Q3 2021 Heron Therapeutics Inc Earnings Call

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Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Heron Therapeutics Q3 2021 Earnings Conference. As a reminder, this conference is being recorded. Now, I would like to turn the call over to David Szekeres, Executive Vice President, Chief Operating Officer. Please proceed.

[music].

Good day, ladies and gentlemen, and thank you for standing by and welcome to the Huron Therapeutics Q3, 2021 earnings Conference. As a reminder, this conference is being recorded now I would like to turn the call over to David <unk> Executive Vice President and Chief Operating Officer. Please proceed.

Thank you Gigi good afternoon, everyone and thank you for joining us with.

David L. Szekeres: Thank you, Gigi. Good afternoon, everyone, and thank you for joining us. With me today from Heron are Barry Cort, Chief Executive Officer and Chairman; John Poynton, President and Chief Commercial Officer; and Kimberly Manhart, Executive Vice President of Drug Development and a Board Director. For those of you participating via conference call, the slides are made available via webcast.

With me today from Heron, or Barry Quart, Chief Executive Officer and Chairman.

Sean <unk>, President and Chief commercial Officer, and Kimberly Manhart Executive Vice President of drug development and a board director.

For those of you participating via conference call. The slides, they're made available via webcast and can also be accessed by going to the Investor Relations page of our website following conclusion of today's call.

David L. Szekeres: It can also be accessed...

David L. Szekeres: by going to the Investor Relations page of our website following the conclusion of today's call. Before we begin, I would like to remind you that this call will contain forward-looking statements concerning adherence to future expectations, plans, prospects, and goals.

Before we begin I would like to remind you that this call will contain forward looking statements concerning <unk> future expectations plans prospects corporate strategy and performance, which constitute forward looking statements for the purposes of the safe Harbor provision under this.

David L. Szekeres: Corporate Strategy and Performance, which constitute four forward-looking statements for the purposes of the.

David L. Szekeres: All purposes of the Safe Harbor Provision are under the Private Securities Litigation and Reform Act of 1995. However, actual results may differ materially from those indicated by these four forward-looking statements as a result of various important factors.

<unk> Securities Litigation Reform Act of 1095.

Actual results may differ materially from those indicated by these forward looking statements as a result of various important factors.

David L. Szekeres: including those discussed in our filings with the SEC. In addition, any forward-looking statements represent our views only as of the

Losing those discussed in our filings with the SEC.

In addition, any forward looking statements represent our views only as of the date of this webcast and should not be relied upon as representing our views as of any subsequent date, we specifically disclaim any obligations to update such statements now ill turn the call over to Barry.

David L. Szekeres: We specifically disclaim any obligation to update such data. Now, I'll turn the call over to Barry.

Barry Cort: Thank you, David. Welcome, everyone. And thank you for joining us. The last several months have been one of the most important and productive periods in our company's history. We successfully launched XenRelief for post-operative pain in the United States, which represents our first product in our acute care franchise and our third commercial product overall. And we are focused on creating long-term growth in this franchise with Zimril. We've had great success with P&T committee approvals, which is very encouraging for our first quarter of launch.

Thank you David and welcome everyone and thank you for joining us the last several months have been one of the most important and productive periods in our company's history with.

We successfully launched Xen relief for post operative pain in the United States, which represents our first product in our acute care franchise and our third commercial product overall.

And we're focused on creating long term growth in this franchise with Zen relief.

We've had great success with PMT Committee approvals.

Is very encouraging for our first quarter of launch.

Barry Cort: Right now, we're focused on expanding the label and our commercial opportunity with Zimmerleaf, which I'll talk more about in a minute. We're also focused on stabilizing our sales in our oncology care franchise through this year and seeing modest growth next year. We've had successful interactions with the FDA to support the label expansion of XenRelief and to increase product supply. The FDA agreed to two SNDAs for XenRelief label expansion. The first supplemental NDA was submitted to the FDA at the end of September, and it is expected to broaden the label to include foot and ankle, small to medium open abdominal, and lower extremity total joint arthroplasty surgical procedures.

Right now we're focused on expanding the label and our commercial opportunity with Zen relief.

Which I'll talk more about in a minute.

We're also focused on stabilizing our sales and our oncology care franchise through this year and seeing minus growth next year.

We've had successful interactions with the FDA to support the label expansion of generally and to increase product supply.

The FDA agreed to <unk> for a label expansion for generally the first supplemental NDA was submitted to the FDA at the end of September.

And is expected to broaden the label to include foot and ankle small to medium open abdominal and lower extremity total joint arthroplasty surgical procedures.

Barry Cort: The FDA also agreed to the contents of the second supplemental NDA to broaden it to broadly cover orthopedic and soft tissue surgical procedures. FDA-agreed studies for this second SNDA are already ongoing. The endpoints in these studies are pharmacokinetics and safety. Demonstration of efficacy is not required for approval.

The FDA also agreed to content of the second supplemental NDA to broaden to broadly cover orthopedic and soft tissue surgical procedures.

The FDA agreed studies for the second NDA are already ongoing.

The endpoints in these studies as pharmacokinetics and safety demonstration of efficacy is not required for approval.

We expect to submit this second S. NDA in the second half of 2022.

Barry Cort: We expect to submit this second SNDA in the second half of 2022. If approved, this broad indication would cover over 14 million target procedures. In addition, the FDA also approved our manufacturing supplement to add a secondary supplier of our proprietary polymer. This approval is a critical step in giving us the ability to manufacture millions of doses annually and significantly lower the cost of goods. This approval was received in under four months and, together with future label expansions, will allow us to supply a highly effective non-opioid post-operative pain drug to millions of patients annually. Overall, the quarter was outstanding for Heron.

If approved this broad indication would cover over $14 million target procedures.

In addition, the FDA also approved our manufacturing supplement to add a secondary supplier of our proprietary polymer.

This approval is a critical step in giving us the ability to manufacture millions of doses annually and to significantly lowered the cost of goods.

This approval was received in under four months and together with future label expansions will allow us to supply a highly effective non opioid post operative pain drug to millions of patients annually.

Overall, the quarter was outstanding for Erin.

Barry Cort: As a company, we remain in a strong position, and we're looking forward to achieving additional key commercial and corporate milestones in the coming year. With that, I'll turn the call over to Jon to review our commercial portfolio.

As a company we remain in a strong position and we're looking forward to achieving additional key commercial and corporate milestones in the coming year.

With that I'll turn the call over to John to review our commercial portfolio.

John.

John Poynton: Thank you, Barry. I'm truly excited to share our third quarter commercial results. We're off to a fast start with Generally, despite significant headwinds in the market. During my presentation, I'll start with a number of key metrics on the initial progress that we're making with the Xen Relief launch and finish with an update on our ecological care commercial results. Thin Relief is off to a strong start in its first quarter of launch with net product sales of $2.1 million.

Thank you Barry I'm truly excited to share our third quarter Commercial's results were.

We're off to a fast start with them really despite significant headwinds in the marketplace.

During my presentation I'll start with a number of key metrics on the initial progress that we're making with the Zen relief launch and finish with an update on our oncology care commercial results.

It's been relief is off to a strong start in our first quarter of launch with net product sales of $2 1 million. We've already established broad nationwide access of stocking in the distribution channel to ensure rapid delivery ordering accounts.

John Poynton: We've already established broad nationwide access to stocking and the distribution channel to ensure rapid delivery for ordering accounts. We're utilizing four full-line wholesalers: ABC, Cardinal, McKesson, and Morse Dixon. Thus far, 68 stocking distribution centers have sold Zinrelief, and 50% of these DCs have reordered. In addition, we're utilizing 10 specialty distributors to supply Ambulatory Surgical Centers, or ASCs. Thus far, 10 stocking distribution centers have sold the product generally, and 60% of these DCs have reordered the product.

We're utilizing four full line wholesalers ABC, Cardinal Mckesson and more sticks then.

Thus far 68 stocking distribution centers have sold literally and 50% of these dcs have reorder.

In addition, we're utilizing 10 specialty distributors to supply ambulatory surgical centers or AFC.

Thus far 10 stocking distribution centers and sold generally and 60% of these tcs have reorder the product.

Yeah.

Slide number seven as an updated version of the slide we shared during our generally FTA approval conference call in May regarding successful hospital launches.

John Poynton: Slide number seven is an updated version of the slide we shared during our Zen Relief FDA approval conference call in May regarding the successful hospital launch. As you'll see, we've added the first five quarters for MGSV, and Full Transparency, although their first quarter only included one month of sale.

As you'll see we've added the first five quarters brand G zone.

And full transparency there first quarter only included one month of sales and.

John Poynton: In addition, we've added the first quarter of ZIN relief net product sales. We feel like we're off to an excellent start and continue to believe that Zim relief total net product sales will exceed those of XBRL over the initial six-quarter period. Slide number 8 highlights the rapid progress that Xen Relief is making with formulary access. As of the end of October, we have 126 formulary improvements.

In addition, we have added the first quarter of <unk> net product sales.

We feel like we're off to an excellent start and continue to believe that didn't really total net product sales will exceed those of EXPAREL over the initial six quarter period.

Slide number eight highlights for rapid progress has been released is making with formulary access as of the end of October we have 126 formulary approvals.

John Poynton: The continued impact of COVID-19 should not be underestimated. We're confident that Zin relief would already have been added to additional formularies without the impact of COVID-19 postponing P&T committee decisions. However, in those accounts actually making P&T decisions, over 91% of hospital P&T committees are adding Xen Relief to the formula. Importantly, 55% of our formulary approvals are for unrestricted usage of

Continued impact of COVID-19 should not be underestimated, we're confident that literally what already have been added to additional formularies without the impact of COVID-19, Postponing PMT Committee decisions. However, those accounts actually making PMT decisions over 91% of.

PMT committees are adding Zimmer week to formulary.

Importantly, 55% of our formulary approvals are for unrestricted usage of generally.

We believe the broader label indications expected with our recently filed supplemental NDA will certainly drive greater usage in these hospitals.

John Poynton: We believe the broader label indications expected with our recently filed supplemental NDA will certainly drive greater usage in these hospitals and also have a significant impact on those hospitals that approve Xen Relief with restrictions on the indicated procedure. The remainder of 2021 will be a critical time for formulary access, with over 150 additional P&T committees scheduled to review ZinRelief before the end of the year. We will continue to closely monitor the potential impact of COVID on the timing of P&T committee schedules. Fortunately, when we have experienced delays with P&T committee schedules, the delays have typically been for 30 to 60 days.

And also have a significant impact on those hospitals that are approved and relief.

With restrictions to the indicated procedures.

Yeah.

The remainder of 2021 will be a critical time for formulary access with over 150 additional PMT Committee scheduled to reviews and released before the end of the year.

We will continue to closely monitor the potential impact of Covid on the timing of PMT Committee schedules.

Fortunately when we have experienced delays with PNC committee schedules, but the way you said typically been for 30 to 60 days.

In the hospital market or PMT Committee approval and formulary win is an important step in the process, but it's just the beginning.

John Poynton: In the hospital market, a P&T committee approval and formulary win is an important step in the process, but it's just the beginning. It's important to keep in mind that many hospitals also require a medical executive sign-off, establishment of CPOE, or computerized physician order entry, and then pharmacy stocking prior to usage in patients. Slide number 9 benchmarks the number of unique accounts ordering during the first three months of launch based on Symfony Health data.

It's important to keep in mind that many hospitals also require a medical executive Sino establishment.

CPO or computerized physician order entry.

And then pharmacy stocking prior to usage in patients.

Okay.

Slide number nine benchmarks the number of unique accounts ordering during the first three months of launch based on Symphony Health data.

John Poynton: We're gaining significant traction with ZenRelink in the first three months of launch with 160 unique ordering accounts. We believe this compares very favorably to the XperEL launch in April of 2012, when Passera launched XperEL with a broad label indication and no COVID to impact their results. During the past 18 months, three non-opioid analgesics, Xenrelief, Xericol, and Ingizo, have launched during the COVID-19 era. Zimmerleaf's number of unique ordering accounts is over four times greater than the next closest competitor.

We are gaining significant traction what's in relief in the first three months of launch with 160 unique ordering accounts.

We believe this compares very favorably to the EXPAREL launch in April of 2012, when <unk> launched EXPAREL with a broad label indication.

No COVID-19 impact our results.

Yeah.

During the past 18 months three non opioid analgesic literally zero call and it <unk> have launched during the COVID-19 era.

<unk> number of unique ordering accounts is over four times greater than the next closest competitor.

In addition.

John Poynton: In addition... General Relief had 50% of accounts reordering during the first three months, the greatest reorder percentage of the four products benchmarked in this analysis. While the initials and relief results are strong, we're far from satisfied and will continue to grow unique ordering accounts and gain more momentum and formulary approved accounts in the fourth quarter. We're already seeing growth on both fronts in October and expect further growth in unique ordering accounts with additional formulary approvals through the remainder of the quarter.

Generally 50% of accounts reordering during the first three months the greatest reorder percentage of the pork products benchmark in this analysis.

While the initials and relief results were strong we're far from satisfied and we will continue to grow unique ordering accounts and gained more momentum and formula reapproved accounts in the fourth quarter.

We're already seeing growth on both fronts in October and expect further growth in unique ordering accounts with additional formulary approvals through the remainder of the quarter.

Okay.

John Poynton: We've also seen tremendous early results on our reimbursement coverage front in both commercial and Medicaid payers. We've already obtained separate reimbursement outside of the surgical bundle for ZIN relief and more than 88 million covered lives in ASCs, and in some cases, we also have separate reimbursement in the hospital outpatient setting. We think this is unprecedented coverage for a new post-operative pain drug. A key component of our pricing strategy is procedures without separate reimbursement, in relief, lower acquisition costs, benefits customers across all settings of care, or the drug may be reimbursed under the surgical bundle payment.

We have also seen tremendous early results on our reimbursement coverage front in both commercial and Medicaid payers.

We've already obtained separate reimbursement outside of the surgical bundle, presumably and more than 88 million covered lives in ASC and in some cases also have separate reimbursement in the hospital outpatient setting.

We think this is an unprecedented coverage for a new postoperative pain drug.

A key component of our pricing strategy is in procedures without separate reimbursement.

<unk> lower acquisition cost benefits customers across all settings of care or the drug may be reimbursed under the surgical bundle payments.

CMS is still reviewing our pass through application and we fully expect pass through in the new year.

John Poynton: CMS is still reviewing our pass-through application, and we fully expect pass-throughs in the new year. Until December 31st, 2021, CMS is reimbursing XenRelief at 95% of the average wholesale price, which is a very favorable rate for Medicare patients in the outpatient setting. Yesterday, we received some great news: CMS published the calendar year 2022.

Until December 31, 2021, CMS is reimbursing generally at 95% of average wholesale price, which is a very favorable rate for Medicare patients in the outpatient setting.

Yesterday, we received some great news CMS published the calendar year 2022.

John Poynton: Outpatient Prospective Payment System. Final Rule and issued then-relief a specific C code, C9088, for separate reimbursement in the ASC setting of care effective January 1, 2022. This will have a meaningful impact since Zen Relief will have ongoing reimbursement in ASCs even beyond the typical three-year pass-through period. We have four key priorities for the remainder of the year with Xen Relief, all of them focused on building off the strong base we built in Q3.

Outpatient perspective payment system.

Final rule and issued generally and specific sic code 69088 for separate reimbursement in the ASC setting of care effective January one 2022.

This will have a meaningful impact since then relief will have ongoing reimbursement and even.

Even beyond the typical three year pass through period.

We have four key priorities for the remainder of the year with Zen relief all of them focus on building off the strong base. We built in Q3 first we'll continue to expand usage and new formulary approved accounts with pull through activities, including in services to create a positive first.

John Poynton: First, we'll continue to expand usage and new formulary-approved accounts with pull-through activities, including in-service, to create a positive first experience and convert surgeons into loyal users. The initial results we've seen and heard from physicians are even better than those we saw in our clinical trials, which is extremely exciting, both for patients and surgeons. In fact, we have several orthopedic surgeons who have been so impressed with Xenrolase's results that they've already used it in over 100 TKA, TKA cases. Thanks a lot.

And convert surgeons into loyal users.

The initial results, we've seen and heard from physicians are even better than those we saw in our clinical trials, which is extremely exciting both for patients and surgeons.

In fact, we have several orthopedic surgeons, who have been so impressed with generally results.

Already used it and over 100 Teekay.

Teekay eight cases since launch.

John Poynton: Second, we'll continue to focus on gaining formulary access at both the Integrated Delivery Network, or IDN, and hospital level to build more unique accounts that are routinely reordered. Our 91% hospital formulary approval rating demonstrates the unmet need in the marketplace and gives us great confidence for the future. Third, we'll continue to expand commercial and employer reimbursement coverage, creating a financial benefit for our customers and greater access to non-opioid solutions for patients.

Second we will continue to focus on gaining formulary access at.

At both the integrated delivery network or I began and hospital level to build more unique accounts that are routinely reordering.

Our 91% hospital formulary approval rating demonstrates the unmet need in the marketplace and gives us great confidence for the future.

Third we will continue to expand commercial and employer reimbursement coverage, creating a financial benefit for our customers and greater access to non opioid solutions for patients.

The critical factor in commercial payers covering <unk> outside the surgical bundle has been the demonstration of superiority to the standard of care bupivacaine in our clinical trials.

John Poynton: The critical factor in commercial payers' coverings and relief outside the surgical bundle has been the demonstration of superiority to the standard of care of bupivacaine in our clinical trial. Xen Relief is the first and only local anesthetic designated extended release by the FDA with up to 72 hours of pain reduction.

Zen relief is first and only local anesthetic.

Designated extended released by the FDA with up to 20 with up to 72 hours of pain reduction.

Yesterday's news with CMS issuing generally for specific C code.

For separate reimbursement in ASC is another positive step in this process.

Finally, we remain confident the strong base of literally doesn't this will put us in an excellent position to expand usage once the FDA approves our new label indications that were previously described by Barry.

John Poynton: Yesterday's news with CMF's issuing and relief of specific C codes for separate reimbursement and ASCs is another positive step in this process. Finally, we remain confident this strong base of Xen Relief business will put us in an excellent position to expand usage once the FDA approves our new label indications that were previously described by Barry. Now I'd like to shift gears and review the third quarter results for our Oncology Care franchise.

Now I'd like to shift gears and review the third quarter results for our oncology care franchise.

The third quarter was another solid performance for the <unk> franchise products with net sales of $21 $1 million, which.

[noise] presented a 6% increase over the prior year.

We did have some headwinds in the third quarter with the impact that COVID-19 decreasing cancer screening and new patient starts.

John Poynton: The third quarter was another solid performance for the CINB franchise products, with net sales of $21.1 million, which represented a 6% increase over the prior year. We did have some headwinds in the third quarter with the impact of COVID, decreasing cancer screening, and new patient starts.

Secondly, CMS is oncology care model and other value based contracts support community oncology practices.

Towards cheaper generic and Biosimilar products.

Lastly, competitive products, we're maintaining high value or net cost recovery to oncology practices with aggressive pricing.

John Poynton: Secondly, CMS's Oncology Care Model and other value-based contracts support community oncology practices moving towards cheaper generic and biosimilar products. Lastly, competitive products are maintaining high value or net cost recovery to oncology practices with aggressive pricing. Nevertheless, we believe that both Symbonti and Sustol sales are poised for growth in the clinic segment beginning in 2022. This belief is based on two key facts.

Nevertheless, we believe that both <unk> and Bonnie and softball sales are poised for growth in the clinic segment beginning in 2022.

<unk> is based on two key factors.

Generic Boston proper ASP reimbursement has decreased 27% from the prior quarter down to $36 45 and.

In Q4, 'twenty, one, which makes <unk> value for oncology practices much more attractive in 2022.

Second as a result of Covid, there's a backlog of oncology patients and we believe that both products can be used in pack and the majority of Mac regimens as new patients reentered the system for treatment. These new patient starts will create growth opportunities for both of our products.

John Poynton: First, Generic Fossil Profit and ASP reimbursement decreased 27% from the prior quarter down to $36.45 in Q4'21, which makes Symvanti's value for oncology practices much more attractive in 2020. Second, as a result of COVID, there's a backlog of oncology patients. And we believe that since both products can be used in HEC and the majority of MEK regimens, as new patients re-enter the system for treatment, these new patient starts will create growth opportunities for both of our products. During the fourth quarter of 2021, we expect CIMB net product sales to be in the range of $20 to $22 million.

During the fourth quarter of 2021, we expect <unk> net product sales to be in the range of 20% to $22 million.

During 2021, our team has done an excellent job of stabilizing our <unk> portfolio net net.

Net sales in markets dominated by generic competition as you can see in the graph, we generally stabilized <unk> net sales and started the process of growing self stall. Following the refresh program we implemented in 2019.

As mentioned on the previous slide we believe that <unk> products are poised for moderate growth in 2022.

On slide number 15, we take a closer look at <unk> during the fourth quarter of 2019, we removed all discounting from soft stall in order to reset the ASP reimbursement for the product.

John Poynton: During 2021, our team did an excellent job of stabilizing our CIMB portfolio net net sales and markets dominated by generic competition. As you can see in the graph, we've generally stabilized some BontiNet sales and started the process of growing Sustol following the refresh program we implemented in 2019. As mentioned on the previous slide, we believe that CIMB products are poised for moderate growth in 2022. On slide 15, we take a closer look at Sustol.

This process takes five quarters to implement and following the reset refresh program. We returned soft stall to growth in 2021, and we expect continued growth in 2022.

Following that brief review of the oncology franchise I'll now turn the call back over to Barry.

Thank you John.

Thanks for the fantastic first quarter launch and.

Now I'd like to turn the discussion over to post operative nausea, and vomiting are known as <unk>.

It's a large and important new market for Erin beautifully aligned with our current commercial efforts in the postoperative pain space.

John Poynton: During the fourth quarter of 2019, we removed all discounting from Sustol in order to reset the ASP reimbursement for the product. This process takes five quarters to implement, and following the reset refresh program, we returned Sustol to growth in 2021, and we expect continued growth in 2022. Following that brief review of the oncology franchise, I'll now turn the call back over to Barry. Thank you, John, and thanks for the fantastic first quarter alone.

The <unk> opportunity is about 20 times the size of <unk> and <unk> nine has substantial advantages over available products.

We had a successful pre NDA meeting with the FDA to align on our planned submission.

We plan to submit this quarter.

Based on a standard 10 month review period, we could be launching <unk> and <unk>.

Fourth quarter of next year with the opportunity for several hundred millions in sales.

To highlight why we are so excited about this product.

Here's a direct comparison of two dose levels of the precedent to the current market leader Ondansetron looking at the percent of patients with no vomiting after surgery and patients prophylaxis with these agents.

Barry Cort: I'd now like to turn the discussion over to post-operative nausea and vomiting, or known as PONV. It's a large and important new market for Heron, beautifully aligned with our current commercial efforts in the post-operative pain space. The PONV opportunity is about 20 times the size of CINV, and HDX-019 has substantial advantages over available products. We had a successful pre-NDA meeting with the FDA to align our plan submission, which we plan to submit this quarter.

I think everyone on this call we'd like to be in the top two at represent arms versus Ondansetron.

While there are approximately 65 million surgical and diagnostic procedures, each year, where patients are at risk for <unk>.

We would be focused on the high to moderate risk patients shown in the top Pie chart.

Based on our risk factors there is approximately 35 million patients a year currently receiving prophylaxis for NV.

Usually with Ondansetron.

Barry Cort: Based on a standard 10-month review period, we could be launching HDX 019 in the fourth quarter of next year, with the opportunity for several hundred million in sales. To highlight why we are so excited about this product, here's a direct comparison of two dose levels of a prepadent to the current market leader on Vancitron, looking at the percent of patients with no vomiting after surgery and patients prophylaxed with these agents. I think everyone on this call would like to be in the top two at Prepetent Arms versus Ondansky.

Within the group of patients with high to monitor at risk for <unk> should receive a second agent such as <unk> one nine.

Of even greater importance are the approximately 5 million patients who are having surgical procedures, where vomiting, a regimen could adversely affect their recovery.

This is an important target group for <unk>.

Moving it to <unk> fits perfectly with heron's commercial strategy.

We have two primary.

Components of our strategy first is to establish <unk> as a leading company in acute care.

As I described earlier generally.

As currently is clearly off to a fast start and despite the headwinds had an excellent first quarter of launch.

Barry Cort: Well, there are approximately 65 million surgical and diagnostic procedures each year where patients are at risk for PONV. We would be focused on the high to moderate risk patients shown in the top pie chart. Based on risk factors, there are approximately 35 million patients a year currently receiving prophylaxis for PONV, usually with ondanse. Within the group, patients with high to moderate risk for PONV should receive a second agent, such as HTX019. Of even greater importance are the approximately 5 million patients who are having surgical procedures where vomiting or retching could adversely affect their recovery.

Our agreement with the FDA to expand the label indications once approved will accelerate <unk> growth in the future.

With the submission of the NDA for <unk>, one nine for this.

This quarter, we will be in the enviable position of potentially adding a second commercial product to the acute care franchise in the fourth quarter of next year.

This product will allow us to optimize or acute care resources with the same commercial team and customers.

The second component of our commercial strategy is to return to growth in.

Maximize the profitability of the oncology care business.

To recap, we have stabilized sales and a competitive generic market and are poised for moderate growth in 2022.

Barry Cort: This is an important target group for HDX 019. Moving it to PONV fits perfectly with Heron's commercial strategy. We have two primary components of our strategy. First, we want to establish Heron as a leading company in acute care. As I described earlier, the company is clearly off to a fast start and, despite the headwinds, had an excellent first quarter.

In addition.

<unk> taken important steps to maximize profitability of our oncology care products.

The first step is to invest in large scale manufacturing for <unk>, which will significantly reduce cogs in 2022.

We also have better aligned our resources to support maximizing profitability with a significant cost savings.

Throughout the call today, you've heard the commercial numbers from both our product franchises.

To wrap up on our financials.

To recap these numbers and provide a little more detail on our overall financial picture.

Our net product sales for the third quarter of 2021 for both our commercial franchises was $23 2 million compared to $20 million for the same period in 2020, which represents a 16% increase in year over year growth.

Barry Cort: Our agreement with the FDA to expand the label indications will accelerate Xen Relief's growth in the future. With the submission of the NDA for HDX 019 for PONV this quarter, we will be in the enviable position of potentially adding a second commercial product to the acute care franchise in the fourth quarter of next year. This product will allow us to optimize our acute care resources with the same commercial team and customers.

<unk> recorded $2 1 million in net product sales for the first quarter of 2021.

For <unk> net product sales were $18 million in the third quarter compared to 19 million $19 8 million in the same period in 2020.

<unk> net product sales were $3 1 million for the third quarter of 2021 compared to <unk> 2 million in the same period in 2020, we assessed all demand units increasing by 22% over the prior quarter.

Barry Cort: The second component of our commercial strategy is to return to growth and maximize the profitability of the oncology care business. To recap, we have stabilized sales in a competitive generic market and are poised for moderate growth in 2022. In addition, we've taken important steps to maximize profitability of our oncology care products. The first step is to invest in large-scale manufacturing for Synvanti, which will significantly reduce COGS in 2022. We also have better aligned our resources to support maximizing profitability with a significant cost savings.

In the fourth quarter of 2021, we expect net product sales for the oncology care franchise in the range of $20 million to $22 million in.

And in 2022, we expect to see moderate growth in net product sales.

In terms of our operations net cash used for operating activities. During the nine months ended September 32021 was $158 1 million compared to $132 3 million for the same period in 2020.

The increase in our net cash used for operating activities was primarily due to changes in working capital related to the launch of the Zen relief in July 2021, including manufacturing of commercial inventory.

We expect expect net cash used for operating activities of $45 million to $48 million in the fourth quarter and we anticipate that our net cash usage will continue to moderate lower in 2022 as net product sales inquiries and we realized cost savings from reduced.

Barry Cort: Throughout the call today, you've heard the commercial numbers from both our product franchises. But to wrap up, on our financials. I'll quickly recap these numbers and provide a little more detail on our overall financial picture. Our net product sales for the third quarter of 2021 for both our commercial franchises were $23.2 million, compared to $20 million for the same period in 2020, which represents a 16% increase in year-over-year growth. For Zen Relief, we recorded 2.1 million in net product sales for the first quarter of 2021.

<unk> expenses in the oncology care franchise and from anticipated large scale manufacturing.

Finally as of September 32021, we had cash cash equivalents and short term investments of $202 $8 million.

Overall im very pleased with our progress over the last several months and we look forward to carrying our momentum through the end of 2021 as we look forward to expanded commercial opportunity present relief.

Through 2022, and continue to execute driving our oncology care franchise forward.

Barry Cort: For Cimvanti, net product sales were $18 million in the third quarter, compared to $19.8 million in the same period in 2020. For Sustol, net product sales were $3.1 million in the third quarter of 2021, compared to $0.2 million in the same period in 2020, with Sustol demand units increasing by 22% over the prior quarter. In the fourth quarter of 2021, we expect net product sales for the oncology care franchise to be in the range of $20 to $22 million.

With that we're ready to take questions Gigi.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.

These standby, while we compile the Q&A roster.

Our first question comes from the line of Josh Schwimmer from Evercore ISI. Your line is now open.

Great. Thanks, so much for taking the question and thanks for providing such a detailed overview on the early launch metrics in just a few questions for me.

Barry Cort: And in 2022, we expect to see moderate growth in net product sales. In terms of our operations, net cash used for operating activities during the nine months ended September 30, 2021, was $158.1 million, compared to $132.3 million for the same period in 2020. The increase in our net cash use for operating activities was primarily due to changes in working capital related to the launch of XenRelief in July 2021, including manufacturing of commercial inventory.

First can you can you help me understand the rationale for generating more PK and safety data to expand the label for the broader ortho and soft tissue indications what data are you going to generate from those studies that you don't already have.

And then for the for the ongoing launch.

Where do you expect youre going to be for covered lives at the end of the year for.

Both hospitals and ASC is after you get through these additional PMT committees and for Wednesday.

<unk> been generating.

In settings that are typically EXPAREL friendly or not friendly or just or is it a mix of them. Thanks.

Barry Cort: We expect net cash use for operating activities of $45 to $48 million in the fourth quarter, and we anticipate that our net cash usage will continue to moderate lower in 2022 as net product sales increase and we realize cost savings from reduced expenses in the oncology care franchise and from anticipated large-scale manufacturing. Finally, as of September 30, 2021, we had cash, cash equivalents, and short-term investments of $202.8 million. Overall, I'm very pleased with our progress over the last several months, and we look forward to carrying our momentum through the end of 2021 as we look forward to expanded commercial opportunities for Zen Relief through 2022 and continue to execute, driving our oncology care franchise forward. With that, we're ready to take questions. GG

Thanks, Josh.

I appreciate the questions on the first one.

So just for clarity so the first NDA that we've already submitted.

The contained actually no new information.

And it was so it was based on the data we'd already generated.

The agreement with the FDA was that that data would get us.

As I described a broadened indications covering.

Foot and ankle surgical procedures.

Small to medium open.

Abdominal surgical procedures.

And lower extremity or total arthroplasty so.

A clear broadening of the indication statement to go beyond that the agency was looking to confirm that when the product is placed in other regions of the body that there wouldn't be any surprises and.

In terms of the pharmacokinetics and safety.

Agency and this is not just for US this is across all of the recently developed locally applied bupivacaine.

<unk>.

They are very.

Interested in making sure that we keep the risk of last local anesthetic systemic toxicity to a minimum and they just want to make sure that theres no surprises in.

The pharmacokinetics of the product because they have indicated they have seen unusually high levels with the prior approved.

And they want to confirm that that's not the case with ours.

So the agreement is that since we have the data that I just mentioned in certain regions.

Operator: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Josh Schwimmer from Evercore ISI. Your line is now open.

To supplement that information and collect data in other regions.

That we don't have current data and so that would be for.

For example shoulder.

If youre looking at getting a broad orthopedic indication all both upper and lower extremity.

We will have lower extremity from the current lease submitted NDA there.

Josh Schwimmer: Great, thanks so much for taking the question and thanks for providing such a...

They're asking for some PK data in shoulder in order to get it across the board arthroplasty.

Josh Schwimmer: providing such a detailed overview of the MS and Relief launch metrics, I have just a few questions for me. First, can you help me understand the rationale for generating more PK and safety data to expand the label for the broad ortho and soft tissue indications? What data are you going to generate from those studies that you don't already have? And then, for the ongoing launch, where do you expect you're going to be for covered lives at the end of the year for both hospitals and ASCs after you get through these additional PNTs?

Theyre looking for data in spine in order to include a totally broad application indication for orthopedics, because thats a important component of orthopedics.

And it's also highly vascular area.

So they want to see data in spine.

Nominal amount, but nonetheless, it's an important component of what Theyre looking for.

And we're also doing some additional work in abdominal plasty.

That kind of checks the box for large abdominal procedures.

And so that's really the rationale for the request.

As I noted the great part of this is that there is no requirement for doing randomized efficacy studies.

So there is very limited risk of failure.

Josh Schwimmer: And for the wins that you've been generating, have they been in settings that are typically...

And because we already know.

From the data we've collected so far that our product really.

Unknown Executive: Transcribed by https://otter.ai Thanks, Josh. Appreciate the questions.

Leases bupivacaine independently of vascularity and independently of anatomic sites and we've already done.

Significant work and Abdominoplasty did.

Unknown Executive: On the first one, so just for clarification, the first SNDA that we've already submitted contained actually no new information, and so it was based on the data we'd already generated. The agreement with the FDA was that that data would get us, as I described, a broadened indication covering foot and ankle surgical procedures, small to medium open abdominal surgical procedures, and lower extremity total arthroplasty, so a clear broadening of the indication statement.

As well as a highly vascular breast.

Breast augmentation mammoplasty. So we have no expectation of seeing any unusual drug levels, and we just need to check that box and so those studies.

Our ongoing in <unk>.

Collect the data and allow us to submit the application in the second half of next year.

And the second part of that question I think I'll turn it over to John.

Yeah, absolutely Hi, Josh just wanted to clarify your question on covered lives were you referring to the 88 million covered lives that we currently have for separate reimbursement is.

Just wanted to make sure I understand your question correctly.

Just curious where you think youre going to be both for for coverage in the hospitals and for ASC is by end of the year as you get through this next round of formulary discussions.

Unknown Executive: To go beyond that, the agency was looking to confirm that when the product is placed in other regions of the body, there wouldn't be any surprises in terms of pharmacokinetics and safety. The agency, and this is not just for us, this is across all of the recently developed locally applied bupivacaine products, they're very interested in making sure that we keep the risk of late, local anesthetic systemic toxicity to a minimum, and they just want to make sure that there are no surprises in the pharmacokinetics of the product.

So.

With respect to the Payor mix right now, we're covering payers that represent about 220 million covered lives.

And we're making good progress with additional ones.

Some of them will be.

Basically impossible to get because youll need to have contracts that are actually developed at the provider stage, rather than what they'll be able to offer but we're taking a number of approaches to expand that as broadly as we can one is a strategy that we're really working with employer coalitions and union.

Unknown Executive: Because they've indicated they've seen unusually high levels with a prior approved product, and they want to confirm that that's not the case with ours. So the agreement is that since we have the data that I just mentioned in certain regions, we're going to supplement that information and collect data in other regions that we don't have current data in. So that would be, for example, shoulder. If you're looking at getting a broad orthopedic indication, both upper and lower extremity, we'll have lower extremity from the currently submitted SNDA, they're asking for some PK data in the shoulder in order to get across the board arthroplasty.

That have great interest in making sure that their employees and their families are able to remain opiate free post surgical procedure.

That's been something that we're gaining a lot of momentum and we think we will continue to expand that number.

At this point I'm really not comfortable giving a specific number but we have made it a top priority to make sure that Zen relief is available and separately reimbursed.

Unknown Executive: They're looking for data in spine in order to include a totally broad indication for orthopedics because that's an important component of orthopedics, and it's also a highly vascular area, so they want to see data in spine, a very nominal amount, but nonetheless, it's an important component of what they're looking for. And we're also doing some additional work in abdominoplasty that kind of checks the box for large abdominal procedures. And so that's really the rationale for the request.

With commercial payers and its many ASC and hospital outpatient settings as possible I think your second question was the PMT Committee wins that we're getting right now with formulary acceptance and I would say that the majority of them right. Now are accounts that EXPAREL is currently on formulary.

So that that would answer that question I think one of the things that we're most excited about.

Unknown Executive: As I noted, the great part of this is that there's no requirement to do randomized efficacy studies. So there's a very limited risk of failure because we already know from the data we've collected so far that our product really releases bupivacaine independently of vascularity and independently of anatomic size. And we've already done significant work in abdominoplasty as well as highly vascular breast augmentation mammoplasty. So we have no expectation of seeing any unusual drug levels, and we just need to check that box.

Is that we're also able to add some major.

Hospital systems that EXPAREL has never gained formulary access to and it's really based on the strength of our clinical data based on doing an actual evaluation and some of these hospital systems and the results have really done a stellar so.

We're excited about that because our goal ultimately is not just to replace EXPAREL, but it's also to really make significant headway with bupivacaine in order to reach our goals. So let me know if that answered your question.

Unknown Executive: And so those studies are ongoing and will collect the data and allow us to submit the application in the second half of next year. And so the second part of that question, I think I'll turn over to John.

Ill, let others ask I'll jump back in the queue. Thanks.

Thank you.

Our next question comes from the line of Brandon Folkes from Cantor Fitzgerald. Your line is now open.

Alright, thanks for taking my questions and congratulations on a good quarter.

John Poynton: Yeah, absolutely. Hi Josh.

Wanted to follow up on that prior question and yes.

John Poynton: Josh, I just want to clarify your question on covered lives. Were you referring to the 88 million covered lives that we currently have for separate reimbursement? I just want to make sure I understand your question correctly.

I heard your comments about getting on formulary with EXPAREL is but maybe just in terms of usage could you just elaborate if you have any feedback if you actually are being used in place of generic bupivacaine or other branded products at this stage.

John Poynton: Just curious where you think you're going to be both for coverage in hospitals and for AS, years to get through these next round of formulary discussions. Yeah, so with respect to the payer mix, right now we're covering payers that represent about 220 million covered lives, and we are making good progress with additional ones. Some of them will be basically impossible to get because you'll need to have contracts that are actually developed at the provider stage rather than, you know, what they'll be able to offer.

And then maybe secondly.

On the types of procedures can you just comment a little bit in terms of what procedures, you are gaining traction and understanding you're promoting to the label, but there are number of formularies that have not placed you said your strict restrictions on the product. So all youre hearing, but much off label usage at this stage will still have it. Thank you.

Yes.

You like me to take that for me. Please.

Please.

So with respect to are we being used at absolutely.

You take a look at those.

Those orthopedic surgeons that I referred to.

As using literally and over 100 Teekay eight cases those are all hospital based physicians. So we're clearly being used in hospitals.

John Poynton: But we're taking a number of approaches to expand that as broadly as we can. One is a strategy that we're really working with employer coalitions and unions that have a great interest in making sure that their employees and their families are able to remain opioid-free post-surgical procedures. So that's been something that we're gaining a lot of momentum on. We think we'll continue to expand that number. At this point, I'm really not comfortable giving a specific number, but we have made it a top priority to make sure that ZIN relief is available and separately reimbursed with commercial payers in as many ASCs and hospital outpatient settings as possible.

We'll point out and this was part of my prepared remarks is is that the formulary approval process is only the first step.

And other accounts, we haven't gotten the usage, even with formulary approval, yet because you'd have to work through the medical executive sign off.

Sure Youre getting through the computer.

The computerized physician order entry pharmacy ordering so.

That's going to be a bit of pent up demand that will happen in the marketplace, but we're very happy about the usage that we're getting thus far.

John Poynton: I think your second question was about the P&T committee wins that we're getting right now with formulary acceptance. And I would say that the majority of them right now are accounts that Expirel is currently on formulary. So that would answer that question.

I'm sorry, the second question was remind me.

And the time the procedures right.

Unrestricted usage.

Is it.

Being used on medical are you carrying about samples label usage at this stage.

John Poynton: I think one of the things that we're most excited about is that we're also able to add some major hospital systems that Expirel has never gained formulary access to, and it's really based on the strength of our clinical data. They've been doing an actual evaluation in some of these hospital systems, and the results have really been stellar. So we're excited about that because our goal, ultimately, is not just to replace Expirel, but it's also to really make significant headway with bupivacaine in order to reach our goals. So let me know if that answered your question.

Yes, yes, thanks, Brandon I appreciate the reminder, there so.

What we have seen is.

We're only promoting on label or three indicated procedures and as I talked about from a formulary approval standpoint, 55% of.

Hospitals, and IBM federally approved doses for unrestricted views. So we have heard anecdotally about use outside of the indicated procedures.

When surgeons doing a case there are representatives leap.

Operating room since we can't be part of that but.

Josh Schwimmer: That's good. I'll let others ask. I'll jump back in the queue. Thanks.

But we have heard anecdotally about cases like with orthopedic surgeons, having good results in antiques.

Josh Schwimmer: I'll jump back in the queue.

Operator: Thank you. Our next question comes from the line of Brandon Folkes from Cantor Fitzgerald. Your line is now open. All right, thanks for taking my question.

Teekay.

Using it in total hip replacement and having very fine results there, but that's obviously not something that we're promoting it's all been anecdotal information thus far.

Brandon Richard Folkes: Congratulations on a good course. I just want to follow up on that prior question. I heard your comments about getting on the formulary where Expro is, but maybe just in terms of usage, could you just elaborate, if you have any...

I don't know if you want to say anything else about that.

No look I think I think you've covered it exactly right. We clearly have have heard about the use of the product outside of the three.

Surgical procedures in the indication.

And we through medical affairs.

That information we wanted to.

To help us in terms of any future clinical studies that we might be doing like the spine study.

Learn from positive experience that people have already had.

But.

As already noted several times, we clearly don't promote on it we don't allow the reps due to go into the or when that kind of procedures being done.

Obviously, a lot of that is going to change.

Once we have the expansion of the label.

And we look forward to that because thats going to really open up the opportunity for a lot of valuable communication.

Brandon Richard Folkes: that you are actually being used in place of generic bupivacaine or other branded products at this stage.

With with surgeons and really get the best possible outcome for patients.

Great. Thank you very much.

Thank you. Our next question is from the line of Boris <unk> from Cowen. Your line is now open.

Brandon Richard Folkes: And then maybe secondly, on the types of procedures, can you just comment a little bit in terms of what procedures you are gaining traction in, understanding that you're promoting to the label, but there are a number of formularies that have not placed usage restrictions on the product. So are you hearing about much off-label usage at this stage, or is it still a bit early? Thank you.

Great. My next question is maybe a little more focusing on the formulary discussions I'm curious are you being compared directly to EXPAREL and are these facilities ending of choosing one drug over another or in many cases that they are putting both EXPAREL in general on the formulary.

John you want to start that one too.

Sure.

John Poynton: Yeah. Would you like me to take it, Barry?

So yes, that's a that's a great question Boris in the vast majority of accounts that we have been added to formulary.

John Poynton: Okay. So, with respect to, are we being used? Absolutely.

They've actually maintained EXPAREL on formulary, if it had been on formulary to begin with as I talked about in the earlier question that.

John Poynton: If you take a look at those orthopedic surgeons that I referred to as using XenRelief in over 100 TKA cases, those are all hospital-based physicians. So, we're clearly being used in hospitals. I will point out, and this was part of my prepared remarks, that the formulary approval process is only the first step. On other accounts, we haven't gotten usage even with formulary approval yet because you have to work through the medical executive sign-off, make sure you're getting through the computerized physician order entry, and pharmacy ordering.

That Josh asked really talked about how the fact that we're getting both accounts, where EXPAREL is on formulary and where does that but that's really not surprising we are not looking to have them kicked off formulary. They certainly have indications, whether it's for things like pediatrics or nerve block, where they wouldn't use and relief and so we have no.

Problem with that what our goal is to get access to the product have a great experience for surgeons and patients to get as much usage as we possibly can so we're not looking for this to be an either or situation.

John Poynton: So, that's going to be a bit of pent-up demand that we'll have in the marketplace, but we're very happy about the usage that we're getting thus far. The second question was, could you remind me?

But certainly some accounts may in the future what can make therapeutic substitution within label, we'd be all part of that as well.

John Poynton: In time, the procedures, right, in terms of unrestricted usage, is it all being used on them, or are you caring about some off-label usage at this stage? Yeah, yeah. Thanks, Brandon. I appreciate the reminder there.

Yes, I'll, just I'll, just remind everyone that.

EXPAREL.

Has single digit penetration in terms of the potential patient population.

And so.

And again, it's not our intent to try to get them removed from formularies.

John Poynton: And what we have seen is, you know, we're only promoting on label our three indicated procedures. And as I talked about from a formulary approval standpoint, 55% of hospitals and IDNs that have approved us have approved us for unrestricted use. So we have heard anecdotally about use outside of the indicated procedures. When a surgeon is doing a case there, our representatives leave the operating room since we can't be part of that. But we have heard anecdotally about cases where orthopedic surgeons have had good results with TKA, using it in total hip replacement, and having very fine results there. But that's obviously not something that we're promoting. It's all been anecdotal information thus far. Barry, I don't know if you want to say anything else about that. No, look, I think you covered it exactly right.

Our intent is to get our product used in as many patients.

As possible and get the best outcome for those patients as possible. So.

The fact that they would stay on formulary in particular stay on for those indications.

Very specific indications like pediatrics in there, but we don't have is as expected.

No.

Hopefully that answers your question.

Certainly helpful. My last question is on the competitive so you've received a C code can you comment that competitive advantage that gives you and when and how should we actually see that competitive advantage evolving.

Well right.

Go ahead, John go ahead Sir.

I was going to say the C code.

Is really.

Was established for the ambulatory surgical center market and that will become effective January one of 2022. So from a competitive advantage standpoint will be in the same position as other companies that are being reimbursed in that setting up there. In addition, CMS is continue.

Barry Cort: We clearly have heard about the use of the product outside of the three surgical procedures in the indication, and we, through medical affairs, collect that information. We want it to help us in terms of any future clinical studies that we might be doing, like the spine study, learn from positive experiences that people have already had, but it's already noted several times, we clearly don't promote it, we don't allow the reps to go into the OR when that kind of procedure is being done.

The revaluation.

Barry Cort: Obviously, a lot of that is going to change once we have the expansion of the label, and we look forward to that because that's going to really open up the opportunity for a lot of valuable communication with surgeons and really get the best possible outcome for patients.

Operator: Thank you. Our next question is from the line of Boris Peaker from Cowen. Your line is now open. Great. My next question is...

Boris Peaker: Great. My next question is maybe a little more folks in the formulary discussions. I'm curious, are you being compared directly to Xpiril? And are these facilities ending up choosing one drug over another? Or, in many cases, are they putting both Xpiril and Xenrolip on the formulary?

John Poynton: So yeah, that's a great question, Boris. In the vast majority of accounts that we have been added to formulary, they've actually maintained exper on formulary if it had been on formulary to begin with, as I talked about in the earlier question that Josh asked, really talked about how the fact that we're getting both accounts where Expirel is on formulary and where it isn't. But that's really not surprising. We're not looking to have them kicked off formulary. They certainly have indications, whether it's for things like pediatrics or nerve block, where they wouldn't use Xen Relief. And so we have no problem with that.

About patient hospital an AFC.

But the the.

Extended coverage that the C code provides be going beyond.

Three years of normal pass through.

Also it's important because it gives confidence too.

See that may be reluctant to take on a new product if.

If it only has temporary coverage there always worried that the surgeons are going to love a product is getting reimbursed and then three years later.

They have this huge usage and all of a sudden the reimbursement goes away. So the fact that this is more of a expected to be continued.

Ongoing for an extended duration.

John Poynton: What our goal is is to get access to the product, have a great experience for surgeons and patients, and get as much usage as we possibly can. So we're not looking for this to be an either-or situation. But if certainly some accounts may, in the future, look to make therapeutic substitutions within the label, we'd be all for that as well. Yeah, I'll just remind everyone that, you know, XBRL has single-digit penetration in terms of the potential patient population.

Is actually very positive in terms of getting more afcs to adopt products that are covered.

Thank you. Our next question comes from the lineup Serge <unk> from need handling company. Your line is now open.

Hi, good afternoon.

Good afternoon, just a couple of questions for me.

First on this.

This isn't really.

Can you talk about where do you expect the productivity get traction as things ramp up here is it going to be the AFC setting an.

H O P DS or hospitals and then.

You discuss the label expansion plans.

Curious.

John Poynton: And so, and, you know, again, it's not our intent to try to get them removed from formularies. You know, our intent is to get our product used in as many patients as possible and get the best outcome for those patients as possible. So, the fact that they would stay on formulary and particularly stay on for those indications, very specific indications like pediatrics and nerve block we don't have, is expected.

If there's if those plans include a nerve block indication.

Whether that's something you may seek separately.

Okay. So.

Yeah, I'll I'll take the first one search so as far as traction if you look at the first 160 unique ordering accounts that we have in July through September.

Those accounts were divided pretty equally 50 50 on the number of ordering accounts, but a significantly higher percentage of that business was coming from the hospital setting a chair, which is not surprising because hospitals, obviously are performing far more procedures than what afc's are.

Barry Cort: So, we'll play that.

Boris Peaker: It's certainly helpful. My last question is, so you received the C code. Can you comment on the competitive advantage that it gives you, and how should we actually see that competitive advantage evolving?

John Poynton: Go ahead, John. Well, I was going to say that

Are doing if you look at the overall AFC market, it's somewhere around 15% of our targeted procedures. So that's what we would expect but afc's have a lower hurdle rate as far as getting in and getting early usage.

John Poynton: The C code was really established for the ambulatory surgical center market, and that will become effective on January 1st, 2022. So from a competitive advantage standpoint, we'll be in the same position as other companies that are being reimbursed in that setting of care. In addition, CMS continues its evaluation generally for pass-through status. That's where we think one of the major advantages could be because pass-through status would provide reimbursement not only in the ambulatory surgical center of care but also in the hospital outpatient setting of care. And that's a place where the leading branded product, Expiral, does not have coverage. And we'll...

So I think that probably answered the question search.

Oh boy.

Yeah on the label expansion certainly the two S. NDA is that that we have been discussing are strictly for local application.

And we don't anticipate in the future doing any additional nerve block work.

And relief as it really was designed based on the unique synergy that we observe between bupivacaine and the small amount of meloxicam.

Where we see significantly enhanced pain reduction even in the first 24 hours, but continuing in the second 24, and the third 24 hours.

Views compared to bupivacaine alone and.

John Poynton: And where would you get that past their status?

And that's because of.

John Poynton: Well, they are still evaluating our application. So, as I talked about in my comments, we expect it sometime in the new year. Generally, they make their determination about four to two to four weeks prior to the end of the quarter, so we could hear as soon as you know early to mid-December on the CMS decision. Great thanks for taking my comments, Boris.

The local and flat inflammation that occurs when you cut through tissue and bone that you get this local inflammation and by using Zennor left you can see greater benefit from the view pivot game that situation would not occur in a nerve blocks.

Heading so we'd really lose the great pharmacology that we have with Sen relief movie.

Moving it into a nerve block setting, but I'll point out that as you may be aware or.

Competitor is suing.

Say because of publication.

Boris Peaker: You know, I'll just remind everyone that the Medicare percent of patients that we're currently targeting is a little less than 20% in the ASC and in the outpatient hospital setting. And that's why the commercial coverage that John described is so exciting and important because commercial payers are really the bulk of the patient population. It's really the bulk of patients going through our two primary target areas of the outpatient hospital and ASC.

Which highlighted that there didn't appear to be any benefit of EXPAREL versus bupivacaine.

In nerve block and so it's our view.

That it's perfectly reasonable just simply used low cost bupivacaine, where an anesthesiologist thinks there is a need for a nerve block.

And then use generally locally applied.

To provide much longer duration of benefit.

So we think that's the optimal outcome versus trying to use an extended release product and.

For the nerve block itself.

Okay.

Just a quick one on the <unk> franchise, you mentioned you would expect.

Boris Peaker: But the extended coverage that this C code provides, going beyond three years of normal pass-through, is important because it gives confidence to an ASC that may be reluctant to take on a new product if it only has temporary coverage. They're always worried that the surgeons are going to love a product, it's getting reimbursed, and then three years later, they have this huge usage, and all of a sudden, the reimbursement goes away. So the fact that this is more of an ongoing ongoing for an extended duration is actually very positive in terms of getting more ASCs to adopt products that are covered.

Franchise to return to growth in 2022 just.

Just curious if you.

Expect to return to prior.

2018 levels for example, especially first invented given the changes.

Based on the value based contracting reimbursement.

You are affecting the market dynamics.

John.

Yeah. So the guidance that we provided today Serge was that we expect.

Moderate growth in 2022 and that to re achieved those levels would be significantly higher than what I think we would define as moderate we think with somebody there are a number of things that are really working in our favor.

Operator: Thank you. Our next question comes from the line of Serge Belanger from Needham and Company. Your line is now open.

One is the generic pass aprepitant as I talked about in my comments have the reimbursement has gone down to.

Serge D. Belanger: Good afternoon. Just a couple of questions for me. First, on Zin Relief, can you talk about where you expect the product to get traction as things ramp up here? Is it going to be the ASC setting?

$36.45.

So the value that they are able to offer even by aggressive pricing for community practices isn't there.

Serge D. Belanger: HOPDs or hospitals, and then you discussed the label expansion plan. Curious if those plans include a nerve block.

Another key factor is that.

Serge D. Belanger: If those plans include a nerve block indication and whether that's something you may seek separately. Thanks.

What their ASP reimbursement falling so low within the hospital market beginning January 1st of 2022, there'll be no reimbursement for generic pops of private and outside of the the bundled payment. So we think those two combination of of.

John Poynton: Yeah, I'll take the first one, Serge. So, as far as traction goes, if you look at the first 160 unique ordering accounts that we had in July through September, those accounts were divided pretty equally, 50-50 on the number of ordering accounts. But a significantly higher percentage of that business was coming from the hospital setting of care, which is not surprising because, you know, hospitals obviously are performing far more procedures than what ASCs are doing.

Vamps both.

The impact on the clinic market with the lower ASP the reimbursement no reimbursement at all in the hospital market lends itself to.

Allowing us to get.

Somebody better come the growth track as we enter 2022 I would expect that we provide a bit more guidance on that.

John Poynton: If you look at the overall ASC market, it's somewhere around 15% of our targeted procedures. So, that's what we would expect. But ASCs have a lower hurdle rate as far as getting in and getting early usage.

With the year end results on what we think 2022, what look like.

Okay, great. Thank you.

Sure.

Thank you. Our next question comes from the lineup Kelly She from Kathryn Your line is now open.

John Poynton: So I think that probably answered your question. Yep. Oh boy.

Hi, Thank you for taking my question I Wonder if $2.1 million sounds from this quarter. What are you won't be able to put a number on this plane of all of them from asking if that answers as hospital settings for the assay is it how well below 20% at this moment.

Barry Cort: Yeah, on the label expansion, certainly the two SNDAs that we have been discussing are strictly for local use, and we don't anticipate in the future doing any additional nerve block work with Xen Relief. Xen Relief was designed based on the unique synergy that we observed between bupivacaine and a small amount of meloxicam, where we saw significantly enhanced pain reduction, even in the first 24 hours, but continuing in the second 24 and then the third 24 hours of use compared to bupivacaine alone. And that's because of the local inflammation that occurs when you cut through tissue and bone.

And the office do you call it in the next year.

Yeah, well, they will be able to like C. Dot com, so different across right I'm gonna each setting. Thank you.

Okay. So on your on your first question the.

The a F C volume. So the 2.1 is what we sold into the distribution channel what was pulled out from a demand standpoint, it was probably about 30% in the first quarter.

Was driven by AFC accounts and as I talked about earlier.

Barry Cort: You get this local inflammation, and by using Xen Relief, you can see greater benefit from the bupivacaine. That situation would not occur in a nerve block setting, so we'd really lose the great pharmacology that we have with Xen Relief by moving it into a nerve block setting. But I'll point out that, as you may be aware, our competitor is suing ASA because of a publication which highlighted that there didn't appear to be any benefit of Expirel versus bupivacaine for nerve block.

The mix up unique ordering accounts was about 50 50. So it gives you a sense of the greater volume coming out of the hospital marketplace and I wasn't really sure on your second question could you please repeat that.

Yeah, so what kind of changing an ice pack anytime is definitely one of his plane attack under ask <unk> Martha how far does that include the next year.

Yeah. So.

That first quarter like I said, an actual demand. It was about 70 31, 70% being in the hospital, we would expect going forward that it would more normalize and probably with upwards of over 80% of our business coming from the hospital markets and probably you know roughly 20 per cent.

Barry Cort: And so it's our view that it's perfectly reasonable just to simply use low-cost bupivacaine where an anesthesiologist thinks there's a need for a nerve block, and then use Xen Relief locally applied to provide a much longer duration of benefit. And so we think that's the optimal outcome versus trying to use an extended release product for the nerve block itself. Just a quick one on the CIMV franchise, you mentioned you expect the franchise to return to growth in 2022. Just curious if you expect it to return to prior levels, such as 2018, levels, for example, especially for Synventi, given the changes.

From the AFC market.

Thank you very much.

You're welcome. Thank you again.

Thank you. Our next question comes from the lineup Josh swimmer from Evercore ISI. Your line is now open.

Thanks for taking the follow up is.

Realized I was asking the wrong question about covered lives in hospitals cause they don't they don't go bike covered lives. So maybe you can talk to the the successes you've had a panty committees at hospitals kind of where you are in that in that progress either in terms of.

John Poynton: Given the changes, see https://www.larryweaver.com

John Poynton: Yeah, so the guidance that we provided today, Serge, was that we expect moderate growth in 2022 and that to reach those levels would be significantly higher than what I think we would define as moderate. We think with Symbonte, there are a number of things that are really working in our favor. One is the generic FOSA precedent. As I talked about in my comments, reimbursement has gone down to $36.45. So the value that they're able to offer, even at aggressive pricing for community practices, isn't there.

Percentage of hospitals that you're taking the targeting and what the cadence of those PNT decisions.

Will be through the rest of this year and then into 2022.

Right. So as we described today, we have 126 formulary approvals the vast majority of that number are actually with hospital systems.

We have another 150 P and T committees that are scheduled to meet between now and the end of the year Josh So.

John Poynton: Another key factor is that with their ASP reimbursement falling so low, within the hospital market, beginning January 1st, 2022, there will be no reimbursement for generic FOSA precedent outside of the bundled payment. So we think those two combinations of events, both the impact on the clinic market with the lower ASP and the reimbursement, and no reimbursement at all in the hospital market, lend themselves to allowing us to get Symbonte back on the growth track as we enter 2022. I would expect that we will provide a bit more guidance on that with the year-end results on what we think 2022 will look like. Thank you.

That gives you a sense of what the total could be we're targeting.

Targeting.

1300 hospitals overall.

What's interesting about the piano T. As every week that we update this we're seeing more and more pnt's scheduled some of them I haven't gotten into.

<unk> scheduled already for 2022, but we continue to make that a priority and you know we will get as many of those as we possibly can I think what's very encouraging for US are two factors. One is is that we do have a 91% PNT committee approval rate in hospitals.

And the fact that the the majority of those hospitals are proofings in relief.

Operator: Thank you. Our next question comes from the line of Kelly Shee from Jeffries. Your line is now open. Thank you for taking the time.

For unrestricted use of Jeff, 55%, but as far as the the cadence.

With COVID-19, it it's a bit hard to predict but.

Kelly Shee: Thank you for taking my questions. I wonder for the $2.1 million sales from this quarter, would you be able to put a number on the split of volume from AFC settings versus hospital settings? For the AFC, is it well below 20% at this moment? And after C-code in the next year? Here, would we be able to see the growth, the different growth rates under each setting?

We'll try to provide updates as we go forward on the survey call, So where we're at and what's in the queue for the remainder of the quarter to give you a better sense of that.

But given given the target of 1300 come on hospitals and the pace to date should we expect there to be an acceleration next year or we're just kind of continuing to slog through that large number.

Kelly Shee: Thank you.

John Poynton: Okay, so on your first question, the ASC volume, so the 2.1 is what we sold into the distribution channel. What was pulled out from a demand standpoint, it was probably about 30% in the first quarter was driven by ASC accounts. And as I talked about earlier, the mix of unique ordering accounts was about 50-50. So it gives you a sense of a greater volume coming out of the hospital marketplace. And I wasn't really sure on your second question. Could you please repeat that?

I would think there's gonna be an acceleration next year for a number of reasons of some of the PMC committees have been postponed.

Because of the Covid. So we think that that will help accelerate the process.

Certainly the sooner that we get the new indicated procedures I think that could also accelerate the process and some hospitals. They just automatically start with a moratorium of saying, we're not going to evaluate any products for six months.

Kelly Shee: Oh yeah, so what kind of change are you expecting in terms of the volume of play under ASC versus Hospital settings in the next year? Yeah, so, um, yeah.

Until the product has been on the market for six months. So all those things converge to what we think should be a faster rate as we enter 2022 on on formulary approval stripes.

John Poynton: Yeah, so, for that first quarter, like I said, in actual demand, it was about 70-30, with 70% being in the hospital. We would expect going forward that it would normalize and probably, you know, with upwards of over 80% of our business coming from the hospital market and probably, you know, roughly 20% from the ASC market.

Got it and last question on this topic.

Does this kind of follow the.

80, 20 rule, 20% of hospitals account for 80% of volume and you kind of target those first for for PMT committees or is it a little bit different dynamic.

So if you look at the hospitals that we're targeting the 1300 that gets us to about 80% of the opportunity whether it's competitive products or you know, it's a little less than that on the indicated procedure. So it's probably 65% to 70%.

Operator: Thank you. Our next question comes from the line of Josh Wimmer from Evercore ISI. Your line is now open.

Josh Schwimmer: Thanks for taking the follow-up. I realized I was asking the wrong question about covered lives and hospitals because they don't go by covered lives. So maybe you can talk about the successes you've had at P&T committees and at hospitals, kind of where you are in that progress, the percentage of hospitals that you're targeting, and what the cadence of those PNT decisions will be through the rest of this year and then into 2020. Right.

We always start with the the ones that are the largest since you would imagine, but sometimes those larger ones are slower too. So we're trying to be option opportunistic all the 1300 hospital accounts that we're targeting are valuable.

And will happily take any of them, but we start with the ones that have the greatest value.

John Poynton: So, as we described today, we have 126 formulary approvals, and the vast majority of that number are actually with hospital systems. We have another 150 P&T committees that are scheduled to meet between now and the end of the year, Josh. So, you know, that gives you a sense of what the total could be.

We've got some good English.

Yeah. Thank you got some some some very big ones yeah.

Thank you at this time I'm showing no further questions I would like to turn the call back over to Bury Court for closing remarks.

Well. Thank you everyone for participating in the call very exciting quarter, and we look forward to.

John Poynton: We're targeting... 1,300 hospitals overall. What's interesting about the P&T is, you know, every week that we update this, you know, we're seeing more and more P&T scheduled. You know, some of them I haven't gotten into, you know, are scheduled already for 2022. But, you know, we continue to make that a priority. And, you know, we will get as many of those as we possibly

Continued quarterly updates.

Have a great day.

Ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect Goodbye.

[music].

John Poynton: I think what's very encouraging for us are two factors. One is that we do have a 91% P&T committee approval rate in hospitals. And the fact that the majority of those hospitals are approving Zin relief for unrestricted usage at 55%. But, you know, as far as the cadence goes, you know, with COVID, it's a bit hard to predict. But, you know, we'll try to provide updates as we go forward on these earnings calls of where we're at and what's in the queue for the remainder of the quarter to give you a better sense of that.

John Poynton: Given the target of 1300 some-odd hospitals and the pace to date, should we expect there to be an acceleration next year, or are we just kind of continuing to slog through that large number? I would think there's going to be an acceleration next year for a number of reasons. Some of the P&T committees have been postponed because of COVID, so we think that will help accelerate the process. You know, certainly the sooner that we get the new procedures, I think that could also accelerate the process.

John Poynton: And some hospitals, they just, you know, automatically start with a moratorium of saying they're not going to evaluate any products for six months, you know, until the product's been on the market for six months. So all those things converge to, you know, what we think should be a faster rate as we enter 2022 on formulary approval strategies. Got it. And last question on this topic: does this kind of follow the 80-20 rule, 20% of hospitals account for 80% of volume, and you kind of target those first for P&T committees, or is it a little bit different that way?

[music].

Josh Schwimmer: This is a little bit different dynamic.

John Poynton: So if you look at the hospitals that we're targeting, the 1,300, that gets us to about 80% of the opportunity, whether it's competitive products or it's a little less than that on the indicated procedures, it's probably 65 to 70%. We always start with the largest, as you would imagine, but sometimes those larger ones are slower too. So we're trying to be opportunistic. All of the 1,300 hospital accounts that we're targeting are valuable, and we'll happily take any of them, but we start with the ones that have the greatest value.

Josh Schwimmer: We've got it. Thank you very much. Thank you. Thank you. We've got some very big ones.

Operator: Thank you. At this time, I am showing no further questions. I would like to turn the call back over to Barry Court for closing remarks.

Barry Cort: Well, thank you everyone for participating in the call. It was a very exciting quarter, and we look forward to continued quarterly updates.

Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect. Goodbye.

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Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Heron Therapeutics Q3 2021 Earnings Conference. As a reminder, this conference is being recorded. Now, I would like to turn the call over to David Szekeres, Executive Vice President, Chief Operating Officer. Please proceed.

David L. Szekeres: Thank you, Gigi. Good afternoon, everyone, and thank you for joining us. With me today from Heron are Barry Cort, Chief Executive Officer and Chairman, John Poynton, President and Chief Commercial Officer, and Kimberly Manhart, Executive Vice President of Drug Development and a Board Director. For those of you participating via conference call, the slides will be made available via webcast and can also be accessed by going to the investor relations page of our website following the conclusion of today's call.

David L. Szekeres: Before we begin, I would like to remind you that this call will contain forward-looking statements concerning future expectations, plans, prospects, corporate strategy, and performance, which constitute four forward-looking statements for the purposes of the safe harbor provision under the Privacy Treaties Litigation Reform Act of 1995. However, actual results may differ materially from those indicated by these four forward-looking statements as a result of various important factors.

David L. Szekeres: Including those discussed in our filings with the SEC. In addition, any forward-looking statements represent our views only as of the date of this webcast and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statements.

David L. Szekeres: Now, I'll turn the call over to Barry. Thank you, David. Welcome, everyone, and thank you for joining us. The last several months have been one of the most important and productive periods in our company's history. We successfully launched XenRelief for post-operative pain in the United States, which represents our first product in our acute care franchise and our third commercial product overall. And we were focused on creating long-term growth for this franchise with Zimril.

David L. Szekeres: We've had great success with P&T committee approvals, which is very encouraging for our first quarter of launch. Right now, we're focused on expanding the label and our commercial opportunity with Zenerly, which I'll talk more about in a minute. We're also focused on stabilizing our sales in our oncology care franchise through this year and seeing modest growth next year.

Barry Cort: We've had successful interactions with the FDA to support the label expansion of Xen Relief and to increase product supply. The FDA agreed to two SNDAs for XenRelief label expansion. The first supplemental NDA was submitted to the FDA at the end of September, and it is expected to broaden the label to include foot and ankle, small to medium open abdominal, and lower extremity total joint arthroplasty surgical procedures. The FDA also agreed to the contents of the second supplemental NDA to broaden the label to broadly cover orthopedic and soft tissue surgical procedures. The FDA-agreed studies for this second SNDA are already ongoing, and the endpoints in these studies are pharmacokinetics and safety. Demonstration of efficacy is not required for approval.

[music].

Barry Cort: We expect to submit this second SNDA in the second half of 2022. If approved, this broad indication would cover over 14 million target procedures. In addition, the FDA also approved our manufacturing supplement to add a secondary supplier of our proprietary polymer. This approval is a critical step in giving us the ability to manufacture millions of doses annually and significantly lower the cost of goods. This approval was received in under four months and, together with future label expansions, will allow us to supply a highly effective non-opioid post-operative pain drug to millions of patients annually. Overall, the quarter was outstanding for Heron.

Good day, ladies and gentlemen, and thank you for standing by welcome to the Huron Therapeutics Q3, 2021 earnings conference.

A reminder, this conference is being recorded now I would like to turn the call over to David <unk> Executive Vice President Chief Operating Officer. Please proceed.

Barry Cort: As a company, we remain in a strong position, and we're looking forward to achieving additional key commercial and corporate milestones in the coming year. With that, I'll turn the call over to Jon to review our commercial portfolio.

Thank you Gigi good afternoon, everyone and thank you for joining us.

With me today from Harris, Barry Quart, Chief Executive Officer and Chairman.

John.

John Poynton: Thank you, Barry. I'm truly excited to share our third quarter commercial results. We're off to a fast start with generally despite significant headwinds in the market. During my presentation, I'll start with a number of key metrics on the initial progress that we're making with the Xen Relief launch and finish with an update on our oncology care commercial results. FinRelief is off to a strong start in its first quarter of launch with net product sales of $2.1 million.

Evidence and Chief commercial officer, and Kimberly Manhart Executive Vice President of drug development and a board director.

For those of you participating via conference call. The slides, they're made available via webcast and can also be accessed by going to the Investor Relations page of our website following conclusion of today's call.

Before we begin I would like to remind you that this call will contain forward looking statements concerning harrington future expectations plans prospects corporate strategy and performance.

Which constitute forward looking statements for the purposes of the Safe Harbor provisions under the private Securities Litigation Reform Act of 1095.

Actual results may differ materially from those indicated by these forward looking statements as a result of various important factors, including those discussed in our filings with the SEC.

John Poynton: We've already established broad nationwide access to stocking and the distribution channel to ensure rapid delivery for ordering accounts. We're utilizing four full line wholesalers, ABC, Cardinal, McKesson, and more stick sticks. Thus far, 68 stocking distribution centers have sold Zinrelief, and 50% of these DCs have reordered. In addition, we're utilizing 10 specialty distributors to supply Ambulatory Surgical Centers, or ASCs. So far, 10 stocking distribution centers have sold Zinrelief, and 60% of these PCs have reordered the product.

In addition, any forward looking statements represent our views only as of the date of this webcast and should not be relied upon as representing our views as of any subsequent date.

We specifically disclaim any obligations to update such statements now ill turn the call over to Barry. Thank.

Thank you David and welcome everyone and thank you for joining us the last several months have been one of the most important and productive periods in our company's history.

We successfully launched Xen relief for post operative pain in the United States, which represents our first product in our acute care franchise and our third commercial product overall.

And we are focused on creating long term growth in this franchise with generally.

John Poynton: Slide number seven is an updated version of the slide we shared during our Zen Relief FDA approval conference call in May regarding the successful hospital launch. As you'll see, we've added the first five quarters for Amjizo and Full Transparency, although their first quarter only included one month of sale.

Okay, Great success with PMT Committee approvals, which is very encouraging for our first quarter of launch.

Right now we're focused on expanding the label and our commercial opportunity with <unk>.

Which I'll talk more about in a minute.

We're also focused on stabilizing our sales and our oncology care franchise through this year and are seeing modest growth next year.

John Poynton: In addition, we've added the first quarter of ZIN relief net product sales. We feel like we're off to an excellent start and continue to believe that Zim relief total net product sales will exceed those of XBRL over the initial six-quarter period. Slide number 8 highlights the rapid progress that Xen Relief is making with formulary access. As of the end of October, we have 126 formulary improvements. The continued impact of COVID-19 should not be underestimated.

We've had successful interactions with the FDA to support the label expansion generally and to increase product supply.

The FDA agreed to two <unk> for label expansion for generally the first supplemental NDA was submitted to the FDA at the end of September and.

And is expected to broaden the label to include foot and ankle small to medium open abdominal and lower extremity total joint arthroplasty surgical procedures.

The FDA also agreed to content of the second supplemental NDA to broaden to broadly cover orthopedic and soft tissue surgical procedures.

John Poynton: We're confident that Zin relief would already have been added to additional formularies without the impact of COVID-19 postponing P&T committee decisions. However, in those accounts actually making P&T decisions, over 91% of hospital P&T committees are adding Xen Relief to the formula. Additionally, 55% of our formulary approvals are for unrestricted usage of Xynrile.

The FDA agreed studies for the second NDA are already ongoing.

The endpoints in these studies as pharmacokinetics and safety demonstration of efficacy is not required for approval.

We expect to submit this second NDA in the second half of 2022.

If approved this broad indication would cover over $14 million target procedures.

John Poynton: We believe the broader label indications expected with our recently filed supplemental NDA will certainly drive greater usage in these hospitals and also have a significant impact on those hospitals that approve ZIN relief with restrictions to the indicated procedures. The remainder of 2021 will be a critical time for formulary access, with over 150 additional P&T committees scheduled to review ZinRelief before the end of the year. We will continue to closely monitor the potential impact of COVID on the timing of P&T committee schedules. Fortunately, when we have experienced delays with P&T committee schedules, the delays have typically been for 30 to 60 days.

In addition, the FDA also approved our manufacturing supplement to add a secondary supplier of our proprietary polymer.

This approval is a critical step in giving us the ability to manufacture millions of doses annually and to significantly lower the cost of goods.

This approval was received in under four months and together with future label expansions will allow us to supply a highly effective non opioid post operative pain drug to millions of patients annually.

Overall, the quarter was outstanding for Heron.

As a company we remain in a strong position and we're looking forward to achieving additional key commercial and corporate milestones in the coming year.

With that I'll turn the call over to John to review our commercial portfolio.

John.

John Poynton: In the hospital market, a P&T committee approval and formulary win is an important step in the process, but it's just the beginning. It's important to keep in mind that many hospitals also require a medical executive sign-off, establishment of CPOE, or computerized physician order entry, and then pharmacy stocking prior to usage in patients. Slide number nine benchmarks the number of unique accounts ordering during the first three months of launch, based on symphony health data.

Thank you Barry I'm truly excited to share our third quarter Commercial's results.

We're off to a SaaS start with generally despite significant headwinds in the marketplace.

During my presentation I'll start with a number of key metrics on the initial progress that we're making with the <unk> launch.

And finish with an update on our oncology care commercial results.

It didn't release is off to a strong start in our first quarter of launch with net product sales of $2 $1 million with already established broad nationwide access of stocking in the distribution channel to ensure rapid delivery ordering accounts.

John Poynton: We're gaining significant traction with ZenRelief in the first three months of launch with 160 unique ordering accounts. We believe this compares very favorably to the XperEL launch in April of 2012, when Passera launched XperEL with a broad label indication and no COVID to impact their results. During the past 18 months, three non-opioid analgesics, Xenrelief, Xericol, and Injizo, have launched during the COVID-19 era. Zimmerleaf's number of unique ordering accounts is over four times greater than the next closest competitor.

We are utilizing for full line wholesalers, ABC, Cardinal Mckesson and more sticks thus.

Thus far 68 stocking distribution centers have sold literally and 50% of these dcs have reorder.

In addition, we're utilizing 10 specialty distributors to supply ambulatory surgical centers or AFC.

Thus far 10 stocking distribution centers, and so generally and 60% of these tcs have reorder the product.

John Poynton: In addition... Generally, we've had 50% of accounts reordering during the first three months, the greatest reorder percentage of the four products benchmarked in this analysis. While the initials and relief results are strong, we're far from satisfied and will continue to grow unique ordering accounts and gain more momentum in formulary approved accounts in the fourth quarter. We're already seeing growth on both fronts in October and expect further growth in unique ordering accounts with additional formulary approvals through the remainder of the quarter.

Okay.

Slide number seven as an updated version of the slide we shared during our didn't really FTA approval conference call in May regarding successful hospital launches.

As you'll see we've added the first five quarters for AMG Zoe.

In full transparency there first quarter only included one month of sales.

In addition, we have added the first quarter of <unk> net product sales.

We feel like we're off to an excellent start and continue to believe that Zen relief total net product sales will exceed those of EXPAREL over the initial six quarter period.

John Poynton: We've also seen tremendous early results on our reimbursement coverage front in both commercial and Medicaid payers. We've already obtained separate reimbursement outside of the surgical bundle for Xen Relief and more than 88 million covered lives in ASCs, and in some cases, we also have separate reimbursement in the hospital outpatient setting. We think this is unprecedented coverage for a new post-operative pain drug. A key component of our pricing strategy is procedures without separate reimbursement.

Slide number eight highlights the rapid progress that has been released since making with formulary access.

As of the end of October we have 126 formulary approvals.

The continued impact of COVID-19 should not be underestimated, we're confident that literally what already have been added to additional formularies without the impact of COVID-19, Postponing PMT Committee decisions. However, in those accounts actually making PMT decisions over 91% of Pos.

Spittle Pnp committees are adding Zimmer a week to formulary.

John Poynton: Zynrelief's lower acquisition costs benefit customers across all settings of care where the drug may be reimbursed under the surgical bundle payment. CMS is still reviewing our pass-through application, and we fully expect pass-throughs in the new year. Until December 31st, 2021, CMS is reimbursing XenRelief at 95% of the average wholesale price, which is a very favorable rate for Medicare patients in the outpatient setting. Yesterday, we received some great news. CMS published the calendar year 2022.

Importantly, 55% of our formulary approvals are for unrestricted usage of generally.

We believe the broader label indications expected with our recently filed supplemental NDA will certainly drive greater usage in these hospitals.

And also have a significant impact on those hospitals that are approved and released.

With restrictions to the indicated procedures.

Okay.

The remainder of 2021 will be a critical time for formulary access with over 150 additional PMT Committee scheduled to review then released before the end of the year.

John Poynton: Outpatient Prospective Payment System. The final rule and issued Xen Relief a specific C code, C9088, for separate reimbursement in the ASC setting of care effective January 1st, 2022. This will have a meaningful impact since ZinRelief will have ongoing reimbursement in ASCs even beyond the typical three-year pass-through period. We have four key priorities for the remainder of the year with Xen Relief, all of them focused on building off the strong base we built in Q3.

We will continue to closely monitor the potential impact of Covid on the timing of PMT Committee schedules.

Fortunately when we have experienced delays with PMT committee schedules. The delays have typically been for 30 to 60 days.

In the hospital market at PMT Committee approval and formulary win is an important step in the process, but it's just the beginning.

It's important to keep in mind that many hospitals also require <unk>.

Medical executive Sino establishment.

John Poynton: First, we'll continue to expand usage and new formulary-approved accounts with pull-through activities, including in-service, to create a positive first experience and convert surgeons into loyal users. The initial results we've seen and heard from physicians are even better than those we saw in our clinical trials, which is extremely exciting, both for patients and surgeons. In fact, we have several orthopedic surgeons who have been so impressed with XenRelief's results that they've already used it in over 100 TKA, TKA cases. Thanks a lot.

CPO or computerized physician order entry.

And then pharmacy stocking prior to usage in patients.

Okay.

Slide number nine benchmarks the number of unique accounts ordering during the first three months of launch based on Symphony Health data.

Gaining significant traction what's been released in the first three months of launch with 160 unique ordering accounts.

We believe this compares very favorably to the EXPAREL launch in April of 2012, when <unk> launched EXPAREL with a broad label indication and no COVID-19 impact our results.

John Poynton: Second, we'll continue to focus on gaining formulary access at both the Integrated Delivery Network, or IDN, and hospital level to build more unique accounts that are routinely reordered. Our 91% hospital formulary approval rating demonstrates the unmet need in the marketplace and gives us great confidence for the future. Third, we'll continue to expand commercial and employer reimbursement coverage, creating a financial benefit for our customers and greater access to non-opioid solutions for patients.

Yeah.

During the past 18 months three non opioid analgesics generally zero call in an in vivo have launched during the COVID-19 era.

The release number of unique ordering accounts is over four times greater than the next closest competitor.

In addition.

Generally 50% of accounts reordering during the first three months the greatest reorder percentage of the four products benchmark and this analysis.

While the initials and relief results were strong we're far from satisfied and we will continue to grow unique ordering accounts and gained more momentum and formulary approved accounts in the fourth quarter.

John Poynton: The critical factor in commercial payers' coverings and relief outside the surgical bundle has been the demonstration of superiority to the standard of care of bupivacaine in our clinical trials. Zen Relief is the first and only local anesthetic.

We're already seeing growth on both fronts in October and expect further growth in unique ordering accounts with additional formulary approvals through the remainder of the quarter.

John Poynton: designated extended release by the FDA with up to 72 hours of pain reduction. Yesterday's news with CMS issuing guidelines and relief of specific C codes for separate reimbursement and ASCs is another positive step in this process. Finally, we remain confident this strong base of Zinrelief business will put us in an excellent position to expand usage once the FDA approves our new label indications that were previously described by Barry. Now, I'd like to shift gears and review the third quarter results for our Oncology Care franchise.

We've also seen tremendous early results on our reimbursement coverage front.

In both commercial and Medicaid Payors, we've already obtained separate reimbursement outside of the surgical bundled person internally and more than 88 million covered lives in afcs.

In some cases also have separate reimbursement in the hospital outpatient setting.

We think this is an unprecedented coverage for a new post operative pain drug.

A key component of our pricing strategy is in procedures without separate reimbursement.

<unk> lower acquisition cost benefits customers across all settings of care or the drug may be reimbursed under the surgical bundle payments.

John Poynton: The third quarter was another solid performance for the CINB franchise products, with net sales of $21.1 million, which represented a 6% increase over the prior year. We did have some headwinds in the third quarter with the impact of COVID, decreasing cancer screening, and new patient starts.

CMS is still reviewing our pass through application and we fully expect pass through in the new year.

<unk> December 31, 2021, CMS has reimbursement generally at 95% of average wholesale price, which is a very favorable rate for Medicare patients in the outpatient setting.

John Poynton: Secondly, CMS' Oncology Care Model and other value-based contracts support community oncology practices moving towards cheaper generic and biosimilar products. Lastly, competitive products are maintaining high value or net cost recovery to oncology practices with aggressive pricing. Nevertheless, we believe that both Symbonti and Sustol sales are poised for growth in the clinic segment beginning in 2022. This belief is based on two key facts.

Yesterday, we received some great news CMS published the calendar year 2022.

Outpatient perspective payment system.

Final rule and issued generally a specific sic code.

9088 for separate reimbursement in the ASC setting of care effective January one 2022.

This will have a meaningful impact since then really will have ongoing reimbursement and even.

Even beyond the typical three year pass through period.

John Poynton: First, generic fossil profit and ASP reimbursement decreased 27% from the prior quarter, down to $36.45 in Q4'21, which makes Symbionte's value for oncology practices much more attractive in 2020. Second, as a result of COVID, there is a backlog of oncology patients, and we believe that since both products can be used in the HEC and the majority of MEK regimens, as new patients re-enter the system for treatment, these new patient starts will create growth opportunities for both of our products. During the fourth quarter of 2021, we expect CIMB's net product sales to be in the range of $20 to $22 million.

We have four key priorities for the remainder of the year with Zen relate all of them focus on building off the strong base. We built in Q3 first we'll continue to expand usage and new formulary approved accounts with pull through activities, including in services to create a positive first.

And convert surgeons into loyal users.

The initial results, we've seen and heard from physicians are even better than those we saw in our clinical trials, which is extremely exciting both for patients and surgeons.

In fact, we have several orthopedic surgeons, who have been so impressed with generally result.

Already used it and over 100 Teekay.

Teekay eight cases since launch.

Second we will continue to focus on gaining formulary access at.

John Poynton: During 2021, our team did an excellent job of stabilizing our CIMB portfolio net net sales and markets dominated by generic competition. As you can see in the graph, we've generally stabilized BontiNet sales and started the process of growing Sustol following the refresh program we implemented in 2019. As mentioned on the previous slide, we believe that CIMB products are poised for moderate growth in 2022. On slide 15, we take a closer look at Sustol.

At both the integrated delivery network or I began and hospital level to build more unique accounts that are routinely reordering.

Our 91% hospital formulary approval rating demonstrates the unmet need in the marketplace and gives us great confidence for the future.

Third we will continue to expand commercial and employer reimbursement coverage, creating a financial benefit for our customers and greater access to non opioid solutions for patients.

The critical factor in commercial payers covering literally outside the surgical bundle has been the demonstration of superiority to the standard of care bupivacaine in our clinical trials.

John Poynton: During the fourth quarter of 2019, we removed all discounting from Sustol in order to reset the ASP reimbursement for the product. This process takes five quarters to implement, and following the reset refresh program, we returned Sustol to growth in 2021, and we expect continued growth in 2022. Following that brief review of the oncology franchise, I'll now turn the call back over to Barry. Thank you, John, and thanks for the fantastic first quarter launch. I'd now like to turn the discussion over to post-operative nausea and vomiting, or as known as PONV.

Relief is first and only local anesthetic.

Designated extended released by the FDA with up to 20 with up to 72 hours of pain reduction.

Yesterday's news with CMS issuing and relief of specific C code.

For separate reimbursement in Afcs is another positive step in this process.

Finally, we remain confident this strong base of literally business will put us in an excellent position to expand usage once the FDA approves our new label indications that were previously described by Barry.

Barry Cort: It's a large and important new market for Heron, beautifully aligned with our current commercial efforts in the post-operative pain space. The PONV opportunity is about 20 times the size of CINV, and HDX-019 has substantial advantages over available products. We had a successful pre-NDA meeting with the FDA to align on our plan submission, which we plan to submit this quarter. Based on a standard 10-month review period, we could be launching HDX 019 in the fourth quarter of next year, with the opportunity for several hundred million in sales, to highlight why we are so excited about this product.

Now I'd like to shift gears and review the third quarter results for our oncology care franchise.

The third quarter was another solid performance for the <unk> franchise products with net sales of $21 1 million, which represented 6% increase over the prior year.

We did have some headwinds in the third quarter with the impact that COVID-19 decreasing cancer screening and new patient starts.

Secondly, CMS is oncology care model and other value based contracts support community oncology practices move.

Barry Cort: Here's a direct comparison of two dose levels of a preposent to the current market leader on Dancetron, looking at the percent of patients with no vomiting after surgery and patients prophylaxed with these agents. I think everyone on this call would like to be in the top two at Prepedent Arms versus Dancentrix.

Towards cheaper generic and Biosimilar products.

Lastly, competitive products, we're maintaining high value or net cost recovery to oncology practices with aggressive pricing.

Nevertheless, we believe that Bulks, and Bonnie and softball sales are poised for growth in the clinic segment beginning in 2020. This belief is based on two key factors.

Barry Cort: Well, there are approximately 65 million surgical and diagnostic procedures each year where patients are at risk for PONV. We would be focused on the high to moderate risk patients shown in the top pie chart. Based on risk factors, there are approximately 35 million patients a year currently receiving prophylaxis for PONV, usually with on-demand support. Within the group, patients with high to moderate risk for PONV should receive a second agent, such as HTX019. Of even greater importance are the approximately 5 million patients who are having surgical procedures where vomiting or retching could adversely affect their recovery.

First generic Boston proper ASP reimbursement has decreased 27% from the prior quarter down to $36 45 and.

In Q4, 'twenty, one, which makes some bond key's value for oncology practices much more attractive in 2022.

Second as a result of Covid, there's a backlog of oncology patients and we believe that both products can be used in pack and the majority of Mac regiments.

As new patients reentered the system for treatment. These new patient starts will create growth opportunities for both of our products.

During the fourth quarter of 2021, we expect <unk> net product sales to be in the range of $20 million to $22 million.

Barry Cort: This is an important target group for HDX 019. Moving it to PONV fits perfectly with Heron's commercial strategy. We have two primary components of our strategy. First, we want to establish Heron as a leading company in acute care. As I described earlier, the company is clearly off to a fast start and, despite the headwinds, had an excellent first quarter.

During 2021, our team has done an excellent job of stabilizing our CIB portfolio net net.

Net sales in markets dominated by generic competition as you can see in the graph, we have generally stabilized <unk> net sales and started the process of growing self stall. Following the refresh program we implemented in 2019.

Barry Cort: Our agreement with the FDA to expand the label indications will accelerate Xen Relief's growth in the future. With the submission of the NDA for HDX 019 for PONV this quarter, we will be in the enviable position of potentially adding a second commercial product to the acute care franchise in the fourth quarter of next year. This product will allow us to optimize our acute care resources with the same commercial team and customer.

As mentioned on the previous slide we believe that the AMB products are poised for moderate growth in 2022.

On slide number 15, we take a closer look at <unk> during the fourth quarter of 2019, we removed all discounting from soft stall in order to reset the ASP reimbursement for the product.

This process takes five quarters to implement and following the reset refresh program. We returned <unk> to growth in 2021, and we expect continued growth in 2022.

Barry Cort: The second component of our commercial strategy is to return to growth and maximize the profitability of the oncology care business. To recap, we have stabilized sales in a competitive generic market and are poised for moderate growth in 2022. In addition, we've taken important steps to maximize profitability of our oncology care product. The first step is to invest in large-scale manufacturing for Symbonti, which will significantly reduce COGS in 2022. We also have better aligned our resources to support maximizing profitability with a significant cost savings. Throughout the call today, you've heard the commercial numbers from both our product franchises. But to wrap up on our financials...

Following that brief review of the oncology franchise I'll now turn the call back over to Barry.

Thank you John.

Thanks for the fantastic first quarter launch.

I would like to turn the discussion over to post operative nausea, and vomiting, or <unk> known as <unk>.

It's a large and important new market for heron beautifully aligned with our current commercial efforts in the postoperative pain space.

The <unk> opportunity is about 20 times the size of CAE NV and <unk> nine has substantial advantages over available products.

We had a successful pre NDA meeting with the FDA to align on our planned submission.

We plan to submit this quarter.

Based on a standard 10 month review period, we could be launching <unk>.

Fourth quarter of next year with the opportunity for several hundred millions in sales.

To highlight why we are so excited about this product.

Here's a direct comparison of two dose levels of the precedent to the current market leader Ondansetron I'm looking at the percent of patients with no vomiting after surgery and patients prophylaxis with these agents.

Barry Cort: I'll quickly recap these numbers and provide a little more detail on our overall financial picture. Our net product sales for the third quarter of 2021 for both our commercial franchises were $23.2 million compared to $20 million for the same period in 2020, which represents a 16% increase in year-over-year growth. For Zen Relief, we recorded 2.1 million in net product sales for the first quarter of 2021. For Symbonte, net product sales were $18 million in the third quarter, compared to $19.8 million in the same period last year.

I think everyone on this call we'd like to be in the top two at represent arms versus Ondansetron.

While there are approximately 65 million surgical and diagnostic procedures, each year, where patients are at risk for <unk>.

We would be focused on the high to moderate risk patients shown in the top Pie chart.

Based on our risk factors there is approximately 35 million patients a year currently receiving prophylaxis for NV.

Usually with Ondansetron.

Within the group patients with high to monitor at risk for <unk> should receive a second agent such as <unk>.

Of even greater importance are the approximately 5 million patients, who are having surgical procedures, where vomiting or <unk> could adversely affect their recovery.

Barry Cort: For Sustol, net product sales were $3.1 million for the third quarter of 2021, compared to $0.2 million for the same period in 2020, with Sustol demand units increasing by 22% over the prior quarter. In the fourth quarter of 2021, we expect net product sales for the oncology care franchise to be in the range of $20 to $22 million. And in 2022, we expect to see moderate growth in net product sales. In terms of our operations, net cash used for operating activities during the nine months ended September 30, 2021, was $158.1 million, compared to $132.3 million for the same period in 2020.

This is an important target group for <unk>.

Moving it fits perfectly with <unk> commercial strategy.

We have two primary components of our strategy first is to establish <unk> as a leading company in acute care.

As I described earlier generally.

As currently is clearly off to a fast start and despite the headwinds had an excellent first quarter of launch.

Our agreement with the FDA to expand the label indications once approved will accelerate generally EPS growth in the future.

With the submission of the NDA for <unk>, one nine for.

This quarter.

We will be in the enviable position of potentially adding a second commercial product to the acute care franchise in the fourth quarter of next year.

This product will allow us to optimize our acute care resources with the same commercial team and customers.

The second component of our commercial strategy is to return to growth.

Maximize the profitability of the oncology care business.

To recap, we have stabilized sales and a competitive generic market and are poised for moderate growth in 2022.

Barry Cort: The increase in our net cash use for operating activities was primarily due to changes in working capital related to the launch of XenRelief in July 2021, including manufacturing of commercial inventory. We expect net cash use for operating activities of $45 to $48 million in the fourth quarter, and we anticipate that our net cash usage will continue to moderate lower in 2022 as net product sales increase, and we realize cost savings from reduced expenses in the oncology care franchise and from anticipated large-scale manufacturing.

In addition to <unk>.

Taken important steps to maximize profitability of our oncology care products.

The first step is to invest in large scale manufacturing for <unk>, which will significantly reduce cogs in 2022.

We also have better aligned our resources to support maximizing profitability with a significant cost savings.

Throughout the call today, you've heard the commercial numbers from both our product franchises.

To wrap up on our financials.

Quickly recap these numbers and provide a little more detail on our overall financial picture.

Our net product sales for the third quarter of 2021 for both our commercial franchises was 20 382 million compared to $20 million for the same period in 2020, which represents a 16% increase in year over year growth.

Barry Cort: Finally, as of September 30, 2021, we had cash, cash equivalents, and short-term investments of $202.8 million. Overall, I'm very pleased with our progress over the last several months, and we look forward to carrying our momentum through the end of 2021 as we look forward to expanded commercial opportunities for Zen Relief through 2022 and continue to execute, driving our oncology care franchise forward. With that, we're ready to take questions. GG.

For us generally IRA recorded $2 1 million of net product sales for the first quarter of 2021.

For <unk> net product sales were $18 million in the third quarter compared to 19 million $19 8 million in the same period in 2020.

<unk> net product sales were $3 1 million for the third quarter of 2021 compared to <unk> 2 million in the same period in 2020, we assessed all demand units increasing by 22% over the prior quarter.

In the fourth quarter of 2021, we expect net product sales for the oncology care franchise in the range of $20 million to $22 million in.

Operator: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Josh Schwimmer from Evercore ISI. Your line is now open.

And in 2022, we expect to see moderate growth in net product sales.

In terms of our operations net cash used for operating activities. During the nine months ended September 32021 was $158 1 million compared to $132 3 million for the same period in 2020.

Josh Schwimmer: Great. Thanks so much for taking the question and thanks for providing such a detailed overview of the medicine relief launch metrics. Just a few questions for me. First, can you help me understand the rationale for generating more PK and safety data to expand the label for the broad ortho and soft tissue indications? What data are you going to generate from those studies that you don't already have? And then, for the ongoing launch, where do you expect you're going to be for covered lives at the end of the year for both hospitals and ASCs after you get through these additional PNT committees? And for the wins that you've been generating, have they been in settings that are typically expiral-friendly or not, or is it a mix of the two? Thanks, Josh. I appreciate the questions.

The increase in our net cash used for operating activities was primarily due to changes in working capital related to the launch of the Zen relief in July 2021, including manufacturing of commercial inventory.

We expect expect net cash used for operating activities of $45 million to $48 million in the fourth quarter and we anticipate that our net cash usage will continue to moderate lower in 2022 as net product sales inquiries and we realized cost savings from reduced.

<unk> expenses in the oncology care franchise and from anticipated large scale manufacturing.

Finally as of September 32021, we had cash cash equivalents and short term investments of $202 $8 million.

Overall im very pleased with our progress over the last several months and we look forward to carrying our momentum through the end of 2021 as we look forward to expanded commercial opportunity present relief.

Unknown Executive: On the first one, so just for clarification, the first SNDA that we've already submitted contained actually no new information, and so it was based on the data we'd already generated. The agreement with the FDA was that that data would get us, as I described, a broadened indication covering foot and ankle surgical procedures, small to medium open abdominal surgical procedures, and lower extremity total arthroplasty, so a clear broadening of the indication statement.

Through 2022, and continue to execute driving our oncology care franchise forward.

With that we're ready to take questions Gigi.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.

Please standby, while we compile the Q&A roster.

Our first question comes from the line of Josh Schwimmer from Evercore ISI. Your line is now open.

Unknown Executive: To go beyond that, the agency was looking to confirm that when the product is placed in other regions of the body, there wouldn't be any surprises in terms of pharmacokinetics and safety. The agency, and this is not just for us, this is across all of the recently developed locally applied bupivacaine products, they're very interested in making sure that we keep the risk of late, local anesthetic systemic toxicity to a minimum, and they just want to make sure that there are no surprises in the pharmacokinetics of the product.

Great. Thanks, so much for taking the question and thanks for providing such a detailed overview on the on this.

It's an early launch metrics just a few questions for me.

First can you can you help me understand the rationale for generating more PK and safety data to expand the label for the broader ortho and soft tissue indications what data are you going to generate from those studies that you don't already have.

And then for the for the ongoing launch.

Unknown Executive: Because they've indicated they've seen unusually high levels with a prior approved product, and they want to confirm that that's not the case with ours. So the agreement is that since we have the data that I just mentioned in certain regions, we're going to supplement that information and collect data in other regions that we don't have current data in. So that would be, for example, the shoulder.

Where do you expect youre going to be for covered lives at the end of the year for.

Both hospitals and ASC is after you get through these additional PMT committees and for Wednesday.

<unk> been generating.

In settings that are typically EXPAREL friendly or not friendly or just or is it a mix of them. Thanks.

Unknown Executive: If you're looking at getting a broad orthopedic indication, both upper and lower extremity, we'll have lower extremity from the currently submitted SNDA. They're asking for some PK data in the shoulder in order to get an across-the-board arthroplasty. They're looking for data in the spine in order to include a totally broad indication for orthopedics because that's an important component of orthopedics, and it's also a highly vascular area. So they want to see data in the spine, a very nominal amount, but nonetheless, it's an important component of what they're looking for.

Thanks, Josh.

I appreciate the questions on the first one.

So just for clarity so the the first NDA that we've already submitted.

Ah contained actually no new information.

And it was so it was based on the data we'd already generated.

The agreement with the FDA was that that data would get us.

As I described a broadened indications covering.

Foot and ankle surgical procedures.

Small to medium open.

Abdominal surgical procedures.

And lower extremity or total arthroplasty so.

A clear broadening the indication statement to go beyond that the agency was looking to confirm that when the product is placed in other regions of the body that there wouldn't be any surprises and.

Unknown Executive: And we're also doing some additional work in abdominoplasty that kind of checks the box for large abdominal procedures. And so that's really the rationale for the request. As I noted, the great part of this is that there's no requirement to do randomized efficacy studies, so there's a very limited risk of failure. Because we already know from the data we've collected so far that our product really releases bupivacaine independently of vascularity and independently of anatomic size, and we've already done significant work in abdominoplasty as well as in highly vascular breast augmentation mammoplasty.

In terms of the pharmacokinetics and safety.

Agency and this is not just for US. This is across all of the recently developed locally applied and bupivacaine.

<unk> there.

They are very.

Interested in making sure that we keep the risk of last local anesthetic systemic toxicity to a minimum and they just want to make sure that theres no surprises in.

The pharmacokinetics of the product because they have indicated they have seen unusually high levels with the prior approved.

<unk> then they want to confirm that that's not the case with ours.

So the agreement is that since we have the data that I just mentioned in certain regions.

To supplement that information and collect data in other regions.

That we don't have current data and so that would be for.

For example shoulder.

If youre looking at getting a broad orthopedic indication all both upper and lower extremity.

We'll have lower extremity from the current lease submitted NDA.

Unknown Executive: So we have no expectation of seeing any unusual drug levels, and we just need to check that box. And so those studies are ongoing, and we'll collect the data and allow us to submit the application in the second half of next year. And so the second part of that question, I think I'll turn over to John.

They are asking for some PK data in the shoulder in order to get it across the board arthroplasty.

Theyre looking for data in spine in order to include a totally broad application.

Indication for orthopedics, because thats a important component of orthopedics.

And it's also highly vascular area.

John Poynton: Yeah, absolutely. Hi Josh.

So they want to see data in spine, a very nominal amount, but nonetheless, it's an important component of what theyre looking for.

John Poynton: I just want to clarify your question on covered lives. Were you referring to the 88 million covered lives that we currently have for separate reimbursement? I just want to make sure I understand your question correctly.

And we're also doing some additional work in Abdominoplasty.

That kind of checks the box for large abdominal procedures.

John Poynton: Just curious where you think you're going to be both for coverage in hospitals and for ASL, years to get through this next round of formulary discussions. Yeah, so with respect to the payer mix, right now, we're covering payers that represent about 220 million covered lives, and we are making good progress with additional ones. Some of them will be basically impossible to get because you'll need to have contracts that are actually developed at the provider stage rather than, you know, what they'll be able to offer.

And so that's really the rationale for the request.

As I noted the great part of this is that there is no requirement for doing randomized efficacy studies.

So there is very limited risk of failure.

And because we already know.

From the data we've collected so far that our product really.

Leases bupivacaine independently of vascularity and independently of anatomic size and we've already done.

Significant work and Abdominoplasty bid.

As well as a highly vascular breast.

Breast augmentation mammoplasty. So we have no expectation of seeing any unusual drug levels, and we just need to check that box and so those studies.

Our ongoing in <unk>.

Collected data and allow us to submit the application in the second half of next year.

And the second part of that question I think I'll turn it over to John.

Yeah, absolutely Hi, Josh just wanted to clarify your question on covered lives were you referring to the 88 million covered lives that we currently have for separate reimbursement is.

John Poynton: But we're taking a number of approaches to expand that as broadly as we can. One is a strategy that we're really working with employer coalitions and unions that have a great interest in making sure that their employees and their families are able to remain opiate-free post-surgical procedures. So that's been something that we're gaining a lot of momentum on. We think we'll continue to expand that number. At this point, I'm really not comfortable giving a specific number, but we have made it a top priority to make sure that Zinc relief is available and separately reimbursed with commercial payers in as many ASCs and hospital outpatient settings as possible.

Just wanted to make sure I understand your question correctly.

Just curious where you think youre going to be both for for coverage and hospitals and for ASC is by end of the year as you get through this next round of formulary discussions.

So.

With respect to the Payor mix right now, we're covering payers that represent about 220 million covered lives.

And we are making good progress with additional ones.

Some of them will be.

Basically impossible to get because youll need to have contracts that are actually developed at the provider stage, rather than what they'll be able to offer but we're taking a number of approaches to expand that as broadly as we can one is a strategy that we're really working with employer coalitions and union.

John Poynton: I think your second question was about the P&T committee wins that we're getting right now with formulary acceptance. And I would say that the majority of them right now are accounts that Expirel is currently on formulary. So that would answer that question.

That have great interest in making sure that their employees and their families are able to remain opiate free post surgical procedure.

John Poynton: I think one of the things that we're most excited about is that we're also able to add some major hospital systems that Expirel has never gained formulary access to, and it's really based on the strength of our clinical data. They've been doing an actual evaluation in some of these hospital systems, and the results have really been stellar. So we're excited about that because our goal, ultimately, is not just to replace Expirel, but it's also to really make significant headway with bupivacaine in order to reach our goals.

That's been something that we're gaining a lot of momentum and we think we will continue to expand that number.

At this point I'm really not comfortable giving a specific number but we have made it a top priority to make sure thats been relief is available and separately reimbursed.

With commercial payers and its many ASC and hospital outpatient settings as possible I think your second question was the TNT Committee wins that we're getting right now with formulary acceptance and I would say that the majority of them right. Now are accounts that EXPAREL is currently on formulary.

John Poynton: So let me know if that answered your question about Skid Row.

Josh Schwimmer: That's good. I'll let others ask. Then I'll jump back in the queue.

So that that would answer that question I think one of the things that we're most excited about.

Operator: Thank you. Our next question comes from the line of Brandon Folkes from Cantor Fitzgerald. Your line is now open.

Is that we're also able to add some major hub.

Hospital systems that EXPAREL has never gained formulary access to and it's really based on the strength of our clinical data based on doing an actual evaluation and some of these hospital systems and the results have really done stellar so.

Brandon Richard Folkes: Thanks for taking my questions and congratulations on a good quarter. I just want to follow up on that prior question. I heard your comments about getting on Formulary where Expro is, but maybe just in terms of usage, could you just elaborate if you have any feedback?

We're excited about that because our goal ultimately is not just to replace EXPAREL, but it's also to really make significant headway with bupivacaine in order to reach our goals. So let me know if that answered your question.

Brandon Richard Folkes: that if you are actually being used in place of generic bupivacaine.

Ill, let others ask I'll jump back in the queue. Thanks.

Brandon Richard Folkes: And then maybe secondly, on the types of procedures, can you just comment a little bit in terms of what procedures you are gaining traction in, understanding that you're promoting to the label, but there are a number of formularies that have not placed usage restrictions on the product. So are you hearing about much off-label usage at this stage, or is it still a bit early? Thank you.

Thank you.

Our next question comes from the line of Brandon Folkes from Cantor Fitzgerald. Your line is now open.

Alright, thanks for taking my questions and congratulations on a good quarter.

Wanted to follow up on that prior question and yes.

I heard your comments about getting on formulary with EXPAREL is but maybe just in terms of usage could you just elaborate if you have any feedback if you actually are being used in place of generic bupivacaine or other branded products at this stage and then maybe secondly.

John Poynton: Yeah. Would you like me to take it, Barry?

John Poynton: Okay. So, with respect to, are we being used? Absolutely.

On the types of procedures can you just comment a little bit in terms of what procedures, you are gaining traction and understanding you're promoting to the label, but there are number of formularies that have not placed you said your strict restrictions on the product. So all youre hearing, but much off label usage at this stage. Thank you.

John Poynton: If you take a look at those orthopedic surgeons that I referred to as using XenRelief in over 100 TKA cases, those are all hospital-based physicians. So, we're clearly being used in hospitals. I will point out, and this was part of my prepared remarks, that the formulary approval process is only the first step. On other accounts, we haven't gotten usage even with formulary approval yet because you have to work through the medical executive sign-off, make sure you're getting through the computerized physician order entry, and pharmacy ordering.

Yes.

You want me to take that please.

Please.

So with respect to are we being used at absolutely.

You take a look at those.

Those orthopedic surgeons that I referred to.

As using literally and over 100 Teekay eight cases those are all hospital based physicians. So we're clearly being used in hospitals.

We'll point out and this was part of my prepared remarks is is that the formulary approval process is only the first step.

John Poynton: So, that's going to be a bit of pent-up demand that we'll have in the marketplace, but we're very happy about the usage that we're getting thus far. The second question was, could you remind me?

And other accounts, we haven't gotten the usage, even with formulary approval, yet because you'd have to work through the medical executive sign off.

Sure Youre getting through the computer.

Yeah, the computerized physician order entry pharmacy ordering so.

John Poynton: In time, the procedures, right, in terms of unrestricted usage, is it all being used on men, or are you caring about some off-label usage at this stage? Yeah, yeah. Thanks, Brandon. I appreciate the reminder there.

That's going to be a bit of pent up demand that will happen in the marketplace, but we're very happy about the usage that we're getting thus far.

I'm sorry, the second question was remind me.

And the time the procedures right.

Unrestricted usage.

Is it.

John Poynton: Yeah, yeah. Thanks, Brandon. I appreciate the reminder of that.

Or are you carrying about samples label usage at this stage.

Yes, yes, thanks, Brandon I appreciate the reminder, there so.

John Poynton: And what we have seen is, you know, we're only promoting on label our three indicated procedures. And as I talked about from a formulary approval standpoint, 55% of hospitals and IDNs that have approved us are for unrestricted use. So we have heard anecdotally about use outside of the indicated procedures. When a surgeon is doing a case there, our representatives leave the operating room since we can't be part of that.

What we have seen is.

We're only promoting on label or three indicated procedures and as I talked about from a formulary approval standpoint, 55% of.

Hospitals, and IBM federally approved doses for unrestricted views. So we have heard anecdotally about use outside of the indicated procedures.

When surgeons doing a case there are representatives leap.

Operating room since we can't be part of that but.

John Poynton: But we have heard anecdotally about cases of orthopedic surgeons having good results with TKA, using it in total hip replacement, and having very fine results there. But that's obviously not something that we're promoting. It's all been anecdotal information thus far. Barry, I don't know if you wanted to say anything else about that. No, look, I think I think you covered it exactly right.

But we have heard anecdotally about cases like with orthopedic surgeons, having good results and antiques.

Teekay.

Using it in total hip replacement and having very fine results there, but that's obviously not something that we're promoting it's all been anecdotal information thus far.

I don't know if you want to say anything else about that.

No look I think I think you covered it exactly right. We clearly have have heard about the use of the product outside of the three.

Barry Cort: We clearly have heard about the use of the product outside of the three surgical procedures in the indication. And, you know, we, through medical affairs, collect that information. We want it to help us in terms of any future, you know, clinical studies that we might be doing, like the spine study, and you know, learn from positive experiences that people have already had. But, as already noted several times, we clearly don't promote it.

Surgical procedures in the indication.

And we through medical affairs.

Collect that information.

Wanted to.

To help us in terms of any future clinical studies that we might be doing like the spine study.

Learn from positive experience that people have already had.

But.

As already noted several times, we clearly don't promote on it we don't allow the reps due to go into the or when that kind of procedures being done.

Barry Cort: We don't allow the reps to go into the OR when that kind of procedure is being done. You know, obviously, a lot of that is going to change once we have the expansion of the label. And we look forward to that, because that's going to really open up the opportunity for a lot of valuable communication with surgeons and, you know, really get the best possible outcome for patients.

Obviously, a lot of that is going to change.

Once we have the expansion of the label.

And we look forward to that because thats going to really open up the opportunity for a lot of valuable communication.

With with surgeons and really get the best possible outcome for patients.

Operator: Thank you. Our next question is from the line of Boris Peaker from Cowen. Your line is now open. Good.

Great. Thank you very much.

Thank you. Our next question is from the line of Boris <unk> from Cowen. Your line is now open.

Boris Peaker: Great. My next question is maybe a little more folks in the formulary discussions. I'm curious, are you being compared directly to Xperil? And are these facilities ending up choosing one drug over another? Or, in many cases, are they putting both Xperil and Zunariluf on the formulary?

Great. My next question is maybe a little more extreme a formulary discussions I'm curious are you being compared directly tax Bureau, and are these facilities ending of choosing one drug over another or in many cases that they are putting both EXPAREL and general left on the formulary.

John Poynton: So yeah, that's a great question, Boris. In the vast majority of accounts that we have been added to formulary, they've actually maintained XBRL on formulary if it had been on formulary to begin with, as I talked about in the earlier question that Josh asked, really talked about how the fact that we're getting both accounts where Expirel is on formulary and where it isn't. But that's really not surprising.

John you want to start that one too.

Sure.

So yes, that's a that's a great question Boris in the vast majority of accounts that we have been added to formulary.

They've actually maintained EXPAREL on formulary, if it had been on formulary to begin with as I talked about in the earlier question that.

That Josh asked really talked about how the fact that we're getting both accounts, where EXPAREL is on formulary and where does that but that's really not surprising we are not looking to have them kicked off formulary. They certainly have indications whether it's for things like pediatrics, our nerve block, where they wouldn't use and relief and so we have no.

John Poynton: We're not looking to have them kicked off formulary. They certainly have indications, whether it's for things like pediatrics or nerve block, where they wouldn't be used for relief. And so we have no problem with that.

Problem with that what our goal is to get access to the product have a great experience for surgeons and patients to get as much usage as we possibly can so we're not looking for this to be an either or situation.

John Poynton: What our goal is to get access to the product, have a great experience for surgeons and patients, and get as much usage as we possibly can. So we're not looking for this to be an either-or situation, but if certainly some accounts may in the future look to make therapeutic substitutions within the label, we'd be all for that as well. Yeah, I'll just remind everyone that, you know, xBarrel has single-digit penetration in terms of the potential patient population.

But certainly some accounts may in the future look to make therapeutic substitution within label, we'd be all for that as well.

Yes, I'll, just I'll, just remind everyone that.

EXPAREL.

Has single digit penetration in terms of the potential patient population.

John Poynton: And so, and, you know, again, it's not our intent to try to get them removed from formularies. You know, our intent is to get our product used in as many patients as possible and get the best outcome for those patients as possible. So, the fact that they would stay on formulary and particularly stay on for those indications, very specific indications like pediatrics and nerve block we don't have, is expected.

And so.

And again, it's not our intent to try to get them removed from formularies.

Our intent is to get our product used in as many patients.

As possible and get the best outcome for those patients as possible. So.

The fact that they would stay on formulary in particular stay on for those indications.

Very specific indications like pediatrics and nerve block, we don't have is as expected.

No.

John Poynton: So hopefully, that answers your question.

Hopefully that answers your question.

John Poynton: Yeah, it's certainly helpful. My last question is, on the competitiveness, so you received the C code. Can you comment on the competitive advantage that it gives you and when and how should we actually see that competitive advantage evolving?

Certainly helpful. My last question is on the competitive so you've received a C code can you comment that competitive advantage that gives you and when and how should we actually see that competitive advantage evolving.

Well right.

John Poynton: Go ahead, John.

Go ahead go ahead Sir.

Well I was going to say the C code.

John Poynton: Well, I was going to say that the C code is really was established for the ambulatory surgical center market, and that will become effective on January 1st, 2022. So from a competitive advantage standpoint, we'll be in the same position as other companies that are being reimbursed in that setting of care. In addition, CMS continues its evaluation generally for pass-through status. That's where we think one of the major advantages could be because pass-through status would provide reimbursement not only in the ambulatory surgical center of care but also in the hospital outpatient setting of care. And that's a place where the leading branded product, Expiral, does not have coverage. And we'll...

Is really.

Was established for the ambulatory surgical center market and that will become effective January one of 2022. So from a competitive advantage standpoint will be in the same position as other companies that are being reimbursed in that setting of care. In addition, CMS is.

The revaluation.

And then really for pass through status, that's where we think one of the major advantages could be because pass through status provide reimbursement not only in the ambulatory surgical center of care, but also in the hospital outpatient setting of care and that's a place where.

The leading branded product EXPAREL does not have coverage.

John Poynton: And where would you get that past their status?

And when would you get that pass through status.

John Poynton: Well, they're still evaluating our application. So, as I talked about in my comments, we expect that sometime in the new year, generally, they will make their determination, about four to two to four weeks prior to the end of the quarter. So we could hear as soon as, you know, early to mid-December on the CMS decision. Great. Thanks for taking my comments, Boris.

While they are still evaluating our application so as I talked about in my comments, we expect that sometime in the new year.

Generally they make their determination.

About 40.

Two to four weeks prior to the ended the quarter. So we could hear as soon as is.

Early to mid December.

<unk> decision.

Great. Thanks for taking my questions.

Thanks for us.

I'll, just remind everyone that the.

Boris Peaker: You know, I'll just remind everyone that the Medicare percent of patients that we're currently targeting is a little less than 20% in the ASC and in the outpatient hospital setting. And that's why the commercial coverage that John described is so exciting and important, because commercial payers are really the bulk of the patient population. They're really the bulk of patients going through our two primary target areas of the outpatient hospital and the ASC.

The Medicare percentage of patients that were currently targeting is a little less than 20% in the ASC and in the outpatient.

Hospitals setting.

And Thats why the commercial coverage that John described.

So exciting and important is because commercial payers are really the bulk of patients.

Going through our two primary target areas of outpatient hospital and ASC.

But the the <unk>.

Boris Peaker: But the extended coverage that this C code provides, going beyond the, you know, three years of normal pass-through, is important because it gives confidence to an ASC that may be reluctant to take on a new product if it only has temporary coverage. They're always worried that the surgeons are going to love a product, it's getting reimbursed, and then three years later, they have this huge usage, and all of a sudden, the reimbursement goes away. So the fact that this is more of an expected to be continued ongoing for an extended duration is actually very positive in terms of getting more ASCs to adopt products that are covered.

Extended coverage that the C code provides be going beyond the.

Three years of normal pass through.

Also it's important because it gives confidence to.

NASD that may be reluctant to take on a new product.

If it only has temporary coverage there always worried that the surgeons are going to love our product is getting reimbursed and then three years later.

Have this huge usage and all of a sudden the reimbursement goes away. So the fact that this is more of a expected to be continued ongoing for <unk> and <unk>.

Extended duration.

Is actually very positive in terms of getting more assays to adopt products that are covered.

Operator: Thank you. Our next question comes from the line of Serge Belanger from Needham and Company. Your line is now open.

Thank you. Our next question comes from the line of Serge <unk> from Needham <unk> Company. Your line is now open.

Hi, good afternoon.

Serge D. Belanger: Good afternoon. Just a couple of questions for me. First on, uh, Zin-relief.

Afternoon.

Couple of questions for me.

First on.

Serge D. Belanger: Can you talk about where you expect...

Can you talk about where do you expect the product to.

Serge D. Belanger: [inaudible]

Serge D. Belanger: And you discussed the label expansion plan.

<unk> traction as things ramp up here is it going to be the ASC setting and <unk>.

Serge D. Belanger: Curious if those plans include a nerve block indication and whether that's something you may seek separately. Thanks.

<unk> or hospitals and then.

You discussed the label expansion plans.

Yes.

John Poynton: separately. Thanks. Thank you. Thank you. Yeah, I'll take the first one, Serge.

If those plans include a nerve block indication and.

Whether thats something you may seek separately. Thanks.

Okay.

Yeah I'll take the first one search so as far as traction if you look at the first 160 unique ordering accounts that we had in July through September.

John Poynton: So, as far as traction goes, if you look at the first 160 unique ordering accounts that we had in July through September, those accounts were divided pretty equally, 50-50 on the number of ordering accounts. But a significantly higher percentage of that business was coming from the hospital setting of care, which is not surprising because, you know, hospitals obviously are performing far more procedures than what ASCs are doing. If you look at the overall ASC market, it's, you know, somewhere around 15% of our targeted procedures. So, that's what we would expect. But ASCs have a lower hurdle rate as far as getting in and getting early usage, so I think that probably answered your question. Oh, boy.

Those accounts were divided pretty equally 50 50, the number of ordering accounts.

Significantly higher percentage of that business was coming from the hospital setting of care, which is not surprising because hospitals, obviously are performing far more procedures than what <unk> are doing if you look at the overall ASC market, it's somewhere around 15% of our targeted procedures.

So that's what we would expect but afcs have a lower hurdle rate as far as getting in and getting early usage.

So I think that probably answered the question Serge yes, hopefully.

John Poynton: Yeah, on the label expansion, certainly the two SNDAs that we have been discussing are strictly for local use, and we don't anticipate in the future doing any additional nerve block work with Xen Relief. Xen Relief was designed based on the unique synergy that we observed between bupivacaine and a small amount of meloxicam, where we see significantly enhanced pain reduction, even in the first 24 hours, but continuing in the second 24 and then the third 24 hours of use compared to bupivacaine alone. And that's because of the local inflammation that occurs when you cut through tissue and bone.

Yes on the label expansion certainly the two S. NDA is that that we have been discussing are strictly for local application.

And we don't anticipate in the future doing any additional nerve block work.

Zen relief generally was designed based on the unique synergy that we observed between bupivacaine and the small amount of meloxicam.

Where we see significantly enhanced pain reduction even in the first 24 hours, but continuing in the second 24 in the third 24 hours.

Views compared to bupivacaine alone.

And that's because of the.

<unk> local and.

Flat inflammation that occurs when you cut through tissue and bone that you get this local inflammation and by using <unk>, you can see greater benefit from that bupivacaine.

Barry Cort: You get this local inflammation, and by using Xen Relief, you can see greater benefit from the bupivacaine. However, that situation would not occur in a nerve block setting. So we'd really lose the great pharmacology that we have with Xen Relief by moving it into a nerve block setting. But I'll point out that, as you may be aware, our competitor is suing ASA because of a publication which highlighted that there didn't appear to be any benefit of Expirel versus bupivacaine in nerve block.

That situation would not occur in a nerve block setting so we'd really lose the great pharmacology that we have with Sen related.

Moving it into a nerve block setting, but I will point out that as you may be aware our.

Competitor is suing.

Assay because of publication.

<unk> highlighted that there didnt appear to be any benefit of EXPAREL versus bupivacaine.

In nerve block and so it's our view.

That it's perfectly reasonable just to simply used low cost bupivacaine, where an anesthesiologist thinks theres a need for a nerve block.

And then use generally locally applied.

To provide a much longer duration of benefit.

And so we think that's the optimal outcome versus trying to use an extended release product.

And for the nerve block itself.

Okay.

Just a quick one on the CRM franchise, you mentioned you expect.

Barry Cort: And so it's our view that it's perfectly reasonable just to simply use low-cost bupivacaine where an anesthesiologist thinks there's a need for a nerve block and then use Xen Relief locally applied to provide a much longer duration of benefit. And so we think that's the optimal outcome versus trying to use an extended release product for the nerve block itself. Just a quick one on the CI&V franchise. You mentioned you expect the franchise to return to growth in 2022. Just curious if you...

The franchise through returned to growth in 2022, just curious if you.

We expect to return to prior.

2018 levels for example, especially for <unk> given the changes.

Based on the value based contracting reimbursement.

Andrew or affecting the market dynamics.

John.

Yes, so the guidance that we provided today surge was that we expect.

Moderate growth in 2022, and two re achieved those levels would be significantly higher than what I think we would define as moderate we think with some <unk>. There are a number of things that are really working in our favor.

Serge D. Belanger: expect to return to prior

Serge D. Belanger: You know, the 2018 levels, for example.

John Poynton: Dr. David C. Cohen, Serge Belanger, Carl Byrnes, David Szekeres, William Forbes, Heron Therapeutics Inc., based on value-based contracting reimbursement that is affecting the market dynamics. Yeah, so the guidance that we provided today, Serge, was that we expect, you know, moderate growth in 2022 and that to reach those levels would be significantly higher than, you know, what I think we would define as moderate. We think with Symbonte that there are a number of things that are really working in our favor.

One is that generic fossil Providence as I talked about in my comments out of reimbursement has gone down to 30.

$36 45.

The value that they are able to offer even by aggressive pricing for community practices isn't there and.

Another key factor is that.

The ASP reimbursement falling so low within the hospital market beginning January one 2022, there'll be no reimbursement for generic <unk> outside of that.

The bundled payment so we think those two combination.

John Poynton: So, we think those two combinations of events, both the impact on the clinic market with the lower ASP and the reimbursement, and no reimbursement at all in the hospital market, lent themselves to, you know, allowing us to get Symbonte back on the growth track as we enter 2022. I would expect that we'd provide a bit more guidance on that, you know, with the year-end results on what we think 2022 will look like. Thank you.

Events both.

The impact on the clinic market with the lower Asps in the reimbursement and no reimbursement at all in the hospital market lends itself to.

Allowing us to get.

Some bouncing back on the growth track as we enter 2022, I would expect that we'd provide a bit more guidance on that.

With the year end results on what we think 2022, what look like.

Okay, great. Thank you.

Operator: Thank you. Our next question comes from the line of Kelly Shee from Jeffries. Your line is now open. Thank you for taking the time to join us.

Sure.

Thank you. Our next question comes from the line of Kelly <unk> from Jefferies. Your line is now open.

Thank you for taking my questions I wonder for the coupon of $1 million sales from this quarter. What do you will be able to put a number on this play to a volume from ASC settings versus hospital settings for the assay.

Kelly Shee: Thank you for taking my questions. I wonder for the $2.1 million sales from this quarter, would you be able to put a number on the split of volume from AFC settings versus hospital settings? For the AFC, is it well below 20% at this moment? And after C-code in the next year, would you be able to, like, say the growth, the different growth rates under each setting?

Oh, well below 20% at this moment and after Steve call. It in the next year would you be able to like say.

So as different growth rates on the <unk>.

Setting thank you.

Kelly Shee: Thank you.

John Poynton: Okay, so on your first question, the AFC volume, so the 2.1 is what we sold into the distribution channel. What was pulled out from a demand standpoint, it was probably about 30% in the first quarter was driven by AFC accounts. And as I talked about earlier, the mix of unique ordering accounts was about 50-50. So it gives you a sense of, you know, the greater volume coming out of the hospital marketplace.

Okay. Okay. So.

On your first question.

The AFC volume.

The $2 one is what we sold into the distribution channel what was pulled out from a demand standpoint, it was probably about 30%.

The first quarter was <unk>.

Given by AFC accounts, and as I talked about earlier the mix up unique ordering accounts was about 50 50. So it gives you a sense of.

Greater volume coming out of the hospital marketplace.

Kelly Shee: And I wasn't really sure about your second question. Could you please repeat that? Oh, yes.

And I wasn't really sure on your second question could you please repeat that.

John Poynton: Oh yeah, so what kind of change do you expect in terms of the role it will play under SA versus hospital settings in the next year? Yeah, so, um,

So what kind of changing the packaging in terms of all of this play.

Andreas <unk> versus hospitals that are in the next year.

Yeah. So.

John Poynton: Yeah, so, for that first quarter, like I said, in actual demand, it was about 70-30, with 70% being in the hospital. We would expect going forward that it would normalize and probably, you know, with upwards of over 80% of our business coming from the hospital market and probably, you know, roughly 20% from the ASC market.

For that first quarter like I said, an actual demand. It was about 70 30, 70% being in the hospital, we would expect going forward that it was more normalized and probably.

Upwards of over 80% of our business coming from the hospital market.

And probably you know.

Roughly 20% from the ASC market.

Operator: Thank you. Our next question comes from the line of Josh Schwimmer from Evercore ISI. Your line is now open.

Thank you very much.

Youre welcome. Thank you again.

Thank you. Our next question comes from the line of Josh swimmer from Evercore ISI. Your line is now open.

Josh Schwimmer: Thanks for taking the follow-up. I realized I was asking the wrong question about covered lives and hospitals because they don't go by covered lives. So maybe you can talk about the successes you've had at P&T committees and at hospitals, kind of where you are in that progress, the percentage of hospitals that you're targeting, and what the cadence of those PNT decisions will be through the rest of this year and then into 2020. Right.

Thanks for taking the follow up.

I was asking the wrong question about covered lives and hospitals.

Go buy covered lives. So maybe you can talk to the successes you've had at P&G committees at hospitals kind of where you are in that and that progress either in terms of.

Percentage of hospitals that you are targeting targeting and what the cadence of those PMT decisions will.

It will be through the rest of this year and then into 2022.

Right so.

John Poynton: So, as we described today, we have 126 formulary approvals, and the vast majority of that number are actually with hospital systems. We have another 150 P&T committees that are scheduled to meet between now and the end of the year, Josh. So, you know, that gives you a sense of what the total could be.

As we described today, we have 126 formulary approvals, but vast majority of that number are actually with hospital systems.

We have another 150 PNT committees that are scheduled to meet between now and the ended the year Josh So.

That gives you a sense of what the total could be we're targeting.

John Poynton: We're targeting... 1300 hospitals overall. What's interesting about the P&T is, you know, every week that we update this, you know, we're seeing more and more P&T scheduled, some of them I haven't gotten into, are scheduled already for 2022. But, you know, we continue to make that a priority, and we will get as many of those as we possibly can. I think what's very encouraging for us are two things.

1300 hospitals overall.

What's interesting about the PMT as every week that we update this.

Seeing more and more PMT scheduled some of them I haven't gotten into.

Our scheduled already for 2022, but we continue to make that a priority and.

We will get as many of those as we possibly can I think whats very encouraging for US are two factors. One is is that we do have a 91% PMT committee approval rate in hospitals and the fact that the majority of those hospitals are prepaying and relief for.

John Poynton: One is that we do have a 91% P&T committee approval rate in hospitals, and the fact that the majority of those hospitals are approving and relief for unrestricted usage at 55%. But, you know, as far as the cadence, you know, with COVID, it's a bit hard to predict.

Unrestricted use of jet, 55%, but as far as the cadence.

With Covid, it's a bit hard to predict but.

John Poynton: But, you know, we'll try to provide updates as we go forward on these calls of where we're at and what's in the queue for the remainder of the quarter to give you a better sense of that. Given the target of 1350 some-odd hospitals and the pace to date, should we expect there to be an acceleration next year, or are we just kind of continuing to slog through that large number? I would think there's going to be an acceleration next year for a number of reasons.

We will try to provide updates as we go forward on these earnings calls, where we're at and whats in the queue for the remainder of the quarter to give you a better sense of that.

Given given the target of <unk> hundred some on hospitals and the pace to date should we expect there to be an acceleration next year or just kind of continuing to slug through that large number.

I would think theres going to be an acceleration next year.

John Poynton: Some of the P&T committees have been postponed because of COVID, so we think that will help accelerate the process. Certainly, the sooner that we get the new procedures, I think that could also accelerate the process. And some hospitals automatically start with a moratorium of saying they're not going to evaluate any products for six months until the product's been on the market for six months. So all those things converge to what we think should be a faster rate as we enter 2022 on formulary approval strategies. Got it. And one last question.

For a number of reasons of some of the P&C committees have been postponed.

Because of Covid. So we think that that will help accelerate the process.

Certainly the sooner that we get.

The new indicated procedures.

That could also accelerate the process and some hospitals. They just automatically start with the moratorium of saying, we're not going to evaluate any products for six months.

Until the product spend on the market for six months. So all of those things converge to what we think should be a faster rate as we enter 2022 on on.

Malaria approval strategy.

Got it and last question on this topic.

Josh Schwimmer: Does this kind of follow the 80-20 rule, 20% of hospitals account for 80% of volume, and you kind of target those first for P&T committees, or is it a little bit different dynamic?

Does this kind of follow the 80 20 rule, 20% of hospitals account for 80% of volume and you kind of target those first for PMT committees or is it a little bit different dynamic.

John Poynton: So if you look at the hospitals that we're targeting, the 1,300, that gets us to about 80% of the opportunity, whether it's competitive products or it's a little less than that on the indicated procedures, that's probably 65 to 70%. We always start with the largest, as you would imagine, but sometimes those larger ones are slower too. So we're trying to be opportunistic. All of the 1,300 hospital accounts that we're targeting are valuable, and we'll happily take any of them, but we start with the ones that have the greatest value.

So if you look at the hospitals that we're targeting the <unk> hundred that gets us to about 80% of the opportunity whether it's competitive products or.

So a little less than that on the indicated procedures, so it's probably 65% to 70%.

We always start with the ones that are the largest since you would imagine, but sometimes those larger ones are slower to so we're trying to be opportunistic all of the 1300 hospital accounts that we're targeting are valuable and we will happily take any of them, but we start with the ones that have that.

The greatest value.

Josh Schwimmer: We've got some big ones. Thank you. Thank you. We've got some very big ones.

Got it thank you so much.

Okay.

Great.

Thank you got some some some very big ones yes.

Operator: Thank you. At this time, I am showing no further questions. I would like to turn the call back over to Barry Court for closing remarks.

Thank you at this time I am showing no further questions I would like to turn the call back over to Barry Port for closing remarks.

Barry Cort: Well, thank you everyone for participating in the call. It was a very exciting quarter, and we look forward to continued quarterly updates.

Well. Thank you everyone for participating in the call very exciting quarter, and we look forward to.

Continued quarterly updates.

Have a great day.

Ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect Goodbye.

Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect. Goodbye.