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BioDelivery Sciences International, Inc. (NASDAQ:BDSI)

Q1 2017 Earnings Conference Call

May 15, 2017, 04:30 PM ET

Executives

Al Medwar - Senior Vice President, Corporate and Business Development

Dr. Mark Sirgo - President and CEO

Ernie De Paolantonio - Chief Financial Officer

Scott Plesha - Senior Vice President, Sales and Marketing

Mike Bullock - National Director, Managed Markets

Analysts

Scott Henry - ROTH Capital

Tim Lugo - William Blair

Corey Davis - Wainwright

Sameer Singh - Piper Jaffray

Matt Kaplan - Ladenburg Thalmann

Chiara Russo - Cantor

Ken Trbovich - Janney

Operator

Please standby, we are about to begin. Good day, everyone. And welcome to the BioDelivery Sciences First Quarter 2017 Earnings Conference. Today’s conference is being recorded.

At this time, I would like to turn the conference over to Al Medwar, Senior Vice President of Corporate and Business Development. Please go ahead, sir.

Al Medwar

Thank you. Good afternoon. This is Al Medwar. And welcome to the BioDelivery Sciences first quarter 2017 earnings conference call. Leading us for the call today are Dr. Mark Sirgo, President and Chief Executive Officer; and Ernie De Paolantonio, Chief Financial Officer. Scott Plesha, Senior Vice President, Sales and Marketing; and Mike Bullock, National Director of Managed Markets will join us for the question-and-answer session following prepared remarks from Mark and Ernie.

In order to thus communicate the data that will be discussed during this call we will be using slides. Those on the webcast will be able to follow along with the presentation and for those joining by phone the slides are posted on the Investor Relations section of the BDSI website.

That said, I will now read the company’s Safe Harbor statement. Certain statements of BDSI’s management made during today’s call or in responding to questions and any other public documents of BDSI or statements of its management may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

As forward-looking statements are based on management’s current beliefs and assumptions about the future but are not statements of fact and therefore involve and are subject to significant risks and uncertainties.

Forward-looking statements may include, without limitation, statements with respect to BDSI’s plans, objectives, projections, expectations and intentions, and other similar statements about the future.

Forward-looking statements are typically identified by words such as projects, may, will, could, would, should, believes, expects, anticipates, estimates, intends, plans, potential or similar expressions.

These statements are based upon the current beliefs and expectations of BDSI’s management and are subject to significant risks and uncertainties, including those detailed in today’s conference call, as well as BDSI’s filings with the Securities and Exchange Commission.

Please note that actual results, including without limitation, results of the commercial launch of BUNAVAIL and BELBUCA may differ significantly from those set forth in the forward-looking statements.

The risks and uncertainties relating to forward-looking statements are also subject to change based on various factors, many of which are beyond BDSI’s control. BDSI undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. You’re advised to review BDSI’s SEC filings for risk factors that could impact BDSI’s ability to achieve these goals described in the forward-looking statements.

And with that, I’ll turn the call over to Mark Sirgo. Mark?

Dr. Mark Sirgo

Thank you, Al. Good afternoon everyone. And thank you for joining BDSI’s first quarter 2017 financial results conference call. On our last call we laid out to you the opportunity BDSI now has with BELBUCA and our commercial plan aimed an effectively and efficiently executing on this important opportunity.

Today I will devote the majority of my time with the BELBUCA including the immediate value that has brought to BDSI as well as key metrics around our early execution of a commercial plan during this first quarter and as we regain the licensing of the BELBUCA. The results of which in this quarter are very encouraging.

But before I get into specifics around BELBUCA, let me spend -- being with our key accomplishments in the first quarter 2017 that you will find out on slide four. I would like to start by highlighting the swift and rapid transition of BELBUCA to BDSI since the close of the BELBUCA transaction on January 6th.

First, BELBUCA inventory and distribution responsibility was transferred to BDSI immediately following the closing of the transaction and BDSI again shipping BELBUCA as schedule and without disruption on January 9th.

Existing BDSI sales force was trained on BELBUCA and within the field and detailing the product to customers by late January, we also completed an expansion of the sales force and recruited, trained and deployed one additional sales representatives by mid March.

Successfully completing a transition of this magnitude nearly seamlessly in such a short period of time with the significant accomplishment and I would like to take this opportunity to thank all of our employees for their tremendous effort. The return of BELBUCA was totally a critical turning point for BDSI in an event that we believe is already showing signs of having a positive financial impact.

Now turning to the financial highlights of the first quarter this year, BDSI net revenue totaled $29.5 million that includes net revenue from our marketed products BELBUCA and BUNAVAIL of $7.8 million.

Also, as we anticipated on our last call, the addition of BELBUCA sales along with those of BUNAVAIL a lot of promotional business unit to reach profitability in March and albeit early into re-launch of BELBUCA, I believe the sales we are seeing are a direct reflection of our targeted approach to this market and we are seeing accomplishment with far less resource when compared to Endo’s efforts last year.

Also, as we said on our last call, it’s been a good deal of interest from potential U.S. and ex-U.S. partners of BELBUCA. I am pleased to report that we have made substantial partners in this area. There are multiple regions where we are pursuing licensing opportunities for BELBUCA, including Canada, Europe, Latin America, Southeast Asia and Australia. Now licensing deals take time, but I am pleased with our progress this January and I am confident in our ability to close one or two transactions in the coming months.

Finally, we completed a debt financing with CRG LP, a healthcare-focused investment firm to retire BDSI’s existing credit facility and provide additional working capital. This financing which help support our current operating plan into the second half of 2018, a loan consist of $45 million drawn on closing and ability access additional funding of up to aggregate of $30 million in two equal tranches for total of $75 million based on achievement of certain financial milestones during the period from September this year to September 30, 2018.

With that, I want to next highlight the immediate value BELBUCA has brought to BDSI and our shareholders before moving to key BELBUCA performance metrics. If you turn to slide six, first the reacquisition has allowed us to take the $20 million in deferred revenue that was part of the $50 million BELBUCA NDA approval milestone payment from Endo and now recognize this as revenue. At the same time, this comes off the balance sheet as the liability. So this outcome has had a positive impact in two distinct ways.

Second, we are now able to attribute $43.3 million in value to our balance sheet, which reflects the value of the license and distribution agreement versus the amount we pay to Endo for the return of BELBUCA. Ernie will describe how the valuation was determined and how it will be reflected in the company's financial statements momentarily. But as we mentioned back in December when announced this reacquisition it came on a favorable financial terms.

On top of these two positive outcomes to our financials, we also recognize $4.6 million of BELBUCA revenue in first quarter, adding approximately $0.07 to our earnings per share and allowed our commercial business unit to reach profitability in March. This $4.6 million is compared to what would have been approximately a $600,000 royalty payment from Endo under the former agreement.

So let’s now focus on BELBUCA’s actual performance over the first quarter. Taking in mind what we said out to do in first quarter was the first to rapidly re-launch BELBUCA and doing to stabilize the base business, while focusing on growing the business to our targeted selling strategy as we proceed in the second quarter and the second half of 2017.

What’s important to keep in mind as you look at slide eight is that following Endo’s discontinuation of BELBUCA promotion, there was a gap of nearly two months with little to no selling effort. During which time we saw about a 15% drop in prescriptions combined in January and February from the December high. As mentioned earlier, BDSI sales force was deployed in two ways with the first in late January and the second by mid-March.

Following these actions, BELBUCA prescription volume rapidly stabilized followed by growth in the month of March. March proves to be the highest net sales month since the product launched and by the end of April with the prescription volume was back to the peak levels achieved by Endo in December before their promotion fees. You can also see on this next slide, that prescriber growth has increased nicely in March off of our February low and while final data is not yet available for, but this trend appears to be continuing.

Another positive sign that our strategy is working is the growth we saw in a number of prescriptions per targeted prescriber in March which is shown on slide 10. This is a metric I previously mentioned that we would be monitoring closely.

As you can see from the slide if you look specifically at the base of healthcare practitioners we are targeting with prescribers of BELBUCA the average number of prescription per prescriber increased to three in the month of March compared to 2.6 to 2.7 prescriptions per month in the preceding months.

This is important because it is critical that we make inroads with those healthcare practitioners that have started to prescribe BELBUCA that they represent the quickest fact a sustainable prescription grow.

Now another important trend we have observed recently is an increased in use of product doses of BELBUCA as you can see here on slide 11. There has been a steady increase in the use of higher strength of BELBUCA. The graph on the left shows that the increase use of BELBUCA doses are 450 micrograms and above which have increased from 15% of total unit sold in June of 2016 to over 30% in March of this year.

This shift from lower doses to higher doses has occurred as we continue to educate healthcare professionals on the optimal dosing and administration of BELBUCA as prescribers continue to become increasingly comfortable with the product.

Importantly, this has a positive impact on the price for prescription as higher dosage strengths a price higher as you can see on the right hand side of this slide. This also includes a price increase on March 1st which was in line with other branded long acting opioids.

Let’s now turn to the next slide that provides you with the managed care update. BELBUCA’s managed care currently represents approximately 85% of the commercial prescription potential for the product.

In addition, BELBUCA is now available without restriction beyond label which means no restriction beyond the need to fall the use of short-acting opioids. In over 70% of the commercial prescription potential, which represents levels III, IV and V, corresponding to the green, blue and purple sections of the chart on this slide.

Let’s also take a closer look at the increase in formulary win for BELBUCA that went into effect in January with United Healthcare as a preferred product of Butrans, which is on slide 14. Since the BDSI sales force were deployed BELBUCA prescriptions were UHC’s commercial business group of about 450 to over 550 prescriptions per month in March. We expected the UHC contract will be a continued contributor to our growth throughout 2017.

The next slide shows positive trends in approval rates of BELBUCA by payor type since launch. As you can see in the most recent data of the month 80% of prescriptions for BELBUCA covered by commercial payors were approved that compares favorably with the overall long-acting opioid class 86%, particularly given that BELBUCA is still relatively early in its launch.

Now turning to slide 16, which represents future managed care opportunities, starting first on the commercial side. The contract process is ongoing for initial and/or improved coverage with Cigna, ProCare, EnvisionRx, Envolve, Health Partners and Kaiser among other.

Another opportunity is Medicare, while Endo submitted proposals for coverage last fall. The decision on these proposals will be made in the second half of this year and implemented at the start of 2018. Importantly, Medicare account for 34% of the total long-acting opioid market and as such this is an important potential growth driver for BELBUCA next year.

Also efforts around government contracts with the veteran appear to administration, the Department of Defense and other federal contracts remain ongoing. These are also significant future potential value drivers for BELBUCA starting potentially early in the second half of this year. So there will be additional significant access and reimbursement opportunities for BELBUCA moving forward.

Lastly, let’s review what we believe the critical success factors behind the future growth of BELBUCA which are outlined on slide 18. First, it’s critical that we target the right audience with the right BELBUCA message. We are focus on targeting those healthcare practitioners that are most likely to drive BELBUCA sale which includes those healthcare practitioners that have already prescribed BELBUCA and high volume prescribers of long-acting opioids, particular those with buprenorphine experience such as prescribers of Butrans.

We have identified over 6,800 of these physicians that meet our targeting criteria of the focus of our 65 sales representatives. Through our sales force we are also be rolling on a new promotional campaign and more focused messaging in sales materials in the coming weeks.

We are also dedicate to expand the buprenorphine education particularly among primary care physician. Expanding buprenorphine education will allow us to expand our current target over time to further enhance BELBUCA prescribing. As part of this we have partnered with the organizers of the annual pain conference which is the leading national meeting on pain for frontline practitioners where we are participating in the PainWeekend and regional conference series.

These are two-day meeting with CME credit provided to physicians, nurse practitioners, physician assistance and other healthcare practitioners treating patients with chronic pain. These dedicated BELBUCA symposium are being attended by 100 to 150 pain prescribing physicians. These programs will run through June of this year. To-date programs have been completed in seven important markets including, Atlanta, St. Louis, Detroit, Kansas City, Indianapolis, Raleigh, Durham and Oklahoma City.

In addition, we completed BELBUCA speakers training in early April and our sales representatives are initiating our National Speakers Programs across the country to provide peer-to-peer education on BELBUCA and the assets of buprenorphine. We expect to complete over 60 programs by the end of June. Speakers programs are typically key value drivers for our product and we expect to see their benefit as we move into the second half of this year.

Also, over the last quarter, we have participated in important national and regional pain conferences such as the American Academy of Pain Medicine and we will look to publish BELBUCA related research and real world experience with the product in a number of prominent pain journals.

Third, a critical part of our strategy is to work to assure access and affordability to BELBUCA. We will do this behind our managed care strategy which I have already described and a new BELBUCA copay savings program that launch in early March as well as national programs such as Relay Health and Cover My Meds that helped to significantly offset the cost of BELBUCA in patients whose insurance plan is yet to add BELBUCA.

So summarize the progress we've made with BELBUCA since we resumed responsibility before January. Let’s look at the next slide. We have seen an increase in the month of March compared to January and February and the number of prescriptions written were now nearly back to pre-Endo levels. We have seen an increase in the number of prescribers, as well as the number of prescriptions per targeted prescriber.

We've also had positive move into the higher dosage strengths, which has driven a higher value of the average BELBUCA prescription, which helped to drive BELBUCA sales to the highest level of all time in March. All of these metrics together point to early success with our targeted BELBUCA strategy.

With that, let me now move on to BUNAVAIL. While we need to focus much of the attention of our commercial effort in the first quarter on the re-launch of BELBUCA and establish ourselves in the offices of the top prescribers of pain products BUNAVAIL remains an important opportunity for us and a complementary product for BELBUCA given the close association between the treatment of pain and opioid addiction. BUNAVAIL revenue in the first quarter 2017 was $3.2 million.

As you can see from slide 21, first quarter 2017 BUNAVAIL prescriptions were slightly below fourth quarter 2016 levels. A couple of factors contributed to BUNAVAIL’s perform this quarter. first and foremost, as I have already mentioned, that the shift in much of our sales force is focused on launching BELBUCA particular in this critical first quarter.

Second, we have the managed care plan which added BUNAVAIL last summer made the unexpected decision to remove all brand of buprenorphine and naloxone products from its formulary in December resulting a loss of nearly 350 prescriptions per week for BUNAVAIL.

And finally the impact of new contracts of BUNAVAIL that begin January 1st have had a slower uptick anticipated. This is something that other companies have recently reported across several therapeutic categories.

We continue to believe that managed care contracting highlighting the benefits of BUNAVAIL compared to Suboxone is the strategy that ultimately gives us the best opportunity to improve market share. We also continue to believe that regulatory actions to increase access to buprenorphine products for the treatment of opioid dependence such as the cap lift and legislation allowing those practitioners and physician assistance that prescribed buprenorphine and other trends continue to support increase use of the buprenorphine and naloxone products will benefit BUNAVAIL.

There are also positive signs from commercial insurers such as Cigna and Aetna where both announced that they were opening up the full launch our buprenorphine and naloxone products in order to address the problem of opioid addiction in this country and doing so potentially reverse the dominance that Suboxone has shown in this marketplace.

Finally, as part of our strategy behind BUNAVAIL as shown on slide 22, we continue to support our most prolific BUNAVAIL prescribers which total approximately 1,200 physicians that cover 95% of BUNAVAIL prescriptions and some of which also prescribed BELBUCA.

So in summary, we believe BELBUCA and BUNAVAIL represent two attractive growth opportunities during the time when opioid addiction is an all-time high and better and more responsible solutions for treating chronic pain are being sought.

As slide 24 indicate, this combination was responsible for $7.8 million revenue in the first quarter. This amounted $1.7 million in product royalty of which $0.7 million was attributed to BELBUCA makeup the $9.5 million in total revenue showing for the first quarter and this compared to total product revenue of $3.3 million in the fourth quarter of 2016.

With that, let me close by reviewing our key value drivers over the next few quarters on slide 25 before turning things over to Ernie. First, we are focused on the continued growth of BELBUCA and we are at work executing on the three primary critical success factors for this product that I highlighted earlier that include targeting early prescribers and the doctors, moving up buprenorphine education and ensuring patient access.

We are confident they are well-positioned long-term success with BELBUCA and look forward to continue deliver on our strategy. We are also focus on securing partnership for at least readings of the world in the coming month and this will potentially bring a non-dilutive income in order to maximize the value of BELBUCA in the long-term.

In addition, we are hopeful to receive regulatory approval for BELBUCA in Canada in June and continue work to secure partnering to commercialize the product in that territory while discussions are ongoing that could allow BELBUCA to launch in early 2018.

Overall, we are pleased with our BELBUCA progress thus far as we have nearly achieved pre-Endo levels using a more efficient and targeted commercial effort. With respect to our pipeline we anticipate the results from the first cohort of our single dose PK study of our 30-day sustained release buprenorphine injectable product by the fourth quarter of 2017.

As a reminder, the first trial was set, single ascending doses of sustained release buprenorphine injection in treatment seeking opioid use disorder subjects. This single dose PK study will be an important value driving event as we confirm whether we have another 30-day desired formulation. We will then work to move to the multi-dose study in early ‘18 which will be followed by our Phase 3 program.

Finally, we anticipate that the regulatory submission that will followed by the new manufacturer ONSOLIS will be submitted later this year, allowing our partner Collegium Pharmaceuticals to return the product to the market. So by all account it’s been an extremely exciting, busy and productive quarter.

So with that, let me turn things over to Ernie to cover our financials in more detail and then we will come back to take Q&A.

Ernie De Paolantonio

Thank you, Mark. Good afternoon, everyone. Before I review our key financials I would like to first address the changes made to our P&L and adjustments made this quarter due to the reacquisition of BELBUCA. Then I will review our key financials for the first quarter of 2017. For a more thorough review of our financial results, please see our 10-Q which will be filed this evening.

First, reference to slide labeled March year-to-date P&L. The reacquisition of BELBUCA and termination of our licensing agreement with Endo Pharmaceuticals, as Mark mentioned, has significantly positive impact on the P&L and I will discuss each area impacted individually in detail.

The far left hand column on adjusted P&L, represents the quarterly P&L, it includes BELBUCA revenue that is prior to the BELBUCA purchase adjustments and is consistent with our P&L will be presented in the future.

Please also note that embedded within this column is our profitable commercial organization for the month of March now the BELBUCA is ours free and clear. The unadjusted P&L for the first quarter yielded a net loss of $13 million or $0.23 a share. Importantly, without BELBUCA revenue this quarter, our loss would have been $3 million more or $16 million ending 29% -- $0.29 share loss.

The next column shows the first adjustment due to the termination of the licensing agreement with the release of $20 million from the deferred revenue on our balance sheet to contract revenue on our P&L. The $20 million deferral which part of the $50 million NDA approval payment from Endo and was setup as the contingency, should generic competition enter the market from 2023 through 2027.

This contingency was terminated with the licensing agreement to not only have we recognize this is a revenue at this period but we have also remove the $20 million contingent liability from our balance sheet. The release of the $20 million into earnings had $0.36 per share positive impact this quarter.

The next column to the right shows the adjustment due to the reacquisition of BELBUCA as a result of recognizing the licensing and distribution transaction as a business combination. That is when the product is acquired from a -- and classified as a business combination evaluation of the assets acquired must be performed to be compliant under GAAP. That valuation resulted in a favorable impact of $43.3 million to BDSI it means that the value of BELBUCA licensing and distribution agreement as a value of $43.3 million more than the purchase price paid by BDSI. The impact of the evaluation on the P&L was $0.74 per share.

Also highlighted on the P&L is the cost attributable for the valuation both in G&A and cost of sales. In G&A the amortization of the intangible on our balance sheet that will be amortized over the next 10 years in this quarter $1.1 million and in cost of sales that will reflect the increase fair value of the inventory acquired in this quarter $0.9 million for the remainder of the year when those units will have been sold into the market. We will continue to break this out on a quarterly basis. The far right hand column represents the adjusted P&L including all items impacted by the BELBUCA purchase were a positive on diluted earnings per share this quarter of $0.87.

Now moving to the second slide. I will review the key financials for the first quarter. Again, I want to remind everyone that beginning January 1st all revenue for both BELBUCA and BUNAVAIL is based on the sell-in method, which records revenue when we sell product from our distribution center versus the sell-through method which we have been using previously.

Total net revenue for the first quarter of 2017 totaled $29.5 million in consist of the $7.8 million of product revenue, $4.6 million for BELBUCA and $3.2 million for BUNAVAIL, which asset relates to BUNAVAIL includes $1.7 million of deferred revenue recognized from switching to the sell-in method. $20 million of contract revenue from the termination of the licensing and distribution agreement with Endo and $1.7 million of royalty revenue from BELBUCA and BREAKYL.

Total operating expenses for the first quarter were $15.9 million, including $1 million of the expense for the PDUFA fee for the BUNAVAIL induction label and $1.1 million of non-cash amortization from the $45 million intangibles I previously mentioned.

Operating expenses were $2.5 million or 14% less than the first quarter of 2016 because of lower marketing and sales and R&D spending offset slightly G&A and legal expense. Sales and marketing operating expenses in the first quarter were $4.8 million or $0.3 million less in the fourth quarter of 2016 and $1.5 million or 24% less versus prior year, also reflecting cost reductions in our commercial expenses. In addition, with the BELBUCA revenue included, we reached profitability in our commercial unit for the first time in the month of March.

General and administrative expenses for the first quarter were $7.1 million, $0.7 million higher than the fourth quarter, a $6.4 million reflecting the $1.1 million of amortization expense and $0.6 million more than the first quarter of 2016.

R&D expenses for the first quarter were $2.7 million or $2.4 million less in the fourth quarter of 2016, up $5.1 million and were $2.7 million less than prior year's first quarter expenses, which mostly supported the Collegium program.

Net profit for the first quarter was $48.3 million or $0.89 basic earnings and $0.87 per diluted share compared to a loss of $18.7 million or $0.36 per diluted share in 2016. First quarter 2017 net profit excluding stock compensation expenses of $3.1 million was $51.4 million or $0.94 per basic share and $0.93 per diluted share versus net loss of $14.6 million or $0.28 per diluted share, excluding the $4.1 million of stock compensation expenses in the first quarter of 2016.

Now for first quarter product financials in more detail. BELBUCA has a net revenue in the first quarter $4.6 million and had an average net price of approximately $257 with an average gross profit of over 80%. Looking ahead addition manufacturing and packaging efficiencies could yield an additional 30% cost improvement going forward. For the fourth consecutive quarter the unit cost of sales for BUNAVAIL has continued to decrease and in the first quarter cost of sales decreased by 20% over the fourth quarter of 2016.

Finally, our cash balance of $35.2 million on March 31st represents $10.5 million cash -- net cash reduction in our first quarter. With the continued profitability of BELBUCA we continue to focus an average cash burn of approximately $7 million to $8 million which gives us one way into the second half of 2018 based on our current operating plan and objectives.

Now let me turn it back over to Mark for the Q&A session.

Dr. Mark Sirgo

Thank you, Ernie.

Question-and-Answer Session

Operator

[Operator Instructions] We will go first to Scott Henry with ROTH Capital.

Scott Henry

Thank you. Good afternoon and congratulations Mark for the nice job, you and all team have done a nice job of stabilizing the BELBUCA franchise as you’ve taken it over.

Dr. Mark Sirgo

Thank you, Scott.

Scott Henry

Couple questions, I wanted to think sort of do you think, are you seeing the benefits of this sort of anti-opioid tailwind as some prescribers are really kind of being steered away from opioid, are you seeing that trend and would you expect that to continue and perhaps take you for continued growth?

Dr. Mark Sirgo

Yeah. I am going to give you a brief answer and I am going to ask Scott since he is lot closer in the field, lot more than I am. But I think when you know things are changing is when anecdotal reports sort of turn into to more when I’d like to think of this trends and to your question, I think, that’s what we are beginning to see because we are accounting more and more physicians who really, whether it’s due to government pressure, DEA or all the above are starting to really look closely how they are prescribing new patients and also considering making changes to current patients and we had several offices that we call on -- that are making wholesale changes of moving people from category 2 opioid over to a buprenorphine product. So I don’t say, it’s all going to BELBUCA, but it’s going to buprenorphine and we are in a great position to get our fair share of that that business. But I will ask Scott also make a comment on it based on what he think.

Scott Plesha

Okay. Thank you, Mark. Yeah. I would agree with what Mark has shared. The other thing I would add as well is we are saying more and more state put in place, almost every state putting in place MSE, morphine sulfate equivalent model in place, restricting what the physician can prescribe to any one patient and even auditing and looking out a physician to prescribing at the MSE level.

We are also starting to see that in the payor -- on the payor side as well and if you look the CDC conversion chart for BELBUCA actually quite favorable for us some of the factor 900 microgram doses, if it’s given twice today would be at 54 with most states and payors kind of hitting their cap round 90.

So we are within that range and if you can imagine a doctor being scrutinize for they are -- how prescribing -- how much they are prescribing one way to lower that MSC prescribing would be to go to something like BELBUCA. So I think that’s a real positive thing for us going forward.

Scott Henry

Okay. Great. Thank you for that color. Just a couple more questions on BELBUCA. First, the $257 net revenue per script, is that a pretty stable number as far as the current run rate or -- and I guess the question is would I expect that decline in coming quarters and how do I think of this kind of sell-in method versus sell-through as far as when I related to the prescription number I see, I assume it should be somewhat similar?

Ernie De Paolantonio

Yeah. Scott, hi, it’s Ernie. I will take the question. On the sell-in method versus sell-through, what we are right doing now is recognizing from the three PL. However, that will be indicative of what's getting pull through in the field. So as a unit is consumed in the field, what we're seeing in a similar number is that the wholesalers or the pharmacies then ordering from the wholesalers. So I expect that those members could be pretty similar going forward.

On the $257 amount, I would expect that decline because as patients move toward the higher doses that amount will decrease and we are seeing that in the first quarter go from the lower doses to higher dose and Scott, I don't know if you want to add anything to that.

Scott Plesha

Yeah. Well, Ernie, so, I think this is an important data point actually. One of the things that was really evident when we first had the promotion of BELBUCA, lot of physician didn’t realize it can go higher than 300 micrograms. The Endo sales force wasn’t provided with data that we have in our hands, they -- until like two weeks before literally they stop promotion, that looks that dose titration over time.

So if you would look at the 450 micrograms and 900 microgram, they are made up of the firm, retail setting they are about 24% of the firm in Q4, while in Q1 it jumped to 29.3%. So that’s substantial because obviously there's additional revenue at those higher doses. In March 31.1% and in April was -- we see that go even higher with the 31.4% through April 28th, we don’t have the whole month yet, that just at the retail setting.

We are continuing to see the higher doses as patient -- as physicians become more comfortable prescribing higher doses, but also a clinical data suggest that 84% of the patients in our studies were at 450 micrograms to 905 microgram by the time they are titrated up. So I think we will continue to see that number go, I mean, well setting, like I said, 31% from changes right now.

Scott Henry

Okay. Great. Thank you for taking the questions. I will jump back in the queue.

Dr. Mark Sirgo

Thanks, Scott.

Operator

Pardon me, we will go next to Tim Lugo with William Blair.

Tim Lugo

Congratulations as well on the BELBUCA transition and execution in the quarter. I guess, a couple BELBUCA questions, because of the changes of the sell-in versus the sell-through method of rev rec. Can you just confirm that the BELBUCA strength was related to the end-user and maybe not just inventory fluctuations between the Endo and BDSI transition.

Dr. Mark Sirgo

Yeah. Hi. That was -- if there isn’t a pull-through in the field, we don't see orders, that the orders will go back off. So as inventory was depleted in the field and I believe that that's what was behind the much strength in the sales numbers is that -- it was a -- is a strong month than we experienced strong sales in that month, so, yeah.

Scott Plesha

Tim, I will add that. This is Scott, again. The percentages I gave you were based on symphony data, so prescription data.

Tim Lugo

Okay. Great. Yeah. We have seen the prescription as well. The transition has been very impressive. And can you maybe talk about where we should expect blended average dose throughout the year. It sounds like a price per prescription is trending, while I guess how should we look for the next few quarters as well?

Dr. Mark Sirgo

Yeah. Tim, this is Mark. I don't think we are quite in the position that to provide that answer with confidence as of yet. I mean, it's clearly trending upwards as Scott has pointed out. But I don't think we are quite at a point here where we know where that’s going to level off. I think as we get certainly deeper in this quarter and the second half we will have a better understanding, but as Scott has pointed out, we are actually now using sales materials that are focused on more aggressive titration of the product as it probably should have been from this outset and those types of things are having impact as we are seeing, but too, probably, too early to state that with any kind of confidence.

Tim Lugo

Understood. And you called out Cigna, ProCare, Kaiser, a few managed care opportunities in your slide deck. Should we view the 2018 managed care negotiations is likely a net positive overall or are there something might be slipping as well and you maybe they can’t reach other out, just what you are kind of view as we enter those -- or as you guys are entering those negotiations?

Dr. Mark Sirgo

Yeah. I am going to ask Mike Bullock to comment, but the thing I would say is, I think, we mentioned in the last call. We transitioned all of the contract from Endo over to BDSI back in January, February timeframe and like I believe we up those in terms of their longevity, the contracts, so they shouldn’t, the ones that we currently have and we heard should not terminate so in this year. But maybe comment on that and comment on the likelihood of where we go with Medicare and some of the other commercial plans we bid on.

Mike Bullock

Yeah. Mark, you spot on so, one of the things we did when we transition over those contracts is one to extend them over -- move those over to BioDelivery Sciences paper, so that was the first thing that we did.

I think the short answer to your question, I would absolutely viewed as net positive and partly for the reason Mark said as we've extended those agreements where we could through the 28 bid cycle and also and where we had a gap was in the Medicare Part B space, so all of those agreements are -- not agreements but all those RFPs have been submitted for 2018. So want a more about that over the summer. But I think it is safe to say that 2018 I would expect the net positive to your question and for access to improve.

Tim Lugo

Understood. Well, congratulations on all the progress in the quarter.

Dr. Mark Sirgo

Thanks, Tim.

Operator

We’ll go next to Corey Davis at Wainwright.

Corey Davis

Thanks very much. Just one clarification on the pricing and the value prescript of $257, I'm assuming that’s your net price in that slide 11 or you are showing the price prescript of $355 that's just a gross price?

Dr. Mark Sirgo

That’s correct.

Corey Davis

Okay. And then kind of a big picture question and more of a hypothetical or anything else, but if you did have kind of unlimited access just to capital and you could do a study with BELBUCA or is there something that docs are saying, at least we really like to know this and what kind of study do you think you could or would or maybe at some point in the future due to kind of enhance its profile in the field?

Dr. Mark Sirgo

Yeah. So, Corey, hi, this is Mark. We hear it a lifecycle management plan from Endo that we paid a lot of attention because a lot of work went into it and we certainly have our own views and made adjustments and so on going forward. But anything you can do to tease out some of the real benefits of buprenorphine molecules such as its impact on respiratory depression, its impact on drug liking, the thing that gets people acquiring the opioids. Any those type of studies with come in high value, because it would enhance our ability to promote behind those types of things in a more direct way. So we are considering those types of activities.

At the same time other indications one being actually utilization in neuropathic pain, which at least one of their opioid has been approved for, we -- there is a lot of data and the literature that suggested that buprenorphine is an effective treatment for different types of neuropathic pain. So this is a molecule and a product where you can clearly build a brand around that’s extremely sustainable and as we go forward we will certainly consider doing studies that we hope they could add information about the way took a label and our ability to promote.

Corey Davis

Okay. Great. Thank you.

Dr. Mark Sirgo

Thank you, Corey.

Operator

Next David Amsellem at Piper Jaffray.

Sameer Singh

Hey. This is Sameer on for David. Just one here so, what you think you will be able to do with BELBUCA that Endo didn’t, just on little bit, but you talk of the titration and educating physicians there. So could just provide more specifics on how your messaging is different from Endo?

Scott Plesha

Yeah. So this is Scott. I mean, to be honest, we felt Endo was doing a nice job, they had -- I mean, had growth trend in place. Our goal is just to be able to grow the product also in a meaningful way with less resources. We basically start out with 50 reps. We did ramp up to 65, but 15 of those did not even hit the territory until March, mid-March, were trained and in territory in March, so we are just starting to see their impact a little bit. We have put speaker programs in place recently. We trained everybody, updated the slide deck. We are just starting speaker programs as of last week, we have 50 done by at the end of June, 200 by the end of October, but I don't know that I would compares those to Endo in anyway, we are really just doing what we think can be best with brand going forward.

Dr. Mark Sirgo

Yeah. I think the one thing you said, Scott, reiterated that, I do think we are more aggressive in our approach to messaging and there are things around being a CIII opioid that I think we are messaging stronger around, in fact, that buprenorphine is the only opioid that has a similar effect on respiratory depression, which we all know it’s a problem you face with overdose.

And as we talk about more forceful education and titration of this product extremely effective opioid and even in patients with severe pain as we saw in our opioid experience trial, but in order to get to those patients you got up the dose.

So I think we have been more aggressive in way that we have approach to, we have got new sales materials that Scott pointed out and it’s coming out and we don’t have a conflicting CT opioid in our back. So I think those are things that really we are doing and I think we will continue to make a difference.

Sameer Singh

Thanks.

Operator

Next to Matt Kaplan, Ladenburg Thalmann.

Matt Kaplan

Hey. Congrats on the smooth transition again. Just shifting gears little bit, in terms of induction indication that you were able to get into label for BUNAVAIL, how should we think about this in terms of its impacting uptake of BUNAVAIL?

Dr. Mark Sirgo

Yeah. Hey. Matt, it’s Mark again. Physicians use this products for induction they have for years and only recently did any of the product actually get approved for induction, although the processes of reducing patient is being going on for dozen years or so. So, our product, although we couldn’t promote it and I think that’s the advantage now, we cannot promote it for induction was likely being used to reduce patient.

So we haven't put a lot of increased value behind it at this point, but it does at least prevent from any of detailing that we may have encountered out there, so it’s a -- it’s really net positive, but we don't think it's going to have a major impact going forward on sale. There were few managed care plans that actually deal hold against us. So we will be revisiting those. So it is really -- it’s a help for attribute that we can now you to our advantage, but it won't have an immediate impact as far as we can tell on prescription sales.

Matt Kaplan

Okay. Fair enough. And then in terms of just going back to BELBUCA, you mentioned some ex-U.S. licensing opportunities, how should we think about those and as they occur?

Dr. Mark Sirgo

Like I said, we have had a lot of interest, some of this was already another way with Endo, ex-U.S. and we picked up those in our actions and we have added quite a few of our own. Like I said, extremely encouraging, these things take time and nobody likes to hear that, but we engage fully in January, February and we continue with significant discussions in the territories that I outlined and we do expect we will be able to close some transactions in the next couple of months.

Matt Kaplan

And should we think about those in terms of typical in terms of our payments and milestones of the end royalties, sound like that?

Ernie De Paolantonio

Yeah. In realizing that the U.S. is the largest and whatever structures or deals we do outside of the U.S. would have the similar structure but not the same types of say upfront and milestone payments and so on. But certainly we expect to have those types of payments included in these transactions, so there would be access to non-dilutive capital.

Matt Kaplan

Okay. And then in terms of educational challenges that year running into and talk about how your in terms of the lack of similarity perhaps with BELBUCA and then buprenorphine overall. How are you addressing those?

Dr. Mark Sirgo

I am going to ask Scott to address how we are approaching the educational aspects of BELBUCA, I think, that’s what’s you are review, referring to.

Matt Kaplan

Yeah.

Scott Plesha

Yes. So, number one, I think the speaker programs are a crucial part of that. But you remember that we are taking a very focused approach on our targeting where majority of our targets have buprenorphine experience already. So we are not really trying to go out to a primary care doctor that does have experience writing at least a significant amount of Butrans within their practice and we are -- obviously we are also aware that there's a lot of off label people working for pain also whether it’s Suboxone or buprenorphine. So really we have some work to do there and we will allow doctors speaker programs to do a lot of that work and that’s really where most of they will come from.

Dr. Mark Sirgo

Yeah. So, Matt, right now we are focus on as Scott point out people who are familiar with buprenorphine and that’s mean, they have been writing Butrans, they have been writing BELBUCA, other buprenorphine treatment of chronic pain and then as we get further into the launch and our success continues we will look to add other physicians to the call list, namely being primary care where they will need additional education.

Dr. Mark Sirgo

And it will make sense as we grow our business to be in teaching institution as well, making sure that people who are trying appropriately before leaving get out in real world to prescribe.

Matt Kaplan

Great. Thanks for taking question. Thanks.

Dr. Mark Sirgo

Sure.

Operator

Next Chiara Russo with Cantor.

Chiara Russo

Yeah. Hey, guys. Congratulations on the first effort with BELBUCA, that’s an excellent acquisition there? But I do have a couple of questions. First, I know with this even touched on the floor with the sell-in and sell-through method, I just want to make sure, I understand that. The sell-in basically means that you are tie to what the wholesalers are ordering, whereas the sales-through was more of when retail actually dispenses medications, do I have that correct?

Dr. Mark Sirgo

That’s correct.

Chiara Russo

Okay. And what was a decision to go ahead and change the way that you recognize revenue?

Dr. Mark Sirgo

It was based on the history that we have. If you don’t have a history, our returns you really aren’t allowed to recognize revenue in the sell-in method. So we had -- we deployed enough information on the returns and we move to the sell-through.

Chiara Russo

Okay. And did you see already that -- that the difference this quarter for BELBUCA was $1.7 million in the sell-in method, did I hear that or was that in regards to something else?

Ernie De Paolantonio

No.

Chiara Russo

Okay. Okay.

Ernie De Paolantonio

One point.

Chiara Russo

Yes. Okay. I have a question, in terms of the Medicare opportunity, which is obviously not quite, but perhaps how do you sort of look at that in terms of your strategy approaching those plans, obviously, they kind of work a little bit different than your commercial payors, how do you kind of approach of those and look to win?

Ernie De Paolantonio

Yeah. I am sorry, Chiara, it’s Ernie. I did want to go back, you are right, $1.7 million was recognized in this quarter, when you switch from the sell-through to the sell-in, I'm sorry for giving wrong, the BUNAVAIL, I thought you were just speaking about BELBUCA.

Chiara Russo

Okay. So that was the BUNAVAIL difference between the two methods?

Ernie De Paolantonio

Correct.

Chiara Russo

Okay. Do you have that number for BELBUCA?

Ernie De Paolantonio

There is no, because we just begun selling BELBUCA this quarter.

Chiara Russo

Got you. Okay. All right. Okay. And the…

Ernie De Paolantonio

Can you repeat the question please?

Chiara Russo

Yeah. Obviously, that I -- I look that is a nice opportunity to expand coverage and lot of more scripts so sort of kind of your take on that and what is the strategy obviously that's a different payor than you currently have with your commercial?

Ernie De Paolantonio

Yeah. So the -- remember the timing of when BELBUCA was launch with Endo. So one of the challenge is just the timing of how you bid this a year in advance.

Chiara Russo

Right.

Dr. Mark Sirgo

So we missed the 2017 window just last year timing of when the product was launch. So just by the nature of how we will bid this 2018 there is a significantly greater opportunity for us and we are positioning not be similar from what we are doing with commercial space with probably advantages that Mark has alluded to in terms of the advantage of buprenorphine and BELBUCA specifically, so…

Chiara Russo

Okay. Okay. And then couple of sales questions, so upside on the sales force, they're out there, they are doing their things and I think the last time you mentioned that you had about 16 or so Endo reps that you pulled over, how have they impacted the BELBUCA sales force over your topline?

Dr. Mark Sirgo

Yeah. So they have contributed but not in a favorable way we have top reps that are went under reps and one that are, so I mean, overall, though, it was nice to have some of that institutional knowledge come across when we were training our wholesale reps so they can share their insights and some real world experiences instead of just us trying to train everybody. So that was very helpful.

Chiara Russo

Okay. And then the last question one, I guess, is maybe go to Ernie. I'm looking at the P&L and I'm looking at something called a bargain purchase gain, I just wondering if you could maybe educate what that is?

Ernie De Paolantonio

Bargain purchase gain is when the value assigned is worth more than the value that was the consideration, you have a bargain purchase gain.

Chiara Russo

Okay. Is that like a one-time event?

Ernie De Paolantonio

That’s a one-time, that’s correct.

Chiara Russo

Okay. All right. Great. Thank you guys. Great quarter.

Dr. Mark Sirgo

Thank you.

Operator

We’ll go next to Ken Trbovich with Janney.

Ken Trbovich

Thanks. I have got a few question, I guess, Mark, touching on comment you made earlier, you mentioned there were price increase in March in line with the competitors, could you be a little more specific, was that 9%, 7%, where we had an increase for -- that March increase.

Dr. Mark Sirgo

I am looking at earning actually it was 9%.

Ken Trbovich

9%.

Dr. Mark Sirgo

Yeah.

Ken Trbovich

Okay. And then just with regard to channel inventory levels and Ernie I know this is one of the challenges for some of the competitors in the space is obviously trying to monitor those levels, I know, you mentioned, but you saw some, obviously, pull-through in terms of higher purchases in March as a result of the prescription demand. But can you give us a sense for where you think channel inventory sort of ended the first quarter and how that from your perspective would compare to what you think a normalized level?

Ernie De Paolantonio

Channel inventory, if you look at with the wholesalers and the pharmacy could be anywhere between six, eight, all the way up to 12 weeks. The way I look at that Ken is I look at what I sell for my three PL and what the wholesaler sell out to the pharmacies and if those numbers are parallel or they are in line which they are then I believe I have a pretty good story.

Now the other thing is, I monitor every one of our wholesalers in the amount of inventory that they have and at any one time they could have between two weeks and four weeks on average. So when I look at that there's maybe another two weeks or three weeks out in the field. I think that we have the right side -- the right amount of inventory in the supply chain.

Ken Trbovich

Got it. And there was no significant shift with the transition one way or the other.

Ernie De Paolantonio

No. My thought is that Endo probably ran out of inventory that they had in the field probably in March and I believe that's why we sold the increase in March.

Ken Trbovich

Got it. Mark, I apologies, I think, I am going to kick off with that the same answer?

Dr. Mark Sirgo

No. We are -- I am fine.

Ken Trbovich

Yes.

Dr. Mark Sirgo

Okay. So I guess just to put a point on Chiara’s question about the managed care coverage, given that you sort of a dealer today, what you guys have it as it go for the managed Medicare was 20% or even enroll you guys for something closer to 50%?

Ernie De Paolantonio

Is your question about Medicare or?

Ken Trbovich

Managed Medicare for 2018 that sort of goal where you have like to be, I mean, the sense I get from your competitors is that, a lot of time these products get covered even if not officially planned, so the sense like there is no need to go to 90% coverage with Medicare, but certainly want to get sense for where you guys think you would like to go?

Ernie De Paolantonio

Yeah. So that’s a fair question and accurate in the access. So we see that as well with BELBUCA today where the access is pretty comparable to others. Our goal right now is just to improve and make it more accessible to the patients that want the product. So from a percentage, I can’t give you a percentage or plans that we hope to get, we bid them all, thinking we are get them all. So what percentage of those we get is need to be determined.

Ken Trbovich

Okay.

Dr. Mark Sirgo

I think you mentioned earlier Mike, there has been receptivity to the differentiated features that CIII opioid like buprenorphine presents, so it’s not like we are going in there with the same story everybody else has with the CII. I mean, people are paying more attention to the fact that this is a differentiated product with attributes that that are resonating during this period where we’ve got this opioid crisis, I mean, I think their statement that may not change probably, ultimately, make their decisions but we certainly there -- it’s getting their attention.

Mike Bullock

Yeah. And I think that’s right, I think, to the question really about the education around buprenorphine as Scott answered where we are focused on physicians that actually understand the molecule and prescribe that already. Where the education does come in to play is that the pair level and we are certainly engaging that as we speak.

Scott Plesha

Yeah.

Ken Trbovich

And then Scott, you talked about the picture with regard to educating the field sales force on the dosing that exists in the clinical studies. Can you give us a better sense for what that average dose was in the actual clinical study, I know you said that 84% sell within the range of 450 micrograms to 900 microgram but would you kind drive a max rep to that number.

Scott Plesha

Yeah.

Ken Trbovich

Can you give us sense for what that number was in the study and kind of where things are today with regard to average micrograms per patient?

Scott Plesha

Yeah. So this came exactly from our clinical trials and it is probably open-label titration phase of the study. As I said, 84% have 450 microgram or higher every 12 hours, that number in study are 36% were on the 900 micrograms, 17% were on the 750 micrograms, 17% were on the 600 micrograms and 14% were on the 450 micrograms. And I apologies I do not have the average microgram per script in hand.

Ken Trbovich

Yeah.

Dr. Mark Sirgo

We have been tracking.

Ken Trbovich

Yeah. It sounds like I mean a third of your patients are or if only a third are on 450 micrograms to 900 micrograms, it certainly sounds like you have got lot sort of to go?

Scott Plesha

Yeah. It went from 24% in Q4 we are up to 31.5% in April so…

Ken Trbovich

Yeah.

Scott Plesha

It’s a decent job in that period of time and there is even some, I guess, I would call titration information within the sales piece that we have that was probably confusing for physicians that such a crucial thing that we are updating on our new sales day that will be available in a couple week. But yes, we think it laid out that clear and they are just confused and just way it was and we have had to go in and kind of re-educate around that and around this dose.

Dosing also because we are also hearing patient -- physician say that they don’t think it was effective and the first think you would ask is how they have gone, it was 300 micrograms. So this data has been very helpful to also just get better patient outcome and that’s a key to all of us really patient outcomes.

Ken Trbovich

Okay. And then just one last, yes.

Dr. Mark Sirgo

These are opioid experienced patients, of course, that he is referring to in his data…

Ken Trbovich

Yeah. No. I totally understand. Yeah. No. I totally understand. And then, I guess, just to touch on the point you made with regard to the outlook on the cash burn, I think, you commented earlier in the call that you folks are looking to forward to seeing that cash burn come down to $7 million to $8 million and I was looking at the first quarter looks like closer to $9 million. How much of that is factoring in growth in prescriptions versus growth in the dose or is this really driven by further cost savings, I am just trying to figure out whether this is topline growth that’s driving that improvement or cost savings that’s driving that improvement on the cash burn outlook?

Dr. Mark Sirgo

Well, we can always modulate our spending, but it’s really based on topline, so we are expect to see growth in prescriptions and we are expecting it to trend at the higher dose trends.

Ken Trbovich

Okay.

Dr. Mark Sirgo

And if we need…

Ken Trbovich

Appreciate you are taking question. Thank you.

Dr. Mark Sirgo

Thank you.

Operator

This does conclude today’s conference. We do thank you for your participation. You may now disconnect.

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