Pacira BioSciences, Inc. (NASDAQ:PCRX) Q1 2024 Earnings Call Transcript

Pacira BioSciences, Inc. (NASDAQ:PCRX) Q1 2024 Earnings Call Transcript May 7, 2024

Pacira BioSciences, Inc. misses on earnings expectations. Reported EPS is $0.62 EPS, expectations were $0.64. PCRX isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Thank you for standing by. My name is Hermione and I will be your conference operator today. At this time, I would like to welcome everyone to Q1 2024 Pacira BioScience Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question-and-answer session. po [Operator instructions] I would now like to turn the call over to Susan Mesco, Head of Investor Relations. Please go ahead.

Susan Mesco: Thank you and good afternoon, everyone. Welcome to today’s conference call to discuss our first quarter 2024 financial results. Joining me are Frank Lee, Chief Executive Officer, and Charles Reinhart, Chief Financial Officer. Jonathan Slonin, Chief Medical Officer is also here for today’s question-and-answer session. Before we begin, let me remind you that this call will include forward-looking statements based on current expectations. Such statements represent our judgment as of today and may involve risks and uncertainties. For information concerning risk factors that could affect the company, please refer to our filings with the SEC, which are available from the SEC or the Pacira website. With that, I will now turn the call over to Frank Lee.

Frank Lee: Thank you, Susan, and good afternoon, everyone. It’s been an exciting and productive time since I joined the company earlier this year, and I’m pleased to say sales are off to a solid start and on track, for all three of our trusted opioid-sparing products, which continue to make an important impact on patient’s lives. This year, our priority is EXPAREL, which is what I’ll focus on today. I’ll also touch briefly on PCRX-201. Let’s start with EXPAREL. Our goals are centered on preparing the organization and marketplace to fully realize its long term potential. Let me walk you through the progress we’ve made in advancing three key drivers for 2024. First, advancing the launch of EXPAREL and two, new lower extremity nerve block indications; second, progressing our awareness and educational activities around separate Medicare reimbursement at average selling price for ASP, plus 6% in outpatient settings beginning in 2025 with the implementation of NOPAIN and third, expanding patient access to EXPAREL through a 340B pricing and new GPO partnerships such as Premier.

I’ll start with lower extremity nerve block, where we’re seeing positive market receptivity across all sites of care, delivering four days of opioid-sparing pain control with a single 10 ml EXPAREL dose is an attractive value proposition to the anesthesia and surgical community; for knee, foot and ankle surgeries. Physicians are also reporting consistent results, with some patients not taking any opioids, following very painful lower extremity procedures. To remind you, we launched with a strong presence in the TKA segment. We’re also working to build relationships and advanced product uptake through education and training and other lower extremity procedures like ACL repair, foot and ankle procedures. We would expect a slower uptake in this segment of the market.

Turning now to the opportunity ahead with the upcoming changes in EXPAREL reimbursement for outpatient procedures. Separate CMS reimbursement of EXPAREL across all outpatient settings marks an important milestone. It will eliminate the cost barrier by fully reimbursing EXPAREL at ASP, plus 6%, beginning in January of 2025. Given the market’s steady migration away from hospital inpatient care, we see ample room for expanding EXPAREL utilization in outpatient settings. We’ve allocated resources to drive education and help healthcare systems implement EXPAREL as best practice standard of care for CMS patients. There are roughly six million annual CMS procedures in the outpatient settings, with a split of roughly 3.5 million procedures in the hospital outpatient settings and 2.5 million procedures performed at ambulatory surgical centers.

To maximize this important opportunity, we’re enhancing our organization with new talent and capabilities, to ensure operational excellence within critical functions such as marketing, strategic accounts, medical and market access. In parallel, we’re advancing initiatives to drive awareness, education, action across key decision makers. We’re also paving the way for NOPAIN through our participation in 340B pricing and new GPO partnerships. Earlier this year, we announced a partnership with Premier, whose significant network of hospitals and healthcare systems covers nearly 20% of EXPAREL-relevant market procedures. Through these preferential pricing programs, we’re helping healthcare systems afford the opportunity to be at the forefront of opioid sparing pain management.

While it’s still early days, we’re pleased with the initial data we’re seeing from our partnership with Premier. In the first two months of post launch, EXPAREL volumes at Premier accounts are up, with only a modest impact on net sales dollars. In short, this partnership is starting to do what we expect it to do. Importantly, we have two additional GPO partnerships in process. As for ZILRETTA and iovera, I’m pleased to say both products are performing according to plan, with solid sales growth for the quarter. With respect to margins, while EXPAREL landed in our guided range, ZILRETTA and iovera margins weighed on consolidated margins for the quarter. Charlie will share more details on margins shortly, but I want to emphasize that our primary focus is on driving top line growth.

As we grow, the top lines, margins will in turn benefit. Switching gears to our research and development pipeline, I’d like to share a few quick updates on PCRX-201, This novel intra-articular helper dependent adenovirus, gene therapy product candidate codes for Interleukin 1 receptor antagonist, or IL-1RA, for the treatment of osteoarthritis (OA) of the knee. Here, we believe PCRX-201 has the potential to become a leading disease modifying agent by turning the patient’s own cells into therapeutic production sites of IL-1RA. As background, IL-1 is a known inflammatory cytokine with inhibition tied to the reduction in catabolic processes in the joint that contribute to OA of the knee and progression. Last month, we presented encouraging preliminary results from a 72 patient Phase 1 study of PCRX-201 at the Osteoarthritis Research Society International or ORSI 2024 World Congress in Vienna.

The data will also be featured at an encore podium presentation at the Annual Meeting of the American Society of Cell and Gene Therapy this week in Baltimore. These data showed that a single intra articular injection of PCRX-201 demonstrate a sustained clinical effect, as assessed by patient reported outcomes at all dose levels for at least one year post injection. Importantly, PCRX-201 was shown to be well tolerated with a favourable safety profile. We now have data for two years, and we are preparing to submit those data for presentation at a medical meeting in the fall. Of the 14 million Americans suffering from symptomatic OA of the knee, two million are under the age of 45. The duration of effect for currently available treatments is limited to three to six months.

Based on our market research and feedback from our scientific advisory board, improving pain and function while potentially modifying the disease for a year or more would be considered transformative by both physicians and patients. Furthermore, a year or more of durability would be clinically and economically meaningful for patients and the healthcare system. These promising preliminary findings earned PCRX-201, the FDA’s first ever Regenerative Medicine Advanced Therapy, or RMAT designation for gene therapy product in osteoarthritis. Lastly, unlike other gene therapies, we believe PCRX-201 will be able to be manufactured at large scale for a favourable cost of goods sold. Before I turn the call over to Charlie for a review of the financials, I’d like to highlight today’s announcement of our plans to implement the $150 million stock repurchase plan.

This stock repurchase plan underscores our confidence that we have in our growth outlook and the belief that Pacira shares offer an attractive investment opportunity given the significant value ahead. With that, I’ll turn the call over to Charlie for his financial report.

Charles Reinhart: Thank you, Frank and good afternoon to all on the call. To remind you, I will be discussing non-GAAP financial measures this morning. A description of these metrics, along with our reconciliation to GAAP, can be found in the news release we issued this afternoon. I’ll start with an update on sales and margin trends starting with EXPAREL. First quarter EXPAREL sales increased to $132.4 million versus $130.4 million in 2023, driven by volume growth of 3%, which was partially offset by contracted discounts with the rollout of our premier partnership in January, as well as a modest shift in vial mix. First quarter ZILRETTA sales increased to $25.8 million versus $24.3 million in 2023, and iovera sales improved to $5 million compared to $4 million in the first quarter of 2023.

Turning to margins on a consolidated basis, our first quarter non-GAAP gross margin percent was 72%, while first quarter EXPAREL margins landed within our full year guided range of 74% to 76%, ZILRETTA and iovera margins were below our guided range and negatively impacted consolidated gross margins for the quarter. For non-GAAP R&D expense, the first quarter increased to $16.4 million from $15.3 million reported last year. This year-over-year increase primarily relates to the start-up activities for the ZILRETTA Phase 3 study in shoulder OA. Of note, the first quarter R&D expense includes $7.4 million of product development and manufacturing capacity expansion cost, which is down 4% from the prior year as we approach the completion of our pre-commercial scale up activities for the recently approved 200 liter EXPAREL manufacturing suite in San Diego.

Non-GAAP S&GA expense came in at $63.8 million for the first quarter, which is up from $62.5 million last year. This increase is largely due to professional and legal fees associated with the Paragraph 4 and other litigation, and to a lesser extent, costs associated with our transition to a new CEO. First quarter interest expense improved to $3.3 million versus $9.6 million reported last year. This was driven by the interest expense savings associated with retirement of our Term Loan B on March 31 of 2020, using a new Term Loan A and cash on hand. And lastly, we delivered another quarter of significantly positive adjusted EBITDA of $44.6 million. With respect to capital allocation strategy, we are focused on creating long term shareholder value.

Today we announced a $150 million stock repurchase plan, which gives us the flexibility to opportunistically return capital to our shareholders. We believe that our stock is undervalued and we view our share repurchase program as a productive use of capital that will generate favourable returns for our shareholders. Turning to guidance, today we reiterate our full year guidance for 2024 as follows; total revenue of $680 million to $705 million, non-GAAP gross margin of 74% to 76%, non-GAAP R&D expense of $70 million to $80 million non-GAAP SG&A expense of $245 million to $265 million and stock-based compensation of $50 million to $55 million. With that, I’ll turn the call back to Frank.

Frank Lee: Thank you, Charlie. In closing, I’m very pleased with the progress we’ve made thus far in 2024, leveraging growth opportunities for EXPAREL, launching new indications, preparing for the significant reimbursement opportunity that lies ahead next year and also growing ZILRETTA and iovera. The progress we’re making is setting the stage for us to further entrench our leadership position in providing non-opioid pain management solutions. We’re sharply focused on growth as we continue to execute our growth strategy will create value for shareholders, healthcare systems, and most importantly, transform the lives of the patients we serve. With that operator, we’re ready to open the call for questions.

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Q&A Session

Operator: Thank you. We will now begin the question-and-answer session. [Operator instructions] And your first question comes from the line of Gregory Renza with RBC Capital Markets. Please go ahead.

Gregory Renza: Thank you. Good afternoon Frank and Pacira team. Congrats on the progress. Thanks for taking my question. Frank, I appreciate all the updates and the color on EXPAREL for the quarter, especially on premier and the GPO contract. I was wondering if you and the team could just comment on how you view the cadence of the contracting that you alluded to with a couple more potentially coming online, how should we be thinking about that and its impact and the influence on EXPAREL performance over 2024?

Frank Lee: Yeah. Thanks, Greg. Thanks for the question. We’re excited about what we’re seeing. It’s still early days now, right, because we signed this thing in January. Its early days, but we’re excited about what we’re seeing for my comments, and we’re working on a couple more, as you mentioned. Let me turn it over to Charlie to give a little bit more color on that.

Charles Reinhart: Hey, Greg. So the expectation from a rollout perspective is that we would likely have a second contract kind of later in the second quarter and maybe another one in the third quarter. So the contracts are rolling in throughout the year and as Frank said, the first quarter of the activity probably isn’t at its peak. So it takes a little time for them to get warmed up. But we anticipate, by the end of this year that we’ll have three active GPO relationships.

Frank Lee: And let me just add some additional color there. In addition to the contracts, what this enables to do is to partner with the GPOs to better educate their membership on what’s coming with respect to outpatient reimbursement at SP plus six starting in January, 2025.

Gregory Renza: Got it. That makes sense. And maybe keeping with a similar theme for my question, I know it’s too early to tell when it comes to 2025, as you just mentioned, but when it comes to that, call it a bolus of patients with NOPAIN. At what point would you have some comfort in talking about what that trajectory could look like? Of course, with the six million patients for CMS and then that additional as a double when it comes to the commercial opportunity, at what point should we start thinking about your comfort level as you prepare for kind of that trajectory of those patients and capturing that opportunity from 2025 and beyond? Thanks again and congrats, Frank.

Frank Lee: Yeah, that’s a good question, Greg. We’re doing a lot of work now, so as you know from prior discussions, we’ve reallocated our resources toward NOPAIN and so a lot of folks are working on getting not only ourselves prepared, but the market prepared. We’re going to have a better view as we get closer to the end of the year. And I know that there’s quite a bit of interest in terms of thinking about how we model the uptake of NOPAIN. And my sense is that the work that we’re doing now with a number of partners and having discussions in various settings along with some qualitative and quantitative research that we’re doing in partnership with various parties, we’re going to have much better insight into the uptake of NOPAIN come towards the end of the year, and we’ll be able to provide some better clarity in terms of what segments we think are going to uptake earlier on versus later.

And of course, as we mentioned, it’ll take some time for commercial payers to follow suit and so we’re focused on that as well. Broadly speaking, as we’ve mentioned before, Susan Mesco, our Head of IR, will be hosting some information settings in the fall. That timing will release in due course, which will provide better clarity on some initial feedback that we’re getting from the marketplace. I think, Greg, if there are no other questions, we can move to the next caller.

Operator: Your next question comes from the line of David Amsellem with Piper Sandler. Please go ahead.

David Amsellem: I have a couple questions. First, I know you said, Frank, that it’s going to take some time for commercial payers to follow suit as it relates to NOPAIN. I guess my question here is, can you talk to your dialogue with commercial plans and ultimately your confidence that these commercial plans will indeed follow suit? And then secondly, when you talk about that lag time, if you will, with commercial plans, is that more of a 2026 event? Just help us understand how long it might take for them to follow the lead of CMS. And then the last question is just on the cost structure you talked about 201 and, of course, allocating resources to NOPAIN. I’m wondering where ZILRETTA and iovera fit in terms of the long-term strategy of the company going forward. Thanks.

Frank Lee: David. Thanks for the questions. First, let me just provide a little bit of context on the opportunity known as NOPAIN. But I think we’re trying to really make sure we focus on this one as outpatient reimbursement at ASP Plus 6 for CMS patients. Initially, as you know, we’ve quantified that as approximately four million patients in the HOPD setting and about four million in the ASC setting, which is quite substantial. So we’ve got a fair amount of opportunity right in front of us that we need to make sure that we do a good job of education in the marketplace to provide those patients with access to EXPAREL. As we stand up the broader commercial organization and I think you’ve heard me say before that we are bolstering our commercial resources, commercial medical, and importantly market access.

So that’s in progress. We’ve reallocated resources from other parts of the company to bolster that area and as we start to further now make progress there and again, I think that’s going to be more towards end of the year, we’re going to have much better clarity in terms of specifically how we see NOPAIN playing out over the course of ’25, ’26 and ’27. So that’s where we are with that. With regard to ZILRETTA and iovera, as you heard earlier, we’re making good progress there. We’re making good progress and sales are very solid in terms of what we’ve been able to deliver, and that’ll continue from what we can see, but as I’ve said before, we are sharply focused on growing EXPAREL. So in terms of disproportionate resourcing towards EXPAREL, we’re doing that.

We are treating this like a product launch and so that’s how we’re approaching this situation.

Charles Reinhart: Hey David, this is Charlie. Just building on your comment of 201, please note we are investing in clinical trials for both ZILRETTA and iovera with the Shoulder OA study and the spasticity study. So there is investment going on.

Operator: Your next question comes from the line of Hardik [ph] with JPMorgan. Please go ahead.

Unidentified Analyst: Hey guys, thanks for taking my question. I just had a couple questions on the 495 patent challenge from eVenus [ph]. So I was just wondering if you guys could give us some latest kind of thinking you guys have in terms of where some of the more likely scenarios that could play out and what actions, kind of market actions eVenus could take in the meantime, based on the ruling and just wanted to confirm, is the expectation that the ruling from the judge still comes in July, or is there any kind of change on that front?

Frank Lee: Thanks for the question. Just a little bit of background and so we do expect the ruling on the first patent litigation sometime by end of June and so that’s consistent with what we said before and just to remind, we’ve got a number of other patents that will need to be litigated. In addition, of course, eVenus will need to get their product approved and eventually decide to launch the product at some point. So there are a number of things ahead, but let me turn it over to Christian to provide some additional color here.

Christian Pedetti: Yeah, thanks. As Frank said, there really isn’t an update since we talked to you all at the end of February on the 495 trial. We still expect it to read out by July 1, which is when the 30 month stay is up. So we look forward to the court’s opinion being issued before then. And as Frank mentioned, and as we’ve reiterated, and we actually put a little detail in our release, we continue to produce new IP around EXPAREL Orange Book listed patents, and those are additional hurdles that eVenus would need to get through in order to eventually launch a product. So it’s in our release, but we did just have in March, three additional Orange Book listed patents, two method of use and another composition of matter and those are in addition to the other ones after 495.

So there are quite a few, a few patents that we still need to get through, but as I said, we’re looking forward to getting resolution to 495 here in short order, and then we’ll continue to produce new IP and they will continue to have to work through our other patents that are all on the Orange Book here.

Unidentified Analyst: Great, thank you. And then just one more on you mentioned the EXPAREL gross margin was within the full year guidance range. I was wondering if you give a little bit more granular detail about how margins are progressing among the various facilities, for example, the one in the UK versus in San Diego.

Frank Lee: Yeah, thanks for that, Hardik. I think overall we’re progressing well. We haven’t really broken it down specifically by site. As you know, the 200 liter facility is coming in — is going to come online later on this year. I don’t know, Charlie, if you want to say a few words about margins.

Charles Reinhart: No, listen. In the long term, the improvement in gross margins is going to be driven by two major factors for EXPAREL. One is the manufacturing equipment the vial is manufactured on. So the 200 liter is generally less expensive than the 45s, but probably even more importantly is the total volume. So we’re focused on expanding top line and driving volume and so that margins can follow.

Operator: Your next questions come from the line of Gary Nachman – Raymond James. Please go ahead.

Gary Nachman: Great. Good afternoon, Frank. First, talk more about your progress with the modernization of the commercial organization. Do you think you’ll have most of that in place by mid-year as you prepare for no pay next year? I think that’s been the target. So what big hires still need to take place? And then how aggressive do you plan on being with the share buyback? How is that contemplated with the convert coming due next year and you have to maintain a certain amount of cash for that. So maybe talk through that as well.

Frank Lee: Great. Thanks for the questions, Gary. First, on the commercial organization, as I mentioned earlier, we’re making very good progress on modernizing and bolstering the commercial, medical and market access organizations. At a high level, we’ve talked about plans and we’re making good progress on plans to hire a chief commercial officer, and that’s on track. In addition, we’re expanding the number of folks in our field, reimbursement management team, payer team, as well as market access strategy and operations. So those are all things that are on track. In addition, we’re looking very carefully at the broader commercial organization, including bolstering our resourcing of our marketing teams and medical teams. So those things are right on track and again, supported by reallocating our resources away from certain areas of the company and investing them here where we believe it’s going to make a difference here for our NOPAIN launch.

So that’s a comment on our commercial organization, and I’d characterize it as we’re making good progress. And largely speaking, we expect that to be in place sometime in the second half of the year. With respect to share buyback, let me turn it to Charlie here. I’ll just say that it really does underscore our confidence in our growth outlook and it’s an attractive investment given the value that we believe is ahead. So, Charlie, let me turn it over to you.

Charles Reinhart: Thank you, Frank and Gary, thanks for the question. So listen, as you point out, that we have a business that’s operationally cash flow positive. We generate cash every year. We just reported having roughly $326 million on the balance sheet. As you point out, we do need a certain amount of money on the balance sheet to repay the $400 million of August 25 notes next year. And so we’re going to balance priorities and we’re not going to make any commitments about whether we, when we’re going to spend the $150 million, that we’re going to use it opportunistically as we think benefits our shareholders, and we will balance all of the needs from a cash flow perspective over time.

Gary Nachman: All right, great. Actually, maybe one follow up for Frank, just what are the next steps for 201? You seem pretty excited about the data you’ve seen there so far. Following the Phase 1, what comes next? What sort of resources will you put behind it? Charlie mentioned before you are investing a little bit in pipeline. So I’m curious, is that something that could start this year or will you likely wait until to see how things unfold next year? Thanks.

Frank Lee: Yeah. Gary, so it’s an important question. There’ll be certainly quite a bit more effort this year in terms of planning and thinking through what we need to do. But in terms of any sort of spend and investment largely that will be ahead of us in ’25, ’26 and ’27 and so we’re excited about it. As I mentioned, we have had an opportunity to review the data with the scientific advisory board. We’ve also presented some of the data, as I mentioned, at ORS and this week at ASGCT. And so we continue to vet the data. We also continue to think through clinical development strategy going forward. But in terms of activity, a lot of it this year will be vetting our strategy and planning, and the investments will largely occur in ’25 and beyond.

Operator: Your next questions come from the line of Les Sulewski with Truist Securities. Please go ahead.

Unidentified Analyst: Hi, this is Jeremy [ph] on for Les. Thanks for taking our questions. How do you view the opportunity with PCRX-201 and how exactly does the recent designation help you? Thanks.

Frank Lee: Yeah, it’s a very interesting opportunity because this is the first RMAT designation for gene therapy and osteoarthritis. And what that means is that the FDA and the company will work closely as we think about further vetting the data and development strategy. So this is a wonderful opportunity to make sure that we stay close with the FDA. And to the extent that we develop this asset going forward, this could truly be transformational for patients. As I mentioned earlier, based on our market research and discussions with thought leaders, current treatments offer patients three months to six months of benefit and durability, whereas we know that from market research, twelve months or more is considered transformational.

And so to the extent that PCRX-201 can deliver that, this could be an important new treatment option for patients. So we’ll continue to vet the data, put the development plan together, but we’re very excited about the data and obviously based on the RMAT designation, FDA as well.

Operator: Your next questions come from the line of [indiscernible]. Please go ahead. Thanks.

Unidentified Analyst: Thanks. Congrats on a pretty clean quarter. A couple questions, just to build on earlier questions about the commercial follow on after NOPAIN kicks in, I just want to make sure I understand what we’re talking about here. Obviously, you have pretty small overall market share of the broader landscape of procedures. I think you’ve highlighted in the past about 12 million relevant outpatient commercial procedures. And so I just want to understand, when you talk about following on, do you mean plans are just not covering EXPAREL at all, hence your small market share now and they’ll maybe feel compelled to cover it if CMS is, or is it about improvement in terms and access with those plans. Just help me understand what we’re even talking about here, big picture. I do have a follow up.

Frank Lee: Yeah. So thanks for that question, Oren. What I’m talking about is oftentimes CMS will come out first with reimbursement, and commercial plans will take some time to evaluate when and if they’ll cover the new therapy. And so, our task at hand now is to work very closely with the commercial payers to accelerate that adoption on the commercial side of things. Now, that said, we do have a C code, and oftentimes that can be reimbursed in the ASC setting currently, but it’s not straightforward as it could be. And so here we have an opportunity with NOPAIN and CMS reimbursement to use this now to engage commercial payers to follow suit sooner than they normally would. And so that’s really it. But I’ll remind you again that there’s a substantial opportunity just with the CMS patients. What we’re trying to do now is to really make this even a broader impact. So that’s the idea.

Unidentified Analyst: Okay. So just so I’m clear, you obviously have a lot of outpatient use now, like you said. it’s a $500 million, $600 million product, not all inpatient. So I just wanted to understand is how that’s being done now, suboptimal, even across the entire board of your commercial outpatient reimbursement and that could change meaningfully at some point afterward.

Frank Lee: Yeah. What’s important with the NOPAIN legislation is in the outpatient setting, it provides for ASP Plus 6% reimbursement, which, for example, in the HOPD is pulling that thing out of the bundle. So this is important. So the product will be reimbursed separately. So now if you add up favourable access through 340-B or GPOs, and you add on top of that ASP Plus-6 reimbursement, I think this provides for an attractive value proposition, given what EXPAREL delivers on the clinical setting and oftentimes, some of the cost issues have been a barrier. So this is important. So to the extent that that sort of reimbursement formula is followed to any extent by commercial payers, this will be something that further EXPAREL launch.

Unidentified Analyst: Okay. And then just to follow up, I don’t want to parse your language too closely. I know that can be pretty irritating. But you said to the extent we develop this asset going forward, and I want to know if I should interpret that as just to the extent it, payers developing going forward based on how the data turns out, or maybe if you are looking to out license this to another company for someone else to take it forward potentially.

Frank Lee: I’m sorry, which product are we talking about?

Unidentified Analyst: PCRX-201. Yeah.

Frank Lee: I see. Look, at first, we’re very excited about 201. We’re going to go through a lot of thinking here about our development strategy. We have no plans to do anything but that right now. So that’s what I’d say to you.

Operator: Your next question comes from the line of Balaji Prasad with Barclays. Please go ahead.

Balaji Prasad: Hi. Good evening and thanks for the questions. So, a couple from me, while I can understand the rationale for the [indiscernible], I’m curious to know the capital allocation factors, which went to deciding the quantum of $150 million that’s one. And two, I’m not sure if you covered this already. So again, if you can take us through the growth dynamics of the quarter and how it changed was in previous quarter and what cadence we expect for the year, and maybe just on second EXPAREL on the 18 million procedures that are going to be covered are these 18 million procedures which we fully incremented to EXPAREL credit? Thanks.

Frank Lee: Hey, Balaji, you were breaking up on me there a little bit. So I think your first question was related to the stock repurchase, if that’s correct and so again, so what I’ll underscore here is the confidence we have in our growth outlook and the fact that it’s an attractive investment, given that outlook going forward. If your question is about sort of the cadence and the amount, maybe I can turn that over to Charlie.

Charles Reinhart: Hey, Balaji, it’s Charlie here and so I think one of your questions might have been about the amount and so from our perspective, we looked at what typical first time people size, and it was kind of 10% to 15% of market cap, and that’s really how we came up with 150 million. We also note that we haven’t between now and the end of 2026 to utilize it, but if we utilize it more quickly and it makes sense, we can go back to the well and get another authorization. So this is something we’re going to try. We’re going to use it opportunistically and hopefully to everybody’s benefit.

Frank Lee: Thanks, Charlie. And I think, Balaji, your other question was about broadly NOPAIN and just some numbers. So 18 million total that we believe are outpatient procedures that could fall under NOPAIN, now, specifically with respect to the settings and patient populations. So out of that 18 million, six million CMS and 12 million commercial and so inside that six million is roughly about four million that lie within the HOPD setting and two million that are within the ASC setting, whereas in the commercial, that 12 million in the commercial is roughly about four million in the HOPD setting and about eight million in the ASC setting. So hopefully that’s clear.

Balaji Prasad: If I could ask a follow up there, Frank, just what percent of these 18 million procedures would be incremental to EXPAREL? That is, those who are not in EXPAREL today through any pathway?

Frank Lee: Yeah, I think by and large this is going to be a very favorable impact and particularly if I think about the CMS patients right out of the gate, six million CMS patients in the HOPD specifically and ASC, I can’t give you a hard number right now about how much is incremental, but what I can say is that our penetration, largely speaking, is fairly low. And a lot of that is due to the cost barriers that have existed and hence, that was the thinking behind making sure that we drive NOPAIN legislation to passage. And so the company saw that early on and has worked over the past seven years with our Voices coalition in partnership, and that’s why this thing was passed. And so fundamentally, it’s pulling the drug reimbursement or product reimbursement out of the bundle.

So there’s not a financial disincentive to use the best product for the patients. So hopefully that’s clear. So I think given our low share penetration in this marketplace, we’ve got substantial room to further penetrate where those cost barriers are the real issue.

Operator: Your last question comes from the line of John Glonka [ph] with Needham and Company. Please go ahead.

Unidentified Analyst: Hi, everyone, this is John on for Serge. Thanks for taking our questions today. We have two questions regarding EXPAREL pricing for this year and beyond. First, can you provide some context on what the discount looks like right now to improve the user base and what the strategy might look like for the rest of the year based on what you’ve seen so far? And then when NOPAIN comes into effect next year, what does the pricing strategy look like at that point with improved reimbursement? Thanks.

Frank Lee: So, Charlie, maybe you want to talk a little bit about EXPAREL pricing strategy. What I’ll say here is that when you think about what we’re doing with GPO and access to 340B, that’s very favorable. So I’ll say that, and with NOPAIN, obviously the reimbursement then gets better as opposed to the pricing. So beyond that, Charlie, maybe probably a little bit of color.

Charles Reinhart: Sure. So if we think about EXPAREL’s total gross to net at this point, it’s a hair under 84%. And that includes product returns and prompt pay discount. It includes 340-B, a series of individual customer contracts and over time, it will also include the GPOs as well. I think that was probably your question. If you’re talking about pricing, actually price increases, we’ve been pretty modest in that regard. We did one in January, and we’re really focused on expansion of the top line by volume. Not so much price.

Unidentified Analyst: Yeah, I think really just for next year when NOPAIN comes to effect. Do you see the pricing kind of taking a, I don’t know, a more lumpy change at the beginning of the year, or do you see more of a gradual flip from a discount to a price increase?

Frank Lee: So ASP plus 6 is critically important in the outpatient setting to drive volume. ASP plus 6 has nothing to do with our ROI [ph] or the prices we will charge. So I don’t know that we will change our strategy in any way, shape or form. We’re just going to try to educate our potential customers so that they can benefit from ASP plus 6 and we can benefit from volume.

Charles Reinhart: And, John, I want to go back to. We’re sharply focused on growth. Doing so solves a lot of things, including margin. Some of the questions earlier and this is the opportunity for us to drive penetration and growth with this catalyst of NOPAIN. So that’s what we’re focused on.

Operator: That concludes our Q&A session. I will now turn the conference back over to Susan Mesco, Head of Investor Relations for closing remarks.

Susan Mesco: Thank you, Hermione and thanks to all on the call for your questions and time today. We are excited about the opportunities that lie ahead for us. Throughout the balance of the year, we will continue to ensure we are well positioned for long term success. The opioid epidemic continues to be a national crisis, underscoring the vital importance of our mission. Thank you and stay well.

Operator: Gentlemen. That concludes today’s call. Thank you all for joining. You may now disconnect.