Welcome back everyone to the 2023 RBC Global Healthcare Conference. My name is Gregory Renza, one of the senior biotech equity research analysts here at RBC. We're pleased to be joined by Pacira BioSciences. Joining us from the company, of course, is the Chairman and CEO, Dave Stack, as well as the Chief Strategy Officer, Ron Ellis. Gentlemen, thanks for joining us. Thanks for the opportunity, Greg. Yeah. Why don't we dive right in? Certainly a lot of interesting dynamics when it comes to the surgical environment with EXPAREL and the commercial drivers. Maybe Dave, we can just have you take a step back and give us a brief overview of Pacira and just the current franchises in non-opioid pain relief. Yeah. Thank you, Greg. Yeah, we have three commercial assets, EXPAREL, which is the only long-acting non-opioid post-surgical pain reliever, with a broad label for infiltration as well as field blocks and nerve blocks for adults and children six and above. We have a product called ZILRETTA, which is for osteoarthritic knee pain. It's the only long-acting product that's approved by the FDA for osteoporosis or osteoarthritis of the knee. We have a cryotherapy device we call iovera°, which is a very interesting asset that provides immediate non-drug nerve blocks that last for several months. All of these products are unique, and all of them are strengthened by the safety profile. Yeah, that's great. You certainly managed to build a nice commercial portfolio. Also have a pipeline that we do wanna talk about later, but the focus does remain on EXPAREL. We always look to you, Dave, and the team, just on your insights on surgical trends, especially exiting COVID and some of the tumult that the pandemic has brought. You've established guidance earlier this year. You've talked about some degree of stabilization. We are not out of the woods yet, but maybe you can just give us your updated thoughts on current trends, the different segments that sort of post-pandemic recovery, and how the company's positioning towards those pushes and pulls. Yeah. Thank you, Greg. We just got November IQVIA data yesterday. For the first time in any fireside chats I've done, I actually wrote some things down. Go for it. explicitly accurate here. You know, first, the broad picture, this is an IQVIA data set that shows 2022 over 2021. That's the latest data we have. That the only procedures that grew were knee and hip. Our interpretation of that is, in an inflationary environment, it's food, fuel, and healthcare. A procedure of ambulation actually starts to blend healthcare and food, right? You know, it allows you to have a job and generate revenue, et cetera. If you look at the IQVIA data, the rest of ortho was slow enough that all ortho was down 2022 over 2021. In the soft tissue procedures, and this is mastectomies and abdominal wall reconstruction and hernia and hysterectomy and all of those type of procedures, there is no procedure that was up in 2022 over 2021. Very interestingly, I just mentioned quickly, Greg, that all procedures, both soft tissue and hard tissue, the peak for 2022 was in the second week in April. At the time, we thought that labor was a major driver of procedures, but that couldn't be true if the peak was in the second week in April. We've been spending a lot of time looking at the impact of inflation on these numbers. You know, Greg's specific question was around the sites of care and how this is rolling out. I'll just take a second and then try to explain why this is important to us and how the rest of it goes. 2022 over 2021, month of November, all procedures, and this is a $26 million procedure TAM, and what's not in here is cardiovascular, oral maxillofacial surgery, and plastics. Overall, all procedures down 1.4%. Orthopedics flat. Soft tissue down 4.1%. Hospital inpatient down 5.5% overall. Both orthopedics and soft tissue down. Soft tissue down almost 7%. Hospital Outpatient Department down 5.3%. Ortho down 6.8%. Soft tissue down 3%. There's a reason why I accentuate that. ASC up 5%, with ortho up 5.5% and soft tissue up 1.3%. What we see happening at the macro level in the marketplace is that, when we achieved reimbursement for the ambulatory surgery center in 2018 for the 2019 CMS rule, you saw a 20% spike in the procedures in the ASC for EXPAREL that was quickly overtaken by the commercial payers who understood that they can move these procedures from inside the hospital to the ambulatory surgery environment. Today, 80% of the capacity of the ASCs is taken up with orthopedic and spine and bariatric surgeries. Easy to do when the surgeons are primary owners of these facilities, and they're able to live on the high margin, high acuity for pain profiles. What's not obvious there is that the margin pressure in the HOPD arena is what's kept most patients from being able to go to that hospital outpatient environment and be able to get a non-opioid treatment therapy. The margins are very thin, and it would be very difficult to use any of the non-opioid post-surgical pain relievers there. In the same environment and from the same data set, I would say, EXPAREL was up 6.4% in 2022, which is very consistent with our first quarter report numbers. Ortho is up 8.4%, and soft tissue is up 4%. Inpatient, flat for EXPAREL, ortho up 5%, soft tissue down 5%. ASC up 10.5%, ortho up 10.5%, soft tissue up 10%. That's very consistent, again, with 80% of these procedures being done by commercial ortho and spine. For us, at least, HOPD, this is hospital outpatient, up 12%, ortho up 11%, soft tissue up 12%. What we see here is the hospitals can't do these soft tissue procedures for cost reasons, and they're embedded cost. The ASC doesn't have an opportunity to do these procedures because their capacity is constrained by the orthopedic commercial procedures. The market is tending towards these hospital outpatient opportunities, but still cost-constrained by the cost of the non-opioid options, which is why NOPAIN and TRICARE and the rest of these opportunities that I'm sure we'll discuss is so important. Yeah. It's a little more than you asked for, but it puts in context. No. The number of things we'll talk about. It's helpful context on these trends and some important data points. As we acknowledge that EXPAREL over-indexes on some of these trends, and maybe just connecting that to what the company is doing, working towards the EXPAREL volumes, and certainly from the angle of how that's reflected in your investment, your OpEx and your sales and marketing. Maybe just from a program-specific level, how that looks for the current year and even looking beyond. Well, I guess a couple of foundation hypotheses, if you will. First is, you know, our intention is that as we get into 2024, we will have a lot of capacity, well over $1 billion, and that we will have gross margins that are in the 80% range. Given those two numbers, it gave us an ideal opportunity to get into the 340B opportunity to be able to provide those 10 million patients or 10 million procedures that were being done in 340B hospitals that did not have access to EXPAREL. As we went down that road, we were anticipating that about 20% of our current business hospitals that were also 340B hospitals, and they would likely convert over to 340B pricing, and that would cause us a 5.5% discount to gross to net. What's happened in the marketplace is that the 340B hospitals are the fastest-growing segment of our business. We are slightly beyond what we thought in that 5%-5.5% calculation. We believe that that will be offset on July 1st as we get the price increase that we took in January for the other 75%, 77% of our business would net it out to about 3.5%. We think something like 2% or 3% of that will flow through to the 340B patients, and that will then go back to where we thought it was gonna be in the original calculation. 340B is a big part of what we're doing now. There are another bucket of procedures that are less inflation sensitive. C-section, oral maxillofacial surgery, just to give you an example, Q1 over Q4, oral maxillofacial surgery grew by 13% for EXPAREL. You know, OBGYN procedures, you know, debridements at places like MD Anderson. Those are, and pediatrics. Those segments of the marketplace are growing. You know, as that specifically relates to SG&A and some of the guide that we've given, there were a number of expenses that were taken in Q1 that were Well, they're not exactly one time, but they were heavily weighted towards the front end of the year. Because we've got lower extremity nerve block and we have a PDUFA date for November, we added a number of high-end orthopedic resources to the mix to be able to maximize that opportunity. We also spent a significant amount of money on No Pain. We can talk about that, Greg, when we get to NOPAIN. you know, all of the activities that we're undertaking in Washington, since we've had NOPAIN Act put into law, to move that up to 2024, turned out to be expenses that were very much front-loaded into the first part of the year that weren't anticipated until we actually got the legislation approved. That didn't happen till December 28th. Yeah. So. Yeah. That's helpful. Your mention of 340B expansion potential with lower extremity forthcoming and then NOPAIN Act, and maybe just tacking those one by one. Just with respect to the 340B mix. I'm curious what your impressions have been on the velocity of that traction, whether it's the switch. You've alluded to just your view on the existing that have converted or will convert versus the net new. It's really a volume, trading volume and price game. What is your thought on the current velocity of those conversion and dare I say, expansion? Yeah. I think the 20% that we thought was gonna convert very rapidly did. Yeah. It's a little bit slower for the folks who can buy as a result of being a 340B participant, but who don't actually buy under 340B. There are several of those in the government, and they are coming on board now. As I mentioned, you know, 340B is the fastest-growing segment. We are now seeing, well, I guess there's two aspects. We are seeing new customers come and being very thoughtful about their orders are split between 340B opportunity and non-340B opportunity. It would be no surprise, I don't think, to anybody that there are still accounts that are 340B 100%. Mm-hmm. We've been communicating with those folks, and you do see that they are, for the most part, honoring 340B. On a weekly basis, you can see that the 340B percentage is floating back towards the original intention. When we get that and marry it with the, with the price increase on July 1st, we think we'll be right back where we thought we were gonna be when we, when we took the strategy on. Okay. Great. Lower extremity, a wide pool of new procedures potentially, but also those that you've dabbled in. Maybe just help us quantify, you know, the potential, firstly the data package, putting that into context, and then just quantifying a potential rollout to ramp up in lower extremity nerve block. It's another significant opportunity for us, without saying. There's two opportunities embedded here, and there were two specific subsets of patients that were in the clinical trial. The first is an adductor canal block. That is a nerve block, and it's a 10 ml dose, and the p-value is 0.007 for both opioid reduction and pain with a 10 ml dose, and the efficacy was durable through 96 hours. That's the fastest-growing segment. I mean, we believe that will convert very quickly, probably not as quickly as 340B, but very quickly. The reason for that is virtually every total knee arthroplasty that's done in America today is done with an adductor canal block. About 30% of those are done with EXPAREL, and the other 70% are done with bupivacaine, largely because there are places where pharmacy insists on something being on label before they use it in that hospital setting. The simple task of getting it approved by the FDA, even though it's in wide use in the marketplace, and the strategy here will be take out the bupivacaine, put in the EXPAREL, and instead of writing a prescription for 90 Percocet, write a prescription for six. That's the way the discussions have gone with the regulatory agencies and that'll be the quicker win of the two. The foot and ankle is a sciatic block of the popliteal fossa. It will require that we have some additional resources put into the sales program, largely, pain management and regenerative medicine guys. PM&R guys really are not a target customer today, this is more of a chronic use of our product, and podiatrists as well. We don't have a lot of business there though, we think that'll be more like a normal launch and a normal linear progression over the first few years. To put all that in context, lower extremity nerve block would be valued at about 3 million procedures, but the product is already used in roughly 300,000 of those knee procedures, so the net benefit is 2.7 million. 700,000 would be in the immediate TKA, the other 2 million will be lower extremity, foot, ankle, mid-leg, et cetera. Great. Certainly expansion prospects there and very compelling. Then just on NOPAIN Act with the legislation and really the question is just around that pull-forward potential and having it enacted and really being on the ground for this to have a net benefit to EXPAREL in the space. Just remind us of the timelines there and what the legislation entails. The legislation as it's written into law requires a three-year administration timeline and a 2025 start. As the legislation was originally intended, it was a 2024 start, and that's what the effort now is to try and to go back to 2024. What we've been talking about with folks is, you know, 107,000 Americans died of a drug overdose. 2/3 of those started with opioids. You know, we need to do everything we can to address that. Also benefiting from the fact that the administration has made the opioid epidemic a significant pillar in all of the discussions that they've had. You know, without any of our activity, there have been a number of, very hard-edged op-eds written by Axios and Politico and things that are really important communication tools down in the D.C. area. We've also been working with certain members of the House to, who were part of NOPAIN with the intended implementation date of 1/24, who are questioning the move back and asking why was that done and, you know, what are the issues that need to be covered. We've also had a number of op-eds in major papers around the country, The New York Times, The Washington Post, the Chicago Tribune, and a dozen more, with editorials who are commenting on the opiate epidemic and the need to step in front of this, at least to the extent that we can. The later kinds of discussions have more been around, well, what is the reason that it was moved forward to 1/25? You know, there's considerable work done around to be done around new products and new devices, especially the devices that might be reimbursed as a result of this legislation. Where we've tried to create an opportunity for the administration to win and for CMS to win and for patients to win is to take the lowest hanging fruit and just say there are four products that are currently approved for reimbursement in the ASC. Let's just make those four products approvable for 1/24, then go forward to 1/25, as CMS has suggested. That's what we're hoping to do. We've got a lot of support in the political environment and in the communication environments and, still working through Voices for Non-Opioid Choices and patient advocacy groups to make sure that we're in front of the agency and CMS, running ads on Sunday mornings in the Washington District and all of those kinds of things. It's a full-on effort. I, you know, I don't know. You know, I think it's not a Hail Mary for sure. I think we have a real opportunity to improve patient care here, and that's what we're trying to do. That's great, Dave. Maybe leaving EXPAREL and just touching on ZILRETTA, indicative of your, of your PD from a few years ago, several quarters now under the belt. Great deal of maybe realignment or optimization when it comes to commercial marketing distribution. what trends are you seeing, whether it's month-over-month, quarter-over-quarter, that gives you confidence in the traction for ZILRETTA? I'll go back a step, Greg, and just say that, you know, a tactical error on our part, on my part is from the due diligence, we way overestimated the awareness of ZILRETTA. We weren't as effective out of the gate because we had assumed some things in the marketplace that turned out not to be valid. We realigned the sales organization, and the objective for both iovera° and ZILRETTA was to increase reach and frequency by 300%. That was done at the January sales meeting, so in effect, at the end of the first quarter, they had only been out there for nine weeks. We had 122 new ZILRETTA first-time orders in the first quarter and 55 iovera° first-time purchasers in the first quarter. At least there's a front-end indication there that, you know, that the strategy is working. There is a data set for ZILRETTA around the avoidance of glycemic spikes as a result of substituting the immediate-release triamcinolone with a longer-acting drug, very similar to the Cmax spikes that we see with EXPAREL, that we don't see with bupivacaine that we don't see with EXPAREL. The safety trial that is meant to follow that is a little slower in rolling out than we wanted because we've gone to the endocrinology community because of the nature of the safety. They've asked us to study some very specific points that would be of strategic interest to them as participants in this. We'll start that trial here in the next couple of months. In addition, we're doing a shoulder study that'll start third, fourth quarter this year. If we're successful there, we would be the only corticosteroid with an indication for shoulder use. We think, you know, that we have some data points coming. It's a large market. It's a quite dissatisfied market right now. I think we have to do a better job. We have a J- code, so we have reimbursement. We've got to do a better job of engaging these folks and using the reach and frequency now to get into the reimbursement profile and where this fits in the algorithm of care for those patients. I don't think we've really achieved that. Great. Okay. Right. Why don't we skip iovera° and go right to pipeline. As we talk about, the goals of just building a non-opioid portfolio, it's both on the commercial but also in the early stage development, and certainly, hearing more about early-stage pipeline, I think it's certainly punctuated by the gene therapy that we're going to talk about a little bit more. We have Ron here as well, and maybe we can just hear a walkthrough on PCRX-201, the intra-articular gene therapy and where you are with that and what some of your goals are. Sure, Greg, thank you. For anyone who doesn't know, PCRX-201, as Greg mentioned, is a gene therapy which modulates IL-1RA or increases the production of it to decrease inflammation in the knee. We had very encouraging phase I-A results, which we recently presented back in March. In the late third quarter, early fourth quarter of this year, we intend to open a phase I-B study. That I-B study will determine dose and regimen, and by regimen, the steroid, either co-administration or pretreatment that goes with it as it does so many other gene therapy studies. That trial will run about a year or so we'll have data in early 2025 from it likely. At the same time, we're parallel processing an improvement in the manufacturing of the product, and that will take about two years. Very simultaneous with the data in early 2025 for that. The plan right now would be to get data as well as an improved manufacturing process and data being what's the exact dose we're gonna use, what's the regimen to go with it in the first half of 2025, and then think about a phase II study to start before the end of the year. In that same timeframe, it really opens up the window for us to talk about partnerships and likely a, an Asian partnership or a European partnership, someone to come in and help us co-develop this product, which we think could have global implications to improve OA. Yeah. That's helpful. You know, just alluding to the strategic activity that building for value internal, in state side and also ex-U.S. What does Pacira put on this to maybe improve its chances or increase its POS? Certainly new frontiers capability-wise, but what should we know about what Pacira is doing in order to put that program forward? On 201, we have some of the remaining Flexion people who has great experience in this area. We've also initiated a process development partnership with the original developer, which was GeneQuine, which is now GQ Bio. They're the developer of the adenovirus technology as well as the IL-1RA target. Along with that, we have just announced a partnership with a CDMO, Exothera, in Europe as well. We think that we brought the right skill set to the asset right now, and the phase I data is incredibly encouraging. Just to execute on that, we think that we've got something that will be very powerful with the phase I-B study. That's great. We, we covered a lot and we could keep going, but I think we're out of time. With that, Dave, Ron, thank you so much. Thank you very much, Greg. Thank you. For the opportunity.