Hi. Good morning. I'm Serge Belanger, one of the healthcare analysts at Needham. I want to welcome everybody this morning to Needham 25th Annual Healthcare Conference. For our next fireside chat session, we have Pacira BioSciences, and from the company, we have the CFO Shawn Cross. I'll hand over to Shawn. To give us an overview, and then we'll move over to some Q&A for the rest of the session. Shawn, thanks for joining us this morning, and I'll hand it over to you.
Great. Thanks so much for having us. We appreciate it. Maybe I'll just give a brief company overview and some of our priorities for 2026 and beyond. Maybe for some of those who don't know Pacira as well as others, so our mission is to deliver non-opioid pain therapies to transform the lives of patients. We have three commercial products that we market domestically, and we're a vertically integrated company. Our flagship product is called EXPAREL, which is a non-opioid pain relief product. It's applied during surgery at the surgical site, and it provides up to four days of pain relief, or maybe better said, pain prevention, immediately and during the first few days after surgery when patients need it the most. Our second product is called ZILRETTA. It's the only FDA-approved, extended-release.
It's an intra-articular steroid injection for the management of OA, osteoarthritis knee pain. It's an interesting product in that it can provide multiple months of pain relief for knee OA patients. I'm sure we'll talk about it a little bit later, but we're currently conducting a trial in shoulder OA as well. Our third product is called iovera°. It's a novel pain treatment that alleviates pain through a mechanism called cryoneurolysis, which applies intensely focused cold therapy to a specific nerve, and it interrupts its ability to transmit a pain signal. Results are felt immediately after treatment, and pain relief can last multiple months, up to three months, and in some cases longer as the nerve regenerates over time. On the financial front, in 2025, we generated approximately $726 million on the top line and adjusted EBITDA of around $187 million.
Out of that $726 million, EXPAREL, the flagship product contributed around $575 million of revenue. As I talked about a little bit earlier, we're vertically integrated. We market our products domestically, directly through our dedicated commercial team. We manufacture EXPAREL at two sites, with our main facility located in San Diego, California. We're not just a story about who we are today, but one of the future as well. In January of 2025, we announced something called our 5x30 plan, with the idea of transitioning into a more innovative biopharmaceutical company, and continuing to be the leader in musculoskeletal pain and adjacencies. The 5x30 strategy is a five-pillar plan, hence the number five at the beginning, and 30 indicates 2030, the timeframe we're intended to achieve these goals.
Out of the 5 pillars, the first is patients served, the second pillar is product revenue, profitability, the pipeline, and partnerships because there's white space domestically and internationally where we don't sell our products. Something we'll talk about here in a little bit. With regard to patients served, we treated over 2.5 million patients in 2025. The 5x30 goal is by 2030 to help 3 million patients annually, to benefit from our products. On the revenue side, we're focused on driving our commercial business and achieving double-digit top-line growth. Last year was a promising start. For example, EXPAREL, our flagship product, achieved year-over-year volume growth of 6.2%, up from 3.6% in 2024.
We saw additional trajectory in the second half of 2025, which we're looking to carry into 2026 and beyond, where the volume of EXPAREL growth over the same period from the previous year was approximately 8%. Looking more closely at the profitability target of 5x30, just as a benchmark, in 2024, our non-GAAP gross margin was around 76%, and we're targeting a five-point improvement in the plan steadily over the next four or five years. We made very encouraging progress last year in that our non-GAAP gross margin was approximately 81%, which is a real testament to our manufacturing team and continuous improvement initiatives, particularly at our San Diego facility. With regard to the pipeline, we're currently advancing two promising phase II clinical programs. The first is called PCRX-201. It's a novel, locally administered gene therapy for OA of the knee.
And we recently in-licensed an asset we call PCRx-2002, which is complementary to our EXPAREL franchise in that it's a long-acting ropivacaine-based local anesthetic for post-surgical painAnd as mentioned, if it's approved, it will be complementary to the EXPAREL franchise and really solidifying our leadership position in the acute pain setting post-surgically. So these programs place us on course for the goal of five novel programs by 2030, and each has the potential to deliver meaningful top-line accretion as we move beyond 2030. And then finally, on the partnership side, we expanded our commercial reach both inside and outside of the US by signing strategic collaborations with leading companies in the space. So the first one was with Johnson & Johnson MedTech, who is marketing ZILRETTA domestically in complementary accounts to our existing sales force. And then ex-US, we announced our first partnership for EXPAREL with LG Chem.
Again, that's two out of our goal of five partnerships by 2030. With regard to 2026, more specifically, we're pretty excited about what's coming up this year on the pipeline side as we enter a data-rich period. We expect to report three key clinical milestones this year, including data from our phase III study of ZILRETTA in shoulder OA, top-line results for our registrational study of iovera for the treatment of something called spasticity, which we can talk about a little bit more later. We're super excited about that we're reading out top-line data. It's 52-week data from the Part A of our phase II ASCEND study of PCRX-201 in knee OA. We'll also be initiating the phase II study for PCRX-2002. I guess in short, a lot going on and an exciting year ahead for us.
Yeah, absolutely. Thanks for the overview. Maybe we'll start with EXPAREL. You mentioned, I think it grew about 6% year-over-year in 2025. Curious how that sets you up for 2026, what you're expecting and what the growth drivers are going to be for this year?
I touched upon the progress we made in 2025 with regard to the EXPAREL year-over-year growth. We're confident that we've really set ourselves up for a steady cadence of growth in 2026 and beyond. It's an interesting market that we're in that overall surgery volumes have been relatively soft. With the 8% volume growth in the second half of 2025, we're outperforming the overall elective surgery market. As mentioned, we saw the acceleration of volume growth in the second half of the year. The third and fourth quarter volume growth was 9% and 7% respectively, and that's the highest we've seen in three years. With respect to pricing, as we move forward in 2026, we expect year-over-year pricing headwinds will diminish.
So when we take a look at the difference, for example, between volume growth and revenue growth, which is a question we get relatively frequently, we expect the first half of '26 to be similar to the second half of 2025. With volume growth, it's being partially offset by a low single-digit percentage, roughly 2% to 3% from shifts in vial mix. We have both the 20 and the 10 mil vials for EXPAREL. And then also the impact of discounting/payer rebates. They both have approximately equal impact. Interestingly, we signed three GPO partnerships to help again set us up for continued growth of the brand. And so once we get into the second half of '26, we expect the delta between volume and revenue growth will narrow as we lap the first anniversary of our third and final GPO partnership, which will happen mid this year.
Going forward, we can begin to see a path of double-digit top-line growth, assuming volume continues to grow and results of annual price increases, and also lapping this third GPO partnership.
You mentioned that overall surgery volumes have been somewhat under pressure. Is that due to macro environment or there's some other factors driving that pressure?
I don't have all the details, but I think in general it's sort of a macro, and it's something that we monitor. I think the good news is that EXPAREL is a product that really helps patients. On the back of the NOPAIN Act, we're seeing improved reimbursement to encourage and reduce the financial barriers for non-opioid cutting-edge pain therapy. We're particularly very proud of the commercial team and the medical and market access group that we stood up over the past couple of years that are help driving expanded use.
Is most of the current EXPAREL usage still in the ASCs and HOPD setting, or there's still a significant portion that resides in a hospital?
Yeah, it's a good question. So think about the three main buckets, and then there's a couple of other areas where we're seeing lower volumes, but pretty significant growth, so under-penetrated. So we think about the hospital inpatient settingThen there's HOPD, the hospital outpatient setting, and ambulatory surgical centers. And so when we think about those particular segments, we're seeing the most significant growth over the past year in the ASC setting and also in the community hospitals, particularly on the back of the implementation of NOPAIN Act . But we are still seeing improving opportunities in the inpatient setting. So when you think about the background of the NOPAIN Act , it was for CMS patients in the outpatient setting where CMS took, or the act took, provided separate reimbursement for 11 non-opioid pain therapies outside of the bundle.
Just as a reminder, if you have one particular surgery, historically you get one reimbursement for the entire procedure, including the pain medication. For example, immediate-release, generic bupivacaine, which doesn't provide the same magnitude of pain relief and opioid-sparing opportunity that something like an EXPAREL does. That was really a spark that we had been spearheading. It took about seven years for that legislation to come through. It was enacted in January 1st of 2025. Just as a reminder, CMS, it's an important but a relatively small part of the overall market, in that it was around 30 million patients who are covered under CMS. Over the past year, we also had set up a payer team, and we're also very encouraged by the progress that they have made and encouraging commercial payers to follow CMS.
We ended the year with around 102 million lives, 30 million in the CMS setting, and then 70 million of commercial lives, and we'll continue to work on that here going forward so that there's expanded access for non-opioid, cutting-edge pain therapies, in the acute setting here going forward.
You think that the key to unlocking the NOPAIN potential here is just raising awareness and, like you said, working with the hospitals on protocols, or is there more than that that needs to be done to really take advantage of this new policy?
Yeah, it's a complicated landscape, and you think about muscle memory, for lack of a better term, and internal protocols, and so it really depends on the setting. I think part of the reason why we're seeing very significant double-digit growth and adoption in the ASC setting is because they can make decisions more nimbly than going through complicated P&T committees and schedules at some of the larger IDNs. It's a combination of awareness, in addition to getting all the stakeholders around the table to change protocols. When you think about some of the barriers that were there from a headwind perspective with regard to streamlining reimbursement, we didn't have a permanent J code for EXPAREL until towards the end of 2024, in front of NOPAIN being rolled out. Also we didn't have GPO partnerships.
Now we have three GPO partnerships, so we've helped reduce some of those barriers. In terms of taking kind of a step back and a one-year progress report, for lack of a better term, we knew coming out of the gates that it was going to take some time. We live and breathe NOPAIN, as well as the other companies that were part of the 11 initial products that were provided this separate reimbursement to reduce the barriers for, again, cutting-edge non-opioid pain therapy. In January, as mentioned, we passed the one-year mark, and I think progress has been largely in line with our expectations. NOPAIN was the initial catalyst, and as mentioned before, there were decades of muscle memory where bundled reimbursement incentivized the use of cheaper generic approaches. What happened, patients get discharged with an opioid prescription.
Based upon some of the data that I've seen, something on the order of one out of 10 patients who've had surgery are on opioids 90 days after, which makes no sense, and it's just indicative of the opioid crisis and sort of the opportunity for a product like EXPAREL, where you get those three or four days of pain relief, and hopefully don't need to have opioids or you're using fewer opioids subsequent to your surgery. We are really making a difference. On our fourth quarter call, Brendan Teehan, our Chief Commercial Officer, discussed a recent survey that we had conducted of nearly 750 physicians and pharmacy leaders.
You can read this in our call script or some of the post-earnings materials we've put out, that something on the order of more than 80% of those 750 people surveyed view NOPAIN as important for advancing non-opioid stewardship. 92% believe NOPAIN is already contributing to reduce opioid prescribing. Here's the interesting one, and there's still more work to do. About half reported changes taking place across protocols, formularies, and prescribing patterns. There's a real opportunity and something that we're highly focused on this year and beyond to improve that sort of report card with regard to only half reporting changes taking place across protocols. There's still a lot of work to do and a lot of opportunity for us.
It aligns directly with the original intent of NOPAIN, which was to reduce unnecessary opioid exposure around surgery and providing appropriate reimbursement for those 11 proven alternatives.
Remind me again about the economics. Under NOPAIN, Medicare reimburses at ASP plus 6%?
Yes.
Have commercial payers kind of mirrored that? Is it the same 6% economic incentive?
So we're very encouraged by what we're seeing out of the commercial payers as they adopt No Pain or No Pain-like reimbursement. So yes, in summary, for the CMS patients, it's ASP plus 6%, but we've been very pleased to see that, again, commercial payers are following suit, got more work to do, but making great progress thus far. But what we're seeing with commercial payers is they're actually reimbursing at a premium to the CMS rate of ASP plus six, with some as much as ASP plus 20% or higher.
Got it. Interesting. We've been covering the company for a long time, and I remember when EXPAREL first got its first nerve block indication that really started a growth inflection in the product. Just curious now, how much of the EXPAREL usage is driven by the anesthesiologists who use it as nerve blocks versus the surgeons?
Yeah, I don't have that specific data from a domestic perspective. It really depends on the site of care or even the geography. In the early days of EXPAREL, I'll provide an example or a hypothetical. You might have a particular surgeon who has maybe more influence than others within a local hospital or at an IDN, and same with an anesthesiologist. It really depends on the setting. Yeah, very significant use, particularly with the nerve block. Where we are seeing growth is in orthopedics, and we've been relatively flat in general surgery and women's health, but there's an opportunity to expand there. Like I said, it really depends on the specific group or facility where EXPAREL might be on formulary or not, and the particular dynamics of the decision-making framework.
It does sort of tap into where we see additional opportunity for long-acting pain prevention post-surgery, and that's part of the reason why we in-licensed the long-acting ropivacaine asset from a company out of Canada called Amicathera that we'll be studying in phase II beginning later this year. It's more of an infiltration that can provide, and we'll see once we study it in well-defined phase II trials. If you look at the pharmaco sort of release data, they're seeing release beyond a week. I don't know if we'll study it beyond a week, but it's an infiltration product that's very easy to apply. Again, the finance person here providing a descriptor where a surgeon can simply squirt the product into the surgical site before they suture it up, and it will provide.
That's an opportunity where we see where it will be utilized perhaps more by surgeons than anesthesiologists, and it's again, a complementary product to EXPAREL. There is an opportunity to expand further just with the surgeons beyond the anesthesiologists.
Mm-hmm. You've entered three contracts with the GPOs?
Yes.
How impactful has it been in terms of driving volumes? I know you've taken a bit of a hit on pricing, but the intent was really to grow the volumes for EXPAREL.
These are very thoughtfully constructed contracts. Yes, we brought on board our third GPO mid last year, and we've seen very encouraging growth out of the gates, particularly with the third GPO. You do give a little bit of price for volume, but these are mutually beneficially constructed contracts. Once we lap the anniversary of the third GPO, we should start to see that price and revenue and volume converge in the second half of the year. If you just take a step back and again, think about a hypothetical where when volumes and revenue are converging, we'll take an annual price increase. We anticipate taking an annual price increase next year and going forward, and that's where you start to see at least pretty simple math as it relates to seeing double-digit top-line growth.
These are three-year agreements, performance-based and to maintain and grow both volumes and revenues.
Okay. Remind me again on the IP of EXPAREL. I know you entered into a settlement agreement with one of the generic filers about a year ago, maybe almost to the date.
Good memory. It doesn't seem like it's been a year, but it has been a year. Yes. Back in 2021, there was a P4, when we had one patent, and we can talk about some of the additional IP we've secured since then and what we're working on currently, if that would be helpful. Yes, we did a settlement in April of 2025 with Fresenius on generic EXPAREL, and it's a very interesting structure. Again, very proud of our legal team who negotiated this favorable settlement with Fresenius. It's a volume-limited settlement, and the structure provides visibility through 2039, which again, something very proud that the team accomplished. At a high level, we've agreed to provide Fresenius with a license to manufacture and sell limited volumes of EXPAREL in the U.S. beginning in 2030.
As a reminder, Fresenius will need to manufacture and import the product. Unlike traditional settlements, which can result in a rapid erosion cliff, the volume settlement allows Fresenius to have a gradual and contractually defined uptake of share starting in 2030. Without going into the complete sausage-making, and this is oversimplification, but a third party will look at the volume, the number of vials of EXPAREL that were sold in 2029. Fresenius will have the opportunity, again, if they can manufacture and import the product, a high single-digit % of the volume that was sold in 2029, they can sell that in 2030. That sort of steadily increases over the next four or five years to a maximum % in the high 30s for the final three years of the agreement until unlimited entry in 2039.
A very measured, thoughtful settlement that does give us visibility over the next number of years and runway for the product.
Great. I think since then, your IP portfolio has been enhanced with additional patents. How do you think about the potential for additional generic filers going forward?
Yes. We have 2 additional filers, a couple of companies out of China. Multiple generic filers are common for successful products like EXPAREL. As mentioned earlier, we only had 1 Orange Book-listed patent when we received the first Paragraph IV challenge, and a great deal has changed since then. Again, without going into the complete sausage-making, but first, the legal team secured a favorable re-examination of our 495 patent from the USPTO. Importantly, during this process, any weakness in what was called or what is called the Urisic family was cured when we amended the patent's claim. The 495 patent has been reissued and we believe is now the strongest of our Urisic acid family of patents. In parallel, we continue to innovate, and we've meaningfully expanded the EXPAREL patent protection.
Stepping back, we had one Orange Book-listed patent when the first P4 came out in 2021, and we now have over 20 Orange Book-listed patents. Back in, it was November or December of 2024, we had another family that was issued that really brought Fresenius to the table and enabled us to negotiate this, what we think is a very favorable settlement. It's called the IVRA family of patents. The IVRA family has never been challenged or litigated, so this will be fresh eyes from the court as we move forward with the two additional P4 filers here over the next couple of years.
Okay. Let's talk about ZILRETTA. I think that the product I think underperformed in 2025, so how do you think the new J&J partnership could help it revive and return it to its growth potential?
Yes. Maybe a quick step back. In 2025, on the back of NOPAIN, our top priority was reinvigorating EXPAREL and setting it up for sustained growth as we expanded the commercial coverage, and we'll continue to do so here going forward. In late 2024, early 2025, we restructured our sales force, where we had three separate teams as opposed to one team selling all three of our products. We deployed three separate teams to support EXPAREL as a top priority, and then we stood up two separate sales forces for ZILRETTA and iovera°. It does cause some disruption and impacted the growth, or lack thereof, for ZILRETTA and iovera° in 2025. We think they're set up for success here going forward. We inked the J&J MedTech partnership. We spent the latter part of 2025 training that team.
As is widely publicized, there was some disruption at J&J with regard to the DePuy spin-out news. That is all settled down and the leadership team is in place. We actually have the J&J early intervention sales force and leadership team at our facility in San Diego earlier this year. We're cautiously optimistic. We've specifically guided, I think, conservatively to make sure that we're providing ample time and visibility on getting that partnership really up and running and a well-oiled machine. We're encouraged about the progress here in Q1. We'll talk about it more on our Q1 call here in a couple of weeks. We believe the changes we implemented in 2025 will start to kick in this year and make a greater impact. Stay tuned for more on the ZILRETTA front.
Okay. You do have, as you mentioned earlier, the shoulder OA study is going to read out this year. Maybe just highlight the TAM opportunity, what it represents relative to the knee OA label.
Knee OA is definitely a larger market, and if you look at the penetration that we've had thus far, ZILRETTA is a promotionally sensitive product with J&J more than doubling our reach, and there's something on the order of, I can't remember how many thousands of accounts that we haven't been able to get to with our sales force that J&J calls on. Again, there's a real opportunity there. With regard to the shoulder opportunity, it's a label expansion. It's a smaller opportunity than knee, but still a sizable market. There's approximately 1 million intra-articular shoulder injections administered each year. That compares to roughly something on the order of 7 million of knee injections, but it's still a meaningful opportunity.
And the feedback that we're getting from the KOLs in the community, it's a difficult indication, but a meaningful one, and solidifying our leadership in helping out patients with osteoarthritis.
Okay. The bar for success in that trial, you're seeking stat sig or you need to go beyond that for it to be commercially successful?
That's a good question. Perhaps stating the obvious, if it's statistically significant compared to if we see something slightly less, but there's important information coming out of it. We'll see how the data read out. I think even if we're showing improvement for these patients who don't have a lot of opportunities, that would be a win. Of course, if we can see statistically significant on-label, that could certainly help with reimbursement for these patients.
Remind me, the competitor arm here to ZILRETTA, is a placebo or is it immediate release?
Yeah, it's a placebo. Yep.
Okay. Got it. Let's touch on iovera°. You mentioned there's also a trial that's going to read out that could enhance the profile of iovera° this year. Just how the product has performed, and I think it's also covered by NOPAIN.
Yeah.
How do you view its future?
iovera° is an important product. It's very interesting that it acts immediately, and these patients, the label's incredibly broad. For pain specialists, some of the super users, for lack of a better term, use it all over the body for patients. It's currently being studied for something called spasticity, and this might be cerebral palsy patients or post-stroke patients where you have the sort of nerves or muscles both pulling in opposite directions. You might have a patient who can't move their arm or otherwise. It's a very important opportunity, and these patients are typically treated with toxins, and you can only have so much toxins injected over time. This is something that could be potentially repeat use, et cetera. Those data will read out later this year, and that's a very meaningful opportunity.
As mentioned before, we stood up a separate iovera° sales force and we'll talk more about this in a couple of weeks, but we're encouraged about the opportunity in general pain use, but also to the extent that we can see positive data in spasticity. It could be a game changer for these poor patients.
While we're on data readouts, your gene therapy program, 201, is going to read out the Part A of the ongoing study by year-end.
Yes.
Just give us a preview of what is that data that we're going to see, safety or efficacy, and kind of how it dictates the next step of development.
Yeah, it's great. We're super excited about this product. Just as a reminder, the PCRX-201 boosts local cellular production of IL-1RA that is identical to endogenous IL-1RA that's produced by the body. This is a trial where it's a three-arm trial against an active comparator, which is an immediate-release steroid, so all patients in each of the three arms will get a steroid and then a sham injection or PCRX-201 at different doses in the other two. It's predominantly a safety trial, and it's not powered for significance with regard to efficacy, but we'll be looking for trends. If anybody's interested, we have on our website some publications and a webinar with regard to the 72-patient phase I data, where we've seen encouraging patient data out to three years with one injection.
All right. I think we only have a couple minutes. Since I have the CFO on, I'll ask you to provide an overview of financials and kind of your capital allocation priorities.
Yeah, absolutely. As mentioned, we're generating north of $700 million, approaching $200 million of adjusted EBITDA. We ended the year with north of $230 million of cash. From a capital allocation perspective, it's something that we are very thoughtful about. We went through a benchmarking and extensive exercise last year. The initial priority was to make sure that we had the right modernized medical and market access team in place to drive EXPAREL growth beyond NOPAIN. We also think the shares are undervalued, and again, balancing that liquidity and return of capital to shareholders, we bought back about $150 million worth of stock last year. We increased the authorization from a buyback perspective to $300 million through the end of 2026, and that was something we announced last year.
We're halfway through that at the end of last year. We have the medical and market access and that particular capital allocation, for lack of a better term, out of the way, and we'll be leveraging that infrastructure here going forward, which is why you saw our guidance for this year being relatively flat on the SG&A side. We'll be very thoughtful over time about reinvesting some of the top line in research and development, while maintaining strong operating margins as we advance the pipeline.
All right. Well, John, thanks for joining us this morning. I appreciate the overview of Pacira and appreciate your presence at the Needham Conference.
Great. Again, thanks for having us. We appreciate the relationship and look forward to some good investor meetings your team has set up for us later today.
Great