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Collegium Pharmaceutical Carving a Niche in the Pain Management Industry

19 Feb Collegium Pharmaceutical Carving a Niche in the Pain Management Industry

Collegium Pharmaceutical (NASDAQ: COLL), a Speciality Pharmaceutical Company focussed on developing novel abuse-deterrent therapeutics for pain relief and management, announced the closing of its acquisition of the Nucynta franchise from Assertio Therapeutics (NASDAQ: ASRT), in consideration for $375.0 million in cash at closing, less royalties paid to Assertio in 2020. The agreement also included payment for certain inventories and equipment.

The Company has also completed the funding of its $200.0 million senior secured term loan from BioPharma Credit PLC, in addition to closing a previously announced underwritten public offering of $143.75 million.

Joe Ciaffoni, President and Chief Executive Officer of Collegium, commented

“We are excited to close the Nucynta acquisition, a financially transformative transaction for Collegium. Looking ahead, we expect this transaction will significantly grow EBITDA and operating cash flows, and the financing structure will enable us to pursue future business development transactions that will diversify our portfolio.”

NUCYNTA is an extended-release prescription pain medicine that contains an opioid for treating severe pain, and is indicated for the management of severe short term pain in adults who do not respond well to non-opioidor other opioid-based medicine. Collegium had previously received an exclusive sublicense to commercialize Nucynta and Nucynta ER in the United States, on account of its agreement with Depomed, Inc, which later changed its name to Assertio Pharmaceuticals in August 2018. The Nucynta franchise enjoys patent protection until June 2025 and can avail another 6 months of paediatric extension.

Collegium Pharmaceutical (NASDAQ: COLL)

Market Cap: $774.14M; Current Share Price: 23.11 USDChart
Data by YCharts

Industry
Chronic Pain is the leading cause for seeking medical aid in the U.S.A study undertaken by the Centres for disease control and prevention (CDC) in conjunction with NIH and other entities titled “Morbidity and Mortality Weekly Report (MMWR)”in the year 2016, estimates that 20.4% percent of the adults population in the U.S suffered from chronic pain, while 8 percent had high-impact chronic pain limiting at least one important activity in their daily life. Untreated or undertreated chronic pain contributes to$560 billion each year in direct medical costs, lost productivity, and disability programs in the U.S alone.

The global analgesic market is poised to amass $ 26.4 billion by 2022, growing at a CAGR of 7.1% during 2015 – 2022, according to a report titled “Analgesics Market by Type (Non-opioids, Opioids) and Route of Administration (Oral, Intravenous, Rectal, Transdermal, Topical) – Global Opportunity Analysis and Industry Forecast, 2015 – 2022” published by alliedmarketresearch.

The Analgesic market is broadly divided into Opioid and Non-Opioid therapeutics. Opioid based medicine has given rise to an addiction endemic with prescription drug overdose becoming one of the leading causes of preventable deaths in the U.S in turn prompting the government to declare a public health emergency in 2017.

This has resulted in growth in the non-opioid based drugs segment, with increasing emphasis being laid on research and development in finding non-opioid alternatives to managing chronic pain. According to a study published by BBC research named “Non-opioid Pain Treatment: Global Markets to 2022” the global market for non-opioid pain treatment which was $ 9.9 billion in 2017, is estimated to grow at a CAGR of 18% and reach $ 22.6 billion by 2022.

The largest product category under non-opioid pain treatment is that of Medical cannabis constituting 73% of the market, followed by Menthol – Containing treatments accounting for 9% of market share. Omega-3 fatty acid based treatments constitute 9% of the market share, followed by Botulinum toxins based drugs that contribute 5% and Capsaicin derived treatment make up 3% of the market share.

An increase in the geriatric population along with a rise in life-style related ailments and chronic diseases will drive the growth in the pain management therapeutic markets, along with a favourable government and regulatory environment, increased spending on research and development and fast track approvals for breakthroughs.

Company
Collegium Pharmaceutical develops and commercializes abuse-deterrent products for chronic pain management. Its patented technology platform DETERx provides extended release drug-delivery while deterring abuse and tampering. Xtampza ER, an oral formulation containing extended-release Oxycodone, that uses the DETERx technology platform, is approved by the FDA for management of chronic pain. This also supports alternative administration options besides intravenous such as gastrostomy or nasogastric feeding tube or mixing directly with soft food or liquids.

The company offers Nucynta ER, an extended release formulation of tapentadol for chronic pain that necessitates the daily use of opioids, for conditions such diabetic peripheral neuropathy in adults. Another product Nucynta IR, an immediate release formulation of tapentadol, is used for the management of moderate to acute pain in adults.

On November 8, 2018, Collegium entered into an amendment to the Commercialization Agreement with Assertio Therapeutics (formerly Depomed) related to the Nucynta franchise wherein it removed the $135.0 million guaranteed annual minimum royalty obligation in future years, which was expected to significantly reduce liabilities on Collegiums balance sheet and enables a tax efficient structure. However, with the complete acquisition of the Nucynta franchise will result in a significant improvement in the Company’s EBITDA and considerable cost saving.

As per the Company’s financial guidance for the year 2020, revenues from Xtampza ER are estimated to be in the range of $150.0 million to $160.0 million, while revenues from Nucynta franchise are projected to be in the range of $170.0 million to $180.0 million.

Joe Ciaffoni, President and Chief Executive Officer of Collegium, stated

“In 2020, Xtampza ER is well-positioned for the next stage of growth driven by the 15 new exclusive extended-release oxycodone formulary wins covering more than 35 million lives that took effect on January 1, 2020. Xtampza ER growth, as well as a commitment to leverage our existing cost structure, will drive Collegium to profitability in 2020.”

Risk Assessment 

  • The Company’s proprietary DETERx technology platform has two distinct advantages over conventional pain medication namely it has anti-abuse properties and its pain release mechanism cannot be manipulated. The extended-release pain medication segment is estimated to be worth over $ 6 billion and is currently dominated by Oxycontin. Xtampza is considered far safer and has lower abuse potential compared to the options currently available in the market, which may augur well for its growth.
  • Collegium has managed to land key national accounts, such as from January 1st 2020, the drug became the exclusive extended-release oxycodone for more than 35 million patients, making it the most-prescribed ER oxycodone. The drug has been adopted by premier heathcare networks such as Cygna and CVS Health (NYSE: CVS) which validates its technology and addresses the need for an abuse-deterrent, safer alternative to conventional pain medications.
  • The Company which was earlier paying royalties to Assertio, will no longer be required to make any such payments, leading to an estimated $100 million in annual EBITDA and cash flow improvements. Combined with an increasing patient population and the deal with Assertio, the Company is poised to make major strides in the market in 2020.
  • Opioid Addiction is a growing epidemic which has reached an endemic proportion in the U.S. Prescription drug overdose is one of the leading causes of preventable deaths in the U.S, prompting the government to declare a public health emergency in 2017. There is stringent regulatory control and negative perception towards opioid based drugs, which makes it an extremely challenging environment for drug development and commercialization for any company.
  • Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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    Source

    https://finance.yahoo.com/news/collegium-pharmaceutical-inc-prices-125-001503640.html

    https://www.globenewswire.com/news-release/2020/02/13/1984916/0/en/Assertio-Therapeutics-Announces-Closing-of-Sale-of-NUCYNTA-Franchise-to-Collegium-Pharmaceutical-for-375-0-Million.html

    https://ir.collegiumpharma.com/news-releases/news-release-details/collegium-provides-2020-financial-guidance

    https://finance.yahoo.com/quote/coll?ltr=1

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