Good day, ladies and gentlemen, and welcome to the Pacira Pharmaceuticals' Fourth Quarter Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference Head of Investor Relations, Susan Mesco. Ms. Mesco, you may begin.

Thank you, Daniel, and good morning, everyone. Welcome to today's conference call to discuss our fourth quarter and full year financial results. Joining me on today's call are Dave Stack, Chairman and Chief Executive Officer; Richard Scranton, Chief Scientific Officer; Scott Braunstein, Chief Operating Officer; and Charlie Reinhart, Chief Financial Officer. Before we start, let me remind you that today's call will include forward-looking statements based on current expectations. Such statements represent our judgment as of today and may involve risks and uncertainties. Please refer to our filings with the SEC, which are available from the SEC or our website for information concerning the risk factors that could affect the company. With that, I will now turn the call over to Dave Stack.

Thanks, Susan. Good morning, everyone, and thank you for joining us today. Throughout 2017 you could not open a newspaper or turn on the TV without being confronted by the latest tragedy of the opioid epidemic in the United States. This crisis continues unabated. A recent national survey revealed that 1 in 10 patients inadvertently become addicted to or dependent on opioids after surgery, resulting in more than 3 million post-surgical patients per year becoming persistent opioid users, and the societal cost of this epidemic is staggering. The U.S. Centers for Disease Control and Prevention recently reported that the opioid crisis carries an estimated $78.5 billion annual burden to the U.S. economy. The only single administration long acting local analgesic for post-surgical pain, EXPAREL, is uniquely positioned to play an important role in addressing this national crisis right at its roots, the surgical suite. We are pleased with the significant progress Pacira made during 2017, as we continue to advance our mission of providing EXPAREL, our opioid free alternative to as many patients as possible. In addition to our own dedicated internal initiatives, we have forged several meaningful partnerships that are helping us get the message out about the importance of our opioid-sparing alternative. Our robust partnership with J&J continues to gain traction and helped accelerate EXPAREL daily growth to 10% for the fourth quarter of 2017. Our new collaboration with the Cancer Treatment Centers of America, the Illinois Surgical Quality Improvement Collaborative, WellStar Health Systems and the University of Tennessee Medical Center are raising awareness around opioid alternatives and minimizing opioid use through a variety of joint initiatives. These partners share our commitment to reducing the role of the operating room as the gateway for opioid use and abuse. Collectively, these campaigns will drive enhanced awareness for patients, payers…

Thanks, Dave. I'll start with WellStar, the largest health system in Georgia. In January, we announced a joint commitment with WellStar to minimize opioid use and standardize outcomes across surgical procedures. With our WellStar partners, we are developing a suite of provider and patient-facing opioid education materials as well as quality improvement data that tracks the progress of opioid-sparing protocols and the resulting reduction in overall opioid consumption. These data will guide next steps in optimizing patient care. We're also developing a best practice playbook to transfer protocols from one hospital to an entire hospital system. This will be a valuable, scalable resource that we can use for future system wide endeavors. Next, I'd like to highlight an important initiative launched in the fourth quarter with the Illinois Surgical Quality Improvement Collaborative. ISQIC is a nationally recognized partnership of 56 Illinois hospitals. We launched this program in December to develop programs and resources to support best practice pain management prescribing for patients undergoing surgery in the State of Illinois. We are focusing on developing intensive, interactive educational tools that hospitals can use to drive adherence to event-based best practices for perioperative pain management. I'd also like to highlight our new relationship with the Cancer Treatment Centers of America. CTCA is a national network of five hospitals in Atlanta, Chicago, Philadelphia, Phoenix and Tulsa, specializing in the treatment of adult patients with cancer. This collaboration is centered on the Opioid Risk Reduction Initiative, an educational effort that is driving responsible use and increased awareness of opioid alternatives. The Opioid Risk Initiative is aimed at improving the experience of cancer patients by expanding their pain management options that includes a variety of educational programs. Finally, I'd like to touch upon our collaboration with the University of Tennessee Medical Center at Knoxville which we announced yesterday. This partnership will develop low or no opioid post-surgical pain management pathways for patients undergoing hernia, one of the most common surgical procedures. All-in-all we are very gratified with the growing number of key organizations interested in partnering with Pacira to make a meaningful difference in addressing the opioid epidemic as quickly as possible. We continue to have discussions with additional likeminded partners, including healthcare systems, payers and even employers. I'll now turn the call over to our Chief Operating Officer, Scott Braunstein, to share an update from our J&J partnership. Scott?

Thanks, Rich. And good morning to all joining today's call. Our collaboration with J&J continues to advance with the teams building on their established rapport. In just one year, we have created an energy and enthusiasm that is palpable and from which we expect to produce great results. We're thrilled with the resources J&J is investing in EXPAREL and their shared commitment in providing an opioid alternative to as many patients as possible. In the coming weeks, our top sales leadership along with key opinion leaders will be participating in a series of national sales meetings across four of the J&J sales verticals, joint reconstruction, spine, sports and trauma. In addition the number of activated accounts continued to grow. To remind you, account activation involves the J&J sales team working with their Pacira colleagues to train customers on proper EXPAREL technique. Looking ahead, some of our key 2018 priorities include PEAK programs, professional education, medical society meetings and digital video campaigns. PEAK programs are peer to peer programs that involve high caliber KOLs sharing their EXPAREL expertise with the specific specialty. The audience typically averages 30 physicians including a mix of surgeons, anesthesiologist and residents. J&J has committed to resourcing a six-fold increase in the number of PEAK programs in 2018. In fact the number of PEAK programs already completed or planned so far this year is greater than the number of programs completed all of last year. Each PEAK program covers the opioid crisis, multi-modal pain management with EXPAREL, case reports and interactive Q&A. On the professional educational front, here too our J&J colleagues are exceeding our expectations. J&J's world-class programs include replicas of operating rooms, cadaver labs and classrooms, all of which can simulcast real-time video training courses to doctors and reps. J&J's educational programs will also begin…

Thanks, Scott, and good morning everyone. I'll start by summarizing our 2017 financial results and then walk through our outlook for 2018. To remind you, I will be discussing non-GAAP financial measures this morning. A description of these metrics along with a reconciliation to GAAP can be found in the news release we issued this morning. We ended 2017 in a very strong financial position, with $371.4 million in cash and investments we're well-positioned to advance our three-part EXPAREL growth strategy. EXPAREL net product sales were $78.7 million for the fourth quarter and $282.9 million for the year, which was in line with our guided range of $280 million to $285 million. Our non-GAAP gross margin was 75% for the fourth quarter and 71% for the full-year. This full-year gross margin was in line with our guided range of approximately 70%. Non-GAAP research and development expenses were $8.8 million for the fourth quarter and $53.9 million for the year. This was at the lower end of our guided range of $50 million to $60 million. The $11.6 million increase in our full-year R&D expense for 2017 versus 2016 was largely due to our two Phase 3 studies in nerve block and development costs related to the scale-up of our manufacturing capacity in the UK. Our non-GAAP selling, general and administrative expenses were $33.4 million for the fourth quarter and $138.7 million for the year. This was below our guided range for 2017 of $145 million to $155 million due to a modestly lower spending across a number of functions. The $14.7 million increase in our full-year SG&A expense for 2017 versus 2016 was primarily driven by marketing and educational initiatives to generate product and opioid sparing awareness in key surgical markets, expenses related to our co-promotion activities with J&J and…

Thanks, Charlie. Looking at the remainder of 2018 and beyond we believe Pacira is well-positioned for continued success. 2017 was a year of important progress and paved the way for several key milestones throughout the remainder of this year, including achieving full-year 2018 EXPAREL sales guidance of $300 million to $310 million, defining next steps for the nerve block indication, completing the C-section study and reporting top line results, launching additional Phase 4 studies in hip fracture, spine, colorectal and breast reconstructive surgeries, securing separate reimbursement for EXPAREL from both government and commercial payers, and continuing to broaden the national education and awareness campaign about the non-opioid alternatives for postsurgical pain management through our Choices Matter program, and forming new collaborations with healthcare providers and payers who share our passion for improving patient care through opioid minimization strategies. With that, I'd like to turn the call over to the operator to begin our Q&A session. Daniel?

Thank you. And our first question comes from Randall Stanicky with RBC. Your line is now open.

Great. Thanks, guys. Dave, I just have two questions. Number one, can you provide some context for the guidance range? It implies growth of 8% for EXPAREL and that's against low double-digit growth that we've seen from both you in December and Symphony in January. So where is the disconnect there in the growth outlook? And then, specifically how are we thinking about the J&J ramp and contribution to that growth as we move throughout this year? So that's number one. And then, the second question is on the J code. It's more of a logistical question. Talk about the timeline, the CMS agenda for the May meeting should be released, I think in the next few weeks. Is that the right way to think about timing? And if we do see a separate J code for EXPAREL in 2019, what does that do for sales for context? Is that a 5% boost, growth boost opportunity, 10%? How do we think about the P&L opportunity there? Thank you.

Thanks, Randall. I'll address the – well, I'll take it in the order that you put it. First, the guidance, we believe – well, we hope is conservative. I think as Charlie outlined, we have not done a good job over the last couple of years of making sure that we've met the guidance that we put out there, so we wanted to be appropriately conservative to make sure that we're providing a number to the marketplace that we'll be able to revise upward as the year goes on. But I think Charlie's context was also important. We've got a number of moving parts, the CMS initiatives, the commercial payer initiatives, the resolution of the nerve block AdCom, I mean, all of those things make it difficult for us to project exactly the timing of when these increases are going to take place, so we thought the conservative approach in this case was the best approach. J&J, as Scott outlined, I mean, it's just as good as it could be, Randall. I don't know how we could expect anything more from this partnership. I think I would focus in addition to all the representatives and all the things that we've talked about with the financial community many times, what's really important is the PEAK programs and the educational opportunities that Scott outlined and then specifically all of the work that's been done around AAOS where our partnership is really providing an opportunity at AAOS that would have been well beyond the capabilities of Pacira if we didn't have them as a partner. So we see all of that as upside going forward. The question you ask about CMS, it's a perfect example of why our guidance is appropriately conservative at this point. We are engaged in very constructive discussions with…

That's great. Thanks, Dave.

Thanks, Randall.

Thank you. And our next question comes from Douglas Tsao with Barclays. Your line is now open.

Hi. Good morning. Thanks for taking the questions. Just, Dave, maybe going back to the guidance, just curious in terms of some high level perspectives in terms of how it rolls up and specifically sort of thinking about the breakdown between the growth in orthopedics versus the soft tissue business. I mean, we know soft tissue has been growing more quickly but obviously we're starting to see some pick-up or impact from J&J. And so it'd just be helpful to sort of understand where you are on the soft tissue side, I mean, because I know that you had some very good traction in TAP in 2016 and certainly in the first part of 2017.

Yeah. Thank you, Doug. We continue to suffer from the same issue that we've discussed a bunch of times with you guys. Our data lags significantly. The data analysis are delayed by a quarter but frankly by the time we get them, it's more like four – I'm sorry, yeah, it's more like four months delay. So what we're always looking at is a bit of a delayed opportunity versus what we see day to day working in the marketplace. To answer your question specifically, Doug, orthopedics remains more than 50% of the business. And since everything is growing, TAP is growing as well as you say, I think a number of papers that have come out just in the last couple of weeks, talking about the use of TAP for a number of surgical procedures really highlights the issue that the anesthesia community, which is relatively new to EXPAREL around TAPs and with nerve blocks going forward is starting to gain traction, and at least keeping pace with orthopedics now. Specifically, as it relates to orthopedics, and Scott can jump in here as well, I mean, we saw what we expected from our J&J partnership as it relates to recon. And I think a bit of a surprise to me, but Scott really was much more bullish about spine as we went through 2017. But I think now you start to understand the potential around J&J joining in a strategically aggressive way around sports medicine and around trauma. And some of the work that we're doing is specifically to address those opportunities with J&J. So everything is growing. I think that some of the clinical trials that we're doing are very specifically pointed at areas where we see great interest in not only the medical community, but also the payer community. A lot of our current thinking going downstream is in response to the discussions and the relationships we have with the payers and the Cignas of the world as well as the medical systems and all of the folks that we deal with clinically on a daily basis. So I don't know if Scott has anything more to add on J&J?

No. Dave, I would say we continue to see the greatest interest in the spine market and that we've been very happy on both sides. We've added significant number of KOLs and you should imagine that many of those PEAK programs we've talked, spine will be a key focus. We're starting to see growing interest in the trauma space. We'll have quite a bit at AAOS around hip fracture. We're very excited about that opportunity and we are seeing wins in the recon space where specifically the organization and J&J is referencing PILLAR and that is having a material impact in the way we're looking at the recon market. So we see those three areas being very strong, the fourth, sports, certainly we are really excited about the opportunity there as well.

And so, Doug, if you don't mind, Doug, I'll take on your question regarding guidance and back to Randall's question as well. Look, I own the fact that we haven't made guidance in the last two years. And as you come up to the fourth quarter that puts enormous pressure on the entire organization around a number and the appropriate way for this company to react at this time is to put out a number that we have a high confidence in, that we will make and exceed. And hopefully as the year goes on and all of these different issues that we're raising and discussing here resolve themselves we'll be able to do exactly that. But this guidance is meant to take that pressure off of the organization because it is not productive for anybody.

Okay. Great. And then just one quick follow-up in terms of the Pacira sales force, what is it going to be focusing on from sort of in terms of specific indications in 2018?

So, the regional anesthesia world, Doug, is moving very quickly. So, we continue to focus on working with caesarian – well the hot areas in the marketplace if you think about it are women's health and inside that bundle you would have C-sections and breast reconstructions and in some places just single mastectomies without reconstruction. I mean there's a whole series of women's cancer approaches around cervical cancer and ovarian cancer. So think about a therapeutic theme, if you would, around using low dose opioids or minimizing opioids in women, largely because especially in an oncology situation you do not want to dampen the immune system of a patient in an oncology setting for example. The obvious C-section's 100,000 of those done in every month in the United States and women don't want the opioids. They don't want the itching that's associated with the opioids. And so we think we have a much better mousetrap, if you will. If you step outside of that, our field force is focused on working with anesthesia around TAPs, the marketplace is moving very quickly. Now that we have QL blocks that the anesthesia community wants to do and wants to know more about how to use EXPAREL, there is a whole series of field blocks which are on label as it relates to the agreement we have with Janet Woodcock at the FDA. And so there's a whole range of opportunities to work with our key opinion leaders at Duke and MD Anderson and Cleveland Clinic. And as you saw from the discussion today the University of Tennessee, where we can use these advanced therapies to not only improve patient care, but extend the duration of these regional blocks by using EXPAREL instead of bupivacaine. So that's really the big periods of focus. And then there still is a lot of resource committed to synergizing J&J; our folks helping their folks, their folks helping our folks. And so that relationship is still young and we're still learning a lot from each other.

Okay, great. Thank you.

Thanks, Doug.

Thank you. And our next question comes from Tazeen Ahmad with Bank of America. Your line is now open.

Hi. Good morning, guys. Thanks for taking my questions.

Good morning.

Maybe a pipeline question. So, Dave, you did talk about no longer trying to pursue DepoMeloxicam. In the past you've talked about a bunch of areas that you might be interested in pursuing down the road. One of those for example was chronic pain. And so given we haven't spoken about it in a while I just wanted to get maybe your refreshed thoughts on what you think the company should be focusing in on pipeline wise going forward?

Yeah. Thanks, Tazeen. If that's what I said, let me correct myself. We are pursuing DepoMeloxicam. We are no longer pursuing Tranexamic Acid.

Oh, okay. Sorry about that.

Okay. No, no, that's okay. And the reason is there are a number of trials that we're aware of where people are using oral and it appears to be working. And so there's really no reason for us to continue invest in something where it appears that an oral formulation is going to be the future of that therapy. I remain very interested in chronic pain. So you're in an area where I have a personal interest as well. There's a number of products that we're working with chronic pain folks to make sure that we get the product profile right. But I'll give you a sense of the kinds of things we're working on. First is and maybe interesting to everybody is to look at EXPAREL itself as an opportunity in chronic pain. We have a number of clinicians today who are using EXPAREL in very low doses in CNS applications. So think about sciatic where we are aware of a number of centers where they're using two CCs of EXPAREL and one CC of 0.5% bupivacaine in order to provide a longer duration of relief from the traditional bupivacaine and injection in that patient population. So we have a natural bridge without having to invest in any manufacturing or regulatory or anything else right because it's – yes, it is off label and it's not sponsored by the company, but it is something that we were going to look into developing in a fuller way. We also have by the way have a number of animal studies that would have been done that support the continued investment in that application. To answer your question specifically, our R&D group out in San Diego is looking at pregabalin, clonidine, ketamine, dexmedetomidine. There are a number of products that either are currently being used on a daily basis by the chronic pain guys and they would like to see a more guidance from the company and an approved label that would help them with gaining reimbursement et cetera, as well as a longer way to use those products in a way that would improve patient care by extending the duration of pain relief. So that's about as close as I can get. We hope to be able to provide more guidance later this year, Tazeen, on which of those we're going forward in a traditional development timeline. But for right now that's about what I could say with some certainty.

Okay. Thanks for that color, Dave.

Thanks.

And then maybe one more on what your thoughts are just given FDA's stance recently about trying, number one, to get drugs approved faster, but also on trying to get generic drugs an easier path to approval. So how is the way that you're looking at the potential for any kind of generic entrants or competitor for EXPAREL change at all as a result of language from FDA recently or for any other reason?

No. I actually view the guidance from FDA on generics as a positive for us. It's what we've tried to communicate several times in the past that the generic division will be very specific in the way it would approve a multivesicular liposome generic of EXPAREL and that guidance document provides very specific outputs that make it very clear to a generic that this is a very high hurdle. So I think, if anything the recent guidance is a positive. And as we continue to develop EXPAREL, I mean, we understand that the process that's been developed is highly reproducible when you get it right. But remember it took us several years to develop a commercial process that we could get EXPAREL out the door. And so, it's hard for me to understand how anybody can meet the obligations of that generic division memo in a sterile cold chain environment. This is highly – the technical bar here is very high which means the financial bar here is very high. You may see another multivesicular liposome someday, but I don't believe you'll ever see a generic EXPAREL.

Okay. Thanks, Dave.

Thanks, Tazeen.

Thank you. And our next question comes from David Amsellem with Piper Jaffray. Your line is now open. Michael E. Ingerman - Piper Jaffray & Co.: Hi. This is Mickey Ingerman on for David. Thanks for taking the question. Just curious as to what extent there's already usage of nerve block off-label and what portion of the procedure mix that is? And also, on the topic of the nerve block based on your experience at the AdCom this past month, has that caused you guys to re-evaluate any of your R&D initiatives and how you think about potentially label expansions going forward?

Thanks, Mickey. On the first topic, I think at major that medical centers with folks like Jeff Gadsden at Duke and Maggie Holtz at WellStar, you do see some increasing use of EXPAREL by nerve block not because that's something that the company has promoted in any way, but because the product is available in those marketplaces and the clinicians understand that it is the best way to provide improved patient care. And in terms of what percentage of our business is, we continue to believe that it's still single-digit. I can't tell you with any more precision, but it is in my view at least less than 10%. With the AdCom, as we said during the prepared remarks, we're keeping an open mind. We're looking forward to working with the FDA. There were a number of issues that we had with the AdCom and our team is communicating with the FDA on those issues and sending down some updated data that was presented during the AdCom. I think it's just too early. We need another couple of months before I can answer that question with any certainty. And I think you guys would understand it just wouldn't be appropriate for us to negotiate through you guys or through anybody else with the FDA. So give us another couple of months and we'll come back to you with a lot of clarity with what the path forward looks like. Michael E. Ingerman - Piper Jaffray & Co.: Got it. And then one quick follow-up on the J&J sales force. Do you guys have any means of quantifying how much incremental benefit they're providing? I guess put another way, are you able to quantify how many uses of EXPAREL are originating from J&J's sales force member rather than say like a legacy Pacira sales force member?

We don't have the clarity that you would hope that we would have. I can start off by telling you we wish it was better. But with that said, we do have and Scott mentioned these, we have scenarios where the product is being made available in systems because of trauma, specifically hip fracture. We have a list of hospitals where the person who has either improved access or achieved access has been a spine surgeon that we don't have any relationship with at all. So we can track places where the only person that has the relationships that lead to a positive outcome with EXPAREL have been non-EXPAREL employee. So that list we have. We track activations on a monthly and a quarterly basis. And so you can see as J&J activates and like I said in spine and trauma and sports medicine, those are all relationships that we would have never had if it wasn't for our J&J partnership. So I think that's the low-hanging fruit. As we go forward, and we see the PEAK programs and we see all the other things that Scott talked about, we can track hospital usage where we know those programs were held and track the educational initiatives where folks are going to the J&J facilities or participating in their simulcast programs. But many of those programs are fairly nascent and so they haven't matured enough that we would be reporting any meaningful revenue from those programs yet.

Dave, if I was to add I think our partner has some sophisticated tools that they use to help them assess their sales force and they're sharing all those tools with us. So we feel confident that we'll have incremental data sources to have a good understanding of where we're having success in the markets. But a lot of those details we won't be sharing with you. Michael E. Ingerman - Piper Jaffray & Co.: Okay. Thank you.

Thanks, Mickey.

Thank you. And our next question comes from Dana Flanders with Goldman Sachs. Your line is now open. Dana Flanders - Goldman Sachs & Co. LLC: Hi. Thank you for the questions. I guess my first one here, in the AdCom, I believe there was discussion that potential for guidance on opioid-sparing claims could be published soon. Is that something you're in discussion with the FDA and how you would expect that to potentially impact EXPAREL either positively or negatively?

That was a comment that was made by the FDA. And we are not in discussion with anybody on opioid-sparing claims and I wouldn't hold my breath. Dana Flanders - Goldman Sachs & Co. LLC: Okay. Thank you.

Yeah. Thanks.

Thank you. And our next question comes from Chris Schott with JPMorgan. Your line is now open.

Great. Thanks very much for the questions. First one was just on the upcoming Phase 4 programs for EXPAREL in hip, spine, et cetera. I guess two questions here. One, is there any read across from the recent FDA panel on how you're thinking about approaching clinical design for any of these studies just based on some of the feedback from that AdCom? And then second, can you help us better understand timing and which of these are the largest opportunities in your view in terms of incremental sales for EXPAREL to the extent (00:48:46)? And I just had one follow-up from there.

Great. Thanks. Yeah, some of the comments from the AdCom actually were fairly bizarre. The comment that a P value of 0.0001 doesn't have clinical relevance does put into question exactly what you talked about. I think the biggest opportunity for us frankly is that none of the programs that we're running in a Phase 4 design require any interaction with the FDA. They are all infiltrations. In some cases, we will do studies where we will compare two different EXPAREL designs. So, for example, you might think about comparing an EXPAREL TAP with an EXPAREL quadrus lumborum, because the marketplace is moving and many of the anesthesiologists who are not in academic centers are asking which are providing more efficacy in these people who are advanced in the academic centers. So the two things are completely separate. I think your question is entirely relevant as it relates to EXPAREL nerve block and the stance of the FDA as well as additional products that might go down in the future. But our current Phase 4 trials are all infiltrations and are all on label today. As you – and I'll ask probably both Scott and Rich if they have any thoughts here. But all of these products are huge and all have a strategic theme. So virtually all of the clinicians who we involve are interested in opioid-sparing strategies but for different reasons. So for example, as I stated earlier, because you don't want to use females or expose girls (00:50:38) who are having cancer surgery to a reduction in their immune system through the use of high-dose opioids, then there's a great interest in opioid minimization in cancer situations. And we're working with MD Anderson and Cleveland Clinic on those. There's a great interest in the marketplace in reducing…

Yeah. Perfect and very helpful. And then my quick follow-up was just on just shifting gears a little bit on business development priorities. Can you just update us in terms of priorities right now, appetite as particularly just thinking about adding either another in market or a near to market asset to the portfolio?

Appetite is as wide as you could get. I mean we're looking at a lot of different things. You know this is all part of Scott's group. Increasingly folks appreciate not only the fact that we have a marketing and a sales organization that understands the institutional channel, but also the medical science liaisons that we have that are geographically dispersed that can go into places like ambulatory surgery centers and smaller hospitals and teach on appropriate technique. So we're getting a lot of interest not only in drugs and we've had it for whatever reason these things come actually in bunches and just in the last couple of weeks we've had a number of very interesting calls with opportunities for us on the pharmaceutical side. And I think for the last several quarters frankly we've seen a fairly significant increase in the opportunities that we have on the – what would be more a traditional device side. And so we're not really driven by the size of the deal or the finances associated with the deal, we think our balance sheet and our relationship with folks who would be potential financial partners is very strong. We're really being driven now by the – our desire to partner with anesthesiology and surgery and especially ambulatory care. So, special interest in moving from in to out which leads us to regenerative medicine and reconstructive medicine as well as pain relief and getting rid of catheters and pumps and all of that kind of stuff.

Great. Thanks so much.

Okay. Thanks.

Thank you. And our next question comes from Serge Belanger with Needham. Your line is now open. Serge Belanger - Needham & Co. LLC: Hi, good morning and thanks for taking my questions. I have a question about your – the partnership strategy. Outside of the J&J promotion collaboration, you've been successful in entering a number of partnerships with hospital systems and physician groups. Now that we're coming on about a year on the Trinity Health collaboration, how much do you think that will be a driver in 2018 or 2019 to drive additional EXPAREL demand?

Thank you for the question. I would be the first – well, so first of all the basis of the Trinity deal was a two way opportunity for a healthcare provider and a pharmaceutical company to partner together to advance patient care. And so we always have to remember that that was the guidance. And in the early days there were a number of data driven and educational driven opportunities for us to work with them, so that we could really understand what their needs were and they could understand how EXPAREL would serve as a solution to their needs. I would tell you and we've made really good progress here over the last couple of quarters. And I think that I have increasing confidence that the Trinity relationship has been strategically important to us because it's brought a number of other health systems interested in opioid sparing to talk to us because it was now possible for a manufacturer and a provider to have a relationship, Trinity sort of made that okay if you will. And then specifically to answer your question we are working and we have a number now of pathfinder opportunities that have been worked through with Trinity that we think will be pulled through to the entire organization as we move through 2018. So I think Trinity is another one of those levers that Charlie referenced that the timing is not easy to identify on a monthly basis. But all arrows are pointing in one direction and we're not only really proud of our Trinity collaboration and the ability to help patient care but we do think it would be important to our investors as well as over 2018 and 2019. Serge Belanger - Needham & Co. LLC: Okay. And just to follow up on these partnerships, the Aetna collaboration was kind of your first foray into oral health. Can you just give us an update on how that is going and how you intend to kind of penetrate your oral health opportunity?

Yeah, so it's funny, I almost have the same answer in many ways. Similar to Trinity, Aetna made it okay for an insurer and a payer and a pharmaceutical company to work together to improve patient care. Actually Aetna has on their website a banner that talks about EXPAREL and opioid-sparing as a major strategic opportunity for Aetna. We continue to expand on that opportunity. You will see some press releases in the not too distant future that pick up on some of the different things that are going on and we are working with Aetna to expand that opportunity beyond oral maxillofacial surgery. We've learned enough I think from that that we are looking at different strategic ways internally that we can resource the oral maxillofacial surgery opportunity. Frankly as part of a retail opportunity because we've also not – this is separate from Aetna by the way – but we've not addressed plastic surgery which is another specific opportunity for us in a meaningful way, largely cash, so it wouldn't be a payer opportunity. But as a resource opportunity, we could put a team of people in place that can address the retail marketplace, if you will. So, Aetna is well, there the Aetna CMO actually gave testimony in Washington, D.C. a couple of weeks ago at a Senate hearing where he specifically called out their relationship with Pacira and EXPAREL as a significant tool that they're using to address the opioid epidemic. It's really interesting for us because in a real time way we get data from them, different than the way I had answered Doug's question about the lag and the lack of visibility. In the relationships we have with payers we have almost instant visibility. So it gives us a real opportunity to address the marketplace in a different kind of way. Aetna leads the way but I would also tell you that there are a number of other Aetna-like relationships that are at various stages of development. So, think about the commercial payers paying for EXPAREL not only because their physicians want to work in an ambulatory center, their patients want to go to an ambulatory center, but they save a meaningful percentage of the total cost of care by having a treatment in an outpatient environment. So, it's an opportunity that we're exploring pretty aggressively. Serge Belanger - Needham & Co. LLC: Okay. Thank you.

Thank you. And our last question comes from the line of Gary Nachman with Bank of Montreal. Your line is now open.

Hi, good morning. Dave, I jumped on late, so I'm not sure if you addressed it, but I'm assuming your sales force is fully transitioned on the soft tissue side at this point. If you don't get nerve block or it's delayed meaningfully, will your sales reps come back to detail orthos as well? And then where are you with the spray process for manufacturing, and what's the timeline to shift over from the batch process to extend IP? Is that still the plan for you guys long term? Thanks.

Thanks, Gary. So nerve block is largely a opportunity to work with the anesthesia, and to improve their understanding of EXPAREL and how it can improve patient care. Frankly, if we don't get a formal nerve block application from the FDA on our PDUFA date of April 6, I don't see the mix of how the field forces working in the marketplace changing at all. I want to make sure that I'm clear on this Gary, we have not abandoned orthopedics. I mean there are scenarios think about the J&J folks and the EXPAREL folks working together collaboratively in a marketplace in a hospital or in a hospital system for example. And so they work together wherever the greatest opportunity to improve patient care is. So we have a significant focus on soft tissue, but we still talk to orthopedic surgeons through their PEAK programs and you know if there's and not – well there is one actually, I'm going to be at a PEAK program tomorrow night in Florida that is driven by anesthesia and reconstruction. It's an anesthesiologist giving the talk, half the audience is orthopedics. And if you ask me why I'm going, I'm going to find out later today actually. I'm not 100% sure myself, but I know I'm scheduled to be there. And so it is not a complete abandonment of everything that's going on. If the spray process is – so here's where we are, right? We will get so we've got 245 liter skids in San Diego, we have 245 liter skids in the UK. As Charlie said during his prepared comments, we expect to get commercial material from the UK that will have an improved gross margin in the back half of this year. We have a 200 liter batch skid in…

Okay. Could you just remind us when the patents expire for both the batch and then the spray, how far that could go from there?

So the product in process that's in play right now goes to Christmas eve of 2021, December 24, 2021. We filed the application for spray on April 9, 2011. So it goes out to April 9 of 2031, but you would expect significant extensions based on the time that the patent application is sitting with the PTO for example, and I know you guys know more about that than I do, so. But at least April 9, 2031.

Thanks.

Okay. Thanks, Gary.

Thank you. And that does conclude our question-and-answer session for today's call. I would now like to turn the call back over to Dave Stack for any further remarks.

Thanks for your questions and time this morning. We look forward to providing additional updates in the future. Next up for us is the Barclays Conference in Miami. We look forward to seeing you all soon. Thanks a lot.

Ladies and gentlemen thank you for participating in today's conference. This does conclude today's program. And you may all disconnect. Everyone have a wonderful day.