If you know a little bit about Pacira, you know a little bit about Pacira. You know that we're focused on musculoskeletal pain and adjacencies. We have three products: Exparel, our flagship product, which is a nerve block; Zilretta, a long-acting steroid for osteoarthritis; and Iovera, which is a medical device that uses cryoneurolysis to alleviate pain. Those are our three products that are in line portfolio. Of course, we've got a couple of other products or projects in the pipeline that I can talk a little bit more about. That's the business as it stands. Earlier this year, at a different conference, I rolled out 5x30, which is what are the five things that we're going to accomplish by year 2030.
By year 2030, 3 million patients or more, treated in that year; double-digit compounded annual growth rate between now and then; five-year expansion, or five-point expansion in margin; five novel programs in development; and five partnerships. We can talk a little bit about the progress we've made this year, but I'm pleased with where we are.
Perfect. And to give investors a sense of the revenue base, you know, this is not a small company, right, in terms of revenue. So, talk a little bit about Exparel, which is the main growth driver of the company, as well as just the relative sizing of the revenue for the other products.
Sure. I do not want to talk about exactly where we will land this year, but we will be somewhere around, give or take, call it $750 million, give or take, plus minus, north of $700 million. How is that? North of $700 million, with most of the sales being Exparel, north of $500 million, and the other two products making up the balance. That is where we are. In terms of EBITDA, we will be certainly around that $200 million mark, plus minus, depending on how we land the year.
Okay. Perfect. On Exparel specifically, I mean, this is not really a new product, right? Yet you guys are sort of still growing quite substantially. Talk a little bit about the drivers of that growth, and maybe specific to 2025 and beyond, just the dynamics around no pain.
Sure. Exparel has been on market for almost 12 years. What has happened this year is, as of January 1, we have a catalyst called no pain. That is where, for Medicare patients in the outpatient setting, Exparel is reimbursed separately outside of the bundle at ASP plus six. That is for Medicare outpatient. What I would think about that is, it is a spark. It is a catalyst. What we have to do now is to make sure that commercial payers follow suit and that we educate our customers on how to take advantage of this new reimbursement, both in Medicare and also in commercial payers. That is why we have said, hey, it is a good catalyst.
In order to take advantage of that, we need to invest in our commercial medical market access capabilities to better help our customers and also make sure that commercial payers follow suit.
Okay. How would you characterize the adoption of this no pain reimbursement situation on the ground? Like, what did you expect going into the year, and how has the year played out relative to those expectations?
Yeah, that's a good question. I think, in many ways, expected a light switch type phenomenon where January one , there'd be this sudden surge of volume. In fact, as we provided guidance at the beginning of the year, we said, you know, it's going to be more like the second half of the year before we start to see meaningful acceleration of growth for a number of reasons, and we can get into those. We've seen exactly that. First quarter, year- over- year, 3% volume increase. Second quarter, 6%. This past third quarter, it was 9%. In terms of sales, sales are now catching up, for a variety of reasons. We expect that as we get into 2026, sales and volume will start to converge, and we'll be set for the double-digit growth that I've talked about in our 5x30.
Okay. So volumes are certainly accelerating, right? Three, six, nine, that's an acceleration. Like, I guess, what is driving that acceleration beyond just organic use of Exparel, no pain, right? Like, how has adoption been? If you kind of look at the ASCs and, you know, the commercial plans, etc., like, some of the nuances there would be helpful.
Sure. What, what's driving that? I'd say that we've made some investments, as I may have mentioned earlier, on commercial medical market access. What does that mean? That means that we're helping our customers acquire the product better, so through GPOs, Group Purchasing Organizations. We signed the third one in the middle of this year. Now we have over 80% of our business that's contracted under GPOs. That's product acquisition made easier and simplified, and more efficient. On the access side of things, we're on track to have over 100 million lives covered under no pain-like policies. That is ASP plus six or better by the end of this year. We're tracking well to that. Those are important things, both on the product acquisition side and on the reimbursement side of things.
I feel pleased about where we are, in that journey. Like I said, you know, in terms of uptake, where we've, per the earnings call, where we've seen the uptake initially is on the smaller institutions, say the ASCs, ambulatory surgery centers, smaller hospitals. On the larger institutions, it'll take a little more time because that's more of a bigger process, bigger organization. We're working on that. It is important that we've made these investments in commercial medical market access to help our larger and smaller customers take advantage of this.
What's preventing these larger centers from adopting some of these no pain-like reimbursement situations? Is it just timing, or anything else that might have come up in your discussions?
Yeah, it's different dynamics, but, you know, just purely by the fact that they're just a larger organization. So driving any sort of behavior change in a large organization is more, it takes more time, right? The other dimension is that in a given area, we think there's a tipping point in terms of the amount of coverage. So if the majority of patients are covered under no pain-like policies, that is ASP plus six or better, then there's more of an incentive to take the steps to change behavior inside an organization. So those are some of the dynamics that are in play. I mean, the good news is we're helping our customers through that, with the organization that we built. And so we expect that to continue going forward. So, you know, my sense of this is no pain, like I said, is a, was a good catalyst.
We've done things to take advantage of that catalyst. This growth is starting to accelerate, as we talked about in the second half of this year, and that'll continue in the year ahead.
Okay. As we think about 2026, do you expect some of these bigger commercial players, these bigger hospitals, these bigger networks, do you expect them to start coming online, or do you think it would take a little bit longer than that?
Yeah, when we did our initial research, into our customers ahead of no pain as a catalyst, what we heard from our customers is that some would adopt it within a year, some would adopt it within two years, and about two-thirds said they would adopt it within the two-year time frame. It will take time. I do expect that the larger customers, in addition to more of the smaller ones, will adopt in the coming year, and the following year after that.
Yeah. Okay. In terms of physician feedback, and their experience with Exparel, it's been completely positive. It just sounds like a structural change that needs to happen that may take a little bit of time. That's been your messaging all along, right, that it's going to be a little bit, it'll take time. Let's be patient.
Yeah.
Right?
There is no question in my mind that Exparel is a product that provides a lot of patient value. Also, there is value to the institution as well in terms of getting patients out of the hospital faster, minimizing the use of opioids, minimizing return visits. All of these things have value. You know, I think previously there was this perception that because the reimbursement was bundled, that is, you got one payment regardless of the kind of medications you use, there was in some ways a disincentive to use a product like Exparel. Now, because with no pain, the eleven products are reimbursed outside the bundle, they are more able to take advantage of products like Exparel. You know, I think going back to your point, there is no question about Exparel as a valuable product.
It's really now re-educating folks that now it's available outside the bundle, and also how to incorporate into a large organization.
In terms, you know, to that point around education, like, like, I guess, who exactly needs to be educated? Is it the doctors? Is it these members on the P&T committees? Like, who, like, who are the targets that you guys can focus on to drive that education and awareness?
Yeah, it's a good question. You know, we've traditionally been right there with our healthcare professionals, that is, anesthesiologists, orthopedic surgeons, other surgeons, and physicians. Where we've increased our presence in terms of education is with payers. We now have a group that'll call on commercial payers. We now have a group that'll call on pharmacy directors who are very important to making those kinds of formulary decisions, and also purchasing decisions, right? We have a group that calls on the GPOs and signed those contracts. That's what's really different here. Yeah.
Okay. Can you remind me, the size of your sales force for Exparel? Is this a very promotional-sensitive market where, you know, maybe you could reinvest a little bit more and expand the sales force in 2026 and 2027 just to capitalize on some of these tailwinds, especially as they start ramping up in late 2026, let's call it?
Yeah, I guess broadly, I don't want to give guidance here because, you know, starting of next year in February, we'll provide guidance. What I'll say is we've made investments in SG&A, again, going back to commercial, medical, market access. And my sense is those investments are largely where they need to be. So I would expect those to be roughly flattish, you know, going forward, plus minus inflation and those kinds of usual things. The mix inside of that might change a bit. You know, that's where I'd expect us to be overall. With respect to Exparel, you know, what we did is, in previous years, we had one sales force selling all three products. And these are very different products. What we did was we took Exparel and said, okay, Exparel sales force, sell Exparel.
and then we stood up two separate sales forces for our two other products. So I believe they are where we need to be. And now it provides opportunities, for example, if we want to put in some other products or a product in these bags, we could do so very efficiently, and realize synergies that way. So, we've got a very, I would think a well-trained team, well-functioning team on Exparel. The Zilretta and Iovera, they're really catching their stride. So we should see the benefit of that going forward.
Got it. Now that we're in Q4, I know you're not going to comment on Q4, but if we talk factually, volumes are accelerating, right? Q4 is a seasonally strong quarter for Pacira and for, generally, surgical procedures, and if you follow med tech like ortho revenue. Do you expect a continued acceleration in Q4, year over year? What are some of the things that people should pay attention to in terms of the holidays and selling days and, like, all those nuances in Q4?
Yeah, there is seasonality in our business. Typically, Q4 is higher than, let's say, quarter one is usually pretty soft. I'm not going to comment on the quarter, but what I will say is that, you know, typically it's a big quarter. We'll have to see how it turns out because, again, it is a big quarter and they're growing on top of that, at higher numbers, is a big bar for sure. The way I would sort of think about this now, over time is that we've got growth, you know, say at 9% this past quarter. If you think about dollar growth, that was about 6%. The difference was by vial mix and a little bit of gross net.
and so over time, as we lap the last GPO agreement, and, of course, at some point, we typically do take price, all that should flow through into a good run rate that points to double-digit sales growth, as we've talked about in 5x30.
Yeah. Okay. The question on the 5x30, I think one of the components is a double-digit CAGR through 2030 on revenue. If you do the math relative to 2024, there's still, I think, a delta in terms of where the business is and where it needs to be to get to that double-digit CAGR. Is it safe to assume that that comes from BD, from in licensing other assets and things like that just to fill that gap, or is there something else that we're missing? Are you thinking that Exparel is going to accelerate more materially to fill that gap?
I think it's a combination of things. Exparel certainly will continue to grow steadily. Again, it's not a light switch or a hockey stick type phenomenon. I believe Zilretta has room to grow. Again, it's promotionally responsive. We saw that because as we were reorganizing the field force and setting up a dedicated Zilretta and Iovera field force, there was distraction, and we saw that in the results, right? I believe when the two sales forces really catch their stride, we're going to see the results there. The other opportunities that we've talked about before in terms of partnerships are important, both in the U.S. and outside the U.S. In the U.S., you've seen that we signed the agreement with Zilretta to triple our reach for Zilretta, and that Johnson & Johnson MedTech agreement is live now. We've got the reps trained.
They just need some time to settle in, and really catch their stride, right? We have seen Iovera do quite well this past quarter because we have med tech people selling a med tech device, which makes a lot of sense as opposed to pharma people selling a med tech device, right? Broadly, outside the U.S., right now, we do not sell our products outside the U.S. We think that there are certain markets where there is a real opportunity. I think some of the growth also would be contributed by XUS as well. Broadly speaking, for other kinds of partnerships, certainly we remain open to other partnerships in the U.S., both in terms of bringing products into the bag and also others who are expanding our reach very efficiently.
Sure. And in terms of, outside of the U.S., like if we kind of think about EU or the U.K., do you think they would require additional clinical studies to get approval, or do you think the studies that you've done historically are enough to warrant a filing?
Yeah, we don't believe we're going to have to do any additional studies to market our products outside the U.S. You know, that's the answer to that question. I really think it's a matter of making sure that we find the right markets and the right partner, the leading partner in that space, because there is sort of an overhead associated with managing these sorts of things, right? You got to make sure the juice is worth the squeeze, so to speak. We think we prioritize those markets and, you know, we should be able to communicate to you in due course here in the not too distant future about, you know, what we're doing outside the U.S.
Got it. And then on Q3, you had a pretty decent quarter. You guys raised gross margin guidance. Maybe talk a little bit about that, the gross margins and what really drove that, that adjustment.
Yeah, I have to say our manufacturing teams are doing a great job. Historically, as you know, you do not have to go back too far where our margin stood at about 76%. We struggled with meeting demand because of the 45-liter process. What have we done? We have now switched over to the 200-liter process, both in Swindon and in the Science Center campus in San Diego. What that has meant is that we are able to more reliably produce Exparel and have less wastage. It also opens up space where previously we were running around the clock to meet demand. Now we have some downtime to improve the process. Because of that, we have been able to improve our margins actually quite substantially. You know, we guided to the 80s, and more recently.
What I would expect is that over time there'll be some ups and downs associated with the margin, because of various factors. We're right on track with respect to realizing at least five points in margin over the five-year horizon. That's really attributed to not only the 200-liter process, but also the people who've worked on this. Now they have time to do some continuous improvement to even further improve. I'm not going to commit to more than five points, but what I am telling you is that our folks now have time to further improve this process that they didn't have before. Yeah.
Got it. And if we can kind of talk a little bit about the pipeline, I know that's something that I feel like does not get enough attention or credit for you guys. But PCRX-201, maybe talk a little bit about that product, what unmet need you are trying to fulfill, and just where you guys are in the clinic.
Sure. You know, when we think about PCRX-201 and broadly the high-capacity adenovirus platform that we purchased earlier this year, you know, we had the program before, but we purchased the company earlier this year. You know, we think about it as gene therapy for the masses. You might know that most gene therapy is really for rare orphan conditions. And most of the time it is a systemic administration. This one is for the masses. We are starting out with osteoarthritis of the knee. It is locally administered. It is an intra-articular injection. The safety profile is much improved versus a systemic administration. And, very small amounts. Cost of goods is very attractive relative to something you have to administer systemically.
All of this adds up to a platform that could be literally the first gene therapy for the masses starting out with osteoarthritis of the knee. We have a phase I program that's completed. It's 72 patients. We follow for three years. We fully enrolled a phase II A program just recently. We'll be providing top-line results of that program end of 2026. That's important. We've also declared that we have three other preclinical programs of interest. We can get into those if you want. We're very excited about it. The other thing that's important about this program is it's de-risked in terms of not only local administration and the safety profile, but also we know that IL-1 RA, the IL-1 cascade, is very, very important in inflammation.
In fact, there's a drug already approved to block IL-1 that's called Kineret. The only real barrier to widespread use there is that it has a very short half-life. In this case now, we're going to ask the body's own cells to produce IL-1 RA to block the IL-1 cascade when there's inflammation present. It's got an inducible promoter, and that's why we've been able to see the result that we've been able to demonstrate over three years now. It's important to think about it in that kind of a context. It's not your typical gene therapy as you would think about it. It is gene therapy, we think, for the masses. Yeah.
Can you talk a little bit about the phase II design, and the data that you guys will disclose in late 2026? Like what is clinically, like what does a clinically meaningful result look like to you?
Sure. Just to set the context a little bit, we've done a lot of work with payers, with other healthcare professionals, and we know that the current standard of care gets people to mostly about three months, plus minus, some to six months in terms of pain relief from osteoarthritis. We also know that getting patients out to a year would be considered transformative. Okay. This phase II program, the part A of the program, is called Ascend. It's got three different arms. You know, one is a control arm. Everybody gets a steroid and not a placebo, true placebo. Then we've got two different doses of PCRX-201. We'll look at the 38-week endpoint and the 52-week endpoint. It's your classic phase II type study.
The primary endpoint will be safety, but certainly secondary endpoint will be looking at signals of efficacy.
Okay. How quickly can you move that program into phase III? Because I think there's a separate phase II with a different manufacturing process.
Sure. Yeah, the good news is we're already working on a commercially viable manufacturing process. And so, based on that process, we'll be using the product from the commercially viable manufacturing process for phase II B of the study. And so we'll start enrolling that study probably sometime mid next year. And so, oftentimes you might know that in cell and gene therapy, the manufacturing process can be the rate limiting step, right? And so, that's the good news there. And of course, we'll sit with the FDA, meet with the FDA, under our MAT designation, which many of you know is similar to breakthrough on cell and gene therapy, which we have for PCRX-201. So we'll sit with the agency and sort out next steps in terms of what phase III should look like.
Okay. So it doesn't sound like you will need to see the data from the phase II A to start the phase II B, right?
No, we'll start enrolling earlier. Yeah.
Okay. That's helpful. I think we are out of time, actually, but thank you, Frank, so much for the time. Looking forward to 2026.
All right. Thank you all.
Thank you.