Pacira BioSciences, Inc.

Good day, and thank you for standing by. Welcome to the Q3 2023 PACERA Biosciences Earnings Conference Call. At this time, all participants 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'll need to press star 1 1 on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your questions, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand over the conference to your first speaker today, Susan Mesko, Head of Investor Relations. Please go ahead.

Thank you, Cerise, and good morning, everyone. Welcome to today's conference call to discuss our third quarter 2023 financial results. Joining me are Dave Stack, Chairman and Chief Executive Officer, and Charlie Reinhart, Chief Financial Officer. Ron Ellis, Chief Strategy Officer, is also here 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 at 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 today's call. 2023 has been a year focused on execution of missed opportunities and challenges. While we continue to be encouraged by improving trends and near-term opportunities, Today, we are adjusting our full year XPREL sales guidance to reflect an updated view of the remainder of the year. All other financial guidance remains intact. We established guidance based on historical data alongside current and projected market conditions. We are now forecasting full year XPREL sales to be $535 to $540 million. While we are disappointed to adjust XPREL guidance for the year, it in no way impacts our confidence in the significant potential we have in front of us. We maintain strong conviction in the substantial and growing untapped prospects within the Pucera commercial portfolio, and we are laying the groundwork to unlock its full value. We have built an attractive, patient-focused business while maintaining financial discipline, enabling us to manage effectively in all environments. Third quarter revenues of $164 million, improving gross margins, and ongoing operating discipline resulted in significantly positive adjusted EBITDA of $53 million. We also remain focused on deploying capital in a manner that we believe will maximize shareholder return. With significant and durable cash flows fueled by XPREL exclusivity through 2041, we are well positioned to return to meaningful growth by advancing three priorities. One, improving gross margins, two, growing revenues through short and medium-term opportunities, and three, expanding reimbursement and access to non-opioid pain management across all sites of care. I'll start with gross margins, where we continue to make important progress with consolidated third quarter margins improving to 77%. For Expirel, our San Diego facility continues to exceed output targets and achieve third quarter Expirel margins of 86%. In addition, The significant quality improvements we implemented earlier this year at our Swindon United Kingdom facility are now positively impacting margins. Top line, we remain in good shape to exit 2023 with gross margins in the high 70% range, and we expect to maintain or improve upon these margins going forward. On the regulatory front, we recently submitted a supplemental application to the FDA for approval of our 200-liter manufacturing facility in San Diego. This positions us for an early 2024 approval and will also serve to further improve XPRO gross margins as it will allow us to decommission our two higher cost 45 liter facilities in San Diego. Turning now to more specifics on the commercial side of the business, starting with XPRO, where we saw third quarter average daily procedure volume grow by 5%. Our mission has not changed with the aim of providing a non-opioid alternative to as many patients as possible. We continue to educate our shareholders about the benefits of Expirel. Recently, we announced a new partnership with the American Society of Anesthesiology, or ASA, to reinforce education and awareness ahead of key Expirel milestones. Our lower extremity nerve block PDUFA date action is coming up on November 13th, and anesthesiologists are a key ally who are aligned with our mission of improving patient care and optimizing patient outcomes. We had a meaningful and productive presence at the ASA's annual meeting last month, with several additional programs are in development with a focus on building momentum around the anticipated launch of our new lower extremity nerve block indications. To remind you, expanding our label with these two key lower extremity nerve blocks will significantly extend our reach within surgeries of the knee, lower leg, and foot and ankle, which collectively represent more than 3 million annual procedures and annual sales expected to exceed $100 million within five years of launch. Immediately following approval, we will begin education and promotion with key accounts with a broad launch rolling out at our national meeting in January. We will be launching with an overwhelmingly positive body of data, supporting Expirel as the first and only single-dose product to safely demonstrate four days of superiority versus bupivacaine, achieving statistical significance and p-values of less than 0.01 for post-surgical pain, opioid consumption, and percentage of opioid-free patients. These positive outcomes were achieved with a lower 10 mL dose, making Expirel, Adductor Chanel, and sciatic nerve blocks a very attractive value proposition to the anesthesia community for knee, lower leg, and foot and ankle surgeries across all sites of care. Turning to market access, we are continuing to invest in programs to significantly expand the Expirel user base ahead of no pain. We believe these programs will help our customers offer non-opioid pain control, especially in hospital outpatient settings where the current lack of sufficient reimbursement greatly impedes patient access to non-opioid sparing regimens, particularly for low-margin soft tissue procedures. With 75% of Expirel's relevant market procedures taking place outside of the hospital inpatient setting, we continue to benefit from our unique product-specific code, C9290, which is currently reimbursing Expirel at $1.44 per milligram in ambulatory surgery settings. TRICARE, WHICH COVERS 10 MILLION GOVERNMENT AND MILITARY LIVES, ALSO RECENTLY ADOPTED THE CMS MEDICARE REIMBURSEMENT METHODOLOGY AND IS NOW REIMBURSING EX PER EL VIA C9290 IN AMBULATORY SETTINGS. WE SEE A SIGNIFICANT GROWTH OPPORTUNITY AHEAD WITH NO PAIN AS IT WILL MANDATE CMS REIMBURSEMENT ACROSS ALL OUTPATIENT SETTINGS, PROVIDING A REIMBURSEMENT PATHWAY FOR NEARLY 20 MILLION EX PER EL RELEVANT PROCEDURES. No pain will eliminate the cost barrier of performing lower-margin soft tissue procedures in outpatient sites of care by providing a non-opioid pain management solution that is fully reimbursed at average selling price, or ASP, plus 6%. We expect no pain will grow into a multi-hundred-million-dollar opportunity as commercial payers adopt Medicare reimbursement policies over time. Our 340B pricing program is helping to alleviate cost challenges by offering a reduced price to eligible entities and low-income communities where patients are most vulnerable to opioid addiction. By investing in 340B, we are growing the X-Pro user base and volumes with an existing and new business, while maintaining a highly favorable gross net for our industry of roughly 86%. We are also working to solidify and grow our business and no pain, it is the right time to begin partnering with select group purchasing organizations, or GPOs, on the cost and value proposition of Expirel. Through these partnerships, which we are launching in 2024, we will be offering a broad network of hospitals and healthcare systems preferred Expirel pricing. We expect this will have immense single-digit impact on our overall net selling price while growing volumes over time. We believe by helping our hospital customers navigate ongoing financial pressures, we will significantly expand patient access while staying true to our mission of making a non-opioid pain management broadly accessible. Our GPO partners will also reinforce best practice post-surgical pain management and disincentivize hospital directives for cost-driven approaches that call for short-acting, compounded, illicit combination, generic drug regimens, and opioids. that expose patients to serious health risks. The proliferation of outside compounders is a threat to patients and our healthcare system, as we saw with the recent GLP-1 legal and regulatory activities from Novo Nordisk and Lilly. These pharmacy compounders employ misleading marketing practices without the benefit of any pivotal safety or efficacy data. They do not have FDA approval or a product package insert to support promotional activity. We are advancing a multi-pronged strategy to address the serious and illegal marketing activity. These include working directly with law enforcement and regulatory authorities, as well as lawsuits seeking injunctive relief under the Lanham Act, similar to the recent legal actions taken in support of the GLP-1 products. To quantify the potential upside of these activities, our research shows that approximately one million of these products will be sold in the United States in 2023. A 25% conversion to the 10 mL Expirel dose would benefit sales by more than $40 million. Through these programs like 340B and GPL partnerships, we are accessing a significantly larger pool of patients with their anesthesia and surgeon providers who want to offer superior opioid-sparing pain control. These programs are paving the way for us to leverage the No Pain Act by building an extensive Expirel user base ahead of the implementation in 2025. Switching gears to Zuretta and Ilvera, both products posted strong year-over-year growth in the third quarter with several milestones on track for the coming year. These include launching a label expansion study for Zuretta and shoulder osteoarthritis, expanding the use of specialty pharmacy to benefit our Zuretta customers and their patients to reduce risk and administrative burden on orthopedic and pain management office practices, expanding the Iovera cash pay market for a long-acting drug-free nerve block for osteoarthritic knee pain through targeted direct-to-consumer initiatives, initiating a registration study of Iovera for the treatment of spasticity, and developing new Iovera smart tips for low back pain, pediatrics, sports medicine, while generating new Iovera data in rib fracture, foot and ankle, thoracotomy, and shoulder procedures through investigator-initiated studies. For the balance of the year and throughout 2024, we will be keenly focused on executing these value-creating strategies that we are confident will continue to grow the best-in-class commercial portfolio. With that, I'll turn the call over to Charlie for his financial report.

Charlie? Thank you, Dave, and good morning, everyone. To remind you, I will be discussing non-GAAP financial measures this morning. A description of these metrics, along with our reconciliation at GAAP, can be found in the news release we issued this morning. I'll start with an update on sales and margin trends, starting with Expirel. Third quarter Expirel sales were $128.7 million. Average daily sales were essentially flat versus the third quarter of last year, as volume growth of approximately 5% was offset by our investment in the 340B program and other contracting activities. With the market showing signs of elective surgery market normalization, we continue to expect the fourth quarter to be the strongest and the largest contributor to full-year XBRL sales. Zolretta and Iovera both posted strong year-over-year growth. Third quarter Zolretta sales increased to $28.8 million, and Iovera improved to $5.3 million. Turning to gross margins, on a consolidated basis, our third quarter non-GAAP gross margin percent came in at 77%. This is comprised of non-GAAP gross margins of 81% for X4L, 66% for Xilretta, and 72% for Iovera. Our San Diego facility exceeded third quarter targets, and Swindon is back on track, which leaves us optimistic that we will exit the year with margins in the high 70% range, with additional improvements going forward. Turning to expenses, non-GAAP R&D expense for the third quarter of was $18.6 million, up modestly from $17.6 million last year. This year-over-year increase primarily relates to product development and capacity expansion costs for the 200-liter facility in San Diego, as well as increased regulatory activities. These increases were partially offset by lower clinical costs due to the completion of our two Lower Extremity Neuroflex studies. Non-GAAP SG&A expense came in at $58.9 million which is up from last year due to new strategic partnerships with sports organizations, a $2.5 million educational grant to the ASA, and legal fees associated with the Paragraph 4 and other litigation. Third quarter interest expense improved $3.5 million versus the $9.9 million reported last year. This was driven by the interest expense savings associated with the retirement of our term loan fee on March 31st. using a new term loan A and cash on hand. And lastly, we delivered another quarter of significantly positive adjusted EBITDA of $52.9 million. As for guidance, as noted in today's release, we are updating our full-year guidance for XORL sales, which we now expect to be $535 to $540 million. This update reflects our current view of market conditions and our actual results for the first nine months of the year. We are reiterating all other financial guidance ranges as laid out in today's release, with non-GAAP R&D expected to be at the low end of the range and non-GAAP SG&A expected to be at the high end of the range. In summary, we remain bullish on our five-year outlook with XBRL returning to more robust growth with next year's anticipated launch of lower extremity nerve block and normalizing market conditions, improving gross margins, minus year-over-year increases in operating expense. significantly adjusted with the margins driving durable cash flows. We are laser focused on maximizing the value of our current commercial portfolio. We will continue to be highly strategic in how we manage our operating spend. That concludes our prepared remarks. I'd like to now turn the call over to the operator to begin our Q&A session. Operator?

Thank you. As a reminder, to ask a question, you'll need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A. Our first question is from David Amselem from Piper Sandler and Company. Your line is open.

Hey, this is Tim on for David. Thanks for taking our questions. Just a few from us. First, you know, looking at manufacturing and your initiatives to fix past issues, what's the timing and extent to which you'd expect the margin expansion and operating leverage that you're guiding toward? Second, given the improvement in the underlying surge , when do you think that'll translate into more robust volume growth for X4L? Will that continue to be a steady grind, or do you expect an inflection at some point, particularly with respect to soft tissue? And last, at what point do you discontinue devoting resources to IOVERA as a means of limiting spend? Thanks.

Good morning, Tim, and thank you. we're in very good shape. They had a strong Q3, and we see that extending into Q4. As we said in the script, we expect to get into the late 70, high 70% range for Q4, and that as we continue to improve our performance at the Swindon UK facility, we expect that that will continue to improve. We have a couple of other things that will be inflection points for manufacturing. Importantly, once we put up the 200 liter in San Diego, we will have the opportunity to decommission the 245 liter facilities that are in San Diego. That will have a material impact on our gross margins as well. The plan going forward is to largely rely on these 200-liter facilities, and we're in very good shape there, especially with a number of more modest but important opportunities to improve gross margins that are ongoing initiatives in San Diego. Procedures, you know, we continue to see procedures grow in this 5% to 7% range. I mean, that's what we forecasted for the year, and that's exactly where we are. September was on the low end of that range, and we're expecting that based on Q1 that Q4 should be in the high end of that range. We'll just have to wait and see whether that materializes or not. And so the study grind that you're talking about is for sure associated with procedure volumes. And what we see there is there's a couple of things that are helping us or should help us with tailwinds going forward. One, and historically speaking, there was a material impact of the pandemic and folks that had passed away as a result of the pandemic and those folks not being available for largely soft tissue procedures as we went through 22 and 23. We think that that is largely behind us now. In our own work here, the data for lower extremity nerve block and the P values for lower extremity nerve block are really exquisite, and we believe that that will have a material impact on revenues in 2024. And then important, you know, we raised the issue of these compounders And during the call, we called out on the script that we expected that the market issues associated with the use of those products would add to a material improvement in XPREL sales. And the number that we referenced, if all of those conversions were 10 ml, would be $40 million. And so, you know, we've got a number of things that lead us up to no pain, which will be the inflection point of all time in my mind. And all of the issues that we face in the marketplace are related to cost and access. And with TRICARE, with continuing C9290 for ambulatory surgery, then we add no pain, which will pay full and take the burden off of 340B as well, right? And we'll go from a 24% statutory discount to full reimbursement of ASP plus six. And we expect that that will have a very material impact on procedure inflections. So... Appreciate your thoughts on that. In terms of discontinuing Iovera, nothing could be further from any thinking that I have. Iovera is a very important product going forward. The growth trajectory is material, although on a small end. But of all the things that we're doing in our commercial pipeline, Iovera for spasticity is at least as important as anything else we're doing. So we expect to see really material on a percentage basis growth for Iovera next year. and really important contributions over the five-year planning period for Iovera as we get into spasticity and we start to grow the opportunity. There should be no mistake. Iovera is an unbelievably important and really valuable asset for us going forward.

Thank you very much for your question. One moment. One moment, please. Our next question is from Gregory Renza with RBC Capital Market. Your line is open.

Good morning, Dave and team. It's Anish on for Greg. Thanks so much for taking my questions. Firstly, I just wanted to ask on the lower extremity nerve block expansion opportunity, with the upcoming PDUFA, how should we be thinking about labeling? And second, if you would share an early assessment on the 340B strategy progress to date and expectations ahead. Thanks again.

Yeah, thank you, Anish. The lower extremity nerve block, you know, we believe, well, first of all, you know, the data is as strong as any that we've ever had for Expirel, and really importantly, it's a superiority label against bupivacaine. So this is data where these P values, in some cases, 0.00001, for opioid reduction and pain control are compared to bupivacaine. So an important aspect that I'm not sure everyone understands. And we have 96 hours of pain control, you know, four days with a 10 ml dose. So we think that we address the at least start to address the pain or the opportunity to use a lower extremity nerve block with a price that is very appropriate for the four days of pain control. And we think that starts to address the cost issue as well. So we're really excited about the lower extremity nerve block. We expect that the PDUFA data is in play here and we're looking forward to the next couple of weeks and moving ahead on that. In terms of the early assessment of 340B, it's done exactly what it was supposed to do in terms of patient growth in the 340B environment to the point where, especially in the first half of this year, the impact of 340B was greater than we had anticipated that it would be when we put the program into play. So what we've seen in the second half of the year with some growth in the non-participating accounts, the accounts that are new to X4L as a result of 340B, as well as understanding that we got the price increase from early in the year, took effect for 340B in July, we see that that number comes back to something that's much closer to the 20% discount that we anticipated in the first place relative to XPREL specifically. So it's doing what it's supposed to do. We will look at 340B again when we have no pain, you know, as we come up on no pain. One of the things that will be really important for us to do is see if replacing a 24% statutory discount with full reimbursement at ASP plus six really allows us to look only at the places where there may be certain patient populations that fall out of 340B that won't be picked up and no pain, and we want to make sure that we have strategies to address those patient populations. Other than that, you know, in terms of maintaining access and building the pool for no pain going forward, 340B is doing what it was supposed to do. Thanks, Anish. Thank you.

Thank you for your questions. Our next question is from Balaji Prasad from Barclays. Your line is open.

Hey, good morning. This is Xiao for Balaji, and thanks for taking our questions. And just a quick follow-up on 340B. So Express volume growth, can you give us a bit of dynamics of what portion of that growth was from 340B and what portion of the growth was from existing channels? Thank you.

I don't have that number specifically off the top of my head. I can tell you that, you know, one of the things that make the GPO contracting that we talked about today on the call was the fact that the vast majority of our growth in 2023 has come from places where we have contracted business. 340B is a significant portion of that. I can't give you a number that goes with that, but what we see is where we have individual contracts or group contracts outside of 340B, we see growth, and 340B also has provided growth. I'm sorry, I can't give you a percentage, but it's the places that we're seeing the product growing have some form of price protection. That's why continuing with 340B and adding GPOs, we think, continues to provide access for X4L in a very difficult cost environment, especially for our hospital customers, but really for all customers. I'm sorry, I can't give you a specific number if that's what you're looking for.

No worries. Thank you.

Thank you for your question. Our next question is from Les Zalewski from True Security. Your line is open.

Hi, this is Jeremy on for Les. Thanks for taking my questions. Firstly, any concern for how GLP-1s will impact orthosurgeries when an overall healthier population result in fewer elective surgeries? And then also, can you just walk us through the competitive landscape, specifically with Zimmerloff and other cheaper treatment options? And what type of impact have you been seeing from those? Thanks.

Yeah, thank you. You know, bariatric surgery is... very modest in terms of the GLP-1s for us. So on the downside, we really don't see bariatric surgery impacting us in any way, material or otherwise. On the other hand, you know, we do have orthopedic surgeons telling us that because of the GLP-1s that there is some thought around patients with BMIs that are not appropriate for orthopedic surgery today could well become candidates for orthopedic surgery going forward because of the GLP-1 opportunities. And so we think, if anything, that GLP-1s are additive to what we call procedures of ambulation, knee surgery, and hip surgery, especially if these patients, these patients generally that have a high BMI are highly motivated. So the GLP-1s could very well help in that scenario. The issue of Xenralef is really nonexistent. You know, some of their contracted numbers and some of their pricing is such that it's almost the same as generic cocktails. So it doesn't really enter into any of our strategies in terms of any competitive things that we see going forward. The cocktail programs that we talked about today are a material issue. And you probably would have seen from the GLP-1, on the GLP-1 topic again, that specifically Novo, Nordisk, and Lilly were very aggressive in the compounders that were going after their GLP-1 brands. We see essentially the same activity for compounders putting combinations of generic drugs together, generic drugs that are Schedule III controlled substances, compounds like Ketorolac others that have black box warnings for patient safety. None of those things are called out in any of these combinations. In fact, none of these products have any pivotal data, zero, for efficacy or safety, and none of them have package inserts. So there's really no way for them to have a black box because they don't even have a package insert. So they are all being sold illicitly and illegally, and we think that we are in a very strong position a la the way Lilly and Novo Nordisk handle the GLP-1s. We will follow some of those same strategies going forward. So, you know, when a site goes to bupivacaine alone or bupivacaine with epinephrine, essentially that allows them to buy this, you know, seven, eight hours of pain control In many places, they will add dexamethasone or another steroid trying to get 10, 12 hours of duration. But in all of these short-acting strategies, they are relying on opioids. And so, you know, as we move forward here, our strategy is not only to be able to be cost-conscious given the struggles of our customers, but also to be able to provide a long-acting product so that they can reduce opioids. So, you know, none of these strategies that you're hearing where people are going to lower cost products allow them to have anything that works for more than 10 to 12 hours. And all of those strategies rely on opioids, and we think that we can do better than that.

Thanks. Thank you. Our next question is from Orin Livnoff from A&P Wainwright. Your line is open.

Thanks. I have a couple questions. If I could just follow up on, Dave, your earlier comments about growth generally this year coming or maybe entirely coming from contracted customers, whether that's 340B or other contracts or, I guess, as you said, price-protected customers going forward in 2024 and beyond. How do you feel about organic growth, I guess you could call it, across the entire book of business, including the non-contract business? You know, should we think that, you know, where you were able to penetrate, you've hit a ceiling that just is what it is without further price action or help? Or is it just a function of the market is still needing to normalize and next year you do see growth across that book too? I have a follow-up.

No, well, we believe that it's a both. All right. Thank you for the question, by the way. You know, we think lower extremity nerve block, well, first of all, we think that the market normalization and the, it sounds morbid when I talk about it this way, but I don't mean it that way. The pipeline of patients who will require largely soft tissue procedures as disease progression, largely in the cancer population, you know, goes forward, that population that I talked about earlier that was absent for 22 and 23 because of the mortality associated with the pandemic. We think that that's back, so we think procedure normalization means the procedures will grow at a slightly higher rate to start with. Then we add no pain to that, or we add lower extremity nerve block to that, which should, by the way, be sponsored to a greater degree because of our relationship with the ASA, we will have specific activities that are directed by the ASA as a result of the lower extremity nerve block launch. And then as we get into 24, we have the combination of these cocktails, and we believe that there will be some ability to take these products off the market, which will move more of these procedures back to X4L, especially the lower dose of X4L. And at the same time, our GPO contracts will provide a broader base of contracted business, which is where we saw the growth in 2024. So we really, I see it, you know, we see it as two and a half buckets. The half bucket is procedure normalization and and the two buckets are lower extremity nerve block in combination with the ASA and the anesthesiologist having increased interest in a 10 ml dose, again, addressing the cost issue. And then the whole opportunity to broaden our contract base with GPOs, eliminate some of the higher percentage rate individual contracts that we have with specific health plans, and then at the same time allow those folks to start to use Expirel Again, some of these cocktails, which, as stated earlier, are not FDA-approved and are only short-acting products in the best case, which require that they use opioids. And really, the clinicians are not happy with those decisions at all. Those decisions are being made purely on cost alone by pharmacy and, in some cases, by C-suite initiatives.

Okay. And if I could just follow up on 2024. I know you're not giving guidance today, and so I don't expect any hard numbers, but can you just both help us understand just the push and pull? You mentioned expanded contracting having, I guess, a mid-single-digit impact projected. I guess all else equal, without lower extremity nerve block adding on, do you expect to see net growth and overall, you know, in the balance of procedures versus price offsetting next year. And then I guess just when you talk about EBITDA and margins, are you committed to growing EBITDA, I guess, at a faster rate than sales next year? Or is it possible that you know, the lower extremity nerve block investment when that launch could have, I guess, a short-term drag on profitability next year. Thanks.

No, that's a three-credit MBA course that you just asked for. So, a number of things. Excuse me. Let me start out with gross margin, where, you know, we're coming off a base, let's just, I'll just take the first quarter, right? We're first quarter of 23, our gross margin was in the low 70s. We expect that that will be materially improved over next year, and so we're starting from a much better position. You know, the impact of 340B will be relative to itself now, relative to, you know, comparing 24 to 23. So we expect that that impact will be, you know, it'll be the same number, but on a comparison basis, it will be a better comp for us. The GPOs are much less consequential to the bottom line than the 340B aspect of this is. And so it becomes then a question of, you know, how do we handle OpEx on a go-forward basis? And, you know, coming up on no pain, it would be illogical for us to go aggressive at OpEx when we think that the grand opportunity of all time is right in front of us on 1-1-25. So long ball to answer your question, as a result of all the parts of this that I went through in the first question that you asked, we do expect that we will get tailwinds from not, well, you eliminated lower extremity nerve block. That's hard for me to do. I haven't actually looked at what the year would look like if we didn't get approval of lower extremity nerve block, which I guess is a statement of my confidence that we will get lower extremity nerve block in a couple of weeks. But I think, you know, as we said in the script, cocktails on material. We expect to at least not to have a stable growth environment as the growth environment improves with GPOs and 340B and TRICARE. So net-net, there should be an improvement. And even on next year, although it will likely be modest as we wait for no pain to come.

All right. Thanks so much for the color.

All right. And I would say, Arne, even if we look at three-quarter this year over three-quarter last year at the EPS line, you know, it's material. I mean, it's a material improvement, and I think you're starting to see some of these things come into play already.

Oh, and it will be remiss of me not to congratulate you on your announced retirement.

So far, we've seen no evidence of that, but I'm looking forward to spending some time with the grandkids and actually doing some things. No, but I appreciate that. I mean, it's a bit bittersweet. I mean, I love this place, but I'm going to be 73 in April, and there's nothing I can do about that.

Thanks, man. Take care.

Thank you. I see no further questions at this time, so I would like to now turn it back to Dave Stapp, Chairman, CEO.

Thanks, Therese, and thanks to all on the call for your questions and time today. We're excited about the opportunities that lie ahead of us. Throughout the balance of the year, we continue to build on our strong foundation to ensure we are well positioned for long-term success. The opioid epidemic continues to be a national crisis, underscoring the vital importance of our mission. Next up for us is JP Morgan in Miami, followed by Truist and Piper in New York. Thanks to you all, and stay well. Bye for now.

Thanks to everyone for your participation in today's conference. This does conclude the program, and you may now disconnect.