BioDelivery Sciences International, Inc.
Q3 2019 Earnings Call Transcript

Published: 13 Nov 2019

[Operator:]

Greetings and welcome to the BioDelivery Sciences Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.I would now like to turn the conference over to your host, Terry Coelho, Chief Financial Officer. Please go ahead.

[Terry Coelho:]

Thank you, and good afternoon, everyone. Welcome to our third 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 third 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, November 12, 2019, and the Company assumes no obligation to update statements as circumstances change.In addition to our prepared remarks, there are slides accompanying this call presentation can be viewed on the Investors page of our website at www.bdsi.com and can be viewed by logging into the webcast. An audio recording and broadcast replay for today’s conference call will also be available online in the Investor Section of 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 third quarter 2019 earnings call. I am very pleased to report that we had another very successful quarter at BDSI highlighted once again by record level scripts and strong brand growth, robust financial results and numerous accomplishments across the organization.This marks the sixth straight quarter of exceeding expectations and record level performance for our company, which is directly attributable to the hard work and dedication of all of our employees. I would like to thank them for their continued efforts in building a rapidly growing enterprise and for the value we bring to patients across the country every day with our clinically differentiated portfolio of products.Our success during the third quarter was fueled by the continued strong growth momentum of BELBUCA, which once again reached record level in total scripts, volume growth, market share, and numerous other important metrics of a successful brand launch.As we have stated previously, our dashboard is green across the board. We continue to see very broad and deep utilization of the product with record level unique prescribers, a steady stream of new prescribers and continuously expanded access from payers, placing BELBUCA in preferred position.Very importantly, we also continue to reach record level new-to-brand share, which historically has been tightly linked to the long-term total peak share level of brands in the category. In fact, and NBRx share was 7.6 for the third quarter, more than 2.5 times our total scripts share indicating a very promising, sustained trajectory of growth.The third quarter also represented the first full quarter of our Company promoting Symproic, an ideal compliment to leverage our efforts on BELBUCA. I’m very pleased to see that we achieved record level number of scripts for the product growing 39% versus prior year. Also, very importantly, we achieved record number of prescribers during the quarter and similar to BELBUCA are continuously adding a steady stream of new prescribers with Symproic.During the second half of the quarter, we also saw significant growth in new and total script share providing momentum to build upon for 2020 and beyond. As we look forward, I expect the current success with these two products to be further enhanced in near-term by greater access across payers. We continue to experience increased appreciation of the clinical differentiation of BELBUCA and Symproic and the therapeutic value they bring to patients in the chronic pain community.As we previously announced, we finalized an agreement with a major national pharmacy benefit manager, which significantly improved the additional insurance coverage for both BELBUCA and Symproic with full plan adoption by January 1st, 2020. This provides approximately 14 million additional commercial covered lives with either preferred or preferred exclusive access to our products.We continue to have very positive discussions with payers for BELBUCA and Symproic and are optimistic of securing additional expanded access for patients moving forward. In addition, another major catalyst supporting continued growth for BELBUCA is the substantial recognition buprenorphine is receiving from agencies within health and human services for the management of chronic pain.Beginning with the Pain Management Best Practices inter-Agency Task Force report released in May, which called for better coverage and primary use of buprenorphine for chronic pain, there have been several recent meaningful initiatives from divisions within HHS on the optimal usage of opioids.These initiatives include; the recent HHS Guideline on Opioid Tapering, the Agency for Healthcare Research & Quality or AHRQ draft report an opioid treatment for chronic pain and the Center for Medicare and Medicaid services or CMS requests for information on opioid utilization.Together these efforts exemplify a growing and steady stream of recommendations and efforts helping the medical community more fully understand the significant opportunity that buprenorphine offers in treating patients suffering from chronic pain.We are encouraged by this level of progressive activity and believe these policy initiatives will provide further clarification of BELBUCA’s unique profile versus Schedule II opioids and potential benefits to patients.To summarize, the third quarter was once again marked by very strong record performance across the organization. We are well poised to sustain this momentum and drive substantial shareholder value in the Company as both BELBUCA and Symproic continue their market penetration.We are on the cusp of a major turning point for the company. We have record brand performance, two straight quarters of being EBITDA positive and expect to be operationally cash flow positive in the fourth quarter of this year. Given this strong momentum, we are raising 2019 net sales guidance to a new level of $105 million to $110 million from the previous range of $101 million to $105 million.In addition, I am very pleased to provide full-year net sales expectations for 2020 of $150 million to $160 million per BELBUCA and $165 million to $175 million for total company. We have accomplished a great deal in 2019, are poised to finish the year strong and are very enthusiastic for 2020 and beyond.With that, I will turn the call over to Scott to provide more details of the operational success during the third quarter. Scott?

[Scott Plesha:]

Got it. Thank you, Herm. As Herm highlighted, our commercial team continues to deliver record levels of BELBUCA prescriptions and revenue during the third quarter and has successfully integrated Symproic. And similar to past quarters, we’re continuing to meet or exceed every key indicator, a metric we’re tracking for BELBUCA in terms of our commercial execution.During Q3, we had another all time high for BELBUCA retail prescriptions of more than 89,600 exceeding our previous all-time-high establishing Q2 by 12%. This represents growth of 103% when compared to the third quarter of 2018, an increase of over 45,000 BELBUCA TRxs the largest year-over-year quarterly volume increase ever experienced.Additionally, the increase in TRxs from Q2 to Q3 2019 was 11% than from Q2 to Q3 2018 indicating continued acceleration in growing our flagship product. We firmly established a strong track record of commercial execution for BELBUCA and remain confident in the sustainability of that growth based on a number of key drivers and supportive market dynamics, which I’ll now discuss.First, our prescriber base for BELBUCA continues to expand. During the quarter, we added 1,110 new prescribers who contribute to a record. 6,991 total unique prescribers for the quarter. This represents an increase of 47% versus the same period a year ago. With respect to our established prescriber base, we’re continuing to see a quarter-over-quarter increase in BELBUCA prescriptions per prescriber across all deciles of prescribers. This is an encouraging indicator of the momentum BELBUCA continued to gain as physicians recognized more and more the value that our product can provide for their chronic pain patients.Another important indicator of our growth is new patients taking BELBUCA for the first time. During the third quarter, we increased our new to brand market share to a new high of 7.6% compared to 4.2% a year ago. Importantly, our new-to-brand market share was more than double our 3% TRx market share for the quarter.While compared to all other long acting opioids, BELBUCAs NBRx market share far exceeds its TRx share, which is predictive of a long-term growth as historically there has been a convergence of TRx and NBRx shares over time. And in addition to NBRx share growth, we also saw both BELBUCA starting and titration doses strengths continue to grow during the quarter.We view the growth of both dosage ranges as a positive as healthcare providers look to start patients on BELBUCA and then titrate them to the lowest possible dose of BELBUCA to attain the appropriate level of efficacy.As we've discussed, BELBUCA sales are clearly benefiting from the current paradigm shift in the treatment of chronic pain and the use of opioids. The primary use of BELBUCA prior to failing CII opioids aligns with the recommendations from the HHS task force report.We believe this is one of the reasons why more than 80% the overwhelming majority of our patients that were new to BELBUCA are transitioning from short-acting opioid regimens. Oxycodone IR and hydrocodone IR account for 60% of this volume. It's also important to note that as we are gaining indirect share, we're seeing a declining share in current long-acting opioid leaders, morphine ER, fentanyl and OxyContin.Last quarter, we improved BELBUCA coverage by more than 6 million lives and just at the close of third quarter, we announced the formulary win with a Major Pharmacy Benefit Manager or PBM. Covering both BELBUCA and Symproic and improving access for approximately 14 million covered lives within commercial plans.While currently in effect, we expect full adoption of the plan by January 1, 2020 whereby BELBUCA, will become either the preferred or preferred exclusive buprenorphine product and Symproic will be the preferred exclusive product within its class. This was a major PBM win for BDSI and particularly for Symproic at this early stage of the launch and will allow us to gain additional market share into more class.So as we stand now, we're heading into 2020 with an additional 20 million covered lives with new or improved access for BELBUCA and 14 million for Symproic, which we believe establishes a strong foundation to support our growth trajectory. You can be assured that we are continually engaging with additional health plans and the federal policy initiatives we described are facilitating those conversations. We're very pleased with our success today and with those on the horizon and we look forward to providing further coverage updates.Now that we have another quarter of experience with Symproic, I can provide an update in the launch. As you know, Symproic is a complimentary product of BELBUCA that allows us to leverage our high performing sales force within our target audience of pain specialists. This allows us to take advantage of our relationships with prescribers in detailing Symproic and differentiating features.We're very pleased with how the transition to BDSI has gone and believe we have built a solid foundation for future growth. For Q3 which was our first full quarter of Symproic promotion, prescriptions reached a new high of 15,686, representing a 39% increase year-over-year compared to Q3 of 2018. We were encouraged with the acceleration of an NRx to 9,503 during the quarter, an increase of 7.7% over Q2 2019 while also reaching new highs in the third quarter for both TRx and NRx share.In the third quarter, we successfully reached a new quarterly high of 4,706 unique prescribers for Symproic. While pleased with the progress we were making in adding new prescribers, there are still significant opportunities to expand utilization across our prescriber base.Our focus on improving Symproic market access is resulted in a major PBM making Symproic the preferred exclusive product in over 14 million lives. This new coverage will require patients to first utilize Symproic for OIC, which we believe is a clear reflection of the product’s clinical differentiation.While some plans in this PBM have already made the formulary update, the majority of the lives will be added January 1, 2020. With the sales force has proven track record of pulling through market access coverage, we believe this expanded and approved access will be an important catalyst to Symproic growth in 2020.In summary, we are intensely focused on continuing to improve market access across our portfolio, expanding our prescriber base, growing the number of patients receiving BELBUCA the first time and building further confidence in the differentiating features of Symproic. We are confident that our commercial expertise and execution will continue to drive value for BDSI and we look forward to future updates.With that, I'll turn the call over to Terry to cover the financials in more detail. Terry?

[Terry Coelho:]

Thank you, Scott. Similar to the last quarter, our third quarter financial results exceeded both the second quarter of 2019 and the prior year quarter. Total net revenue for the third quarter ended September 30, 2019 was $30.3 million, an increase of 114% compared to $14.2 million in the third quarter of 2018. The increase in 2019 is principally driven by BELBUCA growth, which accounted for 88% of total revenue and the addition of Symproic to our commercial portfolio.BELBUCA net sales in the third quarter were $26.5 million, an increase of 115% compared to $12.4 million in the third quarter of 2018. Gross-to-net deductions of 51.6% remained relatively flat quarter-over-quarter in line with our expectations. Symproic net revenue in the third quarter ended September 30, 2019 was $2.2 million. As a reminder, this is the first full quarter of our commercialization of Symproic, following the acquisition of the product in April.Symproic gross sales increased 12.5% versus the second quarter of 2019, mostly driven by the price increase taken July 1. Symproic net sales were $1 million below the second quarter which had benefited from the terms of the distribution agreement with Shionogi, which was in effect June 30. While third quarter net sales reflect the standard approach to actual and estimated revenue deductions and at 62.9% are in line with our expectations for the brand.BUNAVAIL net sales in the third quarter were $937,000, a reduction of $468,000 compared to the third quarter of 2018, reflecting market trends for that product and our prioritization of our strategic products, BELBUCA and Symproic. Royalty revenues for ex-U.S. sales of PAINKYL and BREAKYL totaled $683,000 for the three months ended September 30, 2019, an increase of $313,000 compared to the third quarter of 2018.Total gross margin for the quarter was 82% as compared to 73% in the third quarter of 2018. The year-over-year increase in gross margins reflects improvements in BELBUCA manufacturing unit costs and the current gross margin percent is in line with our expectations. Total operating expenses in the quarter ended September 30, 2019 were $23.4 million compared to $14.2 million in the third quarter of 2018. The year-over-year increase is primarily driven by the impact of the expanded sales force and market access teams as well as the establishment of medical affairs and MSL teams, together with the introduction of Symproic to the portfolio.GAAP net income for the quarter was $400,000, compared to a GAAP net loss of $6.4 million in the third quarter of 2018. The improvement in net income reflects the overall revenue growth coupled with higher gross margins and improved operational efficiencies. In addition to reduced net interest expense and warrant amortization expenses which are approximately $1.4 million below the ongoing comparable quarterly costs prior to the refinancing of our debt.As a reminder, the GAAP net loss of $11.1 million for the second quarter of 2019 included the refinancing of our debt in May of this year. Non-GAAP net income for the quarter was $3.5 million and reflects GAAP net income excluding stock-based compensation and non-cash amortization of intangible assets.EBITDA in the third quarter of 2019 was $3.5 million or 11.6% of net sales compared to negative EBITDA of $2.3 million in the third quarter of 2018. This is our second consecutive quarter of being EBITDA positive, which highlights our commercial success together with our operational efficiencies.Operating cash flow in the third quarter was negative $1.5 million, in line with expectations and with the prior quarter. At September 30, 2019, BDSI had cash and cash equivalence of approximately $55.9 million. While the final $10 million installment of the upfront payment to Shionogi, Incorporated relating to the acquisition of Symproic was paid subsequent to the end of the third quarter. We continue to anticipate being operating cash flow positive during the fourth quarter of 2019.Shifting to our 2019 top line expectations, we are updating our 2019 net sales expectations for the total company to $105 million to $110 million, an increase compared to our prior expectations of $101 million to $105 million. In addition, given the company's strong performance over the last six consecutive quarters and confidence in the growth momentum of the portfolio, we are now in a position to provide our net sales expectations for full year 2020.For full year 2020, our expectations are range of $150 million to $160 million for BELBUCA net sales and we expect total company net sales to be in the range of $165 million to $175 million. Looking forward, we expect continued strong growth momentum and continue to believe the long-term combined potential of 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:]

Thank you, Terry. As you can see, the third quarter was a very successful quarter at BDSI, highlighted once again by record level scripts and strong brand growth, robust financial results, and numerous accomplishments across the organization. We are well poised to finish the year strong, have the plan in place and tailwinds for robust growth expectations in 2020 and are confident of our continued future as a growing enterprise.We will now turn the call over to answer your questions. Operator?

[Operator:]

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Your first question comes from the line of Oren Livnat with H.C. Wainwright. Please proceed with your question.

[Oren Livnat:]

Hey guys, I have a couple. Congrats on a yet another great quarter and some pretty spectacular 2020 guidance. On that latter point, I think it's a solid 18% at the midpoint above the Street. So obviously we were already expecting growth. You're expecting a lot more, which presumably includes a lot of volume growth year-over-year. But can you also just talk to price in terms of what you had to give up or not to get those incremental preferred lives covered, should we expect value per script to go up, down, flat next year. And also just in terms of the patent, should we expect a big jump in Q1 with these new lives coming on or more of a slow and steady climb? And I have a follow-up. Thanks.

[Herm Cukier:]

Hey Oren, it's Herm. Thank you so much for the accolades, greatly appreciated. Obviously very proud of the entire organization and the trajectory that we're on. So we're going to break down a couple of points that you asked there. One with regard to pricing versus volume in the growth expectations for 2020, I think consistent with what we've shared previously, we expect net price to be fairly comparable to what we've seen over the last couple of years to be in the mid single-digits moving forward.The only thing I would remind folks is obviously, we did take the price increase this year in March and anticipate doing that in the early part of Q1. So we'll have a little bit of a positive impact in Q1 from – and the impact from year-over-year. But the rest of that will be volume. And I think, Scott, maybe I'll turn over to you because I think the second question was with the significant access that we've been able to secure, how does that really change the rebate profile and the impact on gross-to-nets, which I think is a very positive story as well.

[Scott Plesha:]

Yes. Thanks for the question, Oren. Our team continues to do a great job on our market access side. We've opened up obviously a lot of lives, but we've been very thoughtful about how we do that. We are actually very encouraged to be able to add this plan really within the current structure we have for other rebates. It really will not take our gross-to-net up as a result of it. And that's for both products.We are actually really encouraged. I do think that one of the reasons we are able to secure the PBM and actually increase their interest was the HHS task force recommendations actually in guidelines actually were an important catalyst in our discussion with them. And then the clinical value as well, obviously.So we're encouraged by the rates we're paying to get this win. As far as coming on board, so just give you an idea. So with BELBUCA, a little bit over 5 million lives went to effect early in October. And then the majority – so the remainder, another 9 million or so will actually go into effect in January, what we've seen in past wins, it does take a good quarter or so to really start ramping up. We don't expect a hockey stick. I think what's really important, if you look at any of our market access wins, they're very consistent in how they perform.We're not forcing a switch to our product. We're basically opening up access, removing step edits and then we're going in and selling clinically in the benefits of the patients. So we're able to have very sustained predictable growth across these wins. And then on Symproic on that same front, really only about 10 million lives have been moved over at this point. But the remainder will be in January and that is a little bit more of – a little bit more of a forced switch because we will be a preferred exclusive there where patients will have to utilize Symproic first. Again, a very favorable rebate there as well too.

[Herm Cukier:]

Yes. I agree, Scott team's done a tremendous job and the only thing I would add to your question is that I think we should expect the sales trajectory to be comparable to what we've seen for example this year. But we know Q1 for the entire U.S. healthcare system creates a little bit of a dampening effect as the high deductible plans kick in and folks are transitioning. So I would anticipate that we'll see a similar patent as we move forward into 2020. And Oren, you said you had another follow-up question.

[Oren Livnat:]

Yes. Sorry to be a hog. Just to switch gears a little bit, are you still expecting results of a respiratory depression study at first half of next year? And can you just talk about potential upside or even downside risks maybe associated with that, like if it looks really compelling, how would you be able to take advantage of that data, could it eventually end up in a label or be used elsewhere? And conversely, if it doesn't look as good as you hoped, is there any risk to future growth in your mind or even to existing business? Thanks.

[Herm Cukier:]

Absolutely. Yes, that study has progressed very well is on track. And to your point, we anticipate the final study report to be available during the first half or really probably in earlier part of Q1. We have a great deal of confidence. I think the respiratory ceiling effect of the molecule is well appreciated, well understood. We thought it was important to provide additional guidance and information by studying it specifically within BELBUCA and doing a head-to-head versus oxycodone ER and we're looking forward to seeing the results.And to your point about the potential impact, I think consistent with what I've shared, there is a growing appreciation and groundswell of activity at the federal policy level. And I think if you look at the task force report, for example, they specifically highlighted the safety differentiation of buprenorphine versus Schedule II opioids. And I think this will only further add to the understanding and appreciation of that significant attribute in the kind of environment that we're dealing with today for opioids utilization.

[Oren Livnat:]

All right. Thanks for all the time. I appreciate it. Congrats again.

[Herm Cukier:]

Thank you, Oren.

[Scott Plesha:]

Thanks, Oren.

[Operator:]

Your next question comes from the line of Greg Fraser with SunTrust. Please proceed with your question.

[Greg Fraser:]

Thank you. It's Greg Fraser on for Gregg Gilbert. On access and coverage, what are your goals for preferred access? You're at about 60% of covered lives now. Where would you ideally like that to be? And how do we think about the costs of getting there? You had a lot of lives with the recent wins without impacting gross-to-nets, you mentioned the benefit of the HHS report. Is that a trend that you think can continue?

[Herm Cukier:]

Hey, Greg, thank you so much for your question. I'm going to just start and turn it over to Scott. Our goal is 100% of patients in the United States should have appropriate access to BELBUCA. Patients that are suffering from chronic pain, we believe implicitly in providing physicians with an open playing field to make the best clinical choice for their patients. And we believe the BELBUCA is an important element of physicians on an interim and the appropriate management of this disease.But I know that that wasn't exactly the essence of your question, but I think it's important for folks to recognize and understand our strong belief in the product. And we continue to advocate intensely with payers to ensure that we do our part as a good steward of a product for patients to have access. But Scott, maybe you want to talk a little bit about some of the conversations that we're having on the preferred side. And to be fair Medicare continues to be a little bit stickier for us.

[Scott Plesha:]

Yes, that's a great question. And so on the commercial side, we still feel we have an opportunity. We obviously just had this important formulary change with really the last large PBM that we had not secured previously. So we've done that. Now what we're doing is making sure we have regional plans underneath these commercial plans that we could also improve access. And we believe we can continue to do that. It just takes a longer period of time sometimes to do so. In regards to Medicare, Herm had mentioned it being stickier. It is we're really always having active conversations trying to improve it there, but we're trying to be thoughtful also.The truth is if you can get access, but it's not profitable access, if it doesn't make sense, if it's a completely destroys your gross-to-net, it doesn't make sense. However, we firmly believe that Medicare patients should not have to step through fentanyl, oxycodone, and morphine to get to BELBUCA. So we're committed to doing so and we'll continue to work hard to do that. And then Herm?

[Herm Cukier:]

Yes, Scott, as I say, I really appreciate that you're absolutely right. We continue to have very active engaging discussions with the entities that are providing coverage for Medicare patients. We continue to believe, as we expressed on multiple occasions that if the clinical value and clinical proposition of a product that is really most important element of the discussion. And again, as I mentioned earlier, there's a lot of activity in Washington, including CMS, really re-evaluating their particular guidance to the organizations that they contract with on the opioid coverage that is provided to patients that are suffering from chronic pain.And we're hopeful that that there's going to be an opportunity to have a focus of the conversation, be on the clinical value of BELBUCA moving forward. And again, we will do our part to be good partners in that process and look forward to continuing to drive a pathway of opening access to Medicare patients moving forward. And we're very optimistic that that can happen in the time to come.

[Greg Fraser:]

Great. That's very helpful color. On business development, can you speak to your latest priorities and how would you characterize the availability of the types of assets that you're interested in?

[Herm Cukier:]

Yes, Greg, I appreciate the question. Obviously, we're having a tremendous amount of success. And we first and foremost say priority number one is continued flawless execution with a portfolio of products that we have. Think of anything, we have demonstrated that we keep an eye on the task at hand. And while we're certainly very proud of the success, of the growth that we've achieved with BELBUCA, we have 3% market share.And we have, I guess third quarter of less than 8% new-to-brand share, which as Scott pointed out is a dramatic increase from where we've been, but we're defending that also highlights to us the significant opportunity to continue to drive dramatic growth with BELBUCA. And again Symproic is a wonderful complementary asset, that's perfect plug and play into our portfolio and we're doing very well with it.And we also see significant opportunity for a lot of growth moving forward with Symproic. So priority number one is to your question is the flawless execution with the portfolio that we have and to continue to drive this dramatic growth that we've been experiencing. Now that does create an organization with an opportunity to really control its destiny.And our focus is really to be thoughtful, to be judicious as how we scale the company moving forward. But we are a growth-oriented company and we will keep an eye open for opportunities that we feel continue to be additive and accretive to the opportunity of driving significant growth moving forward. But what – we are going to be very thoughtful about the kind of opportunities that we take a look at. And again, right now, we're really just focused on execution of the products that we have.

[Greg Fraser:]

Got it. Thank you.

[Operator:]

Your next question comes from the line of Scott Henry with Roth Capital. Please proceed with your question.

[Scott Henry:]

Thank you. Good afternoon and congratulations, Herm, really strong execution on the BELBUCA launch. Just a couple questions, first of all, I heard Terry give a peak sales estimate. I think I heard $500 million was the back of it. Could you just remind, I didn't quite catch that. Just let me know what exactly that was and what that was pertaining to?

[Herm Cukier:]

No, I think it's consistent – Scott, thank you so much and I'd like to transfer your accolades to Scott, the entire organization. It's really a tremendous team and other ones that have really done a tremendous job both greatly appreciate your kind words, a long way to go and a great opportunity moving forward as we've expressed here. I think what we've just really reiterated is that when we look at the portfolio of products with BELBUCA and Symproic, again looking long-term we have a great deal of confidence in the growth opportunity for these products.We continue to see a portfolio that can reach $500 million in every day, every month, every quarter as we continue to execute as well as we have, our confidence level in that continues to rise. And moving forward, we've always said, we may increase that if the data proves to us that the opportunity could be bigger than that moving forward. I think more importantly, right in front of us the confidence in finishing 2019 very strong, the confidence in the significant growth expectations that we have now for 2020.And I think what's also important, what we've said all along is that beyond 2020, we continue to see very strong growth. We're growing 100% this year with BELBUCA, you see BELBUCA next year again growing well over 50%. And obviously, we don't anticipate in 2021 that that's all of a sudden going to collapse, right. So we do see moving forward an opportunity for this brand to continue to drive significant growth and therefore significant shareholder value to the corporation.

[Scott Henry:]

Great. Thank you for that clarity, Herm. A couple of modeling questions, I guess, first Symproic, we've got our first full quarter. It looks like revenue per script is kind of in that $140 to $150 range. The question is, is that a good range? Should we think about that as representative going forward? And then a second question, could you talk a little bit about the gross margin assumptions we should have on Symproic?

[Terry Coelho:]

Sure, Scott. This is Terry. So yes, your estimate is about right. I estimate about $150 per script. And so that's probably a good place to be. And for the foreseeable future and based on the gross-to-net, we're estimating at this point in time and it is early days we're just over 60% as I shared earlier. So it's probably a safe place for you to be estimating. I do think once we get a few quarters under our belt, we'll be able to fine tune that and reflect what's really where the patients are really coming from across the different payers and so on.In terms of the gross margins was your question. So actually our gross margins on Symproic are very comparable to BELBUCA, they are in the low to mid-80s, even after paying the royalty to Shionogi. So actually, we liked that, it actually doesn't play with our P& L and is in line with what we would expect as well.

[Scott Henry:]

Okay, great. Thank you for that color. Staying on the model, SG&A I think was around $23 million in the quarter, which was up as we would expect from Q2. How should we think about that SG&A line going forward? Is this kind of a new rate to expect or should we think about it higher or lower from here?

[Terry Coelho:]

Yes. So I think the fourth quarter, being in line with the third quarter is probably where we would end up, as we look forward into 2020, we've been thinking we will end up somewhere averaging in the mid-20s throughout the year and that's excluding amortization.

[Scott Henry:]

Okay. Great

[Terry Coelho:]

Amortization runs about $1.9 million a quarter, so pure SG&A.

[Scott Henry:]

Okay. A final question, still on the model interest expense, it’s that kind of a representative that I think it was $1.2 million in the quarter, is that a good go forward number.

[Terry Coelho:]

Yes. I think it reflects the significant improvement we’ve made on the – yes that’s our net interest expense and it reflects a significant improvement following the debt refinancing earlier this year. So, we no longer have any warrants amortization either. So the net number is the 1.2, we were up at like 2.6 a year ago when you had everything in.

[Scott Henry:]

Yes, that looks great. Well, thank you for taking the questions. Congratulations again.

[Herm Cukier:]

Thank you so much, Scott.

[Scott Plesha:]

Thanks Scott.

[Operator:]

Your next question comes from the line of Matt Kaplan with Ladendburg Thalmann. Please proceed with your question.

[Matt Kaplan:]

Hey guys, good afternoon and congrats on a nice quarter. Just wanted to dig into a couple of things with BELBUCA, can you give us a little bit more color in terms of who is currently prescribing the drug? Is it really pain specialist or is it GPs and I guess what’s the mixture? And then, really who are they prescribing it to? Are they patients transitioning from other opioids or patients transitioning from and NSAIDs to something stronger? Where are you getting traction?

[Scott Plesha:]

Hey Matt, this is Scott, I’ll, answer the question for you. Appreciate the question. So as we look at our prescriber base, it’s sometimes difficult to tell exactly their specialties. So, for example, probably 50%, 60% of them actually have a pain designation. Their AMA designation is pain-related. And then there are many mid-levels and Nurse Practitioner and PAs that really don’t have a specialty associated with them. They’re kind of our next bucket prescribers and those are really our call targets as we go forward.And then there obviously there is a small number of rheumatologists, neurologists and so kind of specialties on the edge of pain specialty. And for the most part they are patients that are being transitioned from short acting opiates. We shared this during our script, about 80% of the patients we see going over to BELBUCA are coming from short-acting opiates. 82% recently, 18% was from long-acting, but about 60% of that is a BU transwitch.So, very little long acting – long acting movement and that’s actually pretty common in this space. So, that’s where the patients are coming from. We don’t – unable to understand if somebody is moving from NSAID to BELBUCA because it’s not captured within our data. I know that is happening and there will be somewhat, but majority is really short acting to BELBUCA. I hope that’s helpful.

[Matt Kaplan:]

Yes, that’s very helpful. Thank you. And then just digging into Symproic, the opportunity in general, can you help us think about that kind of going forward and, you gave us some good detail on BELBUCA and I think people are more familiar with that, but help us understand in terms of the opportunity for Symproic as you go forward here.

[Scott Plesha:]

So when we look at it, the PAMORA market not that complex. It’s basically Movantik, Relistor and Symproic with Movantik owning about 80% of the market. So, our primary goal is the only, the market has been stable, which is good. When you compare it to the long acting opiate market that actually is declining much more than the PAMORAs have.So we think that’s encouraging, but if you look at just Movantik, it’s about 40,000 scripts per month. So, we definitely have some room to grow there. We believe that we’re clinically differentiated. We believe that adding additional market access wins specifically in the commercial space. We have an opportunity to add more preferred lives. We also have a good number that are not covered still. So, we have an opportunity to, I’m sorry a cover but we have to step through Movantik and we’ll work very hard over the next six months to a year to change that so that we’re not having to step through them.

[Matt Kaplan:]

And what’s the price point differential between Movantik and Symproic, is there?

[Scott Plesha:]

It’s negligible. We’re all within like 5% of each other us and Movantik, with Relistor being eight or nine I’m sorry. about four fold higher.

[Matt Kaplan:]

Okay, great. Well, thanks for that detail.

[Scott Plesha:]

Well, thank you.

[Operator:]

Your next question comes from line of Tim Lugo with William Blair. Please proceed with your question.

[Unidentified Analyst:]

Hey guys, this is John on for Tim and thanks so much for the question. I was just wondering, given that you already have about 90% of commercial covered lives with BELBUCA access, where do you see the next major growth opportunities for the product in route to peak sales expectations?

[Scott Plesha:]

Hey John, it is Scott? So first and foremost we just need to keep executing within our current wins. When you look at it adding just 14 million lives here going into 2020 and that’s a good number of lives in the commercial side. And then again, if I look at really every plan that we’ve been able to improve our access there’s a really nice growth trend in place there. So we need to keep that in place. We do that, we’re going to have really nice steady growth going forward. And then we will look to pick-off some Medicare plans, but we need to do it at the right rebate levels. And then Herm

[Herm Cukier:]

Yes, I was just going to add look when you’re – John I think it is a great question. I think it’s a very important question and we get asked this a lot. I guess – in the line [indiscernible] once you run out of plans to open, therefore you cannot grow. It’s actually flipping that around because one of the greatest barriers to growth of a product launch is the availability of physicians to write it with ease if patients don’t have access to the product.What we’ve done is in a relatively short period of time, we have removed that barrier of physician prescription for their patients. So, now it’s really about clinically partnering with physicians as they think about optimal utilization of their opioid choices. And how, as we’ve been describing BELBUCA can really be an important consideration given the significant differentiation, particularly from a safety perspective and the high degree of efficacy.So now the element of whether it’s covered or not covered is removed from the physician’s consideration. And now it’s up to our team to really partner with those doctors and capitalize on that open access. It actually is a pathway in a playing field of growth rather than the other way around.

[Scott Plesha:]

It’s really about changing the way they practice the treatment of chronic pain and in selling clinically and providing the benefits. And we’re, really fortunate to have a clearly different products and a CIII product in BELBUCA. We’re very fortunate and the other thing I’ll add is our goal has really never been to force switches. It’s been really just remove a step at it where we don’t have to step through the other long actings. We need to have, we want to insert ourselves when a patient needs a long acting, we really believe, firmly believe that, CIII product should be the first thing you use like BELBUCA, as long as it’s clinically appropriate. Always has to be clinically appropriate, but all things being equal CIII should always be used before CII.

[Unidentified Analyst:]

All right. Thanks so much, and congrats on the quarter.

[Herm Cukier:]

Thank you, John.

[Terry Coelho:]

Thanks, John.

[Operator:]

Your next question comes from the line of Brandon Folkes with Cantor Fitzgerald. Please proceed with your question.

[Brandon Folkes:]

Hi. Thanks for taking my questions and congratulations on the quarter and the 2020 guidance. Seriously Scott, I think you mentioned that 80% of patients in each BELBUCA are coming from IR switches. I believe this is up nicely from 2Q of about 70%. So we definitely see the task force report working. My question to you is, do you have any color in terms of what percentage market share capture do you have of patients switching to any long-acting from an IR? I’ll let you answer that and then have a follow up? Thank you.

[Scott Plesha:]

Hey Brandon, can you clarify that question? I’m sorry. I’m trying to data switching from

[Brandon Folkes:]

From, so all IR to long acting switches across all opioids, do you have a sense of what percentage market share capture you currently have of any IR patient switching to any long acting opioid?

[Scott Plesha:]

Yes. So that’s our new-to-brand share that we’ve been sharing. So that actually incorporates switches and adds though. So it’s, we’d like to refer to them as transitions Brandon. So a good number of patients are, they’re just adding a long-acting, doctors are adding a long-acting to a short acting. And then, especially with BELBUCA, what they do is they’ll put, they’ll taper down on their short acting, add BELBUCA, and then what really, what’s the goal of eventually getting off the short acting. But so a lot of times it’s an add and then very seldom is a cold switch over to another product.They usually, kind of transitioning over and then tapering down the short acting. But yes, that’s our NBRx with 7.6% for Q3. Up significantly and that’s what we’ve referred to during kind of our script where we’re really encouraged by the fact we had a 7.6% NBRx compared to 3% TRx share, which is exactly the opposite of the other traditional long-acting opiates. They all have an NBRx that is much lower than the TRx share.

[Brandon Folkes:]

Okay, great. Thank you. And then secondly, I know Scott, historically in the past, you’ve, talked that your commercial footprint is right sized, right. With the growth that we’ve seen in 2019 and 2020, can you just provide some color around your updated thinking there? Thank you.

[Scott Plesha:]

No, I appreciate the question. So we’re always looking to optimize and make sure we’re right sized. We do feel that our footprint is appropriate in our space. But as part of our recent review of where we are and also coupling with the wins we’ve had when we look at the access in certain parts of the country, what, for example, this, this recent win means to us, we are going to be heavy in a few areas where we feel like we’re not going to maximize our opportunities. So, what you could probably think about going forward is maybe another seven or eight reps. So about 120 total, no incremental managers, so a minimal spend. We want to be thoughtful and make sure that, we’re not growing larger than we need to.

[Herm Cukier:]

Yes. I would add Scott to the question. I think that that’s very well said. Our approach with our go-to-market model is to call on the pain specialists. As you described earlier that are really writing the vast propensity of long acting opioids and as he pointed out, every year we reevaluate that and the market moves a little bit. And so to your point, we are appropriately making tweaks in the periphery to put our team in the best position to capitalize on the opportunity with BELBUCA. But as he correctly pointed out that, that’s just a little tweaking, and they are showing no need for any wholesale changes. We have the right model to capitalize on the opportunity. We have the right team in place, which is why we’re experiencing the strong growth and the expectations that we have for 2020 and beyond.

[Operator:]

Your next question comes from the line of Esther Hong with Janney Montgomery Scott. Please proceed with your question.

[Esther Hong:]

Hi. So guidance has been raised three times this year. I’m mean, so I’m just wondering of all the factors contributing to BELBUCA sales growth, what was the most surprising or perhaps under appreciated? Thanks.

[Herm Cukier:]

Hi, it’s Herm, thank you very much for your question. It has been a tremendous year. And, part of it is – to your question is a brand that’s in launch mode, right. And as evidence amounts and developed in terms of the robustness of the growth, it gives us the confidence to have a forward-looking point of view. And, we’ve been in a wonderful position where the team has done a tremendous job and again, we have a lot of environmental support from the payers who are providing the kind of access that patient’s needs to the product on the commercial side as we described. And now more and more so from federal policy initiatives coming out of health and human services and so as these events have unfolded, it’s just given us more clarity and more specificity and enabled us to provide an elevated view of the opportunity.So, I’m not sure that there’s really necessarily been a one event that has really been a surprise. It’s really been a collective convergence of the four point strategic plan that we put into last year, which was getting the team that Scott just described the right size and the right architecture to partner with the physicians opening up access, which I think we’ve done a really incredible job at more, more room to go, certainly, but I think really a tremendous advancement over the last 18 months.Building out the medical team, which certainly takes time and we’re really seeing the fruits of that labor. And I think PAINWeek for me was a coming out party for all the work the medical team has done over the last year. We had a tremendous presence in early September at the largest pain conference in the United States with five abstracts and presentations that were accepted and very highly appreciated and a lot of other activity that was robustly attended by healthcare professionals as well as a multitude of other endeavors and activities that the medical team has done and will be doing, such as the respiratory study moving forward.And then finally, the fourth element of our strategy was really beginning to appropriately engage with consumers. And, so what we’re really seeing is all the fruits of all this investment in effort, continuously really taking root and taking hold and give us a confidence to have a rosy and rosier outlook throughout the year and also to give us the confidence to provide now a very robust look for 2020.

[Esther Hong:]

Great, thanks.

[Herm Cukier:]

Thank you very much Esther and Hector, before we conclude, actually I’m wanting to see if, I think Terry is going to just provide a clarification on a data point, Terry.

[Terry Coelho:]

Yes, thanks Herm. So yes, just wanted to clarify that there is a minor typo in the earnings presentation, regarding the upper-end of our total net revenue expectations for 2020 on Slide 5 and 15. As Herm and I shared in our prepared remarks, our expectation is that the range will be $165 million to $175 million. The press release is correct and we will repost the deck for your information and follow-up.

[Herm Cukier:]

Great.

[Operator:]

And ladies and gentlemen, this concludes today’s conference. Any last minute remarks?

[Herm Cukier:]

Yes, I was going to say, thank you very much and we are prepared to close the meeting at this point.

[Operator:]

All right, ladies, gentlemen, this concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.