All right. Well, welcome to the Jefferies Healthcare Conference. My name is Dennis Ding. I'm mid-cap biotech and spec pharma analyst here. I have the great pleasure of having Collegium Pharmaceutical here, CEO Vikram Karnani, as well as CFO Colleen Tupper. Welcome.
Thank you.
Thank you.
Before we get into Q&A, would love to just pass it over to you to make some opening remarks around the company just the progress that you guys have made over the last 12 months. Obviously, a lot of things have happened, including a sizable acquisition in AZSTARYS, so maybe just level set us and set the stage in terms of where we are right now.
Absolutely. Happy to do that. Collegium today is a strong, commercially focused biopharmaceutical company. We primarily operate in two areas. Our legacy, which is in pain management, responsible pain management, which has three products, and ADHD, which now, as of very recently, have two complementary medicines.
Across the board, we gave guidance very recently, after the closing of our latest acquisition. We expect sales up to in the $900 million range. Almost half a billion dollars in EBITDA, which is very strong growth compared to last year. We are based out of Stoughton, Massachusetts, just south of Boston. We are about 450 employees in the company, which has seen very substantial growth in the last 18 months or so.
Perfect. When I take a look at Collegium, there's essentially two big franchises, right? There's ADHD.
Right, which is, think, around going to be $250 million, $260 million, $270 million in revenue this year. There's also this big legacy pain business. Right? Why don't we start off with the pain business right now? Just maybe just help us understand the durability of that portfolio.
When I look at consensus numbers, I think people assume that NUCYNTA is going to fall off a cliff in 2027, which I don't agree with, but also the fact that BELBUCA is going to be dive substantially year-over-year, which I also don't agree with. Maybe just talk us through that dynamic, and there are several products, but just help us understand the generic situation.
Yeah. I'll kick us off, then maybe I'll invite Colleen also to jump in and comment. We take a step back and look at the pain business. Three primary products. XTAMPZA ER, which goes out to 2033 in terms of exclusivity. We have BELBUCA and the NUCYNTA franchise, which NUCYNTA has an IR as well as an ER medicine.
When we take a step back and look at the total business here, we believe that the durability of revenues and cash contribution from this business is there's way more to it than definitely meets the eye. For reasons that we'll get into just in a couple of minutes here, we will go through one by one to make sure everybody understands why that may be the case.
NUCYNTA, both IR and ER, we do have an authorized generic agreement with Hikma, which both the AGs for both products were launched earlier this year. NUCYNTA IR, there was a first generic entrant that hit the market earlier this year. When we gave our guidance specifically for the pain franchise, the pain business represents a 2% year-over-year decline. All of that is primarily driven by the AG and generic activity on NUCYNTA. You look at the rest of the business, which is XTAMPZA and BELBUCA, we expect those two to be flat to low single-digit growers in terms of net revenue. Take the time, Colleen, to just dive into each one of them.
Absolutely. High level, to just repeat, overall, we expect a longer and more robust tail for our pain portfolio. NUCYNTA specifically, as Vikram mentioned, has had generic activity already this year. Strategically, we had our partner, Hikma, launch a authorized generic, and we've had that one external generic. We expect a fairly modest decline in NUCYNTA revenue this year, which is incorporated in that guidance mentioned.
Although we haven't provided any insight or guidance for next year, we would expect another, for the NUCYNTA franchise, modest decline. Our partner, Hikma, launched an authorized generic, both for the ER and the IR, at the end of February and early March respectively.
Importantly, we supply Hikma with the product, and we enjoy a high profit share of their sales. tapentadol as the active ingredient in NUCYNTA is only used in our products, there is limited commercial availability.
Out of the four DMFs that are approved in the U.S., only one is available at commercial scale. We believe that both contributed to Hikma's interest in having an authorized generic arrangement where we supply them, as well as limits Epic, the third-party generic, their ability to supply more significant volumes. In the Q1 , our total NUCYNTA franchise revenues, which included the royalties we received from Hikma, were flat compared to Q1 of 2025.
As we move through the rest of the year, we expect some pressure on revenues, which is contemplated in our guidance. Interestingly enough, with NUCYNTA IR, there are several other tentatively approved generics, they have thus far not launched. We believe there's a bit of a stabilization in the number of parties that will come in.
For NUCYNTA ER, the situation is a bit more positive for Collegium, which is the first external generic that could launch would be Teva, if they so choose to, in July of 2027. The other potential launch would be from Alkem, and they could launch in 2028 based on some regulatory decisions they had made.
We see even though there will be modest declines, that Collegium will continue to enjoy significant economics via branded sales, as well as our profit share for the authorized generic. As we move into the rest of the pain portfolio, so XTAMPZA is a little bit more straightforward, so I'll start there. We have an LOE date expected for September of 2033. That is with the first and only filer, which was Teva.
I hinted to it previously, but it does remain unclear if Teva will make the choice to launch another opioid. It doesn't strategically fit necessarily with their stated strategy, and there have been some market dynamics that we've observed of late, over the past few years, for example, them exiting distribution of the OxyContin IR generics.
It remains a question. We don't believe that they do have an interest in launching in this space. If I move on to Belbuca, which is a little bit more complex. Teva is also the earliest potential generic entrant. They were the first filer for Belbuca, and the predecessor company, before we acquired them, BDSI, settled to allow Teva to enter, if they so choose, January of 2027.
To date, they do not have tentative approval, and they did relinquish first filer exclusivity, so that, coupled with some of their strategic motives, does present a question on whether they will choose to launch or not. It is our belief that they don't have the intention to launch, and our plans are based on that belief.
We monitor very closely, and we are at the ready to take very quick action if that is an incorrect assumption. The next potential generic entrant against BELBUCA is a company by the name of Alvogen. That was fully litigated, and they are currently barred from the market until December 2032. The third and final is Chemo, which they are trying to pursue a non-infringement, but to date have not been technically successful. They've received recently their sixth CRL.
They would need to first be able to produce a product. We would move forward on a trial date. A long answer to the pain portfolio. There's a fair amount of complexities that come with this space that I think does contribute to that.
Yeah.
View of a long and more robust tail.
Well, thank you for that. I think that was really helpful and actually very important. I'll keep it simple. I don't think Teva's going to launch a generic opioid. What does that mean for the pain business? It means it's, in our view, in Jefferies' view, is that it's going to be much more durable out to the 2030s.
I don't think people necessarily appreciate that NUCYNTA, the authorized generic, that you guys get 70%-80% of the profit share. Right? When I look at consensus numbers for 2027.
Right.
I think consensus is modeling like an $80 million year-over-year erosion in NUCYNTA or something like that. In BELBUCA, also a $30 million-$40 million erosion there. Right? All that flows through to EBITDA, that's why I think we are materially higher, that's why we're obviously buy rated. Right? I think what people really need to appreciate is that the durability of the business is actually fairly good.
Right? It's a very cash flow positive and stable business, which I think is great, I think that's also a great segue to go into the ADHD portfolio, which you guys have made a lot of investments in over the last few years. That's a way for Collegium to diversify away from pain, away from opioids, which is a great decision.
You've managed to essentially double JORNAY revenue over the few years, and you just doubled down with the AZSTARYS acquisition just a few months ago. Maybe, before going through some of the details, just talk about the rationale in ADHD specifically, why that product, and why the decision to make the AZSTARYS acquisition?
Yep, happy to. Look, take a step back and think about the ADHD market. It's about 22 million-23 million patients generating, in 2025, for example, 111 million prescriptions in one year. The vast majority, 98 million of those prescriptions were stimulants. Okay. A market this size is also growing at a 6% CAGR, which is actually driven more by the adult segment, which is growing almost at 8%-9% CAGR,
Which obviously implies that the pediatric segment is a little bit slower, but still growing. What does that tell us? When we look at both JORNAY PM as well as AZSTARYS, we see an opportunity to be an important player in the ADHD community. There aren't very many players that provide branded medicines to begin with in this space, in a very large space with still significant unmet need.
There's probably not another player that provides a portfolio now of two differentiated but complementary medicines. In September of 2024, Collegium closed the transaction of Ironshore Therapeutics, which brought JORNAY PM. JORNAY PM did exceptionally well in the first year. In 2025, we grew almost 50% year-over-year, driven both by a mix of volume growth as well as gross to net benefits.
In 2026, in the beginning of the year, we guided to a full year $190 million-$200 million. At the midpoint, that's a 31% year-over-year growth estimate. That growth is expected to come both driven by volume growth as well as continuing to refine other things like gross to net, as an example.
Now with the acquisition of AZSTARYS, which was announced just a couple of months ago and we closed about three weeks ago, we now have a portfolio of two complementary differentiated stimulants in the methylphenidate class that in the very early days are being very positively received by physicians. We'll get to more of that in a second.
Maybe if I could take maybe a quick down into JORNAY and talk about what gives us the confidence for a full year, 31% year-over-year growth at the midpoint. First of all, continuing to see strong demand growth. Volume growth continues to be a major factor. In Q1, we saw that the adult segment grew 23% year-over-year, and the pediatric segment grew 12% year-over-year. Recall that pediatric segment makes up 80% of the JORNAY business.
The other thing is we have a strong back-to-school season coming up in the second half of the year. If you go back and look at last year, we saw significant momentum as we went from the summer into the back-to-school season.
That played out. Since then, we have continued to increase our investment in the sales force, increase our investment in marketing programs, be it digital or social. They were very well-received. We are looking forward to continue to drive that. Maybe on the third point, there's a gross to net point also that I want you to comment on.
We expect ongoing gross to net improvements and stabilization relative to levels in 2024 and 2025. If you recall, for fiscal year 2024, gross to nets were about 71% and then improved to a full year level of about 64% in 2025.
We expect gross to nets in 2026, as incorporated into our guidance, to be in the mid 60% range for the full year and have already seen Q1 perform slightly better than Q1 2025. Our gross to nets in the Q1 of this year was just short of 68%, compared to just short of 70% in Q1 of last year.
I think the only other tailwind that I will add, which was not contemplated at the beginning of the year, because we closed the transaction that brought AZSTARYS into the portfolio, we've now expanded our target list from 21,000 prescribers to 25,000 prescribers. We've expanded the sales force from 180 representatives to 195 representatives that are calling on that list of prescribers.
Very early days. As I said, we closed the deal May 12th. The very next day, we had our reps in training over the next several days, only last week they were in the field selling both products. Early days, so far, the impressions that we're getting back from the field are very positive. They have much more receptivity that they're seeing from physicians. There are lots of offices where we were not able to access before.
Those doors are opening up where they were previously closed. The general perception of us now being a partner to the physician's office, serving the needs of that expanded patient population that we can now serve, as opposed to only one product at a time competing with time with another sales representative, for example. Very early days, but the experience so far has been very positive.
Perfect. One of the questions that we get investors is just both of these products are for ADHD, and how do they not cannibalize each other? Maybe talk a little bit about the target patient demographics and for both of these products and the use cases.
Yeah, look, great question. Before we did the deal, when we did our market research, these are two products that were already in the market. We wanted to understand how are physicians currently positioning these two products for their patients. For those patients that where morning efficacy upon awakening is important, JORNAY is a perfect match for those patients. This is what we heard back from physicians.
For those patients where morning efficacy upon awakening is not an unmet need or not a stated need, but rather these are patients that want immediate or fast onset of action, rapid onset of action that lasts up to 13 hours, they position AZSTARYS as the more appropriate patients. When we looked at the switching data from in IQVIA, both these medicines were getting their source of business primarily from generics, not from each other.
There is already an established practice in the field where physicians have figured out how they're positioning each medicine for the different patient populations. What we are now seeing is for those offices and those physicians that were prescribing one or the other, we're now able to bring the other medicine to them and frankly, discuss with them how to bring this other medicine, be it JORNAY PM or AZSTARYS, to the appropriate patient.
We actually don't see very much cannibalization. If anything, we see our ability now to expand to a broader set of patients within the office. That's what our research told us, and that's what I believe we will see play out in practice.
Yeah. Perfect. You mentioned selling AZSTARYS opened up, I think, 4,000 or 5,000 more offices or physicians or something.
Prescribers. Yeah.
Prescribers.
You said that doors that were closed to us before were now open. I'm a little confused by that because they're both ADHD products. Why would one office be closed to you with JORNAY but not AZSTARYS?
Yeah. What that would mean is having the second product allows us to bring something of additional value, right? There are plenty of physicians out there. If you take a step back and think about JORNAY, you're talking about a medicine that you have to take at night. In this entire field, there hasn't been a medicine until JORNAY came along that you would take at night.
That's a change of habit. There are plenty of physicians out there who have their own habits that have been formed over a long time, that their receptiveness to hear a JORNAY message may or may not have been there, right? When you bring another medicine that is in AZSTARYS, which does appeal to their patient population, it does give us the opportunity to now also message them about JORNAY.
That's what I meant by opening up doors where previously they were closed.
Okay. Sounds good. You mentioned that you had to train the sales force over the last few weeks, I guess.
Maybe comment a little bit about were they all pulled from the field or staggered or? I'm just curious about some of the demand over the last three weeks.
Our goal was to make sure that the harmonized sales force of 195 reps were trained as quickly as possible on both products, that they were out there fully trained with their new target lists. As you know, it takes a little bit of time when your targets change, it takes a little bit of time to meet your new targets, form relationships.
There's a little bit of an on-ramp that has to happen for a lot of representatives, our goal was to complete all of that as quickly as possible. Why? Because we didn't want this to take longer and eat into the back-to-school season, right? The back-to-school season is a really important time of the year for us to generate momentum.
Any near-term disruption that you might see from people being pulled for training or otherwise, we just wanted to get that done as quickly as possible so that we went into the second half of the year with full momentum.
Yeah. I guess Q2 is probably the best time to do that anyway, given the seasonally soft-
That's exactly right. In June and July, you typically see a bit of a lull, which is also part of the seasonality in this marketplace. Kids are out of school. Using that as an appropriate time to get all the kinks ironed out, so to speak, it lined up well from a timing perspective.
Okay. For AZSTARYS, you guys guided $60 million-$70 million in revenue this year for that Collegium would book. Can you just help us understand would some of that revenue fall into Q2? Also, what does that look like for Q3 and Q4, and how much of an inflection that we could see given that there's 195 reps out there selling AZSTARYS relative to, I think last year was only like 60-100 with the company that you acquired?
You want to take the revenue question, and then I'll add on to that?
Yeah, absolutely. We aren't providing any quarterly revenue guide, but yes, there will be revenue recorded in the Q2 from the time of acquisition on May 12th through June 30th. You will see that.
Obviously, and Vikram will speak to it further, there is an opportunity to reinvigorate growth in prescriptions, and we expect to see that in the back-to-school season and beyond. I would also flag that there is a regulatory requirement to update our 8-K 71 days post-close. At that time, the market will have insight to pro forma financials for the past few years.
Okay.
That will be a good information point for the market to just see how their trajectory has gone.
Got it. Perfect. Can you talk a little bit about gross and net for AZSTARYS and what's your expectation for this year? When you think about JORNAY PM, there was some kind of improvement over time once it was in your hands. I'm just curious if that could be a similar situation with AZSTARYS as well.
There was. I view, as of the acquisition of AZSTARYS, that we are catching it at a bit of a elevated gross-to-net level, similar to JORNAY PM. Now, I don't believe that we will have as large of a magnitude of a step down over such a short period. There were just some different dynamics in the gross-to-net stack between the two products.
We will absolutely look to optimize gross-to-nets, and we will see incremental improvements in each of the first few quarters, and then really evaluate. There are not major changes to be made on the rebating or co-pay structure, but there will be the refinements that will benefit gross-to-nets overall.
Got it. Okay. Maybe a big picture question around ADHD.
Alkermes and Lilly, who acquired Centessa, they're all fairly bullish around orexins in ADHD, and there's going to be some data coming up in the second half that Alkermes is going to report.
I'm curious to hear what your views are around orexins, and how JORNAY PM and AZSTARYS in your portfolio would be positioned relative to that. Appreciating that the orexin class is still early, but I just want to hear what your thoughts are.
Yeah, you're right, Dennis. It is very early. I think the data has to play out. Look, as a practical matter, if we take a step back and think about the overall ADHD space, even though there are so many generic alternatives, the branded medicines with appropriate patient support and everything that comes with it, we still see a lot of signs of unmet need.
Which is why more alternatives for patients is always going to be a good thing. Not just the orexin class, but there are others that are looking at potentially launching medicines if they get approved, be it stimulants or non-stimulants. Overall, we think having more options for patients is a good thing.
It's a large growing market. If you look at the branded medicines like the ones we represent, we are a very, very, very small sliver of the overall market. As far as the data is concerned, I don't know that we'd be able to comment on the data just yet,
Because I think it just needs to play out. There is a very well-established practice in this market of using stimulants first, as is evidenced from the fact that 98 million of the 111 million prescriptions written were stimulants.
The majority of the stimulants are either methylphenidate or amphetamines, and they have been around for a long, long time. Could that practice evolve over a period of time? Sure, if the data pans out and if it solves an unmet need.
For the foreseeable future, we expect to continue to grow both JORNAY PM as well as, in the future, AZSTARYS, given the strong position that they both have in the market.
Perfect. Maybe a question on EBITDA. You guys raised revenue guidance to incorporate AZSTARYS, I think it's $865 million-$895 million, that incorporates the $60 million-$70 million in AZSTARYS. Your EBITDA guidance only went up by $20 million-$25 million.
I'm curious, maybe it's a gross margin dynamic because AZSTARYS is a two-product combo pill, or maybe there's additional sort of sales and marketing investments that you guys are making in the second half of the year. I'm just curious how you're thinking about that, if that's fair, and how to also think about 2027 in terms of those sales and marketing expenses.
I'd say our EBITDA adjustment, which was an increase of between $20 million and $25 million, is a fair representation of what we expect this year. We expect that immediate accretion in EBITDA to accelerate as we go into 2027. You're right, it's a combination of the things you mentioned.
It is gross margin, cost of production, and some selling and marketing investments. We did expand the field force very modestly, but that is a field force expansion, and we will put marketing investments behind AZSTARYS because we believe that that is what will reinvigorate growth and really help the product see its maximum potential.
Okay. As we think about 2027, if you make some assumptions on what gross margins are, whether it's 80%, 85, or something like that, the rest of it largely goes to sales and marketing or SG&A, right? That's only for, sorry, that's only for half a year. When you annualize that, maybe that's $40 million-$50 million next year of incremental expenses. Is that a fair way to characterize it?
It's a reasonable way to characterize it. I would say the best thing is after we get the product in our hands for a few quarters.
We'll be able to give you insight and full-year guidance. You're also going to see the revenue growth trajectory.
Okay.
Tick up and gross to net improvements. All those things combined, I think, will inform our 2027,
Yeah.
Guidance.
Yeah. Like you said, you're making investments right now to build on that.
That's right, you build on it.
Your revenue is going to accelerate, and the pain business is very durable in our view.
Great.
In the last minute or two, maybe comment on BD or just, I guess, capital allocation priorities at this point.
Yep. Capital allocation priorities remain largely unchanged, I would say. We've always said capital allocation is a mix of three things. It's, one, investing in business development, acquiring future assets. Two, paying down the debt and strengthening the balance sheet. Three, repurchasing shares opportunistically if and when it makes sense. Those three priorities remain the same.
We obviously look at, depending on at any given point in time, one may make more sense than the other. At a high level, that has not changed. In terms of business development, we continue to look for ways to strengthen the portfolio.
At the right time, when we're ready to pull the trigger again, we'll think about it. We've previously said that we are willing to go up to 3x net debt over EBITDA for business development purposes.
At the close of the AZSTARYS acquisition, we were right about 2x. We expect that over the next 6- 12 months, given our cash generation profile, we should be able to delever enough to bring it back down to that 1x net debt over EBITDA. I think we will continue to look for products to strengthen the portfolio, but equally important, strengthen the balance sheet, pay down debt, and if and when it makes sense, buy back shares.
Perfect. All right, well, thank you so much. That's all the time that we have.
Thank you.
Great conference.