Good day, and thank you for joining us. Welcome to the Heron Therapeutics Q1 2025 Conference Call. Currently, all participants are in a listen-only mode. Please note that today’s conference is being recorded. After the presentation, there will be a question-and-answer session. I will now hand the call over to your speaker today, Melissa Jarel, Executive Director of Legal at Heron.

Thank you, operator, and good morning, everyone. Thank you for joining us on the Heron Therapeutics conference call this morning to discuss the company's financial results for the quarter ended March 31, 2025. With me today from Heron are Craig Collard, Chief Executive Officer; Ira Duarte, Executive Vice President, Chief Financial Officer; Bill Forbes, Executive Vice President, Chief Development Officer; 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. Good morning, everyone, and welcome to Heron Therapeutics First Quarter 2025 Earnings Call. Today, we are extremely excited to share our results for the first quarter of 2025. After establishing the company's financial foundation in 2024, we are now focused on targeted product growth for our two key assets, ZYNRELEF and APONVIE, while continuing to maintain CINVANTI and APONVIE within clinics and select hospital accounts. With ZYNRELEF formulary status now covering approximately 19% of all orthopedic procedures and key catalysts such as our expanded label, the VAN launch, the approval of the NOPAIN Act, and the Crosslink partnership, we see a clear opportunity to drive deeper adoption in a market where we already have access and the potential to expand coverage as interest grows nationwide. In 2025, we will focus on disciplined execution, optimizing commercial performance and selectively expanding the team where it directly supports high-return growth opportunities. Looking at our achievements in Q1, we generated total net revenues of approximately $39 million, achieved a record quarterly adjusted EBITDA of $6.2 million and reported net income of $2.6 million. Since joining the company in 2023, our management team has been clear in our commitment to not only reach profitability but also to execute with consistency. In addition, we reached a settlement agreement with Mylan Pharmaceuticals regarding the CINVANTI and APONVIE products, avoiding costly litigation fees and removing uncertainty around the outcome of the litigation. Lastly, as we continue advancing our commercial plans, hiring the right commercial leader was a key priority. We're pleased to share that Mark Hensley joined us on April 28. Mark, who previously worked with me at Veloxis as our commercial lead, brings deep expertise from a career spent entirely in the hospital market. He is the missing piece to the puzzle as we move into this next phase of growth. Now moving on to product performance. The oncology franchise continues to outperform our expectations with combined net revenues from CINVANTI and SUSTOL reaching $28.6 million for the quarter. We have maintained market share in a highly competitive environment, and we believe these products will continue to deliver consistent performance throughout 2025. We are extremely pleased with the results of our oncology supportive care franchise, and we are actively exploring creative strategies to drive continued growth in this market. CINVANTI, our lead product for chemotherapy-induced nausea and vomiting, or CINV, continues its strong growth. While I spoke earlier about the overall oncology franchise, you can see on the left side of this slide that CINVANTI is steadily increasing in average daily units, even within a highly competitive market. Now that the company is commercializing CINVANTI through a more focused account team across our entire portfolio, we are seeing positive results. New accounts shown in green on the graph, and defined as those who have ordered within the past three months are growing at a healthy rate and have benefited from the IV bag shortage in October of last year as reflected in the spike on the graph. Existing accounts depicted by the blue line and defined as those with continuous product orders are also experiencing steady growth since the new management team joined in April of 2023. CINVANTI's well-established safety profile and competitive advantages such as the IV push administration support its continued upward trajectory and unit growth. The key to sustaining consistency with this product will be the strategic management of our average selling price or ASP. Now moving on to the acute hospital side of our business. Both APONVIE and ZYN experienced significant growth in Q1 of 2025, up over 432% and 60%, respectively, compared to the same period last year. We believe these two products have significant growth opportunity. Building on our efforts to strengthen our financial foundation last year, including a significant cost restructuring and the completion of numerous strategic initiatives, the full focus of the organization will emphasize product growth and execution this year. Today, the company is well positioned for sustainable, scalable, and capital-efficient growth. With APONVIE, we are beginning to see a dramatic shift in key trends, particularly in average daily units and the number of ORE accounts. We believe this growth will continue throughout 2025 and beyond, as our pull-through efforts drive expanded product adoption within hospital institutions. Our goal with APONVIE is to continue building awareness, focusing our message on its strong safety profile and unique mechanism of action. Postoperative nausea and vomiting, or PONV, is a serious issue that can often be mitigated by the addition of APONVIE as the provider's third agent of choice in a multi-modal approach to PONV therapy for moderate to severe cases. A similar positive trend is emerging with ZYNRELEF. Our daily unit sales are steadily increasing, and we are onboarding new accounts at a much faster rate than in the past. With the VAN launch just getting underway and the Crosslink partnership fully integrated, we believe ZYNRELEF is positioned to show a significantly stronger growth trajectory as we approach Q3 and beyond. Many of the current initiatives around ZYNRELEF are already in motion, but require time to take full effect. As both daily unit volumes and the number of order accounts continue to rise, we remain confident in ZYNRELEF's multi-hundred-million-dollar potential provided we can continue to improve execution and expand usage within our existing access points. Our top priority for 2025 is disciplined execution, converting access into sustained case-level market share, optimizing our current commercial footprint, and selectively investing in team expansion where it directly supports high-return growth opportunities. I will now turn the call over to Ira Duarte, our CFO, to cover our financials and update our financial guidance. Go ahead, Ira. Thank you, Craig.

Our product gross profit for the three months ended March 31, 2025, was $30.4 million or 78%, which increased from 76% for the same period in 2024. This is due to a lower cost per unit in the three months ended March 31, 2025, as a result of production efficiencies compared to the same period ended March 31, 2024, offset by an increase in the units sold. G&A expenses for the three months ended March 31, 2025, were $25 million compared to $26.4 million in the same period in 2024. The decrease was primarily related to decreases in personnel and related costs and legal expenses related to the timing of patent litigation, offset by increased sales and marketing spend to support revenue growth. Research and development expenses were $2.3 million for the three months ended March 31, 2025, compared to $4.6 million in the comparable period in 2024. The decrease was primarily related to decreases in personnel and related costs due to the terminations in 2024 as well as a decrease in development activities. We achieved net income for the three months ended March 31, 2025, of $2.6 million. During the comparable period in 2024, we had a net loss of $3.2 million. Cash and short-term investments at March 31, 2025, was $50.7 million. If we had excluded depreciation and stock-based compensation, our adjusted EBITDA results would have been a positive $6.2 million operating income compared to a loss of $0.7 million for the same period in 2024. We are revising our previously given guidance for adjusted EBITDA from a range of $0 to $8 million to a range of $4 million to $12 million. And now we would like to open the call for any questions.

Thank you. Our first question comes from Clara Dong with Jefferies. You may proceed.

Hi guys. Congrats on the great quarter. So, my question is on the Silent litigation settlements to understand you might not be able to share details of terms quantitatively. So, wondering whether you can give any qualitative comments? And how should we think about the implications of settlement for maybe your near-term financials or guidance? Thank you. And I have a follow-up also.

We aim to not only continue with CINVANTI, but also to grow APONVIE.

Got it. Based on what you've seen so far with the ZYNRELEF launch and considering the partnership that began in April, how should we anticipate sales momentum for the second half of the year?

Yes. No, it's a great question because when you look at sort of Q4 to Q1 and net revenues were fairly similar. But if you look at demand, we were actually up 2% in unit demand and the market was actually down 5.3%. And so what we foresee in front of us, we've got a number of accounts actually, I think there's six accounts right now that we're in the onboarding process, meaning they've gone through P&T and we're now getting to train physicians and training the hospital and getting things in the Epic system and so forth, and this just takes time. And so, one of the things that we're extremely excited about is bringing these accounts on board. And so, for us, we can sort of see this coming. And if you think about all the things that are moving as far as moving pieces right now with the Crosslink partnership and just our messaging and really getting us to hit on all cylinders. We see this all kind of coming together midyear and beyond. And so, I feel extremely confident that you're going to really see a different inflection as we move towards the end of the year, and we feel very comfortable with consensus numbers and hitting our targets as we move forward.

Got it. Thank you and congrats again.

Thank you. Our next question comes from Serge Belanger with Needham. You may proceed.

Hi, good morning. Thanks for taking my questions. The first one, Craig, can you just talk about the overall Q1 trends, whether the usual seasonality was what you were expecting or similar to prior years? And then maybe just secondly, Ira, just highlight some of the changes to the guidance and what's driving the EBITDA increase? Thanks.

Thanks, Serge. And great question. Again, I thought the trends were fairly consistent with what we've seen in the past, whether it's co-pay resets or deductibles, what have you, you typically see a little bit of a fall-off in Q1. But again, we were pleased because with all the other things going on, we were actually up versus the market. So I think it's a positive sign. But again, we have much bigger hopes than growing 2% versus the market. And so, I think as we move forward, again, as I said before to Clara's point, I think there's a lot coming at the end of the year. With the number of accounts we have coming on board and really just getting this Crosslink partnership where it's really just functioning and going just to continue to become more efficient. One of the things, too, that we're looking to do is that as we're onboarding several of these accounts, we're looking to do a little bit more of a targeted expansion, as I said in my prepared remarks, and what I mean by that is that as we onboard these accounts, we, from time to time, have gaps as far as being able to do this as fast as we want, and we may need more coverage in a certain account based on sort of the cross-link overlay of their footprint. And so, we are going to expand in some areas like that. It may be headcount such as an MSL, a medical sales liaison, it may be some kind of clinical support staff or even a sales rep. And so we're really taking a much more targeted approach versus just an all-out expansion. And we're going to do that where we have access and where things are going well as far as a new account coming on board and so forth. So, that's why we're really upbeat about what we see and what’s coming towards the end of the year. So I'll turn it over to Ira on the other question.

Yes. As far as EBITDA, thank you for the question. EBITDA, we obviously had a very strong first quarter and some of that is due to efficiencies on the overall spend. Some of that is on the announcement for the settlement, affecting future spend. So overall, we feel very comfortable that the rest of the year will be fairly positive and have revised guidance for that.

Thank you.

Thank you. Our next question comes from Carl Byrnes with Northland Capital Markets. You may proceed.

Thanks for the question, and congratulations on the results and the progress. It looks like the gross profit margin came in around 78.3%. I'm wondering if you can talk a little bit about how you expect that to progress through the balance of the year or if there were any anomalies. Obviously, the CINVANTI sales were higher than expected, which should be part of it. Thanks. And then I have a follow-up as well.

Thank you, Carl. Yes, our gross margin was somewhat higher than usual. We've indicated before that we expected to be in the low to mid-70s range. The increase was indeed attributable to the rise in CINVANTI sales. We are currently utilizing two different manufacturers, and we are still relying on our primary manufacturer at a larger scale, which is where most of the losses occurred. As the year progresses, we plan to incorporate some batches from our smaller-scale manufacturer, which may result in a slight decrease in the margin. However, we still anticipate remaining in the mid-70s range.

Got it. Thanks. And then switching gears to APONVIE as a third-line agent. Obviously, the sales there, again, higher than expected. How do you see it progressing? And what do you see as sort of near-term or long-term potential in terms of peak sales? That's obviously referencing long term? Thanks.

Yes, we sometimes focus a lot on ZYNRELEF, but APONVIE is a product that, once we establish it in a hospital system, tends to remain with those accounts. It’s a product that performs exceptionally well and is very safe, and we consistently have positive experiences with it. The challenge we face is that while we are securing many formulary and P&T wins, which grant us access, APONVIE typically starts its journey in specific areas like bariatric surgery. As it gains traction, its usage tends to expand throughout the hospital. We are currently working on this, and it presents a dual challenge. As we’ve mentioned, integrating our Crosslink partnership enables our representatives to spend less time in the operating room and more time selling within the hospital. This should positively influence the pull-through for APONVIE. For instance, if we have access through bariatric surgery, our reps can engage with nurses and anesthesiologists, increasing pull-through and system-wide adoption of APONVIE. I believe APONVIE will continue to expand due to its unique safety profile and mechanism of action. Our primary aim is to be the top choice for a third-line agent, which could lead to substantial revenues since there are roughly 70 million surgeries annually in the U.S., with about half being moderate to severe cases, our target patient demographic. Therefore, we anticipate significant growth moving forward, especially as we strengthen our partnership with Crosslink and enable our reps to operate outside of the OR suite.

Great. Thanks. That's very helpful. And then switching back to ZYNRELEF. Considering the formulary wins and new accounts coming on, and obviously, you have a feel for the timing of that. How do you see an inflection of the timing of an inflection where similar, you start achieving sequential revenue growth? Again, I know you mentioned 2% unit growth versus the market being down that may be related to somewhat related to deductible resets and such, given the fourth quarter, first quarter transition. But I'm just wondering when you might expect to see that inflection and ZYNRELEF sales taking off? Thanks.

We currently have five new accounts in Michigan, North Carolina, and a few other states that are ready to start onboarding. These accounts will lead to a significant number of surgeries across various areas, not just orthopedics. They are also connected to our Crosslink partnerships, which increases our access. We anticipate that these accounts will complete the onboarding process around June or July. As we progress into the latter part of Q3 and into Q4, I expect to see a noticeable change in our product. I believe this will lead to a significant shift, especially as we approach the end of the year and into 2026. I am confident that we will meet our financial targets this year, and as these accounts come online and we improve our partnership with Crosslink, I believe it will positively impact the direction of our product.

Great. Excellent. And again, congratulations on the progress and results. Thanks.

Thank you. I would now like to turn the call back over to Craig Collard for any closing remarks.

So I just would like to thank all the employees at Heron. We had a great quarter, and we continue to execute as we move forward. And we want to thank everyone for being on the call today, and we'll see you next quarter.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.