Collegium Pharmaceutical Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 3, 2023

There are 12 speakers on the call.

Operator

Greetings. Welcome to the Collegium Pharmaceuticals' 2nd Quarter 2023 Earnings Call. I apologize. Greetings, and welcome to the Collegium Pharmaceutical Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode.

Operator

A question and answer session will follow the formal presentation. 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

Welcome to Collegium Pharmaceuticals' Q2 2023 earnings conference call. I'm joined today by Joe Ciaffoni, our Chief Executive Officer 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, 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 on 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 collegianpharma.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 towards achieving a banner year in 2023, our financial performance in the first half and expectations for the remainder of the year. At Collegium, we are focused on building a leading, diversified At Specialty Pharmaceutical Company, committed to improving the lives of people living with serious medical conditions. Our commitment includes Supporting the communities where we live and work.

Speaker 2

During the Q2, we launched a new partnership with the Boston Red Sox and Science from Scientists, a non profit organization leading STEM education initiatives for kids from low income households. This partnership furthers Collegium's commitment to equitable access to educational resources that support the next generation of STEM leaders. I'd like to recognize my colleagues Thank you, Steve. Thank you, Steve. Thank you, Steve.

Speaker 2

Thank you, Steve. Thank you, Steve.

Speaker 3

Good morning, everyone. Good morning, everyone. Good morning, everyone. Good morning, everyone. Good morning, everyone.

Speaker 3

Good morning, everyone. Good morning, everyone. Good morning, everyone.

Speaker 2

Good morning, everyone. Good morning, everyone. Good morning, everyone. Good morning, everyone. Good morning, everyone.

Speaker 2

I am pleased to report that we are on track to make 2023 a banner year for Collegium Pharmaceutical. At the beginning of this year, we committed to strong top and bottom line growth that would be achieved by maximizing the potential of our differentiated pain portfolio and leveraging our cost structure. We also said that we would generate strong operating cash flows that would enable us to rapidly pay down debt and position us to achieve our other capital deployment priorities. That is exactly what we have accomplished in the first half of this year and what we will be focused on for the remainder of 2023. I am confident that we are on track to deliver on our strategic and financial commitments.

Speaker 2

Key accomplishments in the first half of twenty twenty three include, we delivered record revenue and adjusted EBITDA. In the first half of the year, we grew revenue 35% and adjusted EBITDA 51% compared to the first half of twenty twenty two. We generated strong performance in our pain portfolio. BELBUCA is trending to achieve prescription growth on a full year basis. Total prescriptions were up 3.5% in the 2nd quarter compared to the Q1.

Speaker 2

We continue to be encouraged by the trends that we are seeing. The week ending July 21, BELBUCA generated 9,376 total prescriptions, the highest level achieved since we acquired BDSI in March of 2022. We grew Xtampza ER revenue in the first half of the year by 38% year over year, driven by improvement in gross to net Due to the successful completion of contract renegotiations last year, we delivered on our commitment that Nucynta franchise revenue would be relatively stable year on year, in the first half of the year, Nucynta franchise revenue grew 4%. We achieved an important step in the pursuit of a 6 the end of the Q2 of 2019, we expect to be in the next month pediatric extension for the Nucynta franchise with FDA approval of both Nucynta IR and Nucynta oral solution for use in children ages 6 and older. We increased our cash Marketable securities balanced over $300,000,000 leaving us well positioned to execute on our capital deployment strategy.

Speaker 2

And our Board has authorized us to enter into a $50,000,000 accelerated share repurchase program. We believe that our At the

Speaker 3

end of the quarter, we expect to

Speaker 2

continue to be significantly undervalued and we are committed to leveraging our $100,000,000 share repurchase program to opportunistically We returned cash to our shareholders. We are laser focused on our 2 pronged strategy of maximizing the potential of our differentiated pain and strategically deploying capital to create value for our shareholders. We believe that strong commercial execution is key to maximizing the Our capital deployment strategy is focused on creating long term value for our shareholders and business development is our top priority. We are actively pursuing differentiated commercial stage assets that we believe have peak sales potential of more than $150,000,000 and exclusivity into the 2030s. Although business development is our top capital deployment priority, We are absolutely committed to being disciplined in our approach.

Speaker 2

Our strong financial position allows us to do so. For perspective, in our base case long range plan, net of paying off our Pharmakon loan, we will have greater than 1,000,000,000 We are committed to leveraging our strong financial position to create value for our shareholders. 2023 is on track to be a banner year for Collegium Pharmaceutical. We delivered a strong performance in the first half of the year and we expect to see revenue increase and expenses decrease for the remainder of the year. We are reaffirming our full year 2023 financial guidance, which includes growing adjusted EBITDA by approximately 1.5 times the rate of revenue growth and 2.5 times the rate of adjusted operating expenses growth.

Speaker 2

We believe that there is a meaningful disconnect between our share price this time, we will be utilizing the Board authorized accelerated share repurchase program to buy back $50,000,000,000 of our stock to deliver value to our shareholders. Our priorities for the remainder of the year are clear and we are well positioned to achieve them. I will now hand the call over to Colleen to discuss the financials.

Speaker 4

Thanks, Joe. Good afternoon, everyone. We remain on track to achieve our financial objectives in 2023. In the Q2, we generated year over year double digit revenue growth and grew adjusted EBITDA at twice that rate. We managed operating expenses and generated positive operating cash flows while paying down debt.

Speaker 4

Financial highlights for the 2nd quarter include net product revenues were 135 point $5,000,000 for the Q2 compared to $123,500,000 for the Q2 of 2022, an increase of 10%. As expected, revenue in the 2nd quarter tends to be lighter than the Q1 due to the higher coverage GAAP expense, also known as the donut hole in Medicare coverage. We expect quarterly revenue to increase in the remaining quarters of 2023. BELBUCA net revenue was $43,100,000 in the 2nd quarter, an increase of 2% over the Q2 of 2022. Xtampza ER net revenue was $41,200,000 in 2nd quarter, an increase of 24% over the Q2 2022 and Xtampza ER gross to net was 63.5% in the 2nd quarter.

Speaker 4

We expect full year Xtampza ER gross to net to be between 61% to 63% in 2023. Nucyntia franchise net revenue was $47,300,000 in the 2nd quarter, an increase of 8% over the Q2 of 2022. GAAP operating expenses were $38,200,000 in the 2nd quarter, which decreased 7% compared to $41,300,000 in the Q2 of 2022. Adjusted operating expenses were $31,100,000 in the 2nd quarter, which decreased 3% compared to $32,000,000 in the same quarter of 2022. Net income for the Q2 was $13,000,000 compared to a net loss of $5,200,000 in the Q2 of 2022.

Speaker 4

Non GAAP adjusted EBITDA was $85,800,000 for the 2nd quarter compared to $71,200,000 in the 2nd quarter at 2022, an increase of 21%. GAAP earnings per share was $0.38 basic and $0.34 diluted in the 2nd quarter compared to GAAP loss per share of $0.15 basic and diluted in the Q2 of 2022. Non GAAP adjusted earnings per Share was $1.26 in the 2nd quarter compared to $1.07 in the Q2 2022, an increase of 18%. Please see our press release issued earlier today for a reconciliation of GAAP to non GAAP results. As of June 30, our cash, cash equivalents and marketable securities increased to $325,500,000 During the Q2, we paid down $45,800,000 in debt related to our term notes.

Speaker 4

We ended the 2nd quarter at 1.2x net debt to adjusted EBITDA and expect to end the year at approximately one time. We are reaffirming our financial guidance for 2023. We expect net product revenues in the range of $565,000,000 to $580,000,000 adjusted operating expenses in the range of $135,000,000 to $145,000,000 and adjusted EBITDA in the range of $355,000,000 to $370,000,000 As part of this financial guidance, we expect net product revenues in the second half of the year to exceed the first half of the year and adjusted operating expenses in the second half to be lower than the first half. Collegium is a financially strong organization well positioned to deliver on our capital deployment priorities. We remain focused on creating long term value for our shareholders through our capital deployment strategy.

Speaker 4

Business development is our top priority and we remain committed to a disciplined approach. We are locked into deleveraging the balance sheet paying down $162,500,000 of debt in 2023, which would put us at approximately one time net debt to adjusted EBITDA at year end. Our ability to delever quickly is a testament to our strong cash generation. We are also returning capital to shareholders through share repurchases. Our share repurchase program announced in January enables us to purchase up to $100,000,000 worth of our shares this year.

Speaker 4

We believe in the long term success of our company and that our stock at the current valuation represents a very attractive investment with a favorable return profile for investors. As such, we announced today that as part of our repurchase program, our Board has authorized us to enter into a $50,000,000 accelerated share repurchase program, Reinforcing our commitment to deliver to our shareholders through effective capital deployment. We see the share repurchase program as a high return use of our capital for the benefit of our shareholders. I will now turn it over to Scott.

Speaker 5

Thanks, Colleen. We take pride in Collegium being viewed by pain specialists as the leader in responsible pain management. It's a testament to our highly We've grown our portfolio share to 50% of the branded market. Our field force is at 100% capacity and focused on growing our differentiated pain portfolio. In the Q2, we were encouraged to see an uptick in the BELBUCA total prescription trend.

Speaker 5

BELBUCA total prescriptions grew 3.5% The Q1 of 2023 and over the past several months, weekly prescriptions have been steadily increasing. The trends that we are seeing along with a favorable comparator in the back half of twenty twenty two reinforce our expectation that BELBUCA prescriptions will grow on a full year basis. In addition to growing total prescriptions, our focus in the second half of the year will be on improving BELBUCA's position within Medicare Part D for 2024. We're encouraged by the clinical and financial discussions that we're having with payers and are confident in our ability to grow BELBUCA in 2023 and moving forward. Xtampza ER revenues grew significantly year over year as a result of gross to net improvements from the successful contract renegotiations we completed in 2022.

Speaker 5

Prescription trends in the 2nd quarter stabilized from the Q1, but we did not see prescription growth in the first half of the year. This is due to pressure from the plans that represented about 10% of prescriptions within the contracts that we renegotiated last year, where Xtampza was removed from formulary and candidly, the need for stronger commercial execution where we maintained our position. To be clear, we're making progress within the plans where we maintained Xtampza ER's formulary position, but not to the level that we anticipated. We're focused on building momentum for Xtampza ER through the remainder of the year. In terms of managed care, we're focused on renegotiating contracts that expire this year, which represent an additional 30% of prescriptions and winning new plans for Xtampza ER.

Speaker 5

Our payer Our strategy will serve as a catalyst for growth in 2024 and we're forever committed to keeping gross to net below 65%. In November, we expect to provide an update on the status of our contract renegotiations as well as any new wins we've secured for BELBUCA and Xtampza for 2024. Importantly, we're excited by the performance of the Nucynta franchise. The Nucynta franchise continues to deliver stable revenue and contribution, which was our commitment when we acquired it from Assertio in 2020. Our commercial organization and our market access team in particular has done an excellent job.

Speaker 5

The Nucynta franchise serves an important role within pain management. Our differentiated pain portfolio is strong with BELBUCA Stampsa and Nucynta ER holding a combined 50% share of the branded ER market. We have a stable commercial organization committed to making a positive difference in the lives of people living with pain and the communities that we serve. In September, We look forward to participating as a leading sponsor in Pain Week, the largest pain conference in the United States. We'll have a large presence Our medical team expects to present 10 posters supporting our pain franchise.

Speaker 5

We're focused on building momentum in the second half of the year and executing our market access strategy to position the pain portfolio for growth in 2024. I'll now turn the call back to Joe.

Speaker 2

Thanks, Scott. We had a strong performance in the first half of twenty twenty three and are on track to achieve our strategic and financial commitments. We are focused on growing our core business and creating long term value for our shareholders through our capital deployment strategy. 2023 will be a banner year for Collegium. I will now open the call up for questions.

Speaker 2

Operator?

Operator

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

Speaker 6

Hey, thanks. So just have a few. So on BELBUCA, you talked about looking to improve Medicare Part D Access. I guess, can you help us understand on a broad level what your goals are in terms of percent covered lives over time. What you're looking for in terms of a gross to net range?

Speaker 6

Just how should we think about what that improved Part D access for the product could look like? So that's number 1. And then number 2 on capital deployment, can you talk about how you're balancing buybacks versus BD activity. I know it's not an eitheror, but I guess the question is, Do you expect to do even more buybacks down the road? And then lastly, just remind us how you're thinking about different therapeutic categories that you may or may not be interested in regarding business development?

Speaker 6

Thanks.

Speaker 2

Okay. David, thanks for the question. I'm going to ask Scott to take the BELBUCA Med D Colleen Capital Deployment and I'll come back on the 3rd question.

Speaker 5

Thanks, David. So first in BELBUCA and Medicare Part D. Look, when you look at the profile of the access, very strong in commercial, Only one real large plan in Part D. We're looking to improve it. I'm not going to get into guidance around gross to net and where we're heading other than saying We will always be looking to effectively manage gross to net and profitability.

Speaker 5

But the bottom line is with the profile of BELBUCA and where it stands, We feel more patients in Part D should have access. We're encouraged by the clinical discussions we've had. We've submitted our bids and now we're waiting to hear back from the plans and we'll give you an update in November.

Speaker 4

Thanks, David, for the question about capital allocation priorities. So, Jupal, we've always been clear that our first priority is We returned capital to our shareholders via the share buyback program. So as you can see from our track record in the past in years With or without BD 2022 in mind, we have done share repurchases. We will in a typical year where BD is light accelerate our buying of shares, but we're pleased to right now have In place for the full year, what we announced in January was $100,000,000 share repurchase program. And then today, as part of that $100,000,000 we've announced That the Board has authorized us to enter into a $50,000,000 accelerated share repurchase program.

Speaker 2

And then David, with regards to BD, which is our top priority from a capital deployment perspective, Because of the current market conditions, we think it's important to be agile. So we're very open minded in terms of therapeutic area. The next acquisition we do will be a pivot to a new footprint, a new infrastructure to the organization. So it will be a lower synergy deal Than what it is that we've done historically. So what we're really anchored to are the fundamentals of a differentiated commercial stage asset with peak sales of greater than $150,000,000 in our opinion, with exclusivity into the 2030s, More so than any one particular therapeutic area.

Speaker 6

If I may just sneak in A follow-up, what does the market look like in terms of asset prices. And you've talked a number of times about being disciplined here. Are asset prices at a place that you find more attractive? Or do we still have a bit of a ways to go to a point where you feel more comfortable?

Speaker 2

No, David, I appreciate the question. I think it's a great question. What I would say is the noticeable difference This year, whether it's private, public companies, is the level of engagement, which is different than what it had been in previous years when The capital was easier for people. Now look, as we go forward, because we don't have to do a deal because of the financial of the company and the durability of our growth drivers, we're going to be disciplined. We're going to do the right deal for Collegium.

Speaker 2

And what I would say is in some instances, I suspect where we've been engaged, maybe companies need to see a couple more quarters or additional time before we can get to what we would as a rational position or one that's the strike zone to getting a deal done. So what we're really focused on is executing against our core business continuing to strengthen the company financially and what I am confident in is that we will find the right deal For Collegium Pharmaceutical that will create value for our shareholders.

Speaker 6

Okay. That's helpful. Thank you.

Speaker 2

Thank you, David.

Operator

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

Speaker 7

Hi, team. This is John on for Tim. Thanks so much for taking our questions. Maybe just 2 from us. So on the BD front, can talk a little bit more about maybe a potential overlap on the sales force that you might see and how you might manage that as you continue to focus on the growth of your existing franchises?

Speaker 7

And then maybe on BELBUCA, I know in the past you said that's a little bit more of a complicated product requiring some additional education. Can you speak a little bit on how the ramp up of that education is progressing and how you expect those efforts to affect the growth trajectory of BELBUCA both in the near and the long term? Thanks.

Speaker 2

Sure. John, this is Joe. I appreciate the questions. I'll take the BD one and Scott will comment on BELBUCA. So look, from a BD perspective and when you think about the organization, 1, we take a lot of pride And I think we're able to say that we are the leader in responsible pain management and we have a portfolio with runway in front of it.

Speaker 2

So one of the things when we think about BD is not doing anything that would be disruptive to that. And the good news is with what we're focused on, We'll be setting a new strategic beachhead, which we're confident will enable us to not disrupt the focus and what we're setting out to do with the pain business, While also shifting the narrative of the company with an asset that we have a belief has that potential of $150,000,000 plus peak sales and then that becomes an infrastructure that will then be focused on leveraging with additional assets over time. And that's the approach that we're taking.

Speaker 5

And Scott on BELBUCA? Yes. Thanks, John. So look, yes. So We have talked about the complexity of the sale before and we put a lot of effort when we talk about execution into training our sales professionals upon acquisition of the product, practicing rolling out new tools and resources.

Speaker 5

And by all means, I think that's a contributor to some of the momentum that we're starting to And clearly that gives us confidence in our ability to continue to grow through the rest of the year.

Speaker 7

Thanks so much.

Speaker 2

Thank you.

Operator

Our next question comes from the line of Serge Belanger with Needham and Company. Please proceed with your question.

Speaker 8

Hi, good afternoon. Just a couple of questions from us. I guess the first one on gross to nets. Can you just tell us what kind of movement you saw in gross to nets for the 3 major products over the Q2? And what do you expect those gross and that's to move into in the second half of the year?

Speaker 8

And then secondly, now that you've got the pediatric extension for Nucynta, maybe just updated outlook on for that product post 2025?

Speaker 2

Okay. Thanks, Serge. So Colleen on gross to net.

Speaker 4

Hi, Serge. Thanks for the question. Great topic of interest here. So as Expected, the Q2 gross to nets were higher due to the impact of the higher Medicaid coverage gap expense. That's really the same theme across all of our products To varying degrees depending on how much of the business is Medicare Part D.

Speaker 4

But gross to net is generally more favorable in Q1 of each year due to the lower coverage gap, also known as the donut hole and then through the back half of the year as Patients are coming out of that. There is improvement in 3rd and then or in 4th quarter, but not quite as good as the first. So we are right now in the height of Medicare coverage GAAP expense as we would have expected and we'll see improvement through the back half of the year.

Speaker 2

And then Serge, with the Nucynta franchise, we would expect to know whether we're going to achieve the pediatric extension in the Q1 Of 2024, if we do, that would take us from a July 2025 to the full year 20 25 in terms of exclusivity.

Operator

Our next question comes from the line of Glenn Santangelo with Jefferies. Please proceed with your question.

Speaker 9

Yes. Thanks for taking my question. Hey, Colleen, I just want to follow-up on a couple of comments that you made. First, did I hear in your prepared remarks that you said you expect to retire $100,000,000 worth of debt In 2023 and finish the year with a leverage of 1, is that the goal?

Speaker 4

That's right. We have per our debt payment reschedule paying over $160,000,000 this year and that will put it at the end of the year about one times net debt to adjusted EBITDA. At EBITDA. Okay. We're at 1.2 right now.

Speaker 9

Yes. And I apologize, I probably should know this, but you have the 100,000,000 authorization out there. Now there's another $50,000,000 accelerated share repurchase authorization. So is it $150,000,000 in total now?

Speaker 4

No, the 50 accelerated share repurchase is part of the 100 for the full year.

Speaker 9

Okay. All right. And so I mean just looking at your level of cash flow, would you expect that the $100,000,000 in debt $50,000,000 of accelerated repo would probably be The aggregate of what you would return to shareholders this year?

Speaker 4

So we have the authorization throughout the entire year to do up to $100,000,000 in share repurchases of which today's announcement is that we have the Additional tool within that $100,000,000 to do an accelerated share repurchase of which we'll issue a press release as soon as that contract has been executed.

Speaker 9

Yes. Okay. And Joe, maybe if I could just follow-up on some of your comments, your previous question about what you're seeing in the M and A market right now. Said the level of engagement is different than previous years. Were you sort of implying that there's a higher level of engagement or a lower level of engagement?

Speaker 9

And I guess what we're all trying to assess is, the market now, are you seeing reasonable valuations or not? And would you be Disappointed if we exited the year without a deal?

Speaker 2

Yes. So great question, Glenn. So what I'm focused on in that comment is that we are actively in pursuit of commercial stage assets and there is a difference In terms of receptivity of companies that perhaps we've reached out engaged in the past that weren't in a mindset because of a different market dynamic to engage that now are. In terms of a deal, I'm not going to make any commitment From a timing perspective, to your question from valuation, if we were able to agree on valuation, then we would have a deal done. And of course, as you know, that's the unpredictable part of you need 2 parties to come to a rational or a reasonable position to get that deal done.

Speaker 2

So we work with urgency while maintaining discipline and we're afforded the luxury to do so Because of the financial strength of the organization and the durability of the assets that we have. So we'll find the ideal for today, Joe.

Speaker 9

Yes. Thanks for the comments.

Speaker 2

You got it. Thank you.

Speaker 4

Thanks.

Operator

Our next question comes from the line of Oren Livnat with H. C. Wainwright. Please proceed with your question.

Speaker 10

Thanks. I have a few, if you'll indulge me. Just as I think about your full year guidance And where products are, I know you've previously committed to both BELBUCA and Xtampza growing year over year total. And it looks like BELBUCA trends have improved nicely, but it's still lagging, yet you reiterated your full year guidance. So I just want to understand, Should we assume that maybe Nucynta franchise outperformance is the difference there and helping you get to your full year?

Speaker 10

Or are there other positive revenue Offsets that I guess can make up for maybe potential lower volumes than you had hoped 6 months ago? And I have

Speaker 8

a couple of follow ups.

Speaker 2

Okay. So Oren, the way I would think about and as you know, we don't give product specific guidance. As you said, we do expect to see BELBUCA prescriptions to grow on a full year basis. We've seen that acceleration in revenue of Xtampza right out of the gate this year and we expect to see that revenue will continue to grow. We do not need prescription growth with xtamsa to achieve the guidance that we reaffirmed today.

Speaker 2

So what we've seen withxtamsa is stabilization, which is an important step, we will be focused for the remainder of the year and trying to build From there, but we don't believe at this point that we could say with confidence that we'll see full year Rx Growth with Xtampza. And as I said in my prepared remarks and I'll emphasize here, we're really encouraged And Nucynta is exceeding the expectation of relative stability that we had set at the beginning of the year. So the pain portfolio is forming in a manner where we're confident reaffirming the full year guidance. Okay.

Speaker 10

And Just to get into gross to nets, is it, I guess, cadence through the year or maybe a little bit different? I guess, for Colleen, Then in the past, it looks like at least on Xtampza, maybe 2Q gross to net wise, it grew a little From Q1 than I had expected, but you guys are guiding to second half revenue growth. So besides Q4, which should improve. Are we thinking maybe we got through the donut hole or getting to donut hole a little faster this year and perhaps you'll actually see an improvement in gross to net even in Q3 For Xtampza or am I misunderstanding? And then I guess just big picture when you think about gross to nets, I know you keep promising to stand or 65%, which is great.

Speaker 10

I'm just wondering though with all that volume that's still out there Extended release oxycodone that is in less safe products right now. How do you think about maximizing revenue? Is that 65% arbitrary? Or is there any reason why you wouldn't next year say, hey, you know what, let's give a little bit more away than 65%, but there's a huge headroom that we can grow into volume wise, it will more than make up for.

Speaker 2

Okay. So thanks for the question, Doren. I'll let Pauline go through some of the mechanics and gross to net and then we'll come back to the question around Our oxycodone market and how we think about the approach in it.

Speaker 4

Thanks, Lauren, for the question on gross to net. So as we expected Q2, the gross to net Increases quite dramatically due to the Medicare coverage gap. That's most acute with Xtampza as you noted. For the full year, we are still anticipating Xtampza ER will be within the range of 61% to 63%. So as you see generally across Board and the products, Q3 improved slightly and then a bit in Q4, but again not quite as good as the Q1.

Speaker 2

Okay. And then The other question, look, right now where Xtampza is at its lifecycle, we have a really strong access position of product that from a real data perspectives performing within the marketplace, we're committed to managing gross to nets to less than 65%. What you need to be mindful on how we'll approach the market as we go forward with what we accomplished last The renegotiations along with another 30% up for renegotiation this year, we now have the headroom to add new wins If we're able to achieve them at a rebate level that we're comfortable with. So look, at the end of the day, the mission of Collegium is anchored to putting together a differentiated portfolio that we believe can be a positive contributor and making a difference to the opioid We believe our products are relevant and that we're going to do everything we can to get access and then we're going to educate around it to get the highest shares that we possibly can because at the end of the day, we believe that BELBUCA and Schedule III should be used before Schedule II and Schedule 3 more broadly. And certainly, we believe that the case can be made that Xtampza ER should eliminate OxyContin utilization and that's what we're aspirationally trying to do.

Operator

All right.

Speaker 10

Thank you. I appreciate

Speaker 2

Thank you.

Operator

And our next question comes from the line of Les Nowinski with Chula Securities. Please proceed with your question.

Speaker 11

Good afternoon, guys. Thanks for taking my questions. Can you explain what happened with Xtampza coming off of formularies on 10% of the contracts and what have been some of the headwinds to get this back online? And second, I have I guess, I believe you took a price increase on Xtampza in January, which has been historically a bit lower. Is there a pricing event scheduled for the back half of the year?

Speaker 11

And I have a follow-up. Thanks.

Speaker 2

Okay. Scott will take the first and then Colleen

Speaker 1

will talk about price.

Speaker 5

Yeah. Thanks a lot. So first, with the 10% that where Xtampza was removed from formulary, the bottom line there is those are still more at profitable scripts right now. So we've seen script erosion, but the scripts we have have contributed to the profitability and net revenue increases we're seeing. What we were counting on Is that growth where we maintained our formulary access would be greater than what we've seen.

Speaker 5

So we're seeing progress and growing in our other exclusive imperative positions, but not the extent that we thought we would and that's what's the headwind against the gross year to date. That's what we're focused on pushing through in the second half.

Speaker 4

And less on price increases, particularly for Xtampza ER, as your question was, on January 1, we took a 5% price increase For Xtampza, which we recognize and realize about 80% of that. Historically, we've taken about 9.9% Annually on January 1. The reason why it was lower this year was really taking into consideration the impact of the Inflation Reduction Act and optimizing where price Should

Speaker 11

be. Got it. That's helpful. And just to go back to the BD question, What gives you confidence you can execute within a new vertical? You mentioned a new beachhead outside of pain.

Speaker 11

And in terms of quality of That's out there. Are you mean are you gravitating towards perhaps underperforming assets that you can see from like a carve out from an operator that perhaps hasn't just been given the full marketing efforts? Or are you willing more to take up something that's high performing and pay up a bit?

Speaker 2

Great questions, Les. So the first thing I would say is what matters to us is that we have a belief That the asset has peak sales potential of at least $150,000,000 and that it has exclusivity into the 2030s. And I think dependent upon the situation and what we always ask ourselves is why are we a better owner of that asset? And I think it depends. That's on an asset to asset basis, whether it's the company who has it is not able to make appropriate investments, whether it's The market access capabilities that we have, which I think we're demonstrating over the past several years, the level of capability that we have there or whatever it may be.

Speaker 2

That's the question we always seek to answer And I think it's important whenever we do get that deal done that we're able to articulate to everybody that is interested in or currently shareholders of Collegium of why that transaction makes sense.

Speaker 11

Very helpful. Thank you.

Speaker 2

Great. Thank you, Les.

Operator

And we have reached the end of the And I will turn the call back over to Joe Ciaffoni for closing remarks.

Speaker 2

Thank you, and thank you everyone for joining the call today. We look forward to updating you on our progress and I hope that everybody has a great evening.

Operator

This concludes today's conference and you may disconnect your line at this time. Thank you for your participation.

Speaker 4

Thank you.

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Earnings Conference Call
Collegium Pharmaceutical Q2 2023
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