Collegium Rises As Cigna Turns To Xtampza In Fighting Opioid Abuse
Shares of Collegium Pharmaceutical (COLL) are on the rise after health insurer Cigna (CI) announced that it will start covering the drugmaker's Xtampza ER, an extended-release oxycodone equivalent that cannot become more fast-acting through cutting or crushing. Citing growing opioid addiction, Cigna also said it is stopping coverage of OxyContin, the painkiller sold by Purdue Pharma.
CIGNA CONTRACT WITH COLLEGIUM: In a press release yesterday, Cigna said it has taken a "multi-faceted approach" to reducing opioid use among its customers by 25% by 2019. "The company's covered drug lists are regularly evaluated with an eye to eliminating the inappropriate use of opioids and assisting customers in safely achieving positive health results, while also managing their out-of-pocket costs. As a result, the brand OxyContin is no longer covered as a preferred option on Cigna's group commercial drug lists effective January 1, 2018," the company said. Cigna is asking opioid manufacturers to align with efforts to reduce opioid use, and has signed a value-based contract with Collegium for Xtampza ER, an oxycodone equivalent with abuse deterrent properties. Under the terms of the contract, Collegium is financially accountable if the average daily dosage strengths of Xtampza ER prescribed for Cigna customers exceed a specific threshold. If the threshold is exceeded, Collegium will reduce the cost of the medication for many of Cigna's benefit plans.
MANAGED CARE PLANS CHANGES TO HELP XTAMPZA: Commenting on the news this morning, Needham analyst Serge Belanger said he believes Xtampza can play a "significant role" in payors' efforts to address the ongoing opioid epidemic, and that he does not expect Xtampza's price/prescription to be impacted by the contract terms. Overall, Belanger told investors that he sees this as a "nice formulary win" that will help drive substantial prescriptions away from OxyContin toward Xtampza and create goodwill for Collegium. Furthermore, the value-based contract could become a blueprint for other payors seeking to reduce OxyContin use while encouraging responsible opioid usage with an abuse-deterrent product such as Xtampza, he contended. Belanger reiterated a Buy rating and $25 price target on Collegium's shares. Meanwhile, his peer at Jefferies pointed out in a research note of his own that Cigna's plan changes as well as UnitedHealth (UNH) coverage of Xtampza as a preferred brand in 2018 versus Tier 3 coverage in 2017 should bolster Collegium's drug uptake. Analyst David Steinberg told investors that given the recent improvement in prescriptions, this year's consensus Xtampza estimate now "looks beatable" and next year's forecast could be as well. Moreover, the analyst argued that he continues to believe that Collegium shares are seemingly well positioned for an uptick as the company's modest valuation arguably does not entirely reflect improving fundamentals. He reiterated a Buy rating and $15 price target on Collegium's shares.
PRICE ACTION: In morning trading, shares of Collegium have gained 8% to $11.59.