Alright, good afternoon everybody. Thanks for joining us. Sorry, we're running a minute late. Where's the clock? Is it back there?
This one here.
Alright.
Go ahead.
Oh, geez, right in front of me. Okay, awesome. Thank you very much. Well, we're excited to be hosting the representatives from Collegium here with us. Representing the company is the Chief Financial Officer, Colleen Tupper, and to her right, Scott Dreyer, who's the Chief Commercial Officer of the company. So I'm Glen Santangelo. For those of you who don't know me, we cover Collegium on the research side, and you know we have 24 minutes to run a fireside chat. So guys, welcome, Colleen and Scott. Thank you guys for joining us.
You know, Colleen, since we have the numbers expert with us, why don't you just quickly start off on three key results? Another decent quarter. I mean, I guess, you know, some were kind of questioning where the beat came from, but maybe just sort of give a little bit of color on the base business and sort of what happened in the quarter, and then we'll just dive right in.
That sounds good. Thanks, Glen. So we had record revenues in the third quarter of $159 million, which was up 17% year-over-year. Both Belbuca and Xtampza delivered record revenue, with Belbuca up 17% year-over-year, and Xtampza was up 24% year-over-year. JORNAY PM delivered, as expected, $8 million for just shy of one month and slightly lower days on hand at the end of September. We did speak about, in our earnings call, a one-time benefit that was experienced with Xtampza . That helped Xtampza with approximately two percentage points of gross to net, which equates to about $2 million.
And now we project that Xtampza gross to nets will be the low end of our range, about 55%, where we were previously estimating 55%-57%. Even without those one-time benefits, that one-time benefit, we would have had exceeded consensus, but nothing was to take us off of our recently updated guidance at this point. On the bottom line, we had record Adjusted EBITDA of $105 million, which was up 18% year-over-year.
Okay, obviously the big news on the quarter was the CEO announcement, right? So, I mean, this, you know, I think people were a little bit surprised going back, I don't know if it was six months ago when Joe departed the company, Mike, sort of the founder, previous CEO, came back as interim CEO, and now he's announced his successor again in Vikram Karnani. I don't know if you can sort of give an update since he's not here and maybe what made him, why Mike maybe thought that he was a right fit for Collegium, and if he expects, if you all expect any sort of strategic different changes, moving in any other directions, or is it kind of maybe more, you know, he'll sort of conform to the strategy? How should we think about the CEO evolution in 2024?
Absolutely, so Vikram is on his second week in the role as CEO, sitting here today. He looks forward to meeting everyone at upcoming meetings, including in San Francisco in January. On his background, I would say the board was really looking for an experienced leader who could help drive Collegium to its next phase of growth. Vikram spent almost a decade, sorry, Vikram spent almost a decade at Horizon, joined in the early 2010s, but 2014, when they were really a spec pharma company about the size of where Collegium is today, and sort of led them through their evolution, and so I think that background from both commercial and business development perspective was incredibly important.
As far as Vikram's perspective in the interest in Collegium, he has a strong appreciation for the foundation that we've built, which is set upon a really strong pain franchise, which is now across four products, where we've been able to deliver a strong top line of nearing $600 million and a really strong bottom line of nearing $400 million. And off of that foundation, he looks forward to driving us through the next phase of growth, which will be focused on both organic and inorganic.
As you said, I mean, the base business has been very stable, right? When you look at the core three products, right, generating $500 million and I'll call it $80 million, $90 million, $95 million, you know, so far a year or year- to- date, the expectation. And then, you know, you just said you had one month of JORNAY PM this quarter, you know, but that's going to contribute in the fourth quarter as well. You know, when we looked at the third quarter, you called out the Xtampza ER sort of gross to net one-time benefit. Maybe that will be different in 4Q, and so maybe that's a little bit up this quarter, maybe down a little bit next quarter. But is that sort of a fair sort of summary, summation, I guess, of where things sort of are at this point?
Yeah, I would say things are hitting on all cylinders. We were really pleased with the third quarter results, both from the record revenues, record bottom line, and what we're seeing in the early days of JORNAY PM being in our hands. We closed the acquisition on September 3rd.
Yeah, and so maybe before we walk the JORNAY PM acquisition, I mean, when you look at the stock post Q3, and then I'm going to let Q3 go, kind of interesting to us how, you know, you beat the third quarter, but yet the stock went down. Do you think it was really a function of just the beat and maintaining guidance that was the culprit, or do you think there was a certain level of expectation above and beyond that? Just, I don't know if you had any high-level thoughts as to maybe why you thought the stock reacted the way it did post the quarter.
Yeah, I would say there is a disconnect in the stock reaction that we've seen really starting from the October period, but then accelerating upon, you know, the earnings timeframe of about November 8th and all the conversations that we've been having. All of the investors that we've talked to and all of our top shareholders are really excited about what they're seeing in the early days of JORNAY PM through the back-to-school season and with no disruption. One of the things, maybe it was your idea of the beat and maintain. I would say we only updated guidance in early September, so our guidance is still very fresh, and I don't know who was looking for sort of an upgrade at this point. But there also could be some quant selling.
In the third quarter, with the close of the acquisition, our cash balance went down quite significantly. We obviously had the debt, and Cash from operations was impacted by the accounting treatment for the deal. So there were a number of items because it was treated as an asset acquisition, such as the warrants and the RSU payouts, as well as liabilities that all flowed through cash from operations. So there could be some triggering events by some of those metrics.
Alright, so maybe let's start with the acquisition. Scott, maybe this is a good place to sort of bring into the conversation. You know, talk about this JORNAY PM, and maybe what's so differentiated about it in this ADHD market, which feels like a very crowded sort of therapeutic category, right? But what's different about JORNAY PM?
Yeah, great question, Glen. So, yeah, look, what we about JORNAY PM is a unique position in the market. So as you said, it's a highly genericized market in ADHD. The majority of products used to treat are stimulants. There's methylphenidates in there, and there's amphetamines, and it's, you know, been a lot of lack of innovation with products that basically immediate release, extended release, and that's about it. as JORNAY PM came on the scene, it's a truly unique molecule for patients, and here's why. It's the only extended release methylphenidate that's dosed in the evening, right? So what's the benefit of that feature? Well, the benefit is the first need of a, we'll focus on a pediatric patient, is in the morning upon awakening, and the of JORNAY PM is such that it's released slowly in the colon.
When administered in the evening the night before, about 10 hours later, it starts to work. And so the first time a patient needs efficacy in the morning, JORNAY PM starts to kick in. But that slow release continues throughout the day. So the efficacy that's needed to take the child through school and later on in their day is kind of at the disposal. So another big benefit, many children now, they have to carry an immediate release product to school. It's a Schedule II. The nurse has to hold it. If you get to the right dose of JORNAY PM, that can be alleviated. So we like that differentiation. We think it's meaningful for the marketplace and specifically think it's really meaningful to patients and caregivers.
Could you talk about the IP around the product?
Yeah, so IP through 2032.
Alright, and maybe just talk about sort of the script growth. I mean, you've given a little bit at the time of the acquisition, sort of how things trended 2023 and so far year to date in 2024.
Yeah, so one, you know, the time of year right now is really critical in ADHD. It's called back-to-school season. You always see kind of a growth pattern. So closing the deal right in the middle of back-to-school season, we were really focused on execution and ensuring that we benefited from back-to-school. So what that's resulted in, scripts were up 58% year-over-year. Last year, to $490,000. This year, they're up 32% year-over-year. And in the last six weeks, we've seen a significant acceleration of about 18% just in the last six weeks, benefiting from the back-to-school opportunity. So the team's done a great job.
I'm sorry, Scott, the plus 18% in the last six weeks is compared to what?
It's comparing October weekly to July weekly, so the back-to-school impact.
Okay, so it's sort of like almost like a quarterly sequential sort of growth rate.
Yep.
Okay, awesome. And then, you know, your conversations, you know, with managed care companies, no issues in terms of, you know, getting coverage and you're comfortable where everything sort of sits at this point?
Yeah, JORNAY PM, very different business than our pain business, right? So no Medicare Part D. You've got 60% of the business in commercial, 40% Medicaid. And across that entire pie, JORNAY PM is covered for 80%. So we're real happy with where the coverage is right now. We'll always look to expand coverage for patients, but right now we're happy with where it is.
Any competition on the horizon on the extended release side that you're paying attention to?
No significant competition on the horizon.
Okay, maybe let's shift gears and go through the three core products Xtampza . Colleen, you talked about there was a slight gross to net benefit this quarter, won't be there in the fourth quarter. You know, could you maybe just remind people the guidance that you, what you did in the third quarter to gross to net, what the guidance is for the full year, and hence we can sort of derive what you're expecting in the fourth quarter?
Yeah, so the gross to net for Xtampza was 50.8% in the third quarter, which, as I noted, was benefited by about two percentage points due to commercial rebating, basically a formulary review where we were able to claw back some rebates that weren't due. We had been previously guiding or giving additional color for Xtampza gross to nets to be between 55% and 57% for the full year. With where we've trended thus far, plus that one-time benefit, it will be really right around the 55%.
But at the same time, Colleen, scripts have sort of declined, right? Can you walk through what are the drivers to ultimately grow Xtampza in the coming years if that gross to net sort of flattens out from this level?
Yeah, so as expected this year, prescriptions have been under pressure. We have walked away from a number of payer contracts that have put that pressure onto Xtampza from a prescription perspective, but it has allowed us to grow revenue year-over-year. So as we came into 2024, we guided Xtampza overall to have revenue growth this year that would be driven by gross to net improvement. And going forward on a year-by-year basis, you will have revenue growth, could be a combination or one or the other of revenue, gross to net improvement or prescription growth.
You still think there's opportunity to improve gross to net from here in this level?
Yes, it's not the same opportunity that we've experienced over the past two years, and it's not renegotiating a large bolus of contracts all at once, but yes, there are things around the edges.
Okay, and just remind people the Xtampza revenue growth year- to- date, you gave it to us for the third quarter.
Year- to- date revenue growth was 24%, oh sorry, I have in front of me 24% for the quarter.
24% year- to- date?
Sorry, no, that's the quarter. Year to date will be low single digits.
Low single, okay. Alright, can we maybe talk about, I don't know, what do you want to talk, Nucynta or Belbuca first? I mean, we can talk, let's just pick Belbuca, right? I mean, this has obviously been a great growth driver for you guys. The concern with both Belbuca and Nucynta is the LOEs upcoming in sort of 2027. You know, with Belbuca in particular, there are three ANDA filers. There seems to be some debate in terms of when the company may see some generic entry. You know, we've struggled looking at consensus estimates throughout 2026, 2027, and 2028 on how people have sort of had it modeled. And so, I don't know, maybe you could just spend 30 seconds sort of giving people, you know, the background on Belbuca, when the IP runs out, the three ANDA filers, and sort of, well, in the interim, and then we can talk about the growth in the interim, which has been fairly robust.
Okay, so with the three ANDA filers, the first I'll mention is Alvogen, which was fully litigated through BDSI on invalidity, and therefore they lost, so they are barred until December of 2032. Chemo is the second I'll mention, which is bound by the Alvogen outcome on invalidity, but is pursuing non-infringement on their own. To date, they have received four CRLs, so we think they have a manufacturing hurdle first and foremost to overcome, and then they would need to prevail in litigation. We feel pretty strongly about our position there. And then lastly, the third filer is Teva, which had been settled in about the 2018 timeframe with BDSI and Teva to allow them to enter January 2027. What I can tell you is to date, they have not received tentative approval.
They have relinquished their first filer exclusivity, and I think in our mind, it remains uncertain on whether or not Teva will launch another opioid. Their strategy is focused on branded pharmaceuticals and complex generics. So what we will do, what Collegium will do, is really invest through that date and wait to see what happens. We won't walk away from payer contracts or retailers.
For what it's worth, we hosted Teva this morning, and we did inquire about opiates. I mean, they get that canned answer that they're not categorically opposed to opioids, but, you know, to your point, I mean, their actions maybe speak louder than words, and would that extend that exclusivity for another five years from 2027 to 2032 if Teva doesn't take action?
That's right.
Which would be obviously very meaningful given the contribution. Alright, and I think, Scott, that I just heard Colleen say, you know, the plan is to continue to fully invest in this product up until and maybe hopefully through 2027. Can you talk about the investments you're making, just sort of giving the, I don't want to call it a truncated timeframe you have, but essentially given where we are in the calendar cycle?
Yeah, look, so the growth is driven by prescriptions, and that prescription growth is driven by execution. So the investments we're making are things like the focus of the field force and the weighting of their incentive comp, right? New marketing materials that are fresh, that drive engagement. Those are the type of things that we're investing in. Very happy to see that we've now seen growth of Belbuca, five straight quarters, year-over-year. And if anything, we're seeing a further acceleration in the recent weeklies and a bit of a breakout. Another bit of color I'd give you, Glen, is when I look at it across segments, so whether you look at Medicare Part D or commercial, it's growth in both areas. And even when I dip into subnationally across the country, we're seeing the growth everywhere. So there are really great signs of brand health for Belbuca. I'm confident it'll continue to grow.
So Scott, just to be clear, did you tell me now we've seen a recent weekly breakout in Belbuca, and you told me we've seen a recent weekly breakout in JORNAY PM?
That's right.
Okay, alright. Just taking notes. Thank you very much. Can we talk about, just back to Xtampza for a second, because we obviously, everybody tracks those scripts pretty closely. Did you give an update on a third quarter call that there'll be some certain contracts that won't be tracked, and so maybe the numbers that we see in IQVIA or other places may be a little bit misleading? Could you just remind us of what that statement was?
Yeah, so specifically what we announced on the call is we won coverage not just for Xtampza, but for Belbuca as well at an integrated health system that's about 8 million commercial lives and 2 million Part D lives. That integrated health system is a direct purchaser, so you will not see any benefit in the IQVIA data. There'll be no script read-through, but obviously it'll have a positive net revenue benefit.
Right, so at least the script data that we're looking at there should be upside to that, just sort of given this dynamic.
The tie of revenue to scripts will not have a script element related to this.
Okay, perfect. Alright, and maybe lastly, I did want to touch on Nucynta, right? And this is another sort of 2027 sort of timeframe, and you know, here we have four ANDA filers, and there's another one that I think, you know, you have some type of an agreement with Teva, but I think people get confused, so I don't know if you can maybe just, you know, give us the 30-second overview of Nucynta and where that stands.
Sure, so two important milestones occurred this year was one that we signed the authorized generic agreement with Hikma, which allows them a date certain launch. Our profit share that Collegium retains starts in the mid-80% there. The second important milestone was that we achieved the six-month pediatric extension. That puts Nucynta at the end of December 2025 and Nucynta IR at the end of January 2027. We're watching this space carefully for API availability. Tapentadol is not readily available. There are only four DMFs, of which only one is at commercial scale, which is our exclusive supplier. Certainly, someone could make the investments and the time to scale up, but to date, that has not been done. As far as the players there for Nucynta which again would be December 2025, it's Hikma who will launch as our authorized generic.
It's Teva, question mark if they're interested in coming into this space. And Alkem is the third, but they're not going to be able to come in until 2028 because they chose not to adopt a skinny label. So the question really for which is early 2026, is only around Teva. And then for IR, it's those same players plus Rhodes and PuraCap in January 2027. And so I think with the Nucynta franchise, we'll have a longer and more robust tail than you otherwise would expect from a generic company.
I'm sorry, so you said, so what was the date on Alkem? January 2028?
It's in 2028. I think it's mid-2028.
Mid-2028, so absent Teva is now the worst, if we take Teva out for a second, is the worst case scenario mid-2028?
Yeah.
Yeah, alright. I mean, do you look at the 2026, 2027, and 2028 consensus numbers and kind of scratch your head, right? Because I think everyone just automatically goes to those LOE dates, you know, and starts slashing and burning the estimates without sort of peeling back the layers to understand what's going on with Belbuca and Nucynta.
There is uncertainty here, and there's a wide varying assumptions, I think, between the models as well.
Yeah, yeah, okay. We have four minutes left. Let's maybe switch to, you know, back to maybe some more financial questions. Do you expect when we model, you know, fiscal 2025, do you expect an uptick in the operating expense run rate, you know, to JORNAY PM and the promotional and marketing and sales activity around that? And can you talk about maybe some of the changes that you're making?
So we'll look forward to provide you with full color when we issue guidance in early January. To give you a bit of framing on the OpEx investment though, as you think about it now, recall that post-close, we updated our operating expense guidance by increasing it $30 million, which represented about four months at the acquired investment levels. So that would be annualizing to about $90 million. The levers that we have the opportunity to optimize both the field footprint as well as direct to consumer, which will increase that investment over the next year. I would just also flag that keep in mind that prior to Ironshore, the Collegium investment level on adjusted OpEx was about $125 million. So right now, consensus sitting at about $200 million is undercalling it a bit.
Is what? I'm sorry.
It's a little bit low.
Okay, when we talk about sort of, Scott, the JORNAY PM script growth this year, you know, I get it, you only own the asset for a very short period of time, but when you think about the conversations you're having, I mean, do we think about that growth trend sustainable 2025 and into 2026 without giving anything too specific or detailed? I mean, how do you feel about the runway for that product?
It's a good question, Glen. So first I'd say, yeah, I've never seen a product minus new indications that continues to grow in a linear fashion. So scripts grew 58% last year, 32% this year. There's robust growth ahead of us, right? The drivers are the value prop of the product. The response from HCPs is very strong. They're seeing the value. One thing we didn't talk about that's happened in the last year is the prescriber base has grown 25%. So in the third quarter, there were almost 23,000 physicians that have used the drug. Those are all indicators of brand health that I expect to fuel going forward. In addition to what Colleen mentioned, when we talk about further investment in the field, that's because awareness of the product among HCPs is a little low, so we will invest to improve that.
And when it comes to the profile that I explained, there's parents who are really not aware of the product. There hasn't been a lot invested in raising awareness among parents and caregivers. So we'll do that through digital marketing efforts, and that should be a catalyst to growth as well. So feel really good about the growth propositions going forward.
Yeah, when you think about sort of your base business, sort of expectation pre-JORNAY PM this year, and we sort of, again, without sort of giving guidance, but we translate that into next year, you should maybe have less headwinds on Nucynta, you know, the full benefit of the Xtampza ER contract sort of year-over-year. You know, Belbuca certainly has a fair amount of momentum, but you know, when we think about just sort of the base ex-JORNAY PM, like it shouldn't look wildly different in 2025 versus 2024, and if anything, you could argue it hopefully looks better, I mean, just sort of given some of the things I just talked about.
That's right. Without putting my cards out there on my guidance in January, I would say we continue to expect sustainable revenue growth from the pain portfolio. I would expect that the dynamics of that will be similar to this year, Belbuca to grow on both gross to net improvement and volume, and Xtampza to grow predominantly on gross to net improvement. Nucynta will be roughly flat.
Alright, let's talk about a big balance sheet question because obviously there's a big change here in the second half of 2024 with the Ironshore acquisition, but you know, the capital allocation priorities from here with sort of a new CEO sort of coming in and acquisition that you've just completed that you need to sort of maybe weave within your operations. And so, you know, talk to me about the cash level and the debt level and what you think about those capital allocation priorities going forward because the company bought back a lot of stock in 2022, 2023. Stock price was reacting very favorably. Now you've seemingly shored up the pipeline, you know, add a little debt to the balance sheet, but how should we think about those capital allocation priorities from here?
Cash on the balance sheet at the end of September was $120 million. We are back in build mode now after the acquisition. Our debt will be less than 2x net debt to EBITDA at the end of the calendar year. Our capital allocation priorities remain broadly unchanged, which is to seek out business development of which we just closed.
Yeah, we're done in 10 seconds. We're done in 15 seconds.
The Ironshore acquisition, paying down our debt and opportunistically repurchasing shares. And we'll look to in the future bolt around what we've just acquired with Ironshore.
Okay, alright, Colleen and Scott, thank you very much. Really appreciate it. Thanks, so much.
Thank you.