COLL - NASDAQ

Greetings. Welcome to the Collegium Pharmaceuticals Second Quarter 2023 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] Please note that this conference call is being recorded. I will now turn the call over to Christopher James, Vice President of Investor Relations at Collegium. Thank you. You may begin.

Welcome to Collegium Pharmaceuticals second quarter 2023 earnings conference call. I'm joined today by Joe Ciaffoni, our Chief Executive Officer; Colleen Tupper, our Chief Financial Officer; and Scott Dreyer, our Chief Commercial Officer. Before we begin today's call, we want to remind participants that none of the information presented today is intended to be promotional, and that any forward-looking statements made today are made 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 the risks that we may not be able to successfully commercialize our products that we may incur significant expense and that we may not prevail in current or future litigation pertaining to our business. These risks and other risks of the company are detailed 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. Our earnings press release and this call will include a discussion of certain non-GAAP information. You can find our earnings press release including relevant non-GAAP reconciliations on our corporate website at collegiumpharma.com. I will now turn the call over to our CEO, Joe Ciaffoni.

Thank you, Chris. Good afternoon, and thank you everyone for joining the call. Today we will discuss our progress toward achieving a banner year in 2023, our financial performance in the first half and expectations for the remainder of the year. At Collegium, we are focused on building a leading diversified specialty pharmaceutical company committed to improving the lives of people living with serious medical conditions. Our commitment includes supporting the communities where we live and work. During the second quarter, we launched a new partnership with the Boston Red Sox and Science from Scientists, a non-profit organization leading STEM education initiatives for kids from low-income households. This partnership furthers Collegium's commitment to driving equitable access to educational resources that support the next generation of STEM leaders. I'd like to recognize my colleagues for their hard work and dedication to our organization and thank them for their commitment to people living with serious medical conditions and the communities that we serve. I am pleased to report that we are on track to make 2023 a banner year for Collegium Pharmaceutical. At the beginning of this year, we committed to strong top and bottom-line growth that would be achieved by maximizing the potential of our differentiated pain portfolio and leveraging our cost structure. We also said that we would generate strong operating cash flows that would enable us to rapidly pay down debt and position us to achieve our other capital deployment priorities. That is exactly what we have accomplished in the first half of this year and what we will be focused on for the remainder of 2023. I am confident that we are on track to deliver on our strategic and financial commitments. Key accomplishments in the first half of 2023 include; we delivered record revenue and adjusted EBITDA. In the first half of the year, we grew revenue 35% and adjusted EBITDA 51% compared to the first half of 2022. We generated strong performance in our pain portfolio. BELBUCA is trending to achieve prescription growth on a full-year basis. Total prescriptions were up 3.5% in the second quarter compared to the first quarter. We continue to be encouraged by the trends that we are seeing. The week ending July 21, BELBUCA generated 9,376 total prescriptions the highest level achieved since we acquired BDSI in March of 2022. We grew Xtampza ER revenue in the first half of the year by 38% year-over-year driven by improvement in gross to net due to the successful completion of contract renegotiations last year. We delivered on our commitment that Nucynta franchise revenue would be relatively stable year-on-year. In the first half of the year Nucynta's franchise revenue grew 4%. We achieved an important step in the pursuit of a six-month pediatric extension for the Nucynta franchise with FDA approval of both Nucynta IR and Nucynta oral solution for use in children under the age of six and children aged six and older. We increased our cash and marketable securities balance over $300 million leaving us well-positioned to execute on our capital deployment strategy. And our Board has authorized us to enter into a $50 million accelerated share repurchase program. We believe that our stock continues to be significantly undervalued and we are committed to leveraging our $100 million share repurchase program to opportunistically return cash to our shareholders. We are laser-focused on our two-pronged strategy of maximizing the potential of our differentiated pain portfolio and strategically deploying capital to create value for our shareholders. We believe that strong commercial execution is key to maximizing the potential of our pain portfolio. Xtampza ER revenue is benefiting from gross to net improvement, BELBUCA prescriptions are expected to grow on a full-year basis and the Nucynta franchise is exceeding expectations. Our capital deployment strategy is focused on creating long-term value for our shareholders and business development is our top priority. We are actively pursuing differentiated commercial stage assets that we believe have peak sales potential of more than $150 million in exclusivity into the 2030s. Although business development is our top capital deployment priority, we are absolutely committed to being disciplined in our approach. Our strong financial position allows us to do so. For perspective in our base case long-range plan, net of paying off our Pharmacon loan we will have greater than $1 billion of cash on hand at the end of 2027. We are committed to leveraging our strong financial position to create value for our shareholders. 2023 is on track to be a banner year for Collegium Pharmaceutical. We delivered a strong performance in the first half of the year and we expect to see revenue increase in expenses decrease for the remainder of the year. We are reaffirming our full-year 2023 financial guidance, which includes growing adjusted EBITDA by approximately 1.5 times the rate of revenue growth and 2.5 times the rate of adjusted operating expenses growth. We believe that there is a meaningful disconnect between our share price and the intrinsic value of the company and we'll be utilizing the Board authorized accelerated share repurchase program to buy back $50 million of our stock to deliver value to our shareholders. Our priorities for the remainder of the year are clear and we are well-positioned to achieve them. I will now hand the call over to Colleen to discuss the financials.

Thanks Joe. Good afternoon, everyone. We remain on track to achieve our financial objectives in 2023. In the second quarter, we generated year-over-year double-digit revenue growth and grew adjusted EBITDA at twice that rate. We managed operating expenses and generated positive operating cash flows, while paying down debt. Financial highlights for the second quarter include, net product revenues were $135.5 million for the second quarter compared to $123.5 million for the second quarter of 2022, an increase of 10% as expected revenue in the second quarter tends to be lighter than the first quarter due to the higher coverage GAAP expense also known as the donut hole in Medicare coverage. We expect quarterly revenue to increase in the remaining quarters of 2023. BELBUCA net revenue was $43.1 million in the second quarter, an increase of 2% over the second quarter of 2022. Xtampza ER net revenue was $41.2 million in the second quarter, an increase of 24% over the second quarter 2022 and Xtampza ER gross to net was 63.5% in the second quarter. We expect full-year Xtampza ER gross to net to be between 61% to 63% in 2023. Nucynta franchise net revenue was $47.3 million in the second quarter, an increase of 8% over the second quarter of 2022. GAAP operating expenses were $38.2 million in the second quarter, which decreased 7% compared to $41.3 million in the second quarter of 2022. Adjusted operating expenses were $31.1 million in the second quarter, which decreased 3% compared to $32 million in the same quarter of 2022. Net income for the second quarter was $13 million compared to a net loss of $5.2 million in the second quarter of 2022. Non-GAAP adjusted EBITDA was $85.8 million for the second quarter compared to $71.2 million in the second quarter of 2022, an increase of 21%. GAAP earnings per share was $0.38 basic and $0.34 diluted in the second quarter compared to GAAP loss per share of $0.15 basic and diluted in the second quarter of 2020. Non-GAAP adjusted earnings per share were $1.26 in the second quarter compared to $1.07 in the second quarter 2022, an increase of 18%. Please see our press release issued earlier today for a reconciliation of GAAP to non-GAAP results. As of June 30th, our cash, cash equivalents and marketable securities increased to $325.5 million. During the second quarter we paid down $45.8 million in debt related to our term notes. We ended the second quarter at 1.2 times net debt to adjusted EBITDA and expect to end the year at approximately one time. We are reaffirming our financial guidance for 2023. We expect net product revenues in the range of $565 million to $580 million, adjusted operating expenses in the range of $135 million to $145 million and adjusted EBITDA in the range of $355 million to $370 million. As part of this financial guidance, we expect net product revenues in the second half of the year to exceed the first half of the year and adjusted operating expenses in the second half to be lower than the first half. Collegium is a financially strong organization, well-positioned to deliver on our capital deployment priorities. We remain focused on creating long-term value for our shareholders through our capital deployment strategy. Business development is our top priority and we remain committed to a disciplined approach. We are locked into rapidly deleveraging the balance sheet, paying down $162.5 million of debt in 2023, which would put us at approximately one time net debt to adjusted EBITDA at year-end. Our ability to delever quickly is a testament to our strong cash generation. We are also returning capital to shareholders through share repurchases. Our share repurchase program announced in January, enables us to purchase up to $100 million worth of our shares this year. We believe in the long-term success of our company and that our stock at the current valuation, represents a very attractive investment, with a favorable return profile for investors. As such, we announced today that, as part of our repurchase program, our Board has authorized us to enter into a $50 million accelerated share repurchase program, reinforcing our commitment to deliver to our shareholders through effective capital deployment. We see the share repurchase program as a high-return use of our capital for the benefit of our shareholders. I will now turn it over to Scott.

Thanks, Colleen. We take pride in Collegium being viewed by pain specialists, as a leader in responsible pain management. It's a testament to our highly differentiated and distinctly positioned pain portfolio, and our talented and committed commercial organization. In the first half of this year, we've grown our portfolio of share to 50% of the branded market. Our field force is at 100% capacity and focused on growing our differentiated pain portfolio. In the second quarter, we were encouraged to see an uptick in the BELBUCA total prescription trend. BELBUCA's total prescriptions grew 3.5% versus the first quarter of 2023. And over the past several months, weekly prescriptions have been steadily increasing. The trends that we are seeing, along with a favorable comparator in the back half of 2022, reinforce our expectation that BELBUCA prescriptions will grow on a full-year basis. In addition to growing total prescriptions, our focus in the second half of the year, will be on improving BELBUCA's position, within Medicare Part D for 2024. We're encouraged by the clinical and financial discussions that we're having with payers, and are confident in our ability to grow BELBUCA in 2023 and moving forward. Xtampza ER revenues grew significantly year-over-year, as a result of gross-to-net improvements from the successful contract renegotiations, we completed in 2022. Prescription trends in the second quarter, stabilized from the first quarter, but we did not see prescription growth in the first half of the year. This is due to pressure from the plans that represented about 10% of prescriptions, within the contracts that we renegotiated last year, where Xtampza was removed from formulary and candidly, the need for stronger commercial execution where we maintained our position. To be clear, we're making progress within the plans, where we maintained Xtampza ER's formulary position, but not to the level that we anticipated. We're focused on building momentum for Xtampza ER through the remainder of the year. In terms of managed care, we're focused on renegotiating contracts that expire this year, which represent an additional 30% of prescriptions and winning new plans for Xtampza ER. Our payer strategy will serve as a catalyst for growth in 2024, and we're forever committed to keeping gross to net below 65%. In November, we expect to provide an update on the status of our contract renegotiations, as well as any new wins, we've secured for BELBUCA and Xtampza for 2024. Importantly, we're excited by the performance of the Nucynta franchise. The Nucynta franchise continues to deliver stable revenue and contribution, which was our commitment when we acquired it from Assertio in 2020. Our commercial organization and our market access team in particular has done an excellent job. The Nucynta franchise serves an important role within pain management. Our differentiated pain portfolio is strong with BELBUCA, Xtampza and Nucynta ER holding a combined 50% share of the branded ER market. We have a stable commercial organization, committed to making a positive difference in the lives of people living, with pain and the communities that we serve. In September, we look forward to participating as a leading sponsor in PAINWeek, the largest pain conference in the United States. We'll have a large presence and our medical team expects to present 10 posters, supporting our pain franchise. We're focused on building momentum in the second half of the year, and executing our market access strategy to position the pain portfolio for growth in 2024. I'll now turn the call back to Joe.

Thanks, Scott. We had a strong performance in the first half of 2023 and are on track to achieve our strategic and financial commitments. We are focused on growing our core business and creating long-term value for our shareholders through our capital deployment strategy. 2023 will be a banner year for Collegium. I will now open the call up for questions. Operator?

Thank you. At this time, we will be conducting a question-and answer session. [Operator Instructions] Our first question comes from the line of David Amsellem with Piper Sandler. Please proceed with your question.

Hi. Thanks. So just I have a few. So on BELBUCA, you talked about looking to improve Medicare Part D access. I guess can you help us understand on a broad level, what your goals are in terms of percent covered lives over time? What you're looking for in terms of a gross-to-net range? Just how should we think about what that improved Part D access for the product could look like? So, that's number one. And then number two on capital deployment. Can you talk about how you're balancing buybacks versus BD activity? I know, it's not an either/or but I guess the question is do you expect to do even more buybacks down the road? And then lastly, just remind us how you're thinking about different therapeutic categories that you may or may not be interested in regarding business development.

Okay. David thanks for the question. I'm going to ask Scott to take the BELBUCA Med D and Colleen capital deployment and I'll come back on the third question.

Yeah. Thanks David. So first in BELBUCA and Medicare Part D. Look, when you look at the profile and the access very strong in commercial only one real large plant in Part D. We're looking to improve it, I'm not going to get into guidance around gross to net and where we're heading other than saying we will always be looking to effectively manage gross to net and profitability. But the bottom line is with the profile of BELBUCA and where it stands, we feel more patients in Part D should have access. We're encouraged by the clinical discussions we've had. We've submitted our bids and now we're waiting to hear back on the plans and we'll give you an update in November.

Thanks, David for the question about capital allocation priorities. So, we've always been clear that our first priority is business development and then secondly rapidly paying down debt and then also third continuing to opportunistically return capital to our shareholders via the share buyback program. So as you can see from our track record in the past years with or without BD 2022 in mind, we have done share repurchases. So we will in a typical year where BD is light accelerate our buying of shares but we're pleased to right now have it in place for the full year. What we announced in January was a $100 million share repurchase program. And then today as part of that $100 million we've announced that the Board has authorized us to enter into a $50 million accelerated share repurchase program.

Okay. And then David, with regards to BD, which is our top priority from a capital deployment perspective. Because of the current market conditions we think it's important to be agile. So we're very open-minded in terms of therapeutic areas. The next acquisition we do will be a pivot to a new footprint a new infrastructure, to the organization. So it will be a lower synergy deal than what it is that we've done historically. So what we're really anchored to are the fundamentals of a differentiated commercial stage asset with peak sales of greater than $150 million in our opinion with exclusivity into the 2030s more so than any one particular therapeutic area.

If I may just sneak in a follow-up. What is the market look like in terms of asset prices? And you've talked a number of times about being disciplined here. Are asset prices at a place that you find more attractive, or do we still have a bit of ways to go to a point where you feel more comfortable?

No, David, I appreciate the question. I think it's a great question. What I would say is the noticeable difference this year whether it's private public companies is the level of engagement which is different than what it had been in previous years when access to capital was easier for people. Now, look as we go forward, because we don't have to do a deal because of the financial strength of the company and the durabilities of our growth drivers we're going to be disciplined. We're going to do the right deal for Collegium. And what I would say is in some instances, I suspect, where we've been engaged maybe companies need to see a couple more quarters or additional time before we can get to what we would see as a rational position or one that's the strike zone to getting a deal done. So what we're really focused on is executing against our core business continuing to strengthen the company financially. And what I am confident in is that we will find the right deal for Collegium Pharmaceutical that will create value for our shareholders.

Okay. That's helpful. Thank you.

Thank you, David.

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

Hi, team. This is John on for Tim. Thanks a lot for taking our question. Maybe just two from up. So on the BD front can you talk a little bit more about maybe a potential overlap on the sales force that you might see and how you might manage that as you continue to focus on the growth of your existing franchises? And then maybe on BELBUCA. I know in the past you said that's a little bit more of a complicated product requiring some additional education. Can you speak a little bit on how the ramp-up of that education is progressing and how you expect those efforts to affect the growth trajectory of BELBUCA both in the near and the long term? Thanks.

Sure. John, this is Joe. I appreciate the question. I'll take the BD one and Scott will comment on BELBUCA. So look from a BD perspective and when you think about the organization, one, we take a lot of pride and I think we're able to say that we are the leader in responsible pain management and we have a portfolio with a runway in front of it. So, one of the key things when we think about BD is not doing anything that would be disruptive to that. And the good news is with what we're focused on we'll be setting a new strategic beachhead, which we're confident will enable us to not disrupt the focus, and what we're setting out to do with the pain business, while also shifting the narrative of the company, with an asset that we have a belief has that potential of $150 million plus peak sales. And then that becomes an infrastructure that will then be focused on leveraging with additional assets over time. And that's the approach that we're taking. And Scott on BELBUCA?

Yes. Thanks John. So, look, yes, so we have talked about the complexity of the sale before. And we put a lot of effort, when we talk about execution into training our sales professionals upon acquisition of the product, practicing rolling out new tools and resources. And by all means, I think, that's a contributor to some of the momentum that we're starting to see build. And clearly, that gives us confidence in our ability to continue to grow through the rest of the year.

Thanks so much.

Thank you.

Our next question comes from the line of Serge Belanger with Needham & Company. Please proceed with your question.

Hi. Good afternoon. Just a couple of questions from us. I guess, the first one on gross to net. Can you just tell us what kind of movement you saw in growth in net for the three major products over the second quarter? And what do you expect those gross net to move into in the second half of the year? And then secondly, now that you've got the pediatric extension for Nucynta, maybe just an updated outlook for that product post-2025?

Okay. Thanks, Serge. So, Colleen on gross to net.

Hi, Serge. Thanks for the question. Great topic of interest here. So as expected, the second quarter gross to nets were higher due to the impact of the higher Medicaid coverage cap expense. That's really the same theme across all of our products to varying degrees depending on how much of the business is Medicare Part D. But gross to net is generally more favorable in the first quarter of each year, due to the lower coverage gap also known as the donut hole, and then through the back half of the year as patients are coming out of that there is improvement in third in or in the fourth quarter, but not quite as good as the first. So, we are right now in the height of Medicare coverage gap expense, as we would have expected, and we'll see improvement for the back half of the year.

And then Serge with the Nucynta franchise, we would expect to know whether we're going to achieve the pediatric extension in the first quarter of 2024. If we do that would take us from July 2025 to the full year 2025 in terms of exclusivity.

All right. Our next question comes from the line of Glen Santangelo with Jefferies. Please proceed with your question.

Hi. Thanks for taking my question. Hey, Colleen, I just want to follow-up on a couple of comments that you made. First, did I hear in your prepared remarks that you said you expect to retire $100 million worth of debt in 2023 and finish the year with a leverage of 1%? Is that the goal?

That's right. We have per our debt payment we schedule paying over $160 million this year, and that will put it at the end of the year about one times net debt to adjusted EBITDA. We're a $1.2 billion right now.

Okay. Yes. And I apologize I probably should know this, but you have the $100 million authorization out there. Now there's another $50 million accelerated share repurchase authorization. So is it $150 million in total now?

No. The $50 million accelerated share repurchase is part of the $100 million for the full year.

Okay. All right. And so I mean just looking at your level of cash flow, would you expect that $100 million in debt and $50 million of accelerated repo would probably be the aggregate of what you would return to shareholders this year?

So we have the authorization throughout the entire year to do up to $100 million in share repurchases of which today's announcement is that we have the additional tool within that $100 million to do an accelerated share repurchase of which we'll issue a press release as soon as that contract has been executed.

Yes. Okay. And Joe maybe if I could just follow-up on some of your comments on the previous question about what you're seeing in the M&A market right now. You said the level of engagement is different than in previous years. Were you sort of implying that there's a higher level of engagement or a lower level of engagement? And I guess what we're all trying to assess is the market now. Are you seeing reasonable valuations or not? And would you be disappointed if we exited the year without a deal?

Yes. So great question Glen. So what I'm focused on in that comment is that we are actively in pursuit of commercial stage assets. And there is a difference in terms of receptivity of companies that perhaps we've reached out engaged in the past that weren't in a mindset, because of a different market dynamic to engage that now are. In terms of a deal, I'm not going to make any commitment from a timing perspective. To your question from valuation, if we were able to agree on valuation then we would have a deal done. And of course, as you know that's the unpredictable part of you need two parties to come to a rational or a reasonable position to get that deal done. So we work with urgency while maintaining discipline and we're afforded the luxury to do so because of the financial strength of the organization and the durability of the assets that we have.

Thanks for the comments.

You bet. Thank you.

Thank you.

Our next question comes from the line of Oren Livnat with H.C. Wainwright. Please proceed with your question.

Thanks. I have a few if you dug me. Just as I think about your full-year guidance and where products are, I know you've previously committed to both BELBUCA and Xtampza's growing year-over-year total. And it looks like BELBUCA has improved. Nucynta is still lagging yet, you reiterate your full-year guide. But I just want to understand should we assume that maybe Nucynta franchise outperformance is the difference there and helping you get to your full year, or are there other positive revenue offsets that I guess can make up for maybe even lower volumes than you hoped six months ago? And I have a couple of follow-ups.

Okay. So Oren, the way I would think about – and as you know we don't give product-specific guidance. As you said we do expect to see BELBUCA prescriptions grow on a full-year basis. We've seen that acceleration in revenue of Xtampza, right out of the gate this year and we expect to see that revenue will continue to grow. We do not need prescription growth with Xtampza to achieve the guidance that we reaffirmed today. So what we've seen with Xtampza is stabilization which is an important step. We will be focused for the remainder of the year and trying to build from there but we don't believe at this point that we could say with confidence that we'll see full-year Rx growth with Xtampza. And as I said in my prepared remarks, and I'll emphasize here we're really encouraged and Nucynta is exceeding the expectation of relative stability that we had set at the beginning of the year. So the pain portfolio is performing in a manner where we're confident reaffirming the full-year guidance.

Okay. And just to get into gross to net is it I guess cadence through the year or maybe a little bit different I guess for Colleen than in the past it looks like at least on expense maybe 2Q gross to net wisened or grew a little faster from Q1 than I had expected but you guys are guiding to second half revenue growth. So besides Q4, which should improve are we thinking maybe we got through the donut-hole or getting to donut-hole a little faster this year and perhaps you'll actually see an improvement in gross to net even in Q3 for Xtampza or a misunderstanding? And then I guess just big picture when you think about gross ones I know you keep promising to standard 65%, which is great. I'm just wondering though with all that volume that's still out there on extended-release OxyContin that is a less safe product right now, how do you think about maximizing revenue? Is that 65% arbitrary, or is there any reason why you wouldn't next year say "Hey you know what let's give a little bit more away than 65% but there's a huge headroom that we can grow into volume more than makeup for?"

Okay. So thanks for the question Oren. I'll let Colleen go through some of the mechanics and gross to net and then we'll come back to the question around the OxyContin market and how we think about the approach.

For the question on gross to net. So as we expected Q2 the gross-to-net sort of increases quite dramatically due to the Medicare coverage gap, which is most acute with Xtampza as you noted. For the full year we are still anticipating expand will be within the range of 61% to 63%. So as you see generally across the board in the products Q3 improved slightly and then a bit in Q4. But again not quite as good as the first quarter.

Okay. And then the other question, look right now we're extant in its life cycle. We have a really strong access position a product that from a real-world data perspective performing within the marketplace. We're committed to managing gross to nets to less than 65%. What you need to be mindful of and how we'll approach the market as we go forward with what we accomplished last year in the renegotiations along with another 30% up for renegotiation this year. We now have the headroom to add new wins, if we're able to achieve them at a rebate level that we're comfortable with. So look at the end of the day, the mission of Collegium is anchored to putting together a differentiated portfolio that we believe can be a positive contributor in making a difference to the opioid epidemic. We believe our products are relevant and that we're going to do everything we can to get access and then we're going to educate around it to get the highest shares that we possibly can. Because at the end of the day, we believe that BELBUCA and Schedule III should be used before Schedule II and Schedule III more broadly. And certainly, we believe that the case can be made that Xtampza ER should eliminate OxyContin utilization. And that's what we're aspirationally trying to do.

Great. Thank you. Appreciate it.

Thank you.

And our next question comes from the line of Les Sulewski with Truist Securities. Please proceed with your question.

Good afternoon, guys. Thanks for taking my questions. Can you explain what happened with expenses coming off of formularies on 10% of the contracts? And what have been some of the headwinds to get this back online? And second, I have -- I guess I believe you took a price increase on Xtampza in January which has been historically a bit lower. Is there a pricing event scheduled for the back half of the year? And I have a follow-up. Thanks.

Okay. Scott, will take the first and then Colleen will talk about price.

Yeah. Thanks, Les. So first with the 10% where Xtampza was removed from the formulary, the bottom line there is those are still more profitable scripts right now. So we've seen script erosion, but the script we have contributed to the profitability and net revenue increases we're seeing. What we were counting on is that growth where we maintained our formulary access would be greater than what we've seen. So we're seeing progress in growing in our other exclusive and parity positions, but not to the extent that we thought we would. And that's what's the headwind against the growth year-to-date. That's what we're focused on pushing through in the second half.

And Les on price increases, particularly for Xtampza as your question was on January 1st you took a 5% price increase for Xtampza which we recognize and realize about 80% of that. Historically, we've taken about 9.9% annually on January 1. The reason why it was lower this year was really taking into consideration the impact of the Inflation Reduction Act and optimizing where the price should be.

Got it. That's helpful. And just to go back to the BD question. What gives you the confidence you can execute within a new vertical? You mentioned a new beachhead outside of pain. And then in terms of quality of assets out there, are you gravitating towards perhaps underperforming assets that you can see some like to carve out from an operator that perhaps hasn't just been given the full marketing efforts, or are you willing more to take up something that's high performing and pays off a bit?

Great question, Les. So the first thing I would say is what matters to us is that we have a belief that the asset has peak sales potential of at least $150 million and that it has exclusivity into the 2030s. And I think dependent upon the situation and what we always ask ourselves is why are we a better owner of that asset. And I think it depends. That's on an asset-to-asset basis, whether it's the company who has it is not able to make appropriate investments, whether it's the market access capabilities that we have, which I think we're demonstrating over the past several years, the level of capability that we have there or whatever it may be. That's the question we always seek to answer. And I think is important whenever we do get that deal done that we're able to articulate to everybody that is interested in or currently shareholders of Collegium why that transaction makes sense.

Very helpful. Thank you.

Great. Thank you, Les.

And we have reached the end of the question-and-answer session and I'll turn the call back over to Joe Ciaffoni for closing remarks.

Thank you, and thank you everyone for joining the call today. We look forward to updating you on our progress and I hope that everybody has a great evening.