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

Q2 2019 BioDelivery Sciences International Inc Earnings Call

RALEIGH Aug 16, 2019 (Thomson StreetEvents) -- Edited Transcript of BioDelivery Sciences International Inc earnings conference call or presentation Thursday, August 8, 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

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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

* Gregory Daniel Fraser

Deutsche Bank AG, Research Division - Former Research Analyst

* 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

* Scott Robert Henry

Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Head of Pharmaceuticals Research

* 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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Good day, and welcome to the BioDelivery Sciences Second Quarter 2019 Financial Results Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Terry Coelho, Chief Financial Officer. 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 second quarter 2019 earnings conference call. Leading the call today is Herm Cukier, Chief Executive Officer. We are joined by Scott Plesha, President and Chief Commercial 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 second quarter 2019. 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 information available to BDSI today, August 8, 2019, and the company assumes no obligation to update statements as circumstances change.

An audio recording and broadcast replay for today's conference call will also be available online in the Investors section of the company's website.

With that, I'd like to 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. It is my pleasure to welcome everyone to BDSI's Second Quarter 2019 Earnings Call. The second quarter of 2019 was a very successful and important period of time for our company. To begin with, we once again achieved record-level sales performance for BELBUCA, with very strong quarter-over-quarter and year-over-year growth outperforming expectation and providing very high confidence in the sustainability of this growth momentum for the rest of this year and into 2020. Given the accelerated market demand for BELBUCA, we are once again raising our 2019 net sales guidance for BELBUCA to $90 million to $93 million from previous level of $83 million to $88 million and total company net sales to $101 million to $105 million from previous level of $92 million to $100 million. This strong continued growth trajectory is a result of the tremendous effort by all BDSI employees day in and day out. Together with the medical community, we are helping to fundamentally change the management of chronic pain. Specifically, we are seeing more and more physicians using BELBUCA as the first long-acting opioid when shifting patients from short-acting opioids in their treatment continuum. There is evidence that suggests this is part of a broader, growing recognition among the medical community of buprenorphine's differentiated profile in efficacy and safety with its Schedule III designation.

Supporting this paradigm shift, during the second quarter, we were very pleased to see the final report issued by the best practices pain management inter-agency task force chaired by Health and Human Services, which calls for payers to provide more access and reimbursement for buprenorphine for chronic pain and encourage primary use of buprenorphine for chronic pain management. We have already experienced very positive reactions by both the medical community and payers to this federal guidance as witnessed by the significant number of regional insurance plans that expanded coverage for BELBUCA during the second quarter.

With this expansion, more than 90% of commercially covered Americans have access to BELBUCA through their insurance plans, and we will continue our efforts to ensure all patients have appropriate access.

This level of activity clearly signals we are entering a new era in the management of chronic pain, and that BELBUCA is being viewed more and more as an important option to treat these suffering patients. The growing support for use of buprenorphine as the first long-acting opioid, because of its differentiated profile, will be a key driver of our company's sustained growth into the future, and we are well poised to fully capitalize on this unique opportunity.

Building upon our success with BELBUCA and capitalizing on the high-performing commercial team we've built, during the second quarter, we licensed and successfully integrated Symproic for opioid-induced constipation into our portfolio. Symproic is an ideal tuck-in acquisition given its operational, strategic and complementary financial profile for our company. I am very excited to have this clinically differentiated product with exclusivity through 2031 for a disease category so meaningful to our physician and patient customer base. I'm very proud of our team's ability to quickly and smoothly integrate Symproic into our operation during 2Q and achieve record level prescriptions, experiencing more than 40% growth year-over-year. I'm very confident in the continued growth opportunity for Symproic and believe it will become the category leader over time.

In addition, during the second quarter, we significantly strengthened our balance sheet, both by restructuring our existing debt and issuing new equity. The new debt will be operationally cash flow positive, accretive as -- excuse me, operation cash flow accretive as well as having significantly improved terms and extended maturity. Our improved financial flexibility enables continued focus on sustaining our commercial momentum and further driving long-term value for the company and our shareholders.

To summarize, the second quarter was marked with dramatic accomplishments by our organization and has positioned us to control our destiny and further build upon our commercial success. With this continued growth momentum, we now expect combined long-term net sales for BELBUCA and Symproic to be between $425 million and $500 million from our previous level of $325 million to $400 million.

Our organization is executing at an exceptional level, and as we'll describe momentarily, all of our key metrics support our potential for substantial growth going forward. Our future is indeed very promising, and I have ever-growing confidence for the remainder of 2019, 2020 and beyond.

With that, I will turn the call over to Scott to provide more details of the operational success during the second quarter. 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 second quarter, with our commercial teams continuing to execute at a high level in delivering record levels of BELBUCA prescriptions and revenue. As we review our dashboard analyzing BELBUCA's performance, every metric is meeting or exceeding expectation or a green as we categorize them.

During Q2, BELBUCA's accelerated growth resulted in our achieving an all-time high at more than 80,000 retail prescriptions. We generated BELBUCA's largest TRx quarter-over-quarter increase to date at 14,700 TRx. This represents more than a 23% increase compared with Q1. BELBUCA also had its largest year-over-year TRx increase of 44,560 TRxs or 125% from Q2 of 2018. As a result, we outpaced the previous all-time TRx high we established during Q1 of 2019.

We continue to be encouraged by our strong execution and believe there are key drivers and market dynamics supporting the growth of BELBUCA. One important driver is expanding BELBUCA prescriber base. During the quarter, we added more than 1,100 new prescribers, the most added since Q2 of 2018. These new prescribers contributed to the record 6,579 total prescribers for the quarter. This represents an increase of 52% versus the same period a year ago.

In addition to accelerating our growth by adding new BELBUCA prescribers, we gained greater traction within our established customer base who are more frequently prescribing BELBUCA for their chronic pain patients. This is supported by the quarter-over-quarter TRx growth of 14% or more we saw in all deciles of our targets.

During the quarter, we greatly increased the number of new patients being prescribed BELBUCA, which is reflected in new highs for new-to-brand prescription count and new-to-brand market share. We generated more than 16,000 NBRxs during the quarter, which is up from 13,680 in Q1 and 9,100 from a year ago, an increase of 76% year-over-year. We more than doubled BELBUCA's new-to-brand market share from 3.3% in Q2 of 2018 to 7.3% in the second quarter of 2019.

Importantly, more than 70% of patients that were new to BELBUCA were either switched from short-acting opioids or BELBUCA was added to them. This highlights the paradigm shift that Herm described where we're seeing health care professionals fundamentally change the way they treat chronic pain by utilizing BELBUCA more frequently as their first LAO of choice when medically appropriate.

The primary use of BELBUCA -- buprenorphine prior to failing other Class II opioids aligns with the recommendations from the task force report. These recommendations have been very helpful to HCPs as they consider appropriate treatment options for chronic pain and the use of buprenorphine for their patients.

As a matter of fact, buprenorphine is the only long-acting opioid molecule used to treat chronic pain that has exhibited year-over-year growth, and this growth is being driven by the success of BELBUCA. As Herm mentioned, these task force recommendations have also had an impact on payers as we've seen a significant number of payers improve their coverage of BELBUCA since the final report was published.

We've also seen increased interest from payers and plans that may not cover BELBUCA or require patients to fail C2 long-acting opioids prior to having access to BELBUCA. We are encouraged by the increase in meetings we're having and the tone of these meetings. While it is difficult to predict future coverage wins, we are focusing on providing improved patient access to BELBUCA and believe we will continue to build upon our recent success.

As we've previously discussed, our strategy was to gain more regional plan level wins in 2019, and we've executed very well against this. Through our efforts, several prominent regional commercial plans have helped enhance BELBUCA coverage by moving its preferred status or initiating coverage on BELBUCA.

During Q2, we saw an important improvement in coverage of approximately 6 million lives. During our Q1 call, we discussed the recent Cigna commercial formulary win, and I'm excited to report that the sales team has done an excellent job of executing, growing prescriptions within the plan by 31% from Q1 to Q2.

We're excited about the progress we continue to make with BELBUCA and the impact it's having on patients suffering from chronic pain, and we are focused on building upon our current growth.

Building our success in execution with BELBUCA, we have also successfully transitioned to grow BDSI, which has gone as we have expected. We believe Symproic provides a complementary product to BELBUCA and allows us to leverage our high-performing sales force within our target audience. We are very encouraged by the reception we're receiving to our promotion of Symproic.

I'm pleased to share that in Q2, Symproic retail prescriptions reached 15,510, a new quarterly high, an increase over Q1 by more than 1,900 TRxs or 14%. This is the largest quarter-over-quarter increase the brand has experienced since Q2 of 2018. In addition, Symproic grew by 4,450 TRxs from Q2 of 2018 to Q2 of 2019 or 40.3%. During the quarter, we successfully added 960 new prescribers for Symproic, which helped the brand reach a new quarterly high of 4,530 prescribers. Importantly, our current BELBUCA targets provided much of the growth that we saw for Symproic during the quarter.

We had a strong quarter with BELBUCA and are encouraged that BELBUCA growth has continued into Q3, resulting in weekly all-time TRx highs in July. Our focus remains on improving market access, growing the number of patients receiving BELBUCA for the first time and expanding our prescriber base. Additionally, we are confident that our commercial expertise and execution will have a positive impact on Symproic sales, and we look forward to updating everyone on our progress on our next call.

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

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Mary Theresa Coelho, BioDelivery Sciences International, Inc. - CFO & Treasurer [5]

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Thank you, Scott. Second quarter financial results exceeded both first quarter of 2019 and prior year quarterly results. Total net revenue for the second quarter ended June 30, 2019, was $29.7 million, an increase of 50% compared to $19.8 million in the first quarter of 2019 and an increase of 144% compared to $12.2 million in the second quarter of 2018. The total net revenue growth was driven by BELBUCA, which accounted for 86% of total sales, and the addition of Symproic to our commercial portfolio.

BELBUCA net sales in the second quarter were $24.1 million, an increase of 29% compared to $18.7 million in the first quarter of 2019 and an increase of 147% compared to $9.7 million in the second quarter of 2018. The growth in the second quarter versus prior quarter was primarily driven by the significant script growth, which Scott shared, and the impact of the mid-March price increase in addition to an approximate $1.3 million impact from wholesalers bringing inventory levels up to more appropriate levels of 2 to 3 weeks to support our continuing growth in demand. These increases were partially offset by an increase in gross-to-net deductions.

Symproic net revenue in the second quarter ended June 30, 2019, was $3.2 million, which accounted for 11% of total sales. As a reminder, this is the initial quarter of our commercialization of Symproic following the acquisition of the product on April 4.

BUNAVAIL net sales in the quarter were $821,000, a reduction of $235,000 from the first quarter of 2019 and a reduction of $199,000 compared to the second quarter of 2018, reflecting market trends for that product and our prioritization of BELBUCA, along with the recent acquisition of Symproic. Royalty revenues for ex-U. S. sales of PAINKYL and BREAKYL totaled $1.6 million, including $160,000 for net milestone payments received.

Gross-to-net deductions in the second quarter was 51.5% for BELBUCA compared to gross-to-net deductions of 48.7% in the first quarter of 2019, reflecting higher wholesaler fees, increasing utilization impacting Medicare Part D costs and the impact of the price increase taken in mid-March. Gross-to-net deductions in the second quarter were 38.9% for Symproic, reflecting the terms of the distribution agreement with Shionogi, which was effective through June 30.

Total gross margin for the quarter was 83.4% compared to 62.5% in the second quarter of 2018 and 79.5% in the first quarter of 2019. The increased gross margin reflects improvement in BELBUCA manufacturing costs, the beneficial gross-to-net profile in the second quarter related to the Symproic distribution agreement terms and the royalty revenues and milestone income previously mentioned.

Total operating expenses in the quarter ended June 30, 2019, were $22 million compared to $17 million in the first quarter of 2019 and $14.9 million in the second quarter of 2018. The increase compared to the first quarter was driven by the Symproic acquisition impact as well as the timing of certain spend as certain key BELBUCA marketing initiatives began to ramp up in the second quarter. The year-over-year increase is primarily driven by the impact of the expanded sales force and market access teams as well as the medical affairs and MSL team together with the Symproic spend in the quarter.

The GAAP net loss for the quarter was $11.1 million or $0.13 per share compared to the net loss of $3.8 million or $0.05 per share for the first quarter of 2019 and a net loss of $9.8 million or $0.16 per share in the second quarter of 2018. The increase in net loss was driven by the onetime debt refinancing impact of $11.9 million.

Non-GAAP net income for the quarter, which excludes the impact of the debt refinancing, stock-based comp and the amortization of intangible assets and warrant discounts, was $4.4 million. EBITDA for the quarter was $4.8 million compared to $103,000 for the first quarter of 2019 and negative $5.6 million for the second quarter of 2018. We believe this is an encouraging metric that highlights our commercial success, driven by higher revenues along with operational effectiveness.

As previously shared, under the terms of our agreement relating to the acquisition of Symproic, BDSI paid Shionogi Inc. an initial upfront payment of $20 million at closing and will pay an additional $10 million in October of 2019. In addition, Shionogi is eligible to receive quarterly tiered royalty payments based on net sales of Symproic. As Herm mentioned, we've taken significant steps to strengthen our balance sheet and provide greater flexibility as we execute our commercial strategy.

In April, we received approximately $47.6 million in net proceeds through an underwritten equity offering. This offering provided an opportunity for new and existing investors to participate in the momentum BDSI has been experiencing.

Also, during the second quarter, we successfully refinanced our debt to a lower cost debt facility that improves our cash flow by lowering our annual interest costs, extends our debt maturity and lowers our overall cost of capital, providing even more flexibility to drive our continued success. The new $60 million term loan, along with available cash on hand, was used to repay and retire the company's existing term loan, which had an outstanding balance of $61.8 million. In doing so, we are now benefiting from expected interest cost savings of approximately $1.5 million annually, interest-only payments for the first 36 months as well as an extension in our debt maturity from 2022 to 2025.

Operating cash flow in the second quarter was negative $1.5 million, an improvement of $1.4 million compared to first quarter 2019 operating cash usage of $2.9 million. At June 30, 2019, BDSI had cash and cash equivalents of approximately $57.2 million. This compares to cash and cash equivalents of approximately $41.3 million at March 31, 2019.

Our overall positive cash flow in the quarter of $15.9 million includes the impact of the April equity raise of $47.6 million net, offset by the first upfront payment for the Symproic license and related transaction costs of $20.7 million; the onetime cash impact of the debt refinancing of $11.6 million; operating cash usage of $1.5 million; and other cash income of $600,000. We continue to anticipate being operating cash flow positive by the fourth quarter of 2019, following higher cash utilization expected in the third quarter primarily associated with a number of key annually paid expenditures.

In terms of our 2019 top line expectations, based on higher-than-forecasted revenue during the second quarter and our continued strong momentum, we are raising our 2019 net revenue guidance for BELBUCA to $90 million to $93 million from $83 million to $88 million previously and total company net revenue to $101 million to $105 million from $92 million to $100 million. Similar to last year, we anticipate that the fourth quarter revenue will be higher than third quarter.

Total net revenue expectations for 2019 includes $7 million to $9 million of forecasted Symproic sales, which is in line with our previous expectation. Looking forward, we expect continued strong growth momentum with the combined long-term potential of BELBUCA and Symproic to be in the range of $425 million to $500 million.

At this point, I'd 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 [6]

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Thanks, Terry. I want to reiterate that in addition to our commercial success over the past several quarter and the very strong growth trajectory we've demonstrated thus far, we believe this is only the beginning. We have established a sales infrastructure and a differentiated product portfolio that we believe positions BDSI to capitalize on a substantial long-term revenue opportunity. By focusing on continued commercial execution, we expect to drive significant value over the near term and during the years to come.

Now we would like to take your questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) We will now take our first question from Oren Livnat of H.C. Wainwright & Co.

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Oren Gabriel Livnat, H.C. Wainwright & Co, LLC, Research Division - MD & Senior Healthcare Analyst [2]

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Congrats on a pretty big quarter. A couple of questions. Obviously, you made a big increase to your long-term peak combined potential, about $100 million. I'm wondering, first of all, does that assume the same peak potential of $75 million to $100 million, I think, for Symproic? And also, what is that -- what are those based on? Is that based on detailed market research? What inputs are going into that? Or are you just sort of projecting the trajectory long term? Are you making specific assumptions about anything happening to the long-acting C2 opioid market that's more dramatic than its current erosion, I guess? And also what pricing maybe goes into those assumptions? And then I have a follow-up.

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

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Sure. Thank you so much, Oren. I always greatly appreciate your commentary and excellent question.

So yes, the answer to your question with regard to the contribution that Symproic will make to that. Our view of Symproic is consistent with what we've expressed before. Again, we're very pleased by early days, and Scott and team are doing a tremendous job of including that in our portfolio and already seeing the impact with the customers that we're calling on.

And our continued accelerated belief in the long-term potential of BELBUCA is really driven by a number of factors. One is the success that we're seeing in the marketplace and the accelerated script that we're experiencing not only during the second quarter, but as Scott pointed out, we're off to a strong start of the third quarter as well.

Also, as we referenced, the pain task force report, I think, is a significant milestone in members of the policy community recognizing the differentiation of buprenorphine and the contribution of buprenorphine can make to the treatment of patients suffering from chronic pain, calling for more coverage and more reimbursement, and encouraging the primary use of the product in the treatment of chronic pain.

And then also, the momentum that we're gaining with the payers and the continued ability to actually gain access to the product. And we anticipate that over the next several years, we'll continue to see more and more momentum and success in getting better coverage for patients.

So I think those are some examples, Scott, and I'll ask if you have anything else to contribute to that.

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

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What I'd add is, obviously, Oren, we've had very predictable trend lines in place. And when we look across many different metrics, prescribers at different deciles, payers, payer mix and see the growth trends we have in place, we remain very confident we can maintain the current growth rates we're seeing and then build upon those going forward.

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Oren Gabriel Livnat, H.C. Wainwright & Co, LLC, Research Division - MD & Senior Healthcare Analyst [5]

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Okay. And since you have reiterated sort of your long-term optimism in Symproic, I see clearly a differentiated and better label for that product versus the competitors. But it hasn't gone -- it's not lost to me that the scripts have sort of rolled over a little bit most recently after a strong Q2. And I'm just wondering, what dynamics are you seeing out there competitively? What will it take? I'm assuming there's real competitive rebating pressure in the market. What do you see? And what will it take to really start to gain significant market share?

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Scott M. Plesha, BioDelivery Sciences International, Inc. - President & Chief Commercial Officer [6]

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I appreciate that question, Oren. And in my experience, this is very typical when you have a transition from 1 company to another. There could be a little bit of flattening of prescriptions. We're -- I can promise you we're working very hard using our expertise and execution that we've had with BELBUCA, very similar principles. We do feel that we have an opportunity to improve upon market access. Approval rates are still -- while the market access has improved with the product early in the year, there's still some work to be done there. And if anything, our team has proven the ability to gain extra access at reasonable rates. So we'll continue to work hard to do that. And I think that will be important for us going forward. We need to improve approval rates and things like that in the space.

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

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Yes. And then I would just add to Scott's correct comment that we have exclusivity to 2031. So we're just getting started. We have a long journey ahead of us. And as you pointed out, Oren, we're confident that this product has the potential to be a best-in-class. That's the kind of feedback and receptivity that we're hearing from our customers. And as Scott said, I think what we've seen in the marketplace is very much what we expected when you take on a product and bring it in to a new sales force, and we remain very optimistic over the long-term potential of the asset.

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Operator [8]

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Our next question comes from Gregg Gilbert of SunTrust.

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Gregory Daniel Fraser, Deutsche Bank AG, Research Division - Former Research Analyst [9]

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It's Greg Fraser on for Gregg Gilbert. Congrats on a good quarter. In terms of the expanded insurance coverage that you had in the quarter, how important was that interagency task force for securing that coverage? You clearly had a lot of lives that you were also [within] coverage prior to that report. And obviously, you're very positive on the report. I'd just like to hear a little bit more color on that.

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Scott M. Plesha, BioDelivery Sciences International, Inc. - President & Chief Commercial Officer [10]

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Yes. No, I appreciate that question. So we did have some really nice wins this quarter, including adding Blue Cross Blue Shield of Tennessee, Alabama, and then Independence Blue Cross Blue Shield (sic) [Independence Blue Cross], Magellan, Health Delegates, SelectHealth. And I would say that we had some really nice momentum with payers anyways, and we're already engaged in great discussions, but it truly has added to that momentum and definitely an interest at a payer level. So we're having some really productive meetings right now allowing some of that. And as you imagine, we've used those recommendations daily with our payers.

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Gregory Daniel Fraser, Deutsche Bank AG, Research Division - Former Research Analyst [11]

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Sure. It's probably early, I assume, in terms of discussions for 2020, but do you think that the task force report will give you more leverage with the national payers such that you could get better coverage in 2020 than you have for 2019?

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Scott M. Plesha, BioDelivery Sciences International, Inc. - President & Chief Commercial Officer [12]

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Yes, I can promise you that's what we're working to do. That is the goal, is to always try to provide as much affordable access and clear access to this product for patients. They deserve the right to get it.

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [13]

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Yes, I would just add to what Scott just commented on to your question. The final report specifically called on CMS as one of the payer entities to provide more coverage for buprenorphine for chronic pain. And that's an area that we've had more challenges than in the commercial sector, and we're certainly optimistic that, to your point, that this could be a lever that could enable us over time to perhaps improve and increase our coverage in the Medicare space. So it gives us an opportunity to continue to have those discussions with CMS and the entities that are covering Medicare lives. And we're optimistic that over time, we'll be able to make more traction in that particular market segment.

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Scott M. Plesha, BioDelivery Sciences International, Inc. - President & Chief Commercial Officer [14]

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Yes, and I would add I think it's really important to note is when we do -- are able to obtain a win and open up access, and usually, the key thing we're trying to do is remove step-through of long-actings and allow patients and physicians to make a choice to move from a short-acting and that we'd be the first long-acting of choice. And basically, if you look at any win we have across the board and as soon as we open up those lives, and we're able to share our message with physicians within those plans, we see a very predictable growth trend off of that. We don't see a jump in business and then a flattening. It's a continual growth curve going forward.

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Operator [15]

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Our next question comes from Brandon Folkes of Cantor Fitzgerald.

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Brandon Richard Folkes, Cantor Fitzgerald & Co., Research Division - Analyst [16]

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Congratulations on the very quarter. I wanted to just go back to the final task force report. Can you provide any color whether you felt this benefit yet at the prescriber level? And perhaps, obviously, we're reporting Q2 now, but we have scripts post the quarter. So any color from the feedback you're receiving at the prescriber level post that report would be great.

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Scott M. Plesha, BioDelivery Sciences International, Inc. - President & Chief Commercial Officer [17]

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Brian, I appreciate the question. I've been in the field. Herm's been in the field. Other members of our senior leadership have. And our reps are sharing that information, and the reps have the ability to provide them with that information. And it's been received well. You can imagine it reinforces what current prescribers are doing, and many of them have obviously seen the value of BELBUCA. So -- and we do think it's opening and opening eyes and maybe gaining the attention of those that haven't written. And we do know that offices are also using it as they look to get [prior] authorizations through for -- with the payer level, too, as well. So we do see success there as well.

I think it's early still to really quantify that. Just being out there and quantitively feedback, it feels like -- it looks like it is being helpful, for sure.

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Brandon Richard Folkes, Cantor Fitzgerald & Co., Research Division - Analyst [18]

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Okay. So is it fair to say that, that will remain a tailwind for some time?

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

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Absolutely so. Absolutely, Brandon. You're spot on. As Scott pointed out, we're still very much in the early days. And I think it's -- it just adds to the conversation, it adds to the confidence, it adds to the comfort. As Scott pointed out, I think for those that have already started to more frequently utilize BELBUCA, it reinforces their own experiences and their own belief, especially the specific encouragement of utilizing it as for primary usage in the management of chronic pain, not just after a failure of other opioids. And as Scott pointed out as well, for those that are still in the process of gaining more understanding of the molecule and gaining more individual personal experience, I think it could only serve as a benefit and an accelerant of their journey timing. But in and of itself, it's a compliment to all the great work that our teams have already been doing and all the additional increase increm -- medical information that our medical teams are developing and will be providing through the medical forums, medical congresses. So there's -- it's just a growing understanding and awareness of the important role that buprenorphine can play in the conversation of how to evolve the optimal management of patients that are suffering from this very difficult, challenging disease. And we're seeing very positive results in the marketplace accordingly.

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Operator [20]

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Our next question comes from Scott Henry of Roth Capital.

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Scott Robert Henry, Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Head of Pharmaceuticals Research [21]

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I guess just first, following on to the question with regards to the changes in kind of best practices and guidelines, which all seem to be geared towards moving BELBUCA earlier into the treatment algorithm, do you think there's any possibility to start to look at the label? And some of the boilerplate language in the limitations of use section of the label speak about using alternative treatment options prior to trying BELBUCA. Do you think over the next year or so, there may be opportunities to amend the label?

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

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Sure. Scott, thank you very much for your question. And as you well know perhaps that this was an interagency task force, there were many representatives from different parts of the federal government, including the FDA. So we're certainly encouraged by the fact that there were many voices and many contributors to what was ultimately included for buprenorphine in the task force report. And I think that, that does certainly provide perhaps a pathway to continue the dialogue and discussion, with CMS for discussions on coverage, with FDA to understand if there are opportunities to revisit the label and include some of the particular recommendations that were provided by the task force. And, ultimately perhaps as well, with the CDC as they perhaps consider future evolutions of their particular opioid use guidelines.

So I think it was a stepping stone towards a continuation of the dialogue, and we certainly look forward to participating in that process and are optimistic of perhaps what could happen over time.

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Scott Robert Henry, Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Head of Pharmaceuticals Research [23]

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Okay. A couple of model questions. First, with BELBUCA, the revenue per script was a little higher than perhaps I expected in 2Q. The question is, was there anything unusual that happened in 2Q that could impact revenue per script? Or is it just kind of increasing with the price increases?

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Mary Theresa Coelho, BioDelivery Sciences International, Inc. - CFO & Treasurer [24]

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Yes. So Scott, this is Terry. So 2 things. I mean we did have, as you know, a price increase in the middle of March. So there would be some impact from that. And then secondly, the -- if you were to look at revenue per volume shipped to the wholesalers, right, and I mentioned the $1.3 million that we saw, you would probably come up with a slightly different revenue per script, if you like.

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Scott Robert Henry, Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Head of Pharmaceuticals Research [25]

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Okay. So it sounds like it's just a normal variance, I guess.

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Mary Theresa Coelho, BioDelivery Sciences International, Inc. - CFO & Treasurer [26]

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Yes. Yes.

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Scott Robert Henry, Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Head of Pharmaceuticals Research [27]

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And then the second question, the cost of goods sold seemed a little lower in the quarter. Were there any dynamics with the Symproic launch that would have depressed that? Or is this a good number going forward? I know you've been working on cutting costs there.

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Mary Theresa Coelho, BioDelivery Sciences International, Inc. - CFO & Treasurer [28]

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Yes. So actually, BELBUCA gross margin improved a little bit in the quarter, which is anticipated as the supply chain team has been working on different manufacturing improvements since last year. And so there was a minor improvement from that, maybe 1 percentage point.

But as I mentioned previously, Symproic, we did have a distribution agreement in place for the -- just for the first quarter of the arrangement through June 30, and that had basically an agreed-upon gross-to-net profile, which was pretty favorable, and fixed COGS and no royalty payment associated with that first quarter. So I would not anticipate that continuing. I think you could be thinking about the mid-80s for Symproic, which is -- BELBUCA's in the mid- to upper 80s, and I would see Symproic in the mid-80s going forward. And I think that's one of the reasons we really liked this acquisition as well. It really fit in very nicely in our overall portfolio. And overall, we're still generating the same kind of gross profit for the business.

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Operator [29]

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Our next question comes from Esther Long (sic) [Esther Hong] of Janney.

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Esther Lannie Hong, Janney Montgomery Scott LLC, Research Division - Director of Biotechnology [30]

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So on BELBUCA, any update on the respiratory depression study? And then on Symproic, after -- it's been about a quarter since Symproic's been in your portfolio. So can you provide any insights on physician receptivity, any interactions between physicians and sales reps?

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [31]

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So yes. Thank you so much for your questions. The respiratory study has been initiated. We're recruiting patients. And so far, everything is going according to plan, and we look forward to sharing results of that study in the early half of next year.

And then I'll ask Scott to talk a little bit about the receptivity that we're seeing in the marketplace on Symproic from physicians.

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

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Yes. We've been actually very pleased with the reception. As a matter of fact, when we look at the growth we had this quarter, the majority of it, [up about 70%,] came from our targets. They seem to really value the profile of the drug, the convenience of taking it with or without food, with a laxative and also are valuing the data, the clinical data that comes along it. So as a reminder it's the AGA, so a gastroenterology society, actually put out guidelines and reviewed the different products and their data, and Symproic, in fact, has the strongest rating in that section. So that's going over very well. And we're confident as we go forward, again, we'll be able to build some growth going forward. So appreciate the question.

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [33]

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Maybe, Scott, if I may, I'll add to some of your comments there. And maybe I was talking a little bit about this earlier that the launches has changed a lot in our industry from when you and I started. And getting access and coverage is such an imperative element of the ability to actually have physicians gain the comfort and the fluidity of writing scripts. And Symproic is still very much in the early stages of its launch. I mean we're really only in year 2, truly, of this launch. And it has a good start to coverage, but I think that's an area that, over time, we're going to work very hard, just like we've done with BELBUCA, to improve the coverage. And I think that will be an important lever moving forward to see the kind of growth that I think we all know will come given the profile of the product.

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Scott M. Plesha, BioDelivery Sciences International, Inc. - President & Chief Commercial Officer [34]

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Yes, I would -- when I look back at where BELBUCA was in early 2017, it probably was almost very similar to what we see right now with Symproic, with the approval rates and the lives covered and whatnot. And again, we have an opportunity to, I think, first and foremost improve access and approve the -- get the approval rate improved. And I think once we do that, we'll see a faster uptake in the business. But still confident we can grow it going forward.

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [35]

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And sounds like our teams are having some very encouraging discussions so far.

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Scott M. Plesha, BioDelivery Sciences International, Inc. - President & Chief Commercial Officer [36]

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Yes, we feel really good about the ability in early 2020 to be able to enhance our coverage.

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Operator [37]

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Our next question comes from Tim Lugo of William Blair.

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Timothy Francis Lugo, William Blair & Company L.L.C., Research Division - Co-Group Head of Biopharma Equity Research [38]

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Congratulations a strong quarter. On the contracting side, it sounds like you still have some room for additional wins. But is there a tipping point around contracting where you decide to just stop offering the terms you've previously been fine with given the task force report, given the overall market trend and eventually, patient and physician acceptance and preference for the product?

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Scott M. Plesha, BioDelivery Sciences International, Inc. - President & Chief Commercial Officer [39]

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So Tim, it's Scott. So I appreciate the question. So there's a lot of ways we look at it. So for example, Humana is a Medicare plan that we were able to improve access there to a preferred status. And we're sitting at well over 4% market share there, 4.3% when the rest are -- overall were 2.6% for the quarter, 2.7%. And when we look at other Medicare lives, while we're still -- we're getting the product approved at over -- about 80% approval rate, our market share is lagging. It's 1.4%, 1.5%. And if we can add more of those going forward, we would hope that we'd see an acceleration.

It's similar trends that we see when we have a win. Again, the ones that -- where we've had wins, we see, again, very consistent growth lines. They're very linear. And I think that in the coming quarters and years, we'll be able to continue to add on Medicare. That will be a focus. We saw some regional plans that we really would like to crack. And then there's still some larger and midsized PBMs that we have some work to do with.

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [40]

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Yes. I think that's well said, Scott. And I would add that even though we have very good commercial coverage at this point, where it's about just over 50% having preferred coverage, there's still an opportunity to enhance the coverage the commercial lives [side] and increase the number that have preferred coverage.

And Tim, I think your point is well taken. We will be very thoughtful and ensure that we're not just buying our way in to access even on Medicare. And as you correctly point out, it's clear that we have a differentiated asset. And I think we try to focus more on clinical conversation and the importance of ensuring that even Medicare patients have appropriate access to a product like BELBUCA, especially given the kind of language that -- encouragement that comes out of an important event like the interagency task force.

So I think those discussions are ongoing. And again, as Scott pointed out, we're very optimistic over the next period of time of the ability to have those meaningful clinical discussions both on the commercial and Medicare side and continue to improve coverage for patients.

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Scott M. Plesha, BioDelivery Sciences International, Inc. - President & Chief Commercial Officer [41]

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Tim, what I would add that the HHS guidelines, recommendations have really been a stimulus for meetings. And some plans that are very -- typically, very difficult to get in front of have requested. And even those that we have coverage have immediately requested us to provide updates on clinical. So it's been a nice catalyst for us.

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Timothy Francis Lugo, William Blair & Company L.L.C., Research Division - Co-Group Head of Biopharma Equity Research [42]

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Understood. That's great to hear. And maybe just a follow-up question, Terry, in your comments, you mentioned Q4 cash flow positivity after some kind of seasonal issues in Q3. You don't have to give, obviously, 2020 guidance today. But how should we think about breaking into cash flow positive territory? Is this something that kind of structurally, the company will be set up for going forward once you break into that cash flow positivity? Or is this something which just varies quarter-to-quarter based on the operating trend, seasonality, gross net, all of that?

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Mary Theresa Coelho, BioDelivery Sciences International, Inc. - CFO & Treasurer [43]

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Yes. So great questions, Tim. And I think we've talked a lot -- you've heard the team talk about, obviously, you've seen the growth trajectory, but also, we've given you an indication of where we think the business is heading in the longer term as well. And so as you see the growth continue to happen, you can imagine, we have the infrastructure, we believe, in place to support that growth. And at that point, there's no reason that basically the gross profit isn't being fully leveraged and the margin being able to move forward and being cash flow positive going forward. I don't anticipate. I mean if you think about the growth rate we're seeing and our infrastructure that's in place, you can -- without me giving 2020 guidance, as you said, I think you can expect a pretty good trajectory going forward.

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Operator [44]

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Our next question comes from Matt Kaplan of Ladenburg Thalmann.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [45]

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Congrats on the quarter. Just wanted to dig in a little bit more in terms of strategies or initiatives, programs that you have in place to drive growth beyond gaining access and -- or expanding coverage in terms of your mentioning clinical and clinical questions. What programs, I guess, or strategies do you have to continue the momentum given the best-in-class characteristics of BELBUCA?

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [46]

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Thanks so much, Matt. I really appreciate the question. You may recall that we put in place a 4-point acceleration plan a few quarters ago for BELBUCA. And those 4 points were the expansion of the sales force; the expansion of access; the creation of the medical team and developing more medical information and medical communication and awareness of buprenorphine, BELBUCA specifically, in the utilization for chronic pain; and then also, finally, engaging with patients and bringing back the voice for patients that are suffering from chronic pain, ensuring that they are sufficiently armed to ask the right questions and engage with their health care provider to understand their options and receive the optimal treatment for themselves. And we still feel that those are the right 4 levers to focus on. And that is where we're making our investments, both in 2019 and then we'll continue to do so moving forward to 2020 and beyond.

As Scott pointed out, we're seeing -- and I'll ask him in a second to talk a little bit more about the success and the productivity that we're gaining from the sales force expansion. Provide a little bit more color behind that. Matt, as you pointed out, we've seen tremendous accelerated recognition of the importance of buprenorphine by the managed care entities and PBMs. More work to do there as we were just discussing, but again, we believe that, that will continue to head in a very positive trajectory over the next period of time.

You know in the past, we've talked a lot about the medical investments that we're making, including starting a respiratory depression study, which we think, given the opioid epidemic, is an imperative element of clinical consideration and having more definitive understanding, information about BELBUCA, specifically; and how to recognize within doses strength exactly what that could mean in the decision-making process for patients, I think, will be very important when that data comes out early next year; as well as having a lot more presence and a lot other information and publications and abstracts that are going to be provided through medical congresses and other medical forums and journals, et cetera.

And then finally, we've started to think about and very slowly approached appropriately how to engage the patient, recognizing, again, obviously, that this is an area where patients are suffering tremendously from this disease. And there's a lot of noise and a lot of complexity on getting the right information to engage in a proper discussion with the health care provider. And we're exploring ways that we could potentially engage more profoundly in playing the responsible role of providing patients with that voice back in this process.

So for sure, we are not just focused or dependent on one of those levers. But in fact, we're seeing a lot of success already from those different levers and anticipate that they will be the ones that continue this very strong momentum into 2020 and for the years to come. [And Scott] you can talk a little bit [indiscernible]

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Scott M. Plesha, BioDelivery Sciences International, Inc. - President & Chief Commercial Officer [47]

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Yes. Matt, yes, the point that -- one of the points that I'd really like to build upon a little bit is really the encouraging impact we've seen from expansion. And it's really what we thought it would occur. But as I look at, we added 28 territories, really, October, November, 2 different training classes. As we've track the prescriptions in those territories, it started at a lower baseline, but by the month of May, there was an 80 script per month lift on average per territory. So basically, by the month of May, the incremental business has pretty much paid for those reps. And in my experience, that's pretty effective in getting people up -- quickly up to speed and having an impact.

We also saw an average of a 14 prescriber per month increase per rep as well. And I'll add that we did that, and they were usually subsets we pulled off of other territories and maybe areas we weren't getting to as well. And when you look at the territories that weren't expanded, that were the existing territories, their [trends,] if anything, accelerated slightly during that period of time or since then.

So we're highly encouraged that it really reinforces the effectiveness of the plan we've put in place. And the execution by the sales force, they've done an excellent job.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [48]

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Great. That's very helpful. And then one last question in terms of, given the new guidelines, and do you think you'd be able to leverage new guidelines to help you in terms of negotiating for access and with payers to have a lower discount in terms of getting on -- getting coverage?

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Herm Cukier, BioDelivery Sciences International, Inc. - CEO & Director [49]

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Yes. No, thanks very much, Matt. I appreciate the question. And the interagency task force has a set of recommendations. And obviously, it's a very comprehensive report about best practice in pain management and within the pharmacology arena, really calling out buprenorphine. And Scott, maybe you want to reiterate again just the amount of energy and success, and we really very quickly already had a lot of payers since the report came out. That actually is a [indiscernible]

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Scott M. Plesha, BioDelivery Sciences International, Inc. - President & Chief Commercial Officer [50]

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We did, yes. I mean we -- so we had an outreach to every one of our customers to begin with. But obviously, it's [indiscernible] to us as soon as that was published. And what we will do is, first off, use it to gain access into these plans, to have a -- to reopen conversations maybe where coverage isn't where we want to be. And it will probably depend on plan by plan, Matt, whether we're able to actually leverage those. Remember, they are guidelines. It is not a requirement on these plans. So we will talk to them about the recommendations obviously and work to -- and we're going to be very thoughtful about what we do on the rebate side. We have to make sure that it's profitable access, not just growing business and -- at the cost of giving up gross to net.

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Operator [51]

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Ladies and gentlemen, there are no further questions at this time. Therefore, this concludes today's conference call. Thank you for your participation. You may now disconnect.