BioDelivery Sciences International, Inc.
Q3 2018 Earnings Call Transcript

Published: 9 Nov 2018

[Operator:]

Good day, everyone, and welcome to today’s BioDelivery Sciences Third Quarter 2018 Earnings Call. As a reminder, this call is being recorded. At this time, it’s my pleasure to turn the conference over to Mary Coleman, Vice President of Investor Relations for BioDelivery Sciences. Please go ahead.

[Mary Coleman:]

Thank you, Justin, and welcome everyone. Today we issued a press release reporting BDSI’s third quarter financial results ending September 30, 2018. The press release is available on the company’s website at www.bdsi.com. We are conducting a live webcast of this call, which will be available for replay on our website after its conclusion. I would also like to remind you that during the course of this call, management will make projections and other forward-looking remarks regarding future events or future financial performances of the company. It's important to note that such statements and events are forward-looking statements and reflect our current perspective of the business trends and information as of today. Actual results may differ materially from our current expectations and projections, depending on the number of factors affecting BDSI business. These factors are detailed in our periodic public filings with the Securities and Exchange Commission. BDS disclaims any intent or obligations to update these forward-looking statements except as required by law. Today’s call will be lead by our Chief Executive Officer, Herm Cukier; and he is also joined with Scott Plesha, our President and Chief Commercial Officer; Dr. Thomas Smith, our Chief Medical Officer; and Ernest De Paolantonio, our Chief Financial Officer. At this time, I would like to turn the call over to Herm. Herm?

[Herm Cukier:]

Thank you, Mary, and good afternoon to all and it is my pleasure to welcome you to the company's third quarter earnings call. It has been six months since I started CEO of BDSI. I am very pleased and excited about the progress being made in transitioning our company to a commercial enterprise that’s positioned for strong growth. Achieving this vision will be anchored on the continued successful launch of BELBUCA, ensuring the product becomes the leading choice for the management of chronic pain. More and more, as we continue to build momentum, my belief grows in the long-term potential for BELBUCA to achieve annual sales greater than $200 million. Our very strong performance during the third quarter both in terms of financial achievement and operational execution once again demonstrated this organization's ability to deliver on the strategy we have set forward for sustained growth. The accelerated trajectory we have established underscores my confidence that we are well positioned as a rapidly growing specialty pharmaceutical company prepared to meet our customer needs and create corresponding shareholder value. Let me begin by highlighting the very strong financial success of the third quarter. For the month of July through September, the company achieved total net revenue of $14.2 million with total product revenue growing 48% year-over-year and 11% versus the prior quarter. These results were primarily fueled by our core strategic asset, BELBUCA, which experienced a growth in revenue of 92% year-over-year and 27% versus the prior quarter, reaching a new quarterly high of $12.4 million. In terms of total scripts, during the quarter, BELBUCA reached a new record total of 44,180, an increase of 95% year-over-year and 25% versus prior quarter. Scott and the entire sales team are doing an excellent job in bringing value to our customers every day and creating new and more frequent prescribers. This is a vital element of success during the early stages of any product launch and we are very pleased by BELBUCA’s performance on this front. To that point as we look at all leading indicators of the successful product launch from accelerated script growth to growth coming from a wide range of our prescriber segments and many more, we are seeing universal success. The broad base together with accelerated adoption provides an outstanding foundation to build sustained BELBUCA growth. In addition, one of the most important aspects to fully realize the market potential of BELBUCA is ensuring patients suffering from chronic pain have appropriate access to the product. We remained steadfast in making BELBUCA available on preferred status as many patients as possible. When 2018 began, only 3% or less than 7 million of total covered lives had preferred access to BELBUCA. By the end of the third quarter, we had grown that number to more than 75 million covered lives. We had another major announcement just last week raising this to more than 100 million total covered live having preferred access to BELBUCA; truly getting to this magnitude of preferred coverage in less than one year has been an extraordinary accomplishment by the team. Scott and Tom will further elaborate on our efforts to continue this positive trajectory later in today's call as well as other key elements of our previously announced four point BELBUCA growth plan. The implementation of the strategic plan is now well underway including expansion of our sales team by more than 30% and I am confident that we have the right focus and resources to ensure its complete accomplishment and success. As we further continued to evolve and scale the company for sustained growth, attracting top industry talent remains one of my top priorities. To that end, I am very pleased to welcome Jim Vollins to our leadership team as General Counsel, Chief Compliance Officer and Corporate Secretary. His exceptional qualifications and extensive experience make him a great addition to our team. Furthermore, we have expanded Scott's role to that of President and Chief Commercial Officer. This is an acknowledgement of the important contribution that Scott has made in the successful launch of BELBUCA over the last 18 months and the vital role the commercial part of the company will continue to play in achieving our ambition of sustained company growth. I would also like to take a moment to recognize Ernie who has decided to retire as our Chief Financial Officer by mid 2019. It has been a pleasure getting to know I am working with Ernie since I joined the company. We were very grateful for the many contributions he has made to the company over the past five years and the important role he have had in helping us transition to the rapidly growing commercial stage company we are today. We appreciate the lead time Ernie has provided us in his retirement announcement, which will ensure a smooth transition. Again, we thank Ernie for his dedicated service to BDSI and I look forward to working with him as we identify a new CFO in the coming months. We've made great progress throughout the year on the launch of BELBUCA and transition the company to the rapidly growing commercial organization we are today. We entered the fourth quarter with momentum and the fiscal discipline to properly invest in a BELBUCA’s strategic plan in 2019 and beyond. Based on the performance achieved in first three quarters of the year and our strong balance sheet to properly invest in our plan, we expect year performance to be in the high end of our previously stated guidance range. I will now turn the call over to Scott to describe our operating performance in more detail. Scott?

[Scott Plesha:]

Thank you, Herm. As Herm noted we experienced a very strong third quarter of BELBUCA achieving both significant prescriptions and revenue growth. BELBUCA’s strong growth results in our reaching an all time high this quarter at over 44,000 prescriptions. We have now reached all time consecutive quarterly heights ever since we relaunched BELBUCA in the first quarter of 2017. We have driven strong prescription growth and the key leading indicators around this growth are equally strong and give us confidence that we can not only sustain our growth, but build upon. I’d like to take a few moments to review these key metrics. Since early this year, we've seen a consistent increase in our new prescribers as well as the number of prescribers each quarter. This quarter we saw that trend continue. During the third quarter, there were more than 4,750 unique BELBUCA prescribers and 900 new prescribers. During the quarter, we not only increased our prescriber base, but also saw prescriptions and share growth across every decile position which demonstrates the growing acceptance of BELBUCA by HCPs. We also saw all our [indiscernible] exhibit meaningful growth during the quarter with every strength growing greater than 14%. We believe this demonstrates the comfort HCP have in prescribing BELBUCA across all doses range while allowing the patient's care to be tailored to the lowest effective dose. A very important leading indicator where our products TRx market share is trending is the new to brand market share. I'm pleased to share that while BELBUCA's market share in September was 1.3%, the new to brand market share increased significantly to 4.4%. This represents an increase in new to brand market share from 1.6% in January 2018 and from 3.5% in June of 2018. The accelerated growth, our new to brand market share and the spread between it and our TRx market share are predictive of strong future TRx growth. Finally, as Herm mentioned, we have improved our market access greatly in 2018. Our commercial team has done an excellent job of executing against these wins and has driven record prescription levels in each PBM of plan since the contracts were executed. Market access and formulary wins is another strong trend supporting our confidence and much has been accomplished in this area. In August, BELBUCA was added to the express scripts commercial preferred formulary list adding 20 million covered lives with access to BELBUCA. Most recently we announced that BELBUCA has also been added to the OptumRx commercial preferred list that became effective November 1, 2018. The total number of lives where BELBUCA is covered in a preferred Tier 2 position is now over $100 million and we still see a lot of room to grow. With our recent wins, there are over 45% of combined commercial and Medicare lives covered in preferred Tier 2 position, which is up significantly from 3% of lives covered at the beginning of the year. We continue to see strong interest in acceptance by the commercial and government payers of BELBUCA’s differentiated qualities and then we are very optimistic about adding more wins. While it's difficult to predict when wins will occur, we are confident that over time the number of lives have been preferred access to BELBUCA will continue to rise. As we previously announced, we are in the process of expanding the market access team and anticipate these individuals joining the company before the end of the year. This increase in personnel will allow us to focus more on regional plans as well as important national level payers. We're encouraged by the impact and execution in the sales force expansion that we implemented in early 2018. This success gives us confidence that our recently announced sales force expansion will be a growth driver in 2019 and beyond. I'm pleased to share that the commercial team has worked very hard in an efficient and timely expansion and result of this initiative is nearly complete. We've hired approximately 30 new sales representatives on the process of training and certifying these individuals. We expect to have our full sales force of 130 sales representatives in place by the end of the year and we expect to see them fully contributing to sales and growth over the next six months. Thus far we have had a very successful 2018 with BELBUCA and this success gives us confidence that our plans to accelerate growth will have an impact in 2019 and beyond. I look forward to updating you on the previously mentioned leading indicators and the progress we've made with our growth plans during our next earnings call. With that I'll turn things over to Dr. Tom Smith, Chief Medical Officer to provide a highlight of our medical plan and initiatives.

[Thomas Smith:]

Thank you, Scott. It's a pleasure to update everyone here on the progress we have made in defining and now implementing our strong medical plan. As highlighted at our Analyst Day last month, we identified the key priorities. The elements that will be addressed from a medical perspective, and as such, we have now defined several activities and tactics that will mitigate on those hurdles and allow for awareness and education around BELBUCA. Since our Analyst Day, we have accomplished a great deal. In addition to onboarding top industry talents, we have met with key customers and scientific thought leaders, ensuring that our deliverables will not only satisfy but exceed on achieving the challenges and opportunities we have identified from all stakeholders perspectives. This fourth quarter we are teeing up our 2019 medical plan, preparing to initiate our industry sponsored consensus guidelines in early 2019, finalizing our areas of interest around company funded ISR proposals, outlining ambitious 2019 scientific congress strategy and delineating our 2019 publication plan. In addition to meeting with all our customer groups, we will be holding the advisory board meeting in early December to ensure that we have identified and thoroughly addressed all opportunities. Also in December, we will be attending the American Society of Health System Pharmacists Clinical Meeting at Anaheim and we'll onboard our first MSLs. Our focus this quarter is to ensure that we start 2019 strong and execute fully on the medical plan we have put together. As I shared with you at Analyst Day what gives me as the physician the most satisfaction is knowing that this plan through it initiatives and education will create awareness and understanding around BELBUCA allowing millions of patients who are suffering to now have access to this medication as a solution for their chronic pain. With that, I will now turn the call over to Ernie De Paolantonio to cover the financials in more detail after which we will open the call for questions. Ernie?

[Ernest De Paolantonio:]

Thank you, Tom. Before I start, I wanted to give an update on the number of sales reps that we have. Scott had stated 130 sales reps when there's actually 113. During the third quarter, BDSI recorded total net revenue of $14.2 million, an increase of 16% compared to $12.2 million in the second quarter of 2018 and 26% compared to $11.3 million in the third quarter of last year. BELBUCA revenue this quarter was $12.4 million, up 92% from $6.4 million last year and up 27% from $9.7 million last quarter on a reported basis or 20% versus the $10.3 million on an operational basis taking into consideration the one-time event. Gross-to-net deductions increased in the third quarter to 47% driven by market access contracts and a one-time cost adjustment in Medicaid rebates based on prior utilization. We now have a better visibility into our Medicaid accruals and we continue to expect our gross-to-net rate to be in the high 40s based on expected increase of market access contracts and mixed pull-through. Gross profit for BELBUCA was 81% in the third quarter and while strong still reflects product usage on previous – on the previous packaging line. Beginning with the fourth quarter, we will be using material mostly from our new packaging equipment, which will reflect higher yields and lower cost. Total gross profit from both commercial products was 76%. Total operating expenses for the third quarter was $14.2 million, a decrease of 16% when compared to $16.9 million in the third quarter of 2017. Our expenses this quarter reflect the investment in our commercialization efforts and the cost control of other expenses. Breaking down our operating expenses, expenses for sales and marketing was $7.2 million, G&A were $6.3 million and R&D were $0.7 million. Non-GAAP net loss in the third quarter of 2018 was $6.4 million or $0.10 per share. The GAAP net loss of $18.9 million or $0.29 per share includes a one-time non-cash charge of $12.5 million for the beneficial conversion feature of the Series B preferred stock. Net loss in the third quarter of 2017 was $12 million or $0.21 per share. Finally, as of September 30, our cash balance was $49.5 million reflecting $6.2 million cash burn during the quarter. And based on our current operating plan, we believe we have sufficient cash runway into 2020. Thank you and I will now turn it over to the operator to open the call for a question-and-answer session.

[Operator:]

Well, thank you. [Operator Instructions] Our first question today comes from Brandon Folkes with Cantor Fitzgerald.

[Brandon Folkes:]

Hi. Thanks for taking my questions and congratulations on the quarter and what we've seen post the quarter. So, firstly, can you give us a little bit more color on where the growth of BELBUCA is coming from? How much of this is new pain patients? And how much are you seeing switches to BELBUCA from patients who are actually well tolerated on other opioids? And then secondly, you mentioned you'd be at the high end of your guidance for the year. Given the script data, we're seeing post the end of 3Q that would seem conservative. So just can you talk us through any pushes and pulls that we may have to think about in 4Q? Thank you.

[Herm Cukier:]

Hi, Brandon. Thank you so much for the questions, greatly appreciated. So I'll turn it over to Scott to talk a little bit about where the scripts are coming from, but let me address the second question first. We’re thrilled by the performance that we experienced in the third quarter where we're thrilled by the evolution of the success of the launch of BELBUCA over the first nine months of the year and the momentum that we have adding to the fourth quarter. But we're mindful that we're still very much in launch mode and recognizing that we are entering the holiday season and this is really the first year that drug will experience the holiday season and this kind of growth trajectory. So, we're waiting to see how the quarter really transpires. And Scott and team have done a tremendous job of recruiting and hiring and onboarding new reps, but they're just getting out there and with all the new territories as well. So we need to be mindful of that. And now obviously of the facts that’s just coming online. So we're being very thoughtful about the guidance, which is the first time that company provided guidance. And again, we have a lot of confidence of the momentum that we have and are confident enough to say will be in the high end but because of those factors, we think [indiscernible] talk a little bit about where the scripts are actually coming from.

[Scott Plesha:]

Yeah, thank you for the question Brandon. I will share a little bit more of that data we spoke about at our Investor Day and I think this is important data. I mentioned earlier the NRX share growth – I am sorry new to brand growth and we're very pleased by that being at 4.4% now, which is up dramatically from 1.6% at the start of the year. What we've seen really is about 60% of our patients are really coming on board. There's being added – were being added to a short acting about 80 – almost 90% of the time. So it's patients that are probably elevating their dose of short actings or taking it very frequently and needing a chronic med like BELBUCA. So it's a great fit for that. It's being inserted in front of other long actings in that situation. And then the other 40% a – you’ve kind of broken up a little bit more, but about 70% of the time we’re being switched directly from a short acting about 20% directly from Butrans and a small percentage from long-actings at 10%. So we're encouraged by that because the short acting market is very large and it shows that it's really not just patients being switched from Butrans, which will be in the smarter – smaller pool of patients basically.

[Brandon Folkes:]

Great, thank you very much.

[Scott Plesha:]

Thank you.

[Operator:]

And next is Scott Henry with ROTH Capital.

[Scott Henry:]

Thank you. Good afternoon. And let me first say, Ernie, it's been a pleasure working with you at the past many years. Good luck.

[Ernest De Paolantonio:]

Thanks, Scott. Same to you.

[Scott Henry:]

Okay. So the first question is somewhat subjective, but I think it's an important question is if we think of a drug launch as an S curve, everything I hear seems to – it seems like the market share gains should be increasing for a while. And I just want to get your thoughts on that on where you think you are on that curve as far as market penetration?

[Herm Cukier:]

Hi, Scott, it’s Herm. I think Scott and I were looking each other because we’re both eager to jump in and answer that because we're all time commercial guys and we love launching these kinds of drugs. You're right. I think it's a very important question. And Scott and I are very much on the same page, but we're in the early days. We’re in the early stages of this launch. We are steadfast in our belief that this is the right product, right profile for patients that are suffering from chronic pain, but it is changing market behavior and that will take some time. And I'm looking at Tom as well as a physician. I think we will ask Tom to speak about that. But different launches follow different kinds of curves and different trajectories and every market situation is different. But we are confident that this is a drug that has a long runway and a long way to go, which is why we – as we look at the long-term, we believe it could be more than $200 million in sales. Again a lot of work ahead of us, but Scott and Tom [indiscernible] maybe to jump in as well.

[Scott Plesha:]

Well, I'll take that very quickly. Thank you, Scott. I think we have to look at the evolution of our promotion already. I mean, really we're just getting to right size on sales force, so we really haven't applied the right reach and frequency across all deciles yet and that will start here shortly. We've just recently increased our market access to 100% literally since August and that really hasn't taken full effect. We’re seeing some signs of that, but it's really early, only being a few months for Express Scripts and really Optum just coming on. And this market is evolving. And if anything is some of the factors there I think are tailwind for us. And we believe we're just getting started in this launch. And we're treating this as really a relaunch or launch of the product at this point in time.

[Herm Cukier:]

And I'm looking at – but it will take some work and it will take some time to really change physician behavior that's pretty well entrenched in this space.

[Thomas Smith:]

That's right. That's right. It is and thanks for the question Scott, but kind of echo what Herm and Scott have said that. We are very early in this. And what I see when I'm out there meeting with our customers and meeting with the prescribers out in the field that awareness is just now in it's very – in its infancy rate. And I think some of the data that Scott shared about, a lot of the scripts now are the first long acting opioid being written when. And so physicians are slowly starting to adapt – to adopt this, so very encouraged by that, but – again very early in the process.

[Scott Henry:]

Okay, great. And sort of the related question is the metric new to brand which is, it looks like it's almost tripled from 1.6% to 4.4%. Historically when we think about TRx share versus new to brand share, what is one typically ultimately capture? I don't imagine – I imagine it's a leading indicator, but it's always a little higher than what you would actually get to. So I'm just trying to get a sense of if your new to brand share is 4 – if it was flat at 4.4%, what do you – what would you expect the TRx share to ultimately reach?

[Herm Cukier:]

Yeah, so at the end of the year, giving some metrics, we're at 1.6 new to brand and 0.6 on TRx in January. So – and we obviously didn't have anywhere the rapid growth we have this time. We've really accelerated that, but I think that 1% share is probably fair some of that range. Ultimately, Scott, our goal is to keep building upon that NRx share and the bigger the gap we can build, I think the faster you can see the TRx share pull up towards it. But you're right, you're spot on. We'll never hit that number. So the key for us to have sustained long term growth is to maintain – not just maintain that NRx brand share, but build upon it going forward.

[Scott Plesha:]

Okay. Thank you guys for taking the questions. I'll jump back in the queue.

[Herm Cukier:]

Thank you, Scott.

[Scott Plesha:]

Thank you.

[Operator:]

And next is Matt Kaplan with Ladenburg Thalmann.

[Matt Kaplan:]

Hi, guys. Congrats on an impressive quarter. I'm wanting to focus a little bit on the process in terms of education of doctors and payers alike, physicians and payers alike with respect to buprenorphine and BELBUCA in general. I guess with the payers, what are you seeing in terms of the requirements for let’s call it stepping through a generic opioids other than buprenorphine and having to avoid that. And then I guess for providers, for physicians, where are you in terms of educating them in terms of the ability to switch from other opioids to buprenorphine or to BELBUCA specifically without going through the titration of step kind of a direct switch?

[Herm Cukier:]

Okay. Well, Matt, I appreciate your questions. Regarding the payers, obviously there's been a change of – a rapid change in that, how they're dealing with step through and other long acting. So if you go back to previous to January of 2018, really only 3% of all commercial Medicare lives, we were required always the step through and other long acting except for 3% of lives. And now we're – when you're in 40%, 45%, 46% of covered lives in Medicare and commercial combined, we no longer have stepped through. And really that's been a key to our education clinically with the payers is talking about removing that. That's really what we want. We're not trying to get any kind of force switches. We really just want to open up access. I think the data I shared with you is really important earlier, but on the switch data the majority of patients are either being added to a short acting or switched from one. So if we can open up access where we don't have to step through, you see a really nice pull through and you've seen that across every plan. So what I would say is just our access points to the fact that payers are more open to removing that step through. And I will let Tom comment on the actual switch and titration.

[Thomas Smith:]

Right and thank you, Matt, for the question. And yeah, so what I hear and then what I shared with – at Analyst Day last month was that that is one of the opportunities that we have in front of us right is to get physicians comfortable, right, converting from a schedule two to BELBUCA. And so one of the initiatives that we're going to carry out in the first quarter is actually do an industry sponsored consensus guidelines where we have the experts talk, right, where they have them, we have them review the literature and the scientific evidence about what's being done and share their own personal experience and then we can publish that in the form of a consensus paper. So, again, we're early in the process. I've been here or now three months this week and – but we've identified kind of what are those opportunities from a medical priority perspective and you hit on one of them for sure. And then I think we've got a really good plan in place next year. We've already have identified kind of what our publication strategy is and our Congress strategy and again ways to get this information out to the prescribers and from a bottom up approach, but also a top down approach, right. So that they feel comfortable using BELBUCA as their opioid for chronic pain.

[Matt Kaplan:]

Great, great. Thanks for the added color and congrats again.

[Herm Cukier:]

Thank you.

[Operator:]

And our next question comes from Oren Livnat with H.C. Wainwright.

[Oren Livnat:]

Hey, guys. I would like to add my congrats to the pretty impressive quarter. A few questions. If I can just follow up on the Brandon's question about how conservative your guidance is. I mean, obviously if I'm looking at IMS, not Symphony like you, but I assume it's similar if I flatlined scripts going forward, even with holidays, taking chunks out for holidays. It looks like you're running about 18% – 17%, 18% quarter-over-quarter growth in your guidance at the top end implies 3%. So I just want to confirm that there's not any expected material drop and net value per script in Q4 with you know let’s say Optum coming on or any other contract changes, right.

[Herm Cukier:]

Correct. There's nothing that that we have at this point that makes us reiterate on the upper end of our guidance. It's what I stated before. I think that there's a number of things to observe and for us to really see how the fourth quarter evolves.

[Oren Livnat:]

Okay, cool. And I hope you don't get mad at me if I'm above your guidance. Also I noticed your gross margins…

[Herm Cukier:]

No, we won’t get mad at you.

[Oren Livnat:]

Okay. I noticed you gross margin actually jumped substantially quarter-over-quarter. And that's actually despite what look like lower royalty revenues. So can you just talk about – I know you talked about the product gross margin being – I guess in the mid 80s at least going forward. Just overall corporate gross margins, maybe a little lumpy, where do you think it's going from here and next quarter and what should we think about for 2019?

[Ernest De Paolantonio:]

For next quarter - it's Oren, Ernie. Thanks for the question. For next quarter, I think we'll still be in the 80s for BELBUCA and in the 70s for both products. I think we're going to be pretty consistent with that. As we said we're going to have product mostly from our high speed packaging equipment, which will give us higher yields and lower costs. So we believe we'll be in that range.

[Oren Livnat:]

Okay. And just lastly, Herm, are we still waiting for some formal recommendations from this pain management – it's a mouthful, Pain Management Best Practices Inter-Agency Task Force. And I know I've seen their tentative recommendations that I'm just wondering, do you think there will be a real impact potentially on guidelines and/or coverage expanding for buprenorphine specifically for chronic pain?

[Herm Cukier:]

Thanks very much, Oren, and I appreciate the question. I think as – we as a company have stated on many occasions, we absolutely are steadfast in the belief that BELBUCA is the product with the right profile, today's situation, today's market with today's patients and should be a serious consideration for frontline treatment of chronic pain management. We continue to advocate for that across all stakeholders, including people at the policy level. And we're pleased to see that there is conversation being had in different parts of Washington around best practices of pain management. We'll see ultimately how that develops, but I'll turn it over to Tom in for running the medical perspective…

[Thomas Smith:]

Yeah, thank you, Oren and we are kind of awaiting that draft as well. And we expect it this month as you mentioned. And again just to echo on what Herm is saying, we believe that BELBUCA is frontline therapy for patients with chronic pain and we're optimistic that we'll see what, actual taskforce that I’ll recommend, but yes, optimistic.

[Oren Livnat:]

Alright, thanks. That's it from me.

[Thomas Smith:]

Thanks, Oren.

[Ernest De Paolantonio:]

Thank you, Oren.

[Operator:]

And our next question will come from Tim Lugo with William Blair.

[Tim Lugo:]

Thanks for the question and I want to pass along my congratulations as well. And I guess I'll ask Ernie a question since we'll only have him for a few more quarters. Gross net looks relatively flat, quarter-on-quarter, I believe. Was that the Medicaid accrual issue you mentioned in your prepared comments? And also you mentioned maybe GTN going to the high 40s. Can you talk directionally, is that I guess correct in Q4? And what is going on there? And then maybe as we start to look out on 2019, directionally where GTN will be moving.

[Thomas Smith:]

Sure on the question Tim regarding the Medicaid that was an accrual based on a lower rate than with the charges actually came in. So it was a little bit of a makeup there. As far as the gross to net, we had stated before that as we get newer contracts come onboard that – the gross to net was going to be moving from the mid-to-high-40s and we're still staying with that. That we believe right now with the contracts coming on and the payer mix will continue to be in that range.

[Tim Lugo:]

Okay, fair enough. And as we look into 2019, and maybe this is for Scott or Herm, is the growth really going to be deepening into your current contracts, current kind of preferred lives covered, or should we expect a number of new contracts being signed for 2019 as well?

[Scott Plesha:]

Yes, well thanks Tim, it’s Scott. I'll take that very quickly. So, we feel we have a good amount of growth within our current contracts, keeping in mind that we have like Express Scripts came on board in August and then OptumRx was just November 1. So we're really just getting started there. And we're also very really excited about the continued growth within the other plans and there's really no signs I see that we’re slowing our growth. And we got to keep in mind our market shares are still very low in these plans, highest one I think is 2.3% or so in any one plan. So lot of room to go. And then on the, on the new plans we are encouraged by the conversations and the tone of conversations we're having. It's still unpredictable there, but we have stated, that we're, going to work hard to open up access for this product. It's important to do so and we’ll continue to work at that. But I would, really look at our current contracts and be confident that those will carry our growth going forward without even adding other lives.

[Herm Cukier:]

And this is Herm. Tim, I think Scott is right on. And I would also add, I think, Scott mentioned this at the Analyst Day as well is we're also seeing the opening of backdoors in these plans has the added benefit of driving overall growth even for lines that are not covered by these particular plans. So I think even without adding any additional new plans we are well positioned to continue our sustained growth momentum into 2019 and beyond.

[Tim Lugo:]

Okay. Understood. And I think I might know, at least my belief to answer this question, but I wanted it to, run it by you as well. The new opioid legislation was obviously passed recently. There was a lot of kind of, I'd say some anxiety around this space. Can I just get your kind of broad thoughts around that legislation, whether it's going to be a headwind, a tailwind or maybe not impact your business much at all?

[Herm Cukier:]

Yeah. Thank you very much for the question to Tim. I'll just make one comment and turn it over to Tom. So, from my perspective, I think I’ll skip forward. It is we're very pleased to see the government taking action then that helps patients and expanded access to the treatments and therapies, but Tom you are very much involved in this space.

[Dr. Thomas Smith:]

Right, thank you Herm and thank you Tim. But yeah, the opioid bill as Herm mentioned, it's nice to see the government taking action and seeing them, really address the opioid crisis, which continues in this country. And primarily it expands access to treatment, right? Then medication assisted treatment and otherwise, and but when it comes to, when it comes to our space. It really does not, is not material to the management of chronic pain. But again, we're pleased to see that the government is taking action to help those patients who do suffer from the disease of addiction. So.

[Tim Lugo:]

Understood. Thank you.

[Dr. Thomas Smith:]

Thank you. Tim.

[Herm Cukier:]

Thank you. Tim.

[Operator:]

[Operator Instructions] Our next question today comes from Ken Trbovich with Janney.

[Ken Trbovich:]

Thanks for taking the question. I guess I just want to circle back to the conversation or the question that was asked earlier about new contract wins. And I guess what I'm really trying to understand is Company's plan for communicating future wins. One of the things that obviously made these win's a bit unusual year, with Express Scripts and Optum would be the idea that they're coming off cycle. Is there some plan in terms of communicating going forward, in terms of materiality, should we expect that we won't see or hear anything unless it's off-cycle or is it something that you guys will look at, sort of evaluate and say, hey, if we think it's material, even if it's on the cycle, we'll go ahead and announce it, so that folks have a clear understanding of exactly where you're at on, on some of the key accounts that you're still focused on.

[Scott Plesha:]

Again it is Scott, thanks for the question. We’re actually obviously very pleased with any win and especially the off cycle, I think it points to one of the questions earlier about do we see a trend in opening up access without step through. And I think that also strengthened that point. But yes, we'll always evaluating these wins inside, if they are material and if they are will announce no matter if it said January 1 or March 3 or something. So those are good dates but we will do that and we'll have to evaluate each one plan by plan.

[Ken Trbovich:]

Got It. And then just with regard to the sort of difference between the Medicare and the commercial side. Is there any sense, I know you guys have been fairly pleased with the idea that despite not necessarily having the coverage that you'd like. You're still seeing the ability to get access and to get reimbursement on some of those lives that aren't officially under a preferred sort of contract, is there sort of an update there that you can give us a sense for because I wouldn't expect that you're ever going to reach the same level on the Medicare side that perhaps, you plan to reach on the commercial side?

[Scott Plesha:]

Yes. Thanks again. So we really take every plan differently. There are a lot of different metrics. You look at everything from approval rates. And one, every plan is different in how they manage lives and how closely they manage their formulary. So we have to make business decisions and providing access and need to be profitable access. So, really – we'll take those on a case by case basis and we are committed to opening up when it's appropriate.

[Herm Cukier:]

This is Herm, Ken. I would just add to what Scott saying that I think it's important that again, this is a drug that is a very meaningful treatment choice of frontline managing chronic pain, I think commercial and Medicare patients and Medicaid patients that access to this product. We're steadfast in our commitment to working with all the stakeholders to make that happen and some of them will have them sooner than others, but we remain committed over the long run to increase access to as many patients as we possibly can. I think as Scott builds out his market access team will be able to not only engage with the regional plans but also the blues obviously are very important in that space. So we're optimistic that we have the right product and we are pleased by the national plans that have come online in 2018. It's impossible to predict exactly when and which ones will come on. But we expect over time that this product will be well appreciated by the majority of plans.

[Ken Trbovich:]

Got it. Thank you.

[Operator:]

Thank you. At this time, there are no more questions in the queue. I'll now turn the call back over to the CEO.

[Herm Cukier:]

Thank you, operator. Once again, allow me to congratulate all the employees of BDSI for an outstanding performance during the third quarter and first nine months of 2018. We have said this company on an exciting trajectory as a very rapidly growing commercial stage pharmaceutical enterprise. I'm very confident we're well positioned to finish the year strong and poised for an exciting 2019 and beyond. Thank you all very much for joining us today and we wish you a wonderful evening.

[Operator:]

Well, thank you. That does conclude today's conference call. Thank you for your participation today.