BioDelivery Sciences International, Inc.
Q2 2019 Earnings Call Transcript

Published: 9 Aug 2019

[Operator:]

Good day and welcome to the BioDelivery Sciences Second Quarter 2019 Financial Results Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Terry Coelho, Chief Financial Officer. Please go ahead.

[Terry Coelho:]

Thank you, and good afternoon, everyone. Welcome to our second quarter 2019 earnings conference call. Leading the call today is Herm Cukier, 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 a press release announcing its financial results for the second quarter 2019. A copy of the release 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 8, 2019, and the company assumes no obligation to update statements as circumstances change.An audio recording and broadcast replay for today's conference call will also be available online in the Investors section for the company's website.With that, I'd like to turn the call over to Herm Cukier. Herm?

[Herm Cukier:]

Thank you very much, Terry. It is my pleasure to welcome everyone to BDSI's second quarter 2019 earnings call. The second quarter of 2019 was a very successful and important period of time for our year. To begin with, we once again achieved record level sales performance for BELBUCA with very strong quarter-over-quarter and year-over-year growth, outperforming expectations and providing very high confidence in sustainability of this growth momentum for the rest of this year and into 2020.Given the accelerated market demand for BELBUCA, we are once again raising our 2019 net sales guidance for BELBUCA to 90 million to $93 million from previous level of $83 million to $88 million and total company net sales to $101 million to $105 million from previous level of $92 million to $100 million. This strong continued growth trajectory is a result of the tremendous effort by all BDSI employees day-in and day-out.Together with the medical community, we are helping to fundamentally change the management of chronic pain. Specifically we are seeing more and more physicians using BELBUCA as the first long acting opioids when shifting patients from short acting opioids in their treatment continuum. There is evidence that suggests this is part of a broader growing recognition among the medical community of buprenorphine differentiated profile and efficacy and safety with its schedule 3 designation. Supporting this paradigm shift, during the second quarter we were very pleased to see the final report issued by the Best Practices Pain Management Interagency task force chaired by Health and Human Services, which call for payers to provide more access and reimbursement for buprenorphine for chronic pain and encouraged primary used to buprenorphine for chronic pain management.We have already experienced very positive reactions by both the medical community and payers to this federal guidance, as witnessed by the significant number of regional insurance plans that expanded coverage for BELBUCA the second quarter. With this expansion more than 90% of commercially covered Americans have access to BELBUCA through their insurance plans and we will continue our efforts to ensure all patients have appropriate access.This level of activity clearly signals we are entering a new era in the management of chronic pain and that BELBUCA is being viewed more and more as an important option to treat these suffering patients. The growing support for use of buprenorphine as the first-long acting opioid because of its differentiated profile, will be a key driver of our company sustained growth into the future and we are well poised to fully capitalize on this unique opportunity.Building upon our successes BELBUCA and capitalizing on the high perform commercial team we've built, during the second quarter we licensed and successfully integrated Symproic for opioid-induced constipation into our portfolio. Symproic is an ideal tuck-in acquisition given its operational strategic and complementary financial profile for our company.I am very excited to have this clinically differentiated product with exclusivity through 2031 for a disease category so meaningful to our physician and patient customer base. I'm very proud of our team's ability to quickly and smoothly integrates Symproic into our operation during 2Q and achieved record level prescriptions, experiencing more than 40% growth year-over-year. I'm very confident the continued growth opportunities for Symproic and believe it will become the category leader over time.In addition, during the second quarter, we significantly strengthened our balance sheet both by restructuring our existing debt and issuing new equity. The new debt will be operating cash flow positive accretive as excuse me operating cash flow accretive as well as having significantly improved terms and extended maturity. Our improved financial flexibility enabled continued focus on sustaining our commercial momentum and further driving long-term value for the company and our shareholders.To summarize, the second quarter was marked with Dramatic accomplishments by our organization and has positioned us to control our destiny and further build upon our commercial success. With this continued growth momentum, we now have a combined long-term net sales for BELBUCA and Symproic to be between $425 million and $500 million from our previous level of $325 million to $400 million.Our organization is executing at an exceptional level and as we will describe momentarily, all of our key metrics support our potential for substantial growth going forward. Our future is indeed very promising and I have ever growing confidence for the remainder of 2019, 2020 and beyond.With that, I will turn the call over to Scott to provide more details of the operational success during the second quarter. Scott?

[Scott Plesha:]

Thank you, Herm. As Herm noted, we experienced a very strong second quarter with our commercial teams continuing to execute at a high level and delivering record levels of BELBUCA prescriptions and revenues. This review our dashboard analyzing the BELBUCA performance every metric is meeting or exceeding expectations or green as we categorize them.During Q2 the BELBUCA accelerated growth resulted in our achieving an all time high at more than 80,000 retail prescriptions. We generated BELBUCA's largest TRx quarter-over-quarter increase to date at $14,700 TRx, which represents more than 23% increase compared to Q1. BELBUCA also had its largest year-over-year TRx increase of $44,560 TRx or 125% from Q2 of 2018. As a result, we outpaced the previous all time TRx we established during Q1 of 2019.We continue to be encouraged by our strong execution and believe there are key drivers and market dynamics supporting the growth of BELBUCA. One important driver is expanding BELBUCA prescriber base. During the quarter, we added more than 1,100 new prescribers, the most added since Q2 of 2018. These new prescribers contributed to the record 6,579 total prescribers for the quarter. This represents an increase of 52% versus same period a year ago.In addition to accelerating our growth by adding new BELBUCA prescribers, we gained greater traction within our established customer base for more frequently prescribing BELBUCA for the chronic pain patients. This is supported by the quarter-over-quarter TRx growth of 14% or more we saw on all decile’s of our targets.During the quarter we greatly increased the number of new patients being prescribed BELBUCA, which is reflected in new highs for new-to-brand prescriptions count and new-to-brand market share. We generated more than 16,000 NBRx during the quarter, which is up from 13,608 in Q1 and 9,100 from a year ago, an increase of 76% year-over-year.We more than doubled BELBUCA’s new-to-brand market share from 3.3% in Q2 of 2018 to 7.3% in the second quarter of 2019. Importantly more than 70% of patients that were new to BELBUCA either switched from short-acting opioid or BELBUCA was added to them.This highlights the paradigm shift that Herm described where we're seeing healthcare professionals fundamentally change the way they treat chronic pain by utilizing BELBUCA more frequently as their first ally of choice medically appropriate.The primary use of BELBUCA or buprenorphine prior to failing other class to opioid aligns with the recommendations from the task force report. These recommendations have been very helpful to ATP as they consider appropriate treatment options for chronic pain and use buprenorphine for their patients.As a matter of fact, buprenorphine is the only long acting opioid molecule used to treat chronic pain that is exhibited year-over-year growth and this growth has been driven by the success of BELBUCA.As Herm mentioned these task force recommendations have also had an impact on payers as we've seen a significant number of payers improve their coverage of BELBUCA since the final report was published. We've also seen increased interest from payers and plans that may not cover BELBUCA or require patients to feel C2 long acting opioid prior to having access to BELBUCA.We are encouraged by the increase in meetings we are having and the tone of these meetings. While it's difficult to predict future coverage plans, we are focusing on providing improved patient access to BELBUCA, and believe me we will continue to build upon our recent success.As we previously discuss, our strategy was to gain more regional plan level wins in 2019 and we've executed very well against this. Through our efforts several prominent regional commercial clients enhance BELBUCA coverage by moving into preferred status or initiating coverage on BELBUCA.During Q2, we saw an important improvement in coverage of approximately 6 million lives. During our Q1 call, we discussed the recent Cigna commercial formulary wins and I'm excited to report the sales team has done excellent job of executing, following prescriptions within the plan by 31% from Q1 to Q2. They're excited about the progress we continue to make with BELBUCA and the impact it's having on patients suffering from chronic pain and we are focused on building our current growth.Building our success and execution with BELBUCA, we have also successfully transition Symproic from BDSI, which has gone as we had expected. We believe Symproic provides a complementary product to BELBUCA and allows us to leverage our high performing sales force within our target audience. We are very encouraged by the reception we received into our promotions and product.I'm pleased to share that in Q2, Symproic retail prescriptions reach 15,510, a new quarterly high, an increase over Q1 by more than 1,900 TRxs or 14%. This is the largest quarter-over-quarter increase the brand has experienced since Q2 of 2018. In addition, Symproic grew by 4,450 TRxs from Q2 of 2018 to Q2 of 2019 or 40.3%.During the quarter, we successfully added 960 new prescribers for Symproic, which helped the brand reach a new quarterly high of 4,530 prescribers. Importantly, our current BELBUCA targets provided much of the growth that we saw for Symproic during the quarter. We had strong quarter with BELBUCA and are encouraged that BELBUCA growth has continued into Q3 resulting in weekly all-time TRx highs in July.Our focus remains on improving market access, growing the number of patients receiving BELBUCA for the first time and expanding our prescriber base. Additionally, we are confident that our commercial expertise and execution while the positive impact on Symproic sales and we look forward to updating everyone on our progress on next call.With that I'll turn the call over Terry to cover the financials in more detail. Terry?

[Terry Coelho:]

Thank you, Scott. Second quarter financial results exceeded both first quarter of 2019 and prior year quarterly results. Total net revenue for the second quarter ended June 30, 2019 was $29.7 million, an increase of 50%, compared to $19.8 million in the first quarter of 2019 and an increase of 144%, compared to $12.2 million in the second quarter of 2018. The total net revenue growth was driven by BELBUCA, which accounted for 86% of total sales and the addition of Symproic to our commercial portfolio.BELBUCA net sales in the second quarter were $24.1 million, an increase of 29% compared to $18.7 million in the first quarter of 2019 and an increase of 147%, compared to $9.7 million in the second quarter of 2018. The growth in the second quarter versus prior quarter was primarily driven by the significant script growth, which Scott shared and the impact of the mid-March price increase. In addition to an approximate $1.3 million impact from wholesalers bringing inventory levels up to more appropriate levels of two to three weeks to support our continuing growth in demand. These increases were partially offset by an increase in gross to net deductions.Symproic net revenue in the second quarter and the June 30, 2019 was $3.2 million, which accounted for 11% of total sales. As a reminder, this is the initial quarter of our commercialization of Symproic following the acquisition of the product on April 4th.BUNAVAIL net sales in the quarter were $821,000, a reduction of $235,000 from the first quarter of 2019 and a reduction of $199,000 compared to the second quarter of 2018, reflecting market trends for that product and our prioritization of BELBUCA along with the recent acquisition of Symproic.Royalty revenues for ex-U.S. sales of PAINKYL and BREAKYL totalled $1.6 million, including $160,000 for net milestone payments received. Gross to net deductions in the second quarter were 51.5% for BELBUCA compared to gross net deductions of 48.7% in the first quarter of 2019, reflecting higher wholesaler fees, increasing utilization impacting Medicare Part D costs and the impact of the price increase taken in mid-March. Gross to net deductions in the second quarter were 38.9% for Symproic, reflecting the terms of the distribution agreement with Shionogi, which was effective through June 30th.Total gross margin for the quarter was 83.4% compared to 62.5% in the second quarter of 2018 and 79.5% in the first quarter of 2019. The increased gross margin reflects improvement in BELBUCA manufacturing costs, the beneficial gross to net profile in the second quarter related to Symproic distribution agreement terms and the royalty revenues and milestone income previously mentioned.Total operating expenses in the quarter ended June 30, 2019 were $22 million compared to $17 million in the first quarter of 2019 and $14.9 million in the second quarter of 2018. The increase compared to the first quarter was driven by the Symproic acquisition impact as well as the timing of certain spend at certain BELBUCA marketing initiatives began to ramp-up in the second quarter. The year-over-year increase is primarily driven by the impact of the expanded sales force and market access teams as well as the Medical Affairs and MSL team together with the Symproic expend in the quarter.The GAAP net loss for the quarter was $11.1 million or $0.13 per share compared to the net loss of $3.8 million or $0.05 per share for the first quarter of 2019 and a net loss of $9.8 million or $0.16 cents per share in the second quarter of 2018. The increase in net loss is driven by the one-time debt refinancing impact of $11.9 million.Non-GAAP net income for the quarter which excludes the impact of the debt refinancing, stock-based comp on the amortization of intangible assets and warrant discounts was $4.4 million. EBITDA for the quarter was $4.8 million compared to $103,000 for the first quarter of 2019 and negative $5.6 million for the second quarter of 2018. We believe this is an encouraging metric that highlights our commercial success driven by higher revenues along with operational effectiveness.As previously shared, under the terms of our agreement relating to the acquisition of Symproic, BDSI paid Shionogi Incorporated an initial upfront payment of $20 million at closing, and we'll pay an additional $10 million in October of 2019. In addition, Shionogi is eligible to receive quarterly tiered royalty payments based on net sales of Symproic.As Herm mentioned, we've taken significant steps to strengthen our balance sheet and provide greater flexibility as we execute our commercial strategy. In April, we received approximately $47.6 million in net proceeds through an underwritten equity offering. This offering provided an opportunity for new and existing investors to participate in the momentum BDSI side has been experiencing.Also, during the second quarter, we successfully refinanced our debt to a lower cost debt facility that improved our cash flow by lowering our annual interest costs, extends our debt maturity and lowers our overall cost of capital providing even more flexibility to drive our continued success. The new $60 million term loan along with available cash on hand was used to repay and retired the company's existing term loan which had an outstanding balance of $61.8 million.In doing so, we are now benefiting from expected interest cost savings of approximately $1.5 million annually. Interest only payments for the first 36 months as well as an extension in our debt maturity from 2022 to 2025. Operating cash flow in the second quarter was negative $1.5 million, an improvement of $1.4 million compared to first quarter 2019 operating cash usage of 2.9 million.At June 30, 2019 BDSI had cash and cash equivalents of approximately $57.2 million. This compares to cash and cash equivalents of approximately $41.3 million dollars at March 31, 2019Our overall positive cash flow in the quarter of $15.9 million, includes the impact of the April equity raise $47.6 million net offset by the first upfront payments for the Symproic license and related transaction costs of $20.7 million.The one-time cash impact of the debt refinancing of $11.6 million operating cash usage of $1.5 million and other cash income of $600,000. We continue to anticipate being operating cash flow positive by the fourth quarter of 2019 following higher cash utilization expected in the third quarter, primarily associated with a number of key annually paid expenditures.In terms of our 2019 top line expectations, based on higher than forecasted revenue during the second quarter and our continued strong momentum. We are raising our 2019 net revenue guidance for BELBUCA to $90 million to $93 million from $83 million to $88 million previously. And total company net revenue to $101 million to $105 million from $92 million to $100 million.Similar to last year, we anticipate that the fourth quarter revenue will be higher than third quarter. Total net revenue expectations for 2019 include $7 million to $9 million of forecasted Symproic sales which is in line with our previous expectations.Looking forward, we expect continued strong growth momentum with the combined long-term potential BELBUCA and Symproic to be in the range of $425 million to $500 million.At this point, I'd like to turn the call back over to Herm for some concluding remarks before we open the call for Q&A. Herm?

[Herm Cukier:]

Thanks, Terry. I want to reiterate that in addition to our commercial success over the past several quarters and the very strong growth trajectory we've demonstrated thus far, we believe this is only the beginning.We have established a sales infrastructure in a differentiated product portfolio that we believe positions BDSI to capitalize on a substantial long-term revenue opportunity. By focusing on continued commercial execution, we expect to drive significant value over the near-term and during the years to come.Now we would like to take your questions. Operator?

[Operator:]

Thank you. [Operator Instructions] We will now take our first question from Oren Livnat of H.C. Wainwright & Company. Please go ahead.

[Oren Livnat:]

Thanks. All right. Thanks, I never get in first. Appreciate it. And congrats on a pretty big quarter. A couple of questions. Obviously, you made a big increase to your long term peak combined potential about 100 million bucks and I'm wondering, first of all does that assume the same peak potential of 75 to 100 for Symproic?And also what is that -- what are those based on? Is that based on detailed market research? You know, what inputs are going into that or are you just sort of projecting the trajectory long-term. Are you making specific assumptions about anything happening to the long acting C2 opioid market that's more dramatic than crunched erosion, I guess? And also what pricing maybe goes into the assumptions. Then I have a couple of follow-up.

[Herm Cukier:]

Sure. Thank you so much, Oren. I always greatly appreciate your commentary and excellent question. So yes -- so the answer to your question with regard to the contribution that Symproic makes. Our view of Symproic is consistent with what we've expressed before and again we're very pleased by early days and [indiscernible] tremendous job of including that in our portfolio and already seeing the impact with the customers that we're calling on.In our continued accelerated belief in the long-term potential of BELBUCA, it's really driven by a number of factors. One is the success that we're seeing in the marketplace and the accelerated script that we're experiencing not only in – during the second quarter, but as Scott pointed out we're off to a strong start in third quarter as well. Also as we referenced the pain task force report I think is a significant milestone.Members of the policy community recognizing the differentiation of buprenorphine and the contribution that buprenorphine can make to the treatment of patients suffering from chronic pain calling for more coverage and more reimbursement and encouraging the primary use of the product and the treatment of chronic pain.And then also the momentum that we're gaining with the payers and the continued ability to actually gain access to the product and we anticipate that over the next several years, we'll continue to see more and more momentum and success in getting better coverage for patients. So, I think those are some examples Scott and I'll ask if you have anything else to contribute to that.

[Scott Plesha:]

What I would add is obviously we have very predictable trend lines in place and when we look across many different metrics, prescribers at different styles, payers, payer mix, and see the growth trends we have in place, we remain very confident we can maintain the current growth rates we're seeing and in bolt-ons going forward.

[Oren Livnat:]

Okay. Since you have reiterated sort of your long-term optimism and progress, I see clearly a differentiated and better label for that product versus the competitors, but it hasn't gone lost, it's not lost on me that the script sort of rolled over a little bit most recently after a strong Q2 and I'm just wondering what dynamics are you seeing out there competitively. What will it take? I'm assuming there's real competitive rebating pressure in the market. What do you see -- and what will it take to really start to gain significant market share?

[Scott Plesha:]

I appreciate that question Oren and in my experience is very typical when you have a transition from one company to another, there could be a little bit of flattening of prescriptions where I can promise you we're working very hard using our expertise and execution that we've had -- its albeit very similar principles. We do feel that we have an opportunity to improve upon market access approval rates are still -- while the market access has improved with the product early in the year, there's still some work to be done there. And if anything our team has proven ability to gain extra access at reasonable rates. So, we'll continue to work hard to do that and I think that'll be important for us going forward. We need to improve approval rates and things like that in the space.

[Herm Cukier:]

And I would just add to Scott's correct comments that we have exclusivity 2031. So we're just getting started. We have a long journey ahead of us. And as you pointed out Oren we're confident that this product has the potential to be the best-in-class. That's the kind of feedback in captivity that we're hearing from our customers.And Scott said I think what we see in the marketplace is very much what we expected and we take on the product and bring into any salesforce and we remain very optimistic of a long term potential of the asset.

[Oren Livnat:]

All right. Thanks so much. Congrats again.

[Herm Cukier:]

Thank you, Oren.

[Scott Plesha:]

Thanks Oren.

[Operator:]

Our next question comes from Gregg Gilbert of SunTrust. Please go ahead.

[Unidentified Analyst:]

Thank you. It's great Greg [Indiscernible] for Gilbert. Great, congrats on a good quarter. In terms of the expand insurance coverage that you had in the quarter, how important was that interagency task force to securing that coverage. You clearly had a lot of lives but you were also getting coverage prior to that report. Obviously, you're very positive on the report, just like to hear a little bit more color on that.

[Herm Cukier:]

I appreciate that question. So, we did have some really nice wins this quarter including adding Blue Cross Blue Shield, Tennessee, Alabama and then independently to shield Magellan, Health delegates select health. And I would say that we have had some really nice momentum with payers anyways and we're already engaged in great discussions, but it truly has added to that momentum and definitely an interest at a payer level. So, we're having some really productive meetings right now around some of that. And as you can imagine we've used those recommendations daily with our payers.

[Unidentified Analyst:]

Sure. It's probably early I assume in terms of discussions for 2020. But do you think that the task force report will give you more leverage with the national payers such that you could get better coverage in 2020 than you have for 2019.

[Scott Plesha:]

Yeah. I can promise you that's what we're working to do. That is the goal is to always try to provide as much affordable access and clear access to this product for patients, they deserve the right to get it.

[Herm Cukier:]

I would just add to what Scott just commented on to your question, and the final report specifically called on CMS as one of the parent entities to provide more coverage buprenorphine for chronic pain. And that's an area that had more challenges in the commercial sector. We're certainly optimistic that to your point that this could be a level that can enable us over time to perhaps improve and increase our coverage in the medical state. So it gives us an opportunity to continue to have those discussions with CMS and the entities that are cover Medicare live. And we're optimistic that over time, we'll be able to make more traction in that particular market segment.

[Scott Plesha:]

And I would add, I think it's really important to know is when we do are able to obtain or win, and open up access and usually the key thing we're trying to do is remove stuff through of long actives, and allow patients and physicians to make a choice to move from a short acting that will be the first long acting a choice. And basically to look at any, any win we have across the board and as soon as we open up those lives and we're able to share our message with physicians within those plans. We see a very predictable growth trend off of that. We don't see a jump in business and then a flattening. It's a continual growth curve going forward.

[Unidentified Analyst:]

Great. Thanks for the color.

[Herm Cukier:]

Thank you for your question.

[Operator:]

Our next question comes from Brandon Folkes of Cantor Fitzgerald.

[Brandon Folkes:]

Hi. Thanks for taking my questions and congratulations on the very good quarter. I wanted to just go back to the final task force report. Can you provide any color whether you felt this benefit, yet, actually prescribing level, and perhaps some – obviously, we reporting Q2 now, but we have scripts post the quarter. So any color from the feedback you're receiving prescribing level post that report would be great. Thank you.

[Herm Cukier:]

Brandon, I appreciate the question. I didn't see Benefield other members of our senior leadership had and our reps are sharing that information, and the reps have the ability to provide them with that information. And it's been received well you can imagine it reinforces what current prescribers are doing and many of them obviously seen the value of BELBUCA.So -- and we do think it's opening -- opening eyes and maybe gaining the attention of those that haven't written. And we do know that officers are also using it as they look to get prior authorizations through for the payer level too as well. So we do see success there as well. I think it's early still to really quantify that just being out there and quantitatively feedback, it feels like it is being helpful for sure.

[Brandon Folkes:]

Okay. Thanks. But -- so is it fair to say that that will remain a tailwind for some time?

[Herm Cukier:]

Absolutely, so -- absolutely, Brandon you're spot on, as Scott pointed out, we're still very much in the early days and I think it just adds to the conversation. It adds to the confidence. It adds to the comfort. Scott pointed out. I think for those that have already started to more frequently utilize BELBUCA, it reinforces their own experiences and their own believe, especially the specific encouragement of utilizing it -- as for primary usage in the management of chronic pain, not just after the failure of other opioids.And as Scott pointed out as well, for those that are still in the process of gaining more understanding of the molecule and gaining more individual personal experience. I think it could only serve as a benefit and accelerant of their journey timing. But in of itself, it's a compliment to all the great work that our teams have already been doing and all the additional increased medical information that our medical teams are developing and we'll be providing through the medical forums, medical congresses.So there's just a growing understanding and awareness of the important role that buprenorphine can play in the conversation of how to evolve the optimal management of patients that are suffering from this very difficult challenging disease. And we're seeing very positive results in the marketplace accordingly.

[Brandon Folkes:]

Great. Thank you very much.

[Herm Cukier:]

Thank you for your questions, Brandon.

[Operator:]

Our next question comes from Scott Henry of ROTH Capital. Please go ahead.

[Scott Henry:]

Thank you and good afternoon. I guess, just first falling onto the question with regards to the changes and best practices and guidelines, which all seem to be geared towards moving BELBUCA earlier into the treatment algorithm. Do you think there's any possibility to start to look at the label and some of the boilerplate language in the limitations of use section of the label? Speak about using alternative treatment options prior to trying BELBUCA. Do you think over the next year or so there may be opportunities to amend the label.

[Herm Cukier:]

Sure. Scott, thank you very much for your question. And as you well know perhaps that this was an inter-agency task force. There were many representatives from different parts of the federal government including the FDA. So we're certainly encouraged by the fact that there were many voices and many contributors to what was ultimately included for buprenorphine in the task force report.And I think that that does certainly provide perhaps a pathway to continue the dialogue and discussion with CMS for discussions on coverage, with FDA to understand if there are opportunities to revisit the label and include some of the particular recommendations that were provided by the task force.And ultimately, perhaps as well with the CDC, as they perhaps consider the future evolution of their particular opioid use guideline. So, I think, it was a stepping stone towards a continuation of the dialogue and we certainly look forward to participating in that process and are optimistic of perhaps a lot could happen over time.

[Scott Henry:]

Okay. Thank you for the color there. A couple of model questions. First, with BELBUCA, the revenue per script was a little higher than perhaps I expected in Q2. The question is, was there anything unusual that happened in 2Q that could impact revenue per script, or is it just kind of increasing with the price increases.

[Terry Coelho.:]

Yes. So, Scott, this is Terry. So two things. I mean we did have, as you know, a price increase in the middle of March so there would be some impact from that. And then, secondly, if you were to look at revenue per volume shipped to the wholesalers, right, and I mentioned the $1.3 million dollars that we saw, you would probably come up with a slightly different revenue per script if you like.

[Scott Henry:]

Okay. So, it sounds like a normal variance, I guess.

[Terry Coelho:]

Yes.

[Scott Henry:]

And then the second question, the cost of goods sold seemed a little lower in the quarter, were there any dynamics with the Symproic launch that would have depressed that or is this a good number going forward. I know you've been working on cutting costs there.

[Terry Coelho:]

Yeah. So actually BELBUCA gross margin improved a little bit in the quarter which is anticipated. The supply chain team has been working on different manufacturing improvements since last year and so there was a minor improvement from that maybe one percentage point, but as I mentioned previously, Symproic, we did have a distribution agreement in place for -- just for the first quarter of the arrangement through June 30th and that had basically agreed upon gross to net profile which was pretty favorable and fixed COGS and no royalty payment associated with that first quarter. So I would not anticipate that continuing.I think you could be thinking about the mid 80s for Symproic which is -- BELBUCA is in the mid to upper 80s and I would see Symproic in the mid 80s going forward. And I think that's one of the reasons we really liked this acquisition as well. It really fit in very nicely in our overall portfolio and overall, we're still generating the same kind of gross profit for the business.

[Scott Henry:]

Okay. Great. Thank you for the color and thank you for taking the questions.

[Herm Cukier:]

Thank you, Scott.

[Terry Coelho:]

Thanks.

[Operator:]

Our next question comes from Esther Hong of Janney. Please go ahead.

[Esther Hong:]

Hi. Thanks for taking my questions. So on BELBUCA, any update on the respiratory depression study. And then on Symproic, after it's been about a quarter since Symproic’s been in your portfolio. So can you provide any insights on physician receptivity? Any interactions between physicians and sales reps? Thanks.

[Herm Cukier:]

Hi Esther. Yes. Thank you so much for your questions. The respiratory study has been initiated. We're recruiting patients. So far everything is going according to plan. And we look forward to sharing results of that study in the early half of next year. And from that I'll ask Scott to talk a little bit about the receptivity that we're seeing in the marketplace in some physicians.

[Scott Plesha:]

Yes. Hi Esther. We've been actually very pleased with the reception. As a matter of fact, when you look at the growth we have this quarter, the majority of it puts 7% -- came from our targets. They seem to really value the profile of the drug. The convenience of taking it with those out too with the laxative and also revaluing the data, the clinical data that comes along with it. So as a reminder the AGA, society actually throw guidelines and review the different products in their data and some broken track has the strongest rating in that section. So that's all very well. And we're confident as we go forward, again, we'll be able to build some growth going forward. So appreciate the question.

[Herm Cukier:]

Maybe Scott if I may I'll to some of your commentary and maybe talk a little bit about this earlier that the launches have changed a lot in our industry. And when you nice guarded and getting access and coverage is such an imperative element of the ability to actually have physicians getting the comfort in the fluidity of running scripts and probably still very much in the early stages of its launch.We're really only in year two to truly launch and it has a good start to coverage, but I think that's an area that overtime we're going to work very hard, just as we've done with BELBUCA to improve the coverage and I think that will be an important way we’re move forward to see the kind of growth that I think we all know will come given the profile of the product.

[Terry Coelho:]

Yes, what kind of back…

[Herm Cukier:]

BELBUCA was in early 2017, it probably was almost very similar to what we see right now with Symproic, but the approval rates and the lives covered and whatnot. And again, we have an opportunity to I think first and foremost to improve access and approve the -- get the approval rate improved. And I think once we do that, we'll see an -- even faster taking the business, so its still complicated, we can grow it going forward.

[Terry Coelho:]

And it sounds like our teams are having some very encouraging discussions so far.

[Herm Cukier:]

Yeah. We feel really good about the ability in early 2020 to be able to enhance our coverage.

[Esther Hong:]

Great. Congrats on the quarter.

[Herm Cukier:]

Thank you Esther. Thank you for your question.

[Operator:]

Our next question comes from Tim Lugo of William Blair. Please go ahead.

[Tim Lugo:]

Thanks for the question and congratulations on a strong quarter. On the contracting side, it sounds like you still have some room for additional wins. But is there a tipping point around contracting, where you decide to just stop offering the terms you've previously been fine with, given the task force report, given the overall market trends and eventually patient and physician acceptance and preference for the product?

[Scott Plesha:]

Tim, its Scott. Appreciate the question. So there's a lot of ways we look at it. So for example; Humana, is a Medicare plan that we were able to improve access there to a preferred status and we're sitting at well over 4% market share there, 4.3%, when rest are -- overall at 2.6% for the quarter, 2.7%.And when we look at other Medicare lives, while we're still – we’re getting the product approved at about 80% approval rate our market share is lagging, its 1.4%, 1.5%. And if we can add more of those going forward, we would hope that we've seen acceleration in similar trends that we see when we have a win.Again the ones where we've had wins, we see again very consistent growth lines, they are very linear. And I think that in the coming quarters and years, we'll be able to continue to add on Medicare that will be a focus.We saw some regional plans that we really would like to crack. And then there's still some larger and midsize PBMs that we have some work to do with.

[Herm Cukier:]

Yeah I think that's well said, Scott. And I would add that even though we have very good commercial coverage at this point, it's about just over 50% having the full coverage there's still an opportunity to enhance the coverage that the commercial lines have and increase the number that have the third coverage.And Tim I think your point is well taken. We will be very thoughtful and ensure that we're not just buying our ways to access even on Medicare. As you correctly point out, it's clear that we have a differentiated asset. And I think we try to focus more on clinical conversation and the importance of ensuring that Medicare patients have appropriate access to a product like BELBUCA, especially given the kind of language that -- encouragement that comes out of an important events like the agency task force.So I think those discussions are ongoing. And again, as Scott pointed out, we're very optimistic over the next period of time the ability to have those meaningful clinical discussions both in the commercial and Medicare side and continue to improve coverage for patients.

[Herm Cukier:]

I would add that this FHS [ph] guideline recommendations have really been a stimulus for meetings and some plans that are very typically very difficult to get in front of have requested and even those that we have coverage, have immediately requested us to provide updates on clinical. So it's been a nice catalyst for us.

[Tim Lugo:]

Understood. That's great to hear. And maybe just a follow-up question. Terry in your comments you mentioned Q4 cash flow positivity after some kind of seasonal issues in Q3, you don't have to give obviously 2020 guidance today, but how should we think about breaking into cash flow positive territory. Is this something that kind of structurally the company will be setup for going forward once you break into that cash flow positivity or is it something which is varies quarter-to-quarter, basis operating trends, seasonality, gross to net, all of that.

[Terry Coelho:]

Yeah. So great questions Tim. And I think we've talked a lot. You've heard the teams talk about obviously that you've seen the growth trajectory, but also we've given you an indication of where we think the business is heading in the longer-term as well. And so as you see the growth continue to happen, you can imagine we have the infrastructure, we believe in place to support that growth. And at that point, there's no reason that basically the gross profit isn't being fully leveraged and the margin being able to move forward and being cash flow positive going forward.I don't anticipate, I mean, if you think about the growth rate, we're seeing in our infrastructure that's in place, you can – without me giving 2020 guidance as you said, I think you can expect a pretty good trajectory going forward.

[Tim Lugo:]

That's great to hear. Thanks for the questions.

[Terry Coelho:]

Thank you.

[Operator:]

Our next question comes from Matt Kaplan of Ladenburg Thalmann. Please go ahead.

[Matt Kaplan:]

Hey, guys, thanks for taking the questions, and congrats on the quarter. I just wanted to say again, a little bit more in terms of strategy or initiatives programs that you have in place to drive growth beyond gaining access and/or expanding coverage in terms of you mentioned matching clinical and clinical questions what programs I guess or strategies do you have continuing momentum given the best-in-class characteristics of BELBUCA?

[Herm Cukier:]

Thanks so much, Matt. Really appreciate the question. I may recall that we put in place a four point acceleration plan a few quarters ago for a BELBUCA. And those four points where the expansion of the sales force, expansion of access, the creation of the medical team and developing more medical information, and medical communication and awareness of the Symproic BELBUCA specifically in the utilization for chronic pain. And then also finally, engaging with patients and bringing back the voice for patients that are suffering from chronic pain ensuring that they are sufficiently armed to ask the right questions and engage with their healthcare provider to understand their options and to see the optimal treatment for themselves. And we still feel that those are right four levers of focus on and that is where we're making our investments both in 2019 and we will continue to do so moving forward to 2020 and beyond.As Scott pointed out, we're seeing – and I'll ask him a second to talk a little bit more about the success and productivity that we are gaining from the salesforce expansion. A little bit more color behind that. And as you pointed out, we've seen tremendous accelerated recognition of the importance of buprenorphine, by the managed care entities and more work to do there as we were just discussing. But again we believe that that will continue to head in a very positive trajectory over the next period of time.In the past we've talked a lot about the medical investments that we're making including starting a respiratory depression study which we think given the opioid epidemic is an imperative element of clinical consideration and having more definitive understanding information about BELBUCA specifically and how to recognize within dose strength exactly what that could mean in the decision-making process for patients, I think would be very important when that data comes out early next year as well as having a lot more presence and a lot of other information and publications and abstracts that are going to be provided through medical congresses and other medical forums and journals, et cetera.And finally we've started to think about and very slowly approach appropriately how to engage the patient recognizing again obviously that this is an area where patients are suffering tremendously from this disease and there's a lot of noise and complexity on getting the right information to engage in a profit discussion with the healthcare provider and we're exploring ways that we could potentially engage more profoundly in playing a responsible role of providing patients with that voice back in this process.So, for sure, we are not just focused or dependent on one of those levers, but in fact we're seeing a lot of success already from those different levels and anticipate that they will be the ones that continue this very strong momentum into 2020 and for the years to come.Yes, the point -- one of the points I'd really like to build upon a little bit is really the encouraging impact we've seen from an expansion and it's really what we thought would occur. But as I look at -- we had in 28 territories really October, November, two different training classes as we track the prescriptions in those territories start at a lower baseline. But by the month of May, there was an 80-scrip per month left on average per territory. So, basically by the month of May incremental business has pretty much paid for those reps.And in my experience that's pretty effective in getting people up quickly up to speed and having an impact. We also saw an average of a 14 prescriber per month increase per rep as well. And I'll add that we did that and there were usually subsets we pulled off of other territories, maybe areas we won't get into as well. And when you look at the territories that weren't expanded that were the existing territories, they're trying anything and accelerated slightly during that period of time or since then. So we're highly encouraged, it really reinforces the effectiveness of the plan to put place and execution by the sales force, who has done excellent job.

[Matt Kaplan:]

Great. That's very helpful. Then one last question, in terms of, given the new guidelines, do you think you'd be able to leverage new guidelines to help you in terms of negotiating for access and repairs to have a lower discount in terms of getting on -- getting coverage.

[Herm Cukier:]

Yeah, thanks very much, Matt. Appreciate the question. The interagency task force has set of recommendations and obviously it's a very comprehensive report about best practices and pain management and the pharmacology arena, really calling up the nurse and Scott, maybe, you want to reiterate again just the amount of energy and success and really very quickly already had a lot of payers since it before out came out, that actually is [indiscernible].

[Scott Plesha:]

Yeah. So we had an outreach to every one of our customers to begin with but obviously south to us as soon as that was published and what we will do is first off use it to gain access into these plans to have real conversations maybe where coverage isn't where we want to be and it will probably depend on plan by plant math whether Level 2 actually leverage those. Remember they are guidelines; it’s not a requirement on these plants. So we will talk to them about the recommendations, obviously, and -- we're going to be very thoughtful about what we do on the rebate side. We want to make sure that it's profitable access, not just growing business and the cost of giving up just not.

[Matt Kaplan:]

Great. Thanks. You got to teach all that.

[Scott Plesha:]

Thank you for your questions, Matt.

[Operator:]

Ladies and gentlemen, there are no further questions at this time. Therefore this concludes today's conference call. Thank you for your participation. You may now disconnect.