Pacira Pharmaceuticals, Inc. Stock

Thank you. Thank you for standing by. Welcome to Pesera Biosciences' second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. a question during the session, you'll need to press star 1 1 on your telephone. You'll hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Susan Mesko, Head of Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone. Welcome to today's conference call to discuss our second quarter of 2026 financial results. Joining me are Frank Lee, Chief Executive Officer, Brendan Tehan, Chief Commercial Officer, and Sean Cross, Chief Financial Officer. Kristen Williams, Chief Administrative Officer and Secretary, Tony Molloy, Chief Legal Officer, and Jonathan Slonin, Chief Medical Officer are also here for today's question and answer session. Before we begin, let me remind you that this call will include forward-looking statements subject to the state partner provisions of federal securities laws. These statements represent our judgment as of today and may involve risks and uncertainties. This may cause our actual results, performance, or achievements to differ materially. For information concerning risk factors that could affect the company, please refer to our filings at the FCC or the PACIRA website.

Lastly, as a reminder, we will be discussing non-GAAP financial measures on today's call. A description of these metrics along with our reconciliation to GAAP can be found in the news release issued this afternoon.

that I will now turn the call over to Frank Lee. Thank you Susan and good afternoon to everyone joining today's call. On behalf of the remarkable team here at the ACERA, I'm pleased to share our continued progress in executing our 5x30 strategy and transitioning into a more innovation driven pharmaceutical company. Our second quarter performance reflects disciplined execution of our 5 by 30 strategy, translating into commercial momentum, strong cash generation, pipeline advancement, and high-caliber partnerships. Furthermore, our 5 by 30 progress was clearly recognized with a decisive shareholder vote for both our strategy and director nominees at our annual meeting in June. Notable second quarter accomplishments include revenues of more than $109 million, even as macroeconomic pressures weighed on certain elective procedures in the hospital setting. Adjusted EBITDA of nearly $50 million.

Establishing a scalable, commercially viable, US-based manufacturing process for PCRX201. testament to our team's clinical development and manufacturing capabilities. Opening enrollment in Part B of our Phase 2 Ascent Study for PCRX201. completing enrollment in IAVERA Registrational Study in Spasticity, and completing the iovera divestiture on July 31st and forming a partnership in spasticity with Zimmer Biomed. I'd like to thank the Becerra and Zimmer Biomet teams for working so collaboratively and efficiently past 30 days to close this transaction. I look forward to continued partnership with our Zimmer Biomed colleagues going forward. I'll begin with a high-level overview of the Expiril and then Brim will cover additional commercial details shortly. It's used to increase patient share across all segments. soft tissue procedures, which historically wax and wane with macroeconomic conditions. are getting higher than CMS. And third, increasing penetration in existing and new accounts while driving expansion within macroeconomic resilient procedures in outpatient sites of care.

Turning to Lifecycle Management, we remain on track to report top line results for our Phase III study of Xelretta and shoulder OA later this year. If approved, Xilretta would become the first drug with an FDA-approved indication specifically for shoulder length. We also recently completed enrollment in our Registrational Iovera Spasticity Study and remain on track to report top-line results before year-end. As a reminder, we will collaborate with Zimmer Biomed on advancing the spasticity program The transaction structure provides us with the opportunity to receive additional compensation, assuming clinical and regulatory success. Beyond our commercial products, our pipeline is entering what we believe will be a catalyst-rich We expect top-line data from PCRX 201 later this year and continue to advance PCRX 2002 with Phase 2 development scheduled to begin later this year. DCRX2002 is a novel hydrogel formulation of ropivacaine designed to provide both rapid onset and long-acting analgesia from a single, simple installation into the surgical field. If successful, we believe it has potential to complement Expiril and further strengthen our leadership position. physician in post-surgical pain management.

Let me spend a moment on PCRX201, which we believe has potential to represent a paradigm shift in the treatment of NeoA. Our scalable commercial manufacturing process is now up and running, and enrollment in Part B of our Phase II study is underway. As a reminder, Part A are expected later this year. Part A randomized 49 patients to one of three treatment groups, PCRX201 dose A, PCRX201 dose B, control. All patients received an intra-articular corticosteroid before treatment. allowing the durability of PCR-X201 to be evaluated against the standard of care. The primary objective is safety with secondary efficacy endpoints evaluated at weeks 38 and 52. We recently received some exciting news for our PCRx201 program with the acceptance of a Phase I manuscript for the publication in the Annals of Rheumatic Diseases, the leading journal in rheumatology.

The paper highlights encouraging results from the 72-patient phase 1 study over 104 weeks. We're also advancing HCaT-based preclinical candidates in degenerative disc disease, dry eye disease, and canine OA. completed a pilot safety study in K9-OA and our pilot efficacy study is now initiating. Finally, the last item I'd like to cover is important progress we've made executing new partnerships. pillar of our strategy. I'll begin with the recently completed divestiture of Iovera to Zimmer Biomet. For Pesera, the transaction sharpens our focus as an innovation driven biopharmaceutical company while improving our margin profile. Further, it allows us to redirect capital and resources toward higher return growth opportunities aligned with our long-term strategic priorities. We're also excited about this transaction means for patients.

Zimmer is uniquely positioned to maximize Iovera's global potential for patients through its scale, orthopedic leadership, and strong presence in total needs. On the financial front, the zero will receive up to $140 million with $70 million upfront and additional $70 million linked to revenue-based milestones. The structure preserves our participation in IOVAIR's future success in both existing indications and future projects. and spasticity. We're also pleased to share important progress with LG Chem's recent regulatory filing for Expiril in South Korea. This places revenues on track to beginning 2027. As we move forward in the second half of the year, we plan to provide visibility into additional commercial partnerships outside of the U.S. Secondly, we expect XQH revenues to extend through the life of our patents, which provide exclusivity into the 2040s.

Taken together, these transactions show how the partnership pillar, the 5x30 strategy, can extend our reach, improve capital efficiency and allow us to concentrate resources on our highest priority growth opportunities. Our experience has shown that partnerships with top-tier organizations can generate value beyond the initial agreement by mutually leveraging our scale, expertise, customer relationships, and our relationships with our partners. unlocking commercial value for our partnered assets. In parallel, these partnerships create pathways for potential future collaborations across our portfolios. In summary, Sarah exits the second quarter with strong execution of our 5 by 30 strategy commercial momentum, a broader market access position, meaningful upcoming pipeline catalysts, growing roster of top-tier partners. With that, I'd like to turn the call over to Bryn to share more details.

second quarter commercial performance. Brent. Thank you, Frank, and good afternoon to all joining us today. During the second quarter, Expiril gained penetration and shock to orthopedic and soft tissue market segments, even as the broader elective surgery market slowed in certain areas. The impact varied by procedure category. While orthopedic procedures were relatively stable, elective soft tissue procedures experienced a slowdown with more pronounced declines in the hospital inpatient setting. As a reminder, expiralt volumes are approximately 620 hours a week and the payer to expiralt them outside the surgical bundle. The million-dollar income unites only the largest health insurers in the U.S., all influential. With United and additional recent wins, Expirel is now available to well over 150 million covered lives with separate reimbursement outside the surgical bundle.

This represents roughly 50% of all men. We anticipate further adoption and utilization for XBRLs to encourage commercial payers to evaluate similar reimbursement approaches, which could help expand patient access in the future. Looking ahead, our team remains firmly focused on expanding market access through additional commercial coverage. utilizing our growing body of compelling health, economic, and outcome studies to drive awareness around the X4L value proposition. and broadening utilization within existing accounts while increasing demand for service lines Retta and Iovera, both products are performing well with solid growth in the quarter as the commercial investments we made last year are creating lift. For Zoretta, we are seeing demonstrated momentum from the Paseera team's focus on promotional impact, along with our J&J partnership. For Iovera, the Pacira team delivered another stellar quarter, and with the Zimmer transaction now closed, we believe Iovera sits within the ideal portfolio to further unlock its full global potential. Separately on the payer front, beyond the positive coverage of Expirel, UnitedHealthcare has placed Zolretta on its preferred drug list. Importantly, this eliminates any prior authorization requirements, which is a key advantage versus competing early OA interventions.

In summary, we are pleased with the first half of the year and believe we are well positioned for sustainable top line growth for the remainder of the year and beyond. I'd like to now turn the call over to Sean for his financial review. Thank you, Brent.

I'll start with an update on revenue and margin trends. Second quarter total revenues were 192.4 million, a 6% increase over the second quarter of 2025. Expo remains a significant source of revenue with net sales increasing by 3% to $109.5 147.8 million versus 142.9 million in 2025. Volume growth of approximately 4% was partially offset by a shift in vial mix and discounting from our third GPO, which went live mid-2025. As we move forward for the remainder of 2026, we expect the delta between volume and revenue growth to narrow with the recent lapping of the third GPO. For Zulretta, second quarter sales grew by 4% to $32.6 million versus $31.3 million reported in 2025. As Bryn mentioned, this was largely attributable to the growth initiatives implemented last year, including our dedicated Zorinna sales force.

For Iovera, sales increased by 21% to 6.8 million, compared to 5.6 million in the second quarter of 2025. Again, this was largely attributable to growth initiatives implemented last year. Turning to gross margins, on a consolidated basis, our second quarter non-GAAP gross margin was in line with our expectations at 78%. percent for last year. For non-GAAP R&D expense, the second quarter increased to $27.1 million from $24.7 million last year. This increase relates to our advancing Phase 2 study of PCRx201 as well as our label expansion studies, all of which are on track for top line readouts at year end. In addition, we're supporting three promising HCAB-based preclinical programs. Non-GAAP SG&A expense came in at $81.3 million for the second quarter versus $77.2 million last year.

This increase relates to non-occurring costs specific to the contested election of directors at our 2026 Annual Meeting of Stockholders. All of this resulted in gap net income of 4.7 million, or 12 cents, per basic diluted share, and another quarter of significant adjusted EBITDA of approximately 48.7 million. As for the balance sheet, we continue to be in a position of strength with 251 billion in cash and investments, which will be further enhanced by 70 million upfront payment related to the closing of the Zimmer transaction. With a strong balance sheet and a business that is producing significant operating cash flow, we believe we are well equipped to advance our 5 by 30 growth strategy and create shareholder value. That brings us to our full year guidance for 2026, where we are updating the following ranges to adjust for the closing of the Zimmer transaction. The total revenue range is now $735 to $760 million versus our previously guided range of $745 to $770 million. For SG&A, we are now guiding to $310 to $330 million versus our previously guided range of $320 to $340 million.

And lastly, stock-based compensation of $54 to $59 million versus our previously guided range of $54 to $62 million. For all remaining items, we are reiterating our previously guided ranges as follows. XBRL net product sales of 600 to 620 million. With respect to quarterly trends, we anticipate the remainder of 2026 will largely follow historical patterns. and being our largest dollar contributor. For Zulretta, our guidance assumes the remainder of 2026 will be largely in line with 2025. While we are encouraged by the recent quarterly performance, we will wait to gain more visibility before updating growth assumptions. The final component of our 2026 revenue guidance relates to approximately 7Million expected revenues from our licensing agreement for the veterinary market.

On GAAP gross margin of 77 to 79%, with respect to quarterly cadence, we expect the next quarter to continue to benefit from the sale of lower cost expert inventory to fall within our guided range. fourth quarter we expect margins to be slightly below our full year range through the sale of higher cost inventory as well as shutdown related costs and other expenses. Non-GAAP R&D expense of $105 to $115 million. With the recent initiation of Part B of our Phase 2 Ascend study of PCRRX201, In certain XFRL and Zulretta product development efforts, we expect an uptick in R&D expense in the fourth quarter. And lastly, for those modeling a Just Viva DAW, we expect our 2026 depreciation expense to be approximately $30 million. The focused business model, durable cash flows supported by expert Lanzoretta, and a pipeline entering a catalyst-rich period, the series is exceptionally well positioned for the future. With that, I'll turn the call back to Frank.

Thanks, John. As we discussed this morning, our second quarter reflects clear progress against our 5x30 strategy. We delivered solid financial performance, formed key partnerships, and advanced multiple value driving pipeline programs. I'm excited about the second half of the year in the base business and in our upcoming pipeline catalyst. So with that, we're ready to open up the call for questions. Operator? Yes, thank you.

At this time, we'll conduct the question and answer session, as mentioned. And as a reminder, to ask a question, you'll need to press star 1-1 on your telephone for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile our Q&A roster. Your first question comes from the line of Dennis Sting with Jefferies. Your line is now open.

THANK YOU FOR TAKING MY QUESTION. I HAVE TWO, IF I MAY. NUMBER ONE, ON NO PAYMENT, IS THERE RISK OF THIS EXPIRING AT THE END OF 2027? AND I GUESS WHAT ARE THE LOGISTICS HERE TO RENEWING THIS AND IS THERE ANY PARTICULAR BILL WE SHOULD BE FOCUSED ON OR DO YOU THINK THIS WOULD BE TACKED And then number 2, you guys reiterated expert guidance despite Q2 being a little bit soft. So I guess talk about your confidence in navigating these broader macro dynamics around consumer spending. And I guess what's going to be the driver of growth here and you still expect no pain driven volume acceleration in the future. the second half, or is that going to be tougher to achieve because of the macro dynamics you mentioned? Thanks so much.

Hey, Dennis, Frank Lee here. Thanks for the question. So on the first one about no pain, expiry, maybe some thoughts here and I'll turn it over to Tony, our General Counsel and Head of Government Relations. First off, as we step back, as we know, at present, it's due to expire slash be re-upped at the end of last year. I'm sorry, next year. And we're making very good progress as you've just heard from Bren in terms of what we're doing around commercial payers. And the fact that we've got United on board is a real win. For those of you who've been around payers, United is the benchmark. And so we're really pleased by that. and all the health economic data that supports inclusion in payers going forward.

So bottom line there is what I'm saying is that commercial payers are picking it up. There's a clear health economic story. And so let me just turn it over to Tony to talk a little bit about NoPain, which is specifically specifically for PMS patients in the outpatient setting. So, Tony? Yes.

Thanks, Frank. We're working, we're actually trying to get the or working with Two Paths. We're working directly with CMS, who has the ability to provide basically the same reimbursement that No Pain does through its annual grant. rulemaking cycle. And then we're also working with Congress. We would expect, similar to last time, that this would be tacked on and be part of a larger bill. We're not anticipating it being a standalone legislation. earlier, so we're anticipating something towards the end of next year.

Thanks, Tony. And then Dennis, you had asked about Q2. And so just maybe some high-level thoughts here, and I'll turn it over to Bren for some additional commentary. Just at a high level, just to make sure we're super clear on this, is we're optimistic about the second half. And the reason is that, as Bren mentioned, we've increased penetration across all segments. So that's very important. And again, as I mentioned in my comments, these sorts of procedures and the inpatient setting that are more deferable tend to wax and wane with macroeconomic conditions. So, I mean, with that, let me turn it to Bren.

for his additional thoughts here. Thanks for the question, Dennis, and Frank gives good commentary there. In the second half, we're focused on several, I think, key and important growth drivers. The first is the rapidly growing ASC and hospital outpatient segments, both of which are outpacing the broader hospital market for us. We can and will increase our breadth of coverage there to cover those procedures that are taking place. The second is this, what I would call payer tipping point. UnitedHealthcare, as Frank pointed out, is a substantial addition, even since the UnitedHealthcare contract. We've had several other payers come on board pushing us well beyond the 150 million patient range.

That to us is an encouraging sign of where everything is headed. And then finally, we take a lot of... confidence in both the penetration and share that we've been able to generate. It is significantly outpacing the total available market near term, and we expect with these additional payer wins it will continue long term. That, coupled with our health economics and outcomes research data, which is an expanding evidence package that demonstrates that XBRL is well worth the price for the substantial cost that it offsets give us a lot of confidence both near term and longer term.

Thanks, Brent. And just one last thought here, Dennis, is that as a reminder, these commercial payer wins are very important in the outpatient setting where Expiril is reimbursed outside the bundle separately. And as we've talked about before in commercial payer settings, the reimbursement, that is the remittance, is substantially higher versus the CMS reimbursement. So we've got a good tailwind there.

Perfect. Thanks so much. Thank you. Your next question comes to the line of Serge Bellinger with Needham. Your line is now open. Good afternoon. Thanks for taking my questions.

I guess just a follow-up on Xperil. Volume growth of 4%. a bit of a step down from the prior quarters. I'm just curious if the softness that you've seen in the second quarter has continued into the third quarter and could continue later in the summer. Now that you've divested IOVERA, just curious if that kind of changes your appetite for BD and adding additional assets to the portfolio.

Hey, Serge, thanks for the question. So the first one was around Q2 and what are we seeing in Q3. I'd say it's early days. And as Bren mentioned, what we're really excited about is that in the outpatient setting and places where we have a tailwind from a commercial payer perspective, we're seeing it substantially outperform the marketplace. And so stay tuned. Our business is focused on growth going forward in those macro resilient procedure types. And again, our penetration has increased across all these segments. So we'll see how long-lasting the cycle is. As I mentioned, these kinds of procedures in the inpatient setting where it's not reimbursed separately outside of the bundle tend to wax and wane historically.

So second question was around iovera divestiture and what that means from a BD perspective. So first of all, let me just say that the team did a remarkable job of getting us here and As you know, initially, we started out with partnership discussions with Zimmer Biomet, and this matured into a very thorough process where we believe we have the right person, right group of people and company taking this asset forward, not only in the U.S., but outside the U.S. So it was closed this past Friday, July 31st, with tremendous effort, and I'm very, very confident that this team is the right team, that is Zimmer Biomat, to maximize the value of Iovera, both here in the U.S. and outside of the U.S. Separately, with respect to BD, as Sean has reiterated many times, we're going to be very, very thoughtful about maximizing shareholder value and returns in our capital allocation. So we'll be looking very carefully at that, but our strategy, as we've articulated before, is to focus on those things at the end of the year. could be accretive in the near term and take very careful calculated would say, risk-managed approaches to the pipeline. So that hasn't changed, and so we'll continue to make sure that our capital allocation is consistent with the way we've behaved going forward to maximize shareholder value. Thank you. And I guess one last thing that I'd add is that now we are very clear-minded about being a pharmaceutical company as opposed to being a pharmaceutical and medtech company, which as we've talked about before is very different.

And I think this focus will help us execute even better, you know, going forward.

Thank you. Your last question comes from the line of Hardik Parikh with JPMorgan. Your line is now open.

Hey, everybody. Thanks for that question. So two part one. Well, first is just building off some of the earlier questions. To achieve your implied second half guide for XKRL, what have you assumed about the macro headwinds? Do you need a recovery? to meet that meet that guide. And then the second part is, um, you know, you guys have utilized the partnership model and Zolaretta, could you envision yourself partnering in the U S with XPREL with, with, uh, um,.

like a distributor model? Thank you. So Howard, thanks for the question. You know, you asked about whether a quota recovery is needed. You know, what we're basing our growth and numbers on is continued in terms of what we see right now in the softness and really growing in the places where we can grow. articulated very clearly. We've had very good success in the outpatient setting, in those procedures that are macro resilient. And you can see that we've had some substantial commercial payer wins that are directly applicable in the those kind of settings. So again, as you know that in an inpatient setting, Expiril is not reimbursed separately outside of the bundle.

And so that's what we've assumed, and we've seen good results as we've focused our business toward those segments of our business. In terms of the partnering model, I want to step back a little bit. As we've articulated in our 5 by 30, partnerships are very important. And to date, we've signed some very good partnerships. signed LG Chem, we signed Johnson & Johnson, and now with Zimmer Biomet, a partnership for spasticity. So we remain open-minded about how we can cost effectively and efficiently get our products out to our customers, both here in the U.S. and outside the U.S. So we remain very open-minded about that. We will certainly always have our direct field forces and support, but if the question is, would we want to at some point consider partnership of ExpoRail to extend our reach, that's certainly within the realm of possibility, but we'd have to do that in a way that's very cost effective and returns value. to both organizations and one of the ways we've done that is xus as you can see with our lg kim partnership and the good news there is as i mentioned they have already filed now in south korea and we were going to see the fruits of that labor in terms of revenue come to us in 2027.

Thank you. Thanks, Harvey. Thank you. The next question comes from the line of Sahil Dhingra with RBC Capital Markets. Your line is now open.

Hi, good afternoon. This is Sahil for Dagne. I have two questions. First is on the expirator volume growth. expand what was the ASC versus HoCTE versus community hospital split in terms of the volume growth and are larger IDNs finally moving the needle or is the growth still concentrated in the ASCs and the community hospitals?.

Well, thanks for the question, Sahil, and let me address it briefly and I'll turn it over to Brent for some additional commentary. With regard to the breakout of the expo volume, as you've asked, we typically don't break it out that way, so we don't have those data to provide to you. With respect to the contribution and growth of IDNs versus other parts of our business, I'm going to turn it over to Bren for his thoughts here. Yes, thanks for thanks for the question and I'm, I'm confident that our, the split of our business probably is reflective of other things you've heard in the second quarter. There are 2 dynamics that that we have to take into account. 1 is the migration of procedures to the outpatient setting. and particularly to ASCs. The hospital volumes, I think, in general are down, but they're further impacted, I would say, by this deferred elective soft tissue procedure dynamic. So, X-ray volumes were still significantly significantly higher than what we saw for hospital procedures.

In ASCs, which were modestly up for total available market, I would say that we significantly outpaced that in the ASC setting, which is another reason, given the reimbursement that we've just discussed, multiple payer including UnitedHealthcare in that space that we feel confident in our ability to continue to capitalize on both migration of procedures to that particular site of care, but also the value proposition for X4L there. Thanks, Sahil, for the question. Anything else? Yes.

Yes, my next question is on the PCR X201 per day timing. Can you tighten the year end timeline for us and will the data be disclosed at the medical meeting or will it be a standalone disclosure? Thank you.

Yes, I'll thank thanks for the question. So let me step back here. I'm very excited about the upcoming catalyst as we go through the second half and certainly the catalysts include, as I mentioned earlier, number one, the spasticity data, registrational study with Iovera. Number two, the Xolretta shoulder OA data, which is again, another registrational study. And number three, as you mentioned, PCRx201, Part A. So with that Part A piece, I'm going to turn it over to Jonathan here, our Chief Medical Officer, to talk a little bit about your question and you had asked about timing and some other things. So, Jonathan? Thank you.

Thank you. So, yes, our plan is at the end of the year, we're going to have these three readouts, top line readouts of Part A. Remember that Part A is going to be the first readout of Part A. is the first part of our two-part phase two trial, and we'll provide insights and powered for safety, and we will look for some efficacy trends. We estimate we're probably those top line results at the end of the year, and will continue throughout 2027 to report additional data sets.

Okay, thank you. Thank you. I'm showing no further questions at this time. I would now like to turn it back to Susan Mesko for closing remarks.

Thank you, Kathy, and thanks to all on the call for your questions and time today. We are excited about the opportunities that lie ahead for us. Throughout the remainder of the year, we will continue to ensure we are well positioned for long-term success by executing our 5x30 plan to advance our mission. Thank you and be well.

Thank you. This does conclude the program and you may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Great. Good afternoon, everyone, and thank you for joining us. My name is Matt Dellatorre. I'm a biopharma analyst here at Goldman Sachs. And we're very pleased to continue the next session this afternoon with Pacira Biosciences, where I'm joined by the company's CEO, Frank Lee. Frank, thank you for being here.

Yes. Thanks for the kind invitation.

Frank, maybe to start just to get everyone up to speed before we dive into some of the specific programs, maybe for those less familiar with Pacira, give us a brief overview of the company. And then maybe frame for us where you all stand today, what your key priorities are and then how you're thinking about the outlook and strategy for the company as we head into second half and beyond.

Sure. Well, Pacira, as many of you know, is a leader in non-opioid pain management therapies. And what does that mean? That means that we have 3 products in our portfolio plus a pipeline that's growing that we should talk about. And as we think about sort of the company's history then and now, I mean, we had a pretty substantial reset of the organization. I'm with the organization just over 2 years, joined in 2024. There was a restructuring reset. And in '25, we rolled out the 5x30 strategy for value creation.

So what are the 5 things that we want to accomplish by year 2030. And those are quite simply into 2 different buckets. First is what are we doing about the here and now. And the last 2 are really more about building for the future. And so it speaks to 3 million patients in 2030, double-digit compound annual growth rate, 5-point expansion in margin for the first 3. And for the second 2, we talk about 5 new programs in development and 5 partnerships. And in that regard, we can go through some of the details, but we've made a lot of great progress.

And so what to look forward to. We had very strong results in quarter 1 of this year with EXPAREL growing at 5% on sales and volume was up 7%. And as the year goes on, we expect volume and sales growth to converge because we lap our last GPO. And we're quite pleased with the growth that now we've seen with our 2 other products, that is ZILRETTA, 15% year-on-year growth, iovera° 21% year-on-year growth. And so that's the CareNow business.

The other part of it is from a pipeline perspective, we have now 3 really exciting data events coming out this year. So by the end of the year, we'll report on the registrational study for ZILRETTA in shoulder OA. And if positive, that could be the first drug approved for shoulder away. Second is spasticity for iovera°. And again, if approved, that's a registrational study that could be the first medical device approved for spasticity.

And I have to say the most exciting thing that I look forward to is our readout on PCRX-201, our local gene therapy for osteoarthritis. And this is the Phase II Part A of that study. And as you know, that's an active control plus 2 different doses of PCRX-201, and that will be an exciting readout and an important catalyst for us. In the meantime, we're readying the commercially viable manufacturing process. And as you know, in cell and gene therapy, that's very, very important. And the good news is we've stood it up, and we expect to start enrolling Part B of the ASCEND Phase II study with commercially viable product here very, very soon.

So that's a little bit of the backdrop. You can see we're making very good progress on our plan, existing business, strong first quarter, pipeline events coming up really for the first time in the company's history and a few other things on the horizon.

Great. So you touched on one of those goals of inflecting towards double-digit CAGR by -- I think, by 2030. Maybe help us understand what gives you all the confidence to kind of bridge that gap where you are now. I think 2026 guidance is mid-single-digit growth. So how do you get to that double digit?

Yes. First of all, we set guidance to really make sure that we can deliver on that in all the different macro environment events that could potentially happen, right? So we set that accordingly. Now that said, when you go back in time a little bit with NOPAIN legislation being enacted in January of 2025, what we said is that, hey, that's an important catalyst because that involves the 40 million Medicare patients in the outpatient setting. Now we say a catalyst because we need to get commercial payers to follow suit to make sure that we have the majority of patients covered under outside the bundle policies, right?

And so based on that, we said, look, second half of last year will be a time where we really see volume growth, and we did. So we went from about 3% volume growth in the first half of last year to about 8% in the second half of the year. And that volume growth continued in the first quarter because with EXPAREL, we saw 7% volume growth. And so 5% sales growth, 7% volume growth. And the reason we believe those 2 growth rates will catch up to each other is because in the second half, we lap the last group purchasing organization.

And then going forward, then any price increases we might take would more readily flow into that math as well. So that's one way of seeing line of sight to double digits. In addition to that, there are 2 other important growth drivers come end of next year [indiscernible] for EXPAREL and ZILRETTA will start to kick in. That is with LG Chem. So they're starting in Korea and Thailand, but they have rights to sell EXPAREL and ZILRETTA in the Asia Pacific region. So that's another growth driver, and we'll continue to sign ex U.S. agreements.

And finally, and very importantly, we've got a very strong focus on expanding access to the tune of covered lives outside of the bundle. So right now, one could argue that, hey, Frank, don't you have coverage 100%? That's yes, but that's included in the bundle. If you talk about outside the bundle reimbursement that is being reimbursed separately for a product like EXPAREL, we have that for 110 million covered lives out of, what, $300-plus million in the U.S. So we've got some work to do there. And so we're really pushing on that.

So what to look forward to in the second half of the year, I would say that look forward to expansion in covered lives in a significant way. And when we do that and we get to a tipping point that is the majority of lives are covered under outside the bundle reimbursement. That is for Medicare ASP plus 6% or for commercial, what we're seeing now is ASP plus 29%, then you'll start to see even more of an acceleration. So those are some of the key growth drivers. One is GPO agreement lapping it and any potential future price increases, ex-U.S. revenue, right? And this idea that we're going to continue to push on covered lives.

Would that come on kind of with each of the big 3 PBMs like those will kind of be in blocks as you expand to the commercial?

We're looking primarily at directly to payers. And so we already have some of the big ones already. But what we're looking to do is really get some of the remaining big ones on board. And again, this is outside of the bundle reimbursement. So just to really double-click on that, if one gets a knee replacement surgery, the facility will get total fee regardless of what you use.

Now what NOPAIN and outside the reimbursement bundle does is provide that incremental reimbursement for the product that you use. So historically, that's been the primary barrier. Clinically, EXPAREL does a fine job of preventing pain after surgery. But clinically, one of the barriers has been, well, gosh, if I get one payment inside the bundle, then many folks are incented to use the least expensive as opposed to the most effective.

And what we see based on -- if you follow our press releases, we've had a few recently. We've invested in collecting these data, health economics and outcomes research data that definitively shows that EXPAREL is saving the system costs, patient outcomes are improving. So as you see more and more access and those announcements come through, there's a good reason why.

Great. Great. So, you kind of walked us through some of these maybe commercial levers and how we'll see the volume and sales growth kind of converge. Maybe shifting over to market exclusivity. I think you guys have highlighted 21 Orange Book listed patents for EXPAREL. And then you have a kind of favorable volume limited settlement with a single approved generic starting in 2030. So you clearly have some runway set out. I guess how should we think about other avenues you all are taking to address potentially other generic entrants? And just kind of how we should think about that aspect of the drug?

So broadly speaking, as we all know, in biopharma, this is inherent in the industry, right? So you innovate, you put IP around it. And over time, you diversify your portfolio and you bolster your IP. That's how we go about our business.

And let me talk to you a little bit about then and now when it comes to the IP. Then this is before my time a bit, we had one Orange Book listed patent. That was a 495 patent. And that patent, we got a ruling against it in 2024. And so what did we do? Well, what we did was we further bolstered the strength of that patent for specifically the volume limitation that the judge called out. So now it was reexamined by the patent office, reissued after the USPTO looked at all the different court filings. And so that patent is one of our stronger patents now.

In addition to that, we put another 20 patents in the Orange Book. And as you know, manufacturing patents by statute can't be listed in the Orange Book. These are composition of matter and product by process patents, which are stronger. So they cut across 2 different families. And now we believe we've got a very, very strong patent portfolio based on the investments that we've made.

And what is that exactly? Well, we found another way to really construct this molecule using a larger scale process, which develops a better molecule on a number of different fronts. So that's really the thesis behind it, and we continue to innovate. So meaning like what to expect is more patents forthcoming during the course of this year and next year.

And so from a court proceeding standpoint, we think that the whole process will last through 2030 with really the Markman hearing hasn't even started yet. So to really determine if there are any merits to the different ANDA applications, and that will be determined by the FDA in due course, but to the particular patent filings as well.

So we have a long journey ahead of us. Again, what can we do as an organization? First is strengthen our patent state, which we have. And the other piece of it is broadly diversifying our portfolio, which, as you can see from the pipeline, we're doing. And finally, what I'd say is that from a legal proceeding standpoint, as I mentioned, this will take some time to resolve. And a lot of things can happen before that.

Yes. So we should assume any additional entrants would be kind of post 2030 and perhaps be...

Well, we feel reasonably certain that the court case won't be done until 2030. Until for the 2 other ANDA filings. And as you know, for the first one, it was a very favorable volume-limited settlement. So no entry until 2030. And then from then on, a gradual entry to the high 30 percentages, then flat and unlimited entry starting in 2039. So that's a very favorable settlement. And you might ask, well, gosh, I mean, that seems like favorable if you lost the first court case. Well, if you think about the other patents that we have, it makes a lot more sense.

Interesting. Maybe moving over to your knee pain products. Both ZILRETTA and iovera° had double-digit growth in 1Q. And that -- but kind of in contrast to that, your guidance assumes relatively flat year-over-year revenue growth. I guess, what do you want to see to kind of give you confidence in revising that guide higher?

So as a part of rolling out our 5x30, we said, look, these are very different products being sold to very different audiences. And we had to focus and make sure the EXPAREL team had the capacity to really pull through NOPAIN and expand commercial payer access as we talked about. So what did we do in 2025? We went from 1 sales force selling all 3 products to 3 separate sales forces. And we also signed a co-promote agreement with Johnson & Johnson MedTech now called DePuy for ZILRETTA. And so that agreement took a little bit of time to get on its feet. And now based on first quarter results, you can see that it's driving 15% year-over-year growth.

And for iovera°, what we did there is instead of having pharmaceutical representatives sell a medical device, we've got medical device representatives selling a medical device. which is very different. If you know med tech, that's regulatory compliance, just the way you interact with your customers is very, very different in the expectations. And so now that's starting to show good momentum with 21% sales. So that was the idea. And now one data point doesn't make a trend. And so we've been very careful about -- Sean has as well and Susan about how we set guidance, and we want to see a little bit more before we adjust it either way.

Interesting. Okay. But that potential for that to kind of be sustainable if things go wrong. Okay. How about maybe switching to margins. Maybe give us a little color on what's driving 2026 gross margins. I think they're a little bit below '25. And then how we should think kind of maybe the cadence for the year and going into '27?

Yes. Well, first off, from a margin perspective, let me take a step back. There's a big difference then and now consistent with our transformation story. There was a time when we were literally living hand to mouth on our products, and that gross margin was around 76% very consistently. In the course of just about a year now, we've taken it to 81%. So you could argue, well, gosh, Frank, I mean, it seems like you've already made your goal of 5x30 5-point expansion. And rightly so, I mean, because we delivered based on the team's efforts, that kind of margin expansion in just over a year.

That said, now, we're selling through some of that inventory that we manufactured last year and because we didn't throw away as much because we got better at making the stuff. And this year, as you know, by accounting standards, these lots are bigger now. So if we have a misslot, then it really hits this year or this quarter in that quarter. So we just want to be mindful of that in terms of before we adjust a lot of things. And so we'll see that in the first few quarters, as we've talked about, and Sean has provided good guidance around this, fairly stable to what we saw before and then a little bit of a dip in quarter 4 before we start to catch back up again.

Okay. Great. Maybe now coming to the pipeline. You touched on this a bit in your intro segment when you gave us an overview. You have a number of catalysts coming up. You highlighted Part A for 201. Maybe kind of just walk us through more broadly what we'll see later this year and then what we might be able to expect the next 18 months?

Sure. I'm really excited about PCRX-201. I've been in this industry, what, 35 years. I think about this as local gene therapy for the masses, right, as opposed to systemic gene therapy for the few rare orphan, a very different approach. So what we're talking about is gene therapy that you locally inject at least as a start in the knee for osteoarthritis of the knee. And all we're doing, it's a derisked mechanism of action.

We know that blocking IL-1 is important. There are 2 drugs that's already approved, one is a small molecule, one a monoclonal antibody to block IL-1. So all we're doing -- and by the way, they have very short half-life. All we're doing here is delivering instructions to the body cells to produce more IL-1RA receptor antagonist when there's inflammation as an inducible promoter. And so by the Phase I results, which is 72 patients, quite durable responses relative to baseline. So at 1 year, over 70% of the patients had a 50% or greater response, which is quite substantial.

So the relevance or the importance of Part A is now we have a control, an active control. So we have an active control in a short-acting steroid, 2 different doses of PCRX-201 with the steroid. So -- and that's at 52 weeks. This isn't a short-term study. So it's not statistically powered to look at efficacy, but we'll be looking at different trends. So as you might imagine, a short-acting steroid will have an effect, and that effect will whereas what we'd expect for PCRX-201 is that, again, we have an effect over time relative to baseline.

And we saw that in Phase I in 72 patients, and we look forward to seeing the results in our Part A in addition to any safety, although in Phase I, we really didn't see much in terms of a safety signal because it's local and it stays there, we know through biodistribution studies. And that's, I think, a very important contributor to safety, which has been really the downfall of many gene and cell therapy.

And in addition to that, because we're locally administered in a very small amount, the cost of goods is very attractive. So we will be able to price it in such a way where we can be market competitive to other innovative therapies because, as you know, most gene therapies for rare orphan disease these days are close to $1 million or more. So this one won't be that way because right now, there are 15 million patients in the U.S. alone that have osteoarthritis of the knee.

That's fascinating. So you really have no -- there's no concern from a safety perspective. There's seem like no safety signals.

We haven't seen anything untoward of concern in our Phase I. And we follow these patients now in Phase I. Susan, I think we're up to 5 years. We're going to publish here in the not-too-distant future. So we're excited about this because you might think about the possibility here. So this is a high-capacity adenovirus platform, whereas most gene therapies are AAV, smaller capacity. So this is sort of the Mack Trucks, so to speak, in terms of how many genes it can hold. And so 30,000 base pairs.

So theoretically, you could hold not one, but many genes. And so we're thinking through already what are the other places in the body where it's local gene therapy could be useful, for example, the eye, the ear, the back. There are closed spaces where local gene therapy could be super useful. And also, where are there known mechanisms of action where we could put 1 or 2 or 3 genes into the construct.

One of the very first places we're testing that out is with our canine OA program. So as for those of you that own dogs, have dog owners, you know that as they get older, they get OA of the knee and joints. There's a product approved already for that, doing about $0.5 billion in sales. So we're about to start the clinical part of our canine OA program. And as you know, those development programs are much shorter than humans. And so we look forward to reporting those results. And in due course, we'll have to figure out, are we the best ones to develop something like that or should we get a partner.

Interesting. And then maybe I think you talked about Part A later this year. What should we expect for Part B?

Good question. So Part B, as I mentioned, the tricky part of cell and gene therapy is to stand up a commercially viable manufacturing process. And through our team's efforts, I mean, they've been working very hard on this. We're ready. So we're going to dose Part B with commercially viable product. Part B will be exactly the same in terms of design to Part A. It will just have 90 patients as opposed to 49.

And then as we move forward, what will happen is -- we have RMAT designation with the FDA, the equivalent in Europe as well. So what that allows for, it's basically breakthrough designation for cell and gene therapy. So what that allows for is regular dialogue with the FDA and other regulatory bodies. And so as we see and really critically look at the Part A results, then we can make a better determination with the FDA and what should Phase III start to look like and get ready for that.

Great. Great. Maybe shifting to 2002. You acquired 2002, I think, late last year. Maybe just kind of walk us through that asset, how you're thinking about the opportunity?

Sure. So first of all, for 201, we also acquired GQ Bio, the owner of the platform. So we have access not only to 201, but the entire platform and that expertise, which is really important in cell and gene therapy. So 2002, is an interesting one. It's another good example of how we're thinking about building the pipeline. The mechanism is derisked. We're just adding some additional value on top.

So what is it? Well, it's ropivacaine instead of bupivacaine. So we know ropivacaine works. Now what we've put on top of that are 2 interesting polymers that when you actually put that into the surgical site and in still it, so you squared it in there, close up the site. It could provide postoperative pain relief for up to 14 days. So we've seen this in healthy volunteers. And so by contrast, EXPAREL, now you're either going to infiltrate that is in a different pattern, you inject it into the surgical area or what you do is you put it as a nerve block, which is put it right by the various nerves that are in play.

So this one has an ease-of-use benefit that as you squared it in, close up the site and a potential duration benefit that is instead of 3 or 4 days like EXPAREL, it could be many more days longer than that. So we're excited about this one. Like I said, it could be a nice complement to EXPAREL, and we think the timing of this one could come right around that 2030 time frame, which is important. So yes, that's another good example of it's a derisked sort of known pathway and molecule, but we've kind of put a different sort of innovation around it.

That's fascinating. Maybe before we shift to capital allocation, what would be kind of an ideal label for 201 or 2002? I mean could you get -- would 1 year dosing? Would that be something that's what you would target in terms of duration? And then how are you thinking about the potential for redosing?

Sure. That's a good question. So I just want to really emphasize this point. For 201, the way we're studying it now is one injection. That's it. One injection for this study, one injection, and we're following the durability of that over 52 weeks, and that will be Part A. It doesn't mean it doesn't work longer. It's just saying we're reporting out in that time frame, okay? And so as I mentioned earlier, in our Phase I studies, we saw the durability go much further out than that, right? But it was uncontrolled, right?

So that being said, based on our market research, what we know from physicians, from payers is that the current standard of care provides durability of 3 to 6 months max. What we heard loud and clear is if you can get patients out to a year, that's considered transformational. More than that is, I don't know what beyond transformational is, even more transformational. I don't know what the term is, right? So anyway, that's how the market is viewing it, right? And so for us, as we think about that, we say, gosh, I mean, at a minimum, if we could think about getting patients out to a year with durable response, that would be important.

And then certainly, now we have plans to think about redosing at the right time. So most people, if they have one knee with osteoarthritis, they have another knee with osteoarthritis and they have other joints with osteoarthritis. And what's interesting is we look at neutralizing antibodies, baseline and after. And what we see is that we don't see a big spike in neutralizing antibodies because we're putting such a small amount into the joint. So it's an early indicator that perhaps redosing not only in the index knee, but the contralateral knee is a possibility.

Interesting. Maybe shifting gears to capital allocation. I think you guys -- you have a share buyback program in place. Maybe just speak to that, how does that fit in with your kind of broader capital allocation strategy? And how does it relate to your maybe 5x30 aspirations?

Before we rolled out 5x30, we took a lot of time with the Board and external advisers about capital allocation. And so broadly, as we think about it is how much do we invest in the current business. And one sort of proxy for that is SG&A. And for our [indiscernible] we're right on at 45%, okay? [indiscernible] at 17%, we're at 14%. So as our studies that will come to conclusion at the end of this year roll off, we'll start to add some additional studies and likely we'll be around that 17%, okay?

Separately, we look at, gosh, how do we think about our value relative to how the market is thinking about it. And so there came a time and we thought, gosh, the value of our company as we see it is higher than what the market is seeing it. So we rolled out this $300 million buyback program. And so we've completed $200 million of it, took out 9 million shares. We're down to 39 million shares now, which is a fairly small base. And so we've got $100 million left to go. And so we'll constantly look at, is this the right time to go ahead and do the balance of that? Or should we put our dollars into something else, right?

And so -- and we can talk about what that something else might look like. But certainly, since we have the infrastructure in place now, adding an accretive asset to the bag, selling bag would be important. So if something fit nicely into the EXPAREL bag or ZILRETTA bag or iovera° bag, we could bring a lot of synergy to the table, and it will be accretive out of the gate. So that's one way to think about it.

The other way is, yes, continue on the buybacks. And another one is just like we've done for PCRX-201 and 2002, be very careful about derisked mechanisms of action and sort of innovative ways to develop it. And so it could be likely a combination of those things, but I just want to give you a sense of how carefully we've thought about these things and benchmarked ourselves.

Okay. So I think kind of for BD more late stage or in market within your current commercial footprint. And then in terms of maybe size or capacity, what do you kind of...

I don't think you're going to see us do these kinds of bet the farm kind of things. I think these will be careful assessments and careful, I would say, investments. And take a look at what we did with GQ Bio. We bought that company. It was a very efficient use of our [indiscernible] more of the milestones that are to come [indiscernible] not only the expertise, but also the preclinical programs and the platform. So we've got a pretty good deal on that. And same thing with the AmacaThera asset. We didn't pay a whole lot upfront. And so we're going to be very careful about this.

Great. Well, with that, Frank, thank you for joining us, and we'll be excited to watch the updates over the coming months.

Yes. So thanks for having me here, Matt. And look, I think this is a really great story of then and now. The company has come a long way with the new Board, new CEO, 5x30, and we're now starting to see really the benefits of this new strategy. And hopefully, you see it when you take a look at the first quarter results that we've delivered and also some of the data catalysts to come. And so I'm excited about the balance of the year and what '27 will hold for us as well.

Awesome. Thank you.

Okay. Thank you.

Good day, and thank you for standing by. Welcome to the Q1 2026 Pacira BioSciences, Inc. Earnings 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, Susan Mesco, Head of Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone. Welcome to today's conference call to discuss our First Quarter 2026 Financial Results. Joining me are Frank Lee, Chief Executive Officer; Brendan Teehan, Chief Commercial Officer; and Shawn Cross, Chief Financial Officer. Kristen Williams, Chief Administrative Officer and Secretary; Tony Molloy, Chief Legal Officer; and Jonathan Slonin, Chief Medical Officer, are also here for today's question-and-answer session.

Before we begin, let me remind you that this call will include forward-looking statements subject to the safe harbor provisions of federal securities laws. Such statements represent our judgment as of today and may involve risks and uncertainties. This may cause our actual results, performance or achievements to differ materially. For information concerning risk factors that could affect the company, please refer to our filings with the SEC or the Pacira website. Lastly, as a reminder, we will be discussing non-GAAP financial measures on today's call. A description of these metrics, along with our reconciliation to GAAP, can be found in the news release issued this afternoon.

With that, I will now turn the call over to Frank Lee.

Thank you, Susan, and good afternoon to everyone joining today's call. Just over a year ago, we introduced our 5x30 strategy. This plan was designed to accelerate performance and position the company for sustainable growth and shareholder value creation. To remind you, 5x30 was built to deliver measurable progress around 5 key goals: patients served, product revenue, profitability, pipeline and partnerships. Collectively, we believe advancing these 5 goals will drive shareholder value into and well beyond 2030.

Let me start by saying that I'm pleased with our first quarter results. I'd like to recognize our team for their remarkable efforts. Our solid first quarter results reinforce our confidence that 5x30 is delivering its intended business results, and we're on the right strategic path. One year into execution, our progress across all 5 goals is clear. This is reflected in our commercial performance, financial results and pipeline advancements. I'll start with our flagship product, EXPAREL.

Since our founding, EXPAREL has been the cornerstone of Pacira's leadership in opioid-sparing innovation for postsurgical pain. Through the dedicated efforts of our team, EXPAREL is demonstrating renewed growth more than a decade after its initial launch. This is a rarity in the pharmaceutical industry and a clear testament to the strength of our commercial, medical and market access organizations.

The accelerating volume growth we delivered in the second half of 2025 has continued into 2026. This momentum reflects a combination of fundamental improvements that are strengthening the long-term durability of our franchise, including expanding coverage outside the surgical bundle for Medicare patients following implementation of the NOPAIN Act at the beginning of 2025. A new product-specific J-code enabling streamlined billing and reimbursement, growing commercial payer coverage outside the surgical bundle, which Brendan will discuss in more detail shortly. Increased awareness and adoption of non-opioid stewardship programs as evidenced by encouraging market research results, enhanced intellectual property protection, providing greater long-term visibility for the franchise, we now have 21 Orange Book-listed patents across 2 families protecting EXPAREL from generic challenges.

This is a dramatic evolution from the single patent previously litigated and supported a favorable volume-limited settlement in 2025. This multiyear EXPAREL patent infringement litigation began in 2021 and extended through 2024. In addition to EXPAREL's leadership in postsurgical pain control, ZILRETTA and iovera's position in early intervention OA pain management are expanding. For ZILRETTA, the year is off to a strong start with a 15% year-over-year increase in sales. We believe the growth initiatives we put in place last year are now beginning to deliver results. These include our dedicated ZILRETTA sales force, expanded patient access programs and extended promotional reach through our Johnson & Johnson MedTech collaboration.

From a life cycle management perspective, we're pleased to report enrollment has concluded for a Phase III registrational study in shoulder OA. This place is on track for top line results later this year. The unmet need for shoulder OA is significant. There are approximately 1 million injections for shoulder OA administered annually in the U.S. despite the absence of FDA-approved products. If this Phase III trial meets its objectives, ZILRETTA could become the first product with a labeled indication for shoulder OA. iovera also had a strong start to 2026 with first quarter sales increasing 21% over 2025. We're starting to see the benefits from last year's rollout of a product-specific reimbursement code and a dedicated sales force staffed with experienced medical device account managers.

From a life cycle management perspective, our registrational study in spasticity is on track with top line results expected by year-end. Here, the unmet need remains high with 6.3 million patients with spasticity seeking treatment each year in the U.S. Together, we believe our strong commercial performance and advancing life cycle management will support durable top line growth. Importantly, this momentum further strengthens our leadership in postsurgical pain control and early intervention OA pain management.

In tandem with the momentum across our commercial portfolio, through our 5x30 strategy, we are now advancing an innovative clinical stage pipeline. Here, we're prioritizing mechanistically derisked assets with the potential to drive shareholder value well beyond 2030. In addition to clinical data readouts for our commercial products, our clinical stage assets are entering a catalyst-rich period. Key upcoming milestones include PCRX-201, our locally administered gene therapy for knee OA, remains on track for top line data later this year. With approximately 15 million people in the U.S. affected by knee OA and limited durable treatment options, the unmet need remains high. I'll talk in greater detail about PCRX-201 shortly.

PCRX-2002, our novel hydrogel formulation of the non-opioid analgesic bupivacaine for postsurgical pain. PCRX-2002 was designed to deliver rapid onset and long-acting analgesia from a single application at the time of surgery. We expect to begin Phase II development later this year. This asset has the potential to complement EXPAREL as an easy-to-use, longer-acting therapy with patent protection extending to 2042. Additionally, our gene therapy platform continues to generate promising preclinical candidates to advance our 5x30 pipeline goal. These include PCRX-1003 for degenerative disease, PCRX-1002 for dry eye disease, PCRX-1001 for canine OA, which we believe has significant out-licensing potential.

Let me briefly highlight PCRX-201, our lead HACd program, which represents a potential paradigm shift for the treatment of knee OA. Building on the encouraging durability we observed in our Phase I study, our 2-part Phase II ASCEND study is on track. Part A is fully enrolled with 49 patients and as previously mentioned, we'll have top line results from this 52-week study later this year. Like most Phase II studies, ASCEND is not powered for efficacy. The primary objective is safety, but we'll also be looking for efficacy trends.

Key secondary endpoints include changes in pain and function from baseline as measured by numerical rating scale, WOMAC and KOOS scores. In parallel, we're advancing a commercially viable manufacturing process for PCRX-201. This work is critical to enabling the initiation of Part B around midyear. We expect Part B to enroll roughly 90 additional patients across 3 arms, 2 different doses of PCRX-201 and an active steroid comparator.

While it's premature to quantify the commercial opportunity, we believe PCRX-201 has 3 key attributes that underscore its market potential. First is durability. We believe that demonstrating a treatment effect lasting 1 year represent a transformational advance in knee OA. This would be significantly longer than currently available knee OA treatments, which generally provide durability of approximately 3 to 6 months. Second is cost of goods. PCRX-201 is locally delivered. This differs from systemic approaches requiring much higher dosing to achieve the desired effect. Lower dose levels, coupled with efficient manufacturing support a favorable and commercially viable cost of goods profile. This is an important consideration for any therapy intended for chronic high-prevalence conditions like osteoarthritis. And third is health economic value. If the durability we're targeting is borne out clinically, we believe PCRX-201 could offer attractive value for the health care system.

As a reminder, PCRX-201 is an IL-1 receptor antagonist. IL-1 is a well-validated derisked target for reducing inflammation. There are currently 2 FDA-approved drugs that block the IL-1 pathway in other inflammatory joint conditions. Neither one is practical for early OA intervention because their short half-life, would require very high systemic doses or daily knee injections. PCRX-201 is complementary to ZILRETTA and iovera and could expand our leadership in early intervention OA pain management.

Briefly turning to partnerships, which remain a key pillar of our 5x30 strategy. We're taking a disciplined targeted approach to business development. We're prioritizing strategically aligned assets that are financially accretive and leverage our commercial infrastructure. In parallel, we're utilizing strategic partnerships to access new sources of revenue by expanding our commercial reach into untapped U.S. and international markets. Our strategic collaboration with market leaders, Johnson & Johnson MedTech and LG Chem are both excellent examples of our strategy in motion. These partnerships advance our goal of 5 partnerships by 2030 and efficiently expand our commercial coverage and geographic reach.

In summary, we're pleased with our first quarter results and the momentum behind our 5x30 strategy. With clear progress across every 5x30 goal, we remain confident we'll deliver sustainable growth and value creation into and well beyond 2030.

With that, I'd like to turn the call over to Brendan to share more details on our first quarter commercial performance. Brendan?

Thank you, Frank, and good afternoon to all joining us today. I'm pleased to report that the upward momentum we observed in the second half of 2025 have continued into 2026. Our commercial execution is on point. Demand trends are strong across the complete portfolio, and we're delivering top line growth consistent with what we previewed in February.

I'll start with our flagship product, EXPAREL, where we're outperforming last year's first quarter volume growth while continuing to expand patient and provider access. We continue to see excellent momentum in hospital outpatient and ASC settings where an increasing number of EXPAREL-assisted procedures are taking place and where our customers are seeing favorable reimbursement. Our focus beyond sharing excellent clinical outcomes is demonstrating the enhanced economic value of EXPAREL.

To support this, we recently presented data from real-world studies highlighting EXPAREL's compelling value proposition, along with several health economics and outcome studies at key congresses that include the Orthopedic Research Society, the American Academy of Orthopedic Surgeons and the Academy of Managed Care Pharmacy. These real-world data demonstrate both the clinical and economic value EXPAREL delivers. We look forward to reporting additional data readouts as the year progresses.

Our initiative includes the comprehensive real-world IGOR registry, which now has more than 3,500 OA patients enrolled and is providing valuable information for EXPAREL, ZILRETTA, iovera as well as other treatments. These data are helping guide best practice for knee OA patients across their treatment journey. Importantly, commercial payers continue to recognize the EXPAREL value proposition and implement NOPAIN-like policies that reimburse outside the surgical bundle. We have now surpassed 110 million covered lives with separate reimbursement outside of the bundle for EXPAREL.

With a growing critical mass of coverage, we expect accelerating change in the market throughout the remainder of the year.

In short, we are extremely encouraged by the progress made in the first quarter, building on the momentum from 2025. Demand is being driven by a powerful combination of expanding reimbursement, growing protocol adoption and compelling real-world evidence, all supporting each other and growing our business. With a strong finish to 2025 and a solid start to 2026, EXPAREL continues to gain share as institutions commit to best practice opioid-sparing care. We remain confident in our ability to deliver durable, sustainable growth for EXPAREL as access widens and best practices evolve.

Turning to ZILRETTA and iovera, both products are off to a strong start to 2026 as valuable commercial investments we made last year begin to bear fruit. As you know, last year, we rolled out a dedicated Pacira sales force for ZILRETTA to ensure a focused promotional impact. In addition, we essentially tripled our U.S. commercial reach for ZILRETTA through a strategic collaboration with J&J MedTech. For iovera, we are benefiting similarly from a dedicated sales force we onboarded last year. Looking ahead, we believe both ZILRETTA and iovera have significant upside potential to become more meaningful sources of revenue.

In summary, we are pleased with the strong start to 2026 across our 3 commercial products, and we believe we are well positioned to deliver a successful year of sustainable top line growth.

With that, I will turn the call over to Shawn for his financial review.

Thank you, Brendan. I'll start with an update on sales and margin trends. First quarter EXPAREL net sales increased to $143.3 million versus $136.5 million in 2025. Volume growth of approximately 7% was partially offset by a shift in vial mix and discounting from our third GPO going live last year. In addition, first quarter sales were also impacted by winter storms disrupting shipping and triggering returns. As we move forward in 2026, we expect the delta between volume and revenue growth for the second quarter to be similar to the second half of 2025 and then narrow as we anniversary our third GPO agreement midyear.

For ZILRETTA, first quarter sales improved by 15% to $26.8 million versus the $23.3 million we reported in 2025. As Frank mentioned, this was largely attributable to the growth initiatives implemented last year, including our dedicated ZILRETTA sales force. For iovera, sales increased 21% to $6.2 million compared to $5.1 million in the first quarter of 2025. Again, as Brendan mentioned earlier, this was largely attributable to the growth initiatives implemented last year, including our dedicated iovera sales force.

Turning to gross margins. On a consolidated basis, our first quarter non-GAAP gross margin was 80% versus 81% for last year. Gross margins continue to benefit from the improved costs and efficiencies of our enhanced larger scale EXPAREL manufacturing process and continuous improvement initiatives at both of our manufacturing facilities.

For non-GAAP R&D expense, the first quarter increased to $25.4 million from $23.1 million reported last year. This increase relates to our advancing Phase II study of PCRX-201 as well as our label expansion studies, all of which have anticipated top line readouts later this year. In addition, we're supporting 3 promising HACd-based preclinical programs.

Non-GAAP SG&A expense came in at $83.9 million for the first quarter versus $76.2 million last year. You may recall that last year's SG&A expense was positively impacted by a favorable outcome to litigation and subsequent recovery of $5.2 million in legal fees. Taking this into account, we are largely in line with last year. As we discussed last quarter, we're now leveraging our existing commercial infrastructure, which is well equipped to support top line growth. All of this resulted in another quarter of significant adjusted EBITDA of approximately $40.2 million for the first quarter.

As for the balance sheet, we continue to be in a position of strength and ended the quarter with $202 million in cash and investments. With a strong balance sheet and a business that is producing significant operating cash flow, we believe we are well equipped to advance our 5x30 growth strategy and create shareholder value.

With respect to capital deployment, we will continue to maintain a disciplined and strategic approach, focusing on 3 key areas: first, driving top line growth by leveraging our existing commercial infrastructure; second, advancing an innovative pipeline and becoming the leader in musculoskeletal pain and adjacencies. We are prioritizing accretive in-market assets to leverage our established commercial footprint and derisked clinical stage programs; and third, opportunistically returning capital to shareholders.

During the first quarter, we executed another $50 million in share repurchases. As a result, we retired approximately 2.2 million shares of common stock. Since last year's start of the plan, we have decreased our share count by a total of approximately 9 million shares and reduced our outstanding common shares to 39.3 million. To remind you, as of March 31, we had $100 million remaining under our share buyback authorization, which runs through the end of this year.

Going forward, we remain committed to maintaining favorable operating margins while advancing our 5x30 strategy. This brings us to our full year financial guidance for 2026, which we are reiterating today as follows: total revenues of $745 million to $770 million; for EXPAREL net product sales of $600 million to $620 million. With respect to quarterly trends, we anticipate the remainder of 2026 will largely follow historical patterns. For ZILRETTA and iovera, our guidance assumes 2026 will be largely in line with 2025. While we are encouraged by both products start to the year, we will wait to gain more visibility before updating our assumptions.

The final component of our 2026 revenue guidance relates to $7 million in expected revenue from our licensing agreement for the veterinary market. Non-GAAP gross margins of 77% to 79%. And with respect to quarterly cadence, we expect the next 2 quarters to continue to benefit from the sale of lower-cost EXPAREL inventory. For the fourth quarter, we expect margins to be slightly below our full year guidance range due to the sale of higher cost inventory as well as shutdown-related costs and other expenses.

Non-GAAP R&D expense of $105 million to $115 million. As we prepare to initiate Part B of our Phase II ASCEND study of PCRX-201 and certain EXPAREL and ZILRETTA product development efforts, we expect an uptick in R&D expense during the second quarter, followed by a slight decline in quarterly spend as compared to the second quarter and the back half of the year. Non-GAAP SG&A expense of $320 million to $340 million. With respect to the timing of SG&A spending, we expect the first half of the year to be higher than the second half as a result of proxy-related activities. Stock-based compensation of $54 million to $62 million. And lastly, for those modeling adjusted EBITDA, we expect our 2026 depreciation expense to be approximately $30 million.

And with that, I'll turn the call back over to Frank.

Thank you, Shawn. In closing, 2026 is off to a strong start. Pacira is operating with momentum, clarity and discipline. Our 5x30 strategy is driving strong execution and reinforcing our leadership in postsurgical pain and early intervention OA pain management. We look forward to building on this momentum and positioning the company for sustainable growth and value creation through and beyond 2030.

Thank you again for joining us today and for your continued support and confidence in our mission. With that, we're ready to open up the call for questions. Operator?

[Operator Instructions] Our first question will come from the line of Douglas Tsao of H.C. Wainwright.

I have 2 questions. Maybe, Shawn, just as a starting point, if you could help us walk through a little bit about the cadence for R&D spend through the rest of the year. Just to confirm, it sounds like we're going to have a step-up in 2Q, followed by then sort of a re-step down in the third quarter. Just as we see 201 ramp up, just sort of should we think then more spend in 2027? And then I have a follow-up.

Doug, thanks for the question. So let me just turn it over to Shawn, and he can walk us through that a little bit here.

Thanks Frank. And thanks for the question. Doug, happy to provide a bit more detail on the R&D cadence this year. So as mentioned in my remarks a few minutes ago, we were preparing for initiation of Part B of the ASCEND study for PCRX-201, which we're excited about and then certain EXPAREL product development efforts. So we do expect an uptick in Q2 from the $25.4 million in Q1 that we spent. So just to provide a little more detail, we expect it to be in the low $30 million range, and then we'll come back down closer to the Q1 levels in Q3 and Q4. And that's how we see it playing out, and we'll obviously provide more updates as we get through the year.

Okay. Great. That's very helpful with that specificity. And then just at a macro level, one thing that I've been curious about is sort of the expiration of the Obamacare subsidies, and we've started to see some decline in terms of enrollments. And I think if we look at results for some of the med tech companies in the first quarter and even some of the hospital names that has not seen anything dramatic. But I'm just curious what you are hearing from sort of the hospital channel in terms of their perspective on how they're thinking about the rest of the year playing out.

Thanks, Doug. Listen, we stay close to this. So let me turn this one over to Brendan to give his perspective.

Yes. Doug, thanks so much for the question. Obviously, we're always looking at the broader macro environment. And I'm sure that people are taking a look at what those changes will mean to them individually. We will keep a close eye on those procedures where EXPAREL is favored for addressing, and we'll continue to kind of give updates as we see it play out. I think it's just too early to say.

And our next question will be coming from the line of Dennis Ding of Jefferies.

This is Anthea on for Dennis. Earlier this week, we saw data from a cell-free regenerative therapy for knee OA with a headline efficacy of 93% of patients demonstrating clinically meaningful improvements in mobility and pain reduction. There's not a lot of information on that trial. So I'm curious how you guys are framing that data and how 201 will differentiate from that product? And then any additional color on what promising efficacy trends would look like for PCRX-201's readout would be helpful as well.

Thanks for the question. And I didn't get the name of the company you mentioned. What was that?

I think Creative Medical Technology.

Yes. So okay. So there are a lot of different cell and regenerative therapy companies out there. And so let me turn it over to Jonathan to see if he has any perspective on that because, of course, there are lots of different studies out there with various levels of rigor.

Thanks, Frank. Yes, not commenting on any specific company. We are confident that the HACd platform is the right modality for sustained relief of knee osteoarthritis. We have made tremendous progress in scaling up. We are finalizing our commercial scale manufacturing for Part B as we articulated before and anticipated enrollment is right on time.

To answer your second question, we're expecting the top line data from Part A to read out at the end of the year. Just to remind you, it's primary efficacy is safety. And what we will be looking at is the totality of the data to understand how PCRX-201 performs in a randomized clinical controlled trial with an active comparator. So we are looking at [indiscernible] primary efficacy, but we will also be looking at the secondary endpoints around efficacy as well. So we will be reviewing that data, and then we're going to go forward, we'll assess where we are at. But the trends that we're looking for are trends consistent with durability and efficacy from our Phase I trial.

And our next question will be coming from Les Sulewski of Truist Securities.

This is Jeevan on for Les. How would you characterize elective procedure trends exiting March? Any lasting impact from the winter storms? And then separately, how should we think about potential upside from ex U.S. partnerships across the portfolio?

Thanks for the question, Jeevan. So I'll ask Brendan to comment a little bit about what we saw and what we're seeing now. He mentioned it a little bit earlier. But I'll let him comment on that a little bit. And then I'll mention a little bit about what to expect on ex U.S. partnerships. So Brendan?

Yes. Thank you so much for the question. If we look at the moving annual total for procedures where EXPAREL would assist, that's largely flat year-over-year despite EXPAREL being up over 7%. If we look specifically at the first quarter, market procedures are up in the mid-single digits, I would say, 4% to 5% as opposed to EXPAREL, if that gives you some sense. And then we'll look to see how that progresses here in the second quarter.

And just to answer your question about ex U.S. partnerships. So let me take a step back here a little bit. This is an important part of our 5x30 strategy in terms of signing partnerships, both here in the U.S. and ex U.S. So as you know, ex U.S., we've signed a partnership with LG Chem. They're a leading company in Asia Pacific. And we have plans to sign similar types of partnerships in the other major geographies. And it's premature to provide guidance on these kinds of partnerships and the top line impact. But I would say it's not insignificant. These will be important partnerships that will drive revenue not only through 2030, but well beyond 2030. So that's where we stand now.

And as you know, the first partnership, the intention is to file in the not-too-distant future. And so we'll be updating you on guidance around that starting in '27.

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

The first one, kind of a follow-up to the previous question around the impact of winter storms. I think you were expecting a potential softer 1Q because of those storms. It looks like all 3 of your products had some pretty solid year-over-year growth. So just curious if there was any impact or you were able to recapture it over the remainder of the quarter?

And then my second question regarding NOPAIN. If I remember correctly, the NOPAIN Act is kind of a 3-year term ending in 2027. Just curious if there's any legislation in development here to extend or modify that term.

Yes. Thanks for your question, Serge. Regarding the winter storm, we can provide a little bit more color on this. I'll turn to Brendan for that. And so Brendan, maybe you can talk a little bit about what we saw in the winter storms, and I'll speak to NOPAIN.

Yes, sure. Thank you so much for the question, Serge. So the winter storms do have an impact. They impact both the ability to ship, but also as you would expect in those geographies where those surgeries might have taken place, those surgeries did not happen, which lead to rescheduling, not necessarily within the quarter. So I think there is some kind of carryover as patients look to be rescheduled for those procedures.

Despite that, I think we are very pleased with the performance of EXPAREL volume vis-a-vis the total available market. So that's what I would say for winter storms. I believe we are past that and looking forward to the second quarter.

Thanks, Brendan. And Serge, with regard to your question about NOPAIN, thanks for that. NOPAIN indeed initially is scheduled to expire at the end of 2027. That said, we have been staying very close to CMS and other stakeholders. And what we're very encouraged about is not only the uptake of NOPAIN, but also the expansion of coverage to commercial lives. And so Brendan mentioned earlier that now we have a total of $110 million outside the bundle and growing. And so as you know, NOPAIN is primarily covering Medicare lives. And so what we can tell you is that we're very encouraged by the discussions we've had about the market research and the uptake of NOPAIN with CMS and other stakeholders. We're going to confirm a lot of what we're seeing through claims analysis. And I would say that NOPAIN is doing what it's intended to do and the commercial payers are also coming on board, which is highly encouraging.

And our next question will be coming from the line of Hardik Parikh of JPMorgan.

I just wanted to ask you about -- Shawn, I think I heard you say you expect SG&A to be lower in the second half. Can you talk to the magnitude of the step down you're expecting in the second half? And then just SG&A seems to have elevated the past 5 quarters relative to 2024. I'm just trying to get a sense of what the normalized run rate is going forward.

Thanks for that, Hardik. Let me turn it to Shawn here.

Yes. Thanks for the question. So we -- if you look at the -- we reported $83.9 million in SG&A this quarter. And you can take a look at -- without providing super specific detail, but you can take a look at the information we filed in our proxy on Tuesday or Wednesday, I'm losing track of time here. That provides some of the magnitude of what we anticipate. Spending during the proxy season that would be above the typical sort of course of events. And then we anticipate sort of coming back down in Q3 and Q4 to sort of perhaps a little bit below where we even spent in this quarter, kind of generally directionally correct.

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

Thank you, operator, and thanks to all on the call for your questions and time today. We're excited about the opportunities ahead and remain focused on executing our 5x30 growth strategy with discipline and purpose. As we look to the remainder of 2026, we are confident in our ability to build on our momentum and position Pacira for long-term success.

Thank you again for your continued support. Good night.

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

All right. I think we're good to go. Good afternoon, everyone, and thanks for joining us at the Barclays Miami Conference. I'm joined on stage by Pacira Biosciences and representing the company is the Chief Executive Officer, Frank Lee. Thank you for being here with us today.

Maybe just to kick off the conversation, if you could give us a quick overview of the current product portfolio and then maybe walk us through 2025, how things trended relative to what you expected? And maybe within that, 2025 was an important year because for your biggest product, there was the NOPAIN reimbursement implementation in January. So we'll get into some of the more financial-related questions. But with respect to NOPAIN, maybe just talk about what you've learned in the first year of having that in place?

Well, Jenna, thanks for having me here, and good to see you all. I have to say, last year, we rolled out our 5x30 strategy for value creation, and that was at a different health care conference, and that was January of last year. And so 5x30, what were those things? It's 3 million patients by year 2030, double-digit top line growth, 5-point expansion in margin, 5 pipeline products and 5 partnerships.

And so if you go from January of last year to now, I'd tell you, what a difference a year makes in terms of the kind of progress we've made and the progress that the team has made. And just to recap a little bit, last year, some important events. We did have a settlement with Fresenius, a volume limited settlement, which provided visibility on out to 2039, which is very important for us for our lead product, EXPAREL, and subsequently supported the IP estate with many, many more patents that we can get into.

And we started to see, as we talked about the second half of the year, how NOPAIN, along with some of our investments on the commercial side has started to accelerate growth. And growth starts with volume, and we started to see a good amount of that. And importantly, we did a lot of work to make sure that our customers could access the product in a good way through GPO contracts as well as from the payers.

So if you step back a little bit, EXPAREL is covered period. What we wanted to do is cover it outside of the bundled payment. So NOPAIN provided the outside of the bundle payment for Medicare patients in the outpatient setting at ASP plus 6%. What we want to do is really expand that to the commercial pay. And we ended the year with about 102 million lives covered total outside the bundle. And what we've been able to find is that from a remittance standpoint, what we're seeing on the commercial side is up to ASP plus 29%, which is great.

And as you know, from a pipeline perspective, we're advancing PCRX-201. I'd love to talk about that here shortly as well as the AmacaThera product, which could be a nice complement to EXPAREL. And finally, we signed a couple of very important agreements, one with Johnson & Johnson MedTech to triple our reach for ZILRETTA and importantly, LG Chem, the South Korean company that will cover EXPAREL and ZILRETTA in the Asia-Pacific countries.

Awesome. Thank you. And there's a lot of moving pieces, a lot going on in the pipeline, the 5x30 plan, the gross margin outlook, and we're going to touch on all these things. But I guess let's stick with EXPAREL and just so we can better understand how things are trending so we can frame 2026.

So we talked about NOPAIN, which provides reimbursement in the hospital outpatient department. You also have signed over the past couple of years, several GPO contracts, the latest of which was around midyear. And so with EXPAREL through 2025, we saw a nice uptick in volumes in the second half. So with NOPAIN and with the GPO contract that you signed, can you just talk about the volume trajectory over the last 4 quarters and maybe any impact on pricing and that can -- that will help set the stage for when we talk about this year and beyond?

Sure. And just to give some additional clarity on NOPAIN, it's certainly for Medicare in the outpatient setting, and that will cover all outpatient settings. So HOPD, ASC as well as any other setting like in offices, it just doesn't cover inpatient. So that's that remaining piece.

And then broadly now commercial payers are following suit. And our ambition there is to really expand that to a much larger universe this year. So let's talk about volume growth on EXPAREL. So last year, broadly speaking, we're north of 6% last year in aggregate last year, and that's compared to about 3% the year before. So I always like to say growth begins with volume, and we saw volume growth.

And along the way, as you mentioned, Jenna, we signed some important group purchasing organization contracts, GPOs. And we signed 3 of them that cover the vast majority of our business. And the last one we signed was in June of 2025. And we saw a good uptake from that. So we'll lap that GPO contract in June of this year. And also, as you know, we took a price increase across our product line this year.

So as we think about this year and reflect on last year, last year, we signed a lot of these agreements at various times in the year, various payers are coming online at different times of the year and we were really launching into this new catalyst called NOPAIN that we had to educate. And so as we have predicted, the second half is when we really started to see the uptake in volume. And my sense is it will start to steadily increase over time. And so we're seeing that. We're seeing that for sure.

And likely the second half of this year is when we're going to start to see volume and dollars converge a little more because that's when we lap the last GPO. So that's kind of how we think about it. And we're seeing good growth, and we've set numbers accordingly to make sure that we can hit those numbers.

And I remember when NOPAIN was coming into effect, I just am curious how the clinician community, may be whether they underappreciated it a little bit or there's some education required to get them up to speed because in years past, there was a little bit of a cost-prohibitive nature just given the immediate cheaper generic alternatives, whereas this provides long-acting, reduces opioid consumption. So I'm just wondering now 12 months later, how you feel going into 2026 with just general awareness that this NOPAIN reimbursement structure, moving it out of the bundle is in place.

Yes. What's really great to see is if you go back in time a little bit, the whole idea was that because of the bundled payment, because you get one payment for a procedure, it almost provided a disincentive to use the most innovative products. So what NOPAIN did is say, okay, now you're still going to get paid for the bundle. But now separately, you'll get paid ASP plus 6% or more in the case of commercial, it's up to 29% for 11 products that are included in NOPAIN, of which we have 2 of them, iovera° and EXPAREL, right? So that was the idea.

And because of that, then the idea is that the opioid utilization would decrease over time and because these products do have a favorable impact on opioid use. Now here's the good news. We just ran a survey, a very large market research survey, 740 participants in this, pharmacy directors, anesthesiologists, surgeons, awareness is high. About half have already taken action in terms of how they manage patients before, during and after surgery. And so we're making an impact. We're starting to see it, and we're going to continue to run the survey over time.

And we've shared these data with CMS, of course, because CMS is looking at, gosh, how long are we going to keep NOPAIN? Initially, it was for 3 years, as we all know. And now we're entering an evaluation period. And so I think the data look promising in terms of the impact that NOPAIN is having, not only directly through Medicare, but also broadly through commercial payer access and reimbursement.

And speaking of the duration of NOPAIN, I mean just common sense would suggest it feels like it would be a negative headline to pull that back. Like how confident are you that this -- it makes sense to keep this in place just given the broader effort across the country to keep lowering opioid consumption in favor of non-opioid alternatives?

Yes. What I'm really pleased to see is the data is starting to point that way. So we're already doing some claims analysis to further support the market research. And my sense is as we progress along and the data will continue to point to better patient outcomes, lower opioid utilization and overall health care costs that are reduced because of that. So this is a good idea, and we'll continue to share information. And we should all be happy that this insight led to our government passing this legislation, and it's already having a good impact.

Awesome. So just shifting gears to your 2026 guidance. Total company revenue expected to grow 3% to 6% EXPAREL a bit higher than that at 4% to 8%. And we appreciate breaking out the EXPAREL specific revenue. I think that's very helpful. Can you talk about -- we mentioned with the GPO contracts, there's some pricing impacts and maybe we lap that. So between the volume and price, just for modeling purposes, talk us through the cadence of how that might play out over the year?

We feel comfortable breaking out EXPAREL because I think -- and of course, people want to know exactly what we're thinking about EXPAREL. So we feel comfortable with that guidance. And we've set guidance in a way where we want to make sure that we deliver on that this year. Last year, there were a lot of different moving parts because it's year 1, year 1 of not only NOPAIN, but year 1 of 5x3 and a lot of things that we're doing.

So what are we doing to ensure that we hit our numbers this year? First is, as you know, last year, we broke apart our selling efforts. So we've got one dedicated field force previously selling all 3 products. But now we have 3 separate field forces, each selling their individual product because these are very different products. And -- so last year, we went through a bit of a reorganization, particularly in the second half of the year for ZILRETTA and iovera° while keeping EXPAREL selling effort where it is.

So we took that one sales force and said, just sell EXPAREL, stay focused. That's the priority. We'll restructure and add new sales forces for ZILRETTA and iovera°. And my sense is that effort will pay off this year. But we've been conservative about guidance on ZILRETTA and iovera° because I want to see that growth before I guide to a bigger number. And so my sense is that we're positioned well this year.

And I have a few questions on ZILRETTA and iovera°, and there's also some pipeline developments there as well. But just one last one on the EXPAREL guidance. So as you mentioned, 2024 was a nice uptick in volumes. And then when you think about the total revenue guidance in 2026 versus 2025, the high end, another nice step up, the low end, a slight deceleration. So just between -- and you mentioned a layer of conservatism and wanting to set a bar that you feel very comfortable with. So just can you talk about maybe what would take you to the higher end of that range?

Yes. So we continue to execute on expanding payer coverage, so outside of the bundle. So that's going to be important as more and more commercial payers reimburse at up to what we're seeing and, again, ASP plus 29%, which is substantial. And certainly, pulling through the GPO agreements. So we have a number of people on the ground that help to educate people like pharmacy directors, billing and reimbursement folks and health care professionals that now it's available to the GPO. So I think it's really more about execution this year because a lot of the year 1 moving parts have settled a bit, right?

And as I mentioned earlier, and you mentioned, we'll lap the GPO, the third one mid this year, and that's when volume and dollars will start to converge a little more. So I'm excited about this year. I'm excited because a lot of the things that we put in place. And like I said, if I step back, what a difference a year makes. Last year, in January, we were just rolling out NOPAIN. There was some uncertainty about EXPAREL's IP runway.

Now we have a lot more visibility about not only the IP runway, but also the impact of NOPAIN and people in place in the field now that are really executing in a way that we start to see growth. And just to remind you, EXPAREL has been around a long time. And to get them more of a late life cycle product to grow again like we have, let me tell you something. You don't see that very often in this industry where it was relatively flat before then we went to 3% to 6%, right? So that's -- I want to just recognize the team for that.

And before we focus more on the 5x30 with -- and mostly with ZILRETTA because you announced the J&J partnership, and we'll talk about iovera°. And maybe within this question, for those 2 products, if you could remind us of the pipeline updates that you expect next? And just thinking about the trend from last year, what you're seeing in those products this year, how the J&J partnership can impact ZILRETTA and also the pipeline updates for those?

So what's great is with ZILRETTA, Johnson & Johnson DePuy Synthes now will triple our reach. So last year was a lot about getting that partnership set up, folks in the field trained and working together. So this year will be about executing. And so -- but I didn't want to bake all of that in until we start to really see it, right, and have actual evidence of that.

For iovera°, it was really about let's get medical device people to sell a medical device. And we saw the impact of that in the second half of last year. And so I expect to see that continue going forward. And just so we step back here a little bit. This year, in addition to the base business and what we're doing, it's the first year where we've actually had data events coming up. So we'll have ZILRETTA of the shoulder interim analysis coming up. We'll have iovera° and spasticity, both of those registrational trials and PCRX-201, the Part A reading out at the end of this year.

Awesome. And with the margin -- the gross margin target as part of the 5x30 plan, can you just help us bridge the 5 points of expansion and then there's a little bit of a step down this year. And then also with 4Q and maybe the OpEx guidance for this year, just you're clearly investing. There's a lot of different things to invest in. So maybe help us unpack that a little bit.

Yes. And there, again, I'd say what a difference a year makes because if you go back in time not too long ago, the margin was 76%. And the company was, in many ways, living hand to mouth on inventory. We've gone from that to a very robust process, and we almost got to the 5 points just last year in the first year, as you know.

And so what that wound up doing is we didn't was a much more efficient process. We didn't throw away as much product, and we built up inventory. And so cost per unit went down. We'll kind of work through that this year. And so that's why it's a little lower in terms of guide this year than last year. But we're well on our way to achieving 5x30. So we'll have continuous improvement just on the process, number one. And number two is that as volumes go up, the margins get better.

Awesome. So it feels like for 2026, EXPAREL, likely another step-up in growth. Things are tracking well, ZILRETTA, iovera°. You also have several pipeline readouts and you also announced a partnership in Asia Pac with LG Chem on EXPAREL. So I want to spend a minute there and just talk through maybe some of the due diligence and what gave you confidence and maybe just given in the United States, what we saw were some issues with the cost. So I'm just curious on how you view the adoption over there. And eventually, we're going to talk about the 201 and how all of this will build towards that double-digit growth, but we'll start with the LG Chem.

And I'm really pleased at the quality of partners that we've been able to sign deals with. So J&J DePuy, leader in their field, LG Chem, a leader in Asia Pacific. And when I think about partnerships outside of the U.S., as we've looked at these partnerships in the various regions, and we look to sign something in Europe, Latin America, Japan to build on the broadly South Korea and Asia Pacific partnership with LG Chem. We won't guide to this until next year, but these revenues will be important. They're not insignificant.

And in fact, if you think about how they ramp, it builds nicely so that they really start to peak around the time frame that we might have a little bit of erosion from Fresenius, right? And so historically, as you know, several years back, the company tried to execute more of an ex U.S. strategy by itself. And so we're taking a different tack here with leading partners who have presence in that space. And so in Asia, we expect a lot of this to come from private pay.

And as you know, the price of our product isn't thousands or tens of thousands, it's hundreds of dollars. So it's more accessible, right? And so that's the difference. And so we're excited about signing these ex U.S. agreements, which will often, just like the LG Chem involve an upfront, a transfer price and royalties, and it won't be insignificant. So that's that piece of it. And of course, we can talk about the pipeline as well.

Yes. And on the pipeline, probably the most -- the program that's getting the most attention right now is PCRX-201. And I just wanted to get your thoughts on what is driving the excitement in that, how you view this opportunity, how much of a potential game changer it is in OA pain, just -- and maybe the timing of when you would expect that update?

I have to say I'm really excited about this one. This could be truly transformational. I don't use that word lightly. This could be the first gene therapy that's local for the masses as opposed to systemic gene therapy for the few rare disease. And so we're studying this for osteoarthritis, and there are some impressive results for Phase I, 72 patients. And we'll report out on Phase II Part A at the end of this year.

And as we go through the course of this year, we're going to try and set some, I would say, context as to how to think about the data that we'll see during the course of this year and also the path to regulatory approval. So if you think about this a little bit, some context, we already know what short-acting steroids and HA deliver. It's a few months of durability, right?

When we went out to the marketplace, we said, hey, what would be transformational? And what we got back is if you have durability out to 12 months, that is transformational. But the low bar is about 3 months because that's what you typically get with steroids and HA. So we've got a wide band there.

And as we know from our Phase I data, the durability was quite impressive out to many years. So that's one lens that we'll look at through. The other lens is we know what the safety profile of PCRX-201 is, and it's very favorable, 72 patients that we followed for 3 years. And so we're looking to see something similar to that, that we saw earlier. So I think we'll have some context.

And just as a reminder now, this study isn't powered for efficacy, it's primarily a safety study. But what we'll see are trends toward efficacy, and that will inform our future development. And as you know, we have RMAT designation for this. And so we'll be looking at ways to accelerate the development path to approval.

And on that front with accelerated the path to potentially accelerated approval in the 5x30 double-digit growth. So you have the 3 products on the market. You have a bunch in the pipeline and new indication for ZILRETTA, iovera°. Can you just talk about the double-digit 5x30, like which products are going to contribute to that? And what maybe in your pipeline is a little bit beyond 2030 and the growth driver more long term?

Yes. I suspect that we'll get there in aggregate. To break it down individually, it's going to be hard, but it will get there certainly, and you can see the early signs of it. And the proof in the pudding will be how we report out first quarter and second quarter this year, but I believe we're well on track to that double digit. And as we talked about, we're well on track with margin, tremendous improvement there.

And so my sense of this is we'll step back this year and say, gosh, the numbers look good. We're on track here with delivering 201. We set expectations accordingly. And then we'll have some other interesting data readouts. And now along the way, as you all know, we bought back a fair amount of stock last year because we felt like there's a disconnect between what we think the valuation is versus the market. But as we go forward, we'll have to look at that carefully and also consider some BD deals that could be accretive. So now we have a commercial medical market access infrastructure, so you could easily drop a product or 2 into that.

Yes. And on the capital allocation, just -- and you mentioned BD before we close out, I just wanted to give you an opportunity to remind people of your balance sheet situation. The company has low leverage and just your capacity to do deals.

Yes. We're in very strong financial shape. So not very much leverage. So we do have a fair amount of capacity in terms of firepower. We're going to be very disciplined about this. So the first place we're going to look are going to be places where it could be accretive out of the gate because, of course, we shrunk the denominator now in terms of the number of shares outstanding. So it will be nice to continue on this momentum of delivering top line and perhaps more with something that could be accretive. So as I say to people, this is a year of Pacira. And so what a difference a year makes.

Yes, that's fantastic. Your core driver right now is picking up growth, different volume tailwinds, big pipeline with updates coming this year. And yes, thank you for attending the conference, and we appreciate it.

Thanks, Jenna.

Good day, and thank you for standing by. Welcome to the Q4 2025 Pacira BioSciences earnings 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 speaker today, Susan Mesco, Head of Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone. Welcome to today's conference call to discuss our fourth quarter and full year 2025 financial results.

Joining me are Frank Lee, Chief Executive Officer; Brendan Teehan, Chief Commercial Officer; and Shawn Cross, Chief Financial Officer.

Before we begin, let me remind you that this call will include forward-looking statements subject to the safe harbor provisions of federal securities laws. Such statements represent our judgment as of today and may involve risks and uncertainties. This may cause our actual results, performance, or achievements to differ materially. For information concerning risk factors that could affect the company, please refer to our filings with the SEC or the Pacira website.

Lastly, as a reminder, we will be discussing non-GAAP financial measures on today's call. A description of these metrics along with our reconciliation to GAAP can be found in the news release issued earlier this afternoon.

With that, I will now turn the call over to Frank Lee.

Thank you, Susan, and good afternoon, everyone, joining today's call. I'm pleased to share Pacira's fourth quarter and full year 2025 results and to reflect on what was truly a transformative year for our company. At Pacira, our mission remains unwavering to deliver innovative, nonopioid pain management therapy that transform lives. Everything we do starts with the patient. We're guided by the science, supported by our people, and grounded in a commitment to improve recovery by reducing exposure to opioids.

When I look back at where we stood a year ago, the contrast is striking. Entering 2025, Pacira faced uncertainty with questions around EXPAREL's long-term exclusivity, inconsistent margins, and limited pipeline visibility. Today, we're a very different company. We have a clear strategic direction, reinvigorated top-line growth, a solidified exclusivity runway, and significantly expanded patent protection.

In addition, we're advancing a promising pipeline that is now entering a data-rich phase. Most importantly, we're a company once again growing with momentum. Our exceptionally dedicated team has helped more than 2.5 million patients last year. We achieved $726 million in revenue and delivered the highest gross margins in our history.

This progress is a direct result of our 5x30 strategy, which we introduced last year to guide our next chapter of growth. Today, one year later, I'm proud of where we stand. In our aim to help 3 million patients annually by 2030, we're already at 2.5 million and climbing.

Volume trends in 2025 have shown we're moving towards our goal of double-digit top-line growth. We are clearly on track for a 5 percentage point improvement in margins over 2024 through enhanced manufacturing efficiencies. We're advancing our goal of 5 new pipeline programs. This is demonstrated by our progress with PCRX-201, PCRX-2002, and 3 HACd-based preclinical programs. Finally, we're targeting 5 strategic partnerships. J&J MedTech and LG Chem highlight the caliber of partners joining us on this journey, and we look forward to adding more. In short, the next chapter of Pacira's growth is no longer conceptual, it is coming into clear focus.

Our flagship product EXPAREL delivered solid performance. We're now seeing early durable signs of volume-based growth we achieved in the second half of 2025. As Brendan will highlight later in the call, much of this is driven by a combination of expanding NOPAIN education and awareness, increasing commercial payer adoption, streamlining product acquisition via GPO contracting, and growing demand across all sites of care.

Last year, we exceeded our goal and ended the year with 102 million lives with CMS or commercial coverage outside of the surgical bundle. This achievement demonstrates that payors recognize the value of expanding access to EXPAREL. It also establishes a foundation for shifting both decision-making and utilization patterns.

On the IP front, we secured a volume-limited settlement with Fresenius, giving EXPAREL runway visibility through 2039. Complementing this, we strengthened our IP estate to 21 patents across 2 families. This is a dramatic evolution from the single patent we had when the first paragraph IV was filed. All of this positions EXPAREL for sustained, steady growth, consistent with the role it plays in the evolution of opioid-sparing postsurgical care.

This quarter we announced a significant partnership with LG Chem, a leading healthcare company with deep surgical and orthopedic experience. They will commercialize EXPAREL in select Asian-Pacific markets beginning with South Korea and Thailand, with regulatory filings anticipated this year. This agreement delivers an upfront payment, transfer pricing, and tiered royalties while opening access to new markets with a proven partner. We are forecasting revenues from this agreement to begin in 2027 and to extend through the life of our patents in the 2040s.

Similarly, we expect our partnership with J&J MedTech to gain traction this year. Their sales force is now fully trained and triples our reach for ZILRETTA in the U.S.

Now turning to our pipeline, the coming year will be pivotal as we enter a data-rich period with key clinical milestones that include: an interim analysis for the first half of the year that will inform next steps for our study of ZILRETTA in shoulder OA; top-line results from our Phase II study for the treatment of spasticity are expected before the end of the year, following a mid-year interim analysis. This is an important opportunity given the significant lack of innovation and patient satisfaction in this debilitating condition. And 52-week data from Part A of our Phase II ASCEND study of PCRX-201 remain on track for the end of the year.

I'd like to highlight PCRX-201, the lead program from our proprietary HACd platform, as it deserves special emphasis. 201 has the potential to revolutionize the OA treatment landscape and be at the forefront of local gene therapy for the masses. It is locally administered, nonintegrating, and mechanistically de-risked IL-1 blockade therapy. Our two-part Phase II ASCEND study is assessing safety and tolerability of PCRX-201. Like most Phase II studies, ASCEND is not powered for efficacy. The primary objective is safety, but we'll be looking for efficacy trends as measured by key secondary endpoints.

Later this year we will report top-line data from Part A of the study, which randomized 49 patients. This is an important study that will yield more valuable insights than a typical Phase II study since it includes an active steroid comparator. In parallel, we're rapidly establishing a commercial viable manufacturing process to enable Part B enrollment to start around mid-year. Part B will enroll approximately 90 patients.

We're also planning a Phase II study of PCRX-2002 for patients undergoing bunionectomy surgery that we expect to begin later this year. This is our longer-acting, easy-to-administer bupivacaine-based polymer gel. We believe 2002 is highly complementary to EXPAREL, particularly in procedures where nerve blocks are not ideal. These programs exemplify our portfolio strategy, which is balancing innovative, derisked assets across acute and musculoskeletal health settings.

As Shawn will highlight later in the call, we remain disciplined stewards of capital investing in growth and innovation. In parallel, we returned capital to shareholders with $150 million of stock repurchases, reducing the outstanding shares to 41 million.

In summary, what a difference a year makes. Across every dimension or corridor of our business, strategic, clinical, commercial, financial and operational. Pacira is stronger today than it has ever been. We have reinvigorated EXPAREL growth in the U.S., established a foundation for ex-U.S. revenue to begin next year, robust IP supporting a long-term EXPAREL runway, commercial partners of exceptional quality, and a pipeline poised to deliver meaningful data. Collectively, all grounded in a clear strategic plan with our 5x30 initiatives.

With that, I'd like to turn the call over to Brendan to share more details on our fourth quarter commercial performance. Brent?

Thank you, Frank, and good afternoon to all joining us today. I'm very pleased to review the increased commercial momentum achieved in 2025, which reflects both disciplined execution and a clear strategic vision.

I'll focus today on our flagship product, EXPAREL. Expanding patient and provider access to our best-in-class long-acting analgesic was our top priority in 2025. As you know, Pacira has been the driving force behind a multi-year initiative to get the NOPAIN legislation across the finish line. This underscores our leadership in the space and our patient-focused mission.

We're now just past the 1-year mark of the rollout of NOPAIN, and the progress it has yielded is exceeding our expectations. In a recent survey of nearly 750 physicians and pharmacy leaders, 82% view NOPAIN as important for advancing nonopioid stewardship. 92% believe NOPAIN is already contributing to reduced opioid prescribing. And nearly half report changes taking place across protocols, formularies, and prescribing patterns. This research aligns directly with the original intent of NOPAIN, which was to reduce unnecessary opioid exposure around surgery by providing appropriate reimbursement for proven alternatives.

We continue to validate these findings with claims data, and the early signals are quite encouraging. The momentum is real. NOPAIN provided the initial catalyst to begin knocking down the financial barriers that have historically prevented best-practice pain management. For decades, bundled reimbursement incentivized the use of cheaper, generic approaches that often incorporate opioids. Increasingly, this is no longer the case. With NOPAIN, we secured separate reimbursement at ASP plus 6% for Medicare patients in outpatient settings. This was a great starting point.

Getting commercial plans to follow suit, with access-creating reimbursement has helped accelerate change in the market. Here, we've exceeded our internal goal and ended 2025 with 102 million lives with EXPAREL coverage outside the surgical bundle. This represents a notable shift in policy for some of the largest payers, including Aetna, Cigna, Tricare, and Humana, among others. We will continue to expand our commercial coverage in 2026 to further broaden access in the months ahead.

Our access efforts are strategic, focusing on key markets with high procedural volumes. We have significantly expanded payor coverage in our top 5 states, which account for roughly 40% of EXPAREL volumes. This directly translates into growth in our fourth quarter volumes collectively up more than 7% in these markets over 2024.

On top of these important reimbursement wins, our strategic pricing programs are delivering results. Through these growth-focused pricing programs, healthcare systems can afford the opportunity to be at the forefront of opioid-sparing pain management. Our contracted business drove high single-digit volume growth in the second half of 2025, double the volume growth we saw in the first half of the year.

To further expand market access, we are generating real-world data to further highlight the EXPAREL value proposition to payers. We have several health economics and outcomes studies on track for presentation at upcoming congresses, including: the Academy of Managed Care Pharmacy; the Orthopaedic Research Society; and the American Society of Regional Anesthesia and Pain Medicine.

Our initiatives include the comprehensive real-world IGOR registry, which now has more than 3,200 OA patients enrolled and is providing valuable information for EXPAREL, ZILRETTA, iovera, as well as other products. These data will help guide best practices for osteoarthritis patients along their treatment journey.

In summary, we are encouraged by the progress made establishing a strong foundation in 2025. As a result, EXPAREL is well positioned to drive steady top-line growth in 2026 and beyond.

With that, I'll turn the call over to Shawn for his review of the financials.

Thank you, Brent. I'll start with an update on sales and margin trends. Fourth quarter EXPAREL sales increased to $155.8 million versus $147.7 million in 2024. Volume growth of approximately 7% was partially offset by a shift in vial mix and discounting from our third GPO going live, with each having a roughly equal impact. As we move forward in 2026, we expect the delta between volume and revenue growth in the first half of the year to be similar to the second half of 2025 and then narrow after we anniversary our third GPO agreement mid-year.

Fourth quarter ZILRETTA sales were $33 million, essentially flat versus 2024. For iovera, fourth quarter sales grew to $7 million versus $6.5 million in 2024.

Turning to gross margins. On a consolidated basis, our fourth quarter non-GAAP gross margin improved to 80% versus 79% last year. 2025 gross margins benefited from better-than-expected yields from both of our enhanced larger-scale 200-liter EXPAREL facilities.

These higher production volumes resulted in lower per-unit costs. This performance benefited cost of goods sold, but also placed us ahead of our 6-month inventory target. As a result, we have adjusted production volumes accordingly and anticipate exiting this year at our targeted inventory and steady-state production. Going forward, through our continuous improvement initiatives, we expect a steady increase in annual gross margins over time. This places us on track for achieving our 5x30 objective for a 5 percentage point improvement by 2030 over the 76% non-GAAP gross margins reported in 2024.

For non-GAAP R&D expense, the fourth quarter increased to $34.4 million from $22.0 million reported last year. This increase relates to the $5 million upfront payment to Amicus Therapeutics for the in-licensing of PCRX-2002, our advancing Phase II development program for PCRX-201, as well as expenses associated with the ZILRETTA and iovera registrational studies.

Non-GAAP SG&A expense came in at $91.9 million for the fourth quarter, which is up from $70.6 million in the fourth quarter of 2024. Fourth quarter SG&A was impacted by unanticipated costs associated with business development due diligence and litigation.

As for the balance sheet, we exited the fourth quarter in a position of strength with $238 million in cash and investments. With a business that is producing significant operating cash flow, we believe we are well equipped to advance our 5x30 strategy and create shareholder value.

With respect to capital deployment, we will continue to maintain a disciplined and strategic approach focusing on 3 key areas. First, driving top-line growth by leveraging our existing commercial infrastructure.

Second, advancing an innovative pipeline and becoming the leader in musculoskeletal pain and adjacencies. We are prioritizing accretive in-market assets to leverage our established commercial footprint and derisked clinical-stage programs.

And third, opportunistically returning capital to shareholders. During the fourth quarter, we executed an additional $50 million in share repurchases. As a result, we retired approximately 2 million shares of common stock and reduced outstanding shares to approximately 41 million as of year-end.

To remind you, as of December 31st, we have $150 million remaining on our share buyback authorization, which runs through the end of this year. We will continue to be opportunistic with stock repurchases given what we believe is a significant disconnect in our market valuation. Going forward, we will continue to be highly strategic, balancing favorable operating margins while advancing our 5x30 strategy.

That brings us to our full year financial guidance for 2026 as follows: Total revenue of $745 million to $770 million. For EXPAREL, sales of $600 million to $620 million. As Brent mentioned, we believe the brand is well positioned for a steady cadence of growth in 2026 and beyond. With respect to quarterly trends, we expect 2026 to largely follow historical patterns.

In terms of percentage contribution to full year EXPAREL sales dollars, we expect the first quarter to be approximately 1 percentage point lower than the previous few years due to the impact of the January and February storms. For the remainder of the year, we expect the second and third quarters to be evenly balanced, and the fourth quarter to remain in line with prior years' trends as the highest contributor to full year sales dollars.

Lastly, as a reminder, while the fourth quarter is typically EXPAREL's strongest in terms of dollars, it is not always the highest in terms of year-over-year growth percentage.

For ZILRETTA and iovera, we are currently assuming 2026 will be in line with 2025. As we gain more visibility into our J&J partnership and other ZILRETTA and iovera initiatives taking hold, we will update accordingly.

The final components of our 2026 revenue guidance relate to $7 million in revenues expected from our EXPAREL licensing agreement for the veterinary market.

Non-GAAP gross margins of 77% to 79%. With respect to quarterly cadence, we expect the first 3 quarters' margins to benefit from sales of lower-cost inventory. For the fourth quarter, we expect margins to be below our full year range due to the sale of higher-cost inventory as well as shutdown-related costs and other expenses.

Non-GAAP R&D expense of $105 million to $115 million. At the midpoint, this represents a 5% increase over 2025 and aligns with our 5x30 strategy to transition into an innovative biopharmaceutical company.

Non-GAAP SG&A expense of $320 million to $340 million. At the midpoint, this is a slight increase over 2025 since we are now leveraging our existing commercial infrastructure which is well equipped to support growth.

Stock-based compensation of $54 million to $62 million. And lastly, for those modeling adjusted EBITDA, we expect our 2026 depreciation expense to be approximately $30 million.

With that, I'll turn the call back to Frank.

Thank you, Shawn. I'm incredibly proud of our team and energized by the opportunities ahead. While we made great progress in 2025, I'm even more excited about 2026. As I've said before, this is a year of Pacira. A year in which we bring bold ideas, high energy, and commitment to transforming what's possible in nonopioid pain management.

With that, we're ready to open up the call for questions. Operator?

[Operator Instructions] Our first question comes from Dennis Ding with Jefferies.

This is Anthea on for Dennis. I had a quick one around the OA read out. In terms of trends and efficacy that you were talking about, what exactly do you think constitutes a clinically meaningful signal there? Provided that we are not expecting a stat sig.

Thanks for the question. With regard to I believe you mentioned PCRX-201 Part A trial that will read out at the end of the year. And just to remind folks, we enrolled 49 patients in that trial. And we expect to report the results near year end.

And with that said, I'm going to turn it over to Jonathan Slonin, our Chief Medical Officer, to take you through the endpoints that we're actually going to be reporting out on and then I'll provide some additional context. So Jonathan?

Thank you, Frank. So like most Phase II studies, ASCEND is not powered for efficacy. So the primary focus of this study is safety, but we are actually also looking at important efficacy trends measured by key secondary endpoints. And so we're going to take a look at endpoints related to pain, stiffness and function. Examples are NRS pain scores. We're going to look at WOMAC for pain and stiffness and functional indicators, using KOOS and ADLs. So we will be looking at that data. Remember it's a two-part study. The first part is of 45 patients that you refer to, are already enrolled, and we will have top-line data at the end of the year, around safety and trans for our inputs.

And just let me just add on to that. Thank you, Jonathan. That just to remind folks, this one has an active comparator. So we do have a short-acting steroid on board, and certainly we have some context in terms of how short-acting steroids respond in various studies, in addition to having some data from our IGOR registry that we talked about earlier. So we'll be able to look at some of those trends. But again, I want to just reiterate what Jonathan said, this is primarily a safety study. It's not powered for efficacy, but we intend to look at the endpoints that Jonathan just articulated.

Got it. And just a quick follow up. Do you expect a certain -- do you have an internal bar of the numerical separation on some of these endpoints or is it just really looking for a separation?

Yes, thank you for that. I think again, I think this is just primarily more for safety and trends. And so we have at least some, I would say, context from our Phase I study that I believe you're familiar with and we have some context from our IGOR registry and other studies that have reported out on short-acting steroids. So again, the trial is not powered for efficacy, but we can put the data into sort of that context.

Our next question comes from Douglas Tsao with H.C. Wainwright.

Just first, just curious if we can hear some perspective, in terms of the guidance in particular on EXPAREL. What are the factors that could lead you to sort of come in at the higher end of the range, as well as maybe some of the potential sort of factors that could sort of bring you to the lower end of the range? And then I have a follow up on the 201 study.

Sure. Let me provide a little bit of highlights here and turn it over to Brent. First off, I'm really proud of what the team is able to accomplish this past year and really standing up a commercial and medical market access powerhouse, and you can see how that's paid off for us in terms of the growth that we demonstrated in volume in the second half of the year versus the first half. As well as the number of lives now that we have covered outside of the bundle. And so I'm encouraged by where we are, I expect a steady cadence of growth going forward.

And so let me turn to Brent for some additional commentary.

Yes, thanks for the question. And we'll align with the response. I think we're performing very well. We have positioned ourselves for that steady growth and this is a great starting point in terms of guidance. I think it also provides us with a little bit of opportunity for upside or downside developments from a market perspective. I think Shawn made some comments about, first quarter and some interesting storm dynamics which always have some implications for a product that is driven by procedures taking place, particularly elective procedures. But other than that, I think our investments are showing promise and are paying off. And I think our leading indicators reinforce that confidence.

And just on 201, we'll obviously get that initial data, it's not, as you said, sort of powered for efficacy. I'm just curious, is there anything that you could learn, just in combination with the Phase I data, that looks so compelling, and obviously the duration looked so promising as well, that could sort of lead you to sort of maybe accelerate the program in any way, into sort of a registrational phase.

Yes, thanks for that. So let me step back here a little bit for context. Certainly this platform is a very exciting platform, the HACd platform, and as we all know this is a locally administered gene therapy. So this could be the first gene therapy for the masses as we talk about it, as opposed to gene therapy that's systemic for a rare disease. So we're excited about this program. We're encouraged by the Phase I results.

From a Phase II perspective, what we're excited about is as Jonathan mentioned, we planned for 45 patients, but we actually enrolled 49, and we did that ahead of schedule. And so that's a good sign, and as we think about as we progress through the course of the year, as I mentioned, we'll report these data towards the end of the year. And I want to come back to safety is our primary objective, with looking at trends given what we know about how short-acting steroids respond from various data sets including our IGOR data set, and certainly we have our longer-acting ZILRETTA as context as well.

And again as context, difficult to compare cross studies but the Phase I study as you mentioned was compelling with 72 patients that we've now followed out to 3 years. And so given all that, we'll take all that into stock and report out at the end of the year.

And just to remind that Phase II Part B is scheduled to start enrolling mid this year with a commercially viable product. And so this is important and our target is to enroll about 90 patients there. And those data along with the Part A data will certainly inform how we proceed in terms of an accelerated fashion, base case fashion, et cetera., for the remainder of the development program. So what I'm encouraged about is as you know we have RMAT designation which provides us the opportunity to regularly communicate with the FDA, and I would say so far the discussions have been constructive.

Our next question comes from Les Sulewski with Truist Securities.

Frank, perhaps when taking the 5x30 plan into consideration, could you help us bridge the double-digit revenue growth target versus the just introduced mid-single-digit growth for 2026? And then specifically for EXPAREL, would you frame the 6% growth for this year as conservative, or does it reflect specific headwinds you're already seeing in 4Q or 1Q? And I have a follow-up.

Sure. And let me address the second question first. As Brent mentioned, we're confident about what we've done here in 2025 as a good indicator of what we're going to do in 2026. And it's a good starting point, and it's, I think, a good place to start given what we believe is a relatively soft market in terms of elective procedures. So it gives us an opportunity and room for any upside or downside as the year progresses in the elective procedure market. So I want to really reiterate that.

Secondly, as we think about now 5x30, as I articulated earlier on, we're making very good progress towards 5x30. And I would think about what we've done in the second half of last year, what we've committed to this year, and as we move forward, as we move forward, I would expect that we would continue to drive broader access in terms of covered lives outside of the bundle. I would expect that we would extend our reach for both EXPAREL and ZILRETTA further, through partnerships as we've talked about.

And in addition, starting in 2027, we will have contribution from ex-U.S. sales of EXPAREL. And so as I articulated, we signed with a very strong partner in Asia Pacific, LG Chem, and we intend to sign additional partnerships outside the U.S. where it makes sense, and those contributions will also help with the top-line growth. So I would say I would summarize it that way in terms of not only the core growth, but through partnerships, both here in the U.S. as well as ex-U.S., which allows us to extend our reach in a very efficient way.

As a follow-up, you reached 100 million lives now, and noting implementation and reimbursement takes some time, but it does appear that sentiment around EXPAREL is high, on the positive side. So from the feedback you're getting, is the barrier more on the adoption -- the clinical adoption, rather than reimbursement that you're seeing?

So let me provide a little bit of context and I'll turn it over to Brent here.

I have to say I'm really proud of the team in terms of what we've been able to do. We reported 102 million lives covered outside of the bundle. This is an important distinction now, covered outside of the bundle, because that's a much higher number if you just say covered. So this is outside the bundle, and what we're seeing is really encouraging signs that this momentum will continue, and that our customers are able to code and get reimbursed in ways that make a lot of sense for the patient and to the institution.

So Brent, let me turn it over to you.

Yes, for sure, thanks. Very good question. Very proud that we've gotten by the end of the fourth quarter to 102 million lives. That number has already climbed to about 110 million within the first month of 2026, and we have no intention of stopping and looking to get as many lives covered outside the surgical bundle as possible.

I'd also note that the accumulation of those covered lives has taken time. NOPAIN was an excellent start, if you watch our cadence throughout 2025, it was really the addition of those commercial lives that started to gain the attention of more of those economic stakeholders, especially in the second half of the year, and something we intend to capitalize on in 2026. So I'd it's a function of time on the one hand, and then getting the attention of economic stakeholders, particularly thinking about the difference in cost recovery for EXPAREL outside the surgical bundle which will be a key priority moving forward.

Yes, thank you, Brendan. I'll just add on top of that, I think historically, this is the spirit of the NOPAIN Act is, my sense is that folks, there was not a lot of debate about which products are good for the patients, but the financial barriers were real, both in terms of product acquisition as well as reimbursement. So on the product acquisition side, as we mentioned, we now sign GPO contracts, the last of them will lap mid this year. So that provides performance-driven incentives there to acquire the product.

And then on the remittance side, reimbursement, we're really pleased to see that, of course, Medicare provides ASP plus 6% in terms of reimbursement, but if we take a look at what the commercial setting provides, it's often much higher than that. So clinicians are able to choose the right product and now it makes financial sense for their institution as well.

Our next question comes from Serge Belanger with Needham & Company.

This is John on for Serge today. Just one for us today. I wanted to touch on ZILRETTA and the J&J MedTech partnership. Just curious what you think, if any, headwinds were that led to the relatively flat performance in '25 and what you may be looking for in '26 that could provide some confidence in establishing a growth profile now that the J&J team is fully.

Yes. Thanks for the question, John. Let me provide a little bit of context and then turn it over to Brent about what we expect going forward. As you know back in 2025, as part of our prioritization and really building a commercial medical market access powerhouse, we said we're going to prioritize EXPAREL. So that's what we did, and we focused on EXPAREL. And we restructured the sales forces accordingly to stand up a separate sales force for ZILRETTA and a separate sales force for iovera. So that caused some disruption, and that was impacting sales. So that's some of the context behind that.

And certainly, for Johnson & Johnson now, we spent last year training the team and getting them up to speed. And so let me turn it over to Brent to talk about sort of how we think about 2026.

Yes. Thank you, Frank, and great question. I would describe the latter half of 2025 as a time where both of our organizations were kind of forming our plans on the local level for the teams. And please remember that while they expand our footprint, they also have J&J has as many as 5 or 6 counterparts that would cross paths with Pacira. So just making sure that we were well coordinated in our messaging was important.

We now have entering 2026 clear growth objectives for our partner for the year, and they've added that to their incentive compensation plan, which is super critical. We also have appropriate target selection where J&J will take the primary lead on the accounts where they have existing relationships.

And they now have, for the first time ever and at, I think, a very important time in their company's life cycle, a clinically strong complement to the viscosupplements in ZILRETTA and a solution where they often have not had one. That, coupled with what ZILRETTA offers in terms of consistent reimbursement versus what has been super relatively variable, I would say, on the viscosupplement side provides a very strong complementary asset that we are optimistic in 2026. Once we gain a little traction, we'll start to show the fruits of that partnership.

Our next question comes from Hardik Parikh with JPMorgan.

I was just wondering, I know in 4Q you guys said you had some unexpected business development costs, and as you guys try to grow and diversify the business, can we think of that as maybe happening more often and kind of having some of these kind of one-off business development types of deals? Just wanted to see how active you guys think you will be going forward.

Yes, thanks for the question Hardik. And as Shawn articulated, those were due to not only business development but for some litigation as well. And so just to step back a little bit, as Shawn mentioned, our priority is to really think about how we maximize overall shareholder value, and part of that is how do we invest in the business for our core, and as you can see from the guidance, that's largely done as we think about what we do for commercial medical market access, and that's going to be relatively flat, as Shawn mentioned.

And now slowly, we're investing in R&D. And at some point, it makes sense to think about, as Shawn mentioned, accretive deals that could be products that could be dropped into the bag today that would be accretive, that we could provide synergies and that would make a lot of sense. So I think that's an important priority for us and do that in a very disciplined way, as well as to think about what are those derisked clinical assets that are in later stage of development that we have expertise in that we could carry forward.

So that's how we think about it, because it's important to think about how we replenish our portfolio and not only drive sales. And what I'm really pleased about is if you think about our pipeline now, versus just a year ago, it's quite changed. So now as we think about that 2030 and beyond horizon, we have the following: we have ex-U.S. sales of our products; we have the AmacaThera 143 now called PCRX-2002 in that time frame; we also have PCRX-201, in that around 2030 type of time frame. And so as we look at how do we continue to build our business, we'll drive against that 5x30 objective of putting more things in the pipeline, but also ensuring that we grow double digits.

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Susan Mesco for closing remarks.

Thank you, Danny, and thanks to all on the call for your questions and time today. We're excited about the opportunities ahead and remain focused on executing our 5x30 growth strategy with discipline and purpose. As we move through 2026, we are confident in our ability to build on our momentum and position Pacira for long-term success. Thank you again for your continued support and be well.

This concludes today's conference call. Thank you for participating, you may now disconnect.

Hi, everybody. I'm Hardik Parikh at JPMorgan covering large-cap pharmaceuticals. I am pleased to have Frank Lee here, CEO of Pacira. He's going to start off with a presentation, and then we'll end up doing a little Q&A afterwards. Thank you.

All right. Thank you, Hardik, for the invitation. Good morning, all here at JPMorgan and those of you following us online.

So let me just kick this off with some forward-looking statements and start out with a quick overview of Pacira. Our mission is to deliver innovative non-opioid pain management therapies to transform lives. And we do that by following some simple guiding principles like keeping the patient at the center, following the science and treating our people well. 10-plus years of leadership in this space, -- last year, we reported actually early this year for last year, unaudited sales of $726 million, 800-plus employees that are highly engaged around our mission. And to date, 18 million-plus patients that we've helped.

Three products that are in line, in market in our portfolio. EXPAREL is our flagship product, the nerve block; ZILRETTA, long-acting corticosteroid for osteoarthritis pain; and iovera°, a medical device that uses cryoneurolysis to deliver pain management solutions.

And we're transforming lives, lives like Lea, a division 1 soccer player who injured herself, needed surgery and because of her family's issues with opioid abuse, wanted to make sure she had a non-opioid solution, and she got it and really recovered well. Folks like Dr. Bishai, who is an orthopedic surgeon who has used EXPAREL on so many different cases and actually had it utilized it for his own surgery and again, recovered well with little to no opioids. So many stories about how we're helping patients and transforming the lives and helping recovery with little to no opioids.

So I sat here or stood here about a year ago, and so much has changed. And the headline here is that the next chapter of growth is really coming into focus for Pacira. So if I take you back to January of 2025, where were we? Well, we were more near-term focus, a narrow focus on pain, slow top line growth, inconsistent margins with suboptimal inventory levels, uncertain EXPAREL runway. Recall at the time, we didn't have clarity on the settlement on EXPAREL, limited pipeline and partnerships and finally, volatile stock price performance.

So where are we now? 5x30 strategy with a broader focus on musculoskeletal pain and adjacencies. We built a powerhouse commercial medical market access organization that is now delivering growth, and we'll talk about here shortly. We reached a volume-limited settlement with the first filer, [ Fresenius Hengrui ] that gives us visibility out to 2039. And we have a very strong IP estate in a very different place than we were the first Paragraph IV filer and that includes 21 patents, 2 different families to defend against any future Paragraph IV filers.

More robust top line growth, and the highest historical margins that we've had in this company. Our manufacturing team has done a tremendous job of improving our manufacturing efficiency and robustness of that process. And since January -- between the period of January 2 and December 28, we saw a 40-plus percent increase in our stock price.

We've got an engaged group of people who are very much committed to this mission of transforming lives. And importantly, this year, it's not just about our core business that's in line. But this year, we're entering a period that's data-rich from a pipeline perspective. And so I want to talk a little bit about that. We've got 3 data catalysts coming up that will be very important in addition to the in-line sales growth.

5x30. We unveiled 5x30 a year ago at this meeting. And what does it say? What are the 5 things that we want to accomplish by year 2030. First and most importantly, we want to help more than 3 million patients by year 2030 in that year. And last year, we ended the year helping 2.5 million patients. We also want to achieve a double-digit top line growth rate, and we'll talk about how we're doing there.

Profitability, 5-point expansion in margin. We're well on our way based on our performance. Pipeline, adding 5 new programs into the pipeline, and we've made very good progress there. And finally, partnerships, 5 partnerships because we know that the things that we want to get accomplished, there are places in the world, parts of development, et cetera, that are better done with partners than by ourselves.

So here's how we've done. So going back to number one, our goal of $3 million, we're at $2.5 million. We ended last year with $726 million in unaudited sales. Profitability, we guided to 80% to 82% margin. We'll have the final results in February when we provide guidance, but you can see the baseline is at 72% -- 76%, sorry.

Pipeline, PCRX-201, our local gene therapy for the masses. This is very different than systemic gene therapy for rare populations. And I'll talk more about why this is going to be very, very important and potentially transformative for patients here shortly. We in-licensed PCRX-2002, previously called AmacaThera-143, and this is going to be complementary to our flagship product, EXPAREL. It's going to be easy to use, longer-lasting solution that's instilled into the surgical site as opposed to a nerve block.

Partnerships. We signed a very important partnership with Johnson & Johnson Medical last year to help support the sale process for ZILRETTA. And what that effectively does is it triples our reach. So it triples the number of physicians that we can reach with ZILRETTA. Last year, they were trained and this year, they're going to hit the ground running.

Recently, a couple of days ago, we announced an important partnership with LG Chem. And for those of you that don't know LG Chem, they're a major player in Asia Pacific. They are a leader in orthopedic and pain management solutions. They have revenues over $1 billion, and they're a very important organization in the Asia Pacific region. They'll start selling EXPAREL. They have commercial rights to EXPAREL in that region, and they are also considering selling ZILRETTA in that region as well. So a very important partnership. You can see here that we've partnered with industry-leading companies, which I feel very, very good about, okay?

Some other items that we haven't touched on 5x30. Number one, down at the bottom here, you can see that we acquired a company called GQ Bio and GQ Bio is a company that has the platform, the HCAd platform that is the basis for PCRX-201. So we felt very good about PCRX-201 and thought, you know what, the platform is going to be very important. And in fact, at the third quarter earnings call, we reported that we have started 3 preclinical programs using that platform, again, locally delivered, HCAd and 3 different areas: Number one, dry eye; number two, degenerative disc disease, and number three, a canine program for IL-1 RA.

We've also had a very disciplined approach to capital deployment. So in addition to investing in our commercial medical market access, infrastructure, we also bought back $150 million worth of stock, which is quite substantial. We're now down to 41 million shares of outstanding stock.

And finally, I mentioned it before, we solidified our EXPAREL runway by not only settling with Fresenius in a volume-limited way, which is very important, that gives us visibility out to 2039. But also now we're up to 21 patents. When the first filer filed, we had 1 patent. We had 21 across 2 different families, and that first patent was also reexamined by the USPTO office. So quite the year, the team, very proud of the team. Every part of this organization contributed to our progress this year. And what I'd like to say is I don't know if you believe in Zodiac signs or not. But this year, I believe, is the year of Pacira, and specifically, if you follow this, it's a year, the fire horse. What that means is you've got a lot of energy, you're going to make some bold moves and make some things happen. So this is what we're going to do. You're at Pacira, look for the fire horse T-shirts.

I mentioned LG Chem, tremendous partner, long-standing leadership and expertise in orthopedics and pain. They'll represent us in the first wave in South Korea and Thailand, and you can see the second wave of countries here. These are meaningful markets. And in terms of what it means to Pacira outside of having a very strong partner is we'll get an upfront payment. We'll benefit from a transfer price, and we will get tiered royalties going forward.

So we've talked a lot about NOPAIN. And as you might recall, NOPAIN was something that this company championed for 7 years to get passed, and it was passed this time last year. And so what are some insights 1 year into NOPAIN or some insights. First is we have engaged a robust and broad group of stakeholders to change behavior. That's what it takes.

So NOPAIN was an initial catalyst, which is important. And as you might recall, NOPAIN provides separate reimbursement for 11 products, EXPAREL included as well as iovera° at ASP plus 6 for Medicare patients in the outpatient setting. So that's a good spark. But it's not sufficient. What we have to do is pull that through by making sure that commercial payers adopt so that it becomes the majority of patients that are covered by this kind of reimbursement, not the minority. Then once that happens, we've got to make sure that product acquisition is easy, effective and the incentives are aligned, read into that GPOs.

Then there's a process of really educating the stakeholders involved that, hey, you know what, you can utilize this product like you want to for the benefit of patients. So it's never been about the product. It's always been about the financial barriers, and we're knocking those things down, okay? So what does that mean? That means we're going to have a steady cadence of growth going forward on EXPAREL. It doesn't mean we're going to have an explosive cadence of growth on EXPAREL. And I think we've demonstrated that. You take a look at our second half, and remember this time last year, I said, hey, it's going to be the second half of the year before we see the growth is starting to happen. And in fact, that did, and we'll get into some of that here shortly.

Some important results. We recently surveyed almost 750 stakeholders, physicians, pharmacy directors, et cetera. And we've got a long survey here, a lot of detailed results, but I want to share 2 important highlights. First is that 82% view NOPAIN as important for advancing non-opioid stewardship. And about half have said they've taken action to a certain extent. What does that mean? That means that they made some changes to their protocols. It means adding some products to the formulary, that means changing prescribing patterns.

So they've taken some action. So we're making headway, but there's more work to do. But this next slide, when I first saw it, really made me pause, I have to tell you. 92% believe NOPAIN contributes to reducing opioid prescribing in the U.S. And when you take a deeper look into that, you can see that they believe this is reported data now, so we're going to confirm it with actual claims data that before surgery, during surgery and at discharge, they're using less opioids. They're using less opioids. So we're making a difference.

If you think about what was behind the NOPAIN legislation, fundamentally, we said, hey, we've got an opioid crisis out there. Part of what's contributing to it are these surgeries where patients are being prescribed opioids when they don't need to be prescribed opioids. There are other innovative solutions like EXPAREL and the other 11 products that can help. And we're seeing the difference, okay? We're seeing the difference.

So I really want to thank not only are stakeholders out there, health care professionals and payers, but our team for making this happen. Again, there's more work to do. This is a reported data. We're going to validate it with claims data, but we're on the right track, okay?

So let's talk more detail. I talked about NOPAIN as being important, initial spark and a catalyst, but we've got to really pull that through with commercial coverage. So we set out last year to say, "Hey, can we get to 100 million lives covered total, that CMS and commercial by end of the year." We actually exceeded that. We ended the year at 102 million covered lives, which is really good for a product that's been out there a very long time to change payer mindsets. And we're starting to get to the tipping point in these top 5 states where the majority of patients are being covered by NOPAIN-like policies as opposed to the minority, which is very important in driving utilization change.

We also said, hey, where is the early uptake happening and where is there more work to do? Early uptake took place in the ASCs and the smaller hospitals, as you can see here on the left and the bigger hospitals, it takes a little bit more time. There's a lot more stakeholders to educate and pull through.

In terms of product acquisition now, we've got over 90% of our business that's contracted. And as you can see here, all of this is starting to make a difference, because when you look at 2024 growth rates and you look at 2025 year-over-year growth rates, you see a big difference. You see that in 2025, we started out at a baseline of about 3% in terms of volume growth. And as we talked about, second half is going to be very important, and it was. And we steadily saw an increase in year-over-year growth. And you can see this is meaningful. So when I think about top line growth, it first starts with volume growth, and we're starting to see that.

In addition, the question is, how do we further expand market access -- and one of the keys to that is not only driving the idea of NOPAIN, but also driving health economics and outcomes data because sometimes the clinical data is not sufficient to convince stakeholders that they should, in fact, cover like a NOPAIN policy. And so what are we doing here? We have the largest database of its kind. This is patient registry. We're following the patients to the patient journey in osteoarthritis, over 3,100 patients and a number of other health economic studies that you're going to see being published throughout the course of this year and next year. So this provides great information for not only thinking about wider access, but in some cases, thinking about how do we think about shaping labels, okay? And provides tremendous insight along that patient journey as well for other products and initiatives that we think about.

I mentioned earlier that this year is differentiated by the fact that we're data-rich from a pipeline perspective. And I want to call out 3. Number one, ZILRETTA, OA of the shoulder. We're going to have that interim readout. That's a registrational study. Iovera° spasticity, we'll have that readout first half of this year. And that's important because, as you know, spasticity is largely treated by toxins right now. You can only use so much of that. So that's very important. And finally, PCRX-201, Part A of the Phase II study will read out at the end of this year. And I'll go into detail on some of these.

Iovera° spasticity, you can see here the clinical trial design, primary endpoint here is changed from baseline in the MAS score. And this one, as you know, with iovera°, the effect is immediate. So we look forward to seeing the interim analysis and the final results, which will happen first half of this year.

PCRX-201. As I mentioned earlier, this is gene therapy for the masses, not gene therapy for the few. This is gene therapy for the masses, locally administered. As you might recall, the Phase I data of 72 patients followed for 3 years showed very good efficacy and a very good safety profile. And so what's different here? This one now has a control group. You can see 3 different groups. And the control group is getting an active control. So that's a corticosteroid and the other 2 groups 2 different doses of PCRX-201 in addition to the steroids, so 10 to 10 and 10 to 11 doses. And this will read out at the end of this year, 52-week end point, primary endpoint being safety. This is a Phase II study. We will certainly get some trends in terms of efficacy on the WOMAC and KOOS scale, okay?

Now in the meantime, we're working very quickly to stand up a commercially viable manufacturing process. And as you know, in cell and gene therapies is very important. And so we will have that process up and running so much so that Part B of the study that will include twice the number of patients in the same design will kick off and start patients mid this year, okay?

And so just to remind you, from a mechanism of action perspective, this is derisked in a lot of ways. As you may well know, this goes after IL-1. Blocking IL-1 is inflammation cascade. There's already a product approved block IL-1. It's called Anakinra. All we're doing here with this locally administered gene therapies instructing the cells to produce IL-1RA receptor antagonist, when there's inflammation. It doesn't integrate into the genome. It stays in the knee capsule. So this is derisked from an MOA standpoint, derisked from a local administration standpoint. And so we look forward to the results.

In addition to PCRX-201, I mentioned earlier that we acquired a product from AmacaThera and this is a product that's going to be complementary to EXPAREL. So you might recall, EXPAREL is a nerve block. So it prevents pain. This one is not a nerve block. It's actually instilled into the surgical site. And so it's differentiated by both ease of use and also durability. So in healthy volunteers, this showed an effect out to 14 days.

So quite simply, what is it? It's ropivacaine. So it's not bupivacaine, ropivacaine with 2 different polymers that once instilled and it gets to body temperature, it turns into a gel and it slowly releases ropivacaine over the course of 14 days. So again, this could be a very good complement to EXPAREL for situations where there may not be someone who can administer a block or a particular surgical situation that requires this kind of approach.

Okay. So let's talk about expanding our leadership in musculoskeletal pain and adjacencies. Right now, if you take a look at our business, we've got an acute care business that is EXPAREL. We live in the hospital, community hospitals, ASCs. And we also have a muscular scale to a health business. So this is out in the orthopedic offices, sports medicine, physiatry, rheumatology.

And so what I'd love to see over time is that we sort of balance these out a bit. So as we think about where we deploy capital going forward, we've certainly invested in the commercial medical market access infrastructure, and we'd expect that to stabilize, so we can leverage that over time. We've bought back some stock, and that's been important, and we'll continue to monitor that.

But going forward, I think building this portfolio, some things that can be bolt-on in the acute care setting, a bolt-on in muscular skeletal health and also some important pipeline additions to where the mechanism of action has been derisked -- and it's actually in Phase 2 or, let's say, later, okay?

So let me wrap up with this. Let me wrap up with this. I want to say that a year, the team has done a phenomenal job of getting us here, what a year -- what a difference a year makes. Like I said, I believe this is a year of Pacira. And I noted the differences between January of last year and January of this year, and I'm excited. I'm excited by the momentum that we're generating in our core business, and we focused on EXPAREL and we're delivering on EXPAREL in terms of growth, and we'll continue to focus on ZILRETTA and iovera°. We prioritized over those 2 products. So those 2 products did have some disruption this past year, but we're going to get some footing on ZILRETTA and iovera° going forward.

And this year now, we're going to get some pipeline reads and a very important pipeline reads. And so that, combined with all the other things that we're doing around our manufacturing efficiencies and other areas really contributes to, I think, an opportunity here with Pacira as I mentioned, that the next chapter of growth is really coming into focus.

So with that, let me close and thanks for your attention, and we'll go to Q&A.

All right. So I'll start off with some high-level ones, but I know you covered this in your presentation. But just looking back at 2025, I want to know what you thought were the biggest accomplishments for Pacira? And then what are your biggest priorities kind of looking into 2026?

Yes. Well, thanks for that, Hardik. I have to tell you, I'm very proud of the team and the organization we've developed here. It shows up in our engagement surveys and it's always about people overachieving, and they're doing that across the company.

Now that said, very proud that we're able to stand up a powerhouse commercial medical market access organization that showed up through the number of covered lives that showed up to volume growth that showed up to signing GPO contracts, showed up in so many ways. Very proud of that. And now we can leverage it, add some additional products going forward, very proud.

Second is the progress that we have made in our pipeline. So bringing products in as well as advancing the products that we have, meaningful progress. So bringing in AmacaThera-143, now PCRX-2002 and advancing PCRX-201, our local gene therapy, not only in Phase II, but also getting our manufacturing processes up and running.

And finally, take a look at what we've done around partnership. So I'm a big believer that As. I do business with As. And J&J is a tremendous partner, and so is LG Chem. And so those are some of the things, and I step back and when we talked about 5x30 and we rolled it out last year at this meeting, I believe there was a very strong positive response to that. And you can see by the talk that I just gave that we've made meaningful progress and that progress is made by a really talented group of people who are super engaged about our mission. And all of this is adding up to us making a difference in how pain is managed and the decrease in opioid utilization.

Great. So in the last kind of year or so, the stock has been kind of in that tight range in the mid-20s. What do you think kind of makes it kind of come out of that range? What do you think people want to see? What you that would kind of boost that stock price?

Good question, Hardik. I think it's 2 parts. One is, I think there was a lot of uncertainty about what kind of impact NOPAIN would have. Is it a spark? Is it a wildfire? Is it something in between? And we know that from our experience now, it takes a lot of effort to drive behavior change, but it's worth it, and we're starting to see the results.

So I think that, number one, we've got to demonstrate that we can continue this growth momentum. And when we do, I believe we'll get some credit for that. okay? Number two, as I mentioned, for the first time now, we're in a data-rich period. We've got spasticity reading out for iovera°. We've got OS of the shoulder reading out for ZILRETTA, which is -- which could be the first to be labeled that way.

And importantly now, we've got PCRX-201, which could be truly transformational for patients. And as you know, we've done a lot of market research. The current view is that current treatments help patients for about 3, maybe 6 months. But if we can get patients to a year, that's considered transformational. And certainly, we're encouraged by the Phase I results, and we'll see what the Phase II Part A deliver for us.

So I think it's a combination of 2 things. One is, let's continue that momentum to drive growth, particularly on EXPAREL, and that's where we focused our efforts in some ways causing some disruption to ZILRETTA and iovera° and secondly, let's start to flip over some data cards that will be important for our future.

Okay. And you talk about the 201 asset. I know you have a Phase II going on right now. But what do you -- when you think about longer-term potential, what do you think kind of additional indications or kind of the broader use of 201?

That's a great question. So 201 is exciting because fundamentally, you think about this, and it makes sense, "hey, if you want to minimize safety impact and have a safety profile that's amenable to patients, local is good because we know the product stays there. If you want to minimize clinical risk, you go after pathways that are validated.

And this one is IL-1. We're blocking IL-1. It's been validated. There's a product approved. So I think we're on the right track here. And OA is a huge market with huge unmet need. I mean just OA of the knee alone is 14 million patients, never mind the other joints. And as you know, current products have been out there for a very long time. In fact, ZILRETTA was the last product approved in this space a very long time ago.

And so we're on the right track. Some of the other areas that we think about would be, gosh, could this be redosed? If we get patients out to a year, could this be redosed in the index knee? And so what would give us at least some insight into whether that's possible. When we took a careful look at our Phase I data, it turns out that the level of initial baseline neutralizing antibodies did not make a difference in terms of safety or efficacy. So that gives us at least a hint that, that's possible.

We also think about what about the other joints? Most people, if they have OA in one knee, they'll have it in the other knee. And so -- and if they have in the other need, they might have it in the hand or the shoulder. And so we think about that in terms of development plan. But the first step is let's really investigate this for OA of the knee and then we'll expand it into, let's say, repeat dosing and other joints.

And of course, this platform, as I mentioned, is an interesting platform because it's a high-capacity platform, 30,000 base payers. And so as you know, AAVs aren't as big as that, right? So we can accommodate large genes. We can accommodate multiple small genes. And this idea of local delivery minimizes not only untoward safety events, but also helps with cost of goods. And so this will be able to market priced as opposed to read into a typical gene therapies might be a really big numbers that we're all aware of.

So last year, first year of NOPAIN, you were able to kind of achieve good acceleration in EXPAREL growth. What -- you mentioned kind of challenges with kind of some pockets where being bigger hospital chains and what do you see as kind of the biggest variables for 2026, one way or the other when you kind of look at a more granular level?

Yes, that's a good question. So in the launch here, sometimes you have these onetime events that you're not quite sure exactly when they're going to hit, right? And so we've gone through most of that already now. If you think about when are certain payers going to come online, okay? When are certain GPOs going to be signed? So those are some questions that were up in the air at the start of the year.

And now we're largely through a lot of that. So of course, we'll continue to build on the momentum we've generated from a payer standpoint and drive that. And we're going to anniversary the third and final GPO mid this year. So that's going to be important, right? And so I think we're set up for a good year going forward, recognizing that, look, quarter 3 was about 9% volume growth, quarter 4 or 7% volume growth. So we could debate on could it be -- could it have been higher or lower, but I want to come back to in a launch year, you have some timing events that sometimes you can't predict exactly.

And of course, we're trying to change behavior of a product that's been out there for over a decade, right? And so kudos to the team. And in my experience, there haven't been very many products mid- to late life cycle that have been able to go back to growth again. If you know of one, let me know. And EXPAREL will be the first.

And you talked about being on the -- sorry.

Can you talk maybe about ways to make the procedure easier for physician, either administration, less shots, easier shots, just other ways to either get surgeons to do more to bring in surgeons on?

You're talking about EXPAREL? Okay. Yes, education is super important, both for anesthesiologists who oftentimes are doing the blocks and also on certain occasions for surgeons. What we're doing there, we have a very talented group of professional education folks that can educate on site at our Tampa facility, educational facility or one of our other facilities. And we also send out clinical educators to help with that. So it's not an insignificant effort, but it's an important one. In addition, we're engaging early on with fellows so that they're very much apprised of how to do these kinds of blocks. So it's really down to education, and we spend a lot of time and effort around that.

Just ways to make it faster or easier to do?

Faster?

Just administration. Is that a challenge for some physicians?

We haven't heard that, no. We haven't heard that. It's really about the technique and making sure one is comfortable with the technique.

Great. So you mentioned about the product has been in the market for over a decade now, right? So is there a process of having to kind of reeducate? Are you talking about starting with fellows getting them early. Is there a process of having to reeducate the broader community on the benefits of EXPAREL and using it and how to kind of get the best out of it?

So it's a good question. I think there are some who've always believed in EXPAREL. And as I mentioned earlier, there's been a financial barrier that, for example, perhaps it wasn't supported by the pharmacy or other leaders in that institution. And so we're knocking down those barriers in the ways that we just talked about with broader payer access with better acquisition price that's performance-driven and better education. So we're doing that.

For some, they needed additional data to convince themselves. And so that's why we believe in investing in iGOR, this patient registry, which is a super high quality as well as doing other health economic analysis to show that there are benefits not only financially, but there are also other benefits that aren't quite captured by clinical studies in terms of how they sleep, their mood. There's a lot of things there that are important to patients that are often are not captured by clinical studies, but are important in clinical decision-making. So we've done that.

And we've also started to educate patients in a very targeted way to say, "Hey, there are opioid sparing and opioid-free options that you should ask your physician about, whether you're having a surgery for your knee or other parts where you're having third molar surgery, et cetera, ask your physician. And certainly, we get a lot of inbounds around that, too.

Okay. And in 2024 and March 2025, a lot of your sales force was kind of focused on making sure that hospital administration was aware of how NOPAIN works, how the reimbursement process works. Looking at 2026, what are those efforts? Are they more still around educating around NOPAIN? Or is it more what you just talked about educating the doctors or more patient targeted?

Yes, it's a good question. So let me give a little context here. When I talked about investing in our commercial medical market access capabilities, previously, we had one field force selling all 3 products. Now we took that one field force and so that we really focus on EXPAREL, We said, hey, focus on EXPAREL.

We stood up 2 separate sales forces for one for ZILRETTA, one for iovera°. Why that makes sense? Well, you want medical device folks selling a medical device, not pharma folks selling a medical device. And so that's starting to show signs of benefit. With ZILRETTA, we knew that, that effort, that size wouldn't be sufficient. So we got a great partner in Johnson & Johnson. So from a purely promotional standpoint, that was important for focus on EXPAREL.

And like I said, I think we had some disruption on ZILRETTA and iovera° because of that, okay? And so then it's really about making sure we're educating pharmacy as well as the leadership as well as the physician stakeholders, the billers and coders. So there are a number of stakeholders, and we're on a, I would say, a good trajectory here. We know that it can be done, but the work is not done.

And so we'll continue. But we're on the right track in terms of how we spend our time with certain stakeholders. And so we'll continue to do that. And I think what to look at going forward would be how are we doing around market access and commercial lives cover And how are we doing now on really changing behavior at that local institution. And so because from a GPO standpoint, the contracts are in place that are volume and performance driven.

So I think it's really about that. I don't think it's about any sort of course correction. So when I come back to -- I think this is really a year of Pacira. We've done a lot of heavy lifting here and put things in place. We're starting to see some early signs that we're on the right track. And it's a matter of like sticking to it and executing on it. And so that's what we intend to do, not only for EXPAREL, but ZILRETTA and iovera°. And as I mentioned earlier, what a great opportunity this year to build on the data catalyst that we have for the first time and add to our portfolio, those bolt-on things that could be accretive right out of the gate, maybe small things that could be put into the bag and also derisked clinical assets that are sort of in our wheelhouse, right?

So that will be our focus. So no changes, no big changes in strategy. We've done a lot of that heavy lifting over the last 2 years. And as I mentioned, we're in a very different place from where we were just a year ago.

Got you. And just one last quick question. We have 30 seconds left. But you had a very favorable kind of settlement with [Hengrui]. I was just wondering how you're approaching it at least at high level with these 2 new ANDAs that you...

Yes. Let me just first say that we're in a very different place now than where we were with the first Paragraph IV filer. Believe it or not, we only had 1 patent in that first Paragraph IV filer. We now have 21 across 2 different families. And actually, that first patent has recently been reexamined and strengthened for the feedback that we got at the New Jersey Court. So we feel very confident about our IP estate. Nothing is going to happen in the near term. And I think that we're in a very good position to have visibility for EXPAREL for a very long time.

And so -- and we're very pleased with the volume limited settlement that we have with Fresenius that gets us out to 2039. And so bottom line is this franchise will throw off a lot of cash going forward, and we're going to be very disciplined about how we invest it to drive shareholder value.

Great. Thanks, Frank. We're out of time, but I really appreciate you being here.

Good day, and thank you for standing by. Welcome to the Pacira BioSciences Third Quarter Earnings 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, Susan Mesco. Please go ahead.

Thank you. Good afternoon, everyone. Welcome to today's conference call to discuss our third quarter 2025 financial results. Joining me are Frank Lee, Chief Executive Officer; Brendan Teehan, Chief Commercial Officer; and Shawn Cross, Chief Financial Officer. Jonathan Slonin, our Chief Medical Officer, is also here for our question-and-answer session.

Before we begin, let me remind you that this call will include forward-looking statements subject to the safe harbor provisions of federal securities laws. Such statements represent our judgment as of today and may involve risks and uncertainties. This may cause our actual results, performance or achievements to differ materially. For information concerning risk factors that could affect the company, please refer to our filings with the SEC. These are available from the SEC or the Pacira website.

Lastly, as a reminder, we will be discussing non-GAAP financial measures on today's call. A description of these metrics, along with our reconciliation to GAAP, can be found in the news release issued earlier this afternoon. With that, I will now turn the call over to Frank Lee.

Thank you, Susan, and good afternoon to everyone joining today's call. We're pleased to report another successful quarter of strong execution across our corporate, clinical and commercial initiatives. We're seeing top line growth accelerate with year-over-year revenues increasing by 6%, driven by a strong quarter for EXPAREL and iovera. We continue to make important progress advancing our 5x30 path to growth and value creation.

To remind you, this plan supports 2 broad strategic initiatives: first, growing our best-in-class commercial-based business; and second, advancing an innovative pipeline of potentially transformative assets such as PCRX-201. Notable third quarter highlights include increasing EXPAREL demand with year-over-year volumes up approximately 9%. This is the highest quarterly growth we've seen in over 3 years and underscores the value of our commercial investments, improving manufacturing efficiencies and favorable gross margin supporting our second increase in full year guidance, significant cash flows and a strong balance sheet, enabling investments in new growth initiatives, meaningfully expanding our clinical pipeline with the in-licensing of AMT-143. This complementary long-acting non-opioid directly aligns with our 5x30 strategy and has the potential to provide longer pain relief versus currently available local analgesics.

Disciplined and strategic capital deployment, including share repurchases of another $50 million. And finally, solidifying our exclusivity runway with the listing of our 21st EXPAREL patent. This now appears in the FDA's Orange Book and additional patents are forthcoming.

I'll begin with a high-level overview of our commercial portfolio, where we're seeing improving trends for each of our products. For our flagship product, EXPAREL, momentum is on the rise as a result of strong execution, expanding market access, awareness and utilization. On the market access front, we continue to make important strides improving patient access to opioid-sparing pain therapies. To that end, our GPO partnerships and performance-based contracting are delivering and growing our EXPAREL user base. We continue to secure key wins with additional national and regional commercial payers now providing separate EXPAREL reimbursement. We remain ahead of plan and expect to surpass our full year goal of 100 million covered lives across commercial and government payers.

Turning to Zilretta, new initiatives to better support this promotionally responsive product are underway. We're confident the foundation is in place for a return to growth. Our colleagues at Johnson & Johnson MedTech are now trained and active in the field. This partnership is a great example of 5x30 in action. We have tripled our commercial footprint, which we believe will provide a meaningful incremental growth. Lastly, iovera had a strong third quarter as a result of its dedicated sales force and other commercial investments.

On the manufacturing front, the team continues to make important progress with third quarter gross margins supporting another increase in guidance. Switching gears to the pipeline. Here, we're focused on becoming the therapeutic area leader in musculoskeletal pain and adjacencies. These are large markets with high unmet need. Our clinical initiatives center around advancing an innovative pipeline along with life cycle management for our commercial base. For new product development, we're prioritizing complementary mid to late-stage derisked opportunities spanning the patient journey.

PCRX-201 is a great example that's advancing in a Phase II study for osteoarthritis of the knee. Interest in this study has been high, and we recently concluded enrollment for Part A ahead of plan, placing us on track for 12-month data next year. The data continue to underscore PCR-201's potential to revolutionize OA treatment landscape and be at the forefront of local gene therapy for the masses.

Last month, we presented 3-year follow-up data from the Phase I study at the American College of Rheumatology Convergence. These data demonstrated sustained efficacy with improvements in pain, stiffness and function for over 3 years. Importantly, efficacy was observed across all structural severity subgroups, including the most severe. Investigators also highlighted that pre-existing neutralizing antibodies did not affect PCR-201’s efficacy or safety at all 3 doses.

Natural immune responses are a major obstacle for gene therapies, and these preliminary data indicate the potential for redosing. We also expanded our pipeline with the recent in-licensing of AMT-143, a novel long-acting formulation of bupivacaine. This asset sits squarely in our wheelhouse, given our deep expertise in long-acting locally administered pain therapeutics.

This franchise-enhancing asset is highly complementary to EXPAREL and will allow us to serve a broader range of patients and health care professionals. Its innovative hydrogel technology is a proprietary combination of 2 polymers. It's easy to administer, requiring only installation into the surgical site with minimal reliance on specialized technique. The hydrogel rapidly forms a slow-release depot as it warms to body temperature. In a Phase I study, AMT-143 demonstrated sustained analgesic release through 14 days. This supports its potential for several days of pain control, which would be the longest duration among currently available local analgesics. These data, along with bupivacaine's validated mechanism of action provide an attractive development risk and differentiated product profile. We expect to initiate a Phase II program next year, which places on track for commercialization to begin within our 5x30 time frame.

Given its strong commercial synergies, we expect it to be meaningfully accretive to cash flows and earnings. With respect to our HCAd-based preclinical portfolio, we prioritized 3 programs, all with disease-modifying potential in painful conditions of high unmet need. PCRX-1003 for degenerative disease, addressing a major cause of chronic back pain with few currently available effective therapies. PCRX-1002 for dry eye disease, a widespread condition where current treatments offer only temporary relief and PCRX-1001 for canine osteoarthritis, which has strong out-licensing potential for a large market lacking durable solutions.

Switching gears to life cycle management. Here, we're highlighting the value of our products with real-world data. Last month, we presented 3 health economics and outcome studies at the AMCP Nexus. The use of EXPAREL was associated with reduced opioid use, lower costs and improved recovery outcomes. Our comprehensive real-world IGOR registry now has more than 3,000 OA patients enrolled. As you know, OA is a unique condition that patients live with for decades and receive a myriad of pain treatments as their disease progresses. IGOR is positioned to provide in-depth insights into the patient journey. We're capturing clinical and economic data as well as patient-reported outcomes for all 3 of our products. Its potential for meaningful evidence is better than any known OA registry of its kind. And to round out the pipeline discussion, our 2 registrational studies for Zilretta in the shoulder OA and iovera in spasticity are progressing. We expect to have interim data readouts from both studies next year.

The last item I'll touch upon are the recent Paragraph IV notifications. And as you know, generic attempts are common for successful products like EXPAREL. A great deal has changed since the first genetic filer, where we had one patent at the time. Our current EXPAREL patent estate is stronger than it's ever been, and the team continues to innovate to further solidify our runway. Bottom line, any [ ANDA ] filer has a very high series of hurdles they will need to overcome to be commercially successful. We intend to vigorously protect our intellectual property and have an expert team focused on advancing our legal strategy. As for the rest of us, we're sharply focused on driving growth and remain confident EXPAREL will be a key growth driver of our success for the foreseeable future. With that, I'd like to turn the call over to Bren to share more details on our commercial performance in the third quarter. Bren?

Thank you, Frank, and good afternoon to all joining us today. I'm excited to share highlights of the terrific progress we've made over the past few months on the commercial front. Building on our first half trends, we further increased our revenue growth rate in the third quarter, driven by improving EXPAREL volume growth of roughly 9%. This is nearly 3x the first quarter volume growth rate of 3% and significantly higher than our second quarter volume growth rate of 6%.

As Frank mentioned, this underscores the value of our commercial investments and positions us for significant and sustainable revenues going forward. We're seeing continued momentum from leading indicators as we head into year-end. These data reinforce our confidence that EXPAREL will be a key driver of our 5x30 objective of 5-year double-digit CAGR for revenue. I'll start with market access, where we continue to reshape the value story for our customers. In addition to clinical value, our accounts consider market access for their specific patient population when making treatment decisions. Here, we're using real-world evidence to highlight EXPAREL's clinical and economic value to national, regional and local commercial plans.

We're excited to report that we continue to track ahead of plan and are maintaining an accelerated pace, expanding our commercial coverage map with NOPAIN like policies covering EXPAREL outside of the surgical bundle. We currently estimate that approximately 60 million commercial lives now have access to EXPAREL via the separate reimbursement mechanism. This places us ahead of plan with a total covered population of nearly 90 million lives across both commercial and government payers. As we build this critical mass of coverage, we're communicating these advances to our customers and are very encouraged to see them expanding EXPAREL utilization as evidenced by our growth.

Our access efforts continue to be strategic, focusing on key markets with high procedural volumes. We have prioritized our top 5 states, which collectively account for approximately 40% of EXPAREL volumes, where we are steadily expanding coverage. Access here is increasing utilization with third quarter volumes up more than 10% collectively in these markets. Coupled with this progress, we continue to see strong and growing utilization of the EXPAREL J-code for both commercial and Medicare claims.

We're also expanding access through compelling strategic pricing programs. Through these preferential pricing programs, health care systems for the opportunity to be at the forefront of opioid-sparing pain management. Our pricing strategy is having a positive impact with our contracted business delivering year-over-year volume growth in the low teens. We expect volumes to improve over time with only a modest impact on net sales dollars. On the GPO front, our third partnership went live in June and is off to an excellent start. Since launch, we have seen significant growth in volumes from accounts within this network, exceeding our forecast. With our 3 GPO networks and individual agreements with health care systems, more than 90% of our EXPAREL business has contracted pricing. Importantly, these are performance-based and designed to maintain and grow both volumes and revenues.

In addition to providing our customers with favorable pricing, we are assisting patients in new ways with our recently launched patient assistant programs to further support best practice patient care. Our support specialists are helping qualified patients overcome financial and administrative barriers, minimizing patient out-of-pocket costs. All of these programs have created market access that is more favorable than it has ever been with more key milestones on the horizon for all 3 of our products.

Given our strong progress on the market access front, we believe the time is right to mobilize patients to ask for EXPAREL to be part of their treatment plan for postsurgical pain. We rolled out several targeted digital pilot programs in the first half of the year to advance patient and physician awareness and engagement. We're seeing encouraging early signs from these campaigns. Since launch, overall EXPAREL website traffic is up more than 70% across both consumer and health care provider platforms. This is an excellent indicator that our refreshed marketing approach is resonating. Importantly, patient and caregiver awareness, coupled with improved access is translating into real-world volume growth for EXPAREL.

Looking at the sites of care, we continue to see strong adoption in ambulatory surgery centers with this setting delivering third quarter volumes up more than 25% over last year. As you know, decision-making in these settings is more streamlined, enabling faster adoption to take advantage of the new reimbursement policies. In the hospital setting, year-over-year volume growth has improved from mid-single digit to a high single-digit percentage. As expected, faster adoption is taking place within community hospitals, where we saw third quarter volume growth in the low teens. Switching gears to our other commercial products.

For Zilretta, we're currently expanding our reach through our new partnership with J&J MedTech. In addition, we've rolled out key programs to expand utilization, including our new patient support hub and co-pay assistance programs as well as performance-based agreements with our top customers. We believe these will help meaningfully overcome barriers to Zilretta utilization.

For iovera, our sales force realignment is kicking in, and we are seeing a small but growing uplift from the [ MEDEO ] branch launch and improving reimbursement from NOPAIN. We are also ramping up reimbursement training and launching additional customer-facing materials around our new patient services hub.

In summary, we believe we are well positioned for a strong finish to 2025 with improving growth ahead. I will turn the call over to Shawn for his review of the financials.

Thank you, Bren. I'll start with an update on sales and margin trends. Third quarter EXPAREL sales increased to $139.9 million versus $132.0 million in 2024. Volume growth of 9% was partially offset by a shift in vial mix and discounting from our third GPO going live with each having a roughly equal impact. As Bren mentioned, third quarter volumes within this network were ahead of plan, which resulted in a slightly higher-than-expected single-digit year-over-year impact to our net selling price.

As we move forward into 2026, we expect volume growth and revenue growth to converge over time as we anniversary these 3-year agreements. Third quarter Zilretta sales were $29.0 million versus $28.4 million in 2024. Looking ahead with our new partnership with J&J and other commercial investments, we believe the stage is set for improving growth. For iovera, third quarter sales grew to $6.5 million versus $5.7 million in 2024.

Turning to gross margins. On a consolidated basis, our third quarter non-GAAP gross margin improved to 82% versus 78% last year. Gross margins continue to benefit from the improved cost and efficiencies of our large-scale EXPAREL manufacturing suites. For non-GAAP R&D expense, the third quarter increased to $22.5 million from $17.3 million reported last year. This increase relates to strong enrollment in Part A of our Phase II study, PCRX-201 as well as expenses associated with the Zilretta and iovera registrational studies.

Non-GAAP SG&A expense came in at $81.7 million for the third quarter, which is up from $65 million last year. This increase is largely due to investments in our commercial, medical and market access organization, targeted marketing initiatives and field force expansion. All of this resulted in another quarter of significant adjusted EBITDA of $49.4 million for the third quarter. As for the balance sheet, we continue to operate from a position of strength. We ended the quarter with cash and investments of approximately $246 million.

With a business that is producing significant operating cash flow, we are well equipped to advance our 5x30 strategy and create shareholder value. We continue to take a disciplined approach to capital allocation where we're focusing on 3 areas: first, accelerating growth of our best-in-class base business; second, advancing an innovative pipeline and becoming the leader in musculoskeletal pain and adjacencies; and third, opportunistically returning capital to shareholders.

During the third quarter, we executed an additional $50 million in share repurchases and retired approximately 2 million shares of common stock. To remind you, we have approximately $200 million remaining under our current share buyback authorization, which runs through the end of 2026. We will continue to be opportunistic with stock repurchases given what we believe is a significant disconnect in our market valuation. As we execute 5x30, we expect to prioritize accretive opportunities that benefit operating margins to enhance shareholder value. That brings us to our full year P&L guidance for 2025.

Today, we are increasing our guidance for non-GAAP gross margins to 80% to 82% from our previous range of 78% to 80%. 2025 margins benefited from increased manufacturing efficiencies, favorable production volumes and the elimination of our EXPAREL royalty obligation. For all other guidance, we are narrowing our full year ranges as follows: revenues of $725 million to $735 million. While EXPAREL and iovera had a strong uptick in the third quarter as expected, Zilretta's acceleration has been slower than anticipated. Non-GAAP R&D expense of $95 million to $105 million, non-GAAP SG&A expense of $310 million to $320 million, stock-based compensation of $56 million to $59 million. And lastly, for those modeling adjusted EBITDA, we expect our full year 2025 depreciation and amortization expense to be approximately $30 million.

Looking ahead, we expect sustainable and significant earnings driven by improving sales, enhanced gross margins and stabilizing operating expenses. In addition, opportunistic stock repurchases and reduction in share count will further enhance EPS. So with that, I'll turn the call back to Frank.

Thank you, Shawn. In closing, I want to thank our entire team for their strong execution, advancing our 5x30 strategy and dedication to the patients we serve. I'm proud of the significant strides we've made this year across our corporate, clinical and commercial objectives. Looking ahead, we believe we're well positioned for sustainable success and significant value creation. Thank you again for joining us today and for your continued support of our important mission. With that, we're ready to open up the call for questions. Operator?

[Operator Instructions] Our first question comes from the line of Les Sulewski from Truist.

So in the prepared remarks, you commented that the GPO had a higher volume than expected, which pulled down the ASP. How much of that total volume growth was tied to that GPO? And then second, was there anything noteworthy about the difference in the number of selling days in the quarter? And could you share any metrics around average volumes per day? And then I have a follow-up.

Les, this is Frank. Thanks for the question. Yes, we had strong uptake from the GPO that we signed in June. That's a favorable thing. And so as we anniversary that, that will flow through the system in Shawn mentioned the gap between volume is very strong, as you heard, 9% and sales will start to close as we get into next year. So Shawn, I don't know if you want to say anything more.

I completely agree. We anticipate them narrowing over time, and we're feeling good about the volume trajectory.

Les, you had another question, remind me the second question?

Yes. The second day was around the selling days in the quarter, any potential impact from that and metrics around average volumes per day.

[ No ] So let's just come back to -- it's an important point overall about as we now think about, as you heard, the volume growth of EXPAREL going from 3% to 6% to 9% and as we get into next year and flow through these GPO agreements. And of course, there will be -- we'll take price at some point. This will all add up into dollar sales that are running more at double digits as we had talked about. So we're encouraged that the second half is starting to turn out the way we start to articulate that at the beginning of the year in terms of growth accelerating in the second half.

Okay. Okay. That's helpful. And just one last one for me, and I'll jump in the queue. What's the rationale [ between ] the AMT-143 program? And then how do you think about the trial design, specifically which pain indications would you pursue? And how do you envision the label ultimately to look like? Will it be indication specific or broad based on your design? And then thoughts around the IP protection around this technology given the compound is generic.

That's a good question. So I'm going to come back to our thinking around how we think about building our pipeline in a disciplined manner. We are certainly well, I would say, from a capability standpoint, well versed in developing products like this. We think there's a place in the market for a product that has longer durability and ease of use, that is installation as opposed to any other method that requires technique and so that's the rationale behind it. We think there's a place in the market. We think it's complementary to EXPAREL. And of course, we have the infrastructure in place, so it will be highly synergistic.

When it comes to our development programs, it's early to say, Les, we need to work through this. But my sense of it is that we'll be very consistent with the way that we've built other programs in the past, and we'll provide more light on in terms of specific trial design as we get into next year. So that's broadly what it is. In terms of IP, I believe you can speak to that, AMT-143.

Sure. The IP goes out to [ 2042 ]. They have a solid state, and we're going to look to expand upon that.

Yes. Jonathan, anything more on your end?

I agree with you, Frank. opportunity here to provide another non-opioid pain solution. And so we're excited about the potential of this asset.

The next question comes from the line of Gary Nachman with Raymond James.

So where are you in terms of improving awareness of NOPAIN with the bigger hospitals? Where are you seeing the bigger challenges in getting faster adoption there? And when will that accelerate? Will it be next year potentially? And then what was the overall market growth for elective procedures in the third quarter? And maybe what you're seeing, how that's trending in the fourth quarter so far?

Yes. Thanks for the question, Gary. Let me say a few words, and I'll turn it over to Bren for any of his comments. Just to set the stage, I think we've been very consistent in saying that we've seen a good growth uptake when it comes to the smaller hospitals and ASCs. And these bigger institutions will take more time because it's obviously more decision-makers and of course, they have to implement this into their overall system. So it will take some more time. There's clearly an effort behind it. But let me turn it over to Bren for any additional thoughts here. Bren?

Yes, for sure. Thanks for the question. I think we are seeing increased awareness for NOPAIN. And I would reference a couple of our prepared comments. Obviously, where there are fewer decision-makers in ASCs and community hospitals, that's where we have our fastest growth. But we've also seen improvement in the larger and broader hospital segment. And despite the fact that there are more decision-makers, we are seeing formulary and P&T decisions in favor of EXPAREL that would be reflective of an audience that's not only taking into account NOPAIN, but are starting to see the significant commercial wins that we have along the way. And it is one of our key commercial initiatives to make sure that we're engaging more of those economic stakeholders, particularly pharmacists and the C-suite, so they have a broader understanding of not only the reimbursement that's being generated, but the potential for EXPAREL, not just clinically but from a profitability standpoint to be of value to the IDN.

And Gary, you had asked about procedures overall, the market-- and from what we've seen, maybe, Brendan, you can comment on that a little bit.

For sure. The first half of the year, elective procedures were sluggish, even a little bit down. Having looked at the data in the third quarter, I would say there are modest improvements, but not monumental. And certainly, I think EXPAREL's performance in terms of continuing to drive increased volumes are despite what I would consider to be sluggish or somewhat headwinds in that space. Fourth quarter to be determined, but I would say that fourth quarter, we tend to see more elective procedures simply as a function of seasonality.

Okay. Great. And then just a couple more quick ones. Just any early indicators for how the J&J partnership is helping Zilretta so far? When do you expect to see somewhat of an inflection there in sales? I know it's still early days and probably didn't see much of an impact in the third quarter, but could it be as early as 4Q or it's going to take more time? And then just on the gross margin, should that continue to improve next year from the 80% to 82% level that you're at right now?

Gary, with regard to Zilretta, I'll just say a few words here and turn it over to Bren. Just a big picture, as Shawn mentioned, we're very pleased with the way that now EXPAREL has grown and also now iovera with this new dedicated field force it's taken a little bit more time to get Zilretta where it needs to be. And when you take a look at our numbers, that's really what was flat instead of growing. So with that said, let me turn it over to Bren for any other thoughts here about how we're going to maximize J&J MedTech partnership.

Yes. Thanks, and thanks for the question. I would say 2 things have been important changes in the third quarter. Obviously, we have a dedicated Zilretta sales force. In doing so, they have an expanded footprint and are engaging a number of customers that for that singular group will be first-time customers. And I think that's just a little bit of disruption you would have expected in the third quarter. Also, the J&J MedTech team was fully trained in the third quarter, but that's a good way to describe it, trained and not yet fully out there to see the entire footprint that we have an opportunity to address. So I expect us to begin to see further momentum in the fourth quarter and then significant progress in 2026 as we see a larger audience multiple times with our message. And I would say that Zilretta fits very nicely into the J&J story of the osteoarthritis of the knee treatment journey, and there are a lot of market dynamics that would help us to incorporate Zilretta logically into that treatment journey.

Thanks, Bren. And for the question, Gary, about gross margin, certainly, we're very pleased with the progress we've made. And I think your question was how we see that going forward. And so let me turn it over to Shawn here.

Yes. Thanks, Gary. So maybe just a step back from a big picture, the guidance we put out for goals we put out from a long-range plan perspective are in our 5x30, which is the 5 percentage point improvement over the 2024 margin. And just as a reminder, the non-GAAP was 76%. So that's the big picture. So just with regard to the performance we've seen this year, first of all, terrific execution by the team and better-than-expected yields from both the 200-liter facilities. So these higher volumes, simple math have resulted in lower per unit costs that have benefited the margins this year.

So inventory target is 6 months. We're a little bit ahead of that. We're selling through the lower cost inventory. And so going forward, as the production volumes normalize, we expect to be back on track for our 5x30 plan for a 5% point steady improvement in gross margins over 2024, 76%.

Okay. That sounds great. So you should at least be in that level looking out into next year, it sounds like.

Bottom line, inventory levels are higher this year, Gary. And so per unit, the margin is better. Next year, as we work it down, it will be slightly less favorable, but then we'll come back to that favorability probably in the second half of the year as we work through the inventory.

The next question comes from Dennis Ding with Jefferies.

I have 2, if I may. Number one is on BD. Should we expect more deals like [ Amicathera ], i.e., things that seem fairly early? Or do you plan to do more of these types of Phase I deals or can you be more opportunistic and bring something that's in Phase III or even commercial? And then number two, just on PCRX-201, I know you referenced docs who are excited about 201. But what about feedback from docs who aren't as excited? What's the major barrier there? Is it just data? Or do you think there's broader skepticism around gene therapy, especially in the ortho community who may be unfamiliar with the modality?

Thanks for the question, Dennis. First on BD and then on 201, I'll say a few words and turn it over to Jonathan. BD, as we've talked about, we're going to take a very, very disciplined approach to BD. And so that means that these are things that fit into the broadly defined musculoskeletal pain and adjacencies. And certainly, AMT-143 fits into that. As we look at assets, certainly, we favor those assets that are further along in the clinic that have validated mechanisms of action. And so we're not going to take target risk. And so those are some of the guideposts, so to speak, as we think about bringing things into the pipeline. And so we remain open to those kind of opportunities, and we're going to look at those very, very carefully in a disciplined way and bring in those things where we can really add value to those programs.

With respect to 201, what I'd say there is, overall, I believe we've seen very good enthusiasm for PCRX-201. And so let me turn it over to Jonathan to have his thoughts. He's been the recent meetings, et cetera.

Yes. All the feedback has been extremely positive and exciting. To your point, I think we continue as we do education and address some of the misnomers around what our platform is compared to current gene therapy. And we explain the benefits around the safety, the cost, the flexibility because of the payload size, it becomes very favorable, not just over current treatment options, which we see lasting maybe 3 to 6 months. And our research shows that patients just aren't happy, and that's all they have. So once we explain to them the benefits of 201 in that we're not giving you a drug produced in a factory, but we're just helping your body cells become that factory and the safety that we've seen so far in our clinical trials, the first question is usually like when can I get this? So we are very optimistic moving forward with 201 and excited that Part A of Phase II enrolled ahead of schedule for us.

Yes. Thanks, Jonathan. Look, I'd summarize it as this is gene therapy for the masses. And so when we come from that line of thinking, that opens up people's minds this opportunity because the way we do that is by, as you know, a local approach as opposed to systemic and that has obviously favorability when it comes to safety and cost of goods and all the things that Jonathan talked about. So we remain optimistic. We're running the Part B and manufacturing process will -- from a commercially viable standpoint is well underway. And so we've got good momentum on this one.

The next question comes from the line of Serge Belanger with Needham & Co.

This is John on for Serge today. Just a couple from us. First, I wanted to touch on the shift in bio mix and discounting associated with the latest GPO that came on board in June. Curious if you could provide any color on the level of discounting that you've seen thus far and when you'd expect pricing to stabilize? And then second, on the in-licensing from for AMT-143. Just curious how you view 143's profile in comparison to EXPAREL? And with the potential of [ bohooan ] being on the market down the line, how would you view the future commercial dynamics between the two.

Yes. So thanks for the question, John. Let me answer the AMT-143 a little bit more, and then I'll turn it over to Shawn to talk about [ volume mix ] and GPOs and [ anniversarying ] that last one. What I'd say is that when we take a look at the marketplace, of course, currently available therapies and analgesics are in the range of what we provide for EXPAREL, 3 or 4 days, et cetera. Now we think there is a place in the market for longer durability of effect. And also in those situations where there might not be an ability to bring in other specialists that the surgeon himself can instill this particular product. And so we think it's complementary to what we have. And so that's how we think about it. Certainly, we've got a little ways to go to get this program to market, and we'll be starting our Phase II program as we talk about next year. But there's clearly a market need for something like this. So let me turn it over to Shawn here to talk about [ volume mix ] GPO.

Great. John, thanks for the call. So just to reiterate from the prepared remarks, we saw the 9% encouraging volume growth for EXPAREL with a 6% growth on the revenue side. And that 3% delta, as mentioned, was roughly 50-50 split between the volume mix towards the 10 ml and then the impact of the GPO discounting. So we can't talk about specific discounts with regard to the GPOs. But as we move forward, we would expect the fourth quarter to be somewhat similar. But then encouragingly, and we'll talk more about this when we put out 2026 guidance. But as we move forward into '26 and beyond, we do expect volume and revenue growth to converge over time. And there's a couple of key things just to remember.

Let's just assume we continue to drive volume at the current levels or even a bit higher, if all goes as planned, January price increase. And then once we do lap the third GPO agreement, which is performing quite well in mid next year, that's when we expect the convergence to sort of hit its stride.

I'm showing no further questions at this time. I would now like to turn it back to Susan Mesco for closing remarks.

Thank you, Jill, and thanks to all on the call for your questions and time today. We're energized by the opportunities ahead and remain focused on executing our 5x30 growth strategy with discipline and purpose. As we close out the year, we are confident in our ability to build on our momentum and position Pacira for long-term success. Thank you again for your continued support and be well.

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