Pacira BioSciences, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the 2020 Pricera Bioscience Earnings Conference call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Susan Mesko, Head of Investor Relations. Ma'am, please go ahead.

Thank you, Tina, and good morning, everyone. Welcome to today's conference call to discuss our fourth quarter and full year 2020 financial results. Joining me as speakers on today's call are Dave Stack, Chairman and Chief Executive Officer, and Charlie Reinhart, Chief Financial Officer. Additional members of the FASERA Executive Leadership Team are also in the room for today's question and answer session. Before we begin, let me remind you that today's call will include forward-looking statements based on our current expectations. 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 our website. With that, I will now turn the call over to Dave Stack.

Thank you, Susan. Good morning, everyone, and thank you for joining us. 2020 was a difficult year for people around the world. Like all of you, we enter 2021 with great hope that the vaccines developed by our industry colleagues will stem the tide of the global pandemic. COVID-19 has further escalated our nation's opioid crisis, placing an even brighter spotlight on the tremendous need for opioid-sparing pain management to avoid this key gateway to addiction. A rising number of drug-related fatalities continue given the health, social, and economic disruptions that are facing our country. Equally important is the pain that patients have had to endure due to COVID-related delays in necessary surgical procedures. Expedited recovery is even more critical than ever, and we are dedicating considerable resources to develop and implement ex-pro-based enhanced recovery after surgery or ERAS protocols that are enabling earlier discharge and accelerating the migration of elective procedures to outpatient sites of care. I am both proud and delighted to report that during these challenging times, we quickly adapted to our customer needs to provide opioid-free pain relief in a virtual world. This translated into record revenues for 2020 despite ongoing geographic disruptions in care delivery. This success is really a testament to the Pacira team and their steadfast commitment to provide an opioid alternative to as many patients as possible and redefine the role of opioids as rescue medication while enabling elective surgery migration to outpatient care. As noted in today's press release, Our 2020 revenues were our highest ever, coming in at $430 million for 2021, despite COVID-related challenges. The overwhelming needs of the marketplace and transformation underway in the ambulatory surgery care setting allowed Expirel average daily sales to return to year-over-year growth in June. Attractive growth continued throughout the remainder of 2020, and we see this trend continuing right into 2021. None of these numbers should come as a surprise. as we have aimed to be as transparent as possible during these unprecedented times by reporting our preliminary monthly sales. While we feel incredibly bullish about our long-term business prospects and revenue opportunity, near-term uncertainties around COVID remain, which can impact our business on a variety of levels. To provide you with insight on intra-quarter trends, we will continue to share monthly sales until we have visibility necessary to reinstate guidance. Today, we also reported $113 million in adjusted EBIT after 2020. As we continue to grow our top line and improve our gross margin, we are in an extraordinarily strong position to deliver accelerating profitability while continuing to support our top and bottom line growth with appropriate investments and operating expense. The vision we laid out years ago that highlighted the transition from an inpatient surgery-based company to an outpatient anesthesia-based company is translating elegantly into a powerful earning story. This ongoing evolution of the marketplace is the direct result of Expirel-based ERAS protocols. The important changes underway in the surgical sites of care are redefining medical practice for lower-know opioid post-surgical pain control, leaving us very bullish on our long-term growth outlook. Turning now to a more detailed strategic review of the business, 2020 was highlighted by a strong execution across two robust global growth strategies. First, expanding the use of Expirel and iAlvera for opioid-sparing pain management while enabling the migration of large, painful, and profitable procedures to the ambulatory surgery center and hospital outpatient department settings. Second, pursuing innovation by investing in our internally and externally sourced portfolio of non-opioid pain management and regenerative health solutions, while simultaneously advancing partnerships and education designed to revolutionize medical practice through the best practice opioids-faring ERAS protocols. I'll start with Expirel. With more than 8 million patients treated since launch, Expirel remains well positioned for long-term market leadership as the only long-acting local analgesic approved for infiltration, field block, and brachial plexus nerve block. In January, we completed a smooth transition with our partners at J&J. For the last several months, we've been rolling out additional customer-facing resources to help support the market's continuing shift towards anesthesia-driven regional pain management and the migration of procedures to all patient sites of care. In fact, we believe the increased use of regional anesthesia is the most important driver of our business for 2021. In 2020, only 20% of anesthesia procedures used a regional approach. The field is poised for rapid expansion given advances in ultrasound guidance, newer techniques, and improved outcomes. We are paving the way for Expirel to revolutionize the practice of regional anesthesia through our expanding networks of anesthesia group partnerships and robust educational and training initiatives. This is the key to the future and the focus of our state-of-the-art training center in Tampa, The Pit. For decades, anesthesiologists have had a high level of interest in regional blocks, but with short-acting agents only providing hours of pain control, it was difficult to justify a time return on investment. Fast forward to today, long-acting XPREL-based blocks have extended the duration of pain control to several days, allowing the XPREL block to be administered before patients arrive in the OR. truly a significantly positive change in the paradigm of patient care. Our anesthesia customers see the strong advantages of using blocks and replacing antiquated pumps and catheters. Additionally, the ASC environment is an area where XPREL reimbursement is consistently improving as payers and self-insured employers continue to drive the shift from inpatient to outpatient care given the economic benefits. This is especially important for elective surgeries. Not only are these market dynamics fundamental to our growth, but also directly correlate to patient outcomes and satisfaction rates, given the compelling advantages of opioids-bearing regional approaches. I would like to highlight a few markets where we see continuing regional anesthesia redefine best practice for post-surgical pain control. Expirel administered as a brachioplexis nerve block continues to be a massive commercial opportunity. To remind you, an Expirel brachioplexis block provides coverage for the upper quadrant, so not only the rotator cuff and shoulder arthroplasty, but also elbow, wrist, and hand procedures. we see brachial plexus nerve block as an addressable market of more than 3 million patients per year. Our customers are consistently reporting positive results. Surgeons are not only delighted with clinical outcomes, but they also prefer the demonstrated consistent results of anesthesiologists administering single injection blocks preoperatively versus infiltration at the end of the case. After having success in brachial plexus blocks, anesthesiologists can broaden their use to a whole range of long-acting expiral regional field and nerve blocks. Transverse abdominus or tap blocks are a significant market where Expirel provides long-acting pain control for the abdominal region. As Expirel tap block opens the door for more than 6 million abdominal and colorectal procedures per year and supports the migration of these painful procedures to the ASC space. There's a growing body of evidence supporting the safety and efficacy of tap blocks. With only high single-digit penetration and a surge of interest, we expect this market to be a significant long-term growth pillar. Turning to women's health, we are also seeing strong uptake in the regional blocks for a variety of surgeries where Expirel is transforming the standard of care for women and enabling earlier discharge. Our Phase IV data generated great interest in establishing Expirel-based tap blocks as institutional protocol in cesarean section, gynecologic oncology, and abdominoplasty procedures. There is also growing utilization of pectoralis or pec blocks for mastectomy and breast reconstruction and migrating these procedures to outpatient care. We are seeing significant demand among women for non-opioid pain control. Opioid addiction in women is growing at an alarming rate with women 40% more likely to become newly persistent users of opioids following surgery. With just under 4 million gynecologic oncology C-section and breast procedures each year in the United States, women's health is a major opportunity that we remain in the infancy of tapping. We are also seeing the emergence of newer regional blocks driving significant demand in the market for information and training with detailed live and virtual programs taking place regularly at the PIT innovation and training facility in Tampa. The erector spinae or ESP block is another field block technique that is expanding a safe and effective approach for providing non-opioid pain control that extends from the bottom of the neck to the hip. This versatile block, which is relatively easy to perform, is growing in popularity for spine, scoliosis, and cardiothoracic procedures. A significant transformation is underway in the spine market. Historically, spine surgeries were largely confined to the inpatient setting, with only a small percentage performed at outpatient sites of care. With the emergence of safe and effective blocks and opioid-sparing ERAS protocols, Spinal procedures are on a trajectory like other painful orthopedic procedures with a rising number of ASCs specializing in these complex surgeries. With XBRL representing less than 2% of the total cost of a spine surgery case and 2.8 million procedures each year, this market is poised to be a key long-term revenue driver. In the cardiothoracic market, we have a growing single digit penetration. With 1.5 million procedures per year, there is great interest in making sure these patients do not leave the hospital relying on opioids to manage pain. Further, based on package inserts for other long-acting local analgesics, we believe Expirel has a clear safety advantage, especially for cardiac patients. The pericapsular nerve group, or PENG block, is a newer regional technique that targets the anterior hip capsule. The PENG block has garnered great interest as it offers anesthesiologists and surgeons a means of shifting hip replacements to the outpatient setting. This is especially important since CMS has added total hip arthroplasty procedures to the ASC covered list effective January 1st, 2021, joining knee arthroplasty, which was added in January of 2020. Beyond the significant on-label opportunities I just highlighted, we are working to further broaden the XPREL label with key milestones on the near-term horizon. As you know, the FDA is reviewing our supplemental new drug application seeking approval for XPREL in patients age six and older. The PDUFA action date is set for March 22nd. Having pediatrics on a label is of critical importance given the significant unmet need for non-opioid options for managing post-surgical pain in this vulnerable patient population. With approximately 1 million pediatric patients per year, where catheters and pumps are currently the main state of post-surgical pain control, we see a significant unmet need and envision this to be a minimum of a $100 million opportunity. Beyond pediatrics, we are also advancing our Phase III stride study to evaluate Expirel versus bupivacaine as a nerve block for lower extremity procedures. We anticipate completion of enrollment by the end of the first quarter with a clinical study report in the second quarter and, if successful, an approval in the second quarter of 2022. We believe the lower extremity opportunity to be as significant as the upper extremity market. We also continue to make progress in markets outside the United States. We remain on track to launch XPREL along with IOVERA in Europe in the middle of this year. Importantly, our broad efficacy label, which covers XPREL administration via infiltration, field blocks, and importantly, both upper and lower extremity nerve blocks, along with a superior safety profile, we have a clear competitive advantage in Europe where IOVERA is already approved. For Canada, we remain in labeling discussions with health authorities. Given the current status, it is not likely we will launch in Canada, as we will not jeopardize the brand with labeling that is not in harmony with major country regulatory authorities. In China, we are working with our partners to determine possible next steps in the regulatory process to provide XPREL to this market without any potential for proprietary data to be used to develop a generic. Before turning over to Iovera, I would quickly like to touch on the market exclusivity for XPREL. Our orange book listed patent expires later this year. We have several unpublished and pending patents around the product, process, and manufacturing that we are confident will extend our proprietary position well into the 2040s. Remember, Pacera is the only company that has ever manufactured a multivasicular liposome at commercial scale anywhere in the world. Our sterile cold chain manufacturing expertise has been developed over 20 years of experience. Regarding any potential generic expirale, The FDA's 2018 draft guidance on a multi-vesicular liposome bupivacaine established an extremely rigorous hurdle. This would require a multi-year, near decade-long effort to design and construct a dedicated commercial scale manufacturing facility that would then require an operational license and validation prior to any bioequivalent study requirements by the FDA. This is a long and extensive process and little chance of duplicating the XPREL pharmacokinetic profile. since we have never disclosed our proprietary batch specifications or release assay. In short, we have great confidence that there will never be a generic Xperil, and given the package inserts that we have seen for potential competitors, Xperil will remain the branded market leader for many years to come, given our broad label, excellent safety profile, and flexible product features and benefits. Switching gears to Iovera, our innovative system which delivers a non-pharmacologic nerve block using the body's natural response to cold to safely and immediately reduce pain. COVID-19 made 2020 a very difficult year for Ivera and triggered significant clinical and commercial delays. While it has proven more difficult to achieve our initial objectives for Ivera, we have implemented several commercial enhancements that we believe will start to take hold in 2021. We recently established a high-caliber management team of roughly 30 sales managers that will be dedicated to Iovera, focusing on two specific opportunities. One is the procedural solution of Iovera Plus Xperel to improve total knee arthroplasty during, before, and after surgery. The second is Iovera for opioid-free, surgery-free, and drug-free osteoarthritis pain control. Simply put, if somebody is not ready for surgery or is not a surgical candidate for some reason, we can turn the pain signal off for several months with a simple 20-minute procedure. This allows them to play golf, walk on the beach, or enjoy a family occasion such as a wedding or vacation, all the things that folks might not be able to do with significant osteoarthritis pain. On the clinical front, our PREPARE trial is enrolling patients to evaluate Iovera and Expirel for opioid-sparing pain management for patients undergoing total knee arthroplasty. We expect enrollment to conclude before the end of this year. In parallel, we are launching an Iovera registry to capture real-world experience for the use of TKA procedures with leading academic and orthopedic centers of excellence. We are also encouraged by the excitement around using Iovera for other key areas. Key opinion leaders in orthopedics, spine, and anesthesia are interested in replacing heat-based radiofrequency ablation with Iovera cold therapy. We are seeing great interest across a wide range of treatment opportunities, such as low back pain, spine spasticity, and rib fracture. And we will use investigator-initiated studies and grants to develop data across these areas. To remind you, IOVERA reimbursement in the hospital outpatient department setting is highly favorable, with Medicare paying $900 to $1,900 for IOVERA procedures targeting nerves around the knee. We continue to work to further enhance reimbursement to expand patient access to IOVERA. Our team of reimbursement specialists are experts in the space and working to maximize fee schedules for the value provided. We are also interacting with commercial payers who understand the economic advantages and improve patient outcomes associated with low or no opioid strategies. In sum, we remain highly confident in the technology behind the innovative system, with sales potential approaching $200 million within our five-year planning horizon. Turning now to business development, our team is leading a robust effort and thoughtfully pursuing opportunities of interest to surgical and anesthesia audiences we are calling on today. We believe our leadership position in opioid-sparing pain control provides us with a significant opportunity to build a differentiated portfolio to improve the patient journey along the neural pain pathway. We recently announced a strategic investment in GeneQuine. This transaction provides us the opportunity to participate in the development of an exciting disease-modifying gene therapy for osteoarthritis. GeneQuine's lead product candidate, GQ303, is currently in preclinical development as a treatment for osteoarthritis. 303's helper-dependent adenovirus vectors express PRG4, a protein that plays an important physiological role in regulating OA through lubrication and decreased inflammation. Finally, let's touch on some of our internally sourced non-opioid opportunities for acute and chronic pain. To augment our business development efforts, our in-house team is focusing on leveraging the proven safety, flexibility, and customizability of our DepoFoam platform. Our lead program is an epidural delivery of DepoFoam-based local anesthetic for acute and chronic pain. We are conducting a phase one pilot study with Expirel, which will allow us to make a go, no-go decision in the next phase of development. We're also looking at different DepoFoam opportunities that target inflammation and chronic pain. We look forward to keeping you appraised of our progress of this early stage pipeline. And with that, I'd like to turn the call over to Charlie for a review of the financials.