Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Heron Therapeutics Q1 2023 Earnings Conference. Before we begin, I would like to remind you that this call will contain forward-looking statements, concerning Heron's future expectations, plans, prospects, corporate strategy and performance, which constitute forward-looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in Heron's filings with the SEC. In addition, any forward-looking statements represent Heron's views only as of the date of this webcast and should not be relied upon, as representing Heron's views as of any subsequent date. Heron specifically disclaims any obligations to update such statements. Now, I'll turn the call over to Craig.

Thank you, operator. Good afternoon, everyone, and welcome to the Heron Therapeutics First Quarter 2023 Earnings Call. I'm Craig Collard, the new CEO of Heron Therapeutics, and I'm thrilled to be leading this organization, as we continue to make headway in the hospital and oncology markets. Today, I'll provide an overview of our recent performance, highlight key achievements, but more importantly, give some insight into my assessment of the business in my first four weeks and discuss our strategic vision moving forward. Total product net revenues for the first quarter were $29.6 million, up from $23.5 million in the same quarter last year, an increase of over 26%. We continue to make steady progress on the oncology side of our business, but we remain excited about the market opportunity for both ZYNRELEF and our newly approved product APONVIE, which was launched in March of this year. Starting with ZYNRELEF, I realize the product has had a slow uptake since launch for a variety of reasons. Despite competing in a huge market, the product has a differentiated clinical profile that works well when used. The label has limited our ability to be the drug of choice across a variety of indications. To counter that, we filed an sNDA within October 23 PDUFA date, that if approved, will expand our indications and number of procedures we can treat. The viscous nature of our products has slowed the withdrawal from the vial, compared to other drugs. To improve the handling, we recently started multiple enhancement programs to address some of the issues we have faced in the surgery suite during preparation, including a vial access needle or van and ultimately a prefilled syringe that could be game changing. Since joining the company, I've been able to get in the field and work with…

Thank you, Craig. As Craig mentioned in his remarks, our net product sales for the first quarter of 2023 were $29.6 million compared with $23.5 million in the first quarter of 2022, representing an increase of 26% over the same period in 2022. For the first quarter of 2023, our ZYNRELEF net product sales were $3.5 million. In March 2023, APONVIE became commercially available in the US. For the first quarter of 2023, our ZYNRELEF net product sales were $3.5 million. In March 2023, APONVIE became commercially available in the U.S. For the first quarter of 2023, APONVIE net product sales were $244,000. Our Oncology Care franchise net product sales for the first quarter were $25.8 million, which was an increase of 15% over the same quarter in the prior year. For the full year 2023, we expect Oncology Care franchise net product sales of $99 million to $103 million. Cost of product sales for the first quarter of 2023 were $16.9 million, compared to $11.4 million for the same period in 2022. For Q1 2023, cost of product sales included a onetime charge of $5.3 million, resulting primarily from the write-off of short-dated ZYNRELEF inventory. Research and development expense decreased from $42.1 million in Q1 2022 to $13.8 million for the first quarter of 2023, primarily due to a decrease in external development costs related to ZYNRELEF. Our sales and marketing expense decreased slightly from $23.4 million in Q1 2022 and to $21.2 million for the first quarter of 2023, primarily due to a decrease in costs to support the ongoing commercialization of ZYNRELEF. We are reporting a loss from operations of $33.1 million for the first quarter of 2023, which compares to an operating loss of $62.9 million for Q1 2022. Our balance sheet at the end of March 2023 shows cash balance of $60 million, down from $84.9 million at the end of December 2022. Craig, back to you.

Thanks, David. Operator, we'd now like to open things up for questions, and go ahead, please.

[Operator Instructions] Our first question will come from the line of Brandon Folkes with Cantor Fitzgerald. Please go ahead.

Hi. Thanks for taking my questions and Craig, congratulations on the appointment. Maybe just firstly from me, just how quickly do you think we can see a return on the trading of staff and then secondly, I know it's early stage and we perhaps need to be just be patient here. But any more granularities in terms of going forward and deeper into these accounts and sort of maybe some of the specifics that you think you can do to change the trajectory of ZYNRELEF. And then lastly, maybe just any color, and I know sort of this wasn't given during your time, Craig. But I think we're looking for a 10% volume growth in 1Q 2023 over 4Q 2022, when we report year-end earnings. So just any color, did that volume growth materialize? Were there any movements on price? Just any color there on ZYNRELEF? Thank you very much.

Thank you, Brendan. I would -- I guess, just start by saying that, as you know, we're in cash preservation mode. And what we're really trying to do is to optimally -- have optimization of our resources. And so, regarding stock price and that type of thing, I believe that, again, with property management and beginning to see consistent quarters and growth of our product, I think, again, that should affect the stock price longer term. I think in the short-term, again, keep in mind I was not here for this quarter that, I'm speaking of. So growth of products and that type of thing and depth in the accounts and what happened this prior quarter, I can't really speak to other than just to speak to where we are. But again, getting back to -- our goal is to get this company to profitability as soon as we can. And we're going to give a lot more detail around that, and that really includes many modes in our, spend being a little bit more of a leaner organization and then really maximizing our efficiency in sales. Speaking specifically, to ZYNRELEF and getting deeper into accounts and that type of thing, I agree. I think where we have usage, we can certainly get deeper into those accounts. I spoke a little bit about the day I was in the field -- and the thing that I left with that Day really was, I'm looking for things we can standardize. One thing, if one person doesn't account, can you really carry that across all the salespeople that we have and create something that can be replicated. And when I saw that data, we can, I think the application issues that I have seen and heard about, again, with the proper prep and training, as I'd said, it really does go away. And when the surgeon walked in to do the knee surgery that day, it was literally invisible to that person. The product was on the -- in the field in the sterile field, if you will, they used it. And one of the things that we actually mentioned that, I thought was very interesting, because we talked a lot about viscosity the surgeon mentioned to me that I really like the viscosity he actually called the product honey. He said, "I really like the viscosity of this product because it stays where I'll put it. And again, I think in some ways, we sort of ran from that, but I think we should be running towards it. I really do think the product is very under optimized. And again, the good news is the product works, and it works well.

Great. Thank you very much for taking my questions.

You're welcome.

Your next question will come from the line of Boris Peaker with TD Cowen. Please go ahead.

Hi. This is Nick on for Boris. Thanks for taking our question. Just quickly on APONVIE, how are you thinking about marketing this moving forward? I know that, you mentioned that there are a lot of similarities between like the calls that you'll make with the APONVIE and ZYNRELEF. But I was just thinking about like separately, how would you be planning to market this to potentially have a faster growth in ZYNRELEF?

Yeah. No, it's a great question. I mean one of the things I was sort of faced with when I walked into the company was where do you put your resources? Do you continue to pour more resources towards ZYNRELEF, or do you move things a little bit more towards a APONVIE. I think right now, as I walked in the door, we were a little more weighted towards ZYNRELEF. And if you think about it, ZYNRELEF is a trickier cell. APONVIE is a little bit different. It's almost like an annuity. In a sense, if you're getting formula -- if you can break through P&T and get on formulary, you almost get a bit of a protocol scenario where you're in the epic system and you're being used all the time. And so from my perspective, APONVIE is a much easier sell. Now, again, how it's been reacted by customers and all that. I just haven't had a chance to really see a lot of that yet. But as part of this sort of plan, as I talked about communicating more going forward, we're looking at that, and we're looking to put additional resources behind APONVIE. The really interesting thing that I've seen from the marketing data thus far and upon APONVIE though is that the oral prepatent market is growing with literally no promotion. And that's generally -- and so the takeaway from that is hospitals and physicians and anesthesiologists like this product, and it's growing without literally any promotions. So if I look at that and then I look at the massive size of the market, and really just look at patients that are dosed again with the same product. If we could just capture those two markets I mean this is a multi-hundred million dollar drug. And so from that perspective, it really doesn't treat you of what we can actually do with that product. So again, we're looking at it now and trying to sort of really look at not only how we comp our reps, but the alignment of our sales force and all that. So I think all of that is up in the air at this point, but we'll have some decisions here pretty quickly.

Great. Thanks for that. And space -- so for the VAN in prefilled syringe, what are the next steps to get them approved? And when do you expect this to be done for each of them?

I'm sorry, did you say prefilled syringe?

And the VAN as well,

We've got some initial time lines that I've looked at. I'm hoping that we can be a little quicker on this, but it's -- and we've done some work on the prefilled syringe. So I mean, we're sort of looking at the 26th time frame, I think, is sort of generally what I've heard, but I'm hoping we can pull that back a bit. The VAN will probably fall somewhere in between that in that time frame. So if it does work out that way, we would have the VAN coming in about 1.5 years or so and then, call it, 1.5 years after that you've had the prefilled syringe. And I think in the midst of all that as well, you've also got the expansion of the label possibly with the sNDA filing.

Great. Thank you very much.

You’re welcome. Thank you.

Your next question will come from the line of Rohit Bhasin with Needham & Company. Please go ahead.

Hi. This is Rohit on for Serge. Thanks for taking our questions. For the CINV franchise, the previous management provided prior guidance of $99 million to $103 million. Does this guidance still stand? And then secondly, you mentioned reducing cash burn. Do you have any plans to pull back on the sales force? Thanks.

Yes. So on the CINV franchise first, I've seen that we've given guidance in the past. And what I can tell you is I think that the CINV franchise is moving along quite nicely and is fairly steady. What I didn't like when I initially saw I just being perfectly honest, I haven't been involved in a company that gave partial guidance on partial products. So what I would prefer to do as we get our hands around this is give guidance a little more from a company standpoint and less about a particular product. So that's sort of the reason and that was my decision. But I can tell you that things are moving along fairly steadily. Regarding -- I'm trying to ink you or part of your question.

Yes. So you mentioned reducing cash burn. Do you have any the sales force?

Yes, I'm sorry, the sales force. But we're looking at that. Again, we want to be more efficient. It may be more of a realignment. We're certainly not doing anything on the oncology side. I think on the acute side, we're just trying to really assess are we aligned in the proper accounts and what does that look like? Would we trim that a bit in the short term? It's possible, but we're really more looking at how better to align to the -- whether it's a APONVIE, ZYNRELEF and how we kind of go about that. So it's -- that takes a little bit of time. And Jason, like I mentioned before, it was hired just a few weeks ago and he is on top of that. And so I'm hoping we can have something a little more clear on that here very shortly.

Great. Thank you.

You’re welcome.

Your next question comes from the line of Carl Byrnes with Northland. Please go ahead.

Thanks for the question and congratulations on the promotion. Considering the one-time ZYNRELEF inventory write-off, which I think was referenced at $5.3 million. If we back that out, it looks like the gross profit margin would have been around 61%. Does that sound right? And is that a number that you would expect to be sustainable and for the second going forward in future quarters?

Yes, Carl, it's a great question. You just said some time when you congratulated me on the promotion. I'm hoping the next quarter or quarters after this, what you say is, hey, guys, congratulations on a great quarter. That's what we're striving for. So I'd like to get that out first, I guess. Regarding gross margin, no, we're not awfully where we need to be. I would like to see us move towards under sort of a 20% COGS, which will be 80% gross margins. That's where I'd like to strive for. And I think with what we're doing batch size, why is now you're going to see some of that being reflected. I'm also looking into every manufacturing agreement we have and seeing where we can improve upon that. So ideally, I would like to get us down in sort of that, I would call it, high teens to 20% range. So we're not there yet, but it was affected obviously by this onetime write-off of ZYNRELEF.

Thanks.

You’re welcome. Thank you. Operator: [Operator Instructions] Your next question comes from the line of Kelly Shi with Jefferies. Please go ahead.

Hi. Thanks for taking my question. This is Clara on for Kelly. So, for the same accounts you're targeting for APONVIE and ZYNRELEF, what would be your strategy to maximize the synergy between those two products? And how should we expect the synergy to kind of be reflected on the sales in the coming quarters? And also for the ZYNRELEF, for the sNDA, what are some strategies and efforts to help ZYNRELEF for recognized the additional opportunity indicated by this additional education? Thank you.

Yes. No, thanks for your question. I'll start with the sNDA. I mean, again, as you know, we've filed it with the FDA, and we have a PDUFA date. But outside of that, we cannot predict what indications we will get and how broad the label will ultimately receive approval of. And so, our hope, obviously, is that it broadens and we get all the indications we ask for, but we just don't know that yet. And so, it's difficult to plan until you really know what you're going to have. So there'll be more to come on that. And really with the APONVIE and ZYNRELEF, the synergies there, I mean, if you think about it, there's two products that fit really well together. I think the question we're really struggling with right now is where do we put our resources now, because when I look at ZYNRELEF and I think about the VAN coming, you've got a positive expansion of sNDA and then you have really what should be game changing, because it changes the whole sterility problem is the prefilled syringe. And so, one could argue that in this period, should we focus more on a resources possibly on APONVIE, which is a much easier sale, quicker, has a bit of an annuity factor to it in a very large market. And so, again, I don't have specifics yet, but that's what we're debating. And I think we'll have answers very shortly. But the good news is the products, as you mentioned, do fit well together. The call points are similar. And again, I think over time, these products should both grow significantly. And it's just a question of which one we focus on first and how we sort of do that.

Very helpful. Thank you.

Okay. Thank you. You’re welcome.

I will now turn the call back over to Craig for any closing remarks.

Yes, thank you, operator. First, I'd like to thank everyone, from my first call here as CEO of Heron. And I also really want to thank all the employees here. I mean change is difficult. And again, there's been a lot of things going on here, and we're putting a lot of information together. And I think what you're going to see in the future is a much, much different company that, again, will head towards profitability and will be a success. And so I'm excited about that. And again, I just want to thank everyone here, that's being a part of that thus far. And we'll see you next quarter.

Ladies and gentlemen, that will conclude today's call. Thank you all for joining. You may now disconnect.