Good afternoon, everyone. My name is Bob Klingenberger. I'm an Executive Director with the Morgan Stanley Healthcare Investment Banking Group. It's my privilege to welcome the Collegium team here today. Before we get into some of the Q&A, I need to read a brief disclaimer. For important disclosures, please see the Morgan Stanley disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. I'm excited to be here with Vikram Karnani, who's the CEO, Colleen Tupper, the CFO, and Scott Dreyer, the Chief Commercial Officer. Maybe just to start, Vikram, starting with you, I know it's not quite a year since you became CEO, but maybe just to kind of update us with the progress in the 10 or so months since you took over and the progress Collegium's made.
Yep. First of all, thank you for having us at the conference. I'd say, look, the last few months, and particularly 2024, has been a pretty exciting and a very productive year for Collegium. At the beginning of the year, we laid out our priorities as a company, our strategic priorities. One was to maximize the growth of Jornay, or accelerate the growth of Jornay PM. As a reminder, Jornay was acquired as part of the acquisition of Ironshore Therapeutics just about a year ago, which launched us into ADHD, which is an exciting new space for the company. The second priority was to continue to extend the durability of our pain franchise, which is about $600 million in net sales, and supported by a very modest infrastructure, both in terms of sales and marketing.
Number three was to continue to have a smart capital allocation strategy, which is a mix of continuing to pursue business development, adding new assets to the portfolio, share repurchases and returning value to our shareholders, and paying down debt. I'm glad to say that across all three of these priorities, we've done quite well throughout the year. Let me just give you a sense of what that looks like, and then maybe we can get into some of the more detailed questions. On Jornay, in our Q2 earnings call just a few weeks ago, we highlighted the fact that Jornay has made excellent progress this year. As a reminder, we acquired this from Ironshore, and at the time, I believe last year, it had done a pro forma $100 million in net sales.
When we issued guidance at the beginning of the year, we had said it would be $135 million plus this year. In our most recent earnings call, we further raised guidance in the range of $140 to $145 million for the year. We continue to see excellent progress with Jornay. In pain, we've said that our pain franchise is expected to grow low single digits. In Q2, we demonstrated 7% growth year over year. That business also continues to do well. In terms of business development, we remain active in terms of looking for the next asset to add to our portfolio. In the meantime, we also have opportunistically repurchased shares, returned value to our shareholders, as well as paid down the debt, and strengthened our balance sheet.
Across all of our facets of all the strategic priorities, I think the company has done extremely well, and we'll look forward to continue to demonstrate this performance.
Yeah. You sort of led with it as the top priority, but kind of starting with Jornay PM®, you obviously referenced the increased guidance throughout the year. Could you talk a little bit about, and maybe Scott also, for you, kind of what the driving factors have been from a commercial initiative standpoint, and what's kind of led to that increased performance?
Yeah, sure. I think first, it's important to start with the product, right? What we love about Jornay PM® is that it's a highly differentiated medicine. It's the only branded ADHD product that's dosed once in the evening the night before and brings a promise and an ability to basically provide efficacy upon awakening in the morning and through the next day. It starts with the differentiation that we've been able to leverage as we commercialize. The second thing is physician perceptions and thoughts of the brand are really strong. In Q2, we had 26,000 prescribers. That was up 23% year over year. When we actually did a recent market research survey, physicians ranked Jornay PM® number one on differentiation, and it was twice as high as any other brand. That's what we've leveraged to take the following actions, right? Two main things that we've been focused on this year.
One, we knew that to grow the brand, we need to increase awareness. Awareness is a big issue, not just with physicians, but with patients and caregivers. A lot of our activities have been focused on that. We expanded our sales force from about 125 representatives to 180, and that's all about increasing awareness and engagement with physicians. The second thing is we're making numerous investments to basically increase awareness of patients and caregivers because we know when they're aware of the product and they ask a physician, a physician is happy to honor it. Execution in the first half of the year around those topical areas is what has driven performance. What's exciting for us is the full impact of the expansion or the full impact of the DTC initiatives we're taking. We don't even expect them to really kick in till late this year and more 2026, 2027.
The first half was really driven by just good old-fashioned execution. The other thing I would tell you is it's back to school season. That's really big in ADHD. We're hitting that now. It's a time where a lot of children are given new options by physicians to get them through the school year. That starts in the August time period. We expect Jornay PM® to continue to benefit and grow during that time. Just a recent data point is if you look at average weekly prescriptions in the month of August, they're up about 1,200 versus July. That's a pretty good increase, even higher than last year where they were up about 1,000. We're seeing the beginning. We expect that to continue through the second half of the year.
You talked a little bit about the specific differentiation advantages and maybe just thinking about the kind of the patient population and the kind of patient journey with ADHD. Can you talk about how those advantages translate from a patient experience, and then how does that funnel to how you think about sales?
Yeah. The full benefit of that differentiation I mentioned is that when you're dosed in the evening, right now, a child or even an adult, one of the challenges they have is they'll start to take a medication in the morning. They often need something called a booster later in the day. Sometimes they need more efficacy. The promise of Jornay PM® is pretty straightforward. We dose in the evening once, it's absorbed in the colon. It doesn't actually start to turn on until upon awakening in the morning. The first time an efficacy is needed, it begins to work. Because of the slow release, it has the ability to have duration throughout the day and could, for many patients, eliminate the need for a booster or an add-on therapy. That's something that's completely different than what anyone has experienced to date in terms of treatment.
That's the main value proposition. When we talk to parents or caregivers about that, it's something that really piques their interest. That's why we're making investments to raise awareness of that. How does it translate in the marketplace? I think the best testimony to the translation of the profile is that now we're seeing over 26,000 physicians prescribing the perceptions that I mentioned around differentiation, how they see the drug. Physicians, it's translating that they see this as a real tool for their toolbox. For parents and caregivers or adult patients, they see it as something different that can really make a difference in the way they live their daily lives.
Yeah. Yeah. I know, Vikram, you referenced the $140 to $145 million in guidance you've given for the year, up from earlier this year. I think if you just look at kind of where the sell-side analysts are, they're maybe anywhere from $300 to $400 million in terms of peak. How do you sort of square that a little bit in terms of the trajectory the product is on? You talked about kind of $100, $250, the sell-side. Obviously, I know you haven't given formal guidance, but maybe just help us think about what that path looks like and if that's maybe a little bit on the lower side.
Yeah. Look, first of all, going back to what Scott said earlier, it's really important to recognize that we're just now taking meaningful steps to inflect that growth curve. The salesforce expansion has just occurred in the beginning of Q2. Many of the other targeted investments in terms of non-personal promotion, they're taking place now to be timed right with back to school. I think we need to give it a few months to see how these investments pan out, to what extent they inflect the curve. Because going back to the point that Scott made earlier, there is a real opportunity in creating awareness of this medicine. When awareness does get created, when a physician or a patient or a caregiver does become aware, they take action. That is evident from the growth that we're seeing.
I think what we'd like to do is make sure we can see the impact of this expansion. It's got to say, it takes a little bit of time. Give it till the end of the year. Going into next year is when we can really start to see the impact of these investments. I think we'll have a better sense on what that growth curve looks like for the future, which is one of the main reasons why we haven't talked about future or peak sales estimates for the future. Just in terms of where we are at this point in time, as I look at the back half of the year, we're seeing when we gave guidance and we actually raised guidance, the increase in net revenue is a function of both script trends that we're seeing as well as improvements in gross to net.
As those tend to play out throughout the rest of the year, we see the impact of the salesforce expansion. We see the impact of direct to patient, digital programming, social media, a lot of the things that Scott's team is working on. I think we'll come back and have a better sense of how big this growth can be. Rather than give guidance now or talk about peak sales, where we are right now, I wouldn't want to speculate, but we're very, very encouraged by the opportunity here. This is a growing market, right? It's a vast market. 22 million patients, 100 million prescriptions a year, growing at 6% CAGR over the last five years, just to give you a sense of the scale of the opportunity here.
Given all of that, given the opportunity that we have in front of us, and given our starting position is relatively early and small, but with a real strong value proposition, we are pretty encouraged with what we've got in front of us.
Yeah. No. When you go back to even kind of the prescriber numbers, right, today versus the large market victim you were referencing, it's sort of there's a lot of runway that you feel like ahead of.
Absolutely. I mean, just in Q2 alone, we saw a 23% increase both in prescriptions and in new prescribers, right? When you think about a drug that's been on the market for, call it, three, four, five years in a seemingly crowded category, for a medicine to now have that kind of growth, we're not only increasing depth, but we're also increasing breadth that we can build on top of in the future.
No, that's great on Jornay PM®. I think you referenced that second priority being the pain portfolio, kind of that low single-digit growth, 7%, I think you said in the last quarter. Could you talk to us just a little bit about, I know there have been some kind of recent developments in terms of the longevity and also kind of what you're seeing from just a trend perspective in that portfolio?
Yeah. Look, I think the pain business, the pain franchise remains highly profitable for us. Again, as a reminder, roughly $600 million in net sales, really driven by a relatively small team of about 95 sales reps, very modest marketing spend. Highly profitable, throwing up a lot of cash. As we've said before, we expect the growth numbers to be in that low single digit, 2%, 3%. We're very encouraged by Q2 performance at 7% year over year. I think for 2025, we continue to feel that that low single digit is an appropriate benchmark for us to look at. Importantly, what I want to highlight about that business is about the longevity or the durability of that franchise.
There is no, in order for a generic player to come in and compete with any one of those medicines, any single entity would have to satisfy three requirements and all three requirements for each of these medicines, right? They would need to have regulatory approval. They would need to have a pretty clear legal pathway. They would need to have access to manufacturing or supply. Across our entire pain franchise, all three medicines, there is no one party that has satisfied all three conditions for any of our medicines. When you drill down into the details, what you see is a franchise where the durability of those long-term revenues remains underappreciated.
Maybe said a different way, the sort of disclosed patents that I know you all have in your public filing, that might not be the right way to think about kind of the potential end of life or so.
That's right. This would not, you would not expect a typical LOE phenomenon play out here like you would see in other small molecules, specifically because of the very nature of the medicines, what this market has experienced, frankly, our strong position, and our strong IP.
I think as you think about that kind of modest growth, you know, durability in the franchise, it's not something you're going to make additional investments. That's going to remain a very high-margin business.
That's right. The way we think about that business, in fact, it does extremely well with the level of investment that we have against it. Like I said, it's highly profitable, generates a significant amount of cash, which then allows us to make targeted investments either for organic growth of Jornay PM® or for bringing on other, fulfilling our other capital allocation priorities.
Yeah. No, that's a good transition because I think that my next question is really around that kind of external investment that you've talked about publicly as being one of the priorities. Maybe just talk to us about how you think about that from a criteria that you use to think about those potential opportunities externally.
From a business development perspective, when I talk about capital allocation, as a reminder, we look at three specific areas, right? We've got doing business development, adding new products to the portfolio, returning value to shareholders through share purchases, and paying down debt, right? Specifically looking at business development, some of what we're looking for are mostly in commercial assets or call it very near commercial assets. We're a company that has strong commercial infrastructure and commercial know-how. Therefore, that's the area that we're most interested in. We're looking at assets or medicines that are meaningfully differentiated, right? That add meaningful value for patients. Number three, peak sales in excess of $300 million. I would say what's also important is some longevity, so IP going out into the mid-2030s and beyond. We get asked a lot of questions around what therapeutic areas are we interested in.
Ideally, we'd be able to leverage the infrastructure that we build for our medicines. So Jornay PM®, for example, we call on psychiatrists and pediatricians. If we can find an asset that fits into one of those two areas, of course, we'd leverage our infrastructure, and that would be a very obvious answer. We're open to looking beyond that and building out the portfolio in newer assets or newer areas. Of course, we'd have to be a bit more mindful about making sure that our financial criteria are met, and we're being very responsible in terms of delivering overall high-level financial performance for our shareholders.
Yeah. As you think about some of those financial criteria, whether it be sort of leverage or impact to the earnings of the company going forward, do you have kind of a bar in terms of what you would be willing to kind of go up to on a leverage standpoint or something along those lines?
Yeah. Maybe I'd invite Colleen to comment on leverage and how high we would go.
Yeah. From a leverage perspective, currently at the end of the second quarter, we have about 1.4 times net debt to EBITDA. We're tracking to just under 1 by the end of the year. What we've said, and given where we are looking for assets, either commercial or near commercial, we'd be comfortable with going up to about 3 times. Employing the same playbook we've done several times now, which is deleveraging rapidly to replenish our firepower.
Yeah. Kind of getting into the other capital allocation priorities you talked about, right, being return to capital and kind of rapid deleveraging, right? How do you sort of, in the absence of an opportunity for external BD, how do you sort of think about balancing what is kind of maybe a run rate, net leverage ratio that you're comfortable with versus kind of opportunistically returning capital?
Perfect. We remain focused on creating both near and long-term value for shareholders, and the strength of our balance sheet and our financial profile gives us a lot of flexibility on how to balance the three priorities of business development, paying down debt, and shareholder repurchases. At a given moment in time, depending on where we're at, we may make a choice of all three of those. We are always paying down our debt pretty rapidly and have a very strong profile there. To date, since 2021, we have repurchased over $220 million worth of shares and currently have a share repurchase program open with an authorization of $150 million. We think, given the strength, we have the ability to do all three, just not in the same, maybe not at all at the same time. It really gives us that flexibility.
The sort of guidance you've given on net leverage is to get to roughly one time?
We will naturally, on our current paydown, be below one time by the end of the year. Our debt stack right now is a combination of a five-year term loan and a convertible note that matures in February 2029. On that natural cadence, we'll be below one time. I'd say to your question, what's the optimal leverage profile? It really comes down to never not above the three times and then coming down quickly to replenish that firepower.
As you all sort of talked a lot about the progress that the company has made this year, as you sort of think about the second half and into 2026, what are you kind of most excited about in terms of the opportunities that lay in front of the company?
I think first of all, let me go back and say that at our Q2 earnings call, we raised guidance for 2025. That was a mix when we raised our revenue guidance, which originally was $735 million to $750 million. We moved it to $745 million to $760 million, so a $10 million shift or increase, which is a mix of both Jornay PM® as well as performance in our pain franchise. One of the things that, when we look ahead to the rest of this year, we see strength in the entire portfolio, which I think is pretty significant. Secondly, when we look at capital allocation, right, again, we're coming at this from a position of strength.
When Colleen talks about balancing those various capital allocation areas, again, we're coming from a position of strength, which affords us the flexibility to look at doing the right deal, adding the right type of product, and building for the future. We remain committed to building for the future, as well as finding ways to return capital to our shareholders and creating value for them, and balancing that both in the long run and the short run. I'd say the thing to look forward to also, specifically in Jornay PM®, is these investments that have been made playing out in the second half of the year, frankly, more towards the end of the year, which will give us a lot of confidence going into 2026.
That way, when we come back in the beginning of 2026 and talk about guidance for 2026, we hope to have a lot more of an informed point of view in the company.
Yeah. Obviously, you know, sort of back-to-school fusion, not only for Jornay PM®, but also investor conferences, you've been meeting with investors over the last couple of weeks. You know, what do you feel like is sort of the maybe element of the company or the story that people are, you know, maybe missing or you know, they're just, you feel like it's a little underappreciated as you all are, you know, having conversations?
The three areas that we spend a lot of time with our investors or potential investors on mirror our three priorities, right? Number one is Jornay PM®. There's a lot of discussion on Jornay PM®, especially as the quarters go by and as we demonstrate more and more progress. I think people are paying attention and trying to understand more in depth the patient demographics and the payer makeup and how our investments are panning out and things like that. That's one area. The other area where I think we spend a lot of time explaining the nuances is around the durability of the pain franchise.
I will say, as time goes by, we find that as it gets closer and closer to 2027, for example, the lack of somebody else out there talking about coming into the market or making any progress, as in getting access to supply or anything, there's no news out there, it starts to lend a little bit more confidence for investors and frankly for ourselves that our franchise is actually more durable than people think. The third area where we spend a lot of time is talking about capital allocation. What are the areas where we're interested in business development and how are we going to build a company?
Maybe just on the durability point, you talked about kind of as time marches on, increased confidence. I guess any sort of information around those three kind of requirements that you noted for any of those products, you know, that would all be sort of in the public domain for folks, right, as you get closer over time. The absence of news on that front is really what people should be, you know, kind of looking for.
Yeah. Unfortunately, we can't speak for other people. That would be nice. I think in this particular case, we're relying on the lack of action from other folks. All we can point to are public statements that they make, whether they're direct or indirect, about the areas where they will or won't go into. We can look at other areas where they could have gone and how that has performed. That's what we can point to. If we want to dive into any of those areas, we're happy to do that now.
We have spent a lot of time explaining, specifically actually less so on Xtampza® ER, but more on Nucynta® as well as Belbuca®, what do we see as it relates to action or lack of action by other generic entrants and why we are confident or much more confident as time goes by on the durability of that franchise.
Yeah. No, I think that makes a lot of sense. As you know, maybe taking a step back from the here and now and thinking a little bit longer term, like we talked about at the beginning, right? You know, almost a year in the CEO seat, Vikram, as you think about the longer-term vision for the company. I know we talked about the investments that you're making in the products today, the durability in the pain business. Maybe it's certainly a hypothetical, but sort of in three to five years, call it that towards the end of the decade, where do you sort of see the company?
Yeah. First of all, I think as time goes by, as Jornay PM® continues to grow like we think it will, we expect that ADHD side of the business to become a bigger part of the mix. That's number one. Number two, you know, it's hard to comment on business development. Certainly, that's an area of priority for us. We would be looking forward to adding more products into our portfolio that can generate attractive returns for our shareholders and continue to shift the mix towards those types of products that have longevity into the future. They're clinically differentiated. They have high growth aspirations and high growth prospects. I would say that that's what you should expect from us.
In the meantime, given the cash generation profile of the pain business, we're also at the same time able to return value to our shareholders as we continue to build the company.
Yeah, not asking you to sort of comment on hypothetical business development kind of priorities, but ideally sort of aligning, so to speak, somewhat with either complementing what you have today or continuing to kind of build out either in psychiatry or pediatrics.
Yeah. Like I said, ideally, our business development should focus on those areas where we can leverage our investment that has already been made, right? We have 180 representatives that are calling on pediatricians and psychiatrists. If we can get complementary products that we can drive with that salesforce, absolutely ideal. By the way, we haven't said we haven't made exactly that statement about pain, but the same applies to pain. We have 95 representatives and a long history of calling on pain specialists. Those are very obvious areas of interest for us. Like I said, we are open to considering other areas, near and near adjacent areas where we could continue to build out our presence through smart business development decisions like Ironshore and Jornay PM®.
Yeah. You know, I know we're coming up kind of against time. Any kind of final words, things you want to kind of leave us with as we wrap up here?
Yeah. Look, I think we've covered a lot of details. I'd go back and say thank you for having us at the meeting. I think with Collegium Pharmaceutical, what you should expect to see is, and what you hopefully do see, is a company that is generating growth both organically as well as inorganically. We are a highly profitable company. We are almost 60% or just shy of 60% in EBITDA margin, generating a lot of cash, strong commercial execution, and strong financial firepower, which sets us up for continuing to drive organic growth with what we have, but also positions us to bring new assets, quickly replenish, and be in a position to continue to build out the company and add more products to the company. That's what I would leave you with. Thanks for having us here.
Yeah, thanks for being here. Thank you.
Thank you.
Thank you.