Collegium Pharmaceutical Q3 2023 Earnings Call Transcript

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Provided by Quartr
November 7, 2023

There are 9 speakers on the call.

Operator

Greetings and welcome to Collegium Pharmaceuticals Third Quarter 2023 Earnings Conference Call. 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.

Speaker 1

Will be available at the Investor Relations' 3rd Quarter 2023 Earnings Conference Call. I'm joined today by Joe Ciaffoni, our Chief Executive Officer are Colleen Tupper, our Chief Financial Officer and Scott Dreyer, our Chief Commercial Officer. Before we begin today's call, we want to remind participants that none of the information presented today is intended to be promotional and that any forward looking statements made today are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. You are cautioned that such forward looking statements involve risks and uncertainties, participating in the process of executing on our financial results, including and 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 Securities and Exchange Commission.

Speaker 1

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 collegiumpharma.com. I will now turn the call over to our CEO, Joe Ciaffoni.

Speaker 2

Thank you, Chris. Good afternoon and thank you everyone for joining the call. Today, we will discuss our progress on delivering a banner year, including our financial performance in the Q3, provide an update on the payer landscape for Xtampza ER and BELBUCA discuss the Nucynta regulatory extension. We will also share our expectations for the remainder of the year and our outlook for 2024 and beyond. As we build a leading diversified specialty pharmaceutical company committed to improving the lives of people living with serious medical conditions, will be in the range of 2nd annual day of service.

Speaker 2

During the Q3, we held

Speaker 3

our 2nd annual day of service.

Speaker 2

At our corporate headquarters, we partnered with Science from Scientists to build STEM kits for some of the 12,500 students While our colleagues across the country volunteered at organizations that make a positive difference in their local communities. I'd like to recognize the Collegium team for their commitment to healthier people, stronger communities. Future. We are confident that we will deliver on our financial commitments and make meaningful progress on our capital deployment priorities. Key accomplishments in the Q3 of 2023 include: we delivered solid financial results, including record quarterly BELBUCA revenue are in record quarterly adjusted EBITDA.

Speaker 2

In the Q3 of this year, we grew revenue 8% and grew adjusted EBITDA at 2.5 times that rate at 19% compared to the Q3 of 2022. We completed the renegotiation of contracts company's 2023 Earnings Conference Call. At this time, all participants are participating in the company's 2023 Earnings Conference Call. Xtampza ER will maintain its current formulary position participants are participating in the company's financial statements and accounts representing 57% of the opportunity at an overall lower rebate level. In plans where xtampza ER will move to non formulary.

Speaker 2

It will be at parity with OxyContin. We expect these successful renegotiations to drive will be in the range of 10% to 20.24 percent. We successfully renegotiated a major Medicare Part D contract for BELBUCA, representing 12% of total prescriptions in which we maintained access and materially rolled back rebates. Be participating in the 2020. We also won a new Medicare Part D plan representing approximately 1,000,000 covered lives.

Speaker 2

These accomplishments will serve as a catalyst for BELBUCA revenue growth and prescription growth in 2024. We participated in Pain Week, the largest pain conference in the United States, which included 10 poster presentations highlighting clinical and real world data on our differentiated pain portfolio. Continue to execute on our strategy, which included paying down $45,800,000 in debt and executing an accelerated share repurchase program, which returned $50,000,000 in capital to shareholders at its conclusion on October 31, 2023. We received new patient population exclusivity for Nucynta, extending the period of U. S.

Speaker 2

Exclusivity from June 27, in the range of 20 25 to July 3, 2026. With Nucynta representing 56% of Nucynta franchise revenue year to date, This positive event materially increases the value of the Nucynta franchise and improves our outlook for the business in 20252026. We plan to submit a pediatric extension in December that would potentially extend exclusivity of the entire franchise take an additional 6 months. We expect a decision in the second half of twenty twenty four. And our Board authorizes will enter into a new $25,000,000 accelerated share repurchase program, further reinforcing our commitment to particularly return capital to our shareholders.

Speaker 2

We are executing our 2 pronged strategy of maximizing the participants are in the range of $1,000,000 in deploying capital to create value for our shareholders. In the range of $1,000,000 in the Q3. We expect to deliver a banner year. Participating in the 2020. We expect to grow revenue greater than 20% year over year and adjusted EBITDA at 1.5 times that rate.

Speaker 2

Encouraged by the company's continued growth in 2024. We also expect BELBUCA prescription growth. The financial strength of the company enables us to execute on our capital deployment strategy in a focused and disciplined manner. Participating in the company's prepared remarks. We are actively engaged on multiple fronts and continue to participants will pursue differentiated commercial stage assets with peak sales potential of over $150,000,000 and exclusivity into the 2030s.

Speaker 2

Participated through our completed $50,000,000 accelerated share repurchase program and now our additional $25,000,000 accelerated share repurchase participants are undervalued, and we will continue to leverage our share repurchase program to return capital to our shareholders. Participating in the Q2 earnings call in August, our outlook for the business in 20252026 has improved. This is driven by the new patient population exclusivity for Nucynta that we received, which extends U. S. Exclusivity be participating in the call by 12 months from June 27, 2025 to July 3, 2026.

Speaker 2

With Nucynta representing 50 participating in the Q1 of 2019. This represents a significant positive event that was not factored into our base case. We are pursuing and we are optimistic that we will achieve a pediatric extension for Nucynta and Nucynta ER. If successful, this will extend the exclusivity for Nucynta ER to December 2025 and Nucynta to January 2027, further strengthening our outlook. It is important to highlight that the 14% royalty we paid to Grunenthal on Nucynta franchise sales are participating in the 2020 and 2020 5.

Speaker 2

We also expect the Medicare Part D redesign in 2025 call as part of the Inflation Reduction Act to have a positive impact on revenue, Xtampza ER in particular. Participating in the future. 2020 participated in the portfolio and deploying capital to create value for our shareholders. For the remainder of the year, are focused on achieving our financial objectives and preparing for success in 2024. I will now hand the call over to Colleen to discuss the financials.

Speaker 4

Thanks, Joe. Good afternoon, everyone. We are confident we will achieve our financial objectives for 2023. Q3, we grew revenue 8% year over year, while adjusted EBITDA grew at 2.5 times that rate. As expected, we sequentially reduced operating expenses and generated positive operating cash flows, while paying down $45,800,000 in debt are participating in executing an accelerated share repurchase program, which returned $50,000,000 in capital to shareholders at its completion on October 31.

Speaker 4

Financial highlights for the Q3 include net product revenues were $136,700,000 in the 3rd quarter, up 8% year over year. As expected, revenue in the 3rd quarter reflects higher coverage GAAP expense, also known as the donut hole in Medicare coverage. As is typical, we expect revenue in the 4th quarter to be sequentially higher than the 3rd quarter. BELBUCA net revenue was a record 45 $400,000 up 17% year over year. Xtampza ER revenue was $39,800,000 up 2% year over year and Xtampza ER gross to net was 64.6% in the 3rd quarter.

Speaker 4

The prior year comparator for Xtampza ER is challenging given we had a favorable returns adjustment of approximately $8,100,000 in the Q3 2022. We expect full year Xtampza ER gross to net to be between 60% to 62% in 2023, 100 basis points lower than our previous range. Nucynta franchise net revenue was 47,500,000 7% year over year. GAAP operating expenses were $35,300,000 down 8% year over year and adjusted operating expenses were $28,300,000 down 13% year over year. Net income for the Q3 was $20,600,000 compared to $500,000 in the prior year period.

Speaker 4

Non GAAP adjusted EBITDA was $89,400,000 up 19% year over year. In the range of $0.61 basic and $0.53 diluted in the 3rd quarter compared to GAAP earning per share of $0.01 basic and diluted in the prior year period. Non GAAP adjusted earnings per share was $1.34 in the 3rd quarter, up 22% year over year. Please see our press release issued earlier today for a reconciliation of GAAP to non GAAP results. As of September 30, 2023, we had $304,600,000 in cash, in the range of $1,000,000 in cash equivalents and marketable securities.

Speaker 4

During the Q3, we paid down $45,800,000 in debt related to our term notes. We ended the Q3 at 1.2x net debt to adjusted EBITDA and expect to end the year at approximately 1x. Moving to our 2023 financial guidance. We are on track to deliver on all our financial commitments. We are tightening the guidance ranges across all metrics.

Speaker 4

For 2023, we expect net product revenues in the range of 5.65 in the range of $570,000,000 We expect adjusted operating expenses in the range of $125,000,000 to $130,000,000 and adjusted EBITDA in the range of $360,000,000 to $365,000,000 We are on track to achieve our 2023 financial guidance as well as deliver on our commitment to a strong second half of twenty twenty three. On our Q2 earnings call in August, we stated we would increase revenue and decrease expenses in the second half of the year as compared to the first. Will be available to provide 2024 financial guidance in early January, which will reflect continued top and bottom line growth. Ready to begin

Speaker 2

the Q1 of 2019. We remain focused

Speaker 4

on creating long term value for our shareholders through capital deployment strategy. Business development remains our top priority and we are committed to taking a disciplined approach while focusing near term on rapidly paying down debt utilizing our share repurchase program to create value for our shareholders. We are locked into rapidly deleveraging the balance sheet, paying down over $160,000,000 of debt in 2023, which

Speaker 5

would put

Speaker 4

us at approximately one time net debt to adjusted EBITDA at year end. In the range of $1,000,000 Our ability to delever quickly is a testament to our strong cash generation. We are committed to opportunistically returning capital to shareholders and have a strong track record of doing so. Since 2021, we've returned $112,000,000 of capital to our shareholders at an average share price of 20.7 $2 per share inclusive of a $25,000,000 accelerated share repurchase program in 2021 and the $50,000,000 accelerated share repurchase program that closed at the end of October. As part of this 50 in the 1st 1,000,000 accelerated share repurchase program, we bought back nearly 2,200,000 shares at an average share price of $23.09 Further reinforcing our commitment to deliver value to our shareholders through effective capital deployment, today we announced

Speaker 2

participating in the

Speaker 4

press release. As part of our $100,000,000 share repurchase program, our Board has authorized us to enter into a new $25,000,000 accelerated share repurchase program. We believe that our stock continues to be significantly undervalued and we view our share repurchase program as productive use of our capital to generate high returns for our shareholders. I will now turn it over to Scott.

Speaker 5

Thanks, Colleen. At Collegium, we're proud to be the leader in responsible pain management. BELBUCA, Xtampza participants are in the range of 50% share of the branded ER market. In recent market research, 70% of HCPs indicated that they intend to prescribe more BELBUCA and Xtampza ER, 30% intend to maintain their prescribing and none intend to decrease their prescribing. In the same research, 80% rated the quality of their interactions with Collegium sales professionals highly.

Speaker 5

Our pain portfolio is highly differentiated and our commercial organization is engaged and committed to improving the lives of people living with serious medical conditions. In the Q3, BELBUCA total prescriptions grew 1.2% year over year and 1.4% versus the Q2 of 2023. We anticipate BELBUCA prescriptions will grow on a full year basis in 2023. While Xtampza ER revenue was up 24 0.5% year to date, prescriptions have declined, which is disappointing. Total prescriptions were stable in the 3rd quarter, a continuation of what we saw in the Q2, averaging around 12,000 prescriptions on a weekly basis.

Speaker 5

Q1 of 2019. For the remainder of the year, we'll be working on generating momentum for Xtampza ER and taking actions to mitigate any pressure on prescriptions in 2024. Importantly, the Nucynta franchise continues to be a relatively stable contributor and revenue grew 7% versus the same quarter in 2022. I'm excited to report that we've successfully completed the contract renegotiations with plans that account for approximately 30% are in the range

Speaker 2

of $1,000,000 of all Xtampza

Speaker 5

ER prescriptions. This was a top commercial priority in 2023 and will serve as a catalyst of revenue growth in 2024. Now let me take a moment to highlight the results of the Xtampza ER contract renegotiations. In plans that represent approximately 27% of this opportunity. Xtampza ER will maintain its current formulary position at a lower overall rebate.

Speaker 5

In plans that represent approximately 43% of this opportunity, Xtampza ER will move to a non formulary position and pay no rebates. In all plans where Xtampza ER was removed, it will be at parity with OxyContin. Over the last 2 years, have successfully renegotiated contracts that represented 84% of all Xtampza ER prescriptions. In 77% of the renegotiation opportunity, we were able to maintain Xtampza ER's formulary position and materially roll back the overall rebate level. In 23% of the renegotiation opportunity, Xtampza ER was moved to a non formulary position and we no longer pay any rebates.

Speaker 5

As was the case in 2023, our market access strategy will drive Xtampza ER revenue growth in 2024. Our focus is now on pull through, mitigating the impact of formulary position changes and importantly, striving to secure new payer wins in commercial and Medicare Part D. With BELBUCA, are participating in the company's Medicare Part D contract, representing 12% of all prescriptions. I'm pleased to report that we were able to maintain BELBUCA's formulary position at a meaningfully lower rate. In addition, we were able to add a new Medicare Part D plan, company's 20 24, we expect to see BELBUCA revenue and prescription growth.

Speaker 5

Our focus with BELBUCA is pulling through our strong commercial access and continuing to grow volume in Medicare Part D. In addition, most notably the successful contract renegotiations for both Xtampza ER and BELBUCA, which will serve as a I'll now turn the call back to Joe.

Speaker 2

Thanks, Scott. We are on track to deliver a banner year in 2023. Q4. For the remainder of the year, we are focused on achieving our financial objectives and preparing for success in 2024.

Operator

Thank you. Our first question comes from the line of David Assellem with Piper Sandler. Please proceed with your question.

Speaker 6

So just a couple of questions here. So with the renegotiations, and I'm sorry if I missed this, can you talk to on BELBUCA, where you think the gross to net will be next year relative to this year? And then on Xtampza, just talk about participate in what the improvement in gross to net next year versus this year will be. And then switching gears just on capital deployment. I participants In an environment where you don't find an asset participants that suits you, where you don't pull the trigger on an acquisition.

Speaker 6

Do you get significantly more aggressive on buybacks? How do you think about that and maybe I'll ask it a different way is how important is it participating in the process of doing an acquisition just in a vacuum. Thanks.

Speaker 2

Okay. David, thanks. I'll let Colleen take first question on gross to nets for Stamps and BELBUCA and then I'll come around to your question on capital deployment.

Speaker 4

Hey, David. Thanks for the question. I guess first I'll frame for 2023. So for BELBUCA, gross to net have been in the low 50s and have been pretty stable. And for Xtampza, we've updated our range in 2023 to 60% to 62%.

Speaker 4

With the renegotiations for both of those products, we do expect improvement from the 2023 level in 2024, and we will further update you in early January when we issue our guidance.

Speaker 2

Okay. And David, with regards participating in the Q1 of 2019. The first thing I want to emphasize is the financial strength of the business. On track this year to deliver the banner year that we set out to. We're confident in growth in 2024.

Speaker 2

But really important to your question, our outlook in 20252026 has really improved with the Nucynta new patient have a great day to day basis. So the reason I make that point is we are actively engaged. BD continues to be our top priority, participating in the process of being disciplined. We don't have to do a deal. And I think the ability to be clear headed in our pursuit of an acquisition connect between the intrinsic value of the company and where our share price has been.

Speaker 2

And as we've demonstrated to the degree that persists, We're certainly glad and believe it's a really good use of capital to be leveraging our share repurchase program and would continue to do so.

Operator

Our next question comes from the line of Tim Lugo with William Blair. Please proceed with your question.

Speaker 3

Thank you for the questions. Can you give us a sense of how these non formulary conditions for Xtampza ER are expected to play out? Participants are expected to go away versus what revenue might erode due to the non formulary position?

Speaker 2

Sure. Tim, this is Joe. I'll take that one. I think I understand the question you're asking. So look, with what we accomplished with Xtampza ER this year, we expect to see revenue with Xtampza grow, and that will be driven by improved gross to net.

Speaker 2

From a prescription perspective, there is the And the key point I would emphasize is that in no plan where Xtampza ER was removed from formulary was OxyContin added.

Speaker 3

Okay, understood. And can you give us a sense around less around gross than that and just gross price increases? I know that that's something that the class had traditionally performed yearly.

Speaker 2

Participants are participating.

Speaker 4

Suraj, thanks for the question. As you saw at the start of 2023, we moderated our price increases a bit given the inflation reduction act And we will continue to assess and do the math around that to optimize the level of price increase that we can take at the start of the year and ensuring we don't have tip over to the rebate, being in excess of the benefit of the price. So you'll see slightly moderated as you saw in 2023.

Speaker 3

Okay, understood. And maybe one last question. With the new $25,000,000 accelerated share repurchase program on top of the $50,000,000 you did earlier in the year, Can you just give us an insight into what's kind of the capital deployment process for sizing these repurchase programs? And I assume they allow plenty of room for business development, but maybe Just how we should think about these programs going into 2024?

Speaker 2

Sure, Tim. I'll have Colleen take that one.

Speaker 4

Yes. Thanks, Tim. So I would say we're optimizing our capital allocation based on our priorities and we really think it's an and not an or participants are in the range of $1,000,000 where we're ensuring that we can stay opportunistic on the BD front and if we see something we can pull the trigger there, continuing to rapidly delever based on our schedule there over the total 4 year period for our term loan and then opportunistically return shares participants are participating in the share repurchase program. So as you've seen this year, we've been pretty active in the back half of the year, will, I would expect we continue to value going forward.

Speaker 3

Thank you. Yes.

Speaker 2

Thanks, Tim.

Operator

Thank you. Our next question comes from the line of Serge take the question from the line of Alex Blumberg with Needham. Please proceed with your question.

Speaker 7

Hi, good afternoon and thanks for taking my questions. The first one on BELBUCA. Maybe if you can just talk about the new Medicare Part D plan. You said it was about a 1000000 additional covered lives. How does that compare to the existing major Medicare Part D contract that And then secondly, now that Nucynta exclusivity has been extended and the economics will improve, any plans to add additional resources behind that product?

Speaker 7

Thanks.

Speaker 2

Thanks for the question, Serge. I'll have Scott take the first one and then I'll comment on the Nucynta question.

Speaker 5

Yes. Thanks, Serge. In terms of the 1,000,000 lives, That's across some regional Part D plans. And to your question about how it compares to what we currently have, we're currently covered that large plan for about 12,000,000 lives. So it adds another $1,000,000 And what we're excited about is, look, it opens the opportunity to fuel growth and we'll continue to engage payers to try to expand coverage further.

Speaker 2

Ready to take questions. And with regards to NucyntaSurg, the extension will not result in any additional investment beyond what it is that we've been doing. We continue to be committed to our entire pain portfolio, participants are in the range of $1,000,000,000 of revenue. We are now in the range of $1,000,000 of revenue.

Operator

Our next question comes from the line of Lee

Speaker 8

Good evening. Thank you for taking my questions. First on Xtampza, what levers you have to mitigate the declining scripts and then on BELBUCA, the patient what is the patient profile for BELBUCA? See any transfers from Constancia that you're seeing and when do the $1,000,000 of the Medicare Part D come online?

Speaker 2

Participants Les, thanks for the questions. Scott will take those.

Speaker 5

Yes, thanks. So to your first question, Les, when comes to the levers to mitigate the erosion. The primary lever we have is, look, where those were lost were almost all commercial plans. And so we have a copay program that sets the cost of the patient and that's a big lever for us in addition to our overall commercialization effort and push through with physicians across all our marketing in terms of the patients and kind of patient flows, what we see across the portfolios are The brands are each uniquely positioned in the minds of a physician, and have a unique space. But by all means, if someone fails on Xtampza, we will sometimes see a move to BELBUCA And

Speaker 2

vice versa. Okay. And then, Les, with regards to Part D, the opportunity with all Part D plans really sets up for the Q1 Of 2024, that's when the renewals take place, which are 12 months. It's about 60% of them occur in that time period. So that's we're focused on and targeting.

Speaker 8

That's helpful. One more for me on the BD front. What's your funnel essentially look like now? Are there any opportunities in other non abuse deterrent options available in the market now? And then if not other opportunities out there, what's the competitive landscape essentially look like and also valuations in the current market environment?

Speaker 8

Thank you.

Speaker 2

Thanks for the question. So look, therapeutically, and we've talked about this in the past with the current in the market conditions, we're going to be very agile. I wouldn't say we're therapeutically agnostic, but we're open be participating in the 2030s. Whatever acquisition we're able to achieve participants will not be like the ones we've done in the past where we're leveraging our pain infrastructure. We'll be setting a second Commercial Beachhead, so these will be a lower synergy, more strategically oriented deal for Collegium, and that's our focus.

Speaker 2

In terms of valuations, what I would say Les is right now what we've seen is a lot of receptivity and willingness to engage and look with the financial strength of our company and the fact that we don't have to do a deal, we aspire to do one, will continue to engage and work with urgency, but we won't strike until we get to a price participants are comfortable with and believe creates value for our shareholders.

Operator

Thank you. There are no further questions at this time. I would now like to turn the floor back over to Joe for closing comments.

Speaker 2

Thank you, operator, and thank you everyone for joining the call.

Operator

Ready to begin the conference call.

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