Everybody, welcome to day three of the J.P. Morgan Healthcare Conference. My name is Hardik Parikh. I am an equity research analyst at J.P. Morgan, helping to cover large-cap pharma as well as SMID Biotech. Welcome to Frank. This is his second year now. I believe last year it was day two or three on the job. So welcome for your second time around here.
Thanks, Hardik. In fact, it was day two. I think I told a couple of jokes. I didn't know much about the business back then. I'm really pleased to be able to share with you the progress we've made in 2024, and importantly, our plans for 2025 and beyond. Here are our forward-looking statements. I want to take you back a little bit. As many of you know, you have family members and other people you know with pain. When you have pain, your world gets smaller. You get more isolated. It has an impact not only on the patient, but also the people around the patient. Our job, our mission now, is to deliver innovative non-opioid pain therapies to transform lives of patients in pain. Let me start with 2024.
Strong execution in 2024 has laid a really strong foundation for success in 2025 and beyond. We've achieved full-year 2024 revenue guidance. In fact, I believe it's on the high end of guidance, and I want to recognize our teams for this because, as you might imagine, in the first year, we've had a number of changes in leadership, changes in structure, changes in people to set ourselves up for growth, and to be able to accomplish this and be at the high end of guidance is a pretty remarkable thing, so I want to recognize our teams for that. We've secured EXPAREL reimbursement through NOPAIN. That was expected. What is a pleasant, I would say, not a surprise, but I think a pleasant benefit to our efforts around NOPAIN is the inclusion of iovera.
Of the 11 products that are covered under NOPAIN, Pacira has two of them. And this just speaks to our leadership here in driving forward NOPAIN with the advocacy teams and stakeholders over the past eight years. And as you know, NOPAIN is live as of January 1 this year. We obtained FDA RMAT designation for PCRX-201, as you know, in gene and cell therapy. That's equivalent to breakthrough designation. And that's based on the data, not the concept. And so we're very excited about this. We did present our two-year data at the American College of Rheumatology. I'm going to talk a little bit more about that and show you some of the data. And we're very excited to share more of that data with you this year as we look at sharing the three-year data.
I want to give you some context here that most of you may appreciate is that current standard of treatment is three to six months of durability of effect in terms of benefit. We've now shown benefit out to two years, now going out to three. We know, based on our market research, that 12 months of benefit is considered transformational. Importantly now, we've established a powerhouse commercial medical market access organization to drive growth going forward. Very, very importantly, as we head into 2025 now and beyond, we have a solid foundation in place in terms of our mission, a clear guiding principles and values. These guiding principles are on keeping the patient at the center, following the science, and treating our people well. In my experience, when you do this right, you have a high level of engagement in the company.
And just to let you know, based on our surveys, over 90% of our employees feel very proud to work at Pacira. Let me talk about 2025 and beyond. And so what can we expect over the next five years? We've sort of put this under the 5x30 growth strategy, growth path to value creation. It comes in two different buckets. The first bucket is accelerating growth of the base business. And the second is about advancing our pipeline and building value there. So let's go through these one by one. So let's talk about the first three, patients. We expect to be treating more than 3 million patients when we get to 2030. In this period of time between now and then, we expect CAGR to be in double digits. We also expect five-point expansion in gross margin. Let's talk about why we believe this.
We've got three best-in-class products, EXPAREL, ZILRETTA, and iovera. And as you know, these are products that still have a lot of room to grow as it relates to our TAM. And importantly, as of this year, the NOPAIN Act is now effective, as I mentioned earlier, as of January 1. And so what does that mean? That means that there are a total of 18 million surgical procedures out there, approximately 6 million that are CMS, and 12 million that are commercial. And so, as you know, with EXPAREL, the reimbursement in the HOPD and the ASC settings is going to be average selling price plus 6%.
And now, depending on the acquisition price, if they're a part of 340B or GPOs, it can be a very favorable financial outcome that goes with the favorable patient outcome that we deliver with this product called EXPAREL. For iovera, what this means under NOPAIN is $250 more on top of what physicians currently get reimbursed. So this is significant. This is significant. And this is why we put in place a powerhouse commercial medical market access organization to drive growth. So let's talk a little bit about what are the key drivers for each product going forward. Start with EXPAREL. We've talked about NOPAIN . What you may not know or appreciate is that last year, around September, we were provided and granted a J code for the first time in the product's history.
Now, up until this time, the product has been operating off a temporary C code. And as you know, commercial payers often don't recognize temporary codes. So the fact that we have a J code, what that means is it's going to streamline billing and reimbursement. It also means that this is going to be important for bringing commercial payers to follow suit with CMS. GPO partnerships. So we signed Vizient and Premier last year, and we expect to sign one more. We recognize hospitals and hospital systems are under tremendous pressure. And so this provides a favorable acquisition price, and we mutually benefit as those volumes increase. Targeted patient education. So as we have now, number one, convinced physicians that this is the right product, and we've convinced business stakeholders like hospital administrators and payers, we have an opportunity to activate the patient.
And in my informal market research and asking people that I see every day, and I say to them, "Hey, if you're thinking about a surgical procedure, and if there was a product that could give you NOPAIN , in essence, three or four days after your surgery, when the pain is at its worst, and you'd use very little to no narcotics, would you ask for it?" Resoundingly, the answer is, "Yes, I would." Then I said, "Hey, if it wasn't totally covered, would you pay out of pocket for it?" They would say, "Absolutely." And so, by the way, my anecdotal market research is supported by real market research that our teams have conducted.
And because of that, we're going to be doing some targeted work, some pilots initially, to really understand how we can optimize educating patients and those around them to have that discussion because they should. They absolutely should. So let's talk about ZILRETTA for a second. ZILRETTA, I always like to say, is the one child in the family that hasn't gotten enough attention. So we have our flagship product, EXPAREL. We've had iovera, which is an amazing product, which I'll talk about here shortly. But ZILRETTA could use some more attention. It's a wonderful product. It's an only steroid that lasts for three months. It's particularly effective in diabetes patients because of this PK profile. And it's got an opportunity now, with some of the studies that are ongoing, to now be indicated for shoulder OA in addition to knee OA.
That shoulder data will be available mid-2026, so not too far away from now. This first point around some additional share of voice to get additional reach and frequency to those targets that really don't know about ZILRETTA and the benefits it can provide patients. That's a real opportunity. Going to iovera, we mentioned NOPAIN reimbursement, which is significant. Again, $250 on top of what they're already being reimbursed. New C code, a new indication. Great news at the end of last year. We were approved for 510(k) for medial branch, which is back pain, used for back pain. Finally, spasticity. Middle of 2026, next year, we'll be reading out on our pivotal study for spasticity.
So if you know of any patients, loved ones who have suffered a stroke and their muscles are bound up, cerebral palsy patients where it's pulling and pushing at the same time, it's shown remarkable, remarkable results. And now we're going to build on that anecdotal data to have real data to make sure it's indicated and reimbursed appropriately. Let's talk a little bit about advancing the pipeline. And that comes in two different things. First is the pipeline itself. We expect to expand the clinical development pipeline with five novel programs by the time we get to 2030. Second is partnerships, establishing five partnerships. And this includes not only development, but also commercialization partnerships. Why do I say that? It's because many of you may know that currently our products are only marketed in the U.S. So there's a real opportunity outside the U.S.
And it's not in every market outside the U.S. My sense is there are a handful of markets in each major geography outside the U.S. where our products can be financially viable and deliver value. So we'll be actively in discussions with potential partners to realize that potential, as well as now development programs and how we can partner with others to move forward in a more de-risked way. So it's interesting when you think about Pacira. We're uniquely positioned as a company to deliver benefit across the patient journey, across the patient journey. So you look at the horizontal axis and all the different sites of care, episodes of care across the patient journey. And you look at the vertical axis. We have products that provide pain relief and benefit days, weeks to months, months, and now potentially with PCRX-201, years of benefit.
And this program, this series of programs, this company has, I believe, unique capabilities in terms of developing pain assets and really being very close to the market and being a leader in this marketplace. So let's talk about key data catalysts. So these catalysts will start in 2026. So working our way up from the bottom, as I mentioned earlier, spasticity for iovera, that's mid-2026. That's a registrational label enabling study. Shoulder OA will be mid-2026. And then at the top, you see knee osteoarthritis for our PCRX-201 program. The Phase 2, Part A of that program will read out late 2026. This will be an important program. And as we move forward, we'll be able to share with you in the not-too-distant future our clinical development strategy, clinical trial design.
I'll let you know now that this will be against an active comparator, not a placebo, an active comparator. Let's talk a little bit about 201 for a second. It's a well-validated pathway. For those of you that know IL-1, you'll know that a product is already approved for this particular pathway. It's well-known, well-studied. It's called anakinra. We have some unprecedented clinical results that led to our RMAT designation, so 72 patients that we've now followed for three years. I mentioned RMAT designation. The other thing that's important is this product has a very attractive cost of goods profile. Naturally, when you think about gene therapies, you think about gene therapies as such that it's for very, very narrow patient populations with a big price tag.
This is gene therapy for prevalent populations where, because it's locally administered and the cost of goods is so low, we're going to be able to access it, provide access to it at prices that are going to be amenable to payers. So very different. Osteoarthritis, 14 million patients suffer. And currently, when you take a look at what's available in the marketplace, what you see is three to six months of benefit for various different modalities of treatment. And again, based on our market research, we know 12 months is considered transformative. And we already see data for 201 out to two years, and we're going to share data out to three years. You can see here the IL-1 pathway. When it's active, it leads to inflammation. When we block it, we stop the inflammation. So here are the data.
70%, greater than 70% of patients saw a greater than 50% improvement in pain and stiffness versus baseline at weeks 16 and 78. We continue to follow these patients. This is on the WOMAC pain and stiffness scale. These different colored lines are for the different doses. I'll tell you that when you take a look at the data further, very consistent data across not only all doses, but also across different severity grades as represented by the KL grades. That's what gives me confidence around these data, not only the magnitude and durability, but the consistency across doses and different severities of OA. Now, oftentimes, when we think about OA, we have to think about placebo response. We've done quite a bit of work here in looking at placebo response, particularly as we think about how we design our Phase 2/3 program.
And when we look carefully at the literature, what we see is a lot of data around six months, very few data at 12 months, and nothing after that. And so I'm not going to show you data here, but I'm going to show you a range just for reference. This is important. I'm not trying to compare one against the other because this is a study. These placebo responses are some that oftentimes investors ask about. So I'm going to share those with you. And so when you look at the literature, and we're happy to provide additional detail on this analysis, what you see is a placebo response somewhere around two points that goes around six months and some maybe to 12 months. But you can see that we've far surpassed that with the initial data from our Phase 1 study. And this isn't a small data set.
It's a large data set of 72 patients. So as we think about 201, we think it has the potential to be a pipeline in a product. We're starting out with OA of the knee, but there are other joints that could benefit from this approach, the hand, etc. And there are other adjacencies that are important. And I think that this platform, this platform is very interesting as we think about locally administered therapies. Why? Because locally administered therapies typically have a very good safety profile. This isn't systemic. Very small quantities, so manufacturing cost of goods, very attractive. And the chassis for this gene therapy, the adenovirus chassis, is big enough to accommodate large genes. And there are plenty of other cytokines that we can think about.
We've started with IL-1, but you might imagine there are other cytokines of interest as it relates to inflammation and other joints, so as we think about now going forward, we're going to have a very, very disciplined approach to capital allocation to drive shareholder value going forward, and it comes in four different parts. First, I've talked about accelerating growth of the base business. That means establishing a powerhouse commercial medical market access organization to take advantage of the growth drivers going forward. Lifecycle management, we talked about shoulder OA, spasticity. These are products that we know. We know how to conduct these studies. These are de-risked and have a favorable return. Educating patients and providers, lots of opportunity here to drive that for these products. Advancing the pipeline, we're going to focus very, very sharply on musculoskeletal pain and pain adjacencies. That's home for us.
We think this is a large market, high unmet need. There hasn't been much innovation in these spaces. Some would say pain is next to obesity. I don't know, but there's a huge unmet need here. We're going to prioritize mid- to late-stage assets that are de-risked. So 201 is a great example. We know the pathway. There are clinical data that are available. We know how to develop this drug. So we're going to be looking at molecules like that as we think about adding to the portfolio in a very careful, disciplined way. And then, of course, we need to balance, manage our balance sheet. So we've got convertible notes coming due at 2025 and 2029. We also have a Term Loan A that we need to manage, and we'll do that very carefully.
We're very pleased to have Shawn Cross with us, our new CFO, and he is on it. We'll also think carefully about returning capital to shareholders. As many of you know, we have $125 million available on our share repurchase plan, and so we'll put all of these things into the mix as we think about how we allocate capital to grow value going forward. So let me just summarize by saying we're transitioning from more of a specialty pharma company into more of an innovative biopharma company. So we've started that transition. And we intend to be the leader when it comes to musculoskeletal pain and pain adjacencies. Three million patients or more will be treated by that year, 2030, as we think about 2030. Double-digit CAGR starting in this time horizon and going out to 2030. Profitability, five points, expansion and margin.
Five novel programs in the clinical development pipeline starting with 201, and partnerships, both commercial as well as development, and that means, as I mentioned, ex-US opportunities and other opportunities to co-develop products that offset some risk, so that's our plan for the future, and we'd like to call it better is possible. Better outcomes are possible for patients, and you can fill in a lot of betters there, and so we're excited about the future. It's been a tremendous year with the team. We've made remarkable progress, and as we thought about how do we capture our confidence in the future and our long-range plan, we encapsulated it into this 5x30, and we've been very, very thoughtful about this, and so I'm excited to roll this out to you here at J.P. Morgan and certainly happy to talk more about it. So thank you very much.
Thank you very much, Frank. So I told you last year on your second day on the job, I was incredibly impressed with how strong of a command you had on the Pacira story. So now that you're one year in, how has that perception of Pacira changed, differed between now and then? And then what are your priorities for these kind of first three to six months of this year?
Sure. That's a good question. One thing that hasn't changed is I was so impressed by the people and the culture and the mission of this organization. There are so many people in this organization who are absolutely energized and fired up about delivering non-opioid innovative treatments to patients. And many of them have personal connections to this. And so that's been right there. That's been reinforced. What for me, I think we accomplished in this past year is really coming together and saying, "Hey, where do we want to focus? What's our long-term plan?" Musculoskeletal pain and adjacencies. I'm not sure we knew that 100% a year ago. We've done a lot of work around that. Is it possible? Are there tractable opportunities out there? Is the unmet need there? So we've done a lot of work to convince ourselves that that's home for us.
We've also done a lot of work to, as I mentioned, become a powerhouse now in commercial medical market access and to really elevate our game. We were always very good, Pacira, at engaging with our physician stakeholders. I think now that and we're engaging our business stakeholders, our payer stakeholders, because in hospital systems, that matters. They are under tremendous pressure. That matters. And so to me, we've made tremendous progress there in saying, "Hey, what is the benchmark best when it comes to commercial medical market access?" We went through the exercise, and we said, "We want to be that. Let's structure ourselves to that." And so that's what we have now. So that's a big part of the progress.
The other thing is, I have to tell you, quite candidly, when I came into the job, when I heard about PCRX-201 and gene therapy, in a nanosecond, I said, "No." And kudos to the team. They convinced me otherwise. When I look carefully at the data, this is not your typical gene therapy for all the reasons I described. So they convinced me. And I've gotten very excited about not only the molecule, but also the platform. And so this whole idea now that that can be our first step as we start to transition from more of a specialty pharma to innovative biopharma company. Because as you know, that's home for me. Having grown up at Genentech and many other places, that's home for me. So tremendous progress.
Like I said, the thing that's really stood out for me is how passionate our folks are about our mission.
So a couple of follow-ups on that. So you mentioned first this mission that Pacira is on. And part of the 5x30 is you were talking about having potentially five different partnerships along the way. You talked about adjacencies. Have you any more thoughts on the different therapeutic areas or how those partnerships could look like? Are you thinking like very early-stage M&A or more collaborations with companies? How are you thinking about this?
Yeah, it's a good question. So I'm going to address it in maybe a few parts. If you think about our commercial infrastructure, commercial medical market access infrastructure, now we have a dedicated field force for EXPAREL, for ZILRETTA, for iovera, and some specialty areas. Now, one could look at that and say, "We've got an opportunity to put product two, product three in the bag." And often, as you know, having additional products in the bag enhances the sale of all the products. So we're open to those kinds of possibilities where we're not going to rejigger our field force. But if it's the same target and we can get product two, product three, and we can make our overall sales infrastructure more efficient and deliver value, that's of interest to us.
Again, I talked about ex-US and partnerships there because, as you might know, the company tried unsuccessfully to try and commercialize by itself. So I'm a big believer that partnership is the way to go outside of the US. It takes a tremendous amount of know-how, people, capabilities to do that right. And I believe there are viable markets out there. And then when it comes to development assets, I'm going to come back to we're going to work our way backwards here. So don't look at us to go de novo research and various targets. This is really going to be about what's out there that we can perhaps do a better job of developing and through our know-how that are de-risked. So we know the mechanism. We know the target. There's clinical data available. It's safe.
And then we'll slowly start to work ourselves backwards there into earlier and earlier research. So that's how we think about it. And as we were doing our therapeutic area strategy, there's plenty of science out there and molecules where perhaps those molecules have been looked at through the lens of, you name it, therapeutic area because it's sort of the hot therapeutic area at the time. But maybe it hasn't been looked at through the lens of pain, musculoskeletal pain and adjacency because at the time, it wasn't in vogue. So I'm looking around the room. I'm sure many of you have been a part of the oncology boom and then now the immunology boom and now the obesity boom. So in the background, one might say many of these mechanisms and targets have overlaps, as we all know, across therapeutic areas. And we appreciate pain and musculoskeletal pain.
And it takes a special kind of expertise and capability to not only recognize it, but to develop drugs in it. And so that's how we're thinking about it.
Okay. Very good. And then you mentioned the PCRX-201 asset. And you mentioned that obviously, typically in gene therapy, the cost can run into the millions. And you said this is going to be much more for the masses. Can you explain a little bit more about the differential there and why you think you can achieve that?
Sure. I'm going to come back to this is a first of its kind locally administered gene therapy for osteoarthritis of the knee. These concepts are very important now. So again, going back to typical gene therapy is for systemic administration for very, very narrow patient populations. This is locally administered for prevalent populations. And when you think prevalent, you've got to think it's got to be safe. It's got to be affordable in terms of the value that you deliver to the patients. And so in that context, this will not be millions of dollars per course, just like you see in rare orphan. What it will be is thinking about, gosh, what does a knee replacement cost? Knee replacement is $25,000 a year.
So this is going to have to be better than that from an affordability standpoint for payers to say, "Hey, if you provide years of benefit, now I can kind of work that into the equation." So this is going to be more like what I'm going to call traditional pricing and reimbursement as opposed to, quote, "gene and cell therapy" types of approaches. And we can do that because the manufacturing process is very straightforward. And we need very, very small amounts to be locally administered in the knee. You might have seen in the graphs that the low, medium, and high doses, the lines almost overlap. And in fact, in this upcoming study, we're going to go even lower because we see such a strong response. And that's important as we think about at some point, what about the contralateral knee? People have two knees.
And oftentimes, both are impacted. What about the possibility down the road of redosing? And so making this thing affordable for this health system is very important. So that's how we think about it. And then that's a start. So as I mentioned, we could think about other joints of interest. And then you might think about this platform and say, "Gosh, what other genes could be loaded up in this platform that are of interest when it comes to musculoskeletal pain and pain adjacencies?
Okay. Very good, so some of the, as you probably understand, the biggest kind of questions we get from clients is on the kind of the potential generic entry with eVenus. I just wanted to give you an opportunity. What's the latest on when or if you think they're going to launch? And I just want to get an idea of, I'm sure the legal teams are talking, but is there a communication between the management teams of the two companies? And how is that tone? Is it constructive? Is it contentious?
Well, that's a good question, Hardik. So I want to come back to. I wouldn't be sitting here telling you about 5x30 if I didn't feel like we could deliver on it. So read into that what you'd like. So that's number one as a headline. Number two, we do not expect any legal or generic entry events in 2025. Nothing. We also expect that going forward, we're going to continue to innovate as we have been. So you might know that we've got three lawsuits that are ongoing now. And this last one, as it relates to our IVR patent, is particularly interesting because every batch gets tested for IVR. And during the course of this year, we'll have a steady stream of new IP that I'll issue.
So as we think about what will happen in the courts, these cases will likely take five years at present with the current cases to get resolved. So that's why I feel very confident about our 5x30. And we do not expect an at-risk launch, and nor do we see any manufacturing activity. And as you know, this is a particularly difficult product to manufacture. We've been perfecting it over the past 12 years, let me tell you. And we're just now starting to figure it out. And as a result, there's a lot of innovation and IP that comes with it. So I want to come back to. There's a reason why we feel very confident about providing this 5x30. We haven't taken this lightly.
And it's for all the reasons we talked about just now around the IP, but also importantly about how we feel about the way that we can really leverage the growth drivers that are ahead of us and also the pipeline. Because as you know now, most great companies, when we've looked at our peer set who have really outperformed, they've not only outperformed when it comes to driving the base business, but oftentimes, there's value built in the pipeline. And some would argue that the pipeline is given disproportionate value relative to what's being delivered now in terms of sales. And you can see that through some of the acquisitions. There's a lot about the promise of the future and the ability to replenish current sales. So that's going to be a very important part going forward.
That's why we're very excited about 201 and where else we could take not only that asset, but that platform.
Okay. So you talked about just the current cases that are filed right now. It could take five years, potentially longer with the new cases. How do you balance as a CEO? You obviously want to defend your IP. I assume you don't want to go into a prolonged kind of litigation. How do you kind of balance those two things?
Yeah, that's a good question. So I've said from the very beginning, I value certainty as much as any other investor. But that certainty has to come from both sides in terms of mutual recognition of value and how we're going to build value over the long term. So it's got to be the right kind of agreement going forward. So that's what I'll say about that. And so we feel good about our IP estate and the ongoing litigation, as we talked about. But at the same time, I value certainty because you could argue that some of the overhang on the stock now is because of the uncertainty. So to the extent that we can get certain, be it winning cases or a case or coming to some sort of an agreement, you could see a lift in value because of that. So I see it.
But again, our guiding principle is we've got to make sure we drive long-term value for shareholders.
Yeah. I think one of the things that makes this so complicated is obviously the patent litigation timeline is so long. The patents don't expire till 2040. So you have a long runway. Is there a kind of precedent that you can kind of see in the industry where when patents are so out there in terms of long timelines, how do you kind of get to a settlement? Because usually, you see it as like two, three years and not.
Well, I mean, you should take a look at all the different approaches that people have taken. And there's all sorts of case studies about what's the average, how do they come in, do they come in in a limited way, do they come all in. There are all sorts of analogs that are out there. So I'd encourage folks here to take a look. And there are good examples of how one might do that. And it's all very different. And so in terms of the number of years and again, how they come in, do they come in all at once or in some limited way? So I don't want to go into too many details about that, Hardik . But like I said, I'm going to come back to we're going to do the right thing for shareholder value going forward.
At the same time, I recognize the value of certainty.
Great, and I remember last year, the main focus of the presentation was obviously the NOPAIN Act, and so now we're launching now. Can you tell me, you said previously it would be a gradual kind of uptake. What's your kind of most updated process and what you think the potential opportunity looks like for you now? Is anything different from last year?
Yeah, so we've done quite a bit of work in engaging our stakeholders, and I have to tell you, we've had some really positive discussions with our stakeholders, particularly in the health systems because over time now, as I've mentioned in my earlier talk, there's no doubt that EXPAREL is a great product. It's always been a struggle about how does it get reimbursed and what's the impact on budgets, and so now the great news is, as I mentioned, it's going to be reimbursed, ASP plus six, and the acquisition price is going to be very favorable, so it's a totally different kind of discussion now, so first thing I want to say is we've had very positive discussions, number one. Number two, we've got a lot of really excited, fired-up people who are going to come to our national sales meeting next week, and they're ready. They're ready.
That said, now, it will take some time for our customers to integrate this new reimbursement, this new way of utilizing EXPAREL because we've had 12 years of doing it a different way. We expect most of the uptake that we see, the meaningful uptake, to happen in the second part of this year. As we move forward, we'll be able to provide some guidance on some leading indicators about how things are going. By and large, what we expect is that we'll see the initial uptake in those accounts where EXPAREL is currently being used, but albeit in more limited ways because of budget constraints.
Great. Well, we're out of time. But Frank, I'm really excited to see how this year evolves in your second year as CEO. Thank you very much.
All right. Thanks, Hardik.