Collegium Pharmaceutical Inc (COLL) 2015 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Collegium Pharmaceutical fourth-quarter 2015 earnings call. (Operator Instructions). As a reminder, this conference call is being recorded.

Before we begin today's call, we wish to inform participants that the forward-looking statements made today are pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.

You are cautioned that such forward-looking statements involve risks and uncertainties, including and without limitation, the risk that we will not obtain final FDA approval for Xtampza ER; may not obtain the label claims that we are seeking from the FDA; and may not successfully [commercial] Xtampza ER. Furthermore, we are subject to patent infringement litigation relating to Xtampza and may in the future be subject to additional litigation relating to our other product candidate, which may be expensive to defend, and delay the commercialization of Xtampza or our other product candidates.

These risks and uncertainties of the Company are detailed from time to time in the Company's periodic reports filed with the Securities and Exchange Commission. Our future results may differ materially from our current expectations discussed today.

I would now like to introduce your host for today's conference, Mr. Mike Heffernan, Chief Executive Officer. Sir, you may begin.

Thank you. Good morning. This is Mike Heffernan. I'm the CEO of Collegium, and with me today is Paul Brannelly, our CFO, who will review Collegium's financial results; and Barry Duke, our Chief Commercial Officer, who will provide an update on some of our commercial initiatives as we prepare for the final FDA approval and launch of Xtampza ER, our abuse-deterrent, extended-release oxycodone for the treatment of chronic pain.

2015 was truly an exciting and transforming year for Collegium. As 2015 began, we had recently filed our Xtampza ER NDA in December of 2014, and we had an organization of 21 employees, all of which were focused on the Xtampza development program. By the end of 2015 and through the beginning of 2016, we had raised almost $175 million in three separate financings, including a mezzanine financing in March, our IPO in May, and our follow-on offering in January of 2016.

We also had a successful FDA advisory committee meeting in September of 2015, where we received a 23 to 0 vote in favor of Xtampza. Subsequently, we received FDA tentative approval in November. As a reminder, a tentative approval is given when an exclusivity issue prevents final approval. In our case, it was a patent infringement suit filed by Purdue Pharma.

With the tentative approval, the FDA and Collegium have agreed upon, for example, the product label, product packaging, the REMS program, CMC commitments -- but each of these is subject to change if new information or product-related updates become available to the FDA prior to final approval.

As it relates to our current tentative label, it looks to be quite supportive of the robust abuse-deterrent properties of Xtampza, as well as includes data in the labeling that describes the ability to open the capsules and sprinkle the microspheres on soft food, or administer it through a feeding tube. This unique product attribute will benefit patients that can't swallow their medication whole, or that require a feeding tube, such as a patient that may be in a nursing home that currently has limited treatment options for their chronic pain condition. Barry will talk in more detail about this opportunity in a few minutes.

In 2015, we also initiated the build of our commercial infrastructure with the hiring of Barry as our Chief Commercial Officer last March. Barry has made significant progress in building out his organization, and we are currently in the process of hiring the field sales organization. The Collegium team, which started with 21 employees in January of 2015 and then increased to 46 employees at the end of the year, will be in the range of 260-plus employees by the end of 2016, with the vast majority of these new employees in the commercial organization.

In 2015, we also made significant progress in our patent infringement lawsuit filed by Purdue. In March of 25th, as many of you may remember, Purdue filed a patent infringement lawsuit that included three Orange Book listed patents. Based upon the Hatch-Waxman statute, this lawsuit automatically invokes a 30-month stay of FDA approval, which, worst case, would have delayed our approval until August of 2017. In February of 2016, this suit was dismissed in the Massachusetts courts, and the 30-month stay is therefore deemed to be lifted.

There are two additional patents in which Purdue has filed suit, neither which of these will cause a 30-month stay, but both remain open cases in the Massachusetts court. There is a hearing scheduled in April in which a case schedule will be discussed with the judge. Again, infringement allegations on these two remaining patents will not prevent final approval by the FDA, and will not prevent the subsequent launch of Xtampza ER. We remain very confident in our non-infringement position as relates to these two patents.

We expect 2016 to be an exciting year for Collegium as we transform from a development company to a company that also has substantial commercial capabilities. We have recently filed a request with the FDA to convert our tentative approval to a final approval. This process can take up to two months. Information that was included in the NDA needs to be updated and finalized, including things such as the REMS program and associated med guide, as well as the final post-marketing commitments, amongst other items.

We are also in the process of manufacturing our full commercial launch supply; finalizing our marketing plans; and recruiting, hiring, and training our sales organization.

Due to our early success in terminating the Purdue litigation, we are working rapidly and diligently to make sure all of the necessary components are in place to ensure a successful commercial launch. Ultimately the timing of the FDA final approval will dictate the precise launch timeline for Xtampza ER, as many required activities are predicated by this event. We continue to target the end of the second quarter as our best estimate for commercial product shipment.

Finally, I'd like to mention a few additional key initiatives underway at Collegium. We are continuing to explore methods to clinically differentiate Xtampza ER from other ADF formulations on the market, and we will report on some of these initiatives later in the year.

We are also continuing to develop our pipeline products, using our DETERx technology. Our IND was accepted by the FDA in January of 2016 for our hydrocodone extended-release product, and we have initiated dosing of our PK proof-of-concept study.

We are also continuing to explore expansion of the geographic reach of Xtampza ER, and are in the process of preparing our Canadian NDS filing. Finally, we are actively identifying and evaluating complementary product opportunities that could be synergistic with our commercial organization and our intended commercial targets.

At this point, I'll hand it over to Paul to discuss our financial results.

Thanks, Mike. Good morning, everyone. Since we issued a detailed press release this morning and plan to file our 10-K soon, I'll just review the financial highlights. As of December 31, our cash balance was $95.7 million, which is a decrease of just under $9.8 million since September 30. We believe that our existing cash resources, along with the net proceeds of our January 2016 follow-on offering, are sufficient to fund our operations into 2018, including the commercial launch of Xtampza and continued clinical development of our second product candidate.

For the year ended December 31, 2015, our net loss increased to $27.3 million from $17.9 million for 2014, resulting in a net loss per share of $1.48 for 2015 versus $22.72 for 2014. The increase in net loss is primarily due to costs related to the preparation for the commercial launch of Xtampza and headcount-related costs. The net loss included stock-based compensation of $2.2 million for 2015 versus $22,000 for 2014.

The large decrease in net loss per share is due to the conversion of preferred stock into common stock at the time of our IPO in May 2015. This conversion increased the number of common shares outstanding used in the calculation of net loss per share. We are still in the early stages of planning, but we plan to hold an Investor Day in New York City during May or June of this year. At our Investor Day, we expect to review our commercial strategy in detail and introduce our senior commercial team.

I will now turn the call over to Barry Duke for a commercial update.

Thanks, Paul. Good morning, everybody. On our last earnings call, I provided an update regarding our commercial build and hiring process. We have continued to make substantial progress, and completed virtually all hiring for all internal roles in marketing, operations, market access, and training. We have hired 19 of the 20 individuals who will lead our sales teams, and have begun recruiting, identifying, and extending offers to sales representatives.

We continue to attract top talent, most with relevant pain experience. We are confident that we will have the commercial field teams trained, deployed, and ready to launch Xtampza.

Additionally, I wanted to provide some insight into our positioning and strategy. We have completed market research with over 300 stakeholders in the chronic pain market, including pain specialists and other physicians who treat chronic pain, pharmacists, and payers. The response to the product profile for Xtampza has been consistently positive.

Abuse, misuse, and diversion are clearly top-of-mind concerns for stakeholders in this field. An oxycodone product like Xtampza provides familiar and trusted pain relief, and combines next-generation abuse deterrence as an attractive option. We have tested several positioning alternatives. The concept of responsible pain control with Xtampza resonated well across the full spectrum of market research participants. Responsible pain control appeals to the need for striking the right balance between the effective pain control and providing best-in-class abuse deterrence.

Based on the product attributes and data we share, and consistent with the final label we anticipate, market research participants say that as long as there were no additional burdens for their patients related to cost or access, they would prefer Xtampza when they were to start a new patient on an extended-release oxycodone product. Thus, our strategy will be to position Xtampza as the first line extended-release oxycodone of choice.

Now I'd like to talk a minute about the unique opportunity that Xtampza may offer patients with chronic pain and dysphagia. Flexible administration options with Xtampza, while interesting to the office space pain specialists, are particularly attractive to the long-term care institution segment of the market. There are 1.4 million patients in skilled nursing facilities: 35% who have a diagnosis of pain, 35% who require mechanically altered diet, and 6% who require feeding tubes.

The ability to sprinkle Xtampza onto soft food, directly into the mouth, or directly into a feeding tube, offers unique administration options not available with other extended-release opioids, including OxyContin.

In fact, OxyContin does 50,000 TRx's per month in long-term care only, or approximately $300 million per year, despite the fact that it actually has cautions in its label for patients who have difficulty swallowing. There are also 130,000 TRx's per month for fentanyl patches in the long-term care setting, many of which are geared towards patients with difficulty or dislike to swallowing.

Long-term care physicians and consultant pharmacists believe Xtampza will be a credible and valuable option for their patients who often have the overlap of chronic pain and dysphagia. Long-term care administrators in some of the biggest national chains have told us that they are concerned about diversion in their nursing homes and that the marriage of the improved ADF features, along with the administration flexibility, makes Xtampza an interesting product for them.

In the institution setting -- hospitals, and hospital clinics, and separate and distinct from skilled nursing facilities -- there are additional sales of $140 million per year for OxyContin. Many of the benefits mentioned for long-term care for Xtampza also resonate here. Thus, as we have discussed before, we will target this long-term care institution segment with a focused team, 24 sales representatives, targeted against the best opportunities.

While the sales cycle may take longer in these channels due to Part D and institution formulary decision timelines, we see a robust, longer-term opportunity for Xtampza.

Finally, we on the commercial team are looking forward to final approval and launching Xtampza. We know from our market research, advisory boards, and KOL conversations that patients and society can benefit from having this important extended-release oxycodone alternative to OxyContin, and then this new option for patients with chronic pain and dysphagia.

With that, I'll turn it back over to Mike Heffernan.

Thanks, Barry, and thanks, Paul. We will now open it up to questions.

(Operator Instructions). David Amsellem, Piper Jaffray.

This is Michael on for David. Just a few quick questions. First, can we get your latest thoughts on the final label? I know that you mentioned that it's going to be supportive of abuse deterrence and the ability to sprinkle it on food, but any more specifics there would be helpful.

And then just second, maybe your latest thoughts on the managed care landscape for Xtampza. And do you think the product will maybe see a more restrictive environment? And just what you are hearing in terms of the landscape for ER opiates with regards to managed care overall. Thanks.

Yes. Great, thank you. I'll take the first one on the label, and then I'm going to pass it to Barry for talking about the managed care landscape. So, as we mentioned, and we mentioned it in our last call, the tentative label is a label that is agreed upon with the FDA in the tentative approval process. But the FDA has the right to change that, based on any new information. So, for that reason, the FDA does not advocate us publishing that label, and so on.

But I can give you the general overview, as we did in the last call, of some of the key attributes -- the first being is, as you mentioned, the flexible dosing option. The other thing that's important is the abuse-deterrent section of these labels, section 9.2. And in there, we would expect, as we've seen in the tentative label, in vitro data on Category 1, suggesting that the product is more deterrent to IV abuse and so on.

And number two, PK data in the label -- which is Category 2 data -- both the nasal PK data, as well as the oral PK data is expected to be in the label. Also, there is expected that there will be Category 3 data for both the nasal and the oral Category 3 studies, which are the human abuse potential studies.

In addition to that, in the pharmacokinetic section of the label, we expect data in there on the sprinkling PK data as well as data in there, again, for the oral PK, which shows what happens if you crush it or if you chew it.

All of which supports the fact that if you crush, chew, break, or grind, or dissolve the product, there is no dose-dumping, and thus not a requirement for a Black Box-specific warning that this product must be taken whole because if you crush, break, or grind it, it will dose-dump. So we do not expect that warning in the label. So, that is an overview of the expectation on the label. That label, upon final approval, will obviously be public.

With that, let me turn it over to Barry, and he can speak on what we're seeing in the managed care landscape.

Sure. Thanks, Mike. Yes, so we've hired our market access managed care team, and they have been deployed, and we've been having conversations with some of the payers. I think from what we're hearing, it's a lot like what we've described before -- that we do expect to have broad coverage in the Tier 3 position, and to contract aggressively with Medicare Part D and Medicaid.

Since our team is still in early stages, we haven't completely defined our strategy, though I think we know where we're going. And I know Paul mentioned earlier that we're going to have an Analyst Day in May and June; we're going to give more details around our commercial strategy. So we will talk there about more of our specific details. But I think it's been consistent with what we expected in the managed care environment. I think there's a recognition amongst payers that we do have a different abuse-deterrent product than anything they've seen.

And I think there's a growing awareness about the importance of covering abuse-deterrent formulations that probably hasn't been there in the past. And with that, we look forward to bringing the team to the Investor Day in May or June, and talking about some more of the specific details there.

All right. Thanks, guys.

Tim Lugo, William Blair.

Congratulations on the progress. Has there been any hints of a possible label change between the tentative and final? And how confident are you that the label will be finalized within the average two-month time frame you mentioned in your prepared comments? I assume your competitors are trying to pull every lever in delaying your launch.

Yes. Thanks, Tim. So, how confident are we about the two months? I'll start with. Well, as we know, the FDA -- the PDUFA date -- the PDUFA guidance is two months on a minor amendment, which this is considered. So, with the additional information that we have submitted. So, the FDA should hit that date, but there's certainly no guarantees. And as we know from our original PDUFA date, the FDA missed that date. So, we think it's a reasonable time frame, but I wouldn't count on it to the exact day. It could be before; it could be sometime after.

At this point in time, we have no hints that, one, the label will be changed or different. And we've had a fair amount of dialogue with the FDA over the past couple of weeks. And we have no hints that this will be delayed. So, that's our best guess, at this point in time.

Understood. And maybe one additional question. We have seen some disappointing drug launches in the scheduled opioid space over the past few years. Can you discuss, maybe at a high level, what have been some of the lessons learned you've seen as you have observed these launches from the outside? And maybe what you are doing ahead of the launch to try and make Xtampza, early days, as successful as possible?

Yes, I'll make a couple of comments, and then if Barry wants to add to that, he can do that as well. So, I think Barry hit the nail on the head from our market research, which was that people understand the differentiation of this product. They understand how the product is different. But what doctors need to know is that when they write a prescription for a patient that that patient, one, is going to be able to get the product at the retail level; and, number two, it is going to be covered in some reasonable way by payers.

So when we look at different launches and benchmark our launch, we spend a lot of time thinking about stocking, coverage, and patient hub services, so that we can make sure that when a patient gets a prescription for Xtampza that it gets filled and gets reimbursed. So, I think those are the critical things.

I think the other thing that may be a little bit different than Xtampza is it is -- we anticipate, based on our tentative label, that it will have a unique positioning. It will allow our sales organization to tell a little bit different message than everybody else has told, which is a little bit of a Me, Too message. So we're hoping that that resonates with the physicians as well.

Barry, I don't know if you want to add anything.

No, I think you summarized it well, Mike. From our perspective, having the patient services support around a very robust hub service is really critical. I think that's one of the lessons we have learned from our markets research, talking to other physicians about recently launched products, and their growing frustration with not being able to get the product when they write for it. So, we're spending a lot of time fine-tuning our strategy and making sure that we have all the support services in place so that physicians, when they write it, that patients are able to get it.

So we have a distribution covered, and then we also have a support system around a co-pay and access. So I think that's really the key lever, and key lesson we learned and heard through our market research.

And, early on, will you be leveraging specialty pharmacies? Or what is the distribution going to be looking like?

No, we will have a specialty pharmacy option through the hub, but this is primarily a retail-driven product. So we will have retail distribution. And what we envision is a hub that -- in addition to having a couple of specialty pharmacy options, we will also have a network we recruited of retail pharmacies that we can direct patients to as well. So we plan to have both, both options, and help the patients find where the product is.

Great. Thanks for all the questions.

Serge Belanger, Needham & Company.

(technical difficulty) question. Mike, you mentioned you were (technical difficulty) differentiate Xtampza from other products. Should we expect you to (technical difficulty)? And could these clinical differentiations (technical difficulty)?

Unfortunately, Serge, your phone is not connected well, and I couldn't hear the whole question.

Can you try to repeat that?

Sure. You mentioned (technical difficulty) clinical differentiation of Xtampza vis-a-vis other products. Just wanted to know if you will be looking at other small trials or -- and if that could be reflected in the final label of Xtampza.

Yes. So, we are looking at differentiation trials. And we are currently running a few trials that we will look to continue to build the clinical evidence that Xtampza is different, especially as it relates to its crushing, breaking, and grinding, and likability to other ADF opioids that are available. We will certainly use that data to try to supplement the label. That will be something that we will explore later in the year, once we get final approval, get the product launched, and get the clinical data in.

As many people know, we have already run one study, head-to-head versus OxyContin. And we are looking again to supplement that data to try to create something that's label quality, and that could be included in the label. So, that is the strategy.

Okay. And then there's numerous (technical difficulty) proposals at the (technical difficulty). I guess more recently one in your own backyard, in a Massachusetts legislator. Just (technical difficulty) market potential for Xtampza, or is it just would be focused on (technical difficulty) these products?

Yes, I think -- and again, you were going in and out a little bit -- but I think what you were talking about was the Massachusetts legislation on opioids that was signed into bill yesterday by the governor. We are supportive of that legislation. The legislation itself calls for responsible opioid prescribing. It calls for limits to the number of pills that one can get for acute pain indications on their first scrip. It requires appropriate diligence by the physician in making sure that the patient is going to be appropriate and followed, and is not doctor shopping.

So again, all of those things we think are an important part of responsible opioid prescribing, and should be part of any treatment with an opioid. Our real positioning of Xtampza is, once you do all those things and you go through the appropriate -- you find the appropriate patient, you put the appropriate monitoring programs in place -- then you need to choose the safest opioid. And that's where we think Xtampza fits in. And that's how we will position the product.

When you think about 29 million prescriptions a year for extended-release opioids in the United States, this is not about expanding the market for opioid prescribing. This is really about taking appropriate patients who are chronic pain patients who don't have other options, and giving them the safest and best opioid option available to them. And that's the positioning that our sales organization will go out with.

Thank you.

(Operator Instructions). Ken Trbovich, Janney.

I think I wanted to pursue some questions again around the reimbursement side, and specifically to touch on some of the things you described in terms of market access. I know one of the questions that I have, and I believe others have, is we look at companies like UnitedHealth that have put into place step edits, for example, that would argue against using some of the abuse-deterrent products that are already approved, and instead are requiring failure on three other products, none of which have abuse-deterrent characteristics.

Do you get the sense in your engagement with managed care, whether it's UnitedHealth or others, that this technology differentiates the way they feel about others? Because clearly, for example, OxyContin -- it's well known on the street that if you chew it, it's going to dump. And you could argue that for those reasons, UnitedHealth and others might have had difficulty justifying reimbursement for an abuse-deterrent product that's easily defeated.

Do you get the sense that this differentiation is the type of thing that helps you to overcome those types of step edits, so that you make the list of those that have to be tried first, as opposed to those that are not prescribed and are substituted?

Yes, Ken, it's a really good question. It's a little early for us to be able to make any definitive statement on that. It's really an education process. As we go out, and our national account managers are out talking to the UnitedHealths of the world, and we're learning and we're doing a lot of market research, without a final approval of our product and a final label, it's a difficult -- we can't talk specifics. But I think there's going to be an education process.

Whether we ultimately get to a world where people look at Xtampza as something that doesn't require step edits -- let's face it, I hope so. I think that's appropriate for all ADF opioids. I think if you look at the statewide legislation that's going on around the country, where there's a real push to make ADF opioids on parity from a co-pay standpoint with non-ADF opioids.

When we look at the whole landscape of the number of patients, commercial patients versus Medicare Part D patients, what we see is there are a fair number of covered patients who require some type of step. Sometimes that step is through an IR product; sometimes that step is through a preferred brand that may be ADF; and sometimes that step is through a non-ADF; and sometimes there's two steps. So, each plan is going to be different. Each strategy for us will be different. And some of them will have higher priority than others.

But at this point in time, I don't think we are prepared to come out and say that the product attributes of the product warrant that United, as an example, or anybody else, will remove all step edits. I think if we get to a world where that's the case, it will take a fair amount of education and evolution.

Sure. Do you think -- and to what extent do you think maybe then price plays a role in that decision, from a managed care perspective? And how does that alter, if at all, the way you think of pricing the product?

Yes, we're not prepared to talk, obviously, any specific pricing strategy at this point until we get to launch. I think price always matters with the payer, and price is going to matter with our product. How sensitive the price is around the market basket price is something that we will explore on a case-by-case basis. But I do think price will be important.

Got it. And then just last question with regard to the process in terms of your experience now with the hiring process and building out the sales organization. Can you give us a sense around the confidence that that builds in the talent and the level of talent, and perhaps even existing relationships that some of that staff might have as they come on board?

Yes, I'll pass that one to Barry.

Yes, thanks, Mike. Yes, we've had our first hiring event, and we're looking to bring on 30 representatives early in April. And they all have relevant pain experience. So, they will have a lot of relationships. I think the average tenure in terms of experience in the pain market with that group was over six years. So they have all been in the pain market and definitely will some relationships. And we will use them to help also train the reps that we will be bringing on later in May, after approval, as well. So we are laying the foundation for successfully training and bringing on the rest of the salesforce.

But we're attracting exactly what we had hoped for in the market. I think there's a recognition from a lot of these representatives who have been in the pain market that we have something special with Xtampza. And we've had no problem. I think we had something like 12,000 applications for our first hiring event. And we narrowed it down, and we're hiring 30 people out of that group. And we have identified others out of that group that we will hire and bring on in May, as well.

So we've been having (multiple speakers) -- we are very confident we're going to get the right people, and meet the timelines as we learn about approval.

Terrific, guys. I appreciate you taking the time for the questions. Thank you.

Thank you. And I am showing no further questions at this time.

I'd like to turn the call back to Mr. Heffernan for closing remarks.

Well, I'd like to thank everybody for joining the call, and we will continue to keep you updated on our progress. Thanks, everyone.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day.