Pacira BioSciences (PCRX) has announced its financial results for the second quarter of 2024, emphasizing robust sales growth across its product portfolio, with a particular focus on its flagship product, EXPAREL. The company has reaffirmed its full-year 2024 guidance, citing increased sales and gross margins.
Key priorities include the expansion of EXPAREL for lower extremity nerve blocks, preparation for the implementation of the NOPAIN Act in 2025, and broadening patient access through new GPO partnerships. Pacira also addressed its ongoing patent litigation against eVenus, expressing confidence in its legal position.
Key Takeaways
- Strong sales performance for EXPAREL and other products in Q2.
- Increased gross margin and reaffirmed full-year 2024 guidance.
- Prioritizing the expansion of EXPAREL use and preparing for NOPAIN Act implementation.
- New GPO partnerships to improve patient access to EXPAREL.
- Ongoing patent litigation with eVenus, with a confident legal stance.
- R&D expenses rose due to registration study activities; SG&A expenses increased for commercial and medical organizations.
- Successful debt financing completed, bolstering financial position.
- Optimism for long-term growth and readiness to face generic competition.
Company Outlook
- Reiterated commitment to full-year guidance for 2024.
- Prepared for growth and commercialization of new products.
- Expressed confidence in the second half of the year and readiness for the rollout of NOPAIN in 2025.
Bearish Highlights
- Legal challenges with eVenus could potentially impact business priorities.
- Uncertainty regarding the timeline for ongoing patent litigation cases.
Bullish Highlights
- Strong sales and increased gross margins reported for the second quarter.
- Positive expectations for the company's legal position in patent litigations.
- Anticipation of a favorable trial opinion regarding the first case against eVenus.
Misses
- No specific data on medical procedures related to sales trends.
- The incremental market opportunity from NOPAIN is yet to be quantified.
Q&A Highlights
- Decision by Judge Arleo on the 495 case expected soon.
- EXPAREL volume growth at 3% in Q2, consistent with Q1.
- Premier agreement satisfaction for better product access.
- First piece of litigation against one generic, not nine, indicating a controlled legal landscape.
- Guidance on NOPAIN's market opportunity to be provided after more customer engagement.
In summary, Pacira BioSciences has reported a successful second quarter in 2024, with a focus on expanding the reach of EXPAREL and preparing for future opportunities. The company is tackling patent litigation head-on while maintaining its business priorities. Investors are kept abreast of the developments and the company's strategies to ensure sustained growth and market presence.
InvestingPro Insights
Pacira BioSciences (PCRX) has demonstrated resilience and potential for growth, according to recent data and analysis. With a market capitalization of $909.51 million and a price-to-earnings (P/E) ratio of 13.02, the company is positioned as a potentially attractive investment. The adjusted P/E ratio for the last twelve months as of Q1 2024 stands slightly higher at 14.44, reflecting the market's valuation of the company's earnings potential.
A key metric that stands out is the company's strong gross profit margin of 61.8% for the last twelve months as of Q1 2024, indicating efficient management and a solid competitive advantage in its operational performance. This aligns with the company's reported increased gross margins in the second quarter of 2024.
InvestingPro Tips for Pacira BioSciences highlight the expectation of net income growth this year and the valuation implying a strong free cash flow yield, which could be of particular interest to investors looking for companies with a robust financial outlook. Additionally, the company's liquid assets surpassing short-term obligations suggest a healthy balance sheet, which is reassuring for investors considering the company's ongoing patent litigation.
Investors can explore additional insights and tips for Pacira BioSciences by visiting https://www.investing.com/pro/PCRX. For those interested in a deeper dive, InvestingPro offers more tips, and users can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. There are 7 more InvestingPro Tips available that could further inform investment decisions.
Full transcript - Pacira Pharmaceuticals Inc (NASDAQ:PCRX) Q2 2024:
Operator: Good day. And thank you for standing by. Welcome to the Q2 2024 Pacira BioSciences Earnings Conference Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the call over to your speaker today, 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 second quarter 2024 financial results. Joining me are Frank Lee, Chief Executive Officer, Tony Molloy, Chief Legal Counsel 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. As our top priority for 2024 is to ensure we're ready to accelerate growth next year and beyond. Toward that end, the first half of the year was marked by strong execution and meaningful progress towards our commercial, clinical, and business objectives. We maintain solid sales across all three of our products, strengthened our balance sheet, and bolstered our leadership team. We reshaped our corporate culture and enhanced our organization with new talent and capabilities. The foundation for a modernized commercial medical market access organization is now in place. Looking ahead to the remainder of the year, we continue to invest in the organization and set the stage for strong sustainable top line growth in 2025 and beyond. We believe that growth will largely be driven by EXPAREL, which is the product I'll focus on today. Let's start by walking through the three key 2024 priorities. First, expanding the utilization of EXPAREL as a lower extremity nerve block. Second, preparing the market for separate Medicare reimbursement at average selling price or ASP plus 6% with the implementation of the NOPAIN Act in 2025. And third, broadening patient access to EXPAREL through new GPO partnerships. I'll start with lower extremity nerve block where we continue to see positive market receptivity across all sites of care. To remind you, the rollout of EXPAREL and lower extremity nerve block is supported by compelling clinical data from two Phase 3 studies that demonstrated four days of superiority versus bupivacaine. These data are also a valuable tool we're leveraging to promote the opioid-sparing benefits of EXPAREL to our customers in advance of NOPAIN. We were pleased to see this new reimbursement policy outlined by CMS in its recently published preliminary rule for 2025. We believe this important reimbursement milestone will drive expanding EXPAREL utilization within the outpatient settings where there's ample room for growth given the market's steady migration away from inpatient care. In preparation for NOPAIN, we're advancing multiple initiatives to drive EXPAREL education and awareness across key stakeholders. To highlight the value proposition, we're generating real world evidence demonstrating the opioid-sparing and economic benefits of EXPAREL. We believe these data will be a powerful tool in our communications with healthcare systems, physicians, and payers. Recent progress includes a publication of three robust retrospective real world studies in colorectal, spine, and breast reconstruction surgeries. Each study compared patients who received EXPAREL with patients who did not. EXPAREL was associated with reduced opioid use as well as lower emergency department visits, length of stay, and hospital readmission rates. To drive education awareness, among our primary stakeholders, we recently launched our national campaign, Make the NOPAIN impact. The campaign is targeting hospital pharmacists, administrators, clinicians, and revenue management teams. It is solely focused on ensuring these critical groups are up to speed and ready when new outpatient Medicare reimbursement takes effect in January of 2025. Based on our market research, preliminary insights indicate a growing level of awareness and understanding among key stakeholders around NOPAIN and its potential impact on patient care. As the year progresses, we'll continue to roll out new resources to help our customers seamlessly integrate this expanded reimbursement change into their systems. Shifting gears to market access, as we're also paving the way for NOPAIN through our participation in 340B pricing and new GPO partnerships. Through these preferential pricing programs, healthcare systems can afford the opportunity to be at the forefront of opioids-sparing pain management. Our customers will have a favorable acquisition cost, and when NOPAIN takes effect in 2025, they'll be reimbursed at ASP plus 6%. We're now six months post-launch of our Premier partnership, which continues to perform as expected with EXPAREL volumes at premier accounts up over the prior year with only a very modest impact on net sales dollars. We're also leveraging our Premier partnership for additional opportunities. For example, last week I had the opportunity to participate in a Hot Topic interview with a member of the Premier leadership team to discuss Pacira at their annual membership meeting. The discussion focused on our commitment to partnering with health systems and NOPAIN. We also utilize opportunities to drive awareness around NOPAIN within the Premier membership base. Importantly, we have two additional GPO partnerships expected to go live this year with both offering similar opportunities to expand patient access to EXPAREL. Turning to ZILRETTA and iovera, I'm pleased to report that both products are performing according to plan with solid sales in the first half of the year. Patient dosing is also underway in our Phase 3 registration study for ZILRETTA in shoulder OA. If successful, this study could make ZILRETTA the first and only long acting steroid approved for use in shoulders. Shoulder OA represents a sizable market opportunity with approximately 1 million intra-articular injections administered each year. Our registration study for iovera for the treatment of spasticity is also underway. Given the significant lack of innovation in the spasticity space, we believe iovera may offer a novel approach for patients afflicted by this debilitating condition. On the research and development front, I'd like to provide a brief update on PCRX-201. This novel gene therapy product candidate codes for interleukin-1 receptor antagonists or IL-1RA for the treatment of osteoarthritis or OA of the knee. There is significant unmet need in the OA space. This is primarily due to lack of drugs with durable and clinically meaningful improvements in pain and function and the lack of disease modification therapies. Current single dose injectable therapies relieve pain and function for only three to six months and do not offer disease modification to the 14 million patients suffering from the OA. Earlier this year, we reported encouraging interim results from a 72-patient phase 1 study of PCRX-201 from moderate to severe knee OA. In this large Phase 1 study, a single intra-articular injection of PCRX-201 demonstrated a sustained and clinically meaningful effect. This was observed at all doses across all levels of severity for at least one year post-injection. Importantly, PCRX-201 was well tolerated with a favorable safety profile. We continue to follow these patients and now have data for two years that were submitted for presentation at a medical meeting in the fall. 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 with a single dose will be considered transformative by both physicians and patients. Furthermore, more than a year of durability would be clinically and economically meaningful for patients and healthcare systems. Unlike traditional gene therapies that focus on rare diseases, PCRX-201 leverages the properties of a novel high-capacity adenovirus or HCAD platform to address unmet needs in prevalent diseases like knee OA. Importantly, our strategy will unlock the potential of gene therapy to provide meaningful and durable and economically viable treatment through local delivery of the affected joint, very low dosing enabled by high-capacity adenovirus, and large-scale manufacturing to support favorable cost of goods. As you may recall, PCRX-201 received the FDA's first ever Regenerative Medicine Advanced Therapy or RMAT designation for a gene therapy product in osteoarthritis. We're scheduled to have our first RMAT meeting with the FDA next month and discuss our plans for clinical development. We look forward to sharing more details on the advancement of PCRX-201 on future calls. With that, I'll turn the call over to Tony for a brief discussion of the EXPAREL patent litigation.
Tony Molloy: Thanks, Frank. And good afternoon, everyone. I'll briefly touch on the FDA's recent approval of a generic version of liposome bupivacaine and next steps in our paragraph four litigation. To remind you, the FDA's decision is a separate track and has no impact on our multiple patent infringement lawsuits against eVenus, which are all still pending. The first case involving our 495 patent concluded in May. We believe we made a strong case that eVenus is infringing on our patent. That said, to provide clarity, I wanted to walk through the three scenarios that could play out with respect to this first lawsuit. Outcome one. Pacira wins the lawsuit against eVenus Pharmaceutical. Under this scenario, we expect the court would enjoin eVenus from launching a generic until the expiration of the 495 patent in January, 2041. So even with an FDA approval, there is no ability for eVenus to commercialize their drug unless they successfully appeal and overturn the lower court's decision. Outcome two, the court upholds the validity of the 495 patent but concludes that eVenus is not infringing on that particular patent. We also view this as a positive for Pacira given that this is only the first patent being litigated. Three additional infringement lawsuits are underway for our 348, 574, 575, and 706 patent. And these patents are broader than the 495 patent. We also have other patents that are forthcoming, many of which will be listed in the Orange Book with expiration dates through January, 2041. In order to be commercially successful, eVenus would have to overcome all of our patents. Outcome three, the court concludes that the 495 patent is not valid and that eVenus does not infringe. This is the least ideal scenario. If this happens, we have a comprehensive strategy in place depending on the findings of the court. We firmly believe the EXPAREL franchises will protect it from multiple directions. We are committed to taking the necessary steps to protect the interests of our business, shareholders, patients, and other stakeholders. We expect a trial opinion on the first case very soon. As I'm sure you can appreciate, it would not be in our best interest to publicly share details around our legal strategy other than to say we believe that we have a strong legal position and that eVenus is infringing upon our patents. We are advancing a robust, multifaceted legal strategy and we stand ready to engage with the court and vigorously defend our EXPAREL franchise in the event of any decision. That being said, we will keep our investors informed as this process unfolds. I want to emphasize that we have a responsibility to patients, their clinicians, and other stakeholders to vigorously defend our intellectual property and a proven safety and integrity of EXPAREL. I'll now turn the call over to Charlie for his financial report. Charlie?
Charles Reinhart: Thank you, Tony, and good afternoon, everyone. To remind you, I will be discussing non-GAAP financial measures this afternoon. 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. Second quarter EXPAREL sales increased to $136.9 million versus $135.1 million in 2023. Volume growth and a January 24 price increase were largely offset by a shift in vial mix and discounting associated with the launch of our Premier partnership. Second quarter ZILRETTA sales increased to $30.7 million versus $29.3 million in 2023, and iovera sales improved to $5.7 million compared to $4.4 million in the second quarter of 2023. Turning to gross margin, on a consolidated basis, our second quarter non-GAAP gross margin percent was 76%, at the high end of our full year guided range of 74% to 76%, driven by strong margins for all three products. For non-GAAP R&D expense, the second quarter increased to $18.4 million from $17.1 million reported last year. This increase primarily relates to the startup activities for our registration studies of ZILRETTA for shoulder OA and iovera for spasticity. Of note, second quarter R&D expense included $7.3 million of product development and manufacturing capacity expansion costs, which are down from $9.3 million in the prior year. Our pre-commercial scale-up activities are now complete, and the 200 liter EXPAREL manufacturing suite in San Diego began commercial production earlier this month. Non-GAAP SG&A expense came in at $59 million for the second quarter, which is up from $57.1 million last year. This increase is largely due to investments we are making in our commercial, medical, and market access organizations, including programs that will drive education and awareness ahead of separate Medicare reimbursement, and third party strategic consulting services. All of this resulted in another quarter of significant adjusted EBITDA of $62.1 million. With respect to the balance sheet, in the second quarter we completed a very successful $287.5 million convertible debt financing, which allowed us to retire about half of our August 2025 notes. With more than $400 million of cash and investments and a business that is producing significant cash flow, we have the flexibility to continue investing in growth and long-term value creation while opportunistically returning capital of shareholders by repurchasing our stock. Turning to guidance, today we are reiterating our full year 2024 guidance 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 proud of the progress we've made in the first half of 2024, which will help cement our leadership position in advancing innovation in non-opioid pain management. We're confident that the investments we're making will support and expand this leadership position, as discussed earlier throughout the balance of the year, will continue our efforts to ensure we're ready for long-term growth. The foundation work that we have undertaken leaves us well-positioned for sustainable success. With that, operator, we're ready to open the call for questions.
Operator: [Operator Instructions] And our first question comes from Gregory Renza from RBC (TSX:RY) Capital Markets.
Gregory Renza: Great. Hey, good afternoon, Frank and team. Thanks for the time and thanks for taking my question. Frank, just to kick off on the generic liposome bupivacaine approval of early July 2nd. Just wondering if you could just comment on your evolving confidence and your ability to sort of defend the EXPAREL at this key point in time. To what degree was that development surprising to you? And I have certainly a follow-up. Thanks.
Frank Lee: Thanks for the question, Greg. With regard to the, I think you're referencing the ANDA approval, and as Tony mentioned, that has nothing to do with our case, so that's a separate matter, and that's our focus. Our confidence hasn't changed with regard to our case, and so as Tony outlined, we have multiple levels of legal action and defense that we have at our disposal, so that's unchanged.
Gregory Renza: Got it. Thanks. And you certainly mentioned just the ability to prepare for NOPAIN with the resources, medical affairs. If you could just give us an update on how that infrastructure is looking, to what degree will you be quantifying that and just applying some extra granularity as we think about receiving that [inaudible] 1 and 2 through 2025 and beyond. Thank you very much.
Frank Lee: Yes, that's a good question, Greg. Let me go back and say that we're very pleased to see the proposed rule come through this past month. And it's exactly as we expected. There are some comments there that we'll comment on, but we expect that everything's on track now for January 1, 2025. And our internal preparations are right on track. As I mentioned, our foundation is set in terms of all the things that we've done to expand our capabilities on the commercialization side, on the medical affairs side, as well as our market access side of things. And so, as I mentioned on the call, I've had a chance to engage our various customers, including our premier customers at their annual meeting. And we can see that there's growing awareness of not only NOPAIN, but of the ASP plus six separate reimbursements. So we've got some additional work to do, but we're off to a good start.
Operator: Our next question comes from David Amsellem of Piper Sandler.
David Amsellem: Hey, thanks. So just a couple of questions. So first, Frank, as you were diligently the company ahead of accepting the CEO position, what was your view regarding the approvability of a generic and did that approval surprise you? And that's in the context of your predecessor talking quite openly that he didn't believe that this filing was approvable. So I wanted to get your thoughts on the level of surprise that you had that ultimately that this did happen. Secondly, I guess a hypothetical to the extent that eVenus does come into the market. Can you talk to how you think market dynamics will play out in terms of your share, and even what your market intel might be telling you on their own capacity, and how you're preparing for that in the event that that does happen, not saying that it's going to happen, but in the event that that does happen. Maybe I'll stop there and get your thoughts. Thanks.
Frank Lee: Well, thanks for the questions, David. So let me just come back. I remember when I first started, there were a lot of questions about Frank. What made you think about joining Pacira? And I'm going to come back to number one, Pacira is the leader in the non-opioid pain management space. It's a leader because we have great portfolio products, not only in line, but also, as I mentioned, some interesting products in the pipeline that we'll continue to add to over time. And broadly speaking, when you think about leadership, you see companies that not only take an interest in products, but also interested in the broadly, the pain therapeutic area, which we've done by our leadership here of all the things that we talked about before in terms of supporting NOPAIN and the passage of that act over the past seven years. So that's what impressed me. With regard to any sorts of approvals, I come back to, it's hard to say due diligence. What I will say is that when you take, when you give people enough resources and time, it's not surprising what they can do. So I'll leave it at that, but I'm going to come back to, that doesn't change anything with regard to the legal actions that are in play now and will be in play going forward. And as Tony mentioned, this is the first piece. There will be others down the road, right. So that's that. With regard to speculating about what could happen if down the road, one generic, remember now there's one generic, would launch at risk. It's hard to say. I'm sure you've looked at various models, but I don't really want to speculate on that. I come back to, I really believe in our physicians and the strength of our IP, and we're going to defend our IP very rigorously going forward.
Operator: Our next question comes from Glen Santangelo of Jefferies.
Glen Santangelo: Oh, yes. Thanks for taking my question. Hey, Frank, I'm not sure if this is for you or Tony, but appreciating the way you guys laid out the three different scenarios and the potential outcomes here. And while the two bookends, the positive scenario of the full invalidity and, oh, I'm sorry, the positive scenario of valid and infringe and the opposite, invalid and not infringed. Those outcomes seem somewhat obvious. I'm kind of curious about the middle scenario where we have a scenario where the patent is valid, but not infringed. And Tony, you seem to paint that scenario as a positive outcome where one might think that that would put the company in a somewhat vulnerable position in the near term. And so I'm kind of wanting to explore that a little bit more in how you think things sort of play out in that scenario and why you think it's positive. Thanks.
Tony Molloy: Sure, thank you, Glen, and nice to meet you. Keep in mind that the 495 case is just the first case. And there are four other patents that are behind the three subsequent cases. Each one of those is different. And just during the course of the litigation, we have reason to believe that there's infringement on the other patents. So even if the 495 isn't infringed, we believe that the other patents are infringed.
Glen Santangelo: And so, but it's my understanding that there's no court case, no court dates currently on the docket for those other patents. And so I'm not sure how long it will take for those cases could ultimately be heard. And I guess in the interim, given the vulnerability of a potential leaving this launch, I'm not sure what the pathway looks like to get a preliminary injunction. And so I'm kind of curious if you could just explore that pathway a little bit and how you might react in that scenario. Thanks. And I'll stop there.
Tony Molloy: Sure. Well, I mean, the standard's well-defined. You have to show irreparable imminent harm and a likelihood of success on the merits. And again, we believe in each of the patents that are being litigated, the 348, 574, 575, and 706. So we have three cases, and we'd look for injunctive relief, if appropriate, depending on the opinion. Again, this could play out, like most IP cases. It could take years for these cases to be resolved in the court system. We've always said this is going to be a marathon and not a sprint. But again, we do believe in, even though we haven't gotten a trial date yet on the other cases, we do believe in the event that it's a mixed outcome, that outcome, too. We do believe in the strength of the patents that are behind the 495.
Glen Santangelo: And you believe those patents are enough to get a PI, if that's the case?
Tony Molloy: Again, it's hard to say without seeing the opinion. But again, we believe in the strength of the patents, and we believe that eVenus is infringing these four pats. So even if there's a finding that the 495 is not being infringed, we've got these other patents.
Operator: Our next question comes from Gary Nachman of Raymond James.
Gary Nachman: Hi, good afternoon. So, yes, just on those three additional patent cases, what is the estimated time for how long it would take for those to progress to trial? Do you think it would be the same judge as the 495 case? And describe a bit how much broader or stronger those patents might be than 495. And then, how many more additional patents down the road do you expect to file? And what would those be on, if you could give us the more color on that and then have a follow-up.
Tony Molloy: Thank you. Okay, well, I'll take each of these questions in order. So at the most recent status conference, the magistrate didn't give a trial schedule for these other cases, and that was because we're expecting the first case to come out sometime this week. All of these cases are going to be in front of the same judge, Judge Arleo, at the District of New Jersey. Each of these patents is different. Obviously, you can't get a patent for the same claims. You can't get two patents for the same claims. So when I say broader there and stronger, they're different, and they claim different properties of EXPAREL as made from the 200-liter process. So they're different, and just from what we've learned of the e-Venus product, we're confident that they're infringing each of these other patents. How many additional patents? We're prosecuting quite a few right now. And it's just hard to predict because a lot happens from application to patent granting, and there are times that there's consolidation of applications and such. So it's hard to say how many additional patents we have, but we do anticipate several additional patents to be coming from this family, including later this year.
Frank Lee: Gary, I just want to come back to, as Tony mentioned earlier, we really believe this is going to be a marathon, and this could take years. This is the first time case. There are many other patents as Tony mentioned and many that are in process so certainly a lot of things can happen but we expect this to be a marathon could take years and we believe in the strength and validity of these patents.
Gary Nachman: Okay, that's helpful and then Frank just how much more do you have to do to get the full commercial organization in place and ready for NOPAIN and just talk about what you think that ramp might look like starting next year. Obviously not giving guidance right now but just what our expectations should be on the implementation of NOPAIN. And then Charlie, how do you see gross margins trending for the rest of the year because you were at the higher end of the guidance range in the second quarter. Thanks.
Frank Lee: Thanks for that Gary. First of all let me say I'm really pleased with the way that the teams delivered on guidance to date. And so, if we take a look at now the balance of the year, to your question, Gary, about when will we perhaps provide some indication of what to expect in 2025 as it relates to the NOPAIN ramp. And I would say that we're looking at some time towards the end of the year early next year. By that time, our teams who have now been deployed will have, I think, a very clear idea of the key segments of customers and to what extent certain customers will adopt earlier as opposed to a little bit later in the year. As I mentioned, we see growing awareness and education about not only NOPAIN, but also about the fact that ASP plus 6% separate reimbursement will be in place for Medicare patients and that along with our, GPO contract and the two that are pending, we think is going to be a very strong value proposition that marries with the clinical proposition. So, in short, what I'd say is that the foundation is set, in my mind, as it relates to commercial medical market access. Now, we're going to engage our customers and really start to execute in a way that gives us clear insight about what to expect as we go into next year.
Charles Reinhart: Gary, as far as margins go, looking forward for the second half of this year, I would anticipate that actual non-GAAP margins look closer to the second quarter than they do the first quarter. The first quarter had challenges in it, and we didn't see those challenges this quarter.
Operator: Our next question comes from Hardik Parikh of JP Morgan (NYSE:JPM).
Hardik Parikh: Hey, everybody. Thank you very much for taking my question. Just want to ask, pretty sure you guys can’t share your legal strategy. I was just wondering; this question is just more around kind of what options you actually do have. So specifically in regard to the injunctive release, just wanted to know, let's say there's a, you guys file an appeal on the 495 patent, you can ask for an injunctive release. Could you do that for each kind of subsequent case? Be like, could you in theory get like five subsequent injunctive release or is there some sort of a cap after, yes, after one or two or whatever?
Tony Molloy: You can file for injunctive relief in all the cases. In practice though, I mean, this is all before the same judge. You really, you need one injunction, but you can file as many of these as you want.
Hardik Parikh: Okay, thank you. And then just on the GPO countries, you guys said, yes, two more going live this year. Any comments on what kind of impact that could have on EXPAREL kind of net pricing in 3Q, and just broadly for the rest of the year?
Frank Lee: Thanks for the question, Hardik. With regard to GPO, we'll reiterate that we expect two more to be signed by the end of the year, and Charlie can comment on this, but I think we reiterate guidance, as we talked about before, and we expect that this will be a positive for us, and net positive as we go into ‘25 and beyond. So, Charlie?
Charles Reinhart: Our original guidance included the GPO contracts being signed, roughly one a quarter, but the second two are a little delayed, so that gives us a little positive impact to the extent revenues haven't suffered from not signing them. So, all in all, right now, EXPAREL’s gross to net is in the 83% range. That's projected to come down a couple of points by the time the third is signed, on a going forward basis. All of that's built into our models.
Operator: Our next question comes from Leszek Sulewski of Truist Securities.
Leszek Sulewski: Good evening, guys. Thank you for taking my questions. Charlie, perhaps, just to build up on the guidance comments. Given the strong 2Q results, is there a level of conservatism built into the guidance, perhaps we expect maybe would have been tightened. And then second, on the capital allocation strategies, and given kind of the current market conditions around shares, is there an accelerated component to your share repurchases or anything we kind of could expect for the remaining day of the year? And then my last question, has, eVenus provided you a commercial sample of their generic product? Thank you.
Charles Reinhart: I'll just take them in order and I'll let Tony talk about the eVenus sample question. So, listen, we're pleased with where the business has been in the second quarter. We think we did what we needed to do and anticipated we do in the top line on margins and OpEx. So all of those put us favorably within the original guidance ranges. Was guidance conservative? Well, it might have been, we'll see. Remember that last year we thought we were conservative and it didn't work out all that well. So there's a little bit of that, hanging around too as well. Share repurchase, we have, as you know, we started the repurchase by buying back $25 million worth of stock in conjunction with the convert we already did. We're a positive cash flow, and we will evaluate when we think it makes opportunistic sense, and to what extent, and use the cash accordingly. And there is a question about assurance.
Tony Molloy: Yes. So, we've not received a sample of the end-of-product yet, and the issue is currently before the magistrate judge to work out the logistics to get those samples.
Operator: Our next question comes from Serge Belanger of Needham.
Serge Belanger: Hi. Good afternoon. Thanks for taking my questions. I guess the first one for Tony. Do you still expect the decision by Judge Arleo on the 495 case on or prior to August 1st? And then secondly, I guess, for Frank and Charlie on EXPAREL, you mentioned 3% volume growth in the second quarter. I believe it was the same as what we saw in the first quarter. Just curious how that compares to the overall market growth and whether it's coming from ortho-procedures or soft tissue. And then lastly, on the GPO front, I think that in the past, you've described Premier as consisting of 20% of EXPAREL relevant procedures. Just curious if the other two are similar or would have a larger impact. Thanks.
Frank Lee: So let me go on reverse order a little bit and I'll take the Premier and maybe Charlie can talk a little bit about EXPAREL volume ortho versus soft tissue, and then turn it over to Tony after that. So, Premier, again, we're pleased with how that agreement is performing, how we're pulling through, and how we have now other opportunities with Premier to leverage other opportunities to educate their membership about not only EXPAREL, but about also NOPAIN. As we discussed before, as we think about other GPOs, and if you think about the 340B program as well, that would encompass well over 80% of our, broadly, of our market. And so we're very happy about where we're going to wind up by the end of the year in terms of providing our customers with, I would say, better access to our products. So, with that, then we turn it over to Charlie here.
Charles Reinhart: So, as far as knowing that the actual medical procedures that sales are related to, we don't have that data that so quickly it takes us four or five months to get that data. So the data we have now there's no significant change in the trends. But that doesn't really tie to the second quarter access.
Tony Molloy: Serge, thank you for the question Yes, we still expect a decision this week at closing arguments in May as Judge Arleo told us she expected to have the decision by August 1st, and we haven’t heard anything from the court that they would lead us to believe that that's not going to happen.
Serge Belanger: Okay. Charlie, can you tell us what gross and nets on EXPAREL were for this quarter.
Charles Reinhart: Well, the 83% in the second quarter.
Operator: Our next question comes from Balaji Prasad of Barclays (LON:BARC).
Balaji Prasad: Hi, good evening and two questions from me. Firstly on the litigation itself. While I can understand the legal defense against an at-risk launch or potential injunctive relief being sought. What would a commercial defense against an at-risk launch look like? And two, is it fair assume you might imagine that this is not impacting or influencing your business allocation priorities your CapEx thoughts going to next year. And Frank also on the reorganization of the company structure that you're embarked on since taking over. Thanks.
Frank Lee: So, Balaji, listen, based on what we know about our IP we've been as you know making sure that we build our capabilities, modernize our approach to commercialization, medical market access. And we've done that, as I mentioned, we laid the foundation and we're executing on that in the second half of the year, so that we're ready for driving growth, accelerated growth in ‘25 and beyond. So that's what I'll say to that. I really can't speculate in terms of all the different things that could happen. Again, I'll reiterate that this is one generic, not nine. So that's an important fact to know. And again, I want to come back to this is the first piece of litigation that's being litigated relative to all the other patents that we still have to go. So it is going to be a marathon. So I really don't want to speculate about all the different kinds of tactics and strategies. I'm sure folks can look at that, but again, the point here is there's one generic, not nine.
Balaji Prasad: Understood, Frank, maybe as a quick follow-up, last quarter I asked about the incremental market opportunity within the $18 million procedures coming from NOPAIN. I think you said that your team was figuring this out, checking in to see if there's better clarity now on this, on what is the exact incremental opportunity. Thanks.
Frank Lee: Yes, Balaji, I think -- guidance with confidence as we get into towards the end of this year and early next year. As our now enhanced teams engage customers and really get granular in terms of their thinking, their plans, we're going to be able to provide guidance that we can stick to just like we have to date, this year. And I'm really proud of the team for that. So hang tight, we're getting there, as I mentioned, the foundation is set. And so I'm really excited, actually about the second half. And I feel the momentum building. And so we'll be able to identify as we move forward. Again, those kinds of customers and accounts are likely to adopt sooner rather than later. So the early adopters or the middle adopters and late adopters. And based on that, we'll be able to provide some guidance in terms of growth.
Operator: Thank you. This concludes the question and answer session. I would now like to turn it back to Susan Mesko, Head of Investor Relations, for closing remarks.
Susan Mesco: Thank you, DeeDee. And thanks to all on the call for your questions and time today. We're 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 the rollout of NOPAIN in 2025, which we believe will pave the way for our long -term success. The opioid epidemic continues to be a national crisis, underscoring the vital importance of our mission. Thank you and be well.
Operator: This concludes today's conference call. Thank you for participating. And you may now disconnect.
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