Pacira BioSciences, Inc.

Good day and welcome to the third quarter 2024 Procedure Biosciences, Inc. 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. Instructions will be given at that time. As a reminder, this call may be recorded. I would like to turn the call over to Susan Mesko, Head of Investor Relations. Please go ahead.

Thank you and good afternoon, everyone. Welcome to today's conference call to discuss our third quarter 2024 financial results. Joining me are Frank Lee, Chief Executive Officer, and Sean Cross, Chief Financial Officer. Kristen Williams, Chief Administrative Officer, Lauren Riker, Senior Vice President, Finance, and Jonathan Slonin, Chief Medical Officer, are also here for today's question and answer session. Before we begin, let me remind you that this call will include forward-looking statements subject to the safe harbor provisions of federal securities law. Such statements represent our judgment as of today and may involve risks and uncertainties, which may cause our actual results, performance, or achievements to differ materially. 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 the PACERO website. Lastly, as a reminder, we will be discussing non-GAAP financial measures on today's call. A description of these metrics, along with our reconciliation to GAAP, can be found in the news release we issued earlier this afternoon. With that, I will now turn the call over to Frank Lee.

Well, thank you, Susan, and good afternoon, everyone. As you know, our top priority in 2024 is to ensure that, as an organization, we're well positioned to deliver accelerated growth in 2025 and beyond. Since our last call, we've continued to make important progress in three key areas. First, we're now aligned and committed to a refreshed, clear mission to deliver innovative, non-opioid pain therapy to transform the lives of patients. It's a straightforward yet compelling mission that personally resonates with me and our PICERA employees. Underpinning our mission are three guiding principles that we uphold every day. Keep the patient at the center, follow the science, and treat our people well. Second, we've completed comprehensive portfolio review and defined a growth-oriented, long-term plan and therapeutic area strategy focused on musculoskeletal pain and adjacencies. These are all significant and growing markets of high and met need that are poised for innovation. Our portfolio of products and expertise in the space leaves us well positioned to drive innovation and create value. Third, we've established a foundation for a modernized best practice commercial market access and medical powerhouse. In parallel, we continue to advance our commercial initiatives as we lay the groundwork for expanded expert utilization ahead of the implementation of NoPain. As you know, this important reimbursement policy will begin providing separate outpatient reimbursement at ASP plus 6% in 2025. We've completed another round of market research among hospital C-suite and key stakeholders. Similar to our original findings, awareness and understanding around NoPain and its potential impact on patient care is growing among these hospital decision makers and key stakeholders. We expect it will take time for customers to implement this new reimbursement across their organizations. We're also pleased to report that XPRIL will have its own product-specific JCODE beginning in January of 2025. In addition to streamlining the reimbursement billing and coding process, a J-code is more likely to be recognized and covered by commercial payers. This, combined with impending reimbursement from NoPain, is particularly important to expanding escrow access across different sites of care and types of payers. As you know, we're also partnering with GPOs of broad use and paved the way for NoPain. Through these preferential pricing programs, healthcare systems can afford the opportunity to be at the forefront of opiates-bearing paint management. We recently launched a new partnership with Vizient, whose significant network covers approximately 30% of XPRIL-relevant market procedures. We're on track for our third and final GPO partnership to go live at the end of this year or early next year. This agreement will cover another 20% of the market Once completed, more than 80% of expert-owned business will be under contract. Turning to Zolretta and Iovera. Both products are performing according to plan with solid third-quarter sales. Our phase three registrational study for Zolretta and shoulder OA is progressing with top-line results expected in 2026. If successful, the study could make Zolretta the first and only long-acting steroid approved for use in shoulders. Children's Relay represents a sizable market opportunity with approximately 1 million intra-articular injections administered each year. As for Ivera, on Friday, CMS issued their final hospital outpatient and ASC prospective payment system rule for 2025. We're pleased to see that the rule includes a newly created product-specific code for Iovera, C9809. In its final rule, CMS concluded that Iovera meets the statutory requirements of no pain and qualifies for separate reimbursement in both the hospital and ASC settings. Importantly, the rule adopts a consistent add-on payment of up to $255 in addition to the standard Iovera procedural rates in the hospital outpatient and ASD sites of care. Our registrational study for Iovera for the treatment of spasticity is also underway, with top-line results expected in 2026. Given the significant lack of innovation, and patients that are in need in this debilitating condition. We believe Iovera may offer a novel approach for patients with moderate to severe spasticity who are seeking treatment. The Iovera team is also preparing to file for approval of a new Iovera SMART tip later this year. This tip is specifically designed for use in chronic low back pain. which impacts millions of Americans and often leads to poor quality of life, disability, and prescription opioid use. Switching gears to our early-stage pipeline, we continue to be encouraged by the potential of PCRx201, our novel gene therapy, for the treatment of osteoarthritis in the knee. Its innovative high-capacity adenovirus or HCaD design, manufacturing process, and local administration solve for many of the challenges that have made gene therapy inaccessible for common diseases. Key attributes of 201 include the following. The HVAD viral vector is more efficient at delivering genes into cells than other vectors. This means less medication is needed to achieve the desired effect. PCRS 201 is delivering medicine where it matters. It's injected locally into the knee joint capsule and contained there, leading to a robust clinical effect and favorable safety profile. Smaller doses, local administration, and scalable manufacturing result in an attractive cost-of-goods profile. PCARX-201 has already exceeded expectations in an early-stage clinical trial In this large phase one study of 72 patients with moderate to severe knee OA, a single intraarticular injection of PCRX201 demonstrated pain relief and durability across all levels of disease severity as measured by the WOMAX scores. The study enrolled two three-dose cohorts, a co-administered steroid cohort, and a cohort that did not receive a steroid. Earlier this year, we presented one-year data. PCRX201 was well-tolerated with efficacy observed across all doses studied. The greatest efficacy was observed in the steroid pretreater group, with 75% of patients achieving at least 50% improvement in pain and stiffness versus baseline for all three doses. A 20% improvement is considered clinically meaningful. So these results are highly encouraging. We continue to follow these patients and look forward to reporting exciting new two-year data at the American College of Rheumatology's annual meeting next week. While other therapies typically provide relief for three to six months, PCARS-201 has already set a new standard with a year or more of sustained pain relief from a single injection. PCARs 201 is the first gene therapy to achieve these results and the only OA gene therapy to earn the FDA's RMAT designation, a testament to its promise and potential to revolutionize the treatment of neoA. As a primer to the PCARs 201 presentation at ATR, we made an educational webinar available in the investor section of our website. We invite you to watch and learn more about this exciting asset. The last item I'll quickly touch on before closing is the District Court's recent ruling on our 495 patent litigation. While this was, of course, not the outcome we had hoped for, it is important to remember that this was only the first case. Our legal strategy is comprehensive and includes pursuing an appellate review with respect to an injunction based on information received through ongoing court proceedings. We do not believe irreparable harm from an at-risk launch is imminent at this time. If this changes, we're prepared to adjust to our legal strategy accordingly. As a reminder, in order to be commercially successful, we believe EV&S will need to have overcome all of our patents. Importantly, the team continues to innovate, and additional patents are forthcoming. We're also waiting a trial date for the second lawsuit that's progressing in the New Jersey District Court. This case involves our 574 patent, which we believe represents a higher hurdle for defendants to clear. The 574 patent claims composition of expirial, but includes the volume limitation that Judge found lacking in the 495 case. We will continue to take the necessary steps to protect the interests of our business, shareholders, patients, and other stakeholders. We firmly believe we've built a strong portfolio of intellectual property and that the X4L franchise is well protected on multiple levels. Before I turn the call over, I'd like to formally welcome our new Chief Financial Officer, Sean Cross. Sean's a seasoned industry veteran with more than 25 years of global experience. as a biotechnology executive, board member, and investment banker. And I'm confident you'll be a great steward of our financials and provide valuable insights and strategies as we advance our plan for long-term growth and value creation. I'd like to thank Lauren Riker, our Senior Vice President of Finance, who served as our interim CFO. Lauren has been with Passera for 13 years, during which time she has demonstrated exceptional leadership and financial acumen. I'm grateful to Lauren for ongoing dedication and willingness to accept this responsibility during this transitional period.