BioDelivery Sciences International, Inc. (BDSI) on Q2 2021 Results - Earnings Call Transcript
Operator: Greetings. Welcome to BioDelivery Sciences Second Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to Terry Coelho, Executive Vice President and Chief Financial Officer. Thank you. You may begin.
Terry Coelho: Thank you, and good morning, everyone. Welcome to our second quarter 2021 earnings conference call. Leading the call today is Jeff Bailey, Chief Executive Officer. We are joined by Scott Plesha, President and Chief Commercial Officer. Following our prepared remarks, we will conduct a question-and-answer session. Earlier today, BioDelivery Sciences issued two press releases announcing its financial results for the second quarter 2021 and the acquisition of ELYXYB. A copy of the releases can be found on the Investor Relations page of the company’s website. Before we begin, I would like to remind everyone that certain statements may be made during this call, which may contain forward-looking statements. Such forward-looking statements are based upon current expectations and there can be no assurances that the results contemplated in these statements will be realized. Actual results may differ materially from such statements due to a number of factors and risks, some of which are identified in our press release and our annual, quarterly and other reports filed with the SEC. These forward-looking statements are based on information available to BDSI today, August 4, 2021, and the company assumes no obligation to update statements as circumstances change. An audio recording and a presentation that accompanies our prepared remarks and broadcast replay for today’s conference call will also be available online in the Investors section of the company’s website. With that, I’d like to turn the call over to Jeff Bailey, our CEO. Jeff?
Jeff Bailey: Thank you very much, Terry, and welcome, everyone, to our company’s second quarter 2021 earnings call. Our business remains strong as our team continues to manage the business very well and our brands remain on a strong trajectory for growth. There are three main takeaways I want to cover today. Number one, our overall business remained robust in the second quarter, with net sales growing 13% year-over-year, including BELBUCA total prescription volume growth growing at 11% year-over-year. The net sales growth was aided by increasing face-to-face interactions between sales representatives and prescribers that resulted in an all-time high BELBUCA total prescription market share in the second quarter of 4.7%, complemented by an all-time high and unique BELBUCA prescribers of 8,345, which is an increase of 11% year-over-year. This increase in BELBUCA prescribers will serve us very well to drive continued strong growth as the long-acting opioid market normalizes with an expected improvement of in-person patient visits. Despite the softness of long-acting opioid market during COVID, we remain encouraged that the LAO market grew slightly by 19,000 prescriptions a quarter-over-quarter in the second quarter of 2021. The first time the LAO market grew in quite some time, which gives us optimism going forward. Key takeaway number two, through a combination of solid execution and prudent management and prioritization of operating expenses, we continue to strengthen our balance sheet, ending the quarter with approximately $120 million in cash. In the second quarter, we generated $13.1 million in EBITDA, with an attractive 32% EBITDA margin. This was accompanied by approximately $9.2 million in operating cash flow generation or $12 million excluding litigation costs, which enables us to invest in the future growth of our business in a maximize shareholder value through careful and strategic business development. The third and final key takeaway, I am pleased to announce the acquisition of the U.S. and Canadian rights to ELYXYB. The first and what we see is a series of steps to build a growth platform in neurology. ELYXYB represents an excellent strategic fit for BDSI and an attractive opportunity to diversify our product portfolio by expanding into the dynamic migraine market, deepening our presence in neurology and logical adjacency to our pain franchise. ELYXYB is the only ready-to-use oral solution approved by the FDA for the treatment of acute migraine with or without aura in adults. It has intellectual property protection into 2036. For the planned first quarter 2022 launch, ELYXYB will participate in a substantial growing and evolving migraine market. It is anticipated to drive the company’s revenue growth and shareholder value while leveraging much of our existing infrastructure. A few of the highlights I’m going to share with you, the molecule celecoxib is well known and ELYXYB is in a differentiated formulation that delivered meaningful speed of onset in clinical trials, with Tmax achieved in approximately 60 minutes. Additionally, in the two pivotal studies conducted, the percentage of patients achieving MBS or Most Bothersome Symptom freedom at two hours post-dose was significantly greater among patients receiving ELYXYB, compared to those receiving placebo. In Study 2, the percentage of patients achieving headache pain freedom two hours post-dose was significantly greater among patients receiving ELYXYB, compared to those receiving placebo. The acquisition of ELYXYB leverages our existing infrastructure, it will benefit for our team strong track record of commercial launch success, as well as our medical affairs team’s expertise in the migraine space. The agreement has attractive terms and is estimated to be a creative within the approximate 24 months from commercial launch, which is anticipated to be in the first quarter of 2022. Importantly, we will be working on various ELYXYB expansion opportunities, including a potential label expansion for the treatment of acute migraine in pediatric patients and additional potential indications for the treatment of acute pain and commercialization in Canada. We anticipate the deal will close in late Q3 or early Q4, much more to follow at a BDSI/ELYXYB Investor Day which we expect to take place early in the fourth quarter. Before I turn over to Scott, I wanted to provide you with a brief legal update. As we share at our first quarter earnings call, our three-day bench trial with Alvogen related to their BELBUCA Paragraph IV patent challenge concluded on March the 3rd. Post-trial briefs from the parties were completed on May the 26th. BDSI subsequently requested that the court strike three patent invalidity defenses raised for the first time by Alvogen in its post-trial briefs, as well as two documents that Alvogen improperly cited. On June 28th, the court agreed with arguments and granted the copies motion to strike in its entirety, and moreover, enjoyed Alvogen from launching a generic product pending the trial court’s decision on its merits. We are pleased with the latest developments in the litigation and remain very confident the strength of our IP. In spite of these directionally positive rulings, we can neither predicted decision the court will reach nor the timing of the court’s decision. We are not able to comment further regarding the ongoing litigation. With that, I will turn the call over to Scott to provide more details of our performance during the second quarter. Scott?
Scott Plesha: Thank you, Jeff. As Jeff mentioned, during Q2 BELBUCA prescriptions grew by almost 12,000 TRxs year-over-year to over 118,700 retail, mail order and long-term care TRxs combined. This represents a solid 11.1% increase in BELBUCA TRxs compared to the second quarter of 2020, sequential growth of 5.3% compared to the first quarter of 2021 BELBUCA prescriptions grew year-over-year and quarter-over-quarter despite a relatively flat long-acting opiate market in the second quarter. The LAO market has been pressured by lower clinic staffing and fewer in-person patient visits, which in Q2 according to IQVIA were down 36% in pain practices compared to pre-COVID levels, in contrast to visits for all their specialties, which have recovered to near pre-pandemic levels. We remain pleased with BELBUCA’s continued revenue and script growth, and its rebound in Q2 to new TRx market share high of 4.7%, up from 3.8% in Q2 2020 and 4.5% in Q1 2021. During the second quarter BELBUCA new-to-brand market share of 7.7%, grew by 1% from 6.7% in the first quarter, remained significantly above its TRx share of 4.7%, which means there’s still a meaningful opportunity to grow total prescription share, as these metrics historically converge. Importantly, BELBUCA saw an NBRx count increase of 9.3% from Q2 2020 to the most recent quarter and an increase of 4.4% from Q1 to Q2 of 2021, while the NBRx count for the entire market was down 8.2%. It is now our third consecutive quarter since we implemented the first start NBRx program. This program was intended to enable healthcare providers to efficiently prescribe BELBUCA to appropriate commercial patients for the first time by providing convenient access to BELBUCA, while the HCPs staff is securing prior authorization approval. First start has been an extremely useful tool generating a 29% lift in NBRx and a 16% lift in TRxs in those HCPs participating in the program. We continue to monitor the impact of this initiative and anticipate keeping it in place to the end of 2021. Continuing to build BELBUCA’s prescriber base is important to the brand’s growth trajectory. We are pleased to report that vehicle prescribers increased in second quarter by 11% year-over-year to 8,345 unique prescribers, a new high for the brand. Sequentially, our prescribers also grew by 4.5% for the first quarter. We view this growth as extremely encouraging and expect our prescriber growth to have an increased impact as face-to-face patient visits improve over time within pain practices. Our market access with BELBUCA has reached attractive levels. BELBUCA currently enjoys strong commercial coverage with 90% of live covered, of which 60% are covered at a preferred level, while in Medicare BELBUCA is covered in 33% of lives. This level of coverage provides a significant opportunity for growth, which is supported by our consistent year-over-year TRx growth across all payer types and new Q2 TRx highs for both commercial and Medicaid payers. We remain committed to improving access to BELBUCA, while balancing payer coverage and rebate levels, especially in Medicare. Symproic Q2 2021 prescriptions grew to approximately 18,000 or an increase of 3% year-over-year compared to Q2 2020, with a 7% sequential rebound from Q1 2021. We expect continued growth for Symproic as our NRx count increased 7.6% to 10,715 during Q2, a new NRx count high for the brand. Symproic NRx share increased to 13.8% in second quarter. Like BELBUCA, Symproic is well positioned with covered status for 89% of commercial lives, with 60% at preferred status. As we stated during our Q1 call, the PAMORA market historically declines in Q1 before rebounding the remainder of the year. The PAMORA markets rebound during Q2 played a role in some products renewed growth in the quarter, as well as the brands 26% quarter-over-quarter increase in Prime therapeutics, a plan that improves Symproic coverage during 2020. The BDSI sales force have done outstanding job pulling through formulary wins and we expect to reach new TRx count and share highs throughout the year. As Jeff mentioned, we are very excited to be adding a clinically important product like ELYXYB to our portfolio. The acquisition of this commercially-ready product provides another avenue for growth as a logical adjacency to our pain franchise. Moreover, it leverages our commercial expertise, much of our existing infrastructure and our team’s extensive experience with product launches. I’m confident based on our team’s proven track record that we’ll be able to execute a successful launch in Q1 of 2022. Certainly we remain focused on our current portfolio, believe we are well-positioned for a strong second half of 2021 and beyond. With that, I’ll turn the call over to Terry to provide an update on the financials. Terry?
Terry Coelho: Thank you, Scott. Total net revenue for the second quarter was $41.4 million, an increase of 13%, compared to $36.6 million in the second quarter of 2020 and modestly above the net revenue generated in Q1 of 2021. BELBUCA net sales in the second quarter of 2021 were an all-time high of $36.5 million, an increase of 13%, compared to $32.3 million in the second quarter of 2020 and modestly above the first quarter of 2021. As expected, BELBUCA gross-to-net deductions increase in the second quarter as compared to the first quarter of 2021, primarily due to typical increases seen for Medicare coverage gap, as well as Q1 having included a one-time gross-to-net benefit related to Medicaid accruals. Net sales for Symproic in the second quarter of 2021 were $4 million, which reflects 18% growth year-over-year and a decreased of 9% compared to the first quarter of 2021. As expected, Symproic gross-to-net deductions increased in the second quarter due to the typical increases seen for Medicare coverage gap, as well as Q1 having included the benefit of a one-time update to our gross-to-net channel estimates. Total gross margin for the second quarter was 90%, compared to 85% margin during the second quarter of 2020 and 86% margin during the first quarter of 2021. Gross margin in the quarter benefited from reduced cost of goods due to the impact of a $1.4 million recovery associated with previously reserved inventory. We expect to return to our more typical gross margin range in the mid-80%s going forward. Total operating expenses in the second quarter of 2021 were $25.8 million, compared to $28.2 million in the second quarter of 2020 and $27.8 million in Q1 of 2021. Year-to-date 2021, operating expenses include higher litigation costs associated with the P4 case. As always, we continue to closely manage and prioritize operating expenses. GAAP net income for the second quarter was $9.1 million or $0.09 per share, an increase of $7.9 million when compared to the GAAP net income of $1.2 million in the second quarter of 2020 and an increase of $3.8 million when compared to GAAP net income of $5.2 million or $0.04 per share in the first quarter of 2021. EBITDA in Q2 2021 was $13.1 million or 32% of net sales, compared with $5.1 million or 14% of net sales in Q2 2020 and $9.2 million or 22% of net sales in the first quarter of 2021. Non-GAAP net income for the second quarter of 2021 was $12.5 million or $0.12 per share and reflects GAAP net income excluding stock-based compensation and non-cash amortization of intangible assets, as compared to non-GAAP net income of $9.6 million or $0.09 per share in the second quarter of 2020, excluding the same items, as well as excluding the one-time impact of the CEO transition in that period and certain costs associated with the discontinuation of BUNAVAIL. Year-to-date, non-GAAP net income through June 30, 2021, is $21 million or $0.20 per share. The company has a strong balance sheet, with cash and cash equivalents as of June 30, 2021, of $119.9 million, as compared to $111.6 million a year in 2020. Operating cash flow generation of $9.2 million in the second quarter was partially offset by $5.8 million used to repurchase shares, resulting in a net increase in cash on hand of $3.4 million over the first quarter of 2021. Our share buyback program was initiated late in the fourth quarter of 2020 and we have repurchased approximately 3.3 million shares through Q2 2021 at an average price of $3.70. The $12.1 million in share repurchases to-date represents 48% of the total authorized amount of $25 million. This reflects the continued confidence of the Board and the management team in the strength and value of our business. While we are maintaining our full year 2021 total net revenue guidance range of $170 million to $180 million, after our observation of the slower than expected normalization of the commercial environment in the LAO market this past quarter, we expect net sales in 2021 for BELBUCA to be at the lower end of the revenue guidance range of $155 million to $165 million. As previously discussed, these estimates incorporate the impact in Q1 from the winter storms. We continue to estimate our total operating expenses for the ongoing business to be in the range of $115 million to $120 million. Additionally, EBITDA remains on track to be in the $40 million to $50 million range in 2021 for the ongoing business. The company expects to deliver positive operating cash flow in 2021. ELYXYB will be acquired from Dr. Reddy’s for an upfront payment of $6 million, along with an additional $9 million on August 3, 2022, a modest one-time sales milestones ranging from $4 million upon achievement of $50 million in net sales of ELYXYB up to $100 million upon achievement of $1 billion in net sales. BDSI will make tiered quarterly earn out payments on net sales with rates ranging from the high-single digits to the low-double digits. The closing of the transaction is subject to satisfactory completion of customary closing conditions, including the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act or HSR Act. With these attractive terms for the acquisition of ELYXYB, this transaction allows the company to maintain its strong cash position, and retain financial and strategic flexibility going forward. The company will share any updates to its guidance as a result of the ELYXYB acquisition at a future date. I will now turn the call back to Jeff for some concluding remarks before we open up the call for Q&A. Jeff?
Jeff Bailey: Thank you, Terry. I want to take a moment to thank our employees for their continued dedication and driving results. As a result, the entire team’s contributions and our continued success with BELBUCA and Symproic, we’ve been able to take this important next step to establish a growth platform within neurology. ELYXYB is the ideal assets to form the foundation for future growth and diversification. We are very excited about this next chapter for patients, healthcare providers, BDSI and our shareholders. We will now take your questions. Operator?
Operator: Thank you. Our first question is from Brandon Folkes with Cantor Fitzgerald. Please proceed.
Brandon Folkes: Hi. Thanks for taking my question and congratulations on the quarter and acquisition. Maybe, firstly, let’s go on to the ELYXYB acquisition hasn’t closed. But I heard that, you’re going to be working on a label expansion there. It’s very encouraging to hear. So just maybe on a high level, is this a shift in your view towards R&D at all? And then, maybe secondly, I’ll just ask my both questions up front here, if you don’t mind, in terms of patient demand and funnel for both BELBUCA and Symproic, are you assuming the recovery happens in some sort of kind of bolus rebound later in the year in terms of your guidance and -- or do you think it’s a more measured return of these patients may go over a longer sort of 12-month to 18-month contract? Thank you very much.
Jeff Bailey: Hi, Brandon. It’s is Jeff. How are you doing today?
Brandon Folkes: Good. Thanks, Jeff.
Jeff Bailey: Okay. So when we take a look at ELYXYB, sorry, I am going to take your second question first here. Let me just tackle that one. So, when you take a look at the growth coming back with the markets what we see happening, we do see this as a measured growth. So just want to make sure that we put that out there that we see this is a gradual growth coming back for both BELBUCA and Symproic. The LAO market has been slowed during the pandemic and that’s something that really came into play. But we do see this as a gradual improvement. We’re really encouraged by the second quarter as far as what happened in the LAO market. So gradual and we have good optimism of that. And the first question, could you repeat the first part of your question, you cut out on my end a bit too, when you came to ELYXYB? So I apologize for asking that part of it.
Brandon Folkes: Sure. No problem. And I think you mentioned you’re going to pursue label expansion work on ELYXYB. Just, historically, BDSI has been a commercial execution company with almost no R&D. So just in terms of this label expansion, is that sort of the first glimpse into maybe a changing view on R&D longer term for the company strategically, just any color around your longer term view with R&D, that would be great? Thank you.
Jeff Bailey: I got it. Yeah. No. That’s a great question. So, label expansion we’re primarily focused on is certainly as that pediatrics and somewhere that’s an unmet need and it’s something that, it also is required as part of this as well. So it goes perfectly hand-in-hand. So it’s one where sort of FDA requirement, but it’s also one where you’re basically looking at the data and the need for the pediatric community to really be observed. It’s a great opportunity. I wouldn’t view it necessarily as that we’re getting deep into the development end of the world on that end. This is one where our -- this is the next logical step for ELYXYB and making sure that we really nail this part of it. So it’s really about a great market opportunity. As far as down the road goes, it’s one where, this is really a great next step for us deepening our focus into neurology, which we’re really excited about this, really aligns to the strategy that we laid out over time here. But as far as right now just really focusing on executing ELYXYB, this additional label with pediatric. We also had some optionality as far as it goes also for acute pain down the road. But that’s something that we’ll just assess as we keep going with ELYXYB, because we have so much more potential to go after here with ELYXYB, with migraine and adults as our first step. And then next step, obviously, we’ll make sure that we do our work on pediatrics, because we see that as a really a great unmet need. The ELYXYB profile fits very, very nicely. So, hopefully, I answered your question, Brandon.
Brandon Folkes: No. You did. Thanks very much, Jeff, and congratulations again.
Jeff Bailey: Yeah. Thank you.
Operator: Our next question is from Greg Fraser with Truist Securities. Please proceed.
Greg Fraser: Good morning, folks, and thanks for taking the questions. On the chronic pain market recovery, do you think the slower than expected rebound is tied to the Delta variant cases picking up in certain areas, are there other factors at work?
Jeff Bailey: Scott, do you want to go ahead and take that one?
Scott Plesha: Yeah. Great. Thanks, Greg, for the question. Just a little bit of what we’re seeing out in the marketplace. I guess, to give you background is kind of at the peak of COVID, there was a lot of downsizing that occurred in the pain practices, a lot of staffing, reductions, and specifically, we saw a lot of satellite offices closing as well. And as you can imagine, we’re constantly pulling our team and getting qualitative feedback from them on this. And we see that and then when we go back and triangulate that feedback with the data that we share with IQVIA in my prepared comments, where there’s patients visits are down quite a bit in pain still. We see in the mid-30s, where the face-to-face patient visits are down within pain and that’s with mid-levels and HCP up doctors. And while there is a little bit more telemedicine occurring right now. It still leaves a gap of about 20% and mid-20s. So what we know in the pain space also is that doctors and mid-levels are less likely to make changes to patients’ treatment regimens and what’s there in front of them, without a bears out across all specialties that NBRx are not as productive via telemedicine. So it’s really about -- I think about staffing, trying to staff up. I think we’re hearing across a lot of sectors challenges in hiring. I think that bearing out in the space. They’re just not able to open up these satellites as readily as possible. We’re encouraged. We’re starting to see them open up and we’re getting access in some offices. We haven’t seen maybe in a year sometimes. So we feel like things are going improving. And the market itself was up 0.8%, which is the first time in many, many quarters that the market was up, the LAO market. But I think even with that being stabilized without patient visits kind of coming back completely, I think it leaves a little bit of a divot. Hopefully that’s helpful.
Greg Fraser: Right. Yes. That’s very helpful. Thank you. On the new aspect, can you help us understand where you see the oral solution fitting into the acute migraine sort of treatment paradigm and how you’re thinking about sales potential?
Jeff Bailey: We see it’s really fitting, obviously, it’s a key part of our diligence as far as that, is something that is really super clear to everybody that we go in eyes wide open into this market. It’s a very big market, over 13 million migraine patients growing 5% annually. But there’s a lot of noise, with the CGRP is out there, direct-to-consumer advertising, all that noise, which actually, in many ways benefits us, because there’s just a lot of activity as far as when it comes to patient, physicians making decisions on patients play through. But the fact that we are truly at this point differentiation, the state is really important one. We’re the only FDA approved ready-to-use oral solution, the treatment of acute migraine in adults that it really positions us quite well. Because what we do see is that from our market research that physicians are looking for different mechanisms of action, being a crutch to differentiates us from that way and also a lot of our delivery to be an oral solution with the bioavailability of the clinical profile that we see playing out really makes a big difference on that end. I also just want to share, hey, Greg, with your question a little farther a part of that, the experience of our team and I think that helped me to really for us to be able to put our head around where this fits into the marketplace that, I’d be remiss if I didn’t talk with the experienced team. If you take a look at the leadership team here, we have experience of 42 product launches, eight are in neuro and five of migraine. A couple of examples that we have leadership on the commercial team has experienced in migraine. Also our Chief Medical Officer, Tom Smith, he’s a headache and migraine physician, a key opinion leader in migraine. He has developed many products and also launched products in this space, including the triptans. So we know the market well. It is a key part of our diligence, but getting back to your question as far as how this fits in, in so many different ways. But also the part with, when you take a look at the ability to really know the key opinion leaders that are in the space is super important to be able to really play all that out that Tom has relationships with a few key leaders, which we tapped into, about -- getting back to answer your question again, about how it fits into the marketplace. So we really see the really great fit as far as on many fronts. And I want to take it a step further again, but it’s also that we really see the opportunity here to feed off our existing infrastructure, which makes it super efficient, a very targeted effort. That’s in play, focusing on high desktop prescribers and we’re really fit in also with our expertise as far as when it comes to using digital tools, our CRM capabilities. We have proven that with BELBUCA with the uptake of BELBUCA and what’s been playing through on that and so some really good things there. So, hopefully, Greg, your takeaway is that, it’s been a very thoughtful aspect about how we see the products fit into the marketplace based on really extensive market research that we developed quantitative and qualitative. We see that this fits quite well always through on that end and just see that the market opportunity is when we’re, listen, we are not a tuck-in product, this is something significantly bigger than, there is some ProX . We will come back with four or five aspect of that, whether we have our -- we’re going to have an ELYXYB, as we mentioned before. ELYXYB/BDSI Day that will be in early fourth quarter to really go deeper on something, so more refined on some things from a number standpoint for you to answer your question. But I think this is kind of put this in perspective that the migraine market is one that is about 30 times bigger than the PAMORA market. So, certainly, this is no tuck in at that end. And just to garner -- if you garner low single-digit market share in this market, and again, eyes wide open about this competitive landscape here to have this perspective, but this is a significant amount of dollars that if you garner low single-digit market share, your ballpark around the $100 million in net revenue. So, a pretty good situation. So we’re pretty excited about it, Greg.
Greg Fraser: Yeah. Got it. Thanks for that. And do you plan to add sales reps to reach a broader group of neurologists than you’re calling on now. I guess how should we think about the incremental sales and marketing spend types of the product, as well as R&D for the pediatric study?
Jeff Bailey: Yeah. When you think about, well, first of all, for this year is modest spend. So I think that’s important thing, and Terry, can elaborate on that even more so. But I think one of the great things about this deal is that your current footprint really serves as well that you take a look at -- right now as far as the total number of sales reps that we need. I’ll get to that in just a second. But the current sales footprint, it is very much focused on, we would not lose the focus on BELBUCA. BELBUCA is the mothership of the growth and we --really we have a lot of experience that’s keeping an eye on the growth engine of BELBUCA, especially that, we want to maintain the critical relationships that we have there. So that’s really huge trust on this one. And so these same relationships will serve us very well, because it’s interesting to see the data, and Scott, has really done a great job and the team as far as digging up the data. But there’s some really nice potential for migraine within our current caught on universe. So that’s really good. So our approximate 180 or so sales territories, that’s an important place to start. We do plan on a smaller dedicated ELYXYB sales team that will focus on neurology, but the highest that does sale migraine prescribers. So the absolute highest potential super focused and these are people who just get up every day and they just eat, drink and sleep ELYXYB. So we have a good experience with this. We also see within that sales force that targeted effort that there’s some BELBUCA potential also. So we like that also. So they’ll be able to promote BELBUCA in a second position, the certain targets to pay on. What type of patient population we have as well. So that’s where we are right now as far as that goes. And you take a look at, like I said, this year modest spend, really we’re talking about with the launch of the first quarter, that’s where we will bring on the additional sales resources that I just described.
Greg Fraser: Great. Thank you.
Jeff Bailey: Thanks, Greg.
Operator: Our next question is from David Amsellem with Piper Sandler. Please proceed.
Zach Sachar: Hey. Thanks. This is Zach on for David. Congrats on the acquisition in the quarter. Just in light of the ELYXYB acquisition, does this transaction kind of fit the mold in terms of the types of other assets you might be looking at? So are you generally hassling I guess a wide net in terms of what you’re looking for within neurology?
Jeff Bailey: So when you take a look at where we are right now that, it’s so the neurology is what we’ve been talking about for quite some time as far as next logical adjacency to pain. What we have described in the past, it’s a great situation like a Venn diagram as far as the overlap between pain and neurology, going back to my J&J experience as far as with TOPAMAX and ULTRAM as far as those two products. So it’s very similar in that way. So we really see that as a really important reason that this fits so well and we know that is a formula for success as far as what’s happened in the past. As far as, what we see down the road, right now from the standpoint of with ELYXYB, we have enough to chew on right now that, of course, we’re always going to be open minded as far as other things that might come up as far as the so much of the potential that we see in ELYXYB really curious to-date, because it stands on its own very much so based on what we’ve seen. But it comes back to shareholder value is something that only thing we’re going to look at that really brings shareholder value. As far as if there are other assets that we come across, we’ll continue. We are scanning the world there, that’s something that we’ve had really quite a process that plays through. But it’s also what we want to make sure that it’s something that anything that we do look at brings value. So I wouldn’t anticipate that there’s something else that’s going to drop in here anytime soon. But we will keep on scanning the universe on that end, but it’s one where we have enough right now, just to say, the value of ELYXYB and what we actually do from here is certainly something that’s got us very excited and ready to access that and for sure.
Zach Sachar: Yeah. That makes sense. Thanks. And then if I could sneak in one more quick one on BELBUCA. Just on the payer front and on Part D, in particular, has anything sort of changed philosophically in terms of how aggressively you made a contract here?
Jeff Bailey: Scott, do you want to go ahead and take that one.
Scott Plesha: Yeah. Sure. Thanks for questions, Zack. I think, as I mentioned, in my -- again, my prepared comments, we’re always trying to balance maintaining appropriate gross-to-nets with access. And when we look at Medicare, one of the things that’s encouraging is, we do see over 90% approval rate. So it’s actually, if you look at our coverage, we have 90% covered lives in commercial, 33% in Medicare Part D. We actually have a better approval rate in Medicare. So patients still have access to it and it’s affordable access as well. So I think that’s important. It would open some doors and we’re able to get Medicare coverage, but we are trying to balance, making sure that we’re not providing rebates that literally we could not make up over time in prescription growth. So we’re being thoughtful about that and so that’s where it is. We haven’t closed the door. We’re still working very hard and trying to find different avenues to getting approval, I’m sorry, to getting wider coverage, but nothing to report this time. As you know, I believe you probably know a lot of Medicare wins are announced in Q4, is when you kind of learn about those things and usually take effect in beginning of the year typically. So, but as I said, nothing at this time.
Zach Sachar: Yeah. No. Thank you. I will leave with that.
Jeff Bailey: Zack, thanks a lot for the questions. I should expand on what Scott said that, our team has regular venues doing the math. What really brings impact and results for the company? So we’re very careful. The team has a lot of good experience with that. So it’s one where, your question is really good one and we do the math all the time. So it’s only ones that really make business sense. So it’s a very prudent process. But, Zack, thanks for the question.
Zach Sachar: Yeah. No problem.
Operator: Our next question is from Scott Henry with ROTH Capital. Please proceed.
Scott Henry: Thank you and good morning. A couple of questions. I guess, first, like to give Terry a chance to participate. Could you talk about…
Jeff Bailey: Yeah.
Scott Henry: … SG&A in the quarter, it was down notably and the question is, should we think about S -- first, why was it down and then how should we think about it going forward?
Terry Coelho: Yeah. So, thanks, Scott, for the question and the opportunity to answer something. So the quarter was down, I mean, it’s a combination of things. We’ve talked about early in the year you typically -- you have that kind of investment and marketing spend, as you kick off every year and also we’ve spoken about legal spend with the P4 trial being higher as in the early part of the year as well. So I think those would have been two drivers when you look at last second quarter compared to let’s say the first quarter. Going forward, we’ve given the guidance where we’re still holding the guidance the same in terms of our SG&A spend. I think, what you -- yeah, I mean, that we’re still considering that we spend, I think, we’re very prudent we make sure we’re prioritizing spend, keeping it in line with, how the revenue is tracking as well and you can expect us to continue doing that.
Scott Henry: Okay. Thank you for that color. And then shifting gears kind of a tough question. But, obviously, the BELBUCA patent is a significant event for the company and it seems to be going well, but you never know. And the question is, you’re doing a share buyback in front of that event is, perhaps, a little unusual? Should we view that as confidence in front of that case or how should we think about that decision buy back shares in front of such an event?
Terry Coelho: Yeah. I guess, there may be…
Jeff Bailey: Oh! You go first, Terry.
Scott Plesha: You go first, Terry, please.
Terry Coelho: No. I was just going to say, look, we -- this does reflect our confidence in the business. But go ahead, Jeff?
Jeff Bailey: It’s very much the case. It is the confidence of business. And it goes beyond just the legal aspect of it, just merely viewing, what stock has been and just if you take a look at the road in front of us that, with just the part about just confidence and the legal standpoint, also confidence in the growth that’s in front of us as well. So we just think it was a very prudent move, it has been a very prudent move to take that and it was something we’ll calculate on our end. But I think you’re thinking of that the right way, Scott.
Scott Henry: Okay. Great. And just a couple small questions, when I look at BELBUCA, when the script data in the market share, it kind of slowed down a little bit in kind of March and in April, but then picked up in May and June. Is that noise or should we think about progress and accelerating, perhaps, penetration there?
Jeff Bailey: Okay. Also first, Scott, that maybe you build on that. But, yeah, I mean, we are -- something that we’re really paying close attention to is very much patients getting back into the office, that’s huge to us in pain. And Scott talked a bit about the capacity challenges that some of the offices have run into. But it’s really the combination and we see this improving, which is really huge and we are optimistic about the future that your patients getting back into the offices, but also that that really ties back into our representatives getting their face-to-face time, that -- this is something that is huge to BELBUCA to be able to have that face-to-face time to sell, also when new patients getting on. So there’s a good demonstration about how to use the product and all that stuff, but takes the office staff and the face-to-face to play through. So what we did was we really seen that towards the back end of the quarter, the months you described, you describe it very well on stock is that something that we see the ball moving in the right direction there. So I think that’s probably something key. Scott and I spend a lot of time talking about and we closely monitor that, because they go hand in hand. It’s something where -- it’s nothing too complicated here that. This is really the face-to-face sell that that’s so key that. Our representatives who are really good, when they get time in front of a customer and able to -- be able to connect the docs on that and that makes a big difference. And so with that you’re making some positive moves relative to where we were through the pandemic. We really see that as an encouraging sign going forward. Scott, is there anything else you want to add to that as well?
Scott Plesha: I agree with everything Jeff said. We do monitor closely actually on a weekly basis. The activity we’re seeing and we did see a lift in face-to-face activity by our reps during Q2 versus Q1, actually a substantial amount. And I think that’s carried into July as well, Scott. We didn’t share many numbers with that. This is public. But the week of July 23rd actually according to IQVIA, we had our -- it is our second highest week that I viewed as our highest, because the week that was higher was the week after all the weather and kind of outages at the end of February. So the first week in March kind of stands is all-time high, but it was kind of artificially inflated. And then even recently, we’ve seen a TRx share of 4.9% which we have recorded 4.7% in Q2. And then I think even more important our NBRx share the last couple weeks has averaged 8% and that’s a really nice spread between NBRx and TRx share. So we believe that point towards the nice growth going forward.
Scott Henry: Okay. Great. Final question, just for clarification, I think, with the ELYXYB, you mentioned a smaller sales force, potentially a targeted smaller sales force. Should we be thinking about 10 to 20 reps, just curious how -- you define smaller.
Jeff Bailey: Yes. If you think about just a bit bigger than that at this point, I think, that’s probably the right way to think about it. It’s -- yeah, very targeted to the highest deciles and that more refined number will get to you as far as after ELYXYB Day that will happen early fourth quarter. But I would say, just think about it a bit bigger than what you just described. But it’s -- that’s a good way to think about it. So hopefully I gave you enough for now, Scott, to give your perspective.
Scott Henry: Great. Fair enough. Thank you for taking the questions.
Jeff Bailey: Yeah. Thanks for your question, Scott.
Operator: Our next question is from Tim Lugo with William Blair. Please proceed.
John Boyle: Hey, guys. This is John on for Tim. Congrats on the strong execution during the quarter and congrats on the deals, especially impressive that you were able to get it done, while maintaining such strong execution. So just two questions from us, first, as others have mentioned, the pain market appears to be returning a little slower than some other pharma markets with the pandemic. Do you have any insight as to why that is or what’s holding back the overall rebound? And second, I was just wondering if you can give us some update on the midst of the sales team that’s out in the field versus virtual and how you might be planning to manage that as Delta potentially ramped up? Thanks.
Jeff Bailey: I will take the first part, Scott, and you take the second part. But it’s something about, we’ve been really paying very much attention it’s about, what’s going on with the different therapeutic areas as far as coming back from COVID, really did a good baseline and a great deal of data out there, obviously, that we pay close attention to. But the patient visits pre-COVID versus where it is now. And pain is the laggards. It was rheumatology and pain were the two that were the laggards before, rheumatology seem to be coming back. But compared to all other specialties that pain is the laggard on that side as far as patient visits going back and we did a deep dive on this. It’s really important for us to make sure we understood this that we brought our sales leadership together, Terry, Scott and I have met with them for several hours and really went deep into by geography about what’s going on with patient visits all the way through. And it’s something that Scott alluded to you before is that that during COVID, there were some scaled down of some staffing and some different office consultants and satellite offices for pain that were closed down. It’s just because of the really managing through COVID and so they really narrowed their focus in a lot of ways. So it’s something that we’re starting to see that those are starting to come back a bit and we see that as being gradual. That capacity part about the workload versus capacity, workload being patients wanting to get into to see the physician and limited capacity in some areas and some of the key systems of care out there. We do see they starting to come back. But that’s really, John, as far as being really were the key drivers we’ve seen with what’s going on behind the scenes here. But we’re very encouraged about where some things are going to go from there. So, hope I answered that part of question? I’ll be just checking with you before I turn to Scott talking about the mix on promotion. But, John, did I answered your question okay?
John Boyle: Yeah. That was very helpful. Thank you so much.
Jeff Bailey: Okay. All right. Scott, over to you.
Scott Plesha: Yeah. Thanks, Jeff. So, John, on the promotional mix, I think, that’s actually the other part of this, that we’ve seen an improvement in trends is that as things open back up and we have better access, we saw our virtual interaction go down and more face-to-face. So really every rep on our sales force now is out making live presentations and they have really since last year. But the percentage of interactions that have gone to face-to-face, having direct conversations with individuals has really improved and it’s up to over 95% of our interactions are now are done that way. And we always have -- we have a system in place where you send follow-up emails and things like that. That’s part of that mix even, so I -- that’s -- so you can see a big portion of our interactions are now live interactions.
John Boyle: Thank you so much.
Scott Plesha: You are welcome. Thank you.
Operator: Our next question is from Tim Chiang with Northland Capital. Please proceed.
Tim Chiang: Oh! Thanks. Jeff, maybe you could just talk a little bit about what work you think you’ll need to do on ELYXYB just to get Managed Care Access. Obviously, this product will play in a much more sizable market, but there are a lot of competitors, and obviously, you have a well known molecule here in celecoxib. But I’m just sort of wondering, have you guys done quite a bit of work on the Managed Care side, just so that when you launch this in early 2022, you’ll have good coverage?
Jeff Bailey: Tim, hope you are doing well today. So good question. We did a ton of work on this. You can imagine due diligence and I guess less stress to everybody that, this is a very comprehensive due diligence process. The team has a lot of experience as far as all different functional areas, supply chain, to medical, to sales, marketing and also the payer environment. So we did a deep dive. We did our own research on this and really reached out to key contacts to really make sure that we were getting ready for this. And as far as the way that we’re looking at the world going forward with us, we see that there’s a way to appropriately position us well in the payer space. It’s a product that has differentiation. It’s one where the key thing that we are -- the only FDA approved ready-to-use oral solution really makes a big difference for us. And so that differentiation is there, payers see that and that’s something really key with us. But also I bring it back to our team as far as the relationships, something where, again, this back through part of the reason that this is so attractive to us, so we’re able to pick up our existing infrastructure, the expertise of our team and really be able to set us up well there. But it’s been very thoughtful piece on the access from the payer standpoint and we know that you can have the greatest product in the world, but if you’re not able to get that payer access, it’s a challenge. But we’ve learned through our due diligence. We think we’re well positioned there. It’s one of the points, it’s like every product that’s launching just one step at a time as far as being able to just keep building more access as you keep going here. But we think we’re well positioned. Also, when it comes to, Scott, that you want to add, please go ahead weigh in.
Scott Plesha: No. Thanks for the question, Tim. We’re excited to launch this. One of the things that was exciting about the asset was the price structure and the rebate platform hadn’t been put in place yet. So we can kind of control that. And I think if you look also at what we’ve done over time, with our BELBUCA franchise, it’s the market, that’s also a very large market with a lot of players, generics and branded. And we’ve been highly successful in getting access, affordable access for patients and also at a rebate level is reasonable. So I think we’re really confident, like, Jeff said, the team and we did a lot of work, not only with physicians, but also with payers, quantitative work and then we have a consultant who’s operated a VP level in some of the largest payers in the country that helps us work through this and make sure that we understood going in what it would take on pricing structure and probably the rebate structure as well. So it was very…
Tim Chiang: And maybe just quick follow up, Jeff, I mean, you kind of highlighted and you have a small sales force to market ELYXYB. But I guess, your existing sales territories that you cover, those will be complimentary, right, with what you’re already selling in BELBUCA and Symproic?
Jeff Bailey: Absolutely. It’s something that’s what really made this thing so special as far as just what efficient, effective approach that we could have here. We cannot afford to have disruption with BELBUCA. We’re not going to allow that to happen. That’s why we’re keeping the current territory is very much intact those relationships. Our reps have worked hard to build those and just to make sure that that connects very well. And also, the fact that look at we see some potential with ELYXYB that our current footprint and also with neurology, they’ve been going deeper into neurology, so BELBUCA potentially on that end as well. So it’s really a good fit to go both ways. But it’s one where we are very, very focused on. We’ve been down this road before. Scott and I both have a lot of experience with this as far as doing something exactly like what we’re about to do. We’ve been down this road before, which is something that I think really helps us to make sure we keep the focus and execute on everything ELYXYB, but the really -- the big one, of course, BELBUCA to keep the momentum going and really grow this thing.
Tim Chiang: Okay. Great. Thanks. Congrats.
Jeff Bailey: All right. Great. Thanks, Tim.
Operator: Our final question is from Oren Livnat with H.C. Wainwright. Please proceed.
Oren Livnat: Hi, folks. You’ve obviously addressed to some extent this LAO market dynamic, but I was hoping I could test you a little bit more about that. What do you think is different, if anything about that population potentially that might be driving a differential rebound versus most other therapeutic areas? Would it be fair to speculate that population was maybe hit harder by COVID with regards to unemployment and loss of insurance? I’m just trying to tease out if you think there’s really an underlying demand change versus just capacity and logistical issue that you’ve mentioned a couple times. For example, do you see anything in the IR opioid volume that suggests that some of this LAO volume is temporarily been displaced or shuttled off to something more accessible and I do have follow-up then?
Jeff Bailey: Okay. Oren, those are really good question, because it’s actually why we pulled everybody into the sales leadership team together to really go deep on that topic and it’s such an important part of the thinking. So really we were asking the same questions as far as an insurance, are there other underlying issues beyond that. It really came back to primarily, it was just the -- it’s a lot about their capacity and their offices really to handle some volume coming out there that. Back of our minds that going into COVID, you think, boy, when people had pain, they’re going to find a way to get that -- to get a treated one way or another. It’s something where the business being down and we are -- we do see it coming back because of the primary driver. Let’s put this way, in some cases, some things you mentioned, sure are in play. But it’s also one where the primary driver is that we’ve learned from just going deep to stay very close with weekly calls with our sales leadership team about what they hear in the market, what’s going on your geography, other geographies. There’s some capacity challenges there that are impacting some things on that. And so, that’s the important thing to really highlight at this point. We do see some encouraging signs, though, about where we go from here. Your point about IR, actually, Scott and I did a deep dive. Scott went back to the data, because we were wondering about the same thing, as far as are we seeing a change in IR that may be happening and the interest that it’s one where IR is seeing a similar situation now as far as the trend goes. So that was this group. We’ve had to speculate on everything we possibly could on that end and so that’s where we landed, Oren. So, hopefully, that’s helpful.
Oren Livnat: And I think someone asked earlier, I’m not sure if you addressed it, are or -- are there meaningful geographic differences, in general, and maybe in terms of where your business is concentrated? I know, when Texas had those storms, you highlighted that that hit you particularly hard, you have a good chunk of business there. I’m wondering is, are we seeing less of a rebound in the LAO market in those geographies or nationwide?
Jeff Bailey: Scott, do you want to go and take that one as far as what we’re hearing from the field team?
Scott Plesha: Yeah. So, Oren, look at our -- the feedback we’ve got from our team, as well as the data, there’s really not a large discrepancy across the country and we did see a very large decline in the first quarter to your point in Texas, Oklahoma area. But when I look at Q2 now, those areas have really rebounded for us as well. So it’s come back in Q2 as the market has. So I do know the market has declined every year. I think the thing that’s different right now is that it’s the patient visits is way down in the offices, which again, changes don’t occur to therapy, even if somebody’s on short acting and these are long acting, just staying on a lot of short acting right now because they’re not getting back into an office capacity . So those -- I think that that’s the challenge is they’re reluctant to make large changes and if you think about if you’re switching molecules or delivery systems, they’re less likely to change if they’re not some of .
Oren Livnat: Okay. And if I may, I’m sorry to drag on here, but real quickly on ELYXYB. I think Tim kind of touched on it with regard to your current business and it sounds like, obviously, you’re keeping your eye on the prize with BELBUCA. But what sort of overlap with the migraine market is there now in your footprint? Are you calling on some neurologists, like, obviously, pain centers treat migraine as well? If you had to ballpark, what percentage of the migraine scripts are alive that are out there now do you think or even tangentially covered by your current footprint, even if promoted in second position? Sorry, you guys there.
Terry Coelho: Yeah. Jeff, I think you’re on mute.
Jeff Bailey: Oh! Sorry about that. Yeah. Sorry about that. That’ll tricks. We definitely see the potential there. Scott has a few numbers he can share. But, Scott, why don’t you go ahead on that, just highlight that with our current audience with potential for migrate?
Scott Plesha: Yeah. Happy to do so. So, Oren, this is high level data yet and we haven’t finalized structure yet or anything like that, that’ll be fine too here. But you’re looking at over 6% of the market is captured in our current targets within the current infrastructure and that’s predominantly kind of middle decile migraine prescribers in that space. And if you look even on -- if you go back and look at even in training a lot of times pain to lump with headache and migraine, so there’s a lot of experience within the pain market, pain in practices with treating migraine.
Oren Livnat: It is 60% for some of the market, sorry?
Scott Plesha: About 6%.
Oren Livnat: 6%. Got it.
Scott Plesha: Yeah.
Jeff Bailey: Yeah.
Scott Plesha: And that’s why…
Jeff Bailey: That’s why we have a very focused team that would focus on the highest of the prescribers.
Oren Livnat: Yeah.
Jeff Bailey: It’s -- I think if you did look at the way we built out BELBUCA over time that was very thoughtful. We didn’t try to build things too fast, make sure we have the right market access to support the size of our sales team and whatnot.
Oren Livnat: All right. Well, thank you for the color. Look forward to your Investor Day.
Jeff Bailey: Thanks, Oren. And yeah, just add to that is that with those relationships with those mid-decile migraine, I would just say, help us so much that these are relationships that were established over the years. So that’s got us excited about something to get us out of the gate strong? Okay, so any other questions? We think we need to wrap up. We are at the bottom of the hour. Correct?
Operator: Yes. This Q&A is concluded. You may do your closing remarks.
Jeff Bailey: Excellent. So I just want to thank everybody for participating today. As you can tell, our team is really excited about the road that’s in front of us that, what we have right now with the addition of ELYXYB is that a diversified portfolio that includes the growth engines of BELBUCA and Symproic, and you could tell that we’re very focused on keeping that momentum going and we have a strategy in front of us just to make sure that that happens. But also just a great differentiated asset an ELYXYB that’s in front of us. More to follow as far as in early fourth quarter as far as about the ELYXYB Day, I think, that you’ll find that very helpful. But thank you for participating today and very good questions and we look forward to speaking to you soon. Everybody have a great rest of the day.
Operator: Thank you. This does conclude today’s conference. You may disconnect your lines at this time and thank you for your participation.
