Q4 2022 Pacira Biosciences Inc Earnings Call

Speaker 1: Good day, and thank you for standing by. Welcome to the Quarter 4 2022 PASIRA Biosciences Inc. Earnings Conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To answer a question during the session, you'll need to press star 1 1 on your telephone.

Speaker 1: You will then hear an automated message advising that your hand is raised. To withdraw your question, press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Susan Mesko. Please go ahead.

Speaker 2: Thank you, Prince. And good morning, everyone. Welcome to today's conference call to discuss our fourth quarter 2022 financial results. Joining me on the call are Dave Stach, Chairman and Chief Executive Officer, Roy Winston, Chief Medical Officer, and Charlie Reinhart, Chief Financial Officer. Thank you.

Speaker 2: Additional members of our executive team are here for today's question and answer session. Before we begin, let me remind you that this call will include forward-looking statements based on current expectations. Such statements represent our judgment as of today and may involve risks and uncertainties. For information concerning risk factors that could affect the company, please refer to the company's filings at the FCC, which are available from the FCC or our website.

Speaker 3: With that, I will now turn the call over to Dave Stack. Thank you Susan. Good morning everyone and thank you for joining us. We'll start today's call with prepared remarks covering recent business highlights before turning to your questions.

Speaker 3: 2022 was another strong year for Pesera as we continue to all perform the elective surgery market operating from a position of financial strength. We posted record revenues of $667 million in 2022 a 23% increase over 2021. Our growing top line combined with ongoing operating discipline.

Speaker 3: drove significantly positive adjusted EBITDA of $213 million for the year and $59 million for the quarter, and adjusted diluted earnings per share of $2.59 for the year and $0.80 for the quarter. Our performance allows us to fund internal and external growth initiatives while also optimizing our balance sheet with the planned prepayment of our term loan B. —

Speaker 3: This marks our ninth consecutive year of positive adjusted earnings and impressive records that we are proud of. Turning now to some specifics for our XPREL franchise, where I am pleased to report we have now treated more than 12 million patients in the United States. Regional analgesia techniques performed by surgeons and anesthesiologists continue to be a substantial growth driver. XPREL is fostering a significant paradigm shift in patient care by enabling same-day surgeries and accelerating recovery times.

Speaker 3: Surgical market procedures continue to migrate from inpatient to outpatient settings at increasing rates. The most recent rolling 12-month IQVIA procedural data from July 2022 further illustrates this shift. For hospital inpatient procedures, the market experienced a year-over-year decline of 7%. X-bro was flat year-over-year, but with growing interest in women's health.

Speaker 3: The use of X-Browl-4C sections grew by 26% in the hospital in patient setting. The L-patient procedure market demonstrated a year over your increase of 5%. X-Browl continues to enable this growth and significantly outpace the market with 13% year over your increase. Across key L-patient procedures, we continue to see strong X-Browl growth, including total joints with a 22% increase, spine with a 17% increase.

Speaker 3: breast and gynecologic oncology, each with greater than 10% increases, while both shoulder and general surgery experienced a near 10% increase. For your reference, these IQVIA data points are summarized in our investor deck, which is available on our website. In 2023, we will continue to support the market's ongoing migration through several patient-centric initiatives. On the manufacturing front, we have optimized our capacity to supply more than 1.4 billion dollars worth of XPaL annually at the current price. Improving gross margins is a top organizational priority.

Speaker 3: We have addressed different supply chain and manufacturing issues that negatively impact our margins for the last 3-quarters of 2022. We expect to see full-year margins improve in 2023 with an aim of reaching the mid-80% range over time. Some product-specific updates, including the following. For ex-Peral, we expect to secure FDA approval in the coming weeks for an enhanced product release assay that will improve our back-value rate, benefit margins, and support additional intellectual property protection. Ex-Brell test batches from our 200-liter manufacturing facility in San Diego are underway and we remain on track for a supplemental Zodrug application in 2023.

Speaker 3: These two populations are particularly vulnerable to the surgical gateway of opioid addiction and can benefit greatly from expral-based opioid-starring regimens.

Speaker 3: After 17 weeks, we are exactly where we thought we would be with an increase in both 340B and non-340B purchasers and an aggregate 5% discount to our overall net selling price. We believe this program will drive significant volume expansion within existing and naive 340 business representing nearly 10 million expral relevant market procedures. We expect the 340B pricing program to be neutral to slightly accretive to the net revenues by the end of 2023, as we access a significantly larger pool of patients and their surgeon provides.

Speaker 3: and self-insured payers expected to follow CMS. We are actively monitoring efforts to accelerate implementation prior to 2025, either through a technical amendment or regulation. We believe policymakers in Washington, DC, will appreciate urgency for improving access the non-opioid options given the more than 107,000 Americans who died of a drug overdose in the 12-month period and in March 2022, with more than two-thirds of these deaths involving opioids.

Speaker 3: No payments 340B are especially meaningful. The hospitals as they continue to migrate lower margins, soft tissue procedures to hospital outpatient settings. Both programs will assist eligible healthcare systems and appointing the opportunity to offer non opioid pain control for these procedures while advancing our mission to provide a non opioid pain management solution to as many patients as possible while positioning opioids for rescue use only. We're also supporting significant, the significant need for opioid-sparing pain management at our Pesira Innovation and Training Centers as well as our infield educational events. In 2022 alone, our educational programs provided ultrasound-based training to more than 6000 physicians for select regional blocks with a rectus fine a transversive dominance plane and pectoralis the most highly requested extra workshops. Our IAVIRR workshops are also accommodating the markets growing interest and long-ass connecting drug-free nerve blocks.

Speaker 3: Our expral growth initiatives are supported by a strong and growing path of state. As a reminder, we currently have eight more vocalistic patents, and any potential generic would have to successfully overcome each claim within every one of our patents, to get to the point of establishing vital equivalents at the commercial scale. With no commercially viable alternative for long acting, non-alcoholic patients or post-surge vocal pain management.

Speaker 3: from hospital pharmacy departments. Long wait lists for elected surgeries are overwhelming healthcare systems across the United Kingdom of Europe , and we believe X-Brill can help improve this dynamic by enabling more rapid recoveries.

Speaker 3: In Latin and South America, our partner, your Obama submitted for regulatory approval for X-Priol and Brazil in December , and we are now focused on submitting the approval in other countries. On the regulatory front, last month, we submitted our supplemental new drug application to the FDA, seeking expansion of the X-Priol label to include lower exterminator block procedures. This timeline places us on track for approval in the fourth quarter of this year. Complimenting X-Priol, Zoretta and Iovera are serving attractive pre-searchable segments of the market. Last month, we held our annual national sales meeting during which we formally align and trained our full 240-person field force-based team as a single unit with all the company managers now selling all three products in our portfolio. With this realignment, sales territories are smaller in size and we are significantly increasing our recent region frequency with a three-fold anticipated increase in Zoretta and Iovera sales calls.

Speaker 3: We also have several value-created milestones on track for the next 12 to 24 months for Zoretta and Iovera. For Zoretta, we are now promoting safety data showing its advantages for diabetic patients with osteoarthritic knee pain. The data show clinically meaningful reductions in glycemic spikes and will be presented at the osteoarthritic research society world congress taking place in Denver next month. Roy will share more on these data momentarily. For Iovera this quarter, we are launching new commercial initiatives for the cash pay market following the concept of platelet bridge plasma or ERP and stem cell injections. This is a large and important lifestyle market for drug-free nerve blocks which provide immediate pain control and can last for several months. For patients who simply want to play golf, walk on the beach with their grandchildren or dance at their child's place. We also recently signed a multi-year deal for Iovera to become the official non-opioic management partner of the Ladies Professional Golf Association or LPGA. Through this direct consumer initiative, we will be driving awareness of the benefits of Iovera.

Speaker 3: and how to access the product using commercial broadcasts, digital advertising, and in-person presence at Termins and Key Markets nationwide. Our customers are also using Iovera for a treating pain related to spasticity, which is an on-label use. We are on track to begin a registration study for the treatment of spasticity around the middle of this year. In spasticity, Iovera has the potential to be a game changer. There are approximately 10.2 million patients in the United States currently diagnosed with spasticity. 2.6 million of these patients have moderate to severe spasticity. While 42% of these patients have received at least one treatment modality, only 150,000 are currently receiving treatment with a toxin. This underscores the highly dissatisfied market with current treatment options that are inadequate. Beyond the advancing label expansion programs for our commercial portfolio, we have an exciting earlier stage portfolio of new product development opportunities that include PCRX 201, a novel, infracilular gene therapy product candidate that produces IL-1RA for Niasco-Retraeus.

Speaker 3: Our preliminary Phase I data safety and efficacy data findings were compelling. Importantly, the greatest level of efficacy was observed with the lowest dose. These data will be presented at orthopedic and gene therapy meetings in the coming months. We continue to advance our internal monkey vasicula liposome pipeline. Our Phase I study of expral for intratical administration continues and is on track for completion this quarter. We will also initiate Phase I studies later this year for our monkey vasicula liposome dexomethosome formulation in low back pain and a 20 milligram monkey vasicula liposome giftivicine formulation, having nerve block or field block for longer lasting or chronic pain. In addition to our internal programs, we have a portfolio of externally sourced innovation that offers us the opportunity to participate in the development of several exciting product candidates addressing pain along the neural pathway while targeting our current customer base. These opportunities include strategic investments that's fine by Opharma.

Speaker 3: Genocents, GQ Biotherapeutics and Pathronics. With that, I'd like to turn to call over to Roy Winston, our Chief Medical Officer, to summarize some more detail on some of the upcoming near-term value drivers from our clinical programs, right? Thanks, Dave. This is an exciting time, not only for us at the Sarah, but for patients, providers, and payers seeking safe and effective opioid-free options for paying management. I'll start with our lower extremity nerve lock. As Dave mentioned, our supplemental new drug application has been submitted to the FDA and we are awaiting official acceptance, which is expected to come by a standard 74-day letter, which will include our pedophadie. To remind you, the basis of this submission are two phase three studies. The first study was a single dose thermal nerve lock in the AdDARTA canal for total knee-arfer plastic, and the second was a single dose sciatic nerve lock in the papalty opassa for bunion acne. Both utilized the 10 ml dose, which we use 133 milligrams. Both studies achieved the primary and key secondary endpoints of statistical significant reductions.

Speaker 3: in post-surgical pain and opioid consumption from zero through 96 hours when compared to the active comparator if you pivot cane. These data provide strong evidence for label expansion to include these two new indications and should support a superiority claim for expral or if you pivot cane in the new label. We believe adding these two additional nerve lock indications will significantly extend our reach into surgeries of the meat, medial lower leg, foot and ankle representing more than 3 million annual procedures. Working with key opinion leaders we've begun to publish these data to deliver strong evidence in the literature and incorporate them into society practice guidelines to use expral as a nerve lock in lower extremity procedures. We were also in track to begin a pediatric study later this year that has designed to support the expansion of our US and EU label. We are looking forward to minimizing exposure to...

Speaker 3: to opioids in this very vulnerable population. Turning till Zoretta, in March, investigators will present the results of a phase two study of patients with neoway and type two diabetes. Participants will randomize to receive Zoretta or immediate release triumsylone and compare glycemic spikes for the two groups. Zoretta was associated with a clinically meaningful reduction in hyperglyceine universes versus triumsylone, suggesting that Zoretta treatment leads to fewer short-term hypoglycemic related adverse events. In addition, the Zoretta group has significantly long-agoration in the target glucose range, which helps improve glucose management, improve patients' well-being, and reduce complications, and help care utilization. Remember that approximately 50% of patients being treated for OA, Neetayne also have type two diabetes or are prediabetic. Which is especially important for those needing repeat cortical steroid, dosing, or those that have bilateral knee disease.

Speaker 3: We also expect to initiate a new ZOREDA label of Spatian study around the middle of this year. This includes a Phase IV, a Diabetes Safety Study in NeoA and Phase III shoulder OAS study. Our shoulder study with positions ZOREDA as the first and only approved cortical steroids for shoulder osteoarthritis. Both studies will evaluate ZOREDA versus Triumphs and Alone with the goal of adding a superiority claim to the ZOREDA label and equally as important to place ZOREDA into orthopedic and pain management society guidelines as the new standard of care. Turning to Iovera, we are excited about what we are seeing and using Iovera for the treatment of spaticity itself. As Dave mentioned, treating the pain associated with spaticity is already on label and we are now educating physician specialists around the value of Iovera in this study. In parallel, we are launching a registration study to evaluate Iovera as a revolutionary new treatment for spaticity itself. This is based on strong data from the research of Dr. Paul Winston, President of the Canadian Association of Physical Medicine and Revealitation. Dr. Winston and his team recently presented data from his ongoing work in spaticity at the annual meeting of...

Speaker 3: of Cicity Label Advancing Study in the second quarter of this year of 2023. The study will evaluate IOVARAB versus Sham in adult patients and enrollment is expected to conclude before the end of the year because IOVARAB is 510K device, the anticipated review timeline of three to six months, which would place us on the market for the treatment of Cicity as early as the second to third quarter of 2024.

Speaker 3: We are also planning a second active comparator study in spasticity designed to demonstrate the superiority of Iovera versus toxic. It is our belief that Iovera can completely disrupt the current spasticity treatment paradigm, bringing tremendous relief to patients and value creation for miserror shareholders. Lastly, for Iovera, we have completed the study evaluating Iovera versus radio frequency of relation as a medial branch block to treat low back pain. We expect to present these data as scientific conference before the end of 2023. With that, I'll turn the call over to Charlie for his financial review. Charlie, thank you Roy and good morning everyone. I'll start with some commentary on our 2022 results and then walk through our outlook for 2023. To remind you, I will be discussing non-GAF financial measures this morning. The description of these metrics along with our reconciliation to GAF can be found in the news release we issued this morning.

Speaker 3: Let's begin with an update on sales and margin trends. Starting with X-Brill, where we continue to outperform a flat surgical market with net X-Brill sales coming in at $536.9 million for the year and $138 million for the quarter. Fourth quarter average daily value growth of 6% was partially offset by a lower net selling price due to our implementation of 340B drug pricing in October 2022. So, RETA continues to be a highly meaningful and creative addition to the PSERA portfolio, adding $105.5 million post-backed position sales to our top line in 2022. We saw improving sales trends for Zorreda as we exited the year, which we expect to accelerate as we run on education and awareness around its value in treating patients, especially those with unique care needs, such as diabetic patients. For IO-Vera, fund your sales of $15.3 million. We expect demand and sales growth to gain momentum in 2023 and beyond, with a launch of new commercial initiatives in the cash pay and spasticity pain markets, as well as education and awareness collaborations, with professional sports organizations like the NFL Alumni Association, the PGA Tour Champions, and the LPGA.

Speaker 3: We also remain optimistic and I of error within new indications such as the treatment of specificity and medial branch blocks where we are making new clinical investments. Current to gross margins on a consolidated basis are total non-daff gross margin percent for 74 percent for the full year and 72 percent for the fourth quarter. Fourth quarter gross margins by product were 71 percent for expral 82 percent for Zoretta and 58 percent for Iovera. Exprale gross margins in the fourth quarter were negatively impacted by new operational challenges including slightly higher than anticipated batch failures and the scarcity of one disposable part used in our manufacturing department. The supply of this part have now been replenished and we have not experienced elevated batch failures since early in the first quarter of 2023.

Speaker 3: Fourth quarter non-GAP R&D expense was $15.7 million, reflecting ongoing investments in label expansion studies, as well as our clinical stage pipeline. For full year non-GAP R&D was $78.2 million, and in line with our guided range of $75 to $85 million. Our fourth quarter non-GAP S-GNA expense was $54.7 million. For the full year non-GAP S-GNA expense was $219 million, slightly below our guided range of $220 to $230 million. The remainder of interest expense primarily related to our convertible notes. In December , we made a $50 million pre-payment about the standing principle under our term loan B. We expect to use strong-cast position to make another significant pre-payment around the middle of 2023. We are also actively evaluating options to refinance the remainder of the term loan B by the end of the year. For modeling purposes based on current interest rates and the current outstanding balance, with only the required minimum payments of principle of $9 million per quarter, full year interest expense will be approximately $37 million. As discussed in today's press release.

Speaker 3: we are returning to our pre-pandemic standard practice of providing annual financial guidance, and we are discontinuing monthly sales updates. For sales, full-year product guidance is as follows. For X-Brow, we are currently guiding to 2023 global sales of 570 to 580 million dollars, which is in line with the year-over-year growth rate in 2022. Given ongoing macro uncertainties outside of our control, we believe this is very achievable, given several growth initiatives that we expect to kick in as 2023 progresses, such as volume expansion for existing and new 340B customers, as well as new initiatives with OMSS, plastics, altation, sports management, and pain management and rehabilitation healthcare providers, and our ongoing expansion in European markets. With respect to CASE, we anticipate 2023 experelle sales to be more heavily weighted to the second half of the year, because of historical trends of roughly 20% in the first quarter of 25% for both the second and third quarters, and nearly 30% in the fourth quarter. Importantly, we are currently remain very bullish on our long-term experelle growth prospects, and fully expect that once we are on the other side of the current macroeconomic challenges and the elected procedure market normalizes, experelle will return to steady, double-digit year-be-year growth. For Zoretta, we are guiding to 2023 sales of 115 to 125 million dollars.

Speaker 1: and operating expenses and adjusted even the margins that exceed 50%. That concludes our prepared remarks. I'd like to turn the call over to the operator to begin our Q&A session. Operator. Thank you. At this time, we'll conduct a question and answer session. As a reminder, to ask your question, you'll need to press Star 111 on your telephone and wait for your name to be announced. To withdraw your question anytime, press Star 111 again. Please stand by while we compile the Q&A roster. Our first question comes from David and Selam of Piper Sandler. Your line is open. You may go ahead with your question.

Speaker 4: Hey, thanks. So just had a few. Regarding the guidance, can you talk about what that implies? And I apologize if I missed this earlier, but talk about what that implies in terms of the direction of net pricing and just the overall impact of the 340B pricing program and the discounts you're providing. And then secondly, can you talk about what the guide implies regarding new customer ads? You're saying that you're expecting volume growth to drive top line accretion in 23 and beyond. So I'm trying to get a better sense of what you're baking in in terms of new customer ads. And then the last question is on the surgical environment with soft tissue in particular.

Speaker 4: What's your general view on when you think that's going to recover? If you look at the charts, I mean, obviously it's markedly different. Do you think there will be some normalization on the soft tissue side in 2023? Are you thinking about it as normalization as a longer term event? Thank you. Thanks, David. So first with guidance and the implications of guidance, what we have right now, David, our forecast was that we would have a 5% discount in gross to net. And I think, you know, you understand that perfectly. What we see is that as we gain new customers from 340B, that there is a mix of 340B purchases and non 340B purchases were actually modestly surprised by the fact that many of these hospitals split their purchases between the 340B program and regular, you know, ASP plus sales. So,

Speaker 3: You know, we think that we weathered the worst of what we'll see in terms of, you know, the 340B purchasers started buying immediately at the end of October . We are just seeing increased action with more 340B, non-340B, previous to non-340B hospitals purchasing. And as I just said, many of those sales are actually not at the 340B pricing level. So things are unrolling pretty much as we thought. And obviously we've got work to do in terms of continuing that conversion. But we think that 5% is probably the worst that it'll be. If that's an appropriate way to present it, and it'll improve as we widen the base of purchasers. And, you know, also David, you know, just to make the case again from the script. We also see 340B is a way for us to get more customers with hands-on experience, both for their surgeons, anesthesiologists, and the patient experience so that when we get no pain, we shorten the timeline of these same folks having access to X-PRL and going through the formulary process, et cetera. So I hope that answers your question. If not, come back at me. Pretty much, you know, what I just talked about talks about, you know, the new customer ads. We do see, we have a group of customers that are almost 100% 340B. So that's as anticipated.

Speaker 3: We do have the new customers that are coming in. And we also see that there are hospitals that have been purchasers of X-PRL who have either been less aggressive in restricting X-PRL because of our 340B involvement. And in some cases, we've had people tell us that actually they are now encouraging the use of X-PRL more relatively as a short-term expense to them with 340B. And certain situations, but also getting ready for no pain when they will be able to treat all of their CMS patients in the outpatient environments and be fully reimbursement for those. So overall, David, very much what we thought was going to happen in the early stages and very positive for us in terms of opening up new markets. In terms of soft tissue, pretty interesting, David. It's again, you know, the issue here is the AFC C-SPEEDs have been almost totally consumed with the higher margin joints spying and, you know, some of the higher costs and higher margin procedures, bariatrics would be a good example.

So the opportunity for us to have reimbursement in the AAC has been muted by the fact that the insurance carriers are saving thousands of dollars by moving their cases to the AAC. And so the opportunity to save $300 to be reimbursed for experelle really mutes the opportunity for soft tissue in that environment. And as we've seen for the previous quarters, well over 75% of the use of experelle in the AAC is for the competing procedures. Who gets left out in that analysis is the soft tissue procedures that are low margin that the hospitals are struggling to perform in the hospital environment because of the reimbursement structure just doesn't even cover their costs. And so in the outpatient environment, again because these are low margin and many cases, these are these surgeries and these hospitals are in low income and indigenous environments. These patients are getting eupibocaine.

and opioids. You can be, you can be, you can be, because it's cheap and opioids because they consider them free because they write a prescription and they're filled in an outpatient department or in a hospital or I'm sorry in a pharmacy that is part of part D. So when we talk to those folks and say in an in-air or where there's reimbursement, we'll, what will you do? And universally the answer is, you know, I would love to be able to use the expral if I could afford to use it given the financial structure of my hospital and these procedures that I'm doing given the margins. So, the interesting observation there though is when a patient needs soft tissue procedures, if they're not done in a period of time and we're thinking something that they were going to have six months to a year, the only logical explanation we can come up with is that they learn to live with these soft tissue low-acuity paint procedures. Because the numbers would suggest that there's millions of patients walking around out there from these three years of COVID that require soft tissue surgery and we just don't see that demand in the marketplace, David. So, I think the pent up demand.

And ortho is real because the pain profile is such that the patients need to be treated in order to keep their job and get to work and be able to walk even the church and things like that. And soft tissue, the only explanation we have is that there is a very high propensity for pain control in these soft tissue procedures and patients who are in the lipidate and the heads of demand is real, but it is nowhere near apples to apples relative to the number of procedures that have not been done over the last three years, if that makes sense. Thanks, best up over color??.

is real because the pain profile is such that the patients need to be treated in order to keep their job and get to work and be able to walk even to church and things like that. And soft tissue, the only explanation we have is that there is a very high propensity for pain control in these soft tissue procedures and patients who are in the lip with it. And the pent up demand is real, but it is nowhere near apples to apples relative to the number of procedures that have not been done over the last three years if that makes sense. Okay, that's helpful color, thank you Dave. Thanks David.

Thank you. One moment for our next question. This question comes from Glenn Centangelo of Jeffries. Your line is open. Oh yeah good morning and thanks for taking my question. Hey Dave, I also want to follow up on some of the questions that David just asked with respect to X-Brow and sort of your outlook. If I kind of go back to fourth quarter, you know, you said in your prepare to march right that you're continuing to outperform the elective surgery market. Then I think later in the remarks, you seem to suggest that volume grew 6% in the quarter in a flat surgical market. Did I hear that correctly with the offset in 4Q, maybe being some of the pricing differences on the 340B program in particular that you talked about. Is that is that a fair step of what happened in 4Q? It is. Glad yes. Okay. Perfect. So then if we go to your guidance for for 2023, you're sort of forecasting 7% growth at the midpoint, which would that imply sort of low, low double digit sort of volume growth with, you know, a similar type of pricing impact and, you know, and I'm not sure embedded within those assumptions, what you're expecting for the overall surgical market based on that assumption. Okay.

Thank you. One moment for our next question. This question comes from Glenn Centangelo of Jeffries. Your line is open. Oh yeah, good morning and thanks for taking my question. Hey Dave, I also want to follow up on some of the questions that David just asked with respect to Esprow and sort of your outlook. If I kind of go back to fourth quarter, you know, you send your prepared remarks, right, that you're continuing to outperform the elective surgery market. Then I think later in the remarks, you seem to suggest that volume grew 6% in the quarter in a flat surgical market. Did I hear that correctly with the offset in 4Q, maybe being some of the pricing differences on the 340B program in particular that you talked about? Is that okay or stuff of what happened in 4Q? It is. It's glad, yes. Okay, perfect. So then if we go to your guidance for for 2023, you're sort of forecasting 7% growth at the midpoint, which would that imply sort of low double digit sort of volume growth with, you know, a similar type of pricing impact and, you know, and I'm not sure embedded within those assumptions, what you're expecting for the overall surgical market based on that assumption. Thank you.

going to change. I mean when I read that issue in our Washington DC discussions that is the third rail of the Democrats as it relates to healthcare and they won't even discuss providing anything for one-off reimbursement inside the surgical bundles. That's for inpatients. For outpatients where we have the AFC as I commented with David.

You know, the benefit of that is largely viewed by the fact that the insurance carriers saving 30 to 30 by percent on the cost of a procedure are utilizing the vast majority of the ASC capacity with these high margin procedures like joints and spine and things like that. The in the middle there is the soft tissue procedures that are difficult to do given the reimbursement in the inpatient market and are more appropriately done in the outpatient market given the improved cost structure of a hospital outpatient department.

But there are many, many hospitals across the United States, especially in indigen areas and low economic areas where they can't afford to use anything but the cheapest things that they can buy. And there is no reimbursement. So and I talked to many of these folks myself. And so the importance of 340B, Glenn, is to start those folks down the, you know, to have an opportunity at a reduced price to be able to use X-Priel in that environment to achieve our mission of providing an opioid alternative to as many patients as possible. There are still places, many of them here in Rowe, Florida, where they still can't afford X-Priel even at the 340 price. So it is absolutely driven by price in this environment.

And that's why the no-paying act is so important. So the no-paying act will force CMS, and there is a convergence there of these poor patients being largely under some form of social services. So, you know, this is the right patient population. But when CMS is forced to reimburse for non-opioid pain medicines in these, for these patients in these rural settings, we expect that you will see a very important inflection for X-Frel, because in that soft tissue rural market, it is absolutely cost. That is...

a ceiling basically on surgeons' use of the product. Thanks for all the details. You appreciate it. Thank you. One moment for our next question. This question comes from Gregory Renza of RBC Capital Markets. Gregory, your line is open. Great. Thanks, Dave and Team Congrats on the progress. Thanks for taking my question. Maybe just a few from me. Maybe building on the prior theme as well. Dave, I know you touched on this a little bit. Could you just comment about your approach to the organic price increases with respect?

to to experele. You know, how are you strategizing about that, especially with maybe more patients coming online? Do we kind of think about it as in line with the store goals or are there other considerations that even the Yeah, thanks Greg. You know, well, I think, you know, we can go back. It's just a January and I'll use that as the basis of an answer to your question. So, you know, there are 20 ML is.

the effective dose for many of the procedures that we've historically treated. And the trials that throw you out line for lower extremity nerve block, where we expect to be launching that, you know, late this year and early next year. But the 96 hour reduction in pain and opioid consumption for both of those trials was achieved with the 10 ML dose. One of our fastest growing areas, frankly, in our current business is in oral maxill facial surgery. And largely that is 5 MLs per tooth. And you end up with a lot of these extractions also being a 10 ML dose. And in many of the pediatric...

procedures that are being done, you know, not these very large abdominal or competing procedures, but many of the more soft tissue kinds of procedures. We also see a 10 ml dose. So we see a, you know, a basket of surgical procedures where 10 ml is the procedural dose. And we are getting several days of pain control and reduced opioids with 10 ml. And so the first line of strategy here was to close the gap between the 20 ml and the 10 ml because in different surgical procedures, you can achieve the same results with half the dose, right? So that was the broad strategy, if you will. You know, your question is a very interesting one as we go forward from here. As we achieve tricare and as we achieve no pain.

You know, our outlook is that something like 75% of our total address of a market will be reimbursed by 2025. And so, you know, we've made the statement that we expect to be consistent with CPI-targeted kinds of price increases. We don't intend to, you know, raise the price by 40%. There's some other models in this space that suggest that things don't go well. And we should take that approach. And so, we expect that we would have a CPI type of increase as we go forward. That's for X-Grel. Well, for IOVERA, Greg even more importantly, I think, is...

We are working hard to improve gross margins, which gives us more strategic runway as we try to help more patients. And our ability to lower the cost on Iovera as we go into Stellick Ganglia blockade and spasticity and some of these things, the competitive opportunities are priced in the thousands of dollars. Our intention is to continue to price Iovera around $500 so that we can help all of these patients who are in really desperate streets given the poor choices that they have for any kind of pain control and any kind of treatment of their afflictions. So I hope that answers your question. But I don't expect that we're going to go crazy when we have reimbursement. I think we'll use the PPI directed and try to be fair to our shareholders by offsetting any increases in our...

You know, our annual merit increases to our employees, but I don't think you're going to see us take advantage of this in any inappropriate way. I think we'd rather sell more and lower the cons and improve the gross margin by selling every mile we can make when we have two to two hundred liter facilities online. And when we believe that we can sell, we can make as we go into 2024, our forecast suggests that we can make over two billion dollars worth of expra. And so if we can give margins into the mid 80s, I would much rather sell every mile we can make than raise the price in any kind of way that might be inappropriate given our mission.

Great, that's really helpful. Maybe just one last quick one and helpful to have you and Roy lay out the lower extremity and SNDA. I'm just curious how you're thinking about prospects for an adcom or you're preparing for one. What does the likelihood there? Thank you very much. I'm commenting to you for a right as any different idea. Now the p-value here, Greg, there's no, I mean the data is, I should say, astonishingly positive, but in my mind the data is astonishingly positive. Given that the 10 ml dose and the comparator was beautificating, so 0.007 for both pain control and opioids for the 10 ml dose for the adductor canal, and 0.001 for the footnacle. It was a plenty of neck to be trial, but it's a full of heel black and those things.

I'm sorry, it's just bad, it's black and a public health potion. And that also was at 10 MLGOS at the point 0001 was both for opioid reduction and pain control. So I don't, I don't, not being polyannish here at all, but you know, we file this in January where, you know, we're going along in a regulatory process. We'll get our 74-day letter here, you know, relatively soon. I don't see the virus, there would be anybody that would say that they need help from the medical community providing guidance on whether this is a useful agent in the marketplace or not. Or if you have any different ideas. You know, understand one thing to that Greg, the other studies that we've always submitted for, for NDS, NDA with X-Prel have always been against placebo comparator, right? And this time we went against Utivicane and we demonstrated superiority to Utivicane in two steps.

This question comes from the line of Orrin Livnatt of H.C. Wade Wright. Your line is open. Thanks for the questions and really appreciate you returning to guidance.

couple from me. Firstly, on the URL guidance, I noticed you said global sales for that, and I'm wondering if you can help quantify sort of the significance of XUS sales in 2023. And then on 340B,

I appreciate your commentary about the, I guess, neutral to slight revenue accretion by end 2023. And I just want to understand that, does that reflect sort of steady uptake already that begun, you know, eventually sort of surpassing that effective price decrease by your end? Or is there a lag that we're still seeing and as expected between the initial price increase and even beginning to see uptake and new customers or uptake and existing customers such that maybe in 2024, do you expect acceleration on that front? Would be 40b or do we have to wait for no pain to kick in in 2025 ostensibly to see that acceleration?

commentary about the, I guess, neutral to slight revenue accretion by end 2023. And I just want to understand that does that reflect sort of steady uptake already that's begun, you know, eventually sort of surpassing that effective price decrease by your end? Or is there a lag that we're still seeing and as expected between the initial price increase and even beginning to see uptake and new customers or uptake and existing customers such that maybe in 2024 do you expect acceleration on that front with before it be or do we have to wait for no pain to kick in in 2025 ostensibly to see that preparation?

that the expral cells, XUS, are not significant in 2023. It is, we are doing well and it is increasing quite rapidly on percentage basis, but it is not anything that's gonna be material to the 2023 numbers. Important as we go forward, but in 2023, we're still putting the pieces in place and going through the formulary process and teaching people how to use the products effectively. Interestingly, there is a great deal of interest in the Ioveira in Europe , and we're training many of the high-end specificity folks across Europe . Paul Winston is going over there regularly now in training these folks. So Europe will be important, but 2043 is not material. You got all of the pieces for 340 BR.

So, you know, we have a list of people who are currently purchasing X-FRL and we forecasted off of that list, how much of that business would confer to 340B pricing. And that's where the 5% comes from. And then as these new places come on board, you know, we see that the volume, the total volume increases, which will help grow smart, especially as we bring new places online. But the ability to address these folks and have folks in these, not how these are 340B hospitals that never purchase X-FRL before. And they are just starting to come online in a material way. And so we expected that will grow as we go through 2023. And so most of the action moving from 5% to something that approaches...

neutrality will be back and loaded as we get into the second half of the year. On gross margins, I guess some of these issues have persisted a little longer than at least I had modeled through your end and I guess you mentioned a little bit of spillover. Can you just characterize how conservative your 2023 gross margin guidance is on that front? Are you leaving a little room for continued batch failures that maybe, you know, now that you've had to be a little more conservative or are you assuming totally smooth sailing in that guidance and it's entirely sort of sales and volume based? Yeah, no, we are not forecasting totally smooth sailing for sure. You know, what we see, there's a couple of things here. You know, we mentioned this new and vitro test that we will get approved. We've had some issues where the current test and the soon to be removed testers, the replacement test was actually...

causing us to reject lots that were good based on some variability of the test method. And then all of the things that were associated with our inability to access supply are not currently, you know, we're in good shape. We've got everything we need to make expert help. So remember, Warren, that we've been in the late 70s before.

So, in our view, you know, without some of these one-off things that were driven largely by the pandemic and the supply issues, we're really talking about going back to something that looks more normal to where we were before the pandemic. So, you know, we've been in the late, you know, 79, 80% range before we're thinking that we get part way there as we go through this year and then we pick up the rest of it once we get more volume coming online.

All right, thanks a lot. Thank you. One moment for our next question. This question comes from the line of Andreas Agerides of Wedbush. Your life is open. All right guys, good morning and thanks for taking our question and congrats on the progress. Just on.

a couple of them on the no-payment act here. So what are some of the ways that the implementation of the no-payment act would be pushed up to 2024 from 25, trying to get a sense of the likelihood that this would occur. And then how are you thinking about this expral being included in the act and perpetuity in that just for the three years?

I'm going to have some follow-up. Yeah. So, you know, the original bill as it was going through Congress had a 2024 start date. And so, you know, we've got patient advocacy groups that we've got, you know, folks that represent us on the lobby of side of the aisle. We can support you through in a legal way. However, Congressman Lette White has been caught close. The projects at the lien paper cup did six weeks ago, when she was being raised by the rats. Sh Awards were held. The projects at the lien paper cup did six weeks ago, when she was raised by the rats.

And we are actively working with a number of, you know, patient advocacy groups who are the, would be the primary beneficiaries of non-opioid treatment therapy for the low, low, social economic ladder and the disadvantaged.

and working hard going to Congress. Now it is possible that the house...

could have a technical amendment and would push the start date forward to 2024. It's also possible that CMS in their normal rulemaking process would take everything that is currently been approved for 2025 and move it forward to 2024 and we are actively involved in those discussions. In fact, we will be in Washington next week. And so, you know, the starting point under ESS is...

You know, the hundred and seven thousand folks who died of a drug overdose, you know, there's different weighty that this can be established. We're talking to folks about, you know, can we think about approving a 2024 start for folks who currently have a C code or a J code and approving them for 2024? And then if you need more time for new folks who might be re-inverse, you know, make that out of 2025. But those are the things that we're working on right now in real time. I don't know how to handicap that other than the chance. There's a better than zero chance that we're going to have a positive outcome here, but that's the best I can tell you as we sit here in February .

on the extension, I mean, you guys probably know Chris Christie's on our board and what Chris said to me when we were talking about the timing here is that the government never takes anything that's working back. So you know, we have a, what was in the bill was a five year horizon, it was trimmed back to a three year horizon. I would tell you that we're pretty comfortable with that given the fact that, you know, we think that this is going to be a major change in improvement in healthcare and it will be very, very difficult for.

the government to take this back after three years, We're pretty good at working with them too to show them the benefits. We've been able to maintain the ASC reimbursement now since 2018. I think we know how to do all these things with the right people representing us in Washington. Great. And then just a follow-up on our external to what extent would the results in the stride study defective? And could be I think via here? The data is included. The question is, you know, yeah, it's a compilation of both Chris. The stride study while it missed it. 24 hour endpoint was the first indication that we had that we had a p value of 96 hours. So, you know, the difference here in demonstrating even a larger data set. So, the first thing I'm going to say is that if you take care of the front end and you use the standard of care, that, you know, that addresses pain in the first 12 to 24 hours.

that we can extend the duration here and that's what the whole strategy was around the clinical program. So, you know, we will include both of these data sets in the package that goes to the FDA. And you know, the other thing too is in the stride study, those patients all had a general anesthetic. So when they woke up, an actual takes a little longer to set up than the beauty king comparator they had. And we've never positioned extra-ever as something to help you during the surgery, right? It's really for post-operative pain management. So that's why we evolved the next two studies to be patients having regional anesthesia for the surgery, which is really the standard of what's practiced out there today. If you're having bunionectomy, ankle or a total need.

Most of those patients are being done with regional anesthesia for the anesthetic, little sedation along with it and not a general anesthetic. So I think when you look at the striped study days 2, 3, 4, we demonstrated, again, not the primary endpoint, but we did demonstrate really meaningful pain reduction that was superior to the active comparative behavior gain for 24 to 96 hours. That makes sense. Great, thanks for taking my questions. Thank you, Grazone, and all the progress. Thanks, Grazone. Thank you. One moment for the next question.

Our final question of the day comes from Greg Frazier of Truest Securities. Your live is open. Go ahead. Good morning. Thanks for your sweet meeting. I'm fast-tissed. Can you talk a bit more about the design and size of the registration study? Will that study include a Botox armor or will that not come into the later study? And in time of growth margin, can you quantify the impact this year on the guidance from

340B pricing or discounting program and how much growth do you need to see and volume over time to get to your your longer term target in mid 80s. Thank you. I'll start in that Greg or ask you right to pick up the specific issue. So on the gross margin.

You know, the soil, I mean, we've given the answer in a different sort of positioning. So, you know, the 340B has no impact on growth margin at all. It's on that margin, right? And so, what we see over time is more volume from 340B and more volume from no pain. And the ability to get the 200-liter facility in San Diego approved for commercial scale at the end of this year, Greg gives us...

the opportunity to have two to two hundred leaders. And the gross margin from those two facilities is significantly better than the gross margin opportunity longer term with the 45 liter facilities that we're currently making a product on. So best and swimming in the UK with a variable cost environment, improved but not as great an improvement when we go to San Diego where we have a fixed cost environment. But both two hundred leaders will allow us to improve gross margins. So that is a piece of it. It's both the volume and the gross margin enhancement that...

allow us to offset these discounts. And so that's why as you look towards the end of next year, the new business from these 340B customers and the expansion and volume at the Gross Margin line allows us to start to address, to come up on the traility as we...

aspect of our no-paint strategy, you could probably assume from this that when we did 340 B we had some pretty good feelings that we were going to be successful with no-paint. So this is one big opportunity for us to increase margins by increasing capacity and then increasing the number of patients who have an opportunity to get this no-opio treatment strategies.

Thank you. That concludes our Q&A segment. I'll now turn the call back over to Dave Stack, Chairman and CEO for closing remarks. Thank you, Chris. And thanks to everyone on the call for your questions and time today. As you can see, we're making steady progress and expected deliver on a variety of value driving milestones over the next 12 to 24 months. As we grow product revenue, advance our clinical pipeline to expand product offerings, improve gross margins, increase cash flow and strength in our balance sheet, the need for non-opioid pain management remains a global imperative and as the syrup further solidifies its leadership role in this important work.

I.

session. To answer a question during the session, you'll need to press star 11 on your telephone. You'll then hear an automated message advising us or hand is raised. To withdraw your question, press star 11 again. Please be advised that today's conference is being recorded. I would not like to hand the conference over to Susan Mesco. Please go ahead. Thank you, Prince, and good morning everyone. Welcome to Jake.

Let me remind you that this call will include forward the conditions based on current expectations.

Such statements represent our judgment as of today and may involve risks and uncertainties. For information concerning risk sessions that could affect the company, please refer to the company's silence at the SEC, which are available from the SEC or our website. With that, I will now turn the call over to Dave Stack.

Thank you Susan, good morning everyone and thank you for joining us. We'll start today's call with prepared remarks covering recent business highlights before turning to your questions. 2022 was another strong year for Pesera as we continue to all perform the elective surgery market operating from a position of financial strength. We posted record revenues of $667 million in 2022, a 23% increase over 2021. Our growing top line combined with ongoing operating discipline drove significant significantly positive adjusted EBITDA of $213 million for the year.

or I am pleased to report we have now treated more than 12 million patients in the United States. Regional analgesia techniques performed by surgeons and anesthesiologists continue to be a substantial growth driver. X-Prel is fostering a significant paradigm shift in patient care by namedly same-day surgeries as end accelerating recovery times. Curgical marker procedures continue to migrate from inpatient to all patient settings and increasing rates.

The most recent rolling 12-month IQVIA procedural data from July 2022 further illustrates the shift. For hospital inpatient procedures the market experienced a year over year at the climb of 7%. Ex-Brow was flat year over year, but with growing interest in women's health, the use of Ex-Brow LC sections grew by 26% in the hospital inpatient setting.

The outpatient procedure market demonstrated a year over your increase of 5%. Experial continues to enable this growth, and significantly outpass outpaced the market with 13% year over year increase.

Across key outpatient procedures, we continue to see strong X-Brown growth, including total joints with a 22% increase, spine with a 17% increase, breast and gynecologic oncology each with greater than 10% increases, while both shoulder and general surgery experienced a near 10% increase.

For your reference, these Acuvia data points are summarized in our investor deck, which is available on our website. In 2023, we will continue to support the markets ongoing migration through several patient-centric initiatives. On the manufacturing front, we have optimized our capacity to supply more than $1.4 billion worth of expral annually at the current price, improving gross margins as a top organizational priority. We have addressed different supply chain and manufacturing issues that negatively impact that our margins for the last recorders of 2022.

We expect to see full-year margins improve in 2023 with an aim of reaching the mid-80% range over time. Some product-specific updates, including the following. For X-Prel, we expect to secure FDA approval in the coming weeks for an enhanced product release assay that will improve our batch value rate, benefit margins, and support additional intellectual property protection.

Ex-Brell test batches from our 200-liter manufacturing facility in San Diego are underway and we remain on track for a supplemental do-drug application in 2023. Our new Zoretta fill line is in the qualification phase. We expect this line to improve future quality and yield to support anticipated Zoretta grow.

For IOVera, with our new contract manufacturer fully online, we are now seeing lower unit costs and volume expansion, which benefit margins. With expanding manufacturing capacity and improving margins, we are advancing new programs to drive X-Pro volume growth and expand use in outpatient settings, starting with patient access.

In October , we rolled out 340B pricing for XPRL. Participation in 340B provides the opportunity to expand access to uninsured or low income patients. These two populations are particularly vulnerable to the surgical gateway of opioid addiction and can benefit greatly from XPRL-based opioid-starring regimens. After 17 weeks, we are exactly where we thought we would be with an increase in both 340B and non-340B purchasers and an aggregate 5% discount to our overall net selling price. We believe this program will drive significant volume expansion.

within existing and naive 340 business representing nearly 10 million expral relevant market procedures. We expect the 340B pricing program to be neutral to slightly accretive to the net revenue by the end of 2023 as we access a significantly larger pool of patients and their surgeon providers who want to perform more outpatient procedures. Importantly, 340B will pave the way for us to leverage on the new no-payne act. This important legislation will mandate CMS reimbursement for not opioid post-surgical pain treatments in outpatient settings beginning in 2025. No pain was signed into law in December and will provide reimbursment pathway for nearly 20 million expral relevant.

teachers to help hospital outpatient settings.

Both programs will assist eligible healthcare systems in appointing the opportunity to offer non-opioid pain control for these procedures while advancing our mission to provide a non-opioid pain management solution to as many nations as possible while positioning opioids for rescue use only. Where else is supporting significant, the significant need for opioid-sparing pain management at our Pesera Innovation and Training Centers, as well as our... We are now in the center of the Pesera Innovation Center, and we are now in the center of the Pesera Innovation Center, as well as our...

of free nerve blocks. These educational programs Rex Prelon-Iovera also provide increased visibility to expand Zoretta awareness among our customer base of surgeons to be in alternative for non-opioid office-based osteoarthritis pain management solutions. With last month's opening of our second innovation in training center in Houston,

We now have more of the doubled our capacity to host meaningful education program. This state of the art facility features a 125 feet adaptive lecture hall, broadcast studio, and both wet and dry-lapse space for cadaver labs and other interactive workshops, as well as advanced ultrasound with artificial intelligence training software. In fact, it is the only facility in the United States featuring simulation-based block training with computerized bathrooms for user training and scoring.

Our XPRL growth initiatives are supported by a strong and growing path to state. As a reminder, we currently have eight orange vocalist at patents, and any potential generic would have to successfully overcome each claim within every one of our patents to get to the point of establishing vital equivalents at the commercial scale. With no commercially viable alternative for long-acting non-alcoholic paste or post-surge cocaine management, we are highly confident that XPRL will maintain its well-intrested position as the branded market leader for many years to come.

Outside the United States, we continue to make steady progress. We recently appointed a new international general manager, and our team has been further developing the business by securing approval for ESPRL access from hospital pharmacy departments. Long wait lists for elected surgeries are overwhelming healthcare systems across the United Kingdom of Europe , and we believe ESPRL can help improve this dynamic by enabling more rapid recoveries. In Latin and South America, our partner-year-old pharmacist submitted for regulatory approval for ESPRL in Brazil in December , and we are now focused on submitting the approval in other countries. On the regulatory front, last month, we submitted our supplemental new drug application to the FDA.

seeking expansion of the expral label to include lower exterminator block procedures. This timeline places us on track for approval in the fourth quarter of this year. Complimenting expral, Zoretta and Iovera are serving attractive pre-searchable segments of the market. Last month, we held our annual national sales meeting during which we formally align and train our full 240-person field force-based team as a single unit with all the comp managers now selling all three products in our portfolio. With this realignment, sales territories are smaller in size, and we are significantly increasing our region frequency.

was a threefold anticipated increase in Zoretta and Ilevaro sales calls. We also have several value-creating milestones on track for the next 12 to 24 months for Zoretta and Ilevaro. For Zoretta, we are now promoting safety data showing its advantages for diabetic patients with osteoarthritic knee pain. The data shows clinically meaningful reductions in glycemic spikes and will be presented at the osteoarthritic research society world congress taking place in Denver next month. We will share more on these data momentarily. For Ilevaro this quarter we are launching new commercial initiatives for the cash pay market following the concept of platelet rich plasma or PRP and stem cell injections. This is a large and important lifestyle market.

for drug-free nerve blocks, which provide immediate pain control and can last for several months. For patients who simply want to play golf, walk on the beach with their grandchildren or dance at their child's place. We also recently signed a monthly year deal for IOBARRA to become the official non-OPI pain management partner of the Ladies Professional Golf Association or LPGA. Through this direct-consumer initiative, we will be driving awareness of the benefits of IOBARRA and how to access the product using commercial broadcasts, digital advertising, and in-person presence at tournaments and key markets nationwide. Our customers are also using IOBARRA for treating pain related to spasticity, which is an on-label use. We are on track to begin a registration study for the treatment of spasticity around the middle of this year.

The Last Dior McCain.

Our preliminary phase one safety and efficacy data findings were compelling. Importantly, the greatest level of efficacy was observed with the lowest dose. These data will be presented at orthopedic and gene therapy meetings in the coming months. We continue to advance our internal monkey visit and liposome pipeline.

Our Phase I study of expral for intraticular administration continues and is on track for completion this quarter. We will also initiate Phase I studies later this year for our multivacicular liposome dexomethosome formulation in low back pain and a 20 milligram multivacicular liposome guipivocane formulation at the nerve block or field block for longer lasting or chronic pain.

In addition to our internal programs, we have a portfolio of externally sourced innovation that offers us the opportunity to participate in the development of several exciting product candidates addressing pain along the neural pathway while targeting our current customer rates. These opportunities include strategic investments that's fine by Alpharma, Genocents, GQ biotherapeutics and Parthronics.

With that, I'd like to turn to Call of the Roy Winston, our Chief Medical Officer, to summarize some more detail on some of the upcoming near-term value drivers from our clinical programs. Right? Thanks, Dave. This is an exciting time, not only for us at the Sarah, but for patients, providers, and payers seeking safe and effective opioid-free options for paying management. I'll start with our lower extremity neuroblock. As Dave mentioned, our supplemental new drug application has been submitted to the FDA and we are awaiting official acceptance, which is expected to come by a standard 74-day letter, which will include our pedophadie. To remind you, the basis of this submission are two phase three studies. The first study was a single dose-femoral neuroblock in the AdDuctour Canal for total Near for Plasty.

And the second was a single dose sciatic nerve block in the papal teal phasa for bunion activity. Both utilized the 10 ml dose, which is 133 milligrams. Both studies achieved the primary and key secondary endpoints of statistical significant reductions in post-surgical pain and opioid consumption from zero through 96 hours when compared to the active comparator, butivocane. These data provide strong evidence for label expansion to include these two new indications and should support a superiority claim for expral over bupivocane in the new label. We believe adding these two additional nerve block indications.

will significantly extend our reach into surgeries of the need, medial lower leg, foot and ankle, representing more than three million annual procedures. Working with key opinion leaders, we've begun to publish these data to deliver strong evidence in the literature and incorporate them into society practice guidelines to use expral as a nerve lock in lower extremity procedures. We were also in track to begin a pediatric study later this year that it designed to support the expansion of our US and EU label to include patients from zero to six years of age. We look forward to minimizing exposure to opioids in this very vulnerable population.

Turning till Zalreda, in March, investigators will present the results of a phase two study of patients with NEOA and type two diabetes. Participants will randomize to receive Zalreda or immediate release triumsyllum and compared glycemic spikes for the two groups. Zalreda was associated with a clinically meaningful reduction in hyperglycein universes triumsyllum, suggesting that Zalreda treatment leads to fewer short-term hypoglycemic related adverse events. In addition, the Zalreda group has significantly long-deteration in the target glucose range, which helps improve glucose management, improve patients' well-being, and reduce complications, and health care utilization. Remember that approximately 50% of patients being treated for OA NEET pain also have type two diabetes or are prediabetic, which is especially important for those needing repeat cortical steroid dosing or those that have bilateral need disease.

We also expect to initiate a new ZOREDA label of Spatian study around the middle of this year. This includes a Phase IV, a Diabetes Safety Study in NeoA and Phase III shoulder OAS study. Our shoulder study with positions ZOREDA has the first and only approved cortical steroids for shoulder osteoarthritis. Both studies will evaluate ZOREDA versus triumson alone with the goal of adding a superiority claim to the ZOREDA label and equally as important to place ZOREDA into orthopedic and pain management society guidelines as the new standard of care. Turning to Iovera, we are excited about what we are seeing and using Iovera for the treatment of specificity itself. As Dave mentioned, treating the pain associated with specificity is already on label and we are now educating physician specialists around the value of Iovera in this study.

In parallel, we are launching a registration study to evaluate Iowa era as a revolutionary new treatment for spasticity itself. This is based on strong data from the research of Dr. Paul Winston, President of the Canadian Association of Physical Medicine and Rehabilitation. Dr. Winston and his team recently presented data from his ongoing work in spasticity at the annual meeting of the Association of Academic Cisiatrists, which was held in Anon High last week. Presetations included data from 59 patients participating in an ongoing study evaluating cryonular licenses, a treatment for upper extremities spasticity, demonstrating progressive functional improvement, overall 180 day follow-up.

and risk extension and ankle drosuflexion. The patient also reported immediate pain relief. We have met with the FDA and expected kick off our spasticity label expansion study in the second quarter of this year of 2023. The study will evaluate IOVARIP versus sham and adult patients, and enrollment is expected to conclude before the end of the year. Because IOVARIP is 510K device, we anticipated a review timeline of three to six months, which would place us...

on the market for the treatment of spasticity as early as the second to third quarter of 2024. We are also planning a second active comparator study in spasticity designed to demonstrate the superiority of Iovera versus toxic. It is our belief that Iovera can completely disrupt the current spasticity treatment paradigm, bringing tremendous relief to patients and value creation for Pizzeria Sheryls. We are also planning a second active comparator study in spasticity designed to demonstrate the superiority of Iovera versus toxic.

Lastly, for IOVAR, we have completed the study evaluating IOVAR versus radio frequency ablation as a medial branch block to treat low vacay. We expect to present these data as scientific conference before the end of 2023. With that, I'll turn the call over to Charlie for his financial review. Charlie, thank you Roy and good morning everyone. I'll start with some commentary on our 2022 results and then walk through our outlook for 2023. To remind you, I will be discussing non-gape financial measures this morning. The description of these metrics, along with our reconciliation to GAP, can be found in the news release. We issue this morning.

Lastly, for IOWAR, we have completed the study evaluating IOWAR versus radio frequency ablation as a medial branch block to treat low vacay. We expect to present these data as scientific conference before the end of 2023. With that, I'll turn the call over to Charlie for his financial review. Charlie, thank you Roy, and good morning everyone. I'll start with some commentary on our 2022 results and then walk through our outlook for 2023. To remind you, I will be discussing non- GAAP financial measures this morning. The description of these metrics, along with our reconciliation to Gap, can be found in the news release we issued this morning. Let's begin with an update on sales and margin trends.

Starting with X-Pro where we continue to outperform a flat surgical market with net X-Pro sales coming in at $536.9 million for the year and $138 million for the quarter. Fourth quarter average daily value growth of 6% was partially offset by a lower net selling price due to our implementation of 340B drug pricing in October 2022. So red it continues to be a highly meaningful and creative addition to the CERA portfolio adding $105.5 million post acquisition sales to our top line in 2022. We saw improving sales transfers over and as we exited the year which we expect to accelerate as we run education and awareness around its value and treating patients, especially those with unique care needs such as diabetic patients. For IO-Vera, 4 year sales of $15.3 million. We expect demand and sales growth to be a game momentum in 2023 and beyond with a launch of new commercial initiatives in the cash pay and specificity framework.

as well as education and awareness collaborations with professional sports organizations like the NFL Alumni Association, the PGA tour champions, and the LPGA. We also remain optimistic and I of error within new indications such as the treatment of specificity and medial branch blocks where we are making new clinical investments. Current to gross margins on a consolidated basis are total non-dap gross margin percent for 74 percent for the full year and 72 percent for the fourth quarter. Fourth quartered gross margins by product were 71 percent for expral, 82 percent for Zoretta, and 58 percent for Iovera. Exferral gross margins in the fourth quarter were negatively impacted by new operational challenges.

including slightly higher than anticipated batch failures, and the scarcity of one disposable part used in our manufacturing equipment. The supply of this part have now been replenished, and we have not experienced elevated batch failures since early in the first quarter of 2023. Fourth quarter, non-daft R&D expense was $15.7 million, reflecting ongoing investments in label expansion studies as well as our clinical stage pipeline.

For full year non-GAP R&D was $78.2 million and in line with our guided range of $75 to $85 million. Our fourth quarter non-GAP STA expense was $54.7 million. For the full year non-GAP STA expense was $219 million. Slightly below our guided range of $220 to $230 million.

Interest expense was $11 million for the fourth quarter of 2022. To remind you, most of the interest expense will be a stored term loan V finance, which has a floating interest rate of SOFR plus 700 base funds. The remainder of interest expense primarily related to our convertible notes. In December , we made a $50 million prepayment about the standing principle under our term loan V. We expect to use strong-cast position to make another significant prepayment around the middle of 2023. We are also actively evaluating options to refinance the remainder of the term loan V by the end of the year.

For X-BRL, we are currently guiding to 2023 global sales of $570 to $580 million, which is in line with the year-over-year growth rate in 2022. Given ongoing macro uncertainties outside of our control,

We believe this is very achievable, given several growth initiatives that we expect to kick in as 2023 progresses, such as volume expansion for existing and new 340B customers, as well as new initiatives with OMSS, plastics, outpatient, sports management, and pain management and rehabilitation healthcare providers, and our ongoing expansion in European markets. With respect to Cain's, we anticipate 2023 experel sales to be more heavily weighted to the second half of the year, because of historical trends of roughly 20% in the first quarter of 25% for both the second and third quarters, and nearly 30% in the fourth quarter. Importantly, we remain very bullish on our long-term experel growth prospects, and fully expect that once we are on the other side of the current...

macroeconomic challenges and elect the procedure market normalizes. Expo will return to steady double digit year-to-year growth. For Zoretta, we are guiding to 2020 sales of $115 to $125 million. And for Iovera, we are guiding to full year sales of $17 to $20 million. On the expense side, full year guidance for 2023 is as follows. Non-gap gross margins of 76 to 78%. We expect margins to strengthen modestly during the year as sales volumes grow. And acknowledge that first quarter margins may be slightly lower than our full year gross margin guidance range due to the late 2022 manufacturing challenges that spill over into early first quarter operations. Non-gap R&D of $70 to $80 million, which is consistent with 2022. Non-gap SGNA expense of $220 to $230 million, which is also consistent with 2022.

Finally, stock-based compensation, which is expected to be in the range of 51 to 54 million. In summary, quite ongoing macro-handedly, the series delivered impressive financial results in 2022, with adjusted EBITDA of $212.7 million from here and $58.8 million for the fourth quarter. An adjusted delivery of earnings for share $2.59 for the year and $0.80 million for the year. We remain bullish in our five-year plan, the year of year top-line growth, turning to teens once elective surgery market normalizes. Gross margins improving, might as to your be your increases in operating expenses and adjusted EBITDA margins that exceed 50%. That concludes our prepare remarks. I'd like to turn the poll over the operator to begin our Q&A session. Operator, thank you. At this time, we'll conduct a question-answer session. As a reminder, to ask your question, you'll need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question anytime, press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from David and Selam of Piper's-

you think that's going to recover? If you look at the charts, I mean, obviously it's markedly different. Do you think there will be some normalization on the soft tissue side in 2023, or are you thinking about it as normalization as a longer term event? Thank you. Thanks David. So first with guidance and the implications of guidance.

What we have right now, David Bowler, our forecast was that we would have a 5% discount in gross to net and I think you understand that perfectly. What we see is that as we gain new customers from 340B, that there is a mix of 340B purchases and not 340B purchases, we're actually modestly surprised by the fact that many of these hospitals split their purchases between the 340B program and regular ASP plus sales. So we think that we weathered the worst of what we'll see in terms of the 340B purchasers started buying immediately at the end of October . We are just seeing increased action with more 340B non-340B previous non-340B hospitals purchasing and as I just said, many of those sales are actually not at the 340B pricing level. So things are unrolling pretty much as we thought. And obviously we've got work to do in terms of continuing that conversion. But we think that 5% is probably the worst that it'll be if that's an appropriate way to present it and it'll improve as we widen the base of the market. So we're just seeing a lot of the same things of purchasers and also David just to make the case again from the script.

We also see 340V as a way for us to get more customers with hands-on experience, both for their surgeons and anesthesiologists and the patient experience, so that when we get no pain, we shorten the timeline of these same folks having access to X-PRL and going through the formulary process, et cetera. So I hope that answers your question, if not, come back at me. Pretty much, you know, what I just talked about, talks about the new customer ads. We do see, we have a group of customers that are almost 100% 340V, so that's as anticipated. We do have the new customers that are coming in, and we also see that there are hospitals that have been purchasers of X-PRL who have either been less aggressive in rescricting X-PRL, and we have X-PRL because of our 340V involvement. And in some cases, we've had people tell us that actually they are now encouraging the use of X-PRL more relatively as a short-term expense to them with 340V in certain, you know, situations, but also getting ready for no pain when they will be able to treat all of their CMS patients in the outpatient environments and be fully reimbursed for those. So overall, they've been very much what we thought was going to happen in the early stages and very positive for us in terms of opening up new markets.

In terms of soft tissue, pretty interesting, David. It's, again, you know, the issue here is the ASEs have been almost totally consumed with the higher margin joints spine and, you know, some of the higher costs in higher margin procedures, bariatric, so it would be a good example. So the opportunity for us to have reimbursement in the ASE has been muted by the fact that the insurance carriers are saving thousands of dollars by moving their cases to the ASE. And so the opportunity to save, you know, $300 to be reimbursed for experel really mutes the opportunity for soft tissue in that environment. And as we've seen for the previous quarters, you know, well over 75% of the use of experex in the ASE is for orthopedic procedures.

Who gets left out in that analysis is the soft tissue procedures that are low margin that the hospitals are struggling to perform in the hospital environment because of the reimbursement structure just doesn't even cover their costs. And so in the outpatient environment, again because these are low margin in many cases, these surgeries and these hospitals are in low income and in the environment, these patients are getting dupevocane and opioids. You can be, you can be, you can be because it's cheap and opioids because they consider them free because they write a prescription and they're filled in an outpatient department or in a hospital, I'm sorry, in a pharmacy that is part of part D. So when we talk to those folks and say in an in-an-eneral where there's reimbursement, we'll, what will you do? And universally the answer is

I would love to be able to use X-Brel if I could afford to use it given the financial structure of my hospital and these procedures that I'm doing given the margins. The interesting observation there, though, is when a patient needs soft tissue procedures, if they're not done in a period of time and we're thinking something under the neighborhood of six months to a year, the only logical explanation we can come up with is that they learn to live with these soft tissue low-acuity paint procedures because the numbers would suggest that there's millions of patients walking around out there from these three years of COVID that require soft tissue surgery and we just don't see that demand in the marketplace, David. So I think the pent up demand in ortho is real because the paint profile is such that the patients need to be treated in order to keep their job and get to work and be able to walk even to church and things like that. And soft tissue, the only explanation we have...

is that there is a very high propensity for pain control in these soft tissue procedures and patients for the liver that in the PEDS of demand is real, but it is nowhere near apples to apples relative to the number of procedures that have not been done over the last three years, if that makes sense. Okay, that's helpful, color, thank you, Dave. Thanks, David. Thank you. One moment for our next question.

This question comes from Glenn Centangelo of Jeffries. Your line is open. Oh, yeah. Good morning. Thanks for taking my question. Hey, Dave, I also want to follow up on some of the questions that David just asked with respect to X-Brow and sort of your outlook. If I kind of go back to fourth quarter, you know, you said your prepare to March, right, that you're continuing to outperform the elective surgery market. And then I think later in the remarks, you seem to suggest that volume grew 6% in the quarter in a flat surgical market. Did I hear that correctly with the offset in 4Q, maybe being some of the pricing differences on the 340B program in particular that you talked about. Is that is that okay or what happened in 4Q? It is glad. Yes. Okay. Perfect. So then if we go to your guidance for for 2023, you're sort of 4Q. We're asking 7% growth at the midpoint, which would that imply sort of low, low double digit sort of volume growth with.

You know, it's a similar type of pricing impact and, you know, and I'm not sure embedded within those assumptions what you're expecting for the overall surgical market based on that assumption. Close. Like the difference between what you just outlined and our guidance is the price increase. Remember in the early January , we raised the price of the 10 ML by 8% and the 20 ML by 3%. And so what you said is absolutely correct. If you understand that there is a roughly 3% net benefit to us as the price increase.

Then that comes back down into the 7%-70% range, which is what we were trying to do is guide to what actually happened in 2002, thinking that the only thing that it would be conservative guidance, of course, based on a 2022 data. And if our assumption is that the primary reason that the market is the macro environment is negatively impacted by inflation, and if that changes, then this would be a conservative guide, which is what we were trying to accomplish. Perfect. Okay, and maybe just my last question, you know, regards, relates to the competitive landscape. And you sort of touched on who pivoted cane and maybe some of the fact that some of the open opioids are free to some of these surgery centers. And you know, could you sort of comment on the pricing difference, you know, between X-Broad. If you think that's having any sort of impact on overall utilization, you feel like it's a pricing issue, or you think it's just sort of a macroeconomic issue and just overall surgical volume issue. Thanks.

Thank you, Glenn. That's a three credit course. So in the hospital, you know, we're in the DRG environment and that's not going to change. I mean, when I read that issue in our Washington DC discussions, that is the third rail of the Democrats as it relates to health care and they won't even discuss providing anything for one-off reimbursement inside the surgical bundles. That's for in-patients. For out-patients, where we have the ASC, as I commented with David, you know, the benefit of that is largely viewed by the fact that the insurance carriers saving 30 to 30 by percent on the cost of a procedure are utilizing the vast majority of the ASC capacity with these high-margin procedures like joints and spying and things like that. The in the middle there is the soft tissue procedures that are difficult to do given the reimbursement in the in-patient market.

and are more appropriately done in the outpatient market, given the improved cost structure of a hospital outpatient department. But there are many, many hospitals across the United States, especially in indigen areas and low economic areas, where they can't afford to use anything but the cheapest things that they can buy. And there is no reimbursement. So, and I talk to many of these folks myself, and so the importance of 340B, Glenn, is to start those folks down the, you know, to have an opportunity at a reduced price to be able to use X-PRL in that environment to achieve our mission of providing an opioid alternative to as many patients as possible. There are still places, many of them here in rural Florida, where they still can't afford to use X-PRL even at the 340 price.

So it is absolutely driven by price in this environment, and that's why the NOPEAN Act is so important. So the NOPEAN Act will force CMS, and there is a convergence there of these poor patients being largely under some form of social services. So, you know, this is the right patient population, but when CMS is forced to reimburse for non-opioid pain medicines in these, for these patients in these rural settings, we expect that you will see a very important inflection for X-Frell, because in that soft tissue rural market, it is absolutely cost that is...

a feeling basically on surgeons' use of the product. Thanks for all the details. Thank you. One moment for our next question. This question comes from Gregory Renza of RBC Capital Markets. Gregory, your line is open. Great. Thanks, Dave and Team Congrats on the progress. Thanks for taking my question. Maybe just a few from me. Maybe building on the prior theme as well. Dave, I know you touched on this a little, but could you just comment about your approach to the organic price increases with respect to the experelle? How are you strategizing about that, especially with the more patients coming online? Do we kind of think about it as in line with the store goals or other considerations that you and the team are considering? Yeah, thanks, Greg. You know, well, I think we can go back to this. Just a January , and I'll use that as the basis of an answer to your question. So, you know, there are 20 ML is...

the effective dose for many of the procedures that we've historically treated. And the trials that throw you out blind for lower extremity nerve block, where we expect to be launching that, you know, late this year and early next year. But the 96 hour reduction in pain and opioid consumption for both of those trials was achieved at the 10 ML dose. One of our fastest growing areas, frankly, in our current business is in oral maxill facial surgery. And largely that is 5 MLs per tooth. And you end up with a lot of these extractions also being a 10 ML dose. And in many of the pediatric...

procedures that are being done, you know, not these very large abdominal or repeated procedures, but many of the more soft tissue kinds of procedures. We also see a 10 ml dose. So we see a basket of surgical procedures where 10 ml is the procedural dose and we are getting several days of pain control and reduced opioids with 10 ml. And so the first line of strategy here was to close the gap between the 20 ml and the 10 ml because in different surgical procedures you can achieve the same results with half the dose, right? So that was the broad strategy, if you will. You know, your question is a very interesting one as we go forward from here.

As we achieve try care and as we achieve no pain, our outlook is that something like 75% of our total addressable market will be reimbursed by 2025. And so we've made the statement that we expect to be consistent with CPI-targeted kinds of price increases. We don't intend to raise the price by 40%. There are some other models in this space that suggest that things don't go well. When you take that approach, and so we expect that we would have a CPI type of increase as we go forward. That's for X-Grow.

We are working hard to improve gross margins, which gives us more strategic runway as we try to help more patients. And our ability to lower the costs on Iowa, as we go into Steli Ganglia blockade and spasticity and some of these things, you know, the competitive opportunities are priced in the thousands of dollars. Our intention is to continue to price Iowa, Vera around $500 so that we can help all of these patients who are in really desperate streets, given the poor choices that they have for any kind of pain control and any kind of treatment of their afflictions. So I hope that answers your question. But I don't expect that we're going to go crazy when we have reimbursement. I think we'll use the PPI directed and try to be fair to our shareholders by offsetting any increases in our annual merit increases to our employees. But I don't think you're going to see us take advantage of this in any inappropriate way.

I think we'd rather sell more and lower the cost and improve the gross margin by selling every mile we can make when we have two 200-liter facilities online and when we believe that we can sell, we can make as we go into 2024, our forecast suggests that we can make over $2 billion worth of expral. And so if we can get margins into the mid-80s, I would much rather sell every mile we can make than raise the price in any kind of a way that might be an appropriate given armission.

of utivacane. So 0.007 for both pain control and opioids with a 10 ml dose for the ad doctor canal and 0.001 for the footnacle. It was a bunionectomy trial, but it's a a pulpit heel block and the bad block and a pulpit heel potion.

And that also was a 10 ML dose at the point 001 was both for opioid reduction and pain control. So I don't, I don't, not be impolianna sure at all, but you know we file this in January , we're, you know, we're moving along in a regulatory process. We'll get our 74-day letter here, you know, relatively soon. I don't see why there would be anybody that would say that they need help from the medical community providing guidance on whether this is a useful agent in the marketplace or not. Or if you have any different ideas. You know, understand one thing to that Greg, the other other studies that we've always submitted for MDAS, NDA with X-Prile have always been against.

placebo comparator, right? And this time we went against beautifucane and we demonstrated superiority to purification in two studies. So we're actually asking for a superiority claim in the label. And I think that one of the criticisms we've had, and keep in mind the FDA originally asked us to go against placebo when we first started, but people say, well, how come you don't go against an active comparator? Well, here, both of these studies went against an active comparator. And like Dave said, it was only a 10 ml dose instead of the 20 and it demonstrated such meaningful, clinically meaningful reductions and statistical significance. I think we're always prepared for an outcome, but I do feel like the, the chance of it are extremely low. That's very helpful. Thanks so much, guys.

One moment for the next question. This question comes from the line of Orrin Livnott of HC Wainwright. Your line is open. Thanks for the questions and really appreciate you returning to guidance. Couple from me. Firstly, on the experelle guidance, I noticed you said global sales for that. And I'm wondering if you can help quantify sort of the significance of XUS sales in 2023. And then on 340b, I appreciate your commentary about the, I guess, neutral to slight revenue accretion by end 2023. And I just want to understand that.

Does that reflect a steady uptake already that's begun eventually sort of surpassing that effective price decrease by your end? Or is there a lag that we're still seeing and as expected between the initial price increase and even beginning to see uptake and new customers or uptake and existing customers such that maybe in 2024 do you expect acceleration on that front? What's before to be or do we have to wait for no pain to kick in in 2025 ostensibly to see that acceleration?

I'm sort of steady uptake already that's begun, you know, eventually sort of surpassing that effective price decrease by your end. Or is there a lag that we're still seeing and as expected between the initial price increase and even beginning to see uptake and new customers or uptake and existing customers such that maybe in 2024 do you expect acceleration on that front? What's before to be or do we have to wait for no pain to kick in in 2025 ostensibly to see that acceleration? Yeah, no thanks aren't so.

that the expral cells, XUS, are not significant in 2023. It is, we are doing well and it is increasing quite rapidly on percentage basis, but you know, it is not anything that's going to be material to the 2023 numbers. Important as we go forward, but in 2023 we're still, you know, putting the pieces in place and going through the formulary process and teaching people how to use the products effectively. Interestingly, there is a great deal of interest in Iowa, Vera in Europe , and we're training many of the high-end specificity folks across Europe . Paul Winston is going over there regularly now and training these folks, so Europe will be important, but 2043 is not material. You got all of the pieces for 340 BR.

So, you know, we have a list of people who are currently purchasing experel and we forecasted off of that list how much of that business would confer to 340B pricing. And that's where the 5% comes from. And then as these new places come on board, you know, we see that the volume, the total volume increases, which will help grow smart, and especially as we bring to places online. But the ability to address these folks and have folks in these, not how these are 340B hospitals that never purchase experel before. And they are just starting to come online in a material way. And so we expected that will grow as we go through 2023.

And so most of the action moving from 5% to something that approaches neutrality will be back and loaded as we get into the second half of the year. On growth margins. I guess some of these issues have persisted a little longer than at least I had modeled through your end and I guess you mentioned a little bit of spill over. Can you just characterize how conservative your 2023 growth margin guidance is on that front? Are you leaving a little room for continued batch failures that maybe now that you've had to be a little more conservative? Or are you assuming totally smooth sailing in that guidance? And it's entirely sort of sales and volume based? Yeah, no, we are not forecasting totally smooth sailing for sure.

You know, what we see, there's a couple of things here. You know, we mentioned this new and vitro test that we will get approved. We've had some issues where the current test and the soon to be removed tester, replaced test was actually causing us to reject lots that were good based on some variability and the test method. And then all of the things that were associated with our inability to access.

supply are not currently, you know, we're in good shape. We've got everything we need to make expert out. So remember, Warren, that we've been in the late 70s before. So in our view, you know, without some of these one-off things that were driven largely by the pandemic and the supply issues, we're really talking about going back to something that looks more normal to where we were before the pandemic. So, you know, we've been in the late 70s, about 79-80% range before we're-

pain act would be pushed up to 2024 from 25, trying to get a sense of the likelihood that this would occur. And then how are you thinking about this expral being included in the act and perpetuity that it really measures for the three years? And I hope it's involved.

up to 2024 from 25, trying to get a sense of molecular that this would occur. And then how are you thinking about this expral being included in the act and into perpetuity and that just for the three years? And that helps involve us. Yes. So.

You know, the original bill as it was going through Congress had a 2024 start date. And so, you know, we've got patient advocacy groups and we've got folks that represent us on the lobby of side of the aisle. And we are actively working with a number of patient advocacy groups who would be the primary beneficiaries of non-opioid treatment therapy for the low- social economic ladder and the disadvantaged and working hard going to Congress. Now, it is possible that the house could have a technical amendment.

and would push the start date forward to 2024. It's also possible that CMS in their normal rule making process would take everything that has currently been approved for 2025 and move it forward to 2024. And we are actively involved in those discussions. In fact, we will be in Washington next week. And so, you know, the starting point, Andreas is, you know, the 107,000 folks who died of a drug overdose. You know, there's different ways that this can be established. We're talking to folks about, you know, can we think about approving a 2024 start for folks who currently have...

a C code or a J code and approving them for 2024. And then if you need more time for new folks who might be reimbursed, you know, make that a 2025. But those are the things that we're working on right now in real time. I don't know how to handicap that other than the chance. There's a better than zero chance that we're going to have a positive outcome here, but that's the best I can tell you as we sit here in February . On the extension, I mean, you guys probably know Chris Christie's on our board.

And what Chris said to be when we were talking about the timing here is that the government never takes anything that's working back. So we have a, what was in the bill was a five year horizon, it was trimmed back to a three year horizon. I would tell you that we're pretty comfortable with that given the fact that we think that this is going to be a major change in improvement in healthcare and it will be very, very difficult for the government to take this back after three years. But we'll find out, you know, we're pretty good at working with them to show them the benefits. You know, we've been able to maintain the ASC reimbursement now since 2018. So I think we know how to do all these things with the right people.

representing us in Washington. Okay, great. And then just a follow up on lower extremity. To what extent would the results in the stride study defective? And could you have me be out here? The data is included. The question is, you know, yeah, it's a compilation of both. Chris, the stride study while it missed its 24 hour endpoint was the first indication that we had, that we had a p value at 96 hours. So, you know, the difference here in demonstrating even a larger data set to the regulators is that if you take care of the front end and you use the standard of care that, you know, that addresses pain.

in the first 12 to 24 hours that we can extend the duration here and that's what the whole strategy was around the clinical program. So, you know, we will include both of these data sets in the package that goes to the FDA. And you know, the other thing too is in the strived study that those patients all had a general anesthetic. So when they woke up, an actual takes a little longer to set up than the beauty of the King comparator they had. And we never positioned extra ever as something to help you during the surgery, right? It's really for post-opera pain management. So that's why we evolve the next two studies to be patients having regional anesthesia for the surgery, which is really the standard of what's practiced out there today. If you're having bunionectomy, ankle, or total need.

Most of those patients are being done with regional anesthesia for the anesthetic, little sedation along with it and not a general anesthetic. So I think when you look at the striped study days 2, 3, 4, we demonstrated, again, not the primary endpoint, but we did demonstrate really meaningful pain reduction that was superior to the active comparative dep? for 24 to 96 hours. That makes sense.

Great, thanks for taking my questions and congrats on all the progress. Thank you. One moment for the next question. Our final question today comes from Greg Frazier of Truest Securities. Your live is open. Go ahead. Good morning. Thanks for squeezing me in. I'm fast history. Can you talk a bit more about the design and size of the registration study? Well, that study included both our farmer let not come into the later study. And then come across margin. Can you quantify the impact this year on the guidance from 340B pricing or discounting program? And how much growth do you need to see and volume over time to get to your your longer term target of mid 80s? Thank you. I'll start in that. Greg or ask right to pick up the fastest.

issue. So on the gross margin, you know, the, so I mean, we've given the answer in a, in a different sort of positioning. So, you know, the, well, the 340B has no impact on gross margin at all. It's on that margin, right? And so what we see over time is more volume from 340B.

and more volume from no pain. And the ability to get the 200-liter facility and San Diego approved for commercial scale at the end of this year, Greg gives us the opportunity to have two 200-liter and the gross margin from those two facilities is significantly better than the gross margin opportunity longer term with the 45-liter.

facilities that we're currently making a product on. So best in Swindon in the UK with a variable cost environment improved but not as great an improvement when we go to San Diego where we have a fixed cost environment but both 200 liters will allow us to improve gross by construction is

So that is a piece of it. It's both the volume and the gross margin enhancement that allows 340B to be a viable opportunity for us. And if you look at the procedures, about 20% of the... all the... the...

3 340B procedures have flipped 2 340B from current customers. So the new customer is that the 340B helps us with the gross margin and the increased capacity once we can make 2 billion dollars worth of expral. The price increases on an annual basis allow us to offset these discounts. And so you know that's why as you look towards the end of next year the new business from these 340B customers and the expansion and volume at the gross margin line.

allows us to start to address, to come up on neutrality as we come to the end of the year. It's a very complex formula that we use in order to assimilate all of these different pieces, but also don't lose sight of the fact that having all of these additional surgeons using experelle and these previously naive experelle accounts is a really important aspect of our no-paint strategy. You could probably assume from this that when we did 340B we had some pretty good feelings that we were going to be successful with no paint.

So this is one big opportunity for us to increase margins by increasing capacity and then increasing the number of patients who have an opportunity to get this no opioid treatment strategies. Thank you. That concludes our Q&A segment. I'll now turn the call back over to Dave Stack, Chairman CEO for Closing remarks.

Thank you, Chris. And thanks to everyone on the call for your questions and time today. As you can see, we're making steady progress and expected deliver on a variety of value driving milestones over the next 12 to 24 months. As we grow product revenue, advance our clinical pipeline to expand product offerings, improve growth margins, increase cash flow and strength in our balance sheet. The need for non-opioid pain management remains at global imperatives and as the syrup further slow the bites of leadership role in this important work, we expect to have significant market opportunities and growth in years ahead. We look forward to keeping you updated on our progress next up for us as the Barthus Conference in Miami. Thanks all.

Stay well, bye. And thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Thank you.