HERON THERAPEUTICS, INC. /DE/ Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Financing Completion: Successful completion of financing allows focus on commercial execution.
• Financial Performance: Total net revenues $38.2M for Q3, $114.3M year-to-date; adjusted EBITDA $1.5M for Q3, $9.5M year-to-date; gross margin 68.8% (down due to SUSTOL inventory write-off).
• Product Highlights:
  • ZYNRELEF: 49% year-over-year growth in Q3; J-code effective Oct 1, streamlining reimbursement; prefilled syringe on track for late 2027 approval.
  • APONVIE: 173% year-over-year growth in Q3; dedicated team launched, partial deployment in Q3, full activation in Q4; 2025 PONV guidelines expected in Q4.
  • CINVANTI: Steady anchor; APONVIE expansion driving CINVANTI pull-through in hospitals.
• Initiatives: CrossLink Ignite program, VAN launch, dedicated IBM team for APONVIE; ZYNRELEF's J-code implementation

Segment Performance

• Acute Care:
  • ZYNRELEF: Q3 2025 net sales $9.3 million, 49% year-over-year growth; year-to-date $25.8 million.
  • APONVIE: Q3 2025 net sales $3 million, 173% year-over-year growth; year-to-date $7.6 million.
  • Acute care franchise net sales in Q3: $12.3 million, up from $10.7 million in Q2.
• Oncology Care:
  • CINVANTI: Q3 2025 net sales ~$24 million, 6% year-over-year growth; year-to-date ~$72 million.
  • SUSTOL: Q3 2025 net sales $1.9 million, 32% year-over-year decline; year-to-date $5.7 million.
  • Oncology franchise net sales in Q3: $25.9 million

Guidance

• Reaffirmed net revenue guidance: $153M to $163M; adjusted EBITDA guidance: $9M to $13M

Risks

• SUSTOL: Continued downward trend due to competition; plan to wind down commercialization over 12 months.
• Competitive Pressures: Impact on CINVANTI's ASP; potential loss of accounts or need to adjust pricing.
• Regulatory and Development Risks: Uncertainties around prefilled syringe approval timeline and regulatory changes

Question and Answer

Q: Turning back to the slide with respect to ZYNRELEF in the first few weeks of October, it looks like you're pushing 18% in terms of increase. And that's on a month-over-month basis. Is that correct?

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

Q: 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 ZYNRELEF and APONVIE, and how are you thinking about potentially adding to those teams in 2026 or sort of the measure of success to potentially add to those teams in 2026? And then any additional investments you're thinking on the commercial side behind the 2 products in 2026?

A: 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 ZYNRELEF team, a dedicated APONVIE team. That APONVIE team is also beginning to do some work with CINVANTI. And so we think there's a lot of synergy there on both sides. And so the increased focus, we believe, has -- is a partial impact on the results we're seeing in the quarter and certainly as we go forward into next year. In addition to that, we have better alignment with our distributor partners. And so certainly, we think all of those things being put together will result in increased sales as we go forward. Craig Collard: 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.

Q: 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?

A: 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. Kevin Warner: 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 ZYNRELEF indicated procedures, especially our target procedures, have some form of coverage, whether it's be a Medicare or a commercial plan. We have a few other things from the economic perspective that are tailwinds coming into 2025 for us when you look at the teams model by CMS, which is a value-based care model. So你're looking at things like patient-reported outcomes and satisfaction. So do you feel pain? Do you have PONV? That's going to be a significant tailwind. Also the dissolution of the inpatient-only list specifically about 285 orthopedic procedures are coming off that inpatient-only list. So that will make them outpatient eligible procedures now and thus reimbursable under things like the NOPAIN Act. So a lot of value and impact is coming to our patients and really changing the model to a value-based care, looking for these advances in our health care system, long-acting advances like ZYNRELEF and APONVIE that can help facilitate this transition as we're moving our phases of care. Craig Collard: 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.

Q: This is [indiscernible] on for Clara. Congrats on the quarter. So my question is about the ZYNRELEF prefilled syringe program. So you said if successful, it's expected to be approved in 2027. And based on your feedback from physicians on VAN and how do you expect the prefilled syringe program to help on the franchise on the long-term? And how can we think of the momentum there?

A: 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 ZYNRELEF, the VAN has been a big step forward. But the prefilled syringe takes it to another level. Obviously, in that -- in this scenario, we're just going to go ahead and open up the prefilled syringe packaging and place it in the surgeon's hands so that they can -- it can go ahead and install the product. So I think when it comes to receiving the product, it simplifies things even to a much greater extent and obviously, will speed, I believe, the conversion of accounts into use of ZYNRELEF. I don't know if Mark has any other comments on it. Mark Hensley: No, I think that's good. Craig Collard: Yes. I would just add, I think Bill is spot on it. When你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.

Q: Okay. I do have a follow-up. So for the J-code for ZYNRELEF, it's also applicable to the prefilled syringe and also for the VAN, right?

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