Q4 2022 Collegium Pharmaceutical Inc Earnings Call
Greetings and welcome to the Collegium pharmaceutical fourth quarter and full year 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 anyone should require operator assistance during.
This conference. Please press star zero on your telephone keypad.
Please note that this conference call is being recorded.
I will now turn the call over to Christopher James Vice President of Investor Relations at Collegium. Thank you you may begin.
Welcome to Collegium Pharmaceuticals fourth quarter and full year 2022 earnings conference call I'm joined today by Joe CFO , Our Chief Executive Officer, Colleen tougher, 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 pursuing 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, including without limitation. The risks that we may not be able to successfully commercialize our products that we may incur significant expense and that we may not prevail in current or future litigation pertaining to our business. These risks and other risks of the company are detailed in the company's periodic reports filed with the <unk>.
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 our CEO Joe Giovanni.
Thank you Chris Good afternoon, and thank you everyone for joining the call.
Today, we will discuss our performance during the fourth quarter and full year 2022 and share our strategy to achieve a banner year in 2023.
At Collegium, we are focused on building, a leading diversified specialty pharmaceutical company committed to improving the lives of people living with serious medical conditions during.
During the fourth quarter, we continued to support the communities, where we live and work.
We made charitable donations to organizations, leading stem education initiatives.
Having meals to people living with critical and chronic illnesses and providing warm weather clothing to neighbors in shelters and emergency housing.
In recognition of our long standing dedication to serving as a responsible corporate citizen, we publish collegium inaugural ESG report.
We are proud of this milestone as it reflects our deep commitment to operating with integrity accountability and responsibility in all facets of our business, while improving the health and well being of our communities.
I'd like to thank our team for their commitment to our mission and for making Collegium a great place to work.
2022 was a pivotal year for Collegium.
We achieved nearly all of our key strategic and financial objectives.
He accomplishments in 2022 include we expanded our commercial portfolio through the financially transformative acquisition of BDSI.
Tableau shouldn't Collegium as the leader in responsible pain management.
We achieved run rate synergies of approximately $85 million, which exceeded our target of $75 million.
We delivered record full year net revenue and adjusted EBITDA we.
We successfully completed the renegotiation of extensive E. Our contracts, resulting in an expected gross to net of 61% to 63% in 2023.
We resolved all twenty-seven opioid industry related lawsuits brought against the company and each of those lawsuits has been dismissed.
We announced the validity of certain claims of the patents protecting BELBUCA were upheld on appeal, we expect that Alba Jen will be barred from entering the market with its product until 2032.
And we delever the balance sheet and return capital to our shareholders while building our cash position.
These achievements laid the foundation for 2023 to be a banner year.
In 2023, we expect significant top and bottom line growth into strategically deploy capital to create long term value for our shareholders.
Our 2020 for your financial guidance includes growing adjusted EBITDA by over one and a half times revenue and over two times adjusted operating expenses.
We are confident in our ability to deliver on our financial and strategic objectives.
We remain laser focused on executing our three phase action agenda.
During 2022, we successfully completed phase, one seamless integration and phase to generate momentum.
The key accomplishments were the efficient integration of BDSI and the successful renegotiation of expanse. The ER contracts, we are committed to managing gross to net to less than 65% going forward.
This January we launched phase three accelerate.
Consistent with our 2023 financial guidance, we expect to see an immediate acceleration of top and bottom line growth in 2023 propelled by lower extensive E. Our gross to net prescription growth of BELBUCA and expansive E or on a full year basis in the full year impact of the synergies.
<unk> cost structure.
We are excited to make 2023, a banner year for Collegium, our two pronged strategy is clear and thus execution is our strategy. We are focused on two critical priorities maximizing the potential of our pain portfolio and deploying capital.
We plan to maximize the potential of our pain portfolio through strong commercial execution and by leveraging our fully synergize cost structure. We expect extensive E. Our revenue to immediately accelerate as a result of gross to net improvement and on a full year basis, we expect BELBUCA and extend the ER prescription.
Growth.
We anticipate that the NUCYNTA franchise, and some pro it will be steady contributors.
With our current financial strength and cash flow generation, we are focused on deploying capital to create long term value.
The top priority is business development, we believe current market conditions are conducive to potentially getting a deal done we are active engaged and we'll remain disciplined in our approach. We are focused exclusively on commercial stage opportunities with peak sales potential of over 100.
$50 million importantly, we are looking for assets that are differentiated with exclusivity that runs into the 'twenty thirties.
We are committed to rapidly paying down debt and opportunistically using our share repurchase program to return capital to our shareholders.
Although early we are encouraged by the start to 2023 and are confident that it will be a banner year for Collegium our.
Our strategy is clear and our organization is aligned and focused on execution, we are committed to achieving our strategic and financial objectives, while creating long term value for our shareholders I will now hand, the call over to Colleen to discuss the financials.
Thanks, Joe Good afternoon, everyone.
22 was indeed, a pivotal year marked by growing financial strength for Collegium.
Generated record quarterly and full year revenue and adjusted EBITDA.
<unk> financial discipline and leveraged our strong cash flows to execute on our capital deployment strategy.
Financial highlights for the fourth quarter and full year 2022 include <unk>.
Net product revenues were a record $129 6 million for the fourth quarter compared to $27 4 million for the fourth quarter of 2021.
2022, net product revenues were a record $463 9 million compared to $276 9 million in the prior year.
As previously disclosed during 2022, we achieved a complete resolution of our returns matter, reflecting a positive $4 7 million dollar adjustment associated with the resolution well the fourth quarter and full year 2021 reflect a negative $38 3 million adjustment related to the return.
BELBUCA net revenue was $42 million in the fourth quarter and $126 5 million in 2020.
2022 sales reflect the nine months Collegium owns BELBUCA.
For the fourth quarter of 2022 extensive E. Our net revenue was $35 2 million and extends to ear gross to net was 69, 1%.
For 2022 extensive E. Our net revenue was $138 8 million and gross to net was 69, 3%.
Excluding the one time benefit related to the resolution of the returns matter 2022 extensive E. Our gross to net would have been 71, 1%.
We expect extensive E. Our gross to net to be between 61% to 63% in 2023 as a result of the successful contract renegotiations, we carried out in 2020 chip.
NUCYNTA franchise net revenue was $47 8 million in the fourth quarter and $184.5 million in 2022.
GAAP operating expenses were $38 million in the fourth quarter compared to 32 8 million in the fourth quarter of 2021.
For 2022, GAAP operating expenses were $176 2 million compared to 133 million in 2021.
Adjusted operating expenses were $32 3 million in the fourth quarter compared to $20 4 million in the fourth quarter 2021.
For 2022, adjusted operating expenses were 122 million compared to 101.2 million for 2021.
Net loss for the fourth quarter was $7 2 million compared to net loss of 25 million in the fourth quarter of 2021 for.
For 2022, net loss was $25 million compared to a net income of $71 5 million in 2021.
non-GAAP adjusted EBITDA was a record $76 4 million for the fourth quarter and a record 266 million for 2022.
GAAP loss per share was 21 basic and diluted in the fourth quarter of 2022 versus <unk> 73 cents GAAP loss per share basic and diluted in the fourth quarter of 2021.
GAAP loss per share was 74% 74.
Basic and diluted in 2022 versus GAAP earnings per share of $2 <unk> basic and $1.86 diluted in 2021.
non-GAAP adjusted earnings per share was $1.09 in the fourth quarter versus seven non-GAAP loss per share in the fourth quarter of 2021.
For 2022, non-GAAP adjusted earnings per share was $3 96 versus $2.58 in 2021.
Please see our press release issued earlier today for a reconciliation of GAAP to non-GAAP results as.
As of December 2022, our cash balance increased to $173 7 million.
During the quarter Collegium paid down $25 million in debt. We ended the year with net leverage of two times net debt to adjusted EBITDA.
We are pleased with our strong performance in the fourth quarter and 2022.
We achieved our financial goals for the year growing revenue at more than three times the rate of adjusted operating expenses, increasing our cash position and exiting 2022 with financial strength.
We are reaffirming our financial guidance for 2023, we expect net product revenues in the range of $565 million to $580 million.
Adjusted operating expenses in the range of $135 million to $145 million and adjusted EBITDA in the range of $355 million to $370 million.
Our 2023 financial guidance, it's field by our growth drivers BELBUCA and extensive E R and supported by our key contributors NUCYNTA and <unk> as we strive to maximize the potential of our pain portfolio.
Our capital deployment strategy is focused on creating long term value for our shareholders. Our top priority is business development and we are committed to taking a disciplined approach and a market that is potentially conducive to a transaction with.
With the integration of BDSI complete and our strong financial position, we have the ability to execute on a potential acquisition.
We are committed to rapidly deleveraging our balance sheet, we're on track to repay $162 $5 million of debt in 2023, which would put us at less than one five times net debt to adjusted EBITDA at year end.
Our ability to Delever quickly is a testament to our strong cash generation.
Finally, we have the ability to return capital to our shareholders by Opportunistically, leveraging our share repurchase program.
Since the inception of our initial board authorized repurchase program in August of 2020. One we have returned $62 million in capital to our shareholders, which includes $19 1 million in capital returned to shareholders in 2022.
In January 2023, our board authorized a new share repurchase program for $100 million.
As a matter of good corporate hygiene and given the recent strength of our stock just a few weeks ago. We completed a 241 $5 million convertible note financing with a maturity in February of 2029.
Later maturity provides us with more financial flexibility in the management of our debt.
We used $140 1 million of net proceeds from the offering to partially repurchased our convertible senior notes due in 2026, and we intend to use the remaining approximately 95 million of net proceeds for general corporate purposes, including the implementation of our capital deployment strategy.
Overall, we are very pleased with our performance in 2022, we are in a phase of growth are entering 2023, and strong financial standing and are well positioned for a banner year.
I will now turn it over to Scott.
Thanks Colleen.
Our commercial portfolio is strong BELBUCA extensive E. R. In NUCYNTA ER have a combined 50% share of the branded ER market, our paint products have large prescriber bases and broad market access positions.
Collegium as the leader in responsible pain management, our pain portfolio was viewed favorably by HCP is our growth drivers BELBUCA and extensive E. R are seen as highly differentiated and hcp's have a strong intent to increase prescribing of our products the.
The work, we completed in 2022 positions BELBUCA and extends to E. R to grow market share and prescriptions on a full year basis in 2023.
This year, our number one priority is to grow at stamps E R and BELBUCA prescriptions.
The entire commercial organization is taking specific actions to differentiate our portfolio and fuel growth.
These actions include the following launching new promotional campaigns and educational resources for our sales teams to use during interactions with HCP is and pharmacists.
Launching new digital and non personal promotional content, which reinforces the clinical differentiation of extensive E R and BELBUCA.
Launching new personal and non personal promotional tools, so pull through the strong access positions of extensive E. R. M BELBUCA.
And supporting Payors as they ensure that the value of extensive E. R is clearly understood enabling stronger formulary controls were extensive E. R is exclusive.
We're holding our national sales meeting in March we will bring the entire commercial organization together to reinforce our brand strategies and messages with the goal of strengthening the impact of their customer engagements.
The commercial organization is focused on winning in managed care.
This strategy begins with working with Payors to pull through the strong access positions that we have brick stamps or E R and BELBUCA.
In addition, and relative to extent that you are following the successful completion of the first wave of contract renegotiations could drive gross to net below 65% were looking to opportunistically secure new payer wins, which can serve as a catalyst for prescription growth, while ensuring gross to net below 65%.
Going forward.
We plan to successfully renegotiate the contracts expiring this year, which represent about 30% of all extends to ER prescriptions.
Our goal is to maintain access for extensive E R. While improving profitability leveraging the clinical differentiation that <unk> has demonstrated to these plans over time.
For BELBUCA in addition to pulling through the broad commercial access our priority is to improve access in Medicare part D.
We believe that the clinical differentiation of BELBUCA warrants broader coverage within Medicare part D and we're actively engaging with payers to find a path to better access for patients.
We currently have a high level of engagement with payers discussing the clinical value of <unk> and BELBUCA and the difference both products can bring to patients I'm encouraged by the level of engagement so far in.
In closing our priorities in 2023 or Callisto Crystal clear grow extends to E. R M BELBUCA and win in managed care.
I'm confident that we will achieve phase three of our action agenda accelerate in 2023, I will now turn the call back to Joe.
Thanks, Scott, we are making significant strides as we build a leading diversified specialty pharmaceutical company committed to improving the lives of people living with serious medical conditions 2022 was a pivotal year for Collegium marked by several significant financial and strategic accomplishments I'm.
<unk> by the start to the year as we execute on phase three of our action agenda accelerate them.
Confident that 2023 will be a banner year for Collegium I will now open the call up for questions operator.
Thank you and.
Ladies and gentlemen at this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue you.
You May press Star followed by two if you 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.
Our first question comes from David and sell them with Piper Sandler Sandler. Please state your question.
Hey, Thanks, So just had a couple so first.
Joe you had talked about.
Continued renegotiations.
Regarding.
Payor contracts for X stands or not continued but.
But but new renegotiations that could affect the gross to net.
Beyond this year and what I'm, what I'm trying to better understand is how much better can it get from the current 61% to 63% that you're guiding to and and just give us a refresher on.
What kind of plans.
You're renegotiating with going forward or the Medicare part D or the commercial there makes both so that's the first question and then the second question is on on business development M&A.
So you talked about.
Delevering.
So the question I have here is.
How much would you lever up.
To acquire commercial stage assets, so what would <unk>.
Pro forma net debt to EBITDA look like or how far would you go.
To execute on a on the acquisition of an asset or or more than one asset. Thanks.
Sure David Thanks for the questions I'll take the first one and then hand, the second half to call wing. So with regards to extend <unk> E. R. Renegotiations. This year, we have an additional contracts that account for an additional 30% of lives.
Our our STAM see our prescriptions. Unlike last year, where we made a strong commitment to get gross to net to less than 65%.
Not going to do that this year for the following reason.
And that is we're really focused on this year. In addition to those renegotiations trying to secure new wins, which obviously, we now have the headroom with what we accomplished in 2022, along with the additional 30% that will be renegotiating to secure wins at rates that were comfortable with and stay.
Below that 65% threshold that we are forever committed to so the way to think about it is it will be a balance of if we're able to achieve new wins relative to what we accomplished in the renegotiation. If we didn't achieve any new wins. It would certainly have a net benefit or <unk>.
Positive impact on our gross to nets as we move in to 2024, and then to the final part of your questions. The contracts were renegotiating. This year are skewed to commercial plans.
And then calling.
Thanks, David on the leverage question. So in in seeking a commercial stage asset we would be willing to go up to pro forma net debt to EBITDA of four times and then like I imagine we did a playbook of quickly delevering thereafter.
That's helpful can I sneak in a follow up Joe.
On the on the.
On the gross to net and the renegotiations I mean is it is it fair to say that.
Just based on your comments that we could see a scenario next year, where there's gross and that stability versus 2023 but with some new wins that could help drive greater volume growth. I mean is that one plausible outcome regarding what you're trying to accomplish here.
Yeah, that's certainly a plausible outcome day, but book as a leader in responsible pain management with both <unk> and BELBUCA, which we believe deeply are products that can make a meaningful difference in the lives of people living with pain and contribute in a positive way to making a difference in the opioid epidemic.
We will do everything that we can to broaden their access positions and we believe in the case of BELBUCA in Medicare part D for them in Rx spaces. There are certainly catalysts. There if we're able to be successful for growth in 2024 and beyond and in the case of extensive E or are there still.
Room that if we're able to secure wins, where there are also catalyst that would have a very positive impact on prescription growth on 2024 and moving forward.
Okay. That's helpful. Thank you.
Youre welcome Thanks, David.
Our next question comes from Tim Lugo with William Blair. Please state your question.
Hi, This is John on for Tim Thanks for taking our question Congrats on a successful 2022 and looking forward to an exciting 2023.
So I know recently, you've been discussing how some additional education as required around BELBUCA profile to accelerate growth of that franchise can you just talk to us a little bit about how those efforts are going and how you see growth.
The franchise ramping up through 2023 as those efforts are.
Come together.
Sure. Thanks for the question, John I'm going to ask Scott to answer yeah. Thanks, John Yes. So when we look at 2023 and kind of the performance trend and where we're heading and what we believe is on a full year basis, we're positioned for growth and the reason related to your trading comment is you know last year with the acquisition of BDSI, We went through a lot of.
Disruption there was a lot of learning around the brand and what I'd say is similar to what I articulate in the fourth quarter call like were starting to get our sea legs under us our people are stable in their territories. Our sales reps are comfortable with the brand and so for those reasons combined with the other commercial actions, we're taking in the in 2023, that's why.
We believe on a full year basis, we can see growth for BELBUCA.
Alright. Thank you so much for that color.
Okay. Thanks, Sean.
And our next question comes from Brandon Folkes with Cantor Fitzgerald. Please state your question.
Alright, Thanks for taking my questions and congratulations on all the progress this year.
When you put 2020.
But thanks for the details on the extends on BELBUCA prescription growth drivers can you just elaborate how you see the addressable market evolving.
I think we continue to see the headwinds and <unk> and branded oxy cotton or your market. So just any color. There just in terms of how you view the overall market I guess with Stanford BELBUCA.
Checking out this year and maybe going forward.
Yeah. Brandon This is Joe I'll start on that and then Scott may have some additional perspective to provide look when we when we look at stamps or E. R and BELBUCA. The first thing that I would emphasize is we think there is plenty of room within the market for both of these important differentiated brands to continue.
<unk> to grow when we look at it all out at the market over the next five years, we believe that Youll start to see a moderation of the decline going to the mid to low single digits I think the strongest piece of evidence to support that would be where now we would be approaching upon the use of opioids.
The early two thousands which was significant of win pain was called out as a fifth vital sign what we know for sure isn't going to change. Unfortunately is the number of people who are experiencing pain that have chronic pain and the high intensity nature of which opioids will continue to be a cornerstone of third.
So from a.
Oxycodone portion of the market. We are not concerned we are focused on replacing oxy cotton.
Utilization and then as you know the buprenorphine portion of the market is growing and certainly we believe BELBUCA is a differentiated schedule III product in particular relative to view trends from a dose ranging perspective.
So we think the dynamics are there for continued growth.
Yes, I think you hit it Joe the only other thing I'd add is as a reminder, that the biggest feeder pool to the growth of both <unk> and BELBUCA is the IR to ER transitioning the IR market, which is still very large with many patients being treated for their pain. So there's tremendous opportunity for us to grow.
Thanks, very much I was actually kind of a follow up.
Kind of touched on it but do you expect that feeder pool to change or evolve at all over the coming years and that's it for me. Thank you very much.
No I don't think we anticipate any changes in the dynamic portion of the market.
Alright. Thanks for thank you progressed on the progress you bet. Thank you.
Our next question comes from Serge Belanger with Needham <unk> Company. Please state your question.
Okay.
Hi.
Questions for us.
First wanted to maybe.
On recent market dynamics.
I think one of the headwinds for most of 2022 was.
Kind of a slower pace of office visits that led to an unfavorable business mix. Just curious if that has changed over the fourth quarter and in the early.
D front, you've kind of had the boxes that you are looking to take off as you look for assets.
But.
In terms of therapeutic areas that youre targeting.
Should we still expect that.
You can do a third.
Transaction in the pain space or are there still assets remaining debt.
Pick off those categories that you talked about.
Okay.
Yeah, Hey, Serge if you could do me a favor and I apologize for this you were you were coming in and out and I'm not sure. We clearly thought your two questions. So if you wouldn't mind repeating them.
Sure I'll start with the first one.
Is this better.
Yes.
Okay. So the first one was about the recent market dynamics.
One of the headwinds in 2022 is the pace of <unk>.
Slower pace of office visits leading to an unfavorable business mix curious if that has improved and whether an improvement is embedded in.
And the guidance and plans to grow.
And BELBUCA.
Okay.
And Scott, we take rational yes. Thanks, Serge so so look since the since the last time, we talked I mean, no. We haven't seen an improvement in terms of patients our returns, but I think what's important is that's just the market. We play in now and so to your question around guidance no. Our guidance doesn't contemplate any type of return of the market right. We just view it as.
Now this is the market we play in and really from a focused standpoint look we're not focused on the external factors like that that we can control. We're focused on the internal factors and that's where our commercial execution of our people and changing behaviors. So that's where our focus is and we'll keep monitoring what happens external.
Okay.
And then a question on BD and the second question.
Yes.
And talk.
Serge you just broke out again.
Okay.
Okay.
Sure.
Yes.
Sorry could you pick up your handset and maybe it will get a better better sound that way.
Yeah.
Alright so.
Okay. So we're going to move onto the next question Mr. Bellinger just start.
Thats Star, one again and pick up your handset to ask your question. Thank you.
Our next question comes from Greg Fraser with Truest. Please state your question.
Hey, guys. Thanks for taking the questions hopefully you can hear me okay.
No I'm kidding.
When do you believe your commercial initiatives behind a stance that could return the product to positive year over year prescription growth you mentioned growth for the full year for exams to add BELBUCA curious how long or how quickly do you think you can get back to positive growth for prescriptions.
Yeah. So Greg this is Joe I. Appreciate the question look I'm not going to prognosticate on that what I would say to you is we believe on a full year basis, both BELBUCA and <unk> will grow prescriptions in 2023.
As I said in my prepared remarks, I'm encouraged by the start were off to in 2023, and I would say at this point.
There's no surprises everything is tracking in line to our expectations.
Got it okay.
Can you talk a bit more about the initiatives to expand part D coverage for BELBUCA are you seeking to sign contracts. This year that will help next year and beyond and will you try to maintain the gross to net below a certain level as you add part D lives.
Yeah. So I'll pass that question off to Scott Yeah. Thanks, Greg. So yes. So for BELBUCA is it's very straightforward and we look at this portfolio that we've acquired I mean, BDSI did a great job managing BELBUCA and managing the gross to net what we see as the leader responsible pain management as people need access to this product and part D. As an avenue for that so it's early.
We're engaged with payers, we're telling the clinical story of buprenorphine overall, and BELBUCA and the differentiation versus the patch and we'll see where those conversations go if we are to win in one of those plans. It would be for 2024 right. So we don't see that as something that would happen mid cycle and believe that we can do it in a way that's.
<unk> when it comes to the gross to net to your question there.
Got it Okay and then just my last question is on on the recent.
PDP recommendations for opioid prescribing I'm curious do you think whether those recommendations will help boost prescribing or not thank you.
Yeah, Greg So look I. Appreciate the question I think the commentary I'd give on the CDC guidelines as we're glad to see experts step back.
And look at what it is the original guidelines the impact of them and providing the necessary clarity.
For physicians as they treat patients who are living with pain and the most responsible way possible. So that I would keep our comments focus to there.
And what's most important for the care and treatment of the patients and I don't think from a business perspective theres any impact.
But we'll see as a result of that.
Got it thank you.
Youre welcome. Thank you Greg.
Thank you and our might've said audience, if you'd like to ask a question at this time press star one on your telephone keypad will pause for a moment to see if there are any additional questions. Thank you.
Thank you there appears to be no additional questions I'll hand, the floor back to Joe <unk> for closing remarks. Thank you.
Thank you and thank you everyone for joining the call today I look forward to updating you on our progress throughout the year and I hope that everybody has a great evening.
Thank you and with that we conclude today's conference call. All parties may disconnect have a great evening.