Q1 2024 Pacira BioSciences Inc Earnings Call

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Operator: 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 1 on your telephone keypad. If you would like to be directed to a question, press star 1 again. I would now like to turn the call over to Susan Lesko, Head of Investor Relations. Please go ahead.

Lines have been placed on mute to prevent any background noise I think the speaker 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 and your telephone keypad.

Susan Mesco: If you would like to withdraw your question Press Star one again.

Susan Mesco: I would now like to turn the call over to <unk>.

Susan Mesco: Susan Mexico head of Investor Relations. Please go ahead.

Susan Mesco: Thank you and good afternoon, everyone. Welcome to today's conference call to discuss our first quarter 2024 financial results. Joining me are frankly, Chief Executive Officer, and Charlie Reinhart, Chief Financial Officer, Jonathan <unk>, Chief Medical Officer is also here for <unk>.

Susan Mesco: Thank you. And good afternoon, everyone. Welcome to today's conference call to discuss our first quarter 2024 financial results. Joining me are Frank Lee, Chief Executive Officer, and Charlie Reinhart, Chief Financial Officer. Jonathan Slonin, Chief Medical Officer, is also here for today's question and answer session. Before we begin, let me remind you that this call will include forward-looking statements based on current expectations. Such statements represent our judgment as of today and may involve risks and uncertainty.

Susan Mesco: Today's question and answer session before we begin let me remind you that this call will include forward looking statements based on current expectations.

Susan Mesco: Such statements represent our judgment as of today and May involve risks and uncertainties for information concerning risk factors that could affect the company. Please refer to our filings with the SEC, which are available from the SEC or it's a zero website with that I will now turn the call over to Frank Lee.

Susan Mesco: For information concerning risk factors that could affect the company, please refer to our filings with the SEC, which are available from the SEC or the Pacira website.

Frank D. Lee: Thank you Susan and good afternoon, everyone.

Frank D. Lee: Thank you, Susan. Good afternoon, everyone.

Frank D. Lee: It's been an exciting and productive time since I joined the company earlier this year, and I'm pleased to say sales are off to a solid start and on track for all three of our trusted opioid-sparing products, which continue to make an important impact on patients' lives. This year, our priority is Expro, which is what I'll focus on today. I'll also touch briefly on PCRS 201. Let's start with XR

Frank D. Lee: It's very exciting and productive time since I joined the company earlier this year.

Frank D. Lee: And I'm pleased to say sales are off to a solid start and on track.

Frank D. Lee: All three of our trusted opioid sparing.

Frank D. Lee: <unk>, which continue to make an important impact on patients' lives.

Frank D. Lee: This year, our priorities EXPAREL, which is we're all focused on today.

Frank D. Lee: I will also touch briefly on Prs 301.

Frank D. Lee: Let's start with EXPAREL, our goals are centered on preparing the organization in marketplace to fully realize its long term potential.

Frank D. Lee: Our goals are centered on preparing the organization and marketplace to fully realize its long-term potential. Let me walk you through the progress we've made in advancing three key drivers for 2024. First, advancing the launch of Expiril and two new lower extremity nerve block indications.

Frank D. Lee: Let me walk you through the progress we've made in advancing three key drivers for 2024.

Frank D. Lee: First advancing the launch of EXPAREL in two new lower extremity nerve block indication.

Frank D. Lee: Second, progressing our awareness and educational activities around separate Medicare reimbursement at average selling price, or ASP, plus 6% in outpatient settings beginning in 2025 with the implementation of NoPain. And third, expanding patient access to Experil through 340B pricing and new GPO partnerships such as Premier. I'll start with lower extremity nerve block, where we're seeing positive market receptivity across all sites of care, delivering four days of opioid-sparing pain control with a single 10-mL Expirail dose is an attractive value proposition to the anesthesia and surgical community for knee, foot, and ankle surgery. Physicians are also reporting consistent results with some patients not taking any opioids following very painful lower extremity procedures.

Frank D. Lee: Second progressing our awareness and educational activities around separate Medicare reimbursement at average selling price.

Frank D. Lee: ASP.

Frank D. Lee: Plus 6%.

Frank D. Lee: Patient settings, beginning in 2025 with the implementation of no pay.

Frank D. Lee: <unk>.

Frank D. Lee: And third expanding patient access to EXPAREL, <unk> pricing and new GPO partnerships such as Premier.

Frank D. Lee: I'll start with lower extremity nerve block, where we're seeing positive market receptivity across all sites of care.

Frank D. Lee: Delivering four days of opioid sparing pain control with a single 10 ml EXPAREL dose.

Frank D. Lee: He is an attractive value proposition to the anesthesia surgical community.

Frank D. Lee: For knee foot and ankle surgeries.

Frank D. Lee: But this is are also reporting consistent results with some patients not taking any opioids following very painful lower extremity procedures.

Frank D. Lee: To remind you, we launched with a strong presence in the TKA segment. We're also working to build relationships and advance product uptake through education and training. However, and other lower extremity procedures, like ACL repair, foot, and ankle procedures; we would expect a slower outtake in this segment of the market. Turn now to the opportunity ahead with the upcoming changes and expo reimbursement for outpatient procedures. Separate CMS reimbursement of Expiril across all outpatient settings marks an important milestone. It will eliminate the cost barrier by fully reimbursing expiry at AFP plus 6% beginning in January of 2025.

Frank D. Lee: To remind you we launched with a strong presence in the Tpa segment.

Frank D. Lee: We're also working to build relationships and advanced product uptake through education, and training and other lower extremity procedures.

Frank D. Lee: ACL repair foot and ankle procedures.

Frank D. Lee: We would expect the slower uptake in this segment of the market.

Frank D. Lee: Turning now to the opportunity ahead with the upcoming changes in extra reimbursement for outpatient procedures.

Frank D. Lee: Separate CMS reimbursement of EXPAREL across all outpatient settings marks an important milestone.

Frank D. Lee: It will eliminate the cost barrier by fully reimbursing EXPAREL.

Frank D. Lee: ASP plus 6% beginning in January of 2025.

Frank D. Lee: Given the market steady migration away from hospital inpatient care, we see ample room for expanding EXPAREL utilization and outpatient centers.

Frank D. Lee: Given the market's steady migration away from hospital inpatient care, we see ample room for expanding Exporil utilization in outpatient settings. We've allocated resources to drive education and help healthcare systems implement Exporil as best practice data of care for CMS patients. There are roughly 6 million annual CMS procedures in outpatient settings, with a split of roughly 3.5 million procedures in the hospital outpatient setting and 2.5 million procedures performed at ambulatory surgical centers.

Frank D. Lee: We've allocated resources to drive education, and help health care systems implement EXPAREL as best practice standard of care for those patients.

Frank D. Lee: There are roughly $6 million annual CMS procedures in the outpatient settings with a split of roughly $3 5 million procedures in the hospital outpatient settings.

Frank D. Lee: And $2 5 million procedures performed at ambulatory surgical centers.

Frank D. Lee: To maximize this important opportunity, we're enhancing our organization with new talent and capabilities to ensure operational excellence within critical functions, such as marketing strategic accounts medical and market access.

Frank D. Lee: To maximize this important opportunity, we're enhancing our organization with new talent and capabilities to ensure operational excellence within critical functions, such as marketing, Strategic Accounts, Medical, and Market Assets. In parallel, we're advancing initiatives to drive awareness, education, and action across key decision-making. We're also paving the way for no pain through our participation in 340B pricing and new GPO partners. Early this year, we announced a partnership with Premier, whose significant network of hospitals and healthcare systems covers nearly 20% of XRL-relevant market procedures.

Frank D. Lee: In parallel we are advancing initiatives to drive awareness education and action across key decision makers.

Frank D. Lee: We're also paving the way for no pain through our participation in 340, <unk> pricing and new GPO partnerships.

Frank D. Lee: Earlier this year, we announced the partnership with Premier Foods.

Frank D. Lee: Significant network of hospitals, and healthcare systems covers nearly 20% of EXPAREL relevant market procedures.

Frank D. Lee: Through the preferential pricing programs, we're helping health care systems afford the opportunity to be at the forefront of opioid sparing pain management.

Frank D. Lee: Through these preferential pricing programs, we're helping healthcare systems afford the opportunity to be at the forefront of opioid-sparing pain management. While it's still early days, we're pleased with the initial data we're seeing from our partnership with... In the first two months of post-launch, XBRL volumes at Premier accounts are up with only a modest impact on net sales.

Frank D. Lee: While still early days, we're pleased with the initial data we're seeing from our partnership with Premier.

Frank D. Lee: In the first few months post launch extra volumes at Premier accounts are up with only a modest impact on net sales dollars.

Frank D. Lee: In short, this partnership is starting to do what we expect it to do. Importantly, we have two additional GPO partnerships in the process. As for Zylreta and Ivera, I'm pleased to say both products are performing according to plan with solid sales growth. With respect to margins, while Xpiril landed in our guided range, the RETA and AVERA margins weighed on consolidated margins for the quarter.

Frank D. Lee: In short this partnership is starting to do what we expect it to do.

Frank D. Lee: Importantly, we have two additional GPO partnerships and process.

Frank D. Lee: As for sale, rather than a Vera I'm pleased to say both products are performing according to plan with solid sales growth for the quarter.

Frank D. Lee: With respect to margins, while EXPAREL landed in our guided range.

Frank D. Lee: <unk> Aero margins weighed on consolidated margins for the quarter.

Frank D. Lee: Charlie will share more details on margins shortly, but I want to emphasize that our primary focus is on driving top-line growth. As we grow the top line, margins will, in turn, Switching gears to our research and development pipeline, I'd like to share a few quick updates on PCRX 201, this novel, intra-articular, helper-dependent adenovirus. Gene Therapy Product Candidate Codes for Interleukin-1 Receptor Antagonists, or IL-1RA, for the treatment of osteoarthritis OA of the knee.

Frank D. Lee: Charlie will share more details on margin shortly but I want to emphasize that our primary focus is on driving top line growth.

Frank D. Lee: As we grow the top line margins will in turn benefit.

Frank D. Lee: Switching gears to our research and development pipeline I'd like to share a few quick updates on PCR X 201.

Frank D. Lee: This novel intra articulate helper dependent adenovirus gene therapy product candidate codes for interleukin one receptor antagonist for IL one RA.

Frank D. Lee: The treatment of osteoarthritis or OA.

Frank D. Lee: <unk> of the knee.

Frank D. Lee: Here, we believe PCR ex fuel one has the potential to become a leading disease modifying agent by turning the patients own cells into therapeutic production sites of IL one RA.

Frank D. Lee: Here we believe PCRX201 has the potential to become a leading disease-modifying agent by turning the patient's own cells into therapeutic production sites of IL-1 RNA. As background, IL-1 is a known inflammatory cytokine, with inhibition tied to the reduction in catabolic processes in the joint that contributes to OA of the knee and progression.

Frank D. Lee: As background <unk> is it known inflammatory cytokines.

Frank D. Lee: With innovation tied to the reduction in catabolic processes in the joint that contribute to OA of the knee and progression.

Frank D. Lee: Last month, we presented encouraging preliminary results from a 72 patient phase one study the PCR X 201.

Frank D. Lee: Last month, we presented encouraging preliminary results from a 72-patient Phase I study of PCRX-201 at the Osteoarthritis Research Society International, or ORSI, 2024 World Congress in Vienna. The data will also be featured at an encore podium presentation at the annual meeting of the American Society of Cell and Gene Therapy this week in Baltimore. These data showed that a single intraarticular injection of PCRX201 demonstrated sustained clinical effect, as assessed by patient-reported outcomes at all dose levels for at least one year post-injection.

Frank D. Lee: The Osteoarthritis Research Society International for <unk>, 'twenty 'twenty four will Congress in Vienna.

Frank D. Lee: The data will also be featured at an encore podium presentation at the annual meeting of the American Society of cell and gene therapy. This week in Baltimore.

Frank D. Lee: These data showed that a single intra articular injection of <unk> 201.

Frank D. Lee: Demonstrated a sustained clinical effect.

Frank D. Lee: As assessed by patient reported outcomes at all dose levels.

Frank D. Lee: <unk> one year post injection.

Frank D. Lee: Importantly, <unk> hundred one was shown to be well tolerated with a favorable safety profile.

Frank D. Lee: Importantly, PCR-201 was shown to be well-tolerated with a favorable safety profile. We now have data for two years, and we are preparing to submit those data for presentation at a medical meeting. Of the 14 million Americans suffering from symptomatic OA of the knee, 2 million are under the age of 45.

Frank D. Lee: We now have data for two years and we are preparing to submit those data for presentation at a medical meeting in the fall.

Frank D. Lee: The 14 million Americans suffering from symptomatic OA of the knee 2 million are under the age of 45.

Frank D. Lee: The duration of effect for currently available treatments is limited to three to six months. Based on our market research and feedback from our scientific advisory board, improving pain and function while potentially modifying the disease for a year or more would be considered transformative by both physicians and patients. Furthermore, a year or more of durability would be clinically and economically meaningful for patients and the health care system. These promising preliminary findings earned PPRS Bill 1 the FDA's first-ever Regenerative Medicine Advanced Therapy, or RMAP, designation for gene therapy products in osteoarthritis.

Frank D. Lee: The duration of effect for currently available treatments is limited to three to six months.

Frank D. Lee: Based on our market research and feedback from our scientific Advisory Board improve.

Frank D. Lee: Improving pain and function, while potentially modifying the disease for a year or more would be considered transformative.

Frank D. Lee: Both physicians and patients.

Frank D. Lee: Furthermore, a year or more of durability would be clinically and economically meaningful for patients and the healthcare system.

Frank D. Lee: These promising preliminary findings earn PCR, it's still one the fda's first ever regenerative medicine advanced therapy arm App designation for a gene therapy product in osteoarthritis.

Frank D. Lee: Lastly, unlike other gene therapies, we believe <unk> will be able to be manufactured at large scale for a favorable cost of goods sold.

Frank D. Lee: Lastly, unlike other gene therapies, we believe PCRx201 will be able to be manufactured at large scale for a favorable cost to goods sold. Before I turn the call over to Charlie for a review of the financials, I'd like to highlight today's announcement of our plans to implement a $150 million stock repurchase. This top three purchase plan underscores our confidence. We have confidence in our growth outlook and the belief that Pacira shares offer an attractive investment opportunity given the significant value it has. With that, I'll turn the call over to Charlie for his financial report.

Frank D. Lee: Before I turn the call over to Charlie for a review of the financials.

Charlie: I'd like to highlight today's announcement of our plans to implement the $150 million stock repurchase plan.

Charlie: The stock repurchase plan underscores our confidence we have in our growth outlook and the belief that the share of shares offer an attractive investment opportunity given the significant value.

Frank D. Lee: With that I'll turn the call over to Charlie for his financial report.

Charlie: Thank you Frank and good afternoon to all on the call to remind you I'll be discussing non-GAAP financial measures. This morning, a description of these metrics along with our reconciliation to GAAP can be found in the news release, we issued this afternoon.

Charles A. Reinhart: Thank you, Frank, and good afternoon to all on the call. To remind you, I will be discussing non-GAAP financial... A description of these metrics, along with our reconciliation to GAAP, can be found in the news release we issued this afternoon. I'll start with an update on sales and margins, starting with Xpirel. First quarter XRL sales increased to $132.4 million versus $130.4 million in 2023, driven by volume growth of 3%, which was partially offset by contracted discounts with the rollout of our premier partnership in January, as well as a modest shift in vitality. First quarter Zoretta sales increased to $25.8 million versus $24.3 million in 2023, and Iovera sales improved to $5 million compared to $4 million in the first quarter of 2020.

Charles A. Reinhart: Turning to margins, on a consolidated basis, our first quarter non-GAAP gross margin percent was 72%. While first quarter XBRO margins landed within our full year guided range of 74% to 76%, RETA and Iovera margins were below our guided range and negatively impacted consolidated gross margins for the quarter. For non-GAAP R&D expense, the first quarter increased to $16.4 million from $15.3 million reported last year. This year-over-year increase primarily relates to the startup activities for the Zoretta Phase 3 study in Shoulder OA.

Charles A. Reinhart: I'll start with an update on sales and margin trends, starting with EXPAREL first quarter EXPAREL sales increased to $132 4 million.

Charles A. Reinhart: Versus $134 million in 2023, driven by volume growth of 3%, which was partially offset by contracted discounts with the rollout of our premier partnership in January as well as a modest shift in vial mix.

Charles A. Reinhart: First quarter <unk> sales increased to $25 8 million.

Charles A. Reinhart: Versus $24 3 million in 2023, and <unk> sales improved to $5 million compared to $4 million in the first quarter of 2023.

Charles A. Reinhart: Turning to margins on a consolidated basis, our first quarter non-GAAP gross margin percent was 72%.

Charles A. Reinhart: While first quarter EXPAREL margins landed within our full year guided range of 74% to 76%, So reta and <unk> margins were below our guided range and negatively impacted consolidated gross margins for the quarter.

Charles A. Reinhart: For non-GAAP R&D expense, the first quarter increased to $16 4 million.

Charles A. Reinhart: From $15 3 million reported last year.

Charles A. Reinhart: This year over year increase primarily relates to the startup activities for the <unk> phase III study in shoulder OA.

Charles A. Reinhart: Of note, the first quarter R&D expense includes $7.4 million of product development and manufacturing capacity expansion costs, which is down 4% from the prior year, as we approach the completion of our pre-commercial scale-up activities for the recently approved 200-liter Xpirel manufacturing suite in San Diego. Non-GAAP SG&A expense came in at $63.8 million for the first quarter, which is up from $62.5 million last year. This increase is largely due to professional and legal fees associated with Paragraph 4 and other litigation, and to a lesser extent, costs associated with our transition to a new CEO. First quarter interest expense improved to $3.3 million versus $9.6 million reported last year.

Charles A. Reinhart: Of note the first quarter R&D expense includes $7 $4 million of product development and manufacturing capacity expansion costs, which is down 4% from the prior year as we approach the completion of our pre commercial scale up activities for the recently approved 200 leader EXPAREL.

Charles A. Reinhart: <unk> suites in San Diego.

Charles A. Reinhart: non-GAAP SG&A expense came in at $63 8 million for the first quarter, which is up from $62 $5 million last year. This increase is largely due to professional and legal fees associated with the paragraph four and other litigation and to a lesser extent costs associated with our.

Charles A. Reinhart: Transition to our new CEO.

Charles A. Reinhart: First quarter interest expense improved to $3 3 million versus.

Charles A. Reinhart: Versus $9 6 million reported last year. This was driven by the interest expense savings associated with the retirement of our term loan B on March 31, 2023, using a new term loan a and cash on hand.

Charles A. Reinhart: This was driven by the interest expense savings associated with the retirement of our Term Loan B on March 31st of 2023 using a new Term Loan A and cash on hand. And lastly, we delivered another quarter of significantly positive adjusted EBITDA of $44.6 million. With respect to our capital allocation strategy, we're focused on creating long-term shareholder value. Today, we announced a $150 million stock repurchase, which gives us the flexibility to opportunistically return capital to our shareholders.

Charles A. Reinhart: And lastly, we delivered another quarter of significantly positive adjusted EBITDA of $44 6 million.

Charles A. Reinhart: With respect to capital allocation strategy, we are focused on creating long term shareholder value today, we announced a $150 million stock repurchase plan, which gives us the flexibility to Opportunistically return capital to our shareholders. We believe that our stock is undervalued and we view our <unk>.

Charles A. Reinhart: We believe that our stock is undervalued, and we view our share repurchase program as a productive use of capital that will generate favorable returns for our shareholders. Turning to guidance, today, we reiterate our full year of guidance for 2024 as follows. Total revenue of $680 to $705 million, non-GAAP CROS margin of 74% to 76%, non-GAAP R&D expense of $70-$80 million, non-GAAP SG&A expense of $245 to $265 million, and stock-based compensation of 50 to 55. With that, I'll turn the call back to you.

Charles A. Reinhart: Share repurchase program as a productive use of capital that will generate favorable returns for our shareholders.

Charles A. Reinhart: Turning to guidance today, we reiterate our full year guidance for 2024 as follows total revenue of $680 to $705 million.

Charles A. Reinhart: non-GAAP gross margin of 74% to 76%.

Charles A. Reinhart: non-GAAP R&D expense of $70 million to $80 million.

Charles A. Reinhart: non-GAAP SG&A expense of $245 million to $265 million and stock based compensation of $50 million to $55 million.

Charles A. Reinhart: With that I'll turn the call back to Frank.

Speaker Change: Thank you Charlie.

Frank D. Lee: In closing, I'm very pleased with the progress we've made thus far in 2024, leveraging growth opportunities for XMRL, launching new indications, preparing for the significant reimbursement opportunity that lies ahead next year, and also growing Zaretta Nivara. The progress we're making is setting the stage for us to further entrench our leadership position in providing non-opioid pain management solutions. We're sharply focused on growth. As we continue to execute our growth strategy, we'll create value for shareholders, healthcare systems, and, most importantly, transform the lives of the patients we serve. With that, operator, we're ready to open the call for questions.

Speaker Change: In closing I'm very pleased with the progress we've made thus far in 2024.

Frank D. Lee: Leveraging growth opportunities for EXPAREL launching new indications.

Frank D. Lee: Preparing for the significant reimbursement opportunity that lies ahead next year.

Frank D. Lee: And also growing the router.

Frank D. Lee: Either.

Frank D. Lee: The progress, we're making is setting the stage for us to further entrench our leadership position in providing non opioid pain management solutions.

Frank D. Lee: We're sharply focused on growth.

Frank D. Lee: We continue to execute our growth strategy will create value for shareholders healthcare systems and most importantly transform the lives of the patients we serve.

Speaker Change: With that operator, we're ready to open the call for questions.

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 journey go ahead Jay.

Operator: 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 and are listening via loudspeaker on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue, and your first question comes from the line of Gregory Renza with RBC Capital News. Peace, go ahead.

Gregory James Renza: That skew if you will.

Operator: I'd like to withdraw your question simply press Star one.

Gregory James Renza: If you are called upon to ask your question and I, just think violeta speak on your device.

Gregory James Renza: You pick up your handset to ensure that your phone is not on mute when asking a question again, Chris I wanted to join the queue and your first question comes from the line of Gregory <unk> with RBC capital markets. Please go ahead.

Gregory James Renza: Thank you good afternoon, Frank and the <unk> team and congrats on the progress and thanks for taking my question.

Gregory James Renza: Thank you. Good afternoon, Frank and the Pacira team. Congratulations on the progress. Thanks for taking my question. Frank, I appreciate all the updates and the color on XBRL for the quarter, especially on Premier and the GPO contract. I was wondering if you and the team could just comment on how you view the cadence of the contracting that you alluded to, with a couple more potentially coming online. How should we be thinking about that and its impact and the influence on XBRL performance over?? The Bulletproof Executive, 2013?

Gregory James Renza: Frank I appreciate all the updates and the color on EXPAREL for the quarter, especially on Premier in the GPO contract I was wondering if you and the team could comment on how you view the key.

Gregory James Renza: Cadence of the contracting that you alluded to.

Gregory James Renza: With a couple more potentially coming online how should we be thinking about that and its impact and influence on EXPAREL performance over 2024.

Speaker Change: Yeah. Thanks, Craig Thanks for the question.

Frank D. Lee: Yeah, thanks, Greg. Thanks for the question.

Frank D. Lee: We're excited about what we're seeing is still early days now right. Because we signed this thing in January it's early days, but we're excited about what we're seeing for my comments and we're working on a couple more as you mentioned, let me turn it over to Charlie It gives a little bit more color on that.

Charles A. Reinhart: We're excited about what we're seeing. It's still early days now, right? And because we signed this thing in January, it's early days. But we're excited about what we're seeing from my comments. And we're working on a couple more, as you mentioned. Let me turn it over to Charlie to give a little bit more color on that.

Charles A. Reinhart: Hey Greg, so the expectation from a rollout perspective is that we would likely have a second contract kind of later in the second quarter and maybe another one in the third quarter. So the contracts are rolling in throughout the year, and as Frank said, the first quarter of activity probably isn't at its peak, so it takes a little time for them to get warmed up. But we anticipate that by the end of this year, we'll have three active GPO relationships.

Charlie: Hey, Greg so the the expectation from a rollout perspective is that we would likely have a second contract kind of later in the second quarter and maybe another one in the third quarter. So the contracts are rolling in throughout the year and as Frank said, the first quarter of the activity probably isn't that its peak. So it takes a lot.

Charles A. Reinhart: Time for them to get warmed up, but we anticipate by the end of this year that was reactive GPO relationships.

Frank D. Lee: And let me just add some additional color there; in addition to the contracts, what this enables it to do is partner with the GPOs to better educate their membership on what's coming with respect to outpatient reimbursement at SP Plus 6, you know, starting in January 2025.

Speaker Change: And let me just add some additional color. There in addition to the contracts what this enabled us to do is to partner with the GPS.

Frank D. Lee: Better educate their membership on what's coming with respect to outpatient reimbursement at ASP plus six starting in January 2025.

Greg: Got it that makes sense and maybe keeping with a similar theme for my question and I know, it's two related to tell when it comes to 2025. It as you just mentioned, but when it comes to that call. It a bolus.

Gregory James Renza: Got it, that makes sense. And maybe keeping with a similar theme for my question, and I know it's too early to tell when it comes to 2025. When it comes to that, call it a bolus of... With no pain, at what point would you have some comfort in talking about what that trajectory could look like, of course, with the 6 million patients for CMS? That additional is a double when it comes to the commercial.

Gregory James Renza: Patients with with no pain at what point would you have some comfort in talking about what that trajectory could look like of course with the 6 million patients with CMS and then that additional of the double when it comes to the commercial.

Gregory James Renza: That opportunity.

Frank D. Lee: Now, at what point should we start thinking about your comfort level as you prepare for kind of that trajectory of those patients and capturing that opportunity from 2025 and beyond? Thanks again and congratulations, Frank. Yeah. Yeah, that's a good question, Greg. We're doing a lot of work now.

Gregory James Renza: At what point should we start thinking about your comfort level as you prepare for kind of that trajectory of those patients and capturing that opportunity from 2025 and beyond thanks, again and congrats Greg yes.

Frank D. Lee: Yeah, that's a good question, Greg. We're doing a lot of work now. As you know, from prior discussions, we've reallocated our resources toward NoPaint. And so a lot of folks are working on getting not only ourselves prepared, but the market prepared. We're going to have a better view as we get closer to the end of the year.

Frank: Yes, that's a good question Greg.

Frank D. Lee: Doing a lot of work now so as you know from prior discussions we reallocated our resources toward no pain.

Frank D. Lee: And so a lot of folks are working on.

Frank D. Lee: Not only ourselves repair, but the market prepared.

Frank D. Lee: We're going to have a better view as we get closer to the end of the year and I know that there is quite a bit of interest in terms of thinking about how we model the uptake of no pain and my sense is that the work that we're doing now with a number of partners and having discussions in various settings.

Frank D. Lee: And I know that there's quite a bit of interest in terms of thinking about how we model the uptake of NoPaint. And my sense is that the work that we're doing now with a number of partners and having discussions in various settings, along with some, you know, qualitative and quantitative research that we're doing in partnership with various parties, we're going to have much better insight into the uptake of NoPaint by the end of the year.

Frank D. Lee: Along with some qualitative and quantitative research that we're doing.

Frank D. Lee: In partnership with various parties.

Frank D. Lee: Going to have much better insight into the uptake of no pain come towards the end of the year and we will be able to provide some better clarity in terms of what segments. We think are going to uptake earlier on versus later and of course as we mentioned it will take some time for commercial payers to follow suit and so we're focused on.

Frank D. Lee: And we'll be able to provide some better clarity in terms of what segments we think are going to uptake earlier on versus later. And, of course, as we mentioned, it'll take some time for commercial payers to follow suit. And so we're focused on that as well. Broadly speaking, as we've mentioned before, Susan Mesco, our head of IR, will be hosting some information sessions in the fall. And that timing will be released, you know, in due course, which will provide better clarity on some initial feedback that we're getting from the marketplace. I think, Greg, if there are no other questions, we can move to the next caller.

Frank D. Lee: That as well.

Frank D. Lee: Broadly speaking as we've mentioned before Susan <unk>, our head of IR will be hosting some information settings in the fall.

Frank D. Lee: Those that timing will release.

Frank D. Lee: In due course, which will provide better clarity on some initial feedback that we're getting from the marketplace.

Frank D. Lee: Okay.

Frank D. Lee: I think Greg if there are no other questions. We can move to the next caller.

Frank D. Lee: Your next question comes from the line of David Anderson with Piper Sandler. Please go ahead.

Operator: Your next question comes from the line of David Amsellem with Piper Center. Please go ahead.

David A. Amsellem: I have a couple of questions first.

David A. Amsellem: I have a couple of questions. First, I know you said, Frank, that it's going to take some time for commercial payers to follow suit as it relates to no pain. I guess my question here is, can you talk about your dialogue with commercial plans and, ultimately, your confidence that these commercial plans will indeed follow suit? And then, secondly, when you talk about that lag time, if you will, with commercial plans, is that more of a 2026 event?

David A. Amsellem: I know you said Frank that it's going to take some time for commercial pay.

David A. Amsellem: Payers to follow suit.

David A. Amsellem: As it relates to no pain.

David A. Amsellem: Yes. My question here is can you can you talk to your dialogue with commercial plans and ultimately your your confidence that these commercial plans will indeed.

David A. Amsellem: Follow suit.

David A. Amsellem: And then secondly.

David A. Amsellem: When you talk about that.

David A. Amsellem: That lag time, if you will with commercial plans is that more of a 2026 event.

David A. Amsellem: Just help us understand how long it might take for them to follow the lead of CMS. And then the last question is just on the cost structure. You talked about 201 and, of course, allocating resources with no pain. I'm wondering where Zylreta and Iovera fit in terms of the long-term strategy of the company going forward. Thanks.

David A. Amsellem: Just help us understand how long it might take for them to.

David A. Amsellem: Follow the leaves of CMS.

David A. Amsellem: And then the last question is just on the cost structure, you talked about two <unk>.

David A. Amsellem: And of course allocating resources to.

David A. Amsellem: No pain, I'm wondering where silverado and <unk>.

David A. Amsellem: In terms of the long term strategy of the.

David A. Amsellem: Company going forward. Thanks.

David A. Amsellem: David Thanks for the questions.

Frank D. Lee: David, thanks for the questions. First, let me just provide a little bit of context on the opportunity known as no pain, but I think we're trying to really make sure we focus on this one as outpatient reimbursement at ASP plus six for CMS patients. Initially, as you know, we quantified that as approximately four million patients in the HOPD setting and about four million in the ASC setting, which is quite substantial. So we've got a fair amount of opportunity right in front of us that we need to make sure that we do a good job of education in the marketplace to provide those patients with access to Expiril.

Frank D. Lee: First let me just provide a little bit of context on the opportunity known as no pain, but.

Frank D. Lee: I think we're trying to really make sure we focus on this one is outpatient reimbursement at ASP plus six.

Frank D. Lee: For CMS patients.

Frank D. Lee: Initially as you know we've quantified that as approximately 4 million patients in the <unk> setting and about $4 million in the ASC setting, which is quite substantial so we've got a.

Frank D. Lee: Fair amount of opportunity right in front of us that we need to.

Frank D. Lee: Make sure that we do a good job of.

Frank D. Lee: Education of the marketplace to provide those patients with access to EXPAREL.

Frank D. Lee: As we stand up the broader commercial organization, and I think you've heard me say before that we are bolstering our commercial resources, commercial, medical, and importantly, market access. So that's in progress. We've reallocated resources from other parts of the company to bolster that area, and as we start to, you know, further make progress there, and again, I think that's going to be more towards the end of the year, we're going to have much better clarity in terms of specifically how we see no pain playing out over the course of 25, 26, and 27.

Frank D. Lee: As we stand up the broader commercial organization I think you've heard me say before that.

Frank D. Lee: We are bolstering our commercial resources commercial medical and importantly market access. So that's in progress we've reallocated resources from other parts of the company to bolster that area.

Frank D. Lee: And as we start to further now I'll make progress there and again I think thats going to be more towards the end of the year, we're going to have much better clarity in terms of specifically, how we see no pain playing out over the course of 'twenty five 'twenty six 'twenty seven so that's where we are with that with.

Frank D. Lee: So that's where we are with that. With regard to Zoretta and Ivera, as you heard earlier, we're making good progress there. We're making good progress, and sales are very solid in terms of what we've been able to deliver. And that will continue from what we can see. But as I've said before, we are sharply focused on growing Exporail. So in terms of disproportionate resourcing towards Exporail, we're doing that. We are treating this like a product launch, and so that's how we're approaching it.

Frank D. Lee: <unk> as you meant as you heard earlier, we're making good progress there, we're making good progress.

Frank D. Lee: And sales are very solid in terms of what we've been able to deliver.

Frank D. Lee: And that will continue from what we can see but as I've said before we are sharply focused on growing EXPAREL. So in terms of disproportionate resourcing towards EXPAREL. We're doing that we are treating this like a product launch.

Frank D. Lee: So that's how we're approaching the situation.

Frank D. Lee: Okay.

Frank D. Lee: Hey, Dave This is Charlie jet just building on your comment of 201. Please.

Charles A. Reinhart: Hey David, this is Charlie. Just building on your comment of 201, you know, please note we are investing in clinical trials for both Zylreta and Iovera with the shoulder OA study and the spasticity study. So there is an investment going on.

Charlie: Please note we are investing in clinical trials for both <unk> and <unk> with the shoulder OA study and the spasticity study. So there is investment going on.

Speaker Change: Got it helpful. Thanks.

David A. Amsellem: Got it. Helpful. Thanks.

Charlie: Thanks, David.

Charlie: Your next question comes from the line of Harlan maybe J.

Operator: Your next question comes from the line of the Cardiff verdict, J.P. Morkan. Please go ahead.

Frank D. Lee: J P. Morgan. Please go ahead.

Operator: Hey guys, thanks for taking my question. I just had a couple of questions about the $4.95 patent challenge from eVenus. I was just wondering if you guys could give us some latest kind of thinking you guys have in terms of, you know, what are some of the more likely scenarios that could play out and what actions, kind of market actions, eVenus could take in the meantime based on the ruling. And just wanted to confirm, is the expectation that the ruling from the judge still comes in July, or is there any kind of change on that front?

Frank D. Lee: Hey, guys. Thanks for taking my question I just had a couple of questions on 495 patent challenge from even if I was just wondering if you guys could give us some latest kind of thinking you guys have in terms of where some of the more likely scenarios that could play out and what actions kind of market actions <unk> take in the meantime based.

Operator: On the ruling and just wanted to confirm is the expectation that.

Operator: The ruling from the judge comes still comes in July or is there any kind of change on that front.

Operator: Okay.

Frank D. Lee: Thanks for the questions Hardik. Just a little bit of background and so we do expect the ruling on the first patent litigation sometime by end of June and so that's what that's consistent with what we've said before and just to remind we've got a number of other patents that will need to be litigated in addition of course eVenus will need to get their product approved and eventually decide to launch the product at some point so there are a number of things ahead but let me turn it over to Kristen to provide some additional color here

Speaker Change: Thanks for the questions Arctic.

Kristen: Just a little bit of background and so we do expect the ruling on the first patent litigation.

Kristen: Sometime by end of June.

Kristen: And so that's what that's consistent with what we've said before and just to remind you. We've got a number of other patents that will need to be litigated.

Kristen: In addition of course.

Kristen: The Venus will need to get their product approved and eventually decide to launch the product at some point. So there are a number of things ahead, but let me turn it over to.

Frank D. Lee: Kristin.

Kristen: To provide some additional color here.

Kristen: Yeah, thanks. As Frank said, there really hasn't been an update since we talked to you all at the end of February about the 495 trial. We still expect it to be read out by July 1st, which is when the 30-month stay is up, so we look forward to the court's opinion being issued before then. And as Frank mentioned, and as we've reiterated, and we actually put a little detail in our release, we continue to develop new IP around X4L, Orange Book-listed patents, and those are additional hurdles that EDNS would need to get through in order to eventually launch a product.

Kristen: Thanks Frank.

Kristen: Frank said, there really isn't an update since we talked to you all at the end of February on that quantify trial, we still expected to readout by July 1st which is what the 30 month stay is that so we look forward to that.

Kristen: Opinion being issued before then and as Frank mentioned and as we've reiterated and we actually.

Kristen: Put a little detail in our release, we continue to produce new IP.

Kristen: Around EXPAREL Orange book listed patents and those are additional hurdles that you DNS would.

Kristen: We need to get through in order to eventually launch of products out.

Kristen: So it's in our release, but we did just have in March three additional Orange Book-listed patents, two methods of use, and another composition of matter, and those are in addition to the other ones after 495, so there are quite a few patents that we still need to get through. But as I said, we're looking forward to getting resolution to 495 here in short order, and then we'll continue to produce new IP, and they will continue to have to work through our other patents that are all on the Orange Book here.

Kristen: Yes.

Kristen: Our release, but we did just have in March three additional Orange book listed patents to method of use and another composition of matter and those are in addition to that otherwise. After 495. So there are quite a few patents that we still need to get through but as I said, we're looking forward to getting resolution to 495.

Kristen: Im here in short order.

Kristen: And then well continue to lie prettiest, new IP and they will continue to have to work through our other patents that are all on the Orange book here.

Speaker Change: Great. Thank you and then just one more on you mentioned the extra <unk> gross margin was within the.

David A. Amsellem: Great, thank you. And then just one more on, you know, you mentioned the XRL gross margin was within the full-year guidance. I was wondering if you could give a little bit more kind of granular detail about how margins are progressing among the various facilities, for example, the one in the UK versus in San Diego.

David A. Amsellem: Full year guidance range I was wondering if you can give a little bit more kind of granular detail about how margins are progressing among the various facilities. For example, the one in the UK versus in San Diego.

Speaker Change: Yes, thanks for that.

Charles A. Reinhart: Yeah, thanks for that, Hardik. You know, I think overall, we're progressing well. We haven't really broken it down specifically by site. As you know, the 200 liter facility is coming in. It's going to come online later this year. I don't know, Charlie, if you want to say a few words about March. No, I wasn't thinking in the long term about the improvement in the gross market.

Charles A. Reinhart: I think overall, we're progressing well, we haven't really broken it down specifically by buy side as you know the 200 liter facility is coming in.

Charlie: It's going to come online later on this year.

Charles A. Reinhart: Charlie if you want to say a few words about margins.

Charles A. Reinhart: No, listen. In the long term, the improvement in gross margins is going to be driven by two major factors for XPRO. One is the manufacturing equipment the vial is manufactured on, so the 200 liter is generally less expensive than the 45s, but probably even more importantly is the total volume. So we're focused on expanding the top line and driving vial volume so that margins can follow.

Speaker Change: Listen in the long term.

Charles A. Reinhart: Improvement in gross margins is going to be driven by two major factors for EXPAREL. One is the manufacturing equipment. The vilest manufactured on so the 200 leaders is generally less expensive than the 40 fives, but probably even more importantly is the total volume. So we're focused on expanding topline and driving.

Charles A. Reinhart: While volume and so that margins can follow.

Speaker Change: Thank you.

Speaker Change: Thanks Harlan.

Charles A. Reinhart: Your next question comes from the line of Gary Nachman with Raymond James. Please go ahead.

Operator: Your next questions come from the line of Gary and Nachman with Raymond James. Please go ahead.

Speaker Change: Great good afternoon.

Gary Jay Nachman: Great. Good afternoon.

Speaker Change: First talk more about your progress with the modernization of the commercial organization you think youll have most of that in place by mid year as you prepare for no pay next year I think that's been the target would be.

Speaker Change: Higher still need to take place.

Speaker Change: And then how aggressive do you plan on being with the share buyback how is that contemplated with the convert coming due next year.

Speaker Change: And you have to maintain a certain amount of cash for that so maybe talk through that as well.

Gary Jay Nachman: Great.

Frank D. Lee: Frank, first, talk more about your progress with the modernization of the commercial organization. You think you'll have most of that in place by mid-year as you prepare for no pay next year? I think that's been the target. So what big hires still need to take place? And then how aggressive do you plan on being with the share buyback? How is that contemplated with the conversion coming due next year? And you have to maintain a certain amount of cash for that, so maybe talk through that as well.

Speaker Change: Thanks for the questions Gary first on the commercial organization.

Frank D. Lee: As I mentioned earlier, we are making very good progress.

Frank D. Lee: On modernizing and bolstering the commercial medical and market access and organizations at.

Frank D. Lee: Great. Thanks for the questions, Gary. First, on the commercial organization, as I mentioned earlier, we're making very good progress on modernizing and bolstering the commercial, medical, and market access organizations. At a high level, we've talked about plans, and we're making good progress on plans to hire a Chief Commercial Officer, and that's on track. In addition, we're expanding the number of folks in our field reimbursement management team, the payer team, as well as in market access strategy and operations.

Frank D. Lee: At a high level, we've talked about.

Frank D. Lee: Plans and.

Frank D. Lee: We're making good progress on.

Frank D. Lee: Plans to hire.

Frank D. Lee: Chief commercial officer, and that's on track.

Frank D. Lee: In addition, we're expanding the number of folks.

Frank D. Lee: Our field reimbursement management team payer team as well as market access strategy and operations. So those are all things that are on track. In addition, we're looking very carefully at.

Frank D. Lee: So those are all things that are on track. In addition, we're looking very carefully at the broader commercial organization, including bolstering our resourcing of our marketing teams and medical teams. So those things are right on track, and again, supported by reallocating our resources away from certain areas of the company and investing them here, where we believe it's going to make a difference here for our no-pain law. So that's a comment on our commercial organization, and I'd characterize it as we're making good progress.

Frank D. Lee: At the broader commercial organization, including bolstering our resourcing of our marketing teams and medical team. So those things are right on track and again supported by reallocating our resources away from certain areas of the company and investing them here, we believe it's going to make a difference here.

Frank D. Lee: For our no pain launch.

Frank D. Lee: No.

Frank D. Lee: Comment on our commercial organization and I'd characterize it as we're making good progress and largely speaking we expect that to be in place sometime in the second half of the year.

Frank D. Lee: And largely speaking, we expect that to be in place sometime in the second half of the year. With respect to the share buyback, let me turn it over to Charlie here. You know, I'll just say that it really does underscore our confidence in our growth outlook, and it's an attractive investment given the value that we believe is ahead. So Charlie, let me turn it over to you. Thank you, Frank.

Frank D. Lee: With respect to share buyback, let me turn it to Charlie here and I'll, just say that it really does underscore our confidence.

Charlie: In our growth outlook.

Frank D. Lee: It's an attractive investment given the value that we believe is ahead. So Charlie let me turn it over to you. Thank you Frank and Gary. Thanks for the question. So listen as you point out we have a business fits operationally cash flow positive we generate cash every year.

Charles A. Reinhart: Thank you, Frank. And Gary, thanks for the question.

Charles A. Reinhart: So, you know, listen, as you point out that we have a business that's operationally cash flow positive; we generate cash every year. You know, we just reported having roughly $326 million on the balance sheet. As you point out, we do need a certain amount of money on the balance sheet to repay the $400 million of August 25 notes next year. And so we're going to balance priorities, and we're not going to make any commitments about whether or not when we're going to spend the $150 million, we're going to use it opportunistically, as we think benefits our shareholders. And we will balance all of the needs from a cash flow perspective over time.

Charlie: We just reported as having roughly $326 million on the balance sheet as you point out we do need a certain amount of money on the balance sheet to repay the $400 million of August 25 notes next year.

Charles A. Reinhart: And.

Charles A. Reinhart: So we're going to balance priorities and we're not going to make any commitments about what are we when we're going to spend the $150 million that we're going to use it opportunistically as we think benefits our shareholders.

Charles A. Reinhart: And we will balance all of the needs from a cash flow perspective.

Charles A. Reinhart: Over time.

Speaker Change: Alright, great.

Gary Jay Nachman: All right, great. Actually, maybe one follow-up question for Frank: just what are the next steps for 2.01? You seem pretty excited about the data you've seen there so far, you know, following phase one. You know, what comes next? What sort of resources will you put behind it? Charlie mentioned before that you are investing a little bit in pipelines. So I'm curious, you know, is that something that could start this year? Or will you likely wait until, you know, to see how things unfold next year?

Speaker Change: Actually maybe one follow up for Frank just what are the next steps for 201, you seem pretty excited about the data you've seen there so far.

Gary Jay Nachman: Following the phase one.

Frank: What comes next and what sort of resources will you put behind it.

Gary Jay Nachman: Charlie you mentioned before you are investing a little bit in pipeline. So I'm curious is that something that could start this year or will you likely wait until to see how things unfold next year. Thanks.

Speaker Change: Yes, Gary.

Frank D. Lee: Yeah, Gary, so it's an important question. There'll certainly be quite a bit more effort this year in terms of planning and thinking through what we need to do, but in terms of any sort of spend and investment, largely that'll be ahead of us in 2025, 2026, and 2027. And so we're excited about it. As I mentioned, we have had an opportunity to review the data with the Scientific Advisory Board. We've also presented some of the data, as I mentioned, at ORSI and this week at ASGCT.

Speaker Change: An important question.

Frank D. Lee: There'll be certainly quite a bit more effort. This year in terms of planning and thinking through what we need to do but in terms of any sort of spend and investment largely that'll be ahead of us and $25 $6 27 and so.

Frank D. Lee: We're excited about it as I mentioned, we have had an opportunity to.

Frank D. Lee: Review the data with the scientific Advisory Board. We've also presented some of the data is as I've mentioned at OFC and this week.

Frank D. Lee: <unk> and so we continue to vet. The data. We also continue to think through clinical development strategy going forward, but in terms of activity a lot of it this year will be vetting, our strategy and planning.

Frank D. Lee: And so we continue to vet the data. We also continue to think through our clinical development strategy going forward. But in terms of activity, a lot of it this year will be vetting our strategy and planning, and the investments will largely occur in 2025 and beyond.

Frank D. Lee: And the investments will largely occur in 'twenty five and beyond.

Speaker Change: Okay that makes sense. Thank you.

Gary Jay Nachman: Okay, that makes sense. Thank you. Thanks, Gary. Your next questions come from the line of Leszek Sulewski with...

Leszek Sulewski: Thanks, Gary.

Operator: Your next questions come from the line of Leszek Sulewski with Jurisdiction Security. Please go ahead. Hi, this is Jeremy Amferlis. Thanks for taking our questions.

Gary Jay Nachman: Your next question comes from the line of <unk> with Jefferies.

Jeremy Amferlis: Please go ahead.

Jeremy Amferlis: Hi, This is Jeremy on for <unk>, Thanks for taking our questions how.

Jeremy Amferlis: How do you view the opportunity with <unk> 201, and how exactly does the recent designation help you.

Operator: Hi.

Operator: Yes.

Frank D. Lee: Yeah, you know, it's a very interesting opportunity because this is the first RMAT designation for gene therapy in osteoarthritis. And what that means is that the FDA and the company will work closely as we think about further vetting the data and developing the strategy. So this is a wonderful opportunity to make sure that we stay close with the FDA.

Frank D. Lee: It's a very interesting opportunity because this is the first star Matt designation for gene therapy in osteoarthritis and.

Frank D. Lee: What that means is that the FDA and the company will work closely as we think about further vetting the data and development strategy. So this is a wonderful opportunity to make sure that we stay close with the FDA and to the extent that we develop this.

Frank D. Lee: And to the extent that we develop this asset going forward, this could truly be transformational for patients. As I mentioned earlier, based on our market research and discussions with thought leaders, current treatments offer patients three to six months of benefit and durability, whereas we know that for market research Twelve months or more is considered transformation, and so to the extent that PCRx201 can deliver that, this could be an important new treatment option for patients. So we'll continue to vet the data, put the development plan together, but we're very excited about the data and, obviously, based on the RMAT designation, FDA as well.

Frank D. Lee: Going forward this could truly be transformational for patients as I mentioned earlier based on our market research and discussions with thought leaders current treatments offer patients three to six months of benefit in durability, whereas we know that for market research.

Frank D. Lee: 12 months or more is considered transformational.

Frank D. Lee: And so to the extent that <unk> hundred one can deliver that this could be an.

Frank D. Lee: An important new treatment option for patients. So we will continue to vet the data.

Frank D. Lee: The development plan together, but we're very excited about the data and obviously based on the <unk> designation FDA as well.

Frank D. Lee: Okay.

Frank D. Lee: Yes.

Speaker Change: Thank you.

Frank D. Lee: Yes.

Frank D. Lee: Your next question comes further leg of Orange.

Operator: Your next questions come from the line of Oren Divlet, HA1. Please go ahead. Oh, thanks.

Oren Gabriel Livnat: Thank you.

Oren Gabriel Livnat: Please go ahead. Thanks.

Oren Divlet: Thanks. Congratulations on a pretty clean quarter.

Oren Gabriel Livnat: Congrats on a pretty clean quarter, a couple of questions just to build on earlier.

Oren Divlet: A couple of questions. Just to build on earlier questions about the commercial follow-on after no pain kicks in, I just want to make sure I understand what we're talking about here. Obviously, you have a pretty small overall market share of the broader landscape of procedures. I think you've highlighted in the past about 12 million relevant outpatient commercial procedures. And so I just want to understand when you talk about following on, do you mean plans that are just not covering Expirel at all, hence your small market share now, and they'll make me feel compelled to cover it if CMS is? Or is it about improvement in terms and access with those plans? Just help me understand what we're even talking about here, in the big picture.

Oren Gabriel Livnat: Questions about the commercial.

Oren Divlet: Follow on after no pain kicks in I, just wanted to make sure I understand what we're talking about here like obviously, a pretty small overall market share of the broader landscape procedures I think you've highlighted in the past about $12 million relevant outpatient commercial procedures and so I just want to understand when you talk about following on <unk>.

Oren Divlet: Plans are just not covering EXPAREL at all hence your small market share now and they'll make detailed compelled to operate.

Oren Divlet: Gms is.

Oren Divlet: Or is it about improvement in terms and access with those plans just help me understand where were even talking about their business and you have a follow up.

Speaker Change: Yes, so thanks for that question Oren.

Frank D. Lee: Yeah, so so thanks for that question, Oren. What I'm talking about is oftentimes CMS will come out first with reimbursement, and commercial plans will take some time to evaluate when and if they'll cover the new therapy. And so, you know, our task at hand now is to work very closely with the commercial payers to accelerate that adoption on the commercial side of things. Now that said, we do have a C code, and oftentimes, that can be reimbursed in the ASC setting currently, but it's not as straightforward as it could be.

Frank D. Lee: What I'm talking about is oftentimes CMS will come out first with reimbursement and commercial plans will take some time to evaluate when and if they will cover the new new therapy and so our task at hand now is to work very closely with the commercial payers to ask.

Frank D. Lee: Celebrate that adoption on the commercial side of things now that said, we do have a C code and oftentimes that can be reimbursed in the ASC setting currently but it's not straightforward as it could be and so here, we have an opportunity with no pain and.

Frank D. Lee: And so, here we have an opportunity with no pain and CMS reimbursement to use this now to engage commercial payers to follow suit sooner than they normally would. And so, that's really it. But I'll remind you again that there's a substantial opportunity just with CMS patients. And what we're trying to do now is to really make this even have a broader impact. So, that's the idea.

Frank D. Lee: And CMS reimbursement to users now to engage commercial payers to follow suit sooner than they normally would and so thats really it but I'll remind you again that.

Frank D. Lee: There is a substantial opportunity just with the CMS patients of what we're trying to do now is to really make this even a broader impact so that's the idea.

Speaker Change: Okay. So just unclear I mean, you obviously have a lot of outpatient use now like you said I mean, thats, a $5 million to $600 million product not all in patient. So I just wanted to understand is it.

Oren Divlet: Okay, so just so I'm clear, you obviously have a lot of outpatient use now. Like you said, it's a $500, $600 million product, not all inpatient. So I just wanted to understand, is... Is how that's being done now suboptimal even across the entire board of your commercial outpatient reimbursement, and could that change meaningfully at some point afterward?

Oren Divlet: Is how thats being done now sub optimal even across the entire board of your commercial outpatient reimbursement and that could change meaningfully.

Oren Divlet: At some point.

Oren Divlet: Afterward.

Oren Divlet: Yes.

Frank D. Lee: Yeah, you know, what's important with the no pain legislation is that in the outpatient setting, it provides for ASP plus 6% reimbursement, which, for example, in the HOPD is pulling that thing out of the bundle. So this is important.

Oren Divlet: Whats important with no pain legislation is in the outpatient setting it provides for ASP plus 6% reimbursement, which for example in the H O PD is pulling that thing out of the bundle. So this is important so the product will be reimbursed separately. So now if you add up favorable access through three years.

Frank D. Lee: So the product will be reimbursed separately. Now, if you add up favorable access through 340B or GPOs, and you add on top of that ASP plus 6 reimbursements, I think this provides for an attractive value proposition given what Expirel delivers in the clinical setting. And oftentimes, some of the cost issues have been a barrier, so this is important. So to the extent that that sort of reimbursement formula is followed to any extent by commercial payers, this will be, you know, this will be something that further

Frank D. Lee: 40, b or GPS and you add on top of that ASP plus six reimbursements I think this provides for an attractive value proposition given what EXPAREL delivers in the clinical setting.

Frank D. Lee: Oftentimes some of the cost issues have been barriers. So this is important so to the extent that that sort of reimbursement formula is followed.

Frank D. Lee: The extent by commercial payers. This will be this will be something that further accelerates launch.

Frank D. Lee: Okay.

Oren Divlet: Okay. And then, just to follow up, I don't want to parse your language too closely. I know that can be pretty irritating. But you said, to the extent we develop this asset going forward, and I want to know if I should interpret that as just to the extent it, you know, bears developing going forward based on how the data turns out, or... Maybe if you are looking to out-license this to another company for someone else to take it.

Speaker Change: And then just to follow up I don't want to parse your language too closely I know that can be pretty irritating, but you said to the extent we develop this asset going forward and I wanted to know if I should interpret that as just to the extent it.

Oren Divlet: Bears developing going forward based on how the data.

Oren Divlet: Turns out or.

Oren Divlet: Maybe if you are looking to out license to another company for someone else to take it for potential.

Speaker Change: I'm, sorry, which product are you talking about.

Oren Divlet: I'm sorry, which one...

Frank D. Lee: First, we're very excited about 201. We're going to go through a lot of thinking here about our development strategy.

Oren Divlet: <unk> <unk> hundred one.

Frank D. Lee: Kathy.

Frank D. Lee: First we're very excited about 201, we're going to go through a lot of.

Frank D. Lee: Thinking here about our development strategy.

Frank D. Lee: We have no plans to do anything but that right now, so that's what I'd say to you. All right. I appreciate it. Take care.

Speaker Change: We have no plans to do anything but that right now so.

Frank D. Lee: So that's what I would say to you.

Frank D. Lee: Yes.

Speaker Change: Alright I appreciate it.

Frank D. Lee: Take care.

Frank D. Lee: Yeah.

Frank D. Lee: Alright.

Operator: Your next question comes from the line of Balaji Prasad with Park Least. Please go ahead.

Frank D. Lee: Your next question comes from the line of Rajiv Prasad with Barclays. Please go ahead.

Balaji V. Prasad: Hi, good evening and thanks for the questions.

Balaji V. Prasad: Hi, good evening, and thanks for the questions, a couple from a group. While I can understand the rationale for the state of the world, I'm curious to know the capital allocation factors which went into deciding the quantum of $150 million. That's one. And two, I'm not sure if you covered this already, so if you could take us through the growth and dynamics of the quarter and how it changed from the previous quarter, and what are the tariffs that we expect for the year. And maybe just take an experimental question on the 18 million prostheses that are going to be covered. Are these 18 million prostheses going to be fully implemented in experimental care?

Balaji V. Prasad: So.

Speaker Change: Couple from me.

Balaji V. Prasad: While I can understand the rationale from sandy.

Balaji V. Prasad: I'm curious to know the.

Balaji V. Prasad: Capital allocation.

Balaji V. Prasad: When deciding the quantum of $150 million.

Balaji V. Prasad: One and two I'm not sure if you covered this already saw gain.

Balaji V. Prasad: Concluding.

Balaji V. Prasad: Barbara.

Balaji V. Prasad: <unk> and <unk>.

Balaji V. Prasad: Holly change wasn't Steven.

Balaji V. Prasad: And in the full year.

Speaker Change: And maybe just one second.

Balaji V. Prasad: Thanks.

Balaji V. Prasad: $18 million prestige.

Balaji V. Prasad: It can be covered all of this 80 million procedures.

Balaji V. Prasad: Okay.

Speaker Change: Hey, <unk>.

Frank D. Lee: Hey Balaji, you were breaking up with me there a little bit. So I think your first question was related to the stock repurchase, if that's correct. And so again, yeah, so what I'll underscore here is the confidence we have in our growth outlook and the fact that it's an attractive investment given that outlook going forward. If your question is about sort of the cadence and the amount, maybe I can turn that over to Charlie.

Speaker Change: You were breaking up on me there are a little bit so.

Charlie: I think your first question was related to the stock repurchase.

Charlie: That's correct and so.

Frank D. Lee: Again, yeah, so what I'll, what I'll underscore here is the confidence we have in our growth outlook and the fact that it's an attractive investment given that outlook going forward.

Charlie: If your question is about sort of the cadence and.

Frank D. Lee: And the amount of maybe I can turn it over to Charlie.

Charles A. Reinhart: Hey Balaji, it's Charlie here. And so, you know, from our perspective, we looked at what the typical first time people size is, and it was kind of 10 to 15 percent of market cap. And that's really how we came up with 150 million. We also note that we have between now and the end of 2026 to utilize it.

Charlie: <unk> is Charlie here.

Charles A. Reinhart: So I think one of your questions might've been about the amount and so from our perspective.

Charles A. Reinhart: Yes, we looked at what typical first time people size and it was kind of 10% to 15% of market cap.

Charles A. Reinhart: It's really how we came up with $150 million.

Charles A. Reinhart: But if we utilize it more quickly, and it makes sense, we can go back to the well and get another authorization. So this is something we're, you know, we're going to try. We're going to use it opportunistically and, hopefully, to everybody's benefit.

Charles A. Reinhart: We also note that we haven't between now and the end of 2026 to utilize it but if we utilize it more quickly and it makes sense. We can go back to the well and get another authorization. So this is something where we're going to try we're going to use it opportunistically.

Charles A. Reinhart: And hopefully.

Charles A. Reinhart: Everybody's benefit.

Charles A. Reinhart: Thanks Charlie. And I think Balaji, your other question was about broadly no pain and just some numbers. So, you know, 18 million total that we believe are outpatient procedures that could, you know, fall under no pain. Now, specifically with respect to the settings and patient populations, so out of that 18 million, six million CMS, and 12 million commercial. And so inside that $6 million, there are roughly about $4 million that lie within the HOPD setting and $2 million that are within the ASC setting, whereas in the commercial, that $12 million in the commercial is roughly about $4 million in the HOPD setting and about $8 million in the ASC setting. So hopefully that's clear.

Speaker Change: Thanks, Charlie and I think <unk>. Your other question was about broadly no pain.

Frank D. Lee: If I could ask a follow-up question there, Frank, just what percent of these 18 million procedures will be incremental to XperEL, that is, those who are not on XperEL today, through any pathway?

Charles A. Reinhart: And.

Frank D. Lee: Just some numbers so.

Frank D. Lee: $18 million total that we believe are outpatient procedures that could.

Frank D. Lee: All under no pain.

Frank D. Lee: Now specifically with respect to the.

Frank D. Lee: Settings in patient populations, so out of that 18 million <unk>.

Frank D. Lee: $6 million CMS.

Frank D. Lee: And 12 million commercial.

Frank D. Lee: So inside that $6 million is roughly about $4 million that lie within the <unk> setting.

Frank D. Lee: 2 million that are within the ASC setting.

Frank D. Lee: Whereas in the commercial that $12 million in commercial is roughly about $4 million.

Frank D. Lee: In the <unk> setting and about $8 million in the <unk>.

Frank D. Lee: Aussie settings, so hopefully that's clear.

Frank D. Lee: If I could ask a follow up Dan Frank just what percent of these 18 million procedures will be incremental to EXPAREL that is those who are not on EXPAREL today through any pathway.

Frank D. Lee: Yes, I think by and large as it can be a very favorable impact in particularly if I think about the CMS patients right out of the gate 6 million CMS patients in the <unk> specifically in ASC.

Frank D. Lee: Yeah, I think, by and large, this is going to be a very favorable impact, and particularly, if I think about the CMS patients right out of the gate, 6 million CMS patients in the HOPD specifically and ASC. You know, I can't give you a hard number right now about how much is incremental, but what I can say is that our penetration, largely speaking, is fairly low, and a lot of that is due to the cost barriers that have existed. Hence, you know, that was the thinking behind making sure that we drove no pain legislation through.

Frank D. Lee: I can't give you a hard number right now about how much is incremental.

Frank D. Lee: I can say is that.

Frank D. Lee: <unk> penetration largely speaking is fairly low and a lot of that is due to the cost barriers that have existed and hence that was the.

Frank D. Lee: Thinking behind making sure that we drive no pain legislation to passage and so the company saw that early on and has worked over the past seven years with our voices coalition in partnership.

Frank D. Lee: And so the company saw that early on and has worked over the past seven years with our Voices Coalition in partnership, and that's why this thing was passed. And so, fundamentally, it's pulling drug reimbursement or product reimbursement out of the bundle so there's not a financial disincentive to use the best product for patients. So hopefully, that's it. So I think given our low share penetration in this marketplace, we've got substantial room to further penetrate where those cost barriers are the real issue.

Frank D. Lee: And that's why this thing was passed and so fundamentally it's pulling the drug reimbursement or product reimbursement out of the bundle so theres not a financial disincentive.

Frank D. Lee: To use the best product for the patients. So hopefully that's clear so I think given our low share penetration in this marketplace.

Frank D. Lee: Got substantial room to further penetrate.

Frank D. Lee: Are those cost barriers are the real issue.

Speaker Change: Thanks, Mike.

Frank D. Lee: Okay.

Frank D. Lee: Your last question comes from the line of John Lunger, with Japan, and Catherine. Please go ahead.

Operator: Your last question comes from the line of John Blanca with Need Hand & Company. Please go ahead.

John Blanca: Hi, everyone. This is.

John Blanca: Hi, everyone. This is Jon on for Surge.

John Blanca: Jon on for Serge Thanks for taking our questions today.

John Blanca: Thanks for taking our questions today. We have two questions regarding XBRL pricing for this year and beyond. First, can you provide some context on what the discount looks like right now to improve the user base and what the strategy might look like for the rest of the year based on what you've seen so far? And then, when NoPayne comes into effect next year, what does the pricing strategy look like at that point with improved reimbursement? Thanks.

John Blanca: We have two questions regarding EXPAREL pricing for this year and beyond.

John Blanca: First can you provide some context on what the discount looks like right now to improve the user base and what the strategy might look like for the rest of the year based on what you've seen so far.

John Blanca: Then when no pain comes into effect next year, what does the pricing strategy look like at that point with improved reimbursement.

John Blanca: Yes.

Charles A. Reinhart: So Charlie, maybe you want to talk a little bit about Xperil's pricing strategy. What I'll say here is that when you think about what we're doing with GPO and access to 340B, that's very favorable. So I'll say that. And with no pain, obviously, reimbursement then gets better as opposed to prices.

John Blanca: So Charlie maybe you want to talk a little bit about EXPAREL pricing strategy, what I will say here is that.

Charles A. Reinhart: When you think about what we're doing with GPO in excess of 340, B that's very favorable.

Charles A. Reinhart: So I'll say that and.

Charles A. Reinhart: With no pain, obviously, the reimbursement then gets better as opposed to the pricing.

Frank D. Lee: And so, you know, beyond that, you know, Charlie, maybe try a little bit of color. Sure.

Charles A. Reinhart: No.

Charles A. Reinhart: That Charlie maybe probably a little bit of color I'm sure sure. So if we think about ex <unk> total gross to net at this point its a hair under 84% and that includes product returns and prompt pay discount. It includes 340 B a series of.

Charles A. Reinhart: Sure, sure. So, if we think about XBorel's total gross to net at this point, it's a hair under 84%, and that includes product returns and prompt pay discounts, 340B, a series of individual customer contracts, and over time, it will also include the GPOs as well. I think that was probably your question, that if you're talking about pricing, actually price increases, you know, we've been pretty modest in that regard. We did one in January. And, you know, we're really focused on expanding the top line by volume, not so much by price.

Charles A. Reinhart: Individual customer contracts and over time. It will also include the.

Charles A. Reinhart: The GPO loss as well.

Charles A. Reinhart: Sure.

Charles A. Reinhart: I think that was probably your question is if you are talking about pricing actually price increases.

Charles A. Reinhart: Been pretty modest in that regard we did one in January.

Charles A. Reinhart: And we're really focused on expansion of the topline by volume not so much pricing.

Speaker Change: Yes, I think.

John Blanca: Yeah, I think really just for next year, when no pain comes to effect, you see the price kind of taking a, you know, I don't know, a more lumpy change at the beginning of the year, or do you see more of a gradual flip from a discount to a price increase? So.

John Blanca: Really disappeared for next year when <unk> comes to effect do you see the pricing kind of taking a.

Speaker Change: I will now.

John Blanca: More lumpy change at the beginning of the year or do you see more of a gradual.

John Blanca: Flipped from a discount to a price increase.

John Blanca: So ASP plus six is critically important in the outpatient setting to drive volume.

Charles A. Reinhart: So ASP plus six is critically important in the outpatient setting to drive volume. ASP plus six has nothing to do with our whack or the prices we will charge. So I don't know that we will change our strategy in any way, shape, or form. We're just going to try to educate our potential customers so that they can benefit from ASP plus six, and we can benefit from volume.

Charles A. Reinhart: ASP plus six has nothing to do with our WAC for the prices, we will charge. So I don't know that we will change our strategy in any way shape or form.

Charles A. Reinhart: We're just going to try to educate our potential customers. So that they can benefit from ASP, plus 6% and we can benefit from volume.

Frank D. Lee: John, I want to go back to growth. Doing so solves a lot of things, including margin, some of the questions earlier, and this is the opportunity for us to drive penetration and growth with this catalyst of no pain. So that's what we're focused on.

Speaker Change: John I want to go back to we're sharply focused on growth.

Frank D. Lee: Doing so solves a lot of things, including margin some of the questions earlier and this is the opportunity for us to drive penetration and growth with this catalyst of no pain. So that's what we're focused on.

Susan Mesco: That concludes our Q&A session. I will now turn the conference back over to Susan Mesco, Head of Investor Relations, for closing remarks.

Susan Mesco: Alright. Thanks.

Susan Mesco: That concludes our Q&A session I will now turn the conference back over to Susan must go ahead of Investor Relations.

Susan Mesco: Mark.

Susan Mesco: Thank you for Miami and thanks to all on the call for your questions and time today. We're excited about the opportunities that lie ahead for that throughout the balance of the year. We will continue to ensure we are well positioned for long term success. The opioid epidemic continues to be a national crisis underscoring the vital importance of our mission. Thank you and stay well.

Susan Mesco: Thank you, Hermione, and thanks to all on the call for your questions and time today. We are excited about the opportunities that lie ahead for us. Throughout the balance of the year, we will continue to ensure that we are well positioned for long-term success. The opioid epidemic continues to be a national crisis, underscoring the vital importance of our mission. Thank you, and stay well.

Speaker Change: And gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect.

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