Q2 2019 Earnings Call
Good day and welcome to <unk>.
Delivery Sciences second quarter 2019 financial results call today's conference is being recorded.
At this time I would like to turn the conference over to Terry.
Chief Financial Officer. Please go ahead.
Thank you and good afternoon, everyone welcome to our second quarter 2019 earnings Conference call.
Leading the call today is parents, who care Chief Executive Officer, we're joined by Scott Pleasure, President and Chief Commercial Officer.
Following our prepared remarks, we will conduct a question and answer session.
Earlier today by delivery Sciences issued a press release announcing its financial results for the second quarter 2019, a copy of the release can be found on the Investor Relations page of the company's website.
Before we begin I would like to remind everyone that certain statements may be made during this call which may contain forward looking statements such forward looking statements are based upon current expectations and there can be no assurances that the results contemplated in these statements will be realized.
Actual results may differ materially from such statements due to a number of factors and risks some of which are identified in our press release and our annual quarterly and other reports filed with the FCC.
These forward looking statements are based on information available to Mediasite today August eight 2019, and the company assumes no obligation to update statements as circumstances change.
An audio recording and broadcast replay for today's conference call will also be available online in the investors section of the company's website.
With that I'd like to turn the call over to home Cook here Huh.
Thank you very much Perry.
It is my pleasure to welcome everyone to media saw its second quarter 2019 earnings call.
The second quarter wondering I agree was a very successful and important curative calling for a company.
To begin with we once again achieved record level sales performance for BELBUCA with very strong quarter over quarter and year over year growth outperforming expectations.
In providing very high confidence in the sustainability of this growth momentum for the rest of this year and into 2020.
Given the accelerated market demand for BELBUCA, we are once again, raising our 2019 net sales guidance for both you go to $90 million to $93 million from previous level of 83 to 88 million and total company net sales to $101 million to $105 million from previous level of 92 to 100 million.
The strong continued growth trajectory as a result of the tremendous effort by all beauty assign employees day in day out.
Together with the medical community, we are helping to fundamentally change the management of chronic pain.
Specifically, we are seeing more and more physicians using both you go as the first long acting opioid when shifting patients from short acting opioids in their treatment continuum.
There is evidence that suggests this is part of a border growing recognition among the medical community of buprenorphine differentiated profile and efficacy and safety with its schedule three designation.
Supporting this paradigm shift during the second quarter, we were very pleased to see the final report issued by the best practices Pain management Interagency Task force chaired by helping human services, which called for payers to provide more access and reimbursement for buprenorphine for chronic pain and encouraged primary use of buprenorphine for chronic pain management.
We have already experienced very positive reactions by both the medical community and payers because this federal guidance as witnessed by the significant number of regional insurance plan that expanded coverage for BELBUCA during the second quarter.
With this expansion more than 90% of commercially covered Americans have access to both of you get through their insurance plans and we will continue our efforts to ensure all patients have appropriate access.
This level of activity clearly signals, we are entering a new era in the management of chronic pain and the Dubuque is being viewed more and more as an important option to treat be suffering patients.
The growing support for use of buprenorphine as the first long acting opioid because of its differentiated profile will be a key driver of our company sustained growth into the future and we are well poised to fully capitalize on this unique opportunity.
Building upon our success in both UK and capitalizing on the high performing commercial team Weve built during the second quarter, we licensed and successfully integrate its improving for opioid induced constipation in for a portfolio. Some pros is an ideal tuck in acquisition given its operational strategic and complementary financial profile for our company.
I am very excited to have this clinically differentiated product with exclusivity through 2031 for disease category, so meaningful to our physician and patient customer base.
I'm very proud of our team's ability to quickly and smoothly integrate some prolific into operation during two Q and achieve record level prescription experiencing more than 40% growth year over year I'm very confident of continued growth opportunity for us and probably and believe it will become the category leader over time.
In addition, during the second quarter, we significantly strengthened our balance sheet book by restructuring our existing debt answering you record the new debt will be operational cash flow positive accretive that's excuse me operation cash flow accretive as well as having significantly improved terms and extended maturity.
Our improved financial flexibility enables continued focus on sustaining our commercial momentum and further driving long term value for the company and our shareholders.
To summarize the second quarter was marked with dramatic accomplishments by our organization and has positioned us to control our destiny in further builds upon our commercial success.
With this continued growth momentum we now the combined long term net sales for both you can some program to be between 425 and $500 million from our previous level of 325 to 400 million. Our organization is executing at an exceptional level and this will describe momentarily all of our key metrics support a potential for substantial growth going forward. Our future is indeed, very promising and I've ever growing confidence for the remainder of 2019 2020 and beyond.
With that I will turn the call over to Scott to provide more details of the operational success during the second quarter Scott.
Thank you Herm as Tom noted, we experienced a very strong second quarter.
Our commercial team continues to execute at a high level and delivering record levels of use of prescription and revenue.
Let's review our dashboard of analyzing Bellevue. This performance every metric is meeting or exceeding expectations Werent green as we categorize them.
During Q2 BELBUCA is accelerating growth resulted in our achieving an all time high at more than 80000 retail prescriptions.
We generated dug into the largest trs quarter over quarter increase to date at 14700 Trs.
Which represents more than 23% increase compared to Q1.
BELBUCA also had its largest year over year Trx increase of 44560, Trx is 425% from Q2 of 2018.
As a result, we outpaced the previous all time here excited we established during Q1 2019.
We continue to be encouraged by our strongest Acacia and believe that our key drivers of market dynamics supporting the growth of BELBUCA.
One important driver is expanding BELBUCA prescriber base.
During the quarter, we added more than 1100, new prescribers. The most added since Q2 of 2018.
These new prescribers contributed to the record of 6579 total subscribers for the quarter.
This represents an increase of 52% versus same period a year ago.
In addition to accelerating our growth by adding new BELBUCA prescribers, we gain greater traction within our staff established customer base.
Or more frequently prescribing BELBUCA for chronic pain patients. This is supported by the quarter over quarter Trx growth of 14% more and more we saw all death of our targets.
During the quarter, we greatly increase the number of new patients being prescribed BELBUCA, which is reflected in new highs for new to brand prescriptions cow and new to brand market share.
We generated more than 16000 Svrs is during the quarter, which is up from 13680 in Q1.
And 9100 from a year ago, an increase of 76% year over year.
We more than doubled BELBUCA is new to brand market share from 3.3% in Q2 of 2018% to 7.3% in the second quarter of 2019.
Importantly, more than 70% of patients that were new to BELBUCA leader switched from short acting opioid or felt vehicle was added to one.
This highlights the paradigm shift from described where we're seeing health care professionals.
Fundamentally change the way to treat chronic pain by utilizing BELBUCA.
More frequently as our first elio of choice when medically appropriate.
The primary use of BELBUCA, you've been harping prior to failing other class to opioids aligns with the recommendations from the task force with core.
These recommendations have been very helpful to HCP as they consider appropriate treatment option for chronic pain and use of buprenorphine for their patients.
As a matter of fact buprenorphine is the only long acting opioid molecule used to treat chronic pain that has exhibited year over year growth and this growth is being driven by the success of BELBUCA.
As Tom mentioned these task force recommendations have also had an impact on payers as we've seen a significant number of payers improve our coverage of BELBUCA us as the final four report was published.
We've also seen increased interest from payers and plans that may not cover BELBUCA will require patients to fail see too long acting opioids prior to having access to BELBUCA.
We are encouraged by the increase in meetings were having and the tone of these meetings.
Well, it's difficult to predict future coverage lands, we are focusing on providing improved patient assets above Luca I believe we will continue to build upon our recent success.
As we previously discussed our strategy was to gain more regional plan level wins in 2019, and we've executed very well against us.
Through our efforts several prominent regional commercial plans and help enhance BELBUCA coverage by moving it to preferred status or initiating coverage on BELBUCA. During Q2, we saw an important.
Improvement in coverage of approximately 6 million lives.
During our Q1 call we discussed the recent Sigma our commercial formulary win and I'm excited to report sales team has done an excellent job of executing growing prescriptions within the planned by 31% from Q1 to Q2.
We are excited about the progress we continue to make was up you got the impact is having on patients suffering from chronic pain. We are focused on building upon our current growth.
Building on our success and execution with BELBUCA. We have also successfully transitioned some product video side, which has gone as we have suspected.
We believe this approach provides a complimentary product BELBUCA and allows us to leverage our high performing sales force within our target audience. We are very encouraged by the reception receiving to our promotions and product.
I'm pleased to share that in Q2, some product retail prescriptions reached 15500 tonne a new quarterly high an increase over Q1 by more than 19 under tier axis or 14%.
This is the largest quarter over quarter increase the brand has experienced since Q2 of 2018.
In addition, some product grew by 4450 Trx is from Q2 of 2018 to Q2 of 2019 or 40.3%.
During the quarter, we successfully added 960, new prescribers for some product, which helped the brand into new quarterly high of 4530 prescribers.
Importantly, our current BELBUCA targets provided much of the growth that we saw for some product during the quarter.
We had a strong quarter with Bellevue can are encouraged that BELBUCA growth has continued into Q3, resulting in weekly all time trx highs in July .
Our focus remains on improving market access growing the number of patients receiving BELBUCA for the first time and expanding our prescriber base. Additionally, we are confident that our commercial expertise and execution, while the positive impact on some product sales and we look forward to updating everyone on our progress on our next call.
With that I will turn the call over to Jerry to cover the financials in more detail Terry.
Thank you Scott.
Second quarter financial results exceeded the first quarter of 2019 and prior year quarterly results total net revenue for the second quarter ended June Thirtyth 2019 was $29.7 million, an increase of 50% compared to $19.8 million in the first quarter of 2019, and an increase of 144% compared to $12.2 million in the second quarter of 2018.
The total net revenue growth was driven by W. ago, which accounted for 86% of total sales and the addition of some product to our commercial portfolio.
So if you can net sales in the second quarter were $24.1 million, an increase of 29% compared to $18.7 million in the first quarter of 2019.
And an increase of 147% compared to $9.7 million in the second quarter of 2018.
The growth in the second quarter versus prior quarter was primarily driven by the significant script growth, which Scott shared and the impact of the mid March price increase in addition to an approximate 1.3 million dollar impact from wholesalers, bringing inventory levels up to more appropriate levels of two to three weeks to support our continuing growth in demand.
These increases were partially offset by an increase in gross to net deductions.
Some product net revenue in the second quarter ended June Thirtyth, 2019 was $3.2 million, which accounted for 11% of total sales as a reminder, this is the initial quarter of our commercialization of some quick following the acquisition of the product on April 4th.
Universal net sales in the quarter were $821000 a reduction of $235000 from the first quarter of 2019, and a reduction of $199000 compared to the second quarter of 2018, reflecting market trends for that product and our prioritization of BELBUCA along with the recent acquisition of some pretty quick.
Royalty revenues for ex us sales of pain, killing break hill totaled $1.6 million, including $160000 for net milestone payments received.
Gross to net deductions in the second quarter was 51.5% for BELBUCA compared to gross to net deductions of 48.7% in the first quarter of 2019.
Reflecting higher wholesaler fees, increasing utilization impacting Medicare part D costs and the impact of the price increase taken in mid March gross to net deductions in the second quarter were 38.9% for some probably reflecting the terms of the distribution agreement with Sanofi, which was effective through June thirtyth.
Total gross margin for the quarter was 83.4% compared to 62.5% in the second quarter of 2018 and 79.5% in the first quarter of 2019.
The increased gross margin reflects improvement in BELBUCA manufacturing costs, the beneficial gross to net profile in the second quarter related to this approach distribution agreement terms and the royalty revenues and milestone income previously mentioned.
Total operating expenses in the quarter ended June Thirtyth, 2019 were $22 million compared to $17 million in the first quarter of 2019 and $14.9 million in the second quarter of 2018.
The increase compared to the first quarter was driven by this and pro acquisition impact as well as the timing of certain spend as certain KBW can marketing initiatives began to ramp up in the second quarter.
The year over year increase is primarily driven by the impact of the expanded salesforce and market access teams as well as the medical affairs and MSL team together with this approach spend in the quarter.
The GAAP net loss for the quarter was $11.1 million or 13 cents per share compared to the net loss of $3.8 million or five cents per share for the first quarter of 2019, and a net loss of $9.8 million or 16 cents per share in the second quarter of 2018.
The increase in net loss is driven by the onetime debt refinancing impact of $11.9 million.
non-GAAP net income for the quarter, which excludes the impact of the debt refinancing stock based comp.
Amortization of intangible assets and warrant discounts was $4.4 million.
EBITDA for the quarter was $4.8 million compared to $103000 for the first quarter of 2019 and negative $5.6 million for the second quarter of 2018.
We believe this is an encouraging metric that highlights our commercial success driven by higher revenues along with operational effectiveness.
As previously shared under the terms of our agreement relating to the acquisition of some froehlich media side paid shionogi incorporated initial upfront payment of $20 million at closing and will pay an additional $10 million in October of 2019.
In addition, shionogi is eligible to receive quarterly tiered royalty payments based on net sales of some public.
As Tom mentioned, we've taken significant steps to strengthen our balance sheet and provide greater flexibility as we execute our commercial strategy.
In April we received approximately $47.6 million in net proceeds through an underwritten equity offering this offering provides an opportunity for new and existing investors to participate in the momentum media side has been experiencing.
Also during the second quarter, we successfully refinanced our debt to a lower cost debt facility that improved our cash flow by lowering our annual interest cost extends our debt maturity and lowers our overall cost of capital, providing even more flexibility to drive our continued success.
The new 60 million dollar term loan along with available cash on hand was used to repay and retire the company's existing term loan, which had an outstanding balance of $61.8 million.
In doing so we are now benefiting from expected interest cost savings of approximately $1.5 million annually interest only payments for the first 36 months as well as an extension in our debt maturity from 2022 to 2025.
Operating cash flow in the second quarter was negative $1.5 million, an improvement of $1.4 million compared to first quarter 2019, operating cash usage of $2.9 million.
At June Thirtyth, 2019 bps, I had cash and cash equivalents of approximately $57.2 million.
This compares to cash and cash equivalents of approximately $41.3 million at March 31, 2019.
Our overall positive cash flow in the quarter of $15.9 million includes the impact of the April equity raise of $47.6 million net.
Offset by the first upfront payments for this in product license and related transaction costs of $20.7 million.
The onetime cash impact of the debt refinancing of $11.6 million.
Operating cash usage of $1.5 million and other cash income of $600000.
We continue to anticipate being operating cash flow positive by the fourth quarter of 2019, following higher cash utilization expected in the third quarter, primarily associated with a number of key annually paid expenditures.
In terms of our 2019 topline expectations based on higher than forecasted revenue during the second quarter and our continued strong momentum we are raising our 2019 net revenue guidance for BELBUCA to $90 million to $93 million.
From $83 million to $88 million previously and total company net revenue to $101 million to $105 million from 92 to 100 million $100 million.
Similar to last year, we anticipate that the fourth quarter revenue will be higher than third quarter.
Total net revenue expectations for 2019 includes $7 million to $9 million at forecasted some product sales, which is in line with our previous expectations.
Looking forward, we expect continued strong growth momentum with the combined long term potential of BELBUCA and some growth to be in the range of $425 million to $500 million.
At this point I'd like to turn the call back over to harm for some concluding remarks before we open the call for Q in a hurry.
Thanks Terry.
I want to reiterate that in addition to our commercial success over the past several quarters and the very strong growth trajectory. We've demonstrated thus far we believe this is only the beginning.
We have established a sales infrastructure and a differentiated product portfolio that we believe physicians BD aside to capitalize on a substantial long term revenue opportunity.
By focusing on continued commercial execution, we expect to drive significant value over the near term and during the years to come now we would like to take your questions operator.
Thank you.
Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star one on your telephone keypad.
Please ensure the mute function on your telephone is switched off to allow your signal to reach our equipment again. Please press star one to ask a question.
Let's take a brief pause from them all participants the opportunity to signal for questions.
We will now take our first question from.
Live mass of H.C. Wainwright and company. Please go ahead.
All right. Thanks, I never get in first I appreciate it and congrats on a pretty big quarter.
Couple of questions. Obviously, you made a big increase to your long term peak combined potential about 100 million Bucks and I'm wondering first of all does that assume the same peak potential of 75 to 100 I think for some projects.
And also what does that what are those based on is that based on detailed market research.
What inputs are going into that or are you just sort of projecting the trajectory long term are you, making specific assumptions about anything happening to the long acting see to opioid market, that's more dramatic than that current.
Erosion, I guess and also what pricing maybe goes into the assumptions and I have a couple of follow up.
Sure. Thank you so much aren't always greatly appreciate your commentary an excellent question. So.
Yes, the answer to your question with regard to the contribution that's in process will make to that our view of this approach is consistent with what we've expressed.
Before and again, we're very pleased by early days and it's gone through doing a tremendous job of including on our portfolio and already seeing the impact with the customers that we're calling on.
And our continued accelerated belief in the long term potential of BELBUCA is really driven by a number of factors. One is the success that we're seeing in the marketplace and the accelerated script that we're experiencing nataline during the second quarter, but as Scott pointed out we're off to a strong sell in third quarter as well.
Also as we referenced.
The painting Task Force report I think is a significant milestone in.
Members of the policy community recognizing the differentiation of buprenorphine.
And the contribution of buprenorphine can can make to the treatment of patients suffering from chronic pain, calling for more coverage and more reimbursement and encouraging the primary use of the product.
In the treatment of chronic pain.
And then also the.
Momentum that we're gaining with the payers and the continued ability to actually gain access to the product.
And we anticipate that over the next several years, we will continue to see more and more momentum and success in getting better coverage for patients. So I think those are some examples gone and I'll ask if you have anything else to contribute to that.
No what I would add is obviously or we would have very predictable trend lines in place and when we look at look across many different metrics prescribers at different styles payers payer mix.
And see the growth trends, we have in place we remain very confident we can maintain the current growth rates, we're seeing them and build upon those going forward.
Okay and.
Since you have reiterated sort of your long term optimism in some profit.
I see clearly a differentiated and better label for that product versus the competitors, but.
It hasn't gone got lots and lots of me that the scripts to sort of rolled over a little bit. Most recently after a strong Q2 and I'm just wondering what dynamics are you seeing out there competitively what will it take I'm, assuming there is a real competitive rebating pressure in the market you know what do you see and what will it take to really start to gain significant market share.
No I appreciate that question Oren and.
In my experience is very typical when you have a transition for one of these and other other could be a little bit of flattening of prescriptions.
Where I can promise you, we're working very hard in our expertise and execution that we've had with BELBUCA very similar principles. We do feel that we have an opportunity to improve upon market access.
Hurdle rates are still awarded while the market access has improved with the product early in the year.
There's still some work to be done there and if anything our team has proven the ability to to gain extra access at reasonable rates.
So we'll continue to work hard to do that and I think that will be that will be important for us going forward, we need to improve approval rates and things like that in this space.
And I would just add to discuss correct comment that we have exclusivity to 2031. So we're just getting started and we have a long journey ahead of us and as you pointed out are and we're confident that this product has the potential to be the best in class.
That's the kind of feedback from this activity that we're hearing from our customers and as Scott said I think what we've seen the marketplaces is very much what we expected and take on a product and bringing in some new sales force and we remain very optimistic over the long term potential of yesterday.
Alright, thanks, so much congrats again.
Thank you our baseline.
Our next question comes from Gregg Gilbert of Suntrust. Please go ahead.
Thank you, it's Greg Fraser on for Gregg Gilbert.
Great Congrats on the good quarter.
In terms of the expanded insurance coverage that you had in the quarter. How important was that interagency task for us to securing that coverage clearly had a lot of lives that you were also winning average prior to that report.
Obviously, you're very positive on airport, just like to hear a little bit more color on that.
Yes, no I appreciate that question.
So we did have some really nice wins this quarter.
Including at adding Bluecross Blueshield of Tennessee, Alabama, and the independence Blue Cross Blue Shield, Magellan health delegates flux Hell and I would say that we had we had some really nice momentum with payers anyways and we're already engaged in great discussions but.
It truly has added to that momentum and definitely an interest at the payer level.
So we're having some really productive meetings right now.
Around some of that and as you can imagine we will use those.
Those recommendations daily with our payers.
Sure.
It's probably early I assume in terms of discussions for 2020, but but do you think that the task Force report, we'll give you more leverage with the national payers such that.
Get better coverage in 2020 that you have for 2019.
Yeah I can promise you that's what we're working to do that is the goal is to always tried to provide as much.
Affordable access.
Clear access to to this product for patients that deserve the right to get to.
Yeah, I would just add to what Scott just commented on to your question and the.
Final reports, specifically called on CMS as one of the payer entity to provide more coverage will be printer food for chronic pain.
And Thats an area that we had more challenges than the commercial sector and we're certainly optimistic that.
To your point that this could be a a lever that could enable us over time to perhaps improve and increase our coverage in the medical space. So it gives us an opportunity to continue to have those discussions with CMS. The entities that are covered Medicare lives and we're optimistic that over time, we'll be able to make more traction in that particular market segment and I would add I think it's really important to note is when we do.
Our able to obtain a win in an open up access and usually the key thing we're trying to do is removed through of long acting.
And allow patients and physicians to make a choice to move.
From a short acting that we do the first long acting the choices.
Basically you can look at any any when we have across the board and.
As soon as we open up those lives and we're able to share our messes with physicians and this was one of those plans, we see a very predictable growth trend off of that while we don't see that.
A jump in business and then a flattening it's a continual growth growth curve going forward.
Great. Thanks for the color consistent.
Yes. Thank you for your question.
Our next question comes from Brandon Folkes of Cantor Fitzgerald.
Hi, Thanks for taking my questions and congratulations on a very good quarter and I wanted to just go back to the final Task Force report.
Can you provide any color whether you felt this benefit yet at keep describing level and perhaps yeah.
Obviously.
We reported Q2 now, but we have scripts post the quarter any color and from the feedback youre receiving therapy prescribing level post that report would be great. Thank you.
Right and I. Appreciate the question is the old ones than the field other members of our senior leadership Haddon.
Our reps are sharing that information to the reps.
How have the ability to to provide them with that information has been received well you can imagine it reinforces what current prescribers are doing and many of them and obviously seeing the value of BELBUCA. So and we do think its opening and opening items that may be gaining the attention of those that haven't written.
And we do know that offices are also using it as they look to get prior authorizations through.
Four out with the payer level II as well so we do see success there as well.
I think it's early still to to really quantify that.
Just being out there and quantitatively feedback it feels like.
Feels like it is as being helpful for sure.
Okay, Thanks and quick.
So is it fair to say that that will remain a tailwind when for some time.
Oh, absolutely Lisa.
Absolutely Brendan you're spot on.
As Scott pointed out we're still very much in the early days and I think it's it just adds to the conversation that adds to the confidence that adds to the comfort.
As Scott pointed out I think for those that have already.
And started to more frequently utilized BELBUCA it reinforces their own experiences and we don't believe especially the specific encouragement of utilizing it.
As for primary uses in the management of chronic pain not just after failure of other opioids.
And as Scott pointed out as well for those that are still in the process of gaining more understanding of the molecule.
And Ics and gaining more individual personal experience.
I think you could only services as a benefit an accelerant.
Of their journey timing.
But in of itself is a complement all the great work that our teams have already been doing.
And all of the additional increase in for medical information that our medical teams.
Our developing and we will be providing you know through the the medical forms medical Congresses. So there's.
Which is a growing understanding and awareness of the important role that buprenorphine can play in the conversation of how to revolve the optimal management of patients for the suffering from this very difficult challenging disease, and we're seeing very positive results in the marketplace. Accordingly.
Great. Thank you very much.
Thank you for your questions Brendan.
Our next question comes from Scott Henry of Roth Capital. Please go ahead.
Thank you and good afternoon.
I guess just first following on to that.
Good question with regards to the changes in kind of best practices and guidelines.
Which all seem to be geared towards moving BELBUCA earlier into the treatment algorithm I do you think there's any possibility to start to look at the label and some of the boilerplate language in the limitations of use.
Section of the label I speak about using alternative treatment options.
Prior to trying BELBUCA do you think you know over the next year or so there may be opportunities to amend the label.
Sure.
Got it. Thank you very much for your question.
As as you well know perhaps that this was an inter agency task force there were many representatives from deferred parts of the federal government, including the FDA.
So we are certainly encouraged.
By the fact that there were many voices and many contributors.
Two what was ultimately included for buprenorphine in the Task Force report.
And I think that that does certainly provide perhaps a pathway to continue the dialogue and discussion with CMS for discussions on coverage with the FDA to understand if there are opportunities to.
To revisit the label.
And includes some of the particular recommendations that were provided by the transport.
And ultimately, perhaps as well with the CDC.
As they perhaps consider the future evolutions of their particular opioid use guideline. So no I think it was a stepping stone towards a continuation of the dialogue.
And we certainly look forward to participating in that process and and are optimistic of perhaps what could happen over time.
Okay. Thank you for the color there a couple of model questions first with BELBUCA. The revenue revenue per script I was a little higher than perhaps I expect it into Q.
The question is was there anything unusual that happened in twoq or is it could impact revenue per script or or or is it just kinda increasing with the price increases.
Yes, so so.
Scott This is Terry so two things I mean, we did have as you know have a price increase in the middle of March. So there will be some impact from that and then secondly, the.
If you were to look at revenue per year per volume shipped to the wholesalers right and I mentioned the $1.3 million that we saw you would probably come up with a slightly different revenue per script.
You know if you like.
Okay. So it sounds like it's just normal variance.
Yes, yes.
And then the second question.
The cost of goods sold.
Seems seems a little lower in the quarter were there any dynamics with the same product launch that would have.
Depressed that or is this a good number going forward I know you've been working on cutting costs.
Fair.
Yeah, so so actually BELBUCA.
Gross margin improved a little bit in the quarter, which is anticipated to the <unk>. The supply chain team has been working on different manufacturing improvements since last year and so there was a minor improvement from that maybe one percentage point, but as I mentioned previously some pro if we didnt have us distribution agreement in place for the just for the first quarter of the arrangement through June Thirtyth and that had basically an agreed upon gross to net profile.
Which was pretty favorable and fixed Cogs and no royalty payment associated with that first quarter. So I would not anticipate that continuing I think you could be thinking about the mid eighties.
For some product, which is as we say the Dubuque is in the mid to upper Eightys and I would see soon probably in the mid Eightys going forward and I think that's one of the reasons, we really liked this acquisition as well it really fit in very nicely in our overall portfolio and.
Overall, we're still generating the same kind of gross profit for the business.
Okay, great. Thank you for the color and thank you for taking the questions.
Thank you Scott Thanks.
Our next question comes from certain long of Janney. Please go ahead.
Hi, Thanks for taking my questions.
On BELBUCA any update on the respiratory depression study and then.
On some proag after I guess, it's been about a quarter since some probably been in your portfolio. So can you provide any insights on physician receptivity any in or out you know interactions between.
Physicians and sales reps. Thanks.
Hi, yes. Thank you so much for your questions.
The the respiratory study has.
Been initiated were recruiting patients.
So far everything is going according to plan and we look forward to sharing results of that study in the early half of next year.
And moving on from that I'll ask Bob will talk a little bit about.
The receptivity that we're seeing in the marketplace in components and physicians.
Hi, I'm sorry.
We've been actually.
Very pleased with the resumption matter of fact, when you look at the growth we have this quarter the majority of it.
Put 7% came came from our targets.
They seem to really value the profile of the drug.
The convenience of taking it with or without food with a laxative and also are valuing the data the clinical data that comes along with it so as a reminder, the AJ.
So I guess neurology society actually.
Throw guidelines and reviewed the different products in their their data.
And some growth in fact has the strongest ratings in that section. So so thats why were very well and we're confident as we go forward, we'll again, we'll be able to to build some some growth going forward. So appreciate the question.
Maybe Scott if I may I'll lead to.
To some of your commentary and maybe you and I were talking little bit about this earlier that the launches as changed a lot in our industry and when you when I started in getting access and coverage is such an imperative element of the ability to actually have physician.
During the comfort in the fluidity of writing scripts.
And suppose is still very much in the early stages of as long as I mean, we're really only in to truly of launching.
And it has a good start for coverage.
But but I think thats an area evolve over time, we're going to work very hard just like we've done with both yuka.
To improve the coverage and I think that will be an important lever moving forward to see the kind of growth that I think we all mobile com given the profile of the product.
Yes.
I look back at where BELBUCA was in early 2017, it probably was almost very similar to what we see right now some prolific where the approval rates and the lives covered and whatnot and again, we have an opportunity to I think first and foremost improve asset and approve the good the approval rate improved and I think once we do that we'll we'll see an up even faster uptake in the business, but still confident we can grow going forward.
And it sounds like our teams are having some very encouraging discussions so far we feel really good about the ability.
Early 2020 to be able to enhance our coverage.
Oh great.
Congrats on the quarter.
Thank you Esther Thank you for your questions.
Our next question comes from Tim Lugo of William Blair. Please go ahead.
Oh, thanks for the questions and congratulations on the strong quarter.
On the contracting side it sounds like you still have some room for additional wins.
But is there a tipping point around contracting where you decided to stop offering. The terms you previously been for analysts given the task Force report given the overall market trends and eventually patient and physician acceptance and preference for the product.
Tim It's Scott So I appreciate the question so theres a lot of ways, we look at it.
So for example.
Humana is Medicare plan that we were able to improve access there to a preferred status and we're sitting at well over 4% market share. There are 4.3, when the lesser overall were 2.2 0.6 for the quarter 2.7, and when we look at other Medicare lives, while we're still we're getting.
The product approved over about 80% approval rate our market share is lagging is 1.41, 0.5% and if we can add more of those going forward. We would hope that we would see an acceleration.
Similar trends that we see when we have a win.
Again, the ones, where we've had wins, we see again very consistent.
Gross lines are very linear.
And.
I think that.
In the coming quarters and years, we'll be able to continue to add on Medicare will be a focus we saw some regional plans that we really would like to crack and then there's still some larger and midsize PBM that we have some work to do.
Yes, I think Thats, Walter Scott and I would add that even though we have.
Very good commercial coverage at this point.
With about just over 50% having preferred coverage is still an opportunity to enhance the coverage that commercialized hall and increase the number of wells that have deferred coverage.
And Tim I think your point is well taken and we will be very thoughtful.
And ensure that we're not as buying are weighing taxes, even on Medicare and as you correctly point out.
It's clear that we have a differentiated asset.
And then and I think we try to focus more on clinical conversation and the importance of ensuring that even Medicare patients have appropriate access to a product like BELBUCA, especially given the kind of language that encouragement that comes out of an important events like the interesting test for us. So I think those those discussions are ongoing and again as Scott pointed out we're very optimistic.
Over the next period of time will have the ability to to to have those meaningful clinical discussions both on the commercial and Medicare side and continue to improve coverage for patients.
Tim I would add that.
The Pvhs guideline.
Recommendations have have really been a stimulus for meetings and some plans that are very typically very difficult to get in front of have requested even with those that we have coverage.
Have immediately requested us to provide updates on clinical so it's been a nice catalyst.
For us.
Understood. That's that's great to hear and maybe just a follow up question Terry in your comments, you mentioned Q4 cash flow positivity.
After some kind of seasonal issues in Q3.
You don't have to give obviously 2020 guidance today, but how should we think about breaking into cash flow positive territory is this something that.
Structurally the company will be set up for.
Going forward once you break into that cash flow positivity.
Or is this something which is varies quarter to quarter basis, the operating trends seasonality gross.
All of that.
Yeah, So so great questions Tim.
And I think you know we've talked a lot and you've heard the team talk about obviously, the you've seen the growth trajectory, but also we've given you an indication of where we think the business is heading in the longer term as well and so as you see the growth continue to happen.
You can imagine we have the infrastructure, we believe in place to support that growth and and at.
At that point there is no reason that basically the the gross profit isn't being fully leverage you know and the margin being able to move forward and being cash flow positive going forward I don't anticipate I mean, if you think about the growth rate we're seeing.
And our infrastructure that's in place you can without giving 2020 guidance as you said.
I think you can expect that a pretty good trajectory going forward.
That's great to hear thanks for the questions.
Hi, Thank you.
Our next question comes from Matt Kaplan of.
Ladenburg Thalmann. Please go ahead.
Hi, guys. Thanks for taking the questions and congrats on the quarter.
Just wanted to dig in a little bit more in terms of strategies or initiatives programs that you have in place to drive growth beyond gaining access and our expanding coverage in terms of you mentioned matching clinical and clinical questions.
What programs I guess or strategies, you have continuing the momentum given the best in class characteristics of BELBUCA.
Yeah no. Thanks, so much matter really appreciate the question.
You know I may recall that we put in place are four point acceleration plan, a few quarters ago for BELBUCA.
And those four points, where the expansion of the sales force expansion of access the creation of the medical team and developing more medical information and medical communication and awareness of buprenorphine BELBUCA, specifically in the utilization for chronic pain and then also finally engaging with patients and bringing back the voice for patients that are suffering from chronic pain, ensuring that they are sufficiently armed to ask the right questions and engage with their health care provider to understand their options and received the optimal treatment for themselves and we still feel that those are the right four levers to focus on and that is where we're making our investments both in 2019 and they will continue to do so moving forward to 2020 and beyond as Scott pointed out we're seeing and I'll ask them in the second talk little bit more about the success and the productivity of the regaining from new sales force expansion.
There are no more color behind that not as you point out we've seen tremendous.
Accelerated recognition of the importance of buprenorphine by the managed care entities beyond more work to do there as we were just discussing but again, we believe that that will continue to head in a very positive trajectory over the next period of time.
You know in the past we've talked a lot about the medical investments that we're making including starting a respiratory depression study, which we think given the opioid epidemic is an imperative element of clinical consideration and having more definitive understanding information about bill if you could specifically and how to.
Recognized within Ghost assurance exactly what that could mean in the decision making process for patients I think will be very important data comes out early next year as well as having a lot more presence.
And a lot other information and publications and abstracts that are going to be provided through medical congresses, and other medical forms and journals et cetera, and then finally, we have started to think about and very slowly approach appropriately how to engage the patients.
Recognizing again, obviously the this is.
An area where patients are suffering tremendously.
From this disease and there is a lot of noise and other complexity on getting the right.
Information to engage in a proper discussion with the healthcare provider.
And we're exploring ways that we could potentially engage more profoundly employing the responsible role of providing patients with that voice back in this process. So.
For sure we are not just focused or dependent on one of those levers.
But in fact, what we're seeing a lot of success already from those different levers and anticipate that they will be the ones that continue this very strong momentum into 2020 and for the years to come.
Yes, Matt I would go up yes.
Probably not.
One of those points I'd really like to build upon little derivatives is really the encouraging.
Impact Weve seen pro expansion and it's really it really what we thought it would would occur but.
As I look at we added 28 territories really October November two different training classes as we track the prescriptions in those.
In those territories.
Started a lower baseline, but about a month of May there was 80 script per month lift.
On average per territory, so basically about a month of may and incremental business.
Pretty much paid for those for us.
And my experience that that's pretty.
Effective and getting people up quickly up to speed.
And having an impact we also saw.
On an average of 14 prescriber per month increased per rep as well.
And I'll add to that.
We did that and they are usually subsets, we pulled off of other territories and there may be areas, we won't get into as well and when you look at the territories that weren't expanded that that where the existing territories. There are trends if anything accelerated slightly during that period of time or Samsung. So we're highly encouraged that it really reinforces the effectiveness of the plan, we put in place and execution by the sales force does an excellent job.
Great. That's very helpful. And then one last question in terms of given the new guidelines and do you think you think you'd be able to leverage the new guidelines to help you in terms of negotiating with four access then and what payers to have a lower discount in terms of getting on getting coverage.
Yes, thanks, very much Matt I appreciate the question.
The the inter agency pass for is a set of recommendations.
Now this is a very comprehensive report about best practices in pain management, and and winning the pharmacology, we're in a really calling up buprenorphine in Scott.
Maybe you want to.
And again, just the amount of energy and success in.
We really very quickly already had a lot of payers. It seems important now that actually most of all we did yes. We so we had an outreach to every one of our customers to begin with but obviously softer losses since that was published them and what we will do is.
First off uses to to gain access into these plans to have reopened conversations maybe where coverage isn't where we want to be and.
It'll probably depend on plan by plan that whether we're able to actually leverage those.
Remember they are guidelines.
Decided requirement.
These plants so.
We will talk to them about the recommendations, obviously and work to what we're going to be very thoughtful about what we do on the rebate side, we've got to make sure that it's profitable asks us not just not just growing business and the cost of given up gross margin.
Great. Thanks, we added detail guys.
Thank you for your questions.
Ladies and gentlemen, there are no further questions at this time.
Therefore, this concludes today's conference call. Thank you for your participation you may now disconnect.