Pacira BioSciences, Inc.

Good day, and thank you for standing by. Welcome to the first quarter 2025 Spacira Biosciences Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you will need to press star 11 on your telephone keypad. You will then hear an automatic message advising your hand is raised. To withdraw a question, please press star 11 again. Please be advised that this conference is being recorded. I would now like to hand the conference over to our first speaker today, Susan Meskel, Head of Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to today's conference call to discuss our first quarter 2025 financial results. Joining me are Frank Lee, Chief Executive Officer, Jonathan Slonin, Chief Medical Officer, and Sean Krause, Chief Financial Officer. Tony Malloy, Chief Legal and Compliance Officer, and Brandon Tehan, Chief Commercial 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 security laws. Such statements represent our judgment as of today and may involve risks and uncertainties. This 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. These are available from the SEC or the Cicero 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 issued earlier this afternoon. With that, I will now turn the call over to Frank Lee.

Thank you, Susan. And good afternoon, everyone. I'm pleased to say 2025 is off to a solid start. We start the year by introducing our 5 by 30 path to value creation to advance our transition into an innovative pharmaceutical company. To remind you, the plan supports two broad strategic imperatives. First, accelerating growth in our strong commercial-based business. and second, advancing an innovative pipeline of potentially transformative assets like PCRX201. In just a few short months, we've achieved early and meaningful 5x30 milestones. With respect to growing our commercial-based business, we successfully settled our patent infringement litigation for Xperil. This agreement recognizes the strength of our IP and establishes We expanded our ex-boreal patent estate and listed our 18th patent in the FDA's Orange Book with additional patents forthcoming. And our legal team recently secured a favorable court ruling that eliminates our RDF royalty obligation for ex-boreal. This will benefit ex-boreal gross margins by a low single-digit percentage. As for the pipeline, here too, we saw strong progress. First, we added a novel platform, a preclinical portfolio, and a talented research team with the acquisition of GQ Bio. Second, multiple new PCRx201 datasets are reading out this year. The new data continue to underscore the promise and disease-modifying potential of PCRx201 and the HCaD platform. Finally, patient dosing is officially underway in our Phase 2 ASCEND study of PCRx201 in osteoarthritis of the knee. I'll start by expanding a bit more on the settlement of expiratorial litigation. We believe this positive outcome recognizes the strength of our expiratorial patent portfolio. It also provides important short and long-term visibility to confidently advance our 5 by 30 plan and fortify our leadership in musculoskeletal pain. Importantly, the agreement is volume limited with no pricing restrictions. qualities, or technology transfer. Fresenius and his partners are solely responsible for the future manufacture and import of the generic product. As a reminder, this is a sole generic and a filer. Any future filer would have to overcome a significant number of legal hurdles given our growing number of Orange Book listed patents. In short, the agreement sets the stage for long-term XBRL growth and market expansion for the next 14 years. And with only one generic and ample room for increased penetration, we expect XBRL to generate significant cash flow for the foreseeable future. This provides a perfect segue to no pain. We have an important opportunity to significantly expand XBRL utilization. As you know, NoPain provides a reimbursement pathway for 18 million outpatient surgical procedures. Approximately 6 million of these are CMS procedures, which are now covered under NoPain. The remaining 12 million procedures are covered by commercial plans, where we expect NoPain-like coverage and policies will be implemented over time. As a reminder, it will take time for the market to broadly adopt a new reimbursement. That said, we're seeing encouraging leading indicators in this early phase of the launch. First quarter average daily XBRL sales and volumes were up approximately 7% over 2024 after adjusting for two fewer selling days in 2025. This is more than double the low single-digit year-over-year growth rate reported in the last two years. Beyond XBRL sales, other positive early indicators include an increase of more than 30% in both new and reactivated XBRL accounts with customer expansion across all sites of care. Mounting utilization of the new XBRL J-code indicating a rising level of awareness around enhanced reimbursement policies. Growth within community hospitals and ambulatory surgical centers, these accounts, which typically have fewer decision makers, are embracing the no pain value proposition. We're incorporating best practices from these early wins into our discussions with larger health systems. And formulary wins are starting to come in for integrated delivery networks. We expect these wins to grow as the year progresses while we navigate the numerous stakeholders within these large-scale networks. While we're encouraged by the early positive trends, it's important to keep in mind that we're driving change for more than a decade of established processes within complex delivery systems. As you know, claims data can take four or more months to process, and we look forward to sharing quarterly updates as more reliable market data become available in the second half of the year. On the payer front, we continue to highlight XBRL's value proposition to commercial plans with real-world evidence. We're pleased to see an increasing percentage of claims coming in from those plans that have adopted no pain-like policies. This too indicates a rising level of awareness among healthcare providers and organizations about the enhanced reimbursement that's now available. Since our last call, additional commercial plans have adopted no pain-like coverage, and we anticipate more to follow suit in the months ahead. Now turning to our other products, Zoretta and Iovera. As a reminder, late last year, we restructured our field-based teams to prioritize expirill and maximize the opportunity of no pain. As part of our plan to establish a commercial, medical, and market access powerhouse, we pivoted our existing sales force to focus on expirill. In parallel, we onboarded new sales teams to focus specifically on Zoretta in Iovera given specific capabilities required to service these customers. As a result, first quarter sales were impacted by the transition given that both products are promotion sensitive. This should naturally subside with some time as the team strengthens relationships and begins to hit its stride in the second quarter. In addition, our three sales force structure now has the capability and capacity to carry additional products. For Zulretta, we're rolling out several new programs this spring. Among these are establishing value-based contracts with large accounts that have demonstrated interest and are capable of driving volume growth. Broadening use within Medicare population where we have a very good access and coverage. There is no prior authorization requirement for CMS patients in contrast to most commercial plans. This allows Zulretta treatment to be administered during the same office visit that a provider decides to treat. Driving awareness around Zaretta's unique delivery mechanism and strong safety and pharmacokinetic profile. This allows for fewer systemic effects such as blood glucose spikes, a key advantage for diabetic patients and their healthcare providers. And assessing strategic partnerships to expand our breadth and depth of customer coverage. In parallel with our commercial activities, our phase three registration study is advancing its shoulder OA and on track for top-line results next year. If approved, Xereta would be the first and only long-acting steroid approved for use in shoulders. This is a sizable market with approximately 1 million intra-articular injections administered each year. Switching gears to Ayurveda, as you might recall, this year we're launching an innovative smart tip, specifically designed for use as a medial branch block to relieve low back pain. Billions of Americans suffer from chronic low back pain. It often leads to poor quality of life, disability, lost wages, and persistent prescription opioid use. We're pleased with what we're seeing from the first phase of the launch. Initially, we're focusing on a small group of spine key opinion leaders to gather insights and feedback before expanding to a broader targeted audience. The Medial Branch Smart Tip stands to grow the number of eye of error procedures in the second half of the year or beyond. Lastly, our registrational study of Iovera for the treatment of spasticity is advancing with top-line results expected next year. There is significant lack of innovation in patient satisfaction in this debilitating condition. We believe Iovera represents a novel approach for patients with moderate to severe spasticity seeking better treatment options. In addition to our label extension studies for Zolretta and Iovera, We're evaluating other opportunities with near and mid-term path to revenue accretion. We're also evaluating commercial partnerships in certain key markets outside of the U.S. where we believe our products can deliver value. Turning now to our clinical pipeline where we're focusing on becoming a therapeutic area leader in musculoskeletal pain and adjacencies. These are large markets significantly lacking innovation. Nearly one in four Americans are living with chronic pain and are actively seeking new interventions that address its underlying cause. As we look at new product development, we're prioritizing mid to late stage de-risked opportunities. More specifically, product candidates with validated mechanisms and established reimbursement pathways. PCR-X201 is a great example that we believe has the potential to revolutionize the treatment of osteoarthritis. Before I turn the call over to Jonathan for review of our PCR-201 program, I'd like to highlight our recently announced stock repurchase program and continued focus on disciplined capital allocation. This $300 million authorization doubles the amount authorized under the previous stock repurchase program. This decision underscores our commitment to delivering shareholder value and the confidence we have in our growth outlook. We believe the SARA shares offer an attractive opportunity at the current valuation, particularly in light of the settlement of XBRL patent litigation. This settlement agreement solidifies a strong cash flow-generating profile of our business with the certainty of an exclusivity runway to 2039. We believe this will drive significant growth and value as we advance 5x30. With that, I'd like to turn the call over to Jonathan to provide additional details on PCRX201 and our recently acquired HCaD platform. Jonathan?