Welcome to Collegium Pharmaceutical's first quarter 2021 earnings conference call. This is Alex Dasalla, Head of Investor Relations for Collegium.

I am joined today by Joe Ciaffoni, our Chief Executive Officer; Paul Brannelly, our Chief Financial Officer; and Scott Dreyer, our Chief Commercial Officer.

Thank you, Alex. Good afternoon, and thank you everyone for joining the call.

I'm pleased to be here today to discuss our Q1 performance and 2021 outlook. At Collegium, we are focused on our mission of being the leader in responsible pain management and have an unwavering commitment to people living with pain in the communities we serve.

In the first quarter, we helped Life Science Cares launch their second annual 1,000 laptop challenge with the donation of more than 100 laptops, which were distributed to students in underserved communities across Boston through the non-profit Tech Goes Home. We continue to look for ways to make a meaningful difference where we live and work and are dedicated to acting in a socially responsible manner.

We believe we can deliver on our mission and create value for our shareholders by maximizing the value of our differentiated portfolio of pain products, achieving our near-term operational and financial goals, and strategically investing in our long-term growth. I'm pleased to report that in the first quarter, we made meaningful progress against the priorities and objectives for 2021 that we outlined for you in February.

Our business is strong and our people are healthy. We are embarking upon a phase of growth and value creation for the organization and are on track to meet our objectives for 2021.

Thanks, Joe. Good afternoon, everyone.

Before I start with the details on the quarter, I want to thank Joe for his kind words and thank all of my colleagues at Collegium for their dedication and hard work during my time at the company. I feel privileged to have served as CFO over the past six years, during which time the company has undergone an enormous transformation.

I'm happy that we're able to bring such qualified individual as Colleen to succeed me in this role, and I look forward to a smooth transition. Now, on to the quarter.

Q1 was another solid quarter for Collegium with record revenue and record adjusted EBITDA. This performance is supportive of our outlook and we continue to expect Xtampza ER revenue growth and stable Nucynta franchise profit contributions to drive increased profitability and strong cash generation in 2021.

Total product revenue was a record $87.7 million for the first quarter, an increase of 15% from the first quarter of 2020. Xtampza ER net revenue was $35.4 million, an increase of 12% from the first quarter of 2020 and an increase of 15% from the fourth quarter of 2020.

The gross to net discount for Xtampza ER was 67.1% in the quarter, above the range we had communicated back in February for the full year. This is a result of mix of business in the quarter, as our new exclusive ER oxycodone formulary wins performed very strongly on a volume basis in the quarter, and our non-exclusive and non-contracted volumes continued to be impacted by COVID.

We now expect gross to net discount for the full year to be 66% to 68%, reflecting stronger volume contributions from our exclusive contracted business versus our prior expectations. As Joe mentioned, as conditions associated with COVID-19 get better, we anticipate performance in our more profitable books of business to improve over the course of the year.

Thanks, Paul. We're off to a strong start in 2021 as a direct result of the actions we took in 2020 to generate momentum for Xtampza ER and to manage the Nucynta franchise for stable profit contributions.

I am encouraged that Xtampza ER was the fastest growing ER opioid and achieved all-time highs for total prescriptions, new-to-brand and TRx market share and total prescribers in the quarter. The actions we took in late 2020 enabled us to pull through our new exclusive ER oxycodone formulary positions and continue to grow share within our 2020 exclusive wins, building strong momentum for Xtampza ER.

To be specific, Xtampza ER total prescriptions grew to greater than 161,000, up 18% year-over-year and 11% sequentially. Xtampza ER exited the first quarter with a 30.6 % share of the ER oxycodone market, up 5.5 share points from Q4, a really strong quarter.

There were 18,000 unique prescribers of Xtampza ER, a 24% increase versus the first quarter of 2020 and a 22% increase versus the fourth quarter of 2020. This is the most new prescribers we've added in the quarter in three years.

Xtampza ER share performance within exclusive accounts was very strong in the first quarter. We saw immediate market share and volume acceleration within all new exclusive formulary wins, as well as continued share growth within the exclusive formulary wins we had achieved in 2020.

Overall, Xtampza ER or ER market share within exclusive accounts is approaching 60%. Xtampza ER growth skewed toward the exclusive accounts and in particular, Medicare Part D.

While we did see growth in the non-exclusive and non-contracted books of business, performance within these non-exclusive books continues to be adversely impacted by COVID-19. As the conditions associated with COVID-19 get better, we expect that we will see improved performance within these more profitable books of business.

The entire commercial team is now increasing their focus and taking specific actions to grow Xtampza ER market share within our non-exclusive books of business. These actions include launching new selling resources and digital engagement tools for our sales representatives, launching new non-personal promotional content, and executing sales training programs to help our sales representatives increase their impact.

Moving to the Nucynta franchise, we had anticipated Nucynta franchise total prescriptions and market share to be down in the first quarter, following the execution of our payor strategy aimed at improving the profitability of the franchise. While they did, in fact, decline, the positive impact on gross to net that we expected more than offset the decline in prescriptions.

As a result, net revenue was up 15% quarter-over-quarter, ahead of our expectations.

Thanks, Scott. I will now open the call up for questions.

Yeah, thank you for taking the question and congratulations to Paul for his work over the past six years where the company was able to break into profitability in such a manner, so congratulations Paul and the whole team. And Colleen I look forward to working with you.

I did have a question on Nucynta. Nucynta is annualizing at over $200 million and the top end of the guidance is still $195 million.

Is there some sort of quarter-to-quarter lumpiness that we should expect throughout the year? And I know, obviously, the story of giving up some volume for higher value prescriptions, which of course makes sense, but just wondering if there's anything one-time nature in the quarter or something we should watch out for?

Yeah, Tim, well. First, thanks for the kind words and so, I really appreciate it and I have really enjoyed my time here at Collegium.

As far as Nucynta for the year, volume will continue to decline, but we think that the actions we took will just make it more profitable overall with a lower gross to net discount for the year. So our prior guidance on gross to net discount was in the low 50s, we now think it will be more in the range of 46% to 48% for the year, so not quite as good of the gross to net discount as we had in the first quarter.

So, that will bring revenue down on a quarterly basis some as we go forward.

Okay, great. Thanks, Paul.

Great. Thanks, Tim.

Thanks and good afternoon. And Paul, best of luck to you in your new endeavors.

Really appreciate your help over the years. Good luck to you.

So a couple of questions, first on Nucynta. So you mentioned that you now have - you are growing revenues because you've pruned out the less profitable scripts and other related actions.

Just curious, is positive revenue growth sustainable going forward versus declines as scripts continue to decline? And secondly, I know that when you did the transaction to get back more of the rights, you also mentioned that you were looking at some things over time via tech transfer and things to improve the margins on Nucynta.

And I know you said you moved the manufacturing facility to TMO, does that mean that we should be expecting better gross margins in the near-term from Nucynta? Second question is, do you think there might be a chance for some off-cycle wins coming up soon with payors.

And thirdly, on BD, you keep generating more and more cash and I know you've been talking about looking at assets for a while, obviously you want to buy the right asset. But is the issue that the valuations are too high or you just can't really find anything that fits with your strategy?

Thanks.

Right. So David, this is Joe.

I'll start off with the Nucynta questions, I'll hand it off to Scott to talk about off-cycle with Xtampza and maybe come back with some thoughts on BD. So look, when you think about Nucynta, I think it's important that we continue to ground people.

When we did the acquisition, we had communicated that we felt coming out of 2020 on a going-forward annual basis we could deliver sequentially stable revenues, and that continues to be our position. We're very encouraged by the impact of pruning some of the unfavorable contracts that it is having in 2021.

And as Paul said, while we expect to see continued pressure on prescriptions, although I would emphasize we do believe the remainder of this year, it will be at a moderated pace, so it won't be to the degree we saw in the first quarter. As we emphasized with our guidance, we believe that we're going to do better than we had anticipated coming into 2021.

But going forward, I would think about sequentially stable revenues based off of how we exited 2020 for the remainder of the life cycle of Nucynta. From a cost of production perspective, right now the tech transfer that's under way to Thermo Fisher is an important step.

We're also working across the value chain, both with Nucynta and Xtampza, and I think at the end of this year we'll be able to give some perspective on what we think we can accomplish over the next couple of years. And, Scott can talk about Xtampza off-cycle.

Yeah, thanks for the question, David. So look, in the second quarter here, which as we typically do, we come off the first quarter really evaluating the impact of the new wins we've had and how we've shaped the market.

Of course, we're always in conversations with payors. And right now I have nothing to report from a mid-cycle win, but I will reinforce that our strategy hasn't changed.

We always are looking to broaden access for the brand and really with a path of either exclusivity, parity, or in some situations an exclusive run into parity. And so, we'll keep talking and when I have something to share, I'll be back in touch.

And then David, from a BD perspective, what I would emphasize is; one, we feel we're coming at it from a position of strength because of the underlying business and the durability of our revenue from our differentiated pain portfolio. I would say the thing that's most important to emphasize is we're committed to being disciplined as it pertains to our business development activities.

So we're not looking to just do a deal, we're looking to do a deal that really makes sense for Collegium, and so we're not going to rush into anything. We're very focused.

We remain active and engaged and we continue to prioritize later stage non-opioid pain solutions and will also maintain an opportunistic posture as it pertains to commercial stage.

Okay, thank you.

You're welcome.

Thanks. So, just a couple.

So, first on Xtampza and the gross to nets. I understand the near-term dynamics in terms of driving that wider spread between gross and net.

But I wanted to ask you Joe about your longer-term thinking about contracts. In particular, as you continue to gain share of the Oxy market - I'm sorry, the ER oxycodone market, do you need to have the exclusivity in place?

And if you don't, does that mean there is potential for narrower lower rebates over time? So help us understand how to think about that?

And then secondly on BD, you talked about pain. I'm just wondering out loud if you've broadened your focus more to CNS, not necessarily pain, maybe therapeutic adjacencies, maybe neurology more broadly speaking.

But I'm just wondering how you are over time, if you don't find something in pain, do you cast a wider net? So how should we think about that?

Thanks.

Yeah, so David, thank you for the questions. First off, when you look at gross to net and I know your question was longer-term, but I'm going to make a comment shorter-term.

We do believe when there is a return to normal and hopefully that will be the back half of this year that we'll be able to have a greater impact in our parity and non-contracted books of business. One thing that encourages us from that perspective even in a world of COVID, if you were just to look at our non-contracted books of business on a sequential growth basis, it grew 3% versus Q4 of 2020, so we're seeing movement there.

And ultimately when you think longer-term about our strategy with Xtampza ER, our goal has never been to get every life in an exclusive position, but rather to get enough critical mass that we can have a spillover impact into those other books of business. So that's something we'll continue to monitor.

And longer-term, there is a couple of things we'll be focused on; one, our effectiveness in those other books of business, which would have a positive impact on gross to net. Obviously, we'll also continue to, as we get further out with the brand, so think 2022 and beyond, look for opportunities to optimize existing contracts that we have in place when they expire.

And that's how we think about it on a going forward basis. And look, from a BD perspective, right now our focus remains the same.

That being said, as things evolve, if we find that there is nothing that really makes sense for the organization in either later stage non-opioid pain solutions or something commercial stage that directly leverages our infrastructure, we think we have optionality to the degree that it makes sense to explore adjacent areas, and I think neurology would be one that would make sense for Collegium.

Okay, thanks Joe.

You got it.

Thank you. I have a few.

I'm going to start with the comments you made about COVID normalization in the second half or you're not assuming it until the second half. I would assume that you are seeing pockets of improved activity and that this is kind of a continuum of activity not a sort of toggle in a model.

But I wonder how - since you made the comment, how does it affect your model specifically to say that there is normalization versus not normalization? Help me think about that, please.

Okay. So Gregg, I'm going to ask Scott to share some thoughts on that one.

Yeah, thanks for the question Gregg. So it's a very specifically how we think about, it is anchored to two things.

First, it's patient visits. And you're right, it's not peanut butter uniform across the country, but overall patient visits are still down about 20% in pain specialty, and then what we look at to support that is the new to brand market.

And what we see there is the new to brand kind of overall market volume is still where it's been during COVID. So there was a little spike that we drove through our new Xtampza contracts and exclusivity, but now it's settling closer to COVID level.

So those are the two measures we look at, and that's what we look for to bounce back as things move later in the second half of the year.

And Gregg, the only other color I would add to that is really what we believe the potential for impact there is in the other more profitable books of business, where you don't have the payor helping to drive disruption, and we think those two dynamics together will put us in a situation to be more effective there.

I understand that qualitatively, I was just trying to make sure that I wasn't missing something that you actually model as sort of tying to NBRxs and TRxs, etc. It sounds like it's more of a qualitative thing.

Yeah.

Go ahead, Joe.

No, go ahead.

Did you guys notice any differences around the country in performance, in Q1 specifically?

Yeah, thanks for the question. Yeah, the biggest thing I'd point out differentially is when you add a plan like Optum PDP, one of the largest Part D plans all over the country, we absolutely saw that had a differential effect.

In some regions that were lagging in market share where they've more aggressively accelerated market share. So that's the biggest thing I'd point out to you, Gregg.

Okay. Just two more.

One is, have you noticed anything about Purdue, as a competitor, changing ahead of an emergence from bankruptcy or is it status quo from your perspective?

Yeah, Gregg, this is Joe. I don't think there is anything that we've noticed different as a result of those proceedings.

And as you know, we stay laser-focused on what it is that we're trying to accomplish.

Sure. And lastly, Joe we've talked about just the overall long-acting opioid erosion rate and what you have built-in longer term in a moderation, I think to mid-single digit.

Are you tracking sort of toward that as expected or has there been anything interesting that's changed in that sort of erosion rate for the overall pie? Thanks.

Yeah, so great question, Greg. From our perspective and relative to what we model, the market is performing this year in line to those expectations.

And as you said, over the next five years, we believe it will moderate to a low single-digit decline.

Thanks a lot, gentlemen and good luck, Paul.

Thanks, Gregg.

Hi, thanks for taking my questions. First one, I guess for Joe or Scott.

This is usually the time of the year where we start seeing penetration in the newer exclusive formulary plans kind of stabilize. Are we reaching that same level this year?

Should we expect anything different given the nature of the newer plans and the expectations for a COVID recovery in the second half?

Yeah, thanks for the question, Serge. So, yeah, I think when you think about the shape of the curve for this year, I would think of it similarly.

We expect growth throughout the rest of the year, skewed toward the first quarter. I think the one thing I'd point out that's different when we talk about this return to normal, we do believe as that happens and patient visits bounce back and new to brand bounces back a bit that we can have greater growth in the third and fourth quarters of this year than we did in the past.

And so that would be the one thing that I'd say could be different, but the shape overall should be similar.

Okay. And you've talked about the non-exclusive formularies being a much more profitable business.

Can you just give us an idea of how much more profitable that really is?

Yeah Serge, this is Joe. We probably won't get into specifics on that but what I would say to is when you think about a continuum, Medicare would be - Medicare exclusive would be the least profitable commercial better; parity, better than those two and then obviously, non-contracted is the most profitable prescription.

Great. Okay, thank you.

Good luck to Paul.

Thank you.

Hi, thanks for taking my questions. Maybe just following on from a previous question, you talked about patient visits being down, but how much of your sort of in-person reps, how contingent is sort of these wins in the non-exclusive on those face-to-face interactions?

And maybe just sort of any context on kind of maybe what percentage of your sales force are back to face-to-face across the country in April? And then maybe on the guidance, on Xtampza guidance, in particular, obviously gross to net went up a little bit.

Did you perform a little bit better on a volume perspective, do you think in the first quarter or is it sort of in line and you kind of remain within that range? Just any context in terms of how well you've actually done in terms of a volume perspective as the scripts look pretty good.

Thank you.

Yeah, thanks for the question Brandon. For the sales force, so yes.

So basically what we're seeing is, our overall the capacity is at 100%. All our reps are out there making calls.

About 70% of those calls are live in office. So that's where we see improvement or increase as the country continues to open up and we move through COVID.

So that's the context that I'd give to you there. And why that's meaningful?

The biggest reason that's meaningful is for the exclusive business what we've learned, even during a pandemic, is because of the payor's influence that business will grow as it did in the first quarter but it's really our sales representatives being back and patient visits resuming to full capacity, where we're able to really penetrate the non-exclusive books of business. So that's the focal point there.

And Brandon, I would say at a high level when you look at Xtampza uptake in the first quarter was expected from the perspective that we saw it immediate the first day of the year, it was strong throughout the entire quarter, skewed to exclusive, in particular, Medicare Part D. And so the commentary I would make is, think about exclusive perhaps being a higher percentage of the mix than what we anticipated but overall prescriptions in line to perhaps a bit favorable relative to what we were thinking.

Great, thank you. Maybe one quick follow-up.

Medical exceptions at the beginning of this year and then maybe any from the beginning of last year, any impact there, anything material we should consider?

Yeah, so I think when you're asking about medical exceptions, you're probably talking about in Part D and the 12-month approval. What I would say is when you look across all of our exclusive books of business, inclusive of the 2020 and legacy wins, we saw progression across all exclusive.

And I also want to emphasize that we saw growth in contracted non-exclusive and in non-contracted books of business on a sequential basis in the first quarter, which was encouraging to us.

All right. Thanks very much and all the best to Paul as well.

All right. Thank you, Brandon.

Thank you all for your attention. Q1 was a strong start to the year and I'm encouraged by our momentum and strong financial position.

We believe that we are entering a phase of growth and value creation for the organization and are on track to meet our objectives for 2021. I want to recognize my colleagues at Collegium for their hard work and dedication to our organization, and thank them for their commitment to people living with pain and communities we serve.

We will continue to focus our efforts on maximizing the value of our differentiated portfolio of pain products, achieving our near-term operational and financial goals, strategically investing in our long-term growth, and delivering on our mission of being the leader in responsible pain management. I look forward to updating you on our progress.

Have a good evening.