Q4 2024 Pacira BioSciences Inc Earnings Call
Thank you.
Speaker Change: Good day and thank you for standing by. Welcome to the CERB Biosciences fourth quarter 2024 conference call. At this time all participants are on a listen-only mode. After this week's presentation there will be a question and answer session. To ask a question during this session you will need to press star 11 on your telephone. You will then hear an automatic message advising you your hand is raised.
Speaker Change: Please note that today's conference is being recorded. I would like to turn the call over to Susan Mesco, Head of Investor Relations. Please go ahead.
Susan Mesco: Thank you, Operator, and good afternoon, everyone. Welcome to today's conference call to discuss our fourth quarter and full year 2024 financial results.
Speaker Change: Joining me are Frank Lee, Chief Executive Officer, and Shawn Cross, Chief Financial Officer.
Speaker Change: Kristen Williams, Chief Administrative Officer, Tony Molloy, Chief Legal Officer, Jonathan Slonin, Chief Medical Officer, and Brendan Thien, Chief Commercial Officer are also here for today's question and answer session.
Speaker Change: Before we begin, let me remind you that this call will include forward-looking statements subject to the safe harbor provisions of federal securities laws. Such statements represent our judgment as of today and may involve risks and uncertainties.
Speaker Change: This may cause our actual results, performance, or achievements to differ materially.
Speaker Change: For information concerning risk factors that could affect the company, please refer to our filings with the FCC.
Speaker Change: These are available from the SEC or the FISERA website. Lastly, as a reminder, we will be discussing non-GAAP financial measures on today's call. A description of these metrics, along with our reconciliation to GAAP, can be found in the news release issued earlier this afternoon. With that, I will now turn the call over to Frank Lee.
Thank you, Susan, and good afternoon, everyone.
Speaker Change: The considerable progress we made in 2024 leaves us well positioned for 2025 and beyond.
Key highlights from last year include
Speaker Change: Record revenues of $701 million, the high end of our guided range.
Speaker Change: separate CMS coverage and product specific reimbursement codes for both Expiril and Iovera.
Speaker Change: RMAT designation from the FDA for PCRX 201 and the readout of compelling two-year data from our 72 patient phase 1 study.
Speaker Change: and importantly, establishing a best-in-class commercial market access and medical powerhouse to drive top-line growth.
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Speaker Change: Looking ahead, the year is off to a strong start. We're sharply focused on executing our 5 by 30 strategy and becoming an innovative biopharmaceutical organization.
Speaker Change: We believe executing on this strategy is the best way to achieve growth and value creation as a leader in musculoskeletal pain and adjacencies.
Shawn Cross: Thank you for tuning in. I'm Shawn Cross. I'll see you next time.
Speaker Change: The plan focuses on five key objectives that we intend to achieve by 2030.
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Speaker Change: These objectives support two broad strategic imperatives. First, accelerating growth in our strong commercial-based business.
Speaker Change: and second, advancing an innovative pipeline of potentially transformative assets like PCRx201.
Summarize our 5 by 30 goals. Patience.
Speaker Change: We expect our products to be benefiting more than 3 million patients annually by 2030.
Speaker Change: Products. We plan to grow product revenues by double-digit CAGR over the next five years.
Speaker Change: Profitability, we expect to achieve a five percentage point expansion in gross margin over 2024.
Speaker Change: Pipeline. We anticipate having five novel programs in our clinical development pipeline.
Speaker Change: and Partnerships. We plan to establish at least five clinical or commercial partnerships.
Speaker Change: When we look at the Cirrus commercial-based business, we have a solid foundation. Our three best-in-class products are generating significant cash flow.
Speaker Change: Each of these franchises has ample room for increased penetration and market expansion.
Speaker Change: with multiple key growth drivers starting to kick in this year.
Thank you.
Speaker Change: For our flagship product Exporail, the No Pain Act is now in effect. This means we have reimbursement pathway for 18 million outpatient surgical procedures. Approximately 6 million of these procedures have CMS coverage and 12 million have commercial coverage.
Speaker Change: Thank you for watching. Please subscribe to my channel. I'm your host, Shawn Cross.
Speaker Change: Expro now has its own product-specific J-code with a reimbursement rate of average selling price plus six percent.
Speaker Change: Securing this code was a particularly important milestone as it will expand patient access to best practice opioids bearing care.
Speaker Change: In addition, the J-Code will streamline the reimbursement and billing process.
Speaker Change: It is also more likely to be recognized and covered by commercial payers.
Speaker Change: Well, it's still early days. Our field teams are seeing evidence of progress since the rollout of No Pain on January 1st.
This includes recent formulary wins.
Speaker Change: as well as a rising level of awareness around the J-Code.
Speaker Change: While we're pleased with the positive early indicators, it will take time for our customers to adopt this new reimbursement.
Speaker Change: In addition, the IQVIA claims data can take up to four months to process.
Speaker Change: We look forward to sharing future updates as more data becomes available.
Speaker Change: On the payer front, we continue to highlight the external value proposition with real-world evidence.
Speaker Change: In addition to CMS, we now have commercial payers beginning to recognize the importance of reimbursing XBRIL outside of the bundle payment.
Speaker Change: Recent progress includes several national payers adopting no pain like policies.
Speaker Change: This represents roughly 40 million covered lives and more than doubles our previous commercial coverage map.
Thank you.
Speaker Change: Our teams will continue to focus on expanding coverage, and we'll keep you apprised on future calls.
Speaker Change: Along with favorable patient outcomes, separate reimbursement helps our customers navigate financial challenges.
Speaker Change: At the same time, it gives them the opportunity to be at the forefront of opioid-sparing pain management.
Speaker Change: This is especially relevant for those accounts receiving discounted pricing through 340B or GPO networks.
and the Benethys Mutual, given the anticipated expirale volume expansion.
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Speaker Change: We launched two GPO partnerships last year, both are performing according to plan, with volumes up and only modest impact on net sales dollars.
Speaker Change: Our third and final GPO agreement is expected to go live in the first half of this year and once completed more than 80% of our current expert business will be under contract.
Speaker Change: Given our progress on the market access front, along with our learnings from market research, we believe it's the right time to invest in targeted direct consumer marketing.
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Speaker Change: We expect this DTC investment to expand utilization by driving patient demand for Expiril to be a part of their treatment plan for post-surgical pain.
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Speaker Change: We will begin with targeted pilot programs in the first half of the year and adjust our investment accordingly based on the ROI data.
Speaker Change: These patient-focused programs augment the expert value proposition we are presenting to physicians and other key stakeholders.
Turning to Zylreta, a best-in-class product that's promotionally sensitive.
Speaker Change: This year, we are focusing on generating additional shared voice, increasing our reach, and driving awareness around its key advantages.
Speaker Change: in the first and only long-acting single-shot corticosteroid injection for osteoarthritis knee pain.
Speaker Change: So RETA has demonstrated high patient satisfaction, up to four months of reliable pain relief, and fewer office visits.
Speaker Change: Zoretta also has a strong safety and pharmacokinetic profile as it remains localized in the knee.
Speaker Change: This allows for fewer systemic effects, including significantly lower blood glucose spikes, an important benefit for diabetic patients.
Speaker Change: Fourteen percent of patients with osteoarthritis also have diabetes so this represents a meaningful opportunity.
Speaker Change: In parallel with our commercial efforts, our Phase III Registrational Study is advancing in Shoulder OA and is on track for top-line results next year.
Speaker Change: If approved, Zobreta would be the first and only long-acting steroid approved for use in shoulders.
Speaker Change: This is a sizable market with approximately 1 million intra-articular injections administered each year.
Speaker Change: We have a key growth driver kicking in this year with separate CMS reimbursement now in effect via the product-specific code C9809.
Speaker Change: This is important as physicians are eligible to receive up to $256 for Iovera using this new code.
Speaker Change: This payment is in addition to the procedural fees they are receiving.
Speaker Change: We're also launching a new Iovara Smart Tip. This innovative tip was approved late last year and is specifically designed for use as a medial branch block to relieve low back pain.
Speaker Change: Millions of Americans suffer from chronic low back pain. It often leads to poor quality of life, disability, lost wages, and persistent prescription opioid use.
Speaker Change: Lastly, our registrational study of iovarium for treatment of spasticity is advancing with top-line results expected next year.
Speaker Change: There is a significant lack of innovation and patient satisfaction in this debilitating condition.
Speaker Change: We believe IVA represents a novel approach for patients with moderate to severe spasticity seeking better treatment options.
Thank you.
Turning now to our second Strategic Comparative Advancing Innovative Pipeline.
Speaker Change: Here we're focused on becoming a therapeutic area leader in musculoskeletal pain and adjacencies. These are large markets.
Speaker Change: significantly lacking innovation. Nearly one in four Americans are living with chronic pain and seeking new interventions addressing its underlying cause.
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Speaker Change: As we look to new product development, we'll prioritize mid- to late-stage derisked opportunities.
Speaker Change: More specifically, product candidates with validated mechanisms and established reimbursement pathways.
Speaker Change: We'll also look to leverage our long-standing market leadership in treating pain in a precise targeted ways.
Speaker Change: Our recently announced acquisition of the remaining ownership stake of GQBio is a perfect example.
Speaker Change: It directly aligns with our 5x30 strategy by adding an exciting, first-of-its-kind, high-capacity, local delivery platform for genetic medicines.
Speaker Change: This transaction also brings us a preclinical portfolio with disease modifying potential in prevalent musculoskeletal diseases.
and Research and Development Talent.
Speaker Change: Further, it eliminates future milestones and builds upon the process development activities we've been advancing with GQBIO since 2023.
In short, we know this technology very well.
Speaker Change: We believe there's a great potential for this platform to position us as a leading developer of novel treatments for underlying cause of chronic pain using a targeted molecular approach.
Speaker Change: We have a clear understanding of the safety and tolerability of the high-capacity adenovirus or HCaT viral vector, which is based on AD5.
Speaker Change: This is a well-understood serotype that is very common in community circulation.
Speaker Change: We also have strong data suggesting it is not susceptible to pre-existing neutralizing antibodies.
This allows for the possibility of re-dosing.
Speaker Change: This platform solves many of the challenges that have made gene therapy inaccessible for common diseases. The HCaT vector is much more efficient at delivering genes into cells compared to many other gene therapies that rely on the adenovirus-associated virus, AAV vectors.
Speaker Change: As a result, the direct effect can be achieved with much smaller doses.
Speaker Change: The vector used in the HCaD platform can carry up to 30,000 base pairs of DNA, which enables gene therapy with multiple or larger genes compared to AAV vectors.
Speaker Change: is locally delivered and sustained. This differs from systemic approaches requiring much higher dosing to achieve the desired effect.
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Speaker Change: Lower dose levels coupled with efficient manufacturing support, a favorable and commercially viable cost-of-goods profile.
Another key advantage over other gene theorists.
Speaker Change: PSARC 201 is the lead program from this platform, which we believe underscores its promise given its encouraging data in osteoarthritis.
Speaker Change: Last year we reported compelling results from a robust phase one study of PCRX 201 in 72 patients with moderate to severe osteoarthritis.
Speaker Change: A single intra-articular injection demonstrated unprecedented pain relief and durability across all levels of disease severity for at least two years.
The greatest efficacy was observed in the steroid pre-treaty group.
Speaker Change: In all three doses, more than 70% of patients saw at least a 50% improvement in pain versus baseline at week 16 and 78.
Speaker Change: PCRx201 was also well tolerated with no serious treatment emergent adverse events.
Speaker Change: We continue to follow these patients and look forward to reporting exciting three-year follow-up data later this year.
While there's typically a placebo phenomenon within osteoarthritis pain studies
We are encouraged by our data.
Speaker Change: The magnitude and durability of efficacy far exceeds the placebo effect reported in published randomized studies.
Speaker Change: Patient enrollment is now open for our Phase 2, double-blind, two-part study of PCRS 201.
Speaker Change: The study will include an active steroid comparator. We will share additional details on the study design in the coming weeks with top-line data from Part A expected late next year.
Speaker Change: Beyond PCRx201, the GQ transaction brings us several exciting product candidates in preclinical development.
Speaker Change: We've also identified numerous well-validated cytokines for musculoskeletal pain and adjacencies that would be strong candidates for this platform.
Speaker Change: We're planning to share more details on the potential of this exciting platform through an educational webinar in the spring.
Speaker Change: For those areas outside of our strategic focus, we see great potential for partnering.
Speaker Change: This could extend the HCaT platform into other conditions of high unmet need where localized treatment with a therapeutic protein is warranted.
Speaker Change: Fittingly, this brings us to the last component of the 5x30 plan, forming five clinical or commercial partnerships over the next five years.
Speaker Change: As you know, our products are currently only marketed in the U.S.
Speaker Change: We believe there is a meaningful opportunity in certain key markets outside of the U.S. where our products can be financially viable and deliver value to patients.
Speaker Change: We will be actively seeking commercial partners to realize that potential. In parallel, we will also look to identify ways we can partner on development programs to balance portfolio risk.
Shawn Cross: Before I turn the call over to Shawn, I'd like to formally welcome two new additions to our executive team, Brennan Tien, our newly appointed Chief Commercial Officer, and Chris Corbett, who joined as our Chief Business Officer.
Shawn Cross: These two executives bring extensive experience to PSARA at an important stage in our evolution.
Shawn Cross: The Board also recently appointed Laurel Braggie as Chair of the Board, while former Chair Paul Hastings and Andreas Bleke have both retired.
Shawn Cross: As a reminder, our board refreshment began 15 months ago with the appointment of five new directors.
Shawn Cross: These changes also significantly reduced the average tenure of our board to less than five years, compared to nearly 12 years in 2023.
Shawn Cross: We thank Paul and Jez for their many contributions to the company. Moving forward, I have every confidence Laura, Brendan, and Chris will be key contributors to our next phase of growth.
Shawn Cross: With that, I'll turn the call over to Shawn for a review of the financials.
Shawn Cross: Thank you, Frank. I'll start with an update on sales and margin trends.
Fourth quarter VEX furrow sales increased to $147.7 million.
versus 143.9 million, 2023.
Shawn Cross: Volume growth and a 2024 price increase were partially offset by a shift in viral mix and discounting associated with GPO partnerships.
Shawn Cross: Fourth quarter Zilreta sales increased to $33.1 million versus the $28.7 million reported in 2023.
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Shawn Cross: For Iovera, sales were $6.5 million compared to $6.0 million in the fourth quarter of 2023. Turning to gross margins, on a consolidated basis, our fourth quarter non-GAAP gross margin was 79%.
This was driven by improved margins for Xpro and Zilrata.
Thank you.
Shawn Cross: For non-GAAP R&D expense, the fourth quarter increased to $22.0 million from $16.6 million reported last year.
This increase relates to product development and clinical study costs.
Thank you. Thank you. Thank you.
Shawn Cross: Non-GAAP SG&A expense came in at $78.6 million for the fourth quarter, which is up from $57.4 million last year.
Shawn Cross: This increase is largely due to investments in our commercial, medical, and market access organizations, as well as no pain readiness.
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Shawn Cross: All of this resulted in another quarter of significant adjusted EBITDA of $62.5 million.
Shawn Cross: As for the balance sheet, we exited the fourth quarter in a position of strength with $485 million of cash and investments.
Thank you for watching.
Shawn Cross: With a business that is producing significant operating cash flow, we believe we are well-equipped to advance our 5x30 strategy and create shareholder value.
Shawn Cross: We are taking a disciplined approach to capital allocation where we are focusing on four areas.
First, accelerating growth in our best-in-class space business.
Shawn Cross: Second, advancing an innovative pipeline to becoming the leader in musculoskeletal pain and adjacencies.
Shawn Cross: Third, managing our balance sheet and planning for the repayment of debt.
We have a convertible, not due in 2025.
Shawn Cross: A term loan due in 2028, and a second convertible loan due in 2029.
Thank you for watching. See you next time.
and fourth, returning capital to shareholders.
Shawn Cross: We have $125 million remaining of our share buyback authorization, which we put in place last year and runs through the end of 2026.
Thank you.
Thank you for watching. We'll see you next time.
Shawn Cross: Going forward, we will continue to be highly strategic, balance favorable operating margins, while advancing our 5 by 30 strategy.
Shawn Cross: This includes carefully investing in a best practice commercial, medical, and market access powerhouse.
and Targeted Direct-to-Consumer Marketing.
Shawn Cross: In parallel, we will advance a pipeline of potentially transformative assets like PCRx201 as we transition into an innovative biopharmaceutical organization.
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Shawn Cross: That brings us to our full-year P&L guidance for 2025 as follows. Total revenue of $725 to $765 million.
Shawn Cross: As Frank mentioned, we are pleased with the positive early signs and growing levels of awareness around no pain.
Shawn Cross: That said, it will take time for our customers to integrate this new reimbursement.
Shawn Cross: We expect more meaningful update to begin the second half of the year.
Shawn Cross: Non-GAAP gross margins of 76 to 78 percent. Non-GAAP R&D expense of $90 to $105 million.
Shawn Cross: At the midpoint, this represents an 11% increase over our fourth quarter 2024 annualized run rate.
Shawn Cross: The key drivers are increased costs associated with clinical studies. These include the following.
Our Phase 2 study of PCRX201.
Investments to support the PCR-201 and HCaD commercial manufacturing process.
Shawn Cross: as well as other activities related to our acquisition of GQBio.
A new pilot study of Xyloreta and HIF-OA
Shawn Cross: and Ramping Costs for the Zilreta and Iovera Registration Studies, which we anticipate will read out in 2026.
Shawn Cross: For non-GAAP SG&A expense, we are guiding to a range of $290 to $320 million.
Shawn Cross: At the midpoint, this represents an 8% increase over our fourth quarter 2024 annualized run rate.
Shawn Cross: Our new marketing initiatives, including our DTC pilot programs that are beginning in the first half of the year.
Shawn Cross: As Frank mentioned, we believe these DTC investments will drive increased patient demand for Expiro.
Shawn Cross: As always, we will be prudent and adjust FEND accordingly based upon the data.
Shawn Cross: Stock base compensation of $56 to $61 million. And lastly, for those modeling adjusted EBITDA, we expect our 2025 depreciation expense to be approximately $30 million.
Shawn Cross: This increase over 2024 is largely driven by our 200-liter sweep in San Diego, which began producing commercial supply in mid-2024 and is a new Zelleretta fill line.
With that, I will turn the call back to Frank.
Frank Lee: Thank you, Shawn. In closing, 2024 was a tremendous year of progress across the organization.
Frank Lee: All the work completed has allowed us to enter 2025 sharply focused on 5x30 and our transition into an innovative pharmaceutical organization.
Frank Lee: We are confident the steps we're taking position us for sustainable growth and success as a leader in musculoskeletal pain and adjacencies.
Speaker Change: With that operator, we're ready to open the call for questions.
Speaker Change: Thank you. Ladies and gentlemen, to ask a question at this time, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 1 1 again. Please stand by while we compile the Q&A roster.
Thank you. Thank you. Thank you.
Speaker Change: Our first question coming from the line of Oren Lifnet with HC Wainwright. Your line is now open.
Thanks. I've got a couple of questions.
Big picture, can you just...
talk more about the...
Speaker Change: assumptions for no pain both implementation on the customer side and uptake you're obviously not trying to get ahead of yourself by talking about a second half ramp but I'm trying to understand you know what would be the impediments to sort of an aggressive
Speaker Change: rapid uptake on the customer side, given, you know, hospitals certainly would like to be making margins here. And I'll wait for the follow-ups. Thanks.
Thank you.
Thanks for your question, Oren. It's Frank Lee here.
Speaker Change: We're excited about NoPain and as we've said consistently, it'll take time for our customers to really get traction around NoPain and we think that's going to be starting the second half.
Speaker Change: Yep, some of the things that we've got to make sure we do with our customers is certainly raise awareness.
Get them comfortable with the J code.
Speaker Change: and in many cases our customers are trying out the code to make sure that they're getting reimbursed and so there's a learning period there.
Speaker Change: and so we have to go through that and we have some encouraging signs that we're seeing in terms of the use of the J-code, the awareness of no pain.
Speaker Change: and customers utilizing that code and starting to get reimbursed. So, the early signs are good, but certainly it takes time for us to get traction on something like this.
Thank you.
Speaker Change: All right, and I guess you sort of segwayed into my follow-up, which was about what experience people are already having. Are you...
Speaker Change: Seeing successful reimbursement such that, you know, any cautious approach to using it for fear of not getting paid back is already starting to
Make some headway there. And have you had more access?
Speaker Change: or penetration into accounts or geographies already that you hadn't at all before where, you know, obviously there are many accounts that don't use XBorrel at all for financial reasons. I'm wondering if you, you know, broke a new ground with NoPain already with a broader set of customers.
Thank you.
Thank you. Thank you. Thank you.
Speaker Change: These are all really good questions and as we get more and more data we'll be able to answer them, you know, factfully.
Speaker Change: All right, so as we mentioned, the IQVIA claims data takes some time to true up over time, that's lagging data, but you know what, we're seeing encouraging signs.
Speaker Change: and often times these revenue cycles take a little while. They can take a couple of weeks.
Speaker Change: to six, seven, eight weeks to see the revenue cycle be completed. And so it's still very, very early days.
and what I'd say is anecdotally we're seeing good traction.
Speaker Change: And as we mentioned, commercial payers, we've had some wins there.
Speaker Change: And so, as you know, it's not only the accounts, but also the payers that are very important.
and we've all always said that CMS is...
important certainly for the outpatient setting.
Speaker Change: But, of course, they have a mix of CMS and commercial payers, and we find it encouraging that we've got some commercial payer wins out of the gate.
Speaker Change: All right, and if I could just change gears a bit.
Speaker Change: I don't know if you want to comment at all on litigation going forward, but just big picture, you've been very confident in your optimism for a long XPAREL runway with exclusivity.
especially after your new IP issued late last year.
I'm trying to reconcile your...
Speaker Change: approach to capital allocation, given your confidence there, especially with, you know, the market has only barely backed off its most dire concerns from earlier last year, and bounce back a little bit, but there's a huge disconnect, in my view, between, you know, even the current business.
Speaker Change: and what it's worth, let alone major growth potential from no pain and upside optionality from a pipeline, why wouldn't you be much more aggressive with potential buyback at these levels?
Thank you.
Thank you.
Speaker Change: Yes, so let me start by saying, as always, we value certainty.
Speaker Change: as much or more than any other investor, right? And so that's an important part. We also value making sure that we have long-term value for our shareholders. And so that's our guiding principle. And in the background, we've been, as you mentioned,
Speaker Change: very active in making sure that we continue to innovate and drive forward with new paths.
Speaker Change: and new IPs. And I would expect that going forward. We continue to innovate and we believe we'll be providing additional patent protections going forward.
That said, now, from a capital allocation...
Shawn Cross: We're going through a very disciplined approach, as Shawn mentioned. A very disciplined approach to make sure that we're funding our...
current operations and you know we have
Shawn Cross: Quite a few catalysts here as we just talked about. We also have some important pipeline additions with now the great news, I really believe, about GQ Bio. We can talk about that a little bit, you know, just a recent acquisition that we announced.
Shawn Cross: and, of course, managing the balance sheet, and we do have $125 million left.
Shawn Cross: on our buyback program. So all of those we're going to be managing in a very disciplined and balanced way and so that's our approach and we think that's going to get us to what we need to get to over the next five years.
Speaker Change: All right. Thanks. Appreciate it. I'll hop back in the queue.
Thank you. Thank you. Thank you.
Thanks, Warren.
Speaker Change: Thank you. Our next question coming from the line of Gregory Renzo with RBC Capital Markets. Your line is now open.
Speaker Change: Great. Thanks. Good afternoon, Frank and team. Congrats on the progress. Thanks for taking my questions.
Speaker Change: and how you're thinking about that across Xperel, Xilireta and Iovera, and also if there's anything sequentially over the year that we should be thinking about just above and beyond what you've described when it comes to no pain. Thank you.
Shawn Cross: It's true. I'll let Shawn speak to that in a second. Obviously the Xpryl is our flagship product and we have a
Shawn Cross: good catalysts here with the J code as well as no pain but certainly we plan on putting a shoulder behind Zolreta and Iovera as well but you know Shawn you can speak a little bit to you know how we're thinking about that.
Yeah, I think the, you know, the relative mix.
Frank Lee: As Frank mentioned, XORETTA, or XPRO, is still, of course, the flagship product.
Frank Lee: And we think that, you know, we fully expect the commercial investments we've made in 2024 to bear fruit and enable the top line to achieve double-digit figure, you know, really exiting the year and beyond following our 5 by 30.
Frank Lee: As mentioned, we are pleased by the positive early signs of no pain, but just can't reiterate more that it will take time for the customers to integrate the new reimbursement and stay tuned for what we expect to be a more meaningful uptake to begin in the second half of the year.
Speaker Change: Certainly, Frank, your mention of valuing certainty, just help us understand what some of the implications are and some of the competitive landscape that you're thinking about when you cite those numbers through into 2030. Does it imply competitive entry with XPAREL, some degree of timeline and competitive dynamic there?
Speaker Change: Sure, Greg, that's a great question, and I have to tell you, we're very thoughtful as we put the 5x30.
Speaker Change: We have talked a little bit about this before, but we do not believe there will be an at-risk launch of a generic this year or in the foreseeable future.
Speaker Change: So, on top of that, we continue to build on our IP estate.
Shawn Cross: We continue to innovate, and that gave us confidence to put forth this 5 by 30 strategy. And as Shawn mentioned, picking up that growth rate as we exit the year with all the different catalysts that we have behind us.
Thank you.
Fantastic. Thanks guys. Congrats again.
Thanks, Craig.
Speaker Change: Thank you. Our next question coming from the line of Gary Neitman with Greenman James. Your line is now open.
Gary Neitman: Hi, guys. Good afternoon. So back to the revenue guidance range, what are you assuming in terms of volume growth versus how much offsetting pressure you'll have on growth to net from the GPO contracts?
Gary Neitman: You know, just when we think about the no pain dynamic. And then for DTC, the pilot effort, just how much could XPAREL utilization be consumer-driven versus targeting physicians and hospitals like you have done traditionally? And then I have a follow-up.
Speaker Change: Sure, let me address the targeted DTC question first and then I'll hand it over to Shawn to talk a little bit more about the numbers. You know, typically what we see in the industry is once you educate the health care providers
Speaker Change: And when you lower the access barriers, that is reimbursement, payers, coding, etc.
Speaker Change: Then it's the right time to consider a very targeted approach to activating the patient and I want to underscore targeted
Speaker Change: because as you might imagine the level of education and level of access, level of billing savvy varies by customer you know across the various geographies.
Speaker Change: So, we're going to be very, very targeted and we're going to be ROI driven.
Speaker Change: So these days, you can be very, very targeted with these kinds of approaches.
Speaker Change: And as Shawn mentioned, we'll pilot some of those approaches in the first half of the year.
Speaker Change: And depending on what we see, we'll adjust our investment accordingly. So, that's how we're thinking about it. So, the great news here is that we've had a long history of educating healthcare providers about Expiril.
Speaker Change: With the J code now and no pain, it's given us an opportunity to lower those access barriers.
Shawn Cross: Now is the right time to start to pilot and understand how best we can activate patients in certain settings and certain geographies. So that's our thinking there. And let me hand it over to Shawn to talk a little bit about numbers.
Shawn Cross: Yeah, we'll just keep the story. It's a pretty simple answer with regard to the forward guidance on the revenue side that it's effectively all volume growth. That's the way to think about it.
Speaker Change: Okay, great. But in terms of magnitude of just the growth to net, you're going to have a little bit of pressure this year when you have the additional GPO. That obviously would be offset, but is that a little bit of a headwind at all?
Thank you for watching. See you next time.
Speaker Change: Yeah, you got it spot-on. So, you know, take price increase and have a little bit of headwind there and they'll offset each other. So just think about it as volume growth.
Thank you. Bye-bye. Bye. Bye.
Speaker Change: It is a notable step up in terms of your R&D spend this year, and you have a few programs ongoing that sound pretty interesting. How comfortable are you with what you have in-house?
Speaker Change: Maybe you just want to comment quickly on the GQ bio and...
Speaker Change: just adding that, the types of preclinical programs that you have and do you think you need to still go outside the company maybe to expand the pipeline further or do you have enough now internally to generate the kind of innovation that you're looking for? Thanks.
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Speaker Change: Yeah, that's a good question Gary. So I want to step back and say we're in the process of transitioning from more specialty pharma and innovative pharma. I don't think that transition is complete. It will be taking steps deliberately in that direction.
Speaker Change: That's number one. Number two, as a result of that now, we'll start to invest a little more in R&D, consistent with that kind of a company that we're talking about, that's a little bit more innovative pharma than specialty pharma.
Speaker Change: What's great here is we've got not only life cycle programs for our existing products,
But now we're adding some truly innovative programs like PCRx201.
Speaker Change: that we're very excited about. We're starting the phase two study. In fact, the study is open now for enrollment. And as you know, that'll read out sometime late next year in terms of part A of that study.
Speaker Change: So we're very excited about that, and we're going to carefully look at what else is in the non-clinical pipeline from GQBio. And of course, there's some very interesting things there, and this supports the idea in our 5x30 that we'd have five novel development programs.
Speaker Change: by 2030. So, how many of them will come from GQBio, I can't comment on now, but we do think there's some very interesting projects there.
Speaker Change: First and foremost, the platform, the HCaT platform, is something that comes with GQBioNow.
PCRx201, we had that asset, but now we also have...
the platform that could also be a way...
Speaker Change: to generate additional programs and molecules. So we're excited about it. And so, how much of it will come from GQBio? An extra I can't really speak to right now. We're very excited about the acquisition of GQBio.
Speaker Change: And again, it brings with it this idea that now we have a platform.
the preclinical assets.
It gives us some really talented...
Speaker Change: I think talented researchers in this space, people make the difference here in capability and historically we haven't had a lot of that in terms of the research and early development. And finally, from a financial standpoint, I really think it's a no-brainer. We're taking care of the future milestones.
Speaker Change: some of which we would have had to pay this year. So, all in all, it's a great acquisition and we look forward to welcoming the GQ Bio team next week as we make a trip to Germany.
Great. Thanks for that additional color.
Thank you. Thank you. Thank you.
Thank you. Thank you.
Speaker Change: Our next question coming from the line of Serge Belanger with Needham and Company, your line is now open.
Speaker Change: Hi, this is John on PERSERGE today. Thanks for taking our questions.
Speaker Change: First, on iovera, with the implementation of iovera into no pain, do you kind of see it taking on a similar trajectory, kind of adjacent to expirale, regarding any potential increased uptake throughout 2025?
Speaker Change: And then second, on the generic front, although it looks like it's unlikely that we'll see a generic launch in the near term, I just wanted to gauge your guys' appetite on a potential settlement agreement at this time. Thanks.
Speaker Change: Yeah, let me speak to the generic first and then we can chat a little bit about Iovera.
Speaker Change: From a generic standpoint, as I mentioned earlier, we value certainty as much or more than any other investor, any other investor out there. You know, I think in terms of settlement, we really can't comment on those kinds of discussions.
Speaker Change: and so I think whatever we do is going to be in the long-term best interest of our shareholders and patients. So I'll just leave it at that and again want to reiterate that we feel very good
about our IP estate.
Speaker Change: and we continue to innovate and what you should expect are more patents to come later on this year.
With regard to Iovera, what I tell you here is
Speaker Change: It's one where we're very excited about this additional reimbursement. I have to be very transparent and tell you that we didn't know if we were going to get it or not. We were fairly certain about Exporail, for sure, but for Iovera, this one was a bit of a jump-off.
Speaker Change: So we're very excited about Iovera being included as part of the 11th products so Expirail and Iovera 2 out of the 11.
Speaker Change: and provide some additional reimbursement and maybe I mean Brendan you can speak to the additional reimbursement and the situation about Iovera.
Brendan: Sure. Thanks for the question. Thanks, Frank. We do see this as the key growth driver kicking in this year.
Brendan: with separate CMS reimbursement for IOVERA with a product-specific C code, again 9809.
Brendan: And the payment is, importantly, in addition to procedural fees that they would get that they would currently be receiving.
So I think we see that as an untapped opportunity.
Brendan: We look ahead, as we're looking ahead, we're looking at selectively investing in Iovera for accelerated growth. It's in a different stage of its life cycle than X4L, and we'll look at that and try to capitalize on the improved reimbursement landscape.
Brendan: And then finally, as you probably know, we have an additional opportunity with the new smart tip that is launching later this year for low back pain, and we'll continue our phase three registration study in spasticity.
Thank you. Thank you.
Thanks for the question, John.
Thank you. Bye.
Thank you.
Speaker Change: Our next question coming from the line of Les Zaleski with Tourism Security Zealand is now open.
Speaker Change: Hey, good evening. This is Jeevan on for less. Thank you for taking my questions.
Speaker Change: Just a quick one for me. So with Zylreta's phase 3 data for shoulder OA expectation 26, I'm just wondering how you view its potential contribution to revenue growth and are there plans to maybe accelerate development timelines or expand in indications?
Yeah, thanks for the question.
Speaker Change: I have to tell you, I'm excited about Zaretta, you know. Zaretta, as I've always said, is maybe the...
Speaker Change: of the three products that maybe hasn't gotten the attention it really deserves. It's a fantastic product.
This opportunity is shouldered.
Speaker Change: We think this will be, we'll see top line data sometime probably mid to late next year.
and this will be the first long-acting corticosteroid for shoulder.
Speaker Change: And it's roughly about a million intra-articular injections a year, so it's...
Speaker Change: It's quite substantial. So we're optimistic. We obviously have to conduct the studies and have good data, but those studies are now enrolling and we feel very good about delivering that data late next year or mid to late next year.
Speaker Change: Thank you. And as someone that has a question, please press star 11. Our next question coming from the line of Hardik Parikh with J.P. Morgan. Your line is now open.
first question and I'll follow up with that.
Speaker Change: Yeah, you know, Harding, it's a good question. I don't want to go off the guide for too many years. What I'll do is I'll tell you about this year. This year we've got some...
Speaker Change: really important catalysts like we just talked about. And we believe that these investments are going to return against, will have a good return on investment against these investments. So that's number one as it relates to what we're doing on the commercial medical market access side.
Speaker Change: As it relates to the development programs, as I said, it's very exciting around these development programs.
Speaker Change: And in terms of how quickly we shift towards more of innovative versus especially pharma, we'll have to be opportunistic about that. We'll see how these non-clinical assets...
Speaker Change: and GQ Bio, Pan-Al, and there's some other things we're looking at as well. And so we'll be very, very careful there in managing our growth.
Speaker Change: And so the key thing to take away is let's focus on this year.
Speaker Change: And this year, we believe, because of the catalyst and the investment opportunities in front of us, this is going to return, you know,
in terms of the have the ROI that we expect.
Speaker Change: Okay, great. And then you mentioned that you had some commercial payers that had adopted, you know, like a no pain like reimbursement model. I was just wondering if you could give us some more insight into which payers made that switch and how close their models are to the no pain model.
Thank you.
Speaker Change: Yeah so it's a good question. Now it's a tricky thing sometimes to mention specific payers and these kinds of things because
Speaker Change: You have to get permission from those folks. But what I'll tell you, it is a national payer.
Speaker Change: for sure. And we were also able to get a couple of other payers that are very important as well. And so I want to come back to, we're probably sitting at about double where we were before in terms of
Speaker Change: commercial covered lives. So we've gone from about 20 million to about 40 million.
And this is early out of the gate.
Speaker Change: It's early out of the gate, which is a good sign. And this is very consistent.
Speaker Change: with how CMS is reimbursing. In some cases, it's north of that, so it's outside of the bundle, and at least what CMS...
Speaker Change: And I did fail to mention that we also got Tricare as well. So as you know, they service the military and their families. And so that was a great win right out of the gate. So we're encouraged by what we're seeing.
Speaker Change: were encouraged. But it's still early days, so I don't want to get ahead of ourselves. But as I mentioned in prior calls, we expected the commercial payers to lag significantly, as they normally do. But having these kind of wins early on is encouraging.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Speaker Change: And we have a follow-up question from Oren Lipnert with AC Wainwright, your line is now open.
Speaker Change: Thank you for watching. Please subscribe to my channel. I hope you enjoyed this video. If you did, please leave a comment. I love reading your comments.
Speaker Change: Thanks, and just let me try to think about how conservative or not.
This guidance is, you know, it's...
Speaker Change: I did notice on the gross margin, the Adjusted Gross Margin Guidance.
Speaker Change: They're, you know, flat to down from where we were in the entire second half of this year and I would think with the growth, even conservative assumptions on growth above, they're fixed.
Speaker Change: cost structure and the 200 liter skid and San Diego now online.
Speaker Change: But as Frank had mentioned we need to emphasize this there can be quarter over quarter variability.
Speaker Change: And our gross margins.
Speaker Change: And full year margins are much better sort of frame of reference.
Speaker Change: Former.
Our guided range for 2025 for <unk>, 76% to 78%.
Speaker Change: And I think as we start to see volume pick up more going into the second half and particularly quarter four as we talked about.
Speaker Change: Running at that double digit then going into next year that will start to improve quite a bit more than 200 leader will become more and more of a part of our mix and so all these things give us a good tailwind, but it's going to take us a little bit of time to get there.
Speaker Change: Alright I appreciate it.
Speaker Change: Okay.
Speaker Change: Thanks, Laura.
Speaker Change: Okay.
Speaker Change: Thank you ladies and gentlemen quick question I will now turn the call back over to Susan Mcgee with any closing remarks.
Speaker Change: Thank you Andy and thanks to all on the call for your questions and time today.
Speaker Change: We're excited about the opportunities that lie ahead for us.
Speaker Change: The remainder of the year, we will continue to ensure we are well positioned for long term success.
Speaker Change: Executing our size is there any plan to advance our mission. Thank you let me luck.
Speaker Change: This concludes today's conference call. Thank you all participating and you may now disconnect.
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