Research Frontiers Incorporated

Good day and thank you for standing by. Welcome to the PACERA Biosciences Third Quarter 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 will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 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. Please go ahead. Thank you.

Good afternoon, everyone. Welcome to today's conference call to discuss our third quarter 2025 financial results. Joining me are Frank Lee, Chief Executive Officer, Brendan Thien, Chief Commercial Officer, and Sean Cross, Chief Financial Officer. Jonathan Slonin, our Chief Medical Officer, is also here for our 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 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 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 issued earlier this afternoon. With that, I will now turn the call over to Frank Lee.

Thank you, Susan. And good afternoon to everyone joining today's call. We're pleased to report another successful quarter of strong execution across our corporate, clinical, and commercial initiatives. We're seeing top-line growth accelerate with year-over-year revenues increasing by 6%, driven by a strong quarter for Exporil and Ayurveda. We continue to make important progress advancing our 5x30 path to growth and value creation. To remind you, this plan supports two broad strategic initiatives. First, growing our best-in-class commercial-based business, and second, advancing an innovative pipeline of potentially transformative assets such as PCRRx201. Notable third quarter highlights include increasing export demand with year-over-year volumes up approximately 9%. This is the highest quarterly growth we've seen in over three years and underscores the value of our commercial investments. Improving manufacturing efficiencies. and favorable gross margin supporting our second increase in full-year guidance. Significant cash flows and a strong balance sheet enabling investments in new growth initiatives. Meaningfully expanding our clinical pipeline with the in-licensing of AMT143. This complementary long-acting non-opioid directly aligns with our 5 by 30 strategy and has the potential to provide longer pain relief versus currently available local analgesics. Disciplined and strategic capital deployment, including share repurchases of another $50 million. And finally, solidifying our exclusivity runway with the listing of our 21st expiry patent. This now appears in the FDA's orange book, and additional patents are forthcoming. I'll begin with the high-level overview of our commercial portfolio, where we're seeing improving trends for each of our products. For our flagship product, Expirel, momentum is on the rise as a result of strong execution, expanding market access, awareness, and utilization. On the market access front, we continue to make important strides, improving patient access to opioid-sparing pain therapies. To that end, our GPO partnerships and performance-based contracting are delivering and growing our XBRL user base. We continue to secure key wins with additional national and regional commercial payers now providing separate XBRL reimbursement. We remain ahead of plan and expect to surpass our full-year goal of 100 million covered lives across commercial and government payers. New initiatives to better support this promotionally responsive product are underway. We're confident the foundation's in place for a return to growth. Our colleagues at Johnson & Johnson MedTech are now trained and active in the field. This partnership is a great example of 5 by 30 in action. We have tripled our commercial footprint, which we believe will provide a meaningful incremental growth. Lastly, IAVERA. at a strong third quarter as a result of this dedicated sales force and other commercial investments. On the manufacturing front, the team continues to make important progress with third quarter gross margins supporting another increase in guidance. Switching gears to the pipeline, here we're focused on becoming the therapeutic area leader in musculoskeletal pain and adjacencies. These are large markets with high-invent need. Clinical initiatives center around advancing an innovative pipeline along with life cycle management for our commercial base. For new product development, we're prioritizing complementary mid to late stage de-risked opportunities spanning the patient journey. PCRX201 is a great example that's advancing in a phase two study for osteoarthritis of the knee. Interest in the study has been high, and we recently concluded enrollment Part A ahead of plan, placing us on track for 12-month data next year. The data continue to underscore PCR-X201's potential to revolutionize OA treatment landscape and be at the forefront of local gene therapy for the masses. Last month, we presented three-year follow-up data from the Phase I study at the American College of Rheumatology Convergence. These data demonstrated sustained efficacy. with improvements in pain, stiffness, and function for up to three years. Importantly, efficacy was observed across all structural severity subgroups, including the most severe. Investigators also highlighted that preexisting neutralizing antibodies did not affect PCR201's efficacy or safety at all three doses. Natural immune responses are a major obstacle for gene therapies, and these preliminary data indicate the potential for redosing. We also expanded our pipeline with the recent in-licensing of AMT143, a novel, long-acting formulation of ropivacaine. This asset sits squarely in our wheelhouse, given our deep expertise in long-acting, locally administered pain therapeutics. This franchise enhancing asset is highly complimentary to Expirel and will allow us to serve a broader range of patients and healthcare professionals. It's innovative hydrogel technology is a proprietary combination of two polymers. It's easy to administer requiring only installation into the surgical site with minimal reliance on specialized technique. The hydrogel rapidly forms a slow release depot as it warms to body temperature. In a phase one study, AMT143 demonstrated sustained analgesic release through 14 days. This supports its potential for several days of pain control, which would be the longest duration among currently available local analgesics. These data, along with ropivacaine's validated mechanism of action, provide an attractive development risk and differentiated product profile. We expect to initiate a Phase II program next year, which places on track for commercialization to begin within our 5 by 30 timeframe. Given its strong commercial synergies, we expect it to be meaningfully accretive to cash flows and earnings. With respect to our HCaB-based preclinical portfolio, we've prioritized three programs, all with disease-modifying potential in painful conditions of high MFD. PCRX1003 for degenerative disc disease, addressing a major cause of chronic back pain with few currently available effective therapies. PCRX1002 for dry eye disease, a widespread condition where current treatments offer only temporary relief. And PCRX1001 for canine osteoarthritis, which has strong out licensing potential for large market lacking durable solutions. Switching gears to lifecycle management, here we're highlighting the value of our products with real-world data. Last month, we presented three health economics and outcome studies at the AMCP Nexus. The use of Expiril was associated with reduced opioid use, lower costs, and improved recovery outcomes. Our comprehensive real-world IGOR registry now has more than 3,000 OA patients enrolled As you know, 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. We're capturing clinical and economic data as well as patient reported outcomes for all three of our products. Its potential for meaningful evidence is better than any known OA registry of its kind. And to round out the pipeline discussion are two registrational studies for Zolretta in the shoulder OA and Iovera in spasticity are progressing. We expect to have interim data readouts from both studies next year. The last item I'll touch upon are the recent paragraph four notifications. And as you know, generic attempts are common for successful products like Expiril. A great deal has changed since the first genetic filer where we had one patent at the time. Our current Exporil patent estate is stronger than it's ever been, and the team continues to innovate to further solidify a runway. Bottom line, any antifiler has a very high series of hurdles they will need to overcome to be commercially successful. We intend to vigorously protect our intellectual property and have an expertise focused on advancing our legal strategy. As for the rest of us, we're sharply focused on driving growth and remain confident Experul will be a key growth driver of our success for the foreseeable future. With that, I'd like to turn the call over to Bren to share more details on our commercial performance and the third. Bren.

Thank you, Frank, and good afternoon to all joining us today. I'm excited to share highlights of the terrific progress we've made over the past few months on the commercial front. Building on our first half trends, we further increased our revenue growth rate in the third quarter driven by improving expo volume growth of roughly 9%. This is nearly three times the first quarter volume growth rate of 3% and significantly higher than our second quarter volume growth rate of 6%. As Frank mentioned, this underscores the value of our commercial investments and positions us for significant and sustainable revenues going forward. We're seeing continued momentum from leading indicators as we head into year end. These data reinforce our confidence that X4L will be a key driver of our five by 30 objective of five year double digit CAGR for revenue. I'll start with market access where we continue to reshape the value story for our customers. In addition to clinical value, our accounts consider market access for their specific patient population when making treatment decisions. Here, we're using real-world evidence to highlight XBRL's clinical and economic value to national, regional, and local commercial plans. We're excited to report that we continue to track ahead of plan and are maintaining an accelerated pace, expanding our commercial coverage map with no pain-like policies covering XBRL outside of the surgical bundle. We currently estimate that approximately 60 million commercial lives now have access to XBRL via this separate reimbursement mechanism. This places us ahead of plan with a total covered population of nearly 90 million lives across both commercial and government payers. As we build this critical mass of coverage, we're communicating these advances to our customers and are very encouraged to see them expanding XBRL utilization as evidenced by our growth. Our access efforts continue to be strategic, focusing on key markets with high procedural volumes. We have prioritized our top five states, which collectively account for approximately 40% of export volumes, where we are steadily expanding coverage. Access here is increasing utilization with third quarter volumes up more than 10% collectively in these markets. Coupled with this progress, we continue to see strong and growing utilization of the XBRLJ code for both commercial and Medicare claims. We're also expanding access through compelling strategic pricing programs. Through these preferential pricing programs, healthcare systems have the opportunity to be at the forefront of opioid-sparing pain management. Our pricing strategy is having a positive impact with our contracted business delivering year-over-year volume growth in the low teens. We expect volumes to improve over time with only a modest impact on net sales dollars. On the GPO front, our third partnership went live in June and is off to an excellent start. Since launch, we have seen significant growth in volumes from accounts within this network, exceeding our forecast. With our three GPO networks and individual agreements with healthcare systems, more than 90% of our X4L business has contracted pricing. Importantly, these are performance-based and designed to maintain and grow both volumes and revenues. In addition to providing our customers with favorable pricing, we're assisting patients in new ways with our recently launched patient assistant programs to further support best practice patient care. Our support specialists are helping qualified patients overcome financial and administrative barriers, minimizing patient out-of-pocket costs. All of these programs have created market access that is more favorable than it has ever been, with more key milestones on the horizon for all three of our products. Given our strong progress on the market access front, we believe the time is right to mobilize patients to ask for Expirel to be part of their treatment plan for post-surgical pain. We rolled out several targeted digital pilot programs in the first half of the year to advance patient and physician awareness and engagement. We're seeing encouraging early signs from these campaigns. Since launch, overall X4L website traffic is up more than 70% across both consumer and healthcare provider platforms. This is an excellent indicator that our refreshed marketing approach is resonating. Importantly, patient and caregiver awareness coupled with improved access is translating into real-world volume growth for X4L. Looking at the sites of care, we continue to see strong adoption in ambulatory surgery centers, with this setting delivering third-quarter volumes up more than 25% over last year. As you know, decision-making in these settings is more streamlined, enabling faster adoption to take advantage of the new reimbursement policies. In the hospital setting, year-over-year volume growth has improved from mid-single-digit to a high single-digit percentage. As expected, faster adoption is taking place within community hospitals where we saw third-quarter volume growth in the low teens. Switching gears to our other commercial products, for Zolretta, we're currently expanding our reach through our new partnership with J&J MedTech. In addition, we've rolled out key programs to expand utilization, including our new patient support hub and copay assistance programs, as well as performance-based agreements with our top customers. We believe these will help meaningfully overcome barriers to Zulretta utilization. For Iovera, our Salesforce realignment is kicking in, and we are seeing a small but growing uplift from the medial branch launch and improving reimbursement from no pain. We are also wrapping up reimbursement training and launching additional customer-facing materials around our new patient services hub. In summary, we believe we are well positioned for a strong finish to 2025 with improving growth ahead. I will turn the call over to Sean for his review of the financials.

Thank you, Bren. I'll start with an update on sales and market trends. Third quarter ex-grill sales increased to 139.9 million versus 132.0 million in 2024. Volume growth of 9% was partially offset by a shift in vile mix and discounting from our third GPO going live, with each having a roughly equal impact. As Bren mentioned, Third quarter volumes within this network were ahead of plan, which resulted in a slightly higher than expected single-digit year-over-year impact toward net selling price. As we move forward into 2026, we expect volume growth and revenue growth to converge over time as we anniversary these three-year agreements. Third quarters of RETA sales were 29.0 million versus 28.4 million in 2024. Looking ahead with our new partnership with J&J and other commercial investments, we believe the stage is set for improving growth. For Iovera, third quarter sales grew to 6.5 million versus 5.7 million in 2024. Turning to gross margins, on a consolidated basis, our third quarter non-GAAP gross margin improved to 82% versus 78% last year, Gross margins continue to benefit from the improved costs and efficiencies of our large-scale expo manufacturing suites. For non-GAAP R&D expense, the third quarter increased to $22.5 million and $17.3 million reported last year. This increase relates to strong enrollment in Part A of our Phase II study, PCR-X201, as well as expenses associated with the Xilretta and IOVERA registrational studies. Non-GAAP SG&A expense came in at $81.7 million for the third quarter, which is up from $65 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 $49.4 million for the third quarter. As for the balance sheet, we continue to operate from a position of strength. We ended the quarter with cash and investments of approximately $246 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 continue to take a disciplined approach to capital allocation where we're focusing on three areas. First, accelerating growth of our best-in-class based business. Second, advancing an innovative pipeline and becoming the leader in musculoskeletal pain and adjacencies. And third, opportunistically returning capital to shareholders. During the third quarter, we executed an additional $50 million in share repurchases and retired approximately 2 million shares of common stock. To remind you, we have approximately 200 million remaining under our current share 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 increasing our guidance for non-GAAP first margins to 80% to 82% from our previous range of 78% to 80%. 2025 margins benefited from increased manufacturing efficiencies, favorable production volumes, and the elimination of our experimental loyalty obligation. For all of the guidance, we are narrowing our full year ranges as follows. Revenues of $725 to $735 million. While XFRL and IOBARRA had a strong uptick in the third quarter as expected, Zillaretta's acceleration has been slower than anticipated. Non-GAAP R&D expense of $95 to $105 million. Non-GAAP SG&A expense of $310 to $320 million. stock-based compensation of 56 to 59 million. And lastly, for those modeling adjusted EBITDA, we expect our full year 2025 depreciation and amortization expense to be approximately 30 million. Looking ahead, we expect sustainable and significant earnings driven by improving sales, enhanced gross margins, and stabilizing operating expenses. In addition, opportunistic stock repurchases and reduction in share count will further enhance EPS. 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, advancing our 5 by 30 strategy and dedication to the patients we serve. I'm proud of the significant strides we've made this year across our corporate, clinical, and commercial objectives. Looking ahead, We believe we're well positioned for sustainable success and significant value creation. Thank you again for joining us today and for your continued support of our important mission.

With that, we're ready to open up the call for questions. Operator?

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will 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 question. Our first question comes from the line of Les Suliski from Truist. Please go ahead. Your line is open.

Good evening. Thank you for taking my questions. So, in the prepared remarks, you commented that the GPO had a higher volume than expected, which pulls it down to ASP. How much of that total volume growth was tied to the GPO? And then second, was there anything noteworthy about the difference in the number of selling days in the quarter? And could you share any metrics around average volumes per day? And I have a follow-up.

Hey, Les, this is Franklin. Thanks for the question. Yeah, we had strong uptake from the GPO that we signed in June. That's a favorable thing. system in this. Sean mentioned the gap between volume. It's very strong, as you heard, 9%, and sales will start to close as we get into next year. So, Sean, I don't know if you want to say anything more.

I completely agree. We anticipate them narrowing over time, and we're feeling good about the volume trajectory.

Unless you had another question, remind me of the second question.

Yeah, if the second day was around the selling days in the quarter, any potential impact from that and metrics around average volumes per day?

No.

So let's just go back to, is an important point overall about, as we now think about, as you heard, The volume growth of Expo going from three to six to nine. And as we get into next year and flow through these GPO agreements, and of course, we'll take price at some point. This will all add up into dollar sales that are running more at double digits as we had talked about. So we're encouraged that the second half is starting to turn out the way we started to articulate that at the beginning of the year in terms of growth celebrating the second half.

Okay, thank you. That's helpful. Just one last one for me, and I'll jump in the queue. What's the rationale between the AMT-143 program, and then how do you think about the trial design, specifically which pain indications would you pursue, and how do you envision the label ultimately to look like? Would it be indication-specific or broad based on your design? And then thoughts around the IP protection around this technology, given the compound is generic. Thank you.

That's a good question. So I'm going to come back to our thinking around how we think about building our pipelines in a disciplined manner. We are certainly well, I would say, from a capability standpoint, well-versed in developing products like this. We think there's a place in the market for a product that has longer durability and ease of use. That is installation as opposed to any other method that requires, you know, technique And so, that's the rationale behind it. We think there's a place in the market. We think it's complementary to ExpoRail. And of course, we have the infrastructure in place, so it'll be highly synergistic. When it comes to our development programs, it's early to say, Les, that we need to work through this. But, you know, my sense of it is that we'll be very consistent with the way that we've built other programs in the past, and we'll provide more light on in terms of specific trial design as we get into next year. So that's broadly what it is. And in terms of IP, I believe you can speak to that, AMT 143.

Sure. The IP goes after 2042.

They have a solid state, and we're going to look to expand upon that. Yeah. Jonathan, anything more on your end?

I agree with you, Frank. Opportunity here to provide another non-opioid pain solution, and so we're excited about the potential of this asset.

Very helpful. Thank you.

Thank you. One moment for our next question. The next question comes from the line of Gary Nachman with Raymond James. Go ahead. Your line is open.

Hi. Good afternoon. So where are you in terms of improving awareness of no pain with the bigger hospitals? Where are you seeing the bigger challenges in getting faster adoption there? And when will that accelerate? Will it be next year potentially? And then what was the overall market growth for elective procedures in the third quarter? and maybe what you're seeing, how that's trending in the fourth quarter so far.

Yeah, thanks for the question, Gary. Let me say a few words, and I'll turn it over to Brent for any of his comments. Just to set the stage, I think we've been very consistent in saying that we've seen a good growth uptake when it comes to the smaller hospitals and ASCs and these bigger institutions will take more time because it's obviously more decision makers and, of course, they have to implement this into their overall system. So it will take some more time. There's clearly an effort behind it. But let me turn it over to Brent for any additional thoughts here. Brent?

Yeah, for sure. Thanks for the question. I think we are seeing increased awareness for no pain, and I would reference a couple of our prepared comments. Obviously, where there are fewer decision makers in ASCs and community hospitals, that's where we have our fastest growth. But we've also seen improvement in the larger and broader hospital segment. And despite the fact that there are more decision makers. We are seeing formulary and P&T decisions in favor of XBRL that would be reflective of an audience that's not only taking into account no pain, but are starting to see the significant commercial wins that we have along the way. And it is one of our key commercial initiatives to make sure that we're engaging more of those economic stakeholders, particularly pharmacists in the C-suite, so they have a broader understanding of not only the reimbursement that's being generated, but the potential for XBRL, not just clinically, but from a profitability standpoint, to be of value to the IDN.

And Gary, you had asked about procedures overall, the marketing. Maybe, Brent, you can comment on that a little bit.

For sure. The first half of the year, elective procedures were sluggish, even a little bit down. Having looked at the data in the third quarter, I would say there are modest improvements, but not monumental. And certainly, I think XBRL's performance in terms of continuing to drive performance increased volumes are despite what I would consider to be sluggish or somewhat headwinds in that space. Fourth quarter, to be determined, but I would say that, you know, fourth quarter we tend to see more elective procedures simply as a function of seasonality.

Okay, great. And then just a couple more quick ones. Just any early indicators for how the J&J partnership is helping Silretta so far? When do you expect to see somewhat of an inflection there in sales? I know it's still early days and probably didn't see much of an impact in the third quarter, but could it be as early as 4Q or it's going to take more time? And then just on the gross margin, you know, should that continue to improve next year? from the 80 to 82% level that you're at right now.

Thank you. Okay. With regard to Zolretta, I'll just say a few words here and turn it over to Brent. Just a big picture, as Sean mentioned, we're very pleased with the way that now XBRL has grown and also now IAVERA with this new dedicated field force. It's taken a little bit more time to get Zolretta where it needs to be. And when you take a look at our numbers, that's really what was flat instead of growing. So with that said, let me turn it over to Brent for any other thoughts here about, you know, how we're going to maximize J&J MedTech partnership.

Yeah, thanks. And thanks for the question. I would say two things have been important changes in the third quarter. Obviously, we have a dedicated Zillretta sales force. In doing so, they have an expanded footprint and are engaging a number of customers that for that singular group will be first-time customers. And I think that's just a little bit of disruption you would have expected in the third quarter. Also, the J&J MedTech team was fully trained in the third quarter, but that's a good way to describe it. Trained and not yet Fully out there to see the entire footprint that we have an opportunity to address. So I expect us to begin to see further momentum in the fourth quarter and then significant progress in 2026 as we see a larger audience multiple times with our message. And I would say that Zolretta fits very nicely into the J&J story of the osteoarthritis of the knee treatment journey. And there are a lot of market dynamics that would help us to incorporate Zolretta logically into that treatment journey.

Thanks, Brent. And for the question, Gary, about gross margin, certainly we're very pleased with the progress we've made. And I think your question was how we see that going forward. And so let me turn it over to Sean here.

Yeah, thanks, Gary. So maybe just a step back from a big picture. You know, the guidance we put out for goals we put out from a long-range plan perspective are in our 5 by 30, which is the 5 percentage point improvement over the 2024 margin. And just as a reminder, the non-GAAP was 76%. So that's the big picture. So just with regard to the performance we've seen this year, first of all, terrific execution by the team. and better-than-expected yields from both the 200-liter facilities. So these higher volumes, in simple math, have resulted in lower per-unit costs that have benefited the margins this year. So, you know, inventory targeted six months. We're a little bit ahead of that. We're selling through the lower-cost inventory. And so going forward as the production volumes normalize, We expect to be back on track for a 5 by 30 plan for a 5% of, you know, 5% point steady improvement in gross margins over 2024, 76%. Okay.

That sounds great. So, you should at least be in that level looking out into next year, sounds like.

Great. Yeah. Okay. Thank you.

I mean, bottom line, the levels are higher this year. Gary, and so, you know, per unit, the margin's better. Next year, as we work it out, it'll be slightly less favorable, but then we'll come back to that favorability probably in the second half of the year as we work through the inventory. Got it. Okay. Thank you.

Thank you. One moment for our next question. The next question comes from Dennis Singh with Jefferies. Go ahead. Your line is open.

Hi, thanks for taking my question. I have two, if I may. Number one's on BD. Should we expect more deals like Amica Thera, i.e., things that seem fairly early, or do you plan to do more of these types of phase one deals that can be more opportunistic and bring something that's in phase three or even commercial? And then number two, just on PCRx201, I know you've referenced docs who are excited about 201, but What about feedback from docs who aren't as excited? What's the major barrier there? Is it just data, or do you think there's broader skepticism around gene therapy, especially in the ortho community who may be unfamiliar with the modality? Thanks.

Thanks for the questions, Dennis. First on BD and then on 201, I'll say a few words and turn it over to Dennis. to Jonathan. BD, as we've talked about, we're going to take a very, very disciplined approach to BD, and so that means that, you know, these are things that fit into the broadly defined musculoskeletal pain and adjacencies, and certainly AMT143 fits into that. As we look at assets, certainly we favor those assets that are further along in the clinic that have, validated mechanisms of action, and so we're not going to take target risk. And so those are some of the, you know, guideposts, so to speak, as we think about bringing things into the pipeline. And so we remain open to those kind of opportunities, and we're going to look at those very, very carefully in a disciplined way and bring in those things where we can really add value to those programs. With respect to 201, what I'd say there is – Overall, I believe we've seen very good enthusiasm for PCRx201. And so, let me turn it over to Jonathan to have his thoughts. He's been to recent meetings, et cetera.

Yeah, all the feedback has been extremely positive and exciting. To your point, I think we continue as we do education and address some misnomers around, you know, what our platform is compared to current gene therapy. And we explain the benefits around the safety, the cost, the flexibility because of the payload size. It becomes very favorable, not just over current treatment options, which, you know, we see lasting maybe three to six months. And, you know, our research shows that patients just aren't happy and that's all they have so once we explain to them the benefits of 201 in that we're not giving you a drug produced in a factory but we're just helping your body cells become that factory and the safety that we've seen so far in our clinical trials um the first question is usually like when can i get this so we are very optimistic um moving forward with 201 and excited that part A of phase two enrolled ahead of schedule for us.

Thanks, Jonathan. Yeah, look, I'd summarize it as this is gene therapy for the masses. And so when we come from that line of thinking, that opens up people's minds, this opportunity, because the way we do that is by, as you know, a local approach as opposed to systemic, and that has obviously favorability when it comes to safety and cost of goods and all the things that Jonathan talked about. So we remain optimistic. We're running the Part B and manufacturing process. you know, from a commercial viable standpoint is well underway.

And so we've got good momentum on this one. Perfect. Thank you so much.

Thank you. The next question comes from the line of Serge Bellinger with Needham & Co. Please go ahead. Your line is open.

Hi, good evening. This is John on for search today. Thanks for taking our questions. Just a couple from us. First, I wanted to touch on the shift in file mix and discounting associated with the latest GPO that came on board in June. I'm curious if you could provide any color on the level of discounting that you've seen thus far, and when you'd expect pricing to stabilize. And then second, on the in-licensing for AM2-143, just curious how you view 143's profile in comparison to X4L, and with the potential of both of them being on the market down the line, how would you view the future commercial dynamics between the two? Thanks.

So, thanks for the question, John. Let me answer the AMT-143 a little bit more, and then I'll turn it over to Sean to talk about Biomix and GPOs and that last one. What I'd say is that, you know, when we take a look at the marketplace, of course, currently available therapies and analgesics are in the range of what we provide for 3 or 4 days, et cetera. Now, we think there is a place in the market for longer durability of effect and also in those situations where there might not be an ability to bring in other specialists that the surgeon himself can instill this particular product. So we think it's complementary to what we have. And so that's how we think about it. Certainly, we've got a little ways to go to get this program to market, and we'll be starting our phase two program as we talk about next year. But there's clearly a market need for something like this. So let me turn it over to Sean here to talk about VOMIX GPO.

Great. John, thanks for the call. So just to reiterate from the prepared remarks, we saw the 9% encouraging volume growth for X4L with a 6% growth on the revenue side. And that 3% delta, as mentioned, was roughly 50-50 split between the volume mix towards the 10 MLs and then the impact of the GPO discounting. We can't talk about specific discounts with regard to the GPOs, but as we move forward, we would expect the fourth quarter to be somewhat similar. But then, encouragingly, and we'll talk more about this when we put out 2026 guidance, but as we move forward into 2026 and beyond, we do expect volume and revenue growth to converge over time. And there's a couple of key things just to remember. Let's just assume we... We continue to drive volume. You know, at the current levels or even a bit higher, if all goes as planned, January price increase. And then once we do lap the third GPO agreement, which is performing quite well in mid-next year, that's when we expect the convergence to sort of hit its stride.

Great. Thanks for the clarification.

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Susan Mesko for closing remarks.

Thank you, Jill, 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 5 by 30 growth strategy with discipline and purpose. As we close out 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.