Q3 2023 Pacira Pharmaceuticals Inc Earnings Call
Yeah.
Good day, and thank you for standing by.
Welcome to the Q3, 'twenty twenty-three Sera Biosciences 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.
Ask a question during the session you will need to press star one one on your telephone you'll then youre, an automated message advising Kansas right.
To withdraw your question. Please press star one again.
Please be advised that today's conference is being recorded.
I would now like to hand over the conference to your first speaker today isn't Mapco head of Investor Relations. Please go ahead.
You Jerry and good morning, everyone. Welcome to today's conference call to discuss our third quarter 2023 financial results. Joining me are Dave stack, Chairman and Chief Executive Officer, and Charlie Reinhart Chief Financial Officer.
Ryan Ellis Chief Strategy Officer is also here for today's question and answer.
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 with the SEC, which are available from the FTC or our website with that I will now turn the call over to Steve. Thank.
Thank you Susan good morning, everyone and thank you for joining today's call 2023 has been a year focused on execution of missed opportunities and challenges. While we continue to be encouraged by improving trends in near term opportunities. Today, we are adjusting our full year EXPAREL sales guidance to reflect an updated view of the remainder of the year all other financial Guy.
<unk> remains intact.
We established guidance based on historical data alongside current and projected market conditions. We are now forecasting full year EXPAREL sales to be $535 million to $540 million.
While we are disappointed to adjust EXPAREL guidance for the year and in no way impacts our confidence in the significant potential we have in front of us.
We remain strong we've maintained strong conviction and a substantial and growing untapped prospects within the sera of commercial portfolio and we are laying the groundwork to unlock its full value.
We have built an attractive patient focused business, while maintaining financial discipline, enabling us to manage effectively in all environments third quarter revenues of $164 million <unk>.
Improving gross margins and ongoing operating discipline resulted insignificantly positive adjusted EBITDA of $53 million. We also remain focused on deploying capital in a manner that we believe will maximize shareholder return.
With significant and durable cash flows fueled by EXPAREL exclusivity through 2041, we are well positioned to return to meaningful growth by advancing three priorities one improving gross margins through growing revenues through short and medium term opportunities and three expanding reimbursement and access to non opioid pain management across all sites.
A cure all.
<unk> gross margins, where we continue to make important progress with consolidated third quarter market is improving to 77%.
For EXPAREL, our San Diego facility continues to exceed output targets and achieved third quarter EXPAREL margins of 86% and.
In addition.
The significant quality improvements we implemented earlier this year at our Swindon United Kingdom facility are now positively impacting margins top line, we remain in good shape to exit 2023 with gross margins in the high 70% range and we expect to maintain or improve upon these margins going forward on that.
Regulatory front, we recently submitted a supplemental application to the FDA for approval of our 200 liter manufacturing facility in San Diego.
This positions us for an early 2020 for approval and will also serve to further improve X pro gross margins as it will allow us to decommission, our two higher cost 45 liter facilities in San Diego.
Turning now to more specifics on the commercial side of the business, starting with EXPAREL, where we saw third quarter average daily procedure volume grow by 5% our.
Our mission has not changed with the aim of providing a non opioid alternative to as many patients as possible.
We continue continue to educate our shareholders about the benefits of EXPAREL recently, we announced a new partnership with the American Society of Anesthesiology or assay to reinforce education and awareness ahead of key EXPAREL milestones are lower extremity nerve block Paducah date action is coming up on November 13th.
And anesthesiologists are a key ally who are aligned with our mission of improving patient care and optimizing patient outcomes, we had a meaningful and productive presence at the Asa's annual meeting last month with several additional programs are in development with a focus on building momentum around the anticipated launch of our new lower extremity nerve block.
Indications.
To remind you expanding our label with east two key lower extremity nerve blocks will significantly extend our reach within surgeries are in the lower leg and foot and ankle, which collectively represent more than 3 million annual procedures and annual sales expected to exceed $100 million within five years of watch.
Immediately following approval, we will begin education and promotion with key accounts with a broad launch rolling out at our National meeting in January.
We will be launching with an overwhelmingly positive body of data supporting EXPAREL as the first and only single dose product to safely demonstrate four days of superiority versus bupivacaine, achieving statistical significance and P values of less than point, all one for post surgical pain opioid consumption and percentage of AUM.
You had free patients. These positive outcomes were achieved with a lower 10 ml dose speaking EXPAREL adductor canal and sciatic nerve blocks, a very attractive value proposition to the anesthesia community for knee lower leg and foot and ankle surgeries across all sites of care.
Turning to market access we are continuing to invest in programs to significantly expand the EXPAREL user base ahead of no pain.
We believe these programs will help our customers offer non opioid pain control, especially in hospital outpatient settings, where the current lack of sufficient reimbursement greatly impedes patient access to non opioid sparing regimens, particularly for low margin soft tissue procedures.
With 75% of EXPAREL.
Relevant market procedures, taking place outside of the hospital inpatient setting we continue to benefit from our unique product specific code C. $92 90, which is currently reimbursing EXPAREL at $1 44 per milligram and ambulatory surgery settings, Tricare, which covers 10 million government and military lives also re.
We adopted the CMS Medicare reimbursement methodology and is now reimbursing EXPAREL V. S 90, 290 in ambulatory settings.
We see a significant growth opportunity ahead with no pain as well mandates CMS reimbursement across all outpatient settings, providing a reimbursement pathway for nearly 20 million EXPAREL relevant procedures.
Pain will eliminate the cost barrier are performing lower marks in soft tissue procedures and outpatient sites of care by providing a non opioid pain management solution that is fully reimbursed at average selling price or ASP plus 6%.
We expect no pain will grow into a multi hundred million dollar opportunity as commercial payers adopt Medicare reimbursement policies overtime.
340, B pricing program is helping to alleviate cost challenges by offering a reduced price to eligible entities and low income communities, where patients are most vulnerable to opioid addiction by investing in 340, B, we are growing the EXPAREL user base and volumes within existing and new business, while maintaining a highly favorable gross to net for our industry.
Roughly 86%.
We are also working to solidify our and grow our business.
Blackened Mel Payne it is the right time to begin partnering with select group purchasing.
<unk> our G. P O is on the cost and value proposition of EXPAREL through.
Through these partnerships, which we are launching in 2024 will be offering a broad network of hospitals and health care systems preferred EXPAREL pricing. We expect this will have a mid single digit impact on our overall net selling price while growing volumes over time.
We believe by helping our hospital customers navigate ongoing financial pressures, we will significantly expand patient access while staying true to our mission of making a non opioid pain management broadly accessible.
Our GPO partners will also reinforce best practice post surgical pain management, and Disincentivize Hospital directors for cost driven approaches they call for short acting compounded elicit combination generic drug regimens and opioids that expose patients to serious health risks the proliferation of outside.
Compounds as a threat to patients and our health care system as we solve the recent G. L. P. One legal and regulatory activities from Novo Nordisk and Lilly.
These pharmacy compounded employ misleading marketing practices without the benefit of any pivotal safety or efficacy data that you do not have FDA approval or a product package insert to support promotional activity. We are advancing a multi pronged strategy to address this serious and illegal marketing activity.
These include working directly with law enforcement and regulatory authorities as well as lawsuit seeking injunctive relief under the Langham Act similar to the recent legal actions taken in support of the G. L. P. One products.
To quantify the potential upside of these activities. Our research shows that approximately $1 million of these products will be sold in the United States in 2023% to 25% conversion to the 10 ml EXPAREL dose would benefit sales by more than $40 million.
Through these programs like 340, B and G. P. O partnerships, we are accessing a significantly larger pool of patients with their anesthesia and surgery providers, who water offer superior opioid sparing pain control. These programs are paving the way for us to leverage the no pain Act by building an extensive EXPAREL user base ahead of the implementation in 2025.
Switching gears, just a direct niobrara, both products posted strong year over year growth in the third quarter with several milestones on track for the coming year.
These include launching a label expansion study presented in shoulder osteoarthritis, expanding the use of specialty pharmacy to benefit our direct customers and their patients to reduce risk and administrative burden on orthopedic and pain management office practices, expanding the eye over a cash pay market for a long acting drug free nerve block for osteoarthritis.
The pain through targeted direct to consumer initiatives initiating a registration study of iron ore for the treatment of spasticity and developing new <unk> smart tests for low back pain, Pediatrics sports medicine, while generating new how various data and rib fracture foot and ankle thoracotomy and shoulder.
Procedures through investigator initiated studies for the balance of the year and throughout 2024, we will be keenly focused on executing these value creating strategies that we are confident we will continue to grow the best in class commercial portfolio.
With that I'll turn the call over to Charlie for his financial report Charlie.
Thank you, Dave and good morning, everyone to remind you I will be discussing non-GAAP financial measures. This morning, a description of these metrics along with our reconciliation to GAAP can be found in the news release, we issued this morning.
I'll start with an update on sales and margin trends, starting with EXPAREL third quarter EXPAREL sales were $128 7 million.
Average daily sales were essentially flat versus the third quarter of last year as volume growth of approximately 5% was offset by our investments in the 340 <unk> program and other contracting activities with the market showing signs of elective surgery market normalization. We continue to expect the fourth quarter to be the strongest and the largest <unk>.
<unk> the full year EXPAREL sales.
So Rana and I have Eric both posted strong year over year growth.
Third quarter, <unk> sales increased $28 $8 million in Iowa, there improved to $523 million turning to gross margins on a consolidated basis, our third quarter non-GAAP gross margin percent came in at 77%. This was comprised of non-GAAP gross margins of 81% for EXPAREL.
66% personal rack and 72% for iron ore.
Our San Diego facility exceeded third quarter targets in Swindon is back on track, which leaves us optimistic that we will exit the year with margins in the high 70% range with additional improvements going forward.
Turning to expenses non-GAAP R&D expense for the third quarter was $18 $6 million up modestly from $17 $6 million last year. This year over year increase primarily relates to product development and capacity expansion costs for the 200 liter facility in San Diego as well as increased regulatory.
Activities. These increases were partially offset by lower clinical cost due to the completion of our two lower extremity nerve block studies.
non-GAAP SG&A expense came in at $58 $9 million for the third quarter, which is up from last year to the new strategic partnerships with sports organizations, a $2 $5 million educational grant to the assay and legal fees associated with the paragraph four and other litigation.
Third quarter interest expense improved $3 $5 million versus the $9 $9 million reported last year. This was driven by the interest expense savings associated with retirement of our term loan B on March 31, using a new term loan a and cash on hand.
And lastly, we delivered another quarter of significantly positive adjusted EBITDA of $52 $9 million.
As for guidance as noted in today's release, we are updating our full year guidance for EXPAREL sales, which we now expect it to be $535 million to $540 million. This update reflects our current view of market conditions and our actual results for the first nine months of the year, we are reiterating all other financials.
Since ranges as laid out in todays release as non-GAAP R&D expected to be at the low end of the range and non-GAAP SG&A expect it to be at the high end of the range in summary, we remain bullish in our five year outlook with EXPAREL returning to more robust growth with next year's anticipated launch of lower extremity nerve block and normalizing Mark.
Conditions, improving gross margins modest year over year increases in operating expense and significantly adjusted EBITA margins driving durable cash flows we are laser focused on maximizing the value of our current commercial commercial portfolio and we will continue to be highly strategic in how we manage our operating expense.
That concludes our prepared remarks I'd like to now turn the call over to the operator to begin our Q&A session operator.
Thank you.
As a reminder to ask a question you will need to press star one one on your telephone and wait.
Your question. Please press star one one again.
Please standby, while we compile the Q&A.
Our first question is from David M film from Piper Sandler <unk> company.
Line is open.
Hi, This is Tim on for David Thanks for taking our questions. Just a few from US first looking at manufacturing your initiatives fixed past issues, what's the timing and extent to which you would expect the margin expansion and operating leverage that youre guiding toward.
Second given the improvement in the underlying search Matt when do you think that will translate into more robust volume growth for EXPAREL.
That continues to be a steady grind or do you expect an inflection at some point, particularly with respect to soft tissue.
Last at what point do you discontinued devoting resources to bear as a means of limiting spend thanks.
Yes.
Good morning, Tim and thank you.
The manufacturing we are in very good shape there.
<unk> had a strong Q3, and we see that extending into Q4 as we said in the script, we expect to get into.
Late 70 high 70% range for Q4.
And that as we continue to.
Improve our performance at the Swindon UK facility, we expect that that will continue to improve we have a couple of other things that will be inflection points for manufacturing.
Shortly once we put up the 200 liter in San Diego, we will have the opportunity to decommission. The 245 liter facilities that are in San Diego.
That will have a amit a material impact on our gross margins as well. So the plan going forward is to largely rely on these 200 liter facilities and we're in very good shape, there, especially with a number of more modest but important.
Opportunities to improve gross margins that are ongoing initiatives.
San Diego.
Rip procedures.
We continue to see procedures growing this 5% to 7% range I mean, that's what we forecasted for the year and that's exactly where we are set.
September was on the low end of that range and we're expecting that based on Q1 that Q4 should be at the high end of that range.
We'll just have to wait and see whether that materializes or not and so the the Hague steady grind that youre talking about is for sure associated with procedure volumes and what we see there is theres a couple of things that are that are helping us or should help us with tailwind going forward.
One and historically speaking there was a material impact of the pandemic and folks that had passed away as a result of the pandemic and those folks.
Yes.
Not being available for largely soft tissue procedures as we went through 'twenty. Two 'twenty three we think that that is largely behind us now.
And our own.
Work here the data for lower extremity nerve block and the P values for lower extremity nerve block are really exquisite and.
We believe that that will have a material impact.
Revenues for 2020.
Four and then importantly, we raised the issue of these.
Compound errors and.
During the call we called out on the script that we expected that.
The.
The market.
Issues associated with the use of those products would with add to a material improvement in EXPAREL sales and the number that we referenced all four if all of those conversions were 10 ml would be $40 million and so we've got a number of things that lead us up to no pain.
Which will be the inflection point of all time in my mind and.
All of the issues that we face in the marketplace are related to cost and access.
And with Tri care with continuing to see 90, 294 ambulatory surgery that we add no pain, which will pay full.
Take the burden off of $3 40, P as well, Brian and we'll we'll go from a 24% statutory discount to full reimbursement of ASP plus six and we expect that that will have a very material impact on procedure inflections. So I. Appreciate youre appreciate your comp or your thoughts on that in terms of discontinuing <unk>.
Oh Vera.
Nothing could be further from from any thinking that I have.
<unk> is a very important product going forward.
The growth trajectory is materials, although on a small ed.
But of all the things that we're doing in our commercial portfolio and our commercial pipeline.
<unk> is at least as important as anything else we're doing.
So we expect to see really material on a percentage basis growth for iron ore next year and that really important contributions over the five year planning period for <unk> as we get into specificity and we start to grow the opportunity.
There should be no mistake I avera is an unbelievably important and really valuable asset for us going forward.
Okay.
Okay.
You very much for your question.
One moment.
One moment please.
Yeah.
Our next question is from Gregory <unk> with RBC capital markets. Your line is open.
Good morning, David and team into niche on for Greg. Thanks, So much for taking my questions. Firstly I just wanted to ask on the lower extremity nerve block expansion opportunity with the upcoming <unk> deal how should we be thinking about labeling.
And second if you would share an early assessment on the 340 <unk> strategy progress to date and expectations ahead. Thanks again.
Yep. Thank you.
The lower extremity nerve block.
We believe well first of all.
The data is as strong as any that we've ever had for EXPAREL and really importantly is it's a superiority.
Label against Bupivacaine. So this is this is data where these P values in some cases point or one for opioid reduction and paint controls are compared to bupivacaine. So.
An important aspect that I'm not sure everyone understands and we have 96 hours of pain control.
<unk>.
Four days with a 10 ml dose so we think that we address.
<unk>.
At least start to address the pain, operator, the opportunity to use a lower extremity nerve block.
With a price that is.
It's very appropriate for the four days of pain control and we think that starts to address the cost issue as well. So we're really excited about the lower extremity nerve block.
We expect that the <unk> data is in play here and we're looking forward to the next couple of weeks and moving ahead on that.
In terms of the Earth.
Early assessment of $3 40 B.
It's done exactly what it was supposed to do in terms of patient growth and the 340 B environment.
To the point, where.
Especially in the first half of this year.
The impact of 340, <unk> was greater than we had anticipated that it would be.
When we put the program into play so what we've seen in the second half of the year with some growth in the non participating accounts. The accounts that are new to EXPAREL as a result of 340 b as well as understanding that we got the price increase from early in the year took effect for 340, <unk> and <unk>.
July we.
We see that that number comes back to something that's much closer to the 20% discount that we anticipated in the first place relative to EXPAREL, specifically, so it's doing what it's supposed to do.
We will look at 340 B again, when we have no pain as we come up on no pain, one of the things that will be really important for us to do is see if replacing a 24% statutory discount with full reimbursement at ASP plus six really allows us to look only at the places.
Where there may be certain patient populations that fall out of 340, b that won't be picked up and no pain and we want to make sure that we have strategies to address those patient populations other than that.
In terms of maintaining access in building the pool for no pain going forward 340, B is doing what it was supposed to do.
Thanks Anish.
Thank you.
Thank you for your question.
Our next question is from <unk> Prasad from Barclays. Your line is open.
Hey, good morning. This is shell for <unk>. Thanks for taking our questions. Just a quick follow up on 340, B. So express volume growth can you give us a bit of dynamics of what portion of that growth was from <unk>.
And what portion of the growth was from existing channels. Thank you.
Oh, I don't have that number specifically off the top of my head I can tell you that.
One of the things that make the GPO contracting that we talked about today on that on the call.
Was the fact that the vast majority of our growth in 2023 has come from places, where we have contracted business.
340, <unk> is a significant portion of that I can't give you a number that goes with that but.
What we see is where we have individual contracts or group contracts outside of 340, <unk> do you see growth and $3 40, B also has provided growth.
I'm, sorry, I can't give you a percentage, but it's the places that we're seeing the product growing.
Some form of price protection and Thats, why continue with 340, B and adding <unk>.
We think provides continues to provide access for EXPAREL and.
And a very dim.
A difficult cost environment for especially for our hospital customers, but really for all customers.
And so I'm, sorry, I can't I can't give you a specific number if that's what you're looking for.
Thank you.
Thank you for your question.
Okay.
Our next question is from Les Sulewski from curious Securities. Your line is open.
Hi, This is Jeremy on for <unk>, Thanks for taking my questions.
Firstly any concern for how <unk> will impact our ortho surgeries.
Overall health care population result in fewer elective surgeries.
And then also can you just walk us through the competitive landscape, specifically with Cinderella Zimmer life and other other cheaper treatment options and what type of impact have you been seeing from those thanks.
Thank you.
You know Barry accurate surgery is very modest in terms of the GOP ones for us so on the downside.
We really don't see bariatric surgery impacting us in any way material or otherwise.
On the other hand.
We do have orthopedic surgeons, telling us that because of the PLP ones that there is some thought around <unk>.
Patients with BMI that are not appropriate for orthopedic surgery today.
Could well become candidates for orthopedic surgery going forward because of the <unk> opportunities and so.
We think if anything the GOP ones are additive to the.
What we call.
Procedures of ambulation knee surgery or hip surgery.
Especially if these patients these patients generally that have a high BMI are highly motivated so that <unk> could very well health of that in that scenario.
Sure.
The issue of general life is really nonexistent.
Uh huh.
Some of their contracted numbers and some of their pricing is.
Such that.
It's almost the same as generic cocktails. So it doesn't really enter into any of our strategy is in terms of any competitive things that we see going forward.
The cocktail programs that we talked about today.
Our a material issue and you probably would've seen from the <unk> one.
On the <unk> topic again that specifically novo Nordisk at Lilly were very aggressive in the compounds that we're going after their <unk> brands, we see essentially the same activity for compound or is putting on it.
Combinations of generic drugs together.
Generic drugs that are scheduled three <unk>.
Controlled substances comps.
Compounds like <unk> and <unk>.
Others that have black box warnings for.
Patient safety.
None of those things are called out in any of these combinations. In fact, none of these products have any pivotal data zero for efficacy or safety and none of them have package inserts. So theres really no way for them to have a black box because they don't even have a package insert. So they are all being sold Elisa.
Lee and illegally.
And.
We think that we are in a very strong position.
All along the way at Lilly and Novo Nordisk, Canada GOP. Once we will follow some of those same strategies going forward itself.
Site goes to.
Bupivacaine alone or bupivacaine with epinephrine.
Essentially that allows them to buy this.
Seven eight hours of pain control.
In many places they will add.
Flex our methods, one or another steroid trying to get 10 to 12 hours of duration, but in all of the short acting strategies. They are relying on opioids and so as we move forward here. Our strategy is not only to be able to be cost conscious given this the struggles of our customer.
But also to be able to provide a long acting products. So that they can reduce opioids. So none of these strategies that youre hearing where people are going to lower.
Lower cost products allow them to have anything that works for more than 10 to 12 hours and all of those strategies rely on opioids, and we think that we could do better than that.
Thanks.
Thank you.
Our next question is from it.
Now from <unk>.
Your line is open.
Okay.
Thanks and have.
Couple of questions. If I could just follow up on Dave Your earlier comments about growth journey.
Generally this year coming or maybe entirely coming from contracted customers, whether that's 340 <unk> our other contracts or I guess, you said price protected customers going forward in 2024 and beyond how do you feel about organic growth I guess, you could call. It a cross.
The entire book of business, including non contract should.
Should we think that where you were able to penetrate you have hit a ceiling that just is what it is without further pricing action or help or is it just a function of the market is still a meeting to normalize. The next year you do see growth across the book.
I have a follow up.
No well, we believe that it's a both alright.
Alright. Thank you for the question by the way.
We think lower extremity nerve block well first of all we think that the market normalization and the.
Sure.
It sounds more of it when I talk about it this way, but I don't mean it that way.
The pipeline of patients who will require largely soft tissue plus.
Seniors as disease progression largely in the cancer population.
Forward that population that I talked about earlier that was absent for 'twenty two 'twenty three because of the mortality associated with the.
With the pandemic.
We think that that back so we think procedure normalization means the procedures will grow at a slightly higher rate to start with then we add no pain to that we add.
Lower extremity nerve block to that.
Which should by the way be sponsored to a greater degree because of our relationship with EASA.
We will have.
Specific activities that are directed by the USA as a result of a lower extremity nerve block launch.
And then as we get into 'twenty or are you know we have the combination of these cocktails.
And we believe that there will be some ability.
Ability to take these products off the market, which will.
Move more of these procedures back to EXPAREL, especially the lower dose of EXPAREL.
And at the same time, our GPO contracts will provide a broader base of contracted business, which is where we saw the growth through 2024. So.
We really I see it we see it is as two two and a half buckets the half bucket as procedure normalization and the two buckets are lower extremity nerve block in combination with EASA and the anesthesiologists, having increased interest in a 10 ml dose again addressing the cost issue and then the whole opportunity to broaden our cause.
Track base with <unk>.
Eliminate some of the higher.
Percentage rate individual contracts that we have with specific health plans and then at the same time allow those folks to start to use EXPAREL.
Again, some of these cocktails, which as stated earlier are not FDA approved that are really short acting products at the best case, which required that they use opioids.
Really the clinicians are not happy with those decisions at all of those decisions are being made purely by.
Carton cost alone by pharmacy and in some cases by C suite initiatives.
Okay, and if I could just follow up on slide 24.
You are not giving guidance today, and so I don't expect any hard numbers, but can you just.
Both to help us understand just the push and pull.
You mentioned.
Handed contracting having a.
Yes, mid single digits impact projected.
I guess, all else equal without lower extremity nerve block.
Adding on do you expect to see net growth and overall and.
And the balance of procedures versus price offsetting next year.
And then I guess, just when you talk about ebay.
EBITDA margins are you committed to growing EBIT.
EBITDA.
I guess at a faster rate than sales next year or is it possible that.
The lower extremity nerve block investments when that launch could have a short term.
Drag on profitability next year. Thanks.
No.
So that's a three credit MBA course that you just asked for.
So a number of things.
Gives me let.
Let me start out with gross margin, where we're coming off a base, let's say I'll, just take first quarter or first quarter of 'twenty three our gross margin was in the low seventies, we expect that that will be materially improved over next year and so we're starting from a much better position.
The impact of $3 40, b will be relative to itself now.
Relative to comparing 'twenty or 'twenty three.
So we expect that that impact will be.
It'll be the same number but on a comparison basis, it will be a better comp for us.
The GPO is R&R.
Much less consequential to the bottom line than the 340 B aspect of this is and so it becomes then a question of.
How do we handle opex.
On a go forward basis and.
Coming up on mill pain. It is it would be illogical for us to go aggressive in Opex. When we think that the grand opportunity of all time is right in front of us on 125, So long ball to answer your question as a result of all the parts of this that I went through with the first question that you asked we do expect.
Act that we will get <unk>.
Tailwind from not well you eliminated lower extremity nerve block that is hard for me to do I haven't actually looked at what the year would look like if we didn't get approval of lower extremity nerve block, which I guess is a statement of my confidence that we will get lower extremity nerve block and a couple of weeks.
But I think as we said in the script cocktails on material.
We expect to at least not to have a stable growth environment as the growth environment improves with GPO is $3 40, B and Tricare. So net net there should be an improvement in EBITDA next year, although it will likely be modest as we wait for truck for Cardinal.
Pain to come.
Okay.
Alright, thanks, so much for the color.
Alright, and I would say arent, even if we look at third quarter. This year over three quarter last year at the EPS line.
It's material I mean, it's sort of a material improvement and I think youre starting to see some of these states come into play already.
And it will be remiss of me not to congratulate you on your.
Alright announced retirement.
Sure.
So far we see no evidence of that.
But.
Hi, I'm looking forward to spend in supply with the grandkids that actually two things.
No, but I appreciate that.
It's <unk>.
It's a bit bittersweet I mean, I love this place but.
I'm going to be 73 in April and there's nothing I can do about that.
No.
Okay.
Thanks Pat.
Thank you.
You too.
Thank you.
I see no further questions at this time I would like to now turn it back to David <unk>, Chairman and CEO.
Thanks, <unk> and thanks to all on the call for your questions and time today. We're excited about the opportunities that lie ahead of us throughout the balance of the year. We continue to build on our strong foundation to ensure we are well positioned for long term success. The opioid epidemic continues to be a national crisis underscoring the vital importance of our mission next up for us as JP Morgan in Miami, followed.
By Truest and Piper in New York, Thanks to you all and stay well bye for now.
Yes.
Thank you everyone for your participation in today's conference. This does conclude the program and you may now disconnect.
Yes.
[music] okay.
Okay.