Pacira BioSciences, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Pacera Biosciences second quarter 2022 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. To withdraw your question, simply press star one again. I would now like to turn the call over to Susan Masco, Head of Investor Relations. Please go ahead.

Thank you, Paula, and good morning, everyone. Welcome to today's conference call to discuss our second quarter 2022 financial results. Joining me on today's call are Dave Stack, Chairman and Chief Executive Officer, and Charlie Reinhart, Chief Financial Officer. Additional members of our executive team will join for today's question and answer session. Before we begin, let me remind you that this call will include forward-looking statements based on current expectations. Such statements represent our judgment as of today and may involve risks and uncertainties. For information concerning risk factors that could affect the company, please refer to the company's filings with the SEC, which are available from the SEC RR 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. We'll begin today's discussion with brief prepared remarks to cover recent business highlights before turning to your questions. I continue to be proud of our team and its performance. We posted record revenue for the second quarter and continue to drive innovation and non-opioid pain management with notable progress across our portfolio throughout the first half of the year. Second quarter Expirel sales were $137 million, making it the second highest quarter ever for the product. Zaretta was also a key contributor for the quarter, with sales exceeding $27 million, underscoring the rationale for our flexion acquisition last year and the success of our integration. Despite ongoing headwinds, including labor shortages, COVID intrusions, reduced hospital services, decreased hours at ambulatory surgery centers, and the impact of inflation on certain elective procedures, Expirel continues to outpace the elective surgery market recovery with expanding utilization across all target market and sites of care. I invite you to review our most recent IQVIA data in the investor relations section of our website. Strong sales combined with operating discipline allowed us to deliver significantly positive adjusted EBITDA of $44.9 million, marking our 21st consecutive quarter of positive adjusted EBITDA. We are proud of this record and our ability to manage our business across a variety of unpredictable market conditions. I can unequivocally say that Becerra has consistently delivered. In addition to our continued revenue growth, we continue to invest in key initiatives to further improve our gross margins, including our 200-liter XPREL suite in San Diego, which is now fully installed. We are currently commissioning the equipment and expect to submit our application for FDA approval of this new facility in 2023. This expansion provides significant scale that will allow us to further support XPREL top-line growth and improved margins. a new Zaretta fill line that aims to improve quality and yield, and the successful transition of our Iovera activities from Fremont to our San Diego facility and a contract manufacturer. Turning now to an overview of our XPREL franchise. Regional analgesia remains our number one top-line growth driver as long-acting XPREL-based nerve and field blocks are enabling accelerated recovery times and same-day surgeries which continue to drive paradigm changes in patient care. Our anesthesia and surgeon customers see the clear advantages of XPREL-based blocks as they continue to replace cumbersome antiquated pumps and catheters. Improved patient satisfaction and reduced economics of care utilizing the outpatient environment allow for continued improvements in XPREL reimbursement. CMS recently issued proposed outpatient prospective payment system rule for 2023 with XPREL continuing to qualify for separate reimbursement for ambulatory surgery centers under reimbursement code C9290. The agency is also seeking comments and data on whether to expand the current ASC policy to hospital outpatient settings. In parallel to our CMS initiatives, we are also following legislative action, such as the No Pain Act, which would ensure equal access to all non-opioid opportunities in outpatient environments for Medicare beneficiaries. Our state-of-the-art PIT Training and Innovation Center in Tampa continues to facilitate real-time best practice knowledge transfer and accelerate surgical migration to outpatient sites of care. In 2022 alone, we have received 142 inbound requests from institutions requesting training for their anesthesia and surgery teams on select blocks, with erector spinae, transverse abdominis plane, and pectoralis blocks the most highly requested. Our training programs at the Pitt, as well as our in-person medical society meetings, are enabling us to directly engage with clinicians who remain eager for education and training around regional pain management approaches for Expirel. This is also a strong and growing interest in drug-free nerve blocks with Iovera. These educational programs for Expirel and Iovera also provide increased visibility to expand our Xperia customer base. We are making real progress on the build out of our second innovation and training facility in Houston, which remains on track to open later this year. We expect Houston will have an equally positive impact on expanding Xperia and Iovera expertise among clinicians, especially for field blocks and nerve block procedures. Importantly, we continue to advance our robust patent strategy around Xperia to fortify our intellectual property with new patents that extend protection to January 22, 2041. We now have six patents listed in the FDA Orange Book and recently received a notice of allowance for a seventh patent that we expect to issue very soon. We recently finalized a new agreement with one of the largest faith-based private healthcare systems in the United States. This national health system operates in 19 states with more than 140 hospitals and approximately 30 ambulatory surgery centers. We will work together to institutionalize Expirel-based opioid sparing protocols across service lines with their sites of care through extensive localized training provided by our field-based clinical education teams. This agreement also provides an opportunity to expand iOVERA utilization within this system. We are also launching a new partnership with a large group purchasing organization in the dental space. that will allow access to Expirel at one of the nation's largest dental support organizations, serving over 600 affiliated dentists at approximately 400 practices in 42 states. Together, we will support training and education around best practice for optimizing patient recovery after oral maxillofacial surgery using an Expirel-based opioid sparing approach. This partnership will also include working with the group purchasing organization to introduce Expirel to their network of more than 1,100 dental accounts, drilling down into a few key Expirel markets. Orthopedic procedures continue to be a key growth driver, with the most recent annualized IQVIA data from January showing year-over-year utilization up 24%. Expirel-based regional protocols are safely and reliably enabling a shift to orthopedic procedures with XBRL utilization of 34% over the prior year in 23-hour sites of care. In pediatrics, our initiatives continue to make strong progress. Safety continues to be the mission critical message, and awareness around efficacy continues to mount as new data is generated. Investigators from Scottish Rite for Children Hospital in Dallas, Texas, highlighted their experience in a study of children undergoing posterior spinal fusion surgery. The study compared Expirel infiltration to a continuous epidural infusion of ropivacaine. The Expirel group consumed significantly less opioid from 24 to 48 hours and ambulated 6.8 hours sooner. The study, authored by Doctors McClintosh and McLeod, was published in the May issue of the Journal of Pediatric Orthopedic Society of North America. and will be featured at the annual scoliosis research meeting taking place in St. Louis in September. This is a meaningful advance in treating these children who many times require multiple surgeries with multiple opioid exposures. Separately, our medical education platform continues to generate awareness through our monthly series, The Pediatric Exchange, which features thought leaders from leading pediatric centers such as Shriners Hospitals, Cleveland Clinic, and Rady's Children's Hospital in San Diego. In women's health, we continue to see significant growth with success in C-section driving expanded utilization and breast augmentation and gynecologic oncology procedures where there is a strong shift to 23-hour sites of care. Regarding our European launch, we are seeing slow but steady progress in our launches across several key countries. In the UK, several important national health service trust hospitals have adopted Expirel and the value proposition is clear and relevant in the surgical backlog, with Expirel enabling reduced length of stay and increased surgical throughput. New customer feedback has been positive with strong retention, and we've had several repeat orders from major influence hospitals. Moving forward, we continue to strengthen our team, confident that over time, Europe represents an important market opportunity for Expirel and Pacera. Moving to the Expirel pipeline, both of our phase three studies evaluating lower extremity nerve blocks are now fully enrolled. We expect to report top line results from the first study in early September, with data from the second study to follow approximately six weeks later. If successful, these studies will support a supplemental NDA filing early next year. We believe the lower extremity nerve block label is at least as significant as the upper extremity market, with roughly 3 million procedures a year and an addressable market opportunity of approximately $100 million. Planning is also underway for a multi-center registration study of Expirel as a stellate ganglia block for treating refractory cardiac ventricular dysrhythmias and for use to prevent postoperative atrial fibrillation after open heart surgery. Dr. Shiv Kumar, director of the UCLA Cardiac Arrhythmia Center and world-renowned expert in mechanisms of cardiac dysrhythmias, is collaborating with the team. We are working with a steering committee of key opinion leaders in regional anesthesia and stellate ganglia blocks who will convene this fall to help finalize study design. After an FDA meeting to align our regulatory strategy for expanding the Expirel label to include this indication, we will proceed with a registration trial. A stellate ganglia block utilizing Expirel, which lasts for several days, will address a significant unmet need in patients with ventricular and atrial dysrhythmias. Beyond our success with Expirel, our second quarter sales were augmented by strong Xereta performance which underscores the successful integration and strong rationale for the acquisition. Xeretum remains at the early stage of its growth trajectory, and we remain confident it will be an important revenue and earnings contributor as the only FDA-approved extended-release corticosteroid for osteoarthritis pain in the knee. Currently, we are finalizing the designs for label expansion studies in shoulder osteoarthritis and type 2 diabetes. We have reanalyzed the flexion diabetes data and believe there is a tremendous opportunity in providing the diabetic and pre-diabetic community an intra-articular steroid that improves efficacy and is significantly safer with reduced glycemic spikes. To that end, we are in the process of initiating a study in diabetes with osteoarthritis, comparing Xilretta to an immediate-release triamcinolone acetonide. We are also preparing to study Xilretta and shoulder osteoarthritis which could make Xereta the first and only approved steroid for use in shoulders. These studies also provide an incremental opportunity for Xereta to enhance commercial reimbursement as we demonstrate superiority versus immediate release of triamcinolone acetonide for diabetic patients and for shoulder surgery. Moving to Iovera, our novel handheld cryotherapy device. The rollout of the Generation 2 device to our broad customer base is underway. and the market feedback on the new and improved platform has been very positive, with practitioners appreciating the more user-friendly design and increased efficiencies. We recently launched an Iovera partnership with the Professional Golf Association of America's Corporation Tour, or the PGA Senior Tour, through which we had a dedicated Iovera presence at two major tournaments in Q2. Our next event will be the Charles Schwab Cup Championship in November 2021, where we will have a PGA Champions Tour player wearing the Iovera logo and an Iovera Cool Zone tent, which will allow spectators and guests of the PGA Champions Tour to make appointments with local providers for Iovera treatments. Our sports initiatives also include teaming up with the NFL Alumni Association to increase awareness of the availability and benefits of non-opioid pain management options. Together, we will focus on educating retired players, staff, and youth sports organizations about the importance of non-opioid options that can reduce or even eliminate the need for opioids for pain management. Turning to the Iovera pipeline, as you may recall, Dr. Paul Winston, President of the Canadian Association of Physical Medicine and Rehabilitation, has been conducting observational studies of Iovera and spasticity. The preliminary findings of Dr. Winston's research are highly encouraging, and we are now collaborating with our clinical and medical teams on publication strategies for these data. In parallel, we have submitted to the FDA our design for a registration study to evaluate Iovera as a treatment for spasticity in post-stroke patients. We have a meeting scheduled with the FDA for later this year, and we'll then proceed with the registration trial for the treatment of spasticity with Iovera. In parallel with our expirale stellate ganglia block study, Dr. Shubh Kumar is also initiating a study utilizing the Iovera Cryo technology as a long-lasting approach to effectively address various cardiac dysrhythmias. We believe Expirel and Iovera have the potential to address both acute and persistent cardiac disease in a wide range of patients. Moving now to our earlier stage pipeline opportunities where we continue to make progress. We expect to initiate the second half of our phase one study of our multivasicular liposome bupivacaine for subarachnoid analgesia later this year and move to phase two next year. In addition, we are defining clinical programs for our proprietary multi-vesicular liposome formulations of dexamethasone for inflammation and lower back pain and high dose bupivacaine for longer acting pain management of seven days or more. In closing, the progress we have made to date, along with our ambitious plans for the future, are all converging to give us even greater confidence and our ability to achieve our corporate goals for delivering strong revenue and earnings growth. With a significant patient need for opioid sparing options and limited commercial competition, we are more confident than ever in our ability to cement our leadership position in delivering patients innovative non-opioid solutions along the neural pain pathway while building significant shareholder value. With that, I'll turn the call over to Charlie for his financial highlights. Charlie?