Collegium Pharmaceutical, Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016; unaudited. Comparative period is Q1 2015. Collegium was a development-stage specialty pharmaceutical company preparing to commercialize its abuse-deterrent opioid product, Xtampza ER. It reported no product revenue in the quarter and had not generated product revenue since 2011.
Financial results and position
| Metric | Q1 2016 | Q1 2015 / comparison |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $4.1 million | $1.4 million |
| Selling, general and administrative expense | $11.5 million | $2.2 million |
| Total operating expenses | $15.6 million | $3.6 million |
| Net loss | $15.7 million | $3.7 million |
| Net cash used in operating activities | $11.5 million | $1.7 million |
| Cash and cash equivalents at period-end | $134.7 million | $95.7 million at Dec. 31, 2015 |
| Total liabilities | $14.6 million | $12.6 million at Dec. 31, 2015 |
| Term loan payable | $6.1 million, including $2.7 million current | $6.8 million at Dec. 31, 2015 |
There were no reported product sales, so revenue-based margins are not meaningful. No cash was used for investing activities. Financing activities provided $50.5 million, primarily from the January 2016 common-stock offering, which generated $51.2 million net proceeds. Cash increased $39.0 million during the quarter. The company reported a $144.7 million accumulated deficit and $121.7 million in shareholders’ equity.
Material changes versus Q1 2015
- Net loss increased by $12.0 million. R&D expense rose $2.6 million, principally from clinical-trial costs, Xtampza manufacturing, and higher personnel costs.
- SG&A expense rose $9.3 million, reflecting increased staffing and stock compensation, launch preparation and marketing, commercialization consulting, professional fees, and insurance.
- Operating cash use increased by $9.8 million, mainly due to the larger net loss, partly offset by working-capital changes.
- Common shares outstanding increased following the January offering of 2.75 million shares at $20 per share. Weighted-average basic shares were 23.1 million in Q1 2016 versus 1.0 million in Q1 2015; the filing notes this affects per-share comparability.
Outlook, risks and unusual items
- FDA approval after quarter-end: On April 26, 2016, the FDA approved Xtampza ER for specified patients requiring around-the-clock, long-term opioid treatment when alternatives are inadequate. The agreed label includes human abuse-potential study information and sprinkle and feeding-tube administration data.
- Management expects continued losses for several years and higher expenses as it launches Xtampza, develops other candidates, builds commercial capabilities, and pursues regulatory approvals. The planned initial sales effort was to target approximately 11,000 physicians using about 120 representatives, alongside a separate institutional sales team.
- Management stated that existing cash was expected to fund operations into early 2018, including the launch and ongoing development, while also cautioning that estimates depend on assumptions and funds could be used sooner. The filing separately states that cash and expected Xtampza inflows were expected to cover requirements for at least twelve months from filing.
- Additional financing may be needed; it may be unavailable on acceptable terms. Further equity could dilute shareholders, while debt could increase fixed obligations and impose restrictive covenants.
- Patent litigation: A Massachusetts court entered judgment for Collegium on three Purdue patents that had supported the 30-month FDA approval stay, lifting that stay. Purdue continued to assert two other patents, neither associated with an FDA-approval stay. The company said it could not meaningfully quantify potential financial effects and intended to defend the claims. The Federal Circuit affirmed invalidity of the three patents in February 2016 and denied rehearing on May 4, 2016.
- Interest-rate exposure was described as immaterial for a 10% immediate rate change, given the short duration and low risk of cash investments. The company reported no off-balance-sheet arrangements and no material change to contractual obligations or previously disclosed risk factors.
Important facts for investors to verify
- Xtampza’s commercial launch timing, uptake, pricing, reimbursement, manufacturing readiness, and resulting cash needs following FDA approval.
- The remaining Purdue patent claims, their potential impact, and any subsequent litigation developments.
- Cash burn against management’s funding estimates, including the stated runway into early 2018 and the assumptions underlying it.
- Future capital requirements and potential dilution or debt restrictions if additional financing is required.
- Per-share comparisons: Q1 2015 basic EPS was reported as positive $0.34 while diluted EPS was negative $0.65, reflecting preferred-stock allocation and conversion accounting; review the filing’s EPS note when comparing periods.