Earnings call transcript: Pacira Q4 2024 earnings beat forecasts, stock rises

Pacira Pharmaceuticals Inc (NASDAQ:PCRX) reported its Q4 2024 earnings, surpassing analyst expectations with an EPS of $0.91 compared to the forecasted $0.79. The company also reported higher-than-expected revenue of $187.3 million against a forecast of $180.22 million. Following the announcement, Pacira’s stock rose 1.46% in aftermarket trading, reaching $25.75. According to InvestingPro analysis, the company currently appears undervalued, with a "GREAT" overall financial health score of 3.14 out of 5.

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Key Takeaways

• Pacira’s EPS and revenue both exceeded analyst forecasts.
• The stock price increased by 1.46% in aftermarket trading.
• Strong sales growth in key products: EXPAREL, ZILRETTA, and ioverao.

Company Performance

Pacira Pharmaceuticals demonstrated robust performance in Q4 2024, driven by strong sales across its product portfolio. EXPAREL sales increased to $147.7 million from $143.9 million in the same quarter last year. ZILRETTA and ioverao also showed year-over-year growth, contributing to the company’s solid financial results.

Financial Highlights

• Revenue: $187.3 million, up from the forecasted $180.22 million.
• Earnings per share: $0.91, exceeding the forecast of $0.79.
• Non-GAAP gross margin: 79%.
• Cash and investments at quarter-end: $485 million.

Earnings vs. Forecast

Pacira’s Q4 2024 earnings per share of $0.91 exceeded the forecast by 15.2%, marking a positive surprise for investors. This performance is consistent with the company’s recent trend of surpassing expectations, highlighting its effective operational strategies and market positioning.

Market Reaction

Following the earnings release, Pacira’s stock rose by 1.46% in aftermarket trading to $25.75. This increase reflects investor confidence in the company’s ability to deliver strong financial results. The stock has demonstrated remarkable momentum, posting a 76% gain over the past six months. Analyst price targets range from $17 to $50, suggesting diverse views on the company’s potential. The stock’s beta of 0.8 indicates lower volatility compared to the broader market.

Outlook & Guidance

For 2025, Pacira has provided revenue guidance of $725 million to $765 million. The company aims to maintain robust growth through strategic initiatives, including the expansion of its product portfolio and increased market penetration. This outlook aligns with InvestingPro data showing three analysts revising earnings estimates upward for the upcoming period. The company’s five-year revenue CAGR of 15% demonstrates a strong historical growth trajectory.

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Executive Commentary

"We’re in the process of transitioning from more specialty pharma into innovative pharma," said CEO Frank Lee, emphasizing the company’s strategic shift towards innovation. Lee also highlighted the significant market opportunity, noting that "nearly one in four Americans are living with chronic pain and seeking new interventions."

Risks and Challenges

• Potential regulatory changes impacting reimbursement policies.
• Increased competition in the musculoskeletal pain market.
• Dependence on key products like EXPAREL for revenue growth.
• Economic pressures that could affect healthcare spending.

Q&A

During the earnings call, analysts inquired about the implementation of the No Pain Act and its expected impact. Management expressed optimism about gaining momentum in the second half of 2025. Additionally, questions regarding the company’s direct-to-consumer marketing pilot were addressed, with positive early signs reported.

Full transcript - Pacira Pharmaceuticals Inc (PCRX) Q4 2024:

Conference Operator: Good day and thank you for standing by. Welcome to the CERC BioSciences Fourth Quarter twenty twenty four Conference Call. At this time, all participants are in a listen only mode. After this week’s presentation, there will be a question and answer session. Please note that today’s conference is being recorded.

I would now like to turn the call over to Susan Mesko, Head of Investor Relations. Please go ahead.

Susan Mesko, Head of Investor Relations, CERC BioSciences: Thank you, operator, and good afternoon, everyone. Welcome to today’s conference call to discuss our fourth quarter and full year twenty twenty four financial results. Joining me are Frank Lee, Chief Executive Officer and Sean Croft, Chief Financial Officer. Kristen Williams, Chief Administrative Officer Tony Malloy, Chief Legal Officer Jonathan Slonan, Chief Medical (TASE:BLWV) Officer and Brendan Thien, Chief Commercial Officer are also here for today’s question and answer session. Before we begin, let me remind you that this call will include forward looking statements subject to the safe harbor provisions of federal 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 Pacira 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.

Frank Lee, Chief Executive Officer, CERC BioSciences: Thank you, Susan, and good afternoon, everyone. The considerable progress we made in 2024 leaves us well positioned for 2025 and beyond. Key highlights from last year include record revenues of $7.00 $1,000,000 the high end of our guided range separate CMS coverage and product specific reimbursement codes for both EXPAREL and ioverao ARPMED’s education from the FDA for PCRX201 and the readout of compelling two year data from our 72 patient Phase one study. And importantly, establishing a best in class commercial market access and medical powerhouse to drive top line growth. Looking ahead, the year is off to a strong start.

We’re sharply focused on executing our five by 30 strategy and becoming an innovative biopharmaceutical organization. We believe executing on this strategy is the best way to achieve growth and value creation as a leader in musculoskeletal pain and adjacencies. The plan focuses on five key objectives that we intend to achieve by 02/1930. These objectives support two broad strategic imperatives. First, accelerating growth in our strong commercial based business and second, advancing an innovative pipeline and potentially transformative assets like PCRX201.

To summarize our 5x30 goals, patients. We expect our products to be benefiting more than 3,000,000 patients annually by 02/1930 Products, we plan to grow product revenues by double digit CAGR over the next five years Profitability, we expect to achieve a five percentage point expansion in gross margin over 2024. Pipeline, we anticipate having five novel programs in our clinical development pipeline. In partnerships, we plan to establish at least five clinical or commercial partnerships. When we look at Pacira’s commercial based business, we have a solid foundation.

Our three best in class products are generating significant cash flow. Each of these franchises has ample room for increased penetration and market expansion with multiple key growth drivers starting to kick in this year. For our flagship product EXPAREL, the No Pain Act is now in effect. This means we have reimbursement pathway for eighteen million outpatient surgical procedures, approximately six million of these procedures have CMS coverage and twelve million have commercial coverage. EXPAREL now has its own product specific J code with the reimbursement rate of average selling price plus 6%.

Securing this code was particularly important milestone as it will expand patient access to best practice opioid sparing care. In addition, the J code will streamline the reimbursement and billing process. It is also more likely to be recognized and covered by commercial payers. While it’s still early days, our field teams are seeing evidence of progress since the rollout of No Pain on January 1. This includes recent formulary wins as well as a rising level of awareness around the J code.

While we’re pleased with the positive early indicators, it will take time for our customers to adopt this reimbursement. In addition, IQVIA claims data can take up to four months to process. We look forward to sharing future updates as more data become available. On the payer front, we continue to highlight the EXPAREL value proposition with real world evidence. In addition to CMS, we now have commercial payers beginning to recognize the importance of reimbursing EXPAREL outside of the bundled payment.

Recent progress includes several national payers adopting no pain like policies. This represents roughly 40,000,000 covered lives and more than doubles our previous commercial coverage map. Our teams will continue to focus on expanding coverage and we’ll keep you apprised on future calls. Along with favorable patient outcomes, separate reimbursement helps our customers navigate financial challenges. At the same time, it gives them the opportunity to be at the forefront of opioid experience pain management.

This is especially relevant for those accounts receiving discounted pricing through 340B or GPO networks. And the benefit is mutual given the anticipated EXPAREL volume expansion. We launched two GPO partnerships last year, both are performing according to plan with volumes up and only modest impact on net sales dollars. Our third and final GPO agreement is expected to go live in the first half of this year. And once completed, more than 80% of our current EXPAREL business will be under contract.

Given our progress on the market access front, along with our learnings from market research, we believe it’s the right time to invest in targeted direct to consumer marketing. We expect this DCC investment to expand utilization by driving patient demand for EXPAREL to be a part of their treatment plan for post surgical pain. We will begin with targeted pilot programs in the first half of the year and adjust our investment accordingly based on the ROI data. These patient focused programs augment the EXPAREL value proposition we are presenting to physicians and other key stakeholders. Turning to ZILRETTA, a best in class product that’s promotion sensitive.

This year, we are focusing on generating additional share of voice, increasing our reach and driving awareness around its key advantages. It is the first and only long acting single shot corticosteroid injection for osteoarthritis knee pain. ZILRETTA has demonstrated high patient satisfaction, up to four months of reliable pain relief and fewer office visits. ZILRETTA also has a strong safety and pharmacokinetic profile as it remains localized in the knee. This allows for fewer systemic effects, including significantly lower blood glucose spikes, an important benefit for diabetic patients.

Fourteen percent of patients with osteoarthritis also have diabetes, so this represents a meaningful opportunity. In parallel with our commercial efforts, our Phase three registrational study is advancing in shoulder OA and is on track with top line results next year. If approved, ZILRETTA would be the first and only long acting steroid approved for use in shoulders. This is a sizable market with approximately 1,000,000 intra articular injections administered each year. Switching gears to ioverao.

We have a key growth driver kicking in this year with separate CMS reimbursement now in effect via the product specific code C9809. This is important as physicians are eligible to receive up to $256 for ioverao using this new code. This payment is in addition to the procedural fees they are receiving. We’re also launching a new ioverao smart tip. This innovative tip was approved late last year and is specifically designed for use as a medial branch block to relieve low back pain.

Millions of Americans suffer from chronic low back pain. It often leads to poor quality of life, disability, lost wages and persistent prescription opioid use. Lastly, our registrational study of ioverao for treatment of spasticity is advancing with top line results expected next year. There is a significant lack of innovation and patient satisfaction in this debilitating condition. We believe ioverao represent the novel approach for patients with moderate to severe spasticity seeking better treatment options.

Turning now to our second strategic imperative advancing an innovative pipeline. Here, we’re focused on becoming a therapeutic carrier leader in musculoskeletal pain and adjacencies. These are large markets, significantly lacking innovation. Nearly one in four Americans are living with chronic pain and seeking new interventions addressing its underlying cause. As we look to new product development, we’ll prioritize mid to late stage derisk opportunities.

More specifically, product candidates with validated mechanisms and established reimbursement pathways. We’ll also look to leverage our long standing market leadership in treating pain in a precise targeted ways. Our recently announced acquisition of the remaining ownership stake of GQ Bio is a perfect example. It directly aligns with our five by 30 strategy by adding an exciting first of its kind high capacity local delivery platform for genetic medicines. This transaction also brings us a preclinical portfolio with disease modifying potential in prevalent musculoskeletal diseases and research and development talent.

Further, it eliminates future milestones and builds upon the process development activities we’ve been advancing with GQ Bio since 2023. In short, we know this technology very well. We believe there’s a great potential for this platform to position us as a leading developer of novel treatments for underlying cause of chronic pain using a targeted molecular approach. We have a clear understanding of the safety and tolerability of the high capacity adenovirus or HCAD viral vector, which is based on AD5. This is a well understood serotype that is very common in community circulation.

We also have strong data suggesting it is not susceptible to pre existing neutralizing antibodies. This allows for the possibility of redosing. This platform solves many of the challenges that have made gene therapy inaccessible for common diseases. HCAV vector is much more efficient at delivering genes into cells compared to many other gene therapies that are that rely on the adenovirus associated virus, AAV vectors. As a result, the direct effect can be achieved with much smaller doses.

The vector used in the HCAD platform can carry up to 30,000 base pairs of DNA, which enables gene therapy with multiple or larger genes compared to AAV vectors. It is locally delivered and sustained. This differs from systemic approaches requiring much higher dosing to achieve the desired effect. Lower dose levels coupled with efficient manufacturing support, a favorable and commercially viable cost of goods profile. Another key advantage of our other gene therapies.

PCRX201 is a lead program from this platform, which we believe underscores its promise given its encouraging data in osteoarthritis. Last year, we reported compelling results from a robust Phase one study of PTRX-two zero one in seventy two patients with moderate to severe osteoarthritis. A single intra articular injection demonstrated unprecedented pain relief and durability across all levels of disease severity for at least two years. The greatest efficacy was observed in the steroid pretreated group. In all three doses, more than seventy percent of patients saw at least a 50% improvement in pain versus baseline at week sixteen and seventy eight.

PCRX201 was also well tolerated with no serious treatment emergent adverse events. We continue to follow these patients and look forward to reporting exciting three year follow-up data later this year. While there’s typically a placebo phenomenon within osteoarthritis pain studies, we are encouraged by our data. The magnitude and durability of efficacy far exceeds the placebo effect reported in published randomized studies. Patient enrollment is now open for our Phase II double blind two part study of PSRX201.

The study will include an active steroid comparator. We will share additional details on the study design in the coming weeks with top line data from Part A expected late next year. Beyond PCRX-two zero one, the GQ transaction brings us several exciting product candidates in preclinical development. We’ve also identified numerous well validated cytokines for musculoskeletal pain and adjacencies that would be strong candidates for this platform. We’re planning to share more details on the potential of this exciting platform through an educational webinar in the spring.

For those areas outside of our strategic focus, we see great potential for partnering. This could extend the HCAP platform into other conditions of high unmet need or localized treatment with a therapeutic protein is warranted. Fittingly, this brings us to the last component of the five by 30 plan, forming five clinical or commercial partnerships for the next five years. As you know, our products are currently only marketed in The U. S.

We believe there is a meaningful opportunity in certain key markets outside of The U. S. Where our products can be financially viable and deliver value to patients. We will be actively seeking commercial partners to realize that potential. In parallel, we will also look to identify ways we can partner on development programs to balance portfolio risk.

Before I turn the call over to Sean, I’d like to formally welcome two new additions to our executive team, Brendan Tian, our newly appointed Chief Commercial Officer and Chris Corbin, who joined as our Chief Business Officer. These two executives bring extensive experience to FICERRA at an important stage in our evolution. The Board also recently appointed Laurel Bragee as Chair of the Board, while former Chair, Paul Hastings and Andreas Leakey have both retired. As a reminder, our Board refreshments began fifteen months ago with the appointment of five new directors. These changes also significantly reduced the average tenure of our Board to less than five years compared to nearly twelve years in 2023.

We thank Paul and Andreas for their many contributions to the company. Moving forward, I have every confidence Laura, Brendan and Chris will be key contributors to our next phase of growth. With that, I’ll turn the call over to Sean for a review of the financials.

Sean Croft, Chief Financial Officer, CERC BioSciences: Thank you, Frank. I’ll start with an update on sales and margin trends. Fourth quarter EXPAREL sales increased to 147,700,000 versus $143,900,000 in 2023. Volume growth in the 2024 price increase were partially offset by a shift in viral mix and discounting associated with GPO partnerships. Fourth quarter ZILRETTA sales increased to $33,100,000 versus the $28,700,000 reported in 2023.

For ioverao, sales were $6,500,000 compared to $6,000,000 in the fourth quarter of twenty twenty three. Turning to gross margins. On a consolidated basis, our fourth quarter non GAAP gross margin was 79%. This was driven by improved margins for EXPAREL and ZILRETTA. For non GAAP R and D expense, the fourth quarter increased to $22,000,000 from $16,600,000 reported last year.

This increase relates to product development and clinical study costs. Non GAAP SG and A expense came in at $70,600,000 for the fourth quarter, which is up from $57,400,000 last year. This increase is largely due to investments in our commercial, medical and market access organization, as well as no pain readiness. All of this resulted in another quarter of significant adjusted EBITDA of $62,500,000 As for the balance sheet, we exited the fourth quarter in a position of strength with $485,000,000 of cash and investments. With the business that is producing significant operating cash flow, we believe we are well equipped to advance our five by 30 strategy and create shareholder value.

We are taking a disciplined approach to capital allocation where we are focusing on four areas. First, accelerating growth in our best in class based business. Second, advancing an innovative pipeline and becoming the leader in musculoskeletal pain and adjacencies. Third, managing our balance sheet and planning for the repayment of debt. We have a convertible note due in 2025, a term loan due in 2028, and a second convertible note due in 2029.

And fourth, returning capital to shareholders. We have $125,000,000 remaining of our share buyback authorization, which we put in place last year and runs through the end of twenty twenty six. Going forward, we will continue to be highly strategic, balance favorable operating margins, while advancing our five by 30 strategy. This includes carefully investing in a best practice commercial, medical and market access powerhouse and targeted direct to consumer marketing. In parallel, we will advance a pipeline of potentially transformative assets like PCRX201 as we transition into an innovative biopharmaceutical organization.

That brings us to our full year P and L guidance for 2025 as follows. Total (EPA:TTEF) revenue of $725,000,000 to $765,000,000 As Frank mentioned, we are pleased with the positive early signs and growing levels of awareness around no pain. That said, it will take time for our customers to integrate this new reimbursement. We expect more meaningful uptick to begin in the second half of the year. Non GAAP gross margins of 76% to 78%, non GAAP R and D expense of $90,000,000 to $105,000,000 At the midpoint, this represents an 11% increase over our fourth quarter twenty twenty four annualized run rate.

The key drivers are increased costs associated with clinical studies. These include the following our Phase two study of PCRX201 investments to support the PCRX201 and HCAD commercial manufacturing process as well as other activities related to our acquisition of GQ Bio a new pilot study of ZILRETTA and HIF OA and ramping costs for the ZILRETTA and ioverao registration studies, which we anticipate will read out in 2026. For non GAAP SG and A expense, we are guiding to a range of $290,000,000 to $320,000,000 At the midpoint, this represents an 8% increase over our fourth quarter twenty twenty four annualized run rate. Key drivers of this increase are new marketing initiatives, including our DTC pilot programs that are beginning in the first half of the year. As Frank mentioned, we believe these DTC investments will drive increased patient demand for EXPAREL.

And as always, we will be prudent and adjust spend accordingly based upon the data. Stock based compensation of $56,000,000 to $61,000,000 and lastly, for those modeling adjusted EBITDA, we expect our 2025 depreciation expense to be approximately $30,000,000 This increase over 2024 is largely driven by our 200 liter suite in San Diego, which began producing commercial supply in mid-twenty twenty four and is a new ZILRETIFO line. With that, I will turn the call back to Frank.

Frank Lee, Chief Executive Officer, CERC BioSciences: Thank you, Sean. In closing, 2024 was a tremendous year of progress across the organization. All the work completed has allowed us to enter 2025, sharply focused on 5x30 and our transition into an innovative biopharmaceutical organization. We are confident the steps we’re taking position us for sustainable growth and success as a leader in musculoskeletal pain and adjacencies. With that operator, we’re ready to open the call for questions.

Conference Operator: Thank you.

Frank Lee, Chief Executive Officer, CERC BioSciences: Our

Conference Operator: Our first question coming from the line of Oren Lipnat with H. C. Bancroft. Your line is now open.

Oren Lipnat, Analyst, H.C. Bancroft: Thanks. I got a couple of questions. Just big picture, can you just talk more about the assumptions for No Pain, both implementation on the customer side and uptake? You’re obviously not trying to get ahead of yourself by talking about a second half ramp. But I’m trying to understand, what would be the impediments to sort of an aggressive rapid uptake on the customer side given hospitals certainly would like to be making margins here?

And I’ll wait for follow ups. Thanks.

Frank Lee, Chief Executive Officer, CERC BioSciences: Thanks for your question, Warren. It’s frankly here. We’re excited about no pain. And as we’ve said consistently, it will take time for our customers to really get traction around no pain, and we think that’s going to be starting in the second half. Yes, some of the things that we’ve got to make sure we do with our customers is certainly raise awareness, get them comfortable with the J code.

And in many cases, our customers are trying out the code to make sure that they’re getting reimbursed. And so there’s a learning period there. And so we have to go through that and we have some encouraging signs that we’re seeing in terms of the use of the J code, the awareness of no pain and customers utilizing that code and starting to get reimbursed. So the early signs are good, but certainly it takes time for us to get traction on something like this.

Oren Lipnat, Analyst, H.C. Bancroft: All right. And I guess you sort of segued in for my follow-up, which was about what experience people are already having. Are you seeing successful reimbursement such that any cautious approach to using it for fear of not getting paid back is already starting to make some headway there? And have you had more access or penetration into accounts or geographies already that you hadn’t at all before where obviously there are many accounts that don’t use EXPAREL at all for financial reasons. I’m wondering if you’ve broken new ground with no pain already with a broader set of customers?

Frank Lee, Chief Executive Officer, CERC BioSciences: Yes, these are all really good questions. And as we get more and more data, we’ll be able to answer them factually, right? So as we mentioned, the IQVIA claims data takes some time to true up over time, that’s lagging data. But you know what, we’re seeing encouraging signs. And oftentimes, these revenue cycles take a little while, could take a couple of weeks to six, seven, eight weeks to see the revenue cycle be completed.

And so it’s still very, very early days. And what I’d say is anecdotally, we’re seeing good traction. And as we mentioned, commercial payers, we’ve had some wins there. And so as you know, it’s not only the accounts, but also the payers that are very important. And we’ve always said that CMS is important certainly for the outpatient setting.

But of course, they have a mix of CMS and commercial payers. And we find it encouraging that we’ve got some commercial payer wins out of the gate.

Oren Lipnat, Analyst, H.C. Bancroft: All right. And if I could just change gears a bit. I don’t know if you want to comment at all on litigation going forward, but just big picture, you’ve been very confident in your optimism for a long EXPAREL runway with exclusivity, especially after your new IP issued late last year. I’m trying to reconcile your approach to capital allocation, given your confidence there, especially with the market has only barely backed off its most dire concerns from earlier last year and bounced back a little bit, but there’s a huge disconnect in my view between even the current business and what it’s worth, let alone major growth potential from no pay and upside optionality from a pipeline. Why wouldn’t you be much more aggressive with potential buyback at these levels?

Frank Lee, Chief Executive Officer, CERC BioSciences: Yes. So let me start by saying, as always, we value certainty as much or more than any other investor, right? And so that’s an important part. We also value making sure that we have long term value for our shareholders. And so that’s our guiding principle.

And in the background, we’ve been, as you mentioned, very active in making sure that we continue to innovate and drive forward with new patents and new IP. And I would expect that going forward. We continue to innovate and we believe we’ll be providing additional patent protections going forward. That said now from a capital allocation, we’re going through a very disciplined approach, as Sean mentioned, a very disciplined approach to make sure that we’re funding our current operations. And we have quite a few catalysts here as we just talked about.

We also have some important pipeline additions with now the great news, I really believe about GQ Bio. We can talk about that a little bit, just recent acquisition that we announced. And of course, managing the balance sheet and we do have 125,000,000 left on our buyback program. So all of those, we’re going to be managing in a very disciplined and balanced way. And so that’s our approach and we think that’s going to get us to where we need to get to over the next five years.

Oren Lipnat, Analyst, H.C. Bancroft: All right. Thanks. Appreciate it. I’ll hop back in the queue.

Frank Lee, Chief Executive Officer, CERC BioSciences: Thanks, Warren.

Conference Operator: Thank you. Our next question coming from the line of Gregory Renza with RBC Capital Markets. Your line is now open.

Gregory Renza, Analyst, RBC Capital Markets: Great. Thanks. Good afternoon, Frank and team. Congrats on the progress. Thanks for taking my questions.

Frank, and maybe a question for Sean. As you lay out the ranges in the guidance for 2025, just wondering if you could talk a bit about maybe the relative contributions of the product portfolio for 2025 and how you’re thinking about that across EXPAREL, ZILRETTA and ioverao? And also if there’s anything sequentially over the year that we should be thinking about just above and beyond what you’ve described when it comes to no pain? Thank you.

Frank Lee, Chief Executive Officer, CERC BioSciences: Yes, sure. I’ll let Sean speak to that in a second. Obviously, the EXPAREL is our flagship product and we have a good catalyst here with the J code as well as no pain. But certainly, we plan on putting a shoulder behind ZILRETTA and Iovera as well. But Sean, you can speak a little bit to

Sean Croft, Chief Financial Officer, CERC BioSciences: how we’re thinking about that. Yes. I think the relative mix, as Frank mentioned, ZILRETTA or EXPAREL is still, of course, the flagship product. And we think that we fully expect the commercial investments we’ve made in 2024 to bear fruit and enable the top line to achieve double digit CAGR really exiting the year and beyond following our 5x30. As mentioned, we are pleased by the positive early signs of no pain.

But do just can’t reiterate more that it will take time for the customers to integrate the new reimbursement and stay tuned for what we expect to be more meaningful uptake to begin in the second half of the year.

Gregory Renza, Analyst, RBC Capital Markets: Great. That’s really helpful. And maybe just as a follow-up, as you’ve mentioned the double digit CAGR on product revenues with 5x30. And certainly, Frank, you mentioned of valuing certainty. Just help us understand, maybe what some of the implications are and some of the competitive landscape that you’re thinking about when you cite those numbers through into 02/1930?

Does it imply competitive entry with EXPAREL, some degree of timeline and competitive dynamic there? Thank you.

Frank Lee, Chief Executive Officer, CERC BioSciences: Sure, Greg. That’s a great question. And I have to tell you, we’re very thoughtful as we put the five by 30 path to growth together and specifically around compounded annual growth rates are in the double digits. So we’ve talked a little bit about this before, but we do not believe there will be an aspirate back risk launch of a generic this year or in the foreseeable future. So on top of that, we continue to build on our IP estate.

We continue to innovate and that gave us confidence to put forth this five by 30 strategy. And as Sean mentioned, picking up that growth rate as we exit the year with all the different catalysts that we have behind us.

Gregory Renza, Analyst, RBC Capital Markets: Fantastic. Thanks guys. Congrats again.

Frank Lee, Chief Executive Officer, CERC BioSciences: Thanks Greg.

Conference Operator: Thank you. Our next question coming from the line of Gary Nachman with Raymond (NSE:RYMD) James. Your line is now open.

Gary Nachman, Analyst, Raymond James: Hi guys, good afternoon. So back to the revenue guidance range, what are you assuming in terms of volume growth versus how much offsetting pressure you’ll have on gross to nets from the GPO contracts? Just when we think about the no pain dynamic? And then for DTC, the pilot effort, just how much could EXPAREL utilization be consumer driven versus targeting physicians and hospitals like you have done traditionally? And then I have a follow-up.

Frank Lee, Chief Executive Officer, CERC BioSciences: Sure. Let me address the targeted DTC question first and then I’ll hand it over to Sean to talk a little bit more about the numbers. Typically, what we see in the industry is once you educate the health care providers and when you lower the access barriers, that is reimbursement, payers, coding, etcetera, then it’s the right time to consider a very targeted approach to activating the patient. And I want to underscore targeted, because as you might imagine, the level of education and level of access, level of billing savvy varies by customer across the various geographies. So we’re going to be very, very targeted and we’re going to be ROI driven.

So these days you can be very, very targeted with these kinds of approaches. And as Sean mentioned, we’ll pilot some of those approaches in the first half of the year. And depending on what we see, we’ll adjust our investment accordingly. So that’s how we’re thinking about it. So what the great news here is that we’ve had a long history of educating healthcare providers about EXPAREL.

With the J code now and no pain, it’s given us an opportunity to lower those access barriers. Now is the right time to start to pilot and understand how best we can activate patients in certain settings and certain geographies. So that’s our thinking there. And let me hand it over to Sean to

Sean Croft, Chief Financial Officer, CERC BioSciences: talk a little bit about the numbers. Yes. We’ll just keep this very, it’s a pretty simple answer with regard to the forward guidance on the revenue side that it’s effectively all volume growth. That’s the way to think about it.

Gary Nachman, Analyst, Raymond James: Okay, great. But in terms of magnitude of just the gross to net, you’re going to have a little bit of pressure this year when you have the additional GPO

Frank Lee, Chief Executive Officer, CERC BioSciences: that obviously would be offset, but is that a little bit

Gary Nachman, Analyst, Raymond James: of a headwind

Sean Croft, Chief Financial Officer, CERC BioSciences: at all? Yes. You got it spot on. So we take price increase and have a little bit of headwind there and they’ll offset each other. So just think about it as volume growth.

Gary Nachman, Analyst, Raymond James: Okay. And then Frank, just I mean, it is a notable step up in terms of your R and D spend this year and you have a few programs ongoing that sound pretty interesting. How comfortable are you with what you have in house? And maybe just want to comment quickly on the GQ Bio and just adding that the types of preclinical programs that you have. And do you think you need to still go outside the company maybe to expand the pipeline further?

Or do you have enough now internally to generate the kind of innovation that you’re looking for? Thanks.

Frank Lee, Chief Executive Officer, CERC BioSciences: Yes, that’s a good question, Gary. So I want to step back and say, we’re in the process of transitioning from more specialty pharma into innovative pharma. I don’t think that transition is complete. We’ll be taking steps deliberately in that direction. That’s number one.

Number two, as a result of that now, we’ll start to invest a little more in R and D consistent with that kind of a company that we’re talking about that’s more a little bit more innovative pharma than specialty pharma. What’s great here is we’ve got not only lifecycle programs for our existing products, but now we’re adding some truly innovative programs like PCRX-two zero one that we’re very excited about. We’re starting the Phase II study. In fact, the study is open now for enrollment. And as you know, that will read out sometime late next year in terms of Part A of that study.

So we’re very excited about that and we’re going to carefully look at what else is in the non clinical pipeline from GQ Bio. And of course, there’s some very interesting things there and this supports the idea in our 5x30 that we’d have five novel development programs by 02/1930. So how many of them will come from GQ Bio, I can’t comment on now, but we do think there’s some very interesting projects there. Furthermore, the platform, the HCaTS platform is something that comes with GQ Bio now. PCRX-two zero one, we had that asset, but now we also have the platform that could also be a way to generate additional programs and molecules.

So we’re excited about it. And so how much of it will come from GQ Bio and external, I can’t really speak to right now. We’re very excited about the acquisition of GQ Bio. And again, it brings with it this idea that now we have a platform, the preclinical assets, it gives us some really talented, I think, talented researchers in this space. People make the difference here in capability, and historically, we haven’t had a lot of that

Hardik Peric, Analyst, JPMorgan: in terms of the research

Frank Lee, Chief Executive Officer, CERC BioSciences: and early development. And finally, from a financial standpoint, I really think it’s a no brainer. We’re taking care of the future milestones, some of which we would have to pay this year. So all in all, a great it’s a great acquisition and we look forward to welcoming the GQ Bio team next week as we make a trip to Germany. Great.

Thanks for that additional color. Thank you. Thanks, Gary.

Conference Operator: Our next question coming from the line of Serge Belanger with Needham and Company. Your line is now open.

John, Analyst, Needham and Company: Hi, this is John on for Serge today. Thanks for taking our questions. First on ioverao, with the implementation of ioverao into no pain, do you kind of see it taking on a similar trajectory, kind of adjacent to EXPAREL regarding any potential increased uptake throughout 2025? And then second on the generic front, although it looks like it’s unlikely that we’ll see a generic launch in the near term, just wanted to gauge your guys’ appetite on a potential settlement agreement at this time? Thanks.

Frank Lee, Chief Executive Officer, CERC BioSciences: Yes. Let me speak to the generic first, and then we can chat a little bit about ioverao. From a generic standpoint, as I mentioned earlier, we value certainty as much or more than any other investor any other investor out there. I think in terms of settlement, we really can’t comment on those kind of discussions. And so I think whatever we do is going to be in the long term best interest of our shareholders and patients.

So I’ll just leave it at that. And again, I want to reiterate that we feel very good about our IP estate and that we continue to innovate and what you should expect are more patents to come later on this year. With regard to ioverao, what I’d tell you here is, it’s one where we’re very excited about this additional reimbursement. I have to be very transparent and tell you that we didn’t know we were going to get it or not. We’re fairly certain about EXPAREL for sure, but for ioverao, this one was a bit of a jump off.

So we’re very excited about ioverao being included as part of the 11 products. So EXPAREL and ioverao, two out of 11 and provide some additional reimbursement. And maybe, I mean, Brendan, you can speak to the additional reimbursement and situation about ioverao.

Brendan Thien, Chief Commercial Officer, CERC BioSciences: Sure. Thanks for the question. Thanks, Frank. We do see this as a key growth driver kicking in this year. With separate CMS reimbursement for ioverao with a product specific C code, again $9,809 that’s important as physicians are going to receive up to $256 for ioverao when it’s administered in an ambulatory surgical center or an HOPD setting via the new code.

And the payment is importantly in addition to procedural fees that they would get that they would currently be receiving. So I think we see that as an untapped opportunity. We look ahead as we’re looking ahead, we’re looking at selectively investing in ioverao for accelerated growth. It’s in a different stage of its lifecycle than EXPAREL. And we’ll look at that and try to capitalize on the improved reimbursement landscape.

And then finally, as you probably know, we have an additional opportunity with the new SmartTip that is launching later this year for low back pain. And we’ll continue our Phase three registration study and spasticity.

Frank Lee, Chief Executive Officer, CERC BioSciences: Thanks for the question, John.

Conference Operator: Thank you. Our next question coming from the line of Lesilevskiy with Turison Securities. Your line is now

John, Analyst, Needham and Company: open. Hey, good evening. This is Jeevan on for Les. Thank you for taking my questions. Just a quick one for me.

So with ZILRETTA’s Phase three data for shoulder OA expecting ’26, just wondering how you view its potential contribution to revenue growth? And are there plans to maybe accelerate development timelines or expand indications?

Frank Lee, Chief Executive Officer, CERC BioSciences: Yes. Thanks for the question. I have to tell you, I’m excited about ZILRETTA. ZILRETTA, as I’ve always said, is maybe the of the three products that maybe hasn’t gotten the attention it really deserves. It’s a fantastic product, does a lot to help patients with pain.

And now we’re excited about this opportunity with ZILRETTA in the shoulder. And this opportunity in shoulder, we think this will be we’ll see top line data sometime probably mid to late next year. And this will be the first long acting clinical steroid for shoulder. And it’s roughly about one million intra articular injections a year. So it’s quite substantial.

So we’re optimistic. We obviously have to conduct the studies and have good data. But those studies are now enrolling and we feel very good about delivering that data late next year or mid to late next year. Thank

Conference Operator: you. Our next question coming from the line of Hardik Peric with JPMorgan. Your line is now open.

Hardik Peric, Analyst, JPMorgan: Hey, Frank and team. Thanks for the call. Just had a few questions for you. First is a follow-up to the R and D and OpEx question that was asked earlier. So this was definitely a bit higher, the guide, than I think we had expected.

And I was wondering, do you guys see this kind of level of year over year increase kind of being more the standard? Or is this mostly one time because of the two zero one enrollment in the DTC? So that’s just the first question and then I’ll follow-up with that.

Frank Lee, Chief Executive Officer, CERC BioSciences: Yes. Hardik, it’s a good question. I don’t want to go out the guide for too many years. What I’ll do is I’ll tell you about this year. This year, we’ve got some really important catalysts like we just talked about.

And we believe that these investments are going to return against we’ll have a good return on investment against these investments. So that’s number one as it relates to what we’re doing on the commercial medical market access side. As it relates to the development programs, as I said, it’s very exciting around these development programs. And in terms of how quickly we shift towards more of innovative versus specialty pharma, we’ll have to be opportunistic about that. We’ll see how these non clinical assets in GQ Bio panel and there’s some other things we’re looking at as well.

And so we’ll be very, very careful there in managing our growth. And so the key thing to take away is let’s focus on this year. And this year, we believe because of the catalyst and investment opportunities in front of us, this is going to return in terms of the ROI that we expect.

Hardik Peric, Analyst, JPMorgan: Okay, great. And then you mentioned that you had some commercial payers that had adopted like a no pain like reimbursement model. I was just wondering if you could give us some more insight into which payers made that switch and how close their models are to the no pain model?

Frank Lee, Chief Executive Officer, CERC BioSciences: Yes. So it’s a good question. Now it’s a tricky thing sometimes to mention specific payers in these kinds of things because you have to get permission from those folks. But what I’ll tell you, it is a national payer for sure, and we were also able to get a couple of other payers that are very important as well. And so I want to come back to we’re probably sitting at about double where we were before in terms of commercial covered lives.

So we’ve gone from about $20,000,000 dollars to about $40,000,000 And this is early out of the gate. It’s early out of the gate, which is a good sign. And this is very consistent with how CMS is reimbursing. In some cases, it’s north of that. So it’s outside of the bundle, and at least what CMS is reimbursing.

And I did fail to mention that we also got TRICARE as well. So as you know, they service the military and their families, and so that was a great win right out of the gate. So we’re encouraged by what we’re seeing. We’re encouraged and but it’s still early days, so I don’t want to get ahead of ourselves. But as I mentioned in prior calls, we expect that the commercial payers to lag significantly as they normally do, but having these kind of wins early on is encouraging.

Oren Lipnat, Analyst, H.C. Bancroft: Thank you.

Conference Operator: Thank you. And we have a follow-up question from Arren Louthnath with AC Wainwright. Your line is now open.

Oren Lipnat, Analyst, H.C. Bancroft: Thanks. And just really try to think about how conservative or not this guidance is. I did notice on the gross margin, the adjusted gross margin guidance, they’re flat to down from where we were in the entire second half of this year. And I would think with the growth, even conservative assumptions on growth above your fixed cost structure and the 200 liter skid and San Diego now online, I would have thought that would be even higher in 2025. So can you just talk at all about the gross margin trends, maybe cadence through the year?

And is there anything new or something you might be missing on that front that is factoring into that guidance?

Frank Lee, Chief Executive Officer, CERC BioSciences: Yes. Gross margins can be a little lumpy as they were last year. But certainly Sean can speak to how kind of lumpy they were last year and where we wound up. And overall, what I’d say is that we expect these margins to improve over time because of volume, right? So I mean, Sean, you can comment a little bit about kind of where we were with margins last year, where we ended up.

Sure. Thanks for the question.

Sean Croft, Chief Financial Officer, CERC BioSciences: And I completely agree that over time, we’ll improve margins by driving volume growth. But we were pleased to see strong fourth quarter margins that exceeded our guided range of 74% to 76%. But as Frank did mention, we need to emphasize this, there can be quarter over quarter variability in our gross margins. And full year margins are a much better sort of frame of reference. And that informed our guided range for 2025 for 76% to 78%.

Frank Lee, Chief Executive Officer, CERC BioSciences: And I think as we start to see volume pick up more going into second half and particularly quarter four, as we talked about, really running at that double digit, then going into next year, it will start to improve quite a bit more and 200 liter will become more and more of a part of our mix. And so all these things give us a good tailwind, but it’s going to take us a little bit of time to get there.

Oren Lipnat, Analyst, H.C. Bancroft: All right. I appreciate it.

Frank Lee, Chief Executive Officer, CERC BioSciences: Thanks, Oren.

Conference Operator: Thank you, ladies and gentlemen, for your questions. I will now turn the call back over to Susan Mesko for any closing remarks.

Susan Mesko, Head of Investor Relations, CERC BioSciences: Thank you, Olivia, and thanks to all on the call for your questions and time today. We are excited about the opportunities that lie ahead for us. Throughout the remainder of the year, we will continue to ensure we are well positioned for long term success by executing our 5x30 plan to advance our mission. Thank you and be well.

Conference Operator: This concludes conference call. Thank you all for participating and you may now disconnect.

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