Collegium Pharmaceutical, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The filing also reports unaudited quarterly results, including fourth-quarter 2023. All financial figures below are in U.S. dollars; dollar amounts are millions unless stated otherwise.
Business context
Collegium commercializes five U.S. specialty pharmaceutical products: Xtampza ER, Nucynta ER, Nucynta IR, Belbuca, and Symproic. Its portfolio is concentrated in pain treatments, including opioid products; Symproic treats opioid-induced constipation. The company relies on contract manufacturers, limited API suppliers, and wholesale distributors. It reported 197 employees at December 2023.
Financial performance and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Net product revenue | $566.8 | $463.9 |
| Gross profit / gross margin | $326.2 / 57.5% | $209.5 / 45.2% |
| Operating income / operating margin | $167.0 / 29.5% | $33.3 / 7.2% |
| Net income (loss) | $48.2 | ($25.0) |
| Diluted GAAP EPS | $1.29 | ($0.74) |
| Cash from operating activities | $274.7 | $124.2 |
| Cash and cash equivalents at year-end | $238.9 | $173.7 |
2023 revenue grew 22.2%. Belbuca contributed $182.1 million, Xtampza ER $177.4 million, Nucynta IR $108.2 million, Nucynta ER $82.7 million, and Symproic $16.5 million. Belbuca and Symproic benefited from a full year of sales following the 2022 BDSI acquisition. Xtampza’s increase reflected higher gross price and lower rebate provisions, partly offset by lower volume and higher return provisions.
Fourth-quarter 2023 revenue was $149.7 million, gross profit $94.6 million, operating income $61.7 million, and net income $31.9 million. Fourth-quarter gross, operating, and net margins were approximately 63.2%, 41.2%, and 21.3%, respectively. Revenue was $129.6 million and net loss $7.2 million in fourth-quarter 2022.
Cost of product revenues excluding intangible amortization declined to $94.8 million from $118.2 million, while intangible amortization and impairment expense was $145.8 million, up from $136.3 million. SG&A declined to $159.2 million from $172.2 million, principally due to lower acquisition-related costs; 2023 included an $8.5 million Belbuca-related litigation settlement. Research and development expense was zero as the company shifted to a commercial-product focus.
Interest expense rose to $83.3 million from $63.2 million, reflecting the acquisition term loan, higher variable rates, and the 2029 notes. Interest income increased to $15.6 million. A $23.5 million loss on extinguishment resulted from repurchasing part of the 2026 convertible notes. The effective tax rate was 36.4%, versus 13.3% in 2022.
Year-end current assets were $537.6 million and current liabilities $457.9 million, a current ratio of about 1.17. Cash, cash equivalents, and marketable securities totaled approximately $310.5 million. Outstanding principal was $412.5 million on the secured term loan and $267.9 million on convertible notes, or approximately $680.4 million total. The term loan carried a 13.2% contractual rate at year-end, with $183.3 million of principal due in 2024. The company estimates a 1% rate change would alter annual interest expense by about $4.1 million.
Non-GAAP adjusted EBITDA was $367.0 million, compared with $266.0 million; adjusted net income was $223.3 million and adjusted EPS $5.47, compared with $152.7 million and $3.96. These measures exclude substantial items, including amortization, stock compensation, and debt-extinguishment costs, and are not substitutes for GAAP results.
Material changes and capital allocation
- Revenue growth and improved gross profit drove the return to GAAP profitability. Belbuca and Symproic benefited from full-year contribution; acquisition-related SG&A declined.
- Operating cash flow more than doubled. Investing cash use fell substantially because 2022 included the BDSI acquisition; 2023 investing activity included purchases and maturities of marketable securities.
- In February 2023, Collegium issued $241.5 million of 2.875% convertible notes due 2029 and repurchased $117.4 million principal of 2026 notes for cash, recording the $23.5 million extinguishment loss.
- The company repurchased $75.0 million of shares in 2023. In January 2024, it authorized a new repurchase program of up to $150 million through June 30, 2025.
Outlook, risks, and contingencies
The filing provides no quantitative revenue or earnings guidance. Management stated that year-end cash, cash equivalents, marketable securities, and expected operating cash inflows should fund operating expenses, debt service, and capital needs for the foreseeable future under its current plan. Significant scheduled debt repayments, variable-rate exposure, and the potential share-repurchase program remain important uses of capital.
- Commercial and policy exposure: Results depend heavily on continued acceptance, reimbursement, pricing, and sales of a concentrated portfolio of opioid-related products. Opioid regulation, prescribing trends, REMS requirements, generic competition, and drug-pricing reforms could pressure demand, pricing, or costs.
- Concentration and supply: Three customers represented approximately 97% of 2023 revenue; three wholesale distributors accounted for more than 90% of product shipments. The company relies on sole or limited API suppliers and contract manufacturers, including Patheon for Xtampza ER and Nucynta ER.
- Debt and liquidity: The secured term loan is high-cost, floating-rate debt secured by substantially all company assets and subject to covenants. Convertible notes may require cash repurchase upon specified events and may dilute shareholders if converted.
- Litigation and investigations: Patent litigation involving Xtampza ER remains pending against Purdue; the company says it cannot estimate the likelihood or range of loss. Belbuca generic-related litigation also continues. The company is cooperating with state investigations of opioid sales and marketing. It previously paid $2.75 million to resolve 27 opioid-related cases and entered an Assurance of Discontinuance with Massachusetts.
- Other notable items: The $8.5 million Aquestive settlement resolved Belbuca and Bunavail patent disputes. Revenue estimates depend on rebates, returns, and other deductions; the auditor identified the product-return liability as a critical audit matter. Management and the auditor reported effective internal controls, and the financial-statement audit opinion was unqualified.
Most important facts for investors to verify
- Whether revenue growth and margins are sustainable, particularly for Belbuca and Xtampza ER, and how volume, pricing, rebates, and returns evolve.
- Cash generation against the $183.3 million term-loan principal due in 2024, the 13.2% contractual loan rate, and total debt of approximately $680.4 million.
- Product-return and rebate accrual assumptions, including the $77.5 million year-end product-return provision and the auditor’s critical audit matter.
- Developments in Purdue and Belbuca generic patent cases, state opioid investigations, and any resulting financial or commercial effects.
- Customer and distributor concentration, manufacturing continuity, and access to controlled-substance quotas and API supply.
- Actual use of the new $150 million repurchase authorization and its effect on liquidity, debt repayment capacity, and share count.