Great. Good afternoon, everyone, and thank you for joining us. My name is Matt Del Torre. I'm a biopharma analyst here at Goldman Sachs, and we're very pleased to continue the next session of Pesera Biosciences. Thank you for being here.

Thanks for the kind invitation.

Frank, maybe to start just to get everyone up to speed before we dive into some of those less familiar, give us a brief overview of the company, and then maybe frame for us where, and then how you're thinking about the outlook and strategy.

Well, Pissera, as many of you know, is a leader in non-opioid pain management therapies. And what does that mean? That means that we have three products in our portfolio plus a pipeline that's growing that we should talk about. And as we think about sort of the company's history then and now, I mean, we had a pretty substantial reset of the organization. I'm with the organization just over two years. Joined in 2024. those are restructuring reset and in 25 we rolled out the five by 30 strategy for value creation so what are the five things that we want to accomplish by year 2030 and those are quite simply into two different buckets first is what are we doing about the here and now and the last two are really more about building for the future and so it speaks to 3 million patients in 2030 double digit compound annual growth rate five point expansion and margin for the first three and for the second two we talk about five new programs in development and five partnerships and in that regard we can go through some of the details but we've made a lot of great progress and so what to look forward to we had very strong results in quarter one of this year with Xparel growing up five percent on sales and volume was up seven percent and as the year goes on we expect volume and sales growth to converge because we lap our last GPO and we're quite pleased with the growth that now we've seen with our two other products that is Zolretta 15% year-on-year growth I have era 21% year-on-year growth and so that's the Karen now business the other part of it is from a pipeline perspective we have now three really exciting data events coming up this year so by the end of the year we'll report on the registrational study for Zolretta and if positive that could be the first drug approved for shoulder away second is spasticity for iovera and again if approved that's a registrational study that could be the first medical device approved for spasticity and I have to say the most exciting thing that I look forward to is our readout on PCRX-201, our local gene therapy for osteoarthritis. And this is the phase two of that study. And as you know, that's an active control plus two different doses of PCRX-201. And that'll be an exciting readout and an important catalyst for us. In the meantime, we're readying the commercially viable manufacturing process. And as you know, in cell and gene therapy, and that's very, very important. And the good news is we've stood it up, and we expect to start enrolling Part B of the Ascend Phase II study with commercially viable product here very, very soon. So that's a little bit of the backdrop. You can see we're making very good progress in this strong first quarter, pipeline events coming up really for the first time in the company's history, and a few other things on the horizon.

Great. Great. So you touched on one of those goals of inflecting towards double-digit CAGR by, I think, by 2030. Maybe, you know, help us understand what gives you all the confidence to kind of bridge that gap where you are now. I think 2026 guidance is mid-single-digit growth. So how do you get to that double-digit?

Yeah, first of all, we set guidance to really make sure that we can deliver on that and all the different macro environment events that could potentially happen, right? So we set that accordingly. Now, that said, when you go back in time a little bit, with no pain legislation being enacted in January of 2025, what we said is, hey, that's an important catalyst because that involves the 40 million Medicare patients in the outpatient setting. Now, we say a catalyst because we need to get commercial payers to follow suit to make sure that we have the majority of patients covered under outside-the-bundle policies, right? And so, you know, based on that, we said, look, the second half of last year would be a time where we really see volume growth, and we did. So we went from about 3% volume growth in the first half of last year to about 8% in the second half of the year. And that volume growth continued in the first quarter because with Expiril, we saw 7% volume growth, and so 5% sales growth, 7% volume growth. And the reason we believe those two growth rates will catch up to each other is because in the second half, we lap the last group purchasing organization. And then going forward, then, any price increases we might take would more readily flow into that math as well. So that's one way of seeing line of sight to double digits. In addition to that, there are two other important growth drivers. come end of next year, and Zolretta will start to kick in. That is with LG Chem. So they're starting in Korea and Thailand, but they have rights to sell Expiril and Zolretta in the Asia-Pacific region. So that's another growth driver, and we'll continue to sign ex-US agreements. And finally, and very importantly, we've got a very strong focus on expanding covered lives outside of the bundle. So right now, one could argue that, hey, Frank, don't you have coverage 100%? That's yes, but that's included in the bundle. If you talk about outside the bundle reimbursement, that is being reimbursed separately for a product like Expiril, we have that for 110 million covered lives out of, what, 300-plus million in the U.S. So we've got some work to do there, and so we're really pushing on that. So what to look forward to in the second half of the year? I would say that look forward to expansion in covered lives in a significant way. And when we do that and we get to a tipping point, that is the majority of lives are covered under outside the bundle reimbursement. That is, for Medicare, ASP plus 6, or for commercial, what we're seeing now is ASP plus 29%. Then you'll start to see even more of an acceleration. So those are some of the key growth drivers. One is GPO agreement, lapping it, and any potential future price increases, XUS revenue, right, and, you know, this idea that we're going to continue to push on covered lives.

Would that come on kind of with each of the big three PVMs? Like, those would kind of be in blocks as you?

We're looking primarily at directly to payers.

Directly to payers.

And so we already have some of the big ones already, But what we're looking to do is really get some of the remaining big ones on board. And, again, this is outside of the bundle reimbursement. So just to really double-click on that, you know, if one gets a knee replacement surgery, the facility will get one total fee regardless of what you use. Now, what no pain and outside the reimbursement bundle does is provide that incremental reimbursement for the product that you use. So historically, that's been the primary barrier. You know, clinically, Expiril does a fine job of preventing pain after surgery. But clinically, one of the barriers has been, well, gosh, if I get one payment inside the bundle, then many folks are incented to use the least expensive as opposed to the most effective. And what we see based on, if you follow our press releases, we've had a few recently. we've invested in collecting these data, health economics and outcomes research data, that definitively shows that XBARL is saving the system costs, patient outcomes are improving. So as you see more and more access and those announcements come through, there's good reason why.

Now you kind of walked us through the volume and maybe shifting over to, I think you guys have highlighted 21 orange book listed patents for Expirel and then you proved generic starting in 20. How should we think about other avenues you all are taking to address potentially other generic entrants and just kind of how we should think about that aspect of the drug?

Broadly speaking, as we all know, in biopharma, this is inherent in this industry. You innovate, you put IP around it, and over time you diversify your portfolio and you bolster your IP. That's how we go about our business. And let me talk to you a little bit about then and now when it comes to the IP. Then, you know, this is before my time a bit, we had one Orange Book listed patent. That was a 495 patent. And that patent, we got a ruling against it in 2024. And so what did we do? Well, what we did was we further bolstered the strength of that patent for specifically the volume limitation that the judge called out. So now it was reexamined by the Patent Office, reissued after the USPTO looked at all the different court filings. And so that patent is one of our stronger patents now. In addition to that, we put another 20 patents in the Orange Book. And as you know, manufacturing patents by statute can't be listed in the Orange Book. These are composition of matter and product by process patents, which are stronger. So they cut across two different families. And now we believe we've got a very, very strong patent portfolio based on the investments that we've made. And what is that exactly? Well, we found another way to really construct this molecule using a larger scale process, which develops a better molecule, a number of different fronts. So that's really the thesis behind it. and we continue to innovate. So meaning like what to expect is more patents forthcoming during the course of this year and next year. And so from a court proceeding standpoint, we think that the whole process will last through 2030 with really the Markman hearing hasn't even started yet. So to really determine if there are any merits to the different ANDA applications and that'll be determined by the FDA and due course but to the to the particular patent filings as well so we have a long journey ahead of us again what can we do as an organization first is strengthen our patent estate which we have and the other piece of it is broadly diversifying our portfolio which as you can see from the pipeline we're doing and finally what I'd say is that you know from a legal proceeding standpoint as I mentioned this will take some time to resolve and a lot of things can happen before that yeah so we should we should assume any well we feel reasonably certain that the court case won't be done until 2030 right for the two other ANDA filings and as you know for the first one it was a very favorable volume limited settlement so no entry until 2030 and then from then on a gradual entry to the high 30 percentages then flat and unlimited entry starting in 2039 so that's that's very favorable settlement and you might ask well gosh I mean that seems like favorable if you lost the first court case well if you think about the other patents that we have it makes a lot more sense maybe moving over to your your knee pain products both Zellretta and Iovera has you know double-digit growth

in one queue I guess you know what do you what do you want to see to kind of give you confidence in revising that guide hire?

So as a part of rolling out our 5x30, we said look, these are very different products being sold to very different audiences and we had to focus and make sure the expertal team had the capacity to really pull through no pain and expand commercial payer access as we talked about. So what did we do in 2025? We went from one sales force selling all three products to three separate sales forces and we also signed a co-promote agreement with johnson johnson medtech now called the pew for zilretta and so that agreement took a little bit of time to get on its feet and now based on first quarter results you can see that it's driving 15 year-over-year growth and for iovera what we did there is instead of having pharmaceutical representative sell a medical device we've got medical device representative selling a medical device which is very different if you know med tech you know that's regulatory compliance just the way you interact with your customers very very different in the expectations and so now that's starting to show good momentum with 21% sales so that was the idea and now you know one data point doesn't make a trend and so we've been very careful about you know Sean has as well and Susan about how we set guidance and we want to see a little bit more before we adjust it you know either way.

How about maybe you know maybe switching to margins you know maybe give us a little color gross margins I think they're you know a little below 25 and then how we should think.

Well first off from a margin perspective let me take a step back there's a big difference then and now consistent with our transformation story there was a time when we were literally living hand-to-mouth on our products and that gross margin was around 76 percent very consistent in the course of just about a year now we've taken it to you know 81 percent so you could argue well gosh Frank I mean it seems like you've already made your goal of five by 35 point expansion and you know rightly so I mean because we delivered based on the team's efforts that kind of margin expansion just over a year that said now we're selling through some of that inventory that we manufactured last year and because we didn't throw away as much because we got better at making the stuff and this year as you know by accounting standards these lots are bigger now so if we have a missed lot then it really hits this year's or this quarter in that quarter so we just want to be mindful of that in terms of you know, before we adjust a lot of things. And so, you know, we'll see that in the first few quarters, as we've talked about, and Sean's provided good guidance around this, fairly stable to what we saw before, and then a little bit of a dip in quarter four before we start to catch back up again.

Maybe now coming to the pipeline, you know, you touched on this a bit, you know, when you gave us an overview, you know, you have a number of catalysts coming up.

You highlighted part A for 201. maybe um maybe kind of just you know what we'll see later this year and then what we might be able to expect you know i'm really excited about pcrx 201 i've been in this industry what 35 years you know i think about this as local gene therapy for the masses systemic gene therapy for the few what we're talking about is gene therapy that you locally inject at least as a start uh in the knee for osteoarthritis of the knee. And all we're doing, it's a de-risk mechanism of action. We know that blocking IL-1 is important. There are two drugs that are already approved, one a small molecule, one a monoclonal antibody, to block IL-1. So all we're doing, and by the way, they have very short half-lives. All we're doing here is delivering instructions to the body itself to produce more IL-1 RA, receptor antagonist, when there's inflammation that has an inducible promoter. And so by the phase one results, which is 72 patients, quite durable responses relative to baseline. So at one year, over 70% of patients had a 50% or greater response, which is quite substantial. So the relevance or the importance of Part A is now we have a control, an active control. So we have an active control and a short-acting steroid, two different doses of PCRX-201 with the steroid. so and that's at 52 weeks this isn't a short-term study so it's not statistically powered to look at efficacy but we'll be looking at different trends so as you might imagine a short-acting steroid will have an effect and that effect will back for PCRX 201 is that again we'd have an effect over time relative to baseline and we saw that in phase one in 72 patients and we look forward to seeing the results in our part a in addition to any safety although in phase one we really didn't see much in terms of a safety signal because it's local and stays there we know through bio distribution studies and that's I think a very important contributor to safety which has been really the downfall of many a gene and cell therapy and in addition to that because we're locally administered in very small amounts the cost of goods is very attractive so we will be able to price in such a way where we can be market competitive to other innovative therapies because, as you know, most gene therapies for rare orphan disease these days are close to a million dollars or more. So this one won't be that way because, you know, right now there are 15 million patients in the U.S. alone that have osteoarthritis in the knee. So you really have no, there's no. We haven't seen anything untoward of concern, you know, in our phase one. And we follow these patients now in phase one. So I think we're up to five years we're going to publish. here in the not too distant future. So we're excited about this because you might think about the possibility here. So this is a high capacity adenovirus platform, whereas most gene therapies are AAV, smaller capacity. So this is sort of the Mack truck, so to speak, in terms of how many genes it can hold. And so 30,000 base pairs. So theoretically, you could hold not one, but many genes and so we're thinking through already what are the other places in the body where its local gene therapy could be useful for example the eye the ear that the back there are closed spaces where local gene therapy could be super useful and also where are there known mechanisms of action where we could put one or two or three genes into the construct one of the very first places we're testing that out is with our canine OA. For those of you that own dogs, have dog owners, you know that as they get older, they get OA of the knee and joints. There's a product approved already for that. It's doing about half a billion in sales. So we're about to start the clinical part of our canine OA program. And as you know, those development programs are much shorter than humans, and so we look forward to reporting those results. And in due course, we'll have to figure out, are we the best ones to develop something like that, or should we get a partner? And then maybe, you know, part B, as I mentioned, the tricky part of cell and gene therapy is to stand up a commercially viable manufacturing process. And through the team's efforts, I mean, they've been working very hard on this commercially viable product. Part B will be exactly the same in terms of design to Part A. It'll just have 90 patients. And then as we move forward, what will happen is we have RMAT designation with the FDA, the equivalent in Europe as well. So what that allows for, it's basically breakthrough designation for cell and gene therapy. So what that allows for is regular dialogue with the FDA and other regulatory bodies. And so as we see and really critically look at the Part A results, then we can make a better determination with the FDA and what should Phase III start to look like and get ready.

Maybe, shifting to, you know, you acquired, maybe just kind of walk us through that asset. How are you thinking about that?

So first of all, for 201, we also acquired GQ Bio, the owner of the platform. So we have access not only to 201, but the entire platform. and that expertise, which is really important in cell and gene therapy. So 2002, this is an interesting one. It's another good example of how we're thinking about building a pipeline. The mechanism is de-risked. We're just adding some additional value on top. So what is it? Well, it's ropivacaine instead of bupivacaine. So we know ropivacaine works. What we've put on top of that are two interesting polymers that when you actually you know put that into the surgical site and still it so you squirt it in there close up the site it could provide post-operative pain relief for up to 14 days so we've seen this in healthy volunteers and so by contrast Expiril now you're either going to infiltrate that is you know in a different pattern, you inject it into the surgical area, or what you do is you put it as a nerve block, which is put it right by the various nerves that are in play. So this one has a ease of use benefit, that is you squirt it in, close up the site, and a potential duration benefit, that is instead of three or four days, like expiril, it could be many more days longer than that. So we're excited about this one. Like I said, it could be a nice complement to Expiril, and we think the timing of this one could, you know, come right around that 2030 time frame, which is important. So, yeah, that's another good example of it's a de-risked sort of, you know, known pathway and molecule, but we've kind of put a different sort of innovation around it.

Maybe before we shift to capital allocation, what would be kind of an ideal label for, you know, 201? I mean, could you get, you know, would one-year dosing? Would that be something that's what you would target in terms of duration? And then how are you thinking about the potential for redosing?

That's a good question. So I just want to really emphasize this point. For 201, the way we're studying it now is one injection. Oh, that's it. One injection for this study. One injection, and we're following the durability of that over 52 weeks. and that will be part a doesn't mean it doesn't work longer it's just saying we're reporting out in that time frame okay and so as I mentioned earlier in our phase one studies we saw the durability go much further out than that that being said based on our market research what we know from physicians from payers is that standard of care provides durability at three to six months we heard loud and clear is if you can get patients out to a year that's considered transformational. More than that is, I don't know what beyond transformational is. Even more transformational. I don't know what the term is, right? So anyway, that's how the market is viewing it. And so for us, as we think about that, we say, gosh, I mean, at a minimum, if we could think about getting patients out to a year with durable response, that would be important. And then certainly now we have plans to think about redosing at the right time. So most people If they have one knee with osteoarthritis, they have another knee with osteoarthritis, and they have other joints with osteoarthritis. And what's interesting is we look at neutralizing antibodies, baseline and after, and what we see is that we don't see a big spike in neutralizing antibodies because we're putting such a small amount into the joint. So it's an early indicator that perhaps redosing not only in the index knee, but the contralateral knee is a possibility.

Maybe shifting gears to capital allocation, I think you guys have a share buyback program in place. Maybe just speak to that. How does that fit in with your kind of broader capital allocation strategy, and how does it relate to your maybe 5x30?

You know, before we rolled out 5x30, we took a lot of time with the board and external advisors about capital allocation. And so broadly, as we think about it, is how much do we invest in the current business? And one sort of proxy for that is SG&A, and for our 17%, we're at 14%. So as our studies that will come to conclusion at the end of this year roll off, we'll start to add some additional studies, and likely we'll be around that 17%. separately we look at gosh how do we think about our value relative to how the market is thinking about it and so there came a time and you know we thought gosh the value of our company as we see it is higher than what the market is seeing it so we rolled out this 300 million dollar buyback program and so we've completed 200 million dollars of it took out 9 million shares we're down to 39 million shares now which is a fairly small base and so we've got 100 million left to go and so we'll constantly look at is this the right time to go ahead and do the balance of that or should we put our dollars into something else right and so and we can talk about what that something else might look like but certainly since we have the infrastructure in place now adding an accretive asset to the bag selling bag would be important so if something fit nicely into the expiral bag or so read a bag or I have era bag you know we could bring a lot of synergy to the table and it will be accretive out of the gate so that's one way to think about it the other way is you know yes continue on the buybacks and another one is just like we've done for pcrc tool one and two zero zero to be very careful about the risk mechanisms of action and sort of innovative ways to develop it and so it could be likely a combination of those things but I just want to give you a sense of how carefully we've thought about these things and benchmark ourselves okay so I think kind of for beating more late-stage or in market within your current commercial footprint yeah and then in terms of maybe size or capacity what what do you yeah I don't think you're gonna see us do these kinds of bet the farm kind of things I think these will be careful assessments and careful I would say investments and take a look at what we did with GQBio. We bought that company. It was a very efficient use of our milestones that are to come for not only the expertise, but also the preclinical programs and the platform. So we got a pretty good deal on that. And same thing with the Amicathera asset. We didn't pay a whole lot up front, and so we're going to be very careful about this. Yeah, so thanks for having me here, Matt. And lookit, I think this is a really great story. The company has come a long way with the new board new CEO five by 30 and we're now starting to see really the the benefits of this new strategy and hopefully you see it when you take a look at the first quarter results that we've delivered and also some of the data catalyst to come and and so I'm excited about the balance of the year and what 27 will thank you