Hi, good afternoon, everyone. Continuing the Spec Pharma track for the day, delighted to have Frank Lee, the CEO of Pacira, with us. I also just wanna call out Charlie, who was there as CFO, in the audience, and Susan Mesco in Investor Relations. So thank you all for joining us, Frank, and great to have you here.
Yeah, great to be here, Balaji.
Yeah?
Yeah.
So it's been about two months for you in your new role. I think I'd love to get your unique perspective of someone new to the role and visibility across the board and kind of try to see what's exciting you the most about Pacira, what are you seeing in terms of the improvements and changes that it can bring about, and take it from there.
Yeah, great. Well, great. Well, thanks for joining us. You know, it's been an exciting, what is it, two months, 60 days on the job, and we, we've accomplished quite a bit. What's great to see is that, you know, coming into Pacira, I knew Pacira was a leader in the space, and we had great products, and, and for sure, that's, that's been very much true. And what I've been really impressed about is the mission of the company resonates for a lot of folks inside the company, and so there are a lot of good things about Pacira that I knew coming in that have been really reinforced. And if I think about some of the things that we're gonna do more of and bolster, you know, I, I think about this in, in context, which is, currently, I'm gonna focus on EXPAREL for a second.
It's remarkable that EXPAREL has sales over $500 million despite, I would say, access and reimbursement, you know, maybe not being optimal, right? And so, as you know, in the inpatient setting, it's bundled inside the procedure. In the outpatient setting, it's mixed in terms of the kind of reimbursement and access it has. So what we're gonna do, and we are doing, and you might have seen it through our earnings announcement and some of the guidance, is we're doing some things to reallocate our resources from places like the rest of the world. So the activities that we had outside the U.S. are gonna cease going forward. We're gonna have a transition period.
Mm-hmm.
We've ramped down on some development programs that we feel like we don't need to further invest in, and we're reallocating those resources towards driving EXPAREL sales and getting ready for NOPAIN. And so what exactly is that? So going back to commercialization, our field representatives have done a remarkable job of educating on EXPAREL. Where I think we need to do a little bit more and we could help our customers further is in access and reimbursement. You know, specifically, when you think about the reimbursement dynamics that happen on the ground in practices, we can do more there. We can also, perhaps, call on the pharmacies and C-suites of our larger customers, strategic accounts, if you will, in a way that better services that customer group.
Along the way, we're gonna be able to make sure that folks understand that we're a part of 340B now. We've already signed a GPO agreement with Premier, and we intend to further sign other GPO agreements, which in the end, when you combine 340B and GPOs, that should cover about 85% of our business. So if you think about the dynamic right now is because we're a part of the bundle inside the hospital, and we're not a part of some of the GPOs, we tend to be, you know, sometimes viewed as a cost or, you know, this noncompliance spend. And so, we're gonna make sure we service our customers in a way by doing all the things that we talked about to ease access. So acquisition price will be more favorable. Access will be more favorable.
As we turn the corner into January of 2025, as you know, NOPAIN will, you know, be enacted and come online. As you know, that'll open up reimbursement for CMS patient population in the outpatient setting. That's hospital and ASC. So we estimate it's about 6 million patients there and another 12 million in the commercial payer setting. And so a lot of the things that we'll do now to drive awareness and education, call to action around just some of the basics that we talked about with regard to access will serve us and our customers well when NOPAIN comes into effect. And as we think about that over time, you know, the CMS patients, we're hopeful that we'll be able to access the majority of those patients.
The real trick now is in making sure that commercial payers see the value of this and follow suit. So we'll be working carefully with them and to make sure that happens. And that's another, like I said, 12 million potential patients/procedures. So that's generally how I'm thinking about things. So.
Great.
Great to see that our mission is alive and well inside the company. The products are great. What we need to do now a little bit more is bolster our presence and support of access and reimbursement, servicing these big customers, and getting them ready for NOPAIN .
Got it. Great. Frank, thank you. That was a pretty comprehensive outlook, especially highlighting some of the opportunities that you see and what needs to change too. As we'll hear probably from each of these, but as you think about your unique selling proposition, the competitive advantages that Pacira or EXPAREL enjoys, what is it that you want to highlight, and what's going to be the way for you to improve those access and sales structure?
Yeah, you know, EXPAREL's a remarkable product. And, as I've said before, we're sharply focused on growing EXPAREL going forward, and you can see the steps that we've taken to reallocate our investments, you know, from the areas that I talked about into EXPAREL. So, that's important to have the resources to be able to do that, number one. Number two is I'm really encouraged by the data that we just released with our two new indications showing that EXPAREL, against an active competitor, showed up very favorably. Those data are very compelling, and important. So that further helps in terms of differentiation. And then finally, what I'd say, come back to again is by and large, my sense is our customers believe in EXPAREL. They wanna use EXPAREL.
But today, it can often be challenging for all the reasons that I mentioned, that it's in the bundle inside the hospital, that outside of the hospital in terms of reimbursement, it's mixed and somewhat complicated. And perhaps we haven't serviced the customers in the way that we really need to in terms of helping folks with the reimbursement and access kinds of issues. And so you can see the steps that we're taking now with regard to participation in GPO, the first one in Premier, and.
Mm-hmm.
More to come. And then some of the things that we're doing in terms of adding more resources on the ground, to help our customers in the ways that we talked about. Yeah.
Got it. So, look going by the way of things, clearly, you're identifying access and, as one of the core issues or core, agendas for you to drive your growth, and clearly, you're realigning the organization towards that too. So I think that kind of ties up with, with your recent announcement of looking out for commercial officers or business officers. Can you maybe take us through a bit more in terms of what, how the organization is, realigning to gear towards this and how the account structure is going to change?
Yeah. So just to give a little bit of additional detail to some of the restructuring that we announced, not only are we moving away from outside the U.S. and transitioning our presence there to focus on the U.S. and all the development programs I just talked about, you know, it's one where we've also focused on the organization in the sense that, as you might have seen in our announcement, we will be hiring for a chief commercial officer. And it's not unusual. It's fairly typical for an organization of our size and with our revenue to have a really great chief commercial officer. So, I'm looking forward to bringing on board a rockstar chief commercial officer and all the other folks that will support him or her in that position.
So that's exciting, and we're gonna further invest in our commercial team to make sure that they have the resources to do all the things that we need to do to be a very sophisticated commercial organization, having those insights and analytics, having various things in place to help our customers understand the value of our products. And so that's a big step. The other step, as you might have seen, is we made the announcement that we're gonna hire a new chief business officer as well, and we're gonna split that position to have someone focus on strategic product development, and then someone to focus on the CBO, because these are two distinct things, and that can bring more rigor to how we develop our products, and also the kinds of deals that we do going forward.
Then further, you know, you know, there are lots of other things within the organization that we're gonna shift.
Sure.
To align the organization better. And so if you think about all that, that makes sense on paper, but one of the important things, as we all know, is to make sure that every person in the organization is working together. So we don't want many Paciras inside Pacira. As I say, we want one Pacira. And so that's a direction that we're going. So we've got so many motivated and talented people that are passionate about the mission, and they've all been working really hard. And they're gonna be much more effective if they work as one as opposed to many. And that's really about aligning the vision, the mission, and the values and behaviors that are important to us.
Over time, people self-select in terms of, "Is this the right place for me or not?" But I like to think about great organizations as not only having great strategy but also great people and culture. For the organizations that I've been a part of historically, we've had that. That's what allows you to navigate the inevitable ups and downs of this journey and ultimately wind up in a better place. We're spending a lot of time on that piece as well, Balaji, in addition to the usual strategy and execution.
Got it. Maybe starting with something, a bit more near-term focused just on 2024. You provided your guidance recently, $680 million-$705 million top line, gross margin of 74%-76%. I think both of these modest compared to Pacira's or EXPAREL's past growth.
Mm-hmm.
How should we think about the pushes and pulls towards those guidance and any kind of upside risks to those guidance that you'd want to flag?
Yeah. So first off, I'm very comfortable with the guidance, from the standpoint that I'd like to make sure that we establish a very good track record of hitting our guidance. And as we proceed during the course of the year, we'll tighten that guidance accordingly. So that's number one. Number two, if you think about the pushes and pulls, I spoke about the one GPO contract that we've already signed, and there'll be others that we signed during the course of this year. So that'll be a headwind against the sort of mid-single-digit volume growth that we expect. And so net-net, that'll be roughly flat, but then you add into it some of the upside that we expect out of lower extremity, and that'll be the toggle, in terms of how much up or down there is.
In many ways, this year is all about maybe, I would say, delivering on the expectations that we've set, number one.
Sure.
Number two, strengthening our commercial organization to better help our customers navigate the areas that we talked about and eventually get ready for NOPAIN because this is, in fact, a major change in the dialogue. And, you know, in many ways, as I've said before, we're treating this like a new product launch.
Sure.
Because again, I'm gonna come back to today, and the perception, right or wrong, is that it's awfully difficult to use EXPAREL, and in some cases, folks view that as a cost center and not as something else, because it's a part of the bundle. Going forward, in the outpatient setting, it'll be reimbursed at average selling price plus 6%, and the acquisition price will be very favorable, if they're in 340B or GPO. So it's a different kind of story in the outpatient setting. So, we're happy that after so many years, and I think many of you know here, that the company was out front, with a coalition called Voices for Non-Opioid Choices. And this came out of seven years' worth of work through the Opioid Commission and so many advocacy organizations.
And so, it's so gratifying to see that it's finally gonna take place come January 1 of 2025.
Great. We'll look forward to that. While we anticipate that, can you describe the areas of investment for you around NOPAIN to kind of maximize those underlying opportunity and the impact that you would see from this going into next year?
Yeah. Happy to. So, you know, first, I really see an opportunity to serve our big strategic customers better, and some of that, of course, will be born through GPOs. Many of the GPOs, as you know, offer services to better educate their membership.
Mm-hmm.
That'll be important to raise awareness of NOPAIN, to help better educate. Also, there'll be a call to action in terms of how you better prepare their respective organization to really take advantage of NOPAIN. So there'll be good partnerships we put in place with larger institutions, with GPOs to better educate. Of course, I mentioned earlier that we're gonna bolster our presence on the ground with field reimbursement managers. And, as you know, if you take a look at many pharmaceutical biotech companies, they will have a substantial proportion of their field presence not only be representatives but also be field reimbursement managers to help navigate the ever complex way of both billing and getting reimbursed for and helping patients with their medication. So, historically, we've done some there, but in my view, not enough to help our customers.
So we're gonna be better at that. And of course, there'll be some other things that we do, but those are the broad strokes. And as we go through the course of this year, what we'll do is we'll track our progress. And so as we go through the course of this year and our field folks are really engaging their accounts, we'll start to see awareness, education, and call to action through tracking studies. And also, we'll also be able to get a better sense of where will non-opioid business come from? Is it gonna be largely existing customers that could use more, and they're gonna adopt earlier? Or is it gonna be folks who are currently on the sidelines that could perhaps now, with non-opioid, now rethink their use of EXPAREL going forward?
So we'll have better visibility into the sources of business that can be modeled over time.
Got it. Could we expect maybe some time going towards the end of the year or early next year that you would have those visibility to provide a longer-term guidance, a three-year or five-year guidance around what EXPAREL could look like?
Yeah. It'll still be early days, you know, come this year, and there's nothing that replaces actual sort of results.
Mm-hmm.
On the ground. But I will say that Susan's here in the audience that we're gonna plan on in the fall probably. It's gonna be in the October timeframe, give or take, where we'll have a couple of opportunities for investors to call in and also participate in an analyst, an investor day where we'll bring, in addition to other information, we'll have access to folks who are in charge of, let's say, ASCs, HOPDs, other key stakeholders, and you'll be able to hear directly from them in terms of how ready they are and how they're thinking about NOPAIN . So that'll be a good start.
Okay.
And we'll also, at that point, be able to better, I would say, guide you a bit in terms of what we expect in 2025 and the key sources of business that I talked about, which is, like with any product launch, you'll have your early adopters, your middle adopters, and unfortunately, the never adopters. And, you gotta be able to stratify and segment that business, and we're gonna get smarter about that as the year goes on.
Got it. I want to hit upon two or three items, I think, which are weighing on the stock, starting with eVenus. I mean, I think in the past, Dave has been very vocal about there being a very challenging pathway for generic EXPAREL. But we are kind of near the inflection point with regard to hitting a timeline, getting next updates around this. So I want to get your take on eVenus and how resolute you think the 4,951,348 patents are and also the additional patents.
Sure. It's a very good question, Balaji, and we're not very far away.
Yeah.
And so we expect that come end of June-ish, we're gonna know the court's verdict. And I can tell you that, you know, first of all, before joining Pacira, you can bet that I did my own due diligence, and, you know, I voted with my feet, and I'm here. And that, that's number one. Number two is, as you know, this is the first of many patents that will need to get litigated, right? So this is the first one, and behind it are a number of other patents. In addition, we're working on some other things, as well that could wind up in various patents. So there's more to, I would say, litigate and discuss in the courtroom beyond this initial patent litigation. So that's an important point. The second one is that, of course, eventually, the other company would need to get approval for their product.
and so that's the road ahead as well and eventually manufacture. So, the long and the short of it is, we think this is probably gonna be a marathon, not a sprint.
Mm-hmm.
We'll know more come end of June. What we're planning on is, perhaps, the week following that, you know, roughly, we'll have a, a time for investors to call in, and we'll be able to provide our perspective, whether it's, one outcome or the other or something in between.
If you win those litigation, if it goes in your favor, does this effectively settle the eVenus challenge?
Well, as you know, they could always appeal. We could always appeal. There's lots of different ways this could go. So I wanna be clear. Right now, we see it as a marathon. And again, this is the first of many patents.
Got it. Shifting down the point, which I've been getting questions on recently, is the VX- 548 product. Again, I think, you know, the kind of under the current FDA guide, two phase trials are required for a general acute pain indication.
Mm-hmm.
VX-548 is going through this. So if they do manage to get an acute broad label for acute pain, how would this impact or change the dynamics for EXPAREL, especially with regard to your access that you're planning and your strategy?
Yeah. Good question. Yeah. First of all, I love the new innovation in the pain space. It's long overdue. I can recall a time way back when when people talked about obesity that way too. Oh, the path is long and hard, and, you know, we don't know. And it's great to see those drugs come to market. And I think we're gonna see more and more pain innovation. And part of the appeal for me coming into this space is I think there's tremendous room to innovate for patients. That's number one. Number two, I really think that these are really complementary products, you know, the NaV1.8 and an EXPAREL, at least in the acute setting. So if you think about that for a second, EXPAREL is used in the OR to prevent pain, not only during the surgery but postsurgically.
Whereas, as you know, the NaV1.8 trials enrolled patients with pain and tried to decrease pain either in, you know, in both in soft tissue and hard tissue. And so that had varying degrees of success, as you know, and varying degrees of time to onset. So I think this is really a complementary thing. It provides another option for physicians and patients. We think that EXPAREL will continue to be used like it's used to prevent the pain, both while during surgery, and also in the days after. And then just like they do now, they could leave with a Tylenol script, an opioid script, or maybe a NaV1.8 script or all the above in terms of how the physician sees fit in terms of managing the pain.
Got it. And clearly, I think the message that I'm getting for you is that you're going to throw your weight behind EXPAREL, reallocate resources to it. What does this also mean for business development? I think a couple of years ago, or even till last year, BD was a fairly significant priority for Pacira, building on multiple early-stage, mid-stage assets.
Mm-hmm.
How does your BD plans change now?
Yeah. So, right now, we're very focused, as I've said from the very beginning, I think it was day four on the job at J.P. Morgan, on EXPAREL growth. And there's good reason for that and all the things that we just talked about in terms of today and also NOPAIN in 2025 and beyond. So, so that's, that's super important. Now, as we turn the corner into 2025 and beyond, I, I think we'll have to really think about our therapeutic area strategy. So we're doing some of that work now, which is what part of pain and adjacencies would we be really interested in and why? Why is it that we wanna play there, and how do we think our capabilities allow us to win there? So we're gonna have a, a better insight into that as the year goes on.
I suspect that, you know, come next year, we'll have to think about, are there things that, that fall into that bucket? We'll have to weigh that against, are we gonna, you know, invest those dollars into furthering some of our own products in terms of lifecycle management and expansion, or are we gonna do something around BD? But this year, for sure, we are hyper-focused on getting ready for NOPAIN.
Fair enough.
Building our capabilities around commercial.
Got it. I think probably I said three, but I'll go four. I think the fourth issue, which, again, has been a concern for investors, is the whole margin trend, right? While you're being clear that gross margin's going to go down as you expand with 340B and everything else, so 74%-76% guidance for this year. What will take you back to your past historic peak gross margin levels?
Sure. Gross margin's an interesting thing, you know. First of all, let me just say that, we're focused on growing the top line for all the reasons we just talked about. That's number one. Number two, it's really great news that we have FDA approval for the La Jolla facility.
Mm-hmm.
The 200 L. So that's been a long time in coming, and we got that approval not that long ago. So now the teams are really working actively to make sure that that capacity comes online. And so once it comes online, we have that capacity. So now we need to utilize it in order to really improve margins. So I'm gonna come back to growth solves a lot of things. And so that's how we're thinking about it, is we are really happy that the 200-liter facility is now approved. Now we've gotta get it online, and we gotta grow the top line. And when we do, the margins will naturally expand. Yeah.
Sure. I see that we're out of time, but, Frank, thank you for sharing your insights, and glad to see you here at the conference. I wish you a productive time at the conference.
Well, thank you. And thanks, everybody, for paying attention here and joining us. You know, I really believe it's a it's a new day for Pacira, not only for the base business, but you might have seen recently that we have this really intriguing gene therapy product, the first of its kind, get RMAT approval in OA. And that's very interesting. We got 72 patients out to 2+ years now. And so, you know, that'll be interesting in terms of how we reshape the company going forward, but it's, it's certainly a great time for the base business and perhaps some of our pipeline as well.
Sure. Just saw the RMAT designation, so congratulations on that too.
Great. Thank you.
Thanks, Frank.
Yeah. Good. Yeah.