Pacira BioSciences, Inc. (PCRX) Earnings Call Transcript & Summary

Good morning, everyone. I'm Chris here from the biopharma team at JPMorgan. It's my pleasure to be introducing Pacira BioSciences. From the company, we have CEO, David Stack. [Operator Instructions] With that, I'll hand it over to Dave. Happy New Year, and thanks for joining us.

Thank you, Christopher, and thank you to JPMorgan for the opportunity to spend a few minutes with you this afternoon. Any other disclosures can be found on the Pacira website. So Pacira has developed a portfolio of unique, safe, best-in-class products, which act along the patient's neural pathway to treat postsurgical pain, acute and chronic arthritis pain, spasticity as well additional unmet medical needs. As you can see on the slide, we have very large target addressable market opportunities with all of our products. We believe that this unique portfolio allows us the opportunity to sell this suite of products to the same target audiences. So you would see that most of the activity in both commercial aspects and clinical development are related to the same customers, anesthesiologists, orthopedic surgeons, spine physicians, sports medicine physicians and with ZILRETTA, increasingly chronic pain. Specifically for EXPAREL, you would see that EXPAREL has been growing very nicely. If we look at the first COVID -- the last COVID -- non-COVID year in 2019, EXPAREL grew by 23%. And in 2021, EXPAREL grew by 21 -- or 24%. And so the reasons for this growth are largely related to the delivery technology itself, the multivesicular liposome technology. This is what imparts the safety profile that you hear us talk about specifically with EXPAREL. So the only non-opioid long-acting option for local and regional anesthesia for infiltration, field blocks and nerve blocks as well as for pediatrics. EXPAREL is the only product that is Level 1 evidence that we can do serious painful surgeries without any opioids, demonstrated by total knee arthroplasty and rotator cough. And we basically institutionalized the use of EXPAREL through multimodal enhanced after recovery surgery protocols, but also in multimodal recovery surgery -- or recovery from surgery protocols. So when you go into a major medical center now and your admission diagnosis, an internal communication system will print out a protocol that calls for the use of EXPAREL as the platform that allows for these enhanced recovery after surgery protocols, and that's responsible for a lot of the rapid growth that we continue to see. We mentioned earlier that the product and the delivery technology is safe. Increasingly important, next month, we expect to treat the 10 millionth patient with EXPAREL in the United States, alone. So when we look at what's driving that rapid expansion and that overall growth of EXPAREL, the #1 growth platform for us is long-acting regional blocks. So what we're talking about here is the ability for bupivacaine to extend the duration of action from several hours, which is the traditional use of the product, to several days. And so the growth driver then becomes regional anesthesiologists, developing new blocks, perfecting older blocks, coming up with new blocks and using imaging to ensure that we have a successful block, especially important when we look at these patients only being in an ambulatory surgery center for several hours our ability to understand that we're going to provide pain control for the first couple of postsurgical nights is intrinsically important in the entire proposition. In order to affect all of these things, we have state-of-the-art training centers soon. So we are working with these KOL anesthesiologists and regional approaches, teaching on a regular basis, what the best techniques are, what the best volumes are, the gauge size or the needles that provide the best outcome. And we are having this presentation to you all today from our Pacira Innovation and Training Center, the PITT, in Tampa, and we are in the process of building out another innovation and training center in Houston, which we expect will be available in Q3 of this year. We've recently launched the product in pediatrics. That launch requires safety in all our initial discussions and ongoing discussions with pediatric anesthesiologists. It's safety, safety, safety. And so what we see in the marketplace is that the ability to replace antiquated pumps and catheters is very important to these patient populations as well as to the parents and the practicing physicians and the opportunity to treat patients with a single administration and allow them to leave the institution on the same day is very important to mom and dad as well as to the patients and their providers. We've recently launched the products or EXPAREL in the U.K and in the EU. We've launched both EXPAREL and iovera° as a point of interest. And the same principles that have led to the success of EXPAREL in the United States are in play in the EU and in the U.K. Largely the ability to treat these patients with regional approaches for several days of pain control, our ability to do that in a less intensive marketplace like an ambulatory surgery or a hospital outpatient group and allows us to move these COVID patients from a COVID-heavy inpatient environment to an environment where patients and providers are much more comfortable doing these elective surgery procedures. We recently were served with an ANDA filer, and I'll talk extensively about that on the next slide. So we'll save that for a couple of minutes. We see the success of these regional approaches across our development portfolio. A good example would be TAP blocks, which were not commonly done before EXPAREL was available because they are relatively labor-intensive but they -- the clinicians and the patients only enjoyed several hours of therapy, of improved therapy. So what's happened now with TAP blocks with EXPAREL as part of an enhanced recovery after surgery protocol is that these patients are able to deliver the baby, have pain control on board and leave the institution in a very short period of time, one overnight stay. In some cases, no overnight stay. Very much important to mom and baby, and TAP blocks have become a matter of standard of care now. To the point where in 2021, in women's health, a C-section use of an EXPAREL TAP grew by over 40%. We are also redoing the lower extremity nerve block studies called STRIDE. There are 2 separate studies here. One is an adductor canal block for the knee. The other is a popliteal sciatic block, which will be used for a foot and ankle. We expect these trials to be completed sometime in the second quarter, leading to an NDA submission, an sNDA submission in the third quarter of this year and approval sometime in the first half of 2023. And very recently, we've been working with academic communities on stellate ganglion blocks, a very interesting opportunity as we move forward from here, essentially what stellate ganglion is allowing us to do is to block the sympathetic nervous system. And in the particular case of cardiac arrhythmia is to block the catecholamine pain storm, which is common in patients in a post cardiac surgery environment, which appears to be largely resolved with a several day EXPAREL stellate ganglion block. Interestingly, these same institutions are interested in that same procedure with iovera° and some of the more difficult patients who have long-term issues around cardiac events following surgery. So I mentioned that we cover the ANDA filer in the next slide. What we see here is that if I cut to the chase, we don't believe that there will ever be a generic multivesicular liposome. And we analyze this ANDA event in 3 separate buckets, if you will. First is the fact that since the filer, we have additional Orange Book listed patents. Actively, we have -- actually, today, we have 2 Orange Book listed patents that are in the Orange Book. We have one that has been accepted and will be filed in the Orange Book in the coming months, and we have at least 2 or 3 more that we expect will be forthcoming before the end of 2022. So we firmly expect that we have patents that will carry us out until 2041. In addition, if they're required, we also have an FDA guidance letter that talks about bioequivalence and what's required to make a generic multivesicular liposome. And we know that this particular ANDA filer does not have any capabilities that would allow them to meet these rather stringent FDA requirements around size, distribution, particle structure, internal environments, et cetera. And lastly, EXPAREL requires a fairly specific manufacturing capabilities in order to be able to manufacture a multivesicular liposome. These products are made sterile and cold chain. The issue here for a ANDA filer is that the FDA has mandated that they would have to have a commercial scale sterile cold chain manufacturing facility before they could do their bioequivalence study as part of the ANDA process. We don't believe that the current filer has any such capabilities. And in any case, we've never disclosed the manufacturing specifications for EXPAREL or the release aspects from a what we call an IVRA QC assay, which is proprietary to Pacira and again, has never been disclosed in public. Proud to tell you that EXPAREL top line performance is on track, but -- and we will deliver our 19th consecutive quarter of positive adjusted EBITDA. So we also think we're at an inflection point here and that as the product grows and we improve the revenue potential for all of our products, we expect that we will see an enhanced EBITDA opportunity and an enhanced cash opportunity on an ongoing basis. I thought it was worthwhile putting this slide in really to answer some of the questions around elective surgeries and elective surgeries returning to the pre-COVID baseline. If you look at the top half of the slide, you see the purple dotted line that goes through the slide that's the pre-COVID baseline for elective surgeries. In the blue line, you will see that, that is the elective surgery response. This is a case study, a survey that's done on a weekly basis and delivered to us by IQVIA. And importantly, what you'd see is the purple line is that EXPAREL has consistently and increasingly outperformed the COVID market, which says to us that we are gaining share inside this elective surgery market, and we attribute that back to the regional approaches that we talked about, the fact that patients are moving to the ambulatory surgery environment, where you cannot use many of the tools that have been traditionally the mainstay of postsurgical pain control in the hospital institution as well as new procedure uses like the C-section that we referenced, the pediatrics that we referenced and things like the use of EXPAREL in a pediatric scoliosis patient, which is leading to rapid growth in these various procedure-based opportunities. We closed the Flexion deal in late 2021, bringing ZILRETTA into our portfolio. Again, this is a unique, best-in-class asset, the first and only NDA approved, FDA-approved treatment for osteoarthritis knee pain with a different extended-release technology. Importantly, we think that a number of the synergy opportunities that are available to us are because of interest from the same target physician audiences. We will introduce ZILRETTA to the anesthesia ortho and sports medicine marketplace. And we will use ZILRETTA to introduce iovera° and Pacira into the chronic pain marketplace. Over the longer term, we intend to do shoulder osteoarthritis trials with ZILRETTA. We're working with the FDA on what would be required to have enhanced labeling around diabetes and the use of a corticosteroid in osteoarthritis and what kind of safety study might be required in order to make those claims. We're looking at a repeat dosing opportunity with the product. And we also anticipate that in the longer term, we will do a hip trial. So in the short term, we see great synergy opportunities. We've taken ZILRETTA into the Pacira family of unique products. And we think longer term, we can use our commercial and our clinical capabilities in order to expand the use of ZILRETTA. And by the way, at a gross margin that very much parallels our thinking for the rest of the portfolio that we would be in the mid-80s over the next several years. We also have iovera°. iovera° is distinct and unique in many ways. First, it's the only cryotherapy that is available for -- in a handheld design that allows it to be appropriate for a number of institutional settings in environments where you could not use any of the previously available cryoanalgesia products. It offers immediate relief where once we use -- once we freeze a nerve, we'll blow in degeneration, immediately that nerve cannot conduct the pain signal to the brain. So we -- what we bought -- we are currently commercializing in total knee arthroplasty and in peripheral applications, peripheral nerve applications. We're excited about the future. We have a next-generation offering that we think is a lot more user-friendly and durable that will come out right after our national meeting next week here in Tampa. And we have a number of new smart tips that are in development for new indications. We have a specific tip for a medial branch block, which is a low back pain opportunity in spine procedures and importantly, in spasticity, where we believe that there is a significant long-term opportunity for iovera°. So if I roll all that together, you see that there is a tremendous opportunity for Pacira to redefine the standard of care in a whole series of needs across the patient's neural pathway. On this chart, by the way, just for clarity, anything in purple is an existing short-term opportunity. Anything in green is something where we have a bit of a longer-term view of the world and then the light blue on the bottom of the page pertains to an anti-inflammatory opportunity with a multivesicular liposome dexamethasone for inflammation and for low back pain. We also have in process a longer-acting multivesicular liposome with bupivacaine that will not be called EXPAREL, but will benefit from all of our experiences with EXPAREL and will last 5 days or more. And then an intrathecal delivery system, which essentially would be a spinal anesthesia application for EXPAREL itself as long as a number of other products where we are working across the regenerative pain portfolio and across the -- I'm sorry, the regenerative medicine portfolio and across neuropathic pain in osteoarthritic pain. So if we look at this cut differently, this is exactly the same information but looked at as a revenue opportunity. So again, the purple on the bottom are existing opportunities. And you see that we believe that there will be rapid growth. We've openly talked about the fact that we expect EXPAREL to be a $1 billion product inside the 5-year planning period and $200 million for iovera°. As we go forward here with the stellate ganglion and the spasticity opportunities, we expect that iovera° will well extend beyond $200 million over the 10-year planning period, ZILRETTA for additional indications and then all the other things that we just talked about during the presentation body. So continued rapid growth at the revenue line, continued rapid growth at the EBITDA line. And we see that pictorially on the next slide where the company and the assets that have been assembled here continue to grow. We've talked about the late teens. We've talked about all the drivers. Here for 2021, we're using $12 million to $13 million for ZILRETTA, which is what we think is appropriate from when we took over the asset. And in the last column, you'll see a pro forma for what the company would look like if we had the annual sales of ZILRETTA, which we expect will come in at between $101 million and $103 million. So at the end here, we have revenue of over $540 million. And we expect that our EBITDA margin for this year will be over 35%. And during the planning period, the 5-year plan, we will clearly exceed the 50% EBITDA market or milestone that we've talked about in the market. And then our last slide, Christopher, is to talk about 8 consecutive years of positive adjusted EBITDA, and how we've basically fractured the model of every unit of revenue requires a unit of expense. And what you see here is the revenue line going up. We are enjoying an opportunity to significantly have a positive impact on gross margin using a larger facility for EXPAREL and reaching 85% over the next few years. We also think that we will meet the same kind of threshold for iovera°. Right now, the gross margin is a bit inhibited by new tips and some of the enhancements that have had to be made. We think that resolves. And then ZILRETTA is in the low 80s, and we think with increased revenue, we will get into that same $85 million range. The blue line is the OpEx line, and by institutionalizing these ERAS protocols without having any kind of a worrisome competitor from a commercial perspective in terms of viability, we believe that we will achieve and exceed this 50% operating margin threshold that we've set for ourselves. And this is the way we've been running the company for the last couple of years. And I think you can see the short-term impact at the EBITDA line of how we are more successful in generating EBITDA than we are in generating revenue. So with that, Christopher, I'll turn it back over to you for Q&A.

Perfect. Thanks for those prepared remarks. So first question for you, Dave, is just to really get the Omicron variant impact on the elective procedure market and what you're seeing from customers. Just get that question out of the way. So we've seen, obviously, Omicron variant drive another wave of cases. And what are you seeing both for your customers specifically on both health care staffing and on uptick procedure volumes? What impacts are you seeing, maybe you can start there.

Yes. It's rapidly changing. It's the safest way to answer your question, Christopher. So if we use the end of the year as our pro forma model, November was very strong. The first 3 weeks of December were very strong. And then the last week of December was extraordinarily weak. And we think -- and it looks very much, by the way, like August. And so we think that there's an obvious effect of Omicron mostly because these patients are no longer surgically appropriate. And there's patients that are afraid to go into these COVID environments to get surgery, especially the soft tissue, less acute kind of surgical platforms. But what we see as the real driver here, at least for the EXPAREL business and especially in the ambulatory surgery and HOPD environment, which is 70% of our total procedure cases is labor. The mandates, especially the government mandates and the schools being closed, and the nurses not understanding that they don't have childcare for tomorrow until tonight, those kinds of things in the marketplace have really upset the labor opportunity to put together support teams that can achieve the maximum value of the hospital outpatient departments and the ambulatory surgery departments. And so we think that in the short term, if we can solve some of these larger environmental issues, we know from October and November, and we see from the slide that I just presented from IQVIA that when we get anywhere as close to the previous COVID cases that -- or I'm sorry, pre-COVID cases for elective surgeries that we are 20% to 30% beyond those numbers. The issues that we're facing right now relative to Omicron are patients not being surgically appropriate, but more importantly is labor and our ability to staff nursing teams for ambulatory surgery centers and HOPD ORs.

That makes a lot of sense in context. Maybe a follow-up on that question is just your broader expectations on the after-procedure market recovery. So obviously, it's very unpredictable and certainly have not been linear through 2021 and into 2022. But just maybe at a high level, what do you see -- when do you see us getting back to more normalized procedure levels? And then also, do you still envision having kind of a sales benefit from the growing backlog of deferred procedures?

Yes, for sure. So some more than others, Chris. And so it won't be a surprise at all to you, right, that the higher pain acuity, ortho procedures and spine procedures are getting priority in the marketplace. In fact, if we look at June, which is the last IQVIA total marketplace data that we have, almost 75% of the total procedure volume in the ASCs for EXPAREL were orthopedic. And so you -- we have a strong belief that any delayed surgeries coming out of, say, this last week in December that was so weak, will be caught up over the relative short term. It gets a little less obvious when you start to look out at soft tissue procedures, the less painful procedures, the less acute and interestingly less profitable for the centers. So the payers, including CMS would like to see these procedures go to the ambulatory surgery centers to the extent possible because they believe that they're saving roughly 35% on the cost of care of these procedures by having them done in an outpatient environment. The problem is that the only place that these procedures are available is in a hospital environment, it isn't under some kind of current restriction against elective procedures. So you don't see the ASCs currently having the capacity to do all of these procedures and the hospitals either are not set up to do elective procedures or the payers are not paying them appropriately for the use of, say, 35 or 40 minutes of their OR time. And so we know that we'll get the ortho procedures and the high acuity procedures. We know that the peds patients are going to be taken care of at places like Shriners and St. Judes and places like that. We know the C-sections are going to be done because that train left the station, right? Those kids are coming, whether we like it or not. And the question on the table then is if you think there's a couple of million warehouse soft tissue procedures, how does the marketplace anticipate getting those done in terms of the payment that the payers are willing to make, the hospitals working on systems that allow them to have a profitable opportunity to address those procedures and then us clearing the ortho backlog to a degree where we could actually do more of these elective soft tissue procedures in an ambulatory environment.

That's helpful. The next question is really on the evolution of the Pacira's portfolio over time. So with the Flexion acquisition, it's clearly the largest deal that you've done by quite a margin and a significant milestone for the company, diversifying your revenue base. Just at a high level, can you talk about the strategic fit of ZILRETTA and the benefits to the broader portfolio of having several assets in the portfolio versus where you were several years ago with -- as a single product company. And thinking about that kind of across your sales and marketing, commercial and R&D organizations.

Yes. There's -- well, there's -- at the highest level, right, there's many opportunities, and we've talked to several payers about their interest in us having a suite of assets that act across the neural pathway up to and including even a model where they pay on a constituent basis, say, a license to use all of our products for pain control in all of these different environments, on a monthly basis. And the response to that has been much greater than I thought it was going to be to be completely candid. So there is a higher order of thinking here. When we talk specifically about ZILRETTA, I said during the prepared remarks that ZILRETTA will get will have a greater breadth of exposure, especially to anesthesia, which strangely to some people was responsible for most of the iovera° growth in 2021. We will expose the asset to a wider audience of orthopedic folks, sports medicine folks and especially anesthesiologists. Getting to your question and the specifics of your question, we were interested in ZILRETTA because most of our pipeline portfolio is dedicated to chronic pain. And so we have some presence in iovera°, but we think the opportunity to promote iovera° and ZILRETTA to the chronic pain audience will be an opportunity to enhance the sales and the opportunity for both of those assets, especially, as we look at development portfolios for both of those assets in that chronic pain audience. And then we get into a longer-acting bupivacaine, an anti-inflammatory like dexamethasone and then some of the investments we've made in cell and gene therapy in this disease and a number of things that are clearly going to be of great interest to the chronic pain marketplace. So a lot of moving parts there, but all of them lead to a synergy opportunity to sell another product to largely the same customers to be able to use the same commercial and clinical expertise that exists in the organization, the same relationships we have for reimbursement down at CMS and in Washington. All of those kinds of things speak to this being a terrific opportunity for us to expand the customers that we're able to interact with and the healthcare providers who treat them along the neural pathway.

Great. And then more specifically on the Flexion acquisition. You guys have talked about roughly a 30% synergy target that's required to achieve deal accretion in 2022. When you look across roughly $175 million expense base of Flexion in their sales and marketing and R&D organizations, really what's the magnitude of cost reductions that you can see in that portfolio? And how do you envision how quickly can you attain these savings?

So -- yes, thanks for the question, Chris. And so we think what we said was that we needed 30% of synergy in the operating line in order to make this an accretive acquisition. And frankly, we're there now. So as we go through the quarters here, you wouldn't be surprised that we've got some things that we need to clean up around distribution, around rebates and contracts and those kinds of things. Specifically, we have a number of folks who were Flexion employees who have agreed to help us out in transferring information, closing the books. And from the finance perspective and all of those things. We'll work through all of those different things in the first half of this year. So that by the second half of '22, we expect to be materially profitable with ZILRETTA as well as the rest of the portfolio. So from a synergy perspective, this is a great acquisition. We think it will get better and better with additional resources around working with the FDA on labeling, doing additional clinical trials, all of the things that we do well.

Great. And then a couple of clarification questions. For the deal accretion, should we think about that in terms of adjusted EBITDA or EPS? And does that deal accretion include the interest expense from your recent term loan deal?

Two different things, and the answer is yes to both.

Great. That's helpful. And then when we're thinking about the cost savings through 2022, are there going to be additional savings into 2023? Or should we think about the expense line benefit in 2023 of being more annualizing the 2022 expense reduction?

We've pretty much taken ZILRETTA into our portfolio already, Chris. There's a -- you add a few people in manufacturing. You had a few people in clinical, especially if they've got expertise, for example, in gene therapy. Some of the very specific things around the manufacturing of ZILRETTA. We've taken a few people on to -- from the ZILRETTA organization into our commercial organization both as marketing folks and market access folks, but largely, that's done. And so when we look at the business, we strive for 80% gross margin at the manufacturing line. And that we will grow the revenue line at something approaching the late teens or the 20% line and that we would manage our OpEx expenses to something in the mid-single digits. And that's exactly what we've done with ZILRETTA as it enters the Pacira portfolio. So a little bit on the higher side where we might have grown by 5% or 6% at the OpEx line, I think something like 7%. But we think by the third quarter of this year, we will be fully operational with what Pacira is going to look like with ZILRETTA, and there won't be a lot in 2023 other than clinical developments that will lead to enhanced revenue, but that won't have really much to do with the commercial side of our business.

That's super helpful. Maybe to pivot over to EXPAREL, you really highlighted regional anesthesia growth as being kind of key to franchise growth over time. I think you guys have talked about roughly 75% of procedures moving towards regional blocks versus where we stand today at roughly 20%. Can you maybe walk through maybe the key levers driving these trends, the potential impediments and, ultimately, what gives you confidence in your outlook towards 2025.

Sure. So 20%, Chris, was a 2019 number. So we think we've made some progress there. And it's largely because of our ability to work with the KOL anesthesia community and especially with regional approaches as demonstrated through the PITT. And we have training programs here virtually every weekend, and so there is an intense interest in the regional anesthesia world way before EXPAREL actually. And there was a desire to be able to provide non-opioid pain control for a longer period of time, but there was no local anesthetic that was appropriate that lasted more than 6 or 7 hours. And so in the old days, you would do what they call the rescue TAP that they would use the regular PACU kinds of pain management therapies, they would wait for the patient to awake in pain, and then they would do what they call the rescue TAP hoping that they would get that patient through the first postsurgical night. Right? Now we actually do TAP blocks in a block room before the patient ever goes into the OR, and they have 4 or 5 days of pain control on board before they ever have an incision or before they ever have a cut. So the success of brachial plexus nerve block, which we got from the FDA, which we achieved from FDA in April of 2018 led to a very positive reaction from the anesthesia community and especially the regional anesthesia community on -- we finally have a way to do regional blocks without a lot of opioids. And so things like TAP blocks now are standard of care with EXPAREL. But you also see that mastectomies and breast reconstructions with pec blocks, spine blocks and especially scoliosis blocks for spinal procedures with what's called an ESP patient plane block, an erector spinae block are becoming commonplace. When FDA or CMS approved ambulatory surgery for total hip arthroplasty, we immediately heard from the docs that I've changed my knee strategy several times, I really haven't done much with my hip strategy, and we started using something called a PENG block for ambulatory hips. And so you can see what's going on in the marketplace is they've been concerned about this and interested in this for decades. They never really had a product that allowed them to practice the art. And so here in the PITT, and we're building another PITT in Houston that we think will be available in the third quarter of this year. We're working on new blocks. We're perfecting the art. Very importantly, we're training on imaging. Some of the older anesthesiologists wanted some additional training and imaging, but all of the fellows and the residents that are coming out of these regional approaches are fully imaging trained. And so basically, what we're doing with EXPAREL is putting the anesthesiologist in control of pain management and it's moving very quickly. And we think that 75% number by year 5 from here is an achievable target and is our #1 growth driver for sure.

Great. And then I think we're close on time. The last question for me. Maybe what's the most underappreciated market expansion opportunity that you have ahead for EXPAREL. I think the company has talked about EXPAREL sales approaching $1 billion. And you have a number of different launch opportunities, including pediatric, lower extremity nerve block, also you have the international expansion coming up. But just when you look at the street expectations were a bit below -- or rather well below the 2025 target of $1 billion, what do you think is kind of the clearest gap? And I think part of that is clearly going to be just execution, but what do you think is most underappreciated by The Street?

I think it's a couple of different things. It's regional approaches and putting the hands of this product in a -- with a customer that can guarantee that you can provide several days of pain control, especially important for that first postsurgical might. And I put it in that context, Chris, because in addition to regional anesthesia, the big move that's sponsoring this 20% plus growth of EXPAREL is ambulatory surgery and moving these patients to the non-inpatient environment, you can only do that if you have a very high degree of confidence that you're going to control that patient's pain, especially when you don't have them under your care, you don't have a nurse that can run in and see them. So it's anesthesia, regional anesthesia moving to the outpatient environment and the fact that we expect that to move to 80% plus of all the surgeries in the United States by the mid-20s. And then you would add C-section and peds and all that stuff to the bottom. The one thing that is new to EXPAREL is this ability to turn off the parasympathetic block with the first thing be the stellate ganglion, but there's all kinds of case reports and anecdotal information in the marketplace about what you would do if you could turn off the sympathetic nervous system responding to intrusions into the neural pathway. And so we think as that gets going, the dose will likely be relatively small, but as a marquee indication sort of like peds, where you couldn't operate in the space without having EXPAREL on formulary. We think that's what's going on with peds and we think that will continue with stellate and some of the other things that we're developing in the pipeline.

Great. With that, I'll wrap up. I appreciate you taking the time, Dave.

Same here, Chris. Thanks. Look forward to seeing you live soon.