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0:03 Greetings, and welcome to Collegium Pharmaceutical’s Fourth Quarter and Full Year 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference call is being recorded.

0:26 I would now like to turn the call over to Alex Dasalla, head of investor relations and corporate communications. Thank you. You may begin..

0:34 Thank you, operator. Welcome to Collegium Pharmaceuticals fourth quarter 2021 earnings conference call. This is Alex Dasalla, head of investor relations and corporate communications at Collegium Pharmaceutical.

I'm joined today by Joe Ciaffoni, our Chief Executive Officer; Colleen Tupper, our Chief Financial Officer; and Scott Dreyer, our Chief Commercial Officer. Joe and Colleen will share some prepared remarks and then we will take your questions.

1:02 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 consummate our proposed acquisition of BioDelivery Sciences International on the proposed schedule or at all, or derive the expected benefits from that acquisition, that we may not be able to successfully renegotiate our contracts related to Xtampza ER prescriptions on desired terms, that we may not be able to successfully commercialize Xtampza ER and the Nucynta franchise and that we may incur significant expense and may not prevail in current or future patent infringement litigation or other litigation pertaining to our products.

These risks and other risks of the company are detailed in the company's periodic reports filed with the Securities and Exchange Commission. 2:04 Our future results may differ materially from our current expectations discussed today. Our earnings press release and this call will include 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. 2:23 I will now turn the call over to Collegium's CEO, Joe Ciaffoni..

2:28 Thank you, Alex. Good afternoon, and thank you, everyone, for joining the call. At Collegium, our mission is to build a leading diversified specialty pharmaceutical company committed to improving the lives of people living with serious medical conditions.

2022 is a pivotal year for Collegium Pharmaceutical, and we are laser focused on 2 critical priorities. The first is the renegotiation of contracts representing approximately 50% of all Xtampza ER prescriptions. We are absolutely committed to managing Xtampza ER gross to net to less than 65% beginning in January 2023.

3:08 The second is the diversification of our business through an a creative commercial stage high synergy acquisition, which will bolster our long-term durable growth and returns profile.

On February 14, we announced the proposed acquisition of BDSI, which was the highest priority target for our team as it threads the needle on all of our stated business development objectives. The industrial logic of this combination is compelling, and we believe it will create significant value for our shareholders.

When closed BDSI will be the second commercial stage high synergy acquisition that we have executed since 2020. 3:49 Our prior acquisition of the Nucynta franchise was financially transformational for our organization and we are confident that the proposed acquisition of BDSI will propel Collegium to the next level.

Upon reflection, 2021 was a year of many important accomplishments for our organization and I'm encouraged by our overall progress in strong financial position entering 2022. It was also a year in which we face challenges, and our financial results were disappointing.

I take full accountability for our performance and recognize the need to earn trust every day with our key stakeholders, most of all our shareholders. I'm committed to doing so through the actions we take in the results we deliver.

4:37 Key accomplishments in 2021 include, we achieved the largest market share increase for Xtampza ER since the first full year of launch, exit in 2021 with an OER market share of 33% in 8 percentage point increase versus 2020. We leveraged our cost structure by containing the increase in GAAP operating expense to less than 10%.

When GAAP operating expenses are adjusted for stock-based compensation, restructuring and litigation, the adjusted operating expenses were flat versus 2020. We implemented a corporate restructuring that positions us to maximize the potential of the Collegium portfolio and to efficiently absorb BDSI.

5:24 We use our strong cash flow to return $42.9 million to shareholders through share repurchases, and to repay $50 million dollars of debt. We transition to a dedicated manufacturing suite for Xtampza ER, and we filed a prior approval supplement for an alternate Nucynta ER manufacturing site in December.

We expect that we will begin to see costs of production benefits in 2022 and realize full cost savings in 2023. We announced the settlement framework to resolve all pending opioid industry litigation.

We supported our communities for contributions to Life Sciences cares and science from scientists, two organizations with missions that we are passionate about STEM education and eliminating the impact of poverty.

And we receive recognition of our strong corporate culture by the Boston Globe as a top places to work and earn the national top workplaces award for the second year in a row.

I want to acknowledge the hard work and efforts of the Collegium team who not only contributed to our achievement of key objectives in 2021 but are working hard today to ensure we exceed our objectives in 2022. 6:41 Now, I would like to address our primary 2021 challenge.

Persistent COVID dynamics that negatively impacted our ability to deliver on Xtampza ER revenue expectations for the full year. The pain market was significantly impacted by COVID throughout the entirety of 2021 and in a much deeper and more persistent manner than we anticipated.

7:05 Emergence of the Delta and Omicron variants only served to exacerbate this challenge in the second half of 2021. Despite this backdrop, Xtampza ER total prescriptions were up 20% year-over-year to record highs into a level that was 98% of our internal forecasts for the year.

Our primary challenge was prescription mix, Xtampza ER prescriptions aggressively skewed to exclusive books of business, Medicare Part D in particular, which manifested in materially higher gross to net deductions and negatively impacted our reported revenue.

The skewing to Medicare Part D can be traced to a decision that was made in Q3 2020 when we secured an exclusive position and a major Part D plan. 7:59 The second largest source of OxyContin prescriptions at that time. As we anticipated, the contract drove a significant increase in Xtampza ER prescriptions.

What we did not anticipate was the lower than expected contribution from our higher margin parody and non-contracted books of business. We believe growth in these books is highly dependent on in-person patient visits.

For the full year in-person visits remain down approximately 30% versus pre-pandemic levels, which pressured new to brand in switch prescriptions below historical levels and favored continuity of care.

8:42 Looking ahead, we will be renegotiating contracts that account for 50% of all Xtampza ER prescriptions and we are absolutely committed to gross-to-net of less than 65% beginning in January 2023. The improvement in gross-to-net will propel Xtampza ER revenue growth in 2023 and beyond.

9:04 Next, I will move on to discuss the returns adjustment in our reported financial results, which is related to changes in estimates for product returns and product returns claims. As a result of events that transpired in the fourth quarter, we were required to record an aggregate adjustment of $38.3 million.

I will let Colleen address the technical details and the specific accounting impact. But for context, these adjustments are related to wholesalers inability to process returns, in accordance with their clearly defined contractual obligations.

9:44 Our wholesaler customers engaged third parties, including one returns processor that process a majority of Collegium product returns. We have no contractual or other relationship with this returns processor.

Our returns policy, which is incorporated into our wholesaler contracts, provides that we will credit returns that are timely in accordance with our policy. The wholesalers via their returns processor failed-to-return our products timely and that failure had two main implications.

First, because we evaluate and adjust our returns rate based on historical returns rates and actual returns received the return processors failure to timely return our products impaired our visibility into changes in our returns rate, we have now increased our returns rate to 3.5% and will maintain that rate going forward.

10:45 Second, if and when we received the product currently in the custody of the returns processor in due to the prolonged delays in processing such returns, such return product will no longer be timely in accordance with our returns policy. In the face of the sustained failure of their selected vendor.

The wholesalers have declined with one exception to uphold their obligations under our contracts in reimburse us for the credits they claimed in connection with such returns. Our intent is to enforce our contracts and recoup cash that is contractually owed to us, and we will pursue all avenues to do so.

For purposes of year-end financial reporting however, we were required to record a reserve against the receivable relating to untimely returns, as this is now a legal matter and aside from the comments that Colleen will make relating to the impact of the return adjustment on our financial results, we will make no further comments on this topic, and will only answer clarifying questions on the accounting in the Q&A.

11:57 Turning to today, as we enter this pivotal year, it is important to take stock of where we are now. And our path forward from here. Collegium Pharmaceutical is a financially strong organization that is well-positioned to embark upon a period of growth and value creation. We expect to achieve double digit revenue growth in 2022. Driven by Xtampza.

Er, our organization is focused, and our cost structure is aligned to our strategy and future ambitions. The restructuring that we executed in Q4 of 2021 enables us to optimize OpEx, while efficiently integrating BDSI.

12:41 In 2022, we anticipate strong cash flow generation that will bolster an already strong balance sheet with opportunities to strengthen it even further as we build our cash balance to support future business development and pay down debt.

We have more than $50 million remaining from our $100 million authorized share repurchase program that we can use to opportunistically buyback shares. 13:09 The announcement of the proposed acquisition of BDSI represents a major milestone that we are confident will propel Collegium to the next level.

I am highly encouraged by the start to the year and believe that 2022 is a pivotal year for Collegium. Negotiations are underway on contracts representing approximately 50% of all Xtampza ER prescriptions and we are committed to manage and gross-to-net to less than 65% beginning in January 2023.

This will serve as a propellant for future Xtampza ER revenue growth. I am also looking forward to closing the BDSI acquisition later this quarter. As I am confident that it will take Collegium to the next level. 13:55 I will now hand the call over to Colleen for a discussion of the financials..

14:00 Thanks, Joe. Good afternoon, everyone. We exited 2021 in a strong financial position. The company was profitable and generated robust net operating cash flows. During the year we manage our expenses and executed a restructuring that positions us optimally for 2022.

We leveraged our strong cash flows to paydown debt and returned cash to shareholders through share repurchases. Although, full year revenue fell short of our plans from a financial perspective, we have a lot to be proud of in 2021.

I will provide more details on the returns adjustment in a few moments but first it will discuss Q4 and full year financial results. 14:42 Total net product revenues for the quarter were $27.4 million, compared to $76.3 million in the fourth quarter of 2020. For the year total net product revenues were $276.9 million compared to $310 million in 2020.

Q4 and full year 2021 net product revenues reflected aggregate $38.3 million adjustment related to product returns inclusive of $26.6 million of returns adjustments for performance obligations satisfied in the prior year. 15:16 Xtampza ER net product revenues for the quarter were $5.3 million, compared to $30.8 million in the fourth quarter of 2020.

For the year total Xtampza ER net product revenues were $103.7 million, compared to $128 million in 2020. Q4 and full year 2021 Xtampza ER net product revenues reflect $13.8 million related to the returns adjustments. 15:44 Throughout 2021 Xtampza ER was negatively impacted by market dynamics stemming from COVID-19.

The mix of business remain skewed to exclusive accounts and Medicare Part D in particular. Gross to net for the full year for Xtampza ER was 76%. Against that backdrop, I want to reiterate the importance of our commitment to and focus on optimizing the rebate structure for Xtampza ER in 2022 and achieving gross-to-net of less than 65% entering 2023.

In the face of the returns adjustment, we have not changed our commitment or expectation of achieving that target. Nucynta franchise net product revenues for the quarter were $22.1 million compared to 45.5 million in the fourth quarter of 2020. For the year Nucynta Franchise net product revenues are $173.2 million compared to $182 million in 2020.

16:43 Q4 and full year 2021, Nucynta franchise net product revenues reflect $24.5 million related to the returns adjustment. In contrast to Xtampza ER, the Nucynta Franchise benefited from COVID-19 market dynamics throughout 2021 due to continuity of patient care.

Nucynta also had a pricing tailwind stemming from payer optimization that was effective on January 1, 2021. Gross-to-net for the full year was 52.5%. 17:14 Fourth quarter operating expenses, which includes stock-based compensation were $32.8 million in the quarter compared to $29.3 million for the fourth quarter of 2020.

For the full year 2021, operating expenses, including stock-based compensation were $133 million compared to $123.6 million in 2020. Q4 and full year 2021 operating expenses include $4.6 million related to restructuring expenses, and $2.9 million related to litigation settlements.

Adjusted operating expenses, which exclude stock-based compensation restructuring, expenses and litigation settlements were 20.4 million for the fourth quarter, down 11.7% compared to $23.1 million in the fourth quarter of 2020 and $101.2 million for the full year. Flat compared to $101.7 million for the full year 2020.

18:11 We remain committed to managing expenses and leveraging not growing our cost structure. Net loss in the fourth quarter was $25 million, compared to net income of $7 million in the fourth quarter of 2020. Net income was $71.5 million for the full year, compared to net income of $26.8 million for the full year.

Non GAAP adjusted EBITDA was negative $4.5 million in the fourth quarter compared to $38.3 million in the fourth quarter of 2020. 18:43 Non-GAAP adjusted EBITDA for the full year was $118.3 million compared to $139.7 million in 2020. We exited the year with a cash balance of $186.4 million.

During the quarter, we repurchase 25.4 million in shares under our authorized share repurchase program at an ASP is $20.12, which includes 20 million and shares repurchased as part of our $25 million accelerated share repurchase program. The accelerated share repurchase program concluded in January.

As of today, we have purchased $47.9 million worth of shares Since the program's inception in August at an AFP of $20.12, which includes $20 million in shares repurchase as part of our $25 million accelerated share repurchase program. 19:14 The accelerated share repurchase program concluded in January.

As of today, we have purchased $47.9 million worth of share since the program's inception in August and an AFP of $20.21. We now have $52.1 million of our $100 million authorized share repurchase program remaining. 19:34 Let me now shift to provide more detail on the returns adjustment.

For context, provisions for product returns are based on product level returns rate, recent in process return claims, as well as relevant market events and other factors.

The company's return policy for compliance and financial reporting purposes requires the product is physically returned within an 18 month window, beginning 6 months prior to exploration and up until 12 months after exploration.

20:06 During the year ended December 31, 2021, there was unprecedented in significant disruptions in the processing of returns.

Our wholesale customers through a third party returns processor that they directly and indirectly engage to process the majority of the company's product returns, failed to return products to us timely and in the ordinary course.

Due to the fit of customers and their vendor to return product timely, Collegium did not physically receive return products for a significant majority of the return claims. 20:38 The value of actual returned product received represented less than 20% of the value of product returns claimed during the year.

This returns disruption scared of visibility on returns overall enhancing our ability to accurately monitor rates of return and our normal course of business.

20:58 In addition to delay in processing returns resulted in a significant portion of the returns claims not being physically returned within the time period required by the company's return policy, rendering them ineligible for credit.

The company has engaged with its customers to collect amounts due for unprocessed return claims that are not eligible for refund due to the expiration of the return nights and expects to pursue such collections vigorously inclusive of litigation if necessary.

21:26 During the fourth quarter after significant and sustained efforts with customers to resolve the unprocessed return claims. We formally denied a significant portion of these claims under the company's return policy and also concluded that the returns rate had increased.

Although the company has denied and expects to continue to deny credit for products returns that are not in accordance with its return policy. uncertainty exists related to the ultimate resolution of these claims. As a result of this situation, the company recorded an adjustment to reduce net product revenues by $38.3 million.

22:03 Because of the impact of wholesaler returned claims as well as an observed uptick in returns of head of our historical rates, the provision for product returns increase. Going forward we will maintain increase estimated returns rate of approximately 3.5%, which is factored into our 2022 revenue forecasts and guidance.

22:23 Now moving to our 2022 outlook. Let me start by saying that our expectation is that following the close of BDSI, we will issue detailed combined company guidance for 2022. Our detailed guidance will include total company revenue, operating expenses and adjusted EBITDA.

Today, we will provide total product revenue guidance for Collegium excluding BDSI and make directional comments on our spending plans also exclusively BDSI. We are taking a prudent approach on revenue based off our learnings in 2021 and are making no assumptions on COVID-19 market dynamics improving.

23:04 We expect to deliver total net product revenues of $315 million to $330 million, an increase of 13% to 20% over 2021 revenue. Revenue Growth will be driven by Xtampza ER.

We will remain laser focused in the year on renegotiating the 50% of total Xtampza contracts that are up for renewal in the year and driving growth in net down to less than 65% by the beginning of 2023.

Excluding the 2021 impact of returns we expect Nucynta revenue to be flat to slightly down, which assumes moderate volume declines and no further improvements in gross-to-net. 23:44 Directionally on operating expenses, we will continue to maintain financial discipline, excluding BDSI.

Our target OpEx, excluding stock-based compensation is to keep costs flat year-over-year. We will generate additional cash flows from operations throughout the year and anticipate cash flow generation to quickly accelerate post close of BDSI.

Our current near-term use of cash will be prioritized to building our cash balances to support future business development and debt paydown. We also have $52.1 million remaining on our authorized share repurchase program as of today. 24:22 In closing 2022 is a pivotal year for Collegium.

We have a strong financial position entering the year and it will continue to strengthen from here as we optimize our Xtampza ER contracts and integrate BDSI into our business post close. We are truly in an exciting phase of growth and value creation, and I am looking forward to the year ahead. 24:43 We will now open the call up to questions..

24:47 Thank you. We will now be conducting a question-and-answer session. Our first question is come from the line of David Amsellem with Piper Sandler, please proceed with your questions..

25:23 Okay, thanks. So lots, two on here. So hope you can bear with me. Let's just start with the dynamics on Xtampza. You said the gross-to-net for 2021 is 76%. So I guess that's – I should take that to mean that's 4Q, the gross-to-net was continued to trend higher.

So I just want to clarify, make sure I'm thinking about that correctly and then in terms of what you're guiding to and just putting all the pieces together, it doesn't sound like you're factoring in much of any improvement in the gross to net for Xtampza in 2022. 26:10 So I just want to make sure that, you know I've got that down correctly.

Maybe just talk to what you are expecting on the gross-to-net for Xtampza in 2022 to the extent you can. So let's start there. Thanks..

26:25 Okay, David, this is Joe, I'll pass that question the Colleen..

26:29 Hi, David. Thanks for the question. Yes, you're right. I did say full year gross-to-net for Xtampza ER was 76%. The fourth quarter was highly impacted by the returns adjustments that we took. So quarter 4 was about 95%.

We're expecting modest improvement in 2022 gross to net after factoring in the returns rate increase that I spoke of and then looking forward to 2023 you can expect that significant improvement as a result of the Xtampza contract renegotiations..

27:01 Can you quantify what the gross-to-net is in 4Q without the returns adjustments? Is there? Is there a way to think about it in a normalized way?.

27:10 Yeah, but I can say is, from a full-year perspective, the Xtampza impact with 7 points on the gross-to-net..

27:20 Okay. And then, in terms of the returns. Is there a, I mean, is there is there something that, we should read into regarding the higher return rates going forward? I mean, I guess I know that you talked about having an impaired ability to get a line of sight into what the returns rates are.

But is there something just commercially to read into this? The higher returns rate? I'm just trying to make sure I understand that..

28:03 Yeah, David, that's a great question. I would say there's nothing to read into it commercially. I think the impaired visibility is an – is an important point and is we got the information late in the fourth quarter and into the early part of 2022.

We felt it was prudent to take the returns rate to 3.5% across the portfolio and to bake that into our going forward guide and obviously, that's something we'll monitor closely..

28:35 Okay.

And then one last question, a clarification question, the $38 million, Colleen, I think you said $26 million was, what again, I just want to make sure just so I understand the two components, there's the $26 million and then the remaining was just what belongs to what bucket?.

28:55 Yeah, the 26. Point 6 million relates to variable consideration adjustment to the prior year. So 2020 and before..

29:03 Okay. Got it? Okay. Thank you very much..

29:08 Thanks, David..

29:09 Thank you..

29:11 Thank you. Our next question is come from the line of Brandon Folkes with Cantor Fitzgerald, please proceed with your questions..

29:19 Hi, thanks for taking my questions. Along the similar lines, calling on so I guess, for look at your press release, you do call out the Xtampza revenue and the adjustments? If I add them together get to about 19.1 for Xtampza in the quarter.

Am I looking at that correctly and then if so, any other dynamics was a destocking? Any – anything else you can elaborate on Xtampza quarter just given consensus was around $34 million there? And then I guess, as we move through 2022, and you're renegotiate these contracts at 50%? Are those all contracts that begin in January 2023? Or are there any that began during 20 -- this reset the better word in 2022, that we may see that goes to net started to cap towards that goal.

Thank you..

30:16 Okay, Brandon, this is Joe. Thanks for the question. I'll have Colleen answer the question on Xtampza gross net, and then Scott will talk about the renegotiation of the contracts..

30:28 Thanks, Brandon for the question. So I think what you were asking is to try to quantify the impact across the product. So that $38.3 million for the returns adjustment, that's $13.8 million related to Xtampza and $24. 5 million for Nucynta..

30:44 Yeah, thanks, Brandon, when it comes to the renegotiations, it's a very kind of clean break, all the renegotiations we're doing would be contracts that go into effect January 1, 2023, and so it would be right off the bat..

30:58 Right, and then Colleen just following up on it. So, if I add back, that returns adjustment, the gross net was still significantly, is that -- is that what you called out with that one customer is, any anything else going on? Just because I think yeah, even absent that -- that adjustment would probably still be talking goes to some extent..

31:29 Yeah, Brandon, thanks for the questions. So the 76% full year for extensive gross-to-net does include a significant impact of the returns. That said we would have still been in the low 70% for Xtampza for the full year. And we're projecting a modest improvement in after 2022..

31:52 Okay, thank you very much..

31:55 Thank you..

31:58 Thank you. Our next question is come from the line of Serge Belanger with Needham & Company. Please proceed with your questions..

32:05 Hi, good afternoon. So I guess my first question related to the product returns.

Maybe if you can talk about what led to this unprecedented disruptions and disruption in the process? And any assurances that something that won't replicate itself in this year or in the future?.

32:31 Yeah, Brandon. Serge? I'm sorry, this is Joe. I would say as I commented on in the script, we're not going to comment any further with regards to the situation at the wholesalers, other than to say it emanates from a third party processor of which they all utilize and their inability to return products.

I think when you look at the steps we were required to take in the fourth-based off of the data we were seeing in the fourth quarter. We think that that's factored into, and we'll be in a good position as we move forward..

33:10 Okay. And then on Xtampza, just looking at the script levels so far in the first quarter 2022, in past years, usually at this time is when Xtampza scripts start flatlining for the rest of the year. This year, we hadn't seen really any grills over 2021 levels, at least late 2021 levels, at least 21 levels.

And it sounds like most of the growth will come from modest growth. So net improvements. Just curious about your outlook for prescription growth this year. And should we expect Xtampza to continue gaining market share in the future? Thanks..

33:56 Yes, Serge, so those are all great questions. I'll take that one. First off, we're very encouraged that Xtampza in January was up 10%. Obviously, this year is different and that there are no material new payer wins that are impacting the market.

When you think of the full year, we believe that Xtampza prescriptions and market share will grow throughout 2022. So I think that's an important thing and when you look at the guidance we gave, I think that one in the overall revenue, I'd emphasize, obviously the year-on-year revenue growth will be driven by Xtampza.

34:36 We're certainly incorporating what it is we learned in 2021 and the way I depict that is we are at this point trending, we are not doing assumptive forecasting, meaning we're not assuming anything in terms of COVID.

We also, as you know, as part of our strategy, we believe in the concept of spillover and that the exclusive wins ultimately, will have a positive impact in the parity, no- contracted books of business. We believe the issue there has been COVID.

But the fundamental reality, there's also an execution component we haven't yet seen, the spillover we were anticipating. So our forecast assumes modest growth kind of in line to what we experienced in 2021 and both the non-contracted in parity books of business.

And then the only thing I would add to that is that just as a reminder, we also have factored in the 3.5% returns rate, which we think is proven..

35:41 Okay. One last one just on the, we know renegotiation of contracts. I think you mentioned it, it would touch on about 50% of your prescriptions.

What is the mix of that 50%? Is it -- does it lean more Medicare or kind of 50/50 with commercial?.

36:00 Yes, I will hand that one to Scott..

36:03 Yes. Thanks for the question, sir. Yes, so about 40% of those prescriptions are in Part D today. So a significant skewing towards Part D and renegotiation..

36:15 Thank you..

36:19 Thanks, sir..

36:20 Thank you. Our next question is come from the line of Tim Lugo with William Blair. Please proceed with your questions..

36:25 Hey, this is Lachlan on for Tim. Thanks for taking the questions. I guess I'll follow a similar pattern with one clarification on the returns and then normal contracting. Just wanted to clarify that $38.3 million you recognized.

You also said about 20% of that you've actually received the product for so does that mean that the other 80-odd percent is I guess, being contested? Or am I kind of miss understanding those numbers there? And then secondly, obviously, I understand you're talking about contracting or anything, but when you look at the plans, were there on a formulary and sort of the overlap with yours.

Do you expect the addition of LP acreages and product to kind of give you a foothold into some of the new plans? You haven't yet? Got a contract with future contracts?.

37:22 Okay, thanks, Lachlan. Coleen will take your first question and then I'll talk about contracting..

37:29 Hi, Lachlan. Thanks for the question. So the 20% that I referenced in my prepared remarks was when you're looking at all of 2021, out of all of the returns claimed only 20% of the product actually made it back physically to Collegium into. So that product was a small proportion of the product, the 20% was processed in the normal course.

And the remainder of the 80% that has not been fully processed is what that adjustment relates to..

38:00 And Lachlan with regards to contracting, the portfolio, one of the things we like about the proposed acquisition is the portfolio is distinctly positioned, and it plays in different portions of the market. So with the payer, think of it independently.

The strategy we're executing with expanse of the portion of the market that it plays in, obviously has nothing to do and it's distinct from the products if we're or posts the close of the BDSI acquisition. So it's really independent..

38:33 Awesome. Thanks..

38:36 Thank you..

38:40 Thank you. Our next question is comes from the line if Greg Fraser with Truist Securities, please proceed with your questions..

38:48 Thanks for taking the questions. Just the following up on Xtampza to demand sales were about $19 million in Q4, the gross-to-net was higher quarter-over-quarter, it was a delta in gross-to-net versus Q3 separate from the returns adjustment driven by the same trends that had been embedded in a prior quarters.

I guess that the patient may shifting toward exclusive accounts, or was there something else that also embedded sales in Q4.

39:13 Yeah, Greg, this is Joe. Look, the dynamic of the year was consistent, and that we believe COVID had an impact that drove us skewing to exclusive Part D within exclusive that adversely impacted the gross to net. So I don't think there was anything different at any point. In the course of the year.

I would emphasize that at the two points in the second half of the year, and what's significant in the fourth quarter is usually we see momentum, as we hit the end of the year, we think both omicron at that point, and then the Delta variant in the third quarter exacerbated the challenge of it..

39:54 Got it? Okay.

We'll return claims greater than historical levels, I understand that physical returns were low relative to claims or lower claims higher than what you'd seen in prior years?.

40:10 Thanks for the question, Greg. Yeah, based on the assessment of the situation, we have made the judgment to increase our overall returns rate just 3.5% historically, it's been low-single digits hovering around 2%, which is in line with industry trends..

40:26 Got it? Okay.

And then, is the $38 million that you booked in Q4? Is that sort of a worst case number and that could decrease if you're successful of getting reimbursement from the other wholesalers, or could that number get higher?.

40:42 I would say it is a prudent number. And when we are successful in collecting and coming to agreement with the wholesalers, that would come back into the revenue line..

40:54 Okay, and then my last question on that just from the cash, what are the cash flow implications? That is that that has already gone out the door and could come back? Or is that cash that has not been paid yet to get.

41:09 Yeah, the cash has already been accounted. So that's the thing when the return claims are made. The cash is debited from outstanding accounts receivables at that time and in the normal coordinates of business shortly thereafter, when there isn't a disruption, the product arrives at the and the transaction is fully settled..

41:31 Okay. Okay. Thank you..

41:33 Great. Thanks. Greg..

41:35 Thank you..

41:37 Thank you. There are no further questions at this time. I would now like to turn the call back over to Joe Ciaffoni for any closing comments..

41:44 Thank you for your time and attention. 2022 was a pivotal year for the organization and I am pleased with the progress we have made so far. But recognize we have a lot of work to do.

We anticipate that we will close the BDSI acquisition by the end of Q1 and we are absolutely committed to managing expanse that er gross-to-net to less than 65% beginning in January 2023. I look forward to updating you on our progress. Thank you and have a good evening..

42:17 Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day..