Heron Therapeutics, Inc. /De/ Q1 FY2022 Earnings Call

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 the 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. The 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 the first quarter compared to the 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 the full year 2022. During the first quarter, we continued to prosecute our NDA for HTX-019 for postoperative nausea (PONV), which has the 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 in 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, the 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.

Thank you, Barry. I'm excited to share our first quarter commercial results. We have made significant progress with the ZYNRELEF launch. During my presentation, I'll provide updates on key performance metrics related to this progress and conclude with an overview of our strong first quarter commercial results in our oncology care business. I'll begin by summarizing the highlights of the ZYNRELEF launch to date by sharing our scorecard of leading indicators. Over the first three quarters of our launch, we've maintained a strong addition of new unique ordering accounts, growing by about 50 accounts per month. We are also encouraged by the increase in account reorder rates, which rose from 50% in the first three months to 80% in the first nine months. We continue to secure formulary approvals for ZYNRELEF, achieving a run rate of 32 approvals per month. Importantly, we're noticing significant growth in integrated delivery networks adding ZYNRELEF to their formulary. We believe gaining IDN support is essential for potential therapeutic switches from Exparel to ZYNRELEF in future procedures. Additionally, since our last earnings call, ZYNRELEF has gained pass-through status for separate reimbursement outside of the surgical bundle payment, giving us a competitive edge as ZYNRELEF is the only local anesthetic separately reimbursed in the hospital outpatient setting, accounting for an estimated 59% of our targeted procedures. A benchmark of unique ordering accounts during the first nine months of launch, based on Symphony Health data, reveals that we have added 451 ordering accounts, up 46% from the 309 accounts in the first six months. Furthermore, 80% of accounts reordered in the first nine months, marking the highest reorder percentage among all four products analyzed. This growing reorder rate indicates strong real-world experiences that surgeons are having with their patients. While the early results for ZYNRELEF are promising, expanding the number of ordering accounts remains a key priority for 2022, and we are making strong strides toward that goal in April, where we added 61 new unique ordering accounts, bringing our total to 512 in the first 10 months since launch. This accounts for ZYNRELEF orders from 27% of our 1,900 target accounts. Unit demand for ZYNRELEF grew by 68% in the first quarter compared to the fourth quarter. However, it is important to note that the COVID Omicron surge hindered ZYNRELEF growth during late December into early February. During this surge, many customers faced delays in elective surgeries due to policy decisions, positive pre-op COVID tests, and staff shortages. Nonetheless, we demonstrated monthly growth of 42% in February and 25% in March. In the first quarter, the 200-milligram SKU demand surged over 106%, reflecting the broader expansion of ZYNRELEF’s label for surgical procedures like bariatric, foot, and ankle. Although April marked the highest demand since launch, monthly growth slowed compared to the first quarter's prior months. Our sales team reported a slowdown in elective procedures due to spring break for patients and surgeons. To verify this feedback, we analyzed the five-week period ending April 15th against the previous five-week period. This demand analysis shows that ZYNRELEF grew by 12% during this period, while Exparel declined by 3%. We remain focused on the level of ZYNRELEF inventory in the distribution channel. As noted during our fourth quarter call, there was excess inventory initially stocked within the channel. However, we have made meaningful progress in reducing that inventory because of increased ZYNRELEF demand unit sales. First quarter net sales reached $1.1 million, including $300,000 in returns for short-dated products, and our ongoing progress is aimed at reducing initial stocking inventory driven by demand orders from hospitals and ASCs. To better understand inventory levels in the distribution channel, we report ex-factory reorder rates based on demand unit volume for both SKUs. Our goal is to achieve ex-factory orders equaling 100% of demand unit volume, ensuring the distribution channel replenishes inventory for every unit sold, whether in hospitals or ASCs. As of March 31st, the 400-milligram SKU reorder rate was at 92% of demand unit volume, and by May 3rd, the ex-factory order rate had surpassed 100% of the demand unit, indicating stabilization of the 400-milligram SKU and alignment of ZYNRELEF demand units with future ex-factory unit sales. However, the 200-milligram SKU reorder rate through March 31st was 41%, suggesting some excess inventory at the end of the first quarter. This is not unexpected, as the 200-milligram SKU comprises 26% of total ZYNRELEF demand unit volume. We have seen considerable improvement in the 200-milligram ex-factory reorder rate, now at 67% as of May 3rd, with growth for the 200-milligram SKU accelerating. We anticipate depleting the remaining excess 200-milligram inventory by the end of the second quarter, similar to what we accomplished with the 400-milligram SKU in the first quarter. Now, let’s examine our new business pipeline. This slide highlights the continued swift progress ZYNRELEF is making with formulary approvals. By the end of February, we reported 260 formulary approvals, which has since increased at an average rate of 30 new approvals per month, now totaling 319. Importantly, over 90% of hospital P&T committees are now adding ZYNRELEF to their formulary. Notably, around 68% of our formulary approvals are for unrestricted use of ZYNRELEF. We are also advancing in obtaining unrestricted formulary approval for the broader label endorsed by the FDA in mid-December. The remainder of the second quarter will see around 60 additional P&T committees scheduled to review ZYNRELEF before the quarter ends. Additionally, multiple hospitals and IDNs that had implemented a one-year moratorium on new product additions following FDA approvals will become eligible for P&T committee reviews in the third quarter. Securing new formulary approvals is crucial for establishing a pipeline of new ZYNRELEF business and remains a top priority for our commercial team. Next, I want to emphasize our strategy of targeting integrated delivery networks (IDNs) to create new system-wide opportunities for therapeutic interchange from Exparel to ZYNRELEF for indicated procedures. To date, 46 IDNs have added ZYNRELEF to their formularies, encompassing over 1,100 institutions across their systems, with 41% of approvals for unrestricted use of ZYNRELEF. These IDNs represent approximately 676,000 annual ZYNRELEF indicated procedures and $77 million in Exparel sales. Our success with IDNs allows us to engage with senior decision-makers who are assessing the switch from Exparel to ZYNRELEF for indicated procedures. Let's focus on the 13 IDNs interested in potential therapeutic interchange. Given ZYNRELEF’s expanded label indications, it's anticipated that IDNs are eager to save millions on a product that has shown superior clinical results compared to the standard of care, bupivacaine. We are enthusiastic about partnering with both pharmacies and physicians to facilitate their internal evaluations of ZYNRELEF. Of the 13 IDNs showing interest, 11 have already initiated internal trials with ZYNRELEF, and initial feedback on these trials has been very positive across various surgical procedures. While developing a partnership with a large IDN can take time, we expect the first therapeutic interchange decision from an IDN 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 transformative for us. ZYNRELEF is now the only local anesthetic separately reimbursed in the hospital outpatient setting for the next three years, which provides a significant competitive advantage given that we are less expensive than generic bupivacaine, as Exparel’s pass-through status in this setting expired years ago. This important approval builds on our existing strengths in reimbursement. In the fourth quarter, CMS assigned ZYNRELEF a specific C-code C9088 for separate reimbursement in the ASC setting, effective January 1, 2022, which is permanent even beyond the typical three-year pass-through period. Our market access team has excelled at obtaining reimbursement coverage from commercial and Medicaid payers. We have secured separate reimbursement for ZYNRELEF beyond the surgical bundle payment, covering over 123 million lives, and it is also reimbursed in some hospital outpatient settings. A critical piece of our pricing strategy, even without separate reimbursement, is that our lower acquisition cost benefits customers across care settings where the drug may be paid under the surgical bundle payment. This next slide illustrates various savings from purchase price and reimbursement benefits. Switching to ZYNRELEF can save customers 25% to 32% based on wholesale acquisition cost, and 42% to 48% based on our 340B price compared to Exparel. This presents a substantial financial incentive for changing to ZYNRELEF. Additionally, using ZYNRELEF is profitable for Medicare patients in both the hospital outpatient and ASC care settings. In challenging financial circumstances, 340B accounts can benefit by over $429 per patient by selecting ZYNRELEF instead of Exparel. Given these economic advantages, it’s clear why large IDNs are now pursuing therapeutic interchange evaluations. I’ll conclude the ZYNRELEF section with our primary priorities for 2022. Our main priority is to leverage new label indications for accelerated growth by expanding surgeon usage into new procedures. We are also making great strides with accounts having existing ZYNRELEF formulary approvals to remove restrictions allowing us to be utilized in all newly indicated surgical procedures. Our second priority is to boost usage within ordering accounts by increasing the number of surgeons regularly using ZYNRELEF. Many accounts initially tested ZYNRELEF with only two or three surgeons from larger practices. Given the excellent patient outcomes, we are leveraging their experiences to encourage expanded usage with their colleagues. Our third priority is to secure formulary approvals at new targeted IDNs and hospitals, as increasing access in our growth pipeline and therapeutic interchange opportunities is vital. Finally, we aim to maximize our separate reimbursement outside the surgical bundle payment for ZYNRELEF. The pass-through status effective April 1st is already yielding positive results. In summary, we have made significant progress with leading indicators that bolster our confidence in a strong growth year for ZYNRELEF in 2022. Now, I would like to transition to a review of our first-quarter results for our oncology care franchise. In the first quarter, our oncology care team effectively grew our CINV portfolio net sales by 13% compared to the prior quarter, driven by a 22% increase in CINVANTI demand units in the clinic setting, a market heavily influenced by generic competition. Our CINV net sales guidance for the second quarter of 2022 is projected to be between $22 million and $23 million, as gross-to-net revenue will reflect a slight decrease due to higher demand units sold during the quarter. We believe both CINVANTI and SUSTOL are positioned for growth in 2022 due to two main factors. First, we are seeing improved reimbursement tailwinds as the average sales price reimbursement for generic fosaprepitant has dropped to $26.35 in the second quarter of 2022. Additionally, as of January 1st, separate reimbursement also ended in the hospital outpatient segment, making the CINVANTI value proposition significantly more appealing this year. The ASP reimbursement for IV Akynzeo has decreased by over $180 over the past year, reducing the value it can offer and benefiting both SUSTOL and CINVANTI. As Barry indicated, we are now providing full-year 2022 CINV net sales guidance in the range of $89 million to $93 million, reflecting a 7% to 11% increase over the previous year. The ongoing IV bag shortage some accounts are facing could serve as a tailwind for CINVANTI, as it is the only NK-1 that does not necessitate an IV infusion bag. Furthermore, with a backlog of oncology patients resulting from COVID, we believe there are opportunities for both products to be used among HEC and the majority of MEC patients as new patients reenter the system for treatment, creating substantial growth potential. That concludes my prepared comments. I will now hand the call back over to 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.

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 an 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 certainly a key catalyst coming up in the near future. 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 it 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 and 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 those that have a moratorium as based on their policy, 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. 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. That's something that we continue to work with based on the fact that we got superior clinical data, head-to-head against bupivacaine, and we’re trying to work through the surgeons. Those are generally driven by pharmacy where they're trying to maintain budgets. 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, that's a great question. We're experiencing impressive reorder rates, with 80% of accounts placing additional orders for ZYNRELEF in the first nine months. This is particularly encouraging, as it's primarily driven by surgeons who adopted the product from the beginning. Feedback from these surgeons indicates they are achieving better results with ZYNRELEF compared to the outcomes seen in our clinical trials, largely due to previous limitations involving multimodal analgesics. Their response has been outstanding. Just last week, I spoke with a surgeon who previously used Exparel and has treated 400 patients with ZYNRELEF over the past several months. He described it as a complete 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 concluding 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 the first quarter would be really driving use and the demand units. But that probably 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 one thing that certainly has slowed down the launch was the initial label. We've now addressed that. 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. From my perspective, Josh, if you look at a number of indicators, the access and formulary approvals have been doing extremely well. The number of ordering accounts has been doing extremely well; the reimbursement that we've been able to get, not only with just getting pass-through status, but with 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. 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 market research indicated that surgeons would use it broadly off-label, that's not what happened in practice. We're starting to see that change now. 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. 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 the 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 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. Obviously, the difference is 24% being generated by the ASCs. If you look at the procedures that are being used, 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 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. Then, you have to get computerized into the order entry system. The pharmacy has to order, and it has to get to the 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. It may be in a single surgical procedure or 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, and then they want to do follow-up visits with those patients. 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. 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. That will 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 are there 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, including Iceland. The product is available for submission in many other countries; 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. 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. 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. We'll certainly evaluate all possible approaches and make sure that we take the best route for shareholders, and certainly at the current share price, using equity is 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 want to clarify my understanding that there is a financial incentive for using ZYNRELEF in hospitals compared to some other available drugs. Can you confirm this? Are you seeing it impact sales in any way? Why isn't it leading to greater adoption in hospitals 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. First, 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. If you look at it, a non-340B hospital, you make about $12.50 every time you use a 400-milligram vial of ZYNRELEF. You make almost $75 per vial in a 340B hospital. So, very substantial benefit there. You can compare 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, a major benefit there. If you also look at a hospital setting where they're getting packaged reimbursement as part of the surgical bundle, we have a significant benefit from a WAC perspective and also a 340B perspective; you can save about $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 really benefits the hospital. As far as why it hasn't taken on quicker, we actually just got pass-through status on April 1st of this year. 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. My second question is about your financial strategy. Are you thinking about selling just royalties or completely selling your assets related to chemotherapy and nausea management, or is that not something you are considering right now?

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. We feel very comfortable that we'll be able to generate significant deals there. 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 breaks 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 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%. Its growth is accelerating. 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%. 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. 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 in the 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; 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 now disconnect.