Collegium Pharmaceutical, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Amounts below are in millions of dollars unless stated otherwise. Collegium commercializes Xtampza ER, Nucynta IR/ER, Belbuca and Symproic.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Net product revenue | $136.7 | $127.0 | $417.0 | $334.3 |
| Gross profit | $80.3 | $58.8 | $231.5 | $159.7 |
| Gross margin | 58.8% | 46.3% | 55.5% | 47.8% |
| Operating income | $45.0 | $20.5 | $105.3 | $21.6 |
| Net income (loss) | $20.6 | $0.5 | $16.2 | $(17.8) |
| Diluted EPS | $0.53 | $0.01 | $0.46 | $(0.52) |
| Adjusted EBITDA (non-GAAP) | $89.4 | $74.9 | $262.8 | $189.6 |
Q3 revenue rose $9.7 million, led by Belbuca (+$6.6 million) and Nucynta (+$3.1 million); Xtampza increased $0.9 million. Nine-month revenue rose $82.7 million, including the benefit of nine months of Belbuca and Symproic sales versus approximately seven months in 2022 following the BDSI acquisition. Adjusted EBITDA is a company-defined non-GAAP measure and should be considered alongside, not instead of, GAAP results.
Q3 cost of product revenues excluding amortization fell to $20.1 million from $30.6 million, partly because the prior-year quarter included acquired-inventory fair-value step-up costs. Nine-month intangible amortization increased to $111.2 million from $94.0 million, reflecting the longer period of amortization for BDSI-acquired assets. Q3 SG&A declined to $35.3 million from $38.4 million. Nine-month SG&A fell to $126.3 million from $134.2 million, mainly because acquisition costs were lower, partly offset by higher staffing, marketing, legal and regulatory costs.
Cash, liquidity and debt
- At September 30, cash and cash equivalents were $258.5 million and marketable securities were $46.0 million, totaling $304.6 million. Current assets were $537.1 million against current liabilities of $464.6 million.
- For the first nine months, operating cash flow was $201.4 million, versus $57.9 million in 2022. Investing used $45.7 million, including net marketable-security purchases; financing used $72.4 million. Cash, cash equivalents and restricted cash increased $83.3 million.
- Term-loan principal was $458.3 million; convertible-note principal was $267.9 million ($26.4 million due 2026 and $241.5 million due 2029). Total principal was approximately $726.2 million. The term loan carried a 13.2% rate at quarter-end; $183.3 million of principal was due within 12 months.
- Nine-month interest expense was $64.1 million, compared with $42.6 million; interest income increased to $11.3 million from $0.02 million. Management stated available liquidity and expected operating cash inflows should fund operating costs, debt service and capital needs under its current plan for the foreseeable future.
Material changes, outlook and notable items
- Nine-month net income improved from a loss to profit, though results included a $23.5 million debt-extinguishment loss in Q1 and $8.5 million of litigation settlement expense. The debt transaction exchanged new 2029 convertible notes for part of the 2026 notes.
- The variable-rate term loan transitioned from LIBOR to SOFR in July. Management estimated that a 1 percentage-point rate change would alter future annual interest expense by approximately $4.6 million, based on quarter-end principal.
- FDA exclusivity for Nucynta IR was extended through July 3, 2026. The resulting useful-life estimate change reduced Q3 amortization by $1.1 million and increased Q3 net income by $0.9 million.
- No numerical earnings or revenue guidance was provided. Management expects pandemic-era reductions in pain-patient office visits and related access challenges to persist in the near to medium term.
- Collegium repurchased $50 million of shares under an accelerated repurchase arrangement; an additional 462,442 shares were received in October to complete settlement. In November, the board authorized another $25 million accelerated repurchase within the existing program.
Risks and contingencies
- Significant risks include commercial demand, opioid regulation and public scrutiny, reimbursement and pricing pressure, competition and generic entry, product supply and dependence on limited manufacturers, customer concentration, and substantial debt with variable-rate exposure.
- Three wholesale distributors represented more than 90% of product shipments. The filing also describes past disruptions in processing product returns and short-paid receivables.
- Patent disputes include Purdue litigation concerning Xtampza ER and Nucynta, and generic-challenge litigation concerning Belbuca. The company said it could not estimate the likelihood or range of loss for certain pending cases. Opioid-related state investigations remain open; Collegium reports cooperation with authorities and an Assurance of Discontinuance with Massachusetts.
- Management reported disclosure controls were effective as of September 30, 2023, and no material change in internal control over financial reporting during the quarter.
Investor verification priorities
- Track product-level sales, gross-to-net deductions and whether Belbuca and other acquired-product growth is sustained.
- Review term-loan amortization, the 13.2% quarter-end rate, covenant compliance and the capacity to meet near-term principal payments.
- Assess cash generation after working-capital movements, share repurchases, taxes and debt service; compare GAAP results with non-GAAP adjustments.
- Monitor generic-entry and patent-litigation developments, opioid investigations, distributor return processing and concentration, and supply continuity.
- Confirm the impact of the Nucynta exclusivity extension and subsequent repurchase activity in later filings.