Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Heron Therapeutics First Quarter 2022 Earnings Conference. As a reminder, this conference is being recorded. Now, I would like to turn the call over to David Szekeres, Executive Vice President, Chief Operating Officer. Please proceed. .

Thank you, Jason. Good afternoon, everyone, and thank you for joining us. With me today from Heron are Barry Quart, Chief Executive Officer and Chairman; John Poyhonen, President and Chief Commercial Officer; and Kimberly Manhard, Executive Vice President of Drug Development and Board Director.

For those of you participating via conference call, the slides are made available via webcast and can also be accessed by going to the Investor Relations page of our website, following conclusion of today’s call.

Before we begin, I would like to remind you that this call will contain forward-looking statements concerning Heron’s future expectations, plans, prospects, corporate strategy and performance, which constitute forward-looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements, as a result of various important factors, including those discussed in our filings with the SEC.

In addition, any forward-looking statements represent our views only as of the date of this webcast and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statements. Now, I’ll turn the call over to Barry..

Thank you, David. Welcome, everyone, and thank you for joining us. First quarter was a major turning point for the commercialization of ZYNRELEF with the official rollout of expanded indications obtained mid-December.

You will hear from John that we are now reaching critical mass in terms of ordering accounts with a 68% increase in unit demand in first quarter compared to fourth quarter. This has allowed us to make significant progress in reducing the excess inventory at distribution centers.

So, next quarter, you should see dollar sales of 400-milligram vials match demand. With continued increases in ordering accounts, formulary approvals, and pass-through status, and multiple IDNs moving towards therapeutic interchange with ZYNRELEF, we anticipate seeing similar to greater quarter-over-quarter increases in coming quarters.

With our CINV franchise, as we noted last quarter, we observed modest growth and are feeling sufficiently confident in this market post COVID-related disruptions to provide guidance for full year 2022.

During first quarter, we continued to prosecute our NDA for HTX-019 for postoperative nausea -- PONV, which has a potential to be many times larger than our CINV business. There are no outstanding information requests from FDA and they have already provided initial labeling comments.

Lastly, we've continued to focus our energies on both, cutting costs and partnering ex U.S. territories for ZYNRELEF to extend our cash runway. We've made significant progress in both areas with our goal of completing at least one partnership this quarter.

Overall, first quarter was an important turning point for Heron, and we were excited to review our progress with you today. I will now turn the call over to John to review our achievement of important commercial and corporate milestones.

John?.

Thank you, Barry. I'm excited to share our first quarter commercial results. We continue to make significant progress with the ZYNRELEF launch. During my presentation, I'll start with a number of updates on key performance metrics related to this progress.

And then I'll finish with an update on our strong first quarter commercial results with our oncology care business. I'll start by summarizing the ZYNRELEF launch highlights to date by sharing our scorecard of leading indicators.

During our first three quarters of launch, we have continued a strong cadence of adding new unique ordering accounts, which have been growing by about 50 accounts per month. We're also very encouraged by the increases in the account reorder rates, which have grown from 50% in the first three months of launch to 80% in the first nine months of launch.

We continue to gain formulary approvals for ZYNRELEF and targeted hospitals with a run rate of 32 formulary approvals per month during our launch. Importantly, we're seeing excellent growth in integrated delivery networks or IDNs adding ZYNRELEF to formulary.

We believe adding IDN support is a critical component in potential therapeutic interchanges with key accounts switching from Exparel to ZYNRELEF for indicated procedures in the future. Finally, since our last earnings call, ZYNRELEF has received pass-through status for separate reimbursement for ZYNRELEF outside of the surgical bundle payment.

This is a key competitive advantage since ZYNRELEF is the only local anesthetic separately reimbursed in the hospital outpatient setting of care, which represents an estimated 59% of our indicated procedures. Slide number 6 benchmarks the number of unique ordering accounts during the first nine months of launch based on Symphony Health data.

We continue to rapidly add new accounts ordering ZYNRELEF with 451 ordering accounts in the first nine months of launch. This represents an increase of 46% from the 309 level in the first six months of launch.

In addition, ZYNRELEF had 80% of accounts reordering during the first nine months, the greatest reorder percentage for all four products benchmarked in this analysis. We believe the growing reorder rate is an excellent indication of the strong real world experience that surgeons are having with their patients.

While the initial ZYNRELEF results are strong, aggressive expansion in the number of ordering accounts is a key priority in 2022. And we continued to make strong progress on this goal during April, as I'll show in my next slide. In April, we added 61 new unique ordering accounts, bringing the total to 512 in our first 10 months of launch.

This account total represents ZYNRELEF orders from 27% of our 1,900 target accounts. ZYNRELEF unit demand grew by 68% in the first quarter over the fourth quarter. However, it's important to recognize that the COVID Omicron surge stunted ZYNRELEF during the second half of December into early February.

During the surge, our customers were faced with delays in elective surgeries as a result of policy decisions, positive patient pre-op COVID test and staff shortages. Nevertheless, we were able to demonstrate monthly growth to 42% for February and 25% for March.

During the first quarter, the 200-milligram SKU demand units grew by over 106%, based on broad expansion of ZYNRELEF’s label indication, which utilized this dosage strength for surgical procedures, such as bariatric foot and ankle.

While April was the highest demand months total since launch, the monthly growth in April slowed compared to the prior two months in the first quarter. During late March and the first couple of weeks of April, our sales team reported a slowdown of elective procedures based on spring break for patients and surgeons.

In order to test this feedback, we looked at the rolling five-week period ending April 15th and compared that with the prior five-week period. As this demand slide shows, ZYNRELEF grew by 12% during this period, while Exparel actually declined by 3% during the same time period.

The level of ZYNRELEF inventory in the distribution channel continues to be an area of great interest. As we described in our fourth quarter call, there was excess initial stocking inventory in the distribution channel.

Since that time, we've continued to make meaningful progress in burning through that inventory based on increases in ZYNRELEF demand unit volume sales.

First quarter net sales were $1.1 million, which was net of $300,000 in returns for short-dated product and continued progress to draw down the initial stocking inventory based on demand orders from hospitals and ASCs.

In order to better understand the inventory level and the distribution channel, we are reporting the ex-factory reorder rates based on demand unit volume for both SKUs.

Ultimately, our goal is to have ex-factory orders at 100% of demand unit volume, meaning the distribution channel is replenishing their inventory for every demand unit sold, hospital or ASC. Through March 31st, the 400-milligram SKU reorder rate was 92% of demand unit volume.

Fortunately through March 3rd -- or May 3rd, the ex-factory order rate now exceeds 100% of the demand unit. In other words, the 400-milligram SKU has stabilized and ZYNRELEF demand units should be reflected in ex-factory unit sales as we go forward.

With respect to the 200-milligram SKU, the reorder rate through March 31st was 41%, indicating there was some excess 200-milligram inventory in the distribution channel at the end of the first quarter. This isn't surprising with the 200-milligram SKU accounting for 26% of the total ZYNRELEF demand unit volume.

We've already observed significant improvement in the 200-milligram ex-factory reorder right through May 3rd with a 67% ex-factory reorder rate, based on accelerating growth of the 200-milligram SKU.

We expect to burn through the remaining excess 200-milligram inventory by the end of the second quarter, just like we did with the 400-milligram SKU in the first quarter. Now, let's dive into the details of our new business pipeline. This slide highlights the continued rapid progress that ZYNRELEF is making with formulary approvals.

At the end of February, we reported 260 formulary approvals. This number has continued to grow at about 30 new formulary approvals per month since the launch to 319 total approvals. And those accounts actually making P&T decisions, over 90% of hospital P&T committees are adding ZYNRELEF to formulary.

Importantly, an estimated 68% of our formulary approvals are for unrestricted usage of ZYNRELEF. We're also making excellent progress in expanding -- gaining expansion of the unrestricted formulary approval to include the broader label approved by the FDA in mid-December.

The remainder of the second quarter will contain about 60 additional P&T committees scheduled to review ZYNRELEF before the end of the quarter. In addition, a number of hospitals and IDNs, which implement a one year moratorium to add all new products following FDA approval will become available for P&T committee reviews in the third quarter.

New formulary approvals help us establish a critical pipeline for new ZYNRELEF business and remain a key priority for our commercial team.

Next, I wanted to highlight a key top down strategy of targeting integrated delivery networks or IDNs to create new system-wide opportunities for therapeutic interchange from Exparel to ZYNRELEF for indicated procedures. Thus far, 46 IDNs have added ZYNRELEF to their formularies.

These IDN systems include over 1,100 institutions in their system with 41% of the approvals for unrestricted use of ZYNRELEF. In addition, these 46 IDNs account for about 676,000 annual ZYNRELEF indicated procedures and 77 million of Exparel sales.

Our success with IDN allows us to work with senior level decision makers who’re evaluating switching from Exparel to ZYNRELEF for indicated procedures. Now, let's drill down on the 13 IDNs that are interested in a potential therapeutic interchange.

With ZYNRELEF’s expanded label indications, it's not surprising that IDNs are looking to save millions of dollars for a product, which is actually demonstrated superior clinical results to the standard of care, bupivacaine. We are thrilled to be partnering with both, pharmacy and physicians to drive their internal evaluations with ZYNRELEF.

Of the 13 IDNs we are interested, 11 have already initiated their internal trials with ZYNRELEF. Initial feedback on the trials has been very positive across a wide variety of surgical procedures. While moving forward a large IDN certainly takes some time, we expect the first IDN therapeutic interchange decision to be made by the end of this quarter.

The CMS approval of pass-through status for separate reimbursement of ZYNRELEF for Medicare patients is a game-changer for us. ZYNRELEF is the only local anesthetics separately reimbursed in the hospital outpatient setting of care for the next three years.

This is a significant competitive advantage since we are now actually cheaper than using generic bupivacaine, and Exparel’s pass-through status in the hospital outpatient setting of care expired years ago. This important approval builds on our existing reimbursement strengths already in place.

In the fourth quarter, CMS issued ZYNRELEF a specific C-code C9088 for separate reimbursement in the ASC setting of care, effective January 1, 2022 for permanent reimbursement, even beyond the typical three-year pass-through period. Our market access team has done an outstanding job with reimbursement coverage from commercial and Medicaid payers.

We've already obtained separate reimbursement outside the surgical bundle payment for ZYNRELEF with more than 123 million covered lives and ASCs. And in some cases it's also reimbursed in the hospital outpatient setting.

A key component of our pricing strategy is, even without separate reimbursement, our lower acquisition cost benefits customers across settings of care where the drug may be paid for under the surgical bundle payment. This next slide we've shown a wide variety of different versions in the past.

Today, I'll focus on the purchase price savings and the reimbursement benefits. Switching to ZYNRELEF provides a cost savings of 25% to 32% based on the wholesale acquisition cost or WAC, and a savings of 42% to 48% based on our 340B price offering compared Exparel. This is a huge financial incentive for customers to switch to ZYNRELEF.

From a reimbursement perspective, using ZYNRELEF is profitable with Medicare patients in the hospital outpatient and ASC settings of care. In these challenging financial times 340B accounts can experience a financial benefit of over $429 per patient by using ZYNRELEF rather than Exparel.

Based on these economic benefits, it's not surprising that large IDNs are now conducting therapeutic interchange evaluations. I'll close the ZYNRELEF section with our key priorities for 2022. Our top priority is to leverage the new label indications for faster growth. This will be accomplished by expanding an existing surgeon usage into new procedures.

We are also making excellent progress in accounts with existing ZYNRELEF formulary approval to remove restrictions and allow us to be used in all of our newly indicated surgical procedures. Our second priority is to increase usage within ordering account by increasing the number of surgeons routinely using ZYNRELEF.

Many accounts initially evaluated ZYNRELEF with only two or three surgeons from larger practices. Based on the excellent outcomes with their patients, we were actively utilizing their experience to support expanded use usage of ZYNRELEF with their colleagues. Our third priority is to gain formulary approvals at new targeted IDNs and hospitals.

Increased access in our pipeline for growth and therapeutic interchange opportunities is the key of this goal. Finally, we'll continue to maximize our separate reimbursement outside the surgical bundle payment for ZYNRELEF. The April 1st pass-through status in ZYNRELEF and the hospital outpatient setting is already making a positive impact.

In summary, we've already made strong progress with a number of leading indicators, which gives us confidence that 2022 will be a significant year of growth for ZYNRELEF. Now, I'd like to shift gears and review the first quarter results for our oncology care franchise.

During the first quarter, our oncology care team did an outstanding job of growing our CINV portfolio net sales by 13% over the prior quarter. This growth was driven by a 22% increase of CINVANTI demand units in the clinic setting of care, a market dominated by generic competition.

Our second quarter 2022 CINV net sales guidance is in the range of $22 million to $23 million. As our gross to net revenue will be a bit lower on higher demand units sold during the quarter. It's our belief that both, CINVANTI and SUSTOL are poised for growth in 2022, based on two key factors.

First, we continue to see improving reimbursement tailwinds as generic fosaprepitant average sales price reimbursement has decreased to $26.35 in the second quarter of 2022. In addition, effective January 1st, separate reimbursement in the hospital outpatient segment ended, which will make the CINVANTI value proposition much more attractive in 2022.

IV Akynzeo’s ASP reimbursement has decreased by over $180 during the past year. So, there's less value they can offer, which benefits both, SUSTOL and CINVANTI. As Barry mentioned, we're now providing full-year 2022 CINV net sales guidance in the range of $89 million to $93 million, representing a 7% to 11% increase over prior year.

A potential tailwind in the IV bag shortage some accounts are experiencing, which benefits CINVANTI as the only NK-1 that doesn't require an IV infusion bag.

In addition, there's a backlog of oncology patients as a result of COVID that we believe create opportunities for both products since they can be used in HEC and the majority of MEC patients, as new patients reenter the system for treatment, this will create a significant growth opportunity for both products. That completes my prepared remarks.

I'll now turn the call back over to Barry.

Barry?.

Thanks John. Throughout the call today, you've heard the commercial numbers from both of our product franchises. But to wrap up, on our financial slide, of keen interest to everyone as of March 31, 2022, we had cash, cash equivalents and short-term investments of $111.9 million and accounts receivable of approximately $41 million.

We expect net cash used for operating activities of between $37 million to $39 million in the second quarter of 2022. As noted on the next slide, completing an ex-U.S. partnership to improve the balance sheet is one of our highest priorities. Slide 20 contains important catalysts for the Company. The most important of which are completing an ex-U.S.

partnership for ZYNRELEF, completing the necessary work needed to submit sNDA2 for ZYNRELEF to further expand the indications. For CINV, achieving 89 to $93 million in net product sales in 2022; and for PONV, it's obtaining FDA approval for HTX-019 by September. As noted, we've already received initial labeling comments for this NDA.

Slides 21 and 22 contain important safety information for ZYNRELEF. These slides are available on our website. With that, we are ready for your questions.

Operator?.

[Operator Instructions] Our first question comes from Brandon Folkes from Cantor Fitzgerald. Please go ahead..

Maybe just, can you talk about why you aren't gaining formulary approval? What is the reasoning behind those decisions? Is it just label? Will it just take time, just any color there? And then, you mentioned the priority to execute and ex-U.S. partnership.

Can you just talk about the environment you're seeing there, where you may bring in a substantial upfront? Are we in an environment where partners are looking to pay a substantial upfront? Thank you..

Sure. I'll take the second question and turn the formulary question over to John. In terms of partnering, we have significant partnering activities underway, which is why we felt confident enough to identify it as a certainly a key catalyst coming up in the near future.

And because of the fact that we have several different companies, where we have discussions ongoing, late stage discussions, I think, we can safely say that with significant interest gives us the opportunity to ask for significant upfront payments from companies. So, I can't really say much more than that.

But certainly there's a lot of interest in the product. Obviously surgical procedures are ubiquitous around the globe. The ability to significantly reduce pain, get patients out of the hospital are all very attractive endpoints. Not everywhere has an opioid crisis as the U.S. and Canada, but pain is still a significant issue around the world.

So, with that, John?.

Sure. So, first of all, I guess from a P&T committee standpoint, I think we're doing extraordinarily well. We're getting over 90% of those P&T committees that actually review ZYNRELEF to approve it. And we're increasing the number of unrestricted usage approvals that we're getting. So, all of those are very positive, Brandon.

The accounts that aren't I would put in two primary buckets right now, one would be just the -- those that have a moratorium as based on their policy, if not approving any drug, not just ZYNRELEF, but any drug by the FDA that was approved for at least one year until it's been on the marketplace just to gain experience.

And fortunately we're coming up on that and we would expect to reengage with a number of those accounts in the third quarter. The other set of customers that are not approving us are primarily accounts that are currently utilizing a generic cocktail worth of using bupivacaine as a background.

And that's something that we continue to work with based on the fact that we got superior clinical data, head-to-head against bupivacaine. We’re trying to work through the surgeons. Those are generally driven by pharmacy where they're trying to maintain budgets.

But fortunately, those have been less than 10% of the accounts out there and we continue to try to work on it through surgeon champions..

Thanks very much. And do you mind if I just ask one more, as you talk about surgeon champions. Your account reorder rates obviously look very good.

Do you have any commentary in terms of actual surgeons at those accounts? Are they reusing the product or thinking about reordering the product?.

Yes. Great question. So, what we are seeing is we're getting really excellent reorder rates with 80% of accounts during the first nine months are reordering ZYNRELEF. So, that's very exciting for us, but those are really driven by surgeons that have started using the account from kind of -- or the product from day one.

So, what we're hearing from surgeons is that they're getting actually better results with ZYNRELEF than what they have seen in our clinical trials, just because of some of the limitations that we had on the ability to use multimodal analgesics. So, the feedback from them has been phenomenal.

I just spoke with a surgeon last week, who actually was a former Exparel user and had recently done over the last several months 400 patients with ZYNRELEF and just said, this is a total game-changer for his practice and his patients..

The next question comes from Josh Schimmer from Evercore ISI. Please go ahead..

So ZYNRELEF, is it performing according to your internal expectations? If so, why didn't you express clearer cautions since consensus estimates are meaningfully above the reported sales so far? Or if it's not meeting your expectations, what are the unexpected headwinds that you've run into? And then, most investors are waiting for you to address your financing requirements.

Is there something that you're waiting for prior to taking action? And if not, why haven't you addressed this yet? Thank you..

Josh, I appreciate the question, taking the second one first. Again our primary goal right now, as noted, is to conclude at least one, if not more partnering activities, which we believe will play a very significant role in terms of our financing needs. We want to get those completed before we look at any other types of financing activities.

Could we hope that we'll be able to complete our financing activities with the partnering events? We're certainly pretty far down the road. And that's the reason why we haven't done anything else. The partnering activities, as you know, always take a little longer than expected, but we anticipate to conclude one or more of those very soon.

And in terms of the performance of ZYNRELEF, I think that we had provided very clear information last quarter that because of the excess inventory that the target for first quarter would be really driving use and the demand units.

But that probably is -- was not going to be represented in terms of dollar sales, because we needed to work down the excess inventory. As John noted, we've made significant progress in alleviating the excess inventory completely for the 400 at this point, and making significant progress on the 200.

And certainly, we will try to provide as much color as we can in terms of expected sales going forward. It's obviously a very dynamic period at this point. And I think that I'll let John provide his opinion as well. But the one thing that certainly has slowed down the launch was the initial label. We've now addressed that.

And then, the second thing that we've run into that was somewhat unexpected is the desire by virtually all of our significant customers to want to do their own assessment of the product before moving forward aggressively. And those assessments take time, as John noted, for the IDN process of interchange.

They're all moving forward with their own internal assessments. The feedback has been very positive. So, we're not concerned about the fact that they want to do their own assessments. It just takes a lot of time.

And so, we're hopefully coming to the end of the first process there for an IDN switch, and hopefully the rest will follow relatively soon after that.

John, did you want to mention anything else?.

Yes. I'll add a bit of color to that, Barry. Thanks. So, I guess, from my perspective, Josh, if you look at a number of indicators, the access and formulary approvals has been doing extremely well.

The number of ordering accounts has been doing extremely well or the reimbursement that we've been able to get not only with just getting pass-through status, but with the commercial and Medicaid payers is excellent. And the reorder rate is great.

Where we're not meeting our goal right now, I would say, is that we would like to be generating higher volume per account than what we are. And I think that there are a couple of reasons for that.

One is that as Barry indicated, we started off with three indicated procedures, and even though the market research indicated that surgeons would use it broadly off label, that's not what happened in practice. And we're seeing -- starting to see that change now. And the other is just the internal assessment.

A number of accounts were fooled by a previous competitor that came out and they promised them 72 hours worth of coverage and it only gives them 24. So, they had to see in their own hands what ZYNRELEF could produce. And fortunately ZYNRELEF has been producing great results with their patients.

So, it's taken a bit longer than what we would like to generate the volume levels at on an account basis. But the other metrics that we're tracking I think are going very well..

The next question comes from Serge Belanger from Needham and Company. Please go ahead..

Four questions on ZYNRELEF. I guess, first, can you just talk about where you have seen product updates so far in terms of procedures and setting of care? And then, secondly, a follow-up on a prior answer. You talked about the process from formulary acceptance to ordering and usage being longer than expected.

Can you just maybe describe that process, and if there's any way it could be sped up? Thanks..

John, why don't you take those?.

Okay. So I'm sorry. Could you repeat the first question? I was writing down your second one, Serge..

Procedures in terms of setting a care and what are the procedures we're seeing and where?.

Yes. Thank you, Barry. So, if you look at it overall, of our 512 ordering accounts, about 58% of those are hospitals and 42% are ASCs. Those hospitals, those 58% are generating 76% of our business. And obviously, the difference is 24% being generated by the ASCs.

If you look at the procedures that are being used at, I think we've had a tremendous head start with the original three indicated procedures of total knee replacement, hernia and bunionectomy. So, not surprising, those are big ones.

What we've seen during the first quarter with the expanded label is a real increase in the amount of total hip replacements, and the results have been remarkable with that. We're also seeing a lot of bariatric and foot and ankle surgery. So, those would be the key drivers from a procedure’s standpoint.

As far as the process, the process of a formulary approval is only the first step. It also then requires a medical executive approval, which usually takes about 30 days. And then, you have to get computerized into the order entry system. The pharmacy has to order, and it has to get to patient.

But I think what we're seeing right now is that many of these accounts, they'll approve the product, ZYNRELEF, and they will do an internal trial evaluation.

And it may be in a single surgical procedure, it may be in multiple surgical procedures, where they'll do anywhere from 5 to 10 to 20 procedures to get a sense of how it's working and whether it really delivers on that 72-hour promise that we're making.

Fortunately, those are going very well, but they generally start those with only two to three surgeons. So, it takes time to get through that process and do their initial evaluation, then they want to do follow-up visits with those patients.

So, it's not as rapid as what we would like, but what we are seeing is based on the terrific results that they're getting with patients. We're leveraging that experience with their colleagues to get new surgeons added.

And I think that's one of the real benefits that we're going to be seeing the remainder of 2022 is as these trials are ongoing and the results continue to be positive that more and more surgeons will be using it.

So, that'll make a key impact on driving the volume at the individual account level, that and expanding the number of procedures that a surgeon uses ZYNRELEF..

One more question for Barry. As we think about ex-U.S. partnerships, can you just remind us where the product is approved, and where it's been filed? And do you expect, this partnership to significantly extend your cash runway, or there's other avenues also being evaluated? Thanks..

Sure, yes. So, the product is approved in Canada and the European Union and several other countries that accept the European Union approval, Iceland and other countries. The product is available for a submission in many other countries in terms of the package of data that we have is fileable in other countries.

We just have not yet moved forward to submit the product in other countries, but we're in discussions with companies about doing that. And so, the fact that the product is not approved in a region has not been an obstacle in terms of finding companies that are interested in moving forward in that region.

And as I said, the goal is through one or more partnerships to make significant headway in terms of the financial picture of the Company. We continue to look at ways to reduce burn. That's the additional approach.

And then, obviously, once we've completed both of those activities, we'll take a look and see if there's any additional gap that needs to be filled through another route.

And we'll certainly evaluate all possible approaches and make sure that we do -- take the best route for shareholders, and certainly at the current share price using equity is certainly very low on our list in terms of something that we'd want to do..

Our next question comes from Boris Peaker from Cowen. Please go ahead. .

First. I just want to understand -- my understanding is that there's a financial incentive for using a ZYNRELEF in the hospital setting compared to some of the other drugs available.

Can you confirm that? And are you seeing that in any way affecting sales? Why isn't it driving greater hospital adoption that we're seeing so far?.

John, do you want to take that?.

Sure. So, really, a couple of ways to look at that, Boris. You're correct. There is a financial incentive in using ZYNRELEF in the hospital outpatient setting. So, first is with reimbursement for Medicare patients where there's actually reimbursement, that's provided to ZYNRELEF.

ZYNRELEF is the only local anesthetic that is reimbursed for Medicare patients in the hospital outpatient setting of care. And if you look at it, a non-340B hospital, you make about $12.50 every time you use a 400-milligram vial of ZYNRELEF. And you make almost $75 per vial in a 340B hospital. So, very substantial benefit there.

You can bear that with a product like Exparel where if you use their WAC price since there's no reimbursement outside the surgical bundle, it costs $354. So, major benefit there.

If you also look at a hospital setting, if they're getting packaged reimbursement as part of the surgical bundle, because we have a significant benefit from a WAC perspective and also a 340B perspective, you can save with the 400-milligram about a $87 per unit compared to using Exparel and at 340B, it's 149% or 42%.

So, we get you both from a cost savings perspective, as well as a reimbursement perspective that it really benefits the hospital. As far as why it hasn't taken on quicker. If you look at it, we actually just got pass-through status on April 1st of this year. So, we are already starting to see some benefits with accounts looking to move more rapidly.

So, I would say that you will start seeing accelerated growth in the hospital setting of care as we go forward..

Got it. And my second question is on the financial strategy.

Are you considering just selling royalties or fully selling your non -- I don't know if they're considered non-core assets or basically the chemotherapy and nausea management franchise, or is that not something that you're considering at this point?.

Well, I think that Boris, it would be appropriate to say that we are certainly evaluating all different avenues with partnering as non-dilutive dollars being the primary target. And we feel very comfortable that we'll be able to generate significant deals there.

And then, as I said before, once we complete our cost cutting activities, get the burn down as well as bring in significant upfronts in terms of partnering, we'll take a look and see where the gap is and utilize one of several different approaches to fill the rest of that gap..

Our next question comes as a follow-up from Kelly Shi of Jefferies. Please go ahead..

So, the reorder rate for ZYNRELEF currently break down by 400- versus 200-milligram is 92% and 41% and seems like consistent from Q4.

I’m wondering how does the 200-milligram reordering rate would evolve into 2022? And the relevant question is, is the economic incentive for 200 versus 400 similar in terms of dollar value for hospital settings and also under 340B?.

John, you want to take that?.

Sure. So, Kelly, the first question I would say is that the price per milligram between the 400 and 200 is virtually identical. So, there is no real financial benefit of a hospital using one versus the other.

I think what you're seeing as far as usage with 26% of our business coming in the 200-milligram since launch is really reflective of only having one procedure that was indicated by the FDA that used the 200-milligram that was bunionectomy. So, as we expanded the label in mid-December, we started seeing a very significant growth of the 200-milligram.

In fact, during the first quarter, it grew by over 106%. So, it's growth is, is accelerating. And a lot of that is small to medium abdominal surgeries, as well as foot and ankle surgeries that are now available that weren't originally available, based on the FDA limitations of indication.

So, what we would expect is we've already seen very significant growth where we ended the first quarter at 41% reorder rate for the 200-milligram. Just through May 3rd, we're already up to 67%. And by the time we end this quarter, we would expect that we should have depleted the inventory of the 200-milligram. So, we're making great progress with that.

And if you have any follow-up questions, please let me know..

Thank you.

And also, could you comment on the split of volume and also dollar value for the relative use at hospital and use at hospital and ambulance center settings?.

Yes. Right now the split from a demand standpoint is 76% in the hospital outpatient setting -- or the hospital overall for the 400-milligram and 24% of the volume is in the ASC. It's pretty similar. I don't think there's a material difference between the ASC and the hospital.

It's probably a bit higher, I'm sure, if you look at it that the overall rate of ZYNRELEF since launch is 26% within the ASC market. It might be somewhere between 30% and 32% that would actually be in the ASC for the 200, and that's because bunionectomy would typically be done in more of an ASC setting as opposed to a hospital outpatient setting..

There are no more questions in the queue. This concludes our question-and-answer session. I'd like to turn the conference back over to Barry Quart for any closing remarks..

Thank you. And thanks to everyone for joining us on the call today. We're really pleased with the progress this quarter, and look forward to keeping you updated..

The conference is now concluded. Thank you for attending today's presentation. You may not disconnect..