Everyone. My name is Brandon Folkes. I'm one of the biopharma analysts here at H.C. Wainwright. Next up, we have a fireside chat with Collegium Pharmaceutical. And from Collegium, I have joining me Vikram Karnani, the CEO. I have Colleen Tupper, the CFO. And I have Scott Dreyer, Chief Commercial Officer. Thank you to all three of you for joining me.
Thanks for having us.
I guess, Vikram, one thing I'm guilty of maybe is just jumping a little bit too quickly in. So maybe do you want to just give a sort of one-two-minute overview of the Collegium today? Because obviously, the company's been around for a while, but you know a lot's gone on over the last few years.
Yep, happy to do that. Thanks for having us. Collegium is a strong, leading biopharmaceutical company. We are primarily in two areas. The company was built on a long legacy of responsible pain management. So we have a pain franchise which has differentiated pain products addressing chronic pain. That's roughly $600 million in net sales, highly efficient, highly profitable, with a very modest sales and marketing infrastructure. The second franchise is ADHD with a medicine called JORNAY PM that was added into our portfolio with the acquisition of Ironshore Therapeutics last September, so about a year ago. And that medicine, we guided previously this year to about $135 million plus in net sales. And more recently, we raised that guidance to $140 million-$145 million. So at a high level, about our most recent guidance is about $745 million-$760 million in net sales, with an almost approaching 60% EBITDA margin.
Highly profitable company, a leading cash-generating company. Outside of those two areas, I think something that is important to know about us. We have a very solid, disciplined capital deployment strategy, which is a balance of continuing to add more differentiated products and building out our portfolio. At the same time, returning value to our shareholders through share repurchase programs. Since 2021, we have returned more than $220 million in share repurchases or in value to our shareholders. More recently, just recently, our board authorized a new share repurchase program up to $150 million that goes through the end of 2026. The final prong or leg of the capital deployment stool, if you will, is paying down debt.
So given our cash-generation profile and highly profitable profile, we find ourselves to be in a very fortunate position where we can leverage our strong balance sheet and our strong position to acquire products, build the portfolio, but at the same time, find the balance and return value to our shareholders, as well as strengthen the balance sheet by paying down debt.
Great. I appreciate that. And so just diving in, you touched on the guidance for the year. Maybe just digging down into JORNAY guidance, some management's guiding for a very strong back half of the year relative to the first half. Prescriptions look very good in sort of justifying that guidance. But can you just walk us through sort of some of the key drivers of the JORNAY momentum we are seeing? And especially the drivers in the second half of the year, right? Is that just normal second half of the year dynamics that we see? Or is there stuff you're doing on the ground? Can you just walk us through sort of the pushes and pulls of that guidance and that strength we are expecting?
Yep, happy to do so, so first of all, it's important to know that JORNAY PM is a highly differentiated medicine in an otherwise crowded ADHD category, and why I say that is JORNAY PM is the only ADHD medicine that is taken at night. All other products are taken in the day, and the reason you take it at night is because it has a delayed and extended release profile. So when you take it at night, it sits in your system, it gets absorbed in the colon, releases in the colon about eight to 10 hours later, so when you take it at night, it releases in the morning, addresses a very important issue for ADHD patients, which is morning transition.
After that, the extended release takes over, and it releases throughout the day and gives efficacy throughout the afternoon and into the evening, which has another important property. And that is that the medicine, because of its profile, may alleviate the need for a booster or an add-on therapy. The profile of this medicine, frankly, JORNAY was just not well appreciated in the marketplace. The awareness just wasn't there. When we took over, remember back in the first part of the year when we guided, we said $135 million plus.
What we saw in Q1 and Q2 in the first half of the year after we, and frankly, even before we expanded, but even since the expansion of the sales force, we've seen tremendous momentum in Q1 and in the summer months, which gave us a lot of confidence into coming into the second half of the year, a very important phenomenon, which is the back-to-school season, and that back-to-school season begins right about now and extends into the next several months. If you just look at the seasonality of this category and the seasonality of JORNAY PM, that alone gives us a lot of confidence into the demand that we should expect to see in the back half of the year. In addition to demand, another very important metric to look at is gross- to- net.
Just very typically in these categories, gross- to- nets typically start out a bit on the high side in Q1, and then they normalize and continue to go down as the year goes by. So when you think about the two main drivers of what gives us confidence in our full-year guide, it is the momentum with which we came into the second half of the year, the seasonality, the back-to-school season, which we're kind of experiencing right now, and the gross- to- net improvement. If you take all of that together, that's what resulted in our confidence in giving or raising our guidance.
Fantastic. And you touched on JORNAY's differentiation. Can you maybe just elaborate there in terms of a few things, right? One, how you use that differentiation to drive share gains and where prescribers may use that in their toolbox in what you mentioned was a crowded field, but where you have differentiation. And then secondly, maybe, Scott, this is for you, Vikram, but given the differentiation, how much physician education is there around the differentiation? And sort of does that drive, sort of does that put a multi-year tailwind behind the growth?
I'm going to take that.
Yep.
All right.
So yeah, so as Vikram mentioned, highly differentiated product. I think the biggest thing is there's still unmet need in the marketplace. So despite the fact there's so many products, there's a lot of generics. There's a lot of churn. People are always looking for new options. So this unique product that's the only one dosed in the evening that works upon awakening and through the day is truly innovative and different. And that's the main thing that we're leaning into. When we look about future growth and where it fits in the toolbox, methylphenidate as a therapeutic category, right? So you've got stimulants, you've got methylphenidate, and you've got amphetamines. Methylphenidate skews towards pediatrics. So a lot of people think, oh, is JORNAY only going to be used for pediatrics, right? So here's the answer to that. One, huge value proposition for kids and pediatrics.
Why physicians think of methylphenidate there is because often there's a need for efficacy upon awakening. Your child gets up for school. It's a crazy time. So that's the natural place methylphenidate and JORNAY would be used. But we recently completed some market research with adults, and it was fascinating what we found out. We found out that over 50% of adult patients actually say, "I need efficacy upon awakening in the morning." When you talk to a physician, they don't talk about that at all. They don't think it's a need for adults. So it's another area where we expect growth for JORNAY PM. The momentum Vikram started to speak about, if you look at the second quarter, over 26,000 physicians wrote JORNAY PM. So it's not about we're still raising awareness, but that breadth is getting pretty strong. Now it's about increasing where they use the product.
That was up 23% year over year, and so as we enter the second half of the year, Vikram mentioned back-to-school season, it's a critical time. Two key events happen during back-to-school season. One, you have children getting ready to go back, and so the physician talks about treatment changes or a need for therapy, but in October, people get their report cards. They check in with a teacher. That's also often a time of a lot of change, and so that will lead to momentum for JORNAY PM besides the momentum we already built in the first half of the year, and an early indicator that people can look at is in the month of August, if you look at weekly prescriptions, they're up about 1,200 prescriptions versus July. That's higher than what was last year. Last year, we were up about 1,000 prescriptions.
So the season's beginning, but I always want to remind people. It's not a back-to-school in August and then it ends. It carries through the year, frankly, through the end.
Yeah, I think the second part of your question was around tailwind into the future. Look, just if you just look at what's happening this year, and we're not even just about halfway through the year, and we're entering back-to-school, which, as Scott described, is a critical period for this. But even in the second quarter, both prescriptions and prescribers were up 23%. Our share gain, right? We seem to like the number 23 because we're at about 23% market share, which is also a substantial growth from where we started. So there is real tailwinds behind this product.
We have not, at this point, given peak sales guidance, partly because we're still in the mode of realizing and assessing the impact of the investments that we're making. We expanded the sales force that happened in Q2. A lot of the non-personal promotion type of investments are actually taking place right now in time for back-to-school. So it'll be a little bit of time before we can fully assess what is the inflection that we get from these investments so we can talk about what future peak sales might look like. But make no mistake, I think what we're seeing is very, very strong momentum even before the impact of the investments take place.
That leads to my next question, right, about those investments in the sales force. We've talked a lot about this morning on the differentiation and profile, but now sort of as you have this broader sales force, how can they help drive uptake near-term? And then sort of how do you feel about the commercial infrastructure now? Sort of where does that investment get you to conceptually? Obviously, we'll see how the growth continues to go, but can you just talk about sort of the goal of those investments?
Yeah. So I think it's important to step back and say, why did we expand the sales force? Right? So the key lever that we saw when we talk about the profile of the product is the awareness among physicians was not where it should be for a product five years on the market, right? So to improve that awareness, we expanded the sales force from 125 to 180 sales representatives. That's going to do two things. It allowed us to increase our targets. We went from 17,000 to 21,000 targets. We're getting to a broader set, but also allows us to increase the frequency of engagement with physicians. We're trying to change behavior, right? JORNAY's differentiating unique, but it's also the first one that's dosed in the evening, right? And so that expansion allows us to raise awareness and move physicians along that continuum of where they use it.
So that's a big investment we're excited about and we think is going to have real impact on expanding the use of the product. The second investment area was actually with patients directly when Vikram spoke to DTC. Why that's so critical is if you think about the profile that we shared, that's a profile that can make a difference that parents, caregivers were unaware of. In market research, we would show them product X, and they'd say, "Could I get that for my child?" There was zero awareness. So we're making significant investments there because what we know is parents, caregivers are interested, and physician perceptions are strong. So when a parent or patient goes in and says, "I'd like to try JORNAY," the physician's more than willing to honor that request. So those are the two big investments we're making to grow in the future.
In terms of size of the sales force you alluded to, we did not take a stepwise approach. We sized at 180 representatives because that's the right size for the business right now and for that target universe. And we have plenty of powder. We could afford to do more. And if we find that we need to do more because the market evolves, we'll do that. But we're sized exactly where we should be for now.
Fantastic. And maybe just lastly on JORNAY before we move to the rest of the business, can you just talk about reimbursement levels? Collegium as a company has been pretty innovative and nimble on the reimbursement side in the past. Product has been on the market for a while. So how comfortable are you with sort of where you are with reimbursement?
Yeah, that's a great question. So one thing that was very nice is we acquired the product in a situation where there was strong reimbursement, right? So very different than our pain business. In this business, it's 65% commercial, 35% Medicaid, full coverage in Medicaid. And then in commercial, really good coverage of about 75%. There's a couple of plans that there isn't coverage. But what's different about this business is we have an aggressive copay program where we're able to offset costs for the patient. So what we try to do in a highly genericized category is ensure that even if the product's not on formulary, we can help the patient have it at a cost that's reasonable for out-of-pocket. And so we're good.
We always will try to expand coverage for our products, but we're only going to do it in a way that economically works for our P&L.
Fantastic. And I do want to switch gears to the pain portfolio because it still generates a tremendous amount of revenue and cash flow. So when we think about overall growth there, as a portfolio continues to grow individually within the product, there seems to be some growth. So can you just talk about how you achieve growth, the sort of late in a product's life cycle? And we'll stop there for now because I don't want to say late in the product life cycle because it's not towards the end, but we'll get to sort of the exclusivity. It could be a long runway, but I guess at this stage, so many years after launch, can you just talk about how some of these products still eke out growth?
Yep, happy to. I think going back to what I started out with, about $600 million in net sales comes from the pain portfolio. Highly profitable. The company has done an amazing job over the last several years of continuing to find ways to grow net revenue even in the face of pressure on scripts, as an example, right? So we are able to balance script growth or script performance with profitability and deliver single-digit revenue growth for this pain franchise. As an example, we've talked about low single digits as something that should be expected in terms of growth. But in Q2, this business delivered 7% growth year over year.
So I think, as you said earlier, Collegium has been very good in terms of understanding the reimbursement dynamics and market access, and we're able to balance that phenomenon with script growth to continue to deliver revenue growth for this business.
Fantastic. And staying on the pain portfolio, just moving to exclusivity, right? I'm sure it's a question you've been asked many times, but when we think about, call it the three key criteria, right, for a generic to launch, I guess how confident are you in your exclusivity projections or exclusivity line of sight right now? What line of sight do you have? And have any of the potential generics maybe satisfied two of those key requirements? What is the latest update, I guess, because you probably get asked this every time you get in front of people on the generic situation?
So I would make probably two broad comments across the entire pain portfolio, inclusive NUCYNTA, BELBUCA, and XTAMPZA, which is no party has satisfied all three of those requirements. And I think what that will lead to is a longer and more robust tail than you otherwise would expect. Specifically for the NUCYNTA franchise, predominantly two of the three milestones have been met. It's been fully litigated, and most tentative approvals are in place. With the most significant barrier there is access to tapentadol. There's a limited number of DMFs approved in the U.S., and only one of those is at commercial scale. That's our exclusive supplier. To date, our understanding is that nobody has invested to bring up to commercial scale. On the BELBUCA side, there is one potential entrant with a settlement date of January 2027.
It really becomes a strategic question for that party on whether or not they will enter the market. There are numerous other adjacent products that they have not entered or they've withdrawn from the market for. So we're prudent. We plan base case to expect someone will arrive, but there's so much uncertainty there that we're not going to make investment or market access decisions in advance of that. We'll pull those levers when and if someone arrives.
That is my next question. Can you just elaborate on those levers? In multiple scenarios, how are you planning for potential different scenarios in case sort of one of these generics show up? You still have a pain portfolio with multiple branded products out there, right? Can you just elaborate on sort of the levers you have and the planning that goes into these multiple scenarios?
That's right. An important point that you just said is if one shows up. So I think in any case, this is not going to be a multi-source generic situation, particularly for BELBUCA because XTAMPZA and BELBUCA are sort of in that top decile position. If there is generic competition, first and foremost, we do have an authorized generic strategy in place. And then secondly, when and if that happens, we will make the appropriate changes to our cost structure.
Fantastic, and I want to bring this back to the beginning, Vikram. You talked about the capital deployment and the return to shareholders that you have made over the last few years. Combine that with an acquisitive strategy. Can you talk about the balance sheet today, how you view your capital allocation going forward, and sort of maybe where you are in the JORNAY life cycle in terms of getting to peak sales? Are you still on the business development capital deployment side of things? Are you still looking at deploying that side? How do you think about capital allocation, maybe near-term and sort of mid to longer term?
Yep. So our objective is to deliver both near-term and long-term value to shareholders, right? In order to do that, like I said before, we look at all three ways to generate value. We have been an acquisitive company. We have previously talked about continuing to look for other assets to bring into the portfolio. They have to meet the financial criteria that we've set for ourselves. And we're pretty disciplined about that. But in lieu of that, and as you know, we're a cash-generating company. If we don't have necessarily an asset to bring, we have previously demonstrated that we're willing to return value to our shareholders through our share repurchase program. And then finally, Colleen is a big steward of this, but we also look at ways to bring down or pay down debt and strengthen the balance sheet.
So we continue to look at all three ways to deliver value, both near-term and long-term to our shareholders, and that remains the case. I think one thing you asked about in terms of the strength of our balance sheet. Today we talked at our Q2 earnings call; we're about 1.4 times net debt over EBITDA. And we expect that leverage to go to below one by the end of the year, which again gives us the strength and the flexibility of our balance sheet to acquire the right asset for the company without overextending ourselves. So I think that disciplined business development, disciplined capital allocation strategy and approach is what you should expect to continue to see from us.
Fantastic. We are out of time, so I do thank you all for joining us and congrats on the success today.
Thank you for having us.