Can we close that back door? Thank you. All right, good morning, everybody. Thanks for joining us. Why don't we get started? For our next presentation, we're excited to be hosting Collegium Pharmaceutical. With us from the company, to my far left is Colleen Tupper, who's the CFO of the company. To her right is Scott Dreyer, who's the Chief Commercial Officer, and Chris James in the front row, who heads the investor relations function for the company. All right, similar to the other presentations, I think we're scheduling to be about 25 minutes, so we're gonna do some rapid-fire Q&A. And maybe if we have a couple minutes at the end, are you willing to take a couple questions from the audience, if there are some? Perfect. All right, well, why don't we get started?
You know, Colleen, for those who may not be familiar with the company, you know, maybe could you just give us a brief overview of Collegium, some of the acquisitions that you've done, and how the company has sorta got to its three-product portfolio, what it looks like today?
Yeah, absolutely. Collegium Pharmaceutical is a U.S.-based specialty pharmaceutical company. We are the leader in responsible pain management. Our roots go back to our first product, XTAMPZA ER, which was internally developed with a best-in-class abuse-deterrent technology, which was developed and brought to the market as a positive solution, positive tool in light of the opioid epidemic. We have since built the company with two acquisitions that build upon that mission, the first of which was the full acquisition of the NUCYNTA franchise in 2020, which brought two additional products into our portfolio and propelled Collegium into profitability.
And then, we acquired in 2022, BioDelivery Sciences, or BDSI, which brought BELBUCA, another growth driver, into our portfolio, and that was a highly synergistic acquisition and rounded out our portfolio with, the NUCYNTA franchise, XTAMPZA ER, and BELBUCA as our pain therapies, and Symproic for opioid-induced constipation.
Yeah, perfect. And I guess since we're coming off earnings last Thursday, it probably... I think it was Thursday, the days all blend together probably makes sense just to, just to spend, you know, 30 seconds on the, on the quarter. You report a very strong Q3. You know, some decent revenue growth despite, you know, scripts on a couple of the products or a negative territory. Could you just sort of walk through maybe the highs and lows of the quarter for, you know, XTAMPZA, NUCYNTA, and BELBUCA, and anything you wanna take away from, from earnings?
Sure, I'll broadly kind of speak to the year in general terms. Through the year so far for XTAMPZA ER, following on successful contract renegotiations last year, we have had exponential revenue growth for XTAMPZA, buoyed by enhanced and improved gross to net rebating. And that has more than offset the pressure we have had on prescriptions, which is due to a small percentage of the volume we renegotiated was moved off of formulary.
Yep.
With BELBUCA, we've had revenue and volume growth throughout the year, and we expect that same in 2024. And for the NUCYNTA franchise, that remains about stable. And what I would remind folks that know Collegium is what we committed to in 2020, when we acquired that more mature product franchise, was to deliver stable revenues, which are at that time were run rating about $180 million per year. So that's a situation where volumes are declining, but each year we're able to offset those declines with enhanced profitability and pricing.
Yep, okay. Well, for those who aren't paying attention, it was an 8% revenue quarter and 19% EBITDA growth in the quarter, so, pretty impressive. You know, Scott, maybe we'll throw one your way. For XTAMPZA, you know, Colleen just talked about the gross to net change and renegotiating 30% of the contracts. Could you maybe just frame for people how, you know, those contract renegotiations might have impacted the gross to net for XTAMPZA? And then, you know, since 2024 is right around the corner, not expecting you to give any guidance here or anything like that, but, you know, can we see some additional renegotiations into the new year? Will that bleed over into the new year?
Yeah, thanks for the question, Glenn. So yeah, when you talk about renegotiations for XTAMPZA, it's really been a two-year journey, right? So it started in 2022, moving into 2023, and now 2023 to 2024. And the background here is pretty straightforward. We had many contracts for XTAMPZA, where we displaced OxyContin by leveraging an exclusive contract, so removal from formulary, a rebate to get on for XTAMPZA. And two to three years into those contracts, we've been able to come back, and XTAMPZA has lived up to its value proposition for patients and for the community. And so it put us in a position to renegotiate. The two-year journey, over two years, we've renegotiated contracts that represent 84% of all the prescriptions-
Mm.
... for XTAMPZA. Last year, 54%, that's why I brought that up, and then this year, the final 30. In 77% of the situation, we kept the same access position for XTAMPZA at a significantly lower rebate. In the 23%, we couldn't get to an agreeable rebate, so we walked, and that rebate is now gonna go to zero. So when you sum that up, it's a significant change to the gross to net of the product, right? So we moved from the low 70s to this year, our latest earnings call, we mentioned we expect to be 60%-62%. And then, as we move to next year, I can't give you any specifics there, but we do believe-
That's what's impacted the scripts, though, too.
Absolutely.
... with the contract negotiations.
Right. So in the, in the ones where we've been removed, obviously, there's pressure on scripts, so we've had some of the script decline driven by that, but far offset the profitability. So revenue this year through the third quarter for XTAMPZA is actually up 25% year-over-year.
When you think about, you know, the remaining 15% or 18% of the contracts that haven't been renegotiated, are they on your radar screen?
Yeah, you know, Glenn, a lot of that's small scripts that aren't in contracted positions now. So this 2 years was really the leverage point, and then we're gonna continue to focus on growth, going forward.
But when we think about 2024, and again, not I want you to put numbers on it, but we should get some full-year benefit in 2024 versus what we got in 2023, right? On the improved gross to net for-
... That's right. So, the contract renegotiations last year, we got the full benefit of in 2023, and for the full year, we're expecting 60%-62% total gross to nets for XTAMPZA. That compares to about 72% of the prior year.
Yep.
Then, I won't get ahead of the guidance. We'll give you some insight in January 2024, coming up, but we expect gross-to-nets for XTAMPZA, given the new renegotiations, to be better than this year.
Yep, perfect. Okay. All right, can we just flip over to NUCYNTA? You know, there's been some moving pieces on the exclusivity. That's pretty recent, right? Could you talk about where we were and kind of what you got as part of that additional exclusivity?
That's right. So the NUCYNTA franchise comprise two products. So NUCYNTA ER, extended release, loss of exclusivity is July of 2025. And, for NUCYNTA, NUCYNTA , which is an immediate release, we just recently received the FDA's new patient population, which extended NUCYNTA an additional year. So it moved it from July of 2025 to July of 2026.
Perfect. All right, and I guess, you know, why don't we turn to BELBUCA? You know, BELBUCA is 2027, right? Loss of exclusivity.
That's right.
Right, and so I think there's been some. You know, maybe take a step back. Talk about the rationale for that deal and what excited you about that deal, particularly given the LOE was only, you know, four years away in 2027.
That's right, and I'll touch upon the ANDA situation, and really what gave us the green light to do that deal, to get to the first part of your question, Glenn. But really, BDSI and the acquisition of BELBUCA was a highly synergistic transaction for Collegium. It is sold by the, you know, to the same physicians, and so we were able to completely leverage our commercial infrastructure. And so when we announced that deal in February of 2022, we originally committed to $75 million in annual run rate synergies. We were able to exceed that, and so it was a highly synergistic deal for us. As we were looking at BDSI, which gave us the green light to make the move, as we were watching their litigation with Alvogen, which was one of the ANDA filers.
It was the second filer to date, and then ultimately in December 2021, BDSI prevailed in that litigation, which gave us the green light to move forward in that deal, and then that was upheld on appeal, which we had fully anticipated. So there have been three ANDA filers to date, the first of which was Teva, and BDSI settled with Teva to allow them to enter the market January of 2027. At the time that they entered into that settlement, it was a six-month run ahead of the then latest expiring patent. So the second ANDA filer was Alvogen, of which BDSI prevailed in litigation and upheld on appeal. What was interesting about the outcome of the Alvogen litigation was what the judge very strongly upheld the 2032 patents, which at the time of the Teva settlement, had not been issued.
So Alvogen also was an important player because they are the only ones with tentative approval, and so now they are barred from the market until 2032. Then the third ANDA filer to date has been a company called Chemo, and they're tied to the litigation with Alvogen on invalidity and are pursuing... I'm sorry, non-infringement and are pursuing invalidity, and they have thus far received three CRLs.
Hmm.
So this is a marketplace where our base case and, you know, the deal was predicated on a January 2027 launch of Teva. This is a marketplace that has been highly litigious. A lot of companies that have been in this space for a long time have paid significant settlements. So it'll be interesting to see over the next few years who comes into the marketplace and who doesn't.
Right. So, I mean, could you maybe summarize that for us for a second and say, what should we be paying most attention to, right? Because I guess what we're all trying to figure out is if there's upside, you know, to that base case of January 2027.
I would say, you know, base case January 2027, there, of course, could be upside if no entrants come into the market at that time. And even if January 2027 is a generic entrant that comes in, there will be a continual tail for BELBUCA, 'cause it'll be a one entrant, and we have an authorized generic.
Okay. All right, and, and XTAMPZA, could you just remind people- I'm sorry, go ahead, Scott.
Just one other thing on BELBUCA that I think is important to understand, and that is the strategic lever when it comes to commercialization. So when we acquired BDSI, it really stamped us as the leader in responsible pain management in U.S. market, right? Because we have four pain products that span acute therapy to chronic therapy. As Colleen said, highly synergistic deal for our, for our field-based team. Same customers, same infrastructure, but importantly, the relevant player to that community, right? So we have all the responsible pain products in one sales force, and when many companies have run the other way and stepped out of pain, we've stepped in. And so it was a real lever to meet the needs of customers and patients.
Hmm.
... in chronic pain.
Okay. All right, maybe just flipping back to the financials for a second. I mean, it's been an interesting year, right? People have been tracking the scripts very closely on IQ, right? And, you know, we can see, you know, what's happened with your revenues, and we talked about the gross and net, and that's had a positive impact. But I think maybe even more surprising has been the impact on profitability that's been harder for people like me to model, and so fortunately, there's been some nice upside to profitability. Can you talk about, you know, the drivers of that margin performance, maybe at the gross and operating expense level?
Yeah, so I'd say Collegium is a company that prides itself on its financial discipline, and sort of we take each year as clean slate, and really we'll prioritize investments that are gonna drive our business forward. So sort of as you see that come through from the top to the bottom of the P&L, in gross margin, the acquired inventory associated with the BDSI acquisition has now fully flowed through the P&L as of the middle of 2023. So what you saw in the third quarter on the gross margin is more indicative of what the going forward will be. And one thing to note there within our cost of goods sold is that includes, intangible asset amortization, as well as royalties, which accounts for a little over 30 points for those two, those two items.
So going forward, we'll see increment, you know, a little bit of improvement on margin, but the Q3 is more of a normalized rate with that inventory flushed through now. Coming down to our operating expenses, we were able to update our guidance on the third quarter call, tighten it, and really bring it down, just from operating expense discipline. We have a field force of 95 territories. We are right-sized for the assets that we have, and we watch expenses very closely. We do have seasonality, so as you saw this year in the first quarter, we come out of the gate strong with sales and marketing activities, and then that expense tapers off.
Right. So you just mentioned you did tighten your ranges for the full year, right? Which has some implications about 4Q. Could you just talk through that? Because, you know, as we sit here on November fourteenth or whatever it is, half the quarter's already over, and so could you talk about maybe what you saw leading up to earnings day last Thursday that triggered you to sort of tighten those ranges?
Yeah, that's right. Well, part of it is just, you know, sort of as time goes on, we have more certainty on where gross nets are gonna come in. One more quarter for us, particularly with XTAMPZA, on Medicare Coverage Gap invoices being received, and so by this time in the year, we're looking to tighten. And we expect, you know, 2023, we have done what we set out to do, and we're executing on the banner year and delivering.
You know, I appreciate you don't wanna talk about 2024, so I'm not trying to push, but is there any sort of big picture items for 2024, either positive or negative, that we should be thinking about? You know, based on... We talked about the full year implication of the gross to net renegotiations. Anything else on, you know, that you think, we should at least pay attention to from the broad strokes?
Yeah, a couple of things that I'd highlight, and we give guidance in early January, and so what you can expect, as we mentioned on our third quarter call, is we'll have top and bottom line growth next year. You will see gross to net improvement on XTAMPZA, as well as BELBUCA, given the contract renegotiation we had there for a large Medicare Part D plan. I would expect relatively stable expenses, and we look forward to giving you more info in early January. Typical to what we'd normally do, we'll probably use the same metrics that we've guided to this year and some additional color on XTAMPZA gross to nets.
Yeah. You know, if we think about the stock, it's kind of nice to see it's finally broken out to the upside, which is great. I mean, maybe that's clearly a reflection of your results, but, you know, more broadly, we get questions around the overhangs on the company that I'm sure you're aware. You know, so it'd be helpful, you know, whether it be declining scripts, LOEs, you know, focus on opioids. Maybe could you discuss some of those overhangs and how you think about them, and, you know, anything you wanna share with investors about those overhangs?
Yeah, I think the three you just touched upon are what we hear most of. You know, we believe strongly that there's a significant disconnect between our share price and the intrinsic value of the company, and if you look at how we trade from a multiple perspective to any peers in our space, you could see that sticks out quite, quite significantly. What we hear is, you know, although we came into the marketplace as a solution and as a positive contributor to the pain management space, we are still viewed as an opioid company, and so with that comes an overhang. We have potential LOE events in this decade. We talked a bit about NUCYNTA as well as BELBUCA. And then lastly, to the point you made, too, the pain market is actually a shrinking market, and our products have significant potential.
They're really about growing share and beating the competition, not growing the marketplace. So although that isn't an issue for us, we do know it holds some investors back. And so to sort of deal with those concerns squarely head-on, we put our capital allocation strategy in play. And our- for top priority, there is business development, which we believe the diversification of the company, the continuing to bring in products that are meaningful and beyond opioid pain, as well as not with a near-term LOE event helps with that story.
Well, when we launched coverage of the company earlier this year, one of the things that was positive in our minds was the financial strength of the company, and you just sort of talked about it. Maybe could you, just for investors here, just sort of give some of the high level attributes of the company in terms of... I mean, your leverage is just over 1x, right? I mean, could you talk about what you're expecting in terms of cash flow? I mean, you're sitting with over $300 million in cash, about $700 million in debt, so call it, you know, roughly $400 million in net debt. Any sort of upcoming maturities or anything we should be thinking about? Just talk about some of those financial characteristics.
Yeah, absolutely. So we ended the third quarter with over $300 million in cash. You mentioned about a little over $700 million in debt. That's comprised of a term loan, which is a four-year, fully amortizing loan. It will be paid in full Q1 of 2026, and so that's coming down rapidly. At the end of the third quarter, we were 1.2 x net debt to EBITDA, and we'll be about one time by the end of the year, and so we continue to rapidly pay down that debt. Our cash generation continues to grow, gives us the ability to execute on our capital allocation strategy, which includes BDSI, as I just mentioned, paying down our debt rapidly and also returning value to shareholders via our share repurchase program.
Was it $45 million in debt pay down this quarter?
Yeah, it's about $46 million a quarter-
$46 million.
From here on out, $183 million a year.
Can you remind everybody what cash flow from operations was through nine months, roughly?
Significant.
Significant. So let's talk about those capital allocation priorities, and Scott, I'm gonna let you talk about business development in a second, and sort of where, you know, the company is focused and put some parameters around that. But, you know, Colleen, in the absence of any business development opportunities, you know, you've continued to execute on share repurchase. You just announced another $25 million accelerated share repurchase program. As you just said, you paid down $46 million in debt this quarter. So absent some type of deal, I guess the strategy would just be to continue to go down that road.
Yeah, given that disconnect between the share price and our intrinsic value, we find share repurchase program and a combination of accelerated share repurchases, as well as open market repurchases, to be a useful tool.
For those not aware, the valuation sub-4x EBITDA, right? So-
Right.
... just as a function of those overhangs. Scott, you wanna talk about, you know, sort of the business development priorities-
Yeah.
maybe where the company's focused?
Yeah, you got it, Glenn, so-
What you've said historically.
Yeah, yeah. Look, so we're focused—our focus is very clear. One, we're a commercial stage company, so our primary focus is commercial stage assets. We're pretty much therapeutic area agnostic, so we're not declaring a therapeutic area. With one simple thing, we're focused on differentiated products that are meaningfully differentiated, and the main reason for that is in the US marketplace, you cannot be successful without access, and that differentiation leads to coverage by payers. Second, we're looking at assets that have peak potential of $150 million or more, given the profile of our company and what we're trying to do from a growth standpoint. And then third, for patent life that extends beyond 2030, again, because of the profile of our current assets. So that's our focus from a BDSI standpoint.
Okay, we have three minutes left, so if there was anybody that had a quick question or two, we're happy to take those. But, you know, when we've talked to Joe in the past, CEO, he sorta didn't wanna put a definitive timeline on it. Has there been any update? 'Cause I feel like we've been talking about this for some period of time. Is the market proving to be maybe more difficult than you thought? Pricing maybe not as friendly as you thought? I mean...
Yeah, I think my answer will sound vaguely familiar, but, yeah, you know, we remain active and engaged. We do think there are pockets of the market that are definitely conducive for deal making. What's important to sort of taking a step back is Collegium's financially strong. We do not have to do a deal, and that gives us the ability to remain disciplined and clear-headed, and we will continue to be patient and wait for the right deal at the right valuation.
And when you think about, you know, a potential deal, when you think about the leverage, you said 1.2. You know, what sort of leverage ratio might you be comfortable? How far would the company be willing to stretch?
Yeah, our balance sheet gets stronger every quarter, but as we think about a deal that we, you know, think is the right deal for Collegium, in this market, I'd say up to 3x would be the maximum for a commercial stage asset. Some of the attributes we're also looking for from a financial perspective, if not accretive in year one, accretive in year two.
You'd be willing to add two turns of leverage, basically?
That's right.
Okay, what else, I mean, haven't we talked about? I mean, we have a minute or two left. I mean, I wanna give you guys the opportunity to sorta, you know, present some closing remarks or anything to the investors here that, that any messages you wanna get across, anything that's important to, to you both.
All right, I'll start. So Collegium is delivering in 2023 on what it set out to do. We're delivering on a banner year with significant revenue and profitability growth, and we're highly cash generative. As you look to 2024, you'll see growth from a top-line and bottom-line perspective. And given the new patient population exclusivity granted for NUCYNTA, the outlook for 2025 and 2026 in our base case looks better than it did a few months ago.
Hmm.
I'll just layer on a couple of things. I'd say we're in a position of strength, so when we look from a commercialization standpoint, we have meaningfully differentiated assets that make a difference to patients and to the community of pain. We have a really strong commercial organization. So while we're the only one that has stepped in and differentiate ourselves, our customers rate our sales forces number one in meeting their needs and partner with them. That's really important, too. And number three, we've transformed the P&L through contract renegotiations, and now when you look at the portfolio and our commercial infrastructure, we're positioned for growth of revenue, and that's what we're trying to accomplish.
You know, Scott, I know Colleen touched on it, you know, a few minutes ago, but can you talk about the sales infrastructure and sort of where you are now? And is there anything else you can do that, that could maybe improve upon that script growth in 2024? I mean, I know Colleen said she's gonna keep the operating expenses somewhat stable, at least as the expectation of the company. So absent any other significant investments-
Yeah.
... in that type of infrastructure, what else can you do to improve the scripts as we look to 2024 and beyond?
Yeah, so, so look, as Colleen said, we're disciplined, and we have commercial experience where we only spend where we have to, right? And so we're well-sized, we have the right size infrastructure, we spend the right amount from a marketing standpoint. I think your specific questions on scripts, BELBUCA, it is. We acquired the product.
Yep.
It returned to growth-
As we grow.
We've been consistently growing-
Yeah.
... and we will continue to grow. XTAMPZA, every time we do a renegotiation, there's some pressure on scripts. Again, makes the script more profitable, drives the revenue growth. But this year, for that 30%, the one plan where we were removed is a commercial plan.
Yeah.
And so we have things like co-pay programs and other actions that help offset that script pressure.
Yep.
Other than that, it's doing what we do every day.
Okay, can you talk about how much maybe the scripts might have been impacted by your renegotiations? Have you talked about that number?
Well, what I can tell you is, so this year. First, if you go back to when we renegotiated the 54%.
Yep, yep.
Right? 10% of that, we were removed from market. So XTAMPZA was removed, no coverage.
Right.
Our business is down 6% year to date. So the primary driver of the decline has been that removal.
Perfect. All right, well, thank you very much, Colleen, Scott, and Chris, wherever you are, thank you all. We appreciate you. Please follow up with myself or Chris James if you guys have any follow-up questions. Thank you very much, Colleen and Scott.