Case Study: Collegium Pharmaceutical, Inc.

Collegium Pharmaceutical, Inc. is a specialty pharmaceutical company which began as a developer of next generation, abuse deterrent products for patients suffering from Chronic Pain.  It subsequently augmented its product offering to include new topical dermatology products. BMP partnered with an experienced and accomplished entrepreneur, Jane Hirsch, to found the company in 2003. Previously, she also founded Copley Pharmaceuticals, a highly successful generic pharmaceutical company. Jane was a co-Trustee at Tufts University with one of the BMP General Partners and they had been discussing the Collegium opportunity over several months. Collegium’s success was partly dependent on identifying and acquiring a series of patents offering unique market opportunities.

The company’s management was highly experienced in drug formulation techniques and drug delivery, and, as such, is positioned to exploit profitable niches in the pharmaceutical market. Collegium applies proprietary formulation techniques to produce products with improved therapeutic performance. This may involve, for example, combining two different drugs into a single formulation in which the delivery and absorption of the two components is controlled to produce a therapeutic effect. Collegium creates value through performing internal “proof of concept” and out-licensing to suitable marketing partners or in certain cases obtaining regulatory approval and marketing the products themselves. For approved chemical entities, the company uses regulatory paths that do not require large clinical trials to gain approval.  In this way, the cost, time, and risk associated with clinical trials is avoided while maintaining valuable intellectual property rights. The company already has developed or in-licensed multiple proprietary formulation and drug delivery platforms that are applicable both to new drugs and drugs about to come off patent. Thus, the company’s products and services enable pharmaceutical and biotech companies to improve performance of their products and extend patent lives. At the same time, they enable generic pharmaceutical companies to enhance financial performance by marketing proprietary formulations.

Initially, as the only institutional investor in Collegium and with a 30% ownership position, the BMP team was able to work closely with management to refine the company’s strategy and manage the business and financing risks. As the company grew its primary product revenues additional opportunities were identified including acquiring Triax Pharmaceuticals, as well as some other assets, which would augment the company’s product footprint. In order to complete these acquisitions, BMP invited an additional growth stage investor to join the syndicate and subsequently completed three acquisitions.

As a result, Collegium formed and spun out an additional company, Precision Dermatology in 2010, which became a highly valuable dermatology product company. The original pain reformulation assets remained with Collegium as Precision marketed its own Dermatology portfolio.

Precision Dermatology attracted a number of potential acquirers as its revenue grew to over $75,000,000 in 2013. Subsequently, Precision was acquired by Valeant Pharmaceuticals (NYSE:VRX) in July 2014, for $475,000,000 in an all cash transaction. This yielded a 350% return on the BMP investment.

Collegium continued to develop its pain product portfolio and completed its clinical trials in 2014. In May 2015 Collegium successfully completed an IPO raising $80 million in gross proceeds.  In September 2015, the Anesthetics and Analgesic Products Advisory Committee and the Drug Safety and Risk Management Advisory Committee of the FDA voted unanimously ( 23 to 0) to support the approval of Collegium’s Xtampza ER (oxycodone extended – release Capsules) for the management of severe pain.  In November the FDA confirmed the Advisory Committee’s recommendation.  The company expects to market Xtampza ER later in 2016.  The company currently has a market capitalization of $400,000,000 and trades under the symbol COLL on the NASDAQ exchange.

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