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.