Pacira BioSciences, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Q1 2021 PICERA Biosciences Earnings 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. Please go ahead.

Thank you, Tina, and good morning, everyone. Welcome to today's conference call to discuss our first quarter 2021 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 PACIRA Executive Leadership Team are also here for our question and answer sessions. Before we begin, let me remind you that today's call will include forward-looking statements based on 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. One year ago, when we reported our first quarter results, we were facing significant challenges in the face of an expanding pandemic. In the blink of an eye, a moratorium was placed on hospitals performing elective procedures, and the notion of COVID-19 treatments and vaccines seemed a long way off. I cannot tell you how proud I am of our entire Pacira team, as they have truly risen to the occasion over the past year to ensure that we continued our important work to provide non-opioid pain management to patients in need in a difficult and dynamic environment. Consequently, I am delighted to report the significant progress we have made thus far in 2021, highlighted by the U.S. approval and launch of Expirel in the pediatric setting and its growing utilization across a wide range of long-acting regional blocks for low or no opioid pain control. Our first quarter financial performance was strong with a total sales of $119 million and Expirel averaged daily sales coming in at 115% of prior year levels despite ongoing COVID-related challenges. with the elective surgery market. Today, we also reported adjusted EBITDA of $36.2 million and remain well positioned to deliver sustained and accelerating profitability. Before turning now to a more detailed strategic review of our business, I would like to quickly cover the recently filed lawsuit against the American Society of Anesthesiology, seeking damages and the retraction of three articles published in the February issue of their journal, Anesthesiology. These articles create a false and misleading impression that XBRL is not an effective analgesic. Not only were these articles scientifically and statistically unsound, but also failed to disclose that certain authors were accepting payments from competing pharmaceutical or drug device manufacturers, which is not only an ethical violation, but very likely instilled an apparent bias into this body of work. The decision was not one taken lightly. We reached out to the society and the editor multiple times to discuss the shortcomings of the articles and our concerns around lack of proper author disclosure. These requests were repeatedly dismissed. As you know, Expirel is a critical piece of our business and we initiated this legal action to protect the clinical integrity of Expirel and ensure that false and misleading information is not inappropriately cited as an accurate reference in other scientific manuscripts and is not used to limit access to patients and providers who need a safe, effective opioid alternative like Expirel. We would encourage you to review the declarations related to these studies, including Brown University's professor and meta-analysis expert, Dr. Thomas Tricolinos, whose statement discussed the serious methodological and statistical failings of the meta-analysis. These documents are all available on the PCERA website. Now on to our first quarter business update. We continue to execute across our stated global growth strategies. First, expanding the use of Expirel and Iovera for opioid sparing pain management while enabling the migration of large, painful, and profitable procedures to the ASC. And second, pursuing innovation by investing in our internally and externally sourced portfolio of non-opioid pain management and regenerative health solutions, while simultaneously investing in educational programs to revolutionize medical practice through opioid sparing ERAS protocols. I'll start with Expirel. With more than 8.3 million patients treated since launch, an excellent safety profile, a growing body of satisfied customers achieving favorable outcomes, and a long exclusivity runway, XFRL is well-positioned to remain the market leader as the only long-acting local analgesic approved for infiltration, field block, and brachial plexus nerve block. In March, FDA approved the expansion of XFRL label to include use in patients six years of age and older for single-dose infiltration to produce post-surgical local analgesia. With this approval, Expirel is now the first and only FDA-approved long-acting local analgesic for patients as young as age six. Importantly, our label is not limited to cardiovascular and spinal surgeries, but rather a broad label that encompasses all surgical procedures for pediatric patients ages six and older. The broad label is really a testament to Expirel's established safety and excellence. efficacy, and excellent safety profile. With approximately 1 million pediatric procedures per year, we envision this to be at least a $100 million market opportunity. Our initial launch in pediatrics is underway, and we are very encouraged by the high level of receptivity and enthusiasm for replacing current standards of care. Opioids, epidurals, and IV PCA pumps, elastomeric pumps, and off-label use with local analgesics with Expirel. We also see a halo effect in adult procedures. For instance, spine is a tight-knit group of like-minded surgeons. Many have practices that include adults and the technique for spine infiltration or an erector spinae block is the same for children and adults. This opportunity provides a rapid transfer of best practice for erector spinae regional blocks as part of enhanced recovery pathways for both adults and children. The unmet need in this population is clear as physicians understand the difficulties of placing indwelling catheters in pediatric patients. Just imagine trying to keep a catheter in a seven-year-old on top of the well-known catheter and pump issues such as dislodgement, leaking, wound healing, and dose dumping. A recent article in the Journal of Health Economics and Outcomes Research highlighted clinical and economic outcomes associated with the use of Expirel versus the standard of care for the management of post-surgical pain in pediatric patients undergoing spine surgery. Dr. Robert Ballack and his colleagues at Cleveland Clinic concluded pediatric patients undergoing spine surgery who received Expirel had significantly reduced inpatient post-surgical opioid consumption, length of stay, and hospital costs compared with those who did not. The study was a retrospective cohort analysis of 10,189 pediatric patients undergoing inpatient spine surgery. We will also be highlighting Expirel in the pediatric setting at IMASC, the annual meeting of the Scoliosis Research Society, where we will be discussing new and advanced techniques for the treatment of spine conditions with leading surgeons. Additional near-term commercial initiatives include POSNA, the annual meeting of the Pediatric Orthopedic Society of North America, new key opinion leader and fellows training programs, and ask the expert panels, all of which we are launching this quarter. As I've said before, we are deploying a thoughtful, gated approach to ensure providers understand the nuances of Expirel versus short-acting generic bupivacaine and are well prepared to achieve the best outcomes for their pediatric patients age six and up. Our goal is to quickly onboard key opinion leaders at the most sophisticated children's hospitals to ensure that they are well equipped to deploy education across their networks and spheres of influence. Next, I'll turn to an update of the role that XBRL is playing in regional anesthesia and the market shift to outpatient settings. The regional anesthesia field is poised for rapid expansion, given the advances in ultrasound guidance, newer techniques, and improved outcomes. In 2020, only 20% of procedures requiring anesthesia used a regional approach. Given the tremendous upside potential to broaden the use of regional approaches, we have invested significantly in education and training to further expand clinician adoption of regional blocks as they represent the most important growth driver for our business in 2021 and beyond. XPREL-based enhanced recovery after surgery or ERAS protocols continue to revolutionize regional anesthesia by enabling earlier discharge and accelerating the migration of elective procedures to all patient sites of care. Long-acting Expirel-based blots have reliably and reproducibly extended the duration of pain control from hours to several days, establishing institutional protocols that directly enable the migration of procedures such as total joint arthroplasty, spine, and rotator cuff repair to outpatient markets. The COVID-19 pandemic has further shifted the mindset of patients, physicians, and institutions to establish safe outpatient environments providing a reliable continuity of care. By doing so, patients will be able to obtain the care they need. Importantly, we expect this transition to become permanently embedded in the healthcare systems, given the improved patient outcomes, satisfaction rates, and economic advantages, and being driven by payers determining the site of care. These market dynamics, along with XBRL utilization, significantly and consistently outpacing the recovery of elective surgery markets leave us well-positioned for long-term growth as the COVID crisis resolves and elective surgery demand normalizes with the continued rollout of vaccines. Now turning to our Pacira Innovation and Training Center in Tampa, or the PIT, which is delivering best practice knowledge transfer in near real-time for our key expo markets. Momentum and uptake of newer regional blocks continues to drive significant demand from both new and existing customers for education and training through live and virtual programs at the PIT. We recently hosted two regional anesthesia workshops designed for healthcare professionals who are seeking to advance a platform that enhances patients' post-surgical experience. Techniques are taught by expert instructors using didactic presentations, phantom model screening, state-of-the-art 3D virtual cadaver imaging, and ultrasound-guided hands-on live model scanning. In February, we featured a webinar and multi-specialty panel discussing the migration of breast surgery to the ambulatory surgery center. This was also featured recently at the annual meeting of the American Society of Breast Surgeons with over 150 healthcare providers in attendance. In March, we hosted two cardio programs, a cardiothoracic bio-skills lab where key thought leaders from leading cardiac programs around the country collaborated to determine the optimal Expirel technique and volume to adequately treat pain following cardiothoracic surgery. The lab involved ultrasound-guided parasternal blocks, such as the pecto-intercostal and transverse thoracic plane blocks, while capturing the spread and distribution of Expirel via live fluoroscopy and dissection of cadaver models. These findings will help enhance the educational offerings to both cardiac surgeons and anesthesiologists when implementing enhanced recovery pathways using these newer regional blocks for cardiac procedures. The second cardio event featured a panel on the emerging role of regional anesthesia cardiac ERAS protocols and included both discussion and live demonstration. This program was highlighted at the Society of Cardiovascular Anesthesiology annual meeting last month. In March, we hosted an interactive workshop entitled Hot Blocks You Need to Know in 2021. This workshop was broadcast live from the PIT and focused on pericapsular nerve group, or PEN blocks, and erector spinae, or ESP blocks, and was featured during the American Osteopathic College of Anesthesia annual meeting with over 100 healthcare providers. It is important to note that each of these events focused on significant on-label opportunities, so they are driving real-time demand. Approximately three-quarters of the attendees at the PIT event already have experience with Expirel. Clinicians are eager to expand the use and generate data and new procedures after seeing the positive outcomes and consistent results of regional blocks such as erector spinae for scoliosis and cardiac surgeries. Beyond these on-label educational programs, we have a key label expansion milestone on the near-term horizon with our STRIVE lower extremity nerve block study that is evaluating Expirel as a regional block for knee as well as foot and ankle surgeries. Enrollment in stride is now complete and database block is underway with top line results on track for this month. If positive, we will move forward with an SNDA submission seeking expansion of the XPREL label to include lower extremity nerve block, which we believe to be as significant as an upper extremity market. Next, let's turn to our continued progress in the markets outside of the United States. We remain on track to launch XPREL along with Iovera in Europe in the third quarter of this year. a slight delay based on continued COVID-19 issues in key EU markets. The EU launch will focus on only those markets where we can secure pricing that closely aligns with the U.S. price. COVID has caused a tremendous backlog of orthopedic procedures in Europe, with waiting lists as long as two years. In addition, the typical length of stay in Europe is several days. These circumstances provide an important opportunity for both Expro and Ayurveda. There's great interest in using Expirel to improve throughput by accelerating recovery times and discharge, while Iovera can play a key role in long-term pain management, especially as doctors work through the significant waiting list. We would expect the United Kingdom to be our largest contributor in Europe, driving more than 50% of the total business in that market. Importantly, our broad efficacy label, which covers Expirel administration via infiltration field blocks and, importantly, both upper and lower extremity nerve blocks, along with a superior safety profile, give us a clear competitive advantage in Europe, where Ayurveda is already approved. For Canada, we remain in labeling discussions with health care authorities. Given the current status, it is not likely that we will launch Xprel in Canada, as we will not jeopardize the brand with labeling that is not in harmony with major country regulators' authorities. As for the China market, we recently terminated our agreement with our partner Nuance due to the lack of regulatory pathway that makes strategic sense and protects our intellectual property without presenting the risk that our proprietary data would be used to develop a generic competitor. We made a payment of $2.8 million to Nuance in connection with this termination. Switching gears now to Iovera, we remain highly competent in the innovative Iovera system. Since our acquisition in 2019, we have significantly improved the reliability of the device and launched new clinical initiatives to demonstrate its potential to improve patient care using novel cold technology to administer a non-pharmacologic nerve block to safely and immediately deliver months of non-opioid pain control. We have great confidence in a long-term opportunity for this important addition to our commercial portfolio. With our dedicated Iovera sales team, along with recently implemented commercial enhancements now driving new customers and expanded use, Iovera sales increased by 44% in the first quarter, and an average number of ordinary accounts is up 48% year-over-year. As with XPIREL, the PIT is providing a valuable training and educational tool for Ayurveda. So far in 2021, we have hosted four Ayurveda simulation labs that all focused on introducing the product to new customers. Participants at these programs learn how to target superficial genicular nerves using the Ayurveda Smart Tip with ultrasound guidance. Led by healthcare professionals, the lab includes didactic lectures and hands-on training, including live model scanning with nerve identification using ultrasound and peripheral nerve stimulation, virtual 3D cadavers, smart tip treatment steps, and reviews of the Iovera system setup and handpiece operation. We recently hosted an Iovera Bioskills cadaver lab that investigated the utilization of Iovera as a medial branch block for back pain. During this session, a multidisciplinary team comprised of an interventional pain management physician, neurosurgeon, and research engineer evaluated the current modalities of medial branch blocks and the potential for Iovera blocks as an opioid-free option for the 14 million Americans suffering from low back pain. These educational and commercial efforts are driving significant increase in our Iovera customer base, approximately 90% in the first quarter of 2021, with a growing presence in the ASC setting. In fact, ASCs represented roughly 60% of our new Iovera customers in the first quarter. On a clinical front, PREPARE is enrolling patients to evaluate Iovera and Expirel for opioid-sparing pain management for patients undergoing total knee arthroplasty. We continue to expect enrollment to conclude before the end of this year. In parallel, we are launching an Iovera registry to capture real-world evidence for use in TKA procedures with leading academic and orthopedic centers of excellence. We are also encouraged by the excitement around using Iovera in other areas. Key opinion leaders in orthopedics, spine, and anesthesia are interested in replacing heat-based radiofrequency ablation with Iovera cold therapy with interest across a wide range of treatment opportunities such as low back pain, spine spasticity, and rib fracture. We will use investigator-initiated studies and grants to develop data across these areas. Turning now to business development, our team is leading a robust effort to thoughtfully pursue opportunities of interest to our surgical and anesthesiologists we serve today. We believe our growing 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. Earlier this year, we announced a strategic investment in GeneQuine, a gene therapy for osteoarthritis of the knee, and recently invested $3 million in Spine Biopharma to support their advancement of a regenerative approach to treating low back pain caused by degenerative disc disease. Spine Biopharma's lead product candidate is Remedisc, a seven amino acid chain peptide that binds to and induces downregulation of transforming growth factor beta-1, or TGF beta-1, which is often highly expressed in the degenerative discs of patients with low back pain. We also recently made a $10 million equity investment in a privately held company with an exciting gene therapy platform. We will share more details in the coming weeks. Finally, to augment our business development efforts, our in-house team is focused on leveraging the proven safety, efficacy, and customizability of our DepoFone platform. With that, I'll turn the call over to Charlie to review the financials.