Pacira BioSciences, Inc.

Good day, and thank you for standing by. Welcome to the Becerra Biosciences Q2 2025 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 first speaker today, Susan Mesko, Head of Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone. Welcome to today's conference call to discuss our second quarter 2025 financial results. Joining me are Frank Lee, Chief Executive Officer, Brendan Tehan, Chief Commercial Officer, and Sean Cross, Chief Financial Officer. Tony Molloy, Chief Legal and Compliance 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 subject to the State Harbor provisions of federal securities 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 FCC. These are available from the FCC or the Patera 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 report that the first half of 2025 was marked by solid execution across our corporate, clinical, and commercial initiatives. The stage is set for accelerating top-line growth in the second half of the year, and importantly, we delivered several key milestones to advance our 5 by 30 path to growth and value creation. To remind you, this plan supports two broad strategic imperatives, first, growing our strong commercial-based business, and second, advancing an innovative pipeline of potentially transformative assets such as PCRX201. Notable second quarter accomplishments include the following, improving export performance with 6% year-over-year volume growth, the highest in eight quarters, strong commercial progress, allowing us to reiterate and narrow our range for revenue guidance, Favorable gross margins supporting an increase in guidance. Enhanced capital structure and liquidity with a new $300 million revolver and significant reduction of debt. And finally, disciplined and strategic capital allocation with the repurchase of $50 million of common stock. Brent and Sean will share more specifics on the quarter shortly. I'll begin with a high-level overview of our commercial portfolio, where our three vesting class products continue to generate significant cash flow. Our flagship product, Xperil, the first half of 2025, was marked by solid execution across three priorities, market access, awareness, and utilization. We now have a strong base to build on, and we're seeing encouraging momentum across key leading indicators for Xperil. On the market access front, we continue to advocate for expanded patient access to opioid-sparing pain therapies. To that end, we're pleased to see a new policy outlined by CMS and its preliminary rule for 2026. CMS is proposing to completely phase out its inpatient-only list over the next three years, starting with the removal of hundreds of procedures in 2026. In parallel, many of these procedures will be added to its list of procedures covered in ambulatory surgical centers. We believe this will enhance the expert on market opportunity in the outpatient settings. On the IP front, our legal team secured a favorable reexamination of our 495 patent from the US Patent and Trademark Office. Importantly, during this process, we amended the patent's claims to add volume limitations and to address other issues noted in the New Jersey Court's opinion last year. The 495 patent will be reissued shortly, and we believe it will be the strongest in our heuristic acid family of patents. In parallel, the team continues to innovate and expand our heuristic acid and IVRA patent families with two new patents. Both claim expo composition are listed in the FDA's Orange Book, with exclusivity into the 2040s. Shifting gears to strategic partnerships, a key component of 5 by 30 with an objective of 5 partnerships by 2030. We recently executed a potentially transformative collaboration with Johnson & Johnson MedTech for Zoleta. We believe this will significantly expand our reach and patient access for Zoleta. The proven long-lasting benefits of Zaretta and its distinct mechanism of action make it an ideal addition to the J&J MedTech's existing portfolio of OA pain solutions. Because there's no one-size-fits-all for treating patients suffering from OA pain, a personalized approach is essential with a highly complementary non-opioid option. The J&J MedTech team, we better support multiple treatment paths and improve the patient journey. For Pacera, this collaboration essentially doubles our sales calls for Zolretta, which is a promotion-responsive product. It gives us access to a well-established team and an extensive customer base. These relationships span a variety of physician specialists beyond orthopedics, such as sports medicine, osteopathy, pain management, and rheumatology. We believe this will meaningfully accelerate the Zulretta growth trajectory in an efficient manner. As for growth margins, enhanced manufacturing efficiencies have allowed us to increase our full-year guidance. This is a result of a multi-year investment in our 200-liter facilities in Swindon and San Diego. These suites provide ample capacity to meet demand with more favorable cost structure and manufacturing yields. Turning now to our pipeline, where we're focused on becoming the therapeutic area leader in musculoskeletal pain and adjacencies. These are large markets with high unmet patient needs. Our two registrational studies for Zolretta in the shoulder OA and Iovera in spasticity are progressing according to plan. To further solidify our leadership in opioid sparing innovation, we're advancing Innovations in Genicular Outcomes Registry, or IGOR. PICERA designed this comprehensive, prospective, observational, real-world study in the interest of science, not as a health authority obligation. OA is a unique condition that patients live with for decades and receive a myriad of pain treatments as their disease progresses. IGOR is positioned to provide in-depth insights into the patient journey, and we're capturing clinical and economic data as well as patient-reported outcomes. Its potential for meaningful insights is better than any known OA registry of its kind. With over 2,500 patients enrolled to date and growing, IGOR is now bearing fruit Recent and upcoming publications are further reinforcing the value of our products. In addition, we believe the insights gained from IGOR will support much-needed innovation and new product development for treating away pain. PCRX201 is a great example of innovation that we believe has the potential to revolutionize the treatment landscape. Clinical data continue to underscore the promise and disease-modifying potential of PCRX201 and the HCaTS platform. In June, we presented three-year follow-up data at the European Alliance of Associations for Rheumatology Congress. Very few OA studies reached such a milestone for study duration. Results showed that a single intra-articular injection of PCRX201 was well-tolerated with sustained efficacy through three years. In addition, we're making great progress in rolling our phase two ASCEND study Part A on track to conclude by year end. Beyond PCARCS 201, we have a promising portfolio of other HCaD platform-based assets that may have disease-modifying potential in other musculoskeletal diseases and adjacencies. We look forward to sharing more as the year progresses. In summary, this quarter is marked by solid execution across corporate, political, and commercial initiatives. as well as delivery of key milestones that advance our 5 by 30 strategy. With that, I'd like to turn the call over to Brent to share more details on our commercial performance on the second quarter.

Brent?

Thank you, Frank, and good afternoon to all joining us today. I'm excited to share a few highlights of the strong progress we've been making on the commercial front. Significant second quarter revenues were driven by improving Expirel's volume growth of 6%. This is a two-fold increase over the 3% year-over-year growth in the first quarter of 2025 and the second quarter of 2024. As Frank mentioned, during the first half of the year, we were sharply focused on establishing a foundation to support sustainable top-line growth. We made great strides expanding physician and payer awareness around no pain. As you know, this is an important shift in reimbursement policy and represents a significant opportunity to broaden the XBRL utilization in outpatient procedures. As expected, we are seeing robust momentum from leading indicators as we head further into the year. These data reinforce our confidence that XBRL is well positioned for steadily improving year-over-year growth as the year progresses. I'll start with market access where we've made terrific progress that is driving change. In addition to clinical value, accounts consider market access for their specific patient population when making decisions. Here, we're focusing on highlighting X4L's clinical and economic value to national, regional, and local commercial plans with real-world evidence. We're excited to report we are tracking ahead of plan and are maintaining a strong pace expanding our commercial coverage map. We currently estimate more than 40 million commercial lives now have access to XBRL by a separate reimbursement outside the bundle. We'll continue our efforts to expand access, and we're on track to reach 60 million covered commercial lives by the end of this year. This positions us to exit the year with a total covered population of nearly 100 million lives across both commercial and government payers.

As we gain critical massive coverage, we're creating increased leverage amongst our practices for broader X4L utilization.

Importantly, our payer progress has been strategic, focusing on key markets with high procedural volumes. We've prioritized our top five states, which collectively account for roughly 40% of X4L volumes. We are steadily expanding coverage and estimate that we will soon have the majority of lives covered in these top states. Coupled with this progress, we continue to see strong and growing utilization of the XBRL J-code with an increasingly favorable payer mix. We're also utilizing our strategic pricing programs as important tools to expand patient access. Through these preferential pricing programs, Healthcare systems can afford the opportunity to be at the forefront of opioid-sparing pain management. On the GPO front, we're excited to have signed our third partnership in the second quarter, and it's off to an excellent start. With this agreement, we now have more than 80% of our X4L business under contracted pricing, which is predicated on driving volume growth. Our pricing strategy is performing according to plan with our contracted business delivering high single-digit volume growth thus far. We expect this to accelerate over time and with only a modest impact on net sales dollars. Switching gears to awareness. Our market research is showing increasing awareness among formulary decision makers, mainly surgeons and anesthesiologists. As a reminder, it will take time for broader market adoption. Of those who indicated their facility would adopt CMS reimbursement guidelines, approximately 75% reported implementation could take six months to a year. Approximately 60% expressed a willingness to place expiry on formulary in light of separate reimbursement with the highest level coming from surgeons and anesthesiologists. Importantly, these key number already taking first steps, such as P&T committee meetings and reevaluating formulary status. This research aligns with the real-time X4L utilization data we're seeing in the market. Faster adoption is taking place within community hospitals and ambulatory surgery centers where we're seeing high single to low double-digit volume growth. Decision-making in these settings is more streamlined, enabling faster adoption to take advantage of the no-pain value proposition. Beyond the early adopters, year-over-year growth in the hospital setting has improved from a low single-digit percentage to a mid-single-digit percentage with the academic segment returning to growth. We've also secured multiple formulary wins at large integrated delivery networks and major national healthcare systems. These accounts are delivering an early lift in volumes after more fully understanding the value of XBRL unlocked by no pain. We expect these trends to accelerate as expanding commercial coverage further enhances the value proposition and drives policy change. Turning to our other products, as you may recall, we started the year with a new sales team supporting Xilretta and Iovera. The team has begun to hit its stride, and we are confident these products are back on track for improving growth as the year progresses. WE LOOK FORWARD TO THE SECOND HALF OF THE YEAR IN REPORTING ADDITIONAL COMMERCIAL PROGRESS ON FUTURE CALLS. WITH THAT, I WILL TURN THE CALL OVER TO SEAN FOR HIS REVIEW OF THE FINANCIALS.

THANK YOU, BRAN. I'LL START WITH AN UPDATE ON SALES AND MARGIN TRENDS. SECOND QUARTER EXPERIENCE SALES INCREASED TO 142.9 MILLION VERSUS 136.9 MILLION IN 2024. SALES GROWTH OF 4% WAS DRIVEN BY IMPROVING which was partially offset by a shift in vile mix in discounting. Second quarter Zulretta sales were 31.3 million versus the 30.7 million reported in 2024. Looking ahead with our new partnership with J&J MedTech and other programs, we believe the foundation is set for improving growth. For Iovera, second quarter sales were 5.6 million compared to 5.7 million in the second quarter of 2024. Turning to gross margins, on a consolidated basis, our second quarter non-GAAP gross margin improved to 82% versus 76% last year. Gross margins continue to benefit from the improved costs and efficiencies of our two large-scale manufacturing suites. With these suites now consistently producing commercial supply We have ample capacity to meet the growing demand for X4L. As a result, we have decommissioned our first-generation 45-liter suite located in San Diego and optimized our workforce accordingly. We expect these changes will benefit our income statement through a $13 million annual reduction in operating expenses that will begin in the third quarter. For non-GAAP R&D expense, reported last year. This increase relates to the strong enrollment in Part A of our Phase II study of PCRx201, as well as expenses associated with the Xilretta-Iobera registrational studies. Non-GAAP SG&A expense came in at $77.2 million for the second quarter, which is up from $59 million last year. This increase is largely due to investments in our commercial, medical, and market access organization targeted marketing initiatives and field force expansion. All of this resulted in another quarter of significant adjusted EBITDA of $54.3 million for the second quarter. As for the balance sheet, we continue to operate from a position of strength. In July, we bolstered our liquidity and financial flexibility with the new $300 million five-year revolving credit facility, we used an initial draw of approximately $100 million to fully repay our term loan aid. This new revolver will also benefit interest expense with an annualized savings of 60 basis points beginning in 2026 with no amortization requirements. In addition, we recently repaid our August 2025 convertible notes with cash on hand. Taking this into account, along with RDS repayment of the extra royalties, we ended the quarter with pro forma cash and investments of approximately $270 million. With a business that is producing significant operating cash flow, we are well equipped to advance our 5 by 30 strategy and create shareholder value. We are also taking a disciplined approach to capital allocation, where we are focusing on three areas. First, accelerating growth in our best-in-class-based business. Second, advancing in an innovative pipeline and becoming the leader in musculoskeletal pain and adjacencies. And third, opportunistically returning capital to shareholders. During the second quarter, we executed $50 million in share repurchases, retired approximately 2 million shares of common stock. This is in addition to the $25 million repurchase executed last year To remind you, we have approximately $250 million remaining under our current buyback authorization, which runs through the end of 2026. We will continue to be opportunistic with stock repurchases given what we believe is a significant disconnect in our market valuation. As we execute 5 by 30, we expect to prioritize the creative opportunities that benefit operating margins to enhance shareholder value. That brings us to our full-year P&L guidance for 2025. Today, we are narrowing our range for full-year revenue guidance to $730 to $750 million. In addition, we are increasing our guidance for non-GAAP gross margins to 78 to 80% from our previous range of 76 to 78%. 2025 margins benefited from increased manufacturing efficiencies favorable production volumes, and the elimination of our X4L royalty obligation. We remain well positioned to achieve our five-year goal of steadily expanding margins with a five percentage point improvement over 2024. We are reiterating all of our other financial guidance ranges as follows. Non-GAAP R&D expense of 90 to 105 million, non-GAAP SG&A expense of $290 to $320 million, stock-based compensation of $56 to $61 million. And lastly, for those modeling EBITDA, we expect our full year 2025 depreciation expense to be approximately $35 million. Looking ahead, with the commercial investments we've made, we expect to achieve sustainable earnings growth driven by improving sales, enhanced gross margins, and stabilizing operating expenses. In addition, opportunistic stock repurchases and reductions in share count will further enhance EPS. And with that, I'll turn the call back to Frank.

Thank you, Sean. In closing, I want to thank our entire team for their strong execution and dedication throughout the first half of the year. We've already achieved meaningful milestones that advance our 5 by 30 strategy and position us for sustainable success. with this foundation in place for entering the second half of the year with strong momentum and a clear focus on further accelerating growth. Thank you again for joining us today and for your continued support and confidence in our mission. With that, operator, we're ready to open the call for questions.

Thank you.

At this time, we will conduct a question and answer session. As a reminder, to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Les Slusky with Truist Securities. Your line is open.

Good evening. Thank you for taking our questions. I have a couple. First, maybe could you provide some commentary around the new partnership with J&J MedTech on Villaretta And how does that compare to the previous co-promote with J&J and XBRL? And then as a follow-up, what are the economics on this partnership and what assumptions can we derive from the strategy? Any figurative commentary would be helpful. My second question is around the third GPO. What are the expectations for impact to gross to net? And then a couple more, just progress on the Salesforce expansion and maybe one for Sean. Appreciate the commentary around the expected savings on the consolidation of plans. But how do we kind of view the gross margin outlook in the second half and then into next year? Thank you.

Thanks, Les, for the question. It's Frank Lee here. First of all, let me just say before we jump into this, and I'll turn to uh, Sean and Brent for some commentary here that I have to say, I'm really proud of the team on executing on all fronts here across the entirety of the business, you know, whether it's, uh, growth and revenue, it's, uh, margins, pipeline, IP, et cetera. There's a lot of activity that happened this year and that net, it's a strong foundation for growth going forward. Uh, so let me just comment a little bit, uh, about the J and J partnership. And then I'll turn to, uh, I'll turn to Sean for gross and nets and some commentary about gross margin and then maybe a little bit about the sales force. Just at a high level, just to remind everybody that the J&J partnership previously was for export, and that was prior to COVID. and during COVID, as we all know, the dynamics changed. So prior to that, it was a very successful partnership, and so the events of COVID led to the discontinuation of that particular partnership, but we've always appreciated J&J's capabilities and partnership there. So this particular partnership is now with Zolretta, which is in a very different setting under different circumstances. So that's as a high-level overview. Sean, maybe you could speak to gross nets and gross margins, as Matt said last time?

Sure, happy to. So the gross net's pretty simple. It's a low single-digit impact. Plus or minus 1% is a reasonable modeling, but that's pretty straightforward. And then with regard to gross margin outlook for second half and into next year, as we discussed, the team's doing a great job, and we've benefited from increased production efficiencies, favorable production volumes. And again, very proud of the team so that we could raise the full year margin guidance to a range of 78 to 80%. And we'll provide another update in Q3 as things progress. And just as a reminder, there can be pretty significant quarter over quarter variations. You know, one bad batch in a quarter, you take a charge for that quarter. But based upon how the team is doing, we're confident that we'll, in terms of raising the range to 78% to 80%. And then going into next year, there's a plan for just relentless continuous improvement at manufacturing sites. And so that's something, again, we'll provide an update later. But the goal is to 5% improvement for our 5x30 plan, and that continuous improvement will continue into next year.

Thanks, Sean. So, Brian, maybe you want to talk about Salesforce expansion? Yeah, sure. Thanks for the question. We are excited about the focus we're able to provide to all three of our assets. We have a team in Zilbereta and iAlvera that have now gotten more and more experience with their target audience. I think they're hitting their stride and beginning to improve in our overall performance there. Equally excited about what we're seeing with Expirel, not only in terms of what we've seen for no pain execution, but also significant formulary wins, both at IDNs and large health care systems. And I think we're also bolstered by improving commercial coverage, as you heard from my prepared comments. Thanks, Brian. So the last part of it, Les, you had asked about the economics of changing MedTech. We're not going to go into details here, but what we can say is, number one, it's reflected in the guidance, and we expect this to be beneficial in 2026. Okay?

Very helpful. Thank you.

Next question comes from Serge Ballinger with Needham and Company.

Hi, this is John for Surge today. Thanks for taking my question. Just a quick one regarding surgery volumes. Can you just give us a little bit of color on what you saw in the second quarter and then what you're seeing, I guess, to the first month of the third quarter and in which settings you think you're seeing the most traction at this time? Thanks.

Hey, thanks, John. We can't go into specifics about how this quarter started, and so you'll have to wait until the next quarter about that. But I'm going to turn to Brian here to talk a little bit about kind of what we're seeing in volumes over the course of the first half here. For sure. And actually, I'm encouraged by what we've seen for expo volumes in light of what the broader market has looked like. For us, at least the most recent data points we've seen would suggest that surgery outpatient case volumes are slightly down in the second quarter versus same time last year. And I see more inpatient surgery kind of flat, comparatively speaking. That said, to have seen the progress that we have in the HOPD or the outpatient setting for community hospitals as well as in ambulatory surgery centers,

is very encouraging. Great.

And if I could just have a quick follow-up. You mentioned having 40 million commercial lives under having Expirella access and looking to get to 60 million by the end of the year. And then 100 million of total lives covered across commercial and government providers. Just curious where the focus might be in terms of making gains, you know, throughout the remainder of this year and then into next year.

Sure. Thanks for the question, John. And I would say that we've been as strategic as we can be with especially regional plans. We're trying to align as best we possibly can our surgical volumes and opportunity with those large regional payer plans. Of course, we will be opportunistic and I think we're also seeing a number of national plans start to really embrace no pain, start to see reimbursement outside of the bundle. So we're encouraged with what we've seen through the first half of the year and a couple of very recent wins as well. So we'll continue to pursue that. We know that there's kind of a tipping point for our customers when they see not only reimbursement from CMS, but a preponderance of their commercial lives being covered as well. John, let me just add to that. I have to say that I'm very pleased with what progress we've made on the commercial payer front from market access. As we had talked about before, no pain was actually enacted. Getting commercial payers to adopt sooner rather than later was important, and oftentimes this can take years. And so really proud of the market access team for what they've accomplished. This is ahead of our plans, and I think to the extent that we hit our target end of the year of $100 million total, that will be a really great accomplishment.

Great. Thank you. Our next question comes from Gary Nachman with Raymond James.

Hey, guys. This is Dennis Resnick on for Gary Nachman. Thanks for taking our questions. So first, you've previously talked about expanding the current suite of products, XUS, as a partner. So can you provide an update on how those conversations are going? What are you looking for in a partner? When do you think a deal could materialize? And would you look for a partner for all three products at once, or would you go one by one? And then I've got a couple follow-ups. Thank you.

Thanks, Dennis. Really good questions. Indeed, we believe there are markets outside the U.S. with meaningful opportunity for all of our products. Of course, the initial focus, you know, certainly our flagship product, Nexpro, but Zoretta and I and Vera, potential there as well. So, we're making good progress, and if you think about our 5 by 30 goal of having five partnerships in this timeframe, we think we're well on track. So I can't give you any specific dates, but what I can tell you is that there's been very good interest. And as we think about potential strategic partners, they would, of course, be leaders in their field at meaningful penetration and portfolio and values that are aligned with ours. So those are some of the things that we look for. And the good news is, I think that there are meaningful partners out there And so we'll keep you apprised of how things are progressing, but I can tell you now that we're active in the process and that we're pleased with the kind of dialogue we're having.

That's great. And then if I may ask for some more color on PCRx201 and the recent three-year data, kind of any color you can give about the significance of it and the feedback from the poster presentations. And then on the ongoing phase two, it's nice to see the enrollment going so well. Can you just remind us how many total sites you plan on having and the split between how many are in the U.S. versus ex-U.S.? Thanks.

Yeah, thanks for the question, 201. I have to tell you, there's been very good excitement about 201. As we all know, there's been a lack of innovation in broadly the OA and the knee space and, you know, a big reason why we have, in essence, breakthrough status for gene therapies, the RMAT designation. So, The data that we recently presented were three-year data, and as I mentioned in my comments, there are very few studies that follow patients with OA of the knee out to three years, and we're seeing still very good response, very good safety profile and data that we've observed. Of course, this is an open-label study, and we'll know a lot more as we progress and report on our ASCEND study. So, to answer your question about the Response from investigators, thought leaders, et cetera, and tool, and there's been a lot of great excitement about that. 1 number 1 number 2. Is that as we think about the sense that the. We haven't provided all the specifics about number of sites, et cetera, but what we can tell you is that. There are 3 arms and 1 is the control is the steroid control. And then 2 other arms that are the steroid plus. We're more than halfway through our enrollment. That's progressing very, very well, and so we expect to be completed by the end of this year for Part A, and then Part B will start next year. So, bottom line is we'll have some initial data, as we've talked about before, from Part A sometime towards the end of 26, early 27, in that time frame.

Great. Thank you so much, and congrats on all the progress.

Our next question comes from Douglas Mame with RBC Capital Markets.

Excuse me. Good afternoon, everyone. My question just has to do with the guidance. I saw that you tightened it, 730 to 750 now. But what I'm curious about is back in Q1 when you were looking at these numbers and you had a wider range, What is it that's changed that's moved you away from, let's say, the upper end, the 750 to 765? Is it more price or is it no pain and the discussions that you're having with payers a little slower than you anticipated? Just curious about that.

Thanks for the question, Douglas. You know, obviously, ahead of a launch of something like this, there are uncertainties. And, of course, we provided a guidance range where we thought was reasonable. It all comes down to just some of the fundamentals that we talked about in Brent's address, which is market access. To what extent could we get commercial payers to come on board, along with now this new CMS reimbursement? enough so that we have tipping points in certain geographic areas where the majority of patients, let's say, are covered under this new approach to reimburse expirable. That's when meaningful change really happens. And so, without having some initial data, we had to provide that kind of a range. And now we have better certainty, as we've now got a half the year under our belt. And so, that's why I think we can provide this more narrow range. The midpoint hasn't changed, if that's your question, of course. But I think it's really about, you know, market access, about tipping point where the majority of patients are covered on this kind of reimbursement. And then, of course, after that, we'll be driving awareness and utilization because access is available for the majority of patients.

Okay. And then just as a follow-up, the J&J deal does look good on Zolota. And I'm curious, as we go into 2026, What in particular would you think that they're going to be able to add the greatest value to the product? And I'll leave it there. Thank you.

Thanks. I'm going to look over here. Brent, thanks for that one. Yeah, just to reiterate, we're thrilled to have this opportunity. I spent the first half of my career at J&J, and it's wonderful to be partners with them again here. As Frank shared in his prepared comments, this essentially doubles our ability to reach our audience with a promotionally sensitive product like Zilrena. And beyond that, J&J has a great deal of experience in the space and a broader customer base than we were originally calling on with Zilrena. So coming into play in much more prominence are groups like sports medicine, some of the pain management centers, and in particular, rheumatologists. All of that, I think, expands our messaging for Zolretta to an audience that needs to know that they have an option beyond the HAs, many of which are not able to give more than once or twice in a year. So it's really a nice complement to their portfolio and a very logical product to have in their bag for the OA treatment journey.

Excellent. Thank you. Thank you, Douglas. Our next question comes from Hardik Parekh with JP Morgan.

Hey, thanks for the questions today and thanks for the update, Frank and team. I had a couple of questions. First is just wondering, you mentioned that survey you guys had done and you're talking about organizations who plan to add XBRL to the formularies. They could take six to 12 months to start adopting. I was wondering, did you get any more color from that survey in terms of what are the gating factors that kind of lead to that six to 12 month timeframe? And then the second part is when your sales teams are pitching to various stakeholders, qualitatively, how much of the discussion is on educating on no pain versus explaining the benefits of XBRL relative to alternatives?

Thank you. So, I'm going to look to Bren here on that one as well. So, Bren, thanks for that.

Yeah, for sure. If you go back to when NoPain went into effect, which is January, most of the time, when you're asking your audience why it might take them a little bit of time to effect that change, a lot of it is to confirm they're going to get the reimbursement that they believe is coming. They also understand that CMS, while that accounts for a significant number of procedures, it's about a third of the total. So they want to see will commercial follow that plan. So as we've been updating with every earnings call, we want to put increasing points on the board for commercial coverage outside of the bundle. As that becomes reality in a variety of geographic areas, we see increasing numbers of payers come on board with expo reimbursement outside the bundle. And then just speaking about how we speak about XBRL, let's be clear, we are, you know, obviously excited about what no pain means in terms of the value proposition, the enhanced value proposition for XBRL. But the majority of our time is spent explaining what differentiates XBRL from alternatives and why it leads to the types of outcomes that our patients deserve. And I think you'll see more of that in the second half of the year as we look to amplify that message and make sure that patients, caregivers, and physicians understand what makes XBRL the best choice for procedures for which it's approved. Thanks, Brendan. Let me just add to that that regard to the health economic value proposition so important in these settings, increasingly important as we go forward. And as we step back, I mentioned that we have 2,500 patients in this IGOR registry that follows patients through their OA of the knee journey. And we think that's going to provide some really great insights into not only the value of our products, but some other products that are used in this setting and give us, again, better confidence that we'll be able to provide more patients access to our medicines.

Thank you for the call. And this concludes the question and answer session.

I would now like to turn it back to Susan for closing remarks.

Thank you, Sean, and thanks to all on the call for your questions and time today. We're energized by the opportunities ahead and remain focused on executing our five by 30 growth strategy with discipline and purpose. As we move through the remainder of the year, we are confident in our ability to build on our momentum and position to CIRA for long-term success. Thank you again for your continued support and be well.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.