Good day, and thank you for joining us. Welcome to the Heron Therapeutics Q3 2025 Conference Call. Please note that today's conference is being recorded. I will now turn the call over to Melissa Jarel, Executive Director of Legal. Please proceed.

Thank you, operator, and hello, everyone. Thank you for joining us on the Heron Therapeutics conference call today to discuss the company's financial results for the quarter ended September 30, 2025. With me today from Heron are Craig Collard, Chief Executive Officer; Ira Duarte, Executive Vice President and Chief Financial Officer; Bill Forbes, Executive Vice President, Chief Development Officer; Mark Hensley, Chief Operating Officer; and Kevin Warner, Senior Vice President, Medical Affairs, Strategy and Engagement. For those of you participating via conference call, slides are made available via webcast and can also be accessed via the Investor Relations page of our website following the conclusion of today's call. Before we begin, let me quickly remind you that during the course of this conference call, the company will make forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company's projections, expectations, plans, beliefs, and future performance, all of which constitute forward-looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. These statements are based on judgment and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties associated with the forward-looking statements made in this conference call and webcast are described in the safe harbor statement in today's press release and in Heron's public periodic filings with the SEC. Except as required by law, Heron assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. And with that, I would now like to turn the call over to Craig Collard, Chief Executive Officer of Heron.

Thanks, Melissa. Hello, everyone, and welcome to Heron Therapeutics Third Quarter 2025 Earnings Call. Today, we're thrilled to share our third quarter results and provide insight into how product sales are trending. I'd like to begin by highlighting several key accomplishments from the quarter. One of the most significant milestones was the successful completion of our financing. This has been an overhang on the company since I joined, and we're glad to have it behind us. With this resolved, management can now fully focus on commercial execution and product growth. Beyond the successful financing, team Heron delivered strong operational and financial performance in the third quarter. We generated total net revenues of $38.2 million for the quarter and $114.3 million year-to-date. This performance resulted in adjusted EBITDA of $1.5 million for the quarter and $9.5 million year-to-date. Our gross margin was 68.8%, which is slightly down from previous quarters, primarily due to a one-time write-off of SUSTOL polymer inventory. SUSTOL has been trending downward over the past several months due to increased market competition, and we expect this trend to continue for the foreseeable future. CINVANTI, on the other hand, continues to exceed our expectations. We've maintained a conservative outlook this year, anticipating a potential slight decline in CINVANTI performance as we move into Q3 and Q4. So far, that decline has not materialized. Despite ongoing competitive pressure that has historically impacted our average selling price, we're pleased that net sales are remaining fairly consistent. We believe this positive trend will continue through Q4 and into next year. Turning to our acute care portfolio, we implemented several new initiatives in Q3, including the CrossLink Ignite program, an incentive-based initiative to improve distributor engagement, the launch of the 200-milligram vial access needle and the creation of the IBM team, a dedicated sales force focused on APONVIE only. All of these initiatives were rolled out at different times during the quarter and are beginning to have a meaningful impact. That's why we've consistently stated our belief that the acute products will begin to inflect more prominently as we move into late Q3 and Q4 of 2025. ZYNRELEF net sales grew 49% in Q3 2025 compared to Q3 2024, and APONVIE net sales grew 173% in that same time period. More importantly, we're finally seeing real momentum in acute care. While quarterly net revenues and unit demand were solid, weekly unit demand from late September through October has been the highest we've ever seen, clearly indicating a possible trend break. Mark will provide more detail on this in his prepared remarks. Lastly, our J-code for ZYNRELEF went into effect on October 1. This is a significant win for Heron and for the providers who rely on ZYNRELEF in their practices. The J-code will streamline reimbursement and reduce administrative burden, especially as the NOPAIN Act continues to gain traction. We believe this change will improve access and coverage across both government and commercial payers, ultimately supporting broader adoption and better patient outcomes. Also, our prefilled syringe continues to advance with a timeline to possible approval in late 2027. Bill Forbes, our Head of Development, will address any questions regarding PFS and other development initiatives in the Q&A. This quarter has been both busy and successful for Heron. With increasing demand for ZYNRELEF, APONVIE, and even CINVANTI, we're extremely excited about the trajectory of the business moving forward. I'd now like to turn the call over to Mark Hensley, our Chief Operating Officer.

Thanks, Craig. In acute care, ZYNRELEF kept its momentum in the third quarter. This is a site-by-site, case-by-case adoption curve. Access enables OR-proved converts, protocols make it stick. We focused on removing friction and tightening execution. The VAN made prep in the OR easier, the Ignite program kept distributors focused on accounts we can win. Our education and medical support teams help standardize technique and support protocol adoption. And as of October 1, ZYNRELEF has a permanent product-specific J-code, which makes billing conversations clearer. Stepping back, the theme is friction removal and focus. Those same disciplines translated to both APONVIE and CINVANTI as well. In oncology supportive care, CINVANTI remains a steady anchor. As APONVIE expands and deepens our relationships with anesthesia and pharmacy, we see CINVANTI ordering rise in those hospitals. Let me show you how this progress shows up in the revenue numbers on Slide 6. For our acute care franchise, net sales were $12.3 million in the third quarter, up from $10.7 million in the second quarter. ZYNRELEF net sales were $9.3 million. That is a 49% growth year-over-year versus $6.2 million in the third quarter of last year and up from $8.2 million in the second quarter. The drivers are consistent, the VAN, the Ignite program focusing distributors on winnable accounts, support from our education and medical support teams and now permanent J-code clarity. APONVIE net sales were $3 million. That is a 173% growth year-over-year versus $1.1 million last year and up from $2.5 million in the second quarter. Third quarter APONVIE growth occurred before the dedicated team was fully active. The team finished training in October and entered the field in early Q4 to support momentum. Now let me show how this demand shows up in ZYNRELEF operating metrics on Slide 7. Our installed base continues to expand as sites move from first case to protocolized use. Average daily units increased from 882 in the third quarter last year to 1,127 in the third quarter this year, an increase of about 28%. Ordering accounts rose from 705 to 833 over the same period. This comes from friction removal and focus, the VAN, Ignite program, our education and support teams, and permanent J-code clarity streamlining reimbursement. You will also see October plotted on the line, significantly above September. It is a preliminary single month and not a proxy for the fourth quarter. We will stay disciplined and let the quarter play out. With that context, let's turn to Slide 8 and APONVIE. APONVIE's trajectory is strong. Demand units grew 142% year-over-year. Average daily units increased from 418 to 998 and ordering accounts increased from 299 to 405. We launched the dedicated APONVIE team on July 1, six representatives focused on high-potential hospitals. The team completed full training in October, so Q3 reflects partial deployment. Full activation supports momentum going forward. In addition, the 2025 PONV prophylaxis consensus guidelines are expected to be published in Q4. APONVIE is anticipated to be part of the guidelines, which should significantly increase awareness of its availability and clinical profile. We look forward to aligning our education and disseminating the information with our recently expanded field sales and medical teams. Now turning to the oncology care franchise on Slide 9. Oncology franchise net sales were $25.9 million in the third quarter. CINVANTI net sales were approximately $24 million, up about 6% year-over-year and stable sequentially. As APONVIE broadens anesthesia and pharmacy relationships, we are beginning to see CINVANTI pull-through in those same institutions. SUSTOL net sales were $1.9 million, down about 32% year-over-year. We plan to wind down commercialization over the next 12 months while we evaluate potential product updates with a possible late 2027 reintroduction subject to development and regulatory progress. We will continue to support customers and manage the transition responsibly. To wrap up, we are seeing structural progress. The VAN, the Ignite program, clinical education and permanent J-code clarity are turning ZYNRELEF first cases into durable protocols. APONVIE's hospital curve continues to strengthen, supported by a fully trained and strategically aligned team positioned ahead of the imminent release of the updated 2025 PONV prophylaxis consensus guidelines. CINVANTI remains a stable anchor and as APONVIE expands hospital relationships, we believe CINVANTI will benefit. October stepped up for ZYNRELEF, but it is a preliminary single month. We will stay disciplined and let the quarter play out. Thanks, and I'll now turn it over to Ira.

Thanks, Mark. Our product gross profit for the three months ended September 30, 2025, was $26.3 million or 68.8%, which decreased from 71.2% for the same period in 2024. This decrease is due to an increase of $1.4 million of inventory reserves and write-offs recorded and an increase of $1.3 million in the cost of units sold, primarily due to supplier mix. For the nine months ended September 30, 2025, our product gross profit was $84.1 million or 73.6%, which increased from 72.5% for the same period in 2024. This increase is due to an increase in units sold and a lower cost per unit due to the supplier mix. SG&A expenses for the three months ended September 30, 2025, was $26.9 million compared to $23.3 million for the same period in 2024. The increase is primarily due to higher personnel and related expenses due to new hires and increased generalized marketing costs. SG&A expense for the nine months ended September 30, 2025, was $78 million compared to $77.3 million for the same period in 2024. The increase is primarily due to increased marketing costs related to ZYNRELEF, offset by a decrease in personnel and related costs due to terminations, and a one-time stock compensation expense in 2024, which did not recur in 2025, and a decrease in legal expenses due to timing of litigation. Research and development expenses were $3.5 million for the three months ended September 30, 2025, compared to $4.5 million for the comparable period in 2024. The decrease is primarily due to timing of expenses. Research and development expenses were $8.7 million for the nine months ended September 30, 2025, compared to $13.5 million for the comparable period in 2024. The decrease is due to a decrease in personnel and related expenses due to terminations and a decrease in write-offs of property and equipment and other assets. For the three months ended September 30, 2025, we incurred a net loss of $17.5 million compared to a net loss of $4.8 million for the same period in 2024. The increase in net loss is primarily due to the $11.3 million loss on debt extinguishment recognized in the quarter. For the nine months ended September 30, 2025, and 2024, we incurred a net loss of $17.2 million. The net loss for the nine months ended September 30, 2025, included a one-time charge of $11.3 million related to our recent debt extinguishment. Cash and short-term investments at September 30, 2025, was $55.5 million. As a result of the debt and equity transactions completed in the three months ended September 30, 2025, $13.1 million was added to cash and short-term investments. If we had excluded depreciation, stock-based compensation, and inventory reserves and write-offs, our adjusted EBITDA results would have been a positive $1.5 million operating income for the three months ended September 30, 2025, compared to a loss of $400,000 for the same period in 2024. For the nine months ended September 30, 2025, our adjusted EBITDA is $9.5 million operating income compared to a loss of $700,000 for the same period in 2024. We are reaffirming our previously given guidance for net revenue of $153 million to $163 million and adjusted EBITDA of $9 million to $13 million. And now we'd like to open the call for any questions.

Our first question comes from Carl Byrnes from Northland Capital Markets.

Congratulations on the quarter. Just 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?

Yes, Carl, that's about right. It's in the range of 17% to 18%.

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

That is correct, Carl.

Yes, that's accurate.

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

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

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

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

For it was a full quarter, yes.

$2.5 million plus. Got it. Congrats again.

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

Congratulations on the quarter. Maybe just from me, understanding it's very early days on the internal sales team. Can you just talk about though how you're viewing those on 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 about on the commercial side behind the 2 products in 2026?

Thank you for the question, Brandon. I'm Mark Hensley. I'll begin, and then Craig will finish. Internally, we're quite satisfied with the structural changes we implemented at the start of Q3. To remind you, we now have dedicated teams for ZYNRELEF and APONVIE, with the APONVIE team also starting to collaborate on CINVANTI. We believe there is significant synergy on both fronts. This increased focus is likely contributing to the results we're witnessing this quarter and will continue to impact us positively into next year. Moreover, we have achieved better alignment with our distributor partners, and we anticipate that all these efforts combined will lead to increased sales moving forward.

Yes, Brandon, I would like to add to that. As we consider the products in the future, we have consistently stated that when we notice certain regions in the country performing well, particularly during favorable circumstances like having access to an account, good cross-link participation, and the right personnel in place, we aim to replicate that success wherever possible. Therefore, we will continue to identify those successful regions moving forward, and based on the data, we are starting to see that emerge. We are currently going through our budgeting process for the year, looking for opportunities to invest in specific regions while maintaining profitability. So, you can expect to see more developments in this area as we are witnessing a change in trends, and we would definitely like to take advantage of that expansion.

Fantastic. I have a quick follow-up regarding ZYNRELEF. The demand curves appear very promising, and I appreciate you sharing that information. With the VAN coming online significantly this quarter, was there any inventory stocking benefit reflected in the reported revenue for ZYNRELEF in Q3?

We didn't see a significant increase when we launched the 400 VAN. Since the 200 VAN accounts for only about 35% of total sales, there was only a slight increase compared to the 400 VAN. Therefore, the inventory remained relatively stable compared to previous quarters.

Congrats on the quarter.

Our next question comes from Serge Belanger from Needham.

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

Yes, I'll address the question about CINVANTI and then hand over the next topic to Kevin regarding the NOPAIN Act. Throughout this year, I've mentioned in my statements that we anticipated facing some competition that might lead to a decline in Q3 and Q4 sales for CINVANTI. So far, we haven't observed that dip. We've managed to maintain our accounts fairly consistently. Nevertheless, the competitive environment is strong, and we may occasionally lose an account or have to reduce our prices to retain one. That's simply the reality of our market. We're approaching this situation cautiously. On a positive note, our partnership with the IBM team is allowing us to promote CINVANTI more actively to hospital accounts, which could lead to beneficial outcomes. Despite the ongoing competitive landscape, the increased visibility we've gained has already helped us secure a significant account recently. If we can continue this trend, we believe we can maintain stability moving forward. We'll provide updates on a quarterly basis, but our outlook remains quite steady in line with our previous statements.

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 to 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 you'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.

Yes, Serge, to address the second part of your question regarding SUSTOL, we are encountering a situation similar to what we faced with CINVANTI, although it has become slightly more competitive. Additionally, we have fewer accounts. Over the last few years, we have noticed a continuous decline in our average selling price. Therefore, we have decided to phase this product out over the next year. Our plan includes possibly enhancing the delivery of that product, whether through a lighter gauge needle or other means. We aim to reintroduce it around late '27 or early '28 as a relaunch product. There are various strategies we can implement regarding pricing that might allow us to bring this product back to market. We will discuss this further as we move ahead and explore our ideas. For now, the plan is to wind this down as we approach the end of next year.

Our next question comes from Sierra Dong from Jefferies.

Congratulations on the quarter. My question is regarding the ZYNRELEF prefilled syringe program. You mentioned that if successful, it is anticipated to gain approval in 2027. Considering the feedback from physicians on VAN, how do you foresee the prefilled syringe program contributing to the franchise in the long term? Additionally, how should we view the momentum in this area?

Thank you for your question. This is Bill Forbes. I’d like to provide an update on our progress. We have recently manufactured our registration batches and have initiated our stability program. As you know, every new product must undergo at least one year of real-time stability testing, so that clock is now ticking. We’re pleased to have reached this milestone, and we plan to file for approval once we complete the stability program, aiming for approval hopefully in 2027. The impact is noticeable, as reflected by the increase in our VAN performance. I believe that the prefilled syringe will significantly simplify and accelerate the application and use of ZYNRELEF. In this case, we will simply open the prefilled syringe packaging and hand it to the surgeon, allowing for easy installation of the product. This approach makes the process even simpler and should enhance the speed at which accounts start using ZYNRELEF. I’m not sure if Mark has any additional comments on this.

No, I think that's good.

Yes. I would just add, I think Bill is spot on it. When you think about simplicity, we still have the scenario where when we go into onboard an account, there is 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.

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?

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

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

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

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.