Good morning, and welcome to Needham's 23rd Annual Healthcare Conference. I'm Serge Bélanger, one of the healthcare analysts at Needham, and we're happy to kick off today with Pacira BioSciences. We have the new CEO, Frank Lee, as well as the company's CFO, Charlie Reinhart. And for those listening online, you do have the options to submit questions via the portal you're listening in, so we'll be taking a look and asking those questions as you submit them. So to kick it off, I'll hand it over to Frank, so he can give us a quick overview of the company. Well, thank you, Serge, for the opportunity to join this morning. Hi, everybody. Thanks for joining bright and early, and for those of you on the West Coast, it's very early, so, it's good to be here. Again, Frank Lee, joined the company... I guess it's been about three months. It's been an exciting three months, and oftentimes, when I join a company like this, you know, people ask me, "You know, Frank, what was your thoughts about joining the company? What's the rationale?" And, you know, what I say is that, this company is a leader, is the leader, in the non-opioid pain management space. We've got three, very strong products: EXPAREL, ZILRETTA, and iovera, and, we've got a number of growth opportunities ahead of us. That's exciting, number one, from a product portfolio standpoint. Secondly is, the people in this company are very passionate about our mission, and work very, very hard. I think, you know, combined, with the great assets, the mission, and the people, we've got a bright future. Great. So like you said, you've been in the new post for, what, three, four months now? Yes. I think the last quarterly update, you announced some organizational changes and kind of modification to the company's commercial capabilities. Maybe just provide a highlight of those changes and what the overall goals are, as you prepare for NOPAIN. Great. Well, as most of you know, our flagship product is EXPAREL. So we have EXPAREL, which is used in various ways to block pain and manage post-surgical pain. We've got ZILRETTA, which is used for osteoarthritis. It's an injection. And iovera, which is a medical device, which uses a process, by the way, of cryoneurolysis to manage pain. And so, you know, as we step back this year, we're sharply focused on growing EXPAREL sales. This is our flagship product, and the reason we're focused on this is that we have this catalyst that Serge mentioned earlier, called NOPAIN, that I want to talk about here in a second. So, as we think about sharply focusing on growth and getting ready for No Pain, what we've done very quickly now and we're moving very quickly on this is to reallocate resources to make sure that we're ready for No Pain. And so what does that mean? We've already announced per the last earnings guidance call, we're winding down ex-U.S. operations. So we've tried as a company for many years with limited success outside of the U.S., so we're redeploying those resources to preparation for No Pain here in the U.S. In addition, there were some early-stage pipeline projects that we determined didn't have as much opportunity to drive the business going forward as focusing on EXPAREL, and so we wound down those programs as well. And so we made those two changes to reallocate resources to getting ready for NOPAIN. We also announced some executive-level changes, and so we're in the midst of filling those changes, now as we speak. In addition, very importantly, what we're doing now is really modernizing our commercialization efforts, and what that means is we intend to be a commercial powerhouse here. And so we're increasing our focus and resources as it relates to market access. As you may know, we signed our first GPO contract, and we expect to sign a couple more during the course of the coming months, and that will provide more favorable access to our products. In addition, we're going to invest, we are investing, in greater resources to help our customers in terms of billing, reimbursement challenges that they face. And then over the top, we're expanding our strategic and national accounts team so that we not only have a bottoms-up sell, we also have a top-down sell as well. And so those things are happening now, and that's going to help us get ready for NOPAIN in 2025. And so, overall, we've made some reallocation decisions in terms of resources. That's number one. Number two, we've taken steps to get new folks on the leadership team. That's important for the next stage of growth. And third is we're very much focused on modernizing our commercialization efforts, and that's taking place right now ahead of NOPAIN. Okay. Obviously, big focus on EXPAREL, and because of the NOPAIN Act. Is there still a strong appetite for both ZILRETTA and iovera°? Could these benefits from these changes, these commercial changes, as well as NOPAIN, starting next year? ... So let me say that, I love ZILRETTA and iovera too. And in addition, now we've got a great gene therapy product that we can talk about here shortly. So our focus on those products doesn't go away. What we are doing now is sharply focus on EXPAREL. So whatever we do there, I think a rising tide lifts all boats, so to speak, right? So we'll get better in terms of commercialization efforts overall. But what I'll say is that, the vast majority of our efforts this year will be focused on EXPAREL. Okay. So let's talk about the NOPAIN Act. You've previously described it as a relaunch opportunity for EXPAREL. So maybe just talk about the... what it does to your franchise once it takes effect on January 1, 2025. Yeah. So Serge, when I came in, and actually, as I was doing my diligence on the company, what was remarkable for me to see is that the company has worked hand-in-hand with the advocacy community to get this No Pain legislation passed, and this has taken seven years. And that really speaks to the leadership of this company in the pain space. We not only have great products, we also are shaping policy and reimbursement and working hand-in-hand with patient advocacy. So, as a way of background now, as most of you here know, many of these drugs that are used in the procedure, let's take a knee replacement, are bundled in the hospital, in the HOPD setting, ASC setting. And so now what this does is removes EXPAREL from that bundle in the outpatient setting for CMS patients. And so what does that mean? That means that, for those patients and in the outpatient setting, let's take HOPD as an example, there are about 3.5 procedures or patients that are potential candidates now for reimbursement under NOPAIN, just in that HOPD setting. And what I have to tell you is that now, those patients or those procedures where EXPAREL is used will be reimbursed at average selling price plus 6%. And depending on whether they're 340B or GPO, either one, they'll be acquiring the product at very favorable acquisition costs. So this is very different than being placed in the bundle. So, I really think this is almost like a new product. That's why we're calling it almost a new product launch and treating it as such. And so we're getting ready. And as you might imagine, you know, if we think about the success, which is quite remarkable, of EXPAREL to date, it's going to be over $500 million, as we know, this year, well over that. And it's doing that despite being in the bundle in most cases, and so it's quite remarkable. And so once we do get the access barriers lowered, in the way we just talked about, I think there's a bright future to helping a lot more patients, who need EXPAREL. Okay. And obviously, we'll see a significant expansion of coverage and access. What is the current state of coverage and access on both the commercial and managed care side for the product? Yeah. So, you know, in the ASC setting with commercial payers, we do have what's known as a C code in that setting. But as you might imagine, having different types of reimbursement in the outpatient setting isn't straightforward. And so to the extent that now we can get CMS procedures reimbursed ASP plus six with NOPAIN, and importantly, work with commercial payers to now have commercial payers follow suit not too far behind CMS reimbursement, that will be the key. That will be the key inflection point. And so, I want to make sure we manage expectations here as well. It takes some time for our customers to adopt, you know, new reimbursement practices, and so we're going to help them with that. So that there's a reason why we're investing in market access capabilities, to work with the C-suite, the pharmacy, to work with the billers and coders to make sure that they get ready. But we see as a gradual uptake, as those institutions start to integrate this new, reimbursement into their overall process. And then over time, what we'll do is, we'll work very hard to accelerate, commercial payer adoption. And that way, it'll now be very, very simple in the outpatient setting. No matter what kind of patient it is, they can go ahead and make sure to access EXPAREL, in a very efficient way. Earlier this year, you entered into a GPO agreement. I think that's part of your efforts to increase access ahead of January 2025. Maybe just talk about the impact of those agreements and if we should expect additional ones before we turn the page to 2025. Yeah, Serge, we're very pleased with our partnership with Premier, so this is the first GPO agreement that we've signed. And I want to come back to... we've had remarkable success with EXPAREL, and really haven't been a part of 340B until about a year and a half ago, and haven't been a part of GPOs until the first one was signed just, well, a couple of months ago... and to me, that really speaks to the advocacy that we have for EXPAREL among physicians and how good the product is. To not be associated with 340B until recently, relatively recently, and a GPO, you know, until about a couple months ago. And so oftentimes, as you know, in these kinds of settings in the hospital, if you're not a part, if your product's not a part of a GPO, you're flagged as non-compliant spend. And so despite those headwinds, EXPAREL has had a really very strong success. So I think about when those headwinds subside a bit, and we become more compliant spend with EXPAREL as opposed to non-compliant spend, what the possibilities might be. And so that's exciting. Now, what'll happen is, as you know, we're giving a little to get a little. So we'll have to make our volume grow a little more than typical, but over time, we think the volume will grow enough to, you know, be overall net favorable to the business as we continue to grow and expand based on NOPAIN. Clearly, you're gonna be ready for January 25, and with all the efforts you're undertaking now. What about CMS? Do you think they'll be ready? What do they need to do in terms of infrastructure for this program to run smoothly in 2025? Yeah, our folks are staying very close, and we believe they're right on track to make sure that come January 1, 2025, this goes live. For me, I worry less about CMS and more about making sure that our customers are ready. And so, as you know, many of the hospital systems, other kinds of customers, have very complex networks and different systems, and so we just have to get ahead of it. And so that's why if you step back a little bit, we've invested, we've reallocated our investments toward making sure we can help our customers from a market access standpoint. So that means field reimbursement managers, that means our payer team, that means our strategic and national accounts teams bolstering those efforts. So we're working in partnership with our customers to really get ready. So I think that's really our focus and less about will CMS be ready. Okay. So I wanted to talk a little bit more about EXPAREL. Product's been approved now since 2011, I believe. And I'm sure as part of your work since you joined the team, you've had a lot of time to interact with physicians, surgeons, anesthesiologists. How do you think the product is currently viewed by these users? Well, you know what? It's remarkable to me when I look at the data. You take a look at the recent lower extremity data, it's pretty remarkable when you look at that, versus an active comparator and the kind of pain relief we see, the kind of decrease in opioid use, we see. So, that plus, a lot of other data that's out there, and in my experience talking to patients and physicians, this is a good product. This helps patients. I've had so many stories of folks come to me and saying, "Hey, you know, this knee was done without EXPAREL, and this knee was done with EXPAREL, and it's night and day." And to be honest with you, when my mom had her surgery a couple of years ago, I wish I had known, about EXPAREL. So I'm convinced, absolutely convinced, that the product works, and it works well. I think what's gotten in the way a bit here is some of the market access challenges. When those market access challenges rise up, then other kinds of issues surface on top of that as well. And so I think we're gonna really help not only EXPAREL, but our customers and patients by lowering these access barriers because we know the product works. And when we do that, I think it's a no-brainer. Physicians know about EXPAREL. They wanna use EXPAREL. They face some headwinds because of market access challenges that's in the bundle. And you know, we've not actually done as much as we probably should have historically to help our customers in that setting. And so we're doing that now, and it's important to know that we believe that we're gonna make good headway on this to stand up a stronger market access organization that can help our customers by the time that no pain hits. Then it's really more about helping our customers implement it inside their organizations, which, you know, will take some time to do that. Yeah. So prior to the pandemic, this was a product growing at double-digit rates. I think as high as the teens. Charlie may correct me if I'm wrong. That's right. Low right. Low 20s, actually, 1 year, but- Yeah ... great neighborhood. Clearly, the pandemic had a massive impact on surgery volumes, and the product has struggled a little bit post-pandemic. You mentioned access has been an issue. What else regarding surgery volumes or anything else do you think has been a headwind to prevent the product having to go back to these growth rates? Yeah, that's a good question, Serge. When I think back on the pandemic, there was a huge amount of stress put into the healthcare system at that point in time. And as you know, costs were rising because of nursing shortages and staffing requirements. And I just think that, you know, a lot of these financial challenges are challenges that the organizations are still grappling with, if I'm honest. That's my sense. And so if you couple that with this market access challenge that we've had historically, I think that's caused a bit of a headwind. So I think to the extent that now we can solve some of that with no pain, that will be important. And secondly, to the extent that we can help our customers more with these market access challenges, that'll be important. So, in short, you know, what I'd say is that there is still, I would say, spillover, in terms of some of the financial challenges that our customers face, from the pandemic. That's real. And so when you have a product that's had, historically some market access headwinds, it doesn't help. And so the good news is, you know, come January 1, we'll have NOPAIN, and, ASP plus six will be the reimbursement out of the bundle. And so this, this will be a good thing for our customers, and this will be a good thing for patients. Yeah. Do you see any competition for EXPAREL? I mean, we cover here on therapeutics, ZILRETTA has been out for a couple of years now in the market. Not sure it's had much impact, but do you foresee that changing? Then I think the other product that gets mentioned is the new Vertex pain product. Do you see that as a potential competitor? Yeah, it's a good question. So, you know, the way I look at this is the market is very large, and yet, and still our penetration is relatively modest. And I think our number one priority, I know our number one priority, will be driving penetration into the various markets where EXPAREL is indicated. So that's first and foremost because we have, I think, a very differentiated product here that helps patients. With regard to, you know, broadly competition, I just think that's not our focus because we have more than enough opportunity with this differentiated product that we have to drive growth. Because as you know, by some estimates, our penetration is in the mid-single digits in terms of the TAM. So I think that's got to be our focus. Secondly, with respect to the NaV 1.7s and 1.8s that are in various stages of development, the way we look at this is we think it's going to be very complementary. So if you think about what EXPAREL does, EXPAREL prevents breakthrough pain, and so patients postoperatively are without pain oftentimes, or their pain is well controlled 2, 3, 4 days after surgery. Whereas a NaV 1.7 or 1.8s, what they do is they take patients with pain and try and decrease that over a period in time, typically 8-10 hours, and it's an oral. And if you take a look at some of the data that have been presented so far, maybe a little better on the bone, you know, the hard tissue side as opposed to soft tissue. So this could be a situation where, you know, I think that EXPAREL will continue to help patients in the postoperative setting, you know, administered during the operation. And then a patient would likely get a script. You know, it could be some combination of Tylenol, opioid, and maybe a NAV1.7, 1.8. And so that's how we see it as perhaps complementary. And if I think about what the possibilities might be is, you know, already EXPAREL does a great job at minimizing the opioid use post-surgery. And perhaps in combination now, later on after surgery with these NaV1.7, 1.8s or anything else that might come along that's non-opioid, we could see a future where patients could have a truly non-opioid solution in terms of pain management. So I think that's the future, and that's exciting for patients. And I think that the more innovation we have here in the pain space, the better, because the market is huge. The market is huge, and we need more innovation, more interest in the space. While we're on the subject of competition, there's a couple cases that are ongoing regarding generics. I think you're expecting a decision in the next couple of months here. Can you just give us an overview of that case? And I think there's a second case that's also been initiated. Yeah. Yeah, thanks, Serge. So, as you might imagine, I, I've done my diligence before joining Pacira as it relates to anything related to the IP, and I have to tell you that our team has done a remarkable job of putting in place a lot of really strong IP, and we intend to defend that IP vigorously. We think this is going to be a marathon, not a sprint. So, as you mentioned, the first patent is being challenged in the courts, and we expect to get a decision on that sometime by end of June, early July. There's a second patent that will need to be litigated, and there are several more patents behind the second patent that still need to be litigated. So I want to come back to, we believe this is going to be a marathon and not a sprint, and our IP team have done, and our scientists have done a remarkable job of making sure we continue to innovate, our processes, and also make sure that we get those patents in place. So that's the current situation. So it's really the first patent case that will read out end of June, but there will need to be several more behind it that'll need to be litigated. And, I have to tell you, we're not standing still. Our scientists, our research and development people, our teams are continuing to innovate, and drive improvements in our process. And so, I'll leave it at that. You know, so bottom line is, again, a marathon, not a sprint. We'll see what the outcome of the first patent litigation is, you know, come midyear. Okay. I wanted to talk a little bit on ZILRETTA. I guess, how do you think the product is viewed by orthopedics and the overall growth prospects for that product now that you... Well, it's been in the hands of Pacira now for three years. Yeah. Just curious how you think about it? Yeah, ZILRETTA, in addition to EXPAREL and iovera, is a good product. And so for that product, as you know, it's prescribed largely in the office setting, in the office setting. We think that we've got an opportunity here to make sure that we focus on those accounts that are super important for us, those high-producing accounts. At the same time, there could be a possibility to expand our reach through other partnerships. And so that's a product that we believe is promotionally responsive. And so it's a I think from a strategy standpoint, it's a question of how do we promote that product as efficiently as possible, in the office setting? So, that's our thinking there. That product will continue to grow, and we just need to make sure we promote it very efficiently. iovera, does the role of that product change? Mm ... with the new enhancements? And I think there's some clinical development activities ongoing- Sure ... to expand that label. Sure. Well, let me finish off on ZILRETTA. As you know, we continue to invest in that product, so we talked a little bit about efficiently promoting ZILRETTA. In addition now, we've started a shoulder study. So as you know, right now, ZILRETTA is largely used in the knee. So those data will be available sometime next year. So that, that'll be important to continue to drive ZILRETTA growth. For iovera, I have to tell you that that's a very interesting product, and as you know, it's a medical device. We're the leaders when it comes to cryoneurolysis. So as you know, it's a medical device that, in essence, freezes the nerve, and by doing so, it offers patients pain relief for up to three months. And so we continue to develop additional line extensions for iovera in terms of medial branch, as we talked about previously. In addition, what's really exciting is the spasticity. So as you know, patients who've had stroke or cerebral palsy patients, they're bound up because their muscles are pushing and pulling both ways. And some of the early anecdotal data are very remarkable. And so we've initiated that study in spasticity, and so we believe the top line will be available sometime next year, and we're excited about it. I wanna come back to when we acquired that product. Initially, there were some issues in terms of the product quality that we've resolved. And now we're gaining some momentum, and we're thinking about this in the way it should be, which is, as you know, we've got a portfolio here of pharma products and a medical device, and it's a different mindset when you think about how you grow and develop a medical device. And so the point here is to let you know that we understand the difference. We understand the difference between a pharma product and portfolio versus a medical device, and we need to serve our customers in a very different way. The product development cycles are much quicker because of the 510(k) process. Mm. And so, we've got a team now very much focused on that. And as I said, we've got the medial branch block in the works and also the spasticity trial that's just now started. And if you think about spasticity, it's interesting. Many of the toxins are used for spasticity currently, and we think where this iovera might have a place, and we'll have to see, you know, how the data bears out, you know, from the study, is that, you know, oftentimes toxins are used for smaller nerves, and it can only be used for a certain amount of time because it's a toxin, right? Whereas iovera could be targeted for the larger nerves, and because it's cryoneurolysis, it can be repeated over time. And so this could be a very good complement to that market, and so we'll have to see how things work out from the data, but we're very excited about this. Do you envision a future for iovera, where it has comprehensive reimbursement coverage, or at least in the knee space, it sounds like spasticity, you can probably get there? Yeah. Um- Well, let me tell you, what we're doing now is, we're going, through a deep dive now in iovera, to recognize, hey, it's a medical device. How should we now invest in this, over time to maximize its growth? And so, we're doing a deep dive now, and, we'll have better clarity, over the next several months. But like I say, I'm very excited about it. To the extent that we decide to really move forward and drive growth with iovera, we'll need to do the clinical trials to ensure that we not only have differentiation with iovera, but that we also have, reimbursement and access. So anymore, that's very, very important, as you know, Serge. So we're not gonna go halfway in this. If we decide to move forward, then we'll move forward in a way where we invest in the right studies to ensure that we have differentiation and reimbursement. And, you know, if we don't think the market is that big, then we'll invest in a different way, right? And so we're going through that deep dive now. But I'll say, it's a very interesting technology and science. We're the leaders in cryoneurolysis, and I think there's potential here beyond pain into spasticity. And we can position it in the right way, where it's a, and I believe a good complement or could be a good complement to the toxins that are used out there. Then I guess to wrap up our conversation on the current product portfolio, sorry, maybe just highlight the 2024 guidance and what we should expect from each product this year. Sure. I'm gonna let Charlie do that here in a second, but let me just to wrap the portfolio a little bit. We haven't talked about our gene therapy product, 201, that's in development, and I have to say that coming into the job, I was somewhat skeptical about gene therapies, but I have to... After doing my diligence here with the team, I'm excited about this one. And we haven't made a full decision yet on exactly how we'll proceed, but if you haven't looked at it already, you should. It's a situation now where we have 72 patients that we followed out to 2 years, some out to 3 years. This is an intra-articular injection for osteoarthritis. We enrolled a wide range of patients, and we're gonna share the one-year data this month, and we'll share the two-year data sometime in the fall. And the interesting thing about this product is that we believe the cost of goods is gonna be very, very favorable, and in a way that's accessible to the osteoarthritis market. And as I say, the one-year data look very promising, and we've got patients out to 2 years and some out to 3 years. So this is not an insignificant sample size for gene therapy. This is 72 patients, and we're going through a very detailed workup now in terms of our strategy moving forward. That is, should we move forward by ourselves with a partner, et cetera? And so we'll have better insight into that in the coming months. But I think this could be potentially a transformational product for patients, because if you think about the landscape now, you've got steroids that'll take patients out to, what, every three months or so, and then PRP and other mechanisms that might get, you know, patients out a little bit further. But what we've heard loud and clear from our thought leaders and investigators is, if a product can get a patient out to a year or more, that's transformation. That's transformation. And so, this is what's really exciting about this product. And as I say, we've got data now out to two years for all the patients and three years out to some other patients. You recently received a designation from the FDA for this product? Yeah, we're very, we're very pleased to get RMAT designation, which, as you know, is somewhat akin to breakthrough therapy when it comes to cell and gene therapies. So that really speaks to not only the need, but also the promise of the science. So, and we did get the equivalent of that, in Europe as well earlier on. So we're excited to work closely with the FDA on this, and, as I say, look for the data this month, and in the fall. So I guess with that, Charlie, you can, you can speak to guidance just a little bit here. So Serge, as you know, we guided total revenue of $60-$75. We haven't given product splits, but what we have said is that we see EXPAREL volume going up in kind of the mid-single-digit range, and that that would be significantly offset by the cost of doing the GPOs- Mm-hmm ... so that the net for EXPAREL is likely to be the impact of the NOPAIN, label expansion. So you know, with all three of those added, you know, we see modest uptick in EXPAREL. From a ZILRETTA perspective, volume is likely to be up in the mid-single digits as well, with maybe a couple points more for price. And iovera is in the kinda low- to mid-teens growth we see, and that's all volume-based. Okay. And we were expecting additional margin expansion, again- Mm-hmm ... for 2024. Maybe just talk about that and what we should expect in the future regarding margins. So, you know, we guided 74-76, and that's a modest improvement over 2023. You know, you and I have had conversations over the years about two things driving margin or gross margin improvement. One being the manufacturing equipment upon which the EXPAREL vials were manufactured, so i.e., the 200-liter manufacturing skids, and the other is basically volume. And so Frank has been focused, and mentioned earlier, the importance of driving volume. We are in the process of getting the 200-liter unit up in San Diego that was recently FDA approved, to get that ramped up from a manufacturing perspective. But when we do, we'll have a 200-liter in San Diego, we'll have two 45-liters in San Diego, and we'll have a 200-liter in the UK. That's a lot of capacity. So now what we need is volume. Okay. All right, I think we only have a few minutes, so I think I'll hand it over to Frank, if you just wanna highlight upcoming catalysts and things to look forward to for 2024. Sure, I'd be happy to. First of all, thanks everybody for joining us this morning. I've got to tell you, it's been about 100 days now since I joined Pacira, and I'm more excited than ever. You know, I have to tell you, we've got a great team here. We're gonna continue to add to that team with new leadership. The mission is very strong and powerful here. We've got a great set of products, and it's amazing to me that, despite not having some favorable reimbursement, some other things in place, commercialization-wise, how much success we've had, and that speaks to how good the products are, how many champions we have amongst our physicians, and how hard our folks have worked. And so I think about the possibility when we now, modernize, so to speak, our commercialization efforts, we further help our customers, lower those access barriers, and, and I think we do this with a catalyst that's coming, that's very meaningful. And a lot of things are gonna come together, and I, you know, my sense is that, this product, is gonna really see the potential, EXPAREL, that it, that it should, and this is literally like a new product launch. And so we think about that, plus then over time, growing our other businesses in the appropriate way, and, I see a bright future here for our, our company and our products. Also very exciting about this gene therapy that we'll carefully, you know, think through and think about how we proceed, but it's great to see the data. Great. Well, I wanna thank both of you for joining us this morning. Thought it was a great discussion, and obviously, we look forward to some nice developments over the year. All right. Thanks, Serge. Thank you, all. All right. Okay. Bye-bye. Bye.