Q1 2022 Collegium Pharmaceutical Inc Earnings Call
Greetings and welcome to the Collegium Pharmaceutical Inc. First quarter 2022 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 he would like to ask a question. Please press star one on your telephone keypad, 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 Sola. Thank you. Please go ahead.
Thank you operator, welcome to Collegium Pharmaceuticals first quarter 2022 earnings Conference call. This is Alex to Salah head of Investor Relations at Collegium pharmaceutical.
I'm joined today by Joseph <unk>, Our Chief Executive Officer, Colin Tucker, Our Chief Financial Officer, and Scott Dreyer, Our Chief commercial officer.
I will share some prepared remarks, and then we will take your questions.
Before we begin today's call we want to remind participants that none of the information presented today is intended to be promotional and that any forward. Looking statements made today are made pursuant to the safe Harbor provision of the private Securities Litigation Reform Act of 1995.
You are cautioned that such forward looking statements involve risks and uncertainties, including and without limitation. The risks that we may not be able to derive the expected benefits of our recently completed acquisition of bio delivery Sciences International on the proposed schedule or at all that.
That we may not be able to successfully renegotiate our contracts related to extend the ER prescriptions undesired terms.
That we may not be able to successfully commercialize our products.
And that we may incur significant expense and may not prevail in current or future patent infringement litigation or other litigation pertaining to our products. These risks and other risks of the company are detailed in the company's periodic reports filed with the Securities and Exchange Commission, our future results may differ materially from our current S.
Spectation 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 Jos you phony.
Thank you Alex good afternoon, and thank you everyone for joining the call at Collegium. Our mission is to build a leading diversified specialty pharmaceutical company committed to improving the lives of people living with serious medical conditions.
We are dedicated to delivering on our mission upholding our strong corporate culture and supporting the communities, where we live and work, including four partnerships with life Sciences cares and science from scientists to organizations with missions that we are passionate about stem education and eliminating the impact of <unk>.
In the first quarter Collegium was recognized by our employees for the second year in a row as a top workplace in the USA I wanted to acknowledge my colleagues for their hard work and thank them for their dedication to people living with serious medical conditions and the communities we serve.
2022 was a pivotal year for Collegium as we embark on a period of growth and value creation in the first quarter, we made meaningful progress against our strategic priorities.
[noise] accomplishments include we completed the acquisition of BDSI, which is strategically and financially transformative solidifies our leadership in responsible pain management and gives us a strategic foothold in neurology.
We are on track to exceed targeted run rate synergies of at least $75 million, we integrated BDSI seamlessly and achieved day, one field force readiness, we grew BELBUCA and extends to ER total prescriptions, 4% and 3% respectively over the first quarter of 2000.
'twenty one we received FDA approval, we received approval from the FDA for the prior approval supplement for a new NUCYNTA ER manufacturing site, which is expected to have a positive impact on NUCYNTA gross margins in the second half of 2022 and be fully realized in 2023.
We executed a master settlement agreement resolving all 27 pending opioid related lawsuit brought against the company by cities counties and other subdivisions in the United States, We appointed Dr. Tom Smith, as Chief Medical Officer, and we strengthened the board of directors with the appointment of Neil Mcfarlane.
<unk>, former Chief Executive Officer, and director of <unk> Pharmaceuticals.
The first quarter was a strong start to the year and we expect to deliver record revenue and adjusted EBITDA. In 2022, we are focused on executing a three phase action agenda that will position us to achieve our financial objectives in 2022, and accelerate top and bottom line growth.
In 2023.
Phase one is to ensure seamless integration of the acquisition through the end of the second quarter operational integration was immediate with no disruption to our core operations. Our team achieved day, one commercial readiness and we are on track to exceed our targeted run rate synergies of at least 75.
<unk>.
Phase II is generate momentum and will be the focus for the second half of 2022.
Our priorities are to grow BELBUCA and extend <unk> ER total prescriptions and complete contract renegotiations that account for 50% of all stamps. The ER prescriptions, we remain absolutely committed to gross to net for <unk> E. R of less than 65% beginning in January 2023.
Additionally, as part of phase two we will achieve the remaining acquisition synergy targets and execute a focused in phase launch of elixir, where we choose to play with Alexa we will play to win and we will be synthesizing learnings and assessing uptake throughout the year any expansion of the.
Neurology footprint in support of Alexa will be success Gator.
Phase III is accelerating and will be the focus of 2023 <unk> gross to net of less than 65% beginning in January along with prescription growth of BELBUCA and <unk> E. R will drive acceleration, we will further bolster the bottom line by realizing the full benefit.
Our synergize cost structure.
Our priorities for the remainder of the year are crystal clear, we are focused on growing the top line accelerating the bottomline strategically deploying capital to create shareholder value and renegotiating extensor ER contracts to achieve gross to net impact of less than 65% begins.
In January 2023.
As it pertains to capital allocation business development is our number one priority and we are focusing on commercial stage neurology assets with $150 million peak sales potential that will expand our presence in neurology. We also plan to rapidly deleverage our balance sheet by paying down debt.
And we have more than $50 million remaining from our $100 million authorized share repurchase program that we can use to opportunistically buy back shares.
2022 is off to a strong start we are on track to achieve record revenue and adjusted EBITDA for the year, we completed a strategically and financially transformative acquisition seamlessly integrated BDSI into our business and are on track to achieve our synergy target our balance sheet is strong.
And we will accelerate operating cash flow through the remainder of this year, we are well positioned to continue to strategically invest in the growth of our business and create value for our shareholders I will now turn the call over to Colleen for a discussion of the financials.
Thanks, Joe Good afternoon, everyone.
We entered the year in a strong financial position in the quarter, we seamlessly integrated BDSI into our organization, while managing operating expenses, we generated positive operating cash flow, excluding onetime acquisition related expenses and driven by the financially transformative bds.
<unk> acquisition, we exited Q1, even stronger.
Total net product revenues for the quarter were $83 8 million down four 5% over the $87 7 million in the first quarter of 2021 revenues include eight days of BDSI sales.
Ex Samsung E. Our gross to net in Q1 was 71, 4%, which is in line with our expectations for the full year, we expect gross to net around 73% with some lumpiness from quarter to quarter.
Operating expenses, which include stock based compensation were $58 5 million in the quarter adjusted operating expenses, which excludes stock based compensation and acquisition related expenses were $25 2 million down eight 4% compared to $27 5 million in the first quarter.
2021.
We achieved significant leverage in the quarter as a result of the synergies realized from the acquisition of BDSI more on that later.
We remain committed to managing expenses and leveraging not growing our cost structure. Our goal is to grow revenue approximately two times the rate of operating expenses in 2022.
Net loss for the first quarter was $13 1 million compared to net income of $15 7 million in the first quarter of 2021.
Income from operations, excluding acquisition related <unk> related expenses was $17 2 million.
non-GAAP adjusted EBITDA was $43 5 million in the first quarter down 4% compared to $45 3 million in the fourth first quarter of 2021.
Before I cover the balance sheet, let me share more on the synergies achieved to date following the acquisition of BDSI. As a reminder, we closed the deal on March 22nd I'm pleased to say that we implemented operational changes on closing that are providing immediate synergies post close we are also on track to exceed targeted.
Run rate synergies of at least $75 million.
As a result of the transaction, we estimate that our net leverage will be below three X by the end of this year based on estimated fiscal year 2022 pro forma combined EBITDA, including run rate synergies.
We also expect significant cash flow generation post transaction that will enable us to quickly deleverage and maintain a strong balance sheet to fund our growth going forward.
Moving to the balance sheet, we exited the quarter with a cash balance of $106 $7 million, we expect operating cash flow to accelerate from here, which will further strengthen our already strong financial position. This gives us optionality in deploying our capital.
Our number one priority for capital deployment remains business development, and we have flexibility to fund or finance additional transactions near term. In addition, we will rapidly deleverage the balance sheet by paying down $100 million in debt by March of 2023, and the remaining balance over the next three years.
In this regard we expect to have debt to EBITDA ratio of less than three <unk> by year end.
We also have the option to Opportunistically return capital to shareholders with the $52 million remaining on the $100 million share repurchase program authorized by the board last year.
Today, we are reaffirming our full year 2022 financial guidance originally provided on April 5th for.
For the full year, we expect total product revenues in the range of 450 to 465 million up approximately 65% at the midpoint compared to net product revenue of $276 9 million in 2021.
Total adjusted operating expenses, which excludes stock based compensation and acquisition related expenses are expected in the range of 130 to 140 million in 2022, we expect to grow revenue at approximately two times the rate of operating expenses.
Total adjusted EBITDA, which excludes stock based compensation and acquisition related expenses is expected in the range of 235 to 250 million. This is up approximately 105% at the midpoint compared to adjusted EBITDA, excluding stock based compensation of $118 three.
In 2021.
2022 is a pivotal year for Collegium, we have started the year off strong and are executing well against our plan. We are entering an exciting phase of growth and value creation for the company and I am looking forward to the year ahead, I will now turn the call over to Scott.
Thanks, Colleen I want to start by recognizing the hard work of our people, which enabled us to be operational on day, one after closing the BDSI transaction.
<unk> is firmly established as the leader in responsible pain management are paying portfolio consisting of BELBUCA extends to ER NUCYNTA ER and NUCYNTA IR is diversified and durable.
The Collegium pain portfolio spans the continuum of care from acute to chronic pain and includes both schedule III and scheduled two products. All four products are highly differentiated and viewed favorably by health care providers. Each product is distinctly positioned in sources differently.
Together BELBUCA extends to ER and NUCYNTA ER have approximately 50% share of the branded ER market.
<unk> E our growth drivers and in market research healthcare professionals articulate our high future intend to prescribe <unk>.
New center and some products are key contributors since <unk> is a differentiated opioid induced constipation product with a complementary pain specialist call point.
In the first quarter, we saw a total prescription growth and market share gains for BELBUCA and <unk> E. R.
Compared to the first quarter of 2021, BELBUCA total prescriptions were up 4% and share of the branded ER market was up two percentage points to 17, 4% BELBUCA is broad prescriber base grew approximately 8% to nearly 9000 prescribers.
To the first quarter of 2021 extends to ER prescriptions were up 3% and Oxycodone ER market share grew to 34, 2% up three six percentage points <unk> is large and growing prescriber base was up nearly 4% to approximately 18700 prescribers.
The NUCYNTA franchise is a strong contributor and NUCYNTA ER maintained a stable of five 6% market share of the branded ER market in the first quarter same product prescriptions grew approximately 13, 7% over the first quarter of 2021.
Alex It represents a launch opportunity and gives us a strategic foothold in neurology Alexa Celecoxib oral solution indicated for the acute treatment of migraine, where taking a focused and phased approach to the elixir launch and where we choose to play will play to win.
Initially we will have 25 territories, calling on approximately 3500 doctors that represent about 15% of the acute migraine market in the U S will be assessing receptivity and uptake throughout 2022 and the expansion of the neurology footprint in support of election will be success skated.
To close we're in a strong position BELBUCA and <unk> are growing volume and market share, which we expect to continue for the remainder of the year. We're actively renegotiating contracts that represent 50% of all extends to ER prescriptions and are absolutely committed to managing gross to net to less than 65% beginning in January .
2023 and beyond.
For the remainder of 2022, we're laser focused on growing BELBUCA and <unk> ER prescriptions and maximizing the potential of the NUCYNTA franchise in some products will be closely assessing the Alexa launch I am excited about our leadership position in the pain market and a strategic foothold we now have in neurology with that I'll turn it back to Joe.
Yes.
Thanks, Scott I will now open the call up for questions.
Thank you the floor is now open for questions. If he would like to ask a question you May press star one on your telephone keypad at this time, a confirmation tone will indicate that your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing.
The Star Keys, once again Thats Star one to register a question at this time.
The first question is coming from David <unk> of Piper Sandler. Please go ahead.
Hey, Thanks, So just have a few first on BELBUCA can you talk about anything.
And anything you may be doing differently from bio delivery regarding commercial support of the product.
And you know what I mean by that is I think differently in terms of physician targeting or how are you approaching that.
Payer landscape. So that's number one number two and extends our.
Just more of a refresher on getting to that 65% or below target can you talk about.
The extent to which you can at least get closer to that.
This year or should we think about the gross to net essentially being stable this year versus last year, what's the right way to think about that just remind me there and then lastly on Alexa.
You're talking about a targeted launch I guess, what do you need to see in order to.
The expand.
Commercial support of that prop.
Product.
You know what kind of metrics are you looking for.
Targets et cetera. Thank you.
Thanks, David David I'll take the extensor question, and then Scott will take BELBUCA and elixir.
With regards to extend so the way to think of gross to net in 2022 is that factored into our guidance, we're assuming approximately a 73% gross to net so the impact of the contract renegotiations will all have effect beginning in January 2023, and Scott BELBUCA.
Thanks, Yeah. Thanks, David So first starting with BELBUCA when it comes to targeting and commercialization one of the main drivers of the synergies related to this deal was the unbelievably high overlap of targets with <unk> and NUCYNTA targets. So our targeting is the same we still are deploying 91 representatives to about 12000 targets and from a marketing strategy.
Endpoint leveraging the same things we do on the rest of our brands kind of broad non personal promotion and enhancing our resources for our sales representatives. When it comes to the payer so first and foremost for all our brands. We're always looking for opportunities to expand coverage right now Bob <unk> has broad commercial access over 85%.
As we have for the rest of our portfolio as those contracts come due we will be always looking for opportunities to win and we will be assessing what we can do with those contracts as they are up for renewal now onto your question about <unk>. We're just getting going we're excited about the opportunity in the foothold in neurology as we said 25 territories 3500 targets as we get going here as a kind of a firm.
Stage of our evaluation in terms of anything that would inform future expansion when we see a level of performance that drives profitability at the territory level from there we would make decisions on whether we wanted to expand or not.
Okay helpful. Thank you.
Thanks, David.
Thank you. The next question is coming from Tim Lugo of William Blair. Please go ahead.
Hey, guys. This is lachlan on for Tim Thanks for taking my questions and congratulations on the new integration.
On the topic of integration.
Scott I think you may have just touched on this but can you maybe talk about the sales force looks like now relative to.
The two companies when they have a standalone I mean is it has it grown at all.
Maybe the mix of reps from V S either because it's still in the field and then the second question.
Just given the timing of the deal close is it fair to say that the synergies you you've already.
I didn't realize that mostly going to be hitting in the second quarter and a question first quarter numbers.
Yeah.
Great. Thanks, Lachlan So Scott will take the question on field Force and then choline on synergies yeah. Yeah. Thanks, a lot Glenn So first looking at our pain sales force. So right in pain 91 dedicated territories 12000 targets and what's important there thats a bit of differentiation from where BDSI was those people or 100.
Percent focused to our pain portfolio and not having anything to do with the <unk> launch then targeting and deployment for <unk> 25 territories focus to about 3500 targets that represent about 15% of the migraine market opportunity.
Hello, Lachlan. Thanks for the question to date with the integration, it's been seamless and as a result, we've achieved significant leverage in the first quarter.
Realize from that the majority of those synergies come from Iraq rationalization of head count across the functions, especially G&A and commercial roles. There are certain items that are contractual in nature will take a little bit longer, but youre absolutely right with only a few days left in the first quarter. When the deal concluded most of that synergy capture.
As in the second quarter and beyond.
Okay. Thanks.
Alright, Thanks Lachlan.
Thank you. The next question is coming from Serge philosophy of Needham <unk> co. Please go ahead.
Hi, Good afternoon, just a couple of questions for me the first one.
Just around market trends for the first quarter.
I'm curious if the continuum of care headwinds that have been impacting extends our continued.
And whether those same headwinds.
What impact they have on BELBUCA.
And then secondly in terms of the contract.
Renegotiations.
I think you've been pretty clear about breaking down gross to nets to 65% or less but.
But curious if you can change the terms of the contracts and impact of the pull through.
Going forward in January thank you.
Sure.
Hey, Serge. So this is Joe I'll take the market trend and then the hand contract renegotiations off to Scott I would say early in the year and let me step back I think in our financial guidance, we were clear.
On our previous discussions that we're not factoring in any improvement or assumption of improvement to the markets, we more or less are trending the prescriptions over the course of the year. The second thing I'd emphasize this is a different year in particular with extensive where we're not hitting the market with a bunch of new.
Payer wins and then to your question directly at this point in the year and the surrogate. We would use is looking at the overall IR opioid market along with the N B Rx market I don't think that we've seen recovery.
To this point that you would expect to see in a post COVID-19 environment. So.
So we'll see how the year progresses, what we're encouraged by is the fact that both stamps and BELBUCA our growth drivers are growing market share and our growing volume on a year on year basis, but we think that that continuity of care dynamic is persistent.
Yes, Serge Thanks for the question on the renegotiation. So yes, we're in the throes of those renegotiations and nothing new to report, but what I'll reinforce is our goal for the lifecycle of the <unk> is to maintain access while improving economics. That's what our focus is and will ultimately we're committed to being less than 65% gross to net.
Immediately on January one 2023.
So would you look to switch from a.
Exclusive position to a nonexclusive parity position or you expect those to stay put.
Yes, Serge this is Joe I think the key thing with the high market shares and that's the thing that needs to be appreciated within these exclusive accounts, we have exceptionally high market share. So at this point, whether its exclusive whether it's maintaining a preferred position I don't think in terms of brand performance matters.
At this point in time and in the one plan that we've talked about previously where we've had and it's really the first and only opportunity. We've had to do so we were able to reduce the discount rate while maintaining the exclusive access position. So we'll see where it ultimately nets out on the year, but we are.
Absolutely committed to be less than 65% on January one of 2023.
Great. Thank you.
Got it thanks Serge.
Once again, ladies and gentlemen that is star one to register a question at this time.
The next question is coming from Greg Fraser of Truth Securities. Please go ahead.
Thank you and congrats on the progress.
Just following up on BELBUCA do you think that the expanded commercial effort that you have behind the product could lead to an acceleration in demand growth at some point this year.
Second question on the returns issue have you made any progress with your efforts to get reimbursement.
From the wholesalers and then I'm not sure if I missed this but on share buyback. If you could speak to your appetite for buying back shares at these levels that would be helpful. Thank you.
Great. Thanks, Greg.
Look Scott and I, maybe we'll tag team on BELBUCA, Colleen can take returns and share buyback.
I think when you look at BELBUCA and when you look at our presence in paying the first thing I would emphasize is we are sized correctly for the opportunity that this portfolio represents I would also share with you. We are doing this call from our national sales meeting here in Las Vegas, and what I can tell you is that we have a <unk>.
Highly motivated group of people, who believe deeply in these pain products, along with physicians, who view them as highly differentiated view them favorably with a high intent to prescribe more in the future. So I expect to see us get momentum coming out of this meeting and as I outlined in the three phase.
Action agenda, our expectation for the second half of the year is to generate momentum and that is anchored to a belief that we will see growth with ICH stamps and BELBUCA setting up acceleration in 2023, driven by further prescription growth of both of those brands and Scott if theres any more to add Joe.
You got it great.
Alright, Thanks for the question, Greg Let me touch on returns first so as far as where we are we continue to pursue and engage with all of the wholesalers.
We are committed to recouping as much cash as possible and we'll update you folks accordingly, when we've made some significant progress there.
On the share buybacks to date, we have.
We used approximately half of the authorized amount, leaving a little over $50 million remaining for US. We are actively engaged in our business development search and that is our top capital allocation priority as noted in our prepared remarks, we do however look to the share repurchase program, giving us the ability and the option to repurchase.
Chairs.
When the Time's right.
Thank you.
Oh.
Yeah.
Thank you once again, ladies and gentlemen that is star one to register a question at this time.
Our next question is coming from Brandon Folkes of Cantor Fitzgerald. Please go ahead.
Hi, Thanks, so much for taking my question and congratulations on the progress.
Maybe just one for me and I apologize.
And can you just remind me how large a vacate businesses and as you renegotiate these contracts over the next two years, how should we think about maybe the receipts in Medicaid best price and the rebate.
Thank you Chris Thank you.
Yep, Thanks, Brendan Scott will take back yes. Thanks for the question Brandon so across our portfolio, our Medicaid percentages about 8% of our overall business and by all means the way Medicaid best price resets.
As we renegotiate these contracts the highest contracts. We have are some of the ones that are expiring and so we would expect it's a delay I usually have over six months, but a reset of the Medicaid best price if were successfully able to renegotiate two to lower levels.
Great. Thank you very much.
Alright, Thanks Brandon.
Thank you at this time I'd like to turn the floor back over to Mr. <unk> for closing comments.
Thank you we are building a leading diversified specialty pharmaceutical company committed to improving the lives of people living with serious medical conditions. We are the leader in responsible pain management and we now have a strategic foothold in neurology that we intend to build upon 2022 is off to a strong start and our.
Our priorities for the remainder of the year are clear, we will diligently focus on executing against our three phase action agenda Collegium is well positioned to embark upon a period of growth and value creation I look forward to updating you on our progress. Thank you and have a good evening.
Ladies and gentlemen, thank you for your participation you may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.
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