Q3 2022 Heron Therapeutics Inc Earnings Call
[music].
Okay.
Good day, ladies and gentlemen, and thank you for standing by and welcome to the Heron Therapeutics Q3 2022 earnings conference.
As a reminder, this conference is being recorded now.
Now I would like to turn the call over to David <unk> Executive Vice President Chief Operating Officer. Please proceed.
Thank you Dennis good afternoon, everyone and thank you for joining US with me today from Heron, or Barry Quart, Chief Executive Officer, and Chairman, John pointing President and Chief Commercial Officer.
Kimberly Manhart.
Executive Vice President drug development and Board director.
For those of you participating via conference call. The slides, they're made available via webcast. You can also be accessed by going to the Investor Relations page of our web site following conclusion of today's call.
Before we begin I would like to remind you that this call will contain forward looking statements concerning parents 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.
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.
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 I'll turn the call over to Barry.
Thank you David.
Welcome everyone and thank you for joining us.
Third quarter has been productive on a number of fronts and disappointing on others.
Obviously delighted with the approval of a ponzi our fourth commercial product. Upon D is indicated for the prevention of post operative nausea, and vomiting or <unk> in adults.
Our policy will be available in first quarter is a very convenient room temperature stable ready to use 32 milligram single dose vial for direct administration as a 32nd intravenous injection prior to induction of anesthesia.
It will be the only intravenous NK one receptor antagonist available for NV.
As we discussed on our NDA approval call in September Upon me was approved based on the results from two randomized controlled trials of PREPA debt against the standard of care Ondansetron.
In patients undergoing open abdominal surgery.
In both studies more than twice as many patients receiving ondansetron for prophylaxis vomited through 48 hours post surgery compared to those who received <unk>.
We firmly believe that upon V will follow in the footsteps of Cincinnati.
And quickly, becoming an important product for both clinicians and patients.
Jon will describe the commercial opportunity and our pricing strategy. John also touched on are successful.
Touch on our successful <unk> franchise, which continues to show growth in the face of generic competition.
As well, which is well on its way to achieving $93 million to $95 million and net product sales this year.
Where are we have been less successful is in the launch of Zen relief.
We're disappointed in third quarter results.
18% quarter over quarter growth in units is not satisfactory, we get it and are doing everything possible to change the launch trajectory.
You'll hear about good progress in moving Idms to exchange generally for EXPAREL.
We're also taking a page from the EXPAREL launch and have initiated activities to get more field personnel involved through contract relationships, which John will briefly discuss with more information on future calls.
Future calls.
Fortunately as elective surgeries began to rise in October .
In the early stages of our new strategies take hold we had our best month ever.
And all signs point to an improved fourth quarter.
Last December we were able to get an improved indication statement with no new data covering 7 million procedures for us generally.
We also reached a written agreement with the FDA about what new data would be needed to achieve a full label covering the $14 million soft tissue and orthopedic procedures. We originally targeted.
We have now completed the agreed upon studies and are deep into preparing what we call S. MBA number two.
Designed to obtain broader indication.
This NDA as planned for submission later this year as.
As a reminder, the key endpoints for these studies or safety and pharmacokinetics.
I'm pleased to report that no new unique safety.
Issues were observed.
And we found consistent bupivacaine PK following Xinyuan least administration in these additional procedures.
Can see on the slide the dose normalized <unk> of bupivacaine, which generally is generally stable and lower than bupivacaine Hcl.
We believe these results will provide the basis for expanded indications next year.
Alleviating a major headwind for us in relief.
I will now turn the call over to John .
Yeah.
Thank you Barry we continue to make progress across our acute care and oncology care franchises. During my presentation I will start with a number of updates on key performance metrics related to Zen relief, then I'll provide an update on our upon the pricing strategy.
Finish with an update on another strong commercial quarter with our oncology care business.
I'll start by summarizing Zen reliefs quarterly performance of our leading indicators.
Despite third quarter performance being impacted by a decline in indicated surgical procedures, which I'll describe on the next slide <unk> net sales grew to $2 7 million for the quarter, representing an 8% increase over the prior quarter.
Third quarter demand units grew 15077 units, representing an 18% increase over the prior quarter.
This growth was impacted by a much slower than expected July .
The difference between the 8% net sales increase and the 18% unit demand increase.
<unk> function of lower generally net price primed.
Primarily driven by higher 340, <unk> sales and an increase in the percentage up 200 milligram sku's purchase to support the traction Zen relief is gaining in general surgery and foot and ankle procedures.
Total sudden relief unique ordering accounts grew to 704 with the account reorder rate remained strong at 84%.
Total formulary approvals present really grew to 416 approvals.
Importantly, we're seeing growth with integrated delivery networks, or <unk> 66, ibm's that about it generally to formulary.
Gaining IBM support is a critical component to drive therapeutic interchanges with key accounts substituting generally for EXPAREL for indicated procedures in the future.
Overall, although we certainly made progress during Q3, we know we can do better and we have refocused our Q4 priorities to accelerate generally sales in our existing user accounts.
As I mentioned on the prior slide we believe.
Third quarter performance was impacted by a decline in indicated procedures.
This line chart shows the volume of currently indicated procedures since 2019.
Several relevant observations.
First our target indicated procedures still have not returned to 2019 levels.
Second the July to August period in 2022, what's the lowest volume in the four years measured.
And finally, the first 10 weeks of Q3 declined 11%.
The first 10 weeks in Q2.
While the market. Despite the market weakness generally grew 18% in Q3 and the brand continues to make steady progress.
As a comparison symphony data indicates that in the third quarter 2022, EXPAREL total unit demand volume declined by 3% versus the prior quarter.
As previously mentioned Zen relief demand unit volume grew by 18% in the third quarter over the second quarter. This translates into an average of 1160 units per week during the quarter.
We're starting Q4 with some positive news October was our highest volume month in history at 6534 units.
This translates into 1475 units per week, representing a 27% increase over the Q3 weekly average.
Historically, the fourth quarter has been the strongest quarter for elective surgical procedures and we are encouraged by our start to Q4.
Based on this growth, we anticipate generally net product sales to increase in the range of 30% to 40% in the fourth quarter compared to the prior quarter.
Similarly, formulary approvals group to a total of 416 approvals through the end of October .
And those accounts actually making PMT decisions over 90% of hospital PMT Committee continues to ads and relate to formulary.
Importantly, an estimated 68% of our formulary approvals are for unrestricted usage of generally.
One of the key strategic changes, we are making is deploying greater resources to existing user accounts to drive pull through in the fourth quarter and.
In addition, our focus is on expanding the procedures and surgeons, where an <unk> can be used especially in ibm's to accelerate generally volume and net sales.
While we understand that new formulary approvals help us establish a critical pipeline for new business.
Driving greater usage as our current and our current ordering accounts is our key priority for the commercial team.
Next I wanted to provide an update on key top down strategy of targeting integrated delivering networks to create new system wide opportunities for therapeutic interchange from EXPAREL literally for indicated procedures.
Thus far 66, idms have added generally to their formularies, what 35% of approvals for unrestricted Houston generally.
These 66 Ibm's account for over 1 million annual generally indicated procedures.
Finally, our IGN formulary expansion now covers $143 million of annual EXPAREL sales.
We currently have 15 ideas at various stages of evaluating switching from EXPAREL to Zimmer like for indicated procedures.
Now, let's drill down on the 15 ibm's that are interested in potential therapeutic interchange.
But zen release existing expanded label indications, it's not surprising that ibm's are looking to save millions of dollars with a product that has demonstrated superior clinical results to the standard of care in head to head trials.
We're excited to be partnering partnering with both pharmacy and physicians to drive their internal evaluations with similarly.
Of the 15 Ibm's moving forward all 15 Ibms have initiated their internal trials.
Feedback on their trials continues to be very positive across a variety of surgical procedures.
Well I'm looking at large IBM certainly takes some time five ibm's have now made positive decisions for therapeutic interchange and are now switching because generally for indicated procedures.
Last quarter, we introduced a new metric to help us evaluate the impact we're making with IBM.
As a reminder, the new metric to measure performance is branded market share, which is simply general leap units divided by the total number of ex grow units faster than really P units.
Overall in the 66 Ibm's with formulary approval were demonstrated solid branded market share growth.
It's important to keep in mind, adding new ibm's actually lowers our share as we build new business in these apps.
For example last quarter, when we reported 57, Ibm's, what formulary approvals, which has now grown to 66 Atms.
Advancing ibm's to evaluation of therapeutic interchanges an important step in accelerating <unk> growth.
As the table shows the 15 Ibm's evaluating ti.
A combined 12 four branded market share in Q3, which is over 50% higher than the average for the 66, Ivy ads, which apps and relief on formulary.
Finally, we've also provide a general <unk> branded unit market share for the top five IBM share accounts out of the 15 Ibm's evaluating yeah.
As this table demonstrates our branded market share can grow very quickly, but the high over 50% for Q3.
Based on our current indicated procedures, 50% market share is approaching the upper limit until we receive an additional label expansion, which is expected in the second half of 2023.
We've shared different versions of the slide in the past today I'll focus on purchase price cost savings and reimbursement benefits switching to generally provides a cost savings of 25% to 32% based on wholesale acquisition cost.
In the fourth quarter for Sarah implemented an estimated 25% discount from WAC pricing and for the first time are offering 340 <unk> pricing for EXPAREL.
Even with the <unk> 340, B pricing generally still provides 340 <unk> accounts with a 23% to 31% savings compared to EXPAREL.
Many 340 <unk> customers that we've spoken with have indicated that <unk> response to the Zimmer relief pricing strategy, it's too little too late.
The <unk> move at this late stage in the product lifecycle, it's interesting considering the significant financial impact it will have on our business base.
Based on Symphony data of 45% of X Girls Hospital sales earned $3 40 be eligible accounts.
23% discount could have a meaningful reduction in top line sales and profits.
We don't believe they would've taken upset because they didn't see all starting to gain traction and 340, b accounts and becoming a larger correct.
Finally from a reimbursement perspective, using generally remained much more profitable with Medicare patients in the hospital outpatient and ASC settings of care.
And these challenging financial times 340, <unk> accounts are still experiencing a financial benefit of over $340 per patient by using generally rather than EXPAREL.
Based on these economic benefits. It is not surprising that large idms continue reevaluate generally for Ti and indicated procedures and are anxious to limit EXPAREL usage.
What caused the Zen relief section with our.
Refocus priorities for 2022, our top priority is to build consistent usage and ordering accounts. We have nearly 600 accounts that had reorders and we're working to increase pull through and build average order size.
This will be accomplished by increasing the number of surgeons using generally cap and the number of surgical procedures were achieved.
During October we began deploying new flexible resources to ensure that we have additional personnel for in servicing surgeons and their staff.
Simply put we want the right resources at the right account at the right time.
These new resources are especially important in formulary approved ibs with multiple hospitals, and again geography, where there can be too many accounts to cover all at once.
These contracted resources provide us with the bandwidth to grow faster.
Another advantage is our ability to deploy resources in territories quickly and cost effectively.
We're already beginning to see the initial impact of these new resources and believe the true impact will be seen in Q1.
Our second priority is to maximize our separate reimbursement outside of the surgical bundle payment for generally.
The CMS pass through status in relief paths for Medicare patients in the hospital outpatient setting of care continues to make a positive impact, especially on ibms.
In addition, Zen relief is now approved for separate reimbursement and over 200 million covered lives by commercial payers and Medicaid.
Finally, we will continue to gain formulary approvals at new targeted ibm's and hospitals to build our pipeline for growth and therapeutic interchange opportunities.
Now I will shift the presentation to a party or new product for the prevention of post operative nausea, and vomiting or <unk>.
During my September approval presentation, I focused on the market opportunity.
I'll be sharing specific details on our pricing strategy for our pocket.
We truly believe that upon the <unk> market is the next big opportunity inherent let's.
Let's start with the name upon <unk> conveys a precedent for <unk>.
The market research on the brand name was extremely positive from health care providers, and importantly, differentiates this lower dosage offering up a property in a mall strength from some fonti, our highly successful product for <unk>.
We will be targeting $36 million annual procedures in patients at moderate to high risk <unk>.
And this large segment, an estimated 12 million high to moderate risk patients are not receiving prophylaxis.
One of our goals will be to utilize for 2020 consensus guidelines to change this practice growing the market addressing one of the most concerning side effects for patients undergoing surgery.
Market research identified a number of significant unmet needs in the current market, including a more convenient product with faster onset with poppy meets with rapid IV push and 97 receptor percent occupancy within five minutes.
A more effective product his desire and our proppant is the most effective product for <unk> prevention alone or in combination and finally longer lasting treatment with apondi, providing <unk> prevention for up to 48 hours.
The last time that need is especially important with the growth in outpatient surgeries and patients being discharged after surgery hours after surgery.
In short our poppy is clearly differentiated in this market and positioned for success.
<unk> is also the perfect strategic fit for Heron's based on the synergies with our commercial organization.
It starts with tremendous overlap of accounts were already targeting for <unk>.
We have existing trusted relationships with anesthesia in pharmacy, which is critical for formulary access and usage and.
In addition, about 65% that's <unk> business comes from the hospital market.
The existing positive experiences at major hospitals, and <unk> ads can you help us jumpstart upon be access and usage.
Next I wanted to share some market research with health care providers and the impact of our pumping pricing on their market share.
The circle graph shows that our overall use of <unk> prophylaxis for prevention by patient risk factor low moderate and high.
Not surprisingly the estimate is 18% share and low risk patients growing to 59% share in high risk patients.
The bar graph on the bottom shows the HCP market share based on price points, ranging from $75 to $35 per upon b vial.
A key observation was the change in market share across all three patient risk categories as price moves closer to $65 price.
Based on <unk>.
<unk> HCP feedback, we determined that WAC pricing between $65 and $55 like the right range, but we also needed to consider formulary access for our pumping.
Slide number 20 provides key market research finding from pharmacy directors on formulary access for our pond based on price points, ranging from $40 to $96 per upon <unk>.
Once again, there was a significant difference between the $65 and $55 WAC pricing on formulary access for upon me what $60 being the tipping point on access.
Our goal is to select and upon fee pricing strategy, which maximizes the profit contribution to the company our final pricing recommendation balances the HCP market share and moderate to high risk patients and Optimizes overall formulary access including the level.
A potential restrictions to the product usage.
With this in mind, we will launch upon being with a WAC price of $58 per buyer.
Apondi will only be sold to end users and packs containing 10 box.
In addition, consistent with our corporate pricing strategy will also offer 340, <unk> pricing to accelerate access to health care providers and patients.
With a discount of at least 23, 1% from WAC $3 40, the pricing for <unk> will be under $45 per vial.
It's important to note the market research showed in the two previous slides also supports incremental HCP market share and improved formulary access at this lower price level.
Finally, as Barry mentioned, we're still on track for a ponzi availability in the first quarter of 2023.
Now I'd like to shift gears and review the third quarter results for oncology care franchise.
During the third quarter, our oncology care team did an outstanding job of growing our <unk> portfolio net sales by 13% over the same quarter in the prior year.
We're very proud of restoring growth to our <unk> franchise following generic arbitrage with both products and believe this will remain a valuable and highly profitable franchise for years to come.
We remain on track to deliver <unk> net sales in the range of <unk>.
<unk> $93 million to $95 million, representing an 11% to 14% increase over prior year.
The outlook for our <unk> products remains positive based on continued improving reimbursement tailwind over the past year.
As shown by the table below.
<unk> and <unk> are in a much more favorable reimbursement position versus the competition and at the same time last year.
Generic faucet <unk> down to $20 66.
And IV Kenzie are down to 423 12 reimbursement.
In addition, the elimination of separate reimbursement for generic <unk> in the hospital outpatient segment effective January one of this year continues to make <unk> value proposition much more attractive.
The new CMS guidelines published in July indicated that effective July one 2023 that reimbursement for 340, B accounts will increase the ASP plus 6% compared to the prior rate of ASP minus 22, 5%.
But the greatest portion of our <unk> hospital demand units are in 340 <unk> accounts. We believe this opportunity will help us increase.
<unk> units in the fourth quarter and in 2023.
Finally, large scale <unk> manufacturing is now online with product in the distribution channel, resulting in significant improvements in our gross margin.
That completes my prepared remarks, and I'll turn the call back over to Barrett.
Okay.
Okay.
Thank you John .
We will conclude the formal presentation or the financial overview slide.
Hey, Erinn had cash cash equivalents and short term investments of $121 7 million.
As of September 32022, net cash used for operating activities in third quarter was $37 1 million, including restructuring fees.
<unk> reduction in force.
Impact of reducing head count by approximately 34%, we will continue to be realized through this quarter and next.
The following slides in the deck.
Contain important safety information for Zen relief and upon me.
Slides are available on our website.
With that we're ready for your questions.
Yes.
If you would like to ask a question simply press Star then the number one on your telephone keypad. Once again. Please press star one if you would like to ask your question.
Your first question comes from the line of Brandon Folkes with Cantor Fitzgerald. Please go ahead.
Hi, Thanks for taking my question then.
Yes.
Okay and candidate vaccine released performance, but.
No surprise I do want to just digging a little bit can you maybe just elaborate what changed so much from the beginning of August when we held the <unk> coal and guided to sort of that 40% to 50% quarter over quarter growth and with past July at that stage that we quote out on this call today and then similarly I mean.
Any visibility.
The risks into the October figures, you mentioned mentioned now just in light of sort of.
That dynamic of August and July .
Just expecting maybe more of a bounce back in surgery any color would be helpful. And then maybe just just to add something to that I mean this year. It did call out an improvement in year on year trends in mid August .
Anything we should look into sort of in.
And that comment with your results today.
Yes, Thanks, Brandon I appreciate the question.
And.
Yes, I think that you.
You hit the nail on the head we had anticipated a.
Much stronger rebound after a week of July .
And obviously that didn't occur.
And.
Sometimes not 100% clear on a month to month basis.
In terms of the impact of the <unk>.
Macro environment that we're in.
You mentioned.
Sarah.
They had indicated a week.
Going into a weakness going into October .
October is extremely strong so I think there is going to be some variation across the products in terms of seasonality.
Let Jon add any additional information.
In terms of the.
The second part of the quarter.
In terms of.
Rash reasons, why we didn't see the rebound that was anticipated I will also add that.
We did have very restructuring, which included some of the commercial team.
It has been very successful in terms of.
Really invigorating.
That group, but.
Any kind of restructuring obviously.
There is always some downtime to get things reorganized so Jonathan.
Thank you Ed.
Yes.
The one thing that I would add areas, we feel very good about the direction. We're headed in Q4 and really were starting to see.
The.
Claims data procedure trends support that Brandon. So if we look at it what we tend to follow is a five week over the prior five week on indicated launch procedures and we're finally, starting to see growth of that that was really reflected after labor day.
We had a very strong finish to.
For September and then really have backed that up with our strongest month ever in October .
In our core a whole one weekend now but.
On November 1st week is higher than October one so we feel good about.
The statement that we've made that we're looking for 30% to 40% net sales growth for the quarter.
Thanks, I appreciate the color.
Maybe just one follow up that quickly did put a cash runway guidance previously.
Obviously on a quarter over quarter growth can you sort of far off but not really on a dollar.
I'll, let denominated amount so just.
Can you just.
<unk> do you still stand by that cash runway post this ramp and then maybe just one more if I may just sort of in a more sort of constructive minutes and with the audience that are evaluating Zen relief now in.
In these trials if you are successful in gate, gaining that further label expansion how should we think about whether these audiences will ensure another round of evaluation or do you think that will just sort of fold it in.
Running it on a broader set of surgery is maybe than the label just any color on that would be helpful to you as we think about the ramp in 2023. Thank you.
Thanks, Brian and actually I'll turn it over to John .
To answer the last question first on Ibms and I don't take cash runway.
Okay.
Yes, it's a great question, Brandon and we believe that.
Unfortunately, we won't be dependent on IBM by IBM basis.
Got some accounts that have already gone to the point, where they have taken extra all off formulary.
And certainly in those accounts that we feel like the additional indicated procedures that we're going to get we're going to be able to get a large portion of that business relatively quickly and others. It may take a bit longer so it's a bit early to make that call but.
We're gratified that some of the accounts they are having such great results out one in particular that I can think of that Scott.
Six different hospitals within the IBM and then three of them <unk> already removed EXPAREL from formulary and those are the types of results that we get excited about we're not looking to have EXPAREL removed, we're looking to grow usage, but in those situations, where we actually don't have EXPAREL as a branded competitor.
We think that that business can grow much more rapidly with the further label expansion.
Thanks, John Yeah on cash runway, obviously cash runway.
The levers are.
Cash burn in revenue.
We are we are working very hard to increase.
Revenue numbers as John went through in his presentation.
Looking at the.
Ways to obviously control the burn.
We had anticipated seeing.
Seeing an increase in burn this quarter when we gave the original guidance.
We were finishing up the validation of large scale manufacturing for both general leaf and soon <unk>.
Which.
Take some additional resources.
So that was part of the original plan and so we are doing everything we can to to maintain.
Maintaining that guidance.
Hi.
Thank you very much I appreciate all the color.
Okay.
Your next question is from the line of Josh Schwimmer with Evercore. Please go ahead.
Thanks for taking the questions I guess the first.
Do you expect upon the revenue to be greater than and relief in either 2022 year 2024.
Okay.
Well, it's a little early to be giving.
Giving revenue guidance I think the.
The unit volumes certainly.
It could be higher.
Dollar revenue would be a challenging.
Target John do you have any other and any additional color on that.
Okay.
No.
That's well stated there I don't have anything to add.
Yes.
Okay.
You don't really articulated a clear explanation as to why the Zen relief launch has been so far below expectations and it makes it kind of hard to have a lot of confidence in some of your commentary and optimism that youre going to be able to get back on track. If you can't really explain how it got sold off track to begin with can you maybe kind of lift.
Top three or four dynamics that you think were.
We're off relative to the launch and initial expectations and how youre going to be able to correct. Those thank you.
Well certainly.
I'll start and John can include.
As you know Josh.
We we got a.
Less than ideal initial label for general leaf that had a much greater impact on utilization than initial market research would have indicated.
And I think you yourself has pointed out that was.
That was a clear miss on our part that we should have appreciated that would have a bigger impact.
B, we fumbled the ball there in terms of believing the market research.
In terms of surgeons.
Not really carrying what the indication statement was and certainly that was a reasonable.
View, given the off label use of our competitors product in the in the nerve block space.
So it seems reasonable turned out not to actually be the case.
We were fortunate to get.
The label revised in December .
It has helped too.
Expand the utilization and has helped to bring on these therapeutic interchanges from idms.
We're still somewhat hamstrung by the still diminished label.
It means that some idms are not considering a therapeutic interchange because.
The scope of the indications isn't broad enough.
So we still have.
Obviously efforts in place as I already noted.
To fix that that issue and we anticipate that being corrected in the second half of next year.
The the other challenge that we have.
<unk> identified is that.
It is taking more sales rep time.
Per surgeon too to get them familiarized with the product to get the staff familiarized with the product.
And with the much larger turnover in staff.
And certainly we ever anticipated pre COVID-19 or even.
As Covid started to wane.
We didn't appreciate the turnover issues that hospitals would have and staff.
It's just taking more time.
Of the Rep for individual surgeons and.
And that has resulted in obviously.
The sales reps getting to fewer new surgeons.
And not expanding the utilization as quickly as as we certainly had projected.
John .
Do you have any other things to add yes, I do.
I think that.
Both of the items that you described were really important I think the other real big impact has been that.
What we're finding is that every single account is.
Virtually doing their own evaluations generally so even though we have these wonderful well controlled studies against the standard of care bupivacaine and beat them.
We're still evaluating the product themselves.
When we ask them. That's the reason comes back loud and clear extra all told US. They were there were 72 hours and they're not they're 24 to 30 hours.
And now we need to prove it was generally thought youre actually 72 hours. So.
I think having to go through that type of evaluation at every single account and in multiple procedures oftentimes. So you might have to do an orthopedic surgeon and a soft tissue.
Taken far more time than we ever imagined and I think that's one of the reasons that we're really looking forward to making sure that we.
Do you have the right resources available through this deployment of flexible resources as we go forward Josh.
Yes, I would just add that we certainly knew that there would be.
Some trials.
Done at.
At hospitals for the reasons that John articulated, but the size and scope of the trials and the time that it's taken.
As dramatically longer than than we would have projected.
We're getting excellent results.
And certainly positive feedback from these <unk>.
Just a very timely time consuming process and a slowdown introduction of the product.
That's very helpful. Thank you.
Your next question is from the line of Serge Belanger with Needham <unk> Company. Please go ahead.
Hi, good afternoon.
A couple of quick questions on interim relief.
Right off.
Looks like the net price movement.
With a bit of a headwind in the third quarter. Just curious if you expect additional movements in net price in the coming quarters.
And then secondly, maybe just talk about that.
What kind of market share you have in your targeted indicated procedure.
We're also trying to get an idea.
Where you are displacing ex barrel.
Yeah.
And then finally I think John mentioned.
The deployment of additional resources in the fourth quarter kind of reinvigorate didn't rollout here.
Curious what that does to Opex and how many additional people that we're talking about here.
Hey, John .
Do you want to take that.
Yes.
Sure. So you're right surge there was definitely some impact on net price.
I think as we've seen some shift with the broader indication that we received in December there has been a.
A bit of.
Change in the SKU mix.
And the first six months it was probably about 80% 400 milligram to 200%.
Or excuse me, 20% 200 milligram. This last quarter. It was about 67% for the 433%. So just by virtue of that SKU change you will see a lower net price.
If you take a look at that combined with the growth that we've experienced in 340 <unk> accounts.
340, B accounts between second and third quarter.
Probably grew about 25%, which means we're going to be looking at a lower net price. So.
I would say from a modeling standpoint, probably best to adjust that down as we've shifted to more 200 milligram SKU to our model price of about $1 75 to $1 80 for net price per unit.
Yeah.
With respect to where are we replacing EXPAREL I talked a little bit about that.
This concept of <unk>.
Branded market share when we look at the percentage of Zen relief units compare to the total of EXPAREL and similarly units combined and if you look at the overall market what that right now generally.
Shows a share of about three 8% when you compare that to the numbers that we're showing in the Ibms and you can see the idea and so you kind of in the 66 Ibm's at eight 1% and 12, 4%. So we're really seeing.
Very strong growth in those compared to the overall market and Thats one of the reasons.
That will continue to focus on.
Ibm's and especially those conducting therapeutic interchanges.
And I believe your last question was how does it relate to.
Opex.
As we look at these flexible resources.
The one thing that I'll say is that these are all contracted.
Work that we're having done so they are not employees of the company if you will.
We have.
Some that are full time operating room educators that have the ability to travel or the businesses and they are really a hit or hospital implementation team, where they can really help us get an idea and up and running very quickly.
The others are more part time and local flexible supports.
They include both or nurses as well as other support staff.
We also are using them for in surfaces and to leverage relationships with surgeons, who are working with some medical device reps I think the key difference on our strategy with that compared to what other companies have done.
That were only paying if they were actually in is generally case, if they are in the operating room and supporting the surface of it so a very different model and incrementally certainly more than pays for itself, but as Barry mentioned, we did have some reduction.
We looked at from the commercial organization and certainly can more than offset that small incremental cost as we test pilot. Some of these new flexible resources. So I don't know if you had anything to add Barry on Mt.
No I think I think you covered it well.
The.
Really the incremental cost of these contract personnel are essentially being.
Covered by the original.
Commercial budget.
It's not going to have a substantial impact in terms of.
And as I previously said controlling burn obviously is.
It is very important to us.
But I do think it's important to.
Just reiterate that these activities that John has outlined which are.
Just in early stages, we're seeing clear evidence of the success.
These activities in terms of pull through in terms of getting IV ends moving more quickly.
With the therapeutic interchanges.
And and then we're seeing that in terms of.
Weekly sales increases.
And I will say that.
As I mentioned.
Previously.
Terms of using.
Additional field Representatives and co promote type activities.
This is a page out of the EXPAREL playbook in terms of their initial launch.
And it did have.
Important impacts in terms of.
They're they're launch trajectories and so.
I think that this is something that.
We're probably a little late in the game and implementing but its clearly having an important impact and we feel.
Very confident that these activities are showing fruit and we will continue to in terms of meeting.
The target.
Growth that we have identified for fourth quarter.
Just one last one to finish off.
Curious if the oncology franchise.
The guided sales rate of $93 million to $95 million.
It's profitable for the company.
Okay.
Im not sure we got the end of your question Serge.
Yes, yes, that's very profitable franchise right, Matt right now so.
Not sure if you were looking for something more specific.
Maybe what kind of change.
Changes in reimbursement that could drive additional growth.
Sure.
For 2023.
Yes, John outlined what is.
A very important driver.
We believe in.
And it's to a large extent very similar to.
An important driver for us generally in terms of the reimbursement.
<unk>.
And so for that matter.
In the hospital setting.
Where because of our recent Supreme Court decision.
CMS will go back to the original.
Reimbursing <unk> III for the hospitals.
Full ASP plus six rather than.
<unk> 2008 2.3.
Percent and that that's a huge windfall.
When when you have a product like <unk>, where.
Where they can make say $40.
And faster prep a tenant is not reimbursed at all because its fallen below the threshold for reimbursement.
And so we.
We have a lot of $3 40, the hospitals, who moved to generic foster prep event to take advantage of the arbitrage.
That are now either coming back or evaluating coming back to some amount of data.
And that will certainly be an important driver for us.
Into next year.
Yes, just a little more color on that area, if I could so.
Those the ibms that that moved to generic cross a profit entering the arbitrage actually with this new reimbursement windfall for 300 <unk> hospitals.
We've already signed contracts with three idms to come back to some biopsy.
Now ibms because of a number of them are over.
Over 30 hospitals a piece.
Takes a bit of time to get them back in.
Using the product but.
We're very optimistic about what this quarter could look like as well as going into next year. We think that can help fuel growth and we continue to talk to other idms that weren't former users.
Some bumpy and Thats, a perfect discussion because when you're going to be out there talking to them about.
Upon being as well.
Yes.
So add that we have been.
Somewhat resource constrained in terms of somebody.
Up until really this quarter.
With limited supplies being manufactured at our at small scale.
And so we have kind of slow walk.
Some potential opportunities just because of the fact that there is a limited amount of material that could be manufactured even though we have two contract manufacturers.
Now as already noted validated the larger scale manufacturing is at 10 X increase.
Which allows us to greatly expand availability and we've put pedal to the metal in terms of going back out and looking for.
Additional business and we will continue to do so.
Great. Thanks.
Okay.
At this time there are no further questions I will now turn the call back to Barry for any closing remarks.
Yeah, well I want to thank everyone for joining us on the call today.
As noted obviously, we're very disappointed with.
The Zen relief results and third quarter, but very optimistic.
For our fourth quarter and beyond.
See that the building the base.
Business that John defined.
And in the call.
Starting to bear fruit and with some of the new initiatives, we've put in place.
And.
The increase in procedures were.
Extremely positive about the fourth quarter.
And moving into next year. So thank you very much.
Tuning in and we look forward to keeping you updated in the future.
Ladies and gentlemen that does conclude today's conference call. Thank you for your participation you may now disconnect Goodbye.
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Yeah.
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