Q4 2023 Heron Therapeutics Inc Earnings Call
Operator: Thank you for standing by, and welcome to the Heron Therapeutics fourth quarter 2023 conference. I would now like to welcome Melissa Durrell, Executive Director of Legal, to begin the call. Melissa, over to you. Thank you, operator. And good afternoon, everyone.
Thank you for standing by and welcome to the Heron Therapeutics fourth quarter 2023 conference call.
Now I'd like to welcome Melissa Jarrell executive director legal to begin the call.
Melissa Jarrell: So over to you.
Melissa Jarrell: Thank you operator, and good afternoon, everyone. Thank you for joining us on the hair on their conference call. This afternoon to discuss the company's financial results for the fourth quarter ended December 31st 2023 with me today from here.
Unknown Executive: Thank you for joining us on the Heron Therapeutics conference call this afternoon to discuss the company's financial results for the fourth quarter ended December 31, 2023. With me today from Heron are Craig Collard, Chief Executive Officer, Ira Duarte, Executive Vice President, Chief Financial Officer, Bill Forbes, Executive Vice President, Chief Development Officer, and Kevin Werner, Senior Vice President, Medical Affairs Strategy and Education. For those of you participating via conference call, slides will be made available via webcast and can also be accessed via the Investor Relations page of our website following the conclusion of today's call. Before we begin, let me quickly remind you that during the course of this conference call, the company will make forward-looking statements. We caution you that any statement that is not a statement of historical facts is a forward-looking statement.
Melissa Jarrell: I would call our Chief Executive Officer Era, Duarte Executive Vice President Chief Financial Officer, Bill for Executive Vice President Chief Development Officer, and have any Warner Senior Vice President Medical Affairs strategy.
Melissa Jarrell: For those of you participating via conference call slides are made available via webcast and can also be accessed via the Investor Relations website. Following the conclusion of today's call.
Speaker Change: Before we begin let me quickly remind you that during the course of this conference call. The company will make forward looking statements. We caution you that any statement that is not a statement of historical facts may be forward looking statements.
Unknown Executive: This includes remarks about the company's projections, expectations, plans, beliefs, and future performance, all of which constitute forward-looking statements for the purposes of the safe harbor provision under the Private Security Legislation Reform Act of 1995. These statements are based on judgment and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties associated with the forward-looking statements made in this conference call and webcast are described in the Case Harvard statement in today's press release and in Haram's public periodic filings with Etsy. Except as required by law, Heron assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so.
Speaker Change: This includes remarks about the company's production expectation plan.
Speaker Change: These are performance all of which constitute forward looking statements for purposes of the safe Harbor.
Speaker Change: For provision.
Speaker Change: Securities.
Speaker Change: The performance of 1995.
Speaker Change: These statements are based on judgment and analysis as of the <unk> conference call and are subject to numerous important risks that could cause actual results to differ materially from those described in the forward looking statement.
Speaker Change: And uncertainties associated with the forward looking statements made in this conference call and webcast are described in the Safe Harbor statement in today's press release and in here on public filings.
Speaker Change: Except as required by law Sharron assumes no obligation to update these forward looking statements to reflect future events or actual outcomes and.
Speaker Change: Does not intend to do so.
Craig Collard: And with that, I would now like to turn over the call to Craig Collard, Chief Executive Officer of Heron. Good afternoon, and welcome to the Heron Therapeutics fourth quarter 2023 earnings call. Today, we are pleased to update you on our latest achievements in 2023, financial performance, direction on our development projects, cross-linked training, and some insight into where we are headed strategically with our product. Since joining Heron Therapeutics as CEO back in April of 2023, we have taken significant steps to get this business back on track. It started with headcount and expense reduction combined with getting the right management team in place.
Speaker Change: And with that I would now like to turn over the call to <unk> Chief Executive Officer.
Speaker Change: Good afternoon, and welcome to the Cara Therapeutics fourth quarter 2023 earnings call.
Speaker Change: Today, we are pleased to update you on our latest achievements in 2023 performance restaurant, our development projects also in training and some insights into where we are headed strategically with aircrafts.
Speaker Change: Since joining <unk> as CEO back in April of 2023, we have taken significant steps to get this business back on track.
Speaker Change: It started with head count expense reduction combined with getting the right management team.
Speaker Change: Bliss.
Craig Collard: We've implemented a comprehensive streamlining of our financial processes, enhancing efficiency and accountability across the organization. As you can see from this slide, we have had a number of significant achievements in 2023 that have us well positioned as we move into 2024 and beyond. We've been able to reduce operational expenses from $182 million in 2022 to $135 million in 2023, and we should be in a range of $108 to $116 million in operating expenses in 2024. As part of this process, we have also looked to improve our girls' margins. Historically, the company has had growth margins in the 50% range. However, through better inventory management and with some renegotiations with our manufacturers, we've been able to reduce costs and improve growth margins over 70%.
We've implemented a comprehensive streamlining of our financial processes.
Speaker Change: Looking at efficiency and accountability across the organization.
Speaker Change: As you can see from this slide we've had a number of significant achievements in 2023.
Speaker Change: As well positioned as we move into 2024 and beyond.
Speaker Change: We've been able to reduce operational expenses from 182 million in 2000 $22 million to $135 million in 2023, and we should be in a range of $108 million to $116 million and operating expenses in 2024.
Speaker Change: As part of this process, we will also look to improve our gross margin.
Speaker Change: Historically the company has had gross margins in the 50% range.
Speaker Change: However, through better inventory management and with some renegotiations with our manufacturers, we have been able to reduce cost and improve gross margin over 70%.
Craig Collard: We anticipate future growth margins to continue to improve into the mid-70s. We completed a capital raise early in 2023, which will allow us to have enough cash to get to profitability by late 2024. We close the year in 2023 with over $80 million in cash and cash equivalents, which again is enough cash for us to reach profitability in Q4 of 2024.
Speaker Change: We anticipate future gross margins to continue to improve up to the mid Seventy's range.
Speaker Change: We completed a capital raise early in 2023, which will allow us to have enough cash to get to profitability by late 2024.
Speaker Change: We closed the year in 2023 with over $80 million in cash and cash equivalents, which again is enough cash to reach profitability in Q4.
Speaker Change: <unk>.
Craig Collard: Moving down the list, we were able to restart the Vial Access Needle, or VAN, project along with the prefilled syringe. Both of these projects are progressing nicely, with the expected van approval by the end of this year and the prefilled syringe approval expected in 2026. Both of these projects will provide significant improvements to our product's MLS, which is indicated for post-operative surgical pain. Our oncology franchise continues to outperform, and I'm happy to report total net revenues of $107.9 million, which exceeded full year 2023 guidance. We're also very pleased with NLF's performance in Q4 of 2023. For the first time in our history, we were able to do over $5 million in net revenue for the quarter, even while significant change was happening in the business.
Speaker Change: Moving down we were able to restart the biologics as Neil or van project, along with the pre filled syringe.
Speaker Change: Both of these projects are progressing nicely as expected <unk> approval by the end of this year and the pre filled syringe approval expected in 2006.
Speaker Change: Both of these projects will provide significant improvement to our product settlements, which as indicated post surgical pain.
Speaker Change: Our oncology franchise continues to outperform and I'm happy to report total net revenues of $107 9 million, which exceeded full year 2023 guidance.
Speaker Change: We're also very pleased with that I'll, let performance in Q4 2023.
Speaker Change: For the first time in our history, we were able to do over $5 billion in net revenue for the quarter, even while significant changes happening in the business.
Craig Collard: And last, in January 2024, we were able to sign the Crosnick Agreement, combined with getting our label expansion for ZenderLab. These two events should have a significant impact on Zenilab revenues as we move through 2024 and beyond. Now moving to product performance, the ecology franchise continues to outperform our expectations, with bonding net revenues coming in at $94.9 million for the year and stuffed dogs coming in at $13 million.
Speaker Change: And last in January 24, we were able to finally prostate agreement combined with getting a label expansion for <unk>.
Speaker Change: These two events should have a significant impact as inland revenues as we move through 2024 and beyond.
Speaker Change: Now moving to product performance.
Speaker Change: The oncology franchise continues to outperform our expectations was advancing net revenues coming in at $94 9 million for the year and thus all coming in at $13 million.
Craig Collard: We have been very pleased with the Oncology franchise, and we believe these products will continue to show the same consistency as in past years. The acute franchise is where we anticipate the majority of our product growth to come from as we move forward. We were very pleased to hit a record of $5.6 million in net revenue for the quarter, which is the first time this product has ever been over $5 million for a quarter. Total acute care net revenues for the year were $19.1 million, which included a positive net revenue of $1.4 million.
Speaker Change: We have been very pleased with the oncology franchise and we believe these products will continue to show the same consistency as in past years.
Speaker Change: The acute franchises, where we anticipate the majority of our product growth to come from as we move forward.
Speaker Change: We were very pleased and we've hit a record of $5 6 million in net revenue for the quarter, which was the first time this product has ever been over 5 million per quarter.
Speaker Change: All of acute care net revenues for the year were $19 1 million, which included a positive net revenues of $1 4 million.
Speaker Change: We believe that only upon me are both well positioned as we move into 2024.
Craig Collard: We believe Xenoli and Eponme are both well-positioned as we move into 2024. With a cross-linked partnership, an expanded label, combined with increasing morale, improved sales missions, and targeting, we believe this is going to be a great year for Bolt Products. Moving to the cross-linked partnership, this agreement was signed on January 7th and really got kicked off in early February. We began the training process with in-person training of the cross-link executive team, which went extremely well. We will continue this process through March and early April that will lead to having over 150 sales folks trained and ready to go. As the post-dismissal group is being trained, we will continue to roll out other areas of the country. As you look at this slide, it will give you a better understanding of what our footprint post-full implementation of CrossLink will look like. And consider that this will add an additional 650 refs across the country that will be fully trained.
Speaker Change: With the Crossland partnership expanded label combined with increasing morale improved sales message and targeting we believe this is going to be a great year for both products.
Speaker Change: Moving to the cross link partnership. This agreement was signed on January seven and really got kicked off in early February.
Speaker Change: We began the training process of in person training of the cross linked executive team, which went extremely well we will continue this process through March and early April.
Speaker Change: Lead to having over 150 sales folks trained and ready to go.
Speaker Change: Post. This initial group main train we will continue to roll out other areas of the country.
Speaker Change: As you look at the slide it would give you a better understanding of what our footprint.
Speaker Change: All implementation across Lily will look like.
Speaker Change: This will add an additional 650 reps across the country that will be fully trained.
Craig Collard: We anticipate having the entire group fully trained and up and running by the end of 2024. We also believe that we will see an impact in 2024 from this amount of representatives coming into place. But I do want to temper the enthusiasm, as obviously this will take time before we really start to hit on all cylinders.
Speaker Change: We anticipate having the entire group fully trained and up and running by the end of 2004. We also believe that we will see an impact in 'twenty four from this amount of representatives coming into place, but I didn't want to separately enthusiasm is obviously this will take time before we really start to hit on all cylinders.
Craig Collard: I really believe the inflection for Xenolith will take place as we move into 2025, after the launch of VAM and having all the new reps fully trained, but we certainly have positive momentum, and we believe the Crosslink reps will have an impact in 2024. We have been looking at doing more at the ASC level as we have tried to focus more of our efforts around the orthopedic space. After signing the partnership with Crosslink, it has become increasingly apparent that Crosslink has a significant footprint in this space and that our product mix works in parallel with the strategy of the ASC, which is to get these patients out of surgery and into rehab as quickly as possible. Our perioperative one-two punch with a Ponvian Xenolab will be extremely beneficial to our potential partners at the ASC level. I'm now going to pass the call to our newest hire, Kevin Warner, who is our newest Senior VP of MedAffairs Strategy and Engagement. Kevin feels a vital need for us to have hands-on experience with our products at the clinician level and is going to have a significant influence on our ASP strategy as we move forward. Go ahead, Kevin.
Speaker Change: Really believe the inflection presented will take place as we move into 2025 after the launch of <unk> and having all the new reps fully trained but we certainly have the momentum.
Speaker Change: Momentum and we believe the cross-link rest, we will have an impact in 2024.
Speaker Change: We have been looking at doing more ASC level as we have tried to focus more of our efforts reservoir repeated space and the size of the partnership across link has become increasingly apparent as the property has a significant footprint in this space and that our product mix works in parallel with the strategy of the ASC, which to get these pace.
Speaker Change: <unk> out of surgery and has rehabs fixed costs.
Speaker Change: Our very operative <unk> clients to the <unk> Nols will be extremely beneficial to our potential partners at the agency level.
Speaker Change: Im going to pass the call to our newest hire Kevin Warner who is our new senior VP of Med affairs strategy and engagement.
Kevin Warner: <unk> fills a vital need for us having handling experience with our products at the clinician level and is going to have a significant influence in our ASC strategy as we move forward.
Speaker Change: No.
Kevin Werner: Thank you, Craig. I'm so excited to be joining the Heron Therapeutics team and supporting the commercial portfolio of acute care and oncology care products. I have over 15 years of clinical pharmacy experience with a focus on perioperative care as a pharmacist, in addition to over a decade of experience in drug development, discovery, and clinical trials as Director of Pharmaceutical Sciences at Osteo Therapeutics. As Senior Vice President of Medical Affairs, Strategy, and Engagement for Heron, it will be my job to support the accurate dissemination of medical information to our team and providers, ensuring patients have access to the best possible care.
Kevin Warner: Thanks, Craig.
Joining me ahead and therapeutics team as part of the commercial portfolio of acute care and oncology care products at over 15 years of clinical pharmacy experience with a focus on very aftercare Department.
And over a decade of experience in drug development discovery and clinical trials as director of pharmaceutical therapies.
Kevin Warner: Thanks.
Speaker Change: As senior Vice President of Medical Affairs strategy engagement per head it would be my job to support the accurate determination of medical information to our team and providers sharing patient that at best Okay.
Kevin Werner: Forming strategic alliances and collaborating with the medical community to assure Heron's products become part of the standard of care as medical literature dictates. I look forward to working with our team at Heron on expanding indications, access, adoption, and medical literature with our current commercial portfolio and future products. I will focus on our acute care portfolio today, as I've had the pleasure of having extensive real-world experience with then-released and upon-mission, witnessing the positive impact on our patients and health. Enhanced Recovery After Surgery Protocols are evidence-based protocols that are essential to patient outcomes and sustaining the financial viability of our healthcare system. The primary clinical focuses of enhanced recovery after surgery are reducing post-operative pain while minimizing opioid consumption and the control of post-operative nausea and vomiting. Post-operative pain and post-operative nausea and vomiting are two of the most common concerns for both patients and clinicians. Similarly, TANF and IMB offer what we consider to be best-in-class, quality solutions to these problems.
Speaker Change: Borrowing strategic alliances and collaborating with medical community to assure Aaron's products become part of the standard of care as medical literature.
Speaker Change: I look forward to working with US and you may have any indications access adoption in medical literature with our current commercial portfolio and future products I will focus on our acute care portfolio today as I've had the pleasure of having extensive real world experience with Emily and economy witnessing the pause.
Speaker Change: <unk> impact on our patients and health systems.
Speaker Change: The enhanced recovery after surgery protocol of our evidence based protocols that are essential to patient outcomes and sustaining the survivability of our health system. The primary clinical focuses of enhanced recovery after surgery or reducing postoperative pain, while minimizing opioid consumption and the control of both offered about Nevada.
Speaker Change: Post operative pain, and post operative nausea, and vomiting as soon the most common concerns both patient and clinician.
Speaker Change: Literally and we offer what we consider best in class.
Speaker Change: <unk> solutions to these problems.
Kevin Werner: Implementation of Centerleaf anapondia as the foundation of our enhanced recovery after surgery protocols may improve overall patient satisfaction, clinical outcomes, and overall quality of life. On an institutional level, while supporting enhanced recovery after surgery, both liver relief and a POMD can have a positive financial impact on our... Both products are currently separately payable in the hospital outpatient and ambulatory surgical centers by BMI. In addition, many commercial payers are providing coverage presently outside of the surgical bundle.
Speaker Change: Implementation of similarly antibody is the foundation of our enhanced recovery. After surgery protocol, we believe may improve overall patient satisfaction clinical outcome and overall quality of life.
At an institutional level, while supporting enhanced recovery after surgery, both literally nobody can have a positive financial impact on our institution both products that currently separately payable in hospital outpatient and ambulatory surgical centers. Both BMS. In addition, many commercial payers are providing coverage to generally outside of the surgical bundle.
Kevin Werner: Improving the efficacy of our enhanced recovery after surgery protocols, combined with separate reimbursement outside of the surgical bundle, is critical to the financial viability of our health system and the clinical outcomes of our patients. I want to touch on epondy, an existing injectable emulsion, and the current unmet need and lack of awareness. Post-operative nausea and vomiting is often overlooked or under-recognized secondary to the timing and different phases of care in which patients can experience it. Post-operative nausea and vomiting is ranked the number one most undesirable post-op complication by patients but also presents clinical risk factors as well that can lead to increased length of stay, readmissions, and surgical complications.
Speaker Change: Improving the efficacy of an enhanced recovery after surgery protocol combined with separate reimbursement outside of the physical bundle is critical to the financial viability of our health system and clinical outcomes of our patients.
Speaker Change: I'll just touch on Etame <unk> injectable in Boston, and the current unmet need and lack of awareness postoperative nausea, and vomiting, often overlooked or under recognized secondary to the timing and different phases of care when patients can experience. It post operative nausea, and vomiting, or <unk> number one most undesirable applications.
Speaker Change: By the patient, but also presented clinical risk factors as well.
Speaker Change: Chris Thank those day readmission and surgical complications.
Kevin Werner: Post-operative allergy and vomiting rates can reach as high as 80% in high-risk patients. The current guidelines recommend the use of three or four agents depending on patients' risk factors, making them moderate to high risk. In the United States, we perform over 65 million diagnostic and surgical procedures, of which 50% of those patients are at moderate to high risk for post-operative nausea and vomiting. Prepsit has been on the market in an oral formulation and as a prodrug infusion plastic prep. During a formulation at the late onset of action of about one to five hours, plastic drug treatment requires compounding and a 20 to 30 minute infusion, followed by systemic conversion of the prodrug to the active form.
Speaker Change: Both are about the environment in which it had 80% in high risk patients. The current guidelines recommend these are three or four agents in patients with risk factors, making them moderate to high risk.
Speaker Change: In the United States, we perform over $65 million diagnostics and surgical procedures of which 50% of those patients are at moderate to high risk for post operative nausea vomiting a.
Perhaps it is that on the market and an oral formulation and as a pro drug infusion plastic resin formulation.
Formulation delayed onset of action of about one five hours facet upset requires compounding and has pointed to a 30 minute infusion followed by seven conversion of that approach to the active quarter because of this they have not been widely adopted in the area for this space. Despite <unk> being ranked number one and most effective anti emetic.
Kevin Werner: Because of this, they have not been widely adopted in the perioperative space, despite Acrobatin being ranked the number one most effective antibiotic for a large-scale papillomata analysis of nearly 100,000 patients. Along with its efficacy, Eruption also has an excellent safety profile, without sharing typical side effects of our commonly used anti-emetic therapies such as QT prolongation, sedation, anti-cholinergic effects, The safety profile is critical when we are combining multiple agents for our moderate and high-risk patients. Condi's 30-second IV push and rapid target receptor occupancy will allow for greater implementation of aprepitant and the acute perioperative pain by those providers making anesthesia most likely to prescribe. Condi's safety and efficacy profile gives us a long-acting solution with a 48-hour duration for one of our most significant post-operative complications, the post-operative malady of vomiting.
Speaker Change: <unk> large scale pack, a meta analysis of nearly 100000 patients.
Speaker Change: Along with the efficacy of <unk> and also has an excellent safety profile without sharing typical side effects of our economy.
Speaker Change: Thus the Qt prolongation of the nation anti bot attacks or exit parallel side effects. The safety profile is critical but we are combining multiple agents for our moderate hydro Asia.
Speaker Change: On the 32nd IV push and rapid target receptor occupancy will allow for greater implementation of a composite EMEA few perioperative aided by both providers anesthesia, most likely to prescribe <unk> safety and efficacy profile, along acting solution with a 48 hour duration one of our most effective post operative.
Speaker Change: Application post operative nausea, and vomiting, we're looking forward to the updated guidelines on the prevention of both asking us about the expected in 2024, which will enhance the education and awareness around this impact of Hanmi to have.
Speaker Change: But generally our focus will be on broadening provider awareness and associated patient impact.
Clinical trials ability to speak for themselves.
Speaker Change: First and only FDA approved extended release anesthetic proven to reduce pain and opioid consumption today I want to highlight some of the significant drivers to growth that have been implemented or will be this year.
Kevin Werner: We're looking forward to the updated guidelines on the prevention of the post-operative malady of vomiting expected in 2024, which will enhance the education and awareness around the impact Condi can have. For Zen Relief, our focus will be on broadening provider awareness and associated patient impact. The clinical trials of Zen Relief speak for themselves, being the first and only FDA-approved, extended-release anesthetic proven to reduce pain and opioid consumption.
Speaker Change: First of all as a significant label expansions as internally approved by the FDA on January 23, 2024, which limited the amount indicated in adult for installations of acute post surgical analgesia for up to 72 hours of advanced tissue Android eight procedures, moving both Nashville, and other procedures, which direct exposure to articulate our diligence.
Speaker Change: Lloyd this is essentially doubled the number of significant indicators of features as a clinician when I think of indicated procedures and appropriate. Similarly, I consider any procedure in which provide it would typically for Scott and opioids post operative patients.
Kevin Werner: Today I want to highlight some of the significant drivers of growth that have been implemented or will be implemented this year. First of all, the significant label expansion for Zenerleaf, approved by the FDA on January 23rd, 2024, where Zenerleaf is now indicated in adults for installation to produce post-surgical analgesia for up to 72 hours after soft tissue and orthopedic procedures, including foot and ankle, and other procedures which direct exposure to articular cartilages is avoided. This has essentially doubled the number of significant indicated procedures. As a clinician, when I think of indicated procedures and appropriate uses of thin relief, I consider any procedure in which a provider would typically prescribe an opioid post-operatively. They should be considering the use of Zenerleaf as the foundation post for both operative analgesia to minimize or eliminate the need for opioids, minimize acute pain, the risk of developing chronic pain, and support clinical recovery.
Thanks: Thanks, Jamie considerations literally as the foundation for both operative analgesia to minimize or eliminate the need for opioid minimizing the heap pain risk of developing chronic pain and support clinical recovery.
Thanks: The label expansion will also have a greater impact on formulary substitution.
Thanks: Some formularies have been hesitant to adoption due to the limited number of indications necessitating need for having multiple agents on formulary and subsequent budget impact with a new broad label for generally other agents that have claimed long acting, but a vacuum is superior to standard of care that can be removed from formulary and generally can be adopted.
That is the long acting foundational element along with cheaper generic anesthetics for the acute base.
Thanks: Additionally, third party data continues to surface surface with adult that align with our clinical trial showing significant impacts on postoperative pain opioid consumption length of stay and functional outcomes.
Kevin Werner: The label expansion will also have a great impact on the formulary it substitutes. Some formularies have been hesitant to adopt due to the limited number of indications, the need for having multiple agents on formularies, and subsequent budget impacts. With the new broad label facility, other agents that have claimed long-acting but have not proven severe to standard care anesthetics can be removed from formularies and similarly can be adopted as the long-acting foundational element along with cheaper generic anesthetics for the acute phase. Additionally, third-party data continues to surface with results that align with our clinical trials showing significant impacts on post-operative pain, opioid consumption, length of stay, and functional outcomes. The opioid epidemic continues to be at the top of our news feeds, costing the U.S. health system an estimated $1.5 trillion in 2020 and many patient lives. Our major accrediting bodies and government agencies are taking notice and stepping in. The Joint Commission now includes metrics for opioid stewardship that can be accredited.
Thanks: Opioid epidemic continues to be at the top of our news feed cost in the U S health system, an estimated one five trillion in 2020 and many patient lives are major accrediting bodies and government agencies are taking notice and stepping in joint Commission now good metrics for opioid stewardship to be accredited and no payback.
Thanks: Which will begin in 2025, we will provide payment for non opioid in the outpatient surgical study.
Thanks: Moving to reduce or eliminate the need for opioids.
Thanks: Along with the opioid settlements currently being distributed to states and the amount is $53 million that will be utilized or awareness prevention treatment of the opioid epidemic.
Thanks: All of these factors will have major impacts on awareness and adoption of generally one of the most important factors I believe will be the cross link partnership that Greg outlined previously having the additional boots on the ground. If you will will be critical to the successful implementation of generally is the foundation of multimodal analgesia across the nation to change how we view.
Thanks: After the pain and the need for opioid across the surgical paradigm.
Speaker Change: I would like to now turn the call over to Dr. <unk>.
Speaker Change: Thank you Kevin we are certainly excited to have eco and our team.
The development opportunity presented as envision III.
Kevin Werner: The No Pain Act, which will begin in 2025, will provide payments for non-opioids in the outpatient surgical setting that have proven to reduce or eliminate the need for opioids. Along with the opioid settlements currently being distributed to states in the amount of $53 billion that will be utilized to support awareness, prevention, and treatment of the opioid epidemic. All of these factors will have major impacts on awareness and adoption of Xynolead.
Speaker Change: First with label expansion, which has been realized the next step involves device modification in the form of the <unk> assets needle for fans and the final steps concludes with a pre filled syringe for PFS.
Speaker Change: In regards to demand it is designed to improve efficiency in preparation and we will achieve this in two ways.
Speaker Change: Firstly, the ban will substitute the current market presentation of the device, which include the exempted vials tanker bds with events.
Speaker Change: Dan will provide a more rapid EZ withdraw the drug product into this the range that is used for installation into the patient by the physician.
Kevin Werner: One of the most important factors, I believe, will be the cross-linked partnership that Craig outlined previously. Having additional boots on the ground, if you will, will be critical to the successful implementation of Xynolead as the foundation of multimodal analgesia across the nation to change how we view post-operative pain and the need for opioids across the surgical paradigm. I would now like to turn the call over to Dr. Bill Gordon. Thank you, Kevin. We are certainly excited to have you on our team.
Speaker Change: Demand has been specifically designed for this purpose and in testing the van and outperform other dented buyout space available on the market today.
Speaker Change: Secondly, the ban will allow us an EBIT more secured presentation of the product into the sterile field present in the surgical room by 18, and then the last file into the sterile shroud of the bank.
This will result in a more efficient process for operating room staff to prepare the product for physicians.
Speaker Change: We anticipate the van approval in Q4 of this year.
William P. Forbes: The development opportunity for Zenileft has envisioned three steps. The first was label expansion, which has been realized. The next step involves device modification in the form of the Vial Access Needle or VAM. The final step concludes with the prefilled syringe or PFN. In regards to the van, it is designed to improve efficiency and preparation, and it will achieve this in two ways. Firstly, the van will substitute the current market presentation of the device, which includes a vented vial spike, or VBS, with the van itself. The van will provide a more rapid and easy withdrawal of the drug product into the syringe that is used for installation into the patient by the physician. The van has been specifically designed for this purpose, and in testing, the van has outperformed other vented biopipes available on the market.
Speaker Change: Of course, the ultimate solution to ease of use and then our lap is the PFS and we expect the PFF again improved in Q4 of 2026.
Speaker Change: And this product presentation the entire trained.
Speaker Change: And ready for immediate use.
Speaker Change: The challenges to this program involve a new container closure system and the sterilization process itself. Once it is available all barriers to preparation will be removed.
Speaker Change: With that I will now turn this over to year end working era.
Bill: Thanks Bill.
Speaker Change: Craig has covered our product performance.
Speaker Change: And I'll just add a few additional points about our Q4 2003 and year to date results.
Speaker Change: Our product gross profit for the fourth quarter was $24 $3 million.
William P. Forbes: Secondly, the van will allow for an even more secure presentation of the product into the sterile field present in the surgical room by encasing the Xenolab vial into the sterile shroud of the van. This will result in a more efficient process for operating room staff to prepare the product for production. We anticipate the van approval in Q4 of this year. Of course, the ultimate solution to the ease of use of Xenolab is the PFS, and we expect the PFS to get approved in Q4 of 2026. In this product presentation, the entire tray is sterilized and ready for immediate use.
Speaker Change: One $9 million for the 12 months.
Speaker Change: <unk> 2023.
Speaker Change: Representing 71% and 49% of net revenues respectively.
Speaker Change: The annual margins were negatively impacted by write offs of annualized inventory during the year.
Speaker Change: We do not anticipate ADR.
Speaker Change: Sure.
Speaker Change: SG&A expenses for three and 12 months ended December 31 2023.
William P. Forbes: The challenges to this program involve a new container closure system and the sterilization process itself. Once this is available, all barriers to preparation will be removed. With that, I will now turn this over to Ira Duarte.
Speaker Change: $23 $6 million.
Speaker Change: $16 7 million respectively.
Speaker Change: Third to $26 $7 million and 100.
Speaker Change: A $19 $9 million in the same period of 2022.
Speaker Change: Research and development expenses were $10 9 million and $55.
Ira Duarte: Thanks, Phil. Craig has covered our product performance in his comments, and I will just add a few additional points about our Q4 2023 end-year-to-date results. Our product gross profit for the fourth quarter was $24.3 million and $61.9 million for the 12 months ended December 31, 2020, representing 71% and 49% of net revenue respectively. The annual margins were negatively impacted by write-offs of generalized inventory during the year. We do not anticipate any of our exams will have write-offs in the future.
Speaker Change: $9 million.
Speaker Change: Right.
Speaker Change: At December 30, <unk>, 2023, compared to $11 $1 million and $175 million payroll period of 2022.
The decrease in spend was primarily related to decrease in costs related to Daimler and for gas and scaled up validation activities in raw materials.
Speaker Change: We will complete in 2022.
Speaker Change: Overall, opex now and related cost decreased due to the reductions in force implemented in June 2022, and June 2023.
Ira Duarte: SD&A expenses for the 3 and 12 months ended December 31, 2023 were $23.6 million and $116.7 million, respectively, compared to $26.7 million and $119.9 million in the same period of 2020. Research and development expenses were $10.9 million and $55.9 million for the three and 12 months ended December 31, 2023, compared to $11.1 million and $107.5 million in the comparable period of 2022. The decrease in spend was primarily related to decreases in costs related to generalists.
Speaker Change: We believe we can continue to reduce costs moving forward in this area has continued to increase efficiency.
Speaker Change: The net loss was $10 7 million for Q4, 2023, and 91 $9 million for the comparable periods in 2022.
Speaker Change: Welcome to the total year to date in.
Speaker Change: 2023, and the net loss of $110 6 million.
Speaker Change: With $182 million in the comparable period of 2022.
Speaker Change: I'll now I would like to give a little bit more clarity on our overall operational spend and cash burn for 2023.
Speaker Change: We began implementing our opex reduction plan in early June which included several cost saving strategy, including a reduction in force as well as all of our companywide expense reduction.
Ira Duarte: As production scaled up, validation activities, and more material qualifications were completed in 2022. In addition, overall personnel and related costs decreased due to the reductions in force implemented in June 2022 and June 2022. We believe we can continue to reduce costs moving forward in this area and continue to increase efficiency. The net loss was $10.7 million for Q4 2023 and $19.9 million for the comparable period in 2022.
Speaker Change: We now have much more visibility into our operational spend and see clear path to profitability.
Speaker Change: If you look at the slides I'll next provide you will see our overall operational spend for 2023 up about a $172 million.
We used a $155 million Capex Lindy.
Speaker Change: <unk> charged about $80 million.
Speaker Change: Reducing these expenses and noncash stock compensation.
Speaker Change: Related to seven and depreciation and amortization of $27 million of cash Opex spend was $128 million for the year.
Ira Duarte: Looking at the total years to date net loss, 2023 is a net loss of $110.69 compared with $182 million in the comparable period of 2020. I now would like to give a little bit more clarity on our overall operational spend in cash for 2023. We began implementing our corporate restructuring plan in early June, which includes several cost savings strategies, including a reduction in force, as well as overall company-wide spend reduction. We now have much more visibility into operational spend and see clear paths to profitability. If you look at the slide from left to right, you will see our overall operational spend for 2023 of about $172 million, which we reduced to $155 million after excluding the reorganization charges of $18 million. Reducing gift expenses for non-cash stock compensation. Not related to severance, in depreciation and amortization of $27 million, our cash off expense was $128 million for the year.
Speaker Change: This compares to $177 million of cash Opex spend for 2020.
Please keep in mind that we started implementing a companywide reduction midyear 2023.
Speaker Change: In our previous earnings call, we believe our operational run rate, excluding stock compensation and depletion depreciation and amortization.
All forward will be between 108 million to $160 million.
Speaker Change: Cash flows increased every quarter as we have stabilized our spend and revenues are increasing every quarter.
Speaker Change: Moving now onto our guidance for 2024.
Speaker Change: We are reaffirming our previously given guidance for revenue of $138 million to 100.
Speaker Change: $58 million for 2000.
Speaker Change: 94, and approved gross margins between 60% to 70%.
Speaker Change: Our operating spend excluding stock compensation depreciation amortization is anticipated to be between 189.
Speaker Change: $160 million.
EBITDA, excluding stock comp will be between a loss of 22 million to income of $300 million.
Speaker Change: I would like to reiterate that we anticipate getting to positive EBITDA in Q4, 2024 and based on this strong balance sheet and our current operating plan.
Ira Duarte: This compares to $177 million of cash offer expense for 2022. Please keep in mind that we started implementing our company-wide reduction mid-year 2023, and as mentioned in our previous earnest call, we believe our operational run rate, excluding staff compensation and depreciation amortization, All forward will be between $108 million and $160 million, and cash flow will decrease every quarter as we have stabilized our spend and revenues are increasing every quarter. Moving now on to our guidance for 2024, we are reaffirming our previously given guidance for revenue of $138 million to $158 million in 2024 and improved growth margins between 68% to 70%. Our operating spend, excluding stock compensation and depreciation and amortization, is anticipated to be between $108 million and $160 million, and even though excluding stock comp, it will be between a loss of $22 million and an income of $3 million.
Speaker Change: We do not anticipate having to make a decent capital.
Speaker Change: And now we would like to open the call for any questions.
Speaker Change: Okay.
Speaker Change: The floor is now open for your questions to ask a question at this time simply press the star followed by the number one on your telephone keypad will now take a moment to compile a roster.
Speaker Change: Our first question comes from the line of Serge Belanger with Needham <unk> Company. Please go ahead.
Serge D. Belanger: Your line is open Sir pardon me. Your line is open. Please go ahead search.
Serge D. Belanger: Oh can you hear me.
Serge D. Belanger: Yes, we can now I'm, sorry, I didn't hear part of that.
Serge D. Belanger: Got it got it.
Serge D. Belanger: So two questions related to <unk>.
Speaker Change: The first one it's been six or seven weeks since the label expansion.
Speaker Change: Just curious if you've seen any impact.
Speaker Change: Demand or usage.
Speaker Change: And then maybe secondly, if you can just talk about what the no pain act means for Zimmer or less.
Speaker Change: I guess, specifically what kind of coverage do you have now and how do you think that changes once we flip the calendar to January 20, fives, when a no pain Act takes effect.
Speaker Change: Okay sure Yeah, I would say again anecdotally when we got the label expansion, obviously, there's a lot of excitement when we go into.
Ira Duarte: I would like to reiterate that we anticipate getting to positive EBITDA in Q4 2024, and based on this, our strong balance sheets, and our current operation plan, we do not anticipate having to raise any additional capital. Now, we would like to open the call to any questions. The floor is now open to your questions. To ask a question at this time, simply press the star followed by the number one on your telephone keypad.
Speaker Change: Certainly centers, where we already have some business.
Speaker Change: As you are to go deeper into those accounts and we're seeing some of that.
Speaker Change: Actually the day one of the label expansion I saw I guess, our first on label.
Spine surgery I was actually in the surgery in Asheville, North Carolina. So we're certainly getting some of that I think that though combined with.
Operator: We'll now take a moment to compile our raw data. Our first question comes from a line from Serge Belanger with Needham & Company. Please go ahead. Your line is open, sir, pardon me, your line is open, please go ahead. So, can you hear me? Yeah, we can now. I'm sorry, Serge.
Certainly cross link we had.
Speaker Change: A meeting at AOS out in San Francisco, We were with cross linked <unk> had some physicians coming by the booth and everything and just the excitement around that but I don't think youre going to see necessarily a dramatic impact as of yet, but we're starting we're certainly seeing some some impact but I think again over time as I said in my comments I think with cross linked with the label.
Serge D. Belanger: We didn't hear the part about that. Got it. Got it. So, two questions related to Xenolab.
Serge D. Belanger: The first one, it's been six or seven weeks since the label expansion, and I'm just curious if you've seen any impact on demand or usage of Xenolab. [inaudible] Since that, and then maybe, secondly, if you could just talk about what the No Pain Act means for Zinrilef. I guess, specifically, what kind of coverage you have now and how do you think that changes once we flip the calendar to January 25th, when the No Pain Act takes effect?
And the launch of <unk> later in the year I think this really begins to take off late into the year into 25, when we really start to see an inflection, but we certainly see some positive seeing some positive momentum.
Speaker Change: Regarding the no pain Act I'm going to turn it to Kevin Warner.
Kevin Warner: Who can give a little bit more insight into the yeah, Hey, Serge. Thanks for that question No pain Act is going to be significant for multiple facets. So what the <unk> does is provide reimbursement in the hospital outpatient procedure department and the ambulatory surgical centers.
Craig Collard: Thanks. Okay. Sure.
Craig Collard: Yeah, I would say, again, anecdotally, when we got the label expansion, obviously, there was a lot of excitement. When we go into centers where we already have some business, it's certainly easier to go deeper into those accounts, and we're seeing some of that. Actually, on day one of the label expansion, I saw, I guess, our first unlabeled spine surgery. I was actually in the surgery in Ashe
Kevin Warner: For products that have been proven to reduce the need for opioids are sold and then released and since we're already covered in both DHL and ASC through 2025 for Q1.
Speaker Change: So no pain act is going to go through 2027 sort of essentially establish that reimbursement for our facilities through 2027, and CMS has discussed the longer.
Craig Collard: So, we're certainly getting some of that. I think that, though, combined with Crosslink, we had a meeting at AAOS out in San Francisco. We were with Crosslink a little bit and had some physicians coming by the booth and everything, and just the excitement around that. But I don't think you're going to see necessarily a dramatic impact as of yet, but we're certainly seeing some impact. But I think, again, over time, as I said in my comments, I think with Crosslink, with the label expansion, the launch of VAN later in the year, I think this really begins to take off late into the year, into 25, when we really start to see inflection. But we're certainly seeing some positive momentum. Regarding the No Pain Act, I'm going to turn it over to Kevin Werner, who can give a little bit more insight into that.
Speaker Change: Im frame from that beyond possibly extending our weighted 2030, so we look forward to working with.
Speaker Change: Our legislature is on that and continuing to get reimbursement for our patients to ensure that it is covered but that'll help assure the adoption and the bolt through for any institution.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Europe.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line of Carl Byrnes with Northland Capital markets. Please go ahead.
Carl Edward Byrnes: Thanks for the question and congratulations on the results and the progress.
Carl Edward Byrnes: Understanding that 2025 is really set up to be the ramp year presumed reluctant <unk>.
Carl Edward Byrnes: How do you see and I know you touched upon that already how do you see the cross linked collaboration and label expansion transitioning in 2024 I think prior language was.
Craig Collard: Yeah, hey Serge, thanks for that question. So the No Pain Act is going to be significant for multiple reasons. What the No Pain Act does is provide reimbursement in the hospital outpatient procedure department and the ambulatory surgical centers for products that have been proven to reduce the need for opioids.
Carl Edward Byrnes: The acute care products at 50% year over year growth.
Carl Edward Byrnes: So comfortable with that number or do you think that that's likely to prove conservative.
Carl Edward Byrnes: Yes, again, one of the reasons, we did give that range was we weren't sure exactly when and how this may take off but to your point with expanded label and the thing I can say about the crossing partnership I mean every now and then you you do one of these where things seem to work perfectly from a standpoint of the personnel and just.
Kevin Werner: So in the VIN release instance, we're already covered in both the HOPD and ASC through 2025 Q1. Thus, the No Pain Act is going to go through 2027. So it will essentially establish that reimbursement for our facilities through 2027, and CMS has discussed a longer timeframe from that beyond, possibly extending all the way to 2030. So we look forward to working with our legislatures on that and continuing to get reimbursement for our patients to assure that it is covered. But that will help ensure adoption and the pull through for coming in.
Carl Edward Byrnes: How things come together, and we really do feel that way that the crossing folks have been fantastic.
Carl Edward Byrnes: Certainly are bringing.
Carl Edward Byrnes: A different relationships that we may have currently with some of the surge and so forth. So that's been ever.
Carl Edward Byrnes: Everything we had hoped for at this point I think one of the surprises that we had when we did the initial training and when I was there along with our team.
Kevin Werner: Thank you. You're Our next question comes from the line of Carl Byrnes with Northland Capital Markets. Please go ahead.
Carl Edward Byrnes: Thanks for the question, and congratulations on the results and the progress. You know, understanding that 2025 is really set up to be the ramp year for Zimbabwe and Africa, you know, how do you see, and I know you touched on this a bit already, how do you see the cross-linked collaboration and label expansion transitioning into African cells in 2024? I think the prior language was, you know, acute care products at 50% year-over-year growth. So comfortable with that number, or do you think that that's likely to prove conservative?
Carl Edward Byrnes: We did that in person again, which is very receptive we had executive team at cross link and so from there we did another training last week in person.
Carl Edward Byrnes: With some of the sales folks there and so we're going to continue to do those and so.
Carl Edward Byrnes: We should have as I mentioned, we should have.
Carl Edward Byrnes: Next 30 days or so about 150 reps that will be sort of fully out there and running and so again, we will certainly see some impact.
Carl Edward Byrnes: I'm just trying to temper this a bit because until we really get fully up and running and.
Craig Collard: Thanks. Yeah, again, one of the reasons we did get that range was we weren't sure exactly when and how this would take off, but, you know, to your point about the expanded label, and the thing I can say about the CrossLink partnership, I mean, every now and then, you do one of these where things seem to work perfectly from a standpoint of the personnel and just, you know, how things come together, and we really do feel that way, that the So that's been, you know, everything we had hoped for at this point. I think one of the surprises that we had when we did the initial training, and I was there along with, you know, our team; we did that in person, and again, it was just very receptive.
Carl Edward Byrnes: Do this for a little while and transfer these or other areas of the country I don't think its going to really take off and inflect until next year, but look we are having positive things happened so far and we're pleased so so far this is going as planned.
Speaker Change: Great. Thanks, and then just a follow up there also seems to be and you touched on the significant opportunity in the AFC segment, particularly to cross sell both Zimbra 11, and upon be with your sales force and with the cross selling collaboration.
Speaker Change: <unk>.
Could you want to can you elaborate a little bit about what your thoughts are in terms of how big that opportunity might be.
Speaker Change: Yes, well certainly the market is moving that way.
Speaker Change: Again, we've tried to I hate to say overly overly simplified things, but we've really tried to go where we think we'd be most successful now in sort of amidst this product a bit and so that has led us to the orthopedic space and will certainly.
Craig Collard: We had the executive team at CrossLink, and so from there, we did another training last week in person with, you know, some of the sales folks there, and so we're going to continue to do those. And so we should, as I mentioned, we should have about 150 reps that'll be sort of fully out there and running in the next 30 days or so. And so again, we will certainly see some impact. I'm just trying to temper this a bit because until we really get fully up and running and, you know, and do this for a little while and transfer these to other areas of the country, I don't think it's going to, you know, really take off and grow until next year.
Speaker Change: Expand from there, but that really is in parallel where where that space is going with ASC. So.
Speaker Change: As we look at our business, we think there's a real opportunity.
Speaker Change: As that space expands for us to really have a true partner there because again, if you think about the goal of an ASC.
Speaker Change: To get these patients how quickly to get them at a rehab. The last thing you want is any patients that would have any kind of nausea associated with the surgery going back into the hospital and so this is where upon we can come in and play and so for those high risk patients. So with our kind of perioperative one two punch, we really do feel that these two products are really positioned perfectly.
Craig Collard: But look, we're having positive things happen so far, and we're pleased. So, so far, this is going as planned. Great, thanks. And then just a follow up. There also seems to be, and you touched on this, a significant opportunity in the ASC segment, particularly to cross sell both Xumber11 and Eponvi with your Salesforce and with the Crosslink collaboration. Can you elaborate a little bit about what your thoughts are in terms of how big that opportunity might be?
Speaker Change: With exactly what the ASC is trying to do and so again with cross-link already having some presence there we think that's going to be extremely helpful. In opening some doors for us there and really trying to move down that path.
Speaker Change: Great Thanks, and congratulations again.
Craig Collard: Yeah, well, certainly, you know, the market is moving that way. And again, we've tried to, I hate to say overly simplify things, but we've really tried to go where we think we'd be most successful now and sort of niche this product a bit. And so that has led us to the orthopedic space. And we'll certainly, you know, expand from there. But that really is in parallel with where that space is going with ASCs. So as we look at our business, we think there's a real opportunity, as that space expands, for us to really have a true partner there. Because, again, if you think about the goal of an ASC is to get these patients out quickly, to get them into rehab. The last thing you want is any patients that would have, you know, any kind of nausea associated with the surgery going back into the hospital.
Speaker Change: Thanks Carl.
Speaker Change: Again the floor is now open for your questions to ask a question at this time simply press the star followed by the number one on your telephone keypad.
Speaker Change: Our next question comes from the line of Kelly <unk> with Jefferies. Please go ahead.
Speaker Change: Hi, this is clearer on for Kelly.
Kelly: Congrats on the group's progress and just one quick question on the cost reduction. So just wondering do you have any plan to further.
Kelly: His jacket, Jack you that your cost reduction plan and towards lineup for like should we expect R&D and SG&A to continue go down in 'twenty going for Antonio AFI.
Speaker Change: At what point do you think your operating cost will be at a more stable level. Thank you.
Craig Collard: And so this is where a Ponvy can come in and play, and so, you know, for those higher-risk patients. So with our kind of perioperative one-two punch, we really do feel that these two products are really positioned perfectly with exactly what the ASC is trying to do. And so, again, with Crosslink already having, you know, some presence there, we think that's going to be extremely helpful in opening some doors for us there and really trying to move down that path. Great, thanks and congratulations again. Thanks, Carl. Again, the floor is now open for your questions. To ask a question at this time, simply press the star followed by the number one on your telephone keypad.
Jack: Thanks, Claire I. Appreciate the question look the range, we've given for $108 million to $116 million I mean again, we'd love to be at the lower end of that we're just again as we've made some of these changes we are trying to now kind of sort through what that may look like this year and we've given ourselves a little bit of wiggle room, but I don't think you're going to see significant cost reductions.
Jack: From here I think we're sort of at a level now where you can kind of expect going forward.
But again, we feel pretty comfortable within this range.
Speaker Change: Got it thank you.
Speaker Change: Okay. Thank you.
Craig Collard: There are no further questions at this time I would now like to turn the call over to Craig collared for closing remarks.
Craig Collard: I just want to thank everyone for joining the call today, and we really look forward to speaking everyone next quarter. Thank you.
Operator: Our next question comes from the line of Kelly Shee with Jeffries. Please go ahead. Hi, this is Clara on behalf of Kelly.
Speaker Change: This concludes today's call you may now disconnect.
Speaker Change: [music].
Clara: Congratulations on the great progress. And just one quick question on the cost reduction. So just wondering, do you have any plans to further execute your cost reduction plan in 2024? Like, should we expect R&D and SG&A to continue to go down in 2024 and 2025? And like, at what point do you think your operating cost will go down? Thanks, Claire. I appreciate the question. No, look, the range we've given from 108 to 116 million. I mean, again, we'd love to be at the lower end of that.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
Craig Collard: We're just, again, as we've made some of these changes, trying to, you know, now kind of sort through what that may look like this year. And we've given ourselves a little bit of wiggle room, but I don't think you're going to see significant cost reductions from here. I think we're sort of at a level now where you can kind of expect going forward. But again, we feel pretty comfortable within this range.
Okay.
Speaker Change: Yes.
Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Sure.
Craig Collard: All right. Okay, thank you. There are no further questions at this time. I would now like to turn the call over to Craig Collard for closing remarks. I just want to thank everyone for joining the call today and we really look forward to speaking to everyone next quarter. Thank you. This concludes today's call. You may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: Okay.