Greetings, and welcome to the Collegium Pharmaceutical First Quarter 2023 Earnings Call, Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference call is being recorded. I will now turn the call over to Christopher James, Vice President of Investor Relations at Collegium. Thank you. You may begin.
Welcome to Collegium Pharmaceuticals' First Quarter 2023 Earnings Conference Call. I'm joined today by Joe Ciaffoni, our Chief Executive Officer, Colleen Tupper, our Chief Financial Officer, and Scott Dreyer, our Chief Commercial Officer. Before we begin today's call, we wanna remind participants that none of the information presented today is intended to be promotional, and that any forward-looking statements made today are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
You're cautioned that such forward-looking statements involve risks and uncertainties, including, and without limitation, the risk that we may not be able to successfully commercialize our products, that we may incur significant expense, and that we may not prevail in current or future litigation pertaining to our business. These risks and other risks of the company are detailed in the company's periodic reports filed with the Securities and Exchange Commission. Our future results may differ materially from our current expectations discussed today. Our earnings press release on this call will include discussion of certain non-GAAP information. You can find our earnings press release, including relevant non-GAAP reconciliations, on our corporate website at collegiumpharma.com. I will now turn the call over to our CEO, Joe Ciaffoni.
Thank you, Chris. Good afternoon. Thank you everyone for joining the call. Today, we will discuss our financial performance during the first quarter and provide an update on our progress towards achieving a banner year in 2023. At Collegium, we are focused on building a leading, diversified specialty pharmaceutical company committed to improving the lives of people living with serious medical conditions. Our commitment to improving lives extends to our communities, and in support of that, during the first quarter, we made a charitable donation to Kids in Tech, a nonprofit organization leading STEM education initiatives for kids from low-income households. We donated 1,000 hygiene and essential kits for people in need through Life Science Cares. I'd like to thank our team for their commitment to our mission and for making Collegium a great place to work.
In the first quarter of 2023, we delivered strong financial results and made progress against our strategic priorities. Key accomplishments in the first quarter include we delivered record quarterly revenue and adjusted EBITDA. We generated record quarterly Belbuca and Xtampza ER revenue. We achieved gross to net for Xtampza ER of 55%, reflecting the immediate impact of the successful contract renegotiations completed last year. We presented four posters at the American Academy of Pain Medicine's annual meeting. We increased our cash balance, leaving us well-positioned to execute on our capital deployment strategy. With our strong performance in the first quarter, we are confident 2023 will be a banner year. As we move through 2023, we expect to recognize significant top and bottom-line growth.
Top line drivers include Xtampza ER gross to net improvement, full year Belbuca revenues, and Belbuca and Xtampza ER prescription growth on a full year basis. We believe our fully synergized cost structure and financial discipline will further fuel bottom line growth and enable us to deploy capital to create long-term value for our shareholders. Our 2023 financial guidance includes growing adjusted EBITDA by over 1.5x revenue and over 2x adjusted operating expenses. We are confident in our ability to deliver on our financial and strategic goals and have already made progress in the first quarter of the year. We are dedicated to making 2023 a banner year by executing our two-pronged strategy, maximizing the potential of our pain portfolio and deploying capital. We plan to maximize the potential of our pain portfolio through strong commercial execution.
During the first quarter, we saw an immediate acceleration of Xtampza ER revenue to a record level with year-over-year growth of approximately 52%, primarily driven by gross to net improvement to 55%. We also delivered record quarterly Belbuca revenue and will recognize the benefit of owning Belbuca for the full year. We do expect Belbuca and Xtampza ER prescription growth on a full year basis. We anticipate that the Nucynta franchise and Symproic will be steady contributors. Our capital deployment strategy is focused on creating long-term value for our shareholders. Our top priority is business development. We are focused, active, and engaged. We are looking for differentiated commercial stage assets that have the potential to generate over $150 million in annual revenues with exclusivity into the 2030s.
We believe market conditions are conducive to potentially getting a deal done. We are in a strong financial position, which gives us the flexibility to evaluate a range of deals that could be a great strategic fit for Collegium. We will remain disciplined in our approach. We are committed to rapidly paying down debt and opportunistically utilizing our share repurchase program to return capital to our shareholders. We are encouraged by our first quarter performance and confident that we are on track to achieve our financial objectives. Our strategy is clear and our organization is focused on execution. I will now hand the call over to Colleen to discuss the financials.
Thanks, Joe. Good afternoon, everyone. We had a strong first quarter in which we delivered record quarterly revenue and adjusted EBITDA, maintained financial discipline, and generated strong cash flows while paying down debt. Financial highlights for the first quarter include net product revenues were a record $144.8 million for the first quarter, compared to $83.8 million for the first quarter of 2022, an increase of 73%. Belbuca net revenue was a record $44.2 million in the first quarter. Xtampza ER net revenue was a record $47.9 million in the first quarter, an increase of 52% over the first quarter of 2022. Xtampza ER gross to net was 55% in the first quarter. The lower gross to net was primarily driven by the Xtampza ER contract renegotiations we completed last year.
As a reminder, gross to net is generally more favorable in the first quarter of each year due to the lower coverage gap expense, also known as the donut hole in Medicare coverage. As we move through the year, gross to nets are expected to be less favorable in the second and third quarters and improve sequentially in the fourth quarter, but remain less favorable than the first quarter level. This is consistent with what we have experienced in past years. We expect full year Xtampza ER gross to net to be between 61%-63% in 2023. Nucynta franchise net revenue was $49 million in the first quarter, an increase of 1% over the first quarter of 2022.
GAAP operating expenses were $52.8 million in the first quarter, which decreased 10% compared to $58.5 million in the first quarter of 2022. Adjusted operating expenses were $38.2 million in the first quarter, which increased 52% compared to $25.2 million in the first quarter of 2022. Our operating expenses were front-loaded into the first quarter, reflecting investment in our growth initiatives for the year. We expect operating expenses will trend lower in the subsequent quarters of 2023. Net loss for the first quarter was $17.4 million compared to a net loss of $13.1 million in the first quarter of 2022.
Included in GAAP net loss, among other items that do not represent our ongoing operations, is a $23.5 million loss on extinguishment of debt related to the repurchase of a portion of our 2026 convertible notes and an $8.5 million charge related to our settlement agreement with Aquestive Therapeutics. Non-GAAP adjusted EBITDA was a record $87.6 million for the first quarter compared to $43.5 million in the first quarter of 2022, an increase of 101%. GAAP loss per share was $0.51 basic and diluted in the first quarter compared to GAAP loss per share of $0.39 basic and diluted in the first quarter of 2022.
Non-GAAP adjusted earnings per share was $1.32 in the first quarter compared to $0.71 in the first quarter of 2022, an increase of 86%. Please see our press release issued earlier today for a reconciliation of GAAP to non-GAAP results. As of March 31st, 2023, our cash balance increased to $269.5 million. During the quarter, we paid down $25 million in debt related to our term notes. We also completed a $241.5 million convertible note offering with a maturity in February 2029 as a matter of good corporate hygiene. The later maturity provides us with more financial flexibility in the management of our debt.
We used $140.1 million of proceeds from the offering to repurchase a portion of our convertible senior notes due in 2026. After note issuance costs, we had approximately $97 million of net proceeds, which we intend to use for general corporate purposes, including the implementation of our capital deployment strategy. We ended the first quarter at 1.5 x net debt to adjusted EBITDA and expect the end of the year at approximately 1 x. We are pleased with our strong first quarter performance, which reflects the progress we are making as we execute our financial objectives for the year. We are reaffirming our financial guidance for 2023.
We expect net product revenues in the range of $565 million-$580 million, adjusted operating expenses in the range of $135 million-$145 million, and adjusted EBITDA in the range of $355 million-$370 million. Our capital deployment strategy is focused on creating long-term value for our shareholders. Our strong financial position allows us to execute our capital deployment strategy. Our top priority is business development. We are committed to taking a disciplined approach in a market that we believe is conducive to potentially getting a transaction done. We are locked in to rapidly deleveraging our balance sheet. We're on track to repay $162.5 million of debt in 2023, which would put us at approximately 1x net debt to adjusted EBITDA at year-end.
Our ability to delever quickly is a testament to our strong cash generation. Finally, we have the ability to return capital to our shareholders by strategically leveraging our share repurchase program. In January 2023, our board authorized a new share repurchase program for $100 million. We are very pleased with our first quarter performance and strong start to 2023 as we positively track against our key financial and strategic priorities. I will now turn it over to Scott.
Thanks, Colleen. As we look at performance in the first quarter, there are two key takeaways. First, the contract renegotiations for Xtampza ER that we completed in 2022 have had an immediate positive impact, driving gross to net improvements and accelerating net revenue. This year, we have the opportunity to renegotiate contracts that represent 30% of prescriptions, and we've created room to opportunistically secure new payer wins while ensuring gross to net for Xtampza ER remains below 65% forever. Second, as we look at Belbuca and Xtampza ER, prescription performance was generally in line with our expectations. We believe the growth of Xtampza and Belbuca were pressured by typical first quarter dynamics, where deductibles reset and increase out-of-pocket costs for patients. Consistent with past years, we expect this to normalize in the second quarter.
Additionally, Xtampza ER prescription growth was pressured due to Xtampza being removed from formulary on January first within plans we renegotiated last year that represented approximately 10% of Xtampza ER prescriptions. We believe that on a full year basis, we will see prescription volume growth for Belbuca and Xtampza ER. This is our number one commercial priority. The fundamentals of both brands are strong, and we believe they are positioned for growth. Xtampza ER and Belbuca are viewed favorably and are considered highly differentiated by healthcare professionals. These same HCPs have indicated a strong intent to increase prescribing of Xtampza and Belbuca. The prescriber bases of both Xtampza and Belbuca are large, with approximately 19,000 and 9,000 prescribers in the first quarter, respectively. This reflects the value these products bring to pain management.
Both products have broad commercial coverage, and Xtampza ER has strong coverage within Medicare Part D. Xtampza and Belbuca grew market share in the first quarter compared to the fourth quarter of 2022, and Xtampza, Belbuca and Nucynta ER have a combined 49% share of the branded ER market. The commercial organization is taking specific actions to differentiate our portfolio and fuel growth. These actions include the following. Launching new promotional campaigns and educational resources for our sales team to use during interactions with HCPs and pharmacists.
Launching new digital and non-personal promotional content, which reinforces the clinical differentiation of Xtampza and Belbuca. Launching new personal and non-personal promotional tools and working with payers to pull through the strong access positions of Xtampza ER and Belbuca. In March, we had a national sales meeting to reinforce the brand strategies and messaging for our differentiated products. Our commercial organization, a highly motivated group of people who believe deeply in our pain products, aligned on our priorities and participated in numerous workshops and practice sessions designed to strengthen the impact of their customer engagements.
Every member of the commercial organization is focused on executing our plan. Our second commercial priority is winning in managed care. Our first step to winning is pulling through the strong access positions that we have for Xtampza ER and Belbuca. Our second step is renegotiating Xtampza ER contracts that expire this year, which represent an additional 30% of prescriptions. Our third step to winning in managed care is securing new access positions for Belbuca and Xtampza in 2024. For Belbuca, our priority is improving access within Medicare Part D.
We believe that the clinical differentiation of Belbuca warrants broader coverage within Medicare Part D, we're actively engaged with payers to find a path to better access for patients. We're highly engaged with payers discussing the clinical value of Xtampza ER and Belbuca and the difference both products can bring to patients. We're encouraged by the level of engagement. In closing, we're committed to achieving our commercial priorities in 2023 of growing Xtampza ER and Belbuca prescriptions and achieving wins in managed care. I'll now turn the call back to Joe.
Thanks, Scott. We are encouraged by our performance in the first quarter, which demonstrates the progress we are making on our strategic priorities. We have a lot of work ahead of us, but we are confident that 2023 will be a banner year for Collegium. I will now open the call up for questions. Operator?
Thank you. At this time, we will conduct a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from David Amsellem with Piper Sandler. Please state your question.
Hey, thanks. Just a couple. First, Joe, I know you talked about Xtampza and Belbuca volume growth or your expectations for volume growth. I was wondering if you can elaborate more on what you're doing to drive renewed volume growth for Xtampza and also what you're doing from a sales and marketing perspective on Belbuca. That's number one. Number two is for Belbuca, I think historically, Medicare Part D access was a real challenge. Is there anything that's changed regarding your dialogue with payers in terms of Part D? What are your expectations on the Part D front for Belbuca as this year progresses and looking beyond this year? Thank you.
Okay. Thanks, David. I'm gonna have Scott answer the first question around the actions we're taking to grow volume with Xtampza ER and Belbuca, and then maybe I'll share some perspective on Medicare Part D.
All right. Thanks, David. Look, when you look at actions that we're taking, I put them into a couple of buckets. First, we're launching a lot of new resources to improve the engagement of our customers through the sales representatives. I mentioned at the national sales meeting, we went through a lot of training and workshops, and the critical piece is we're now a year into the acquisition of Belbuca, and I can see that people are comfortable with the product, comfortable with the resources, and excited to continue to drive that product forward. From a non-personal digital standpoint, we continue to put new content into the marketplace to raise awareness around the profile of our products. Those are the primary actions that we're taking, David, to reinvigorate growth.
Okay. David, with regards to Medicare Part D, I think what we've chosen to do because we think it is a product that certainly merits availability to that patient population, is to take a blank canvas approach or assume that the payers knew nothing about Belbuca. We started foundationally with clinical presentations, and we were surprised to learn that they actually didn't have high awareness in the knowledge set you would expect around Belbuca.
Those are the encouraging discussions that Scott referenced that we've had to this point. We'll continue to work towards it. Our hope is, based off of those positive conversations, that we'll be able to unlock some opportunity in Medicare Part D, and that would have impact in 2024 if we were successful in doing so. As we always do in our November call, we'll provide an update on the payer landscape and its evolution.
That's helpful. If I may just follow up. In terms of the Belbuca gross to net, and I know it's early and this is fluid, but do you have a sense of, I guess, where you would take the gross to net up to for Belbuca to, in exchange essentially for better Part D access?
Yeah. What I would say, David, I don't wanna give any specific perspective on that, but I would distinguish any approach that we take with Belbuca, would be much different than what it is we've historically done with Xtampza ER, where we were at.
Got it. Okay. Thank you.
Thank you. Our next question comes from Tim Lugo with William Blair. Please state your question.
Thanks for taking the question. It sounds like business development landscape is kind of ripe for deals. You mentioned $100 million kind of revenue type of product. Can you discuss maybe the profile of these products a bit more? Are they similar margin profiles? Is it probably gonna be almost overlapping sales forces? Can you just maybe give us a little bit more flavor for what the type of products you're looking at?
One moment, please. Thank you for the patience. We're having some technical issues. Just stand by, please. Thank you. Please continue. Thank you.
Next up in queue, please.
Thank you. It's Tim Lugo was on the line.
Hi, team. Sorry about that. I think everyone's hearing me cough as well, just getting over something. I was talking about business development. It sounds like there are a couple deals that you're looking at. I think you mentioned $100 million in product revenue. Can you just talk about kind of the profile of the deals you're looking for in terms of margins as well as overlap in the sales force?
Yeah, sure. Thanks, Tim, and let me apologize everyone. Our systems here went down, so I appreciate you hanging in there with us. Look, from a business development perspective, because we believe the current market conditions are conducive to getting a deal done, we're being agile in terms of what potential therapeutic area. What we're focused on is, number one, differentiated assets. We think that's critical in order to be able to get reimbursement, which is critical to commercial success.
From a peak sales perspective, we're looking for assets that have greater than $150 million of peak sales potential, and then assets that have runway into the 2030s. You're correct, Tim. We are very focused and active right now with regards to our business development efforts. Colleen maybe can give a perspective in terms of how we think about it from a size and capacity perspective.
Yeah, thanks for the question, Tim. What I'd add onto that from a size and capacity perspective is we have flexibility with the strength of our balance sheet. As we've stated previously, we would be comfortable for a commercial stage asset to go up to 4x net debt to adjusted EBITDA. We're generally looking at assets with the market caps of $1 billion or lower. We would be looking for something that potentially not accretive in the first year but is very rapidly accretive in if not year two, definitely by year three.
Great to hear. Thank you.
Thank you.
Our next question comes from Brandon Folkes with Cantor Fitzgerald. Please state your question.
All right. Thanks, taking the question. Maybe just a few from me. Congratulations firstly on the gross to net performance in the quarter. Can you just talk about that first quarter gross to net performance, though, in light of your expectations and in light of the guidance? Obviously you reiterated guidance on the gross to net side today. Should we expect, you know, one or two quarters, maybe 2Q, 3Q, sort of outside of that gross to net range and kind of averaging back into it? Is it just sort of conservatism at this stage, reiterating that guidance range? Maybe we'll start there.
Thanks, Brandon. Great question. No, we're still expecting from a full year perspective to be in the 61%-63% range. With the portion of business for Xtampza that's weighted to Medicare Part D, we will see the greatest impact of coverage gap in the second and third quarter, and then we'll have that bit of sequential improvement in the fourth quarter, but it won't be as good. We wouldn't expect it to be as good as what we saw in the first quarter. What we see is the typical seasonality associated with the coverage gap. For the full year, you'll see that net out in the 61%-63% range.
Great. Thank you. Maybe just a high level one. I appreciate all the color on the Xtampza and Belbuca volume growth and the initiatives to drive growth in the back half of the year there. How do you feel about bringing or how should we think about bringing in additional commercial assets at this stage while you still sort of execute on those initiatives and sort of try and get those two assets back to volume growth? You know, obviously, I'd imagine it's gonna be an adjacent therapeutic product. Just how do you think about it strategically in terms of focusing on volume growth versus business development and maybe kind of executing those two in parallel? Thank you.
Sure. Thanks for the question, Brandon, and I think that gets to our two-prong strategy. Prong one is maximizing the potential of the pain portfolio. When you think from a business development perspective, the types of things we're looking at will be lower synergy deals than what we've previously done, and that's really highlighting that we'll be pivoting to another therapeutic focus, which will set a second beachhead for the organization and have a separate field force and commercial infrastructure. That's important to the type of question you're asking 'cause it will have no disruption to the focus and the people who are dedicated to maximizing the potential of our pain portfolio. It's something that we believe we'll be able to absorb, bring over, the individuals and be able to be successful with whatever it is we acquire too.
Great. Thank you very much, and congrats.
Thank you.
Our next question comes from Serge Belanger with Needham & Company. Please state your question.
Hi, good afternoon. Just wanted to dig in a little bit on the 1Q performance. Just curious if the usual early year impacts were more pronounced than usual this year. You talked about gross nets on Xtampza, but what about the Belbuca and Nucynta gross nets? Then maybe just comment on prescription volumes through the first quarter. Thank you.
Okay. Thanks, Serge. I'll have Colleen start off, and take the gross to net question.
Great, thanks for the question, Serge. I would say overall, expectations on gross to nets, were aligned with where we saw them come in for the first quarter. To give you a bit of additional context on what we saw by a product beyond Xtampza that I already mentioned, Belbuca gross to nets in the first quarter were 47.8%. Nucynta IR was 41%, and Nucynta ER was 40.7%, and those are all in line with our expectations and built into our guidance.
Yeah. Serge, with regards to prescription trends in the first quarter, I don't think that there was anything out of the ordinary with the following caveat. This is the first time in the history of Xtampza where we didn't add any new payer wins. It was subjected to that first quarter dynamic. Although the team did an outstanding job, and you can see that in the revenue and gross to net performance of renegotiating those 54%, those contracts that represented 54% of all Xtampza ER prescriptions, we did come off formulary in 10% of those plans, which we think also in the first quarter put some pressure on prescriptions. With regards to Belbuca, I think it's in line to what you would historically see.
Okay. Thank you. Nice quarter.
You got it. Thank you. Appreciate it.
Our next question comes from Greg Fraser with Truist Securities. Please state your question.
Good afternoon, folks. Thanks for taking the questions. I had a question on the topic of Belbuca generics. I'm curious if you have insight into the technical issues that Kemo Research had with this ANDA filing, and whether those challenges, if you know what they are, could potentially be faced by other generic filers.
Okay. Greg, thanks for the question. Unfortunately, that's not something that I'm gonna be able to comment on this call. What I would say is we believe that Belbuca is a very hard product to achieve all doses successfully without infringing upon the IP. We will always continue to vigorously defend the intellectual property of Belbuca. I'll also remind you that Kemo had attached themselves to the Alvogen litigation from an invalidity perspective. Both from that perspective, are barred from entering the market until 2032.
Got it. Thank you. quick one on Nucynta ER. Sales were higher than expected given the RX trajectory. Was there anything to note in terms of inventory or gross net dynamics that benefited sales in the quarter?
Colleen?
Hi, Greg. No, nothing related to inventory, in the beginning of every year, we typically have a bit of a profitability acceleration because as Nucynta being late in its life cycle, there are fewer contracts that are renewing. That led to the net sales that we had in the quarter for ER of $21 million.
Got it. Okay. Sorry if I missed this, but could you comment on whether you repurchased shares under the new program, or are you holding off on buybacks pending visibility on a potential deal? Thanks.
Greg, we have not purchased any share. We did not purchase any shares in the first quarter of this year with the new share repurchase program. We certainly, as I've commented on, are very active and engaged from a business development perspective, which will always be our top priority and a key consideration as you think about when we opportunistically utilize the share repurchase program. I would emphasize over the history of the share repurchase programs we've had, we have acquired back $62 million worth of our stock at an average price of $19.14. I think we've been good stewards of capital from that perspective.
Thank you.
Thank you. A reminder to the audience, to ask a question at this time, press star one on your telephone keypad. To remove yourself from the queue, press star two. Our next question comes from Glen Santangelo with Jefferies. Please state your question.
Yeah, thanks for taking my questions. I just want to follow up on a couple of the previous questions. You know, first, you know, with respect to driving the scripts in Xtampza and Belbuca, I think Scott said, you know, it sort of sounds like they're gonna be adding, you know, some resources. Colleen, I'm trying to reconcile that to the SG&A reported this quarter, which was a little bit higher than what we were looking for. I thought I heard you say you expected that to sort of tail off as the year sort of progresses. I was wondering if you could just sort of reconcile all those comments.
Yeah, absolutely, Glen. We did. We came into the year strong, and those investments that we set up in the fourth quarter and initiated in the first quarter, impacted our overall adjusted operating expenses. We had $38.2 million in the quarter of investment, which is higher than what you'll see in the next couple quarters. We're still projecting full year and guiding full year operating expenses between $135 million and $145 million.
Okay. Maybe just following up to Greg's question on Belbuca. I mean, what's your latest thoughts with respect to LOE? I don't know if you're willing to share, you know, your expectation at this point.
Glen, this is Joe. I appreciate the question. I would emphasize that there's no change to our thinking. What I can articulate for you as our base case when we did the BDSI acquisition was that there would be a generic entrant in January of 2027. That's because there was a settlement with Teva. That's our base case. I would emphasize they do not have an approved product, and they also relinquished their first filer exclusivity. The remaining ANDA filers, Alvogen and Kemo, in their pursuit in trying to invalidate the Belbuca patents, there was a favorable ruling in support of Belbuca that was upheld on appeal. They're held out of the market with that formulation until 2032.
Then I think, as you know, recently, Kemo, who is pursuing non-infringement, received another CRL on their product. They had communicated that last week. As I said in response to Greg Fraser's question, we do believe it is very challenging to achieve all doses of Belbuca without infringing upon the patents, and we're committed to very strongly defending the IP. The final thing is we have an authorized generic in the event there was a launch, if Teva were to launch, and that's an arrangement with Par Pharmaceutical. Belbuca would have a long tail in that scenario. The final comment I would make, if you contrast it to what we're doing with Nucynta, where we're pulling back on our investment and managing the payer landscape accordingly, we are committed to investing through 2027 with Belbuca.
Perfect. Thanks for the comments, Joe.
You got it. Thank you.
Thank you. There are no further questions at this time. I'll hand the floor back to Joseph Ciaffoni for closing remarks. Thank you.
Thank you everyone for joining the call today. We look forward to updating you on our progress, and I hope that everybody has a great evening.
Thank you. This concludes today's call. All parties may disconnect. Have a good evening.