Q4 2020 Pacira Biosciences Inc Earnings Call

February 25, 2021

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Ladies and gentlemen, today's call is scheduled to begin shortly until that time your lines will again be placed on music hold thank you for your patience.

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Okay.

Ladies and gentlemen, thank you for standing by and welcome to the 2020 for Sarah Bioscience, Inc. Earnings Conference call. At this time all participant lines are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone please be advised that.

<unk> conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Susan <unk> head of Investor Relations Ma'am. Please go ahead.

Thank you Tina and good morning, everyone. Welcome to today's conference call to discuss our fourth quarter and full year 2020 financial results. Joining me as speakers on today's call are they stack, Chairman and Chief Executive Officer, and Charlie Reinhart, Chief Financial Officer additional members of the for fear of Executive leadership team are also in the room for today's quest.

<unk> and answer session before we begin let me remind you that today's call will include forward looking statements based on our 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 our filings with the SEC, which are available from the U S.

See our website with that I will now turn the call over to Dave stack. Thank you Susan Good morning, everyone and thank you for joining US 2020 was a difficult year for people around the world like all of you. We entered 2021 with great hope that the vaccines developed by our industry colleagues will stem the tide of the global pandemic.

COVID-19 has further escalated our nation's opioid crisis, placing an even brighter spotlight on the tremendous need for opioid sparing pain management to avoid these key gateway to addiction, a rising number of drug related fatalities continue given the health social and economic disruptions that are facing our country equally important is the pain that patients have had to.

Endure due to COVID-19 related delays unnecessary surgical procedures expedited recovery is even more critical than ever and we are dedicating considerable resources to develop and implement EXPAREL based enhanced recovery after surgery or Iraq protocols that are enabling earlier discharge and accelerating the migration of electric procedures to.

Outpatient sites of care.

I am both proud and delighted to report that during these challenging times, we quickly adapted to our customer needs to provide opioid free pain relief in a virtual world. This translated into record revenues for 2020, despite ongoing geographic disruptions in care delivery. The success is really a testament to the <unk> team and their steadfast commitment to.

To provide an opioid alternative to as many patients as possible and redefine the role of opioids as rescue medication, while enabling elective surgery migration to outpatient care has noted in today's press release, our 2020 revenues were our highest ever coming in at $430 million for 2021, despite COVID-19 related challenges.

The overwhelming needs of the marketplace and transformation underway in the ambulatory surgery care setting allowed EXPAREL average daily sales to return to year over year growth in June.

Active growth continued throughout the remainder of 2020 and we see this trend continuing right into 2021, none of these numbers should come as a surprise as we have aimed to be as transparent as possible. During these unprecedented times by reporting our preliminary monthly sales, while we feel incredibly bullish about our long term business prospects on revenue opportunity near.

Term uncertainties around Covid remain which can impact our business on a variety of levels could provide you with insight on intra quarter trends. We will continue to share monthly sales until we have visibility necessary to reinstate guidance. Today. We also reported $113 million on adjusted EBITDA for 2020, as we continue to grow our.

Top line and improve our gross margin we are in an extraordinarily strong position to deliver accelerating profitability, while continuing to support our top and bottom line growth with appropriate investments in operating expense. The vision, we laid out years ago. The highlight is the transition from an inpatient surgery based company to an outpatient anesthesia based company is translating.

On elegantly into a powerful earnings story. This ongoing evolution of the marketplace is the direct result of EXPAREL based SaaS protocols. The important changes underway on the surgical sites of care are redefining medical practice for lower on all opioid post surgical pain control, leaving us very bullish on our long term growth outlook.

Turning now to a more detailed strategic review of the business 2020 was highlighted by strong execution across two robust global growth growth strategies for.

First expanding the use of EXPAREL on IL Vera for opioid sparing pain management, while enabling the migration of large painful and profitable procedures to the ambulatory surgery centers and hospital outpatient department settings.

Pursuing innovation by investing in our internally and externally sourced portfolio of non opioid pain management and regenerative health solutions, while simultaneously advancing partnerships and education designed to revolutionize medical practice through the best practice opioid sparing eras protocols I'll start with EXPAREL with more than 8 million patients treated since <unk>.

Launch EXPAREL remains well positioned for long term market leadership as the only long acting local analgesic approved for infiltration field block and brachial plexus nerve block in January we completed a smooth transition with our partners at J&J for the last several months, we've been rolling out additional customer facing resources to help support the market's continuing shift.

Towards anesthesia, driven regional pain management, and the migration of procedures to outpatient sites of care.

In fact, we believe the increased use of regional anesthesia is the most important driver of our business for 2021 and.

In 2020, only 20% of anesthesia procedures used for regional approach that field is poised for rapid expansion given advances in ultrasound guidance newer techniques and improved outcomes. We are paving the way for EXPAREL to revolutionize the practice of regional anesthesia through our expanding networks of anesthesia group partnerships and robust educational and training.

On the initiatives. This is the key to the future and the focus of our state of the Art training center in Tampa the pit.

For decades, the anesthesiologists have had a high level of interest in regional blocks, but with short acting agents only providing hours of pain control. It was difficult to justify a time return on investment.

Fast forward to today long acting EXPAREL based blocks have extended the duration of pain control for several days, allowing the extra blocks would be administered before patients horizon. You are truly a significantly positive change in the paradigm of patient care, our anesthesia customers see the strong advantages of using blocks on replacing antiquated pumps and catheters.

Additionally, the ASC environment is an area, where EXPAREL reimbursement is consistently improving as payers and self insured employers continue to drive the shift from inpatient to outpatient care given the economic benefits. This is especially important for elective surgeries not.

Not only do these market dynamics fundamental to our growth, but also directly correlate to patient outcomes and satisfaction rates given the compelling advantages of opioid sparing regional approaches.

I'd like to highlight a few markets, where we see continuing regional anesthesia redefined best practice for post surgical pain control.

EXPAREL administered as a brachial plexus nerve block continues to be a massive commercial opportunity to remind you and EXPAREL brachial plexus block provides coverage for the upper quadrant, so not only the rotator cuff and shoulder arthroplasty, but also elbow wrist and hand procedures, we see brachial plexus nerve block as an addressable market of more than 3 million patients per year.

<unk>.

Our customers are consistently reported positive results surgeons are not only delighted with clinical outcomes, but they also for further demonstrated consistent results of anesthesiologists administering single injection blocks preoperatively versus infiltration at the end of the case.

After having success in brachial plexus blocks anesthesiologists can broaden their use to a whole range of long acting EXPAREL regional field and nerve blocks.

Transfer of dominance on tap blocks are a significant market, where EXPAREL provides long acting pain control for the abdominal region as EXPAREL tap block opens the door for more than $6 million abdominal and colorectal procedures per year and supports the migration of these painful procedures to the ASC space. There is a growing body of evidence supporting the safety and efficacy.

<unk> tap blocks with only single height with only high single digit penetration in a surge of interest we expect this market to be a significant long term growth pillar.

Turning to women's health. We are also seeing strong uptake on the regional blocks for a variety of surgeries surgeries, where EXPAREL is transforming the standard of care for women and enabling earlier discharge our phase for David Great generated great interest and establishing EXPAREL based tap blocks as institutional protocol in <unk> section.

Collagic oncology and Abdominoplasty procedures. There is also growing utilization of pectoralis are PEC blocks for mastectomy and breast reconstruction and migrating these procedures to outpatient care, we are seeing significant demand among women for non opioid pain control opioid addiction in women is growing at an alarming.

With women, 40% more likely to become newly persistent users of opioids. Following surgery with just under 4 million gynecologic oncology section and breast procedures each year in the United States Women's health as a major opportunity that we remain in the infancy of tapping. We're also seeing the emergence of newer regional blocs.

Driving significant demand on the market for information and training.

Excuse me with detailed live and virtual programs, taking place regularly at the pit innovation and training facility in Tampa Directors finite our ESP block is another field block technique that is expanding a safe and effective approach for providing non opioid pain control for the expense from the bottom of the net to the hip.

This versatile block, which is relatively easy to perform is growing in popularity for spine scoliosis and cardio fast cardio thoracic procedures, a significant transformation is underway on the spine market historically spine surgeries were largely confined to the inpatient setting with only a small percentage performed at outpatient sites of care.

With the emergence of safe and effective blocks and opioid sparing eras protocols spinal procedures are on a trajectory like other painful orthopedic procedures with a rising number of afcs specializing in these complex surgeries.

With EXPAREL, representing less than 2% of the total cost of the spine surgery case, and $2 8 million procedures. Each year. This market is poised to be a key long term revenue driver in.

In the cardio thoracic market, we have a growing single digit penetration was $1 5 million procedures per year. This there is great interest in making sure. These patients did not leave the hospital relying on opioids to manage pain further based on package interest for other long acting local analgesics, we believe EXPAREL has a clear safety advantage, especially for cardiac.

Since the.

For preparing capsular nerve group or paying block is a newer regional technique that targets the anterior hip capsule the ping block.

It's garnered great interest as it offers anesthesiologists and surgeons have means of shifting hip replacements for the outpatient setting. This is especially important since CMS has added total hip arthroplasty procedures to the ASC covered list effective January one 2021, joining knee arthroplasty, which was added in.

Of 2020.

Beyond the significant on label opportunities I just highlighted we are working to further broadening EXPAREL label with key milestones on the near term horizon. As you know the FDA is reviewing our supplemental new drug application seeking approval for EXPAREL in patients aged six and older.

<unk> action date is set for March 20.

Having pediatrics on our label is of critical importance given the significant unmet need for non opioid.

Non opioid options for managing post surgical pain in this vulnerable patient population with approximately 1 million pediatric patients per year, where catheters and pumps are currently the main state of post surgical pain control, we see a significant unmet need and envision this to be a minimum of a $100 million opportunity beyond pediatrics. We are also advancing our phase II.

Stride study to evaluate EXPAREL versus bupivacaine as a nerve block for lower extremity procedures, we anticipate completion of enrollment by the end of the first quarter with a clinical study report in the second quarter and it's successful and approval in the second quarter of 2022, we believe the lower extremity opportunity to be as significant as the upper extremity.

<unk>.

We also continue to make progress in markets outside the United States. We remain on track to launch EXPAREL, along with <unk> in Europe in the middle of this year and.

Importantly, our broad efficacy label, which covers EXPAREL administration via infiltration field blocks, and importantly, both upper and lower extremity nerve blocks, along with the superior safety profile, we have a clear competitive advantage in Europe, where <unk> is already approved for Canada. We remain on labeling discussions with health authorities given the curve.

<unk> status. It is not likely we will launch in Canada, as we will not jeopardize the brand with labeling that is not inherently major country regulatory authorities in China. We are working with our partners to determine possible next steps in the regulatory process to provide EXPAREL for this market without any potential for proprietary data to be used to develop a generic before.

Turning over to <unk>, I would likely I would quickly like to touch on the market exclusivity for EXPAREL. Our on books Orange book listed patent expires later this year.

We have several unpublished and pending patents around the product process and manufacturing that are that we are confident we will extend our proprietary position well into the 2040 <unk>.

Remember for <unk> is the only company that has ever manufactured on multi particular liposome at commercial scale anywhere in the world our sterile cold chain manufacturing expertise has been developed over 20 years of experience.

Regarding any potential generic EXPAREL the FDA 2018 draft guidance on a multi particular liposome bupivacaine established an extremely rigorous hurdle. This will require a multi year near decade long effort to design and construct a dedicated commercial scale manufacturing facility that would then require an operational license and validation.

Prior to any bioequivalence study requirements by the FDA. This is a long and extensive process and little chance of duplicating the EXPAREL pharmacokinetic profile.

Since we have never disclosed our proprietary batch specifications or release assay in short we have great confidence that there will never be a generic EXPAREL and given the package inserts that we have seen for potential competitors EXPAREL will remain the branded market leader for many years to come given our broad label excellent safety profile and flexible product features and.

Benefits switching gears to <unk>, our innovative system, which delivers a non pharmacologic nerve block using the body's natural response to cold to safely and immediately reduce pain COVID-19 may 2020, a very difficult year for iron ore and triggered significant clinical and clinical and commercial delays.

It has proven more difficult to achieve our initial objectives for <unk>, we have implemented several commercial enhancements that we believe will start to take hold in 2021. We recently established a high caliber management team of roughly 30 sales managers that will be dedicated to Io Vera focusing on two specific opportunities.

One is the procedural solution of <unk>, plus EXPAREL to improve total knee arthroplasty during before and after surgery. The second is idled Vera for opioid free surgery free and drug fee free.

Arthritis pain control simply put if somebody is not ready for surgery or is not a surgical candidate for some reason we can turn the pain signal off for several months with a simple 20 minute procedure.

This allows them to play golf walk on the beach or enjoy a family occasions, such as a wedding or vacation all the things that folks might not be able to do with significant osteoarthritis pain.

On the clinical front, our prepared trial is enrolling patients to evaluate <unk> and EXPAREL for opioid sparing pain management for patients undergoing total knee arthroplasty, we expect enrollment to conclude before the end of this year in parallel we are launching a niobrara a registry to capture real world experience for the use of Teekay procedures with leading academic and orthopedic center.

Of excellence. We are also encouraged by the excitement around using Vera for other key areas key opinion leaders in orthopedics spine and anesthesia are interested in replacing heat based radiofrequency ablation with <unk> coal therapy, we are seeing great interest across a wide range of treatment opportunities such as low back pain spines first.

<unk> on Refracture, and we will use investigator initiated studies and grants to develop data across these areas to remind you <unk>.

<unk> reimbursement in the hospital outpatient department setting is highly favorable with Medicare paying 900 to $1900 for <unk> procedures targeting nerves around the knee.

We continue to work to further enhance reimbursement to expand patient access to <unk>. Our team of reimbursement specialists are experts in the space and working to maximize fee schedules for the value provided.

We are also interacting with commercial Payors, who understand the economic advantages and improved patient outcomes associated with low or no opioid strategies and some we remain highly confident in the technology behind the innovative system with sales potential approaching $200 million within our five year planning horizon.

Turning now to business development, our team is leading a robust effort and thoughtfully pursuing opportunities of interest to surgical and anesthesia audiences. We are calling on today, we believe our leadership position in opioid sparing pain control provides us with a significant opportunity to build a differentiated portfolio to improve the patient journey, along the neuro pain pathway.

We recently announced the strategic strategic investment in gene client. This transaction provides us the opportunity to participate in the development of an exciting disease modifying gene therapy for osteoarthritis gene clients lead product candidate <unk> Q3 hundred three is currently in preclinical development as a treatment for osteoarthritis 300, threes helper dependent.

No virus vectors express PRT for a protein that plays an important physiological role in regulating OE through lubrication and decreased inflammation finally, let's touch on some of our internally.

First non opioid opportunities for acute and chronic pain to augment our business development efforts on in house team is focusing on leveraging the proven safety flexibility and customize ability of our debt for Com platform. Our lead program is an epidural and delivery of Depo phone base local anesthetic for acute and chronic pain. We are conducting a phase one pilot study with EXPAREL.

<unk>, which will allow us to make a go no go decision in the next phase of development. We're also looking to add different depot form opportunities that target inflammation in chronic pain we.

We look forward to keeping you appraised of our progress of this early stage pipeline and with that I'd like to turn the call over to Charlie for a review of the financials. Charlie. Thank you David and good morning, everyone before discussing our fourth quarter financial results I'd like to remind you that I'll be discussing non-GAAP financial measures. This morning, which we believe more accurately.

Our business results a description of these metrics along with our reconciliation to GAAP can be found in the press release, we issued this morning.

I would like to begin by reinforcing David sentiment, we remain very bullish on the outlook for our business market indicators are strong with X growth continuing to outperform the elective surgery market, leaving us on track for accelerating top and bottom line growth as wide spread.

Deployment of the COVID-19 vaccine vaccines will further support for recovery and growth of elective surgery volumes. The COVID-19 pandemic has also acted as a catalyst for accelerating shift of 90 procedures to outpatient settings, where we remain ideally positioned to serve patients.

We ended 2020 with more than $617 million of cash and investments. This strong foundation and our ability to generate high levels of operating cash flow leaves us well equipped to continue to invest in internal and external growth opportunities that align with our mission.

Fourth quarter total revenues of $131 million or approximately 107% of total revenues for the fourth quarter of 2019, our highest quarter ever despite the ongoing pandemic related challenges.

Fourth quarter net product sales of EXPAREL for $125 $3 million, which was approximately 107 percentage of the fourth quarter of 2019.

For <unk>, we reported net product sales of $2 4 million for the fourth quarter of 2020 down 25% from the $3 2 million for the fourth quarter of 2019 due to COVID-19 related commercial challenges.

Non-GAAP gross margin for the fourth quarter of 2020 was 74% versus 75% for the fourth quarter of 2019 on investment in the expansion of manufacturing capacity in San Diego to include a 200 liter batch process suite was the primary driver of this change.

Non-GAAP research and development expenses were $14 1 million in the fourth quarter of 2020 versus $18 $3 million in 2019. The reduction was primarily driven by the capitalization of expenditures on our Swindon base 200 liter manufacturing suite as we transition from this development fees.

Two the registration phase.

Non-GAAP SG&A expenses were $44 7 million for the fourth quarter of 2020 versus $47 $6 million in 2019 the.

The reduction is primarily or primarily attributable to decreased sales commissions to Houston fees, which will directly linked to year over year EXPAREL growth as well as the use of lower cost virtual tools on the cancellation of in person meetings medical conferences and non essential travel during the COVID-19 pandemic.

To remind you our agreement with the few Synthes concluded in January 2021.

All of this resulted in non-GAAP adjusted EBITDA of $42 9 million for the fourth quarter of 2020 versus $29 1 million in the fourth quarter of 2019.

As David mentioned earlier, we are committed to reporting preliminary monthly product sales until we have the visibility necessary to fully reinstate financial guidance.

With respect to taxes, beginning in the first quarter of 2021, our P&L reflects a federal and state income tax provision using an estimated combined rate of 25%. We continue to expect to become a cash taxpayer during the second half of 2022.

Lastly, our long term expectations for robust top and bottom line growth remain very bullish and we believe that by the end of our five year planning period revenues will be approaching $1 billion for EXPAREL and $200 million for iron ore gross margins will have improved 1000 basis points and operating margins will occur.

<unk>, 50% for our current base business was.

With that financial review, let me turn the call back to Dave for his closing remarks. Thank you Charlie.

2021 unfolds, we begin to gain control over the Covid.

19 pandemic through vaccines and new treatment options like all of you. We're looking forward to the world returning to a sense of normalcy. Despite the challenges we have faced with COVID-19 throughout 2020, we solidified our leadership role in non opioid pain management by expanding the use of EXPAREL on its critical role in accelerating recovery and enabling network transition of surgery.

So the 23 hour setting weekly elective surgery data for my queue via which we have summarized in our investor presentations available on our web site continue to show X per hour consistently and significantly outperforming the market. These trends leave us very well positioned for more robust growth as the elective procedures normalize we expect a very.

Exciting 2021, as we build our progress made in 2020 on further entrench EXPAREL as the leader in non opioid post surgical pain management and <unk> in several orthopedic settings achieve a number of value, creating milestones through additional strategic investments and collaborations we entered the new year with a stronger position than ever to advance our mission of providing on opioid alternative.

For as many patients as possible using multimodal your ash protocols and shifting opioids to the rescue only scenario with that I'll turn the call over to Tina to begin our Q&A session Dana.

As a reminder to ask a question simply press star one on your telephone keypad again that is star one to ask a question and our first question is from Randall <unk> with RBC capital markets.

Great. Thanks, Steve just to go back to your last comment there is a lot of focus on the reopening right now how does that impact this year and I'm really thinking about the the opportunity for a volume boost for EXPAREL is that a 5%, 10% boost and when do you think that starts to flow in.

And then on the other end of that we've talked a lot about the move to the.

The ambulatory and outpatient setting I think youre now on the low to mid 60% range does any of that get pulled back into the hospital is reopened.

Takes place and then my second question just curious.

If you can comment on your view of the stickiness of your revenue and volume base ahead of what could be another competitor coming into the surgical pain area over the next several months.

Thanks Randall.

First on the reopening I think our message is pretty consistent and what's rolling out is pretty much. What we thought was going to happen. So far in 2021, I mean, our forecast for this year is that the first quarter would look pretty much like the last two or three quarters relative to.

Growth versus the year before.

I think it's fair to say that the impact of weather over the last couple of weeks, especially as an added complication to getting these elective surgeries done.

But I think generally.

What we thought was going to happen is that the first quarter would look a lot like last year with modest growth. We would start to see these surgical these elective surgical procedures come back out in Q2 and that we would see that accelerate pretty aggressively into Q3 and Q4.

And based on the information we have in hand today I don't see that there's any real reason to change that so we're pretty consistent that these 4 million procedures that we think our warehouse in the elective surgery total addressable market for per seara.

We will be an important growth factor in the second half of the year, but it's going to take us a little while yet to get there.

Don't see that changing in any meaningful way.

The ASC question is an interesting one for us.

We don't see anything.

<unk> in that area in fact quite the opposite.

I think it's important for everybody to know that day that.

But people who own the environment of care now are not to providers. They are the payers.

And the major Payors in the self insured payers and CMS are all aggressively moving patients to the ambulatory surgery market. So.

I don't think that we will see.

Any any any remove back to the hospital.

In fact, our patient survey suggests that patients don't want to go back into a COVID-19 environment.

Our providers actually are increasingly aggressive about telling us that.

They have control over the environment on our more control over the environment on a surgical and an ASC. They can they can actually have access to drugs like EXPAREL and different devices and things Thats denied access in hospital settings.

Interesting that when you talk to these guys Randall they would tell you.

I don't Miss any of the kids sporting events, because I don't spend a half a day rounding anymore like I did several years ago. So it's really been an aggressive move by the providers as well.

And then as I said earlier.

<unk> are in firm control of moving these procedures.

We had our national meeting last year, and we had a little segment that I think is meaningful to this growth five years ago, you would have to get a prior authorization to have a total knee arthroplasty and enabled literary surgery center today, you'll have to get a prior authorization to have a total knee arthroplasty in the hospital and so its come full circle.

And I don't see that changing in fact, we think it's going to continue to accelerate as these elective procedures come back out of the warehouse.

And then the stickiness.

I think we've seen the direct approval.

And it was very.

Sure.

What would you say limited in terms of the indication.

With significant drawbacks on a black box warning.

I don't think any of that changes going forward and.

We are as we've continued to evolve or to develop our field blocks and nerve blocks.

And we develop infiltration across a broad spectrum. There is no reason to believe that anything that's in development is going to have a label that's even close to what's represented by EXPAREL today, and so we're very bullish about the future and the competitors frankly, I think will help accelerate our growth.

That's great. Thanks, David.

Thanks Randall.

Your next question is from David <unk>.

Film with Piper Sandler.

Thanks, So just a couple first.

Any questions for more for Charlie.

I wanted to.

Transition away from the 45 liter batch process to the 200 liter batch process, particularly on the U K perspective.

And the other is volume and so because we believe volume will continue to expand we expect those margins to follow suit.

Based on both volume and the use of the 200 leader in the 200 liter in the U K should be operational end of this year early next year or at least not operational book commercially available.

And ready to go and so as that expands the contribution to total volumes that will have an impact on margins.

From an overall non.

Non cogs or Opex perspective.

The size of the R&D budget is not likely to go up much frankly, it depends on exactly what it is we're going to start investing that money in so the investment in EXPAREL is going to wind down we've got a couple of <unk>.

Interesting programs related to <unk> that are that are on the schedule at this point.

And we have a debt.

<unk> on pipeline and Ron Ellis is always bringing interesting things into the discussion. So we might we expect to have some of that cash freed up for things that aren't even on the list of our pipeline at this point so from an R&D perspective, we do not see any significant increases over the next three to five years subject to any.

New BD opportunity coming on line.

From an SG&A perspective, G&A is going to very modestly sales and marketing will go up a little bit more but we think when you average those two you're talking about something in the low to mid single digit range and so if sales are going up in the high teens and margins are going up from $75 to 85 and overall.

Opex is going to go up somewhere in the low single digits.

By definition is an awful lot that drops to the bottom line.

Okay and answering your second question David So we've we now have we now have August data so.

It's at least six months behind so remember when we exited 2020 are.

23 hours stay environment, our <unk> and ASC was about 60% of the business in our Tam.

Two things for this year.

You see these markets growing and so instead of having 32 million patients or procedures in our Tam. We now have 33 five for 2021, so that that bolsters, a little bit and as of August we moved from 63% to <unk> 63 per timeframe from 60% for 63, 5% of the procedures.

Actually being done in the ambulatory surgery.

And hospital outpatient market so in the middle of the pandemic you sought.

A significant move on.

On $32 million a move of three 5% is quite a lot in the middle of the pandemic and so we see that as I've said, a couple of times now increasing.

It's almost entirely being driven by the opportunity to do a single administration nerve or field block that gives the.

<unk> done under ultrasound guidance, almost always now and give the clinicians the opportunity to have several days of pain control without a pump and a catheter without having to use opioids and remember in these markets. They don't have access to some of the things that would traditionally be used for large abdominal surgeries for example.

Like a spinal.

Like a thoracic epidural so theres a number of drivers here that are moving patients to the app for the ambulatory market and in the ambulatory market Theres fewer options for how you how you treat pain and so or.

Almost the perfect storm for us as we start to see these elective procedures come back out of the warehouse.

Okay very helpful. Thanks, guys.

Thanks, David.

Your next question is from David Steinberg with Jefferies.

Thanks, and good morning couple of questions.

<unk>.

You've been calling on for last year or so.

Some new significant opportunities one being pediatrics in the second Big C section and I was wondering if you could just give us a little more granularity first I mean.

<unk>, which you have already rolled on.

Or is it relatively small percent.

Of your business last year, how are you thinking about.

The acceleration of slope of the curve.

I know, it's a little tricky because their hospital based on ASC based.

You mentioned last call <unk> been in some of these berthing centers.

Which may help accelerate the trends.

<unk>.

Pediatrics I believe youre expecting approval soon.

When do you expect them to launch and.

I wonder if some of your pre marketing activities looking like there.

And then.

The answer side I think Charlie you laid out some additional aspirational guidance.

Okay.

It was this a is this a shift I think lasse.

Most recent times, you've been talking about a doubling of sales over five years at this time.

You talked about I think is it could you make on when it makes sense is correct for the $1 billion in sales in five years for <unk> $200 million for Io, there that 50% target op margins in five years is that correct.

Yes, so youre right that is the aspirational, but it's consistent with the long range plan. The five year plan that we've been speaking from for a while now.

David and so if you go to the fact that we've been saying sales are going to be in the mid to upper teens over the next five years when you start on today's base.

Okay.

And the 200 million for Io Vera is consistent with what we've been saying I think almost since the acquisition so.

Just trying to reinforce where we believe this company is going.

Yes.

So David So the first two questions first I'll start with C section.

C section is interesting impacted by Covid of course.

And a Yang Yang right.

Gail it's they don't want to go into the hospital because of Covid.

But it didn't have any real choice and so low.

<unk> length of stay led to a lot of folks adopting EXPAREL during the.

The COVID-19 environment.

We see now that the C section opportunity is actually the nidus of us to have interactions with hospitals that have not been major supporters of EXPAREL to date.

And some of the big Obgyn centers around the country.

Had the opportunity to get in with EXPAREL, and Ob and Ob anesthesia for Berthing.

And then extend that inside the facility when they see that this stuff really works and when you do these regional approaches.

These gals have been leaving in a day and in many cases wondering why they are there for a night.

As further enhanced what we introduce the last time, where.

Albeit larger bee groups and also private equity groups building birthing centers.

And probably in the top three of requests that we get now over the last two months.

Is do we have a protocol for same day C section.

And so we do have centers working on a protocol for a same day C section, where mom doesn't have to be exposed to any COVID-19 environments.

And they would go in with the expectation elective now so you would have the expectation that you could be scheduled on the morning of discharge the same day and unless there is some issue with the child that is also a same day discharge. So that's ongoing and I don't see any reason why that wouldn't go forward, especially when it's sponsored by the physicians.

Themselves building outgrowths in it almost looks like a small AFC, David but it's a birthing centre in the turnover on on elective basis. It's just the same.

Pediatrics.

We.

We've been obviously in contact with the FDA and so.

We are still expecting a launch or a approval sometime in late March.

We've had a series of AD boards with pediatricians with pediatric surgeons with pediatric anesthesiologists with all of those in the same call et cetera.

Pumps and catheters are the mainstay.

It's been interesting.

A complete lack of awareness by many.

Wouldn't say most book by many.

On a heavy reliance on pumps and catheters.

And very early on in the discussions we hear the war stories about trying to keep a catheter and a seven year old and all the issues of the catheter falling out in pain and mom and dad don't know what to do and all of those kinds of things. So I think the market is ready for <unk>.

Not only on non opioid pain option, but also a single administration that will lead to.

Having having the opportunity to send the patient home and not have to worry about whether their pain is going to be covered or not because they don't have to do anything if they get EXPAREL on a nerve block or in a field block.

So what we've done is we've hired a team of specialty nurses.

We will be very careful here David.

We don't want to just have a big splash and have a lot of people dabbling with EXPAREL in kids. So our team are all.

Intensive pediatric intensive care nurses et cetera, and we've targeted a group of 40, which are the most influential pediatric hospitals on the country and then there's another group of 25 right behind them will launch as soon as we can once we know what the package insert says.

And we will take our time and work through with the key opinion leaders in pediatrics to make sure that they are 100% informed and behind us in terms of how we're going to go to the broader pediatric marketplaces and in fact after the beginning of the launch we will have programs where these kols.

Tutor their own fellows from previous years on best practice use of EXPAREL on these pediatric environment. We're doing some phase four studies, where we will look at things like.

Appendicitis and a phase for design things that we can do fairly quickly. So we can provide very specific data about replacing a catheter on a pump with EXPAREL.

And so we expect that this will be a big market, but not a market, where we can take any chances in terms of.

Having a field force go in and talk for a bunch of people haven't on spec.

For all without very specific guidance on weight based dosing and how you how you get rid of the catheter on how you replace it with a single shot et cetera. So.

I think that answers your question, David unless you want to come back.

That was a very detailed answer thanks.

Thanks, David.

Your next question is from Liana <unk> with Wedbush Securities.

Hi, this issue for Liana. Thank you for taking our questions and congrats on on the program can you provide some color on the European launch plans for EXPAREL and then any comments around the topline sales.

Please write data expected in Q2.

How big is this market opportunity and do you see X value being prescribed off label for low extremity nerve block.

Yes. Thank you.

So Europe is.

A lot of market research, we've got approved we've got a great label. So all very good.

In discussions now with the pricing authorities and our current estimate is that we will launch EXPAREL and that'll Vera in eight countries and we will launch I'll share alone in a couple of additional countries in Europe, and it's largely based on a calculation of value versus the price.

That we're able to get in those different countries. So that drives roughly so we've had boots on the ground now for well over a year.

We've got education programs going with the Europeans.

Many Europeans have got great familiarity with EXPAREL and so we've got all of the.

What looks like a small pit over there where people can go in and be trained with hands on experience et cetera, as soon as we know exactly.

What the launch dates are going to be and how we're going to launch again. This is impacted by COVID-19 more in Europe than it is in the United States and so we're watching carefully how we can put these different resources to work, we will have roughly a dozen medical science liaisons and folks who will work with the European Kols to make sure that we have best practice trans.

For by procedure. So everything is benefits from the mistakes. We made frankly early on in the launch here in the United States and it will be largely in anesthesia launch.

Benefiting from all of the U S experiences and we've signed a contract with a contract sales organization for roughly 30 people, who will provide a lot of the boots on the ground at least for the first 12 months and so we will launch both products were.

For the Europeans are very excited about iron ore. So we think thats very good and there's a lot of interest from the anesthesia community.

What's happened over there.

The the fact that they don't send as many patients home quickly and they don't have the same access in many territories to ambulatory surgery settings.

The length of stay for them for a knee and some of these countries is still for five days and we're told it in some of the key markets. The waiting list is 18 months to get a need done. So there is some very compelling reasons for people to start to get into some of the other ways that we can get this done.

Sure.

So much I forgot what your second question loans.

On.

Oh, yes, yes.

So we're nearing completion of the enrollment of that trial.

As standard practice now you start to clean the Crs up and Youre cleaning the data as you're going along so we think that within a couple of months, we'll have a cooker.

Clinical study report and.

We'll have to see exactly how the data rolls out and when we have database locks et cetera, but.

You can expect that Youll hear something about topline data from us before the end of April that would be the current projection.

It'll be a 10 month regulatory review so if you take a couple of months to put the NDA together and a 10 month regulatory review, we would we would launch in the United States in early 2022, probably early in the second quarter of 2022.

For both peds and the stride study there are European obligations. So once we get done with these studies, we will also update the dossiers for both pediatrics and the stride study.

And there is really an offensive and defensive component associated with strike. So it's a study that investigates the use of EXPAREL and the abductor canal as well as in the foot and ankle innovation. So we think that about 30% of the total knee is done in America today are getting a a.

And Dr Canal block with EXPAREL, So we want to make sure that we cover those folks in the package insert and if there is any issues in any of the hospitals or anything about whether it's on or off label, we get rid of all of that and then it opens up for everybody would be doing this in a NAV. Dr Canal block. It is clearly the best practice.

And then.

<unk> ankle adds another significant market opportunity all in lower extremity nerve block is about 3 million procedures a year.

We're also being used in a little over 20% of a $1 billion of those for Teekay as until you'd have to take that out but you are still well over $2 $5 2 million additional patients that will be available to us with a lower extremity nerve block.

Thanks very helpful.

Thanks.

Your next question is from <unk> Prasad with Barclays.

Hi, good morning on thanks for taking my questions.

Firstly on a couple of questions around the IP and <unk>.

Splitting into two one on the legal on the <unk>.

Bottom side on one on the commercial side.

So you mentioned that youll be lifting couple of additional patents.

In the Orange book this year, so could you describe those more and on the patent protection that it will extend further and secondly on the tire on Neil.

Our launch into China, our entry into China on your comments on how you plan to think about the tradeoff between potential generic access and predicting IP, how do you plan to balance those and at what point could you.

On the market opportunity is so attractive that it is still growing despite generally Chris can China. Thanks.

Yeah. Thank you Archie.

The patent there is a whole series of patents around process and manufacturing specifically as we got into the 200 leader manufacturing process. There were a number of unexpected observations that the patent teams think are worthy of a patent so.

We would be we will be patenting and we're not in a position, where we're going to instruct any potential competition or the Chinese frankly about exactly what the patents say.

Just to be very clear, though I don't expect that youll see those in the Orange book in 2021.

These will take.

More time than that for the <unk> to be able to.

Provide their opinions, but theres, a very high likelihood that we will have additional orange book listed patents going forward and we're not uncomfortable with that because we don't believe there's anybody on the on the globe Thats in a position to be able to manufacture a multi particular zone for many many years. So those two things are not mutually exclusive if you will.

China is a tricky call.

Yeah.

I can answer the second part of your question more easily can answer the first part to be honest with you.

No.

And I'll, just give you a little bit of history here. So there is great interest in China, and so we start to.

Work through the regulatory process and we get a notification that we have to manufacture in China, and we say, we're not going to do that and that's the end of it in several months go by and we get a call that says well, we really have to have this product and we're going to go forward anyway, and we've put a dossier together and it goes in for an IND.

And at the end of that it says and you have to make it in China and so we stop again in several months goes by and then.

Youre talking about the CMC section here and you're starting to get questions like what's the model number on the on the mixture.

Rpm's propellers, and the first batch versus the second batch and it's like there's not a chance on heck that we're going to give that to anybody and so essentially you protect your IP by putting it on CMC section that doesn't actually say anything.

And.

That's what we're doing and so if they accept the fact that they want us to launch in the country without having us to teach them how to make a generic we are we would love to be able to do that but there's not any chance that we're going to.

And struck the Chinese government on how to make a generic EXPAREL and so thats, where we are <unk>. So it's a it's a it's a slow motion poker game.

Thanks, David.

Yes.

Okay.

Your next question is from Greg Fraser with Trust Securities.

Good morning folks and thanks for taking the questions I have two questions first.

Are there any notable changes to reimbursement coverage policies for 2021. In addition to the CNS changed for hip replacement and will be catalysts for demand this year.

Then secondly can you provide some color on your expectations for the pace of adoption of EXPAREL for lower than their block assuming the trial is successful and that you secure approval and whether you see any potential hurdles to rapid adoption in that area.

Yes, Thanks, Greg FERC.

FERC for reimbursement.

On spine hip was the obvious one.

They also have moved I think there are seven <unk>.

Spine procedures that were moved from the inpatient only list to the ASC list and so we are just putting a dedicated spine team out into the field now.

Recognizing spine is a market of its own and taking advantage of the desire of these places to move this to enable the Tory surgery center. So.

The big things in.

I mean, the first port of call every year it is.

EXPAREL is still the only unbundled drug and the ambulatory surgery Center.

We achieved that we expect that they will raise the price currently at $1 29 milligram. We think that will go up so that's a win for us on an annual basis right and then.

The only thing was hip and spine.

Debt were directly related to US now we're here for the marketplace that there is some womens health things and some other surgeries that the docs on the women's health area there.

They are generally in associated with these with these birthing centres discussions are there other women's health surgeries that we could move on on elective surgery basis into an outpatient environment.

So we're still working with those folks on that on the other side 646 two for for <unk>.

Actually it was a significant increase in the reimbursement rate and so.

AFC use of of iron ore, which would have been very difficult before this increase in the reimbursement now as possible.

Still better than the <unk>, but there is a livable reimbursement rate for iron ore in the AFC now as well and so we consider that to be a good one as well so continue to work on it we've got a whole another data set now Tony Malone IR scheduling a meeting with the new CMS team as soon as they are in place and.

We were going to keep going down there.

China influenced these folks in terms of.

They are the leaders frankly.

The big revenue opportunity, it's creating the pathway for reimbursement that's all important markets CMS involved and so on.

We're still working every every time, we get a chance on it right.

For lower extremity nerve block.

Those are largely guys that we do business with already.

So that certainly would be a positive when it terms in terms of the adoption of the art if you will.

As I mentioned I think.

You in a very short period of time I would expect that the vast majority of knees would have a.

Hi.

Net Dr Canal block with EXPAREL once it's on label and we hear often about.

The prolonged pain.

Foot and ankle procedures and the need for a long acting X per hour.

Probably not surprising, but now we're seeing real data that the further distal youll get from the.

From the from the cardiovascular care from the heart the longer half life and so it appears that we're going to be able to have quite an extended duration of action.

In the lower extremities and.

We think thats going to be a good thing and so.

1 million foot ankles, another 1 billion knees and then all the peripheral other stuff that goes on.

We think it'll be an important addition, and will really sort of finished the nerve block if we have upper quadrant and lower quadrant theres really not much else we can do.

Yeah.

Got it thank you.

Thanks, David we have time for one last question from Serge Belanger with Needham <unk> company.

Hi, Good morning, Thanks for squeezing me in.

My first question is about the.

Traditional infiltration segments of the.

Of the markets.

No.

How big is that segment currently.

How much of the external business is represented by.

Segment, where do you think it's.

And then.

Second question.

Comment on the gene coin biotherapeutics investment.

On the technology itself and how the investment plays into your business development strategy.

Great. So I'm going to take the first half and Ron Ellis is with a surge in I'm going to ask him to comment on machine client question. So for.

<unk>.

In terms of infiltration.

Don't have a perfect data source right. So we get data by procedure by site of care.

And some of the datasets, we can see who the provider is but most of the time, we're actually looking at whether they used ultrasound or not and so we can sort of parse this out but I want to be really clear with you that it is an imperfect multiple anecdote collaboration here that I'll tell you about so we think the currently infiltration is about 30%.

Of our business.

And it's there are some places where it is the business right. So.

There are certain areas.

Areas, where you wouldn't do a nerve block for example, there's some literature that you don't want to do a nerve block on the shoulder of a professional athlete for example.

And so infiltrations are still the standard of care in some of the market segments that we address the peds launch for example will be an infiltration launch we are in discussions now with the nerve block label for peds, but that will be an infiltration launch and probably the most significant is the multi compartment opportunity. So if you do.

Teekay for example, we would do on abductor canal nerve block that would take care of the anterior knee largely but you would still infiltrate the posterior capsule and you would still infiltrate the periosteum as part of a very articulate injection.

There's pieces of it that are never going to go away.

And then there's pieces of it that are part of a bigger procedure. So it's really hard for us to <unk>.

This out in the way of what I could be as specific as I'd like to be with you, Let's say 25, 5% I just don't know what I can tell you is that it's a very small percentage of our growth.

So as we look forward virtually everything that's allowing us to have the confidence that we're doing a field block or a nerve block that's going to last for three or four days and a patient that we're going to discharge after a significantly painful surgery in three or four hours on.

Our are being done with some type of imaging by an anesthesiologist and so.

Remember the surgeons don't get paid when a surgeon doesn't infiltration at the end of the case, it's part of a bundle when an anesthesiologist does this pre going into the operating room. It is outside the surgical bundle. So the anesthesiologists gets paid the surgeon doesn't get paid the anesthesiologist does it before the patient goes on the or the surgeon.

Has to take a few minutes at the end of the case to do it in the or for surgeons still owns the patient again.

To be very candid, but it is not as hard as you think it might be to get the surgeon to ask the anesthesiologists to actually do a nerve block once they understand the ramifications of that especially when they move into the ASC.

And Rob is going to talk to you about your deposits.

I appreciate the question on gene quiet in terms of the technology finally would be quite interesting the gene therapy for <unk> for reported Glenn can for which is also known as <unk>. There has been intense in the past to formulate the actual protein, but it's been challenging to do so there may be some more recent break.

<unk> in that space now I think Dave has mentioned previously about how R. R.

<unk> in the field the physicians themselves have spoken to us about what we have extra for surgery and as Dave just mentioned.

Era for knee OA.

Before surgery can you help us earlier in that patient journey and so this is our attempt to do so.

Partner with providers on also be a partner with the patient and help them in a non opioid way.

Net through this and what we really see the promise on the gene therapy is not just the efficacy, but also the duration of it that we can give something with similar efficacy to what's available today or better and then also has that duration last year is in the promise of delaying surgery eventually.

Thank you.

And thats very much in concert with what our doctors are looking for search you know most of the most of the high end guys.

Pain space, the sports medicine space and the orthopedic space are looking at the world and more of a boutique kind of way, where we want to have on earlier react or an earlier interaction with our patients, but it becomes almost almost a lifestyle.

PRP and stem cells and lasers and all the other things that we're using excess sites. For example, we're moving into that environment, where.

I mean, the average age of for total knee arthroplasty in United States last year was 59 right.

10 years ago, you would have gone to jail right and so it's changing very quickly and we see that as an opportunity for us.

To operate with these guys and partnerships and establish how we're going to take care of these patients for 20 years instead of two hour surgical operation and that's the longer term strategy here. So.

With that I'm supposed to close.

I'd like to thank you all for participating and listening to today's conference call. We look forward to keeping you updated on our progress next up for US is the Barclays Conference in March. Thank you all on stay well goodbye.

Thank you again for joining US today. This does conclude today's presentation you may now disconnect.

[music].

Okay.

Yes.

[music].

David.

Yes.

David.

[music].

David.

Yes.

[music].

Ladies and gentlemen, thank you for standing by and welcome to the 2020 per Sarah Bioscience, Inc. Earnings Conference call. At this time all participant lines are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone please be advised on today's call.

Is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your Speaker today, Susan Mexico head of Investor Relations Ma'am. Please go ahead.

Thank you Tina and good morning, everyone. Welcome to today's conference call to discuss our fourth quarter and full year 2020 financial results. Joining me on speakers on today's call are Dave stack, Chairman and Chief Executive Officer, and Charlie Reinhart, Chief Financial Officer additional members with it for fear of Executive leadership team are also on their own for today's question and answer.

For session before we begin let me remind you that today's call will include forward looking statements based on our 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 our filings with the SEC, which are available from the SEC.

On our website with that I will now turn the call over to Dave stack. Thank you Susan Good morning, everyone and thank you for joining US 2020 was a difficult year for people around the world like all of you. We entered 2021 with great hope that the vaccines developed by our industry colleagues will stem the tide on the global pandemic.

COVID-19 has further escalated our nation's opioid crisis, placing an even brighter spotlight on the tremendous need for opioid sparing pain management to avoid this key gateway to addiction, a rising number of drug related fatalities continue given the health social and economic disruptions that are facing our country equally important is the pain that patients have had to.

Endure due to COVID-19 related delays unnecessary surgical procedures expedited recovery is even more critical than ever and we are dedicating considerable resources to develop and implement EXPAREL based on enhanced recovery after surgery or interest protocols that are enabling earlier discharge and accelerating the migration of electric procedures to.

Outpatient sites of care I am both proud and delighted to report that during these challenging times, we quickly adapted to our customer needs to provide opioid free pain relief in a virtual world. This translated into record revenues for 2020, despite ongoing geographic disruptions in care delivery. The success is really a testament to the <unk>.

Team and their steadfast commitment to provide an opioid alternative to as many patients as possible and redefine the role of opioids as rescue medication, while enabling elective surgery migration to outpatient care has noted in today's press release, our 2020 revenues were our highest ever coming in at $430 million for 2021. Despite.

Related challenges.

The overwhelming needs of the marketplace and transformation underway in the ambulatory surgery care setting allowed EXPAREL average daily sales to return to year over year growth in June attractive growth continued throughout the remainder of 2020 and we see this trend continuing into 2021.

None of these numbers should come as a surprise as we have aimed to be as transparent as possible. During these unprecedented times by reporting our preliminary monthly sales, while we feel incredibly bullish about our long term business prospects on revenue opportunity near term uncertainties around COVID-19 remain which can impact our business on a variety of levels to provide you with insight.

On intra quarter trends, we will continue to share monthly sales until we have visibility necessary to reinstate guidance.

Today, we also reported $113 million on adjusted EBITDA for 2020, as we continue to grow our topline and improve our gross margin. We are an interruption extraordinarily strong position to deliver accelerating profitability, while continuing to support our top and bottom line growth with appropriate investments and operating expense provision, we laid out years ago that highlighted.

For the transition from an inpatient surgery based company to on outpatient anesthesia based company is translating elegantly into a powerful earnings story. This ongoing evolution of the marketplace is the direct result of EXPAREL based SaaS protocols. The important changes underway on the surgical sites of care are redefining medical practice for lower on oil.

Post surgical pain control, leaving us very bullish on our long term growth outlook.

Turning now to a more detailed strategic review of the business 2020 was highlighted by strong execution across two robust global stroke growth strategies for.

Pursuing innovation by investing in our internally and externally for its portfolio of non opioid pain management and regenerative health solutions, while simultaneously advancing partnerships and education designed to revolutionize medical practice through the best practice opioid sparing eras protocols I'll start with EXPAREL with more than 8 million patients treated since long.

<unk> remains well positioned for long term market leadership as the only long acting local analgesic approved for infiltration field block and brachial plexus nerve block in January we completed a smooth transition with our partners at J&J for the last several months, we've been rolling out additional customer facing resources to help support the market's continuing shift to.

<unk> anesthesia, driven regional pain management, and the migration of procedures to outpatient sites of care. In fact, we believe the increased use of regional anesthesia is the most important driver of our business for 2021 and.

In 2020, only 20% of anesthesia procedures used for regional approach that field is poised for rapid expansion given advances in ultrasound guidance newer techniques and improved outcomes. We are paving the way for EXPAREL to revolutionize the practice of regional anesthesia through our expanding network of anesthesia group partnerships and robust educational and training.

On initiatives. This is the key to the future and the focus of our state of the Art training center in Tampa the pit.

For decades, Anesthesiologists have had a high level of interest in regional blocks, but with short acting agents only providing hours of pain control. It was difficult to justify a time return on investment.

Fast forward to today long acting EXPAREL based blocks have extended the duration of pain control for several days, allowing the EXPAREL block to be administered before patients horizon. You are truly a significantly positive change in the paradigm of patient care, our anesthesia customers see the strong advantages of using blocks on replacing antiquated pumps and catheters.

Outcomes and satisfaction rates, given the compelling advantages of opioid sparing regional approaches I would like to highlight a few markets, where we see continuing regional anesthesia redefined best practice for post surgical pain control EXPAREL administered as a brachial plexus nerve block continues to be a massive commercial opportunity to remind you and EXPAREL brachial plexus block.

<unk> provides coverage for the upper quadrant, so not only the rotator cuff on shoulder arthroplasty, but also elbow wrist and hand procedures, we see brachial plexus nerve block as an addressable market of more than 3 million patients per year our.

Our customers are consistently reported positive results surgeons are not only delighted with clinical outcomes, but they also for further demonstrated consistent results of anesthesiologists administering single injection blocks pre operatively versus infiltration at the end of the case.

After having success on brachial plexus blocks anesthesiologists can broaden their use to a whole range of long acting EXPAREL regional field and nerve blocks.

Transfer Pseudomonas or tap blocks are a significant market, where EXPAREL provides long acting pain control for the abdominal region as EXPAREL tap block opens the door for more than $6 million of abdominal and colorectal procedures per year and supports the migration of these painful procedures to the ASC space. There is a growing body of evidence supporting the safety and efficacy.

<unk> of tap blocks with only single with only high single digit penetration in a surge of interest we expect this market to be a significant long term growth pillar.

We are also seeing the emergence of newer regional blocs driving significant demand on the market for information and training.

And excuse me with detailed live and virtual programs, taking place regularly at the pit innovation and training facility in Tampa, the erector spinal our ESP block is another field block technique that is expanding our safe and effective approach for providing non opioid pain control that extends from the bottom of the net to the hip.

With EXPAREL, representing less than 2% of the total cost of the spine surgery case, and $2 8 million procedures. Each year. This market is poised to be a key long term revenue driver in.

<unk>.

The prepared capsular nerve group or paying block is a newer regional technique that targets the anterior hip capsule.

Peng block.

It has garnered great interest as it offers anesthesiologists and surgeons a means of shifting hip replacements for the outpatient setting. This is especially important since CMS has added total hip arthroplasty procedures to the ASC covered list effective January one 2021, joining knee arthroplasty, which was added in <unk>.

Annual rate of 2020.

<unk> action date is set for March 20.

Having pediatrics on our label is of critical importance given the significant unmet need for non opioid.

III stride study to evaluate EXPAREL versus bupivacaine as a nerve block for lower extremity procedures, we anticipate completion of enrollment by the end of the first quarter with a clinical study reported in the second quarter and is successful and approval in the second quarter of 2022, we believe the lower extremity opportunity to be as significant as the upper extremity.

Market.

We also continue to make progress in markets outside the United States. We remain on track to launch EXPAREL, along with <unk> in Europe in the middle of this year.

Importantly, our broad efficacy label, which covers EXPAREL administration via infiltration field blocks, and importantly, both upper and lower extremity nerve blocks, along with the superior safety profile, we have a clear competitive advantage in Europe, where <unk> is already approved for Canada. We remain in labeling discussions with health authorities given the curve.

<unk> status. It is not likely we will launch in Canada, as we will not jeopardize the brand with labeling that is not inherently a major country regulatory authorities in China. We are working with our partners to determine possible next steps in the regulatory process to provide EXPAREL for this market without any potential for proprietary data to be used to develop a generic before.

Turning over to <unk> I would likely I would quickly like to touch on the market exclusivity for EXPAREL on books Orange book listed patent expires later this year.

We have several unpublished and pending patents around the product process and manufacturing that are that we are confident we will extend our proprietary position well into the 2000 <unk> remember for <unk> is the only company that has ever manufactured on multiple secular liposome at commercial scale anywhere in the world our sterile cold chain.

<unk> expertise has been developed over 20 years of experience.

Regarding any potential generic EXPAREL the FDA 2018 draft guidance on a multi particular liposome bupivacaine established an extremely rigorous hurdle.

This will require a multi year near decade long effort to design and construct a dedicated commercial scale manufacturing facility that would then require an operational license and validation prior to any bio equivalent study.

Requirements by the FDA. This is a long and extensive process and little chance of duplicating the EXPAREL pharmacokinetic profile.

Since we have never disclosed our proprietary batch specifications or release assay and sure. We have great confidence that there will never be a generic EXPAREL and given the package inserts that we have seen for potential competitors EXPAREL will remain the branded market leader for many years to come given our broad label excellent safety profile on flexible product features in <unk>.

Our initial objectives for <unk>, we have implemented several commercial enhancements that we believe will start to take hold in 2021. We recently established a high caliber management team of roughly 30 sales managers that will be dedicated to Io Vera focusing on two specific opportunities. One is the procedural solution of <unk> plus EXPAREL to improve total net.

Arthroplasty during before and after surgery. The second is idle Vera for opioid free surgery free and drug fee free osteoarthritis pain control simply put if somebody is not ready for surgery or is not a surgical candidate for some reason we can turn the pain signal off for several months with a simple 20 minute.

Procedure. This allows them to play golf walk on the beach or enjoy a family occasions, such as a wedding or vacation all the things that folks might not be able to do with significant osteoarthritis pain.

On the clinical front, our prepare trial is enrolling patients to evaluate <unk> and EXPAREL for opioid sparing pain management for patients undergoing total knee arthroplasty, we expect enrollment to conclude before the end of this year in parallel we are launching on Iot our registry to capture real world experience for the use of teekay procedures with leading academic and orthopedics.

Centers of excellence. We are also encouraged by the excitement around using Io Vera for other key areas key opinion leaders in orthopedics spine and anesthesia are interested in replacing heat based radio frequency ablation with Io very cold therapy, we are seeing great interest across a wide range of treatment opportunities such as low back pain and spine.

<unk> and Refracture and we will use investigator initiated studies and grants to develop data across these areas to remind you.

<unk> reimbursement in the hospital outpatient department setting is highly favorable with Medicare paying 900 to $1900 for iron ore procedures targeting nerves around the knee.

We are also interacting with commercial payers to understand the economic advantages and improve patient outcomes associated with low or no opioid strategies and some we remain highly confident in the technology behind the innovative system with sales potential approaching $200 million within our five year planning horizon.

Turning now to business development, our team is leading a robust effort and thoughtfully pursuing opportunities of interest to surgical and anesthesia audiences. We are calling on today.

We believe our leadership position in opioid sparing pain control provides us with a significant opportunity to build a differentiated portfolio to improve the patient journey, along the neuro pain pathway.

We recently announced a strategic investment in gene client.

This transaction provides us the opportunity to participate in the development of an exciting disease modifying gene therapy for osteoarthritis.

Gene clients lead product candidate <unk> Q3 hundred three is currently in preclinical development as a treatment for osteoarthritis 300, threes helper dependent adenovirus vectors Express PRT for a protein that plays an important physiological role in regulating OE through lubrication and decreased inflammation finally, let's touch on.

On some of our internally sourced non opioid opportunities for acute and chronic pain to augment our business development efforts on in house team is focusing on leveraging the proven safety flexibility and customize ability of our depth of foam platform. Our lead program is an epidural on delivery of <unk> based local anesthetic for acute and chronic pain, we are conducting a fee.

As one pilot study with EXPAREL, which will allow us to make a go no go decision in the next phase of development. We're also looking to add different depot form opportunities that target inflammation in chronic pain and look forward to keeping you appraised of our progress of this early stage pipeline and with that I'd like to turn the call over to Charlie for a REIT.

A few of the financials Charles Thank you, David and good morning, everyone before discussing our fourth quarter financial results I'd like to remind you that I'll be discussing non-GAAP financial measures. This morning, which we believe more accurately reflect our business results. A description of these metrics along with our reconciliation to GAAP can be found in the press release, we issued this morning.

I would like to begin by reinforcing David sentiment, we remain very bullish on the outlook for our business market indicators are strong with EXPAREL continuing to outperform the elective surgery market, leaving us on track for accelerating top and bottom line growth as wide spread.

Deployment of the COVID-19 vaccines vaccines will further support for recovery and growth of elective surgery volumes.

COVID-19 pandemic has also acted as a catalyst for accelerating the shift of 90 procedures to outpatient settings, where we remain ideally positioned to serve patients.

Fourth quarter total revenues for $131 million or approximately 107% of total revenues for the fourth quarter of 2019, our highest quarter ever despite the ongoing pandemic related challenges.

Fourth quarter net product sales of EXPAREL for $125 3 million, which was.

<unk>, 107% of the fourth quarter of 2019 for Iron ore, we reported net product sales of $2 4 million for the fourth quarter of 2020 down 25% from the $3 2 million for the fourth quarter of 2019 due to COVID-19 related commercial challenges.

Our non-GAAP gross margin for the fourth quarter of 2020 was 74% versus 75% for the fourth quarter of 2019, our investment in the expansion of manufacturing capacity in San Diego to include a 200 liter batch process suite was the primary driver of this change.

Non-GAAP research and development expenses were $14 1 million in the fourth quarter of 2020 versus $18 3 million in 2019. The reduction was primarily driven by the capitalization of expenditures on our Swindon based 200 liter manufacturing suite as we transition from the development phase.

Two the registration phase.

Non-GAAP SG&A expenses were $44 7 million for the fourth quarter of 2020 versus $47 $6 million in 2019.

The reduction is primarily or primarily attributable to decreased sales commissions too few synthes, which will directly linked to year over year EXPAREL growth as well as the use of lower cost virtual tools on the cancellation of in person meetings medical conferences and non essential travel during the COVID-19 pandemic.

To remind you our agreement with the few Synthes concluded in January 2021.

All of this resulted in non-GAAP adjusted EBITDA of $42 9 million for the fourth quarter of 2020 versus $29 1 million in the fourth quarter of 2019.

As David mentioned earlier, we are committed to reporting preliminary monthly product sales until we have the visibility necessary to fully reinstate financial guidance.

Lastly, our long term expectations for robust top and bottom line growth remain very bullish and we believe that by the end of our five year planning period revenues will be approaching $1 billion for EXPAREL on $200 million for iron ore gross margins will have improved 1000 basis points and operating margins will occur.

<unk>, 50% for our current base business with.

With that financial review, let me turn the call back to David for his closing remarks. Thank you. Charlie is 2021 unfolds, we begin to gain control over the Covid.

For the 23 hour setting weekly elective surgery data from our <unk>, which we have summarized in our investor presentations available on our web site continue to show X per hour consistently and significantly outperforming the market. These trends leave us very well positioned for more robust growth as the elective procedures normalize we would expect a very.

Exciting 2021, as we build our progress made in 2020 on further entrench EXPAREL as the leader in non opioid post surgical pain management, and Vance I avera and several orthopedic settings achieve a number of value, creating milestones through additional strategic investments and collaborations we entered the new year with a stronger position than ever to advance our mission of providing on opioid alternative.

As many patients as possible using multimodal <unk> protocols and shifting opioids to the rescue only scenario with that I'll turn the call over to Tina to begin our Q&A session Dana.

As a reminder to ask a question simply press star one on your telephone keypad again that is star one to ask a question and our first question is from Randall <unk> with RBC capital markets.

Great. Thanks, Steve just to go back to your last comment there Theres a lot of focus on the reopening right now how does that.

<unk> per share and I'm really thinking about the opportunity for a volume boost for EXPAREL is that a 5%, 10% boost and when do you think that starts to flow in and then on the other end of that we've talked a lot about the move to the.

The ambulatory and outpatient setting I think you are now in the low to mid 60% range does any of that get pulled back into the hospital is reopened.

Takes place and then my second question just curious.

If you can comment on your view of the stickiness of your revenue and volume base ahead of what could be another competitor coming into the surgical pain area over the next several months.

Thanks Randall.

Growth versus the year before.

I think it's fair to say that the impact of weather over the last couple of weeks, especially as an added complication to getting these elective surgeries done.

But I think generally.

To change that so we're pretty consistent that these 4 million procedures that we think our warehouse in the elective surgery total addressable market for per seara.

We will be an important growth factor in the second half of the year, but it's going to take us a little while yet to get there on idle.

Don't see that changing in any meaningful way.

The ASC question is an interesting one for us.

We don't see anything.

<unk> in that area in fact quite the opposite.

It's important for everybody to know that the people who own the environment of care now are not to providers. They are the payers and the major payors in the self insured payers and CMS are all aggressively moving patients to the ambulatory surgery market. So.

I don't think that we'll see.

Any any any remove back to the hospital.

In fact, our patient survey suggests that patients don't want to go back into a COVID-19 environment.

Our providers actually are increasingly aggressive about telling us debt.

And.

Interesting that when you talk to these guys Randall they would tell you.

I don't Miss any of the kids sporting events, because I don't spend a half a day rounding anymore like I did several years ago. So it's really been an aggressive move by the providers as well.

And then as I said earlier the payers are in firm control of moving these procedures.

We had our national meeting last year, and we had a little segment that I think is meaningful to this growth for.

Five years ago, you would have to get a prior authorization to have a total knee arthroplasty and enabled literary surgery center today, you'll have to get a prior authorization and to have a total knee arthroplasty in the hospital and so its comfortable circle and I don't see that changing in fact, we think it is going to continue to to.

Right as these elective procedures come back out of the warehouse.

And then the stickiness.

I think we've seen the direct approval.

And it was very.

What would you say limited in terms of the indication with.

With significant drawbacks in a black box warning.

I don't think any of that changes going forward.

<unk>.

We are as we've continued to evolve or to develop our field blocks and nerve blocks.

That's great. Thanks, David.

Thanks Randall.

Your next question is from David <unk>.

Film with Piper Sandler.

Thanks, So just a couple first of all.

Any questions for more for Charlie.

I wanted to.

Dig deeper into the extent to which you're going to have operating leverage and wanted to do.

More deeply into low cost structure, how we should think about.

On the trajectory of R&D and also <unk>.

Sales and marketing spend not just for this year, but long term and just give us a sense of.

How we should think about operating leverage and I guess also bundled into that question is also how we should think about gross margin expansion. So that's number one and then secondly.

Can you talk about how the mix for EXPAREL is evolving among hospital inpatient hospital outpatient and ASC is I know you've given some metrics in the past maybe.

Maybe talk about where you see the mix, particularly on the ASC front as the year progresses and also longer term. Thanks.

Thanks, David go ahead for sure.

Let's just walk down the P&L for on gross margin perspective on.

David David We still expect gross margins to go from the mid <unk> to the mid eighties and perhaps.

A little higher than that frankly that is going to be driven by two.

Factors one is the transition away from the 45 liter batch process to the 200 liter batch process, particularly on the out of the UK perspective.

And the other is volume and so because we believe volume will continue to expand we expect those margins to follow suit.

Based on both volume and the use of the 200 leader in to 200 leader in the U K should be operational end of this year early next year or at least not operational commercially available.

And ready to go and so as that expands the <unk> contribution to total volumes that will have an impact on margins from from an overall on non cogs or opex perspective.

Interesting programs related to <unk> that are that are on the schedule at this point.

And we have.

Debt performed pipeline and raw analysis always bringing interesting things into the discussion. So we might we expect to have some of that cash freed up for things that aren't even on the list of our pipeline at this point so from an R&D perspective.

Do not see any significant increases over the next three to five years subject to any new BD opportunities come on line.

Promise SG&A perspective, G&A is going to very modestly on sales and marketing will go up a little bit more but we think when you average those two and you are talking about something in the low to mid single digit range and so if sales are going up in the high teens and margins are going up from 75% to 85 and overlap.

Opex is going to go up somewhere in the low single digits, but by definition is awful lot that drops to the bottom line.

Okay and answering your second question David So we now have we now have August data so.

It's at least six months behind so remember when we exited 2020 on.

Our.

23 hours stay environment on our <unk> PD and ASC was about 60% of the business in our Tam and two things for this year.

You see these markets growing and so instead of having 32 million patients or procedures in our Tam. We now have 33 five for 2021, so that that bolsters, a little bit and as of August we moved from 63% to 63 per timeframe from 60% to 63, 5% of the procedures.

Being done and the ambulatory surgery.

And hospital outpatient market so in the middle of the pandemic you sought.

A significant move on.

$32 million a move of three 5% is quite a lot in the middle of the pandemic and so we see that as I've said, a couple of times now increasing.

It's almost entirely being driven by the opportunity to do a single administration nerve or field block that gives the.

And had done under ultrasound guidance almost always now and gives the clinicians the opportunity to have several days of pain control without a pump and a catheter without having to use opioids and remember in these markets. They don't have access to some of the things that would traditionally be used for large abdominal surgeries for example.

Like a spinal.

Like a thoracic epidural so theres a number of drivers here that are moving patients for the app for the ambulatory market and in the ambulatory market. There is fewer options for how you how you treat pain and so or.

Almost a perfect storm for us as we start to see these elective procedures come back out of the warehouse.

Okay very helpful. Thanks, guys.

Thanks, David.

Your next question is from David Steinberg with Jefferies.

Thanks, and good morning couple of questions.

First.

You have been calling on for the last year or so.

Some significant opportunities one being pediatrics in the second Big C section and I was wondering if you could just give us a little more granularity first I mean, <unk>, which you have already rolled on.

I know it was a relatively small percent.

Your business last year, how are you thinking about.

The acceleration of slope of the curve.

I know, it's a little tricky because their hospital based on ASC base.

You mentioned last call the advent of some of these berthing centers.

Which may help accelerate the trends for police action on.

Pediatrics I believe youre expecting approval soon.

When do you expect them to launch and.

I wonder if some of your pre marketing activities looking like there.

And the financial.

Good day side, I think Charlie you laid out some additional aspirational guidance.

It was this a is this a shift I think lasse.

In most recent times EBIT talking about a doubling of sales over five years at this time.

You talked about I think is it could you maybe don't want to make sure. This is correct for the $1 billion in sales in five years for <unk> $200 million for iron ore and then 50% target op margins in five years is that correct.

Yes.

You're right that is the aspirational, but it's consistent with the long range plan. The five year plan that we've been speaking from for a while now.

David and so if you go to the fact that we've been saying sales are going to be in the mid to upper teens over the next five years and you start on today's base, that's where.

And.

On the 200 million for Io Vera is consistent with what we've been saying I think almost since the acquisition so.

Just trying to reinforce where we believe this company has gone.

Yes.

So David So the first two questions first I'll start with C section.

C section is interesting impacted by Covid of course.

And a Yang Yang right.

Gail it's they don't want to go into the hospital because of Covid.

But it didn't have any real choice and so <unk>.

The limiting length of stays led to a lot of folks adopting EXPAREL during the.

The COVID-19 environment.

We see now that the C section opportunity is actually the nidus of us to have interactions with hospitals that have not been major supporters of EXPAREL to date.

And some of the big Obeche land centers around the country, we've had the opportunity to get in with EXPAREL, and Ob and Ob anesthesia for Berthing.

And then extend that inside the facility when they see that this stuff really works on when you do these regional approaches these.

These gals have been leaving in a day and in many cases wondering why they are there for a night.

Yes.

As further enhanced.

What we introduced the last time, where.

Obese large ob groups and also private equity groups building Berthing centers.

And probably in the top three of requests that we get now over the last two months.

Is do we have a protocol for same day C section.

And so we do have centers working on a protocol for a same day C section, where mom doesn't have to be exposed to any COVID-19 environments.

Themselves building outgrowths in it almost looks like a small AFC, David but it's a birthing center and the turnover on an elective basis. It's just the same.

Pediatrics.

We.

We've been obviously in contact with the FDA and so.

We are still expecting a launch or a approval sometime in late March.

We've had a series of AD boards with pediatricians with pediatric surgeons with pediatric anesthesiologists was all of those in the same call et cetera.

Pumps and catheters are the mainstay.

It's been interesting.

A complete lack of awareness by many.

Wouldn't say most book by many.

On a heavy reliance on pumps and catheters.

And very early on in the discussions we hear the war stories about trying to keep a catheter and a seven year old and all the issues of the catheter falling out in pain and mom and dad don't know what to do in all of those kinds of things. So I think the market is ready for <unk>.

Not only on non opioid pain option, but also on a single administration that will lead to.

So what we've done is we've hired a team of specialty nurses.

We will be very careful here David.

We don't want to just have a big splash and have a lot of people dabbling with EXPAREL in kids. So our team are all.

Tutor their own fellows from previous years on best practice use of EXPAREL on these pediatric environment. We're doing some phase four studies, where we will look at things like.

Appendicitis and a phase for design things that we can do fairly quickly. So we can provide very specific data about replacing a catheter on a pump with EXPAREL.

And so we expect that this will be a big market, but not a market, where we can take any chances in terms of.

Having a field force go in and talk to a bunch of people have them start using for all without very specific guidance on weight based dosing and how you how you get rid of the catheter on how you replace it with a single shot et cetera. So.

I think that answers your question, David unless you want to come back.

That was a very detailed answer thanks.

Thanks, David.

Your next question is from Liana <unk> with Wedbush Securities.

How big is this market opportunity and do you see X value being prescribed off label.

<unk> block.

Yes. Thank you.

So Europe is.

<unk>.

A lot of market research, we've got approve we've got a great label. So all very good.

In discussions now with the pricing authorities and our current estimate is that we will launch EXPAREL and that whole Vera.

In eight countries and we will launch on overall alone in a couple of additional countries in Europe, and it's largely based on a calculation of value versus the price that we're able to get in those different countries. So that drives roughly so we've had boots on the ground now for well over a year.

We've got education programs going with the Europeans.

Many Europeans have got great familiarity with EXPAREL and so we've got all of the.

What looks like a small pit over there where people can go in and be trained with hands on experience et cetera, as soon as we know exactly.

What the launch dates are going to be and how we're going to launch again. This is impacted by COVID-19 more on Europe than it is in the United States and so we're watching carefully how we can put these different resources to work.

We'll have roughly a dozen medical science liaisons and folks who will work with the European Kols to make sure that we have best practice transfer by procedure. So everything is benefits from the mistakes. We made frankly early on in the launch here in the United States and it will be largely in anesthesia launch.

Again benefiting from all of the U S experiences and we've signed a contract with a contract sales organization for roughly 30 people, who will provide a lot of the boots on the ground at least for the first 12 months and so we will launch both products were.

The Europeans are very excited about iron ore. So we think thats very good and there's a lot of interest from the anesthesia community.

What's happened over there is.

The fact that they don't send as many patients home quickly and they don't have the same access in many territories to ambulatory surgery settings.

On the length of stay for a for a knee and some of these countries is still for five days and we're told it in some of the key markets. The waiting list is 18 months to get a need done. So there is some very compelling reasons for people to start to get into some of the other ways that we can get this done.

On.

Talk so much I forgot what your second question loans.

On.

Oh, yes.

Stripes, yet so we're nearing completion of the enrollment of that trial.

As standard practice now youll start to clean the Crs up and Youre cleaning the data as you're going along so we think that within a couple of months, we'll have a cooker.

Clinical study report.

We'll have to see exactly how the data rolls out and when we have database locks et cetera, but you can expect that youll hear something about top line data from us before the end of April that would be the current projection.

For both peds and the stride study there are European obligations. So once we get done with these studies, we will also update the dossiers for both pediatrics and the stride study and there is really an offensive and defensive component associated with strike. So it's a study.

That investigates the use of EXPAREL and the abductor canal as well as in the foot and ankle innovation. So we think that about 30% of the total knee is done in America today are getting a a.

And Dr Canal block with EXPAREL, So we want to make sure that we cover those folks in the package insert and if theres any issues in any of the hospitals or anything about whether it's on or off label, we get rid of all of that and then it opens up for everybody would be doing this on an abductor canal block. It is clearly the best practice.

And then.

Foot and ankle adds another significant market opportunity all in lower extremity nerve block is about 3 million procedures a year.

We are also being used in a little over 20% of a $1 billion of those for Teekay as until you'd have to take that out but you are still well over $2 $5 2 million additional patients that will be available to us with a lower extremity nerve block.

Thanks very helpful.

Thanks.

Your next question is from <unk> Prasad with Barclays.

Hi, good morning on thanks for taking my questions.

Firstly on a couple of questions around the IP and IP.

Probably splitting into two one on the legal on the <unk>.

That insight on one on the commercial side.

So you mentioned that youll be lifting couple of additional patents.

In the Orange book this year, so could you describe those smaller and.

On the patent protection that will extend further on.

Secondly on the China on low.

Launch into China, our entry into China on your comments on how you'll plan to think about the tradeoff between potential generic access and protecting IP. How do you plan to balance there is and at what point could you.

On the market opportunity is so attractive that it is still growing despite generate gross can China. Thanks.

Yes. Thank you.

We would be we will be patenting and we're not in a position, where we're going to instruct any potential competition or the Chinese frankly about exactly what the patents say.

Just to be very clear, though I don't expect that youll see those in the Orange book in 2021.

These will take a.

More time than that for the <unk> to be able to per.

Provide their opinions, but theres, a very high likelihood that we will have additional orange book listed patents going forward.

Not uncomfortable with that because we don't believe there's anybody on the on the globe. That's in a position to be able to manufacture a multi particular zone for many many years. So those two things are not mutually exclusive if you will.

China is a tricky call.

I can answer the second part of your question more easily can answer the first part to be honest with you.

No.

And I'll, just give you a little bit of history here. So there is great interest in China.

So we start to.

Work through the regulatory process and we get a notification that we have to manufacturer in China, and we say, we're not going to do that and that's the end of it in several months go by and we get a call. It says well we really have to have this product and we're going to go forward anyway, and we put a dossier together and it goes in for <unk>.

And at the end of that it says and you have to make it in China and so we stop again in several months goes by and then.

Youre talking about the CMC section here and you're starting to get questions like what's the model number on the on the mixture.

Rpms for either the propellers and the first batch versus the second batch and it's like there's not a chance and heck that we're going to give that to anybody and so essentially you protect your IP by putting it on CMC section that doesn't actually say anything.

And that's.

And struck the Chinese government on how to make a generic EXPAREL and so thats, where we are <unk>. So it's a it's a.

It's a slow motion poker game.

Thanks, David.

Yes.

Your next question is from Greg Fraser with <unk> Securities.

Good morning folks and thanks for taking the questions I had two questions first.

Are there any notable changes to reimbursement coverage policies for 2021. In addition to the CNS change for hip replacement and will be catalysts for demand this year.

Yes, Thanks, Greg FERC.

FERC for reimbursement.

On spine hip was the obvious one.

They also have moved I think there are seven <unk>.

Spine procedures that were moved from the inpatient only list to the ASC list and so we are just putting a dedicated spine team out into the field now.

Recognizing spine is a market of its own and taking advantage of the desire of these places to move this to an ambulatory surgery center. So.

The big things in.

I mean, the first port of call every year is.

EXPAREL is still the only unbundled drug and the ambulatory surgery Center.

We achieved that we expect that they will raise the price currently it's $1 29, a milligram. We think that will go up so that's a win for us on an annual basis right and then.

The only thing was hip and spine.

Debt were directly related to US now we're here for the marketplace that there is some womens health things and some other surgeries that the docs on the women's health area there.

They are generally associated with these with these birthing centers discussions are there other women's health surgeries that we could move on on elective surgery basis into an outpatient environment.

So we're still working with those folks on that on the other side six for six two for for iron ore.

<unk> actually was a significant increase in the reimbursement rate and so.

AFC use of of iron ore, which would have been very difficult before this increase in the reimbursement now as possible.

Still better than the <unk>, but there is a livable reimbursement rate for iron ore in the AFC now as well and so we consider that to be a good one as well so continue to work on it we've got a whole another data set now Tony Malloy on IR scheduling a meeting with the new CMS team as soon as they are in place.

We were going to keep going down there.

China influence these folks in terms of.

They are the leaders frankly.

That the big revenue opportunity, it's creating the pathway for reimbursement that its all important month to get CMS involved and so on.

We're still work on every every time, we get a chance on it Greg.

For low extremity nerve block.

Those are largely guys that we do business with already.

So that certainly would be a positive when it terms in terms of the adoption of the art if you will.

As I mentioned I think.

You in a very short period of time I would expect that the vast majority of knees would have a.

Hi.

Net Dr Canal block with EXPAREL once it's on label and we hear often about.

The prolonged pain and.

Foot and ankle procedures and the need for a long acting X per hour.

Probably not surprising, but now we're seeing real data that further distal youll get from the.

From the from the cardiovascular share from the heart the longer the half life and so it appears that we're going to be able to have quite an extended duration of action.

On the lower extremities and.

We think thats going to be a good thing and so.

1 million foot and ankles, another $1 billion knees and then all the peripheral other stuff that goes on.

We think it'll be an important addition, and will really sort of finished the nerve block if we have upper quadrant and lower quadrant theres really not much else we can do.

Yeah.

Got it thank you.

Thanks, Greg we have time for one last question from Serge Belanger with Needham <unk> company.

Hi, Good morning, Thanks for squeezing me in.

My first question is about the.

Traditional infiltration segments of the.

Of the market.

No.

How big is that segment currently.

How much of the external business is represented by.

For that segment, where do you think it's.

It's growing and then.

Second question can you just comment on the <unk> bio therapeutics investment.

On the technology itself and how the investment plays into your business development strategy.

Great. So I'm going to take the first half and Ron Ellis is with a surge in I'm going to ask him to comment on machine client question. So for.

First in.

In terms of infiltration.

Don't have a perfect data source right. So we get data by procedure by site of care.

Of our business.

And it's there's some places where it is the business right. So.

There are certain.

Areas, where you wouldn't do a nerve block for example, there is some literature that you don't want to do a nerve block on the shoulder of a professional athlete for example.

With TK for example, we would do on abductor canal nerve block that would take care of the anterior knee largely but you would still infiltrate the posterior capsule and you would still infiltrate the periosteum as part of a very articulate injection.

So there's pieces of it that are never going to go away.

And then there's pieces of it that are part of a bigger procedure. So it's really hard for us to parse this out in a way what I could be as specific as I'd like to be with you. Let's say 25, 5% I just don't know what I can tell you is that it's a very small percentage of our growth.

And so as we look forward virtually everything that's allowing us to have the confidence that we're doing a field block or a nerve block that's going to last for three or four days and a patient that we're going to discharge after a significantly painful surgery in three or four hours on.

Our are being done with some type of imaging by an anesthesiologist and so.

The anesthesiologists gets paid the surgeon doesn't get paid the anesthesiologist does it before the patient goes on the or the surgeon has to take a few minutes at the end of the case to do it in the or the surgeon still owns the patient again.

And Rob is going to talk to you about T spot.

I appreciate the question on gene quiet in terms of the technology finds a day quite interesting the gene therapy for <unk> for Proteoglycan for which is also known as <unk>. There has been intense in the past to formulate the actual protein, but it's been challenging to do so there may be some more recent break.

<unk> in that space now I think Dave has mentioned previously about how R. R.

Partners in the field the physicians themselves has spoken to us about what we have extra for surgery and as David just mentioned.

For knee OA.

Before surgery book can you help us earlier in that patient journey and so this is our attempt to do so.

Partner with providers on also be a partner with the patient and help them on a non opioid way.

Net through this and what we really see the promise and the gene therapy is not just the efficacy, but also the duration of it that we can give something with similar efficacy to what's available today or better and then also have that duration last year is in the promise of delaying surgery eventually.

Yeah.

Thank you.

And thats very much in concert with what our docs are looking for Serge most of the most of the high end guys.

PRP and stem cells and lasers and all the other things that were using access sites. For example, we're moving into that environment, where.

I mean, the average age of for total knee arthroplasty in the United States last year was 59 right.

10 years ago, you would have gone to jail right and so it is changing very quickly and we see that as an opportunity for us.

With that I'm supposed to close so I'd like to thank you all for participating and listening to today's conference call. We look forward to keeping you updated on our progress next up for US is the Barclays Conference in March. Thank you all on stay well.

Hi.

Thank you again for joining US today. This does conclude today's presentation you may now disconnect.

Q4 2020 Pacira Biosciences Inc Earnings Call

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