Good afternoon. Thank you for joining the H.C. Wainwright twenty-sixth Annual Global Investment Conference. My name is Oren Livnat. I'm a specialty pharmaceuticals analyst here at H.C. Wainwright, and it's my pleasure to welcome for a brief chat today, Collegium Pharmaceutical, and with us is CFO Colleen Tupper and Chief Commercial Officer Chris-- Scott Dreyer. Welcome, Scott and Colleen. It's been a really exciting time lately, I'd imagine, especially for you.
Mm-hmm.
As you guys finally pulled the trigger after a couple of years of talking about diversifying beyond your base pain business, finally acquired in July and just closed this week, or this past week, the Ironshore acquisition, and have expanded now into an exciting new area. So I'm sure you're really motivated to launch a new product in the neuropsych area of ADHD. Let's touch on that first, and then we'll go into your base business. We'll lead off with Jornay PM, okay?
Mm-hmm.
So, Scott, I'd just like to know what excited you about Jornay PM when you were going through the due diligence process for this product? You know, was there anything in particular about this product or the ADHD market in particular that got you excited and made it the right product now to add to the portfolio?
Yeah, it's a great question, Oren. So first, I'd say I'll start a little bit of a zoom out with why, strategically, it's the right fit. As you said, we've been saying for quite a while now, when we looked at our focus for acquisitions, it was commercial assets, durability to 2032, differentiated products that had peak revenue potential of 150 or greater. That's what we've been looking for, and the acquisition of Ironshore and Jornay PM checked all those boxes and then some, right? So it's a highly differentiated asset that we really believe can make a difference for patients and caregivers.
All right, so, you know, let's talk about the differentiation. Obviously, it, this is a methylphenidate product. That doesn't mean much in this space, right?
Mm-hmm.
There's a lot of delivery mechanisms, a lot of variety in the space, and there's also a lot of genericization out there, right? So I'm curious, you know, what... how would you frame as the most important differentiation of this product, and how do you believe that is already perceived in the market?
Yeah.
Has that differentiation gained a foothold?
That's great. Yeah, so the key feature of the product that's unique to any other product that's been approved for ADHD treatment is that it's dosed in the evening. Now, that's just a feature. That's not the benefit, right?
Mm-hmm.
What that leads to is significant benefits for patients and for caregivers. So let's stick with ped-adolescent market, because that's about 80% of the business. So if you're a child that has ADHD, the dosing allows a parent or caregiver to give it to you in the evening, sometime in the 6:30 P.M. to 9:30 P.M. window, and the way the drug was designed is that it's absorbed in the colon, so it's a very slow release and absorption. What that leads to is one of the things that's most important is waking efficacy, right? So right now, what happens a lot of times is a parent may even be waking up their child an hour or two before timing it up to literally just dose them for ADHD. This drug allows that upon awakening, the efficacy begins, but that's just where it starts.
It's then designed to slow release throughout the day, so the efficacy continues throughout the day. Overcoming another challenge in ADHD treatment, which is sometimes a child has to carry the product, an immediate-release ADHD product, to the nurse, Schedule II products, so the nurse has to hold it so the efficacy carries throughout the day. The third thing is it has five doses, and what that allows the physician to do is really tailor treatment to the patient, right? So first, they will dose to get to an efficacy level that they think is right based on the unique situation the child is in, but then they can actually play with that dose to adjust duration of effect. So all those things are what excited me of the product, in that we can really bring something truly differentiated to the marketplace.
This is the only product that has both early morning, like pre-school efficacy and long duration?
That's right. The only one dosed in the evening that has those benefits.
All right. So Ironshore, who initially launched this product, I think, got it to about 15,000 prescriber base, right?
That's right.
Can you put that in perspective?
Yeah
... amongst the entire stimulant prescribing base?
Yeah. So first, what I'd say is that's nice breadth of prescribing, right? So right now, it's about fifteen thousand a month, and that's been growing. To put it into a frame of reference, if we looked at the second quarter, just so that's three months of time together, there's about twenty-two thousand physicians that wrote Jornay. If you look at how many physicians it took to drive the overall ADHD market-
Mm
... it's about eighty thousand physicians, right?
Mm.
There's plenty of opportunity to still grow awareness, not just with those users, to expand use, but to get to other users as well.
Yeah, I guess you really segued into my next question, which really is, it is such a vast market, right?
Yeah.
I think it's about $90 million, amazingly, $90 million-
Right
... stimulant prescriptions a year and still somehow growing robustly.
That's right.
You know, what is the awareness level? In the grand scheme of things, if I had to say, I got Adderall on one end of the spectrum, where is Jornay? What inning are you in on the awareness building?
Yeah, I think that's an area of great opportunity. So the awareness right now among physicians, treating physicians is about 65%.
Mm.
When you get to a product like this, what you're looking to do is drive to greater than 80%. So we'll be putting a lot more focus on the breadth of awareness for HCPs.
So, I mean, Ironshore, for a small company, I guess, did a pretty admirable job getting it to over $100 million run rate now.
That's right
... before you acquired it. You know, what can you do differently? This is a new therapeutic area for you. I mean, maybe not in your career, I'm not actually totally sure, but certainly at Collegium.
Yeah.
What do you think Collegium can do differently and bring to the table that?
Yeah
... maybe Ironshore wasn't able to do?
I think there's a few things. One, to where you ended there, is commercial expertise. So yes, we've been commercializing at Collegium since 2016, but the leadership team and the people that I've brought on board have been commercializing for 30-plus years, right? So we know commercialization. We have expertise internally at Collegium across all elements, which is sales, commercial operations, and market access, right? So what we bring to the table first is leveraging that commercial expertise. We'll leverage that in a few ways. There's some elements of gross to net that we can leverage scale, right? Wholesaler fees, things like that, that we'll be able to to draw down. The biggest thing is marketing opportunity, frankly. When you look at that awareness number-...
But I said 65% of HCPs, we need to get that greater than 80%, and we know what we would do to do that. The consumer and the caregiver is a huge opportunity. Ironshore did not invest anything yet in activating the caregiver. The good news is, we have data that says that if a mom or dad walks in and says, "I'd like-- I heard about this product, I want you to try it for my child-
Right.
-the HCP honors it, which is a big signal. So we're looking at what we can do to invest to do more caregiver marketing and activate that discussion.
Assuming you're able to successfully activate patients, if they go into their physician's office, what is the current coverage landscape now?
Yeah
so that we can have confidence that the doctor will be able-
Yep
to get that patient there?
The coverage is really strong. One thing I failed to mention at the beginning when we were talking about strategy, why we're so focused on differentiated assets is, in the U.S. market today, if you don't have coverage, you're dead. You're not gonna be able to be successful.
Mm.
This product has broad coverage, right? So 80% coverage across the key segments.
Mm.
In this space, unlike our pain business, where we have quite a bit of Part D, there's no Part D business, so it is 60% commercial, 40% Medicaid.
Mm.
The overall coverage in that entire pie is about 80%.
Okay. So right now, and I certainly know, getting up early for my kids, we're in back to school season, which is a crucial time for the ADHD space, of course. Can you just talk about how you're feeling about the prescriptions now, as we're just getting into that season, in terms of trends, growth, but also, during the transition, you know?
Yeah
... change of control here. Are you concerned at all that in this crucial time of year, there could be some disruption there?
Yeah. No, so that's a great question. So I'm not concerned at all because the Ironshore team was moving full steam ahead on the plans that were needed to ensure they maximize the opportunity during back-to-school.
Mm.
They had done regional sales meetings.
Mm
... literally halfway through August, activated those plans. Special incentives were put in place to activate, you know, this opportunity, and so no concerns at all, and now it's business as usual. I've talked to all the teams in ADHD already since the close.
Mm-hmm.
People are fired up, excited, and they're excited to be part of Collegium, and they're focused on the opportunity. The numbers, the back to school season essentially hit in the last few weeks.
Mm-hmm.
So if you look at IQVIA data, right now there's only data through mid-August, but two of the last three weeks were significant acceleration and all-time high. So you see the bend of the hockey stick in growth that you'd expect, and it's right in line with our expectations.
Are you seeing new physicians as we come into this next cycle, back to school cycles, taking up the product?
It's a good question. Don't have prescription at prescriber level data yet, but I would expect that because in the past you see a spike in that 15,000 number in back to school as well.
All right, well, I don't want to neglect the base business, which is only doing about $600 million this year, so that's probably important and material to talk about in the pain business.
Mm.
Can you just talk about, you know, prescription trends for Belbuca and Xtampza in particular right now? They're not necessarily going in the same direction, but I'm curious where they are relative to your expectations at this stage.
Great question. Yeah, so-
Mm
... both are in line with our expectations, and they're different expectations based on strategic choices that we made. So for Belbuca, upon the acquisition, the product had been pretty flat entering the acquisition, and we put a lot of focus into reinvigorating growth, and for four straight quarters, we've had year-over-year growth, and that continues. So we're very happy with that, and what we know is the revenue growth for Belbuca this year is primarily driven by prescription growth. Xtampza, prescriptions are down. That's 100% in line with our expectations. So entering this year was the completion of our two-year journey of contract renegotiations, and so while prescriptions are down, revenue is up-
Mm
... and again, performing exactly in line with our expectations. I think the anchor point I'd give you, we just finished the second quarter of 2024 versus the second quarter of 2022. So when we started that renegotiation journey-
Sure
... revenue is up 32%. Prescriptions are down 15%. So it's just evidence that we made some choices that really matter to the revenue line.
And that strategy is, you know, borne out, as you promised, on Xtampza. Belbuca is a little bit more of a mystery because we want to see.
Yeah
... what you can do with a product that, ostensibly could still grow a lot.
Yeah.
A lot of headroom. It's a differentiated product within the pain space. How confident are you that you can accelerate that product and put it on a sustainable growth trajectory rather than just maybe a step up and improve from where it was when you acquired it?
Yeah. I think you hit the key term. What we're looking is sustained growth now.
Right.
But still, it's a product that's nine years post-launch, right? So the reinvigoration of growth was a big step for that age of a product, right? So I wouldn't use the word acceleration, but continued, consistent growth year over year is what we're focused on, and there's plenty of opportunity to do that.
Is there a lot of headroom for that product? I mean, I covered it for many years, even before you acquired it-
Yeah
... and I always thought it was really underutilized-
Yeah
... in the pain space.
I believe so. I mean, when you look at the environment of treating pain and you have a Schedule III product with the profile of Belbuca, right? There's no reason it shouldn't be used more as the first-choice extended-release product. That's what we're focused on, and that's what's driving the growth so far.
All right, and you mentioned renegotiating contracts for Xtampza. Anything important we should be looking forward to this fall as new contracts for across your portfolio come out?
So what I'd say is November, as we've kind of gotten everybody to understand now, is when we'll announce any ins or outs. The major renegotiation period is over.
Mm-hmm.
Right? And so, and then we have good coverage, right? So we'll see about wins, but the biggest thing I'd say is anything that changes will be announced in November, or I'll give guidance around, and then our commitment is we will grow revenue for Xtampza, and it will still happen one of really a few ways, right? It could be through new wins that will only do at profitable levels. We're not back to the-
Right
... launch, where we're doing more gross-to-net give to get the product going. So we could have new wins. We could have, on the, on the ends, a little bit of renegotiation as well-
Mm
... but it'll be a mix of those things that lead to revenue growth.
All right, Colleen. You just closed this deal this past week. You gave some initial incremental guidance increase for this year. Can you just remind us what, if anything, you've told investors in the street about overall accretion of this Ironshore deal? Do we need to wait till January guidance to get really any details on that, or are there any broad bookends with regards to operating margins or accretion for next year?
Yeah, what I would say is we have announced in part of our materials that the deal is accretive immediately, obviously only as of September, so smaller dollars this year, and we expect it to be highly accretive in the following year. We always give our guidance in early January, so there'll absolutely be more color coming there. But I'll just double-click on sort of our revised guidance that we did as of close announcement, which is for revenue. We enhanced guidance to $620 million-$635 million, up from $580 million-$595 million.
Our operating expenses, we've increased to $150 million-$155 million, which is up from $120 million-$125 million, and Adjusted EBITDA at $395-$405, up from $380-$395. So that immediate accretion is reflective in those numbers. This product, at a base of what we've said is over $100 million in net sales for full year 2024, is already profitable, and it is growing quite significantly on those prescriptions. If you think of cost of manufacturing, this is a high-margin product. It's high 80% margin there.
There is a single-digit royalty associated with the product, and as I said, we look forward to really getting into this, integrating it, maximizing, and providing more color as we get into 2025.
So you have immediate gross and operating line accretion on this product?
That's right.
Okay, so it's higher than your base business on the gross line, which is great. I know you're not a formulation scientist or maybe an IP lawyer, but I'm just curious what math went into this deal. What assumptions, base case assumptions, went around the durability of this asset? I think you mentioned twenty thirty-two IP, but, you know, I've been in this game for a while, especially ADHD, and I know even when products have gone generic in the past, like Concerta famously didn't really go that generic. Patients were pretty picky, especially when you had complicated release profiles, which this has a very unique profile. So I'm curious, do you see life for Jornay PM exclusivity beyond, potentially from a formulation, perspective, beyond 2032 ?
What I would say is there are Orange Book listed patents that go to that 2032 date that we're confident in. There are a few additional patent applications in process. We haven't done the modeling around those additional years, and for those of us that know us and our portfolio in this space and with these formulations, there are a number of nuances. I won't speak to any quantification of, you know, barrier to entry. Those are all considerations in this place, but we're really confident in the patent estate in the 2032.
Okay, so-
Yeah
... you mentioned upfront one of the criteria for your biz dev, and it wasn't new, it's, you know, been a long-standing goal, is to have $150 million for this product. I'm not looking for guidance here, but I am curious, when you think about how vast a market this is, but very competitive, are you comfortable giving even any kind of peak potential for this product?
Yeah, I won't give peak, so I'll stay true to that. But a couple things I would say is, this is a product that is growing quite significantly. You know, It was a private company that maybe had limited resources to be able to support that, so we're really excited about the potential there. As you noted, it's a significant market. It's a growing market, even in spite of the vast genericization that's in the market. It's a differentiated product. Our sort of guiding goal post for any assets that we have been looking at, as you said, was $150 million or greater at peak. That was really about. That's meaningful in the size of portfolio the product already has a base of 2024 sales in north of $100 million.
Mm.
So that goal post for Jornay is significantly higher, and I'd be disappointed, frankly.
Yeah
... the management team would be disappointed if we weren't doubling that expectation.
Exactly OR X 2. All right, so you just made a pretty big deal. I'm assuming your priorities are maybe deleveraging now, after execution on the commercial side. But can you just tell us, you know, looking a little further out, how do you think about capital deployment now? And, you know, on the M&A front, you've just entered a new area. Should we think about-- I mean, it's a pretty specific area of neuro and neuropsych is ADHD. Are you looking broadly at neuro still going forward, or are you thinking, "Should we assume now, let's leverage this ample commercial infrastructure, you know, investment we're making in ADHD, and maybe look more around that?
Yeah, so I'd say in the immediate term, obviously, our focus on integrating and maximizing Jornay. Our capital allocation strategy is a bit nuanced but mostly unchanged. We are going to maximize the asset we've just brought in. We are going to pay down our debt, and with our new terms on that debt, we've been able to decrease the cost and also extend the term, which gives us more flexibility, whether it be to pay down more rapidly or, you know, take advantage of the lower amortization over the next couple of years. We will be, even with this acquisition, less than two times net debt to EBITDA at the end of this calendar year, and we continue to have a share repurchase program authorized by the board with $150 million remaining on it.
And we'd like that tool in our toolbox to opportunistically leverage. But again, immediate focus is really on Jornay. Our business development strategy has been and continues to be finding that first place in a new beachhead. Jornay does that for us, and we will be able to build upon the call points of neuropsych or pediatric. There's a number of assets across-
Right
those call points so that we can start to repeat what we've done in pain over the years, which has really synergized that infrastructure.
I think in this area in particular, there are probably some under-resourced companies or single product companies, too, that are probably struggling. You might have some opportunities there. A major, you know, big picture part of this story for a while has been what I see as a valuation disconnect between, you know, your current base business and your valuation versus the durability, right? There's questions in the market about the durability of your business. Can you just talk about what your base case assumptions are for the exclusivity of the base business, and maybe remind investors what they might be missing as to why there could be major upside optionality on that front?
Yeah. So if I start with the Nucynta franchise, I think the first thing I would remind everyone is that earlier this year, we announced an authorized generic agreement with Hikma. And what that authorized generic agreement does is it gives them a little bit of an advance to launch. In exchange, Collegium retains mid-80% profit share on that deal. Nucynta ER. The second announcement was getting pediatric extension for six months. So Nucynta ER IP, loss of exclusivity date is December 2025, and Nucynta IR is January 2027. With ER, it's important to note that there are three potential entrants, the first of which I'll mention is Rhodes. They are barred until 2028 because they did not adopt a skinny label.
The next two are Hikma, who's now our authorized generic partner, and Teva, which, you know, it's uncertain on whether they have an interest to reenter the market in opioids, given their strategy. So I would sort of frame the landscape there for Nucynta that, at worst, we have a longer and more robust tail than one would have anticipated. For Belbuca, there have been three ANDA filers to date, the first of which was Teva. BDSI settled with Teva to allow entry January-