Heron Therapeutics Inc Aktie

Good day, and thank you for standing by. Welcome to the Heron Therapeutics Q1 2026 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Melissa Jarel, Vice President of Legal. You may begin.

Thank you, operator, and hello, everyone. Thank you for joining us on the Heron Therapeutics conference call today to discuss the company's financial results for the first quarter 2026. With me today from Heron are Craig Collard, Chief Executive Officer; Ira Duarte, Executive Vice President and Chief Financial Officer; Bill Forbes, Executive Vice President and Chief Development Officer; Mark Hensley, Chief Operating Officer; and Kevin Warner, Senior Vice President, Medical Affairs, Strategy and Engagement.

For those of you participating via conference call, slides are made available via webcast and can also be accessed via the Investor Relations page of our website following the conclusion of today's call. Before we begin, let me quickly remind you that during the course of this conference call, the company will make forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company's projections, expectations, plans, beliefs and future performance, all of which constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These statements are based on judgment and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties associated with the forward-looking statements made in this conference call and webcast are described in the safe harbor statement in today's press release and in Heron's public periodic filings with the SEC. Except as required by law, Heron assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. And with that, I would now like to turn the call over to Craig Collard, Chief Executive Officer of Heron.

Thanks, Melissa. Hello, everyone, and welcome to Heron Therapeutics First Quarter 2026 Earnings Call. Today, we're thrilled to share our financial results and provide commercial updates on our business. I'd like to begin by highlighting several key accomplishments. Coming off a strong fourth quarter of 2025, we entered the new year with tremendous momentum. As expected, the first quarter of any year historically brings seasonal headwinds driven by co-pay resets and insurance adjustments, and this year was no exception.

However, 2026 presented additional challenges for us, 2 weeks of severe weather early in the quarter that significantly compounded the typical seasonal softness, making January our most difficult month since I joined the company. The impact of the weather was felt most acutely in elective surgeries, which are highly sensitive to extreme conditions and saw a sharp decline during that period. Importantly, this was not an isolated experience. Multiple publicly traded pharmaceutical and surgical companies have reported the same weather-driven disruption across January and February. The breadth of this industry-wide impact validates that the headwinds we faced were external and temporary in nature, not reflective of any underlying weakness in our business or markets. Despite this, the team responded well.

February brought a clear upward trend and March closed strongly with over $15 million in net sales, demonstrating the underlying strength and resilience of the business. While the weather undoubtedly weighed on our Q1 results, it has not shaken our confidence in the year ahead. We fully expect the remaining deferred elective procedures to be rescheduled throughout the remainder of 2026, creating a meaningful tailwind as we progress through the year. This aligns with our historical pattern where Q3 and Q4 consistently represent our highest volume quarters, and we anticipate 2026 will be no different.

Turning to our Acute Care portfolio. We delivered revenue growth of 32% compared to the same period last year, with ZYNRELEF growing 27% and APONVIE growing over 50%, respectively. Two structural drivers are worth highlighting. Our IGNITE program, the incentive program with our orthopedic distribution partners has been very successful, and we're continuing it into 2026 as a key growth driver for ZYNRELEF. With APONVIE, we are beginning to realize the commercial benefits of its inclusion in the fifth consensus guidelines for the management of postoperative nausea and vomiting, a meaningful clinical endorsement that we believe will serve as a sustained tailwind for adoption. We will provide additional detail later in the presentation on the strategic and commercial implications of that inclusion.

Turning to our sales force expansion. Implementation is on track for the third quarter with the recruitment already underway. We view this as a significant catalyst for growth across our portfolio, and we will walk through the strategy in more detail in the presentation.

Moving on to oncology. We continue to deliver solid performance with CINVANTI despite increased competitive pressure. For the quarter, CINVANTI maintained exit market share of 25% in the NK1 category. And although net sales reflected normal quarter-to-quarter timing, CINVANTI itself has remained resilient, demonstrating strong customer loyalty and continued demand even in this very competitive landscape. We have a number of new accounts coming on board in Q2 that we anticipate could add upwards of $10 million in net revenue on an annualized basis. We will cover this in greater detail as part of the commercial performance update. Before I turn things over to Mark to cover our commercial performance, I want to take a moment again to recognize the entire Heron team for their performance this quarter. We fight every day in a very competitive environment, and this quarter offered other challenges that we had no control over, yet our team continues to persevere and move forward. I will now turn the call over to Mark to cover our commercial performance. Go ahead, Mark.

Thanks, Craig. Moving to product performance, starting with our overall net sales picture for the quarter. This chart shows quarterly net revenue for each product across the last 4 quarters. Total net sales of $34.7 million in Q1. On the Acute Care side, $13.6 million combined: ZYNRELEF at $10.2 million, APONVIE at $3.4 million; on the oncology side, $21.1 million combined: CINVANTI at $20.5 million, SUSTOL at $0.6 million, reflecting the planned wind down we previously discussed.

You can see the sequential dynamics on each product. A few of these reflect ordering and channel patterns rather than changes in underlying demand. The cleaner read on adoption across all 4 products is the demand unit and ordering account data, which I'll cover in detail as we go. But before we get into individual product performance, there's an important strategic point on the next slide.

This slide shows our net selling price per unit across the 4 products over the last 4 quarters. The Y-axis values aren't displayed. What matters is the directional trend within each product. Starting with ZYNRELEF, net selling price has been steadily increasing across the period. Our pricing posture is holding and the J-code and NOPAIN environment are supporting that trajectory.

For APONVIE, net price has been stable. That's what we'd expect for a product still in its growth phase, where our focus is volume penetration rather than per unit price extraction. On CINVANTI, you'll notice the Q4 bar is slightly lower than the surrounding quarters with Q1 returning to a level consistent with our strategy. That Q4 dynamic was temporary and Q1 reflected normal channel ordering patterns following the Q4 activity. The more important point, our underlying pricing strategy on CINVANTI is intact and disciplined and SUSTOL declining in line with planned wind down. The headline message of this slide is straightforward. Across our active commercial products, we are maintaining pricing discipline and not chasing volume through price concessions. That's a deliberate strategic choice. It protects the long-term economics of the franchise and supports the durable recurring demand we're building.

Now on to ZYNRELEF. You can see the 2 charts on the slide, average daily units on the left, ordering accounts on the right. Both have continued to trend up through Q1. The number I'd anchor on is demand unit growth of 22% year-over-year. The broader local anesthetic market was down sequentially in Q1. In that environment, ZYNRELEF outgrew the market on a year-over-year basis and held share sequentially. The underlying franchise is performing.

On reimbursement, the permanent J-code, J0668 has been live since October. Combined with the NOPAIN Act framework that took effect at the start of 2025, the reimbursement environment for ZYNRELEF is the cleanest it's been since launch. That framework streamlines reimbursement across approximately 110 million covered lives on the commercial side. Two quarters in, reimbursement conversations are smoother and the friction at the billing office level continues to come down. Looking at the Q2 through Q4 drivers on the right side of the slide, IGNITE has been extended throughout 2026 and expanded with IGNITE 2.0, which I'll cover on the next 2 slides. We're also seeing expansion of users within accounts, meaning more surgeons within each adopting institution moving on to ZYNRELEF as part of their protocol. And we'll be expanding our ZYNRELEF sales team in Q3 2026, targeted geographies where all 3 foundational drivers are fully in place: formulary access, the IGNITE program, and payer coverage. That expansion sits alongside the aprepitant team expansion, I'll cover on the APONVIE slide, reflecting our confidence in the trajectory of both franchises. On the longer-term side, our prefilled syringe presentation is in late-stage development. Bill will cover that in more detail later in the presentation.

Moving on to Slide 10. Here is the data behind IGNITE 1.0. The chart shows ZYNRELEF unit volume across our IGNITE targeted accounts, pre-IGNITE versus post-IGNITE. We went from approximately 9,000 units in the last pre-IGNITE quarter of last year to over 19,000 units by Q4 of last year. That's 111% growth within these targeted accounts in just two quarters of the program. This is the data that gave us the conviction to extend IGNITE through 2026 and expand it further.

On Slide 11, you can see what IGNITE 2.0 looks like. IGNITE 1.0 in the second half of 2025 covered 2,261 accounts. IGNITE 2.0, which is now live for full year '26, covers 3,109 accounts. That's a 38% increase, adding 848 additional accounts to the program. More accounts in the program means more concentrated distributor focus on the institutions we've identified as most likely to adopt and deepen ZYNRELEF use. The structural drivers that produced 111% unit growth in IGNITE 1.0 are now applied to a meaningfully larger base of accounts in 2026. I will now turn it over to Bill to cover the prefilled syringe.

Thank you, Mark. This slide highlights the strong momentum in our Acute Care franchise and the continued advancement of the ZYNRELEF prefilled syringe program. We have seen consistent and accelerating adoption across our device preparation platforms as we transition from the vented vial spike or VVS to the significantly improved vile access needle or VAN. This evolution has been well received and reflects clear progress in ease of use and workflow efficiency.

At the same time, market demand continues to shift toward ready-to-use systems, which are emerging as an important growth driver as hospitals prioritize efficiency, safety and streamlined operating room workflows. Independent third-party forecasts reinforce the durability of this trend with prefilled syringe adoption expected to scale meaningfully over time. From a program standpoint, the ZYNRELEF PFS is fully funded and on track. It was designed to align with contemporary health system expectations, including both ASHP and Joint Commission guidance, while improving operating room workflow, reducing preparation steps and lowering the risk of medication errors and contamination. The development program is well advanced. Registration batches have been manufactured and placed on stability, and we remain on track to generate 12-month stability data in the first quarter of 2027. Mark, I'll turn it back to you.

Thanks, Bill. Now to APONVIE. There are two charts on this slide, average daily units on the left, ordering accounts on the right. Both showed continued steady upward trajectory through Q1.

On the Q1 metrics, APONVIE demand units grew 68% year-over-year. Average daily units grew 70% over Q1 of last year. We exited Q1 with 371 ordering accounts in March. That's an all-time high for the product and up 67% versus March of last year. And APONVIE is now P&T approved in 1,903 accounts, representing 5.8 million medium to high-risk procedures annually. The last number defines the size of the addressable opportunity that APONVIE has now been formally cleared into. On the growth drivers ahead, APONVIE's permanent product-specific J-code became active April 1, having a permanent dedicated billing code in place removes a layer of reimbursement complexity for the product. We'll be expanding our dedicated aprepitant sales force in Q3 2026. That team currently covers both APONVIE and CINVANTI and the expansion adds capacity to support both products.

And lastly, APONVIE has been prominently included in the fifth consensus guidelines for the management of postoperative nausea and vomiting. That's a meaningful clinical catalyst. I'll hand it over to Kevin to walk through the guidelines and what they mean for the product.

Thanks, Mark. We wanted to provide a brief overview to help the Street understand the broader clinical and economic significance of the recently published fifth consensus guidelines for the management of postoperative nausea and vomiting. These guidelines represent an important shift in perioperative care, moving from reactive management of PONV toward a far more proactive patient-centered prevention strategy. From a medical affairs perspective, guideline updates are highly important because they often serve as the foundation for durable institutional change. Historically, adoption occurs over time through provider education, EMR order sets, anesthesia workflows, perioperative pathways and treatment algorithms. Once integrated into institutional protocols, these practices tend to become highly durable standards of care. Importantly, the updated guidelines substantially elevated the role of NK1 antagonist within multimodal prophylaxis strategies. Aprepitant-based therapies, including APONVIE, received an A1 evidence rating for prevention of PONV in adults, reflecting the highest level of evidence supporting efficacy and safety.

APONVIE is specifically named within the guidelines as the first and only FDA-approved IV push NK1 antagonist for the prevention of PONV in adults. We believe this distinction is clinically meaningful because it combines efficacy, workflow efficiency and ease of perioperative implementation in a way that supports both providers and patients. Another key evolution within the guidelines is the broader recommendation for multimodal prophylaxis. While patient and procedure-specific risk stratification remains central, the updated guidance recognizes that the benefit of prophylaxis often outweighs the risk of undertreatment. As a result, many institutions are expected to adopt a more liberal prophylaxis strategy across broader patient populations.

The guidelines specifically recommend that patients with greater than two risk factors, representing roughly half of the surgical population received 3 to 4 prophylactic interventions. These medium and high-risk patients often require highly effective antiemetic strategies without adding recovery-limiting adverse effects.

We believe APONVIE is uniquely positioned in this setting. Its efficacy profile, combined with a differentiated safety profile that does not overlap with many commonly used antiemetics supports use in patients where prevention matters most. Importantly, APONVIE provides antiemetic protection without contributing to sedation or negatively impacting postoperative recovery pathways, which is increasingly important in enhanced recovery protocols and ambulatory surgery.

One of the most significant additions to the Fifth Edition guidelines was the expanded focus on post-discharge nausea and vomiting, or PDNV. The guidelines emphasize that PONV is not simply an acute PACU complication. For many patients, symptoms occur after discharge when clinical support resources are less available. The guidelines cite data showing approximately 37% of patients may experience PDNV with implications for dehydration, wound complications, unplanned health care utilization and potential readmissions. As outpatient surgery volumes continue to expand and same-day discharge becomes increasingly common, these downstream complications become even more relevant in value-based care models.

Importantly, the guidelines now recommend that patients at risk for PDNV receive prophylactic long-acting antiemetics prior to discharge. We believe APONVIE aligns well with this recommendation given its 48-hour duration of action and ability to provide extended receptor coverage during the vulnerable post-discharge period. The guidelines also reinforce several important differentiators associated with APONVIE and MK1 antagonist therapy more broadly. APONVIE is administered as a simple 30-second IV push with rapid onset and greater than or equal to 97% receptor occupancy within 5 minutes, integrating efficiently into standard anesthesia workflows. This becomes particularly relevant for providers who may not have had adequate preoperative time or oral administration or who are caring for patients with limitations to oral therapies, including those with gastroparesis, GLP-1 utilization, diabetes-related GI dysfunction or altered gastric emptying.

The strength of evidence supporting aprepitant-based therapy was also highlighted throughout the guidelines multiple randomized trials demonstrated aprepitant to be comparable or superior to ondansetron for prevention of PONV. Meta-analysis showed significant reductions in PONV risk when used alone or within multimodal regimens. And a large Cochrane systemic review evaluating nearly 100,000 patients ranked aprepitant as the single most effective antiemetic.

Importantly, the updated guidelines frame PONV prevention not simply as a patient comfort initiative, but as a meaningful clinical quality and operational issue. Poorly controlled PONV contributes to extended PACU stays, rescue medication use, delayed discharge, dehydration, wound stress, aspiration concerns and readmissions. In many high-risk procedures, including abdominal bariatric, ENT, ophthalmology and other belt-up surgeries, preventing vomiting is viewed as critically important to protecting surgical outcomes and patient safety.

Appropriate prophylaxis also supports perioperative operational efficiency by reducing nursing burden, minimizing recovery delays, improving throughput and enhancing both patient and staff satisfaction. The guidelines additionally highlighted the pharmacoeconomic value of effective prophylaxis strategies. One metric discussed was number needed to treat or NNT. For aprepitant combined with dexamethasone, the reported NNT was 3.8, meaning approximately four patients treated prevents one additional case of PONV. Compared with many commonly used antiemetics, this represents a highly favorable value proposition. From a health system perspective, this becomes clinically and economically meaningful very quickly.

A single episode of PONV has been estimated to cost approximately $1,000 when considering rescue therapy, nursing utilization, prolonged PACU time and delayed discharge. When viewed in that context, preventing complications with an intervention costing approximately $60 per dose becomes highly rational and understandable for providers and institutions alike, particularly as value-based care models increasingly focus on patient satisfaction, throughput, readmissions, recovery quality and total episode of care costs. Ultimately, we believe the fifth consensus guidelines reinforce several important macro trends shaping the perioperative landscape, including greater use of multimodal prophylaxis, increasing recognition of post-discharge nausea vomiting, continued migration toward outpatient surgery, demand for workflow efficiency and the growing need for safe, effective nonsedating long-acting therapies that support enhanced recovery pathways, which we believe APONVIE is uniquely positioned to address. I will now turn the call back to Mark to discuss our oncology supportive care franchise.

Thanks, Kevin. Turning to oncology supportive care. There are 2 charts on this slide, average daily units on the left, ordering accounts on the right. CINVANTI's average daily units have remained resilient, sustaining a consistent trend in utilization throughout 2024 and into 2026. That's a meaningful durability marker for a product in its mature commercial phase in a category that has faced steady competitive pressure.

On ordering accounts, you can see the two layers on the right chart. The blue line shows existing accounts running at approximately 1,100 every month, which speaks to the stickiness of the customer base. The purple line shows new and returning accounts averaging about 59 per month in Q1 of '26. In March specifically, 1,188 accounts ordered CINVANTI. That number was in line with the 12-month average of approximately 1,200 accounts.

On market share, CINVANTI ended Q1 with 25% exit share in March of 2026. That was also in line with the 12-month average. The stability is the takeaway. We are holding our position in a competitive category. Looking at growth drivers for the rest of 2026, Greg referenced a number of new accounts coming online this year. Those new formulary wins are due to our REIGNITE program. It's focused on CINVANTI access to major teaching hospitals, where we have already secured formulary wins and the near-term pipeline represents approximately $10 million in new opportunity. And as I mentioned earlier, our dedicated aprepitant sales force expansion in the third quarter of 2026 will support CINVANTI as well as APONVIE. CINVANTI will be promoted in the second position by that team.

Now to the broader category dynamics. On the next slide, the chart shows the broader NK1 category for chemotherapy-induced nausea and vomiting over the last 12 months. The stacked bars show total category units broken out by competitor product. The percentages at the top of each bar show month-over-month volatility in the overall category, ranging from down 19% in some months to up 21% in others. The line running across the chart is CINVANTI's market share within that category. Despite all the category level volatility, CINVANTI's share has been remarkably stable. The 12-month average is 25%. March 2026 closed at 25%. That share stability in a category where the underlying volume is highly variable month-to-month is the durability marker for this franchise. To wrap up the commercial section, ZYNRELEF demand grew 22% year-over-year with IGNITE 2.0 expanding our targeted account base by 38% for 2026. APONVIE demand grew 68%. Ordering accounts hit an all-time high and the fifth consensus guidelines have positioned the product as the evidence-graded standard for PONV prophylaxis. CINVANTI held a stable 25% market share in a volatile category with reignite building approximately $10 million of near-term pipeline. Across all of it, our pricing discipline is intact. Our structural drivers are in place, and our commercial leverage continues to expand with both our ZYNRELEF team and our dedicated aprepitant team set to expand in Q3. The drivers we put in motion in '25 are working as designed, and we have line of sight to deliver on the full year framework we laid out in February. With that, I'll now turn it over to Ira.

Thank you, Mark. As Craig noted, our financial results this quarter came in modestly below plan. That said, while winter storms are outside of our control, how we manage our business in response to them is not. And disciplined cost management remains a hallmark of this team that our shareholders have come to rely on. Net revenues for the quarter were $34.7 million, with gross margin coming in at 69%, below our typical low to mid-70s percent range. As we have discussed in prior calls, we have a secondary supplier for CINVANTI and carried a contractual obligation to produce a certain inventory quantities over the past year. That secondary product is manufactured in smaller batch sizes at roughly 3x the cost per batch of our primary supplier. This inventory will work its way through our system over the next two quarters, after which we will return exclusively to our primary supplier. Once those contractual obligations are fulfilled, we expect gross margins to normalize back to the mid-70% range.

Adjusted EBITDA was negative $727,000 for the quarter, reflecting the combined impact of the storm-related revenue softness and the temporary gross margin pressure from our secondary CINVANTI supplier. Both factors are temporary, and we expect adjusted EBITDA to return to positive territory as we move through 2026. Looking ahead, the recovery is already underway. As noted earlier on the call, March net revenues returned to over $15 million, a strong signal for the second quarter and one that reinforces our confidence in achieving our full year targets. To reaffirm our 2026 guidance, we are maintaining net product sales of $173 million to $183 million and adjusted EBITDA of $10 million to $20 million, reflecting continued profitability alongside meaningful commercial expansion. With that, we are happy to open the call for questions.

[Operator Instructions] Our first question will be coming from the line of Brandon Folkes of H.C. Wainwright.

Maybe just a few from me. Firstly, on your guidance, can you just talk about some of the pushes and pulls on ZYNRELEF that you assume to meet the overall company level revenue guidance? Do you assume ZYNRELEF taking market share? And then maybe secondly, apologies if I missed this. Can you just give me some details on the Baxter settlement, sort of what that allows, what that sort of keeps exclusivity? Yes, that's it for me. Maybe one more, just you talked about friction. So can you just talk about how you meaningfully change the adoption curve across ZYNRELEF and APONVIE. And on ZYNRELEF, it sounds like there's friction in sort of the office to decide to use ZYNRELEF. How do you change that ahead of the prefilled syringe and eliminate the friction you're seeing today so that the prefilled syringe can sort of maximize the value that it can bring?

Brandon, thank you for the questions. I'll start with the Baxter settlement, and then I'll turn it to Mark. Look, based on the terms of the settlement, we really can't go into the details of that other than to say that the dates and everything that have been published. But outside of that, we're just forbidden from saying anything on that. So I'll turn it over to Mark to talk about the ZYNRELEF questions that you asked.

Yes, it's a great question. I think, kind of, 1 and 3 are, kind of, part and parcel of the same. But in terms of our confidence, there are several factors that we're looking at. First, we talked about the weather and the elective procedures being pushed out of January. Obviously, we believe those will be rescheduled throughout the year. And so certainly, that will be a nice tailwind for us. As it relates to both ZYNRELEF and APONVIE really, we're really focused on the expansion of the sales force in the kind of midyear. We certainly think that will help our share of voice and really kind of build upon the foundation that we've already built.

And then IGNITE 2.0, you see the slides and kind of what that delivered in the third and fourth quarter of last year. And so the expansion of that by 38% in 2026, we believe, will be a really nice tailwind for us as we go forward.

And then on the friction piece, I think for us, we don't really see accounts that don't want to use ZYNRELEF. Really, the hardest part for us is getting to a meaningful enough number of them to have that kind of quarter-over-quarter growth that we would want to see with the product, right? And so a lot of that is the reason why we're expanding the team in the, kind of, midyear. And certainly, that share of voice will continue to grow. And so -- because we're continuing to see market share grow within our targeted accounts, certainly within the accounts where we're aligned, not only at Heron, but within our IGNITE program. And so we just want to continue to expand upon that across the country.

And our next question will be coming from the line of Serge Belanger of Needham & Company.

This is John on for Serge today. First, if I could just follow up on ZYNRELEF again with regard to the 1Q winter storm headwinds. Just curious if you could quantify the impact with regard to surgical volumes for the quarter there. And then second, on the implementation of NOPAIN. Obviously, it's been online for over a year now. Curious what impacts you're seeing on commercial coverage and how this has changed over time and what you might be expecting for '26? And then if I could just squeeze one more in on the CrossLink partnership. It seems like you're adding on to the initial IGNITE program, targeting more accounts here in '26. Curious if this is just throwing more muscle at the program to increase the accounts you're getting into and what else we might expect from this?

Great. Thank you for the questions. On surgical volume, our data shows this kind of high single-digit decline from the fourth quarter. So a pretty meaningful impact larger than we've seen in prior years. We think that's part weather-related, part a record Q4 from a surgical volume perspective and maybe some of our surgical partners just taking a deep breath in the quarter. But certainly, we expect that to significantly improve. And obviously, some of those surgeries that were lost, we would imagine that those would be rescheduled. To your second question on commercial coverage, we -- obviously, NOPAIN is a great factor for ZYNRELEF and certainly removes the word I've been using is friction, at least on the Medicare side, on the government payer side. And since its implementation, we've seen more and more commercial payers begin to add ZYNRELEF outside of the surgical bundles, reimbursing outside of that bundle. We reported the number on the call at 110 million lives is the estimate that we have on the commercial side. And so kind of largely across the United States, very well covered for ZYNRELEF. There are pockets where we see ZYNRELEF still bundled, but certainly, we have the ability to go in and have those conversations at the payer level. And for the most part, they're willing to listen and make some changes for our patients.

And then as it relates to CrossLink, we allow them to select the accounts. And so by doing so, the natural selection gave us an expansion in that program, again, at 38%. And so the alignment between Heron and CrossLink now is almost 90% in terms of our focus. That's the highest it's ever been, significantly higher than the back half of 2025. And so what that really means is that we have a Heron employee in the account. We have a CrossLink employee in that account. We have really good payer coverage in those accounts. That's why they were selected. And so those three pieces of the puzzle have shown us that, that's where we really have good success and are able to move ZYNRELEF forward. And so that gives us a lot of confidence for 2026.

[Operator Instructions]

I would now like to turn the conference back to Craig Collard for closing remarks.

Thank you, operator. I just want to thank everyone for joining the call today, and we look forward to speaking to you all next quarter.

And this concludes today's program. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Heron Therapeutics Q4 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Melissa Jarel, Executive Director of Legal. Please go ahead.

Thank you, operator, and hello, everyone. Thank you for joining us on the Heron Therapeutics conference call today to discuss the company's financial results for the fourth quarter and year ended December 31, 2025. With me today from Heron are Craig Collard, Chief Executive Officer; Ira Duarte, Executive Vice President and Chief Financial Officer; Bill Forbes, Executive Vice President and Chief Development Officer; Mark Hensley, Chief Operating Officer; and Kevin Warner, Senior Vice President, Medical Affairs, Strategy and Engagement.

For those of you participating via conference call, slides are made available via webcast and can also be accessed via the Investor Relations page of our website following the conclusion of today's call. Before we begin, let me quickly remind you that during the course of this conference call, the company will make forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company's projections, expectations, plans, beliefs and future performance, all of which constitute forward-looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995.

These statements are based on judgment and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties associated with the forward-looking statements made in this conference call and webcast are described in the safe harbor statement in today's press release and in Heron's public periodic filings with the SEC. Except as required by law, Heron assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so.

And with that, I would now like to turn the call over to Craig Collard, Chief Executive Officer of Heron.

Thanks, Melissa. Hello, everyone, and welcome to the Heron Therapeutics Fourth Quarter and Full Year 2025 Earnings Call. Today, we're thrilled to share our financial results and provide commercial updates on our business. I'd like to begin by highlighting several key accomplishments from the quarter and the full year 2025. One of the most important was the successful completion of our financing. This issue had been an overhang on the company for some time and eliminating it represents a meaningful derisking event. With a solid capital structure now in place, management can concentrate fully on commercial execution, product expansion and delivering sustained growth.

Beyond the successful financing, team Heron delivered strong operational and financial performance in the fourth quarter and for the full year 2025. For the full year, we generated approximately $155 million in total net revenues and delivered adjusted EBITDA of $14.7 million, exceeding our previously communicated guidance range of $9 million to $13 million. Gross margin for this year was approximately 73%, reflecting continued improvements in cost discipline and product mix.

Turning to our Acute Care portfolio. We executed several strategic initiatives in 2025 that strengthened our commercial foundation and drove meaningful acceleration heading into year-end. These included the launch of the CrossLink IGNITE program, an incentive-based initiative designed to enhance distributor engagement, the introduction of the vial access needle or VAN, and the implementation of a new J-Code for ZYNRELEF, which improves reimbursement clarity and supports broader hospital adoption.

For APONVIE, we established a dedicated sales team known as the IBM group focused exclusively on APONVIE and CINVANTI in the hospital setting. Importantly, APONVIE was also included in the newly released Fifth Consensus Guidelines for the management of PONV, further validating its clinical value and bolstering long-term utilization. Throughout 2025, we communicated our expectation for an inflection in Acute Care performance in late Q3 or early Q4. I'm pleased to report that this materialized ahead of our internal expectations.

In Q4, ZYNRELEF delivered 48% net revenue growth compared to Q4 of 2024, while APONVIE grew 97% over the same period. Altogether, our Acute Care franchise increased more than 57% year-over-year in the quarter. These results confirm that the strategic actions we implemented in 2025 are driving sustained momentum across the portfolio. With stronger commercial infrastructure, improved reimbursement pathways and rising clinical adoption, we believe we are well positioned to continue this trajectory as we move into 2026.

As we continue to see a positive shift in our Acute Care product growth, our strategy beginning in 2026 and beyond is to accelerate the expansion of our commercial team in key markets across the country. These priority geographies offer strong success indicators, robust market access, favorable reimbursement dynamics, established cross-link relationships and market characteristics similar to our highest performing territories. By concentrating our investments in areas where foundational success factors already exist, we can scale more efficiently and maximize near-term commercial productivity.

This approach is designed to drive meaningful growth in top line revenue. In light of these opportunities, we are increasing our commercial investments, which may temporarily moderate EBITDA growth. We believe these investments are warranted given the compelling long-term return profile. Expanding coverage in markets where we already have traction allows us to pull forward revenue, accelerate market penetration and unlock a much larger growth trajectory in the out years. For investors, the key takeaway is that disciplined targeted commercial deployment now positions the company for outsized revenue acceleration, enhanced operating leverage and a substantially stronger enterprise value as we capture a greater share of high-opportunity Acute Care markets.

On the development front, we continue to advance the prefilled syringe or PFS presentation for ZYNRELEF. Registration batches were placed on stability in Q4 of last year, and we will need to complete 12 months of stability testing before we can file. Assuming a standard 4- to 6-month regulatory review, we anticipate a potential approval in mid- to late 2027.

Moving on to Oncology. We continue to deliver solid performance with CINVANTI despite increased competitive pressure. For the full year 2025, the Oncology franchise generated just over $105 million in net revenue, representing a modest 7.8% decline compared to 2024. Importantly, the majority of this decline is attributable to SUSTOL as we continue the planned wind down of that product throughout 2026. CINVANTI itself has remained resilient, demonstrating strong customer loyalty and continued demand even in a more competitive landscape.

Before I turn things over to Mark to cover our commercial performance, I want to take a moment to recognize the entire Heron team. The progress we made in 2025 was only possible because of the hard work, commitment and resilience demonstrated across the organization. From our commercial teams driving execution in the field to our manufacturing, R&D, regulatory and corporate functions supporting every aspect of our strategy, your dedication is reflected in the results we delivered this year.

Investors often hear about strategy, portfolio decisions and financial performance, but behind all of that is a group of people who show up every day with focus, urgency and a belief in the mission of Heron. I'm incredibly proud of what we accomplished together in 2025, and I'm confident that with this team, we are well positioned to carry that momentum into 2026 and beyond. To everyone at Heron, thank you for your continued effort, your commitment to patients and your unwavering drive to deliver results. Go ahead, Mark.

Thanks, Craig. I'll start with Acute Care, where we finished the year with clear momentum, and then I'll close with Oncology Supportive Care. Moving now to Slide 6. Acute Care net sales were $16.3 million in the fourth quarter, up from $12.3 million in the third quarter, an increase of about 33%. That quarter-over-quarter increase was driven primarily by ZYNRELEF. ZYNRELEF net sales increased to $12.5 million from $9.3 million in the third quarter. APONVIE net sales also increased to $3.8 million from $3 million.

On a year-over-year basis, ZYNRELEF net revenue grew 48% and APONVIE grew 97%. Overall, we're encouraged by the exit rate and the momentum heading into 2026. While we can see normal quarter-to-quarter variability early in the year, we remain focused on execution and expect performance to build as the year progresses.

Now let's talk about what's behind ZYNRELEF's quarter-over-quarter momentum. A big driver was sharper distributor execution. We launched the CrossLink IGNITE program in July of 2025, and we saw the benefit of that increased focus in the fourth quarter. Based on that performance, we decided to continue the program into 2026 and expanded the number of target accounts CrossLink is focused on. In parallel, we reduced friction for hospitals and ASCs. We completed the rollout of the vial access needle, which improves preparation and handling, and we have a permanent J-Code, J0668, which helps streamline reimbursement.

More broadly, we continue to see reimbursement becoming more straightforward as hospitals and ASCs gain familiarity with coding and the evolving post-op pain reimbursement environment, including the NOPAIN Act. And looking ahead, we continue development of the proposed prefilled syringe presentation. If successful, we are targeting FDA approval in mid- to late 2027. Overall, the story is consistent, more accounts adopting, fewer barriers to continued use and a more repeatable process that supports continued growth over time.

Next is APONVIE, where we're building a similar pattern of expanding adoption in hospitals. Demand units grew 101% year-over-year. Ordering accounts continue to expand as well. Operationally, we launched the dedicated APONVIE sales team on July 1, focused on high potential hospital accounts. This quarter, we are also announcing a permanent product-specific J-Code, J8502, which supports reimbursement clarity. And importantly, APONVIE is now included in the newly released Fifth Consensus Guidelines for the management of PONV.

The way we think about it is straightforward. Guideline inclusion and permanent coding reduce friction for hospitals. They also support education around multimodal prophylaxis and longer-acting coverage. We expect that to support continued adoption over time. Finally, I'll close with Oncology Supportive Care, which remains an important foundation for the company. Oncology Supportive Care net sales were $24.2 million in the quarter. Year-over-year, Oncology was lower in the quarter, largely reflecting the ongoing decline in SUSTOL. CINVANTI remains the anchor of the franchise. And for CINVANTI, we are focused on driving hospital demand while managing expected pricing dynamics on the clinic side. And APONVIE and CINVANTI increasingly benefit from the same hospital relationships.

So as we deepen anesthesia and pharmacy engagement, we often see broader franchise pull-through over time. The overall point is that oncology continues to provide a stable revenue base even as we manage expected pricing and competitive dynamics. To wrap up, we exited 2025 with clear momentum in Acute Care. ZYNRELEF drove the quarter-over-quarter increase, supported by tighter execution, workflow simplification, distributor alignment through the CrossLink IGNITE program and reimbursement clarity.

APONVIE continued to expand hospital adoption, and we believe permanent coding and new guideline inclusion support continued progress over time. Oncology Supportive Care remains a stable base as we manage pricing and competitive dynamics. As we look into 2026, our focus is to keep scaling what's working. With the playbook now in place, we plan to begin adding field capacity midyear, targeted to priority geographies where we already see strong access, reimbursement and distributor traction.

With that, I'll turn it over to Ira now to walk through the financials.

Thank you, Mark. Our financial performance in 2025 underscores the meaningful progress Heron continues to make in transforming its commercial trajectory while maintaining strong financial discipline. Total net product sales for 2025 reached $154.9 million, an increase over 2024, driven primarily by the exceptional performance of our lead product, ZYNRELEF, which delivered 48% year-over-year revenue growth in the fourth quarter alone.

Even more importantly, we continue to shift our product mix towards our higher-growth assets while maintaining strong and consistent gross margins. This acceleration strengthen our confidence in the underlying demand trends and the expanding adoption curve across our Acute Care franchise. At the same time, we achieved this growth while maintaining EBITDA profitability, delivering full year adjusted EBITDA of $14.7 million, more than doubling the prior year's performance and beating full year 2025 guidance. This marks an important milestone. Heron is demonstrating the ability to grow revenue at a meaningful rate without sacrificing financial discipline.

As we move into 2026, we view this as a pivotal year. The commercial inflection we've began to see in Q4 2025 is continuing to build, and we intend to lean into that momentum. Our strategy is to remain EBITDA positive in 2026 while making targeted commercial investments that position ZYNRELEF and the broader portfolio for even stronger growth in the years ahead. These investments may temper near-term EBITDA expansion, but they are deliberate and designed to accelerate our path towards sustained revenue growth and free cash flow generation in 2027.

Importantly, last year's refinancing has eliminated the capital structure overhang that previously constrained the business and has provided Heron with the financial flexibility needed to execute this next phase of growth. With a healthy balance sheet and expanding commercial footprint and strong product level momentum, we are entering 2026 with clarity, confidence and a strategic plan that positions the company for long-term value creation. Our 2026 guidance reflects this confidence, net product sales of $173 million to $183 million and adjusted EBITDA of $10 million to $20 million, demonstrating continued profitability through a year of commercial expansions.

And now we would like to open the call for any questions.

[Operator Instructions] Our first question comes from the line of Serge Belanger from Needham.

Regarding the new guidance for 2026, can you just maybe highlight your expectations for the CINV franchise, which I guess now is mostly almost 95% or so CINVANTI? And then regarding the NOPAIN Act, should we still expect that as a tailwind for ZYNRELEF? I noticed that I don't think it was even mentioned on the slides of growth drivers, but is this still something that could help the franchise going forward?

Thanks, Serge. Regarding the CINV franchise, yes, we continue to think that we're going to -- we'll grow in unit volume. Again, with the IBM team now out promoting that as well, we should get some volume growth on the hospital side. But at the same time, we're going to get some price erosion. So -- but sales should stay relatively flat throughout the year.

Regarding the NOPAIN Act, I'll turn it over to Mark Hensley.

Yes. So certainly, I think it's a great question. And we believe the NOPAIN Act will continue to be certainly very beneficial to us. I think most of 2025 was spent educating providers on the NOPAIN Act. So certainly, we believe that to be a strong tailwind as we go forward. That, combined with the permanent J-Code for ZYNRELEF, certainly will remove friction for our institutions.

Our next question comes from the line of Brandon Folkes from H.C. Wainwright.

Congrats on all the progress. Maybe just on the VAN to start, can you just tell us where you are in terms of sort of P&T committees in terms of the rollout in the VAN? Is that where you'd like it to be for 2026 and it's really just a sort of sales detail that's driving growth this year? Or should we think about sort of a sales detail as well as access within the hospital or institution as a tailwind there? And then maybe staying on that topic, any learnings from the VAN rollout that may change or sort of may tweak the prefilled syringe potential launch? Or should we think of the prefilled syringe rollout is very similar to the VAN commercial rollout?

Thank you for the question. Our growth strategy for this year is 2 parts really. The first part is where our Heron employees are overlapping with CrossLink, where we have the proper resources in our primary targets. And that's going deeper into hospitals, right? So many of our accounts, we only have a few providers that are using ZYNRELEF, but we have formulary access in those accounts and the ability to spread go deeper and wider within them. And so you'll see us continue to do that. Certainly, the VAN has been a big part of removing -- the word is friction that I use, but kind of challenges on the preparation side. That's largely been eliminated.

And then beyond those accounts, CrossLink is a much larger organization than us and has other targets beyond the Heron employees. And so those are other accounts that we continue to focus on and grow as well. From the -- on the rollout of the VAN, that actually went remarkably well. I think the transition was largely -- there was largely no issues as we moved into that. It was simply kind of winding down the prior supply of the VVS and then rolling into the VAN. And so there's probably not much we would change as we moved into the prefilled syringe launch in terms of strategically how we roll it out. It's just managing inventory on both products as we get closer so that we can move quickly when prefilled syringe is approved and ready.

Our next question comes from the line of Carl Byrnes by Northland Capital Markets.

Congratulations on the progress. Yes, I just want to talk a little bit about the Slayback litigation with respect to CINVANTI. If I'm not mistaken, this is the same U.S. District Court of Delaware and the same judge, William Bryson, that ruled in the Fresenius case. And I also believe that it looks like it's the same statutory framework in terms of 505(b)(2) Hatch-Waxman and Orange Book patents along with formulation range, excipient ratios and pH parameters and whatnot. So what are your thoughts with respect to resolution and time frame resolution with respect to this litigation?

Carl, this is Melissa Jarel. Thanks for the question. So we're really confident with the case that we made at trial. We finished briefing earlier this month, and it is with Judge Bryson. We await a deeper oral argument, but we expect a decision before the 30-month stay.

Excellent. Perfect. Very helpful. And then a follow-up, switching back to the NOPAIN Act. Can you talk a little -- maybe a little bit more about what the company may be doing or what others in the industry are doing in terms of creating awareness given where awareness is relative to the significance of the opioid crisis?

Yes, Carl, thanks for the question. It's interesting. One of the things I think we worked -- we did not anticipate is that as NOPAIN kind of rolled out, we thought that it would be fairly simplistic and everybody to be aware and obviously taking what would be otherwise a cost, right, in a surgical bundle type of scenario to actually something where they actually make money. And so there's incentive there. And so -- but what we've learned is as we've gone through this, some of the coding, just the awareness of that, it's just gone a little bit slower. I think it's now happening much faster, but we were a little bit surprised by that. So we've actually -- we're expanding some of our team that handle that so we can answer questions and help with some of that as well. But that was a bit of a surprise. Mark can kind of chime in on some things specifically we're doing that are creating more awareness and helping us on that side.

Yes. And I think kind of to your kind of second part of your question on the industry, it's not just us focused on the NOPAIN and education. Obviously, you know that. There are several other large companies that have invested interest in making sure that there's awareness and understanding of how the reimbursement works. It isn't complicated. It's relatively simple. It's just -- it's a lot of -- there are a lot of players here that have to kind of understand it and seek that reimbursement.

And so it's more just an awareness issue. But certainly, where we're getting business where we're focused on the targeted, they're aware of the NOPAIN Act and understanding that reimbursement. And we're beginning to see more and more commercial plans also follow suit, which I think early on was some of the kind of lag in adoption, whereas as we turn into the new year, we're starting to see a lot more kind of alignment between commercial and CMS on NOPAIN.

Excellent. That's very helpful as well. And then just one real final quick question, and apologies if this is somewhat redundant. But with the inclusion of the Fifth Consensus Guidelines with respect to APONVIE, what's a realistic time frame where you think that takes hold and has a material effect in terms of the APONVIE growth trajectory?

Yes. I mean we were certainly very excited to see what the new guidelines had to say. And certainly, we're confident that they will be a significant tailwind for APONVIE. The guidelines are certainly a good educational tool for us, especially as you think about when APONVIE gets taken to P&T for potential approval. Those guidelines are what pharmacy will likely reference in many cases.

And so prior to that, we had good clinical data. There's certainly a lot behind IV aprepitant and its use in the setting. But the guidelines are robust enough that we believe they'll have a significant impact. Time line to that is probably back half of the year. The cycle of kind of P&T approvals and additions is typically a 6-month cycle. And so I wouldn't expect it to be impacting much today. But as we move and progress through the year, we do believe it will have a significant impact.

This is Kevin Warner. I'll just add a little bit of color there from Mark's comments in regards to the consensus guidelines. So guidelines really change the paradigm, if you will, is what is accepted in the institutions and what we take a look at. They bring a lot of credibility and validity to the information and the data. And so it goes a long way in changing clinical decision tools, order sets, the protocols and driving that long-term adoption.

So right now, when the guidelines are initially released, obviously, you're going to create awareness, education around the clinical impact of PONV and how we should be supporting these patients in the acute phase and the extended phase. But as people adopt it, it will be slow at first to get what I call soft adoption with individual providers recognizing the information, recognizing best practices, but then you get the full implementation. So with the credibility of a guideline, the consensus statement, the level of evidence, the quality of evidence within the guidelines, it brings it to all these P&T tables as a necessity for the best patient outcomes. And so as they go through that, implementing it into order sets protocols so that all high-risk patients receive appropriate therapy, that really changes the trajectory and you get the sustainable long-term adoption.

Specifically for APONVIE within the guidelines, we were very happy with the guidelines and how it laid out the NK1 antagonist class really highlighted their long durable efficacy throughout that entire phase of the post-op recovery for the patients, the rapid onset with the IV push of APONVIE and the clinical efficacy of the NK1 class with a great safety profile.

So the guidelines are going to go a long ways as far as bringing credibility when we walk into an institution to educate them on best practices for patients, but it's not just product-driven then. This is a consensus statement from 25 societies endorsing this information. So a great driver to the future. And like Mark said, it's probably 6 to 9 months until we roll it out into these order sets and these protocols that really change the trajectory and sustained growth.

This does now conclude the Q&A portion of our conference. I would like to now hand it back to Craig Collard, CEO, for closing remarks. The floor is yours.

Thank you, operator. Thanks, everyone, for joining us on the call today, and we look forward to speaking to everybody next quarter. Thank you.

And thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Heron Therapeutics Q3 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Melissa Jarel, Executive Director of Legal. Please go ahead.

Thank you, operator, and hello, everyone. Thank you for joining us on the Heron Therapeutics conference call today to discuss the company's financial results for the quarter ended September 30, 2025. With me today from Heron are Craig Collard, Chief Executive Officer; Ira Duarte, Executive Vice President and Chief Financial Officer; Bill Forbes, Executive Vice President, Chief Development Officer; Mark Hensley, Chief Operating Officer; and Kevin Warner, Senior Vice President, Medical Affairs, Strategy and Engagement.

For those of you participating via conference call, slides are made available via webcast and can also be accessed via the Investor Relations page of our website following the conclusion of today's call.

Before we begin, let me quickly remind you that during the course of this conference call, the company will make forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company's projections, expectations, plans, beliefs and future performance, all of which constitute forward-looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995.

These statements are based on judgment and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties associated with the forward-looking statements made in this conference call and webcast are described in the safe harbor statement in today's press release and in Heron's public periodic filings with the SEC. Except as required by law, Heron assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. And with that, I would now like to turn the call over to Craig Collard, Chief Executive Officer of Heron.

Thanks, Melissa. Hello, everyone, and welcome to Heron Therapeutics Third Quarter 2025 Earnings Call. Today, we're thrilled to share our third quarter results and provide insight into how product sales are trending. I'd like to begin by highlighting several key accomplishments from the quarter. One of the most significant milestones was the successful completion of our financing. This has been an overhang on the company since I joined, and we're glad to have it behind us.

With this resolved, management can now fully focus on commercial execution and product growth. Beyond the successful financing, team Heron delivered strong operational and financial performance in the third quarter. We generated total net revenues of $38.2 million for the quarter and $114.3 million year-to-date. This performance resulted in adjusted EBITDA of $1.5 million for the quarter and $9.5 million year-to-date. Our gross margin was 68.8%, which is slightly down from previous quarters, primarily due to a onetime write-off of SUSTOL polymer inventory.

SUSTOL has been trending downward over the past several months due to increased market competition, and we expect this trend to continue for the foreseeable future. CINVANTI, on the other hand, continues to exceed our expectations. We've maintained a conservative outlook this year, anticipating a potential slight decline in CINVANTI performance as we move into Q3 and Q4. So far, that decline has not materialized. Despite ongoing competitive pressure that has historically impacted our average selling price, we're pleased that net sales are remaining fairly consistent. We believe this positive trend will continue through Q4 and into next year.

Turning to our acute care portfolio, we implemented several new initiatives in Q3, including the CrossLink Ignite program, an incentive-based initiative to improve distributor engagement, the launch of the 200-milligram vial access needle or VAN and the creation of the IBM team, a dedicated sales force focused on APONVIE only. All of these initiatives were rolled out at different times during the quarter and are beginning to have a meaningful impact. That's why we've consistently stated our belief that the acute products will begin to inflect more prominently as we move into late Q3 and Q4 of 2025.

ZYNRELEF net sales grew 49% in Q3 2025 as compared to Q3 2024, and APONVIE net sales grew 173% in that same time period. More importantly, we're finally seeing real momentum in the acute care. While quarterly net revenues and unit demand were solid, weekly unit demand from late September through October has been the highest we've ever seen, clearly indicating a possible trend break. Mark will provide more detail on this in his prepared remarks.

Lastly, our J-code for ZYNRELEF went into effect on October 1. This is a significant win for Heron and for the providers who rely on ZYNRELEF in their practices. The J-code will streamline reimbursement and reduce administrative burden, especially as the NOPAIN Act continues to gain traction. We believe this change will improve access and coverage across both government and commercial payers, ultimately supporting broader adoption and better patient outcomes. Also, our prefilled syringe continues to advance with a time line to possible approval in late 2027. Bill Forbes, our Head of Development, will address any questions regarding PFS and other development initiatives in the Q&A.

This quarter has been both busy and successful for Heron. With increasing demand for ZYNRELEF, APONVIE and even CINVANTI, we're extremely excited about the trajectory of the business moving forward. I'd now like to turn the call over to Mark Hensley, our Chief Operating Officer. Go ahead, Mark.

Thanks, Craig. In acute care, ZYNRELEF kept its momentum in the third quarter. This is a site-by-site, case-by-case adoption curve. Access enables OR-proved converts, protocols make it stick. We focused on removing friction and tightening execution. The VAN made prep in the OR easier, the Ignite program kept distributors focused on accounts we can win. Our education and medical support teams help standardize technique and support protocol adoption.

And as of October 1, ZYNRELEF has a permanent product-specific J-code, which makes billing conversations clearer. Stepping back, the theme is friction removal and focus. Those same disciplines translated to both APONVIE and CINVANTI as well. In oncology supportive care, CINVANTI remains a steady anchor. As APONVIE expands and deepens our relationships with anesthesia and pharmacy, we see CINVANTI ordering rise in those hospitals.

Let me show you how this progress shows up in the revenue numbers on Slide 6. For our acute care franchise, net sales were $12.3 million in the third quarter, up from $10.7 million in the second quarter. ZYNRELEF net sales were $9.3 million. That is a 49% growth year-over-year versus $6.2 million in the third quarter of last year and up from $8.2 million in the second quarter. The drivers are consistent, the VAN, the Ignite program focusing distributors on winnable accounts, support from our education and medical support teams and now permanent J-code clarity.

APONVIE net sales were $3 million. That is 173% growth year-over-year versus $1.1 million last year and up from $2.5 million in the second quarter. Third quarter APONVIE growth occurred before the dedicated team was fully active. The team finished training in October and entered the field in early Q4 to support momentum.

Now let me show how this demand shows up in ZYNRELEF operating metrics on Slide 7. Our installed base continues to expand as sites move from first case to protocolized use. Average daily units increased from 882 in the third quarter last year to 1,127 in the third quarter this year, an increase of about 28%. Ordering accounts rose from 705 to 833 over the same period. This comes from friction removal and focus, the VAN, Ignite program, our education and support teams and permanent J-code clarity streamlining reimbursement.

You will also see October plotted on the line, significantly above September. It is a preliminary single month and not a proxy for the fourth quarter. We will stay disciplined and let the quarter play out. With that context, let's turn to Slide 8 and APONVIE. APONVIE's trajectory is strong. Demand units grew 142% year-over-year. Average daily units increased from 418 to 998 and ordering accounts increased from 299 to 405. We launched the dedicated APONVIE team on July 1, 6 representatives focused on high-potential hospitals. The team completed full training in October, so Q3 reflects partial deployment. Full activation supports momentum going forward.

In addition, the 2025 PONV prophylaxis consensus guidelines are expected to be published in Q4. APONVIE is anticipated to be part of the guidelines, which should significantly increase awareness of its availability and clinical profile. We look forward to aligning our education and disseminating the information with our recently expanded field sales and medical teams.

Now turning to the oncology care franchise on Slide 9. Oncology franchise net sales were $25.9 million in the third quarter. CINVANTI net sales were approximately $24 million, up about 6% year-over-year and stable sequentially. As APONVIE broadens anesthesia and pharmacy relationships, we are beginning to see CINVANTI pull-through in those same institutions. SUSTOL net sales were $1.9 million, down about 32% year-over-year. We plan to wind down commercialization over the next 12 months while we evaluate potential product updates with a possible late 2027 reintroduction subject to development and regulatory progress.

We will continue to support customers and manage the transition responsibly. To wrap up, we are seeing structural progress. The VAN, the Ignite program, clinical education and permanent J-code clarity are turning ZYNRELEF first cases into durable protocols. APONVIE's hospital curve continues to strengthen, supported by a fully trained and strategically aligned team positioned ahead of the imminent release of the updated 2025 PONV prophylaxis consensus guidelines. CINVANTI remains a stable anchor and as APONVIE expands hospital relationships, we believe CINVANTI will benefit. October stepped up for ZYNRELEF, but it is a preliminary single month. We will stay disciplined and let the quarter play out. Thanks, and I'll now turn it over to Ira.

Thanks, Mark. Our product gross profit for the 3 months ended September 30, 2025, was $26.3 million or 68.8%, which decreased from 71.2% for the same period in 2024. This decrease is due to an increase of $1.4 million of inventory reserves and write-offs recorded and an increase of $1.3 million in the cost of units sold, primarily due to supplier mix.

For the 9 months ended September 30, 2025, our product gross profit was $84.1 million or 73.6%, which increased from 72.5% for the same period in 2024. This increase is due to an increase in units sold and a lower cost per unit due to the supplier mix. SG&A expenses for the 3 months ended September 30, 2025, was $26.9 million compared to $23.3 million for the same period in 2024. The increase is primarily due to higher personnel and related expenses due to new hires and increased generalized marketing costs. SG&A expense for the 9 months ended September 30, 2025, was $78 million compared to $77.3 million for the same period in 2024.

The increase is primarily due to increased marketing costs related to ZYNRELEF, offset by a decrease in personnel and related costs due to terminations and a onetime stock compensation expense in 2024, which did not reoccur in 2025 and a decrease in legal expenses due to timing of litigation.

Research and development expenses were $3.5 million for the 3 months ended September 30, 2025, compared to $4.5 million for the comparable period in 2024. The decrease is primarily due to timing of expenses. Research and development expenses were $8.7 million for the 9 months ended September 30, 2025, compared to $13.5 million for the comparable period in 2024. The decrease is due to a decrease in personnel and related expenses due to terminations and a decrease in write-offs of property and equipment and other assets.

For the 3 months ended September 30, 2025, we incurred a net loss of $17.5 million compared to a net loss of $4.8 million for the same period in 2024. The increase in net loss is primarily due to the $11.3 million loss on debt extinguishment recognized in the quarter. For the 9 months ended September 30, 2025 and 2024, we incurred a net loss of $17.2 million. The net loss for the 9 months ended September 30, 2025, included a onetime charge of $11.3 million related to our recent debt extinguishment. Cash and short-term investments at September 30, 2025, was $55.5 million.

As a result of the debt and equity transactions completed in the 3 months ended September 30, 2025, $13.1 million was added to cash and short-term investments. If we had exclude depreciation, stock-based compensation and inventory reserves and write-offs, our adjusted EBITDA results would have been a positive $1.5 million operating income for the 3 months ended September 30, 2025, compared to a loss of $400,000 for the same period in 2024. For the 9 months ended September 30, 2025, our adjusted EBITDA is $9.5 million operating income compared to a loss of $700,000 for the same period in 2024. We are reaffirming our previously given guidance for net revenue of $153 million to $163 million and adjusted EBITDA of $9 million to $13 million. And now we'd like to open the call for any questions.

[Operator Instructions] Our first question comes from Carl Byrnes from Northland Capital Markets.

Congratulations on the quarter. Just turning back to the slide with respect to ZYNRELEF in the first few weeks of October, it looks like you're pushing 18% in terms of increase. And that's on a month-over-month basis. Is that correct?

Yes, Carl, that's -- it's roughly correct. Yes, it's 17%, 18% right in there.

Excellent. Fantastic. And then a financial question. If we look at gross profit margin and back out the onetime stocking charge, which I think is around $2.2 million, you end up with approximately an adjusted gross profit margin, which would be around 74.5%. Does that sound correct?

That is correct, Carl.

Yes, that's accurate.

Which is in line what we've been for the last few quarters.

Okay. And then one further adjustment, which is the extinguishment of debt. What would the net interest income line be backing that out? Would that be somewhere in the $2.1 million vicinity? Or what number should we use there?

Going forward, yes, probably about $2.5 million would be going forward.

Yes. Okay. So $2.1 million for the quarter, but sort of adjusted for the quarter period...

For it was a full quarter, yes.

$2.5 million plus. Got it. Congrats again.

Our next question comes from Brandon Folkes from H.C. Wainwright.

Congratulations on the quarter. Maybe just from me, understanding it's very early days on the internal sales team. Can you just talk about though how you're viewing those on ZYNRELEF and APONVIE, and how are you thinking about potentially adding to those teams in 2026 or sort of the measure of success to potentially add to those teams in 2026? And then any additional investments you're thinking on the commercial side behind the 2 products in 2026?

Thanks for the question, Brandon. This is Mark Hensley. I'll start, and then we'll let Craig kind of finish it up. So internally, we're very pleased with the kind of structural changes we made at the beginning of Q3. Just as a reminder, we now have a dedicated ZYNRELEF team, a dedicated APONVIE team. That APONVIE team is also beginning to do some work with CINVANTI. And so we think there's a lot of synergy there on both sides. And so the increased focus, we believe, has -- is a partial impact on the results we're seeing in the quarter and certainly as we go forward into next year. In addition to that, we have better alignment with our distributor partners. And so certainly, we think all of those things being put together will result in increased sales as we go forward.

Yes. Brandon, I would sort of add to that. As we think about the product going forward or the products going forward, I think we've been pretty consistent in saying when we see sort of pockets in the country take off when we have, let's call it, conducive events like access into an account, we have good cross-link participation, and we have certainly personnel in that area. Once we see that type of success, we would like to obviously mimic that where we can. So I think going forward, we continue to look for those pockets, and we're beginning -- as the data suggests, we're beginning to see that.

And so we're in the process of going through our budgeting process for the year. And I think we'll be looking at where we can add in specific pockets and again, staying within profitability and so forth. But I think you're going to see more to come on that because, again, we're beginning to see a little bit of a different trend. And so if we can expand that, we would certainly like to do that.

Fantastic. And maybe just one follow-up from me. Just on ZYNRELEF, granted the demand curves look really, really good, I appreciate you sharing those. Just given the VAN came online pretty significantly in the quarter, any inventory stocking benefit in the revenue -- in the reported revenue line in 3Q on ZYNRELEF?

We didn't see -- we had that kind of similar bump when we launched the 400 VAN. Because the 200 VAN is really only about 35% of the total sales, there was a minimal, let's say, bump, I guess, but not to the degree that we saw with the 400. So the inventory remained relatively stable compared to prior quarters.

Congrats on the quarter.

Our next question comes from Serge Belanger from Needham.

First question regarding the NOPAIN Act, can you just give us an update on its implementation and what you're seeing from commercial plans, whether they are following in the footsteps of Medicare? And then secondly, on the oncology care franchise, maybe just provide a little bit more color on your long-term outlook for that franchise. It sounds like you expect SUSTOL to remain under pressure for the foreseeable future. And then on CINVANTI, do you expect competitive pressures to come back despite the ones that didn't materialize in the third or fourth quarter?

Yes. Serge, I'll take the CINVANTI question, then I'll pass the other over to Kevin on the NOPAIN Act. But again, we've been saying all year long and even in my prepared remarks about CINVANTI, we felt that with the competition out there that we could see a little bit of a dip in Q3 and Q4. We have yet to see that. We've been fairly consistent in being able to keep accounts and that type of thing.

But to your point, there are -- it is a very competitive space, and we will continue to have pressure. And we could lose an account from time to time or we could be forced to take our price down to keep an account. So I mean that's just sort of the market we're in. We're going to continue to sort of look at this pretty conservatively. What I can say on the upside, though, with the IBM team that we have, we're beginning to promote CINVANTI a bit more from a rep standpoint within hospital accounts. And again, we're thinking that will have or could have a positive impact.

So again, still facing the same competition, but the fact that we have a little bit of a larger voice out there, we've actually -- we had an account we won about 3 weeks ago that was fairly significant. So again, if we can keep doing that, we think we can keep things fairly stable as we move forward. So we'll continue to update quarterly, but I think our outlook remains fairly consistent as with things we've said before.

Serge, it's Kevin Warner. So in regards to the NOPAIN Act and the impact we're seeing out in the field, it's definitely starting to build momentum. As we said previously, as expected, it would take 6, 9 months and be tail half of the year once providers and systems got educated on the fact that you could reimburse outside the bundle, and it's not typical as we know. So we're seeing education happen across all segments from some of our competitors, obviously, other companies that are included in the NOPAIN Act. They're standing at platform presentations like at ASA and delivering the message out there.

So we're continuing to educate around it, provide the systems in place and educational materials of how to actually bill separately. Commercial payers, to your point on that question, we are seeing some momentum there also. We believe it would take them time to reassess and do a rearview take on it and see what's happening with implementation. But you have providers like Aetna and Cigna that are providing separate reimbursement, and it varies state by state with individual commercial plans that we see out there.

Overall, as an estimate, we see about 75% of all ZYNRELEF indicated procedures, especially our target procedures, have some form of coverage, whether it's be a Medicare or a commercial plan. We have a few other things from the economic perspective that are tailwinds coming into 2025 for us when you look at the teams model by CMS, which is a value-based care model. So you're looking at things like patient-reported outcomes and satisfaction. So do you feel pain? Do you have PONV? That's going to be a significant tailwind.

Also the dissolution of the inpatient-only list specifically about 285 orthopedic procedures are coming off that inpatient-only list. So that will make them outpatient eligible procedures now and thus reimbursable under things like the NOPAIN Act. So a lot of value and impact is coming to our patients and really changing the model to a value-based care, looking for these advances in our health care system, long-acting advances like ZYNRELEF and APONVIE that can help facilitate this transition as we're moving our phases of care.

Yes, Serge, just to maybe address the second part of your question regarding SUSTOL, similar scenario as we faced with CINVANTI, although it's just been a little bit more competitive on that side. And again, we have fewer accounts. And so what we've seen over the last few years, we've had a continual decline and a -- continual decline in -- on our ASP. And so what we've decided to do is wind this product down over the next -- into next year.

And again, our plan is to look at possibly improving the delivery of that product, whether that be a lighter gauge needle or what have you. But we would like to bring that out possibly late '27 back into '28 as a relaunch product. And again, there's things we can do there from our selling price and that type of thing that would possibly bring this product back to market. And so we'll talk more about that as we move forward and ideas that we have. But the plan now is to wind this down as we move to really to the end of next year.

Our next question comes from Sierra Dong from Jefferies.

This is [indiscernible] on for Clara. Congrats on the quarter. So my question is about the ZYNRELEF prefilled syringe program. So you said if successful, it's expected to be approved in 2027. And based on your feedback from physicians on VAN and how do you expect the prefilled syringe program to help on the franchise on the long-term? And how can we think of the momentum there?

Thank you for your question. This is Bill Forbes. I'll just give a little bit of an update on this. We've recently just manufactured our registration batches and with that have initiated our stability program. As you know, every new product has to undergo at least 1 year of real-time stability. So we've got that clock ticking. So we're glad we've crossed that milestone, and that's why we're looking -- obviously, once we've completed that stability program, we'll go ahead and file and it will be approved, hopefully, in 2027.

The impact, I think, is one, as you can see from the VAN, we've had a bit of an uptick. And I think as far as simplifying and speeding the application and use of ZYNRELEF, the VAN has been a big step forward. But the prefilled syringe takes it to another level. Obviously, in that -- in this scenario, we're just going to go ahead and open up the prefilled syringe packaging and place it in the surgeon's hands so that they can -- it can go ahead and install the product. So I think when it comes to receiving the product, it simplifies things even to a much greater extent and obviously, will speed, I believe, the conversion of accounts into use of ZYNRELEF. I don't know if Mark has any other comments on it.

No, I think that's good.

Yes. I would just add, I think Bill is spot on it. When you think about simplicity, we still have the scenario where when we go into onboard an account, there is a training even though the VAN has improved dramatically and being able to draw the product out of the vial. And so if you think about really being able to simplify your product and now you go in and you open a tray and you dump the product in the sterile field and basically, it's ready to go, it just takes one step out of the process. So again, we certainly think this is going to have a positive impact. And again, as things are moving forward, we think this just makes the product that much better and has another benefit so.

Okay. I do have a follow-up. So for the J-code for ZYNRELEF, it's also applicable to the prefilled syringe and also for the VAN, right?

It would be once the prefilled syringe is launched. Yes, that's correct.

Thank you. This concludes the question-and-answer session. I will now turn it over to Craig Collard, CEO, for closing remarks.

Thank you, operator, and thank you, everyone, for joining the call today, and we look forward to speaking to you all next quarter.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Thank you for standing by, and welcome to the Heron Therapeutics Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Melissa Jarel, Executive Director of Legal at Heron. Please go ahead.

Thank you, operator, and hello, everyone. Thank you for joining us on the Heron Therapeutics conference call today to discuss the company's financial results for the quarter ended June 30, 2025.

With me today from Heron are Craig Collard, Chief Executive Officer; Ira Duarte, Executive Vice President, Chief Financial Officer; Bill Forbes, Executive Vice President, Chief Development Officer; Mark Hensley, Chief Operating Officer; and Kevin Werner, Senior Vice President, Medical Affairs, Strategy and Engagement. For those of you participating via conference call, slides are made available via webcast and can also be accessed via the Investor Relations page of our website following the conclusion of today's call.

Before we begin, let me quickly remind you that during the course of this conference call, the company will make forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company's projections, expectations, plans, beliefs and future performance, all of which constitute forward-looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. These statements are based on judgment and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

The risks and uncertainties associated with the forward-looking statements made in this conference call and webcast are described in the safe harbor statement in today's press release and in Heron's public periodic filings with the SEC. Except as required by law, Heron assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so.

And with that, I would now like to turn the call over to Craig Collard, Chief Executive Officer of Heron.

Thanks, Melissa. Hello, everyone, and welcome to Heron Therapeutics Second Quarter 2025 Earnings Call.

Today, we're thrilled to share results and progress for the second quarter and first half 2025. It's been an incredibly active and transformative period for team Heron, and I want to begin by recognizing the tremendous effort and dedication our team has demonstrated. One of the most significant milestones this quarter was the successful completion of our new financing. This was a complex and critical undertaking, and I'm proud to say our team executed it with precision and focus as usual.

The financing strengthens our balance sheet, enhances our financial flexibility and positions us to accelerate our strategic initiatives with confidence. This achievement reflects not only our commitment to operational excellence, but also the strong belief our partners and investors have in Heron's long-term vision. With this new capital in place, we're better equipped to drive innovation, expand our commercial initiatives and continue delivering value to both patients and shareholders.

Beyond the successful financing, team Heron delivered strong operational and financial performance in the second quarter. We generated total net revenues of $37.2 million for the quarter and $76.1 million for the first half of 2025. This performance resulted in adjusted EBITDA of $7.9 million for the first half of the year, reflecting our continued focus on disciplined execution and operational efficiency.

Importantly, we're seeing consistent product demand growth with ZYNRELEF and APONVIE, which has outpaced net revenue growth over the past 2 quarters. This is a key indicator of the underlying strength of our business and the growing adoption of our products. Mark will provide more detail on this dynamic later in our prepared remarks. Another major milestone this quarter was the transition from a C-code to a permanent J-code for ZYNRELEF that will become effective October 1. This is a significant win for Heron and for the providers who rely on ZYNRELEF in their practice.

The J-code will streamline reimbursement processes and reduce administrative burden, especially as a NOPAIN act continues to gain traction. We believe this change will improve the access and coverage across both government and commercial payers, ultimately supporting broader adoption and better patient outcomes. Taken together, these achievements underscore the momentum we're building across the organization. We're executing on our strategy, strengthening our financial foundation and positioning Heron for long-term growth.

I'd now like to turn the call over to Mark Hensley, our Chief Operating Officer, to cover product performance and many of the new initiatives we believe will be catalysts for future growth. Go ahead, Mark.

Thanks, Craig. Q2 was a transitional quarter for Heron as we implemented several key commercial changes designed to strengthen execution in the second half of the year and beyond. Combined net revenues from APONVIE and ZYNRELEF totaled $10.7 million for the second quarter and $20.9 million year-to-date. This reflects strong year-over-year growth of 55.5% for the quarter and 70.5% for the first half of '25 compared to the same periods in 2024.

Across the Acute Care franchise, demand growth was encouraging with unit growth across both ZYNRELEF and APONVIE. While reported revenue was relatively flat quarter-over-quarter, this masks meaningful progress in foundational work that will support growth in the second half of the year.

Let me walk you through the drivers in more detail, beginning with ZYNRELEF. ZYNRELEF adoption continues to accelerate with growth in average daily units and total ordering accounts now more than 700 through the month of June. ZYNRELEF demand units grew 6.3% over Q1, signaling continued momentum in provider adoption. However, Q2 revenue was impacted by a transient inventory drawdown at our wholesalers. Primarily related to the transition to the 400-milligram VAN. This type of wholesaler inventory swing is common in new product transitions, and we estimate it reduced net sales by approximately $400,000 in the quarter.

Importantly, this drawdown occurred while end-user demand continued to increase, and we expect wholesaler ordering patterns to normalize in Q3. Operationally, we focused the ZYNRELEF team on targeted pull-through in accounts where we already have formulary access. This alignment ensures our reps are focused on converting approved access into actual utilization. In addition, we made several enhancements to drive long-term growth. We launched a significantly enhanced per unit compensation program with CrossLink. Beginning in July, CrossLink reps were allowed to nominate up to 4 accounts per territory with little or no historical ZYNRELEF use, where they believe they can make an immediate impact. Many of these accounts already had formulary access and the enhanced incentives are in place through the end of 2025.

In addition, we stood up a new Post-Operative Clinical Educator Team. These 3 specialists provide targeted onboarding and support in high-volume accounts, improving adoption efficiency while allowing reps to focus on growth. And importantly, we received a permanent J-code for ZYNRELEF effective October 1. While not a near-term growth catalyst on its own, the J-code streamlines reimbursement and should improve billing clarity. Taken together, these initiatives represent a reoriented and focused ZYNRELEF commercial engine, well positioned for acceleration in the second half of the year.

Turning to APONVIE. We continue to see strong trends nearing the 1,000 average daily unit mark through the month of June, while ex-factory units grew 11%, demand units grew 19%. Net revenue grew 9% over Q1. The difference between demand and revenue reflects inventory normalization at the wholesaler level and a modest impact from standard 340B discounts as larger hospital systems came online in the quarter. To support continued growth, we launched a dedicated APONVIE sales team on July 1, consisting of 6 reps supported by our national account team. This team was created without incremental headcount costs, thanks to strategic consolidation of underperforming territories. We believe this targeted investment will unlock further hospital account conversion going forward.

The oncology franchise continues to outperform our expectations with combined net revenues from CINVANTI and SUSTOL reaching $26.5 million for the quarter and $55.1 million year-to-date. We have maintained market share in a highly competitive environment, and we believe these products will continue to deliver consistent performance throughout 2025. We are extremely pleased with the results of our oncology supportive care franchise, and we are actively exploring creative strategies to drive continued growth in this market.

In summary, Q2 was about restructuring and refocusing our commercial platform. We optimized our sales force and created dedicated teams for ZYNRELEF and APONVIE. We aligned with CrossLink around enhanced pull-through in target accounts. We supported high-volume institutions with dedicated Clinical Educators, and we made real progress in demand growth even amid temporary revenue headwinds. With these changes in place, we believe Heron is well positioned to drive accelerating growth in the second half of 2025 and beyond. Thanks.

And I'll now turn it back to you, Craig.

Thanks, Mark. Now moving to our financial performance. Our product gross profit for the 3 months ended June 30, 2025, was $27.3 million or 73.5%, which increased from 70.8% for the same period in 2024. For the 6 months ended June 30, 2025, our product gross profit was $57.8 million or 75.9%, which increased from 73.2% for the same period in 2024. This was due to an increase in units sold at a higher cost per unit sold than in 2024 due to the supplier mix, offset by lower inventory reserves and write-offs.

SG&A expenses for 3 and 6 months ended June 30, 2025, was $26 million and $51.1 million, respectively, compared to $27.5 million and $53.9 million, respectively, for the same periods in 2024. For the 3 months ended June 30, 2025, the decrease in SG&A expense is primarily attributed to a decrease in personnel and related expenses of $1.8 million due to terminations and onetime stock expense in 2024. For the 6 months ended June 30, 2025, the decrease in SG&A expense is primarily attributed to a decrease in personnel and related expenses of $3.5 million due to the terminations and onetime stock expense in 2024. These decreases were offset by an increase in marketing costs of $600,000, primarily related to ZYNRELEF.

Research and development expenses were $2.9 million and $5.2 million, respectively, for the 3 and 6 months ended June 30, 2025, compared to $4.4 million and $9 million, respectively, for the comparable periods in 2024. The decrease in research and development expense for the 3 months ended June 30, 2025, is primarily due to $1.2 million more of write-offs of property and equipment in 2024 than in 2025 and a decrease in personnel and related expenses of $300,000 due to terminations.

The decrease in research and development expense for the 6 months ended June 30, 2025, is primarily due to the $1.2 million more of write-off of property and equipment in 2024 than in 2025 and a decrease in personnel and related expenses of $2 million due to terminations.

For the 3 months ended June 30, 2025, we incurred a net loss of $2.4 million compared to a net loss of $9.2 million for the same period in 2024. For the 6 months ended June 30, 2025, we earned net income of $300,000 compared to a net loss of $12.4 million for the same period in 2024. Cash and short-term investments at June 30, 2025, was $40.6 million. If we had excluded depreciation and stock-based compensation, our adjusted EBITDA results would have been a positive $1.8 million of operating income for the 3 months ended June 30, 2025, compared to a loss of $1.2 million for the 3 months ended June 30, 2024.

For the 6 months ended June 30, 2025, our adjusted EBITDA is $7.9 million of operating income compared to a loss of $1.9 million for the same period in 2024. On August 8, 2025, we entered into a refinancing consisting of 4 concurrent transactions as follows: Firstly, a new credit facility with Hercules Capital that provides for up to $150 million in aggregate principal, including $110 million funded at closing and an additional $40 million available in future tranches subject to milestone achievement.

Secondly, the issuance and sale of $35 million of new 5% senior convertible notes due in 2031 to Rubric Capital. Thirdly, a placement of common stock and Series A Preferred Stock with certain investors for aggregate gross proceeds of approximately $28 million. And lastly, an exchange transaction with our current convertible note holder involving the repayment of the majority of our outstanding 1.5% senior convertible notes due in May of 2026 in cash and the conversion of a portion of the remaining notes into shares of common stock.

The outstanding $150 million of aggregate principal amount of our existing 1.5% senior convertible notes due 2026 and the $25.7 million of aggregate principal amount outstanding under our prior Hercules Working Capital Facility will be fully repaid and extinguished upon the closing of these transactions, which is expected to occur on August 12, 2025.

Now moving to 2025 financial guidance. Based on the continued performance of our business, we are maintaining our previously given net revenue guidance of $153 million to $163 million, and we are revising our previously given guidance of adjusted EBITDA of $4 million to $12 million to a range of $9 million to $13 million. We would now like to open the call for any questions.

Certainly. And our first question for today comes from the line of Clara Dong from Jefferies.

So one question on ZYNRELEF. So can you give us more detail on the VAN 400-milligram transition and how much of Q2 revenue was impacted? And maybe how much of the impact was on the timing and then whether you expect it to fully normalize in the second half with VAN transition completed in the third quarter? And I have a follow-up.

Thank you for the question. So the VAN 400-milligram transition began at the end of Q4, so really late December. Most of Q1, we were in transition. And by Q2, we no longer were selling any of the VVS, but the inventory buildup at the end of Q4 and into Q1 didn't normalize until Q2. And so we do expect the Q3 normalization of inventory to be complete as of July 1.

Got it. And on the J-code for ZYNRELEF, maybe give us some comments on how this play a role in reimbursement along with NOPAIN act and your thoughts on the impact on the adoption moving forward?

Clara, this is Craig. No, look, we were excited to get the J-code. What we've sort of seen over time as we have passed through reimbursement with the C-code, it's not that that's not recognized, but the J-code is much more sort of universally recognized, if you will. And certainly, with commercial payers, they're a lot more sort of used to dealing with that. So I think with NOPAIN, what you're going to see over time, and we're beginning to see this with certain payers is that they're going to pick up what CMS or Medicare is doing.

And if that happens more, we think, again, having a J-code is just going to make it more conducive for reimbursement and make it simpler. So we don't necessarily see an impact immediately. But as this plays out and commercial payers come on board and reimbursement gets more synonymous with, basically these products being paid for outside of the surgical bundle. I think you're going to see a shift that where this J-code really does help us longer term.

Congrats on all the progress.

And our next question comes from the line of Brandon Folkes from H.C. Wainwright.

Maybe just 2 from me. I apologize if you covered some of this just hopping between calls here. But maybe just on the ZYNRELEF sales force reorganization, can you just elaborate sort of what drove that and what that does to the CrossLink partnership? And then secondly, on APONVIE, looks like demand grew 19%, revenue 9%. Is that just inventory movement? Or are you taking a different approach to pricing in terms of getting in -- just in terms of getting volume on that product?

Brandon, thanks for the question. So on the ZYNRELEF sales force, prior to July 1, we were -- we had one team that was essentially comp 50-50 on APONVIE and ZYNRELEF. But as we evaluated the team, we think that the profiles of those 2 teams should be different in terms of their skill set, where a ZYNRELEF rep is primarily focused in the OR on surgeons. And APONVIE rep is typically your traditional hospital sales rep. And so for that reason, we've divided the teams up. The ZYNRELEF team stayed relatively similar to what it was. The APONVIE team is small. It's only 6 IBMs today or Institutional Business Managers today, but we think the team that we put in place there will have a meaningful impact on APONVIE long term.

As it relates to CrossLink, we've had a really nice agreement in place with them. We started that in 2024. We've built out a really nice network across the country. But what we wanted to do was really engage them focused on specific accounts. And so we've allowed them to pick 4 accounts from a list that we provide, primarily accounts where we already have formulary access. And we've significantly enhanced the incentive around those accounts on a per unit basis. And so we've aligned that with our current ZYNRELEF sales team's targets as well. And so we feel like we're much better targeted in terms of overlap between the 2 teams, and we have the incentives in place right now to really drive momentum on the back half of the year.

As it relates to the APONVIE sales, it's primarily a wholesaler inventory adjustments as we pared down inventory coming out of Q4 and Q1. There is a bit of gross to net in there where we had 2 or 3 large academic centers come online in the quarter. And there was some kind of skew in the amount of 340B that they were acquiring, but we do expect that to normalize over the second half as more and more accounts are added.

And our next question comes from the line of Serge Belanger from Needham.

I guess a follow-up regarding the sales force changes. Is this just a refocusing on the 2 specific products? Or is there an expansion in numbers that comes along with the restructuring?

And then secondly, regarding ZYNRELEF, I believe NOPAIN for Heron came into effect in April. So just curious if you've noticed any changes in usage or uptake of ZYNRELEF during that transition from your original pass-through reimbursement to NOPAIN. Maybe one last one for Ira. Just the new overall share count after the transactions this morning.

So I'll take the restructuring question. Craig can take the NOPAIN and then we'll turn it over to Ira on share count. So in terms of the restructuring, we don't foresee an expansion in the teams beyond today over the short term. What you see is just a more dedicated focus by one single ZYNRELEF team, where before they were also trying their best to also have enough time to sell APONVIE. And so in terms of the profile of those reps, we see them as slightly different in the strategy itself. And so we broke them apart. We hired traditional hospital reps to focus on APONVIE. So that in itself is a bit of an expansion, but we were able to do all of this in a way that didn't meaningfully add to costs over the short term.

Yes, Serge, I would just add to that. I think that if you think of the country and what we've done here with ZYNRELEF and the overlap with CrossLink, think of sort of pods, if you will, or poster stamps around the country. With us cleaning up the balance sheet and some of the extra money we've raised, what we think -- and we're already beginning to see this a little bit with CrossLink really being a lot more engaged based on some of the incentives we're doing is that we're going to see pockets where this really begins to take off.

And so as far as expansion and that type of thing, if we do see that, obviously, we're going to add more support to those areas. And so that's where we could expand possibly in the future. But again, this is kind of a wait and see. And instead of just sort of blanketly sort of throwing out monies and putting 100 reps out there and what have you, we'd like to do this sort of systematically and a little bit more efficiently. I think we've shown at least over the last 2 years, we've tried to be very, I guess, consistent in how we manage the financial picture of the company and so forth. We want to continue to do that going forward.

And if you think about -- to your point about NOPAIN and how this plays out, we haven't seen an immediate impact yet. What we are seeing is that the conversations at pharmacy are just a little different than they have traditionally been in the past. And what I mean by that, generally, a representative walks in and its branded product, park in the last park -- last parking space in the parking lot type of thing. But I think what we're beginning to see now is that it's a little more open because everyone is talking reimbursement, and they realize that these products can actually be a profit versus a cost.

And so I think, as I said before about commercial payers coming on board, I think you're going to see a real shift over the next year or so where commercial payers come on board, everyone systematically sort of accepts this type of thing as far as reimbursement and looks at it a little bit differently than maybe it had in the past. And so again, you throw that in, VAN, the CrossLink incentive, the things we're doing here from a structure standpoint, we just feel like we have a lot of tailwinds that are pushing us in the right direction. And Ira, I'll let you take the last piece of that.

Yes. The pro forma common share is about 183 million shares and pro forma shares, including the convert would be about 208 million.

[Operator Instructions] Our next question comes from the line of Carl Byrnes from Northland Capital Markets.

Congratulations on the progress. Just wondering if you could disclose what the rate is on the senior credit facility with Hercules. And then also with respect to how much cash, net of expenses, et cetera, when everything closes will be added in the balance sheet, excluding the $40 million additional tranches?

Yes. The overall rate, Carl, is a little bit north of 10% and the funds to the balance sheet is probably about $11 million to $12 million after all expenses.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Craig Collard for any further remarks.

No. Thanks, everyone, for the questions today. I know this was short notice. We do appreciate everyone jumping on, and we'll talk to you next quarter.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.