Q2 2019 Earnings Call
Ladies and gentlemen, thank you for your patience and please standby. The Q2 2019 Collegium Pharmaceuticals earnings Conference call will begin approximately two minutes. Thank you for your patience and please continue to standby.
Okay and welcome to the Q2 2019, Collegium Pharmaceuticals earnings Conference call.
I will now turn the call over to Alex The Sala you may begin.
Welcome to the club deal Pharmaceuticals second quarter 2019 earnings Conference call.
This is Alex it's all a head of Investor relations for Collegium.
I'm joined today by John Shipone, Our Chief Executive Officer, Paul Brannelly, Our Chief Financial Officer, and Scott Schrier, 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 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 without limitation. The risks that we may not be able to successfully commercialize xtampza E R and the new center franchise.
And that we will 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 product.
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 expectations discussed today.
Our earnings press release, and this call to discussion of certain non-GAAP information you can find our earnings press release, including relevant non-GAAP reconciliations on our corporate website actually Jim pharma Dot com.
I will now turn the call over to Collegium CEO , Joe sure Tony Thanks, Alex Good afternoon, and thank you everyone for joining the call.
We're pleased with the progress that we made in the first half of 2019 versus our key strategic and operational priorities and we are on track for 29 seemed to be a breakthrough year for Collegium pharmaceutical.
The second quarter milk, another quarter of growth for Collegium capping a strong first half performance.
Total net revenue for the first six months was $149.6 million, which represents a 9.3% increase over the first half of 2018.
Xtampza yard delivered strong year over year growth driven by the 13, new exclusive ERP code on payer when they came online at the beginning of the year.
Compared to the first half of 2018 Xtampza your total prescriptions grew 60%.
And it's damn city, our total net revenue increased 51% to $51.2 million.
Driven by operational stability and execution, we expect xtampza yard to continue to grow over the remainder of 29 team at a moderated pace compared to the first half of the year.
With respect to the New center franchise, we saw signs of stability in the second quarter.
Sequentially total prescriptions and market share were flat compared to the first quarter of 29 thing.
We believe that new Synta your volumes will grow modestly over the remainder of 2019, and we expect new since the IR to decline in line with the IR market.
Importantly, and as we said at the start of the year. We believe the organization is sized appropriately to maximize the potential of the portfolio.
We're committed to leveraging not growing cully dreams cost structure and evidence of that commitment was reflected in lower sequential quarter and year over year quarterly operating expenses.
As we strive to become the leader in responsible pain management, we recognize that are most important brand it's collegium pharmaceuticals.
Our entire organization works hard every day to deliver to differentiate Collegium pharmaceutical into earned the trust and respect of our various stakeholders.
Recent headlines related to opioid litigation developments reinforce the importance of good corporate citizenship and the need to operate from a position of trust and accountability, putting the best interest of patients in our communities at the forefront of all that we do.
Quantitative market research conducted in the second quarter showed that among our targeted healthcare providers Collegium with rank second only to Pfizer as a leader in responsible pain management.
A testament to the quality and professionalism of our team into the growing recognition of collegians commitment.
As part of that same research Collegium was rated number one based on ethical business practices, a belief that the company's product portfolio and materials services and web sites support responsible pain management.
And the positive reputation among the public and medical community.
As we continue to build awareness around our commitment to being the leader of responsible pain management, we recognize the importance of leaving what the science and the evidence based outcomes are a key component to differentiating our brands.
Since joining the team in the spring, our Chief Medical Officer Dr., Richard My element has been evaluating our scientific communications efforts in developing a plan for future enhancements. We now have a comprehensive publication plan in place and we'll have a strong presence at this year's Painweek in September .
The largest U.S. pain conference for clinicians dedicated the pain management.
The presentation of new World World data regarding expenses yard and the new since the franchise, including data derived from surveillance systems, the truck abuse and diversion allow us to enhance our discussions with numerous stakeholders, including payers.
Before I conclude my opening remarks, I would also like to take a moment to address the ongoing industry wide opioid litigation.
Prior to doing so I want to emphasize that our organization stepped into the space in 2016 at a time when others began to step out because of a belief that extends to E. R and our proprietary deterrent technology has the potential to make a positive difference in the lives of people suffering from pain and could play a role in responsibly addressing the opioid epidemic.
As of today, there are over 2000 lawsuit against opioid manufacturers distributors and other participants in the supply chain bought by various plane. That's from cities to states two attorneys general and other parties.
Of these we are aware of 27 in which we are currently name.
Where we have an opportunity to do so we are pursuing dismissal based on Collegium fleet entry to the market and the absence of allegations that we engaged in conduct that could contribute to the crisis.
To date Collegium has been dropped from eight of the 11 lawsuits currently consolidated in the Ohio Multi district litigation that we have been named them and we're waiting dismissal in two cases brought against us in the Pennsylvania State courts.
Collegium was never a party to the prominent Oklahoma EG suit that has recently garnered national attention and Collegium was dismissed from an opioid lawsuit in Arkansas State Court.
We are not named in any case and the multi district litigation that has a track or bellwether case and do not expect to have involvement or engagement in the MTL for some time.
Finally, we did not assume any liability for new since the promotion were sales that occurred prior to January 2018.
Instead, any such liability is retained by 30.
While we typically refrain from commenting on litigation have any sort we realize that this is an area of ongoing inquiry due to the high profile nature of the opioid epidemic and the seriousness of the allegations made against various parties in the industry.
Todays commentary is intended to address some of the common questions. We have been receiving from the investment community.
However, beyond these brief remarks, we will have no further comment on this topic. During this call and we refer you to our quarterly and annual reports filed with the SEC, which contains both detailed descriptions of the status of litigation matters as well as descriptions of the risks associated with them.
Looking to the balance of the year, we remain focused on execution, we are encouraged bonds, but not satisfied with our accomplishments in the first half of 2019, and we have a lot of work to do in the second half of the year.
I am confident that Collegium has the right capabilities and most importantly, the right people in place to make it happen.
And at this time I would now like to hand, the call over the Paul Brannelly for a discussion of the financials.
Thanks, Joe Good afternoon, everyone.
During the second quarter of 2019, we achieved several milestones, including total net product revenue exceeded 75 million for the first time.
Operating activities provided almost $15 million in cash.
And although we had a net loss of 4.7 million on a GAAP basis, we were profitable on a non-GAAP basis for the first time.
Additional financial details for the quarter included net product revenue for Xtampza of 26 million, which is a 44% increase from Q2 2018, and a 4% increase from Q1 2019.
Expanding our revenue growth was driven by prescription growth, partially offset by a reduction on channel inventory, which had a net revenue impact of approximately $500000.
The gross to net discount for expanded CPR was 58.4% in Q2 2019.
Compared to 59.1% in Q1 2019.
The improvement in gross to net discount was driven by a 1.4% reduction in reserves for potential returns, which was partially offset by higher rebates.
We believe that the gross to net discount for Xtampza will average in the low sixtys for the year.
Revenue for the new access to franchise was 49 million in the second quarter of 2019.
Down from $49.4 million in the first quarter.
And from 54.9 million in the second quarter of 2018.
The decrease in any sense to net product revenues driven by lower prescription volumes.
Operating expenses, excluding cost of product revenues.
Were 31.4 million for the second quarter of 2019.
Compared to approximately 35.3 million for the first quarter of 2019.
The decrease was primarily due to lower sales and marketing related expenses.
For the second quarter of 2019, our net loss was 4.7 to 4.7 million compared to a net loss of $13.1 million for the prior year quarter.
The second quarter of 2019 includes approximately 4.2 million of stock based compensation expense and 3.7 million of amortization expense related to the new sent the intangible asset.
Our non-GAAP adjusted income from second quarter of 2000, Nineteens 3.1 million.
Compared to a non-GAAP adjusted loss of $4.9 million for the second quarter of 2018, and the non-GAAP adjusted loss of $1.7 million for the first quarter of 2019.
Please see our press release issued earlier today for a reconciliation of GAAP to non-GAAP results.
As of June Thirtyth 2019, our cash balance was 148.7 million, which is a 13.8 million dollar increase from our March 31st 2019 balance.
We remain encouraged by our financial progress for the first half of the year. Both in terms of total net revenues and operating expenses, which reflects our stated objective of continuing to grow the business, while leveraging our existing cost structure.
With that I will now turn the call over to Scott Schrier for commercial loved it.
Thanks, Paul in the second quarter, we saw continued growth for extensive E R and stabilization of the New Center franchise, our staff that Youre achieved all time highs for total prescription market share and total prescribers in a quarter total prescriptions were 116593, representing 11% growth over the first quarter of 2019, and 51% growth over the second quarter of 2018.
Expenses are exited the second quarter with brand video our market share up 12.6% and Aki cottone, our market share, 17%, an increase of one and 1.4% respectively versus the end of the first quarter.
They were over 13000 unique prescribers in the second quarter, an increase of 7% versus the first quarter and 29% versus the end of 2018.
We saw strong market share performance for extended CR across the exclusive oxy, codell and IAR formulary positions and significant share acceleration within the new formulary positions that went into effect in 2019 in fact extends to E. R achieved branded your market share leadership within 19 of the 26 contracts that were in effect the start of 2019.
Total prescriptions for New center for the franchise in the second quarter were 135257, and we saw stability in prescriptions and market share compared to the first quarter.
In the second quarter, we conducted quantitative market research with our targeted healthcare providers and are encouraged by the results.
Unaided brand awareness for Xtampza was 69% up from 62% in the fourth quarter of 2018.
Our staff. It was rated the number one product on product favorability among branded products and its abuse deterrent technology was rated higher than oxy contin.
58% of prescribers intend to increase their utilization of Xtampza E R and 63% intend to decrease their prescribing of oxycontin.
New simply our was ranked second on product differentiation and 50% of prescribers intends to increase their prescribing of New Center E. R.
In the same body of research our sales organization with highly rated by pain specialists and overall favorability knowledge support and customer engagement.
In the second half of the year, we're taking specific actions to drive performance across the portfolio.
These actions include launching new educational resources to enable interactive engagement with HCP.
Leveraging new digital content to continue to grow brand awareness and executing comprehensive plans to maximize the broad market access coverage of our portfolio.
Specific to actually Fcr the market access team is working diligently to strengthen existing payer positions and to secure a new exclusive VR Oxy code on formulary wins for 2020, we're in the midst of the negotiating season and we're actively engage with a large number of national and regional payers. Thus far we're encouraged by how the discussions are evolving.
For example, we are the messages to payers are clear and they're compelling.
Our staff TDR has a differentiated label relative to oxycontin.
Access to our offers a lower net price than oxy cotton when added to formulary.
And there is numerous case studies, demonstrating favorable market receptivity to an exclusive formulary position.
We believe that we have a strong case to support. The addition of expand CR to payer formularies and we look forward to continuing our interactions to raise awareness around the opportunity Xtampza ER represents for their coverage universe.
The commercial teams laser focused on operational execution and taking the necessary actions to grow extent CR and continue to stabilize the new synta franchise with that I'll turn it back to Jeff.
Thanks, Scott I will now open up the call for questions.
Ladies and gentlemen, if youd like to ask a question. Please press Star then one.
If your question has been answered and you like to remove yourself from the queue. Please press the pound key.
Once again to ask a question that's star then one.
Our first question comes from David Amsellem of Piper Jaffray. Your line is open.
Oh. Thanks, So just a few so on exclusive contracts you already have in place.
Can you talk about what you can do need to do to further increase your share.
I mean, I know you are already in a position of of leadership in the broad E. R opioid space, but how do you.
Grow your share would be intuitive that you can continue to grow your share given that you have exclusive access and yet there's still quite a bit of oxycontin volumes that we see a weekly so help us understand what you can do there and secondly can you elaborate on your negotiations for new contracts, you mentioned national plans and I don't know that you can get specifics, but you know maybe frame for us how many covered lives.
You think it is a new contracts could encompass theoretically.
If you were to execute according to plan. Thanks.
Yes.
Thanks for the question David So first on the current plans that are in place as I said, we feel really good about our performance we've achieved Randy our leadership at 19 of the 26 plans as you referenced when we look at we share performance weakens, we see continued progress and growth of share. So we think we're doing exactly what we need to do there to pull through those plans when it comes to what's on the table for 2020, I would just reinforce that I'm not going to speculate on the size of the opportunity, but we're in negotiations with numerous national and regional payers. We're really encouraged by those discussions and we're looking to add both new wins or strengthen our existing position and well be happy to share more on the next call. When we have results of our work.
And Dave a follow up yeah color, Jeff Sorry, Oh, David I was just going to add where we have the exclusive wins that have been in place.
A couple of the things that we do do is we work it from the plan side and working with them to ensure that the controls that they're trying to implement from our on the ground on the on the ground intelligence are in fact being implemented and then the second thing that we do is we continue to ensure that our people are refined and identifying on a physician by physician basis, where opportunities to continue to grow share.
Exist and then with regards to our negotiations I always like to emphasize that in many respects. We're just getting started so if you look from an opportunity to improve our exclusive positions. We have a long runway with about 70% of the market to go and if you look in Medicare part D. We're at about 50% of those lives in an exclusive position. So we feel really good about where we are we're encouraged by the negotiations that are ongoing and as Scott said, we will provide an update on our next call in terms of how 2020 shaping up.
Okay, and then just a quick follow up any color on where you think gross to net on Xtampza will be next year low sixtys a good way to think about or is going to be higher as you have more exclusives onboarding.
Yeah, We think we can continue to manage it in the low Sixtys did.
Okay, Alright, thanks, guys.
Thanks.
Our next question comes from Greg Fraser of Suntrust. Your line is open.
Thanks, It's Greg Fraser on for Gregg Gilbert Good afternoon.
Hello.
You mentioned that you expect to grow volumes modestly asset just to clarify are you referring to growth in the second half versus the first half for on a year over year basis.
Yeah. Greg This is Joe I was referencing on a sequential quarterly basis, we'd expect to see modest growth with new center here.
Okay got it and then just a quick question on guilty of litigation and I appreciate all of your earlier commentary.
But.
I guess outside of MDR are there any cases and what's your.
And that had been moving forward they could.
Go to trial in 2020.
[noise], Yeah, Greg as I said in my comments on the call, we're not going to communicate.
Beyond what it is that I outlined but if you look what I would emphasize in the perspective that we're trying to provide us that theres over 2000 total cases of which Collegium is currently name.
In 27 of those 23, our state cases, and they are unlikely to go to trial in 2020.
Got it Okay and then just the last question is in terms of business development. It how is the stock price and the market environment impacted your appetite.
For for media at all.
Yes. So Greg this is Joe I appreciate the question what I would emphasize from a BD perspective is the stock price has not impacted.
Where it what it is we're focused on so as we outlined on the last call. Our highest priority is looking in that mid term window, where we're looking for novel mechanisms of action non opioid pain solutions and things that would be of value to the office space pain specialists in the patients that they treat and then of course the other window is in the short term. We're we're certainly open to and looking at potentially differentiated assets that if we executed around it would be accretive in the year, we did it and it's not that you're the following year.
Great. Thanks for the color.
Sure.
Our next question comes from Serge Belanger of Needham Your line is open.
Hey, Thanks for the question. This is a 10 on for search so just one or two.
I've noticed that.
He recently had a guidance for the future approvals of opioids and it seems.
That in terms of drugs of abuse abuse deterrent properties, there's some concern about the AG Center.
That they're seeing.
So how do you think this might impact the products that are already on the market versus those who might be looking into entering this space any thoughts would be great. Thanks.
Yes, Dan This is Joe I appreciate the question.
I'm not sure what it is that you're referencing as it pertains to abuse deterrent formulation, what I would comment with regards to the hearing that the agency is happening on the 17th with a focus on both the future approval of opioid analgesics and also incentives.
And ways to Incent innovation two novel treatments for pain. Those are two topics that we believe are very important.
We think because opioids are serious medications.
But it's important that anything that were to be approved to the market. There is a high bar and it would be to bring something different than currently available therapies and then of course as we've talked about we're trying to position the company to be a part of ushering in the next wave of non opioid pain solution. So from our perspective anything that work to incense innovation is a positive.
Okay, great. Thanks, and then just on the constant losses, that's going on.
The news regarding opioids have you seen any change as far as your encounters with physicians that are prescribing opioids.
Or even with payers you know as you start negotiating contracts. Thanks.
Yes, Dan This is Joe I would emphasize what we're focused on is what it is the Collegium is striving each and every day to do in terms of being the leader in responsible pain management I think the biggest change we're seeing as a result of our efforts is that the Collegium pharmaceutical brand is rising to the top of the list with the health care providers that were calling on each and every day and they value. The the information and education that our people are providing them they see our portfolio as innovative and differentiated and they look at the content of our materials, whether it be our website web sites and other educational information that we provide to be best in class.
Got it thanks for the color.
Sure.
Our next question comes from David Steinberg of Jefferies. Your line is open.
Thanks, I have two questions. The first one is on the status of some of your new contracts.
Since they commence have you seen any increase it on volume from Ohio workers and a large mountain west plan.
And secondly related to Medicare part D. I know that.
You had thought last year, they would start kicking in in a significant way in the second half of the year and that didn't quite materialize.
What are your thoughts about the second half of this year compared to last year for part D plans. Thanks.
Yeah. Thanks for the question David So first on the new wins that we announced that went into effect in the mountain West in Ohio Bureau of workers comp. It's very early but were encouraged by what we're seeing there right out of the gate, we're seeing market share growth consistently week after week, but its early to draw any other conclusions and then on Med D. And your question about continued growth what we've referenced is as the year resets kind of the reset or the second chance at Med D. What we saw in the first quarter was absolutely share acceleration within the Med D plans and we expect to see continued growth in the second half of the year.
Okay. Thanks.
Okay.
Our next question comes from Tim Lugo of William Blair. Your line is open.
Hi, This is lot going on for Tim Thanks for taking the questions I got a couple.
First of all Weve used it does now.
Starting to stabilize how confident you will get the free cash flow expectations, you had when you license franchise.
And then secondly, just you were talking about.
New contracts.
For its data.
The next year.
Should we expect similar discounting in those contracts and at what point do you think you'll be.
Potentially able to get sort of more favorable discounting.
You contract.
Great well thanks for the question to mute your phones going in and out a little bit. So if we don't answer your questions exactly please.
Ask them over again after we comment as far as meeting our.
Well weve our goals as far as free cash flow, we're managing the new center franchise closely and as we've said we view the money center franchise is a great fit into our portfolio a lot of advantages to having it in our commercial organization, but it's really a financial transaction for us where we hope to manage franchise to help us get to profitability sooner and to generate cash and we believe that it's meeting those expectations.
And this is Joe as it pertains to.
New payer wins for 2020, and how we think of that in terms of an impact on gross to net.
We believe and are committed to both in 2019 and 2020.
That we can manage the gross to net of Xtampza CDR and the low 60 percents.
Okay.
Great. Thank you.
Great. Thank you.
Our next question comes from Brandon Folkes of Cantor Fitzgerald. Your line is open.
Hi, Thanks for taking my question I was wondering if you could provide any color on the percentage of extends the Scripps, which currently on north going through the exclusive contracts. Thank you.
Yeah. That's a great question, so right now roughly 65% the prescriptions go through exclusive and 35% go through non exclusive or non contracted.
And Brandon This is Joe one other.
Piece of color I will provide there is we're growing extent CR across exclusive contracted contracted nonexclusive and the non contracted books of business.
Great and maybe one just follow up and as we look at new patient starts in the second half of the year.
Are you willing to provide some color in terms of where those are coming from just so we can get assemblage of.
Do they tend to start in the low doses or are there actually actually coming from other product away, we could see patient switching and starting on the higher doses of Xtampza. Thank you.
Yes, Brandon this is Joe I'll take that one.
With the exception of when there is forced conversion from disruption from the payers the dose utilization of exams is consistent so when patients are force from a payer off of oxy cotton to expand so we'll see a slight increase to the higher doses when more through those conversion periods or those heavy periods of conversion you get back to the steady state of the market and it skews to the lower doses.
Great. Thank you very much.
Got it.
Our next question comes from Kevin Kedra of GE Research. Your line is open.
Hi, Thanks for taking the question.
Wanted to ask about the FDA, we had a change at the top.
I know it was a big priority addressing opioids under I think I'll leave at FDA.
I'm wondering what you're seeing from the sharpest 50, if there has been a change.
In the way that they're approaching opioids and whether the concept of addressing some of the older products with out.
Abuse deterrent formulations, if that something that you think.
This leadership at the FDA may be willing to address.
Yes, Kevin. So this is Joe I would say that what we're seeing is the work that Dr. Gottlieb has done when he headed the agency.
Along with the focus continuing as there has been a transition to leadership as it pertains specifically to anything as it pertains to non abuse deterrent opioids I wouldn't want to speculate on that but I think from our perspective. The focus of the agency. The work that was put into place and started under Dr. Gottlieb are all things that we are supportive of.
Participate in when we have an opportunity to comment and certainly look forward to continuing to see how it evolves from here.
All right. Thanks, and then secondly would you be able to give us some kind of view on.
What your mix is between IR and IAR for a nuisance sales would imagine that.
As that mix shifts over time, it would be useful to know since.
I always kind of it diminishing asset, whereas ERP is something that you've talked about being able to stabilize or grow.
Yes, Kevin if you refer to our 10-Q, we have that listen each quarter in the.
Mdna section of our 10-Q, we breakout New center IR Anita.
Within that so you can track it there.
Thank you.
Thanks.
There are no further questions like to turn the call back over to Joe Shipone for any closing remarks.
Thank you everyone for joining us today, our priorities for the remainder of the year our clear in remain number one taking actions to further establish and differentiate collegium pharmaceutical as the leader in responsible pain management number two to grow extensive E. R stabilized the new center franchise and leverage our existing cost structure to deliver a breakthrough year number three to strengthen existing formulary position Andrew were achieved new era Oxy code on wins for example E. R that will take effect in 2020 number four to lead with the science by generating and presenting real world data on the Collegium paying portfolio and number five to execute against our mid term growth strategy.
Before we sign off I want to take a moment to thank and recognize my colleagues. The Collegium further focus on achieving our goals ensuring that 2019 is a breakthrough year in for their unwavering dedication to our mission of becoming the leader in responsible pain management. We look forward to updating you on our progress next quarter and I want to thank you for your time and I Hope you have a great evening.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect everyone have a great day.