Q2 2022 Heron Therapeutics Inc Earnings Call
Operator: Good day, ladies and gentlemen, and thank you for standing by.
Good day, ladies and gentlemen, and thank you for standing by.
Operator: Welcome to the Heron Therapeutics Q2 2022 Earnings Conference. As a reminder, this conference is being recorded.
Welcome to the Heron Therapeutics Q2, 2022 earnings conference.
Operator: Now, I would like to turn the call over to David Szekeres, Executive Vice President, Chief Operating Officer.
Mind you 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.
Operator: Please proceed.
Good afternoon, everyone and thank you for joining us.
With me today from here are very court, Chief Executive Officer, and Chairman, John <unk>, President and Chief Commercial Officer.
So those of you participating via conference call. The slides are made available webcast. It 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 <unk> future expectations plans prospects corporate strategy and performance.
Which constitute forward looking statements for the purposes of the Safe Harbor provision under the private Securities Litigation Reform Act of 90 to 95.
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.
Any forward looking statement present, 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.
Specifically disclaim any obligations to update such statements.
Now I'll turn the call over to Barry.
Thank you David Welch.
David Szekeres: Good afternoon, everyone, and thank you for joining us.
Welcome everyone and thank you for joining us.
Second quarter has been extremely productive on a number of fronts.
John will discuss details regarding our two commercial franchises both of which showed good growth in the second quarter, beating consensus estimates.
During the second quarter, we continue to prosecute our NDA for <unk>, a one nine for postoperative nausea and vomiting.
Which has the potential to be many times larger than our <unk> business.
Interactions with the FDA remain on track for the September 17th <unk> date.
We've also made excellent progress completing enrollment in the four clinical trials with Zen relief planned for inclusion in what we call S. N da number two designed to further expand the indications regenerative.
This NDA is planned for late this year.
David Szekeres: With me today from Heron are Barry Cork, Chief Executive Officer and Chairman, and John Poynton, President and Chief Commercial Officer.
Based on our agreement with the FDA and DEA too should provide the basis for expanding the indication statement do cover essentially all 14 million target procedures.
David Szekeres: For those of you participating via conference call, the slides are made available, webcast, and can also be accessed by going to the Investor Relations page of our website following conclusion of today's call.
I'll now turn the call over to John .
David Szekeres: Before we begin, I would like to remind you that this call will contain forward-looking statements concerning Heron's future expectations, plans, prospects, corporate strategy, and performance, which constitute forward-looking statements for the purposes of the Safe Harbor Provision under the Private Securities Litigation Reform Act of 1995.
Thank you Barry I'm excited to share our second quarter commercial results, we continue to make significant progress with the sudden really watch during my presentation I'll start with a number of updates on key performance metrics related to this progress that'll.
David Szekeres: 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.
David Szekeres: Any forward-looking statements present 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.
David Szekeres: We specifically disclaim any obligations to update such statements.
David Szekeres: Now I'll turn the call over to Barry.
I'll finish with an update on our outstanding second quarter commercial results with our oncology care of business.
Barry Cork: Thank you, David.
Okay.
Second quarter net sales were $2 $5 million, which was a 140% increase over the prior quarter, where currently expect third quarters generally net product sales to increase in the range of 40% to 50% over the prior quarter.
The level of it doesn't really fit inventory in the distribution channel has been a topic of great interest during the past couple of quarters as.
As we previously described in the earnings calls there was excess initial stocking inventory in the distribution channel.
In order to better understand the inventory level in the distribution channel we've been reporting the ex factory reorder rate based on demand unit volume for both ask of us.
Ultimately our goal is to have X factory orders at 100% of demand unit bottom, meaning the distribution channel is replenishing their inventory forever units sold to a hospital or ASC.
As you can see in the table provided in slide number six we continue to make meaningful progress for progress and burning through the inventory based on increases in general weak demand in unit sales.
Results of the third quarter through August 3rd indicate we have reached our goal of stabilizing inventory levels at the distribution centers, what channel orders mirroring the demand unit results.
400 milligram S K U.
Reorder rate is 99% of demand unit volume and a 200 milligram ask hey, you reorder rate is 105 per cent.
This should simplify the model lineup features then really net sales at levels consistent what's been really demand unit volume.
It's been relief demand unit volume grew by 47% in the second quarter over the first quarter.
Thus far in Q3 as it relates to Madden units are ahead of the same period in Q2 with an expectation of achieving 40% 50% growth in Q3.
Barry Cork: Welcome, everyone, and thank you for joining us.
Next I'll summarize, but generally launch highlights to date by sharing our scorecard of leading indicators during our first year of launch we've continued a strong cadence of adding unique new ordering accounts, which have been growing at about 50 accounts per month.
We're also very encouraged by the increases in account reorder rates that have grown from 50% in the first three months of watch to 84% in the first year of watch.
We continue to gain formulary approvals freezing relief and targeted hospitals with a run rate of 30 formulary approvals per month since the beginning of our launch.
Importantly, we're also seeing excellent growth with integrated delivery networks or idms, adding didn't relief to formulary.
We believe gaining idea and support is a critical component of their potential therapeutic interchanges.
With our key accounts substituting.
And then really for EXPAREL per indicated procedures in the future.
Slide nine benchmarks the number of unique ordering accounts during the first year of launch based on Symphony Health data.
Barry Cork: Second quarter has been extremely productive on a number of fronts. John will discuss details regarding our two commercial franchises, both of which showed good growth in second quarter, beating consensus estimates.
Barry Cork: During second quarter, we continued to prosecute our NDA for HTX-019 for post-operative nausea and vomiting, which has the potential to be many times larger than our CINV business. Interactions with the FDA remain on track for the September 17th PDUFA date.
Barry Cork: We've also made excellent progress completing enrollment in the four clinical trials with ZinRelief planned for inclusion in what we call SNDA number two, designed to further expand the indications for ZinRelief.
They need to rapidly add new accounts ordering generally what 602 ordering accounts in the first 12 months of watch. This represents an increase of 33% from the 451 level in the first nine months of watch.
Barry Cork: This SNDA is planned for late this year.
Barry Cork: Based on our agreement with the FDA, SNDA two should provide the basis for expanding the indication statement to cover essentially all 14 million target procedures.
In addition, certain relief.
The 84 accounts reordering turning the first year represents the greatest reorder percentage of all four products that's market in this analysis.
Barry Cork: I'll now turn the call over to John.
John Poynton: Thank you, Barry.
John Poynton: I'm excited to share our second quarter commercial results.
We believe this growing the reorder rate is an excellent indication of the strong real world experience that surgeons are having with their patients.
While the initial Zen released results are strong aggressive expansion and product usage and ordering accounts is a key priority in 2022.
New formulary approvals represent our new business pipeline.
John Poynton: We continue to make significant progress with the ZinRelief launch. During my presentation, I'll start with a number of updates on key performance metrics related to this progress.
This slide highlights the continued rapid progress that didnt really since making with formulary approvals at the end of April we reported 319 formulary approvals.
John Poynton: Then I'll finish with an update on our outstanding second quarter commercial results with our oncology care business. Second quarter net sales were $2.5 million, which was a 140% increase over the prior quarter.
John Poynton: We currently expect third quarter ZinRelief net product sales to increase in the range of 40 to 50% over the prior quarter. The level of ZinRelief inventory in the distribution channel has been a topic of great interest during the past couple of quarters. As we previously described in earnings calls, there was excess initial stocking inventory in the distribution channel.
John Poynton: In order to better understand the inventory level in the distribution channel, we've been reporting the X factory reorder rate based on demand unit volume for both SKUs.
This number has continued to grow at about 30, new formulary approvals per month since the launch to 384 total approvals through the end of July .
John Poynton: Ultimately, our goal is to have X factory orders at 100% of demand unit volume, meaning the distribution channel is replenishing their inventory for every unit sold to a hospital or ASC.
And those accounts are actually making PMT decisions over 90% of hospital TNT committees continue to add as it relates to formulary.
John Poynton: As you can see in the table provided in slide number six, we continue to make meaningful progress in burning through the inventory based on increases in ZinRelief demand unit sales. Results of the third quarter through August 3rd indicate we have reached our goal of stabilizing inventory levels at the distribution centers with channel orders mirroring the demand unit results. The 400 milligram SKU reorder rate is 99% of demand unit volume, and the 200 milligram SKU reorder rate is 105%.
John Poynton: This should simplify the modeling of future ZinRelief net sales at levels consistent with ZinRelief demand unit volume. ZinRelief demand unit volume grew by 47% in the second quarter over the first quarter. Thus far in Q3, ZinRelief demand units are ahead of the same period in Q2 with an expectation of achieving 40% to 50% growth in Q3.
Importantly, an estimated 68% of our formulary approvals are unrestricted use of chips isn't really.
Those accounts with restricted usage typically limit the procedures for their internal trial evaluations of the product.
Many institutions cutback on P&C meetings over the summer to account for vacation schedules. The remainder of the year will remain busy with over 80 additional TNT committees scheduled to reviews isn't really before the end of the year.
New formulary approvals help us establish a critical pipeline for news and related business.
A key priority for the commercial team.
John Poynton: Next, I'll summarize the ZinRelief launch highlights to date by sharing our scorecard of leading indicators. During our first year of launch, we've continued a strong cadence of adding unique new ordering accounts, which have been growing at about 50 accounts per month. We're also very encouraged by the increases in account reorder rates that have grown from 50% in the first three months of launch to 84% in the first year of launch.
Next I wanted to provide an update on our key top down strategy of targeting integrated delivery networks or ideas.
John Poynton: We continue to gain formulary approvals for ZinRelief and targeted hospitals with a run rate of 30 formulary approvals per month since the beginning of our launch. Importantly, we're also seeing excellent growth with integrated delivery networks, or IDNs, adding ZinRelief to formulary. We believe gaining IDN support is a critical component of potential therapeutic interchanges with our key account substituting ZinRelief or AspirL for indicated procedures in the future.
To create new system wide opportunities for therapeutic interchange from EXPAREL, because literally for indicated procedures.
John Poynton: Q9 benchmarks the number of unique ordering accounts during the first year of launch based on symphony health data. We continue to rapidly add new accounts ordering ZinRelief with 602 ordering accounts in the first 12 months of launch.
John Poynton: This represents an increase of 33% from the 451 level in the first nine months of WATCH.
John Poynton: In addition, Zinrelief, the 84 accounts reordering during the first year represents, the greatest reorder percentage of all four products benchmarked in this analysis.
Thus far fifty-seven IV again said that it didnt relate to their formularies with 33% of the approved bolster unrestricted use.
John Poynton: We believe this growing reorder rate is an excellent indication of the strong real-world, experience that surgeons are having with their patients.
John Poynton: While the initial Zinrelief results are strong, aggressive expansion and product usage in, ordering accounts is a key priority in 2022.
In addition, these 57 Ibm's account for over 1 million annuals isn't really indicated procedures, representing a potential hidden relief net sales opportunity of.
John Poynton: New formulary approvals represent our new business pipeline. This slide highlights the continued rapid progress that Zinrelief is making with formulary, approvals. At the end of April, we reported 319 formulary approvals. This number has continued to grow at about 30 new formulary approvals per month since, the launch to 384 total approvals through the end of July. And those accounts actually making P&T decisions, over 90% of hospital P&T committees continue, to add Zinrelief to formulary.
John Poynton: Importantly, an estimated 68% of our formulary approvals are for unrestricted usage of Zinrelief.
$200 million of antibody, if we converted all indicated procedures.
Of course, no company ever gets 100% sure, but the potential with our existing indicated procedures creates a strong opportunity for meaningful and really sales growth.
In addition, our idea and formulary expansion now covers $135 million of annual EXPAREL sales.
We also have 15 ideas at various stages of evaluating switching from EXPAREL to then really for indicated procedures.
Now, let's drill down on the 15 idms that are interested in potential therapeutic hadn't changed.
Well, it's been released existing expanded label indication, it's not surprising that idms are looking to save millions of dollars for a product with demonstrated superior clinical results with the standard of care of bupivacaine.
We're excited to be partnering with both pharmacy and physicians to drive their internal evaluations with generally after.
John Poynton: Those accounts with restricted usage typically limit the procedures for their internal trial, evaluations of the product.
John Poynton: Many institutions cut back on P&T meetings over the summer to account for vacation schedules.
After 15, Idms, who are interested 11 have already initiated their internal trials with Sun life.
Initial feedback on their trials continues to be very positive across a variety of surgical procedures.
While moving a large IDM certainly take some time the first IBM to make their therapeutic Ed or change decision was positive at the end of the second quarter and they are now switching considerably.
This quarter, we're introducing a new metric to help evaluate the impact we're making with IBM.
Let's start by focusing on the 15 ideas.
Valuation therapeutic and unchanged.
During the first half of 2022.
<unk> demand units grew by 290 per cent compared to the second half of 2021.
Clearly our expanded label indication is fueling this growth.
Additional new metrics to measure is rapid market share.
This is simply Zimmerle leap units divided by the total number of EXPAREL units, plus then really P units.
Overall in the 57 Ibm's with formulary approval were demonstrated solid branded market share growth.
It's important to keep in mind, adding new ideas that actually lowers our share since we're just beginning to get news didn't really business somebody's cats.
For example, last quarter, we reported 46, Ibm's with formulary approvals, which has now grown to 57 ideas.
Finally, we have also provided zinner leaks branded unit market share for the top five IBM share accounts out of the 15 IGN evaluating therapeutic interchange from EXPAREL to generally.
As this table demonstrates our branded market share can grow very quickly what the high of 41% for Q2.
The CMS approval of pass through status for separate reimbursement are generally for Medicare patients in the hospital outpatient setting of care is a game changer for us.
As a reminder, zidan relief is the only local anesthetic separately reimbursed in the hospital outpatient setting for the next three years.
This important approval builds out our existing reimbursement strength already in place.
MFS separate reimbursement freezing relief in the ASC setting of care effective January 1st of a share.
Separate reimbursement outside of the surgical bundled payment for centrally with more than 123 million covered lives.
And in some cases, it's also reimbursed separately in the hospital outpatient setting.
Okay.
A key component of our pricing strategy is eating them without separate reimbursement are lower acquisition cost benefits customers across all settings of care, where the drug may be paid for under the surgical bundled payments.
John Poynton: The remainder of the year will remain busy with over 80 additional P&T committees scheduled, to review Zinrelief before the end of the year.
Similarly value proposition continues to be a critical driver of new business and expansion in the market.
Switching to us in relief provides a cost savings of 25% to 32% based on wholesale acquisition cost.
In a savings of 42% to 48% based on our 340, b price offering compared to EXPAREL.
This provides a huge financial incentive for customers to switch to generally.
From a reimbursement perspective, using zinn relief is profitable Medicare patients.
And the hospital outpatient setting and ASC setting of care.
In these challenging financial times 340, <unk> accounts can experience financial benefit of over $429 per patient by using didnt really rather than EXPAREL.
Based on these economic benefits.
John Poynton: New formulary approvals help us establish a critical pipeline for the new Zinrelief, business and remain a key priority for the commercial team. Next, I wanted to provide an update on a key top-down strategy of targeting integrated, delivery networks, or IDNs, to create new system-wide opportunities for therapeutic interchange from Expiral to Zinrelief for indicated procedures. Thus far, 57 IDNs have added Zinrelief to their formularies, with 33% of the approvals, for unrestricted use. In addition, these 57 IDNs account for over 1 million annual Zinrelief indicated procedures, representing a potential Zinrelief net sales opportunity of $200 million annually, if we converted all indicated procedures.
It's not surprising that large idms are now conducting therapeutic interchange evaluations.
Our key priorities for us in relief in 2022 remained the same from a commercial perspective.
John Poynton: Of course, no company ever gets 100% share, but the potential with our existing indicated, procedures creates a strong opportunity for meaningful Zinrelief sales growth.
John Poynton: In addition, our IDN formulary expansion now covers $135 million of annual Expiral sales. We also have 15 IDNs at various stages of evaluating switching from Expiral to Zinrelief, for indicated procedures.
Top priority is to leverage the new label indications for faster growth. This will be accomplished by expanding existing surgeon usage into new procedures.
Our second priority is increase usage within ordering accounts by increasing the number of surgeons routinely using generally many.
Many of the accounts initially evaluated in silver Lake with only two or three surgeons based on the excellent outcomes with their patients were actively use our experienced support expanded usage of generally what their colleagues.
Our third priority is to continue to gain formulary approvals and new targeted ibm's and hospitals and.
John Poynton: Now let's drill down on the 15 IDNs that are interested in potential therapeutic interchange.
Increased act is access.
And our pipeline is a key opportunity for growth and therapeutic interchange.
John Poynton: With XenRelief's existing expanded label indication, it's not surprising that IDNs are looking, to save millions of dollars for a product with demonstrated superior clinical results that the standard of care bupivicates.
Finally, we continue to maximize our separate reimbursement outside of the surgical bundled payment presented with and.
John Poynton: We're excited to be partnering with both pharmacy and physicians to drive their internal evaluations, with XenRelief. Of the 15 IDNs who are interested, 11 have already initiated their internal trials with, XenRelief. Clinical feedback on their trials continues to be very positive across a variety of surgical, procedures.
In summary, we've already made strong progress with a number of leading indicators, which gives us confidence that 2022 will be a year of significant growth for zimbra.
Now I'd like to shift gears and review the second quarter results for oncology care franchise.
During the second quarter, our oncology care team did an outstanding job of growing our Ci N V portfolio net sales by 12% over the prior year.
This growth was driven by 11% increase of somebody and an 18% increase in soft all over the prior quarter.
Overall symbolic of unit demand units increased by nearly 11% compared to the prior quarter with a strong 11% increase in the hospital setting of care, which was our third highest demand units in a quarter ever and the hospital segment.
Symbiotic demand units also remained strong in the clinic setting of care with a 10% increase over the prior quarter.
We have a number of ongoing discussions to bring former somebody customers back following the end of the generic.
Loss of profit and arbitrage period.
The outlook for our CIB products remains positive based on continued improving reimbursement tailwind over the past year.
As shown in the table below on slide 21 pumps in body and soft style are much more favorable and a much more favorable reimbursement position versus the competition.
But at the same time last year with generic pulse of Providence down to $27 and idea kenzie are down to $458 based on ASP plus 4% reimbursement.
In addition, the elimination of separate reimbursement for generic <unk> and the hospital outpatient segment effective January 1st of this year made some Bob P value proposition much more attractive this year.
Our full year 2022, <unk> net sales guidance has been increased to a range of 93 million to 95 million representing 11.
A 14% increase over the prior year.
In addition, we expect demand units in the second half of 2022 to be higher compared to the prior year.
Partially offset by lower net sales for both products.
Finally, the new CMS guidelines published in July indicated that effective January one 2023 that reimbursement for 340, <unk> accounts will increase to a S P plus 6%.
Compared to the current rate of a S T minus 22, 5%.
What the greatest portion of our somebody hospital demand your unit sales and 340 B of Cats. We believe this new opportunity will help us increase unit sales in the fourth quarter and in 2023.
That completes my prepared remarks, and I'll now turn the call back over to Barry.
No.
Thank you John .
In June we announced a restructuring which included a 34% reduction in head count by year end.
Between the restructuring improvements in gross margin from the move to large scale manufacturing and other cost cutting measures, we expect to achieve reductions of over $50 million in annual operating expenses in 2023.
These reductions in burn coupled with the private placement financing announced this morning.
Projected to provide a cash runway through 2024 and to allow us to become cash flow positive in 2024.
As of June 32022 parents had cash cash equivalents and short term investments of $83 5 million.
Adjusting for net proceeds of $75 2 million from our August 2022 private placement.
<unk> had cash cash equivalents and short term investments of $158 7 million.
Second quarter burn was $28 4 million well.
Well burn will increase in third quarter due to the restructuring fourth quarter burn minus one time expenses is projected to be approximately $21 million.
With significant further reductions going into 2023.
I'd like to take a minute to review a few of the key accomplishments and catalyst for the company.
John Poynton: While moving a large IDN certainly takes some time, the first IDN to make their therapeutic, interchange decision was positive at the end of the second quarter, and they are now switching to XenRelief.
As we have discussed in the second quarter.
Generally demand units increased by 47% compared to the first quarter.
John Poynton: This quarter, we're introducing a new metric to help evaluate the impact we're making with, IDNs.
John Poynton: Let's start by focusing on the 15 IDNs evaluating therapeutic interchange.
Our contract manufacturer has successfully validated large scale manufacturing for generally.
John Poynton: During the first half of 2022, XenRelief demand units grew by 290% compared to the second, half of 2021. Clearly, our expanded label indication is fueling this growth.
And we've completed enrollment in the clinical studies needed to submit S. N D. A to just further expand the indications for Zen relief.
John Poynton: Additional new metrics to measure is branded market share. This is simply XenRelief units divided by the total number of XRL units plus XenRelief, units. Overall, in the 57 IDNs with formulary approval, we're demonstrating solid branded market share, growth.
One area, where we did not meet our goal was to complete a business development deal in the second quarter.
John Poynton: It's important to keep in mind adding new IDNs actually lowers our share since we're, just beginning to get new XenRelief business in these accounts. For example, last quarter, we reported 46 IDNs with formulary approvals, which has now, grown to 57 IDNs.
Unfortunately, the timing of business development deals are difficult to predict.
But we are still laser focused on getting one or more such deals done this year.
For each major territory.
We have at least one regional company.
And at least one multinational and active discussions.
LNG care franchise, we saw good growth in sales, resulting in a raising full year 2022 guidance to $93 million to $95 million.
And as John mentioned, we are very excited by the recent change in CMS reimbursement for three or four D B hospitals.
Which we believe makes it an extremely attractive opportunity for these hospitals to generate additional revenue.
Slides 24, and 25 contain important safety information for Zen relief <unk>.
John Poynton: Finally, we have also provided XenRelief's branded unit market share for the top five, IDN share accounts out of the 15 IDNs evaluating therapeutic interchange from XRL to XenRelief.
These slides will be available on our website.
With that we're ready for questions operator.
John Poynton: As this table demonstrates, our branded market share can grow very quickly with a high of, 41% for Q2.
John Poynton: The CMS approval of pass-through status for separate reimbursement of XenRelief for Medicare, patients in the hospital outpatient setting of care is a game changer for us. As a reminder, XenRelief is the only local anesthetic separately reimbursed in the hospital, outpatient setting for the next three years. This important approval builds on our existing reimbursement strengths already in place. CMS separate reimbursement for XenRelief in the ASE setting of care, effective January, 1st of this year, separate reimbursement outside of the surgical bundle payment for XenRelief with more than 123 million covered lives in ASE, and in some cases, it's also reimbursed separately in the hospital outpatient setting.
John Poynton: ZinRelief's value proposition continues to be a critical driver of new business and expansion, in the market.
John Poynton: A key component of our pricing strategy is even without separate reimbursement, our lower, acquisition cost benefits customers across all settings of care where the drug may be paid for under the surgical bundle payment.
John Poynton: Switching to ZinRelief provides a cost savings of 25 to 32 percent based on wholesale acquisition costs and a savings of 42 to 48 percent based on our 340B price offering compared to XBRL. This provides a huge financial incentive for customers to switch to ZinRelief.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad well pause for just a moment to compile the Q&A roster.
And your first question comes from the line of Brandon Folkes with Cantor Fitzgerald. Your line is open.
John Poynton: From a reimbursement perspective, using ZinRelief is profitable with Medicare patients in the hospital outpatient setting and ASC setting of care.
John Poynton: In these challenging financial times, 340B accounts can experience financial benefit of over $429 per patient by using ZinRelief rather than XBRL.
Hi, Thanks for taking my questions and congratulations on all the progress and maybe just two for me can you just talk about some of the moving pieces that will drive cash flow positivity by 'twenty 'twenty four as we model that.
John Poynton: Based on these economic benefits, it's not surprising that large IDNs are now conducting therapeutic interchange evaluations.
And then secondly, when you look at the 15th audience evaluating switching at $42 million of Expro business.
John Poynton: Our key priorities for ZinRelief in 2022 remain the same from a commercial perspective.
John Poynton: Our top priority is to leverage the new label indications for faster growth. This will be accomplished by expanding existing surgeon usage into new procedures.
John Poynton: Our second priority is increased usage within ordering accounts by increasing the number of surgeons routinely using ZinRelief. Many accounts initially evaluated ZinRelief with only two or three surgeons based on the, excellent outcomes with their patients were actively using their experience to support expanded usage of ZinRelief with their colleagues.
John Poynton: Our third priority is to continue to gain formulary approvals and new targeted IDNs in hospitals.
John Poynton: Increased access in our pipeline is a key opportunity for growth and therapeutic interchange.
John Poynton: Finally, we continue to maximize our separate reimbursement outside of the surgical bundle payment for ZinRelief.
John Poynton: In summary, we've already made strong progress with a number of leading indicators, which gives us confidence that 2022 will be a year of significant growth for ZinRelief.
John Poynton: Now I'd like to shift gears and review the second quarter results for our oncology care franchise. During the second quarter, our oncology care team did an outstanding job of growing our CINV portfolio net sales by 12% over the prior year. This growth was driven by 11% increase of Symbonti and an 18% increase in Sustol over the prior quarter.
What is the hurdle that you're using to evaluate the product and is it just surgeon and patient experience and then should they decide to switch how quickly does that revenue types, you're shifting to the graph is the gradual switch or is it something that sort of as of a certain date they will switch for their business. Thank you.
John Poynton: Overall, Symbonti unit demand units increased by nearly 11% compared to the prior quarter with a strong 11% increase in the hospital setting of care, which was our third highest demand unit in a quarter ever in the hospital segment. Symbonti demand units also remain strong in the clinic setting of care with a 10% increase over the prior quarter.
John Poynton: We have a number of ongoing discussions to bring former Symbonti customers back following the end of the generic fossil prep and arbitrage period.
John Poynton: The outlook for our CINV products remains positive based on continued, improving reimbursement tailwinds over the past year. As shown in the table below on slide 21, both Cimfanti and Sustel are in a much more favorable, reimbursement position versus the competition than the same time last year, with generic fossil prepotent down to $27 and IV Akenzio down to $458 based on ASP plus 4% reimbursement.
Thanks, Brian and then I'll have John answered the second question first because it certainly leads into the answers to the first question.
Yeah.
Good morning, Brandon Yeah. So regarding to your question on the 15 of IBM.
Generally there is.
And evaluation period that will be.
Based on specific surgical procedures. So what we see frequently is they'll start ups and lower extremity arthroplasty like teekay or total hip repair.
Our replacement rather than.
John Poynton: In addition, the elimination of separate reimbursement for generic fossil prepotent and the hospital, outpatient segment effective January 1st of this year made the Cimfanti value proposition much more attractive this year.
In addition, though look at generally something in a small to medium abdominal surgery like bariatrics surgery, and what they're really looking out as key parameter. So well look at pain reduction over three days they'll look at the impact on the opioid usage.
John Poynton: Our full year 2022 CIMV net sales guidance has been increased to a range of $93 million, to $95 million, representing an 11 to 14% increase over the prior year.
John Poynton: In addition, we expect demand units in the second half of 2022 to be higher compared, to the prior year, which will be partially offset by lower net sales for both products.
John Poynton: Finally, the new CMS guidelines published in July indicated that effective January 1st, 2023, that reimbursement for 340B accounts will increase to ASP plus 6% compared to the current rate of ASP minus 22.5%. With the greatest portion of our Cimfanti hospital demand unit sales in 340B accounts, we believe this new opportunity will help us increase unit sales in the fourth quarter and in 2023.
John Poynton: That completes my prepared remarks, and I'll now turn the call back over to Barry.
Barry Cork: Thank you, John.
Importantly, we'll also look at time to discharge those are generally there may be individual differences amongst each of the IBM, but those are what are most typically reviewed.
Respect with respect to the time to change you know each of these systems is a bit different than some move more rapidly than others. I think you can see from the report that we provided today on slide number 13, where actually you know theres one IBM IBM number one that didnt have any more.
Market share in the third or fourth quarter of last year, but went up to 14% than 41% in the second quarter. So they can move pretty quickly once they start making that type of commitment.
But you know it.
Certainly a situation, where we would never expect to get 100% of the EXPAREL business I think that would be fairly rare, but we do believe that we can get a very significant portion of it so hopefully that answered your question.
Barry Cork: In June, we announced a restructuring, which included a 34% reduction in headcount by year, end. Between the restructuring, improvements in gross margin from the move to large-scale, manufacturing and other cost-cutting measures, we expect to achieve reductions of over $50 in annual operating expenses in 2023. These reductions in burden, coupled with the private placement financing announced this, morning, are projected to provide a cash runway through 2024 and to allow us to become cash flow positive in 2024.
Barry Cork: As of June 30, 2022, Heron had cash, cash equivalents, and short-term investments of, $83.5 million. Adjusting for net proceeds of $75.2 million from our August 2022 private placement, Heron, had cash, cash equivalents, and short-term investments of $158.7 million.
Thanks, John I'm going back to the the moving parts associated with becoming cash flow positive.
Barry Cork: Second quarter burn was $28.4 million. While burn will increase in third quarter due to the restructuring, fourth quarter burn, minus one-time expenses is projected to be approximately $21 million, with significant further reductions going into 2023.
Obviously it is.
As.
You know partly associated with decreasing burn.
As mentioned, we did a restructuring in June .
Reducing the organization by approximately 34% and taking.
Significant cost out of our base burn.
We're always continuing to look at ways to be more efficient in that regard.
Also an important contributor here is increasing margin.
Barry Cork: I'd like to take a minute to review a few of the key accomplishments and catalysts for, the company. As we have discussed, in the second quarter, XenRelief demand units increased by 47% compared, to first quarter.
As we've discussed previously Heron has invested a significant amount of money and moving to large scale manufacturing force and body as well as for Zen relief.
We have accomplished that now for Zen relief.
And we are almost through the end of that process for some bonds.
So our anticipation.
Is that we will start being able to sew product from large scale manufacturing of somebody in the fourth quarter that.
Rooms are margin substantially.
And obviously that just drops to the bottom line with increasing sales of units.
And also over the course of the next two years, we anticipate launching HD X O one nine.
And as we bring that product to market.
That has a very exciting opportunity in terms of going after approximately 500000 units of oral Aprepitant. That's currently being used for P. O N V and.
An IV push product like HD XO one nine.
As certainly are set to take a significant portion of that oral market and then expand beyond that as.
As we've discussed in previous.
Forums.
Prep event.
Has been demonstrated to be certainly one of the most effective molecules for P. O N V and with a convenient easy to use easy to administer a product like <unk> nine, but we believe that this will become extremely important component of.
Access for P O N V.
Yeah.
Going into the next question.
Your next question comes from the line of Josh Zimmer with Evercore. Your line is open.
Barry Cork: Our contract manufacturer has successfully validated large-scale manufacturing for XenRelief, and we've completed enrollment in the clinical studies needed to submit SNDA-2 to further expand the indications for XenRelief.
Great. Thanks for taking the questions I have a few if I may but maybe we can start with doesn't really flaunch is about 80% below where EXPAREL was at this point in time, maybe can clearly indicate why do you think that's the case and where there any specific measures or changes to strategy had been put in place to address.
Barry Cork: One area where we did not meet our goal was to complete a business development deal in, second quarter. Unfortunately, the timing of business development deals are difficult to predict, but we are, still laser-focused on getting one or more such deals done this year. For each major territory, we have at least one regional company and at least one multinational, in active discussions.
Barry Cork: For the oncology care franchise, we saw good growth in sales, resulting in our raising, full-year 2022 guidance to $93 million to $95 million.
Barry Cork: As John mentioned, we are very excited by the recent change in CMS reimbursement for, 340B hospitals, which we believe makes CYNVANTI an extremely attractive opportunity for these hospitals to generate additional revenue.
Yeah.
Yeah.
Barry Cork: Slides 24 and 25 contain important safety information for XenRelief.
Yeah. Thanks, Thanks, Josh good question.
Barry Cork: These slides will be available on our website.
Barry Cork: With that, we're ready for questions.
As you know are the first.
Two quarters of launch were significantly hampered by the very restricted label.
And we are you know unfortunately.
Unfortunately misread the market in terms of surgeons willingness to use the product beyond the limited label.
Although market research had indicated.
Is that the label would not be an impediment.
Launching the product it turned out to be a significant impediment in fact, so the first two quarters and obviously the launch was much much slower.
Operator: Operator?
Operator: At this time, I would like to remind everyone in order to ask a question, press star, then, the number one on your telephone keypad.
Than anticipated, obviously, there's the impact of Covid.
Particularly in terms of the AUM or ground Serge.
Early this year right at the time, we were launching the expanded label.
And the broadening of India of of covered procedures.
Around 2 million to over $7 million.
I think we've now started to hit our stride in terms of moving the product into obviously new institutions, starting to see the movement of IV Ns to.
To start switching versus EXPAREL based on both the clinical data that we have.
Showing superiority of Zen relief to bupivacaine.
As well as the economics associated with generally so.
Absolutely it has been much slower launch than we would have projected a lot of factors involved but I think that we're now starting to.
Turning the corner on many of the issues that have hampered us and as noted we anticipate submitting the NDA to to further expand the indication statement.
Near the end of the year and with the approval of that sometime next year. We will finally be in a position to go after the entire market and I think we'll start to see between now and then continued good growth.
Operator: We'll pause for just a moment to compile the Q&A roster.
I mean, given how obvious the narrow label was but what do you think your market research missing something as obvious as does that does that Patrick turned out to be.
Operator: Your first question comes from the line of Brandon Folks with Cancer Fitzgerald.
Well.
You know I'll, let John give us.
Some color on this but.
You know the surgeons that we interviewed for the Mercury research, which was a large number.
<unk> indicated that they were comfortable with.
Use of a local anesthetic they understood.
The pros and cons of using local anesthetics and the fact that the label specifies three specific procedures.
<unk> wasn't going to be an impediment.
One factor that that we didn't take into account early on was that we were actually.
Reinforcing the limited aspect of the label.
Because we would not permit our sales reps to stay in the or if the surgeon was using the product.
In an off label.
We really are.
Reinforce the concept that the product needed to be only used in those three and indicated procedures. John I don't know if you have any anything else to add.
Brandon Folkes: Your line is open.
Brandon Folkes: Hi, thanks for taking my questions and congratulations on all the progress.
No I think that you summarized it very well Barry the one thing I would add just based on Jostens initial question and if you really look at just the past few quarters, which is how we're evaluating the launch because of the very limited label that we have at launch.
Brandon Folkes: Now, maybe just two for me.
Brandon Folkes: Can you just talk about some of the moving pieces that will drive cash flow positivity, by 2024 as we model that?
Brandon Folkes: And then secondly, when you look at the 50 RDNs evaluating switching that $42 million, of expiral business, what is the hurdle they're using to evaluate the product?
Brandon Folkes: Is it just surgeon and patient experience?
Brandon Folkes: And then should they decide to switch?
During the first two quarters of launch EXPAREL sold just over 19000 units.
Brandon Folkes: How quickly does that revenue take to shift?
Brandon Folkes: Is it a gradual switch or is it something that sort of as of a certain date, they will, switch all their business?
Brandon Folkes: Thank you.
And we sold.
If he started at January 1st over 21000, and so you know we think we're tracking much more favorably even with the first expansion of the label and we think that'll continue to expand as we get out of San Diego.
Barry Cork: Thanks, Brandon.
Got it.
Have another couple of questions. One is on the formulary approvals I think based on what you've indicated in the past it looks like Theres still maybe 700 formulary is left to go with where are you in terms of your initial expectations for formulary adoption of math.
What progress do you expect to make for the for the large number of our remaining formularies, where you've not been done yet approved.
John Poynton: You know, I'll have John answer the second question first because it certainly leads, into the answer to the first question.
John Poynton: Good morning, Brandon.
Yeah, that's a great question, Josh So the first thing I would mention is that the way that we evaluate and IBM formulary approval is even if an idea has 10 or 15 hospital accounts and some of those ideas and it only takes the system level approval to get it.
John Poynton: Yeah.
<unk> and <unk>.
You may get the entire number of hospitals within that IBM with just one single approval. So we're probably under accounting it a bit.
Certainly we're getting a great success rate that we're seeing in accounts that are reevaluating that was then relate with over 90% approval rating.
It would.
We would like to see it go faster, but I think if you look at the number of ordering accounts that we have I think we're on track, where we thought we would be as far as the ordering accounts, we just need to increase our usage at those accounts and as I talked about in my comments, you know, that's really buy and start getting surgeons to use and relief and additional surge.
Nicole procedures based on our new label indication and it's also getting more surgeons within the existing accounts, but with me believe that you know of the 600 accounts that we have or have tried to then relief and 84% already ordering we've got a very good base of business. We just need to increase usage at those accounts right now and will continue.
You bet.
To expand the formulary approvals as we go forward.
So what what percent of the addressable market you have formulary coverage for now or a clear line of sight to coverage by end of year.
So if you take a look at the percentage initially we were targeting.
Based on that the reps that we had in the field, what what could be about 65% of the overall market.
So right now I would say that you know based on that formulary coverage that we've got a.
We've probably got somewhere around a third of that so we've probably got lets say, 20% to 25% of the opportunity Josh.
And by the end of the year, we would hope to push that over over 30%.
It sounds like still a fairly long way to go.
Yeah.
Well, it's it's certainly.
As far as getting everything opened up but if you take a look at the number of ordering accounts and the types of business that we can generate from those ordering accounts. You know, we think that there'll be significant growth as we move forward. So.
Hospitals tend to move slowly and certainly this is no different than any other hospital launch, but I think that hospitals that argues generally are getting great results at and that's been demonstrated by the growth that we've seen in units quarter over quarter as well as the reorder rate from the hospitals.
And the last question and thank you for indulging. So many as we think about the O and nine P. O N V opportunity, maybe if you can help frame that for us relative to <unk> and some vontae in and didn't relief and what market dynamics and features might make this.
This launch more soon vontae like than just a lake or is it really like.
John you want to take that.
Sure.
It's a great question and from our perspective, we think that it will be much more some bond to you what a really because if you look at it number one Zen relief as a as a high touch product and selling it for.
From a selling procedure.
We'd have to be end to end service the surgeon as well as the support staff on how to prep the product and then how do we use it.
Everyone in the operating room knows how to use a 32nd IV push and we just had an advisory board last weekend and talk to orthopedic surgeons are about.
About a one nine and there was a very high interest because what they're really focused on is how do we move patients out of the PACU quicker, we get them to discharge with so much of the.
Surgical procedures moving to outpatient and really 019 is the perfect drug to do that because it's got the best clinical profile as far as reducing vomiting, and I'm a sense of any product on the marketplace. So from our perspective, we think that we've got the right pricing strategy.
To come out of the game rapid access in the marketplace as well as rapid uptake since but he had a surface perspective being much much easier than what we've seen.
What's been really.
Great. Thanks very much.
Certainly.
Your next question comes from the line of Boris <unk> with Cowen Your line is open.
Great. Thanks for taking my question. This is Matt on for Boris.
I just have a few questions. The first is for the ideas that are evaluating the therapeutic interchange around how long with Bose. The individual trials take I know that you mentioned that they could be in like a different a couple of different surgeries do you know like how long how many patients for example, they would need and how many surgeries that would need in each indication and also on top of that.
John Poynton: So regarding your question on the 15 IDNs, generally there is an evaluation period that, will be set based on specific surgical procedures.
John Poynton: So what we see frequently is ulcerative and lower extremity arthroplasty like TKA or total, hip repair.
John Poynton: Replacement rather.
Could could the hospital or an I N D R.
<unk> decided to only have therapeutic interchange for one surgery for example, or would it have to be a total therapeutic interchange.
Okay.
John you want to take that.
Sure.
So.
Really they're all over the board on the length of time and Nick as you suggested it really depends on the number of surgical procedures that they'll be evaluating a generally don't be.
John Poynton: In addition, they'll look at generally something in a small to medium abdominal surgery like, bariatric surgery.
A bony model in a soft tissue.
John Poynton: And what they're really looking at is key parameters.
Once that are looking at it and its 10 times the number of accounts or hospitals within an IBM that maybe you can talk to them yet.
John Poynton: So they'll look at pain reduction over three days.
As far as the size.
Sin accounts looking at you know several hundred to make their decision. We've seen some that are you know.
More than 50 of each range. So it really depends on an account by account basis. So it's tough to predict but what I can say is that you know.
During the second quarter, we got the first idea and that really started their evaluation I would say probably in in March and by the end of the second quarter. They had made their decision and it was positive for Zen relate. So they are actually looking to switch a zen relate for indicated procedures.
John Poynton: They'll look at the impact on opioid usage.
If you go through that type of process I think most accounts will what to use and really more broadly than a single surgical procedure and really that's why they expanded label is so important in helping us drive strategy.
John Poynton: And importantly, they'll also look at time to discharge.
Great. Thank you and then just a follow up on that what would it take for the rest of the IBM that currently are not actually evaluating therapeutic interchange, but what would it take for them to start evaluating that is that something that you would have to do on your end or is it more so just takes time for them.
John Poynton: So those are generally, there may be individual differences amongst each of the IDNs, but, those are what are most typically reviewed.
John Poynton: With respect to time to change, you know, each of these systems is a bit different and, some move more rapidly than others.
Yeah.
Based on the feedback that we're hearing some of them just want to get a bit more experience with zero waste before they look at moving that aggressively.
The other thing that I would point out is if you look at some of the accounts in that 57, I D and we already have a 100% market share based on branded products because they either they never used EXPAREL or I'd already quit using it because of the over promising they made on.
John Poynton: I think you can see from the report that we provided today on slide number 13, where actually, you know, there's one IDN, IDN number one, that didn't have any market share in the third or fourth quarter of last year, but went up to 14% and 41% in the second quarter.
On duration of therapy. So you know I think really it has everything to do with experience and getting good feedback from surgeons and their patients to expand that to a much broader label or a much broader group rather of ibm's considering that.
John Poynton: So they can move pretty quickly once they start making that type of commitment.
Great. Thank you very much.
Certainly.
Your next question comes from the line kind of search the ledger with Needham <unk> Company. Your line is open.
John Poynton: But you know, it's certainly a situation where we would never expect to get 100% of the expiral, business.
John Poynton: I think that would be, you know, fairly rare, but we do believe that we can get a very significant, portion of it.
Hi, good morning.
Couple of questions on the general lesson, then a couple on the upcoming.
Coming T O N V to do for the.
The first one on general left I guess for John .
Talking about unit demand increasing to just short of 13000 units.
In the second quarter.
Maybe break that down between the ASC and hospital segments.
And I'm.
I'm wondering if at this point.
We're displacing EXPAREL or.
Really taking over some of the generic bupivacaine.
Sure.
And then I guess secondly, you also discuss.
<unk> X.
Our expectations that it didn't really sales would be up 40% to 50%.
Quarter over quarter in the third quarter. So just maybe talk about your assumptions and maybe what you've seen so far in its.
John Poynton: So hopefully that answers your question.
First five six weeks of the third quarter.
Yeah.
Okay. So the first question on words as the business coming from.
If you look at it right now it's a it's been about 65% coming from hospitals, 35% from AFC East.
That would be from an ordering account perspective. So if you convert that into units, it's about 80% hospital 20 per cent a S Cds.
So I think that was your first question where is the business coming from it's really coming from from both EXPAREL and bupivacaine is as I mentioned in my last response, there were certainly some.
Some accounts that had never used EXPAREL or had stopped using it where we've got a 100% share of the branded product there.
What we're especially excited about is we continue to see good traction against the bupivacaine in the generic cocktails based on the superior clinical results.
We've got a couple of accounts that have been doing very extensive evaluation, but that's with several hundred patients.
They've been doing all on their own and they'll be looking to publish in the second half of the year, which we think will be a great benefit for us as we go forward and.
And finally on the 40% to 50% growth.
Have some some softness in the overall elective surgery market during 2022.
But certainly we continue to see good growth as we enter Q3 with central weight them.
Just put together back to back you know our two strongest weeks ever so looking forward to continuing that throughout the third quarter and the remainder of the year.
Okay, and then on the upcoming.
T O N P O N V product could do for them I don't know if you've mentioned this in the past, but did you require the NDA review require a site inspection.
I know you've got inspection taking place.
Secondly, what kind of marketing.
Additional marketing expense should we expect with this launch.
I'm, just thinking of how that could impact the opex progression in 2023.
Okay.
Yes, thanks Serge.
So.
This this product.
Is a.
A smaller vial of Syn <unk>.
Which as you know we've made and sold over 2 million vials of some R&D to date did not require an inspection.
We are in the you know at the very end stage here of of their review cycle. There's no indication that that situation will change and the the manufacturer for our HD X O. One nine is also our manufacturer for somebody.
So I think there's a very significant track record of that manufacturer.
Being able to make the product certainly a larger bio size of it.
In terms of sales expand our expenses and expansion.
Really excellent question because it needs to a point that we should have highlighted.
When the questions asked previously and that is.
One of the great things about HD X O. One nine is utilized.
<unk> utilizes our resources that are already focused in the acute care.
Setting and so.
We don't anticipate significant additional investment is necessary.
Because we already have the reps out.
Hum in the field they are already talking to surgeons and anesthesiologists exactly the target audience for HD X O one nine.
And so it's a perfect segue for them too to add this into the bag as they stay.
Without a significant additional cost and without the need for any substantial increases in personnel.
So very economical.
And really an exciting product when one looks at the published data on how effective.
The molecule can be four P O N V.
And as John mentioned in today's World.
The biggest issue is getting patients out the door.
Because there's not sufficient staff for patients to be kept in in the PACU and we're seeing you know surgery is not being scheduled into the afternoon.
As they might otherwise be because there's concern about not having staff for recovery.
So if you can use a easy an easy to use safe product that.
Helps you get patients out the door in.
In the ASC setting for example.
This is going to be extremely attractive.
Yeah.
Just one more I guess is this a product that's going to require it kind of the same.
Ruble process, the a PNT formularies or for adoption.
Yes, certainly as as a hospital product it would still need a.
To go to a formulary committee.
In the hospital setting again, however, the molecule itself is very well known.
It simply is a more convenient.
<unk> approach towards administration of a product that's already being used in over a half a million oral pills four P. O N V.
And so we're certainly impressed very hard to get that acceptance from P&G committees as quickly as possible in terms of the launch.
But it probably has the most similarities to somebody in that regard as well, which certainly required formulary approval.
And if you remember back when we launched that product.
That process went relatively smoothly.
And you know obviously, we took a large portion of of the amend market within the first two years of launch.
Thanks for taking the questions.
Yes, certainly.
There are no further questions at this time I will now turn the call back over to Barry for closing remarks.
Barry Cork: Thanks, Jon.
Barry Cork: Yeah, going back to the moving parts associated with becoming cash flow positive.
Thank you and thanks, everyone for joining us on the call today.
Barry Cork: You know, obviously, it is partly associated with decreasing burn.
We're really pleased with the progress this quarter and we look forward to keeping you updated.
Barry Cork: As mentioned, we did a restructuring in June, reducing the organization by approximately 34 percent, and taking significant costs out of our base burn.
Barry Cork: We're always continuing to look at ways to be more efficient in that regard.
Barry Cork: Also, an important contributor here is increasing margin.
Barry Cork: As we've discussed previously, Heron has invested a significant amount of money in moving to large-scale manufacturing for Symbonti as well as for XenRelief.
Barry Cork: We have accomplished that now for XenRelief, and we are almost to the end of that process for Symbonti.
Barry Cork: So, our anticipation is that we will start being able to sell product from large-scale manufacturing of Symbonti in the fourth quarter. That improves our margin substantially, and obviously, that just drops to the bottom line with increasing sales of units.
Barry Cork: Also, over the course of the next two years, we anticipate launching HDX-019 as we bring that product to market.
Barry Cork: That has a very exciting opportunity in terms of going after approximately 500,000 units of oral prepotent that's currently being used for PONV.
Operator: Ladies and gentlemen, that concludes today's conference call.
Ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect.
Barry Cork: An IV push product like HDX-019 is certainly set to take a significant portion of that oral market and then expand beyond that.
Barry Cork: As we've discussed in previous forums, prepotent has been demonstrated to be certainly one of the most effective molecules for PONV.
Barry Cork: With a convenient, easy-to-use, easy-to-administer product like HDX-019, we believe that this will become an extremely important component of prophylaxis for PONV.
Operator: Thank you for your participation.
Operator: We'll go on to the next question.
You may now disconnect.
Operator: Your next question comes from the line of Josh Zimmer with Ervacor.
Josh Zimmer: Your line is open.
Josh Zimmer: Great.
Josh Zimmer: Thanks for taking the questions.
Okay.
Josh Zimmer: I have a few, if I may, but maybe we can start with the Xen Relief launch.
Josh Zimmer: Is about 80% below where XPREL was at this point in time?
[music].
Josh Zimmer: Maybe you can clearly indicate why you think that's the case and whether any specific measures or changes to strategy have been put in place to address that.
Josh Zimmer: Yeah, thanks, Josh.
Barry Cork: Good question.
Barry Cork: As you know, the first two quarters of launch were significantly hampered by the very restricted label. We, unfortunately, misread the market in terms of surgeons' willingness to use the product beyond the limited label. Although market research had indicated that the label would not be an impediment to launching the product, it turned out to be a significant impediment, in fact. So, the first two quarters, obviously, the launch was much, much slower than anticipated.
Barry Cork: Obviously, there's the impact of COVID, particularly in terms of the Omicron surge early this year.
Barry Cork: Right at the time, we were launching the expanded label and the broadening of covered procedures from around 2 million to over 7 million.
Barry Cork: I think we've now started to hit our stride in terms of moving the product into, obviously, new institutions, starting to see the movement of IDNs to start switching versus XPREL, based on both the clinical data that we have showing superiority of Xen Relief to bupivacaine, as well as the economics associated with Xen Relief.
Barry Cork: So, absolutely, it has been a much slower launch than we would have projected, a lot of factors involved.
Barry Cork: But I think that we're now starting to turn the corner on many of the issues that have hampered us.
Barry Cork: And as noted, we anticipate submitting the SNDA to further expand the indication statement near the end of the year.
Barry Cork: And with approval of that sometime next year, we'll finally be in a position to go after the entire market.
Barry Cork: And I think we'll start to see between now and then continued good growth.
Barry Cork: Given how obvious the narrow label was, why do you think your market research missed something as obvious as that factor turned out to be?
Barry Cork: Well, I'll let John give some color on this, but the surgeons that we interviewed for the market research, which was a large number, indicated that they were comfortable with use of a local anesthetic.
John Poynton: They understood the pros and cons of using local anesthetics, and the fact that the label specified three specific procedures wasn't going to be an impediment.
John Poynton: One factor that we didn't take into account early on was that we were actually reinforcing the limited aspect of the label, because we would not permit our sales reps to stay in the OR if the surgeon was using the product off-label. We really reinforced the concept that the product needed to be only used in those three indicated procedures.
John Poynton: John, I don't know if you have anything else to add.
John Poynton: No, I think that you summarized it very well, Barry.
John Poynton: The one thing I would add, just based on Josh's initial question, and if you really look at just the past two quarters, which is how we're evaluating the launch because of the very limited label that we had at launch, during the first two quarters of launch, Exmeral sold just over 19,000 units, and we sold, if you start at January 1st, over 21,000.
John Poynton: We think we're tracking much more favorably, even with the first expansion of the label, and we think that'll continue to expand as we get FMDA2 approved.
John Poynton: Got it.
Josh Zimmer: I have another couple of questions.
Josh Zimmer: One is on the formulary approvals.
Josh Zimmer: I think, based on what you've indicated in the past, looks like there's still maybe 700 formularies left to go.
Josh Zimmer: Where are you in terms of your initial expectations for formulary adoption, and what, progress do you expect to make for the large number of remaining formularies where you've not been yet approved?
Josh Zimmer: Yeah, that's a great question, Josh.
John Poynton: So, the first thing I would mention is that the way that we evaluate an IDN formulary approval is, even if an IDN has 10 or 15 hospital accounts, in some of those IDNs, it only takes the system level approval to get it, and you may get the entire number of hospitals within that IDN with just one single approval.
John Poynton: So, we're probably undercounting it a bit.
[music].
John Poynton: You know, certainly, we're getting a great success rate that we're seeing in accounts that are evaluating, as in relief, with over 90% approval rating.
John Poynton: We would like to see it go faster, but I think if you look at the number of ordering accounts that we have, I think we're on track where we thought we would be as far as ordering accounts.
John Poynton: We just need to increase our usage at those accounts, and as I talked about in my comments, you know, that's really by getting surgeons to use in relief and additional surgical procedures based on our new label indication.
John Poynton: And it's also getting more surgeons within the existing accounts, but, you know, we believe that, you know, of the 600 accounts that we have tribes in relief and 84% already ordering, we've got a very good base of business.
John Poynton: We just need to increase usage at those accounts right now, and we'll continue to expand the formulary approvals as we go forward.
Yeah.
John Poynton: So what percent of the addressable market do you have formulary coverage for now or a clear line of sight to coverage by end of year?
John Poynton: So if you take a look at the percentage, initially we were targeting, based on the reps that we had in the field, what could be about 65% of the overall market.
Yeah.
John Poynton: So right now, I would say that based on the formulary coverage that we've got, we've probably got somewhere around a third of that.
John Poynton: So we've probably got, let's say, 20% to 25% of the opportunity, Josh. And by the end of the year, we would hope to push that over 30%.
[music].
John Poynton: That sounds like still a fairly long way to go.
John Poynton: Well, it's certainly, you know, as far as getting everything opened up.
John Poynton: But if you take a look at the number of ordering accounts and the type of business that we can generate from those ordering accounts, you know, we think that there'll be significant growth as we move forward.
John Poynton: So, you know, hospitals tend to move slowly.
Uh huh.
John Poynton: And, you know, certainly this is no different than any other hospital launch.
John Poynton: But I think the hospitals that are using Zyn Relief are getting great results.
Yeah.
John Poynton: And that's been demonstrated by the growth that we've seen in units quarter over quarter, as well as the reorder rate from the hospitals.
Josh Zimmer: Got it.
Josh Zimmer: And last question, and thank you for indulging so many.
Josh Zimmer: Talking about the 019 PONV opportunity, maybe you can help frame that for us relative to Sustol and Synvante and Zyn Relief.
Josh Zimmer: You know, what market dynamics and features might make this launch more Synvante-like than Sustol-like or Zyn Relief-like?
John Poynton: John, you want to take that?
John Poynton: Sure.
John Poynton: It's a great question.
John Poynton: And from our perspective, we think that it will be much more Synvante-like, really, because if you look at it, number one, Zyn Relief is a high-touch product from a selling procedure where we have to be in to in-service the surgeon as well as the support staff on how to prep the product and then how to use it.
John Poynton: Everyone in the operating room knows how to use a 30-second IV push.
John Poynton: And we just had an advisory board last weekend and talked to orthopedic surgeons about 019. And there was very high interest because what they're really focused on is how do we move patients out of the PACU quicker and get them to discharge with so much of the surgical procedures moving to outpatient. And really, 019 is the perfect drug to do that because it's got the best clinical profile as far as reducing vomiting and nemesis of any product on the marketplace.
John Poynton: So from our perspective, we think that we've got the right pricing strategy to come out to gain rapid access in the marketplace as well as rapid uptake since the in-service perspective will be much, much easier than what we've seen with Zyn Relief.
Operator: Your next question comes from the line of Boris Peeker with Cohen.
Operator: Your line is open.
Boris Peeker: Great.
Boris Peeker: Thanks for taking my question.
Boris Peeker: This is Nick.
Boris Peeker: On for Boris.
Boris Peeker: I just have a few questions.
Boris Peeker: The first is for the IDNs that are evaluating the therapeutic interchange, around how long, will those individual trials take?
Boris Peeker: I know that you mentioned that they could be in like a different, a couple of different surgeries.
Boris Peeker: Do you know like how long, how many patients, for example, they would need and how many surgeries they would need at each indication?
Boris Peeker: And also on top of that, could a hospital or an IND, IDN decide to only have therapeutic interchange for one surgery, for example, or would it have to be a total therapeutic interchange?
John Poynton: John, you want to take that?
John Poynton: Sure.
John Poynton: So really, they're all over the board on the length of time.
John Poynton: And Nick, as you've suggested, it really depends on the number of surgical procedures that they'll, be evaluating.
John Poynton: Generally, there'll be a bony model and a soft tissue in accounts that are looking at it.
John Poynton: And it depends on the number of accounts or hospitals within an IDN that may be conducting it.
John Poynton: As far as the size, you know, we've seen accounts looking at, you know, several hundred to make their decision.
John Poynton: We've seen some that are, you know, more in the 50 of each range.
John Poynton: So it really depends on an account by account basis.
John Poynton: So it's tough to predict.
John Poynton: But what I can say is that, you know, during the second quarter, we had the first IDN that, you know, really started their evaluation, I would say probably in March.
John Poynton: And by the end of the second quarter, they had made their decision and it was positive for XynRelief.
John Poynton: So they are actually looking to switch XynRelief for indicated procedures.
John Poynton: If you go through that type of process, I think most accounts will look to use XynRelief more broadly than a single surgical procedure.
John Poynton: And really, that's why the expanded label is so important in helping us drive the strategy.
Boris Peeker: Great.
Boris Peeker: Thank you.
Boris Peeker: And then just to follow up on that, what would it take for the rest of the IDNs that currently are not actually evaluating therapeutic interchange, but what would it take for them to start evaluating that?
Boris Peeker: Is that something that you would have to do on your end or is it more so just takes time for them?
John Poynton: Based on the feedback that we're hearing, some of them just want to get a bit more experience, with XynRelief before they look at moving that aggressively.
John Poynton: I think the other thing that I would point out is if you look at some of the accounts in that 57 IDN, we already have a 100% market share based on branded products because either they never used Expiro or had already quit using it because of the overpromising they made on duration of therapy.
John Poynton: So, I think really, it has everything to do with experience and getting good feedback from surgeons and their patients to expand that to a much broader label or a much broader group of IDNs considering that.
Boris Peeker: Great.
Boris Peeker: Thank you very much.
Operator: Your next question comes from the line of Serge Belanger with
Operator: Needham Company.
Operator: Your line is open.
Serge Belanger: Hi.
Serge Belanger: Good morning.
Serge Belanger: A couple of questions on ZINRLF and a couple on the upcoming PONV PDUFA.
Serge Belanger: So first on ZINRLF, I guess for John, you talked about unit demand increasing to just short of 13,000 units in the second quarter.
Serge Belanger: Can you maybe break that down between the ASC and hospital segments?
Serge Belanger: And I'm wondering if at this point you're displacing experil or really taking over some of the generic depivoting share?
Serge Belanger: And then I guess secondly, you also discussed expectations that ZINRLF sales would be up 40 to 50% over quarter in the third quarter.
Serge Belanger: So just maybe talk about the assumptions and maybe what you've seen so far in the first five, six weeks of the third quarter.
Serge Belanger: Thanks.
John Poynton: Okay. So the first question on where's the business coming from, if you look at it right now, it's been about 65% coming from hospitals, 35% from ASCs.
John Poynton: That would be from an ordering account perspective. So if you convert that into units, it's about 80% hospital, 20% ASCs.
John Poynton: So I think that was your first question.
John Poynton: Where's the business coming from?
John Poynton: It's really coming from both experil and depivoting, as I mentioned in my last response, there were certainly some accounts that had never used experil or had stopped using it, where we've got a 100% share of the branded product there.
John Poynton: What we're especially excited about is we continue to see a good traction against the bupivacaine and the generic cocktails based on the superior clinical results.
John Poynton: We've got a couple of accounts that have been doing very extensive evaluations of this with several hundred patients that they've been doing all on their own, and they'll be looking to publish in the second half of the year, which we think will be a great benefit for us as we go forward.
John Poynton: And finally, on the 40 to 50% growth, there has been some softness in the overall elective surgery market during 2022, but certainly we continue to see good growth as we enter Q3 with FinRelief and just put together back-to-back our two strongest weeks ever. So, looking forward to continuing that throughout the third quarter and the remainder of the year.
John Poynton: Okay.
Serge Belanger: And then on the upcoming PONV product, PDUFA, I don't know if you've mentioned this in the past, but did the NDA review, require a site inspection, and has that inspection taken place?
Barry Cork: Secondly, what kind of additional marketing expansion do we expect with this launch?
Barry Cork: Just thinking of how that could impact the OPEX progression in 2023.
Barry Cork: Yeah, thanks, Serge.
Barry Cork: So, this product, which is a smaller vial of Symbonti, which, as you know, we've made and sold over 2 million vials of Symbonti to date, did not require an inspection.
Barry Cork: We are in the very end stage here of the review cycle.
Barry Cork: There's no indication that that situation will change, and the manufacturer for HDX019 is also a manufacturer for Symbonti.
Barry Cork: So, I think there's a very significant track record of that manufacturer being able to make the product, certainly a larger vial size of it.
Barry Cork: You know, in terms of sales expenses and expansion, a really excellent question, because it leads to a point that we should have highlighted when the question was asked previously, and that is one of the great things about HDX019 is it utilizes our resources that are already focused in the acute care setting. And so, we don't anticipate significant additional investment as necessary, because we already have the reps out in the field.
Barry Cork: They're already talking to surgeons and anesthesiologists, exactly the target audience for HDX019.
Barry Cork: And so, it's a perfect segue for them to add this into the bag, as they say, without the significant additional cost and without the need for, you know, any substantial increases in personnel.
Barry Cork: So, very economical, and really an exciting product when one looks at the published data on how effective the molecule can be for PONV.
Barry Cork: And as John mentioned, in today's world, the biggest issue is getting patients out the door, because there's not sufficient staff for patients to be kept in the PACU.
Barry Cork: And we're seeing, you know, surgeries not being scheduled into the afternoon, as they might otherwise be, because there's concern about not having staff for recovery.
Barry Cork: So, if you can use an easy-to-use, safe product that helps you get patients out the door in the ASC setting, for example, we think this is going to be extremely attractive.
Barry Cork: Just one more, I guess.
Barry Cork: Is this a product that's going to require kind of the, same approval process via P&T formularies for adoption? Yeah, certainly, as a hospital product, it would still need to go to the formulary committee.
Barry Cork: In the hospital setting, again, however, the molecule itself is very well known.
Barry Cork: It's simply a more convenient approach towards administration of a product that's already being, used in over half a million oral pills for PONV.
Barry Cork: And, you know, so we're certainly going to press very hard to get that acceptance from P&T committees as quickly as possible in terms of the launch.
Barry Cork: But it probably has the most similarities to Symbonte in that regard as well, which certainly required formulary approval.
Barry Cork: And, you know, if you remember back when we launched that product, that process went relatively smoothly. And, you know, obviously, we took a large portion of the MN market within the first two years of launch.
Serge Belanger: Thanks for taking the question.
Operator: Yeah, certainly.
Operator: There are no further questions at this time.
Barry Cork: I will now turn the call back over to Barry for closing remarks.
Barry Cork: Thank you.
Barry Cork: And thanks, everyone, for joining us on the call today.
Barry Cork: We're really pleased with the progress this quarter, and we look forward to keeping you updated.