Q1 2024 Heron Therapeutics Inc Earnings Call

May 7, 2024

Alex: Thank you for standing by. My name is Alex, and I will be your conference operator today. At this time, I would like to welcome everyone to the Heron Therapeutics Q1 2024 conference call.

Thank you for standing by my name is Alex and I will be a conference operator today at this time I would like to welcome everyone to the heroine Therapeutics Q1, 'twenty 'twenty four conference call. All lines have been placed on mute to prevent any background noise I'm sorry, the speaker's remarks, there will be a question.

Alex: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. I would now like to turn the call over to Melissa Jarrell, Executive Director of Legal. Please go ahead.

And answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star One again I would now like to turn the call over to Melissa Giraud Executive Director legal. Please go ahead.

Melissa Jarrell: Thank you, operator. And good morning, everyone.

Melissa Giraud: Thank you operator, and good morning, everyone. Thank you for joining us on the Heron Therapeutics Conference call. This morning to discuss the company's financial results for the quarter ended March 31, 2024 with me today from here on our credit call are Chief Executive Officer eras, Jorge Executive Vice.

Melissa Jarrell: Thank you for joining us on the Heron Therapeutics conference call this morning to discuss the company's financial results for the quarter ending March 31, 2024. With me today from Heron are Craig Collard, Chief Executive Officer; Ira Duarte, Executive Vice President, Chief Financial Officer; and Bill Forbes, Executive Vice President, Chief Development Officer. For those of you participating via conference call, links will be made available via the web guide and can also be accessed via the Investor Relations page or website following the conclusion of today's call.

Gulfport: President and Chief Financial Officer, Gulfport, Executive Vice President Chief Development Officer for those of you participating via conference call.

Gulfport: To be honest via webcast.

Gulfport: Yeah, the Investor Relations page of our web site following the conclusion of the call.

Melissa Jarrell: 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 fact is a forward-looking statement. 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 Litigation Reform Act of 1995.

Gulfport: 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 fact is a forward looking statement.

Gulfport: 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 Securities Litigation Reform Act of 90 95.

Melissa Jarrell: 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 statement. The risks 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 Heron's public periodic filings with the FBI.

Gulfport: 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.

Gulfport: The risks 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 inherent public periodic filings with the SEC.

Gulfport: Except as required by law Geron assumes no obligation to update these forward looking statements.

Gulfport: Tripadvisor pull out and does not intend to use up and with that I would now like to turn the call over to Craig <unk>, Chief Executive Officer of Chevron.

Melissa Jarrell: 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. And with that, I would now like to turn the call over to Craig Collard, Chief Executive Officer of Heron. Thanks for watching.

Craig Alexander Collard: Elizabeth. Good morning, everyone, and welcome to the Heron Therapeutics first quarter 2024 earnings call. Today we are pleased to update you on our latest achievements in Q1, including financial performance, progression on our development projects, cross-link progression, and general corporate updates. We started the quarter off with tremendous momentum.

Craig: Thanks, Melissa good morning, everyone and welcome to the Aaron's Therapeutics first quarter 2024 earnings call.

Craig: Today, we are pleased to update you on our latest achievements in Q1, including financial performance.

Craig: On our development projects cross-link progression and general corporate update.

Craig: We started the quarter off with tremendous momentum.

Craig Alexander Collard: First, we signed a cross-link agreement on January 7, and shortly after, on January 23, we received official approval of our expanded indication for Xenolep, which broadens our label into spine, shoulder, and other soft tissue surgical procedures. Soon after these two events, we had a national sales meeting where we trained all of our sales folks on the new indications. We have also developed an internal group to lead the training process of the cross-linked. We have continued to improve our financial efficiency by reducing spins and improving margins.

Craig: First we found across the agreement on January seven and shortly after our January 23rd we receive official approval of an expanded indication zenola, which broadens our label in the spine shoulder and other soft tissue surgical procedures.

Speaker Change: Good afternoon.

Speaker Change: We had a national sales meeting, where we trained all of our sales folks on the new indications.

Craig: We also developed an internal group to lead the training process of the crossline team.

Craig: We have continued to improve our financial efficiency.

Craig: <unk> spends and improving margins.

Craig Alexander Collard: We believe with this continued approach, we will achieve profitability as predicted by Q4 of 2024. Before we move on to product performance, I did want to show this slide to highlight what has been achieved this quarter versus just 12 months ago. As you can see, in Q1 of 2023, we had net revenues of $29.6 million, COGS of $16.8 million, with an overall loss of just over $33 million for the same time period in 2024.

Craig: We believe with this continued approach we will achieve profitability as predicted by Q4 of 2024.

Craig: Before we move on to slide performance then.

Speaker Change: Wanted to show this slide to highlight what has been achieved this quarter versus just 12 months ago.

Speaker Change: As you can see in Q1 of 2023, we had net revenues of <unk>.

Speaker Change: $6 million cost of $16 $8 million with an overall loss of just over $33 million.

Speaker Change: At the same time period of 2024, we.

Speaker Change: We had $34 $6 million and net revenues of $8 $4 million in cards at a loss of $4 8 million.

Speaker Change: Which is a $28 2 million.

Speaker Change: Positive swing in just 12 months, along with gross margin improvement from 43% to 76%.

Craig Alexander Collard: We had $34.6 million in net revenues, $8.4 million in COGS, and a loss of $4.8 million, which is a $28.2 million positive swing in just 12 months, along with a gross margin improvement from 43% to 76%. The takeaway from this is that we are on the right path, and we have the business well positioned for the future. Now moving on to product performance, The Ecology Franchise continues to outpace our expectations with some daunting net revenues of $25.6 million for the quarter and susto net revenues of $3.6 million for the quarter.

Speaker Change: The takeaway from this is we are on the right path and we have the business well positioned for the future.

Speaker Change: Now moving on to product performance.

Speaker Change: The oncology franchise continues to outpace our expectations with some market net revenues of $25 $6 million for the quarter.

Speaker Change: First of all net revenues of $3 $6 million per quarter.

Craig Alexander Collard: We continue to maintain our existing market share in a very competitive environment with the Oncology franchise, and we believe these products will continue to show the same consistency throughout 2024. Total acute care net revenues for the quarter were $5.5 million, which represents a 45% increase from $3.8 million in the first quarter of 2023. Zipper's left net revenues of the quarter were $5 million, which represented the second straight quarter with revenues of $5 million or greater.

Speaker Change: We continue to maintain our existing market share in a very competitive environment with the oncology franchise and we believe these products will continue to show the same consistency throughout 2024.

Speaker Change: Total of acute care net revenues for the quarter were $5 5 million, which represents a 45% increase from $3 8 million in the first quarter of 2023.

Speaker Change: <unk> net revenues for the quarter was $5 million, which represented the second straight quarter with revenues of $5 million or greater.

Craig Alexander Collard: VNet revenue for the quarter continues to increase quarter-on-quarter and year-on-year to $500,000 for the quarter ended March 31st, 2024. While we are pleased with the direction we are headed, we knew Q1 was going to be relatively flat when considering seasonality and with all the other activities we had going on during the quarter, such as label expansion training and with the kickoff of cross-country. I will speak to Xenrolift Performance specifically in a moment when I give an update on Crosslink, but I did want to mention we are seeing tremendous uptake with Eponvi.

Speaker Change: <unk> net revenues for the quarter continued to increase quarter over quarter and year on year to $500000 for the quarter ended March 31 2024.

Speaker Change: While we are pleased with the direction. We were headed we knew Q1 was going to be relatively flat when considering seasonality and with all the other activities. We had going on during the quarter such as label expansion training and with the kickoff of crossline.

Speaker Change: I will speak to the general performance specifically in a moment when I give an update on cross win but I did have one submission we are seeing tremendous uptake with our policy.

Craig Alexander Collard: Our sales message is really beginning to resonate with many institutions around the country, and this will ultimately trickle down to, in fact, net revenue growth. In Q3 of 2023, our new management team realized that our sales message for Pond B needed to be focused around the issue of PONB versus just trying to convert oral or prepotent and the impact it can have financially in the perioperative space.

Speaker Change: Our sales message is really beginning to resonate with many institutions around the country and this will ultimately trickle balance impact net revenue growth.

Speaker Change: In Q3 of 2023, our new management team realized that our sales message for upon being needed to be focused revenue issue of <unk>.

Speaker Change: Versus just trying to convert all of our products and the impact it can have financially in the perioperative space.

Craig Alexander Collard: We retrain our reps, we find ourselves messages, and improve our incentive comp plan to focus around this message. Since implementation in October of 2023, we have had over 70 P&T wins, and as you can see from the slide, another 35 this quarter as well. Once approved by P&T, there is a bit of lag time before the sales bulls begin to take place.

Speaker Change: We retrained, our reps refined ourselves message and improved our incentive comp plans to focus around this messaging.

Speaker Change: Since implementation in October of 2023, we have had over 70 P&C wins and as you can see from the slide 35, this quarter as well.

Speaker Change: Once approved.

Speaker Change: There is a bit of lag time before the sale pose begins to take place, but as these accounts come onboard we are going to see a continued growth in sales.

Craig Alexander Collard: But as these accounts come on board, we're going to see a continued growth in sales, which has upon me generally billed system-wide in most accounts. We are very pleased with the UPONVY momentum, and this should only improve as we continue to bring more cross-linked reps on board. This will free up more time for our Heron reps to actually still use UPONVY and Xenrolift versus actually being present in the OR during case management for Xenrolift preparation. Now moving on to the cross-link update.

Speaker Change: As a pawn we generally go systemwide in most accounts.

Speaker Change: We are very pleased with the economy momentum and this should only improve as we continue to bring more cross link reps onboard this will free up more time for our hero reps actually sell upon me and then rollout versus actually being present in the yard for Encase management presentable preparation.

Speaker Change: Now moving on to the cross linked uptake.

William P. Forbes: Training for the Crosslink team kicked off with the executive team in late February and with the refs at the beginning of March. We now have 216 cross-length reps consisting of joint, trauma, and spine that have been fully trained and are out in the field selling Zimrilip. While the fruits of the Crosslink partnership are not apparent in Q1, we believe that the timing of the initiation of the partnership and the training that is being staged and is still ongoing will pay many dividends as more and more field reps come online.

Speaker Change: Training for the cross linked team kicked off with executive team in late February and with the reps at the beginning of March.

Speaker Change: We now have 216 cross link reps cases joined trauma and spine that have been fully trained at our outlet field selling general.

Speaker Change: While the fruits of the crossing partnership are not apparent in Q1, we believe that the timing of initiation of the partnership and the training is being staged and is still ongoing we will pay many dividends as more and more field reps come online.

William P. Forbes: Our plan is to continue to expand our reach across the country with over 650 reps being fully trained and integrated before the launch of the van in Q4 this year. Internally, we have been amazed by the relationships the CrossLink team has with the orthopedic surgical community, and we realize that in time, this is going to have a substantial impact on ZenderLab revenue. In just one month of their joint team being trained and promoting ZenerLab, we already had more than 20 new orthopedic surgeons use our product in the first month.

Speaker Change: Our plan is to continue to expand our reach across the country with over 650 reps being fully trained and integrated before the loss of the beds in Q4 of this year.

Speaker Change: Internally, we have been amazed by the relationships across 18 has an orthopedic surgical community and we realized in time. This is going to have a substantial impact on <unk> revenues.

Speaker Change: And just one month of their joint team being trained and promotions that we already had more than 20, new orthopedic surgeons use our product in the first month.

William P. Forbes: This is Justin, North Carolina, South Carolina, and Georgia, which represents the inaugural region of our partnership with Crossline. We have seen a 12-fold increase in unit sales growth within these three states versus the rest of the country. We have had around 60 introductions and touchpoints to new ortho users in the month of April alone, and we anticipate 40 new users to come on board within the next 30 days. We are literally just getting started and building a car while we are driving, but the impact that Crosslink will have is very clear and will continue to play out as we get more refs trained and integrated into the partnership. I will now turn the call over to Bill Forbes, our Chief Development Officer. Go ahead, Bill.

Speaker Change: This is just in North Carolina, South Carolina.

Speaker Change: Georgia, which represents the inaugural region for our partnership with cross selling.

Speaker Change: We have seen a 12 fold increase in unit sales growth within these three states versus the rest of the country.

Speaker Change: We have had around 60 introductions at touch points to new ortho users in the month of April alone and we anticipate 40, new users to come on within the next 30 days.

Speaker Change: We are literally just getting started and building the car while we were drawn but the impact across lake will have is very clear and we will continue to play out as we get more reps train and integrate into the partnership.

Speaker Change: I'll now turn the call over to Bill Forbes, Our Chief Development Officer go ahead.

William P. Forbes: Thank you, Craig. During the last quarterly earnings call, I covered our R&D activities, which are focused on providing easier access to dental care. I will cover some of that again here for investors that are newer to our story and provide an update on current activities as well as our near-term delivery. Following the Xenrolab Label Expansion, R&D continues to focus on the work to modify the device component of this combination product. The first modification involves the vial access needle or band. The van is designed to improve efficiency and preparation, and it will achieve this in two ways.

Speaker Change: Bill.

William P. Forbes: Thank you Craig during the last quarterly earnings call I covered our R&D activities, which are focused on providing easier access to download.

William P. Forbes: I will cover some of that again here for investors that are newer to our story and provide an update on current activities as well as our near term delivery.

William P. Forbes: Following the general that label expansion and R&D continues to focus on the work to modify the device component of this combination product.

William P. Forbes: First modification involves the bio asset need of more bandwidth.

William P. Forbes: Savannah is designed to improve efficiencies in preparation edel will achieve this in two ways.

Ira Duarte: Consequently, the withdrawal of Xenolep from the vial with the band is approximately three to four times faster than the currently marketed vented vial spike or VBS. Secondly, the band will allow for an even more secure presentation of the product into the sterile field in the surgical room by encasing the Xenolab vial into the sterile shroud of the band. We believe that both the improved withdrawal time and the sterile shroud will be extremely well received by operating room staff.

William P. Forbes: First the withdraw of the Nols from the vial with abandoned approximately three to four times faster than the currently marketed dented by us by our Bbs.

William P. Forbes: Currently the ban will allow for an even more to care presentation of the product and of this tariff deal in the surgical room mined 18 agenda led buyout in the sterile drought of the bank.

William P. Forbes: We believe that both the improved withdrawal time and <unk> will be extremely well received by operating room staff.

Ira Duarte: Presently, we have completed all development and testing activities on the ban, and we are finishing up the submission to the FDA. We anticipate FDA approval in Q4 of this year. The ultimate solution to speed and ease of use of Xenolephine is a pre-filled syringe or PFS. We anticipate PFS approval in Q4 of 2026. In this product presentation, the entire tray is sterilized and ready for immediate use. There will be no vials and MLS, and no BDS or VAM, just the syringe itself.

William P. Forbes: Presently we have completed all development and testing activities on the band and we are finishing up the submission to the FDA, we anticipate the ban approval in Q4 of this year.

William P. Forbes: From a solution to speed and ease of use of general methods of prebuilt the range of our PFS, we anticipate the PFS approval in Q4 of 2025th.

William P. Forbes: And this product presentation, the entire trade to sterilize and ready for immediate use.

William P. Forbes: There will be no <unk> and no bvs, our band just that the range itself the.

Ira Duarte: 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.

William P. Forbes: The challenges to this program and while the new container closure system into sterilization process itself. Once this is available all barriers to preparation will be removed.

William P. Forbes: With that I will now turn this over to Aaron to Workday era.

Aaron: Thanks, Bill and Craig has covered our high performance and Opex result in his comments and I will add some additional points by Q1 2024 results.

Ira Duarte: Craig has covered our product performance and object results in his comments, and I will add some additional points for our Q1 2024 results. Our current gross profit for the first quarter was $26.2 million, or 76%, which increased from 43% in the first quarter of 2023. The benefits from the production scale-up, validation activities, and raw material qualifications completed in late 2022 were more fully realized in 2024 as compared to the same period in 2023.

Aaron: Our gross profit for the first quarter was $26 $2 million was 76%, which increased from 43% in the first quarter 2023.

Aaron: The benefit from the production scale up validation activities and raw material qualifications completed in late 2022 was more fully realized in 2024 as compared to the same periods in 2023.

Ira Duarte: SG&A expenses for the three months ended March 31st, 2024 were $26.4 million compared to $37 million in the same period in 2023. The decrease was primarily related to a decrease in personnel and related costs due to the reduction force implemented in June 2022 and June 2023. Research and development expenses were $4.6 million for the three months ended March 31, 2024, compared to $8.8 million in the comparable period in 2023. The decrease is primarily related to a decrease in personnel and related costs due to reductions for its implemented in both June 2022 and June 2023.

William P. Forbes: SG&A expenses for the three months ended March 31, 2024, or $26 4 million.

William P. Forbes: Compared to $37 million.

William P. Forbes: Same period in 2023.

William P. Forbes: The decrease was primarily related to a decrease in personnel and related costs due to the reduction in force implemented in June 2022, and June 2023.

William P. Forbes: Research and development expenses were $4 6 million for the three months ended March 31, 2024, compared to $8 $8 million in the comparable period in 2023. The decrease was primarily related to a decrease in personnel and related cost reductions implemented in both Q1 2022 and June 2002.

William P. Forbes: 93.

Ira Duarte: As noted in the 10Q, the Condensed Consolidated Statements of Operations and Comprehensive Laws as of March 31, 2024, reflect the declassification of certain expenses from research and development to journal and administrative expenses to align with the function of the expenses incurred. This results in no change to total operating expenses.

William P. Forbes: As noted in the 10-Q, the condensed consolidated statements of operations and comprehensive loss as of March 31, 2024 reflect each application up certain expenses on research and development and general and administrative expenses.

William P. Forbes: With a function of the expenses incurred.

William P. Forbes: This resulted in no change to total operating expenses.

Alex: The net loss was $3.2 million for Q1 2024 and $32.7 million for the comparable period in 2023. We are reaffirming our previously given guidance for revenue of $138 million to $158 million for 2024 and improved gross margins between 6 to 8 to 70 percent. Our operating spend, excluding stock compensation and depreciation and amortization, is anticipated to be between $108 million and $160 million, and EBITDA, excluding stock comp, will be between a loss of $22 million and an income of $3 million.

William P. Forbes: The net loss was $3 2 million for Q1, 2024, and $32 7 million for the comparable period in 2023.

William P. Forbes: We are affirming our previously given guidance for revenue of $138 million to $158 million for 2024 and improved gross margins between six to eight 7%.

Alex: Our operating expense, excluding stock compensation, and depreciation and amortization is anticipated to be between $108 million to $160 million and EBITDA, excluding stock comp will be between a loss of 22 million to income of $3 million.

Alex: I would like to reiterate that we anticipate getting to positive EBITDA in Q4 2024, and based on this, our strong balance sheet, and our current operational plan, we do not anticipate having to raise additional capital. Now, we'd like to open the call to any questions.

Alex: I would like to reiterate that we anticipate getting to positive EBITDA in Q4, 2024 and based on this our strong balance sheet and our current operational plan, we do not anticipate having to raise additional capital.

Speaker Change: And now we'd like to open the call for any questions.

Alex: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue. If your first question comes from the line of Serge Belanger, we'll need him. Please go ahead.

Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and we would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue.

Alex: I would like to withdraw your question simply press Star. One again, if you are called upon to ask your question in a listening via loud speakers device beliefs pick up your handset and ensure that your phone is not on mute when asking a question.

Alex: Press Star one to join the queue again.

Alex: First question comes from the line of Serge Belanger with Needham. Please go ahead.

Serge D. Belanger: This one, Craig. It's been about four months since you got the broad label expansion for Xenroless. You highlighted some of the new indications, like you said, spine, shoulder, and soft tissue procedures. Where do you think... The additional uptake from these new indications will be in. And then, secondly, notice in Venti, a strong first quarter. Just curious if that's kind of a new base level for that product going forward. Thanks.

Serge D. Belanger: First one Greg.

Serge D. Belanger: I'm sorry, could you repeat the first part? A little bit got cut off in the first part of your question.

Serge D. Belanger: It's been about four months since you've got the broad label expansion for Xinyuan unless you highlighted some of the new indications, you said spine shoulder and soft tissue procedures.

Speaker Change: Where do you think.

Serge D. Belanger: The additional uptake from these new indications will be in.

Serge D. Belanger: And then secondly noticed invented a strong first quarter.

Serge D. Belanger: Just curious if thats kind of a new base level for that product going forward. Thanks.

Speaker Change: I'm, sorry could you repeat the first part little bit got cut off on your first part of your question.

Serge D. Belanger: Yeah. Um, so the Yeah. Um, so the Yeah.

Speaker Change: Yeah. So.

Serge D. Belanger: Broad Label Expansion for Xenomorpha was about four months ago. There have been a number of new indications. You mentioned spine, shoulder, and soft tissue. Curious whether the product has seen some uptake in these new indications since the expansion of the label.

Serge D. Belanger: Broad label exchange presented a level was about four months ago.

Serge D. Belanger: There's been a number of new indications, you mentioned spine shoulder and soft tissue.

Serge D. Belanger: <unk>, where the product is.

Serge D. Belanger: Some uptake in these new indications since the expansion of the label.

Craig Alexander Collard: Okay okay yeah so actually interesting enough day one of approval I was able to personally sit into a spine case we had a physician here in North Carolina that used it I got to watch that but I think what you're watching happen is that we've had certainly a number of spine surgeons you know orthopedic and so forth that have tried the product either shoulders or spine but I think again the uptake is going to be And while people will use it, I think you're still going to have some experimentation going on about how they apply it, getting used to the product, and kind of going through that whole sort of process that we go through with a product like this, it's a little bit different. So I think the results we've seen so far have been good in the cases we've had. So in the case I was at that day, things went well.

Speaker Change: Okay. Okay, yes.

Craig Alexander Collard: Actually interesting enough day, one of approval I was able to personally sit into a spine case, we had a position here in North Carolina that use it I've got to watch that but.

Craig Alexander Collard: What youre watching happen is that we've had certainly a number of sponsors.

Craig Alexander Collard: Orthopedic and so forth that have tried the product either shoulders spine, but I think again, the uptake is going to be.

Craig Alexander Collard: While people will use it I think youre still going to have some experimentation going on about.

Craig Alexander Collard: How they apply.

Craig Alexander Collard: Getting used to the product and kind of go into that whole sort of process that we go through with a product like this it's a little bit different. So I think the results. We've seen so far have been have been good in the cases, we've we've had sort of the case I was at that direct things went well.

Kevin Werner: Kevin Werner's here as well. I don't know if he has any comments as well, you can maybe add to that. Yeah, definitely. As far as the expanded label goes, it does a couple of things. First off, formulary access. A lot of times when these institutions review a product, they want to be able to bring it on board and cover all of their procedures, and not have a onesy twosy approach with multiple branded drugs on their shelves. So, yeah, I think that's a big part of our research.

Kevin Waters: Kevin waters here with one off category comments as well you can maybe add to that yes definitely thanks. Thanks for that question Serge.

Kevin Werner: Expanded label goes the other couple of things first off the formulary access what happens when these institutions review of product they want to be able to bring it out to cover all of their procedures right now.

Speaker Change: <unk> approach with multiple branded drugs on their shelves, so having that broad label with a big big move forward for swells formulary access as they all take time right.

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Kevin Werner: Process takes two to three months getting into electronic medical record Bill So seeing the rollout and the effects of that broad label is going to be Q3, Q4, as we expand and educate us what that label provides but as far as the procedures go definitely some significant target procedures.

Kevin Werner: Like target procedure that everybody can appreciate the soft tissue space on C section.

Speaker Change: The new mother, we don't want to have exposure to opioids and it's a very painful procedures, we can facilitate that recovery.

Kevin Werner: Hospital without exposure to opioids, and we're exposing that intend to opioids, but definitely the other ortho procedures spine and shoulder. The primary target we're seeing excellent results in those procedures.

Craig Alexander Collard: Yeah, Serge, and regarding the second part of your question regarding Symbonti, listen, we've been extremely pleased with Symbonti and Sustol. I think both had a really good quarter. Again, our unit volume is up, and we're holding prices fairly well. So again, from quarter to quarter, things vary a bit. But you know, the market is still growing, and we're maintaining our share. And so again, we've been very pleased with Symbonti, and the clinical value that it brings is helping us certainly hold share and maintain price.

Kevin Werner: Yes, and regarding I guess, the second part of your question regarding some bonds at listen we've been extremely pleased with some <unk> I think both had a really good quarter again, our unit volume is up and we're holding price fairly well, so again quarter to quarter things vary a bit but.

Craig Alexander Collard: The market is still growing and we're maintaining share and so again, we've been very pleased with somebody in the clinical value that it brings us is helping us certainly hold share and maintain price.

Serge D. Belanger: Thank you. It's nice progress.

Speaker Change: Thank you nice progress.

Serge: Thanks Kurt.

Carl Edward Byrnes: Your next question comes from the line of Carl Byrnes with Northland Capital Market. Please go ahead.

Serge D. Belanger: Your next question comes from the line of Carl Byrnes with Northland Capital market. Please go ahead.

Carl Edward Byrnes: Thanks for the question, and congratulations on the quarter and the progress. You know, considering the demand trends that are obviously improving across the board and the cost reductions and, of course, profit margin improvement, do you think that it's possible that you might see achievement of profitability prior to the fourth quarter that you directed? Thanks. Yeah, Carl. Thanks for the question.

Carl Edward Byrnes: Thanks for the question and congratulations on the quarter and the progress.

Carl Edward Byrnes: Considering the demand trends that are obviously crude across the board.

Carl Edward Byrnes: The cost reductions.

Carl Edward Byrnes: Gross profit margin improvement do you think that it's possible that you might see.

Carl Edward Byrnes: Achievement of profitability prior to the fourth quarter that you directed thanks.

Craig Alexander Collard: Yeah, Carl, thanks for the question. I'm anticipating that somebody might ask that.

Speaker Change: Yes, Karl Thanks for the question.

Speaker Change: Peyton that somebody might ask that.

Craig Alexander Collard: Look, we're really pleased with the way things are going. And again, we're a little under, obviously, the range we gave for expenses was 108 to 116 million. And if you just multiply by four, obviously, we're on the lower end of that.

Craig Alexander Collard: Look we're really pleased with the way things are going and again, we're a little under obviously.

Craig Alexander Collard: The range, we gave on expenses was $108 million to $160 million. If you just multiply by four obviously, we're on the lower end of that and we're hoping that continues I think are maybe reasoning for not improving guidance. We are narrowing guidance. At this point is really due to ongoing litigations that we have and again.

Craig Alexander Collard: And we're hoping that continues. I think our maybe reasoning for not improving guidance or narrowing guidance at this point is really due to ongoing litigation that we have. And again, we're, while we feel like we've got our hands on the business, and we have this under control, there are still things that, you know, are happening development-wise and within the legal realm that, you know, could vary a bit. And so we're trying to be a little bit cautious here, I guess, maybe conservative is the word.

Craig Alexander Collard: While we feel like we've got our hands around the business that we have this under control there are still things that.

Craig Alexander Collard: We're having developed wise within the legal realm that.

Craig Alexander Collard: It could vary a bit and so we're trying to be a little bit cautious here I guess, maybe conservatives the word but again, we're really pleased with the way things are going in.

Craig Alexander Collard: But again, we're really pleased with the way things are going and with how expenses came out this quarter. Regarding margins, again, one of the things that's helped us is that we have renegotiated a few things that are with manufacturers, and that has helped keep, you know, certainly COGS down. But we also, this quarter, primarily just used Alchemy with Cervanti. And so we have a secondary manufacturer as well that we have not used this quarter.

Craig Alexander Collard: Sure.

Craig Alexander Collard: <unk> expenses came out this quarter regarding margins again, one of the things Thats helped us we have renegotiated a few things that are manufacturers and that has helped keep certainly cogs down but.

Craig Alexander Collard: But we also.

Craig Alexander Collard: This quarter, primarily just use alchemy with somebody and so we have a secondary manufacturer as well that we have not used this quarter and so that has helped margins a bit and take us up to kind of that 76% range I still think throughout the year, we're going to be on the lower end of the 70 range, but again, we're going to try to.

Craig Alexander Collard: And so that has helped margins a bit, you know, take us up to kind of a 76% range. But I still think, throughout the year, we're going to be on the lower end of the 70 range. But again, we're going to try to, you know, manage that as best we can. But we're extremely pleased with where we are. And we're hoping that again we end up at the lower end of that expense range. And so if that does happen, obviously, there is a possibility that we could get to profitability earlier. But at this point, we're still committed to Q4.

Craig Alexander Collard: Manage that as best we can but we're extremely pleased with where we are and we're hoping that again, we end up at the lower end of that expense range and so if that does happen. Obviously there is a possibility that we could get to profitability earlier, but at this point, we're still committed to Q4.

Speaker Change: Great. Thank you.

Tim Chang: Your next question comes from the line of Tim Chang with Capital One. Please go ahead.

Craig Alexander Collard: Well, yes.

Craig Alexander Collard: Your next question comes from the line of Tim Chiang with capital one. Please go ahead.

Tim Chang: All right, thanks. Craig, could you talk just a little bit more about the CrossLink reps that you've trained?

Tim Chang: Alright, Thanks, Craig could you talk just a little bit more about the cross link reps that you've trained.

Tim Chang: Like you said over 200 and <unk>.

Tim Chang: You mentioned three specific states that you have.

Tim Chang: Penetrated into what other states do you plan to be in the summer and then how many cross link reps do you plan to have fully trained by the fall.

Tim Chang: Yes, so Tim.

Craig Alexander Collard: I think you said over 200. And you mentioned three specific states that you've penetrated into. What other states do you plan to be in this summer? And then how many CrossLink reps do you plan to have fully trained by the fall?

Tim Chang: Thanks for the question again, we've been extremely pleased with cross link again.

Craig Alexander Collard: So Tim, basically, thanks for the question. Again, I use the word amazing in my comments, but the relationships that I think these guys bring are just a little different than what we have as a pharma company. And keep in mind that in a lot of cases, you know, Crosslink's been around for four years, and a lot of the reps have 10, 15, 20 years of experience with these physicians and have been with them every day. So it's just a different relationship.

Craig: Use the word amazing on my comments, but the relationships that I think these guys bring or just a little different than what we have.

Craig Alexander Collard: A pharma company and keep in mind that.

Craig Alexander Collard: And a lot of cases, you'll cross link has been around for years and.

Craig Alexander Collard: A lot of the reps at 10, 15, 20 years experience with these physicians and being with them every day. So it's just a different relationship and so it allows us to get in front of these folks that allows us to have more time to explain some of the situations was enteral SSL <unk>.

David L. Szekeres: And so it allows us to get in front of these folks; it allows us to have more time to explain, you know, some of the situations with Xenroleth and so forth. And so, as we've mentioned, it frees up time for our reps and that type of thing. But from a training perspective, again, we've been moving fairly quickly. I want to turn it over to David Berezino. He's been directly involved and, you know, again, has been at these training meetings to give you a little more insight into kind of exactly what's going on and where we're going next. Thanks, Greg. So, Tim, thank you.

David L. Szekeres: So as we've mentioned it frees up time for our reps and that type of thing, but from a trading perspective again, we've been moving fairly quickly I wanted to turn it over to David Merrill leader. He has been directly involved in.

David L. Szekeres: Again, he has been at these training.

David L. Szekeres: And mediums and give you a little more insight into kind of exactly what's going on and where we're going next.

David L. Szekeres: Yeah, thank you, Craig. So, Tim, thank you for the question.

David L. Szekeres: Thank you Greg.

Tim Chang: Thank you for the question.

David L. Szekeres: Pertains to cross link, yes, honestly, we started in the legacy States, where cross link is.

David L. Szekeres: This pregnant, which is North Carolina, South Carolina, Georgia, but one of the things that is ongoing and it's in it's ever changing is that on a weekly basis. We're conducting two to three live trainings across the country. The goal by the end of 2020 for us to have a presence in each state.

David L. Szekeres: As it pertains to CrossLink, yes, obviously, we started in the legacy states where CrossLink is present, which is North Carolina, South Carolina, and Georgia. But one of the things that is ongoing, and it's ever-changing is that on a weekly basis, we're conducting two to three live trainings across the country. The goal by the end of 2024 is to have a presence in each state. I can tell you that we've already expanded into areas like Michigan, St. Louis, and Kansas, and it continues to evolve from week to week. But by the end of the year, we definitely hope to have coverage in all 50 states.

David L. Szekeres: I can tell you that we've already expanded into areas like Michigan St. Louis Kansas.

David L. Szekeres: And it continues to evolve as from week to week, but.

David L. Szekeres: By the end of the year, we definitely hope to have coverage in all 50 states.

Tim Chang: Oh, that's great. And maybe just one question. I seem to recall that Florida is a pretty big state for procedures. I mean, are you guys going to penetrate that state in the near future?

Speaker Change: Oh, that's great and maybe just one question.

Tim Chang: I seem to recall that Florida is a pretty big state for procedures. I mean are you guys going to penetrate that state near.

Speaker Change: Near term.

David L. Szekeres: Yes, 100%. We, that is definitely a focal point. I think you could lump New York, Florida, Texas, and California as four big states, and we are in active discussions with some distributors down there as well. Okay, super.

Speaker Change: Yes, 100%.

David L. Szekeres: That is definitely a focal point I think you can you could lump like New York, Florida, Texas, California is for Big State and we are in active discussions with new distributors down there as well.

Tim Chang: Okay, super, very helpful, thanks.

Speaker Change: Okay Super very helpful. Thanks.

Speaker Change: Thanks, Dave.

Dingding Shi: Your next question comes from the line of Kelly Shi with Jefferies. Please go ahead.

Tim Chang: Your next question comes from the line of Kelly <unk> with Jefferies. Please go ahead.

Clara: Hi, good morning. This is Clara on behalf of Kelly. And congratulations on the quarter and thanks for taking my question. So, for Xenra Love, could you please talk about your qualification for the No Paying Act in the context of your pass-through status and how the coverage is going to change after it takes effect in 2025, and whether you could give any color on what's the latest discussion of the No Paying Act's possibility that it will go beyond 2025? Yeah, this is Kevin Warner again. Thanks for that question.

Dingding Shi: Hi, Good morning. This is Claire on for Kelly.

Kevin Warner: On the quarter and thanks for taking my question, So four zero loss.

Kevin Warner: Can you please talk about your qualification for no pay.

Kevin Warner: In the context of your pass through status.

Kevin Warner: Coverage going to change takes.

Kevin Warner: Joseph back in 2025, and whether you could give any color of what is the latest this question of no possibility that will go.

Kevin Warner: Beyond 2027, thank you.

Kevin Warner: Yeah, this is Kevin Warner again. Thanks for that question. So, the No Pain Act is coming into effect in Q1 of 2025, and it's going to provide reimbursement outside of the surgical bundle for our HOPD patients, our outpatient procedure department, the hospital, and our AFCs for these non-opioids that have been proven to reduce opioid consumption. So, right now, Xen Relief has passed through, as you alluded to, and that expires in Q1 of 2025. So, the No Pain Act goes into effect starting Q1.

Kevin Warner: Yes. This is Kevin wondering again, thanks for that question. So no pain Act is coming into effect Q1 of 2025, and it's going to provide reimbursement outside of the surgical bundle for our HBV patients or outpatient procedure department in the hospital or ASC for.

Kevin Warner: For these non opioids that have been proven to reduce opioid consumption. So right now generally has pass through as you alluded to and that expires Q1 of 2025. So no pain that goes into effect starting in Q1, we've already had conversations with CMS very productive conversation highlighted all the criteria.

Kevin Warner: We've already had conversations with CMS, a very productive conversation that highlighted all the criteria to qualify for the No Pain Act, which Xen Relief meets all of those criteria except one, and that one is the fact that we have pass-through status.

Kevin Warner: To qualify for the no pain equity generally qualify for all of those criteria except one.

Kevin Warner: One is the fact that we have pass through status. So that's why we've had this open dialogue.

Kevin Warner: Make sure that we don't fall off in that interim period that we're confident that they will pick it up and pass it through rate on there won't be any pitch that pass through status and make sure institutions still have access in reimbursement or is that an early as far as extending the duration. No pain Act was originally designed to be a five year Act. Unfortunately it took some.

Kevin Warner: Time to get passed through Congress, so a little later than desired.

Kevin Warner: Right now through the end of 2007 as expected, we definitely have a lot of encouragement and support from our community and obviously that the opioid epidemic. The concerns of that we expect them to continue to extend and provide payment for a non opioid for our country and for our patients.

Speaker Change: Super helpful. Thank you.

Clara: Well, thank you. Thanks, Claire. That concludes.

Speaker Change: Thanks, Bob.

Craig Alexander Collard: That concludes our Q&A session. I will now turn the conference back over to Craig Collard, Chief Executive Officer, for closing remarks. I just want to thank everyone again for listening today, and we look forward to speaking to everyone next quarter. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Clara: That concludes our Q&A session I will now turn the conference back over to Craig <unk>, Chief Executive Officer for closing remarks.

Craig Alexander Collard: Just want to thank everyone again for.

Craig Alexander Collard: Listen today, and we look forward to speaking to everyone explorer. Thank you.

Craig Alexander Collard: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.