Q2 2020 Pacira Biosciences Inc Earnings Call

Ladies and gentlemen, thank you for standby and welcome to the Q2 2020, Pacira I'll find <unk> earnings conference call.

At this time, all participants are listen only mode. As it is because presentation. There will be a question and answer session to ask the question during the session duty to press star one on your telephone.

Please be advised the today's conference is being recorded.

For any further systems, Please press star Zero I.

I would now at the end to converts over to your speaker for today season, Masco head of Investor Relations. Please go ahead.

Thank you Dimitrius and good morning, everyone. Welcome to today's conference call to discuss our second quarter 2020 financial results joining me on today's call or Dave Stack, Chairman and Chief Executive Officer, and Charlie Reinhart, Chief Financial Officer before we begin let me remind you that today's call will include forward looking statements based on current expectations.

Such statements represent our judgment as of today and May involve risks and uncertainties for information concerning risk factors that could affect the company. Please refer to the company's filings with the FCC, which are available from the FCC or our website with that ill now turn the call over to Dave stack.

Thank you Susan good morning, everyone and thank you for joining us to review our second quarter financial result in recent business highlights. The 2020 Cobot 19 pandemic has exacerbated our nation's opioid crisis with a significant increase in overdoses versus last year due to delete elective procedures, social isolation and economic uncertainties never before as or better.

On a more urgent need for opioid sparing pain management, we moved quickly to ensure the safety of our team while maintaining highly productive interactions with our customers.

We adopted and we'll continue to adopt feel based face to face physician interactions 20, and all challenges, resulting from a pandemic to maintain continuity of care for patients I could not be more proud of our nimble team and their ability to provide industry, leading customer product and reimbursement support by applying digital tools for virtual training and key opinion leader.

After ships.

As Charlie will discuss later in the call we reported net revenue of $75.5 million for the second quarter of 2020.

While second quarter products sales were impacted by cobot 19 related delays in the looked at surgical procedures. We began to see these restrictions lift on the state by state basis in April.

Remain very encouraged by recent market in revenue trends recognizing that patients need to attend to their medical needs coupled with a stronger grasp on the covert pandemic all 50 states. It stopped soften restrictions and we've seen a significant rebound and elective procedures. Since mid April average daily sales of expert all are now delivering attractive growth over the prior.

A year with an average daily sales in June at 107% in July at 100, a 9% of 2019 levels respectively.

Today, we are pleased to report that steps have been taken to curtail select operating expenditures, including strategic shifts in spending resulting in a positive adjusted EBITDA of $8.5 million for the second quarter. We believe this will continue to ramp as the year progress is operational spend adjustments. We have made continue to drive.

Our ability to grow and deliver attractive results.

We also remain on solid financial footing to continue to invest internally and externally. We ended the second quarter with more than $335 million in cash and investments. Our recent refinancing of our convertible notes along with the cash generative nature of our business further strengthens our financial foundation and brings our pro forma cash balance to more than $500 million further.

Supporting our mission to expand our footprint as a leader in non opioid pain management and regenerative health solutions.

We remain highly confident in our long term outlook given the cold and 19 related uncertainties remain we will not be reinstated financial guidance on today's call. However to provide you with greater transparency and the ability to track our inter quarter.

Progress we are reporting preliminary monthly sales for July 2020, we achieved net product sales of $38.1 billion for EXPAREL and $800000 for eye opener, we intend to provide you with updates on a monthly net product sales around the middle of each month.

We will eliminate or make adjustments to this practice as we gain more visibility about the impact if any of cold it in the fall.

To remind you government intervention any elective procedure marketplace could have a profound impact in one direction or another.

Turning now to review, our second quarter performance during which we continued to execute on the three global rubble global growth pillars.

First delivering robust revenue growth by expanding the use of EXPAREL and idle Bureau for opioid sparing pain management second pursuing innovative acquisition targets to improve the patient journey on the neural pain pathway and third advancing a pipeline of customer focus non opioid pain management and regenerative health solutions, let's begin with EXPAREL.

With more than 7 million patients treated since launch X pro remains well positioned for long term market leadership is the only long acting local and analgesic approved for infiltration field block and break your plexus nerve block.

Our expectation to returned to pre cobot year over year growth rates of 20 plus percent and the second half of the year is largely due to elective surgeries returning to key states and ambulatory surgery centers quickly returning to the operating room to accommodate patients who were required to weak for important surgical interventions to recover 19 related shutdowns.

This underscores our investment in working closely with our ambulatory surgery Center in arena seizure partners to broaden the use of long acting EXPAREL regional approaches as a cornerstone for multi modal opioid sparing strategies that enable to shift from inpatient procedures to the 23 hours stay environment.

Cobot 19 pandemic has created a critical need for expanded expedited recovery, making EXPAREL based enhanced recovery protocols more relevant than ever for patients healthcare providers and payers across all sites of care.

Patients per for opioid minimization strategies reduced length of stay and outpatient care and the facility not burdened by the code pandemic providers are seeking to increase patient throughput, especially for painful surgery surgical procedures, such as total joint arthroplasty, and abdominal and colorectal procedures, while minimizing the risk for patients.

Entering to the emergency room, and payers recognize the significant economic savings from reduced length of stay with procedural migration to the 23 hour site of care.

Women's Health also continues to be one of our top growth drivers and we are seeing anesthesia driven opioid sparing regional approaches using EXPAREL based feel blocks take hold and institutional protocols person Syrian section mastectomy breast reconstruction abdominal plastic and gynecologic oncology procedures, we believe EXPAREL will be.

A key component and transitioning the standard of care for women.

This is especially relevant for moms, who are navigating childbirth during the cold and pandemic.

Most pregnant women prefer an opioid free opportunity. So we are using real world experience from physician thought leaders as well as data from our two successful phase four studies and see section to educate stakeholders virtually about the opioid sparing benefits of an expert Altaf block.

Our first phase four study has recently published in anesthesia and analgesia, comparing EXPAREL tap blocks.

Tap field block to a be picking tap field block and 13 centers in the United States. In addition, the results from our fees for next generation strong choice study have been accepted for oral presentation. At this year's meeting of the American Society of anesthesia or say and we are preparing a manuscript for submission to a peer reviewed journal leaders.

This year.

The choice study successfully demonstrated that EXPAREL tap walk with superior for pain control to morphine based spinal anesthesia, while reducing opioids and control for 72 hours.

In addition to our fuels phase four and education initiatives I would like to highlight two key regulatory programs designed to further broadening the reach of ex of the purple label.

First the FDA recently accepted our supplemental new drug application seeking approval of EXPAREL in patients aged six years and older. The PDUFA action date has been set for March 22nd 2021.

Our our SMB finally is based on the positive data from our place study of EXPAREL in children undergoing cardiac and spine surgeries data from the place study will also be presented at the podium presentation as a podium presentation at the is at this year's American Society of anesthesia meeting.

Having pediatrics unbelievable is a critical importance given the significant unmet need for non opioid options for managing Postsurgical pain and this vulnerable patient population.

Further with the only currently approved.

Label for post surgical pain management, we believe it will be difficult to limit access to the only long acting local entities is approved for use in children under 12 years of age, especially when mom and dad are part of the decision process.

On Pediatrics, we are also working to expand the extra label to include lower extremity nerve block.

Phase III stride study is evaluating EXPAREL versus specific in as a lower extremity nerve block in adult patients undergoing lower extremity procedures, such as foot and ankle surgeries were in the process of incorporating feedback from into our stride protocol and we are currently planning for topline data around the end of the first quarter in 2021.

Dilatory decisions around the end of the year.

We have completed a farm o'clock Anomic study requested by the China regulators and we are working with our partners in China to determine next steps in the regulatory process.

Moving out to our collaboration with a few Synthes last month's we announced the decision determinate our agreement to jointly market and promote the use of EXPAREL for orthopedic procedures in the United States. Since 2017. This collaboration has allowed us to significantly in spam use a EXPAREL solidifying, it's rowland opioid sparing protocols across a range of orthopedic rich.

<unk>.

We have established a firm commercial foundation and orthopedics and we now have the in house expertise to take over the expand.

And expand upon these relationships as we have stated repeatedly orthopedic practice is evolving from an inpatient hospital experience to the ambulatory setting with anesthesia driven regional approaches playing an increasingly a central role.

This growing market is already largely served by ourselves for us. So so we are well trained in proficient in the 23 hours state environment.

In addition to evolving side of care call point for EXPAREL C. I a R. A platform further extends our commercial focus into the orthopedics fine and sports medicine markets.

Believe it is in the best interest of our stakeholders to take ownership of this franchise. Beginning in 2021 are implementing are implemented strategic planning modifications combined with improvement in our X girl related contribution margins due to the conclusion of the partnership made this an obvious decision purpose here.

Also we are nearing completion of the build out of 20000 square foot innovation in training center in Tampa, which will allow for interactive hands on customer training related to both infiltration technique and best press practice nerve block and feel block regional approaches to improve patient care with both EXPAREL and <unk>.

Switching gears too I Rivera as you know we kicked off the <unk> after our national meeting in February.

Given the impact of Coca 19, this lunches now delay.

We remain highly competent and then technology beyond behind this innovative system in a significant commercial opportunity it represents with sales potential approaching the <unk>.

200 million dollar.

Significant or by the 2020 point during the 2020 planning period.

<unk> I'm, sorry, let me be clear on that.

Given the Cove given the impact of October 19th at this lunches now delayed we remain highly confident technology behind this innovative system in a significant commercial opportunity represents with sales potential approach and 200 billion dollar mark within our five year planning period.

<unk>, we have adjusted are near term strategy to support our orthopedic customers and patients who have been impacted by the delay TK surgery and asked me Oh, that's right us to remind you. These patients are significant cry paint we are physicians <unk> as a proven tool for opioid prepay management law bridging the cap the surgery.

Two P. I a R manuscripts are currently under review with two prestigious orthopedic journals.

Your study was a single center randomized control trial by Doctor of William <unk> at the Campbell clinic in Tennessee.

Data from this study demonstrated to cry on there a licensed without <unk> can be an important component to a multimodal post surgical pain management strategy to help reduce the long term full surgical opioid use.

<unk>, who received avera plus the standard of care show to 62% decrease in opioid consumption six weeks after T. K and 25, 9% fewer after 12 weeks patient's also showed improve function at two six and 12 week follow up no patients experienced a serious or device probably under a license related adverse event.

The second study led by Doctor Joshua Urban at Orzo, Nebraska analyzed data from 221 patients undergoing TK received a traditional multimodal pain management versus multimodal regimen that included <unk> an extra <unk>.

Treatment group.

The treatment groups multimodal pain management regimen included preoperative, I'll, Vera and intraoperative EXPAREL during the hospital stay the <unk>, an extra grilled group recorded 32% fewer opioids, Rob reducing paint by 22% versus the control groups. The I ovarian EXPAREL groups also required significantly fewer opioids for two and.

Six weeks after discharge, including discharge opioid prescriptions as well as significantly shortening length of stay in greater and having a greater range of motion at the time with discharge. These data will support the commercial rollout <unk> as we focus on too broad patient categories first a combination of <unk> plus EXPAREL as a multimodal procedural solution for Tuesday.

Procedures and second osteoarthritis patients seeking drug free opioid free surgery free pain management that last several months.

Clinical front, we remain on track to begin enrollment this summer I've or prepare study repair route we'll evaluate <unk> an extra bill for opioid spring pain management for patients undergoing total knee arthroplasty.

<unk> will be administered before surgery and EXPAREL, we'd be administered during surgery with all of our patients.

Patients can prepare for surgery with several months of Magnum P I can't control.

We also expect to the next <unk> for post surgical paint control will support a more rapid functional recovery.

There are $14 million individual's in the United States, who have symptomatic me ask you arthritis, and when we look at the market potential. We believe that this is a $1 billion opportunity while there I can capture a meaningful sure.

As we continue to work with these key opinion liter surgeons, an anesthesiologist, we've identified a number of additional cryo alg's your treatments for development, such as low back pain spine specificity and face paint where there are thought leaders, who have experienced and developing treatments and a great interest in the opportunity to utilize out there.

Turning now to our second growth pillar pursuing innovative product products.

Technologies strategic partnerships and acquisitions that online with our mission such as <unk> remain a key component to our strategy as we leverage are established infrastructure N P N L.

We are thoughtfully pursuing opportunities complimentary toy existing offerings and.

And then all there are also of interest with a surgical any anesthesia audiences, we are calling on today <unk>.

<unk> C a significant opportunity to build a differentiated non opioid portfolio focused on the patient journey, along the neural pathway and have several robust opportunities to consider from our business development team Sports Medicine remains a key area of strategic focus here a S sees are the typical side of care. So this is a well defined position.

Specialist group, who alrighty engaged who we are already engaged with day to day.

The rapidly growing market is driven by continuous and lots of new products and increasing in incidents of sports injuries and a significant advances in the field of gene therapy, and regenerative Medicine Sports Medicine off also offers a prospect.

I've engaging younger patients earlier and their journey with pain, and <unk> degenerative conditions, which is especially important with a projected launch a EXPAREL label for patients H six and next year.

Finally, let's discuss our third girls pillar advancing a pipeline of non opioid opportunities for a cute and chronic pain.

[noise] in house team is focused on leveraging the proven safety flexibility and customize the ability of our that four by four last year, we announced to new Depo phone programs that were released or was that were selected for clinical development.

The <unk> are subarachnoid delivery of telephone base local anesthetic for acute and chronic pain earlier. This year, we met with the F D a to discuss.

This program and a phase one clinical study is now underway next we're currently optimizing formulations for <unk> comedy and we will begin a pilot study shortly or later this year and healthy volunteers using a simulated released we look forward to keeping you appreciate apprised of our progress and both of these important programs.

With that I'd like to turn the call over to Charlie to review the opinions traveling.

Thank you, Dave and good morning, everyone I'll start by summarizing our second quarter of 2020 financial results before proceeding I'd like to remind you that I'll discussing non gap financial measures. This morning, which we believe more accurately reflect our business results description of these metrics along with a reconciliation gap can be found in the press release.

Be issued this morning.

I'll begin by briefly echoing days and saying that the fundamentals of our business are very strong in the sales transfer seeing are highly encouraging.

Well equipped to successfully navigate these challenging times and overcome any temporary disruption to topline sales.

We delivered year every year revenue growth of 25% in 2019, and these robust growth trends continued through mid March we are now seeing a consistent uptake in EXPAREL sales and ordering accounts on a weekly basis since the peak of the Covid 19 pandemic impact in April with both June.

In July returning to year over year of growth.

We remain very bullish about the future of our business, which is on track for accelerating profitability now that many states are back to regularly performing elective any emergency procedures in hospital inpatient hospital outpatient N ASC sites of care.

Furthermore, organization has been preparing for a long time to capture the increasing number of procedures moving to the AFC setting and Covid 19 has only accelerated this shift.

We ended June and very strong financial position with $335 million of cash in investments in July we completed a very successful offering a convertible senior notes do August 2025 that brings are pro forma cash balance to more than $500 million.

Total second quarter total revenue of 75 $5 million was approximately 74% of total revenues for the second quarter of 2019.

This decline was of course due to the negative impact of Cove, 19, and public health guidelines in government directives that postponed elective surgical procedures.

Net product sales of EXPAREL were $73 million, which was approximately 74% of the second quarter of 2019.

For I have era, we reported net product sales of one $4 million for the second quarter of 2020 as compared to $2 million for the second quarter of 2019, we kicked off the relaunch of <unk> at our National meeting in February. However, the lunch was interrupted in mid March when TK as.

And H O P D setting where postponed due to Covid 19.

During the second quarter, we shifted our focus too I owe very utilization and physician offices to help our orthopedic customers offer non opioid pain management to patients who have delayed T. K a procedures due to Covid 19.

Or non gap gross margin for the second quarter of 2020 was 72% versus 77% for the second quarter of 2019.

Gross margin was negatively impacted by inventory write offs as well as unanticipated downtime at our manufacturing sites in Swindon.

Non gap research and development expense.

12, 3 million and the second quarter of 2020 versus $16 $6 million and 2019.

A decrease was primarily driven by the completion of our EXPAREL clinical studies in pediatrics and caesarean section as well as Covid related studied delays these decreases where partially offset by the advancement of our phase III lower extremity nerve blocks study and our phase one pharmacokinetics study of EXPAREL via interest equal.

Injection.

In addition, second quarter R&D spend benefited from reduce costs related to manufacturing capacity expansion with a transition of our 200 leader suite that are Swindon facility from development phase to the registration phase.

Non gap SG&A expenses were 36 $8 million in the second quarter of 2020 versus 43 $8 million in 2019.

This decreases primarily attributable to reductions in J&J Commission, which are directly linked to EXPAREL growth.

In addition to use of lower cost virtual tools and the cancellation of in person meetings medical conferences and non essential travel all triggered meaningful savings on the SG&A line.

All of this resulted in non gap net income of $5 million in the second quarter of 2024 12 cents per diluted sure versus 17 $5 million or 41 cents per diluted sure in 2019.

Looking ahead, we will continue to seek ways to reduce costs, while remaining fully committed to providing the necessary investment for the growth of our products future indications and pipeline.

Operating expenses are being managed very closely with the potential significant full year reductions in SG&A expenses given the social.

Distancing implemented by state and local governments, we remain committed the profitability and expect to be adjusted EBITDA positive for the full year.

Looking out over the long term our five year plan remains unchanged with anticipated high teen topline annual growth rate steadily improving margins appropriately manage operating expenses and significant adjusted EBITDA.

Is Dave mentioned earlier, we are not reinstating 2020 financial guidance today, given that the continued uncertainties around Coca 19, but in order to provide greater transparency, we are reporting monthly revenue to share intra quarter trends.

We will consider changing this practice as we learn more about the impacts from Covid 19, as the year progresses.

To remind you state and local mandates on elected procedures can have a meaningful impact and seasonal factors are also difficult to predict with a high degree of accuracy. We're very confident in the continued growth of our business given the market's desire for opioids bearing post surgical pain management.

With that financial review, let me turn the call back today for his closing remarks.

Thank you Charlie for that review.

We have come through a difficult time in a current market trends are indicating a positive turnaround. We will continue to monitor how cove 19 unfolds and the impacts the market, we are ready and prepared to respond accordingly, noting that patient care and the safety of our employees will always be remain the number one priority.

As we move into the back half of 2020, we have several value creating milestones we expect to achieve we look forward to securing regulatory approval of EXPAREL in both your up in Canada expanding R. U S label to include Pediatrics reporting topline results from our lower extremity nerve blocks study and taking full ownership of the ex girlfriend choices, we wind down our partnership with a few.

Synthes importantly, we have the the financial foundation from which to achieve our goals. We are moving quickly with strong and topline topline and bottomline growth.

As we look ahead beyond Cove at 19 procedure disruptions, we were extremely optimistic about a growth prime suspects in the long term as you recall extra grew by more than 23 per cent in 2019 and that demand continued unabated in January and February 2020.

Given this momentum along with new C section data publications, pediatric and lower extremity nerve black label expansions and the rest of world launches each of which represents an additional addressable market opportunity of $100 million per year.

We are highly competent in our five year planning growth projections.

Oh, well equipped to quickly transition into a powerful earning story with topline year over year growth and the high teens steadily improving margins from the mid seventies to the mid eighties and appropriately managed operating expenses before closing let me take this opportunity to think our shareholders along with our dedicated employees for continued support and encouragement as we built <unk>.

<unk> into the world's leaving provider of non opioid pain management and regenerative Hell solutions.

That I'll turn to call over to the operator to begin Q&A sessions operator.

Thank you as a reminder to ask a question we need a fresh start wine when your telephone.

So if can I get question. Please press the county.

Police named my only comes out of Q&A left there.

Okay.

And our first question comes from David insulin.

Piper Sandler evening <unk>.

This is that on for David. Thank you for taking my question. So just starting off with Cove. It I guess, given the case burden that it's obviously growing across the country and at right. Now I was just wondering if you could take a little bit more provide a little bit more color on what you're expecting out in terms of pace of recovery for extra L and.

And later have this here in 2021 and that and what that might mean for sort of further catalyzing migration N D. A S C setting going forwards. Thanks.

Sure. Thank you for the question.

It's what we've seen here over the last several weeks is.

We are highly sensitive to the <unk>.

Increase in Cogan, 19 cases, and the primary ambulatory surgery States like Florida, Texas and.

California, and so we've seen those states stabilize basically on a on a week to week basis at the same time, we've seen the states. The the state to a less rely on N. A S. C S.

Or who were slower to recover come online so that <unk>.

<unk> continued to see a weekly increase in sales and so.

I think what we're seeing is that you know the the a S. C is becoming the primary root of recovery and so as the has all 50 states participate in a higher level and then when we see the states the the leading states like Texas, California and Florida.

And we see these spikes I'll bet, we expect that we're in a very good position to <unk> to continuing to go to come out of this in a very strong way I mean, I think the nature of your question is.

How does the how does the AFC lead us through the rest of the year and other than the the governmental control of electric procedures and if we don't have any unforeseen spikes that lead us too.

The state governments shutting down electric procedures in the hospital outpatient any a S. C. I think we're in very good shape to meet the the number that we've been talking about for many months now that.

We would see roughly 80% 85% of the procedures.

Back and be performed and that the majority of those would be recovered and the ambulatory and the 23 hours stay market.

Okay, great. Thank you.

Thanks.

And our next question.

<unk>, what RBC capital market excuse me I appreciate.

Two questions number one can you help us understand how sticky the businesses on the or if those side as we think about J&J stepping away.

Your partner in 2021, and specifically how much new spend that you're gonna need.

To support that business. This has been a recurring investor question and then secondly, I I just wanted to ask you about July how normal was.

That month, because if you annualize the $38 million an expert sales you get close to where your initial guidance was for the year. So I'm just trying to understand how much.

More opportunity is there was there any kind of ketchup and that number just to how to think about that that month from our sales perspective. Thanks.

Thanks, Ah Randall and.

Both very relevant questions. So when we look at the projected savings from the termination of the <unk> relationship and we look at the additional cost that will be borne by are taking taking the place of those <unk>.

<unk>, it's roughly 10% of what will be saved so just to be complete here, we've been adding folks for I O'hara, we've got a.

Feel forced alignment an allocation model that is already anticipated that we were going to.

Be replacing depue synthes at the end of 2021, so we've moved that forward modestly and along with build out of our training Center N and Tampa.

Which will allow us to do a lot of these things virtually and this in this post covered with a coke with world that we're addressing.

We think that the the investment will be modest relative to the savings and as I said roughly 10 per cent of what we're expecting to save will be allocated to that effort.

July as an interesting month and I. Appreciate the question because we think about the same way you are.

So that's why I mentioned in my in my previous answer that what we saw was at the market is stable to growing modestly and I'm sure. That's the nature of your question.

We think that that's very encouraging given that we didn't see.

The same kind of progression of growth and the big States that brought us out of this recovery. So specifically, Florida. For example was significantly ahead of pre Cove it.

Going into July N has come back to basically flat on pre Cove. It now so what we see here is it as we get over these spikes in these big states for a S C as in where there's a lot of business in a traditional sense anyway.

We think that were on a great spot to benefit both from the growth and in the states that were delayed or don't have the same with my hands on a S. C. S who are finding different ways to treat these patients and the 23 hours stay environment Hospital outpatient for example.

And so is the big states come back online, we think we're very well position to continue to grow through the back half of 2019 always of course, you know, stating the obvious that.

The unknown of additional covered spikes, especially in these heavy AFC states or any government mandates that come down could have a significant impact on that but X those kinds of intrusions into the marketplace. We think we're at a really good position here.

Alright, Thanks, Dave.

<unk>.

And our next question that sounds great Frazier with Chili security.

You May proceed.

Good morning, you guys. Thanks for taking the question.

Oh I'm running Grill I was wondering I was wondering if you could discuss your strategy to build patent protection around EXPAREL and specifically maybe you can comment on the types of patents that you're pursuing and when you think patterns could issue.

That's a long <unk>, that's a three credit course, Greg I'll I'll go quickly first of all you know, we and as <unk> said several times the points to consider that were developed by the generic division that the FTA, we think help us a lot.

Because of their their demand that you would have an exact duplicate of EXPAREL.

Someone would have to have the.

The specifications for release that we use an order to release a Bachelor of EXPAREL from a manufacturing facility and then they would have to validate that by being able to have an assay that measures all of those specifications and so we see the fact that we've never disclosed those specifications into the marketplace.

As a significant hurdle.

And the fact that the assay that measures. Those really specifications is purpose was developed Piper Sierra is proprietary <unk> and we've never told anybody with that as a is.

There's a second significant hurdle in addition to stray all manufacturing and all the rest.

So in addition to that we've got a series of patterns that were firewood. The P. T O. Many years ago on spray technology and so we will we have not disclosed in a general sense, which of these technologies are being used by mainly for by our manufacturing facilities and when we will use any of the abovementioned pet.

When we were so that's sort of part four if you will and then as we've built out the 200 leader facilities, we have come up with a number of non obvious unanticipated.

Observations that have been patent it.

So you know we the P. P O could I have it could come back with the the.

The the patterns on the new manufacturing process I mean, they've been file for many years. So that could be you know anytime in the relative short term the new patterns based on observations and building up at 200 leader Greg would take you know several years to come through the P. P O.

In the interim we don't believe that anybody has got any type of commercial manufacturing that would allow them to manufacturer.

Most of the secular liposome any kind.

Specifically EXPAREL so it's not a perfect answer to your question, we filed a number of patterns and continue file a number of passion patents not only around these observations, but also on different I V. R. A as we call. It. This this assay that allows you to release these different.

Different batches and so we think we're gonna have and and a strong position relative to anybody being able to make a generic EXPAREL in a bit of a non traditional way, but we don't see a generic patent coming in the foreseeable future if at all.

Great. Thanks for all the color.

Correct.

And our next question contact on me for Dear with S. P V. Leerink gave me a hershey.

Our questions. So the taste of your recovery across the states different states.

Could you give us some idea about the variation from state to state.

What are the best and worst states currently doing in terms of.

Survey volume an expert I'll use.

Is the 109% you over your growth in July.

<unk> bye see Ya large space or is robust recovery I've tried the floor. So for example, even mentioned that's some United States heavy with.

Part of that Tom Texas.

Pennsylvania.

Oh.

But these days are also have seen great spike.

Kobe case.

All day, so have you seen these days, taking any measures that's going back there.

Electric surgery for example, Texas properly I felt Texas put pause elective surgery, a few weeks ago, so any color on those.

I appreciate it thanks.

Sure no. Thanks for the question, let me go in reverse.

So first one there have been no rollbacks of of elective surgeries and ambulatory surgery centers and hospital outpatient departments that were aware of the you are correct there were.

Situations, where hospitals war.

We're saved for the potential.

And so elective surgeries, we're not allowed in hospitals, but they have never been diminished N or eliminated from a S. C. As in H O P. D. U S. So that's a very important aspect of answering the question that you just asked.

So what we saw on July was that we saw a a.

Still growth N.

In Texas, and California, specifically.

Over 2019.

Florida moderated back to.

To where it was basically pre cove it.

And making up the difference from the previous month's or a number of smaller states, who are not as dependent on H O or on on ambulatory surgery centers.

We did see New York State for example come back strong and the and the July time period.

Alright, and states like Ohio, North Carolina, Georgia.

Those kinds of those states are also participating in a more meaningful way then earlier in the covered recovery so to be very specific.

You know, Texas, California, Florida, largely let us out of this mid April time period.

With the with the increase in Covid positive cases in those states and the July time period.

The the Governor's did not close the opportunity for surgery, but what we saw was the number of case patients who were infected and their extended families.

You know really dampened the number of patients who are appropriate for a an elective prefer surgery in any case and so we think that was the reason for some moderation in the growth in those states but.

So we were able to maintain our our growth, especially since July of 2019 with participation from Maine.

A bigger a larger number of of states and that's what gives us the confidence that when we do have you know Ah returned to normal and the Big AFC States, like Texas, California, and Florida that with the participation of all of the other states. We believe that we're gonna be in a position.

To get back to that pre culvert growth rate that we talked about during the script.

Thanks, that's very helpful.

Thanks, Thanks for your question.

And our next question cancer search Bellinger would need to make company gave me proceed.

Hi, Good morning, a couple questions for me.

First Dave on.

Marketing footprint other company can you tell us what that looks like.

Once the D. P. S collaboration is over and should we expect any additions to that footprint with a label expansion to pediatrics and and lower extremities.

Yeah. Thanks for the question surge so.

We have several separate customer facing organizations and so if we started earlier this year actually expanding the regular salesforce are normal size salesforce that is driven by surgeries and surgical procedure opportune.

Alrighty on a geographic basis, and there's roughly 140 folks in that organization search and we started adding to that and training on that so that we would've been add for.

You know full allocation at the end of 2020.

Given covid and some of the the new ways that physicians want to deal with us on a virtual basis or the inability to make time to to train and to see our representatives because they're so busy in the operating room.

We've got a dozen are so territory's that are open that we are not going to fill until the end of this year. When we have a better grasp on exactly.

How we're gonna, how we're going to interact with our customers and how we're going to train those folks at the same time, we've got a in Oregon is nation of roughly 450 that do nothing but train and so there's an elevation team and then there's a clinical education team Ma's. These folks trained.

All of our Anaesthesiologists at all of our surgical customers.

We've increased the size of that Salesforce.

To anticipate the fact that.

We were gonna be doing more of a virtual sessions and more training sessions that we're not gonna be alive that we're gonna be.

Done in in a more virtual online way and that's already taken place and so there's a few more places that we will add based on the <unk> rollout, but I think generally speaking that is right size to as we as we as we move away from the P. O Synthes, we've hired a team of specialty nurses, who will work.

And the and the pediatric hospitals now there's only roughly 60 of those in the United States order of of significant strategic interest. So we don't believe we need to re increase the size of a salesforce at the current time in order to address the pediatric opportunity and right now we're looking at having data from the stride study on lower extremity.

Nerve block at the end of Q1 in 2021, and so with a normal.

10 months review process, we would get approval for for the lower extremity nerve block early in 2022, and so there's no plans to address that opportunity today that will be something that we do sort of mid 2021. So that those people are trained in available for national meeting in early 2022 is we launched nerve block so.

Sure extremity nerve blocks, though.

We've we've we're watching the marketplace, we're building onto training center in Tampa, where we think that we can train.

Physicians 100 at a time.

We also have strategic relationships with Madame accident envision add a number of other anesthesia groups. So we're training more and more people on regional anesthesia and that's been done by a clinical education team and buy all innovation team. So we think we're not very good spot and that's why the amount of resource additional.

[noise] source that needs to be added here.

Two you'd be able to service our customers when we do not have any longer relationship with the Pew Synthes is relatively modest relative to what we have today.

Okay. My my second question is regarding the reimbursement environment for for style as usage increases outside the hospital and especially Nancy.

<unk> expected changes to.

C N S policies or payment levels.

We should look forward this fall.

No as a matter of fact, two days ago now, let's see M. S came out with their 2021.

Oh P P S.

<unk> and they they make specific mentioned that the only a S. C product that is unbundled from the surgical bundle is EXPAREL.

We also have seen that CMS will.

Pay for total hip arthroplasty as we move into 2021.

So C M S weren't very good shape.

We also continue to work with commercial purse and Aetna. For example is paying for hospital outpatient use a EXPAREL and the state of Florida, So we see that as a.

Is a good Thailand for us as we as we improve reimbursement with our.

With a commercial payers as well.

And there's a number of conscientious type services search that of that are entering the marketplace now where they work directly with self insured providers payors and so we've got very significant relationships with those folks as well and I should also mentioned that C. M. S has increase the.

Payment for EXPAREL to $1.29 a milligram now.

And so there is no reason to expect that that there's gonna be anything negative happening with the reimbursement of EXPAREL N increasingly we see payers of all sorts.

I'm more interested in moving patients out of the hospital environment in the way to do that is with EXPAREL and so.

F F N insure is thinking that they're gonna save several thousand dollars on a major procedure like a spine or a knee. It is not an issue at all to spend $300 to make that happen by using EXPAREL.

Okay. Thank you.

Thank you for the question.

And our next question comes from Gary <unk>. So it can be M. L carpet I'm Lucky.

You may appreciate.

It's <unk> on for Gary.

Could you comment on your current appetite for business development are you looking at opportunities more aggressively all over and get recently that refinancing that strength and you're a cash position.

Not more aggressively wrapping we never Ryan Ellis and his team never really stopped.

Looking at these opportunities that were interested in.

So we continue to work with a number of different opportunities. There's a couple it we're really excited about that we continue to to pursue and we expect to be able to tell the world about a couple of these things before the end of this year. So now we've been very active there's a number.

Things that are of great interest to us and.

Always the additional cash always helps of course, but I wouldn't say there were any more aggressive now that we were before.

Thanks, and then for the pediatric indication how quickly do you expect extra morale us kind of rain and that patient population and are you still targeting a nerve block indication for pediatrics.

So two different things right. So the pediatric community is relatively small and.

So you know we will have to train of course, which is one of the reasons for the Tampa training facility.

But we expect it with a relatively modest.

Requirement for hands, you know rep rep to commit to customer training that we will be able to train. This community very quickly and that this will ramp much more quickly than any of the other indications that we've ever had an opportunity to put into the marketplace.

And we see great interest you know, we're we're talking to these folks in addition to EXPAREL about I owe Vera you know, there's a lot of interest in them and they pediatric marketplace and frankly.

Some.

Anger actually in some cases, when the when the Anaesthesiologists and when the pain management folks in P. S find out that.

No local anesthetic is currently approved for pain management in a in a pediatric patient most we're not even aware of that so.

There's a lot of of positive energy and that marketplace.

A so this first indication as you pointed out his forehead infiltration.

We are working with the F D a.

On a nerve block indication it is not easy to find a a nerve block indication that it would be that would pick up on the on the adult use of the product.

Where do you find yourself going or things like.

You know open fractures and things like that and we know from experienced that emergency situations emergency situations, where mom and dad have to sign a patient into clinical trial are very difficult.

The F D. A N knows that and so we're working with them on finding appropriate procedure, where we can do a study that would that would add to the EXPAREL label for nerve Black and kids.

Thank you.

Thanks.

And our next question comes from Dana Flanders.

Give me proceed.

Okay. Thank you for the questions. Dave I know you just mentioned do you have.

Buddy reading out in lower nerve block and Q1 can you just remind us how you are viewing that opportunity and the importance of that indication for future expert gross and I know pain studies or a top especially gets an active comparator what did you learned or incorporated from Pryor Black study.

To position this one for success. Thank you.

Alright, Thanks, a lot and.

Well thanks for the question Dana Yeah, we're not I'm not obviously, we're not gonna teach we've done enough teaching of other competitor potential competitors and how to do clinical trials in pain. So you know I, there's a number of.

Not obvious things that we were able to do when these clinical trials that.

That allow us to have the clinical success that we've had.

Don't think that there's any reason I believe the lower extremity nerve block will be any different than that I. I think the first thing that you know that that is obvious at least to us is that.

You can't use the competitive agents in any kind of appropriate way in a nerve block indication largely because they're neurotoxic for one reason or another.

But secondly, they have limitations on how those products can be used.

When we're doing either a nerve block or a field black.

EXPAREL allows us to put the dragon direct contact with a sensory nerves and then set itself up in such a way that these multi of the secular liposomes release <unk>.

Small quantities of bupivacaine over the next three to four days, but they're in such close proximity to the century nerves that we can achieve this long term application.

And longterm extension of pain control and as far as we know at least today Dana they only product that allows us they only delivery technology that allows you to do that is <unk>. So you know in some respects it's easier for us to do but we also know that there is a number of.

Of problems when you're working in in our area, where you cannot let the patients have pain. So you have to provide a rescue.

It's not so much whether you rescue or not it's more of a statistical.

Analysis that you apply against that and how you analyze the impact of rescue medications, which rest would be medications you awhile. How you set up your your protocol in order to capture that in such a way that not only allows you to deal directly with the regulators in a meaningful way, but also allows you to deal with your practice.

Surgeons, an anesthesiologist, so you shouldn't be very forthright with them about the impact of of trying to control the subjective nature of pain.

Especially when the clinical trial has so many different variables that you'll have to measure it's really all about how you set up the stats protocol and how you set up your protocol.

And your relationship with your clinicians so that they are able to follow a fairly complex protocol and you're exactly right at 50 per cent of paint trials fail for a lot of reasons that we've been able to identify on the 10 years that.

That we've been developing EXPAREL, so not in a position to give any other specifics, but I think we're not very good spot to be able to.

To achieve a nerve block claim and and the F. D. A is very interested in this.

We've been working with them.

Regular basis with the strikes study and one other reasons that we've moved this back a couple of months is because we've been working with that amount a couple of modifications that they suggested that they think we'll we'll make this much easier trial to evaluate on the backside after the patient enrollment is complete.

Anything else Dana.

And just can you remind us how you're viewing the opportunity the market opportunity. Thanks.

So the fastest growing use of nerve blocks and feel blocks isn't foot and ankle.

So we think that that's that's.

That's a specific number that leads us.

To to be quite hopeful about the future of nerf of nerve block in syndication.

We also know that there's a significant use of EXPAREL currently and add Doctor Canal blocks in the knee and so you know we think that we would have a much higher market sure. If we had a nerve black indication for the lower extremity.

So you know in the upper extremity and remind you that the brachial plexus nerve block launch in April of 2018 was when the company really accelerated again, and then where are we got into the low teens of EXPAREL growth on a quarter by quarter basis, We think that the same kind of opportunity at the same ma'am.

That's good opportunity is available for the lower extremity and we also like this because many of the surgeries are actually done at any ambulatory surgery center already so being able to replace pumps and catheters and a lot of the ways the dogs.

A lot of the techniques. The dogs are currently using to achieve several days of pain control.

We think can be much improved with a single dose of EXPAREL. It gives you several days of paint control. So we think this is this is this is another <unk>.

Rapid.

Customer demanded opportunity to move a patient to an extra two a ambulatory surgery center I provide paint control at the same time.

Great. Thanks for all the color Dave.

Dana.

Ladies.

Extra any place in today's conference Paul how can I would like to trying to call back over to Mister <unk>.

Does any much.

Thank you Demetrius I'd like to thank you all for participating in listening to today's conference call. We look forward to keeping your updated on our progress on our progress next for US as the Wedbush Conference in August followed by the H E. Wainwright in September Thank you and stay well.

Ladies and gentlemen. This concludes today's conference call. Thank you for participating in you may know disconnect everyone have a wonderful day.

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