Q3 2024 Heron Therapeutics Inc Earnings Call
Okay.
Speaker Change: Thank you for standing by and welcome to Huron Therapeutics third quarter 2024 conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone. If your question has been answered and you'd like to remove.
Speaker Change: Yourself from the queue simply press star one again.
Speaker Change: Today's program is being recorded and now I'd like to introduce your host for today's program Melissa Journal Executive Director. Please go ahead.
Melissa Journal: Thank you operator, and good morning, everyone. Thank you for joining us on the hand Therapeutics Conference call. This morning to discuss the company's financial results for the quarter ended September 32024.
Melissa Journal: With me today from here on or Craig Collared, Chief Executive Officer Ear Duarte Executive Vice President Chief Financial Officer, Bill for Executive Vice President Chief Development Officer, and Kevin Warner Senior Vice President Medical Affairs.
Melissa Journal: Is that for.
Melissa Journal: For those of you participating via conference call slides are made available via webcast and can also be accessed via the Investor Relations page of our web site. Following the conclusion of today's call.
Melissa Journal: Before we begin let me quickly remind you that during the course of this conference call. The company will make forward looking statements.
Melissa Journal: Caution you that any statement that is not a statement of historical fact is a forward looking statement.
Melissa Journal: Crude 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 1995.
Melissa Journal: 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.
Melissa Journal: 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.
Melissa Journal: Except as required by law Heron assumes no obligation to update these forward looking statements to reflect future events or actual outcomes and does not intend to do so.
Speaker Change: And with that I would now like to turn the call over to Craig <unk>, Chief Executive Officer of Huron.
Speaker Change: Thanks Melissa.
Speaker Change: Good morning, everyone and welcome to the Heron Therapeutics third quarter 2024 earnings call.
Speaker Change: Today, we are pleased to update you on our latest achievements for the third quarter, which includes a narrowing of our financial guidance, including net revenue.
Speaker Change: Adjusted operating expenses and adjusted EBITDA.
Speaker Change: We are also giving a Q4 2024 net revenue guidance range of 37 million to $43 million.
Speaker Change: Based on early success achieved already in Q4.
Speaker Change: We also received FDA approval of all access needle our van on September 24, and we have been included in the final version of <unk>, which goes into effect in January of 2025.
Speaker Change: Last our partnership with Cross link continues to progress and we are now beginning to see the positive impact. This could have presented last as we move forward.
Speaker Change: As I move through my comments today, I will speak in greater detail about each of these achievements for Q3.
Speaker Change: Moving to financial performance, we continue to improve on a financial efficiency by growing revenues.
Speaker Change: Over the past nine months during a time of change and disruption at the company. We grew revenues over 12% improved gross margin from 41% to just over 72% and doubled gross profit from 37 million to $75 million.
Speaker Change: More importantly, we did this and burned less than $10 million in cash for 2024.
Speaker Change: Now that we have expenses in line all of our efforts have been focused on driving revenue growth of our product portfolio.
Speaker Change: We've already begun to see growth based on our weekly sales, which is why we felt it was important to give an early view into Q4, which we anticipate is going to be an excellent quarter based on our net revenue guidance of 37 million to $43 million.
Speaker Change: I would now like to spend a few moments discussing why we believe the van and I know paint Act will have a very positive impact on generalized.
Speaker Change: First the van which was officially approved on September 24th.
Speaker Change: One of the main issues was everywhere has been the preparation around drawing the drug itself out in a while while maintaining its really.
As you can see to pick it from the left to right on this slide we've improved time of withdrawal from a couple of minutes to less than 45 seconds with a simplistic easy to use device may create a sterile environment. Once the vial is snapped into the van.
Speaker Change: We are now in the launch process.
Speaker Change: And anticipate having a ban on the market by the first week of December.
Speaker Change: Now moving to the no pain at.
Speaker Change: CMS recently released proposed rule for the no pain for the calendar year 2025 back in June.
Speaker Change: The final version of the Act was just released this past month.
Speaker Change: In General <unk> was included in the final rule.
Speaker Change: All of the act is to ensure patients have access to non opioid alternatives and providers are not financially incentivized to utilize opioids instead.
Speaker Change: We believe based on CMS action and endorsement of non opioid therapies that many more commercial payers could also followed suit.
Speaker Change: This is a major accomplishment for haren, and we'll certainly provide a nice tailwind present, a laugh when combined with the van or expanded label and increased commercial footprint due to the crossland partnership.
Speaker Change: Total acute care net revenues for the quarter were $7 $4 million.
Speaker Change: <unk> net revenues for the quarter were $6 3 million.
Speaker Change: Upon <unk> net revenues for the quarter were $1 1 million.
Speaker Change: While we are pleased with our progress. We also knew that we were still transitioning in Q3.
Speaker Change: We believe that moving forward, our quarterly growth should start to increase dramatically with the many things we have going on promotional rate.
Speaker Change: These items will not only have an impact on central app, but across our entire product portfolio.
Speaker Change: Earlier I spoke about the man and the no pain Act, both of which will have an impact in 2025.
Speaker Change: Right now we are seeing early results that the crossing partnership is beginning to drive enrollment growth.
Speaker Change: Our team is trained almost 700 crossing distributors and contractors, whose early impact is shown here.
Speaker Change: When a cross-link rep makes a material impact on account like a key introduction or a trial from new surgeon, our salesforce Marc that account as a cross link account.
On the left you can see that there is a growing number of these crossing accounts that are ordering generalists.
Speaker Change: We are currently adding an average of 21 newly ordering crossing accounts per month.
Speaker Change: If we set a threshold of 20 units in the first month. We are currently averaging seven of these qualified prospect accounts per month.
Speaker Change: These metrics are key drivers of our forecast for 2025.
Speaker Change: In the Middle chart, we see a steady increase in monthly units among crossing accounts as a whole.
Speaker Change: And on the right another way to look at this contribution is the cumulative number of <unk> units since the Cross-link program began in April.
Speaker Change: Nearly 40000 units have been ordered and crossing accounts to date.
Speaker Change: Mounting to roughly $4 $4 million in net revenue.
Annualized in the October units would result in over $10 million and net revenue.
Speaker Change: I want to emphasize that this program is just getting underway and these are early results we.
Speaker Change: We are very excited about how this partnership will perform once we were running on all cylinders for a quarter or two.
Speaker Change: Now moving to <unk>.
Speaker Change: Throughout 2024, we have been integrating our business units under the one heron initiatives.
Speaker Change: I've discussed previously.
As a reminder, the one heron approach was implemented so all of our customer facing teams with sell our entire product portfolio versus having two divisions within one small company only focused around acute or oncology.
Speaker Change: Again, our mantra internally is accountability and efficiency.
Speaker Change: One of the key benefits of this approach has been to cooperation among the teams on gaining access and adoption of upon me.
Speaker Change: Our top down national accounts team and especially access teams are working hand in hand, with our on the ground territory business managers to generate wins and coordinate pull through.
Speaker Change: When you look at the two charts shown here is clear that upon V is growing and we expect to be entering 2025 on a new trajectory.
Speaker Change: The number of accounts ordering eponymy has tripled over the last 12 months.
Speaker Change: But even a 182 ordering in October is just scratching the surface for what we think this product can do.
Speaker Change: As more and more providers gain access to upon me and their hospitals. The number of average daily units sold of upon me has really accelerated in 2024.
Speaker Change: This is where I think the new trajectory can really be seen.
If you simply annualize the 652 average daily units in October this would translate over $7 million in sales.
Speaker Change: The team is really motivated by the momentum we've gained was upon me.
Speaker Change: Just like with <unk>, we are excited for what is to come.
Speaker Change: Moving onto product performance with our oncology franchise.
Speaker Change: The oncology franchise continues to provide a strong foundational base for our company.
Speaker Change: <unk> produced net revenues of $22 6 million for the quarter and first of all I had net revenues of $2 $8 million per quarter.
Speaker Change: Although net revenues were down a bit from Q2, we anticipate bouncing back strong in Q4 and throughout 2025.
Speaker Change: As we have stated before we are in a very competitive market with some body, which can cause quarterly fluctuations, but the clinical value that <unk> brings has allowed us to maintain around 20% share of this market.
Speaker Change: We also still believe that we will prevail in the Anda litigation and anticipate that <unk> will have full protection.
Speaker Change: Until patent expiry in 2035.
Speaker Change: I will now turn the call over to air towards.
Speaker Change: Our CFO to cover our financials and update our financial guidance go ahead here.
air towards: Thank you Craig.
Speaker Change: Our product gross profit for the three months ended September 32024 was $23 4 million or 71%, which increased from 42% for the same period in 2023.
Speaker Change: This was primarily due to the fact that the current quarter did not see the significant inventory write offs, we experienced in the comparable quarter of 2023.
Speaker Change: Year to date, our product gross profit was $75 1 million or 73% an increase from 41% for the same period in 2023.
Speaker Change: SG&A expenses for three and nine months ended September 32024 were $23 3 million and $77 three.
Speaker Change: $3 million, respectively, compared to $28 $8 million.
Speaker Change: Hundred $6 $7 million, respectively. In the same periods in 2023. The decrease was primarily related to decreases in personnel and related costs due to the reductions in force in prior years as well as improved cost efficiencies among all departments.
Speaker Change: Research and development expenses were $4 $5 million and $35 million for three and nine months ended September 32024, compared to $9 3 million and $31 3 million for the comparable periods in 2023.
Speaker Change: The decrease was primarily primarily related to decreases in personnel and related costs due to the reductions in force implemented in previous years as well as a decrease in development activities.
As noted in 10-Q, the condensed consolidated statements of operations and comprehensive loss as of September 32023 reflects the reclassification of certain expenses and research and development to general and administrative expenses to align with the function of the expenses incurred this resulted in no change to total operating.
Speaker Change: <unk> expenses.
Speaker Change: The net loss was $4 8 million for the three months ended September 32024, and $17 $2 million for the nine months ended September 32024, compared to $25 million and $99 $8 million, respectively for the comparable periods in 2023.
Speaker Change: Cash and short term investments at September 32024 was $79 million. The overall year to date cash burn for the business was less than $10 million.
Speaker Change: Year to date, we incurred inventory write offs of $2 4 million.
Speaker Change: Unlike last year's write off could you write offs were not related to inventory management.
Speaker Change: In addition, we also recorded asset impairment write offs of $2 1 million primarily related to projects no longer part of the Companys forward looking strategy.
Speaker Change: As you will see on the slide if you had excluded depreciation stock based compensation inventory write offs and the asset of payment models. Our adjusted EBITDA results would have been a positive $1 4 million operating income.
Speaker Change: Ah represents a substantial turnaround in the financial management of the business.
Speaker Change: As a result of our year to date cost efficiency measures and overall performance. We are revising our guidance for the rest of the year. We are narrowing our net revenue range from our Q2 guidance of $138 million to $158 million to a wide range of $140 million to $146 million net revenue.
Speaker Change: We are narrowing our Q2 guidance for adjusted operating expenses, which exclude stock compensation depreciation and fixed asset write offs from our previous range of $107 million.
Speaker Change: $11 million to a revised range of $101 million to $105 million.
Speaker Change: Lastly, we are narrowing our Q2, adjusted EBITDA guidance range, which excludes inventory writeoffs stock compensation depreciation and fixed asset write offs of negative $10 million to positive $3 million to a revised range of positive $2 million to positive $5 million.
Speaker Change: And now wed like to open the call for any questions.
Speaker Change: Certainly and our first question for today.
Speaker Change: From the line of Kelly <unk> from Jefferies. Your question. Please.
Speaker Change: Hi, Good morning, just Jose for Kelly. Thanks for taking our question now that brand is accrued I would should we think about the uptake curve moving forward and what is your anticipation of the customer mix between existing users and new users. Thank you.
Yes, thanks for the question.
Speaker Change: So currently with the ban.
Speaker Change: Anticipate having a band in the market in customers' hands by the first week of December.
Speaker Change: And.
Speaker Change: The plan with that is to really start off with a few accounts.
Speaker Change: And to get.
Speaker Change: Folks comfortable with that to make sure that.
Speaker Change: There is no issue in launching the product and so we're going to places before that.
Speaker Change: We're very comfortable of products beyond that.
Speaker Change: We're then going to accounts, where we've had an issue.
Speaker Change: By that as an account that may be have walked away before due to the preparation of the product and so.
Speaker Change: We have a number of accounts that fall into that category. So I think you have that and then obviously with any new accounts that we have across lake has brought on we've been talking about the fact that this devices coming out and will improve the prep time. So we're extremely excited about the potential of this because it really does solve an issue that has been out there for quite a while.
Speaker Change: With the prep time of the product and also really addressing Mr. Ella.
Speaker Change: Very helpful. Thanks.
Speaker Change: Thank you and our next question comes from the line of Carl Byrnes from Northland Capital markets. Your question. Please.
Carl Byrnes: Thanks for the question.
Speaker Change: My questions arent.
Dan: Dan have been answered so wanted to kind of circle back to <unk> I'm wondering if you could comment a little bit on the nuances in.
In the third quarter.
In terms of the sequential decline and then your outlook for the fourth quarter given the guidance that you've provided thanks.
Speaker Change: Yes, Thanks Carl.
Speaker Change: As we've said before <unk> is in an extremely competitive market.
Speaker Change: It's obviously a lot of things going on with ASP reimbursement.
Speaker Change: And just new new folks coming in to the market and so forth and so we.
Speaker Change: We've historically maintained around 28% share.
Speaker Change: But again you have these quarterly fluctuations were you losing account win an account and that's what I'm, saying, So we did lose a fairly large account in Q3, which obviously showed up in net revenues.
Speaker Change: But we wanted to one of the reasons. We gave the guidance we gave for fourth quarter or is that.
I'll make the comment in my.
Speaker Change: What I was talking about some body and really the whole entire product portfolio is that we now have this sort of one here an approach to things and what I really mean by that is it we're selling across the product portfolio and we've never had that quite so let's focus before with so many of our commercial facing people and so what we've really been able to take advantage of out.
Speaker Change: Side of going after new accounts is over 340 <unk> side at the hospital with somebody and so we're already seeing quite a bit of uptake in that in Q4. So we expect them all to you bounce back strong again perform into next year.
Speaker Change: Great. Thank you.
Speaker Change: What day.
Speaker Change: And as a reminder, ladies and gentlemen, if you do have a question at this time. Please press star one on your telephone. Our next question comes from the line of search Belanger from Needham Your question. Please.
Speaker Change: Hi, good morning, Thanks for taking my questions.
Speaker Change: I guess the first one on <unk> results.
Speaker Change: Opex also took a tick down from second quarter. Just wondering if this is a function of lowered lower sales in the third quarter. It's a new base level, we should think of.
Speaker Change: Going forward and then Craig.
Speaker Change: Back to the litigation ramps in <unk> do you still expect.
Speaker Change: A court decision.
Speaker Change: Next month or by the end of the year. Thanks.
Speaker Change: Yes, no. Thanks.
Speaker Change: Good to hear from you.
Think I want to restate. Your question I think the first question was our Opex.
Speaker Change: Look we're continuing to manage opex is as efficiently as we can.
Speaker Change: <unk>.
Speaker Change: That falling a little bit in Q3 again I think it's just been us managing that I think it will level out.
Speaker Change: And this sort of frame that we're in now but.
Speaker Change: And I'll, let aerospace to that as well, but I want to come to the litigation for a second and speak to that but I'll come back to Europe.
Regarding litigation look we still feel extremely strong about the case, we are closing arguments in August.
Speaker Change: I really believe that ultimately we will witness.
Speaker Change: All said and done on which this has to be resolved by December 14th of this year. So we could literally get a decision any moment.
Speaker Change: But again, we anticipate when the case and moving on in the pattern.
Speaker Change: Extending out to 2035.
Speaker Change: Yes, hi.
Speaker Change: Opex for Q3, yes, it did but I wouldn't necessarily.
Speaker Change: As the new baseline, it's basically a blend of Q2 and Q3. It was just timing in Q3 on a couple of that resulted in lower expenses. So its not that is not the new baseline going forward.
Okay.
Speaker Change: Maybe one last one.
Speaker Change: As we think of no pain for 2025.
Speaker Change: How much of a tailwind can this be.
Speaker Change: I think you had pretty comprehensive coverage right now in the ASC setting so any.
Speaker Change: <unk>.
Speaker Change: Just curious what changes and can it really be.
Speaker Change: How much of a tailwind can it be for the <unk> franchise.
Speaker Change: Are you referring to ban I'm, sorry, I missed the first part of that.
Speaker Change: There are no payback, but how much of a tailwind.
Speaker Change: Yes.
Speaker Change: No look I think again with crossway with van and now no pain.
Speaker Change: I think it's going to be a tremendous help to us I mean, we do have reimbursement now, but one of the issues. We've really suffered from quite a while it's just awareness and I think the fact that were mentioned in the no payback that's being talked about a lot. We're now talking about opioid abuse, and so forth and I think having us in that conversation and the fact that we are the the longer side.
Speaker Change: Payroll product out there I think is going to provide significant awareness is going to create a significant tailwind. So we see it as a really a big plus for us going forward.
Speaker Change: Thank you.
Speaker Change: Sure.
Speaker Change: And our next question comes from the line of Brandon Folkes from Rodman <unk> Renshaw. Your question. Please.
Brandon Folkes: Alright, Thanks for taking my question I, just wanted to follow up on the guidance.
Brandon Folkes: So maybe when youre talking about the sequential revenue from <unk> to <unk>.
Brandon Folkes: Can you just elaborate a little bit further about the syn <unk> non stack that you're referring to versus the van uptake within relief.
Brandon Folkes: Maybe.
Brandon Folkes: And then along those lines, how should we think about the tailwind from the van just in terms of timing.
Speaker Change: Are you assuming.
Speaker Change: Tailwind begins in <unk>, what should we be thinking about that tailwind into 2025 event.
Speaker Change: Yes, thanks, Brian good to hear from you.
Speaker Change: Regarding <unk> I'll start with some volatility again since <unk> was no more than just an account loss in Q3.
Speaker Change: So we've been able to.
Speaker Change: And a few other accounts in Q4, and then what we've as we began to promote this product across the portfolio. This has been going on for a few months. So it wasn't just in Q4, but again, we picked up some business in the hospital.
Speaker Change: They have really seen an uptake in.
Speaker Change: I'd say, a bounce back to what quarterly revenues looked like prior to Q3, and so we really feel that that could continue into 'twenty five and we may even gain from where we were before so that's where <unk> sits and then that obviously, it's about managing asps, which we've historically done fairly well. So if we can maintain price and grow in.
Speaker Change: These accounts, we think somebody continued U K continues to perform as we move forward, but I think the.
Speaker Change: The main way that I would look at <unk> as more of a foundational business for us, it's allowing us again sort of the cash tail. If you will to find what we're trying to do on the <unk>.
Speaker Change: Acute side with Zimbra.
Speaker Change: Several asset upon beef.
Speaker Change: So moving to Zen rollout.
Speaker Change: What we're seeing currently is an uptick I think due to the cross a partnership it's obviously not due to the van yet because we don't have it to market, but I don't think the van is going to have as large of impact in Q4, maybe it will be out there and I think there was some excitement around it but I think to really see.
Speaker Change: <unk> trend is going to move into Q.
Speaker Change: Q1, 25, and kind of beyond but that combined with cross I guess sort of what we're seeing now.
Speaker Change: Great. Thank you very much I appreciate I appreciate the color.
Speaker Change: Thank you.
Speaker Change: Our next question is a follow up from the line of Carl Byrnes from Northland Capital markets. Your question. Please.
Carl Byrnes: Thanks for the follow up I'm wondering if you can give us a bit of an update on the development of the pre filled syringe. Thanks.
Speaker Change: Thanks, Carl Bill Forbes is here in the room with me and I'll turn it over to him.
Bill Forbes: Good morning, Carl Yes, we continue to progress the pre filled syringe program I mentioned earlier that sterilization of stability, where the challenges associated with that and we've made some great progress in the last quarter along those lines, yes, it had a slight delay because the machine parts.
Bill Forbes: And being back ordered but.
Bill Forbes: We're moving through that as well. So overall the program is progressing as expected and we're very hopeful for it because we think it's going to be an advancement even beyond what the band is going to give us pre filled syringes, obviously depend vehicles standard.
Bill Forbes: The approval of <unk> by the way, we're targeting approval the very end of 2026 first quarter 2027.
Speaker Change: Got it thanks.
Speaker Change: Thank you.
Speaker Change: This does conclude the question and answer session of today's program I'd now like to hand, the program back to management for any further remarks.
Speaker Change: So I just wanted to thank everyone for the questions today.
Speaker Change: We appreciate you joining the call and we look forward to speaking to everyone next quarter.
Speaker Change: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Sure.