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Good day, and thank you for standing by. Welcome to the Heron Therapeutics Q3 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Melissa Jarel, Executive Director of Legal. 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 September 30, 2025. With me today from Heron are Craig Collard, Chief Executive Officer; Ira Duarte, Executive Vice President and Chief Financial Officer; Bill Forbes, Executive Vice President, Chief Development Officer; Mark Hensley, Chief Operating Officer; and Kevin Warner, 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 Third Quarter 2025 Earnings Call. Today, we're thrilled to share our third quarter results and provide insight into how product sales are trending. I'd like to begin by highlighting several key accomplishments from the quarter. One of the most significant milestones was the successful completion of our financing. This has been an overhang on the company since I joined, and we're glad to have it behind us. With this resolved, management can now fully focus on commercial execution and product growth. Beyond the successful financing, team Heron delivered strong operational and financial performance in the third quarter. We generated total net revenues of $38.2 million for the quarter and $114.3 million year-to-date. This performance resulted in adjusted EBITDA of $1.5 million for the quarter and $9.5 million year-to-date. Our gross margin was 68.8%, which is slightly down from previous quarters, primarily due to a onetime write-off of SUSTOL polymer inventory. SUSTOL has been trending downward over the past several months due to increased market competition, and we expect this trend to continue for the foreseeable future. CINVANTI, on the other hand, continues to exceed our expectations. We've maintained a conservative outlook this year, anticipating a potential slight decline in CINVANTI performance as we move into Q3 and Q4. So far, that decline has not materialized. Despite ongoing competitive pressure that has historically impacted our average selling price, we're pleased that net sales are remaining fairly consistent. We believe this positive trend will continue through Q4 and into next year. Turning to our acute care portfolio, we implemented several new initiatives in Q3, including the CrossLink Ignite program, an incentive-based initiative to improve distributor engagement, the launch of the 200-milligram vial access needle or VAN and the creation of the IBM team, a dedicated sales force focused on APONVIE only. All of these initiatives were rolled out at different times during the quarter and are beginning to have a meaningful impact. That's why we've consistently stated our belief that the acute products will begin to inflect more prominently as we move into late Q3 and Q4 of 2025.

Thanks, Craig. In acute care,

Thanks, Mark. Our product gross profit for the 3 months ended September 30, 2025, was $26.3 million or 68.8%, which decreased from 71.2% for the same period in 2024. This decrease is due to an increase of $1.4 million of inventory reserves and write-offs recorded and an increase of $1.3 million in the cost of units sold, primarily due to supplier mix. For the 9 months ended September 30, 2025, our product gross profit was $84.1 million or 73.6%, which increased from 72.5% for the same period in 2024. This increase is due to an increase in units sold and a lower cost per unit due to the supplier mix. SG&A expenses for the 3 months ended September 30, 2025, was $26.9 million compared to $23.3 million for the same period in 2024. The increase is primarily due to higher personnel and related expenses due to new hires and increased generalized marketing costs. SG&A expense for the 9 months ended September 30, 2025, was $78 million compared to $77.3 million for the same period in 2024. The increase is primarily due to increased marketing costs related to

[Operator Instructions] Our first question comes from Carl Byrnes from Northland Capital Markets.

Congratulations on the quarter. Just turning back to the slide with respect to

Yes, Carl, that's -- it's roughly correct. Yes, it's 17%, 18% right in there.

Excellent. Fantastic. And then a financial question. If we look at gross profit margin and back out the onetime stocking charge, which I think is around $2.2 million, you end up with approximately an adjusted gross profit margin, which would be around 74.5%. Does that sound correct?

That is correct, Carl.

Yes, that's accurate.

Which is in line what we've been for the last few quarters.

Okay. And then one further adjustment, which is the extinguishment of debt. What would the net interest income line be backing that out? Would that be somewhere in the $2.1 million vicinity? Or what number should we use there?

Going forward, yes, probably about $2.5 million would be going forward.

Yes. Okay. So $2.1 million for the quarter, but sort of adjusted for the quarter period...

For it was a full quarter, yes.

$2.5 million plus. Got it. Congrats again.

Our next question comes from Brandon Folkes from H.C. Wainwright.

Congratulations on the quarter. Maybe just from me, understanding it's very early days on the internal sales team. Can you just talk about though how you're viewing those on

Thanks for the question, Brandon. This is Mark Hensley. I'll start, and then we'll let Craig kind of finish it up. So internally, we're very pleased with the kind of structural changes we made at the beginning of Q3. Just as a reminder, we now have a dedicated

Yes. Brandon, I would sort of add to that. As we think about the product going forward or the products going forward, I think we've been pretty consistent in saying when we see sort of pockets in the country take off when we have, let's call it, conducive events like access into an account, we have good cross-link participation, and we have certainly personnel in that area. Once we see that type of success, we would like to obviously mimic that where we can. So I think going forward, we continue to look for those pockets, and we're beginning -- as the data suggests, we're beginning to see that. And so we're in the process of going through our budgeting process for the year. And I think we'll be looking at where we can add in specific pockets and again, staying within profitability and so forth. But I think you're going to see more to come on that because, again, we're beginning to see a little bit of a different trend. And so if we can expand that, we would certainly like to do that.

Fantastic. And maybe just one follow-up from me. Just on

We didn't see -- we had that kind of similar bump when we launched the 400 VAN. Because the 200 VAN is really only about 35% of the total sales, there was a minimal, let's say, bump, I guess, but not to the degree that we saw with the 400. So the inventory remained relatively stable compared to prior quarters.

Congrats on the quarter.

Our next question comes from Serge Belanger from Needham.

First question regarding the NOPAIN Act, can you just give us an update on its implementation and what you're seeing from commercial plans, whether they are following in the footsteps of Medicare? And then secondly, on the oncology care franchise, maybe just provide a little bit more color on your long-term outlook for that franchise. It sounds like you expect SUSTOL to remain under pressure for the foreseeable future. And then on CINVANTI, do you expect competitive pressures to come back despite the ones that didn't materialize in the third or fourth quarter?

Yes. Serge, I'll take the CINVANTI question, then I'll pass the other over to Kevin on the NOPAIN Act. But again, we've been saying all year long and even in my prepared remarks about CINVANTI, we felt that with the competition out there that we could see a little bit of a dip in Q3 and Q4. We have yet to see that. We've been fairly consistent in being able to keep accounts and that type of thing. But to your point, there are -- it is a very competitive space, and we will continue to have pressure. And we could lose an account from time to time or we could be forced to take our price down to keep an account. So I mean that's just sort of the market we're in. We're going to continue to sort of look at this pretty conservatively. What I can say on the upside, though, with the IBM team that we have, we're beginning to promote CINVANTI a bit more from a rep standpoint within hospital accounts. And again, we're thinking that will have or could have a positive impact. So again, still facing the same competition, but the fact that we have a little bit of a larger voice out there, we've actually -- we had an account we won about 3 weeks ago that was fairly significant. So again, if we can keep doing that, we think we can keep things fairly stable as we move forward. So we'll continue to update quarterly, but I think our outlook remains fairly consistent as with things we've said before.

Serge, it's Kevin Warner. So in regards to the NOPAIN Act and the impact we're seeing out in the field, it's definitely starting to build momentum. As we said previously, as expected, it would take 6, 9 months and be tail half of the year once providers and systems got educated on the fact that you could reimburse outside the bundle, and it's not typical as we know. So we're seeing education happen across all segments from some of our competitors, obviously, other companies that are included in the NOPAIN Act. They're standing at platform presentations like at ASA and delivering the message out there. So we're continuing to educate around it, provide the systems in place and educational materials of how to actually bill separately. Commercial payers, to your point on that question, we are seeing some momentum there also. We believe it would take them time to reassess and do a rearview take on it and see what's happening with implementation. But you have providers like Aetna and Cigna that are providing separate reimbursement, and it varies state by state with individual commercial plans that we see out there. Overall, as an estimate, we see about 75% of all

Yes, Serge, just to maybe address the second part of your question regarding SUSTOL, similar scenario as we faced with CINVANTI, although it's just been a little bit more competitive on that side. And again, we have fewer accounts. And so what we've seen over the last few years, we've had a continual decline and a -- continual decline in -- on our ASP. And so what we've decided to do is wind this product down over the next -- into next year. And again, our plan is to look at possibly improving the delivery of that product, whether that be a lighter gauge needle or what have you. But we would like to bring that out possibly late '27 back into '28 as a relaunch product. And again, there's things we can do there from our selling price and that type of thing that would possibly bring this product back to market. And so we'll talk more about that as we move forward and ideas that we have. But the plan now is to wind this down as we move to really to the end of next year.

Our next question comes from Sierra Dong from Jefferies.

This is [indiscernible] on for Clara. Congrats on the quarter. So my question is about the

Thank you for your question. This is Bill Forbes. I'll just give a little bit of an update on this. We've recently just manufactured our registration batches and with that have initiated our stability program. As you know, every new product has to undergo at least 1 year of real-time stability. So we've got that clock ticking. So we're glad we've crossed that milestone, and that's why we're looking -- obviously, once we've completed that stability program, we'll go ahead and file and it will be approved, hopefully, in 2027. The impact, I think, is one, as you can see from the VAN, we've had a bit of an uptick. And I think as far as simplifying and speeding the application and use of

No, I think that's good.

Yes. I would just add, I think Bill is spot on it. When you think about simplicity, we still have the scenario where when we go into onboard an account, there is a training even though the VAN has improved dramatically and being able to draw the product out of the vial. And so if you think about really being able to simplify your product and now you go in and you open a tray and you dump the product in the sterile field and basically, it's ready to go, it just takes one step out of the process. So again, we certainly think this is going to have a positive impact. And again, as things are moving forward, we think this just makes the product that much better and has another benefit so.

Okay. I do have a follow-up. So for the J-code for

It would be once the prefilled syringe is launched. Yes, that's correct.

Thank you. This concludes the question-and-answer session. I will now turn it over to Craig Collard, CEO, for closing remarks.

Thank you, operator, and thank you, everyone, for joining the call today, and we look forward to speaking to you all next quarter.