HRTX - NASDAQ

Thank you for standing by, and welcome to the Heron Therapeutics Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Melissa Jarel, Executive Director of Legal at Heron. Please go ahead.

Thank you, operator, and hello, everyone. Thank you for joining us on the Heron Therapeutics conference call today to discuss the company's financial results for the quarter ended June 30, 2025. With me today from Heron are Craig Collard, Chief Executive Officer; Ira Duarte, Executive Vice President, Chief Financial Officer; Bill Forbes, Executive Vice President, Chief Development Officer; Mark Hensley, Chief Operating Officer; and Kevin Werner, Senior Vice President, Medical Affairs, Strategy and Engagement. For those of you participating via conference call, slides are made available via webcast and can also be accessed via the Investor Relations page of our website following the conclusion of today's call. Before we begin, let me quickly remind you that during the course of this conference call, the company will make forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company's projections, expectations, plans, beliefs and future performance, all of which constitute forward-looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. These statements are based on judgment and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties associated with the forward-looking statements made in this conference call and webcast are described in the safe harbor statement in today's press release and in Heron's public periodic filings with the SEC. Except as required by law, Heron assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. And with that, I would now like to turn the call over to Craig Collard, Chief Executive Officer of Heron.

Thanks, Melissa. Hello, everyone, and welcome to Heron Therapeutics Second Quarter 2025 Earnings Call. Today, we're thrilled to share results and progress for the second quarter and first half 2025. It's been an incredibly active and transformative period for team Heron, and I want to begin by recognizing the tremendous effort and dedication our team has demonstrated. One of the most significant milestones this quarter was the successful completion of our new financing. This was a complex and critical undertaking, and I'm proud to say our team executed it with precision and focus as usual. The financing strengthens our balance sheet, enhances our financial flexibility and positions us to accelerate our strategic initiatives with confidence. This achievement reflects not only our commitment to operational excellence, but also the strong belief our partners and investors have in Heron's long-term vision. With this new capital in place, we're better equipped to drive innovation, expand our commercial initiatives and continue delivering value to both patients and shareholders. Beyond the successful financing, team Heron delivered strong operational and financial performance in the second quarter. We generated total net revenues of $37.2 million for the quarter and $76.1 million for the first half of 2025. This performance resulted in adjusted EBITDA of $7.9 million for the first half of the year, reflecting our continued focus on disciplined execution and operational efficiency. Importantly, we're seeing consistent product demand growth with

Thanks, Craig. Q2 was a transitional quarter for Heron as we implemented several key commercial changes designed to strengthen execution in the second half of the year and beyond. Combined net revenues from APONVIE and

Thanks, Mark. Now moving to our financial performance. Our product gross profit for the 3 months ended June 30, 2025, was $27.3 million or 73.5%, which increased from 70.8% for the same period in 2024. For the 6 months ended June 30, 2025, our product gross profit was $57.8 million or 75.9%, which increased from 73.2% for the same period in 2024. This was due to an increase in units sold at a higher cost per unit sold than in 2024 due to the supplier mix, offset by lower inventory reserves and write-offs. SG&A expenses for 3 and 6 months ended June 30, 2025, was $26 million and $51.1 million, respectively, compared to $27.5 million and $53.9 million, respectively, for the same periods in 2024. For the 3 months ended June 30, 2025, the decrease in SG&A expense is primarily attributed to a decrease in personnel and related expenses of $1.8 million due to terminations and onetime stock expense in 2024. For the 6 months ended June 30, 2025, the decrease in SG&A expense is primarily attributed to a decrease in personnel and related expenses of $3.5 million due to the terminations and onetime stock expense in 2024. These decreases were offset by an increase in marketing costs of $600,000, primarily related to

Certainly. And our first question for today comes from the line of Clara Dong from Jefferies.

So one question on

Thank you for the question. So the VAN 400-milligram transition began at the end of Q4, so really late December. Most of Q1, we were in transition. And by Q2, we no longer were selling any of the VVS, but the inventory buildup at the end of Q4 and into Q1 didn't normalize until Q2. And so we do expect the Q3 normalization of inventory to be complete as of July 1.

Got it. And on the J-code for

Clara, this is Craig. No, look, we were excited to get the J-code. What we've sort of seen over time as we have passed through reimbursement with the C-code, it's not that that's not recognized, but the J-code is much more sort of universally recognized, if you will. And certainly, with commercial payers, they're a lot more sort of used to dealing with that. So I think with NOPAIN, what you're going to see over time, and we're beginning to see this with certain payers is that they're going to pick up what CMS or Medicare is doing. And if that happens more, we think, again, having a J-code is just going to make it more conducive for reimbursement and make it simpler. So we don't necessarily see an impact immediately. But as this plays out and commercial payers come on board and reimbursement gets more synonymous with, basically these products being paid for outside of the surgical bundle. I think you're going to see a shift that where this J-code really does help us longer term.

Congrats on all the progress.

And our next question comes from the line of Brandon Folkes from H.C. Wainwright.

Maybe just 2 from me. I apologize if you covered some of this just hopping between calls here. But maybe just on the

Brandon, thanks for the question. So on the

And our next question comes from the line of Serge Belanger from Needham.

I guess a follow-up regarding the sales force changes. Is this just a refocusing on the 2 specific products? Or is there an expansion in numbers that comes along with the restructuring? And then secondly, regarding

So I'll take the restructuring question. Craig can take the NOPAIN and then we'll turn it over to Ira on share count. So in terms of the restructuring, we don't foresee an expansion in the teams beyond today over the short term. What you see is just a more dedicated focus by one single

Yes, Serge, I would just add to that. I think that if you think of the country and what we've done here with

Yes. The pro forma common share is about 183 million shares and pro forma shares, including the convert would be about 208 million.

[Operator Instructions] Our next question comes from the line of Carl Byrnes from Northland Capital Markets.

Congratulations on the progress. Just wondering if you could disclose what the rate is on the senior credit facility with Hercules. And then also with respect to how much cash, net of expenses, et cetera, when everything closes will be added in the balance sheet, excluding the $40 million additional tranches?

Yes. The overall rate, Carl, is a little bit north of 10% and the funds to the balance sheet is probably about $11 million to $12 million after all expenses.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Craig Collard for any further remarks.

No. Thanks, everyone, for the questions today. I know this was short notice. We do appreciate everyone jumping on, and we'll talk to you next quarter.