Collegium Pharmaceutical, Inc. — Q2 2016 Form 10-Q
Reporting period: Three and six months ended June 30, 2016. Unaudited financial figures below are in millions of dollars unless otherwise indicated. Collegium is a specialty pharmaceutical company developing and commercializing abuse-deterrent medicines using its DETERx technology.
Business context and developments
- The FDA approved Xtampza ER, an extended-release oxycodone product, on April 26, 2016; Collegium announced its commercial launch on June 20.
- In May, Collegium licensed U.S. rights to ONSOLIS from BioDelivery Sciences International (BDSI). Subject to FDA approval of a manufacturing-transfer supplement, the company expected a launch in the second half of 2017.
- Collegium had not yet recognized product revenue. It said it lacked sufficient historical returns data to estimate product returns and would defer revenue until the recognition criteria, including market acceptance, were met.
Financial performance
| Metric | Q2 2016 | Q2 2015 | Six months 2016 | Six months 2015 |
|---|---|---|---|---|
| Revenue | None recognized | None reported | None recognized | None reported |
| Research and development expense | $4.3 | $1.6 | $8.4 | $3.1 |
| Selling, general and administrative expense | $20.2 | $2.9 | $31.7 | $5.1 |
| Total operating expenses | $24.5 | $4.6 | $40.1 | $8.2 |
| Net loss | $(24.5) | $(4.7) | $(40.2) | $(8.4) |
| Basic and diluted loss per share | $(1.05) | $(0.45) | $(1.73) | $(0.18) |
Margins are not meaningful because no product revenue was recognized. Q2 net interest expense was $46,000; six-month net interest expense was $111,000.
- Six-month R&D expense rose $5.3 million, primarily from clinical-trial costs, increased staffing and Xtampza manufacturing. Six-month SG&A rose $26.6 million, primarily from launch preparation, sales and marketing, and an increase in employees from 12 to 208.
- Advertising and product-promotion expense was $4.7 million in Q2 and $7.0 million for the first six months.
- Common shares outstanding were 23.5 million at June 30, versus 20.7 million at December 31, 2015. The January 2016 public offering generated $51.2 million net proceeds.
Cash, debt and liquidity
| Metric | June 30, 2016 | December 31, 2015 |
|---|---|---|
| Cash and cash equivalents | $110.7 | $95.7 |
| Total assets | $119.7 | $97.7 |
| Total liabilities | $21.1 | $12.6 |
| Term loan payable | $5.5 | $6.8 |
| Accumulated deficit | $(169.2) | $(129.0) |
For the six months, operating cash use was $32.4 million, investing cash use was $2.5 million, and financing provided $49.9 million; cash increased by $15.1 million. Investing outflow included the $2.5 million ONSOLIS license payment. Operating cash use increased substantially from $6.1 million in the prior-year period.
Management expected continuing losses and higher spending as commercialization and development proceed. It said existing cash was expected to fund operations into early 2018, while also stating it believed resources would cover expenses, debt service and capital needs for at least 12 months from the filing date. These are estimates dependent on assumptions; the filing provides no quantified sales or profitability guidance.
Outlook, risks and unusual items
- Collegium planned to detail Xtampza to about 11,000 physicians using a sales force of approximately 120 representatives, with a separate focused team for institutions serving elderly patients and others with swallowing difficulties.
- The ONSOLIS agreement includes potential milestone payments totaling up to $21 million, including $4 million upon first U.S. commercial sale; royalties in the upper teens on U.S. net sales; and reimbursement of BDSI manufacturing-transfer expenses up to $2 million.
- Xtampza supply depends on a sole contract manufacturer and a sole active-ingredient supplier. The company identified alternatives but said qualifying them would take time and incur costs.
- Purdue Pharma’s claims involving three Orange Book-listed patents were dismissed with prejudice, lifting the 30-month FDA approval stay. Purdue continued to assert infringement of two other patents; the company could not meaningfully quantify the litigation’s potential financial impact.
- FDA approval carries post-marketing study requirements, and Xtampza is subject to opioid REMS requirements. Other key risks include market acceptance, reimbursement, opioid-related regulatory or policy changes, competition, clinical-development outcomes, and the need for additional capital.
- Collegium reported that disclosure controls and procedures were effective as of June 30, 2016, and that no material change in internal control over financial reporting occurred during the quarter.
Investor facts to verify
- Track Xtampza prescriptions, net recognized revenue, returns estimates and market acceptance after launch.
- Compare operating cash burn and commercial spending with the stated cash runway; assess whether further financing may be needed.
- Monitor resolution of Purdue’s remaining patent claims and any effect on commercialization.
- Confirm FDA post-marketing obligations, manufacturing-transfer progress for ONSOLIS, and related milestone, reimbursement and royalty exposure.
- Assess continuity of Xtampza supply and the company’s ability to maintain adequate manufacturing capacity.