Mike Heffernan - CEO Paul Brannelly - CFO Joe Ciaffoni - COO

David Amsellem - Piper Jaffray Tim Lugo - William Blair Serge Belanger - Needham Ed Arce - H.C Wainwright Ken Trbovich - Janney David Steinberg - Jefferies Kevin Kedra - Gabelli

Thank you. Good afternoon, and welcome to Collegium Pharmaceuticals fourth quarter and year-end conference call.

This is Mike Heffernan, I'm joined by Paul Brannelly, our CFO; and Joe Ciaffoni, our Chief Operating Officer. We will provide insight into our recent progress and our financial results.

2017 was truly a transformational year for Collegium, Xtampza ER was established as the leading growth brand in the opioid chronic pain market, and Collegium has in turn positioned itself as the emerging leader in opioid management with the licensing of Nucynta IR and ER for the U.S. market.

Collegium is dedicated to providing innovative differentiated product to the pain market and is committed to advocating for balance responsible pain care. This includes supporting opioid describing for only those patients who do not have other available options to relieve their acute or chronic pain.

I’d like to start by reviewing some of their recently achieved milestones. There were 38,000 prescriptions written for Xtampza in the fourth quarter, this is a 37% growth from the prior quarter and a total of 98,000 prescriptions were written for the full year of 2017.

We reported 10.8 million in fourth-quarter Xtampza ER revenue up from 7.6 million in the third quarter on a comparative basis. As we have moved in the 2018, this Xtampza growth is significantly accelerated with almost 20,000 prescriptions written in January 2018 alone.

Joe will provide some additional insights into our commercial performance in a few minutes. In the fourth quarter, we also received FDA approval of our supplemental NDA which further strengthens our labeling differentiation between Xtampza ER and OxyContin with the addition of head-to-head clinical data demonstrating the resistance to crushing by Xtampza ER versus OxyContin.

In addition the Xtampza label now includes an oral abuse claim consistent with the FDA’s guidance of a abuse-deterrent opioids, OxyContin does not have this plan. Throughout 2017, we continue to build on our strong IP portfolio for Xtampza ER and now have 12 patents from four patent family listed in the orange book providing patent protection until 2036.

We also have a number of additional patent applications in varying phases of prosecution that if granted will continue to strengthen the existing patent estate with the potential for extending the last to expire date passed 2036. We also announced in the fourth quarter the signing of an agreement with Depomed to license the U.S.

rights for Nucynta IR and ER for the U.S. market.

This transaction closed early in January of 2018. The Nucynta franchise consists of established point brands with differentiated positioning versus Xtampza ER.

Licensing Nucynta is consistent with our mission of bringing differentiated products from across the spectrum of pain to the pain community. We consider tapentadol the active ingredient in Nucynta to be highly differentiated with its novel dual mode of action.

It is a mu-a [ph] agonist with a reported 18 times less affinity for the new receptor and morphine as well as the norepinephrine-reuptake blocker. This novel pharmacology leads to unique positioning in the market in both acute and chronic pain including chronic pain associated with diabetic peripheral neuropathy.

We are currently working to integrate the products into the Collegium portfolio, as Depomed has previously announced Nucynta ER has experienced supply disruptions due to the effect of Hurricane Maria on the manufacturing of the product in Puerto Rico. The supply issue was continued into 2018 with intermittent product outages down to the retail pharmacy level.

The manufacturer in Puerto Rico is now operational and we have been restocking the supply channel over the past few weeks. We have been notified that the supply situation should be normalized by the end of March.

The supply issue has not affected Nucynta IR that it’s manufactured in the U.S. As the opioid market evolves and manufacturers continue to lead the market, we continue to focus on enhancing the capabilities and expertise of the Collegium organization as we assumed the leadership role in this market.

This includes hiring a Senior Vice President of Sales and Marketing, a VP of Supply Chain and developing a new internal senior leadership role within the company that will focus on leading the legal and compliance functions of the organization. We realize and take very seriously the responsibility that we carry in advocating for responsible balance pain management and we strive for excellence in all facets of the business including corporate and commercial compliance.

Due to the appropriate high level of scrutiny applied to opioids, we are reminded daily of the importance of a strong compliance program and will continue to strive to execute the most comprehensive program possible. Our patients depend on us as there are literally millions of patients in the U.S.

that have exhausted their non-opioid options and rely on companies like Collegium to provide them innovative products such as Xtampza and Nucynta as treatment options that could potentially provide them an opportunity to live as normal life as possible. We are dedicated to ensuring that we live up to this enormous responsibility.

I’ll now turn it over to Joe to provide a commercial update.

Thanks Mike. In the fourth quarter, we generated momentum with Xtampza ER and set the foundation upon which we will accelerate Xtampza ER in 2018.

The strong finish to 2017 was fueled by operational execution and stability. Specific areas of focus were quality message delivery and resource utilization, effective pull through of Xtampza ER’s broad managed-care access including preferred exclusive ER oxycodone position at United healthcare commercial, Humana commercial and Part D and Navitus, and conversion of appropriate Opana ER patients forced to find a replacement therapy.

I would like to highlight the following key accomplishments for the quarter. Grew total prescriptions 37%, Q4 versus Q3, Xtampza ER remains the fastest growing established branded ER opioid.

Added approximately 1600 new prescribers in the fourth quarter, launched to date almost 6900 healthcare providers have prescribed Xtampza ER. Captured approximately 6% of patients forced to convert from Opana ER, secure preferred exclusive extended-release oxycodone access at Optum Medicare Part D, and all Medicare Advantage and select Medicare PDP plans, and improved paid rates in commercial and Part D to 87% and 88% respectively, and significantly expanded pharmacy availability.

In addition to generating momentum with Xtampza ER in the fourth quarter, we began working on phase 1 of the Nucynta franchise integration plan. Phase 1 is focused on transitioning and stabilizing the franchise.

The Nucynta franchise broadens Collegium’s portfolio of meaningfully differentiated products, expands our offering across the pain continuum and has the potential to increase our relevance with all stakeholders. In early February, we conducted a portfolio training event in Phoenix, Arizona.

I can assure you that the Collegium team is excited and prepared to accelerate Xtampza ER and maximize the potential of the Nucynta franchise in 2018. Collegium’s promotion of the Nucynta franchise began on Monday, February 12 and the early feedback has been positive.

I want to take a moment to thank and recognize my colleagues at Collegium for the efforts that they put forth every day and for their commitment to making a positive difference in the lives of people suffering with pain and the communities that we serve. In 2018, the Collegium team will be striving every day to get better, to get stronger at every aspect of what we do.

We are encouraged by but not satisfied with the acceleration we are seeing early on with Xtampza ER. Xtampza ER’s new label, strengthen formulary positions, new preferred exclusive ER oxycodone access at several plans and a significant investment in non personal promotion are the catalyst for acceleration.

I want to now provide an update on Nucynta ER following the disruption and manufacturing at the facility in Puerto Rico caused by hurricane Maria. Nucynta ER prescriptions are being adversely impacted by supply issues early on in 2018.

We believe that when the supply challenges for Nucynta ER are behind us, we will be able to first stabilize and then maximize the potential of the Nucynta franchise. Nucynta ER and Nucynta IR are meaningfully differentiated and well-established products within our target audience of approximately 11,000 healthcare providers.

We are confident in our preparation and have conviction that a laser focus on operational execution is the key to driving growth in 2018. I will now turn the call over to Paul to discuss our fourth quarter financial results.

Thanks, Joe. Good afternoon everyone.

In the fourth quarter, we recorded net product revenue $10.8 million versus $12 million in the third quarter. As discussed on our last earnings call, net product revenue for the third quarter included a one-time increase of $4.4 million as a result of our change to the selling method.

For the year ended December 31, 2017 net revenue was $28.5 versus $1.7 million in 2016. At year end, the average days of inventory on hand and wholesalers was 16 days, which is unchanged from the prior quarter.

Our gross net discount decreased to 53.5% for the fourth quarter from 54.1% in the third quarter. For the year ended December 31, 2017 our growth to net discount was 54.1%.

Similar to 2017, we expect gross to net discount in 2018 to be higher at the beginning of the year and then gradually decrease. This is due to expected higher usage of co-pay cards and a concentration of growth and plans with new exclusive contracts in the early part of the year.

For the fourth quarter 2017, our net loss was $17.4 million compared to $27.6 million for the fourth quarter of 2016 resulting in a net loss per share of $0.54 and $1.02 for 2017, and 2016 quarters respectively. The fourth quarter of 2017 included a one-time impairment charge of $1.8 related to our decision to terminate our license agreement for Onsolis.

As of December 31, our cash balance was $118.7 million, an increase of $11.1 billion from September 30. During the fourth quarter, cash used by operating and investing activities was $13.5 million.

As discussed on our Q3 earnings call, we used our ATM facility in the third quarter and into the fourth quarter. During the fourth quarter, we received net proceeds of approximately $24.9 million.

Based on our current operating plans, we believe that our existing cash resources together with the expected cash in-flows from the commercialization of Xtampza and the Nucynta franchise are sufficient to fund our operations into 2020. I will now turn the call back over to Mike Heffernan .

Thanks, Paul. I will now open it up for questions.

Thanks. So just a couple of quick ones on Xtampza and then one on Nucynta.

ON Xtampza, can you just talk about other contracting opportunities and where you are focusing your energy? I believe you said in the past that you are looking at more regional plans and state blues, so maybe talk about where you are with that?

And then secondly I mean also you can comment on this, but just talk about the cadence or the gross to net, as 2018 progresses, in other words, first quarter versus the rest of the quarters for the year. And then on the center, wanted to get your thoughts on wrapping your abuse-deterrent technology around the molecule, how much of a near-term priority is that, or is the focus at least now going to be just on messaging and fine-tuning that?

Thanks.

Thanks, David. So David, this is Joe.

Thanks for the question; I’ll take the one with regards to managed care on our focus with Xtampza ER. So right now, the first thing I would emphasize is we continue to maintain discipline in our approach of we are interested in contracting for exclusive ER oxycodone opportunities with plans that are willing to NDC block OxyContin.

We will be opportunistic and are continuing to have discussions and you are correct, as we’ve communicated in the past, we are now bringing the strategy from a national perspective setting that landscape to looking specifically from a region and even state perspective where opportunities may exist to remove non-clinical barriers and to enable outflow of prescriptions, so that’s that we are focused on this year.

Great, and David this is Paul. On your gross to net questions, as we move into 2018, we expect to take a little bit more of a portfolio approach to any guidance we give by including the Nucynta franchise in with Xtampza.

But as we look forward, we would expect the products will have a similar gross to net as prior periods and as far as cadence of the decrease I think if you look at 2017 it would be a good surrogate to model from.

And David, this is Mike. With the last question on, where we position our DETERx technology as it relates to Nucynta ER.

As Joe said, our first phase is really to stabilize the existing product and learn what we can about you know additional information about positioning. That being said, tapentadol, the molecule is what we're really interested.

Tapentadol is a novel molecule and the way we position the products with Xtampza has best in class technology around formulation and tapentadol maybe best in class around molecule. So we’ll spend a lot of time as we go into this year and move into next year of understanding how to differentiate the molecule and secondary to that will be – should be considered formulation technology as part of that.

Okay. That’s helpful.

Thank you.

All right. Thanks, David.

Thanks for the question and congratulations on the progress and the year. I guess moving into 2018 scripts have been strong in Q1 for Xtampza and it looks like Nucynta should be accretive during the year.

Without giving formal guidance, can you maybe talk about your need for cash and general thoughts around turning profitable, and give us some sort of idea when this breakpoint should occur?

Hi, Tim this is Paul. So at this point we are really early in the integration of Nucynta, so we are not in a position to really give any more detail guidance than what we did for cash guidance which is existing cash gets us into at least 2020.

I think as we -- we have a little bit more time to integrate Nucynta that we can do a better job pinpointing that, but we are not at that point right now.

Okay, fair enough. And for Nucynta, there with -- hopefully resolution of the supply constraints and manufacturing issues in Puerto Rico, how do you look about restocking that channel in Q1 and Q2.

I assume there’s going to be some lumpiness there?

Yes, Tim this is Mike. So you’re absolutely right.

As we get shipment stack of certain doses that would have been intermittently out, those will need to restock the channel, the channel need to get restock down to the retail level. So you know again what we want to do is make sure that we do that in a way that were not in any way putting more in the channel then needs to be in the channel, so we will manage that very very closely as we get back to normalization in our warehouse level, so that that’s the plan at this point.

Okay and maybe one last one. For the exclusive contracts that you are signing, I guess taking a look at the united contract which I believe was your first exclusive; you know you’re currently at around 40% of your market share.

That’s impressive, but what’s needed to get to 80% and will you ever get 90% to 100% since it is an exclusive contract and there is blocking at the pharmacy level, can you just talk about may be the path to making that truly exclusive?

Yes, so Tim it’s a great question. And what I would say first off to be clear, when we’re giving a market share or the market share you reference, that’s of the overall branded ER basket, so that’s not within the extended release oxycodone.

But your broader point and what we try to do when we look at these opportunities first off, we anticipate when we have these type of opportunities that the conversion phase will occur in the first three to four months from when it is enacted by the plan. From there -- and United, because you referenced that it as a great opportunity, in December of 2016 we had a six share at United.

As we went into the April the market share was just under 30%. So when the conversion occurred you can see that significant pickup from a share perspective.

And then in the rest of the year when you get into the steady-state of the market and capturing those patients who are converting from and IR to an ER that’s the continued growth in the market position as we continue to capture and improve. So we certainly would strive for what it is you put out there in the 80 to 90, but our real focus is operationally making sure that we’re driving awareness around the payer opportunity, most important the asset, so that when physicians make decisions, they are aware of the benefits of Xtampza ER and we believe in doing so we can continue to grow the asset.

Okay. Understood.

Thanks.

Thank you.

Thanks.

Hi. Good evening.

A couple questions on Xtampza. So you launch a new marketing campaign and made an investment in promotion starting in January.

How does the withdrawal of Purdue from the Purdue sales force kind of impact your these plans going forward for the rest of the year?

So, thanks for the question Serge. With regards to the campaign, the first thing I would emphasize the key to it is it’s anchored to the recently approved sNDA and the stronger label, so we’re able to bring that to the marketplace.

Our focus and what we’re setting out operationally to execute really is unchanged and not impacted in any way by Purdue’s decision to walk away from the marketplace in terms of promotion. So we will continue to stay focused on what we can control which is our execution, the delivery of what we believe is a differentiated technology with unique abuse-deterrent properties relative to OxyContin pulling through, the managed-care axis that we have in place and executing the other aspects of our plan such as non-personal promotion.

And the final comment I would make Serge is one of the things that we’re really focused on and feel strong about because of the meaningfully differentiated nature of our portfolio and because of where the science drives us in its potential to make a difference we’re really focused on executing our plan and stepping in to a marketplace where others are choosing to step out.

Okay. And then in terms of payer receptivity to Xtampza, now that you have the label updates and the comparative data, has that changed gross-to-net or will still be 54% this year, but you expect any improvement on that in the future?

Serge, I’ll answer the question on payer receptively and let Paul talk about gross-to-net. And the first thing I would emphasize which what you hit on the thing that is most interesting to payers when we have discussions is the clinical profile of the product of which the approval of the sNDA only furthers to strengthen and drive interest in that story.

The other thing that payers are seeing is when plans put us in this position because of their belief in the technology and product we’re able to deliver from a pull-through perspective. So right now we have the ears of the payers.

We’re in discussions, some of which could potentially be out of cycle implementation in 2018, more likely will be 2019. And the final point I would emphasize is we will continue to be disciplined in our approach of really focusing on those exclusive ER oxycodone access position.

Yes. As far as gross-to-net, I think I’d refer back to my comments earlier about the -- our expectations for the year that gross-to-net discount will be higher in early part of the year because our business is really concentrated in those exclusive contracts.

But as we get more non-contracted business through the year and co-pay cards decrease that's where you'll see gross-to-net come down.

Okay. And then just on Nucynta, given that you inherited the product with significant supply issues, do you expect any modifications to the annual license fee, the 135 million for this year?

Yes. So we – the contract has provisions within it that deal with material supply failure.

We don't think that’s going to be an issue this year as the supply normalizes in the first part of this year. So, we’re confident that we will get supply back to the retail level over the next 30 days or so, and then we'll go from there.

Okay. And then one last one, the FDA issued a non-title letter I think it was a couple weeks ago.

I think it was a pretty minor issue, but can you just tell us what actions you’ve taken and if the FDA is planning anything additional?

Yes. Thanks for the question.

Frankly, it’s an opportunity for growth for us. We believe that we have a very comprehensive compliance program, but it needs to continue to evolve and strengthen.

We’ve responded to the FDA's request and we are 100% committed to following all the OPDP guidance to the letter. And as I mentioned in my opening comments we’ll be adding resources and personnel to make sure that we fulfill this objective.

Thank you.

Hi. Sorry, I’ve been on mute.

Thanks for taking my question guys. And I apologize if some of these have already been asked and answered.

I was off the phone for a bit. First question is on the exclusive contracts with ER oxycodone.

Obviously with a couple of these or three of these starting effectively January 1st, there should be acceleration especially in the first quarter. It would be helpful if you could -- I believe there are eight in total if you could list those?

Okay. Thanks Ed.

This is Joe. So, if you look at we think of the access and what we accomplished last year from two perspectives.

So we have plans in which we had strong access positions that we were able to further strengthen the two that we would put into that pocket or United Healthcare Commercial. There we went from a exclusive third tier product to a preferred second-tier exclusive ER oxycodone which is important especially from a perspective of patient co-pay.

The other one was the Humana D opportunity which we were in the preferred position. They went to the NDC block from an OxyContin perspective at the beginning of the year.

The winds that we added that took effect in either the fourth quarter or beginning of this year were Humana Commercial, Navitus, UPMC Commercial and Part D, Optum Part D and the Medicare Advantage Book of Business and certain PDP, Books of Business, Cigna Commercial and Florida Blue.

Okay. That’s great.

Thank you. And then I believe the last update in discussions I think the last total for your sales reps is about 131 calling on your target of 11,000 physicians, is that still current?

And is there any split among those where they’re focused on one or the other product? Thanks.

So, thanks for the question. This is Joe.

I'll take that. So we’re maintaining the 131 person footprint, and our people are promoting the entire portfolio to the target audience on every call.

And we think that's important because we know that Xtampza ER and Nucynta ER are distinctly position for different types of chronic pain patient and use coming off of different IR products in particular. And then of course Nucynta IR puts us into the acute space, so it’s broadening our offering across the continuum of care.

Okay, great. Thanks Joe for the questions -- the answers.

Two more for Paul if I may. First, the gross margin was about 90% in the quarter.

Is that the something that you think could be more readily maintained consistently? And then finally when do you expect to file 10-K?

Thanks.

Yes. So our 10-K -- take the easiest one first.

Our 10-K should be filed this evening. So there'll be some additional disclosure in there.

And as far as gross margin, as we scale our cost of goods sold comes down and there’s a percentage of net sales. And that's driven by fixed costs and then some other items that won’t scale the same way as our current COGS.

So there’s potential benefit over the course of the next year or two for that as well.

Okay. Do you think it could get meaningfully higher than the 90% you saw on the fourth quarter?

Yes. We’re not providing any specific guidance there.

Just what we’ve said in prior quarters related to COGS.

Got it. Thanks so much.

Appreciate it.

Thanks, Ed.

Thanks for taking the question. I guess I’d like to start maybe with get an update on COL-195 development as well as plans – any plans this year for post-approval requirements on Xtampza?

Yes. This is Mike.

I’ll take those. On post-approval requirements on Xtampza there's a whole host of them as you -- if you read the approval letter for Xtampza.

We won't be reporting those out. Those are normal course type thing, some non-clinical and a whole list of non-clinical obligation.

We also have obligations around surveillance of abuse, misuse and diversion, and we’ll continue that surveillance process. So it’s unlikely that we’ll be making any public announcement about our post-marketing approval obligations unless of course there's an issue which we don't anticipate.

As relates to COL-195, for reminders to people, that’s the hydrocodone product we have done proof-of-concept on that product and with the addition of Nucynta and IR and ER to our portfolio we’ll fully focused on executing on that commercial plan this year. And so we will not be doing any additional development on that product unless of course the market dramatically changes and requires all opioids to be ADF at which point that becomes a lot of more interesting choice.

So, does that mean we should anticipate lower sequentially R&D for the year or you guys still expecting roughly the same levels that you had last year?

I think roughly – you can think if it is roughly the same level. A lot of those items are post-marketing requirements as well.

Sure. So, nothing in a formal sense of a major clinical trial, but just ongoing expenses of associated to those.

On the Joe, I guess on the contracting side you gave a nice example of obviously, the share improvements once those contracts kicked in or at least the example with United Health once the contract kicked in. And I guess one the things a lot of us sort of wondering about is the pace of adoption and sort of the rapid acceleration that we’ve seen here in the first call it half of this first quarter.

I am looking at script data and weekly average it looks like is up 64% compared to the fourth quarter? And based on what you describe United Health, it would suggest that this isn’t everything, there is more there to be done, but I'm just wondering if the experience there with United Health was different in ways for example on [Indiscernible] that cause that to perhaps slower than what we’re seeing in conversion phase now?

So great question, Ken. The way that I would depict it is each of these plans have different nuances.

I don't think any have the complexity of what the organization was dealing with last year in the first quarter with the United Healthcare Commercial dynamic. In addition I think we’re better and more efficient from our pull-through efforts.

Now that being said, I think in general the exclusive ER oxycodone wind you should expect to see conversion occur over the first four months. That being said early on we can see that these plans are performing differently.

So, for example our strongest performers out of the gate in terms of what we’re able to do from a conversion perspective, are Cigna and Florida Blue. The other ones are doing well, but we haven't seen as much of that conversion from OxyContin that we’re seeing in the other.

So, I think in general the learning of four months, thinking of conversion is something to keep in mind and then we get to a steady state, but realize with some of them that four months may start right in January others maybe February March depending upon the nuances within the plan.

Okay. Terrific.

Thank you.

Thanks, Ken.

Thank you. I had a question, I want to follow-up on the question about Purdue last month withdrawing from the market and restructuring their sales force and no longer marketing OxyContin.

Seem like pretty significant news. And I just curious as a management team we surprised by that and then related to that is I know its early, but what sort of impact or what sort of color you’re getting from the field from both physicians, payers and your sales force in terms of them completely exiting the market?

And then related to that I know it's hard to quantify this general question, but what sort of impact might this have on your future business. I assume the view is that it can hurt?

Okay. David, this is Mike.

I’ll take the first part of that and then I’ll turn it to Joe on the feedback. So the question is, were we surprised?

I guess we weren’t surprised that they decreased their sales force and we understand the decision that they made. Again we don't have any insight into all the exact whys and wheres, and we can speculate some of the reasons why they may have done what they did.

But from that perspective I think as Joe said earlier on we really see it as an opportunity, an opportunity for us to step in and take a leadership role with significantly differentiated products. So that’s where we position it, and from a feedback standpoint.

Yes. So David and I would add to the notion also of surprise.

We talked about in past calls this market is one that is complex but not competitive, and in reality we started to see last year Purdue really dialing back their promotional efforts. So I think maybe the formalization and the communication would be a surprise but the actual what was occurring in the marketplace wasn't.

From a feedback perspective from the customer I’ll start with the HCPs. I think they were surprised and to a degree they really are asking us what is our commitment to this marketplace, are we going to continue to be there.

And that's where I made the comment earlier, we feel compelled in fact obligated because of the portfolio of products we have, their meaningful differentiation and the potential they have to make a positive difference for people suffering with pain and in the communities that we serve to step in. And I think with that for us as we think about moving forward it gets to what Mike has focused on his understanding with that notion of stepping in there is a big responsibility to ensure that you're doing things the right way and focusing in on educating physicians in creating awareness around the science associated with the products.

Okay. And then on Nucynta you haven’t had it for that long, but now that you do have the asset, has your internal view on how that product can do this year changed?

And secondly, can you remind us if you decide to opt out of it, when is that decision point or can it be made it any time? And then secondly can you just comment on any recent price increases.

What the gross. What the net to the company is.

And if you've made them would that be it for the year?

Okay. We’ll parse out those questions, David.

I’ll start with the easy one, the price increase. We had an extended price increase at January 1st of 9.9%, on the Nucynta franchise on February 1st of a similar 9.9%.

We haven’t made any additional decisions of whether we will from a go forward standpoint do anything different. And obviously from a strategic standpoint, extended standpoint we wouldn’t talk about that.

So that's the first one. The second question was around the – you said ER whether we think that any differently about that?

From the standpoint of Nucynta IR, we don't think any differently about it. I think the plan has been always the same, stabilized the brand, learn and then figure out how to differentiate going forward as we move into 2019.

We knew about the supply disruption going into the agreement. We built some protections within the agreement around that.

And so we have very good communications with the Depomed team and the [Indiscernible] manufacturing facility around and have visibility on where we are on supply. So as Joe mentioned the prescription have been impacted early on in the year due to supply disruption and we’re going to have to recover on that.

But overall, we still feel very strongly that the Nucynta franchise is going to be accretive to us this year. And as we moved to the year we’ll be able to give a little bit more certainty on where that falls out.

And the last question was around how do we opt out? With after one year we have an opportunity to opt out and with 12 months notice and we pay a $25 million termination fee.

So that’s the provision in the contract.

Okay. Thank you.

Hi. Thanks for taking the questions.

First, wanted to just ask about the Xtampza, some of your contracts you had provisions in there related to dosing and dosing within the recent recommended guidelines. So, can you give a sense of what percentage or how much of the business you’re seeing patients dosing over those guideline levels?

And then secondly you mentioned the cash and you have a runway through 2020, want to get your thoughts about use of cash and you guys thinking of doing other deals for assets like Nucynta and would you be looking at similar structures to what you did with the Nucynta deal or more traditional kind of a licensing deal? Thanks.

So Kevin, this is Joe. I’ll take the question with regards to the risk-based contract that we have in place.

One, we have one of those in place with Cigna on the commercial side of the business. Right now, I think it's too early to give any color in terms of what we’re seeing.

From the dose perspective what I would say is what we see and has been consistent overall in terms of the dose utilization of the product is that 70% of the prescriptions are on the middle to lower doses and we haven't seen any significant shifts of that early on this year.

And Kevin, on the second question regarding use of cash, right now we’re very very focused as we mentioned on execution this year. We are always opportunistic as it relates to BD [ph] opportunities, but that is certainly not the focus of ours right now.

Our primary focus is execution in our cash what we use to execute. Should the right asset come along that is differentiated and consistent with our mission, we would certainly look at it and decide if it made sense at the appropriate time.

Great. Thanks.

Just couple of additional questions on any new developments in the hospital and long-term care segment? And then, in terms of international expansion, did have a filing currently under review in Canada.

Just wanted to see if we should expect an approval there at this year?

So, thanks for the Serge. With regards to the hospital and LTC segments, I don't think there's any noteworthy developments to provide color on.

I would say as we’re seeing the overall performance of Xtampza ER accelerate. We are seeing spillover into the institution and to a lesser degree the long-term care segment.

Relates to the second question on international expansion, I think as you may know we had a very small deal in Korea that is moving forward. And as relates to Canada we have an NDS on file that is under review at the Health Canada.

We also have a lawsuit with Purdue in Canada that we have to work through as part of that process. So it's unclear to us, just based on the way Health Canada operates, but whether that approval will come this year or not.

Okay. Thank you.

Yes. Thanks for the follow-up.

So, these are mostly for Paul. I’m trying to make sure I completely understand the accounting treatment for the Nucynta transaction.

So I’d like to start maybe with the COGS and understanding whether or not this supply disruption in Puerto Rico are going to cause any sort of meaningful durations in the COGS expectations. And to what extent the contracts would have pertained to some protection there.

And then following on with that how should we be thinking about the royalty for the first quarter given that it was only a partial quarter?

Well I’ll take the two questions in reverse order. The royalty will be prorated, so it will be prorated since the deal closed on January 9.

So instead of it being 33.75 million it will be 30 million 750,000 for Q1. As far as COGS and the ER supply issue, there shouldn’t be any of that on COGS related to the Puerto Rican supply issue.

So I wouldn’t expect anything different because of that, it’s simply a matter of when we are able to restart the supply channel.

Okay and then will COGS be buried in SG&A or would you guys break it out as a separate line outside of COGS, but the royalty will it be buried in SG&A or broken under a separate line item?

Yes, we are still working through the details accounting on that, so we don’t have a – that nailed down, so I wouldn’t want to state anything publicly yet.

Okay, all right. Thank you.

Great. Thanks, Tim.

Thank you. Thank you everyone for joining our call today.

And we look forward to providing ongoing updates on our progress. Have a good day.