Good morning, and welcome to Needham's 23rd annual healthcare conference. I'm Serge Belanger, one of the healthcare analysts at Needham. For our next session, we're happy to have the Heron Therapeutics team with us. We have the company's CEO, Craig Collard, the CFO, Ira Duarte, as well as the Senior VP of Medical Affairs, Kevin Warner, with us this morning to tell us more about Heron. Before we get going, just want to remind the audience that they do have the options to submit questions via the portal they're watching the presentation on. Alternatively, you can also email them to me, and we'll ask those as they come in. So I'll hand it over to Craig. He's gonna give us a brief overview of the company. And then, we have a number of questions for him. Craig?
Yeah, thanks, Serge. Yeah, just quickly on Heron. I joined the company back in April of 2023. Primarily at that time, the company was obviously having some issues financially. It had just launched, you know, the product ZYNRELEF a couple years before that. We're really trying to find their footing. You know, we had made that change. So, if you think about the company now, we basically have four products, two on the oncology side, with a pretty stable, you know, base of business. Then the two products on the acute side of the business are ZYNRELEF for postoperative pain, and then APONVIE for postoperative nausea and vomiting, which, you know, those products have a very good overlap.
That's really where the growth from the business and a lot of the things that we'll be talking about today will come from in the future. But since joining the company in April, we've been able to take expenses from, in 2022, the operating expense range was in kind of the $182 million-$184 million expense range. Then last year, we got things down to about $135 million. We've given guidance now for 2024 that has the expenses in the range of $118 million-$116 million. So again, in a very short time, we've been able to, you know, accomplish quite a bit. We've taken the employee headcount down from about 225 to roughly the 130-140 range. We still have, you know, 50 people in our sales force.
So we think at this point, we're very well positioned, not only for the future, but into to be able to achieve profitability by Q4 this year. We've also been able to improve gross margin. We've gotten our two development projects back on track with the vial access needle and prefill syringe, which we'll talk more about, you know, as we go through our presentation today. And so again, I think we feel very strong with where we're headed and now have a pathway to profitability. So maybe, Serge, I'll stop there, and we can, you know, start with some questions.
Yeah, absolutely. So clearly the restructuring and cost-cutting measures had a significant impact on the operating expense structure. But maybe just give us an overview of where you stand in terms of the commercial footprint of the company and its capabilities on that front.
Yeah. So one of the things that when we did, you know, again, one, two, you know, trim expense, we were looking to trim, you know, fat necessarily, not necessarily cut into what we're doing commercially. I mean, we cleaned up a little bit there, but we were looking for redundancies and that type of thing. But where we sit now from a footprint standpoint, again, we've got roughly 50 people in our sales force. We've got, you know, MSL support. We've got account management support on top of that as well from a field perspective. The biggest things that really have happened of late is we expanded our label. We had our PDUFA date on January 23rd, which really broadened our label quite a bit. And we'll again, we'll get into that in a moment as far as other indications and so forth.
but then we signed the CrossLink partnership, which from a commercial footprint is going to take us, upwards of about another additional 100 excuse me, an additional 650 representatives that'll be throughout the country. Thus far, we have, I think, 140 of those folks trained mainly in the Southeast. And again, this should be a rollout nationwide by the end of the year. And, so from a commercial footprint, again, we're getting bigger and bigger as, as this year goes on.
Okay. So on ZYNRELEF, product was approved. Was it 2020 or 2021? So at least three years. Sure, you've had the opportunity to speak with stakeholders and physicians that have used the product. How do you think the product is seen and what are its main opportunities going forward?
Yeah, so I'll, I'll speak to this in a moment and maybe turn over to Kevin because, part of Kevin's background is he was actually, one of our thought leaders and has had on-hand, you know, hands-on experience with our product at the particular hospital he was at, up in Michigan. But if you think about when ZYNRELEF launched, I mean, it was, it, it was a really difficult time. It was right in the heart of COVID. So you had a lot of people, you know, elective surgeries weren't happening as much. It was difficult getting in hospitals and this type of thing. And the company obviously did not get the label that they initially intended. And so you had a lot of factors that were sort of playing against, you know, the product.
However, that being said, we've had, you know, the folks that we have had use the product clinically. I mean, we're getting, you know, 72-hour pain relief and, and that type of thing. So we've had a lot of good experiences from that standpoint. But I think the initial launch was very difficult just with some of the factors that were sort of tossed our way from, again, narrow label, COVID, and so on and so forth. So Kevin, I don't know if you wanna talk about, you know, your, your experience and so what you've seen sort of in the field.
Yeah, definitely. Just so little color around ZYNRELEF when it came to market. Obviously, we had that very restricted label peak COVID area. So we were in survival mode from a hospital basis, and we weren't looking at innovation or changing practice at that time. We were trying to button up our finances and just get through the period, right? So that minimal label with the survival mode of COVID kind of restricted that early adoption. And then the label expansion, the first iteration of it came earlier there in December of 2021. And now we got that full label expansion here in January of 2024, finally. And that makes a big difference for the product and for the adoption and how providers see it and how institutions weigh the possibility of adding it to formulary.
So without that full label, a lot of institutions are really looking at, you know, inventory management, if you will. They don't wanna have multiple products on the shelf that may or may not be used and not get consistency across their provider base and consistency for their patients. So this label expansion kind of gives us that full application of we can go to a formulary, sit down, have a review with the providers, with the pharmacy team, and they can see it and operationalize it much better from that aspect and make it a substitution, if you will. Although there is no other extended-release product on the market, it's in a class of its own. But one of the hardest things I would say with ZYNRELEF and when we launched it is the information around it and the messaging, right?
So the clinical trials, obviously, we kept patients in the hospital for 72 hours to evaluate the effects of ZYNRELEF. In the real world, a lot of practitioners don't get to realize that it's not tactile to them to see these effects. 'Cause most procedures nowadays, whether it's a total knee, total hip, they're in and outta the hospital 12, 18 hours, right? So we're, we're utilizing a 72-hour product. All these associated outcomes have to be looked at and relied upon from the clinical trial data. So some of that messaging around it is the key factor and the importance that they understand the importance of pain management, opioid reduction, and functional recoveries for these patients beyond when they're outta sight, outta mind, right? So, so we're getting there.
Part of that is the boots on the ground that we're talking about with CrossLink and having a larger footprint to be out there, make those first contacts, start to disseminate this information as we get more literature, more units out there. Yeah, the CrossLink group is gonna be huge. We're already seeing pieces of that start in the introductions they make so we can talk about that messaging and then the overall launch of the product.
Maybe if you can just talk about the, in what procedures was the product used prior to the label expansion? And now that you have full label and CrossLink, giving you a tailwind, where do you think it expands in the orthopedic space in terms of the, the types of procedures?
Yeah. So initially, the first product label was for hernia TKA and bunion only, right? So that was severely restrictive. We were very happy with the latest label expansion because it was beyond what we actually studied pharmacokinetically only. So we thought the FDA's new set of guidance was to only approve for indications where you had the pharmacokinetic data. But they gave it, gave us essentially the broadest label we could imagine by saying all soft tissue and essentially all orthopedic procedures where you avoid direct exposure to articular cartilage is the only caveat there. So we got this label now that basically addresses there's 65 million surgical procedures in the United States every year. So not all of those are associated with a high degree of pain or would have the anatomical space to apply ZYNRELEF. But it's a much larger market than we, you know, originally forecasted.
As far as what's an addressable market is probably about 50% of that. But what's our target market? We like to say right around 13 million procedures. But originally it was just that total knee population. We launched that at our institution, like many institutions. And that's one of the most painful procedures, right? So one of the great targets for ZYNRELEF and the way I see it fits across the paradigm is any procedure that you would use an opioid for that patient 'cause of the degree of pain associated with it that you should likely be considering ZYNRELEF as your new foundational element to eliminate or reduce those needs for opioids and enhance that functional recovery. So what we're seeing on an institutional level is when they adopt it, they typically go for those high pain procedures.
So the total knees, the total hips, the label expansion significantly changed that because now we can do spine procedures, shoulder procedures. So another large volume group that has a high level of pain and debility associated with it if you don't control the pain appropriately. So having a 72-hour extended-release product for these major procedures, right now, those are our next two targets, I would say, besides total knee, total hip. It's really spine and shoulder are the next two. But then we also have the soft tissue group that is pretty large too. And one of those that's a nice story is the C-section group, right? So you have a new mother, very painful procedure. Obviously, she doesn't wanna expose the infant to opioids.
So minimizing that impact and improving her recovery, getting outta the hospital, she can go home with a new baby in a much more pleasant fashion. So the soft tissue impacts too are definitely there. Plastic surgery is another large group that we're looking at as far as ZYNRELEF's application and benefits.
And as you see more uptake, what do you believe you are displacing? Is it, you mentioned opioids. I'm sure there's still, you know, some opioid usage. But what about bupivacaine cocktails or even EXPAREL?
Yeah. So the anesthetic market's about $18 billion annual in the United States, right? And EXPAREL has about 3% of that market. So the penetration's not, you know, overwhelming or anything. As far as overall displacement, where you're really impacting is, is gonna be marginal from that head-to-head. You know, when I talk about ZYNRELEF, talk about providers, yeah, it's opioid reduction. That, that's a great piece of the story. But it's also pain management, reducing the acute pain, limiting the risk of developing chronic pain. And overall market access becomes getting that message surrounding extended-release analgesia versus acute anesthetics. The way ZYNRELEF works, it's got very linear release rates. So it allows us to incorporate it with the other anesthetics. So we don't always replace a generic bupivacaine that costs a couple dollars.
So they want that acute onset of the generic version of the anesthetic and then ZYNRELEF, the foundation that they do it in combination with to provide something they've never had the opportunity for. Many institutions that have used EXPAREL or pain pumps hoping for an extended duration of analgesia, they often look at it as a substitution. And that's where that new label kinda helps as far as, hey, you can get rid of this piece off of your formulary, remove this, and you have something that you can fully substitute for all of your indicated procedures now, with that new label expansion. So we do see some of that substitute, substitution. There's definitely a cost advantage to ZYNRELEF for many institutions just on a wholesale acquisition cost. The differences are there, but also on the reimbursement story on the backend too.
That's, that's also significant in this current economic climate, whether it's an ASC or whether it's your hospital outpatient procedure department, understanding the economics, the pharmacoeconomics, and cost benefits of these products. So it's not just safety and efficacy, which is important, but cost efficacy often comes to the forefront in today's economic climate. So as far as the overall addressable market and target market, there's a long, long way to go and a lot of education. So that's where these partnerships and these CrossLink distributors are really helping raise awareness and the major organizations and, and AAOS is bringing it to light.
Yep. I'm sure the current team is currently meeting with P&T committees and the former team did the same thing. Just curious with the new label, does that mean you immediately get expansion to new indications from the existing P&T committees that had you on formulary, or do you kinda need to go back to each of them and represent a label in order to get the broader coverage?
Yeah. So the vast majority of P&T approvals across the U.S. were approved without restriction when they added ZYNRELEF. So many institutions that added were already using it, quote-unquote, off-label and on-label for various procedures. A lot of places that were already doing knees with the initial approval started doing hips right away or started doing shoulders before we got the full label expansion. What the label does do now at that P&T table is if you have a provider that maybe only was spine surgeon or only did shoulders, they're a new champion for us to go to the table. So if we didn't have a surgeon that had an indicated procedure before to be that champion and take it to the P&T to have that discussion, to get that initial onboarding, if you will, now we do.
So there's many more providers out there now that are covered under that label where they can go to the P&T and bring it to the institution as part of a cohesive multimodal product program. But largely all the institutions that have it have already implemented and spread, I would say, or they have it, they're unrestricted, I should say. But the spread will happen more rapidly, if you will, now that the label's out there and you have education coming out about the pharmacokinetics in spine and the pharmacokinetics in shoulders. So now those providers that are doing it, and most people, I would say most providers in today's space don't like to use drugs off-label, right?
So, because of the legal climate that we exist in and we like to do things to a T and to the science, now that it is an open label, you'll see those adoptions across the institutions that already have it, that we're using it only for a specified group, but they can open it up relatively quickly without going back to P&T. It's just the provider saying, "I'm ready to use it now.
What's the current picture, in terms of reimbursement on the commercial and managed care front?
Yeah. So that's a huge piece. Obviously, right now it has CMS pass-through status, and that runs through Q1 2025. So that's all your, your Medicare CADE patients. That's for the HOPD, your hospital outpatient procedure department. That's also covered in our ambulatory surgical centers. So when you're looking at a surgical population, if you're looking at orthopedics in general, many of those are Medicare patients, as you can imagine, right? So your ratio could be 60%-70% Medicare that you're getting reimbursed for, for ZYNRELEF for all those patients. When it comes to commercial payers, many, many more are following on now. They're getting the pressures from the legal side of things and then just the fact that most of 'em usually follow Medicare and their guidance as far as providing a therapy like ZYNRELEF to reduce the need for opioids and minimize opioids.
So you got major cohorts like the UAW and such that have big non-opioid incentives and pushes, that really help drive the adoption of our other commercial payers. I'd say right now the overall mix ends up being for a given institution, the rate about that 70% range. If they're about a 50%-55% Medicare for overall procedures, not just ortho. Most across the United States, you're about 55% Medicare for all surgical procedures. Then you probably capture maybe about 40% right now of the commercial payers. So overall, you're at around 70% reimbursement for your HOPD and ASC patients, which makes it a very low to no cost net, net drug to have major impacts for your patients. Then you start looking at all the soft costs and time reductions also associated, becomes a big financial win for the institution also.
So when your pass-through reimbursement expires first quarter of 2025, NOPAIN Act should be in effect at that point. So relatively seamless transition at that. Is that what you're saying?
Yeah, definitely. So exactly, Serge. So the NOPAIN Act comes into effect, first quarter 2025. Our pass-through expires, end of Q1 2025. So the only thing keeping us from qualifying for the NOPAIN Act is the fact that we have pass-through status at that time, but we qualify for all other metrics based on our opioid reduction. We've already had positive interaction with CMS. They're well aware of that and the fact that we have that small overlap. So we're making sure that we are included and that there is no gap there. So we're confident that that'll continue on. And then that takes everything through 2027. And then there's discussions of the NOPAIN Act even going further. And that's, that's a huge piece for these institutions and having that confidence.
They don't want, you know, a rug pull scenario where you get this product on formulary and everybody's using it on every procedure and then costs go through the roof, right? So the government stepping in and the major commercial providers understanding the impact and the importance of an agent like this is really, you know, giving us a strong push. Our major lobbyists, they're doing that. So I believe, you know, it's likely gonna go 2027 through 2030, most likely that we have coverage for ZYNRELEF.
Okay. So with the label expansion, the CrossLink partnership, clearly that should generate some important growth for ZYNRELEF in 2024. How do you view the VAN as a product enhancement and a growth driver this year? Maybe it's more for next year since it's expected late in the year, but you know, how much enhancement does it provide?
Definitely an improvement for new users, I would say. So existing users, largely, they get used to the process, right? So it takes 'em about 1.5 minutes, 2 minutes to withdraw from the vial sometimes. So anytime you introduce a new process, we're humans. We, we don't enjoy it, right? So it's like you're, you're screwing up my workday a little bit here. So even though it's 2 minutes, but then they get the feedback loop of what's happening for that 2 minutes they took to withdraw that from the vial, to provide to the patient, understand that patient walked outta here, feeling better, had a better functional recovery. They're hearing from the floor nurses. These patients aren't using opioids, aren't having opioid-related adverse effects.
So you get that feedback messaging and largely those institutes stop worrying about that two-minute draw time and they figure out their little caveats, how to make it easier and how to operationalize it in their OR. Where the VAN's really gonna be successful is that immediate pushback you used to get, that immediate resistance. Now if we introduce the product to a new institute and a new OR staff, it's much easier for that withdrawal, not as cumbersome or burdensome. Seems easier upfront. So you don't get that initial resistance and enhanced set adoption and rollout through the institution. Ultimately, the VAN is a bridge to the prefilled syringe.
That'll be the greatest utility of the product, having that prefilled syringe, and that'll improve adoption even, even more, just by resource time management for those providers, having it accessible immediately on the operative field from a sterility perspective, no need for manipulation. So it's got a lot of wins with the prefilled syringe. So VAN's gonna be a nice improvement, but ultimately the bridge to the prefilled syringe.
Okay.
Yeah. So, sir, I would add just quickly to that, one of the issues that I, you know, kind of saw initially coming in was that just the enormous amount of time that our reps are spending in case management, you know, just being in these cases, sitting 2 hours for the, you know, for the 5 minutes that our product ultimately gets used, right?
And so one of the things that I think VAN and CrossLink do, and again, think about it, we've now got another human being that's in these cases every day that's sitting in these cases that is gonna be aware of our product and some of the nuances with it and so forth and being able to talk, you know, getting the product pulled, making sure the, you know, surgeon understands and they have a better relationship with the surgeon than we do, you know, so there's that that exists. And then you take the VAN, the device itself that makes everything easier. All this should equal more time for our reps to go other places and free them up to, you know, to be selling to other surgeons and so forth.
So this is the, you know, again, what we're trying to really source internally is like, what, you know, kind of clip are we operating now as far as getting new physicians on board and that type of thing? And then as we go forward, what I'm hoping to be able to show from a metric standpoint is that, look, we're converting more physicians, you know, more often because we have more time, obviously, to spend with, with these docs. And so I think that's one of the things that will play out over time, that the device and the CrossLink partnership, and then again, ultimately the prefilled syringe should really almost solve for it. But that's sort of how we view it.
Okay. And maybe one last one on ZYNRELEF. Sounds like clearly there's a focus on orthopedic procedures with CrossLink, the CrossLink partnership. But, does that free you up to focus on soft tissue procedures? And is that opportunity also amenable to a, a different partnership with a different partner?
Yeah. I mean, maybe Kevin and I'll hammer and angle on this one a little bit. But, yeah. So one of the things that we, you know, we kind of mentioned briefly was let's talk, you know, plastic surgery. As I look at this, I mean, there's a real opportunity to find a CrossLink-like partner within that space. You know, I would love to find someone like that, and we're free to do that. So, I think our product fits perfectly there, you know, not only ZYNRELEF, but APONVIE as well. I mean, these are the last patients in the world that you want, you know, throwing up after a procedure and so forth. So I think there's a real opportunity there.
And to your point, again, if we have more time to do things, we're gonna have more time to go into other soft tissue, you know, type of infections. So I think clearly that's going to, you know, offer that opportunity. But I think we also have within certain segments the ability to partner and plastic surgery for one is just such a clean partnership because, you know, it's separate. It's, you know, there's certain groups that focus in that area versus, say, you know, a general surgery type of thing where it might not be quite as clean in the hospital.
Okay. Wanted to talk about UponV. I feel it's still a product that doesn't get to really any attention. So maybe just give us an overview and where you think that product fits, and then we can talk about the potential growth drivers for this year.
Yeah. It's a game changer. So for me, APONVIE and watching it go live at our institution and the excitement around it and what anesthesia seen and felt, they love it. It's one of these drugs, like, I don't know if you remember, Sugammadex became a multibillion-dollar drug, and anesthesia really operationalized that and moved that across the nation. 'Cause if you think about anesthesiologists, they're not necessarily tied down to one location always, 'cause they don't necessarily have their single practice or their group of patients that are there, and they start moving hospital to hospital. So that's gonna be a driver of APONVIE. But APONVIE is largely underrecognized, like you said, Serge, because the NK1 class itself had never had a drug that adapted itself or was able to be given in the perioperative phase.
So we know they're the number one most effective antiemetics. We know that they have a limited side effect profile, a great safety profile. And so they fit well into this multimodal paradigm and this ERAS, enhanced recovery after surgery, and our two pillars of post-op pain and post-op nausea vomiting, our patients' top two primary concerns and the top two things that keep our patients in the hospital longer, right? So by limiting PONV with a best-in-class agent that you can add it per the guidelines when the guidelines say use three or four agents, our problem with getting three or four agents is the side effect profiles. They have overlapping side effect profiles when we put our patients at risk. So now we got a product from a class that has a clean safety profile and is the most efficacious, and it works for 48 hours.
So all of these other antiemetics work 6 hours, 8 hours. Guess what happens? That patient starts having nausea vomiting, wasting our nursing time, wasting more rescue antiemetics, more side effects, increasing length of stay. So we're leveraging the new guidelines that are coming out. So aprepitant, the molecule for UponV, already gets the grade 1 A evidence for its efficacy. But because of that poor oral absorption and the need to give it 3 hours before, which our patients don't show up until 2 hours before the procedure in most cases, and then the delayed onset, and you think about all these GLP-1 users also is another piece where they have delayed gastric emptying. They have a higher risk of PONV now.
So the ASA has their warnings, precautions for all these GLP-1 users that they should be getting multiple agents, but then you can't give 'em an oral aprepitant, right? 'Cause of that delayed gastric emptying, they may not absorb it in time for the surgery. So having something like UponV for these huge groups of patients that are moderate to high risk, basically every procedure above the belt should be getting three agents 'cause they're high risk even from a clinical perspective, right? If you just had open heart surgery and abdominal surgery, you can't have that patient vomit, right? So it's not just a patient satisfaction thing. So there's a large cohort of patients out there that UponV fits perfectly to. And it's the fact that there's a lack of awareness around the NK1 class 'cause we didn't have something that could just be given IV push before.
So my anesthesia team at the hospital, they loved it. The fact that they could give it in preop, at induction, that patient was wheeled up from the. They didn't have time to do certain things. Now they have an agent, boom, right there, best-in-class, full efficacy, 97% receptor occupancy within five minutes. So they can really rely on that and change the game for PONV for these patients. So we talked about the 65 million surgical procedures. About half of those patients are moderate to high risk. So that's the group that the guidelines say give three to four agents for. So that's where APONVIE fits. It's not gonna be the, the single agent for everybody on the first step, but that should be that third agent. And that should be like the foundation if you will, 'cause it gives 'em that 48 hours too.
So that's where I see it. Yeah. A huge addressable population, 35 million. How it rolls out at an institution, I would say you capture about half of the indicated procedures or indicated patients that are moderate to high risk as it rolls out. And so overall, it's about 25% of all surgical patients is probably that target or addressable market. And we've seen similar results at the, at my institution where it ramped up, CRNA started using it, anesthesia started using it, everybody became aware, saw the impacts, and then we got to that usage rate that essentially 25% of all of our surgical patients coming through were receiving UponV, and that would be appropriate care on an institutional level.
Okay. Is the process to get uptake here similar to ZYNRELEF? You gotta go through P&T committees and they go through their own evaluations and then they make decisions based on that?
Yeah, definitely. I think it's a little easier from that perspective. So with ZYNRELEF being a provider-driven product and the application piece and the education around it, APONVIE's an IV push product, which we're used to doing it from an administration side of things as far as nursing goes and anesthesia goes, they know how to give the product. There's no education there, right? So this becomes a P&T review, based on safety, efficacy, cost efficacy, right? So they look at safety, they check that box, safe NK1 agent. They look at efficacy, they check that box as far as the most efficacious agent. So it becomes a, a necessity per se. The conversations at the P&T table have largely come around, the use of oral versus APONVIE versus IV fosaprepitant. And all of 'em have their differences and challenges and what you should and shouldn't be doing.
So we touched on oral and the fact that it doesn't constitute itself well to the periop space, and you're gonna miss a lot of patients or some patients aren't gonna be therapeutic by the time they're already in PACU. We knock out a total knee in 45 minutes. They're not even therapeutic with the oral. Fosaprepitant would be off-label use, requires a 30-minute infusion, 30 minutes to convert from the pro-drug to the active drug. So again, you're missing the window, and then it's not dosed appropriately either. So you're not using the lowest effective dose if you're going off-label with fosaprepitant. So APONVIE fits the space, better delivery modality, and then the cost component of it, it is, has pass-through status. It's also reimbursed. And overall, the costs are similar for most institutions for the oral, fosaprepitant, and APONVIE.
So it's a low-cost agent for significant impact, and that is reimbursed. So it could be a net-net $0 drug for your Medicare patients. So really a no-brainer as far as safety, efficacy, and how it fits the paradigm and the overall cost efficacy. Again, it's just messaging and getting in the guidelines and creating awareness of this class of drugs that wasn't utilized heavily in the periop space because of that lack of availability. But now it's here, and definitely the experiences have been excellent when you're talking PONV rates and setting the numbers. A lot of people don't think they have a problem, but if they actually dig into their institutional rates and what the literature says, it's about 20%-30% of all patients experience PONV. It was 26% of my institution. When you add UponV, that goes to less than 10%.
So instead of two to three patients outta every 10 having PONV, you're down to one. One case of PONV costs about $1,000 for the institution. So you're talking about a $50 drug that's saving $2,000-$3,000 of increased healthcare cost. It's a big impact on our institutions.
Based on the market, sorry, go ahead.
No, sir, I was just gonna add, but the way I look at, from a very simplistic view on APONVIE and ZYNRELEF is that, you know, if both of those today got formulary wins at XYZ hospital, okay, with ZYNRELEF, we're still gonna be going surgeon to surgeon to surgeon to get, you know, usage. And so a formulary win does not necessarily mean an institutional conversion. I think the difference with APONVIE is a win at the formulary level. You know, to Kevin's point, you're not going now to every anesthesiologist to try to get them to try the product. It becomes a systematic type of product. And again, it may only be for, you know, say, three indications. Maybe it's bariatric or, you know, ENT or what have you.
But ultimately, what we're seeing is that they're using it more and more and more. But the main thing is that on day one, it goes system-wide. And, and I think that's the biggest difference between the two products because you almost have an immediate annuity effect.
Okay. So based on the market opportunity and numbers for UponV and the unmet need for PONV, definitely sounds like this could be much bigger than ZYNRELEF. Is that how you're thinking about it, or there's still a lot of things that need to happen before we can?
Yeah. I mean, we haven't, you know, yeah, we haven't actually put any guidance out on, you know, kind of future where the product could go. I think they're both very big classes. It's, I mean, obviously we've, we talk a lot more about it, and we've, we've focused a lot more around, you know, ZYNRELEF, when it was out first and so forth. But I think there're, there's similar products in there. They're working in a similar space. They're different products in the way they behave system-wide, right? And so I think what you'll see with APONVIE is it will have these sort of cluster type of wins where sales could, could, you know, jump faster in a quarter, so to speak, where I think ZYNRELEF is gonna have these inflections that create, you know, the, the, the curve that's a bit different.
And that, that's kind of how I view it. But I think, look, these should both be multi-hundred million dollar drugs over time. And the question is, you know, again, I hope I'm, I'd love to be wrong and UponV does $500 million and ZYNRELEF's doing $400 million. I, I, if I make that mistake, then I'll, you know, admit to it now. But I do think both these drugs could be, you know, quite large as far as the, you know, if you think about the number of patients that they could particularly affect, they're, they're big wins. And so, we, we talk about UponV a little bit less, but I think for us, it's a little bit of a sleeping giant.
Okay. Just wanted to touch a little bit on the CINV franchise. Clearly, it's grown into a very stable and profitable product portfolio. Just, you know, what kind of commercial support is still behind the franchise and how do you think about growth for the future?
Yeah. So we've got, you know, an extremely experienced team on the oncology side. I mean, a lot of the folks have been there, you know, 25, 30 years, deep relationships and so forth. And a lot of the things that we're doing there is mainly contractual. And so what I'm looking, you know, one, we have a very stable base of business. I think we have a great clinical profile. I do think there's potential with the SUSTOL product to possibly do some different things formulation-wise. I mean, that product is doing in the kind of, you know, mid-teens, if you will, as far as sales and millions. It's got a good gross margin, about 85%. But the biggest issue with the product is the, the gauge, you know, the size of the needle.
And so it creates, you know, site reactions when you give it subcu and so forth. So, you know, could we improve upon the polymer to make it less viscous to where you could get that through a, you know, a smaller gauge needle? It could do wonders for that product. It could triple sales. And so there's little things like that that I think we may be able to improve upon internally, you know, and have more organic growth, if you will. But even if we do nothing, I think you've got a very stable base of business there that, again, together with CINVANTI, are in the kind of the mid-70s gross margin range. One of the things that we're looking at now, there's a lot of with, you know, some of the J-code and that type of thing that's going on.
There's, you know, a number of 505(b)(2)s that are coming into the space that we may be able to license or do things like that ourselves where we could throw that into this sort of mix. Again, 'cause it's not taking a huge promotional effort. We're doing most of this stuff through, you know, the relationships we have and contractually. And so we've got, you know, roughly eight people on the oncology side that are primarily driving this business. So it's extremely profitable. And again, we wanna, you know, sort of utilize that footprint, you know, as we can going forward.
Okay. Maybe just a quick financial overview. Oh, perfect. Before we end.
Do you wanna take that?
Yeah. I mean, we presented the slide during earnings. Obviously, we have not released Q1 results just yet, but this is what Craig had alluded to previously. Our total operating expenses, excluding stock comp and depreciation and the one-time charges, were $128 million for the year compared to $176 million to prior year. So we have guided to the $108 million-$116 million for next year, excluding stock comp and depreciation. We will now weigh. And obviously, as the revenues grow, we expect to be even a positive by the end of this year.
Okay.
Yeah, Kevin, if you want, you can put the next slide up. It kind of just shows the guidance.
Perfect.
Yeah. So that's what we put out, kind of revenue range. Again, sir, what we would love to be able to do as we move forward, we'd like to obviously narrow these things if possible. I mean, ideally, we, you know, in a, in a perfect world, we'd like to narrow the expense range down and the, the revenue range up. We're hoping that happens. But the reason we gave such a range was really mainly due to ZYNRELEF. With this CrossLink partnership, we just weren't, you know, we're not quite sure when this will take off and how, you know, how much it takes off. And so we gave a little bit broader range. And again, but at the, at the profitability level, if we're in that kind of $138, and the expense range is in that range, we should be profitable by Q4.
We were pretty conservative from that standpoint. Again, the upside comes from higher revenue, obviously.
Okay. Maybe just one last one, just to, to wrap everything up. Craig, anything about the, the story that still remains kind of underappreciated or, or misunderstood by investors?
Yeah. Look, I think the biggest thing, and this was even for us, I think internally when we got in here, there was a lot. I mean, a lot of things going on, and the company, again, just needed a little bit of guidance. And so I think as we've cleaned things up a bit and got, you know, a little different management team in place, more of a, I'm gonna call it a, a mid to small pharma kind of mentality where people are a little more generalist versus, say, more of a big pharma approach to things, I think it has really changed the, the culture and the dynamic here. And it, you know, it's funny, as we watch the NCAA tournament and things like that, every now and then, you know, a team means a little bit different face and a little bit different approach.
I think we certainly needed that. I'm not certainly tooting my own horn, but I think the team we have in place now understands that. We've really just changed the whole excitement and the culture around the company. So I think that's one. Two, look, we've got a very strong base of business on the oncology side, and we have two assets that I don't know many companies that have few, you know, products like this that have, you know, multi-hundred million dollars sort of possibilities with their products with good IP and that type of thing that surround, you know, the products. And so, and we're in a space where there's a lot of noise. I mean, you know, opioid usage and that type of thing. So it's an exciting space. You know, we're excited. We're just now kind of getting this thing turned around.
So from a standpoint of investing and where the company could go, there's just a lot of possibilities here for upside. And again, with profitability, well within sight.
All right. Well, Dick, we're up on time, so we'll have to end it here. Wanna thank you all for joining us this morning. I think a greater overview of what I think is Heron 2.0. It's vastly different than the prior version. So very exciting. Thank you.