Heron Therapeutics, Inc. (NASDAQ:HRTX) Q2 2023 Earnings Conference Call August 14, 2023 4:30 PM ET Company Participants Jeff Cohen - Executive Director, Assistant General Counsel and Assistant Secretary Craig Collard - Chief Executive Officer Ira Duarte - Executive Vice President and Chief Financial Officer Bill Forbes - Executive Vice President and Chief Development Officer Conference Call Participants Serge Belanger - Needham & Company Boris Peaker - TD Cowen Carl Byrnes - Northland Capital Markets Operat ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number: 001-33221 HERON THERAPEUTICS, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdicti ...

Financial Data and Key Metrics Changes - Total product net revenues for Q1 2023 were $29.6 million, an increase of over 26% from $23.5 million in Q1 2022 [5][24] - ZYNRELEF net product sales were $3.5 million for Q1 2023, while APONVIE net product sales were $244,000 since its launch in March 2023 [19] - Cost of product sales for Q1 2023 was $16.9 million, compared to $11.4 million in Q1 2022, including a one-time charge of $5.3 million for short-dated ZYNRELEF inventory [20] - Research and development expenses decreased from $42.1 million in Q1 2022 to $13.8 million in Q1 2023 [26] - The company reported a loss from operations of $33.1 million for Q1 2023, an improvement from a loss of $62.9 million in Q1 2022 [27] Business Line Data and Key Metrics Changes - The Oncology Care franchise net product sales for Q1 2023 were $25.8 million, representing a 15% increase over the same quarter in the prior year [25] - The company expects Oncology Care franchise net product sales for the full year 2023 to be between $99 million and $103 million [25] Company Strategy and Development Direction - The new CEO emphasized the need for a thorough internal review to develop a long-term plan aimed at maximizing shareholder value [13] - Changes will include reducing cash burn, improving operational efficiency, and implementing a realistic product forecast [14] - A flattening of the executive reporting structure has been initiated to enhance sales and marketing efforts [15] Management's Comments on Operating Environment and Future Outlook - The management acknowledged challenges with ZYNRELEF's uptake and indicated that training and preparation are essential for successful product application [9][10] - The CEO expressed optimism about APONVIE's potential, highlighting its favorable clinical profile and market opportunities [11] - The management is committed to providing updates on strategic changes and believes these will position the company for long-term success [18] Other Important Information - The company is exploring enhancements to product handling, including a vial access needle and a prefilled syringe, which could significantly improve usability [7][10] - The management is assessing the alignment of the sales force to optimize resources between ZYNRELEF and APONVIE [40][52] Q&A Session Summary Question: What are the specifics to change the trajectory of ZYNRELEF? - The CEO mentioned the importance of optimizing resources and improving product training to enhance sales [31][34] Question: How is APONVIE being marketed moving forward? - The CEO indicated that resources may shift towards APONVIE due to its easier market entry compared to ZYNRELEF [40] Question: Will the previous guidance for the CINV franchise still stand? - The CEO confirmed that the CINV franchise is progressing steadily but prefers to provide guidance from a company-wide perspective in the future [50] Question: Are there plans to reduce the sales force? - The CEO stated that while efficiency is a goal, any changes would focus on realignment rather than outright reductions, especially on the oncology side [52] Question: What is the expected gross profit margin moving forward? - The CEO expressed a goal of achieving gross margins around 80% by reducing costs of goods sold [57]

Product Development and Approvals - ZYNRELEF generated significant market interest since its FDA approval in May 2021, with commercial sales commencing in July 2021[83]. - The FDA accepted the supplemental New Drug Application (sNDA) for ZYNRELEF, with a Prescription Drug User Fee Act goal date set for October 23, 2023[85]. - APONVIE was approved by the FDA in September 2022 and became commercially available in March 2023, with pass-through payment status granted effective April 1, 2023[91]. - HTX-034, an investigational product for postoperative pain management, showed lower mean pain scores and reduced opioid consumption compared to bupivacaine HCl in clinical trials[94]. - SUSTOL is recognized as a preferred agent for preventing nausea and vomiting in patients receiving highly emetogenic chemotherapy, with a Category 1 recommendation from the NCCN[98]. - CINVANTI, approved in November 2017, is indicated for preventing nausea and vomiting associated with highly emetogenic cancer chemotherapy[100]. - The company is focused on expanding the indication for ZYNRELEF to include a broader range of surgical procedures, enhancing its market potential[85]. Financial Performance - For the three months ended March 31, 2023, net product sales were $29.6 million, a 26.0% increase from $23.5 million in the same period in 2022[110]. - Net product sales of CINVANTI were $22.9 million for the three months ended March 31, 2023, compared to $20.3 million for the same period in 2022, reflecting an increase of 12.8%[112]. - The net loss for the three months ended March 31, 2023, was $32.8 million, or $0.27 per share, compared to a net loss of $63.9 million, or $0.63 per share, for the same period in 2022[124]. - Cash, cash equivalents, and short-term investments totaled $60.0 million as of March 31, 2023, with an accumulated deficit of $1.8 billion[120]. - Cost of product sales for the three months ended March 31, 2023, was $16.9 million, compared to $11.4 million for the same period in 2022, an increase of 48.2%[113]. - General and administrative expenses increased to $10.9 million for the three months ended March 31, 2023, from $9.5 million in the same period in 2022, an increase of 14.7%[116]. - Net cash used in operating activities was $24.9 million for the three months ended March 31, 2023, down from $43.9 million in the same period in 2022, a decrease of 43.5%[125]. Manufacturing and Cost Management - ZYNRELEF's manufacturing capacity has been validated to produce millions of doses annually at a significantly reduced cost[86]. - The company validated larger-scale manufacturing of CINVANTI in Q4 2022, which is expected to significantly reduce product sales costs[105]. - The FDA approved a new J-code for CINVANTI in January 2019, simplifying the billing and reimbursement process for prescribers[104]. Strategic Initiatives - The company aims to establish key collaborations and vendor relationships to support the commercialization of its products[81]. - The anticipated impact of restructuring activities includes reduced headcount and external spending to optimize operations[81]. Research and Development - Research and development expenses decreased to $13.8 million for the three months ended March 31, 2023, down from $42.1 million in the same period in 2022, a reduction of 67.2%[115].

Financial Performance - For the year ended December 31, 2022, net product sales were $107.7 million, an increase of 24.8% compared to $86.3 million for the same period in 2021[342]. - Net product sales of CINVANTI for the year ended December 31, 2022, were $87.3 million, up from $73.5 million in 2021, representing a growth of 18.8%[343]. - Net product sales of ZYNRELEF for the year ended December 31, 2022, were $10.2 million, compared to $2.9 million in 2021, reflecting a significant increase of 251.7%[344]. - The net loss for the year ended December 31, 2022, was $182.0 million, or $1.67 per share, compared to a net loss of $220.7 million, or $2.24 per share in 2021[358]. - As of December 31, 2022, the accumulated deficit was $1.8 billion, with cash, cash equivalents, and short-term investments totaling $84.9 million[352]. Cost and Expense Management - The company expects a decrease in cost of product sales in 2023 due to validated large-scale manufacturing of ZYNRELEF and CINVANTI in Q4 2022[318]. - Research and development expenses are anticipated to decrease in 2023, attributed to the approval of APONVIE and larger-scale manufacturing validations for ZYNRELEF and CINVANTI[321]. - Sales and marketing expenses are expected to decrease in 2023, as 2022 included one-time launch preparation costs for ZYNRELEF[323]. - For the year ended December 31, 2022, the cost of product sales was $54.9 million, an increase from $46.0 million in 2021, including $8.9 million related to the write-off of short-dated ZYNRELEF inventory[345]. - Research and development expenses totaled $107.5 million for 2022, down from $130.8 million in 2021, primarily due to a decrease in personnel costs of $11.5 million[347]. - General and administrative expenses decreased to $37.4 million in 2022 from $40.2 million in 2021, attributed to reduced facility-related costs[348]. - Sales and marketing expenses were $82.5 million for 2022, compared to $87.2 million in 2021, mainly due to lower costs for CINVANTI and SUSTOL commercialization[349]. Cash Flow and Financing - Net cash used in operating activities for 2022 was $146.9 million, a decrease from $203.4 million in 2021, primarily due to changes in working capital[358]. - The company raised $75.1 million from financing activities in 2022, down from $156.0 million in 2021, primarily due to a significant financing event in May 2021[360]. - The company may need to obtain additional funds to meet cash requirements, which could impact operations if not secured[353]. - The company had total purchase obligations of $103.7 million as of December 31, 2022, with $38.7 million due within one year[364]. Product Development and Approvals - The company commenced commercial sales of ZYNRELEF in the U.S. in July 2021, with net product sales impacted by short-dated product returns due to FDA approval delays[344]. - The company is developing HTX-034, a next-generation product candidate for managing postoperative pain[315]. - APONVIE was approved in the U.S. in September 2022 and became commercially available in March 2023[315]. Estimates and Judgments - The company’s financial condition and results of operations are subject to significant estimates and judgments, which may materially affect reported amounts[327].

Product Performance & Sales - ZYNRELEF demand units increased by 38% from Q3'22 to Q4'22[6] - APONVIE launched on March 6, 2023, targeting the PONV prevention market[2, 45] - CINV Franchise net sales increased to $97.5 million in 2022[15] - Total net product sales for the year ended December 31, 2022, were $107.7 million[1, 76] Market & Strategy - ZYNRELEF targets 74 IDNs, representing a potential $149 million Exparel sales opportunity[8] - ZYNRELEF offers acquisition cost savings of 23% to 34% compared to Exparel[13] - APONVIE targets a large market opportunity of 36 million annual procedures in patients at moderate to high risk for PONV[14] Financial Status - Heron had $84.9 million in cash, cash equivalents, and short-term investments as of December 31, 2022[49] - Full-year 2023 CINV Franchise net sales are expected to be in the range of $99 million to $103 million[48] Product Development - A Vial Access Needle (VAN) is being developed to simplify ZYNRELEF withdrawal, with potential availability by mid-2024[20] - A prefilled syringe (PFS) for ZYNRELEF is under development[20, 87]

Financial Data and Key Metrics Changes - ZYNRELEF net sales grew to $3.9 million for the fourth quarter, representing a 44% increase over the prior quarter and a 362% increase over the same quarter in the prior year [22] - Total ZYNRELEF unique ordering accounts increased to 793 by the end of the fourth quarter, up from 704 at the end of the third quarter [10] - CINV franchise net sales for the full year 2022 were $97.5 million, a 17% increase over the prior year [99] Business Line Data and Key Metrics Changes - Demand units for ZYNRELEF grew to 20,765 units in the fourth quarter, a 38% increase over the prior quarter and a 301% increase year-over-year [94] - CINVANTI manufacturing is now online, with gross margins increasing from about 50% towards 75% [12] - The oncology care team achieved a 32% increase in net sales for the CINV business compared to the same quarter in the prior year [34] Market Data and Key Metrics Changes - The company reported a branded market share growth of 9.1% in the 66 IDNs with formulary approval, which is about twice the level of the total market [23] - The elimination of separate reimbursement for generic fosaprepitant in the hospital outpatient segment has made CINVANTI's value proposition more attractive [11] - The company is targeting 36 million annual procedures in patients at moderate to high risk of PONV, with an estimated 12 million patients not receiving any prophylaxis [28] Company Strategy and Development Direction - The company is focused on expanding the label for ZYNRELEF and improving the withdrawal process from the vial to enhance growth [92][104] - APONVIE is positioned as a strategic fit for the company, leveraging existing relationships with anesthesia and pharmacy for formulary access [29] - The company aims to increase the number of surgeons using ZYNRELEF and expand into other surgical lines [50] Management's Comments on Operating Environment and Future Outlook - Management noted that the first quarter typically sees a seasonal decline in surgeries, but growth for ZYNRELEF is expected to continue despite this [20] - The company anticipates a label expansion for ZYNRELEF in October, which could drive further growth [42] - Management expressed confidence in the early customer feedback for APONVIE and the potential for significant market opportunity [33] Other Important Information - R&D expenses declined to $11.1 million in the fourth quarter of 2022, down from $28.9 million in the same quarter of 2021 [37] - The company had cash, cash equivalents, and short-term investments of $84.9 million as of December 31, 2022 [51] Q&A Session Summary Question: What is the reason for the increase in accounts receivable? - Management attributed the increase to minor timing in payments and an overall increase in sales throughout the year [39] Question: Can you elaborate on options for shoring up cash runway? - Management indicated they are working with the Board to explore options to extend the cash runway and reduce R&D expenses [60] Question: What are the overall surgical volume trends? - Management noted that January is typically slow, but they have seen good movement in February and strong March, leading to overall growth [70] Question: What is the strategy for increasing uptake from accounts with consistent ordering? - The strategy includes leveraging medical device representatives to strengthen relationships with orthopedic surgeons and ensure product availability [82] Question: What are the regulatory implications for improving ZYNRELEF's product presentation? - Management stated that they are evaluating opportunities to accelerate the approval process through a 510(k) filing, which generally goes faster [78]

Forward-Looking Statements Heron Pipeline of 4 Approved Products With $106.7 million in | --- | --- | --- | --- | --- | --- | |---------------|-----------------------------------|-------------|----------|--------------------------------------|----------| | | | PRECLINICAL | CLINICAL | NDA | APPROVED | | | | | | | | | | SUSTOL® (granisetron) | | | US FDA Approved for CINV Prevention* | | | Oncology Care | extended-release injection | | | | | | | CINVANTI® | | | | | | | (aprepitant) injectable emulsion | | | ...

Heron Therapeutics, Inc. (NASDAQ:HRTX) Q3 2022 Earnings Conference Call November 8, 2022 4:30 PM ET Company Participants David Szekeres - EVP and COO Barry Quart - CEO and Chairman John Poyhonen - President and Chief Commercial Officer Conference Call Participants Brandon Folkes - Cantor Fitzgerald Josh Schimmer - Evercore Serge Belanger - Needham and Company Operator Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Heron Therapeutics Q3 2022 Earnings Conference. As a reminder, ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number: 001-33221 HERON THERAPEUTICS, INC. (Exact name of registrant as specified in its charter) Delaware (State or other juris ...