Welcome to the Collegium Pharmaceutical First Quarter 2017 Earnings Conference Call. Before we begin today's call, we wish to inform participants that the forward-looking statements made today are pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. You are cautioned that such forward-looking statements involve risks and uncertainties, including and without limitation to the risks that we will not be able to successfully commercialize or achieve the expected rate and degree of market acceptance for Xtampza. Furthermore, we are subject to patent infringement litigation and may in the future be subject to additional litigation relating to our other product candidates, which may be expensive to defend and delay the commercialization of Xtampza, or our other product candidates. These risks and other risks of the Company are detailed from time in the Company’s periodic reports filed with the Securities and Exchange Commission. Our future results may differ materially from our current expectations discussed today. I would now turn the call over to Collegium’s CEO, Mike Heffernan. Sir, you may begin.

Thank you. Good afternoon and welcome to the first quarter Collegium’s earnings call. I am Mike Heffernan and I am joined today by Barry Duke, our Chief Commercial Officer; and Paul Brannelly, our CFO. We intend to provide insight into our recent progress in the first quarter financial results. We remain very encouraged by the prescriber impaired reception to extend the ER and the key differentiation attributes of the product versus all other extended release opioid options. In fact, recent market research that we completed of 176 prescribers from a target list of 10,400 pain specialists suggest that the vast majority of existing Xtampza prescribers expect to increase their Xtampza prescribing from its current level in the coming year, while the majority of this same group of Xtampza prescribers expect to write less time in the coming year. The primary reason they state for this change in prescribing is that they believe in the abuse deterrent advantage of Xtampza versus other ER opioids including OxyContin. In fact, our data showed that since launch, the number of Xtampza prescriptions per prescriber has increased every single month and importantly once a prescriber initiates prescribing Xtampza, they continue to prescribe. Our goal at this point in the launch is to continue to grow prescriber base at a faster rate as well continue to make progress until the major barriers to prescribing Xtampza, pharmacy availability and payer access. Barry will address these in more detail in a few minutes. We finished the first quarter with 13,900 prescriptions, a 106% increase from Q4 2016 and we now have over 3,000 Xtampza prescribers, which is almost double the number of prescribers from 2016. We also have over 3,000 pharmacies that now ordered the product and our managed care coverage continues to improve with the recently announced…

Thanks Mike, good afternoon, everyone. In the first quarter of 2017 we recorded net product revenue of $2.2 million and we shipped $7.6 million of Xtampza to the wholesalers. As discussed on previous calls, we currently recognize revenue based on the sell-through method, since we lack the history required to estimate certain items including returns and rebates. Therefore, as of March 31, we recorded $8.7 million of deferred revenue on our balance sheet. Deferred revenue represents Xtampza shipments to wholesalers that haven't been recognized as revenue. As of March 31, wholesalers have under 25 days of inventory on hand. During the first quarter, our gross-to-net discount was 58.7 and increase from 47.6 during 2016. The increase in our gross-to-net discount was driven primarily by higher rebates in our co-pay card program. The higher rebates resulted from our commercial focus and corresponding success with converting United health patients to Xtampza accompanied by a lower portion of our prescriptions from our non-contracted business. Additionally, our co-pay card program was impacted by high deductible plans at the beginning of a new plan year. We expect the gross-to-net discount to decrease throughout 2017 as prescriptions increase with non-contracted and lower rebated payers. For the full year 2017, we estimate that the gross-to-net discount will be higher than originally anticipated, but in the range of 50%. We also anticipate that the gross-to-net discount will continue to decline as its launch matures. On February 1, we had a 9.5% price increase. During the first quarter, we didn't realize the benefit of the price increase due to product already in the supply chain as well as our conservative revenue recognition policy. We expect to begin realizing the benefit of the price increase in the middle of the second quarter. For the first quarter of 2017, our net loss was $23.1 million compared to $15.7 million for the first quarter of 2016, resulting in a net loss per share of $0.79 and $0.68 for 2017 and 16 quarters respectively. The increase in our net loss was primarily due to the cost related to the commercial launch of Xtampza. As of March 31, our cash balance was $129.6 million. During the quarter, cash used by operating activities was $23.7 million. Based on our current operating plans, we believe that our existing cash resources together with expected cash inflows from the commercialization of Xtampza are sufficient to fund operations into 2019. I will now turn the call over to Barry Duke for a commercial update.

Thanks Paul and good afternoon, everybody. I want to keep my comments today focused on our efforts in Q1 to optimize our commercial approach, as we leverage our learnings today and are continually improving managed care coverage. After a strong early uptick in prescriptions in January and early February, we witnessed a flattening of our growth as we moved through early March. Certainly, United Healthcare and their decisions to add Xtampza as a preferred extended release brand and NDC block OxyContin on their commercial plans was a positive impetus for that early quarter growth. In fact, in December 2016, we only had a 1% market share of the branded extended release opioids with UAC, but we finished the first quarter 2017 in the high 20% share range despite the challenges of the new extended-release class NDD limits within UHC and their new prior authorization criteria. We expect continued growth at UAC over the next several months and throughout the summer as some united beneficiaries begin new plan years opting into the OxyContin exclusion. One of the lessons learned through our market research and execution monitoring was that both our prescriber call breath and message focus have become narrow. Message recall data from prescribers showed that prescribers were primarily hearing the UHC managed-care message from our salesforce and not hearing our differentiating technology, clinical value proposition and broad-base payer access message. We also observed that we only reached approximately half of our 10,400 targets during the quarter. As Mike noted earlier, prescribers stay with their product when they prescribe it and we need to create greater breadth of prescribers. Thus, over the last couple weeks of March, we had held sales meetings to redirect our team's efforts and call expectations, as well as provide additional resources, including enhancing our pharmacy binder…

Thank you, Barry. We'll now open it up for questions.

Thank you. [Operator instructions] And our first question comes from Serge Belanger from Needham & Company. Your line is open.

Hi. Good afternoon. Apologies for the background noise here. Just wanted to dig a little deeper on the gross to nets and where they are and the impact of the April 1 Medicare Part D contract with Aetna and what you -- how that will impact the gross-to-net rates going forward?

Yeah Serge thanks for the question. This is Mike. So clearly as Paul said, the gross to net were impacted in the first quarter really in two key areas. We did -- we met our expectation in United in terms of our internal expectation in terms of how much of our business would come from United. We underestimated the effect of high deductible plans in the first quarter, which we think that effect will start to go away. When we look at our mix of business in terms of going forward where our growth is going to come from whether it be contracted business or contracted business, at this point, we're confident that we're going to end the year in the 50 range. So even with Aetna coming on Board, we don't expect that's going to change our estimate at this point in time.

Okay. And then with the United contract, can you give us an update on how the switch process is going and what sales force changes you did at the recent meetings to address that issue?

Yeah hey Serge, this is Barry. So, United is I think we referenced on our last call, the changes they made at the beginning of the year not all related to Xtampza, but some of the MED limits they put on the extended-release category, clearly created some problems and some challenges at their physician's offices. So, what we found is and right so, United was our first exclusive oxycodone win and really wanted to put a lot of focus and pull that through successfully. So, we spend a lot of time there during the first quarter and probably more time then we expected based on just the challenges of working with the new criteria under the new prior authorization form that they created. So, I think that created a lot of excess drain on our time from the reps perspective. So, as we look at the first quarter and what we saw was that we really got hunkered down and that we're spending almost all our time around the United Healthcare. So, I think we've been happy with the performance. We've met our internal expectations. We met United's internal expectations through the first quarter, but in order for us to really grow our business we need to get beyond that. So, as we directed the sales force, we talked about our expectations more broadly across the target universe and as I indicated in my prepared comments, we're going to add some reps actually to help that cause. So, we get more optimal reach and frequency across our entire target base. So those were really the changes and then there were changes around messaging and again what we learned and what we saw from the market research was that physicians were primarily recalling the UHC message and they really weren’t hearing the merits of and the attributes with our product that have been very positively received throughout all the market research we've done. So, we really needed to get back to that basic roots. So those are the key changes we made, redirected their call activity and expectations and also just re-emphasizing our message around the clinical merits of the product and getting all just specifically talking about UHC.

Okay. One last one and I'll get back in queue. You mentioned in your prepared remarks that inventory was at 25 days as of the end of March. Can you remind me how that changed over the quarter from back in December and whether that's the steady-state going forward?

Yeah, it's just about a steady state. It's just under 25 days at year-end and at the end of the first quarter and we would expect it to remain at above that level.

Okay. Thank you.

And our next question comes from David Amsellem from Piper Jaffray. Your line is open.

So just got a couple and maybe I missed this, I apologize but can you talk about how you're navigating through the dosing limits that you tried it on the last call regarding morphine milligram equivalents. So that's number one. Number two is we've seen some states and we've seen proposals out there in different legislators on dosing limits or not just dosing limits but pill limits for a new opioid naïve patient. So, when you talk about how that could impact the landscape, you try to capture new starts, opioid naive start. And then lastly on solids, given the challenges in the broader turf space, how are you thinking about the opportunity there and what's your latest thought process on commercialization thanks?

Thanks David, this is Mike. So, let me start with your first question which is on dosing limits and how we're navigating through the dosing limits, As Barry mentioned one of the and it's really the first part that we've seen a plan put in place at the same time that we were converting from OxyContin to Xtampza with our new exclusive contract to United, they put in place this 90-milligram equivalent daily dose, which was specific to their extended release opioid. And unfortunately, there is an unintended consequence associated with that because there's lot of people and in this case, there was a large number of OxyContin patients that were at significantly higher than 90 morphine equivalents per day. And so, the only alternative for the patient is to do one of two things. One is to be put on Xtampza at 90 and given rescue medication of immediate release non-abuse deterrent opioids to bridge the gap, You can't take something taking a 150 milligrams morphine equivalent and convert them to 90 milligram Xtampza equivalent without them having some effect and in many cases withdrawal effects especially with patients who are on the product for a long period of time. So, we've spent a lot of time talking to United about the unintended consequences. We intend to do an analysis of the prescription data and look at the number of patients that are now using rescue meds instead of just being on extended release opioid. And what other changes have occurred as this pattern has changed. So, one of the things that's important to us as we continue to look at new contracts is that we make sure that as part of any contract we enter into, there is not an arbitrary dosing limit put in place at the…

And our next question comes from David Steinberg from Jefferies. Your line is open.

Thanks very much. Couple questions, first since your last call, there was a fee advisory committee and as recommended by the committee to the FDA to potentially take that product off the market, I think there is about a million scripts, but there is -- there hasn’t been an FDA Commissioner yet. Any thoughts on if the FDA does decide to remove it, how it could potentially impact your business? And then secondly, I don't believe that in your label the head-to-head data versus OxyContin, but the physicians that you're discussing the project are aware of that or can you actually show them that data during the sales call?

Thanks David, this is Mike. The first question of ER, you are correct. There is about a million prescriptions a year. Oxymoron extended release in the brand and about half of them in generic, you are correct that the FDA Adcom recommended by significant margin that the risk was greater than the benefit. I think there is -- the FDA has got some options clearly, they can take the products off the market. They could put a restrictive REMS program on it. We do not have any insight at this point time in which direction they're going to go. We will be prepared with a strategy either direction and that really includes understanding who the key payers are that have Opana ER in the preferred position where there may be an opportunity as well as understanding who the key providers are, the key prescribers who Opana ER is an important product in their practice. And so, building that strategy and being ready for that strategy will be important for us so that we can't capitalize should something happen with the FDA. As it relates to our head-to-head data, as you can imagine, the head-to-head is pretty impactful, the head-to-head data has been confirmed in two exact studies that show that when you crush OxyContin, the product loses it's extended-release profile and it's proven to an immediate release product and Xtampza that doesn't change. And we would like to have this in our label as part of our sNDA. It is a published data, it's data that is published by [Dr. Jeff] and because of the new medical communications guidance that came out in January, our sales reps are able to talk about the reprint. And so that is something that's relatively new and that is impactful data for a doctor. Again, our primary goal is to get this into the label itself, but the new medical communications guidance that came out in January does open up some avenues for us.

Okay. And just a follow-up on your commercial effort. I think you'd indicated that you've expanded your sales force. I was just curious, has there been much turnover and if so, has that impacted the prescriptions? And then secondly, could just comment on your KLL speaker program. is that up and running, any tweaks, any improvements, any expansion and is that do you think that's yielded any results for you as well?

Yes so, I'll take the first question and Barry will take the second one, so we have 118 retail sales reps territories. We hired all of those folks after getting our approval on April 26 and how launch made shortly thereafter. Then the end of the year came, we made some hard decisions regarding making sure that we had the right people in the right places and we started the year with 100 territories filled and needed to refill those territories in the first quarter. Clearly that had an impact as we had openings in the first quarter and clearly as we add our 13 territories plus continue to backfill those 18, it takes a little bit of time to ramp those up, but again this is a really a long-term strategy for us and it's an investment in knowing that we get the right sales rep in the right territory talking about the right message to the right doctors. This product and doctors start writing the product, they will continue to write the products. So yes, we were down headcount in the first quarter, but we will going into the second quarter have a full group of folks.

Yeah so hi David, this is Barry. I'll take the second part of your question regarding speaker programs. I think as we mentioned on previous calls, we basically weren’t able to launch programs until the end of October last year and we did several hundred in the latter part of the year. We kept that trend in Q1, did several hundred and we have more than that planned in Q2. I think another part of your question was have we revised or updated or enhanced those programs and I think we have again some the key learnings, we've had some of what Mike referenced in terms of the new medical communication guys that the FDA put has allowed us to put the head-to-head data into the program as well. So, we feel like we've really enhanced the program. We worked with our key thought leaders to make it helpful for physicians and we believe we have really good program and again we have a lot planned in Q2.

Okay. Helpful. Thanks very much.

And our next question comes from Raju Prasad from William Blair. Your line is open.

Thanks for taking the question. I think in your prepared remarks you mentioned 13 new sales territories, can you provide just some detail on approximately how many scripts or how many target prescribers that entails?

The way we look at it is we have 10,400 targets and as Barry mentioned in our his opening comments, one of the issues we had in the first quarter is that we only called on about half of them because the amount of time we spent on United and so on. So, part of in addition to changing our targeting and our expectations with our current sales reps, we really look at where are there opportunities by adding headcount to go deeper into that 10,400 and clearly as we -- as our data suggests, that once we get a prescriber on Board, they stay on Board and they write more every month, the goal then becomes to increase your prescriber base and that's the intent of adding the 13 territories.

Great and then in your prepared remarks you also mentioned the message was a bit narrow. Can you just provide a little more color on that? How you refined the sales message?

I think it's around getting back to the attributes that again we know a test well in market research that the differentiation in terms of the technology that we have and how that translates into a clinical value story for the position. What we lost was that in our enthusiasm over pulling through United, which again was the right thing to do, that became the message and physicians don't treat me or managed care organizations, they treat patients. So, we had to get back the message back to your centered on the patient. And also, the other message that I think gets lost is that we have pretty broad coverage now, especially in the commercial part of the payer world and we were losing that and we're focusing too narrowly on United and we want to make sure that the physicians understand that there's actually broad access for Xtampza because that is one of the misperceptions that tends the whole physicians back as we've also seen in our market research. So those are kind of the nuances that we tweak.

Okay. Great. And you mentioned a 9.5% price increase, is that class-wide and what growth in that you expect from that price increase?

Yes. So, 9.5% increase was across the board for all five doses and as stated of the call, we would expect to start realizing that depending on price protection on various payor contracts in the middle of the second quarter.

Okay. Great. Thanks a lot for taking my questions.

And our next question comes from Ken Trbovich from Janney. Your line is open.

Thanks for taking the question. Barry, I guess I would like to start with you if I can and I know you gave the number of the retail sales force. Can you go back and fill in the blank on the long-term care team, it's growing, but I didn't hear the numbers?

Yeah, I didn't give a number Ken. I think as we look at the long-term care team, what we've been and what we're thinking is to be flexible and opportunistic. As we get these national nursing home chain contracts, as we get expansion on part D access for Xtampza we're being opportunistic as we add people in. So, it's flexible. So, I'm not trying to be evasive, but it's a bit of a flexible number as we make decisions about where we want to put new headcount. So, we've added a couple and we'll be adding more as we continue to get these positive indicators that we think will accelerate our business in that channel.

Okay. And then just with regard to ONSOLIS, is there any overlap and I know long-term care maybe isn’t the right way to think about this, but I am thinking a bit in terms of hospital or institutional setting or hospice care. Is there more of an overlap with that team and what you see in turf market as opposed to the retail side. I'm just trying to better understand where you think those targets are really going to lie with regard to turf market when you start to enter that sometime next year?

Yeah Ken this is Mike. Thanks for the question. As you know, we also have folks in the institutional market. We have 14 individuals today that are calling on the hospital market and concentrating a lot of their time in the oncology opportunity. So that's where we think ONSOLIS opportunity really plays out much more so than in long-term care. Now certainly your hospice and palliative care long-term care facilities and so on, will be targets. The interesting thing is that when you look at the turf market, you basically have roughly 1800 doctors who control that market, many of which -- over 75% of which we already call on now and so with our current footprint. So, there's a tremendous overlap both as well in the prescriber base as well as where these patients may be and may be treated and we thought from day one when we like this product there was tremendous energy.

Got it. And then just with regard to Mike I guess, the comment you made earlier on the idea that you got this guidance from the FDA in January, how quickly has published article found its way into the hands of the promotional cycle? Is that something that you guys have fully capitalized on, or is that something that's yet to be realized in your efforts with the sales force and targeting those physicians?

Yes, so good question Ken and we just as part of refining our message coming out of our March sales meetings. So, it just started in April after we spend a fair amount of time with external consultants and such to make sure that anything that we're talking about was consistent with the guidance. And so that just became part of our message and part of the resources that we use in our sales message.

Got it. And then I guess Paul just going back to the comment about the shipment versus the revenue recognition, can you just help us understand why the wholesalers what has taken so much inventory in the quarter? Is that just an availability issue in terms of what you have available to shippers. Is that somehow their own belief that there is going to be pull through that we haven’t yet seen in the scripts?

Yes, that's demand. So, it's stated on average of less than 25 days of inventory on hand, so it matches with that and the way to think about that is the deferred revenue amount is more of the gross sales number than the net sales number.

Got it. Okay. That helps tremendously because I was looking at the 7.6, I can't rationalize that, that helps and then I guess just last question from the perspective of being able to go out into the marketplace knowing that there are a couple of other abuse-deterrent products that are going to be promoting the back half of the year, how important do you -- Mike I guess you and the sNDA decision itself knowing you can promote to the article even without the label?

Yeah, I think the addition of the information and again the reason for the PDUFA extension was in discussions with the FDA. We had to re-file the rest NDA in I think it was February, we reported a positive human abuse detection study oral with both drug liking and take drug again as positive. That became really supportive of some of the label options that we were looking for and the key differentiation between what is in OxyContin and not in OxyContin label. And so, when discussing with the FDA, where our options were, it became clear that adding that to the sNDA package opened up the options of what we potentially can get in the label. So that became important regardless of whether we were going to promote or be able to use a reprint -- publish reprint like that showed the head to head data and again our goal as we look at differentiation OxyContin remains the largest of all the extended release opioids and our goal is to continue to get doctors to understand why Xtampza may be a better choice.

So, Mike is it wrong to think then that they offer you an opportunity to sort the data into this sNDA rather than having to submit a separate one, is that sort of a wrong way to look at this?

Yeah, I am not going to comment on that, just based on our conversations with the FDA or box myself in on that. So, I think I would say that we believe after the conversations that putting both of those pieces of information together just increased our options.

Okay. Makes sense. I appreciate it.

And our next question comes from Ed Arce from H.C. Wainwright and Company. Your line is open.

Great. Thanks guys for taking my questions. So, a few, first you had mentioned your first exclusive win with United and it sounds like too much time was spend on that in terms of the sales force. So, I was just wondering if aside from change in some of the territories in reps if there was any other lessons learned there and any takeaways that you would implement as you look towards further exclusive announcements as you mentioned coming throughout the rest of the year? And then with those other announcements, is the expectation with those that there might be some adjustments perhaps to the player off like United did in there's and then a couple more, the OpEx is a question more for Paul, is this changing reps in territories, is that expected to really to materially change the operating expense for the remainder of the year? And then lastly if you could, the gross to net discount of 50%, could you just give a little more detail around what the components of those are? Thanks a lot.

I'll start Ed, this is Mike, in terms of United, I think they went through a number of different things we needed to do to optimize, there was a lot of lessons learned in that process. I think we're trending on some new ground. Clearly opioid policy is a hot button nationally and changes in prior authorization processes when you put in arbitrary 90 milligram dosage limits is really a new phenomenon and something that we had to learn with United and I think there's a lot of lessons learned out of that. I think we did a really good job of converting United. I think we didn't do so good a job of making sure that we pull to the CIGNA contract, which started in January 1 as well because we were too focused on United. We did want to make sure that we could take an exclusive contract. We can pull it through and we can use that as a model, as we went to other payers and had conversations about exclusivity to show them that you can't convert your business from OxyContin to Xtampza and you can do it successfully and patients can treat it successfully and doctors are able to do it. And I think we do -- we have created that model and that model hopefully is going to provide dividends going forward. One of the goals here is that Barry mentioned some of the data as it relates to payday claims versus rejected claims. There is still a perception by doctors that new products in general and new ADF opioids specifically have very poor coverage and even the perception is really worse than the reality and partly what we know in order to get doctors to convert their long-term patients who are on a given product to a new product the impedes sometimes is change in the payer coverage. And we believe that if we get enough changes in payer coverage it will change the perception of the physician as it relates to its availability of Xtampza and start to change the perception as Barry said the tipping point that now Xtampza is widely available and I can write it for any patient and that's really know where we need to go with this. I'll let Paul take the OpEx question and the GTN question.

Okay. Thanks for the question Ed. On the operating expenses the new rep will be on top of our current infrastructure, but it's within our prior and current guidance and budget. So, we're just moving some money around there. On the gross to net question, we wouldn't give exact numbers for competitive reasons, but it's fair to assume that our rebates will increase as a percentage of gross to net and that's the number one item component of gross to net discounts with point of sales being the second biggest number in our gross to net discounts. But the point of sale discount to pay cards will decrease over time as we get better payer coverage.

Okay. Great. Thanks again.

Thanks Ed.

And we have a follow-up question from Serge Belanger from Needham & Company. Your line is open.

All right. Just wanted to see if you could provide additional color on recent prescription trends? Are the IMS and Symphony number adequately capturing product demand or they still missing some parts of the market? And then I think Barry kind of talked about the flattish growth in March, there was an uptick in early April, was that mostly from Aetna or was there something else in place for that uptick?

Yes so, this is Mike. So, we think Symphony and IMS, IMS is a little big higher than Symphony regularly, but at this point in time inadequate and real viewpoint of the progression of the product, doesn’t obviously pick up hospital sales, but that's a smaller portion and that business is certainly a longer sales cycle we've talked about that since the launch. So, I think like I said the IMS and Symphony data although somewhat different, will tell you directionally what's happening. The second question was regarding…

Some of the recent growth from March.

Yes so, we've had some recent growth and we had increased shipments and so on. Obviously, we're looking to continue to accelerate that and increase the acceleration of that. That's the goal, that's what we're working for here. You can attribute that to Aetna specifically. As a matter of fact, Aetna still remains very small part of. I think it's broadening of the message and I think it's continued growth within United, but it's also continued growth in some of the uncontracted business and again we hope to is that we continue to accelerate that growth and we get out of the period that Barry talked about a flattening which happened in the March timeframe.

Okay. Thanks for the additional color.

And at this time, I am showing no further questions. I would like to turn the call back to Mr. Mike Heffernan for any closing remarks.

I would like to thank everybody for joining our call today and we look forward to providing you ongoing updates in the next quarter. Thanks again.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect. Everyone have a great day.