Q2 2022 Collegium Pharmaceutical Inc Earnings Call
Greetings and welcome to the Collegium pharmaceutical second quarter 2022 earnings call.
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I will now turn the conference over to our host Alex to solid head of Investor Relations. Thank you you may begin.
Yeah.
Welcome to Collegium Pharmaceuticals second quarter 2022 earnings Conference call. This is Alex <unk> head of Investor Relations for Collegium.
I'm joined today by Joseph <unk>, Our Chief Executive Officer, Carl each up 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 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 the acquisition of bio delivery Sciences international on the proposed schedule or at all.
That we may not be able to successfully renegotiate our contracts related to extend the ER prescriptions and desired 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.
To accompany our diesel detailed in the company's periodic reports filed with the Securities and Exchange Commission, our future results may differ materially from our current expectations discussed today, our earnings press release and this call will include discussion of certain non-GAAP information you can find our earnings press release, including relevant non-GAAP .
Patients on our corporate website at Collegium pharma Dot Com I will now turn the call over to Collegium CEO Joe She for me. Thank.
Thank you Alex good afternoon, and thank you everyone for joining the call today, we will discuss our performance during Q2 and the first half of 2022 and provide some perspective on our outlook for the remainder of the year.
Collegium, we remain focused on our mission to build a leading diversified specialty pharmaceutical company committed to improving the lives of people living with serious medical conditions.
During the second quarter Collegium continued to support the communities, where we live and work through our partnership with science from scientists.
Non-profit whose mission is to improve stem literacy.
Collegium tens of thousand dollar donation to science to science from scientists will find multiple stem programs in disadvantaged communities for the upcoming school year we.
We are dedicated to delivering on our mission growing our business and creating value for our shareholders. We will do this by maximizing the potential of our differentiated portfolio, achieving our near term operational and financial goals and strategically investing in our long term growth.
Want to recognize my colleagues for their hard work and dedication to our organization and thank them for their commitment to people living with serious medical conditions.
2022 was a pivotal year for Collegium in the first half of the year. Our accomplishments were significant and we are on track to achieve our 2022 priorities.
We acquired BDSI, a financially transformative deal that establishes collegium as the leader in responsible pain management.
With the close of the acquisition, we achieved day, one commercial readiness.
Seamlessly integrated operations and are on track to exceed targeted run rate synergies of at least $75 million we.
We delivered record net revenue in the second quarter.
We grew prescription volume with our growth drivers BELBUCA and extensive E R versus the first half of 2021.
We achieved we achieved record revenue with BELBUCA in Q2, our first full quarter of promotion.
We renegotiated extensor ER contracts that represent approximately 50% of all prescriptions. We are now awaiting final planning decisions and remain absolutely committed to achieving gross to net of less than 65% beginning in January 2023, and we executed a master settled.
<unk> agreement resolving all 27 pending opioid industry related lawsuits brought against the company by cities counties and other subdivisions in the United States.
We remain laser focused on executing our three phase action agenda phase one seamless integration was a significant undertaking and was successfully completed.
As a result, we are on track to its to exceed targeted run rate synergies of at least $75 million and are moving forward with a synergy synergize cost structure that gives us confidence to raise our 2022 adjusted EBITDA guidance.
In July we transitioned to phase two generate momentum.
Achieving day, one commercial readiness, coupled with a successful in person national sales meeting in late May means we now have a fully trained and engaged commercial organization focused on execution.
We are well positioned to grow BELBUCA and expands the ER prescriptions faster the second half of the year.
[noise] extends to ER contracts have been renegotiated and we expect to be informed unplanned decisions in the fourth quarter.
We remain absolutely committed to managing expansive E. Our gross to net to less than 65% beginning in January 2023.
The elixir launches underway and we will be synthesizing learnings the remainder of the year.
In January 2023, we will begin phase three accelerate.
Our expectation is that we will see an acceleration of top and bottom line growth propelled by improved extensive E. Our gross to net prescription growth of BELBUCA and extensive E R and the full year impact of the synergize cost structure.
Our our singular focus and deploying capital is to create value for our shareholders. Our top priority is business development.
We are committed to taking a disciplined approach, but we believe current market conditions are conducive to potentially getting a deal done.
We are actively evaluating commercial stage opportunities with peak sales potential of greater than $150 million. Importantly, we are looking for assets that are differentiated and with exclusivity that runs into the 20 <unk>.
Our strong financial position allows us to allocate capital in a focused and disciplined manner.
We are committed to strategically investing in the growth of our business to create long term value for our shareholders I will now hand, the call over to Colleen for a discussion of the financials.
Thanks, Joe Good afternoon, everyone Q2 was a strong quarter for Collegium, we generated record revenue completed a seamless operational integration and we remain on track to exceed targeted run rate synergies of at least $75 million.
Collegium is in a strong financial position that will get stronger moving forward.
Financial highlights for the second quarter include total product revenue was a record $123 5 million for the second quarter, an increase of 49% from the second quarter of 2021.
BELBUCA net revenue was $42 3 million in the second quarter of 2022. This was the first full quarter of BELBUCA was a part of the Collegium portfolio and it was a record quarterly revenue for the product.
Extensive E. Our net revenue was $33 2 million extensive E. Our gross to net in Q2 was 79% for.
For the full year, we expect gross to nets around 73% with some lumpiness from quarter to quarter.
NUCYNTA franchise net revenue was $43 6 million in the second quarter of 2022.
Operating expenses, which include stock based compensation expense were $41 3 million in the second quarter compared to $33 8 million in the second quarter of 2021, adjusted operating expenses, which excludes stock based compensation and acquisition related expenses were $32 million in the.
Quarter, an increase of 17% from the second quarter of 2021.
Net loss for the second quarter was $5 2 million income from operations was $11 1 million in the second quarter.
non-GAAP adjusted EBITDA was a record $71 2 million for the second quarter versus $40 1 million in the second quarter of 2021.
Please see our press release issued earlier today for a reconciliation of GAAP to non-GAAP results.
As of June 32022, our cash balance was $122 $7 million during the quarter Collegium paid off $25 million in debt, we expect to end the year with at least $150 million in cash and estimate that our net leverage will be below three times by the end of this year.
In Q2, we posted record revenue and delivered solid operational performance. We are on track to exceed annual synergy targets for the BDSI acquisition, and we expect to grow revenue at greater than two times the rate of adjusted Opex.
Collegium is in a strong financial position that will get even stronger moving forward.
Moving to our 2022 financial guidance for.
For 2022, we continue to expect total product revenues in the range of 450 million to $465 million.
Driven by greater than anticipated synergies from the BDSI integration, we are updating adjusted operating expenses and adjusted EBITDA guidance.
We now expect our adjusted operating expenses in the range of 125 million to $135 million.
We are increasing our adjusted EBITDA guidance and now expect total adjusted EBITDA in the range of 245 million to $255 million.
We remain focused on creating value for our shareholders through focused and disciplined business development BD remains our top priority for capital deployment, and we have significant flexibility to finance additional transactions near term, we will rapidly deleverage the balance sheet paying down $100 million in.
That is March 2023, and fully paying our farmer Khan term loan by March 2026.
We also have the option to Opportunistically return capital to shareholders with more than $50 million remaining on the $100 million share repurchase program authorized by the board last year.
2022 is a pivotal year for Collegium, our business and has a solid financial position. We are in a phase of growth and value creation and are focused on finishing 2022 strong I will now turn it over to Scott.
Thanks, Colleen and.
In the first half of the year, we made meaningful progress against our key commercial priorities and we're now 100% focused on phase two of our action plan generate momentum driven by boat Buga and extends to ER prescription growth and the Finalization of our renegotiated extension E are contracts that will allow us to bring extensive E. Our gross to net to lessen.
65% in January of 2023.
Collegium remains firmly established as the leader in responsible pain management.
Our pain portfolio comprised of BELBUCA extensive E R. NUCYNTA ER and NUCYNTA IR spans the continuum of care from acute to chronic pain and includes both schedule three and two products. All four products are highly differentiated and viewed favorably by health care providers each product is distinctly positioned in.
Sources differently all of our pain products have broad market access coverage.
During the first half of the year, we grew volume and market share for both BELBUCA and extensive E R and maintained market share for NUCYNTA ER.
We grew the market share of our extended release pain portfolio to 49% of the branded ER market.
BELBUCA and extends to ER are positioned for growth.
Both products have large and growing prescriber bases and Collegium is now the only company with active promotion in this space during.
During the second quarter BELBUCA is broad prescriber base grew approximately 7% to 9200 prescribers and extensive prescriber base was up 1% to 19200 prescribers.
The NUCYNTA franchise was a strong contributor in the second quarter with stable market share and a broadened stable prescriber base of 13300 health care professionals.
During the quarter, we successfully completed phase one of our three phase action agenda, achieving day, one commercial readiness in May we conducted a national sales meeting, which enabled us to bring the team together to reinforce the strategy and messaging for our differentiated and distinctly positioned product portfolio to launch new promotional resource.
As for BELBUCA and extensive E R and to focus on execution.
We're in the early days of the Elixir launch and are now fully operational we're taking a focused and phased approach and where we choose to play will play to win we will be assessing receptivity and uptake throughout 2022.
For the remainder of the year, we're focused on growing BELBUCA and <unk> E R.
We've launched new marketing materials for our sales representatives and new non personal promotion content and channels.
Our pain sales force is fully trained and focused on execution of our plan and we expect to drive BELBUCA and extensive E. Our prescription growth.
Our contract renegotiations for extensive E R.
Across contracts, representing approximately 50% of external ER prescriptions are complete we're now awaiting final decisions from plans, which we expect to occur in the fourth quarter.
We're absolutely committed to managing gross to net for less than 65% beginning in January of 2023.
I am confident that the actions that we're taking will generate momentum in phase two of our action agenda and position us to accelerate and phase III I'll now turn the call back to Jeff.
Thanks, Scott I will now open the call up for questions.
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Yeah.
Our first question comes from David and sell them with Piper Sandler. Please state your question.
Hey, guys. This is Lisa on for David Thanks.
Thanks, So much for taking my questions just a couple from us. So I know you guys touched on this briefly with regards to renegotiating contracts for stanza, but any color on this front would be super helpful and I appreciate it.
And then what gives you confidence that you'll be able to get the gross to nets down to 65% by next year and then I've got a few follow ups.
Okay, Hey, Isaac this is Joe I'm going to pass those two questions off to Scott. Thanks, Isaac Yes. So I. Appreciate the question at this point not much more color that I can give other than our negotiations are complete we're confident in those conversations and what we accomplished during those conversations and in the fourth quarter will be informed of the choices that the plans make.
And we will be giving some type of an update on the November call. Thanks.
Okay, Great and then.
More on BD and M&A I know you guys touched on this briefly too, but I mean, it's clear that asset prices have come down and you guys are you know you could be pretty flexible you have I mean your balance sheet is pretty flexible on this front. So can you walk us through your latest thinking on that.
And your preference with regards to.
Taking on a commercial stage asset or a development stage asset and the IP runway there and then the last question. We got is just on the like so I mean, it looks like sales were pretty minimal in the second quarter. I know you guys have talked about this being a phased launch but any.
Any metrics you can provide here.
Because the early performance for the product impact your thinking with regards to M&A and in neurology as a means of diversifying the business.
Yes.
Hey, Isaac.
This is Joe Thanks for the question I'll start off with a broader perspective on BD handed off the call with him to talk a little bit about how we think of our capacity and then Scott will follow up on the elixir question.
So the first thing that I would emphasize as we think about where we're at one worked through essentially all of the activities associated with the BD at BDSI integration, which is important so we're in a position where we're ready if an opportunity presents itself.
To take it on.
As I said in my comments and as you reiterated in your question. We look at the current market dynamics as conducive to potentially getting a deal done certainly much different than what it's been over the past couple of years.
From a strategic perspective, we're looking for commercial stage assets with the potential peak sales potential in our view of over $150 million in terms of runway. We're looking for assets that have runway into the 'twenty thirties neurology is an adjacency that we like <unk>.
Certainly with the launch of <unk> we.
Have a small commercial group there that could be leveraged, but we also will be opportunistic given the favorable market dynamics and the bigger focus is on assets that meet the criteria from a peak sales and runway perspective.
Thanks, Joe Hey, Hey, Isaac it's choline. So I'd say you know we're in a privileged position to have the ability to continue to hunt for strategic assets, but not be forced into a sub optimal deal.
Given our commercial focus deals that we're looking at would bring near term if not immediate positive EBITDA and we have the ability to raise debt and are comfortable with a net debt ratio was about to ask sorry, forex or below and then we have the ability to use our equity if the market dynamics were to be supportive.
Yes, and then lastly on the <unk> of launch look we're just getting started and are glad that now we're fully operational in those 25 first phase territories, it's too early to draw any conclusions, but what we're most excited about is we're developing a foothold in neurology, where we're playing we're playing to win and are all in and we will continue to monitor the uptake through the rest of the year.
<unk> to decide what we do from there in terms of any expansion decisions. Thanks for the question.
Great. Thanks, guys.
You got it thank you Isaac.
Our next question comes from Tim Lugo with William Blair. Please go ahead.
Thanks for taking my question.
Regarding <unk>.
5% could you directionally talk to us about volumes and kind of.
How how that impacts the revenue and then maybe directionally, obviously, that's going to be more profitable, but give us a kind of an idea around the magnitude of that profitability.
Yes, so Tim I'll talk a little bit about the expectation of extent so from a volume perspective, the contracts will renegotiating account for about 50% of <unk> prescriptions. As we commented we're very encouraged by the discussions we had with the payers are.
Objective is first and foremost the bringing the gross to nets to less than 65%, while also maintaining access for <unk>.
As we've said in the prepared remarks, we expect to see expanse of grow not only in 2022, but also in 2023 and choline could talk a little bit about your question on margin.
Yeah, Ken Thanks for the question as you know dropping down to 65% on Samsung question naturally significant drop to the bottom line. We ended last year with a full year of 76% gross to nets and this year were from full year perspective, where we're tracking 173%.
Okay, and just to be clear when you say next steps and will continue to grow that revenue or that volume.
That's a statement Tim on both volume and revenue. So we expect in 2020 for either to be volume growth and then the improved gross to net will be an additional propellant for revenue.
Okay fantastic.
And given the market dynamics for BD, you mentioned the availability of debt.
But you know obviously, we like that market might be a little tighter than they were a year ago can you just maybe give us some color around what kind of got you fine.
Attractive.
Just.
Talking about the availability of that these days.
Sure Tim I'll ask calling to answer that question, Hi, Tim Yeah, Yeah, where we're keeping a close eye on the landscape and cost of capital has increased but we still do believe there are advantageous ways to finance an acquisition when one presents itself that we'd like to make a move on you know you could envision a term loan type arrangement, but we're looking at all options.
There.
Okay fantastic. Thank you for the questions.
Thanks, Tim.
Our next question comes from Serge Belanger with Needham and company. Please state your question.
Hi, good afternoon.
A couple for me I guess the first one for for Joe I think when you gave guidance at the start of the year one of the main assumptions there would be no improvements.
And the market environment.
In terms of the headwinds that were affecting scans.
Just curious if that outlook has changed for the second half of the year.
And then just looking on the.
Individual product basis, it looks like the strength of BELBUCA in the second quarter kind of offset some weakness of NUCYNTA, just sure and assist us.
She constraints.
Sustainable for the second half.
Yeah, Hey, Sarge I'll take the first question and hand, the second one off to Scott.
And I. Appreciate your question look from a market environment perspective, and we set our guidance for the year. We had said we were trending not factoring.
Factoring in any improvement to the market dynamic I would say to this point in the year that has proven to be a wise choice. The pain market continues to be off of the pre COVID-19 levels and when do you think of the numbers that we're guiding to it does not have built into.
And any improvement to the second half of the year from a market dynamic perspective, but.
But we do expect to see the volume growth of both BELBUCA and expand so to pick up in the second half of the year and I'll, let Scott address your BELBUCA question, specifically, yeah. Thanks, Serge so to your comment on the NUCYNTA and kind of BELBUCA trade off when we look at and you say that the second half of the year.
In line with our expectations, we are glad that we maintained market share for NUCYNTA ER and yes, we saw some strength you're referring to for BELBUCA from a revenue standpoint, what we're excited about there is there was a lot of transition in the second quarter Cross training as we came through the integration and now when you look at the second half we are well positioned to grow BELBUCA, It's got us.
Strong market position is strong and growing base of prescribers.
Photo very highly differentiated by the prescriber base, so coming out of our sales meeting, where we're really encouraged by momentum. We think we can build in the second half.
Serge This is Joe the only other thing I would add is when you look historically at the NUCYNTA franchise, when you get past the first quarter and the reset of deductibles.
Deductibles and things like that you still do you see more stable prescriptions in the second half of the year, which is what we would expect to see.
Okay.
I guess just.
One follow up it sounds like the renegotiations of contracts or more or less complete at this point and you're waiting on individual plan decisions.
Does that mean plans still have the option.
To opt out of these.
<unk> contracts or.
What else could come out of these decisions that you're waiting.
Yes, great question, Serge So look where we're at our bids are submitted the negotiations are done.
The outcome that we're.
We're striving for is that we certainly get the rollback from a rebate perspective, while maintaining access.
To extend the ER, but in any event the extensive E. Our gross to nets will be less than 65% beginning in January of 2023. So.
We're very encouraged by the discussions we had during the negotiations.
We think that the bids we put forward our very reasonable given the value of stamps. The E. R and we're looking forward to being able to communicate the decisions when we get on our fourth quarter call.
Great. Thanks for the color.
You got it thanks Serge.
Our next question comes from Greg Fraser with Truest. Please state your question.
Thanks for taking the questions.
Just a quick follow up on the last question about BELBUCA sales.
Just curious if there are any one time items.
Health sales in the quarter or should we look at.
The relationship between sales and prescriptions is a good number to use going forward.
Yeah Colin.
Hey, Greg it's Colin Thanks for the question.
I wouldn't say necessarily a one time.
But we did harmonize some of the co pay programs across the business and BELBUCA definitely had a benefit from that.
With a few changes we made to harmonize that co pay program consistent with Collegium. So we are expecting BELBUCA gross to nets to stay in the low to mid 50% and you see some of that favorability impacting the second quarter.
Got it very helpful.
Hey, Greg Greg I'm, sorry, I'm, sorry, Greg one additional point of color the benefit collines referencing as a revenue benefit. We also believe that harmonization, probably had a little bit of a pressured effect on prescriptions that we don't expect to see as we move to the second half of the year.
Got it okay.
You tweaked the messaging on BELBUCA relative to what BDSI had been doing.
Yeah. Thanks for the message, Greg I would say, it's not a tweak its a training on the strong messaging platform. That's in place. So as we harmonize the Salesforce. If you remember we went through an event in the fourth quarter at Collegium. We then came through integration. It really was a focus in the second quarter, a thoroughly training our people on the messaging for the brand.
And then we were excited we were able to do that live in our national sales meeting. So now we have a position of a product that has clearly differentiated schedule III versus schedule too with a broad dosing range that can provide greater efficacy for patients and that's where we're focused going forward in the second half.
Got it okay.
On the BELBUCA prescriber base.
Growing it clearly.
I'm curious if you think that the prescriber base for BELBUCA could eventually grow to the size of the stance that prescriber base, which is much larger or is there a reason that it would not be that.
His broad.
Yes, I wont hypothesize on getting to the size of the <unk>, which is almost 19000 prescribers, but what's encouraging is as you said BELBUCA is consistently growing 7% in the last quarter at 9200 total prescribers and absolutely. It's a trend that's not slowing so I believe we'll be able to continue to grow the prescriber base and.
Greg the only the only thing I would add there is our organization, we are absolutely passionate and aspire and have a strong belief that BELBUCA as a schedule III products should be being used far more often than it is in the treatment of pain. So we will make every effort to ensure the BELBUCA story is.
And with that Theres, certainly a lot of opportunity to expand that prescriber base.
Understood. Okay, and then just a bigger picture question on the long acting opioid market that market is obviously still declining it has been for many years, but the clients have moderated a bit.
When do you think the market could level off potentially in terms of the prescription volume I'm curious if you have any thoughts on that thanks. So much.
Sure. Thanks, Greg.
Our belief is that the point of which the market. The market is certainly moderating we expect it to continue to do so as you get to around the prescribing level of the early two thousands and the relevant point of that is best when pain was identified as a fifth vital sign which was one of the drivers.
<unk> increased opioid utilization.
From a collegium perspective, we believe that opioids should be used only after other options are exhausted and in appropriate patients and certainly in those scenarios. We believe our products should have a meaningful position.
I think it was the market in terms of total prescriptions that then.
It's we're nearing the level in terms of total opioid prescriptions of the early two thousands when you get to that level in our modeling, that's where we expect to see it moderate to more of a mid to lower single digit decline over.
Over the next five years.
Got it.
Thanks for taking the questions.
Sure you got it correct.
Thank you.
There are no additional questions in queue I'll now turn the call back over to Joseph <unk> for closing remarks. Thank you.
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 laser focused on executing our three phase action agenda I am proud of our achievement in phase one seamless integration confident that we will generate more.
Minimum in phase, two which will position us to accelerate and phase III beginning January 2023, I look forward to updating you on our progress have a great evening.
Thank you. This concludes today's call all parties may disconnect. Thank you.