Collegium Pharmaceutical, Inc. — Q3 2015 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2015. Financial statements are unaudited. Collegium was a development-stage specialty pharmaceutical company with no product revenue since 2011.
Financial performance and position
Amounts below are in millions, except per-share data.
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Research and development expense | $3.36 | $5.82 | $6.44 | $12.65 |
| General and administrative expense | $5.91 | $0.69 | $11.03 | $1.69 |
| Total operating expenses | $9.27 | $6.51 | $17.47 | $14.34 |
| Net loss | $(9.36) | $(6.56) | $(17.73) | $(14.45) |
| Net loss per share | $(0.46) | $(7.85) | $(0.94) | $(18.26) |
- Cash and liquidity: Cash and cash equivalents were $105.46 million at September 30, 2015, versus $1.63 million at December 31, 2014. Current assets were $106.33 million and current liabilities $8.60 million, implying working capital of about $97.73 million.
- Cash flow: Operating activities used $12.63 million in the first nine months, compared with $10.38 million in the prior-year period. Investing activities used $0.18 million; financing activities provided $116.63 million. Cash increased by $103.83 million.
- Debt: Term-loan obligations totaled $7.48 million at quarter-end, including $2.67 million current and $4.81 million long-term. The $5.0 million related-party bridge notes had converted to preferred stock earlier in 2015.
- Margins: Not meaningful because the company reported no product revenue. The filing provides no operating margin based on sales.
Material changes versus comparable periods
- Q3 net loss increased by $2.81 million year over year; nine-month net loss increased by $3.28 million.
- R&D expense declined, principally because Xtampza clinical trials completed during 2014. The nine-month decrease was partly offset by higher consulting and manufacturing costs.
- G&A expense rose sharply as the company expanded commercialization preparation, staffing, public-company functions, insurance, and litigation-related legal work.
- Cash rose substantially following the May 2015 IPO, which generated approximately $72.0 million net proceeds, and the March Series D financing, which generated approximately $44.8 million net cash proceeds. Preferred stock converted into common stock in connection with the IPO; the resulting share-count change makes per-share comparisons less directly comparable.
Outlook, developments, and risks
- Xtampza: The FDA granted tentative approval on November 6, 2015, after the quarter-end. The company said the FDA had determined the application met quality, safety, and efficacy standards, but final approval was subject to an automatic stay of up to 30 months due to Purdue Pharma patent litigation. The agreed label, packaging, and risk evaluation and mitigation strategy remained subject to change before final approval.
- Commercial plans and runway: If Xtampza receives final approval, management planned an initial sales effort targeting about 10,000 physicians with approximately 100 representatives, alongside a separate team for institutions serving elderly and other patients with swallowing difficulties. Management estimated existing cash could fund operations into mid-2017, including planned commercialization if approved and other development; this estimate depends on assumptions and is not a guarantee.
- Profitability and funding: Management expected continued losses and higher expenses, including commercialization, manufacturing, development, and public-company costs. The company anticipated needing substantial additional funding; financing may be unavailable or dilutive, and insufficient capital could delay, scale back, or stop programs.
- Litigation: Purdue asserted patent infringement claims concerning Xtampza. The cases shifted among jurisdictions; the Delaware case was transferred to Massachusetts in October 2015. Collegium filed a summary-judgment motion on November 9, 2015. The company said it could not meaningfully quantify the litigation’s financial impact. Litigation may delay final FDA approval and commercialization.
- Other disclosures: The company reported no material changes to previously disclosed risk factors, no off-balance-sheet arrangements, and effective disclosure controls. It stated a 10% interest-rate change would not materially affect the fair value of its short-term, low-risk cash investments.
Important facts for investors to verify
- Current status and timing of Xtampza final FDA approval, including the patent-litigation stay and any changes to the agreed label or REMS.
- Progress and outcome of Purdue litigation, including the summary-judgment motion and potential effects on launch timing and costs.
- Actual cash use, updated runway, and whether additional financing will be required sooner than management estimated.
- Commercialization spending, launch readiness, manufacturing capacity, and the ability to build planned sales and distribution capabilities.
- Future operating expenses and development milestones for Xtampza and other product candidates; the filing provides no revenue or profitability guidance.