Collegium Pharmaceutical, Inc. (NASDAQ:COLL) Q4 2023 Earnings Call Transcript
Collegium Pharmaceutical, Inc. (NASDAQ:COLL) Q4 2023 Earnings Call Transcript February 22, 2024
Collegium Pharmaceutical, Inc. misses on earnings expectations. Reported EPS is $0.82 EPS, expectations were $1.33. COLL isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings, and welcome to the Collegium Pharmaceutical Fourth Quarter and Full-Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] 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.
Christopher James: Welcome to Collegium Pharmaceutical's fourth quarter and full-year 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 want to 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 provision of the Private Securities Litigation Reform Act of 1995. You are 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.
Joseph Ciaffoni: Thank you, Chris. Good afternoon, and thank you everyone for joining the call. Today, we will discuss our performance during the fourth quarter and full-year 2023 and our focus on operational execution in 2024. As we build a leading diversified specialty pharmaceutical company committed to improving the lives of people living with serious medical conditions, we strive to do good as we do well. We are proud of our partnerships with organizations to drive equitable access to STEM education and underserved communities. As part of this commitment, we recently launched the Collegium Pharmaceutical Scholarship Program for which we will award two full scholarships to Massachusetts-based high school seniors, pursuing a STEM-related major at a U.S. university.
We are proud to provide this opportunity to students who have demonstrated financial need, academic achievement, leadership, community service and a commitment to learning as they pursue a career in STEM. Also, yesterday, we published our 2023 ESG report, which reflects our commitment to operating with responsibility, integrity and purpose. I encourage you to read the report on our website. I'd also like to recognize the Collegium team for their commitment to our mission and for their contributions and accomplishments in 2023. 2023 was a banner year for Collegium Pharmaceutical. We delivered on our financial commitments and executed our capital deployment strategy. Key accomplishments in 2023 include: we delivered record revenue and record adjusted EBITDA; we returned BELBUCA to sequential quarterly prescription growth starting in Q2 2023, and saw year-over-year quarterly growth in Q3 and Q4.
In the fourth quarter, BELBUCA total prescriptions grew 3.2% compared to Q4 2022. We expect to see BELBUCA prescription growth in 2024. We successfully renegotiated a major Medicare Part D plan, accounting for 12% of BELBUCA prescriptions, maintaining access and materially rolling back rebates. This will result in year-on-year gross-to-net improvement. We also won new Medicare Part D plan, representing approximately one million covered lives. We improved Xtampza ER gross-to-net in 2023 to 59.6%, a decrease of 9.7 percentage points over 2022. We successfully renegotiated contracts, representing 30% of all Xtampza ER prescriptions, maintaining access and improving rebates in 57% of plans. We expect to see gross-to-net improve to 56% to 58% in 2024.
We received new patient population exclusivity for Nucynta, extending the period of U.S. exclusivity from June 27, 2025 to July 3, 2026. We submitted a pediatric extension for the Nucynta franchise in December, that if approved, will extend exclusivity of the franchise an additional six months. We expect a decision in the second half of 2024. The new patient population exclusivity for Nucynta, together with the potential pediatric extension for the Nucynta franchise, bolster our outlook in 2025 and 2026. We executed our capital deployment strategy, paying down $162.5 million in debt and returning $75 million in capital to our shareholders through our share repurchase program, and we ended the year with over $310 million in cash and marketable securities.
Our record financial performance and operational achievements in 2023 position the organization for success in 2024 and beyond. We expect to deliver record revenue, adjusted EBITDA, free cash flow and net income in 2024. In 2024, top line growth will be fueled by BELBUCA and Xtampza ER. We are encouraged by the BELBUCA prescription growth we saw in the fourth quarter of 2023, and we expect to see full-year prescription growth in 2024, along with gross-to-net improvement. Over the past two years, we renegotiated contracts representing 84% of all Xtampza ER prescriptions, maintaining access and rolling back rebates in 77% of plans. This is a major accomplishment that will fuel Xtampza ER revenue growth in 2024. We expect gross-to-net to improve to 56% to 58%.
The team is working hard to mitigate anticipated pressure on prescriptions. The Nucynta franchise is a key contributor to our pain portfolio. We do expect some pressure on Nucynta franchise revenue in 2024 because of the American Recovery Act eliminating the Medicaid cap. Beginning in 2025 through loss of exclusivity, we expect to be able to deliver relatively stable year-on-year results. The new population exclusivity achieved for Nucynta in 2023 and the anticipated pediatric extensions for the franchise in 2024, along with the reduction in the royalties we pay on Nucynta franchise sales from 14% to 7% beginning on June 27, 2025, bolster our outlook for the franchise in 2025 and 2026. In 2024, our focus is on operational execution. We are committed to achieving our financial objectives and deploying capital to create long-term value for our shareholders.
We aim to achieve record financial performance while rapidly paying down debt and returning capital to our shareholders by opportunistically leveraging our $150 million share repurchase program. I am confident that we are well positioned to deliver on our financial and capital deployment objectives. I will now hand the call over to Colleen to discuss the financials.
Colleen Tupper: Thanks, Joe. Good afternoon, everyone. 2023 was a banner year for Collegium, in which we achieved all of our financial objectives. We generated record revenue and adjusted EBITDA on both a quarterly and full-year basis. We maintained our financial discipline and leveraged our strong cash flows to execute on our capital deployment strategy. Financial highlights for the fourth quarter and full-year include: net product revenues were a record $149.7 million for the fourth quarter, up 16% year-over-year; 2023 net product revenues were a record $566.8 million, up 22% year-over-year. BELBUCA net revenue was a record $49.3 million in the fourth quarter, up 17% year-over-year and a record $182.1 million in 2023, up 44% year-over-year; 2023 sales reflect a full-year of revenue compared to a partial year of revenue in 2022 due to the timing of the BDSI acquisition.
For the fourth quarter, Xtampza ER net revenue was a record $48.5 million, up 38% and Xtampza ER gross-to-net was 54.5%. For 2023, Xtampza ER net revenue was a record $177.4 million, up 28% and a gross-to-net was 59.6%. We expect Xtampza ER gross-to-net to be in the range of 56% to 58% in 2024 as a result of the successful contract renegotiations we completed in 2023. Nucynta franchise net revenue was $46.9 million in the fourth quarter, down 2% year-over-year and $190.8 million in 2023, up 3% year-over-year. GAAP operating expenses were $32.9 million in the fourth quarter, down 13% year-over-year. For 2023, GAAP operating expenses were $159.2 million, down 10% year-over-year. Non-GAAP adjusted operating expenses were $25.9 million in the fourth quarter, down 20% year-over-year.
For 2023, adjusted operating expenses were $123.6 million, up 1% year-over-year. GAAP net income for the fourth quarter was $31.9 million compared to a net loss of $7.2 million in the fourth quarter of 2022. For 2023, net income was $48.2 million compared to a net loss of $25 million in '22. Non-GAAP adjusted EBITDA was a record $104.2 million for the fourth quarter, up 36% year-over-year and a record $367 million for full-year 2023, up 38%. GAAP earnings per share was $0.99 basic and $0.82 diluted in the fourth quarter compared to GAAP loss per share of $0.21 basic and diluted in the prior year period. GAAP earnings per share was $1.43 basic and $1.29 diluted in 2023 versus GAAP loss per share of $0.74 basic and diluted in 2022. Non-GAAP adjusted earnings per share was $1.58 in the fourth quarter versus $1.09 in the fourth quarter of '22.
For '23, non-GAAP adjusted earnings per share was $5.47 versus $3.96 in the prior year. Please see our press release issued earlier today for a reconciliation of GAAP to non-GAAP results. In 2023, we generated robust operating cash flows of $274.7 million and ended the year with cash, cash equivalents and marketable securities of $310.5 million. For the year, Collegium paid down $162.5 million in debt, ending the year with leverage of approximately 1x net debt to adjusted EBITDA. We are encouraged by our strong performance in the fourth quarter and full-year 2023. We achieved our financial goals for the year, growing adjusted EBITDA at more than 1.5x the rate of revenue, increasing our cash position and positioning us to deliver on our financial commitments in 2024.
We reaffirm our 2024 financial guidance, which we announced earlier this year. We expect net product revenues in the range of $580 million to $595 million. We expect adjusted operating expenses in the range of $120 million to $125 million and adjusted EBITDA in the range of $380 million to $395 million. We are confident in our ability to deliver on our financial commitments in 2024. We are focused on creating long-term value for our shareholders through our capital deployment strategy. We are rapidly paying down debt and plan to opportunistically return capital to shareholders through share repurchases. We are locked into rapidly deleveraging the balance sheet, paying down over $180 million of debt in 2024, which would put us at de minimis net-debt-to-adjusted EBITDA ratio at year-end.
Our ability to delever quickly is a testament to our strong cash generation. We have a strong track record of returning value to our shareholders. Since 2021, we've returned $137 million of capital to our shareholders at an average price of $21.65 per share through a combination of open market and accelerated share repurchase programs. In 2023, we repurchased $75 million through accelerated share repurchase programs, including $25 million repurchased at an average price per share of $27.09 since November. In January, our Board authorized a new share repurchase program to repurchase up to $150 million in common stock over 18 months. We believe that our stock continues to be undervalued, and we view our share repurchase program as a productive use of our capital to generate high returns for our shareholders.
I will now turn it over to Scott to give a commercial update.
Scott Dreyer: Thanks, Colleen. At Collegium, we're proud to be the leader in responsible pain management. BELBUCA, Xtampza ER and Nucynta ER have a combined 50% share of the branded ER market. Our pain portfolio is highly differentiated, and our commercial organization is focused on maximizing the potential of our products to have a positive impact on the lives of people living with pain and the communities that we serve. We ended 2023 with momentum across the pain portfolio. BELBUCA and Xtampza ER are well positioned for growth in 2024, and the Nucynta franchise will be a key contributor. In the fourth quarter, BELBUCA total prescriptions grew 3.2% year-over-year and 1% quarter-over-quarter, continuing the sequential quarterly growth that started in the second quarter of 2023 when we inflected the prescription trajectory of BELBUCA.
As the leader in responsible pain management, we believe that Schedule III products should be used before Schedule II and used more broadly. We're encouraged that the buprenorphine market continues to grow. We believe BELBUCA is uniquely positioned because of its clinical differentiation as a Schedule III product with a broad range of doses for the management of severe and persistent pain that requires an extended treatment period. Our commercial accomplishments in 2023 position BELBUCA for growth in 2024. Stronger commercial execution drove sequential quarterly growth beginning in the second quarter of 2023. We expect BELBUCA to benefit from improved commercial execution, the successful renegotiation of a major Medicare Part D contract and the addition of a new Part D plan, representing approximately one million covered lives.
Our focus in 2024 is on strengthening our commercial execution in support of BELBUCA specifically, investing in the knowledge and training of our field force, pulling through BELBUCA's strong commercial access and improving push through in Medicare Part D. Importantly, we'll work on expanding Medicare Part D coverage for BELBUCA. It's the right thing to do and, if successful will serve as a catalyst for growth in 2025 and beyond. Turning to Xtampza ER. In 2023, we delivered record revenue, driven by significant gross-to-net improvement. Our successful contract renegotiations with plans that accounted for 54% of Xtampza ER prescriptions in 2022, reduced gross-to-net by 9.7 percentage points, offsetting pressure on prescriptions. We expect a continuation of that dynamic in 2024 based off our successful renegotiation of contracts representing 30% of all Xtampza ER prescriptions in 2023.
Our focus with Xtampza ER in 2024 is on challenging the status quo with health care professionals. Xtampza ER has strong data in its label differentiating it from OxyContin, and it has superior access in both commercial and Medicare Part D. Our aspiration with Xtampza ER is to replace OxyContin utilization for appropriate patients. In managed care, we need to pull through our strong access positions in commercial and Part D and importantly, strive to achieve new wins. We have the ability to achieve new wins and forever manage gross to net to less than 65%. The Nucynta franchise is a key contributor to our pain portfolio. Tapentadol is a differentiated molecule with a proposed dual mechanism of action. It's viewed favorably and is highly differentiated by health care professionals.
Our market access strategy enables us to manage the Nucynta franchise contribution in a relatively stable manner year-on-year, beginning in 2025 through loss of exclusivity. In closing, I'm proud of our commercial accomplishments in 2023 and focused on achieving our objectives in 2024 through operational execution. I'll now turn the call back to Joe.
Joseph Ciaffoni: Thanks, Scott. 2023 was a banner year for Collegium Pharmaceutical. Our accomplishments in 2023 position the organization for success in 2024 and bolster our outlook in 2025 and 2026. Our focus in 2024 is on operational execution. We expect to deliver record financial performance, and we are committed to deploying capital to create long-term value for our shareholders. I will now open the call up for questions. Operator?
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