broke ended the year of all time high for the quarter, but also December at.
Well over 6600 prescriptions.
I think one of the things we wanted to be a little cautious with at the beginning of the of the year is always soft with the Morris week, we traditionally see of pull back and in Q1 and the entire market and then it kind of games actually business throughout the year. So.
We still think we can grow and I think one of the crucial drivers, though as it will be for BELBUCA as patients getting back into offices.
<unk> out of the suggests the office visits are still down over 20%.
As we exited 2020, and then the face to face of visits by our reps.
We're encouraged by that we were seeing about 60% of our call activity.
Through Q2, Q, sorry, Q3 Q4.
And just around 60% and in recent weeks here, we're encouraged to see that rising just below 70%. So.
And I think thats the positive but.
And until we fully see the impact of the the vaccines and patients getting back in the offices because we wanted to make sure that we were conservative of what we were.
Putting out there.
Great. Thank you very much the price of it.
Okay. Thank you Brandon.
Thank you. Our next question is coming from Greg Gilbert of true. Please go ahead.
Thanks, Good morning.
As he settles into the permanent CEO role ROHL.
Have you reconsidered the possibility of building and development pipeline or is the focus still and commercial assets as you think about how the company should evolve over the coming years I think the company has been pretty consistent that it's not and the development game.
And as the commercial entity, but just curious to hear your thoughts on that she look out of few years and secondly.
As it relates to the capital allocation noticed the share buyback of Odyssey should we continue to expect you to be active around these levels or at this point of you're more focused on deploying that capital and.
And other ways and maybe lastly, Terry you can comment on the gross margin in the fourth quarter, and what pressured that and how youre thinking about gross margin for the coming year. Thanks a lot.
Yeah.
So thanks for the question, Greg Hope you're doing well.
Yes, as far as the the types of assets. We're looking at are ones that did not pushes and to be coming in the development stage company.
I wonder whether it be consistent with us that if we go way back into the early stage and building out the of complete infrastructure, there and Thats something thats less of.
I guess can change from where we've been the types of assets. We're looking at our later stage type of assets or some of that could be early stage of how already out there.
Commercialize of this particular point, but it's one where the strength of our organization and it has really been proven and as far as what the results in 2020 as far as the.
And the commercial strength the.
Our team brings to the table as far as across the larger from functional areas really lineup. The play the game quite well there to be able to really outperform markets and.
Really go down that road. So we continue to stay focused on those types of assets that are mid to later stage type of assets to bring in.
It's not one where we view ourselves as the development stage coffee at this point.
On the capital allocation and the buyback I'm going to go ahead and let the.
Terry weigh in on that but I think it's all sort of just one way or the real.
Clear of that as one where we see ourselves as being undervalued and so that's sort of important part of why do we focus on some.
And some things tied to the buyback, but the Terry and I want you to go ahead and.
And what are some additional thoughts about capital allocation from your perspective.
Yeah, Thanks, and just and hi, Greg So yeah, and the capital allocation I think look we we mentioned before and just just talked about how we feel value of the stock is and we will continue to evaluate the market.
<unk> as we mentioned before we don't expect to necessarily.
The one large buyback of all at once will we'll be monitoring it.
And I think you can be thinking about that right now you can imagine and we've been and a and a quiet period. So there's a plan in place that that is operating on its own let's say with some guidelines from us that we initially put in place in terms of the gross margins as I shared on the call. The word probably two major drivers one was.
If you were comparing it to Q3, you may recall that we had the channel refresh which.
And I had a favorable impact to the gross to nets and in Q.
Q3, and therefore, the gross margins in Q3, and what we saw was the typical normal kind of second half of the year impact of higher coverage GAAP and so on and so it came back and long because of that and then secondly, the Ah I share that we had some BELBUCA inventory reserves that we took and the quarter.
And for the year the coming your share.
For the coming here. So you know we've talked I think in general, we still see ourselves and that kind of mid eighties, both brands have pretty attractive gross margins and I would expect that to be able to continue.
And thanks, if I could just follow up with one last and Jeff I know you guys are not looking for your comments.
Specifics of litigation, but.
Correct me, if I'm wrong, but of win or a loss here could be quite transformational for the company and my <unk>.
Overplaying that thought is it something that really helps define the types of deals youre looking to do of the sense of urgency with which you need to do them.
And any sort of just philosophical thoughts around and the importance of this event would be would be helpful. It seems to be the elephant in the room for a lot of investors at this point.
Yeah, no. It's a good question because it's an important outcome for us.
And that's clear.
And you don't continue to take a prudent approach to our business development activity and and naturally there is there of light between the outcome of the trial of our BD efforts.
However, we remain very focused in parallel with our BD efforts.
Bringing shareholder value and meantime, so.
It's one where the strong balance sheet really positions us well.
What we've developed at this particular point, where we see the right assets at the right time, we're able to afford with the I think the have the right perspective, Greg So it's.
Hopefully of some helpful background.
Thanks, a lot I appreciate it.
Thank you.
Thank you.
It gives me our next question is coming from David <unk> of Piper Sandler. Please go ahead.
Thank so it was just the hypothetical to the extent that you do win in your case versus Allergan and and using the.
Shored up.
And the exclusivity runaway for BELBUCA.
Can you talk about the extent to which you would invest further in the brand the.
And whether that.
A lot of larger sales organization.
And our or other activities just give us your sense.
Philosophically on how you think about further.
Further investment or is this sort of the brand where you just execute on the formulary front, but in terms of commercial support you know you're pretty much where you want to be for the the duration of the exclusivity runway. Thanks.
Yes.
And David really good question as far as the way that we're viewing the execution with BELBUCA and some products and fat.
As you can see from some of the numbers and some of the things that Terry was talking about and as far as projecting the 2021, we are very focused on investing and our brands sort of where we see so much more upside for these brands the coming years and a lot of this is about marketing and muscle, it's about really funding and debt.
The Covid World, It's one where are we.
You'll have reallocated resources to customer facing and we did the right thing there really paid off force there, but investing even more in to these brands.
It's really one where that helps drive that upsize upside for us that we see clearly.
And you take a look at the size of our sales force Scott and I spent a lot of time with his team talking about this we really feel strongly we are right sized with that a lot of the investments that we're talking about is really on the marketing side and things of that are adjacent to the marketing effort to really drive this the.
The thing I really like about this so much that we can for destiny on this and as far as where we take this thing and it's really good old fashion operational excellence the right Doctor at the right message the right frequency and just really our team the team.
Moving to do what they're doing and to continue this growth trajectory going forward, but what's the additional marketing resources behind it will be really helpful to really drive that Scott you of anything else you want to add to that as well.
And that's a great summary, Jeff the only thing I would add is that we obviously made a pivot last year.
And really built out the digital component of our promotions and I think importantly also.
Moved a large part of our dollars from a non branded promotion setting to branded so and I do think and when you. When you look at our performance year over year compared to the markets. We're in and I think that was the big part of it.
Obviously as well as the reps do and a really nice job.
At a distance virtually as well as the face to face of interaction the that'd be all of that so that Jeff.
Thank you.
David can we give you the background you needed there.
Oh, sorry about that yeah, and if I.
And if I may just thinking of follow up.
You know I know you talked about formulary access, but another philosophical question here just on the at this time on the on the payer front.
You know I guess how aggressive.
Do you want to get and in terms of contract I mean again, assuming that you've shored up the exclusivity runway.
Here.
How aggressive do you want to get in terms of Rebating.
And in order to improve.
The improved formulary positioning, particularly as it relates to the part D.
So I'll, let Scott weigh EBITDA, let me cover a couple of things upfront so.
And you take a look at where we are right now and the team of Terry Scott myself, we have a lot of experience in this area and.
And we would have the opportunity if we really wanted to we could go out and sign a ton of contracts right now and the point that you'd make great headlines as far as the press.
The press releases of that X number of millions more lives that are covered and all of the sort of stuff, but when you take a look the math behind them.
And really super prudent behind that and make sure we're doing the math behind that so as far as future contracting and a lot of our work is really about.
Making sure that we're maintaining good contracting good access we have very good access for our products right now that the.
It really play through and so we're very focused on that but we're also very opportunistic as far as lucky that give you examples force from regional plans and things of that very targeted with that so you take a look at where we are and the product lifecycle that the team has done a really good job as far as contracting and getting us to a good place.
As far as the additional contracting we'll remain opportunistic but the one thing I want make sure just from a shareholder standpoint that we're really prudent about doing the math behind the scenes that what really makes sense or not so we can make some great headlines and the short term and make us feel really good about expanding some things, but I want to make sure there's confidence, though that we're doing the math.
And behind the scenes that what was really best for our business and Scott do you have anything else you would add to that.
And I think Jeff and just spot on here, David We're always and I think it was in my prepared remarks, but we're committed to improving access.
But we're also trying to balance rebates without access and making sure that it makes sense from a business standpoint and.
And just spot on and we could we could go out and sign a bunch of contracts.
You know tomorrow, all of us, but they wouldn't make sense financially to the company and so we're trying to be very prudent.
The other thing that's really important and I know we've talked about this from the past.
The Medicare probably when you look at it that that might look like the opportunity.
We have really high approval rates there, it's almost 90% it's almost identical.
The call too.
The commercial so what that means is if a physician.
Or a mid level of prescribed the product of BELBUCA and they do the proper P. A authorization that about 90% of the time, it's going to get approved which is quite good and the.
Market place. So so we feel we have coverage and places going to allow future growth will continue to look for some improvement and the smaller plans on the commercial side, because that's really about what's left of Sop plant and.
And then and the Medicare again, if it makes sense from a rebate level will will move forward with those but the amount.
Until we do extensive and.
Dallas is on the financial side and financial impact.
Okay. Thanks, that's helpful.
Thanks, David Youre welcome.
Once again, ladies and gentlemen that is star one to register a question at this time.
The question is coming from Scott Henry of Roth Capital. Please go ahead.
Thank you.
And just a couple of questions first.
The first for Terry just for clarification.
And the operating expense guidance for 2021 of 115 to 120 million.
Is that inclusive of cost of goods sold.
No that does not include cost of goods sold.
So it doesn't and it does include Ameren and it does include the amortization however.
Okay. So should I interpret that to be when I when I look at the model of the second half spending.
It was down pretty significant 2020, and the first half was higher so I mean should we think of more of of the first half of being a reflection of operating expenses for 2021.
Yeah, I think so so and as I shared on the call with my prepared remarks, I think we see a couple of things. One is we wanted to make sure we're continuing to invest behind our brands and support the growth.
They're looking to grow nicely and.
I think the other piece of it is we are expecting to see a return to more normal market conditions and being able to have the reps out in the field and traveling and and everything else. So.
We have some of that built into our assumptions as well.
Okay. Thank you for that color.
And then just a couple of questions for Scott.
And when I look at the <unk> prescriptions market share of steadily increase pretty consistently month over month and.
And then of gift of at least according to the numbers I'm looking at in January the <unk>.
And as is.
That noise or is there anything that could be causing that.
Scott Thanks for the question, Yeah, So we're watching that carefully and.
I think it's just noise at this point I don't think we have enough data to conclude there is.
Of trend there so.
And then I think Jeff had mentioned in his remarks also and Terry did the February was pretty disruptive to our business as well.
The the winter storm that hit in that area, that's where some of our biggest businesses so that the.
And that definitely impacted and there's somebody <unk> reports that report that Texas for example was down 40%.
Alone and retail prescriptions during that week so.
And I think it's early.
You've seen the brand recovering here in recent weeks, so I anticipate us getting back on track there.
Okay, Great and then.
With regards to BELBUCA.
The opioid category continues to decline.
How are you thinking about the level of decline and 'twenty 'twenty, one versus 2020 I don't know if it was 2020 impacted Additionally by Covid. So if we don't get that and I'm. Just wondering if you expect the category to stabilize it at lower declines or or to continue at the current rate.
So we've modeled a slower decline going forward and that's been the case really year after year here Scott.
And where to go back to 2017 2018 2019, the decline has definitely slowed and matter of fact last year.
It was actually as we exited the 19 going into early 'twenty.
Especially on the <unk> side, it was really flatten flattening out and almost completely flat and then COVID-19 hit and it pulled it down a little bit so.
I do think that.
We've gotten to the level of more of kind of appropriate prescribing of opioids. The it appears everything and look at it as kind of flattening out and I think a lot of the different programs put in place of helped kind of get to a more normalized area and.
Again, I do we do we do anticipate a flattening of that curve overtime.
Okay, great and not to that outcome.
And Scott just a couple of the data points.
To supplement what Scott just coverages.
And that the.
The guidance, we're providing is we view it as being conservative and achievable, which is probably hopefully where everybody would want us to be and our mindset and as far as also the background goes and this ties back to your market question, we're really pay of Super close attention and be Rx market that.
Last year, the NPR X Mark it was down about 15% compared to 2019 and the real driver. There was patient visits were down and the second quarter of last year were down 45% and that's the key driver to that part of the market and also.
Sales rep face to face interactions are down 56 per cent for the year. That's according to our <unk> of data. So when you take a look at that that's what we're paying really close attention to about the market and Thats something were.
Our view of 2021.
See some trends where that that's coming back and I think that's favorable for the market.
We're paying super close attention the vast as far as how were viewing the road in front of us. So I just want to provide a little bit more day to behind your question as well Scott.
Okay, great. Thank you and then.
And final question with regards to of the litigation and and not specific to this trial, but the perhaps you can add some color.
And what would you typically expect for the timeline between a bench trial and the decision I don't know if there's any guidelines and we should be thinking about but I wanted to hear your thoughts. Thank you.
The only thing really.
Comment on there is that and just for everybody else on the call as well that there was a three day bench trial debt.
It was conducted.
And just on March 1st and it was one where.
The court has requests of the parties to submit post trial briefs over the coming two months and the decision from the court as expected.
Subsequent to the filing of the post trial briefing. So there is no real like Super clear of timeline on that and but Thats really whats out there thats played back from the courts. So.
As you can imagine, but I'm not really comment further on the litigation, but thats really where we stand there.
So and hope that everybody is essentially a bit on the timeline.
Yes, that's that's helpful. I appreciate that thank you for taking the questions.
Thank you Scott.
Thanks Scott.
Thank you. Our next question is coming from Tim Lugo with William Blair. Please go ahead.
Thanks for the question and.
I guess, given the al Virginia case timing any of the overhang impact per discussions and Q4.
Maybe some parents who were looking at preferred contracts what they wanted to know what the net.
Ongoing tail end of the contract would look like.
And.
Do you expect.
Given the favorable outcome.
Have a more active payer round and our Q4 2021.
Okay.
So Scott do you want to take that.
Sure.
And you want to provide any more color behind that.
No no I appreciate that and Tim there is really no awareness out of the payer level of around the trial at all.
And I can honestly say that it has not come up one time and our discussion so.
And really its just been.
Normal contract discussions so it again going forward and the other part of your question I don't really see any impact there as well.
Okay, and what's kind of I guess, given the recent pick up and in person call activity. I think you said, maybe about 10% of and stuff.
Have you seen any of that flow through to.
I guess are at school.
Sure.
Prior authorizations or.
And maybe new to brand growth and.
I guess in general how happy are you with the spread of kind of in January and February given the normal seasonality.
And so I'll take the first question first and we really don't have enough data yet Tim as you know it's lags the good amount of at least a few weeks.
Until we get the full picture and really it's been over the the only the last two to three weeks and.
There was a good there was a week two weeks and February where we had a virtual national sales meeting and then the weather hit.
So those those weeks where were lower and call activities. So it's hard to draw any conclusions, where we would've been.
Jeff mentioned this earlier and I'm a firm believer that its number of calls on the right physicians with the right message.
And.
And I was having additional.
Touch points face to face, while we've enhanced our digital I still believe that's synergistic with getting in front of our prescribers.
And so.
The.
To me that that's that's kind of a crucial for us to see that going forward and then the return of the patients to the office of like Jeff had mentioned.
So.
Okay, I understand I think and I'm sorry, what was your what was the other I'm sorry, the other question.
General comfort all of the trends, yes, the worry of February trends.
So when we go back and look at kind of seasonality of BELBUCA and 2019, we had a very similar trend of what we're seeing now.
Excluding again that week week week and half in February where we saw very soft and we can go back and trace that directly to the the states impacted by winter storm Yuri.
And what we will typically see is March being our next kind of inflection point and growth.
After a little bit of of ticked down in January and February is always the short month. So that's kind of difficult to look out of the monthly basis, but March is usually the rebound month for us and I and I think we're positioned well to do that.
Great Thanks for that.
Yes, thanks for the question Tim.
Our next question is coming from Tim Chiang of Northland Securities. Please go ahead.
Hi, Thanks.
Jeff maybe you could just comment on how active you guys have been.
Looking at potential BD transactions.
There are lot of out there and you guys have.
<unk> seen and do.
Do you think that there is.
Complementary assets and.
You could bring in.
Near term.
Yep.
Hope you're doing well.
Yeah, No we're very active as of course, keeping our finger on the pulse that's the best way to phrase it sort of just give you from a process standpoint, we have a weekly call based upon the <unk>.
The team members and the work that we're doing there there are some interesting assets, we see a number of attractive assets out there neurology CNS rare disease that we see as can be and complementary to our tour of focus.
And so much focused on products that are focused some of the unmet medical needs.
And that's really something that we've always we also focus time on anything that leverages our core capabilities.
Back bone of the commercial team and.
And really making sure the sufficient operating model and the best as possible, we'll share some things there. So it's a good process in place if you take a pie chart of where I spend my time.
Terry and Scott as well, it's the pits.
And you'll become a significant part of the Pie chart, but also it's one make sure that everybody takes away from the call that it's a very prudent process to make sure that it's well thought out and the Roes, let's focus on shareholder value of anything we're doing and all of that and so there's some interesting and stuff out there, but it's also the diligence and making sure that were really solid.
And as the process goes.
There's really four of what's top of mind. So the senior management team is very focused on this and.
The good things of that and.
Okay, Great and maybe just one follow up for Scott Scott I mean, obviously you guys are doing a of you know of Valeant effort from.
A morning BELBUCA.
And what sort of pushback are you still getting on the product here I mean, obviously, there's no shortage of.
Scheduled to.
Opioids being prescribed and this country's I'm, a little surprised that youre not getting.
More traction I mean is there something thats holding holding BELBUCA back.
Tim I think.
The number one thing always and getting some of them prescribed as just changing habits.
Obviously, there are a lot of.
Health care providers that over the years of gotten very comfortable and prescribing the <unk> twos and they work very well. So there's a there's a large base of business and that area and there are a lot of short acting as also of those same molecules that are short acting.
But are very easy the transition to a like molecule of long acting.
So it's really getting people to change how they practice of medicine.
And how they treat their patients so it's really about changing habit and that's why earlier I mentioned.
Being able to be in front of our health care providers of our customers is so important to us because I think that's the best way to change out of it is face to face visit.
And sharing clinical data and information so hopefully that helps.
I mean, he's got used do you see anything that the new.
And.
The government can do in terms of increasing the awareness of of.
Non opioid alternatives to treating pain.
Well, we've seen things come out of for example, the HHS Task Force, obviously issued some different guidance kind of pain guidance, a while back but they really havent mandated anything.
I think we always view.
The policy is being something that could be additive, but we.
And we don't want to count on it to grow our business. So it has to be us executing at a high level. So I don't know that we've ever seen and the government very often come in and just dictate or practice medicine. So I think it's challenging to rely on that to drive our business, we have to kind of one of our destiny going forward.
Got it thanks.
Youre welcome thanks for the questions.
Thank you at this time I think the floor back over to Mr. Bailey for closing comments.
Thank you very much and so just real quickly.
Today, the very much appreciate of our participating on the call.
Hopefully we gave you a pretty good snapshot about why we're so pleased about the fourth quarter very strong results also.
Really two of our employees and the teamwork that's gone on as far as really pleased with the record 2020 results debt that we just weren't April of a review with you and also just to reinforce that we're very excited about the road in front of US, we're really keyed up well here.
Well, great. Thanks for the market dynamics and also with our balance sheet debt, we've really worked hard to really grow that and improve it.
Over the last year or two and some really good stuff happening for the company. That's in front of the so we're really poised for some great growth and.
Just as we wrap up just thanks, everybody for the time participating today and look forward to some of the follow up and really focused on delivering day, a very strong year of 2021.
Paul and that's we haven't already.
Ladies and gentlemen, thank you for your participation and interest and bio delivery Sciences. You may disconnect your lines and log off the webcast at this time and have a wonderful day.
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