Q2 2021 Collegium Pharmaceutical Inc Earnings Call
[music].
Greetings and welcome to the Collegium pharmaceutical second quarter 2021 earnings conference call.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Alex the seller.
Head of Investor Relations and corporate communications.
Welcome to Collegium Pharmaceuticals second quarter 2021 earnings Conference call. This is Alex the Falla head of Investor Relations for CGM.
I'm joined today by Joseph on <unk>, Our Chief Executive Officer, Paul <unk>, Our Chief Financial Officer, and Scott Dreyer, Our Chief commercial officer.
Before we begin today's call we want to remind participants that none of the information presented today is intended to be promotional and the any forward looking statements made today are made pursuant to the safe Harbor provision of the private Securities Litigation Reform Act of 1095.
You are cautioned that such forward looking statements involve risks and uncertainties include.
Including and without limitation the risks that we may not be able to successfully commercialize extends the ER and NUCYNTA franchise, and then we may incur significant expense and may not prevail in current or future opioid industry litigation and investigations.
Patent infringement litigation or other litigation pertaining to our products the.
These risks and other risks of the company are detailed on 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 website at Collegium pharma Dot com.
I will now turn the call over to Collegium CEO Joseph Tony Thank.
Thank you Alex good afternoon, and thank you everyone for joining the call today, we will discuss sort of performance during both Q2 and the first half of the year. In addition to our outlook for the remainder of 2021.
Collegium, we remain focused on our mission of being the leader in responsible pain management.
I want to take a moment to recognize my colleagues for their hard work and thank them for their commitment to people living with pain and the communities we serve.
During the second quarter, we expanded our partnerships and support of life Sciences in education in disadvantaged communities with the donation to science from scientists a nonprofit whose mission is to improve stem literacy our contributions will find multiple stem programs for the upcoming school year.
We are dedicated to delivering on our mission driving growth in our business and creating value for shareholders.
We will do this by maximizing the potential of our differentiated portfolio of pain products, achieving our near term operational and financial goals and strategically investing in our long term growth.
I am pleased to report that in the first half of 2021, we've made meaningful progress against the priorities that we outlined for you at the start of the year our business is strong and our people are healthy.
We are in the phase of growth and value creation, and we are on track to achieve our objectives for 2021.
Notable accomplishments in the first half of 2021 include we posted record revenue net income and adjusted EBITDA.
We expanded our market position with extends the ER delivering all time highs in market share in total prescriptions.
We grew NUCYNTA franchise net revenue to over $100 million of level not seen since 2018.
We reduced operating expenses, excluding stock based compensation and we grew cash on hand to over $200 million.
Expanse, the ER prescription growth and market share gains were strong in the first half of 2021, driven primarily by new Medicare part D. Formulary positions that took effect on January 1.
COVID-19 dynamics adversely impacted the market in person patient visits and our field forces the ability to make in person office visits the.
The combination of these factors resulted in <unk> ER prescriptions skewing to exclusive plans, which pressured gross to net relative to our expectations.
Although we are seeing signs of progress we anticipate the COVID-19 dynamics will persist in the near term and as a result, we are adjusting our full year guidance for <unk> ER and the NUCYNTA franchise.
For the remainder of 2021, we are focused on growing market share with <unk> ER and improving the mix of business over time, we are committed to managing expense the ER gross to net to less than 65% by improving mix of business and optimizing payer.
<unk>.
The NUCYNTA franchise grew revenue in the first half of 2021, driven by favorable gross to net dynamics offsetting pressure on prescriptions.
For the remainder of 2021, we expect NUCYNTA franchise prescriptions to stabilize and favorable gross to net dynamics to continue on.
Operationally, we achieved our key objectives of leveraging our cost structure, specifically, our operating expenses, excluding stock based compensation and generating strong cash flows.
For the remainder of 2021, we continue to be focused on executing on our growth plan and creating value for our shareholders by deploying our strong balance sheet in a disciplined manner of.
Our business development strategy is focused on diversification.
Specifically, we are seeking to diversify the company and 1 of 3 ways first financial diversification like the NUCYNTA acquisition, where we are focused on commercial stage high synergy opportunities that would directly leverage our cost structure.
Diversification through the acquisition of later stage development defined is phase II ready or later non opioid pain assets here. We are pursuing programs that have the potential to generate revenue in the 2025 to 2027 timeframe and that have peak sales potential of at least the 100 <unk>.
$50 million and third we are pursuing commercial stage lower synergy acquisitions that would establish a strategic beachhead into adjacent therapeutic areas.
Business development remains a top priority for the organization and we look forward to updating you on our progress.
We are encouraged by our revenue performance in the first half of the year and by the underlying trends in our differentiated pain portfolio. We are on track to achieve our objectives, but recognize we have a lot of work to do I will now hand, the call over to Colleen for a discussion of the financials.
Thanks, Joe Good afternoon, everyone before I start I want to extend my thanks to my new colleagues at Collegium and recognize the contributions and many talents, which have helped me greatly as I transition to the role of CFO I am truly excited to be at Collegium and Im looking forward to the journey ahead.
With that let me jump into the quarter.
In the face of COVID-19, Q2 was another strong quarter for Collegium as we leveraged our operating cost structure and generated meaningful cash flow from operations.
Total product revenue was $82.9 million for the second quarter, an increase of 6% from the second quarter of 2020.
Expense the ER net revenue was $33 million a decrease of 2% from the same quarter last year and a decrease of 7% from the first quarter of 2021.
In the second quarter, we saw underlying volume growth across all books of business. The COVID-19 remain the challenge and dynamic, particularly in the non contracted and non exclusive books of business.
Because of this dynamic mix of business skewed to exclusive accounts in particular of Medicare part D, resulting in a gross to net discount of 69, 5%.
Looking to the second half of 2021, we expect extents the ER to continue to grow at a moderated pace and consistent with what we have seen in prior years.
Moving to NUCYNTA in Q2 gross to net discount was again better than our expectations and we expect the franchise to continue to benefit from favorable gross to net dynamics for the remainder of the year.
The NUCYNTA franchise net revenue was $49.9 million in the second quarter, an increase of 12% from the second quarter of 2020, and a decrease of 5% from the first quarter of this year.
Operating expenses, excluding stock based compensation were $27.3 million in the second quarter compared to $26.2 million in the same quarter last year and $27.5 million in the first quarter of this year.
The decrease in Q2 operating expenses, excluding stock based compensation compared to Q1 reflects our continued commitment to leveraging our cost structure.
Our non-GAAP adjusted EBITDA was $40.1 million for the second quarter versus $39.1 million in the second quarter of 2020.
Let me make a quick note on net income.
Our GAAP net income of $72.8 million includes a 1 time noncash adjustment of $62.6 million due to the companys release of its tax valuation allowance on the majority of net operating losses and other deferred tax assets.
Please see our press release issued earlier today for a reconciliation of GAAP to non-GAAP results.
As of June 30, our cash balance was $202.8 million, which is the 20 million increase from March 31.
This is the fifth consecutive quarter, we have increased cash on hand.
Now onto 2021 financial guidance.
Due to the ongoing impacts of COVID-19 on our business and gross to net dynamics across the portfolio. We are updating our previous product guidance communicated on may 6 for 2021, we now expect extents. The ER revenues in the range of $140 million to $150 million down from 105.
<unk> $5 million to $165 million.
NUCYNTA franchise revenues in the range of $195 million to $205 million up from $185 million to $195 million.
We would note although product mix assumption assumptions have been adjusted expectations for overall revenue remained consistent from the start of the year as such we continue to manage our P&L to the plans we laid out entering 2021.
For the full year, we continue to expect total operating expenses, which include stock based compensation in the range of $125 million to $135 million and adjusted EBITDA, which excludes stock based compensation in the range of $170 million to $180 million.
Let me finish with the summation of key points.
COVID-19 continues to impact our business, particularly as it relates to gross to net dynamics across our product portfolio.
But despite these dynamics Q2 was a strong quarter for Collegium and our overall revenue and cash generation performance was solid for the remainder of the year. We are focused on continuing to execute commercially leverage our cost structure generate cash and deploy our balance sheet in a disciplined manner.
I will now turn it over to Scott.
Thanks Colleen on.
Pleased to report that we continued to generate momentum for <unk> and successfully manage the lifecycle of the NUCYNTA franchise, which has resulted in a strong first half of 2021 and positions Collegium well for the remainder of the year on.
I'm encouraged that extends the ER was once again, the fastest growing ER opioid and achieved all time highs for total prescriptions market share and total prescribers in the second quarter. The actions. We took in late 2020 enabled us to pull through our new exclusive ER oxycodone on formulary positions and continue to grow share within our 2020.
Exclusive wins building momentum and further advancing the market position of extents the ER.
Extents, the ER total prescriptions grew to greater than 173000 up 22% year over year and 7% sequentially.
Extents. The ER exited Q2 was of 31, 5% share of the ER oxycodone market up 1% from Q1.
There were approximately 19000 prescribers of extents, the ER of 33% increase versus the second quarter of 2020 and of 5% increase versus the first quarter of 2021.
Extend the ER share performance with an exclusive accounts was very strong in the second quarter, we continued to see market share and volume growth with an all new exclusive formulary wins as well as continued share growth within the exclusive formulary wins, we had achieved in 2020.
Similar to Q1 ex stamps the ER growth skewed toward the exclusive accounts and in particular Medicare part D. While we did see growth in the non exclusive in the non contracted book of business. It was behind our expectations and continued to be impacted by the ongoing COVID-19 dynamics.
For the remainder of the year, we're focused on growing extends the ER market share within our non exclusive books of business.
Moving to the NUCYNTA franchise, NUCYNTA franchise total prescriptions and market share were stable in the second quarter for the second quarter in a row. We saw strong results from the execution of our payer strategy, which is aimed at improving the profitability of the franchise.
Through the continued execution of our Payor strategy and overall commercial execution. We believe we can stabilize prescriptions for the remainder of the year.
Looking to the second half of 2021, while we have seen some improvement in patient visits to the health care professionals and the ability of our reps to access physician offices. The COVID-19 pandemic remains of persistent challenging dynamic in the marketplace and the Delta variant introduces uncertainty.
As a result, we anticipate that extends the ER will grow in the second half of the year, albeit at a moderated rate versus the first half of the year and we expect NUCYNTA prescriptions to be stable.
We remain confident about the outlook and market position of our pain portfolio and we're focused on finishing strong in 2021 I look forward to updating you again on our progress on future calls with that I'll turn it back to Joe.
Thanks, Scott and I will now open the call up for questions.
Ladies and gentlemen, we will now have a question and answer session.
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1 moment, please while we now poll for questions.
Our first question comes from David Samsung with Piper Sandler. Please proceed with your question.
Thanks, So just 1 on expense.
1 on <unk>.
The franchise.
So first on extends I guess, given the situation with the gross to net.
And given that you are gaining share.
In the ER Oxycodone market.
And given the patients tend to be sticky.
Here does it make sense to shift your focus to non exclusive of <unk>.
The positioning and try to rework some of these contracts.
It's got to wait of course correct.
If you think you need to course correct at all so that's the it sounds the questions and then on NUCYNTA you seem like you've had success with.
The strategy of getting rid of ridding yourself of contracts of suboptimal economics is there any more work you can do there to further improve the economics in other words.
Are there other contracts that you're evaluating.
And what could we potentially see there.
Beyond 2021 for the franchise.
Hey, David This is Joe Thanks for the question I'll take the expanse of question and then Scott will take NUCYNTA. So.
When you look at stamps of gross to net let's take a step back and I want to emphasize we believe the situation that we're seeing is driven primarily by Covid dynamics, and we expect it to be temporary and transient.
As we said in our prepared remarks, the way that we're going to focus on addressing it is focusing in on improving the mix of business in particular deriving more prescriptions from contracted nonexclusive and even plans in which were non contracted and then over time optimizing con.
<unk> when we have the opportunity to do so 2022 as an aside as of year, where many contracts will.
We will be up for renegotiation and will have opportunity to optimize those contracts of the final comment I would make on <unk> that we expect and we're committed to managing gross to net to less than 65% and we expect to be under 65% No later than 2023 and I'll, let Scott take the.
The NUCYNTA question, that's great. Thanks, David Yes, so when it comes to NUCYNTA.
We're happy with the execution of the strategy on what it's resulted in we really evaluate this on a contract by contract basis with the attitude that we always want to have the broadest access we can for our products, but it has to be at economics that work for us and so going forward, absolutely we will be evaluating upcoming NUCYNTA contracts as they expire if we have the ability to maintain.
The access and improve economics, we will and in some situations, we will make the choice to work from a contract. So there is opportunity going forward to continue to optimize for NUCYNTA.
Okay. Thanks, guys.
Great. Thanks, David.
Thank you.
Our next question comes from David Steinberg with Jefferies. Please proceed with your question.
Thanks, and good afternoon.
The questions I guess, just drilling down on the importance of proposal.
On the global horizontal.
We will provide a little more for the performance level.
Obviously the the.
Of the salespeople won't make is moving.
Some of the Doctor's office flow.
Yes.
For more information on how this works in terms of.
True.
Physical meeting the kuehne will offer on the occasion and we saw on both.
It's true that.
And of course moving on.
Okay.
The proposal from the conglomerate we go on go on.
Although more work wrong with that.
So that we could use roku boxes.
Moving on.
Hello, Michael on patient enrollment.
Shifting to M&A.
I know of BD has been on.
On the front burner for a long time with the company I'm just curious as you build up the cash you have more opportunities as well as debt capacity.
In terms of looking at the companies or is it just the question of evaluation of being too high or.
Or that you just can't find anything that really fit what you want to do or in fact have you bid on some assets that you lost and then related to that Joe would you consider branching into other areas. Besides pan.
Where you can leverage your sales force are there any areas other ancillary or we can use the same sales force or would you have to have a whole new sales force at period of branch out to other areas. Besides besides paying thanks.
The great David Thank you for the questions I'll take both of those.
Well, maybe what I'll do the the first question in terms of what we think the dynamic is with extensor.
Im going to step back and give a little perspective on what we think is happening in the market.
So first off we believe COVID-19 is impacting and I want to be specific on this the dynamic portion of the market and as you all know 85% of the extended release market is driven by patients on an immediate release opioid transitioning to an extended release opioids. If you will.
Look at the overall market from a total prescription perspective. This year, it's performing in line roughly to what it is we would have expected. It's the new to brand market, which is where that dynamic and the changing of products is where you see the pressure in the end result of that is a higher level of.
Continuity of care than what it is we would have anticipated now the primary driver that we believe is having an impact is that in person patient visits with physicians is off now.
Now, it's not that physicians are unable to switch a patient, but what we've learned over the past year on a half is all specialist in general Theyre switching is less productive if they're not seeing the patient in person, but pain specialists in particular are more reluctant to switch and otherwise.
Stable chronic pain patient and so that dynamic is where we think we're seeing the pressure when we don't have the support or the payer driving ER.
Are the ER switching where we're seeing the the physician keep the patient on whatever therapy of there on the if they're not seeing them in person secondarily. We also know that our field forces inability to make in person office visits at.
At the level they were able to pre pandemic is also a factor and then the final thing just the complete that I would say is although we're seeing some signs of progress it hasnt been steady it starts and stops around the country and with where we're at with the Delta variant when we look to the remainder of this year.
We do think COVID-19 dynamics will persist.
Now with regards to business development on that front I'm going to first off emphasize as I always do and I think it's important because it will really clarify what we're doing on our approach our core business is strong.
We are in a growth phase we are generating cash.
And our assets are durable so because of that we are always going to be disciplined and on.
Our approach now for the past year or so we have been active we have been focused and we've been engaged and so to your question specifically, David where are we at as it pertains to the commercial stage high synergy.
And later stage development assets, we know what we like and we also know what we believe makes sense from a value perspective.
And the 1 thing that we won't do is we're not going to overpay for any opportunity. We don't feel that we have to do with deal. So we're looking to do a deal that really makes sense for the company.
And for our shareholders.
And so because of where we're at in those 2 areas. We have expanded our focus to what we refer to as commercial stage lower synergy.
Acquisitions, which would bring us into adjacent therapeutic areas and the reason we call out lower synergy is in those scenarios, we wouldn't be leveraging our current field force.
We would be taking on or building a field force effort.
To support that asset so we would realize some synergy but not the way we would in.
And other types of acquisitions, and I'm, not going to get into or I'm not inclined to get into the adjacent areas. We would look at but because I did reference it on our last call I would say, we do believe and like and think neurology makes sense for Collegium.
Okay. Thanks, Joe.
You got it thank you.
Thank you.
Our next question comes from Tim Lugo with William Blair. Please proceed with your question.
Hi, guys. This is John on for Tim Thanks for taking our question.
Just wondering if you could give any update on how payer discussions are going on ahead of the upcoming contract season and another 1 on NUCYNTA do you feel that the franchise has reached the point of stability or do you still see some variability in how we should think about the seasonality of the franchise moving forward.
Yes, so Jon I'll, let Scott take the question on the payer discussions and then I'll come back on NUCYNTA alright. Thanks, Yeah. Thanks, Sean so.
No nothing new to report right now, but as we typically do a lot of decisions are made in the second half of the year here and well give you an update on the November call related to any wins that we have in place for next year, but I will reinforce strategically what we're trying to accomplish right. We're still looking when it makes sense and being selective but for new exclusive wins or for.
Parity wins, and then sometimes parity as a run into exclusive and the only additional thing that Joe alluded to earlier is we're now at a point where going on we may have some opportunity to optimize contracts for <unk> more on the edges as we enter 2022, and then of greater opportunity as we enter 2023.
Yes, and John as it pertains the NUCYNTA for the remainder of 2021, our expectation is that we'll see stable prescriptions for the remainder of the year on a going forward basis and it will be dependent upon what we do in the payer space for the remainder of this year, but can't.
Lee I don't anticipate significant changes to the access position of NUCYNTA seasonally in the first quarter when deductibles reset that's where you may expect to see some downward pressure on prescriptions, but we think it will be offset by our pricing and contracting strategy, which is <unk>.
Why I would reinforce we expect to be able to deliver on a sequential relative basis relatively stable revenue with the NUCYNTA franchise from now through loss of exclusivity.
Thanks, so much.
Got it.
Thank you.
Our next question comes from Rohit Basin with Needham <unk> Company. Please proceed with your question.
Hi, This is Ross on for <unk>. Thanks for taking my question.
As the as the penetration of extends on the most recent exclusive formularies on par with those for prior years and given the challenges that is the strategy for the next set of formulary wins change.
Yes, Thanks, Robert for the question so yes so.
Our performance in exclusive this year has been just as strong as it typically is and as we alluded to the overhang of the issue that we're up against is the performance in the non exclusive books of business because of Covid. So exclusive performance is strong both the new 2021 wins and continuation of the 2020 wins.
And as a result of that strategically we're still focused on selectively winning new accounts.
And Rohit the 1 thing I would emphasize and I said this in my prepared remarks, the pressure on gross to net debt. We're seeing we think 1 is a COVID-19 dynamic we think it's temporary and transient and the most important thing when you think of expanse of moving forward as we continue to expand on.
Our position in the market from a share perspective, which we expect to continue to do.
We are confident through the optimization of contracts and we are committed to managing the brand at a gross to net of less than 65%.
For the long term so we're really encouraged and excited about the share on the market position of <unk>.
Great. Thank you.
Got it.
Thank you.
Our next question comes from Greg Fraser with true of Securities. Please proceed with your question.
Hey, guys. Thanks for taking the questions.
On the stance that can you comment on how the overall prescription share growth has trended relative to your expectations. It sounds like that mix of business is the primary driver for the guidance change, but I'm curious if the recent share growth of kind of leg of what you're expecting.
Yes, Greg This is Joe I would say that what we're seeing with extensor.
From a share perspective is in line the expectation the challenge that we're experiencing is more mix and where it is that it's coming from.
Got it Okay is it fair to say that the.
The revised outlook does not assume on material pickup in volumes for the non exclusive of non contracted most of the business in the second half.
Yes, I would say look this year, we've seen progression across all books of business. So we expect to see growth through the remainder of the year, but right now look sitting here today with the Delta variant, what's going on around the country.
Okay on driving adoption in the second half in those very books. So how do you do that what can you do differently in second half then that you haven't done in the first half an eye of a separate question. Thanks.
Yeah. Thanks for the question of Orange. So how we do that is the commercial focus that we have so we've launched new materials, we have some new marketing content, we're putting into the marketplace. Some new messaging to create the need for of differentiated abuse. The chair of technology. So when were able to get in front of the physician live it's through that differential messaging and focus.
That we actually get to growing the non exclusive books of business.
Okay, and I guess S.
I'm just wondering if there's a tipping point, where physicians have enough patience and enough experience you know with patients who have had to switch because of the exclusive plans and successfully of switched uhm, either as well either new start the or switching from E. R. D. E. R. When do Doc just get more comfortable and say, okay. You know.
New patient face to face visits or not or exclusive or not I've had ah.
100 patients that I have successfully moved over because I had to [laughter] because of the exclusive coverage and now I'm comfortable with exam to ER. So why wouldn't they you know be pushing more non exclusive lives over you know COVID-19 or not.
Yeah. So warm this is Joe that's a that's a great question and I really appreciate you asking it look at the end of the day. Our strategy is we've been very clear from a payer and physician experienced perspective is not to get every life in an exclusive position, but to get enough scale so that the.
We also on I'll emphasize again, we are absolutely committed to managing extensor at a gross to net of less than 65% and we would do that through the optimization of contracts as we have opportunities and no later than in 2023, we have a lot of opportunity in 2022.
To optimize and the final point I would make which I do not believe will be the case. If we were to find that we werent able to have impact in those books of business through our commercial effort. We would address our cost structure to ensure we were having an impact of of gross to net of less than 65%.
We believe that we can and we will but ultimately we need to see it but we need to have a clean view to be able to make that call.
Alright I appreciate it.
You got it.
Yes.
Thank you.
As a reminder to our audience. If you would like to ask a question. Please press star 1 on your telephone keypad.
Our next question comes from Brandon Folkes with Cantor Fitzgerald. Please proceed with your question.
Brendon you May proceed with your question.
Okay.
Okay.
I believe we lost Brendan on the line.
And it seems there are no further questions at this time.
I'd like to turn the floor back over to management for any closing remarks.
Great. Thank you all for your attention on <unk>.
<unk> by our overall performance of the first half of 2021, the fundamentals and positioning of our differentiated pain portfolio are strong as is the financial position of the company our priorities for the remainder of the year are clear and we are focused on growth and value creation I look forward to updating you on our progress.
<unk> have a great evening.
Ladies and gentlemen. This concludes today's webcast you may now disconnect your lines at this time.
Thank you for your participation and have a great day.