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

Welcome back to the 2024 RBC Global Healthcare Conference. My name is Greg Renza, one of the equity research analyst here at RBC. And we're pleased to have Pacira BioSciences with us today. Joining us from the company is the Chief Financial Officer, Charlie Reinhart. Charlie, thanks for joining us.

Thanks so much for having us. Appreciate it.

Great. And a lot to talk about a lot going on, we're just mentioning that it's been an eventful week for Pacira. And maybe we kick things off. You can just give us an overview of Pacira, the recent strategy EXPAREL and also some of the developments that have transpired over the last week.

So Pacira is focused on being the leader in non-opioid pain management. We have 3 proprietary products, EXPAREL, which is a long-acting formulation of bupivacaine that is labeled for post-surgical pain. We have ZILRETTA, is an intraarticular injection for knee OA. That's a long-acting formulation, a different type of formulation of a steroid. And we have a very interesting medical device named iovera°, which basically uses high temperature -- or excuse me, low temperature, the freeze serves and it's small, but it's got an interesting upside to it.

Great. Great. So as far as things that went this week or last week, I should say?

So our earnings release was at the end of market close on Tuesday of last week. We announced Wednesday evening, the intent to do a convert, and we consummated that transactional Thursday. So it's a really good transaction for us. The market was very strong. We were more than 5x over subscribed. So we hit the tights. We bought a capped call so that we're now up 80%, so [ picks ] the conversion premium a little bit under $55 a share, which was important to us and the pricing on that was really good. So we used the proceeds to buy back roughly $200 million of the August 25, the face value convert. And we also did our first share repurchase. So part of the earnings release last Tuesday was the announcement that the Board had authorized the company to spend up to $150 million over the next couple of years in share repurchases, and we use the convert as the opportunity to do the first one. So we're really happy about that, frankly. I think the transaction was very well received, and we're interested that the Board gave us the opportunity to go on the offensive from a share repurchase perspective. So we think that we're going to use that opportunistically in a way that we think best suits the shareholders.

Great. It's been a nice transition point for Pacira, for EXPAREL. As you're alluding to, this has been a foundational quarter setting the stage with the guidance that you gave and the revenue performance. And as you've noted, it is all about volume. It's about expansion. And I think that there are some surgical trends that you and the team alluded to, maybe just from that top down, just talk a little bit about some of those trends across those segments that you're seeing that enable you to take advantage of some of that momentum in the surgical setting for EXPAREL.

Sure. So we have important presence in both the hard tissue/orthopedic segments of the business and soft tissue. So as far as the orthopedic side, we're growing roughly in line with the big orthopedic companies, kind of mid-single digits. Soft tissue is a little bit behind that because it has not come back in the number of procedures. So the post-pandemic growth in soft tissue has been a slower rebound. And I suspect, frankly, that people are out there and they're looking at their financial situation, and they're asking themselves, what's my budget look like with respect to the impacts of inflation. And on my rent and food and transportation side. And do I have extra a couple of thousand dollars to fund my share of the co-pay. And I think that's what we're waiting to kind of bounce back a little bit. As you recall, EXPAREL was previously growing in high teens growth rates. And now we're -- from a volume perspective, we're kind of at market with mid-single digits. And so we're asking ourselves, what do we need to do to get back. And that's one of the reasons why we're so excited about the NOPAIN opportunity. And for those who don't know what that is, there's -- CMS will begin reimbursing EXPAREL at ASP plus 6% starting January 1, 2025, in the HOPD setting. And that's really important to us. So there has been a trend of shifting surgical procedures from inpatient to the outpatient setting and the outpatient includes both HOPD and the ASC setting. Roughly 72% of our current TAM is already performed in the outpatient setting. But the EXPAREL's biggest challenge really has been reimbursement. And in the inpatient setting, we didn't have any. And at this point today, you don't have any in HOPD. And that's -- HOPD is a big portion of our business. And so we're really excited about that. So the key focus for the company right now is getting ready for that CMS to start reimbursing. So be the new CEO, he is investing a lot in the internal commercial infrastructure. We're having a new Chief Commercial Officer and new Chief Business Officer. We've -- in next week, I think we have 2 new senior marketing folks starting. So there's a lot of excitement around the company. We're really, really asking all the questions that new CEOs should ask him. And we're really excited and getting ready for NOPAIN.

Yes. And I like how you and Frank and the team talk about NOPAIN as almost a product launch, and I think you're touching on that in your remarks on how you describe that, what is that buildup like? And how are you -- how is that actually setting foot in action that is NOPAIN being almost a product launch for EXPAREL?

So the first part was to invest in some of the individuals in the company -- what I didn't talk about is we're also making a significant investment in reimbursement internally. So market access team is being built up. We are hiring some reimbursement specialists that will be out in the field with folks. So that's new for us. So we're -- again, there's an awful lot going on. And everything is being kind of we reviewed as the strategic plan and how to best focus really on the reimbursement side.

Excellent. And related to that, I know certainly the 340B centers, the price and volume mix that you're even referencing. What are your thoughts on the mix there and how that sort of sets up the trending into NOPAIN?

So when we took a look at what our business was prior to a year or so ago, we really didn't have -- we had a handful of contracts with individual hospitals, but we didn't have any GPOs. We didn't have 340B. And it just made sense to us that if you're going to have a hospital product, you probably need to play in those spaces. So we joined 340B, I guess, 2 years ago. And part of the goal for 2024 is to further solidify the base, so to speak, and join a couple of the larger GPOs. And so we have been hearing from customers that we were noncompliant spend, which was starting a conversation with a [ black X ] next to you, and we decided that, that wasn't the way we wanted to start. And so we're going to join a handful of the GPOs. We signed on with Premier in January. We expect to sign a second in second quarter and a third in the third quarter. So by the end of the year, roughly 85% of our total business will have some form of contract linked to it.

Okay. And then with the Premier contract, what does that represent in terms of share or EXPAREL-relevant procedures?

The premier membership is roughly 20% of our total EXPAREL-relevant procedures. So it's a little confusing, because there's 2 ways to look at this. One is, it happens to be true that roughly 80% of our procedures are going to be the combination of the GPOs. Another way to look at it is areas that we have contracted or have discounts. So we have a 340B business, which is roughly 24% of our business today. We have individual contracts that we have signed over time prior to GPOs with specific hospitals. That's about 30% of our business. And then there's going to be the incremental on top of that GPO impact. So it's interesting that either way, gets you to about 80% to 85% of our business. It just so happens that if you look at a GPO like Premier, their [indiscernible] are part of 340B, they may be individual contracts. And if they're not, they'll be hit by -- they'll get into the Premier GPO bucket.

Got it. So then 2 more and we can look forward to over the course of this year to get to that ramp. And maybe talk a bit about the guidance that you reiterated in those pushes and pulls when it comes to EXPAREL and the portfolio.

Okay. So I mentioned earlier that the big ortho hardware companies were predicting that they were going to grow in the mid-single-digit growth pattern. And so we see ourselves in line with that with maybe a hair less than them, because we have half of our business in soft tissue and that is growing more slowly. So that's the volume side, I think, mid-single digits. The additional investment in getting access to the GPO members is going to cost us roughly offsetting. So from a top line perspective, those 2 numbers are offsetting. We also expanded EXPAREL's label for 2 new lower extremity nerve blocks in late last year. So kind of that kicked off with the national sales meeting and launching that. So we think that will add growth as well. So we guided to a relatively modest increase. We didn't do product by product guidance, but inherent in there is a modest increase in EXPAREL.

Got it. And then what about the -- on the margin side, we had some consolidated gross margin report and just talk a little bit about the contributions with EXPAREL and ZILRETTA and iovera°?