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Edited Transcript of BDSI earnings conference call or presentation 14-Mar-19 8:30pm GMT

Q4 2018 BioDelivery Sciences International Inc Earnings Call

RALEIGH Mar 22, 2019 (Thomson StreetEvents) -- Edited Transcript of BioDelivery Sciences International Inc earnings conference call or presentation Thursday, March 14, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Herm Cukier

BioDelivery Sciences International, Inc. - CEO & Director

* Mary Theresa Coelho

BioDelivery Sciences International, Inc. - CFO & Treasurer

* Scott M. Plesha

BioDelivery Sciences International, Inc. - President & Chief Commercial Officer

* Thomas B. Smith

BioDelivery Sciences International, Inc. - Chief Medical Officer

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Conference Call Participants

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* Brandon Richard Folkes

Cantor Fitzgerald & Co., Research Division - Analyst

* Esther Lannie Hong

Janney Montgomery Scott LLC, Research Division - Director of Biotechnology

* Matthew Lee Kaplan

Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research

* Oren Gabriel Livnat

H.C. Wainwright & Co, LLC, Research Division - MD & Senior Healthcare Analyst

* Timothy Francis Lugo

William Blair & Company L.L.C., Research Division - Co-Group Head of Biopharma Equity Research

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Presentation

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Operator [1]

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Greetings, and welcome to BioDelivery Sciences Fourth Quarter and Fiscal Year 2018 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Terry Coelho. Please go ahead.

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Mary Theresa Coelho, BioDelivery Sciences International, Inc. - CFO & Treasurer [2]

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Thank you, and good afternoon, everyone. Welcome to our fourth quarter and year-end 2018 earnings conference call. Leading the call today is Herm Cukier, Chief Executive Officer. We are joined by Scott Plesha, President and Chief Commercial Officer; and Dr. Thomas Smith, Chief Medical Officer. Following our prepared remarks, we will conduct a question-and-answer session. Earlier today, BioDelivery Sciences issued a press release announcing its financial results for the fourth quarter and year-end 2018. A copy of the release can be found on the Investor Relations page of the company's website.

Before we begin, I would like to remind everyone that certain statements may be made during this call, which may contain forward-looking statements. Such forward-looking statements are based upon current expectations and there can be no assurances that the results contemplated in these statements will be realized. Actual results may differ materially from such statements due to a number of factors and risks, some of which are identified in our press release and our annual, quarterly and other reports filed with the SEC. These forward-looking statements are based on the information available to BDSI today, March 14, 2019, and the company assumes no obligation to update statements if circumstances change. An audio recording and webcast replay for today's conference call will also be available online in the Investors section of the company's website.

With that, I'll turn the call over to Herm Cukier. Herm?

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [3]

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Thank you very much, Terry, and thank you all for joining us this afternoon. It is my pleasure to welcome you to the BDSI Fourth Quarter and Full Year 2018 Earnings Call.

To begin with, I would like to welcome Terry, our new Chief Financial Officer. Terry brings broad expertise in business and leadership across all areas of finance and will play an integral role as we focus on our commercialization strategy through our next phase of growth. Welcome, Terry. We're delighted to have you as part of our executive leadership team.

As Terry indicated, we are also joined on the call today by Scott Plesha, our President and Chief Commercial Officer; and Dr. Thomas Smith, our Chief Medical Officer. Each of these executives will share more details on our continued accomplishments and positive expectations for 2019 and beyond. By every measure, the fourth quarter and full year 2018 was a vast success for BDSI. I'm very pleased by our results today and have the utmost confidence in our ability to sustain this positive momentum moving forward. We have made significant strides in transforming the company into a rapidly growing commercial-stage enterprise.

I would like to thank all of our employees for their hard work and dedication throughout the year. It is their commitment and constant positive energy that has enabled this transformation to occur. Because of their efforts, thousands of patients living with chronic pain are benefiting from the therapeutic effect of a truly novel and important product like BELBUCA and we are just getting started. We have achieved our stated intent to strengthen the company, control our own destiny and be well positioned for sustained growth.

When we started this transformation in May of last year, I laid out a straightforward plan that would enable the success to occur. First it was imperative to significantly accelerate the growth of BELBUCA, recognizing it is in the early stages of its launch and has a distinctive clinical proposition for patients. While I would let Scott share more of the details of the success, I'm very pleased to see scripts reach an all-time high during the fourth quarter. In addition, there were record number of new and unique BELBUCA prescribers throughout the quarter also reaching all-time high in December.

Second, ensuring patients had access to BELBUCA was of the utmost importance and became one of our top priorities throughout the year. I'm very proud that we have secured preferred position across the majority of the largest national insurance companies. In fact, we've even added more than 25 million lives in the fourth quarter alone. And so as we exited 2018, more than 100 million covered lives across the country had preferred access to BELBUCA, an outstanding accomplishment considering we entered the year with only 8 million having so. This number continues to expand as we enter 2019, a testament to the growing recognition of BELBUCA as an important treatment option in this patient population.

Third, we strongly believe it was necessary to more broadly and effectively communicate the scientific evidence supported BELBUCA as an important treatment option for chronic pain. This means ensuring we have the right sized sales team to appropriately reach HCPs using opioids in treating chronic pain and building a medical team to leverage scientific platforms such as publications, congresses, et cetera. We made a strategic decision to hire, train and deploy the new teams during the second half of 2018. They hit the ground running as the New Year began. Tom and Scott will share more of the details, but we're already seeing the impact of our new colleagues across the country and certain this investment will help ensure success in 2019 and beyond.

And finally, having a senior leadership team with the experiences and skills to both accomplish the near-term task and be capable of driving our ambition for the longer term was of the utmost importance and a personal priority of mine. I'm extremely proud to have industry leaders such as Tom and Terry in addition to Jim Vollins, our General Counsel and Chief Compliance Officer, joining existing top talent such as Scott and Jody Lockhart, our Head of Operations. We are unified in our ambition and confident in our ability to make BDSI, a highly successful specialty pharmaceutical company.

In summary, the fourth quarter and full year 2018 were extremely successful for BDSI. We accomplished each of the key strategic imperatives laid out last year and have positioned ourselves for continued growth and success.

I will now turn the call over to Scott, who will share more details of our operational performance. Scott?

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Scott M. Plesha, BioDelivery Sciences International, Inc. - President & Chief Commercial Officer [4]

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Thank you, Herm. As Herm noted, we experienced a very strong fourth quarter and 2018 with BELBUCA, not just increasing but accelerating prescription and revenue growth. BELBUCA's strong growth resulted in our reaching an all-time high during the quarter at over 56,000 prescriptions. We've now reached all-time consecutive quarterly highs ever since we relaunched BELBUCA and the growth we experienced in Q4 was the largest quarter-over-quarter growth we have seen at almost 12,000 prescriptions. We accelerated our prescription growth in Q4 and believe there are key drivers supporting this growth. Since early 2018, we have seen a consistent increase in our new prescribers as well as the number of prescribers each quarter. During the fourth quarter, we saw that trend continue and even accelerate.

During the fourth quarter, there were more than 5,350 unique BELBUCA prescribers and nearly 1,100 new prescribers. Both of these metrics represent meaningful increases over Q3 2018 and our all-time highs since the relaunch of BELBUCA.

During the quarter, we increased our prescriber base and saw prescription and share growth across every decile of HCPs, which demonstrates the growing acceptance of BELBUCA. In addition, all of our BELBUCA dosage strengths exhibited accelerated growth during the fourth quarter with every strength growing greater than 22%. This not only demonstrates the comfort HCPs have in prescribing BELBUCA across all dosage strengths, but also how having 7 dosage strengths importantly allows a patient's care to be tailored to the lowest efficacious dose.

During 2018, we greatly increased the number of patients that received BELBUCA for the first time. As we entered 2018, there were approximately 1,700 chronic pain patients per month being prescribed BELBUCA for the first time. By Q4 of 2018, the number of new BELBUCA patients had increased over 4,000 per month. This increase in patients receiving BELBUCA for the first time demonstrates that health care providers identifying patients that are appropriate to receive BELBUCA at an increased rate and this is critical to the accelerated growth of the brand.

As Herm mentioned, we improved our market access greatly in 2018, increasing the number of lives from under 8 million with preferred access to over 100 million.

In November, BELBUCA was added to OptumRx's preferred formulary list, adding over 25 million covered lives with access to BELBUCA. Most recently, we announced that BELBUCA had been moved from not covered to preferred formulary in Cigna Health Care. This win became effective February 1, 2019, and provides improved access to -- for BELBUCA for over 7.3 million lives.

With our recent wins, over 50% are combined commercial and Medicare lives covered in preferred Tier 2 position, which is up significantly from 3% of lives covered at the beginning of 2018.

With these recent wins, BELBUCA is now covered or better in 92% of commercial lives. Importantly, the BDSI commercial team has done an excellent job of executing against these wins and has driven consistent prescription growth in each PBM or plan since the contracts were executed. We continue to see strong interest and acceptance by the commercial and government payers of BELBUCA's differentiating qualities and we are very optimistic about adding more wins. While it's difficult to predict when these wins will occur, we are confident that over time, the number of lives having preferred access to BELBUCA will continue to rise. We are excited by the progress we made in 2018 and are confident that we can continue to build upon our current growth. We believe that our sales force and market access team expansions that were both completed at the end of Q4, will be key to our success in 2019 and beyond. These increases in personnel will allow us to continue to build improved market access to BELBUCA and allow for the proper reach and frequency with our 10,500 targets to maximize results. We are encouraged that early into our expansion, we've already seen an accelerations in new and total prescribers. I'm excited by the success we had in 2018 and the fact that BELBUCA's growth has continued in 2019, resulting in all-time tariff highs for January and February.

As we go forward into 2019, we'll continue to focus on improving market access, growing the number of patients receiving BELBUCA for the first time and expanding our prescriber base.

I'm also very excited about how our medical plan will complement the efforts of the commercial team.

And with that, I'll turn things -- I would like to turn things over to Dr. Tom Smith, our Chief Medical Officer, to provide the highlights of medical plan and the initiatives that are being executed.

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Thomas B. Smith, BioDelivery Sciences International, Inc. - Chief Medical Officer [5]

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Thank you, Scott. It's a pleasure to update everyone here on the progress we have made since we have last spoken in November. I have been in my role now for 8 months, and I'm very pleased by the scientific discourse, the increased understanding and the impact that I'm consistently hearing in meeting with our prescribers, key opinion leaders and other customers.

Late last year, I shared with you our 2019 medical plan and the importance of cementing and the understanding around BELBUCA's efficacy, safety and tolerability. This past Saturday at the American Academy of Pain Medicine's Congress in Denver, BDSI sponsored a scientific symposium and 3 of the world's top KOLs presented on BELBUCA's mechanism of action, pharmacology, clinical data and use in chronic pain. The medical team has identified several addition, both key scientific congresses, which we will focus on this year. And for each of these meetings, we have plans in place to ensure a steady stream of medical communication and education around BELBUCA. One of the events that I spoke about last year was the expert opinion consensus program. It is moving forward and will provide recommendations for conversion as well as address the appropriate use of opioids in patients suffering from chronic pain. Given the importance of this topic, I would expect that the manuscript will be submitted to a top-tier medical journal. There was a real need to elevate the scientific understanding and awareness around drug safety given the rising number of Americans dying each day due to opioid overdose. Chief among these adverse events is the very real possibility of life-threatening respiratory depression in patients taking any CNS depressants. And our team plans to explore a new clinical study, looking specifically at this critical topic. To further solidify BELBUCA's efficacy, safety and tolerability, the team is moving forward with a very robust publication plan. Already, they are overseeing the development of manuscripts and scientific congress abstracts. Our plan is to have a steady cadence of medical literature to help to inform our health care providers. Finally, to further strengthen the team, serve as a resource to our prescribers and others throughout the scientific community and to ensure appropriate use of BELBUCA, we will expand our MSL team next month.

So in summary, we are fully executing on the medical plan exactly as was outlined last year. As I mentioned then, what gives me, as a physician, the most satisfaction is knowing that this plan through its initiatives and education will create awareness and understanding around BELBUCA, allowing millions of patients who are suffering from chronic pain to now have access and to benefit from this medication.

With that, I will turn the call over to Terry Coelho to cover the financials in more detail. Terry?

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Mary Theresa Coelho, BioDelivery Sciences International, Inc. - CFO & Treasurer [6]

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Thank you, Tom. Fourth quarter financial results exceeded both third quarter and prior year quarterly results as well as exceeding the high end of the expectations that we provided last quarter. Total net revenue for the fourth quarter ended December 31, 2018, was $18 million, an increase of 27.4% compared to $14.2 million in the third quarter of 2018, and an increase of 44.1% compared to $12.5 million in the fourth quarter of 2017.

Total net revenue for the full year 2018 was $55.6 million, a decrease of 10.2% compared to $62 million for the year ended December 31, 2017. Total net revenue for 2017 included $20 million in contract revenues recorded in January 2017 as part of the termination of the licensing agreement with Endo and the return of BELBUCA rights to BDSI.

2018 total net revenue growth was 32.5%, excluding the aforementioned $20 million in contract revenues. The total net revenue growth was driven primarily by BELBUCA, which comprised 88% of our total net revenue in the quarter. BELBUCA net revenue in the fourth quarter ended December 31, 2018 was $15.9 million, an increase of 28.3% compared to $12.4 million in the third quarter of 2018, and an increase of 68.3% compared to $9.4 million in the fourth quarter of 2017.

Gross-to-net deductions in the fourth quarter were 47.9% for BELBUCA and were essentially in line with the third quarter deductions of 47.8%. Gross profit for BELBUCA was 86.6% in the fourth quarter and reflects the higher yields and lower costs resulting from our transition to new packaging equipment that we discussed last quarter. Total gross margin from both commercial products increased to 81% in the fourth quarter compared to 76% in the third quarter.

Total operating expenses in the quarter reflects our continued investment in our commercialization efforts. For the fourth quarter ended December 31, 2018, total operating expenses were $18.5 million compared to $14.2 million in the third quarter of 2018, and $21.6 million in the fourth quarter of 2017. The quarter-over-quarter increase in operating expenses was driven primarily by the sales force expansion and medical team growth. Total operating expenses for the full year 2018 were $63.5 million as compared to $71.9 million for the full year 2017. The year-over-year reduction was primarily due to 2017 costs associated with joining the Opioid Consortium, along with remaining R&D expenses.

On a GAAP reported basis, the net loss for the fourth quarter was $7 million or $0.10 per share compared to a loss of $18.9 million or $0.29 per share in the third quarter of 2018. The GAAP net loss for the full year 2018 was $46.4 million or $0.73 per share compared to net income of $5.3 million or $0.09 per share for the full year 2017 on a comparable basis. The full year 2018 GAAP net loss included a onetime noncash charge of $12.5 million or $0.19 per share for the beneficial conversion feature of the Series B Preferred Stock.

Non-GAAP net loss for the full year 2018 was $33.9 million or $0.54 per share, excluding the impact of the beneficial conversion feature just mentioned, compared to the full year 2017 non-GAAP net loss of $22.1 million or $0.40 per share, which excludes the bargain purchase gain of $27.3 million from the reacquisition of BELBUCA.

At December 31, 2018, BDSI had cash and cash equivalents of approximately $43.8 million. This compares to cash and cash equivalents of approximately $21.2 million at December 31, 2017, and $49.5 million at September 30, 2018. As a reminder, in Q2 of 2018, the company successfully completed a $50 million equity financing raise, which together with the solid performance over the past few quarters has strengthened the balance sheet.

In the coming months, I'll be focusing on identifying opportunities to further improve our cash position and profitability as well as our business processes and our finance capabilities to ensure we are well positioned to invest in and fully capitalize on the growth potential of BELBUCA.

Finally, looking ahead to 2019 and based on the strong momentum with which we entered the year, we see 2019 BELBUCA net revenue to be in a range of $80 million to $85 million and total company net revenue to be in the range of $85 million to $90 million. This outlook incorporates an estimated net impact of approximately 5% from the BELBUCA price increase effective earlier this week. As a result of the higher net revenues, along with our ability to leverage our SG&A expenses as we grow, we currently expect that we will be operating cash flow positive in 2019. In the longer-term, we believe our sustained momentum will allow us to achieve annual sales in the range of $250 million to $300 million as BELBUCA continues to evolve into the therapy of choice for the management of chronic pain.

At this point, I would like to turn the call back over to Herm for some concluding remarks before we open the call for Q&A. Herm?

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [7]

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Thank you, Terry. As the team has highlighted, 2018 was a very successful year for BDSI, further exemplified by continued strong performance in the fourth quarter and early momentum in the New Year. We have accelerated the growth of BELBUCA, put the right people and teams in place and have the funds to properly capitalize on our opportunities. We have increased BELBUCA expectations for 2019, expect to be operationally cash flow positive in the year and have expanded our long-term ambition for the product.

In conclusion, we have become a rapidly growing commercial company with a very bright future.

I'll now turn the call back to the operator for Q&A. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Brandon Folkes with Cantor Fitzgerald.

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Brandon Richard Folkes, Cantor Fitzgerald & Co., Research Division - Analyst [2]

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Congratulations on the strong results and guidance. Herm, firstly, can you talk about some of your access win assumptions that go into your revised peak sales estimates? And maybe given the success that you've seen with BELBUCA since the last time we heard from you guys, do you still think your sales force is rightsized? Or has the success made you think otherwise on that? And then lastly, how should we think about capital allocation going forward? Your stock's done quite well. Would you consider an equity raise to expand either the sales force or bring in additional products?

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Scott M. Plesha, BioDelivery Sciences International, Inc. - President & Chief Commercial Officer [3]

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It's Scott. I appreciate the question. So first of all, talking of market access and its impact on our peak sales. Right now, we mentioned we're a little over 50% preferred lives. We're really excited about the progress we made in 2018. It was actually an excellent year for us in opening up access to patients. However, we still have work to do probably on the Medicare side more than anything and on regional plans. We recently completed expansion of the market access team. So we are seeing really nice pull-through in our market access wins, so our share go higher within them, still a lot of upside there though. So we're excited about continuing to pull that through. The trends have been very consistent within those wins and there is really no reason to believe that, that would change going forward. We'll continue to try to layer on additional wins as we go forward. As far as the sales force size, we're really confident that we've done some good work upfront on the sizing of -- zeroed in on about 10,500 targets, so each rep has somewhere between 80 to 100, 110 targets. We feel that's rightsized for where we are right now. Keeping in mind that the opioid space is really consolidated and the pain management doctors primarily are the large writers there. So it allows us to have a very focused in specialty pharma sales organization. And I'll let Herm handle the last question.

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [4]

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Thank you so much, Scott, and good afternoon, Brandon. Thank you for your questions, really appreciate it. And I'll say that, right now, we have to remind ourselves that BELBUCA is still very much in the early stages of its launch, still a lot of hard work and heavy lifting. Obviously, we're very pleased by the success we accomplished in 2018 with the product, in transformation of the company as we just described, the early momentum that we have through the first few months of this year. But we still have a lot of hard work to truly fully capitalize on the opportunity that we have at hand with the product. But we put ourselves in a position of strength and we put ourselves in a position of controlling our destiny. We now have a leading commercial infrastructure that Scott and his sales team doing a tremendous job with customers day in day out. And over time, we'll clearly have more opportunity to do more with that commercial infrastructure and we'll be opportunistic and we'll strike from a position of strength if we see something that makes sense, but that's down the road. Right now, we're keenly focused on ensuring that we fully execute [closely] day in day out with BELBUCA and continue to drive further acceleration uptake of that product.

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Brandon Richard Folkes, Cantor Fitzgerald & Co., Research Division - Analyst [5]

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And maybe if I can sneak in one more, if I may. Did you take a price increase this week on BELBUCA? Am I correct in that assumption?

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [6]

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Yes, that is correct. As Terry pointed out, that did go into factor early this week and we expect the net results will be approximately in the 5% range.

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Brandon Richard Folkes, Cantor Fitzgerald & Co., Research Division - Analyst [7]

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Okay. And did you see any buying at the end of the quarter? I'm just trying to think about how we should model 1Q going into 2Q. Is the inventory end of channel potentially at the end of 1Q, just when we're modeling?

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [8]

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Right. I understand your question. I appreciate that, Brandon. And I guess, I would say that at this point, there is no difference in buying patterns from what we've been experiencing since the relaunch of the product.

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Operator [9]

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Our next question comes from the line of Esther Hong with Janney.

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Esther Lannie Hong, Janney Montgomery Scott LLC, Research Division - Director of Biotechnology [10]

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Congratulations on the successful quarter and year-end. So just a few. So first, can you talk about the market share for BELBUCA and any trends that you're seeing? And then second, regarding the new prescribers, are these physicians who are already familiar with BELBUCA, but didn't prescribe it because of coverage? Or are these prescribers who were not previously familiar with BELBUCA, but gained access through the sales force and other types of awareness? And then third, can you tell us what you've been seeing with prescribing patterns in terms of different dosage strength? I know that there was -- you had mentioned there was growth across all strengths. What are the most highly prescribed doses?

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Scott M. Plesha, BioDelivery Sciences International, Inc. - President & Chief Commercial Officer [11]

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Esther, it's Scott. I'll take these one at a time. So along with our growth, our market share has been growing quite rapidly, so to kind of frame that in the long-acting opioid space, we entered the year with about 7/10 of the share point, so under 1%. And as we exited, we're up to 1.8% in the month of December and we -- Herm and I both mentioned the acceleration we've even seen into 2019. And as we sit here in February, it's up to 2.2% market share there. And then even looking at buprenorphine market, which really is a subset, we're up to almost 34% in the month of February. So -- but keep in mind, when we look at our data, we're not just taking patients from a long-acting opportunity, majority of our patients are either coming being switched from or added to a short-acting so it's a much broader marketplace. And as far as new prescribers go, I think, this is playing out right into our expansion plans. When we looked at our reach and frequency and our market share and penetration, it was probably right in the middle deciles. And in fact, when we look at our -- it's early yet, so the expansion really just got completed at the end of the quarter, end of Q4, but we are seeing a nice uptick within those middle deciles due to our activity in those deciles growing across all of them, but probably the more -- the largest growth within that area. So again, that was part of our strategy. As far as dosage strengths go, we're breaking down a couple of different ways. So the 75, 150 and 300, we'll call those be starting our initiation doses per label. Those are the areas where patients most frequently start on BELBUCA. And in fact, the 150 and the 300 are the most prescribed. And they -- patients don’t always go beyond that, but in our studies, a lot of time they were titrated up as needed to get efficacy. And there is really not a big shift between those doses and the higher doses, so the 450 to the 900, it moves a percentage or 2. However, we did -- we have seen every quarter really since we relaunched those titration doses have increased in pure growth. And I think what that points to is patients being on long-term, having good results and being happy with the product. And so that's crucial. And then the other part is funnel, or new patients coming in at that 150 to 300 has accelerated as well. So those 2 things are both important, and we're really encouraged by what we're seeing there. And I'm sorry, what's the...

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [12]

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That was the third.

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Scott M. Plesha, BioDelivery Sciences International, Inc. - President & Chief Commercial Officer [13]

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Was there a fourth?

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [14]

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No, that was a...

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Scott M. Plesha, BioDelivery Sciences International, Inc. - President & Chief Commercial Officer [15]

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Yes. Okay, okay.

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Esther Lannie Hong, Janney Montgomery Scott LLC, Research Division - Director of Biotechnology [16]

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I could -- can I ask a fourth?

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [17]

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Sure.

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Esther Lannie Hong, Janney Montgomery Scott LLC, Research Division - Director of Biotechnology [18]

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Okay.

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [19]

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I think Scott's ready for one more.

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Scott M. Plesha, BioDelivery Sciences International, Inc. - President & Chief Commercial Officer [20]

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One more.

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Esther Lannie Hong, Janney Montgomery Scott LLC, Research Division - Director of Biotechnology [21]

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Okay. All right. So there was a recent ANDA filing by a few generic competitors. And can you speak about any sort of previous settlements and anything that gives you confidence that the patents will be protected moving forward?

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [22]

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Esther, thank you so much for your questions, greatly appreciate it. And as is public, there have been 2 additional Paragraph IV filings on top of the first-to-file, which was Teva. And to your question, we have obviously reached an agreement with the first-to-file Teva which was done after their diligence and discovery process, which I think, speaks to the fortitude and the resilience of our intellectual protection, which we are extremely confident of and which we will continue to defend as needed with vigor and the utmost confidence. So there are 2 other Paragraph IV filers and they're on the same patents. And so for us, this is a continuation of and maybe a sign of success whether the product grows, there will be others that will follow afterwards. But for us, this is just a continuation of the rigorous defense of our intellectual property protection and there is nothing different from the process that was instituted by first-to-file, which was Teva.

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Operator [23]

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Our next question comes from the line of Tim Lugo with William Blair.

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Timothy Francis Lugo, William Blair & Company L.L.C., Research Division - Co-Group Head of Biopharma Equity Research [24]

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Congratulations on all the BELBUCA growth in 2018 and 2019 so far. I guess, a little bit broader picture. We have a major player in the opioid field discussing bankruptcy protection. Can you give us an idea of what you're seeing from a field potentially due to their marketing pullback? And what stage are you in terms of benefiting from this? I just don't quite see how this could be anything, but be a positive for BELBUCA?

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [25]

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Tim, this is Herm. Thank you so much for your accolades and for your question. I think -- I'll turn over to Tom in a minute to talk a little bit more about some of the things that he and the medical team are working on from a medical perspective and just how different BELBUCA really is from the C2 opioids. But I think that our focus is as we've been saying all along is ensuring that, we helped the medical community fully understand the clinical value proposition that product like BELBUCA offers to this patient population, not only in the safety profile, which I think, we've exemplified continuously. And I think there is an appreciation for it, but it is indeed, an extremely effective analgesic agent. And we believe that it warrants merit as a core therapy for the broader treatment of chronic pain. But I'll turn it over to Tom, maybe he will talk a little bit more about from a physician perspective, just how differentiated the molecules really are and the aspects of historical concerns that have existed in C2 is just not something that applies in the same way to BELBUCA.

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Thomas B. Smith, BioDelivery Sciences International, Inc. - Chief Medical Officer [26]

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Right. Thank you, Herm, and thank you for the question. But yes, the environment has changed a lot just in the past several months certainly during the past year. And I was sharing this weekend -- we had the scientific symposium at AAPM and we had standing room only, right, and the very few people left even before the Q&A wrapped up. So there is a lot of interest. And I remember just a year ago, buprenorphine not even being in discussion at many of these congresses around pain. So physicians are wanting to know, right? There is a lot of external pressures that are on right now. There is the pressures from Medicare to get folks under 90 MMEs of a C2 opioid. I highlighted during my talk this evening that we're going to do this study looking at the very real possibility of respiratory depression. Every day, we hear stories about people who are taking their chronic pain medication, their opioids, then they go home and they have a glass of wine and dinner and then perhaps at night when they go to bed, they take the benzodiazepine to help them sleep. And unfortunately, those -- some of those people do end up passing away. So we believe, as Herm mentioned, BELBUCA is a different molecule. We know its safety profile. And when you think about the adverse events of these opioids, chief among them is the possibility of respiratory depression. We know we have a ceiling effect when it comes to that. So we think this is a great opportunity to expound on that. So really looking forward to the plans that we have in place for this year, but great question.

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Timothy Francis Lugo, William Blair & Company L.L.C., Research Division - Co-Group Head of Biopharma Equity Research [27]

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Understood. And maybe following up on the clinical study. Can you talk about maybe how many patients you're expecting to enroll? What's the time frame of the study? And also maybe for Terry, we've seen R&D at pretty low levels over the past few quarters, I expect that to probably will pick up as you start off a new study?

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Thomas B. Smith, BioDelivery Sciences International, Inc. - Chief Medical Officer [28]

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Right. So this was the study I was talking about late last year when I laid out my medical plan there at the Analyst Day in October and then spoke further about it in November. So this has all been accounted for. What I see is that we'll work on that protocol area this month, hopefully get an IRB approved in the next month or so. It will take several months so -- to conduct the study, but be comparing ourselves, be comparing BELBUCA directly against a Schedule II opioid, right? So I really think that news will be informative and will really help the physicians in their decision making.

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Mary Theresa Coelho, BioDelivery Sciences International, Inc. - CFO & Treasurer [29]

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Tim, this is Terry. So just to address your question on the R&D spend. What I would say at this point is that any spend that Tom is contemplating is already factored into our cost structure and we're continuously evaluating our strategic choices, making prioritizing our spend. And I think you can expect to see a pretty steady trend.

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Operator [30]

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(Operator Instructions) Our next question comes from the line of Matt Kaplan with Ladenburg Thalmann.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [31]

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Congrats on the quarter. Just wanted to circle back a little bit to your access wins. And I guess, the question is, are there additional payers you're in negotiations with to gain preferred access? And when could we see some of these negotiations start to have an impact and have a resolution?

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Scott M. Plesha, BioDelivery Sciences International, Inc. - President & Chief Commercial Officer [32]

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Matt, it's Scott. So we're always obviously out doing clinical presentations and talking with market access companies, plans and PBMs. There's really no way to predict the timing of them. You saw that last year we sprinkled them throughout the year. And all of our payers we're having really meaningful conversations. We made really important progress last year. If you kind of benchmark where we are, it's getting close to where some of the top brands have been over time. So it would be more of a -- more regional plans. Medicare, we need to do some work, but we're confident we'll add more. We will do 25 million lives at a time. There is really not many of those left out there. So I can promise that we're committed to providing the proper access to this product for patients.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [33]

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Great, great. And then given the success you've had with BELBUCA over the last year, especially last quarter, what are your thoughts now in terms of BUNAVAIL and the potential for that product has? What's your thinking now?

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [34]

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Matt, it's Herm. Thanks so much for the questions and the accolades and we're very proud of the work the team is doing. And I think as we've been saying really since I joined the organization, our core strategic focus is capitalizing on the opportunity with BELBUCA. And I think, again, we're off to a tremendous beginning of that process, with the significant ramp still to go and many more years to make these numbers happen. And that will remain and continue to be our core strategic focus. BUNAVAIL and then the revenue that we received from the ex-U. S. opportunities are complementary. We continue to manage them as such. Where it makes sense, we take advantage of that, but it's not an area that is our focus or attention. And as I've said all along, we will look for ways to continue to optimize the value proposition of all of our strategic assets, including BUNAVAIL. But for now, our focus remains and will remain to be the execution of BELBUCA.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [35]

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Right. And then for Terry, I guess. She mentioned in her prepared remarks some potential for increased operational efficiency. It looks like you've had some good results in terms of bringing down the cost of goods. Terry, could you give us some more color in terms of what you're thinking? What you were referring to in terms of operational efficiencies?

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Mary Theresa Coelho, BioDelivery Sciences International, Inc. - CFO & Treasurer [36]

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Matt, it's nice to meet you. So I mean, look, I think tomorrow marks 2 months that I'm with the company and obviously dove in at a very busy time of the year and getting up to speed. And I'm looking across a number of areas, working with the rest of the leadership team to understand the processes and what the business is doing, looking at everything from the operations through to working with sales and marketing and how we allocate our resources and prioritize, as I mentioned earlier. So I'll share more in the future, I think, as we start to uncover that, but I think, there is definitely opportunities.

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Operator [37]

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Our next question comes from the line of Oren Livnat with H.C. Wainwright.

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Oren Gabriel Livnat, H.C. Wainwright & Co, LLC, Research Division - MD & Senior Healthcare Analyst [38]

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I was hoping to follow up on this head-to-head respiratory depression study. Firstly, can you just help us understand what really -- what the study is in terms of what are you comparing? And what kind of patients or subjects and how? And I guess, more importantly, do you think this is the data that could actually make it into the label? And how long might that take if so? And would that give you a very important differentiator when you start going back to either guideline recommendations or managed care where people are still happening to step through C2 opioids in some cases and maybe we get a big picture change in the notion of even stepping through IR C2 opioids before getting to your products?

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Thomas B. Smith, BioDelivery Sciences International, Inc. - Chief Medical Officer [39]

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Oren, thank you for the question. And as I mentioned, we're still kind of exploring what that study looks like, right? So as I mentioned, we're considering the study design and the protocol itself. But the issue of respiratory depression, again, if you look among the adverse events of any of these agents is respiratory depression. So it's hard to say. Is this is a study that we've taken to the agency? No. But it will be interesting to see what the data shows us. And it will -- I think it will inform the appropriate parties as it comes out, right?

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Operator [40]

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Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would like to turn the call back to Herm for closing remarks.

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [41]

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Thank you very much, operator. Again, thank you everyone for joining on our call today. We are extremely proud of the work that we've accomplished in the fourth quarter and full year 2018. We are pleased by the early momentum that we have in 2019. And we look forward to coming back in early May and sharing results of the first quarter of operation of the company. So wishing everyone a wonderful rest of the afternoon and a great rest of the week. Thank you very much.

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Operator [42]

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This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.