Pacira BioSciences Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 7, 2024

There are 13 speakers on the call.

Operator

Thank you for standing by. My name is Hermione, and I will be your conference operator today. At this time, I would like to welcome everyone to Q1 2024 Pacira Biosciences Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question and answer session.

Operator

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

Speaker 1

Thank you, and good afternoon, everyone. Welcome to today's conference call to discuss our Q1 2024 financial results. Joining me are Frank Lee, Chief Executive Officer and Charlie Reinhart, Chief Financial Officer. Jonathan Sloane, Chief Medical Officer is here for today's question and answer session. Before we begin, let me remind you that this call will include forward looking statements based on current expectations.

Speaker 1

Such statements represent our judgment as of today and may involve risks and uncertainties. For information concerning risk factors that could affect the company, please refer to our filings with the SEC, which are available from the SEC or the Pacira website. With that, I will now turn the call over to Frank Lee.

Speaker 2

Thank you, Susan, and good afternoon, everyone. It's been an exciting and productive time since I joined the company earlier this year. And I'm pleased to say sales are off to a solid start and on track for all three of our trusted opioid sparing products, which continue to make an important impact on patients' lives. This year, our priority is EXPAREL, which is what we're all focused on today. I'll also touch briefly on PCRX-two zero one.

Speaker 2

Let's start with EXPAREL. Our goals are centered on preparing the organization and marketplace to fully realize its long term potential. Let me walk you through the progress we've made in advancing 3 key drivers for 2024. 1st, advancing the launch of EXPAREL in 2 new lower extremity nerve block indications. 2nd, progressing our awareness and educational activities around separate Medicare reimbursement and average selling price or ASP plus 6% in outpatient settings beginning in 2025 with the implementation of no pain.

Speaker 2

And 3rd, expanding patient access to EXPAREL through 340B pricing and new GPO partnerships such as Premier. I'll start with lower extremity nerve block where we're seeing positive market receptivity across all types of care. Delivering 4 days of opioid sparing pain control with a single 10 ml EXPAREL dose is an attractive value proposition to the anesthesia and surgical community for knee, foot and ankle surgeries. Physicians are also reporting consistent results with some patients not taking any opioids following very painful lower extremity procedures. To remind you, we launched with a strong presence in the TKA segment.

Speaker 2

We're also working to build relationships and advanced product uptake through education and training and other lower extremity procedures like ACL repair, foot and ankle procedures. We would expect a slower uptake in this segment of the market. Turning now to the opportunity ahead with the upcoming changes in EXPAREL reimbursement for outpatient procedures. Separate CMS reimbursement of EXPAREL across all outpatient settings marks an important milestone. It will eliminate the cost barrier by fully reimbursing EXPAREL at ASP plus 6% beginning in January of 2025.

Speaker 2

Given the market's steady migration away from hospital inpatient care, we see ample room for expanding EXPAREL utilization in outpatient settings. We've allocated resources to drive education and help healthcare systems implement EXPAREL as best practice data of care for CMS patients. There are roughly 6,000,000 annual CMS procedures in the outpatient settings, with a split of roughly 3,500,000 procedures in the hospital outpatient settings and 2,500,000 procedures performed at ambulatory surgical centers. To maximize this important opportunity, we're enhancing our organization with new talent and capabilities to ensure operational excellence within critical functions such as marketing, strategic accounts, medical and market assets. In parallel, we're advancing initiatives to drive awareness, education, action across key decision makers.

Speaker 2

We're also paving the way for no pain through our participation in 340B pricing and new GPO partnerships. Earlier this year, we announced the partnership with Premier, whose significant network of hospitals and healthcare systems covers nearly 20% of EXPAREL relevant market procedures. Through these preferential pricing programs, we're helping healthcare systems afford the opportunity to be at the forefront of opioid sparing pain management.

Speaker 3

While it's

Speaker 2

still early days, we're pleased with the initial data we're seeing from our partnership with Premier. In the 1st 2 months of post launch, EXPAREL volumes at Premier accounts are up with only a modest impact on net sales dollars. In short, this partnership is starting to do what we expect it to do. Importantly, we have 2 additional GPO partnerships in process. As for ZILRETTA and ioverao, I'm pleased to say both products are performing according to plan with solid sales growth for the quarter.

Speaker 2

With respect to margins, while EXPAREL landed in our guided range, DILRETTA and ioverao margins weighed on consolidated margins for the quarter. Charlie will share more details on margins shortly, but I want to emphasize that our primary focus is on driving top line growth. As we grow the top lines, margins will in turn benefit. Switching gears to our research and development pipeline, I'd like to share a few quick updates on PPRX-two zero one. This novel intra articular helper dependent adenovirus, gene therapy product candidate codes for interleukin-one receptor antagonist or IL-1Ra for the treatment of osteoarthritis OA of the knee.

Speaker 2

Here we believe PCRX201 has the potential to become a leading disease modifying agent by turning the patient's own cells into therapeutic production sites of IL-1Ra. As background, IL-one is a known inflammatory cytokine with inhibition tied to the reduction in catabolic processes in the joint that contribute to OA of the knee and progression. Last month, we presented encouraging preliminary results from a 72 patient Phase 1 study of PTRX201 at the Osteoarthritis Research Society International or ORC, 2024 World Congress in Vienna. The data will also be featured at an ENCORE podium presentation at the Annual Meeting of the American Society of Cell and Gene Therapy this week in Baltimore. These data showed that a single intra articular injection of PTRX201 demonstrated sustained clinical effect as assessed by patient reported outcomes and all dose levels for at least 1 year post injection.

Speaker 2

Importantly, PCR X-two zero one was shown to be well tolerated with a favorable safety profile. We now have data for 2 years and we are preparing to submit those data for presentation at a medical meeting in the fall. Of the 14,000,000 Americans suffering from symptomatic OA of the knee, 2,000,000 are under the age of 45. The duration of effect for currently available treatments is limited to 3 to 6 months. Based on our market research and feedback from our Scientific Advisory Board, improving pain and function while potentially modifying the disease for a year or more would be considered transformative by both physicians and patients.

Speaker 2

Furthermore, a year or more of durability would be clinically and economically meaningful for patients and the healthcare system. These promising preliminary findings earned PPIRX-two zero one the FDA's first ever regenerative medicine advanced therapy or RMAT designation for gene therapy product in osteoarthritis. Lastly, unlike other gene therapies, we believe PCRX201 will be able to be manufactured at large scale for a favorable cost of goods sold. Before I turn the call over to Charlie for a review of the financials, I'd like to highlight today's announcement of our plans to implement the $150,000,000 stock repurchase plan. This stock repurchase plan underscores our confidence that we have in our growth outlook and the belief that Pacira shares offer an attractive investment opportunity given the significant value ahead.

Speaker 2

With that, I'll turn the call over to Charlie for his financial report.

Speaker 4

Thank you, Frank, and good afternoon to all on the call. To remind you, I will be discussing non GAAP financial measures this morning. A description of these metrics, along with our reconciliation to GAAP, can be found in the news release we issued this afternoon. I'll start with an update on sales and margin trends, starting with EXPAREL. 1st quarter EXPAREL sales increased to $132,400,000 versus $130,400,000 in 2023, driven by volume growth of 3%, which was partially offset by contracted discounts with the rollout of our premier partnership in January, as well as a modest shift in vial mix.

Speaker 4

1st quarter ZILRETTA sales increased to $25,800,000 versus $24,300,000 in 2023, and ioverao sales improved to $5,000,000 compared to $4,000,000 in the Q1 of 2023. Turning to margins. On a consolidated basis, our 1st quarter non GAAP gross margin percent was 72%. While 1st quarter EXPAREL margins landed within our full year guided range of 74% to 76%, ZILRETTA and ioverao margins were below our guided range and negatively impacted consolidated gross margins for the quarter. For non GAAP R and D expense, the Q1 increased to $16,400,000 from $15,300,000 reported last year.

Speaker 4

This year over year increase primarily relates to the start up activities for the ZILRETTA Phase 3 study in shoulder OA. Of note, the 1st quarter R and D expense includes $7,400,000 of product development and manufacturing capacity expansion costs, which is down 4% from the prior year as we approach the completion of our pre commercial scale up activities for the recently approved 200 liter EXPAREL manufacturing suite in San Diego. Non GAAP SG and A expense came in at $63,800,000 for the Q1, which is up from $62,500,000 last year. This increase is largely due to professional and legal fees associated with the Paragraph IV and other litigation, and to a lesser extent, costs associated with our transition to a new CEO. 1st quarter interest expense improved to $3,300,000 versus $9,600,000 reported last year.

Speaker 4

This was driven by the interest expense savings associated with the retirement of our term loan B on March 31, 2023 using a new term loan A and cash on hand. And lastly, we delivered another quarter of significantly positive adjusted EBITDA of $44,600,000 With respect to capital allocation strategy, we are focused on creating long term shareholder value. Today, we announced a $150,000,000 stock repurchase plan, which gives us the flexibility to opportunistically return capital to our shareholders. We believe that our stock is undervalued and we view our share repurchase program as a productive use of capital that will generate favorable returns for our shareholders. Turning to guidance.

Speaker 4

Today, we reiterate our full year guidance for 2024 as follows: total revenue of $680,000,000 to $705,000,000 non GAAP gross margin of 74% to 76 percent non GAAP R and D expense of $70,000,000 to $80,000,000 non GAAP SG and A expense of 245 dollars to $265,000,000 and stock based compensation of $50,000,000 to $55,000,000 With that, I'll turn the call back to Frank.

Speaker 2

Thank you, Charlie. In closing, I'm very pleased with the progress we've made thus far in 2024, leveraging growth opportunities for EXPAREL, launching new indications, preparing for the significant reimbursement opportunity that lies ahead next year and also growing ZILRETTA and INNOVERA. The progress we're making is setting the stage for us to further entrench our leadership position in providing non opioid pain management solutions. We're sharply focused on growth. And as we continue to execute our growth strategy, we'll create value for shareholders, healthcare systems and most importantly transform the lives of the patients we serve.

Speaker 2

With that operator, we're ready to open the call for questions.

Operator

Thank you. We will now begin the question and answer session. Please go ahead.

Speaker 5

Thank you. Good afternoon, Frank and CECIRA team. Congrats on the progress. Thanks for taking my Frank, I appreciate all the updates and the color on EXPAREL for the quarter, especially on Premier and the GPO contract. So wondering if you and the team could just comment on how you view the cadence of the contracting that you alluded to, with a couple more potentially coming online.

Speaker 5

How should we be thinking about that and its impact and the influence on EXPAREL performance over 2024?

Speaker 6

Yes. Thanks, Greg. Thanks for the question. We're excited about what we're seeing. It's still early days now, right?

Speaker 6

And because we signed this thing in January, it's early days. But we're excited about what we're seeing per my comments. And we're working on a couple of more, as you mentioned. Let me turn it over to Charlie to give a little bit more color on that.

Speaker 4

Hey, Greg. So the expectation from a rollout perspective is that we would likely have a second contract kind of later in the Q2 and maybe another one in the Q3. So the contracts are rolling in throughout the year. And as Frank said, the Q1 of the activity probably isn't at its peak, so it takes a

Speaker 5

little time for them to

Speaker 4

get warmed up. But we anticipate by the end of this year that we'll have 3 active GPO relationships.

Speaker 6

And let me just add some additional color there. In addition to the contracts, what this enables to do is to partner with the GPOs to better educate their membership on what's coming with respect to outpatient reimbursement at SP Plus 6 starting in January 2025.

Speaker 5

Got it. That makes sense. And maybe keeping with a similar theme for my question. And I know it's too early to tell when it comes to 2025, as you just mentioned. But when it comes to that, call it a bolus of patients with no pain, at what point would you have some comfort in talking about what that trajectory could look like, of course, with the 6,000,000 patients CMS and then that additional as a double when it comes to the commercial opportunity.

Speaker 5

At what point should we start thinking about your comfort level as you prepare for kind of that trajectory of those patients and capturing that opportunity from 2025 and beyond? Thanks again and congrats, Frank.

Speaker 6

Yes. That's a good question, Greg. We're doing a lot of work now. So as you know, from prior discussions, we've reallocated our resources toward no paint. And so a lot of folks are working on getting not only ourselves prepared, but the market prepared.

Speaker 6

We're going to have a better view as we get closer to the end of the year. And I know that there's quite a bit of interest in terms of thinking about how we model the uptake of No Pain. And my sense is that the work that we're doing now with a number of partners and having discussions in various settings along with some qualitative and quantitative research that we're doing in partnership with various parties. We're going to have much better insight into the uptake of no pain come towards the end of the year. And we'll be able to provide some better clarity in terms of what segments we think are going to uptake earlier on versus later.

Speaker 6

And of course, as we mentioned, it will take some time for commercial payers to follow suit. And so we're focused on that as well. Broadly speaking, as we mentioned before, Susan Mesco, our Head of IR will be hosting some information settings in the fall. And those that timing will release in due course, which will provide better clarity on some initial feedback that we're getting from the marketplace. I think, Greg, if there are no other questions, we can move to the next caller.

Operator

Your next question comes from the line of David Amsellem with Piper Center. Please go ahead.

Speaker 3

I have a couple of questions. First, I know you said, Frank, that it's going to take some time for commercial payers to follow suit as it relates to no pain. I guess my question here is, can you talk to your dialogue with commercial plans and ultimately your confidence that these commercial plans will indeed follow suit? And then secondly, when you talk about that lag time, if you will, with commercial plans, is that more of a 2026 event? Just help us understand how long it might take for them to follow the lead of CMS.

Speaker 3

And then the last question is just on the cost structure. You talked about 201, and of course, allocating resources to no pain. I'm wondering where ZILRETTA and ioverao fit in terms of the long term strategy of the company going forward? Thanks.

Speaker 6

David, thanks for the questions. First, let me just provide a little bit of context on the opportunity known as no pain. But I think we're trying to really make sure we focus on this one as outpatient reimbursement at ASP plus 6 for CMS patients. Initially, as you know, we've quantified that as approximately 4,000,000 patients in the HOPD setting and about 4,000,000 in the ASC setting, which is quite substantial. So we've got a fair amount of opportunity right in front of us that we need to make sure that we do a good job of education in the marketplace to provide those patients with access to EXPAREL.

Speaker 6

As we stand up the broader commercial organization, and I think you've heard me say before that, we are bolstering our commercial resources, commercial, medical and importantly market access. So that's in progress. We've reallocated resources from other parts of the company to bolster that area. And as we start to further now make progress there, and again, I think that's going to be more towards the end of the year, We're going to have much better clarity in terms of specifically how we see no pain playing out over the course of 2025, 2026 and 2027. So that's where we are with that.

Speaker 6

With regard to ZILRETTA and Iverao, as you heard earlier, we're making good progress there. We're making good progress and sales are very solid in terms of what we've been able to deliver. And that will continue from what we can see. But as I've said before, we are sharply focused on growing EXPAREL. So in terms of disproportionate resourcing towards EXPAREL, we're doing that.

Speaker 6

We are treating this like a product launch. And so that's how we're approaching this situation.

Speaker 4

Hey, David. This is Charlie. Just building on your comment of 201, please note we are investing in clinical trials for both ZILRETTA and ioverao with the shoulder OA study and the spasticity study. So there is investment going on.

Speaker 3

Got it. Helpful. Thanks.

Speaker 6

Thanks, David.

Operator

Your next question comes from the line of Hardik Berdyck, JPMorgan. Please go ahead.

Speaker 7

Hey, guys. Thanks for taking my question. I just had a couple of questions on the $495,000,000 patent challenge from Evinitis. I was just wondering if you guys could give us some latest kind of thinking you guys have in terms of where some of the more likely scenarios that could play out and what actions kind of market actions EVNUS could take in the meantime based on the ruling? And just want to confirm, is the expectation that the ruling from the judge comes still comes in July?

Speaker 7

Or is there kind of change on that

Speaker 6

front? Thanks for the questions Hardik. Just a little bit of background. And so we do expect the ruling on the

Speaker 5

first patent

Speaker 6

litigation sometime by end of June. And so that's consistent with what we said before. And just to remind, we've got a number of other patents that will need to be litigated. In addition, of course, eVenus will need to get their product approved and eventually decide to launch the product at some point. So there are a number of things ahead, but let me turn it over to Kristin to provide some additional color here.

Speaker 8

Yes. Thanks. As Frank said, there really isn't an update since we talked to you all at the end of February on the 195 trial. We still expect it to read out by July 1, which is when the 30 month stay is up. So we look forward to the court's opinion being issued before then.

Speaker 8

And as Frank mentioned and as we've reiterated and we actually put a little detail in our release, we continue to produce new IP around EXPAREL, Orange Book listed patents and those are additional hurdles that Eviness would need to get through in order to eventually launch a product. So it's in our release, but we did just have in March 3 additional orange book listed patents, 2 method of use and another composition of matter. And those are in addition to the other ones after 495. So there are quite a few patents that we still need to get through. But as I said, we're looking forward to getting resolution to 495 here in short order, And then we'll continue to produce new IP and they will continue to have to work through our other patents that are all on the orange book here.

Speaker 7

Great. Thank you. And then just one more on, you mentioned the EXPAREL gross margin was within the full year guidance range. I was wondering if you could give a little bit more kind of granular detail about how margins are progressing among the various facilities, for example, the one in the U. K.

Speaker 7

Versus in San Diego?

Speaker 6

Yes. Thanks for that Hardik. I think overall we're progressing well. We haven't really broken it down specifically by site. As you know the 200 liter facility is coming in it's going to come online later on this year.

Speaker 6

I don't know, Charlie, if you want to say a few words about margins.

Speaker 4

No. Listen, in the long term, the improvement in gross margins is going to be driven by 2 major factors for EXPAREL. 1 is the manufacturing equipment, the vial is manufactured on. So the 200 liter is generally less expensive than the 45s. But probably even more importantly is the total volume.

Speaker 4

So we're focused on expanding top line and driving volume and so that margins can follow.

Speaker 5

Thank you.

Speaker 6

Thanks, Ari.

Operator

Your next question comes from the line of Gary Nachman with Raymond James. Please go ahead.

Speaker 9

Great. Good afternoon. Frank, first talk more about your progress with the modernization of the commercial organization. You think you'll have most of that in place by mid year as you prepare for no pay next year? I think that's been the target.

Speaker 9

So what big hires still need to take place? And then how aggressive do you plan on being with the share buyback? How is that contemplated with the convert coming due next year? And you have to maintain a certain amount of cash for that. So maybe talk through that as well.

Speaker 6

Great. Thanks for the questions, Gary. First on the commercial organization. As I mentioned earlier, we're making very good progress on modernizing and bolstering the commercial, medical and market access organizations. At a high level, we've talked about plans and we're making good progress on plans to hire Chief Commercial Officer and that's on track.

Speaker 6

In addition, we're expanding the number of folks in our field reimbursement management team, payer team as well as market access strategy and operations. So those are all things that are on track. In addition, we're looking very carefully at the broader commercial organization, including bolstering our resourcing of our marketing teams and medical teams. So those things are right on track and again supported by reallocating our resources away from certain areas of the company and investing them here where we believe it's going to make a difference here for our no pain launch. So that's a comment on our commercial organization and I'd characterize it as we're making good progress.

Speaker 6

And largely speaking, we expect that to be in place sometime in the second half of the year. With respect to share buyback, let me turn it to Charlie here. I'll just say that it really does underscore our confidence in our growth outlook. And it's an attractive investment given the value that we believe is ahead. So Charlie, let me turn it over to you.

Speaker 4

Thank you, Frank. And Gary, thanks for the question. So listen, as you point out that we have a business that's operationally cash flow positive. We generate cash every year. We just reported having roughly $326,000,000 on the balance sheet.

Speaker 4

As you point out, we do need a certain amount of money on the balance sheet to repay the $400,000,000 of August 25 notes next year. And so we're going to balance priorities and we're not going to make any commitments about whether we when we're going to spend the $150,000,000 We're going to use it opportunistically as we think benefits our shareholders. And we will balance all of the needs from a cash flow perspective over time.

Speaker 9

All right, great. Actually maybe one follow-up for Frank. Just what are the next steps for 201? You seem pretty excited about the data you've seen there so far following the Phase 1. What comes next?

Speaker 9

What sort of resources will you put behind it? Charlie, you mentioned before you are investing a little bit in pipeline. So I'm curious, is that something that could start this year? Or will you likely wait until to see how things unfold next year? Thanks.

Speaker 6

Yes, Gary. So it's an important question. There'll be certainly quite a bit more effort this year in terms of planning and thinking through what we need to do. But in terms of any sort of spend and investment, largely that will be ahead of us in 2025, 2020 20 27. And so we're excited about it.

Speaker 6

As I mentioned, we have had an opportunity to review the data with the Scientific Advisory Board. We've also presented some of the data as I mentioned at ORSEA and this week at ASGCT. And so we continue to vet the data. We also continue to think through clinical development strategy going forward. But in terms of activity, a lot of it this year will be vetting our strategy and planning and the investments will largely occur in 2025 and beyond.

Speaker 9

Okay. That makes sense. Thank you.

Speaker 6

Thanks, Gary.

Operator

Your next questions come from the line of Les Zaleski with Turits Securities. Please go ahead.

Speaker 7

Hi, this is Jeremy on for Les. Thanks for taking our questions. How do you view the opportunity with PCRX201? And how exactly does the recent designation help you? Thanks.

Speaker 6

Yes. It's a very interesting opportunity because this is the 1st RMAT designation for gene therapy in osteoarthritis. And what that means is that the FDA and the company will work closely as we think about further vetting the data and development strategy. So this is a wonderful opportunity to make sure that we stay close with the FDA. And to the extent that we develop this asset going forward, this could truly be transformational for patients.

Speaker 6

As I mentioned earlier, based on our market research and discussions with thought leaders, current treatments offer patients 3 to 6 months of benefit and durability, whereas we know that for market research, 12 months or more is considered transformational. And so to the extent that PCRX201 can deliver that, this could be an important new treatment option for patients. So we'll continue to vet the data and put the development plan together, but we're very excited about the data and obviously based on the RMAT designation FDA as well.

Speaker 3

Thank you.

Operator

Your next question comes from the line of Oren Dibnak with H. A. Wernig. Please go

Speaker 10

ahead. Thanks. Congrats on a pretty clean quarter. A couple of questions. Just to

Speaker 3

build on

Speaker 10

earlier questions about the commercial follow on after no pain kicks in. I just want to make sure I understand what we're talking about here. Like obviously, you have pretty small overall market share of the broader landscape of procedures. I think you've highlighted in the past about 12,000,000 relevant outpatient commercial procedures. And so I just want to understand, when you talk about following on, do you mean plans that are just not covering EXPAREL at all, hence your small market share now, and they'll make you feel compelled to cover it if CMS is?

Speaker 10

Or is it about improvement in terms and access with those plans? Just help me understand what we're even talking about your big picture. I do have a follow-up.

Speaker 6

Yes. So thanks for that question, Oren. What I'm talking about is oftentimes CMS will come out first with reimbursement and commercial plans will take some time to evaluate when and if they'll cover the new therapy. And so our task at hand now is to work very closely with the commercial payers to accelerate that adoption on the commercial side of things. Now that said, we do have a C code and oftentimes that can be reimbursed in the ASC setting currently, but it's not straightforward as it could be.

Speaker 6

And so here we have an opportunity with no pain and CMS reimbursement to use this now to engage commercial payers to follow suit sooner than they normally would. And so that's really it. But I'll remind you again that there's a substantial opportunity just with the CMS patients. What we're trying to do now is to really make this even a broader impact. So that's the idea.

Speaker 10

Okay. So just so I'm clear, I mean, you obviously have a lot of outpatient use now, like you said, I mean, it's a $500,000,000 $600,000,000 product, not all inpatient. So I just wanted to understand is how that's being done now suboptimal even across the entire board of your commercial outpatient reimbursement and that could change meaningfully at some point afterward?

Speaker 6

Yes. What's important with the no pain legislation is in the outpatient setting, it provides for ASP plus 6 percent reimbursement, which for example in the HOPD is pulling that thing out of the bundle. So this is important. So the product will be reimbursed separately. So now if you add up favorable access through 340B or GPOs and you add on top of that ASP plus 6 reimbursement, I think this provides for an attractive value proposition given what EXPAREL delivers on the clinical setting.

Speaker 6

And oftentimes some of the cost issues have been a barrier. So this is important. So to the extent that that sort of reimbursement formula is followed to any extent by commercial payers, this will be something that further accelerates launch.

Speaker 10

Okay. And then just to follow-up, I don't want to parse your language too closely. I know that can be pretty irritating. But you said to the extent we develop this asset going forward, and I want to know if I should interpret that as just to the extent that Bayer is developing going forward based on how the data turns out or maybe if you are looking to out license this to another company for someone else to take it forward potentially?

Speaker 6

I'm sorry, which product are we talking about?

Speaker 10

For I'm sorry,

Speaker 6

for 201. 201?

Speaker 10

Yes.

Speaker 6

I see. Look, first, we're very excited about 201. We're going to go through a lot of thinking here about our development strategy. We have no plans to do anything but that right now. So that's what I'd say to you.

Speaker 6

Yes.

Speaker 10

All right. I appreciate it. Take care.

Speaker 2

All right.

Operator

Your next question comes from the line of Balaji Prasad with Barclays. Please go ahead.

Speaker 11

Hi, good evening and thanks for the questions. So couple from me. While I can understand the rationale for the share repurchase, I'm curious to know the capital allocation factors which went to deciding the quantum of $150,000,000 That's 1. And 2, I'm not sure if you covered this already. So first, Jamie, you could take us through the growth in the dynamics of the quarter and how it changed was in the previous quarter and what's the cadence that we expect for the year?

Speaker 11

And maybe just on the second, apparel, I expect a question on the $18,000,000 procedures that are being recovered. Are these $18,000,000 procedures will be incremental to the external credit? Thanks.

Speaker 6

Hey, Balaji. You were breaking up on me there a little bit. So I think your first question was related to the stock repurchase, if that's correct. And so again yes, so what I'll underscore here is the confidence we have in our growth outlook and the fact that it's an attractive investment given that outlook going forward. If your question is about sort of the cadence and the amount, maybe I can turn that over to Charlie.

Speaker 4

Hey Balaji, it's Charlie here. And so I think one of your questions might have been about the amount. And so from our perspective, we looked at what typical first time people size and it was kind of 10% to 15% of market cap and that's really how we came up with 150,000,000 dollars We also note that we have between now and the end of 2026 to utilize it. But if we utilize it more quickly, we'll and it makes sense, we can go back to the well and get another authorization. So this is something we're going to try.

Speaker 4

We're going to use it opportunistically and hopefully to everybody's benefit.

Speaker 6

Thanks, Charlie. And I think, Balaji, your other question was about broadly no pain and just some numbers. So $18,000,000 total that we believe are outpatient procedures that could fall under no pain. Now specifically with respect to the settings and patient populations, so out of that 18,000,000, 6,000,000 CMS $12,000,000 commercial. And so inside that $6,000,000 is roughly about $4,000,000 that lie within the HOPD setting and $2,000,000 that are within the ASC setting.

Speaker 6

Whereas in the commercial, that $12,000,000 in commercial is roughly about 4,000,000 in the HOPD setting and about 8,000,000 in the ASC setting. So hopefully that's clear.

Speaker 11

If I could ask a follow-up there Frank, just what percent of these $18,000,000 procedures will be incremental to EXPAREL that is those who are not on EXPAREL today through any pathway?

Speaker 6

Yes, I think by and large, this is going to be a very favorable impact. And particularly, if I think about the CMS patients right out of the gate, 6,000,000 CMS patients in the HOPD specifically and ASC. I can't give you a hard number right now about how much is incremental. But what I can say is that our penetration, largely speaking, is fairly low. And a lot of that is due to the cost barriers that have existed.

Speaker 6

And hence, that was the thinking behind making sure that we drive no pain legislation to passage. And so the company saw that early on and has worked over the past 7 years with our Voices Coalition in partnership. And that's why this thing was passed. And so fundamentally, it's pulling the drug reimbursement or product reimbursement out of the bundle. So there's not a financial disincentive to use the best product for the patients.

Speaker 6

So hopefully that's clear. So I think given our low share penetration in this marketplace, we've got substantial room to further penetrate where those cost barriers are the real issue.

Speaker 11

Thanks, Frank.

Operator

Your last question comes from the line of John Glonka with Needham and Company. Please go ahead.

Speaker 12

Hi, everyone. This is John on for Serge. Thanks for taking our questions today. We have two questions regarding EXPAREL pricing for this year and beyond. First, can you provide some context on what the discount looks like right now to improve the user base and what the strategy might look like for the rest of the year based on what you've seen so far?

Speaker 12

And then when no paying comes into effect next year, what does the pricing strategy look like at that point with improved

Speaker 4

reimbursement? Thanks.

Speaker 6

So Charlie, maybe you want to talk a little bit about EXPAREL pricing strategy. What I'll say here is that when you think about what we're doing with GPO and Axis 340B, that's very favorable. So I'll say that. And with no pain, obviously, the reimbursement then gets better as opposed to the pricing. And so beyond that, Charlie, maybe you want to try a little bit

Speaker 4

of color. Sure. So if we think about EXPAREL's total gross to net at this point, it's a hair under 84%. And that includes product returns and prompt pay discount. It includes 340B, a series of individual customer contracts.

Speaker 4

And over time it will also include the GPOs as well. I think that was probably your question. If you're talking about pricing, actually price increases, we've been pretty modest in that regard. We did one in January. And we're really focused on expansion of the top line by volume, not so much price.

Speaker 12

Yes. I think really just for next year when no pain comes to effect, do you see the pricing kind of taking a, I don't know, a more lumpy change at the beginning of

Speaker 9

the year? Or do you

Speaker 12

see more of a gradual flip from a discount to a price increase?

Speaker 4

So ASP +6 is critically important in the outpatient setting to drive volume. ASP plus 6 has nothing to do with our WACC or the prices we will charge. So I don't know that we will change our strategy in any way, shape or form. We're just going to try to educate our potential customers so that they can benefit from ASP plus 6 and we can benefit from volume.

Speaker 12

And

Speaker 6

John, I want to go back to we're sharply focused on growth. Doing so solves a lot of things, including margin, some of the questions earlier. And this is the opportunity for us to drive penetration and growth with this catalyst of no pain. So that's what we're focused on.

Speaker 12

Great. Thanks.

Operator

That concludes our Q and A session. I will now turn the conference back over to Susan Mesko, Head of Investor Relations for closing remarks.

Speaker 1

Thank you, Hermione, 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 balance of the year, we will continue to ensure we are well positioned for long term success. The opioid epidemic continues to be a national crisis underscoring the vital importance of our mission. Thank you and stay well.

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Earnings Conference Call
Pacira BioSciences Q1 2024
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