Pacira BioSciences, Inc.

Good day, and thank you for standing by. Welcome to the Q1 2023 Pacero Biosciences, Inc. Earnings Conference Call. At this time, all participants are in 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 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Susan Metzko, Head of Investor Relations. Susan, please go ahead.

Thank you, Grace, and good morning, everyone. Welcome to today's conference call to discuss our first quarter 2023 financial results. Joining me on today's call are Dave Stack, Chairman and Chief Executive Officer, Ron Ellis, Chief Strategy Officer, and Charlie Reinhart, Chief Financial Officer. Roy Winston, Chief Medical Officer, is also here and will be joining us 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 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. The year is off to a positive start as Expirel continues to outpace the elective surgery market recovery as we expand utilization across key target markets and sites of care. We are focusing on three major objectives for 2023, growing revenues in a slowly recovering surgical procedure market, further advancing gross margins to the mid to high 70% range, and improving reimbursement across our portfolio with a specific focus on the No Pain Act and TRICARE. First quarter revenues of $160 million include XPREL sales of $130 million. Zaretta also was a key contributor for the quarter with sales exceeding $24 million. These results are highlighted by solid growth in XPREL volumes as the rollout of our 340B program continues to expand volumes within both existing and naive businesses. I'd also note that the first quarter of 2022 was unseasonably stronger than Q1 historical trends. Our significant top line is driving strong and durable cash flows that allow us to self-fund growth opportunities and significantly improve our debt leverage ratio by recently retiring our term loan B using cash on hand and a new term loan A facility. This new highly flexible debt carries a significantly lower interest rate projected to reduce interest expense by at least $15 million in 2023. We are also pleased to report our 24th consecutive quarter of significantly positive adjusted EBITDA of $42 million. As we have said, improving gross margins is a top organizational priority. We have addressed different supply chain and manufacturing issues that negatively impacted margins for the last four quarters. As a testament to our commitment to excellence in manufacturing, We recently, we are excited to welcome Chris Young as our new Chief Manufacturing Officer. Chris brings more than 25 years of experience to Passura, and is responsible for overseeing all manufacturing activities and locations across our product portfolio. Additional progress on the manufacturing front includes our enhanced product release assay for Expirel. The FDA is reviewing our application for this new test, which we expect to benefit gross margins and support additional intellectual property protection. In parallel, we remain on track to submit a supplemental new drug application for our 200 liter facility in San Diego later this year. This will be another critical milestone towards improving XPREL gross margins. Turning now to more specifics on our XPREL franchise, we're pleased with our performance relative to the broader elective surgery market with XPREL volumes increasing by 6% year over year. To further illustrate this, let me highlight some key data points from our most recent site of care and procedural IQVIA data from October of 2022. These data show year-over-year growth for knee and hip procedures, while other orthopedic and soft tissue procedures decreased with inflationary pressures, causing patients to delay healthcare due to costs. In outpatient settings, the procedure market was up 1.2% year-over-year, while Expirel showed 13% growth, with Expirel joint procedures up 20%, while Expirel showed 13%, I'm sorry, breast procedures and gynecologic procedures up 16%, general surgery up 11%, and shoulder procedures up 9%. The hospital inpatient market was down 6%, versus Expirel, which was up 1%, with continued year-over-year growth in key markets, such as spine, with a 49% increase, shoulder with a 20% increase, and C-section with a 16% increase. For your reference, these data points are summarized in our investor deck, which is available on our website. Turning to market access, we continue to expand our XPREL user base and added 180 first-time purchasing accounts during the first quarter. In addition, the rollout of our 340B pricing program for outpatient procedures increased both 340B and non-340B volumes in these accounts. We believe this program will drive significant volume expansion within existing and naive 340B accounts representing nearly 10 million X per L relevant market procedures. As expected, we are seeing growth in existing 340B accounts take place at a greater pace than new 340B business. This is resulting in a slightly lower growth to net, which remains at a highly favorable level for our industry at more than 86%. Importantly, 340B will pave the way for us to leverage the No Pain Act, This legislation currently mandates CMS reimbursement for non-opioid post-surgical pain treatments in outpatient settings beginning in 2025. We are actively monitoring efforts to accelerate implementation to 2024 and should know more about this when the preliminary CMS rules issue this summer. We believe policymakers in Washington appreciate the urgency for improving access to non-opioid options. NoPain will provide a reimbursement pathway for nearly 20 million X4L-relevant market procedures, with commercial and self-funded payers expected to follow the lead of CMS. Reimbursement in the hospital outpatient, as well as the ambulatory surgery centers, will cover more than 70% of the current total addressable market for X4L. In parallel, we are seeing expanding access to non-opioids for government employees and our military and their families through efforts similar to NoPain. In October of this year, TRICARE will adopt CMS reimbursement methodology for ambulatory surgery and begin providing separate reimbursement for XPRO in this setting. We would expect TRICARE to also mirror CMS in the hospital outpatient setting with the implementation of the No Pain Act. There are roughly 10 million members enrolled in TRICARE for primary or secondary coverage. Importantly, No Pain, TRICARE, and 340B are especially meaningful to the migration of lower margin soft tissue procedures to hospital outpatient settings. These programs will assist in eligible healthcare systems affording the opportunity to offer non-opioid pain control for these procedures and advance our mission to provide a non-opioid pain management solution to as many patients as possible. Earlier this year, we opened our second innovation and training center in Houston which more than doubles our previous capacity to host meaningful educational programming. Our training centers are core to developing both physician champions and community-based clinicians who want to stay at the forefront of opioid-sparing pain management, especially for nerve blocks and field block procedures. In the first quarter alone, our educational programs provided training to more than 1,700 healthcare providers at 63 on-site and in-field events. We believe this immense need for training around opioid-sparing pain management bodes well for our future growth as more physicians become familiar with best practice and how to incorporate our portfolio of safe and unique commercial products into their practice. Outside the United States, we continue to make steady progress. Our team has secured approval for Expirel access in key centers across the European Union and the United Kingdom. We are focusing our attention on regional analgesia for Expirel. and we form partnerships with thought leaders who are now advocating for Expirel and Iovera. We will also have a presence at several key scientific meetings and society meetings. In Latin and South America, our partner, Europharma, is advancing the regulatory approval process for Expirel in Brazil, and we are on track for submissions in other South American countries in the coming months. On the regulatory front, we're making important progress. FDA review of our supplemental new drug application for Expirel is now underway with a PDUFA action date of November 13, 2023. To remind you, this application is seeking expansion of the Expirel label to include two key lower extremity nerve block indications that we expect will significantly extend our reach into surgeries of the knee, medial lower leg, foot, and ankle, representing more than 3 million annual procedures. In pediatrics, interest continues to grow as new generative data are generated. We look forward to building on this and initiating our regulatory study later this year to support the expansion of the XPREL label to include patients from birth to six years. Finally, our phase one study of XPREL for intrathecal administration continues and is on track for completion later this year. Switching gears to Zaretta and Iovera, where our full 240-person field-based team is broadening education and awareness around these complementary and standalone non-opioid solutions for monitoring and managing osteoarthritis pain. In the first quarter, the team added 122 new Zoretta first-time purchasing customers and 55 new Iovera customers. Several value-creating milestones are on track for the next year and current and new indications for both products. For Zaretta, we expect to initiate two new label expansion studies. This includes a Phase IV diabetes safety study in knee osteoarthritis and a Phase III shoulder osteoarthritis study. Importantly, if our shoulder study is successful, Zaretta could become the first and only approved corticosteroid specifically for shoulder osteoarthritis. Both studies will evaluate Zaretta versus Triamcinolone with the goal of adding a superiority claim to the Zaretta label. For Iovera, we recently launched a cash pay program and are seeing expanded utilization in knee applications. Clinicians are using Iovera as an additional offering to patients for pain management. In addition to the orthopedic practices, we are seeing success in regenerative medicine specialists, historically early adopters of new technology. Our clinical education team is working closely with KOLs on Iovera treatment for the pain of spasticity to provide a new treatment option for pain control in this patient population. We recently announced a year-long partnership with the PGA Tour Champions, naming Iovera as the official non-opioid pain management option of multiple 2023 tournaments. This partnership will raise awareness around drug-free pain control with Iovera as the product that will have a presence at several PGA Tour Champion tournaments with the first appearance recently taking place at the invited Celebrity Classic. We also recently hosted various educational and awareness initiatives in the LPGA's fitness trailer during the Chevron Championship, which is the tour's first major of the season. On a clinical front, we are preparing to launch a registration study for the treatment of spasticity later this year. In spasticity, Iovera has the potential to be a game changer. There are approximately 10.2 million patients in the United States currently diagnosed with spasticity. 2.6 million of those patients have moderate to severe spasticity, and 42% of them have received at least one treatment modality, but only 150,000 are currently receiving a treatment with a toxin. This underscores a highly dissatisfied market with inadequate treatment options like toxins and phenol. We have an iOVERA Smart Tip for medial branch block for low back pain, which we also expect to have on the market in 2024. Beyond our commercial portfolio, we have an exciting earlier stage portfolio of new product development opportunities that include PCRX201, a novel interarticular gene therapy product candidate that produces IL-1RA for osteoarthritis. Our preliminary phase one safety and efficacy findings were recently presented at the Osteoarthritis Research Society International World Congress in Denver. PCRx201 was well tolerated with improvements in knee pain observed across all dose groups. Importantly, the greatest level of efficacy was observed at the lowest dose. Based on these encouraging data, we are planning to launch a second phase one study of PCRx201 and osteoarthritis of the knee. Ron Ellis will share some more details around the PCRx201 development program shortly. We also took an advance of phase one readiness activities around our internal multi-vesicular liposome pipeline, which include a multi-vesicular liposome dexamethasone formulation for low back pain and a multi-vesicular liposome bupivacaine formulation as a nerve block or field block for longer-lasting chronic pain where patients are most at risk of becoming addicted to their pain medications. With that, I'd like to turn the call over to Ron to provide some more details on our investment in GqBio and PCRx201. Ron?