Heron Therapeutics - Q4 2025

Transcript

Operator (participant)

Good day. Thank you for standing by. Welcome to the Heron Therapeutics Q4 2025 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. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one 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, Melissa Jarel, Executive Director of Legal. Please go ahead.

Melissa Jarel (Executive Director of Legal)

Thank you, operator. Hello, everyone. Thank you for joining us on the Heron Therapeutics conference call today to discuss the company's financial results for the fourth quarter and year ended December 31, 2025. With me today from Heron are Craig Collard, Chief Executive Officer, Ira Duarte, Executive Vice President and Chief Financial Officer, Bill Forbes, Executive Vice President and Chief Development Officer, Mark Hensley, Chief Operating Officer, and Kevin Warner, Senior Vice President, Medical Affairs, Strategy, and Engagement. For those of you participating via conference call, slides are made available via webcast and can also be accessed via the investor relations page of our website following the conclusion of today's call. Before we begin, let me quickly remind you that during the course of this conference call, the company will make forward-looking statements.

We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company's projections, expectations, plans, beliefs, and future performance, all of which constitute forward-looking statements for the purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. These statements are based on judgment and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties associated with the forward-looking statements made in this conference call and webcast are described in the Safe Harbor statement in today's press release and in Heron's public periodic filings with the SEC.

Except as required by law, Heron assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. With that, I would now like to turn the call over to Craig Collard, Chief Executive Officer of Heron.

Craig Collard (CEO)

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

For the full year, we generated approximately $155 million in total net revenues and delivered adjusted EBITDA of $14.7 million, exceeding our previously communicated guidance range of $9 million-$13 million. Gross margin for this year was approximately 73%, reflecting continued improvements in cost discipline and product mix. Turning to our acute care portfolio, we executed several strategic initiatives in 2025 that strengthened our commercial foundation and drove meaningful acceleration heading into year-end. These included the launch of the CrossLink Ignite program, an incentive-based initiative designed to enhance distributor engagement, the introduction of the Vial Access Needle, or VAN, and the implementation of a new J-code for ZYNRELEF, which improves reimbursement clarity and supports broader hospital adoption. For APONVIE, we established a dedicated sales team known as the IBM team, focused exclusively on APONVIE and CINVANTI in the hospital setting.

Importantly, APONVIE was also included in the newly released fifth consensus guidelines for the management of PONV, further validating its clinical value and bolstering long-term utilization. Throughout 2025, we communicated our expectation for an inflection in acute care performance in late Q3 or early Q4. I'm pleased to report that this materialized ahead of our internal expectations. In Q4, ZYNRELEF delivered 48% net revenue growth compared to Q4 of 2024, while APONVIE grew 97% over the same period. Altogether, our acute care franchise increased more than 57% year-over-year in the quarter. These results confirm that the strategic actions we implemented in 2025 are driving sustained momentum across the portfolio. With stronger commercial infrastructure, improved reimbursement pathways, and rising clinical adoption, we believe we are well positioned to continue this trajectory as we move into 2026.

As we continue to see a positive shift in our acute care product growth, our strategy beginning in 2026 and beyond is to accelerate the expansion of our commercial team in key markets across the country. These priority geographies offer strong success indicators, robust market access, favorable reimbursement dynamics, established CrossLink relationships, and market characteristics similar to our highest-performing territories. By concentrating our investments in areas where foundational success factors already exist, we can scale more efficiently and maximize near-term commercial productivity. This approach is designed to drive meaningful growth in top-line revenue. In light of these opportunities, we are increasing our commercial investments, which may temporarily moderate EBITDA growth. We believe these investments are warranted, given the compelling long-term return profile.

Expanding coverage in markets where we already have traction allows us to pull forward revenue, accelerate market penetration, and unlock a much larger growth trajectory in the out years. For investors, the key takeaway is that disciplined, targeted commercial deployment now positions the company for outsized revenue acceleration, enhanced operating leverage, and a substantially stronger enterprise value as we capture a greater share of high-opportunity acute care markets. On the development front, we continue to advance the prefilled syringe, or PFS, presentation for ZYNRELEF. Registration batches were placed on stability in Q4 of last year. We will need to complete 12 months of stability testing before we can file. Assuming a standard four to six-month regulatory review, we anticipate a potential approval in mid to late 2027. Moving on to oncology. We continued to deliver solid performance with CINVANTI despite increased competitive pressure.

For the full year 2025, the oncology franchise generated just over $105 million in net revenue, representing a modest 7.8% decline compared to 2024. Importantly, the majority of this decline is attributable to SUSTOL as we continue the planned wind-down of that product throughout 2026. CINVANTI itself has remained resilient, demonstrating strong customer loyalty and continued demand even in a more competitive landscape. Before I turn things over to Mark Hensley to cover our commercial performance, I want to take a moment to recognize the entire Heron team. The progress we made in 2025 was only possible because of the hard work, commitment, and resilience demonstrated across the organization.

From our commercial teams driving execution in the field, to our manufacturing, R&D, regulatory, and corporate functions supporting every aspect of our strategy, your dedication is reflected in the results we delivered this year. Behind all of that is a group of people who show up every day with focus, urgency, and a belief in the mission of Heron. I'm incredibly proud of what we accomplished together in 2025, and I'm confident that with this team, we are well positioned to carry that momentum into 2026 and beyond. To everyone at Heron, thank you for your continued effort, your commitment to patients, and your unwavering drive to deliver results. Go ahead, Mark.

Mark Hensley (COO)

Thanks, Craig. I'll start with acute care, where we finished the year with clear momentum, then I'll close with oncology supportive care. Moving now to Slide 6. Acute care net sales were $16.3 million in the fourth quarter, up from $12.3 million in the third quarter, an increase of about 33%. That quarter-over-quarter increase was driven primarily by ZYNRELEF. ZYNRELEF net sales increased to $12.5 million from $9.3 million in the third quarter. APONVIE net sales also increased to $3.8 million from $3 million. On a year-over-year basis, ZYNRELEF net revenue grew 48%, and APONVIE grew 97%. Overall, we're encouraged by the exit rate and the momentum heading into 2026.

While we can see normal quarter-to-quarter variability early in the year, we remain focused on execution and expect performance to build as the year progresses. Let's talk about what's behind ZYNRELEF's quarter-over-quarter momentum. A big driver was sharper distributor execution. We launched the CrossLink Ignite program in July of 2025. We saw the benefit of that increased focus in the fourth quarter. Based on that performance, we've decided to continue the program into 2026. We expanded the number of target accounts CrossLink is focused on. In parallel, we reduced friction for hospitals and ASCs. We completed the rollout of the Vial Access Needle, which improves preparation and handling. We have a permanent J-code, J0668, which helps streamline reimbursement.

More broadly, we continue to see reimbursement becoming more straightforward as hospitals and ASCs gain familiarity with coding and the evolving post-op pain reimbursement environment, including the NOPAIN Act. Looking ahead, we continue development of the proposed prefilled syringe presentation. If successful, we are targeting FDA approval in mid to late 2027. Overall, the story is consistent. More accounts adopting, fewer barriers to continued use, and a more repeatable process that supports continued growth over time. Next is APONVIE, where we're building a similar pattern of expanding adoption in hospitals. Demand units grew 101% year-over-year. Ordering accounts continued to expand as well. Operationally, we launched the dedicated APONVIE sales team on July 1, focused on high-potential hospital accounts. This quarter, we are also announcing a permanent product-specific J-code, J8502, which supports reimbursement clarity.

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

As we deepen anesthesia and pharmacy engagement, we often see broader franchise pull-through over time. The overall point is that oncology continues to provide a stable revenue base, even as we manage expected pricing and competitive dynamics. To wrap up, we exited 2025 with clear momentum in acute care. ZYNRELEF drove the quarter-over-quarter increase, supported by tighter execution, workflow simplification, distributor alignment through the CrossLink Ignite program, and reimbursement clarity. APONVIE continued to expand hospital adoption, and we believe permanent coding and new guideline inclusion support continued progress over time. Oncology supportive care remains a stable base as we manage pricing and competitive dynamics. As we look into 2026, our focus is to keep scaling what's working. With the playbook now in place, we plan to begin adding field capacity mid-year, targeted to priority geographies where we already see strong access, reimbursement, and distributor traction.

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

Ira Duarte (EVP and CFO)

Thank you, Mark. Our financial performance in 2025 underscores the meaningful progress Heron continues to make in transforming its commercial trajectory while maintaining strong financial discipline. Total net product sales for 2025 reached $154.9 million, an increase over 2024, driven primarily by the exceptional performance of our lead product, ZYNRELEF, which delivered 48% year-over-year revenue growth in the fourth quarter alone. Even more importantly, we continue to shift our product mix towards our higher growth assets while maintaining strong and consistent growth margins. This acceleration strengthened our confidence in the underlying demand trends and the expanding adoption curve across our acute care franchise. At the same time, we achieved this growth while maintaining EBITDA profitability, delivering full-year adjusted EBITDA of $14.7 million, more than doubling the prior year's performance and beating full-year 2025 guidance.

This marks an important milestone. Heron is demonstrating the ability to grow revenue at a meaningful rate without sacrificing financial discipline. As we move into 2026, we view this as a pivotal year. The commercial inflection we've begun to see in Q4 2025 is continuing to build, and we intend to lean into that momentum. Our strategy is to remain EBITDA positive in 2026, while making targeted commercial investments that position ZYNRELEF and the broader portfolio for even stronger growth in the years ahead. These investments may temper near-term EBITDA expansion, but they are deliberate and designed to accelerate our path towards sustained revenue growth and free cash flow generation in 2027. Importantly, last year's refinancing has eliminated the capital structure overhang that previously constrained the business and has provided Heron with the financial flexibility needed to execute this next phase of growth.

With a healthy balance sheet and expanding commercial footprint and strong product level momentum, we are entering 2026 with clarity, confidence, and a strategic plan that positions the company for long-term value creation. Our 2026 guidance reflects this confidence. Net product sales of $173 million-$183 million and adjusted EBITDA of $10 million-$20 million, demonstrating continued profitability through a year of commercial expansion. Now we would like to open the call for any questions.

Operator (participant)

Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Serge Belanger from Needham. The line is yours.

Serge Belanger (Senior Analyst)

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

Craig Collard (CEO)

Well, thanks, Serge. you know, regarding the CINV franchise, yes, we, you know, continue to think that we're going to, you know, we'll grow in unit volume. Again, with the IBM team now out promoting that as well, we should get some volume growth on the hospital side, but at the same time, we're going to get some price erosion. But sales should still stay relatively flat throughout the year. regarding the NOPAIN Act, I'll turn it over to Mark Hensley.

Mark Hensley (COO)

Yeah, no. Certainly I think it's a great question, and we believe the NOPAIN Act will continue to be certainly very beneficial to us. I think, you know, most of 2025 was spent educating providers, you know, on the, you know, on the NOPAIN Act. Certainly we believe that to be a strong tailwind as we go forward. That, combined with the permanent J-code for ZYNRELEF, certainly will remove friction for our institutions.

Operator (participant)

Thank you for your question. Our next question comes from the line of Brandon Folkes from H.C. Wainwright & Co. The floor is yours.

Brandon Folkes (Senior Research Analyst)

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

Mark Hensley (COO)

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

You know, and then beyond those accounts, CrossLink is a much larger organization, you know, than us and has, you know, other targets beyond the Heron employees. Those are other accounts that we continue to focus on and grow as well. You know, on the rollout of the VAN, that actually went, you know, remarkably well. I think the transition, you know, was largely, you know, there was largely no issues as we, as we moved into that. It was simply a, you know, kind of winding down the prior supply of the VVS and then, and then rolling into the VAN. There's probably not much we would change, you know, as we, as we moved into the prefilled syringe launch in terms of strategically how we roll it out.

Just managing inventory on both products as we get closer so that, you know, we can move quickly when prefilled syringe is approved and ready.

Brandon Folkes (Senior Research Analyst)

Great. Thank you very much.

Mark Hensley (COO)

You're welcome.

Operator (participant)

Thank you for your question. Our next question comes from the line of Carl Byrnes by Northland Capital Markets. The floor is yours.

Carl Byrnes (Senior Research Analyst)

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

Melissa Jarel (Executive Director of Legal)

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

Carl Byrnes (Senior Research Analyst)

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

Craig Collard (CEO)

Yeah, Carl, thanks for the question. You know, it's interesting. One of the things I think we worked, we did not anticipate, is that as NOPAIN Act kind of rolled out, we thought that it would be fairly simplistic and everybody be aware and, obviously taking what would be otherwise a cost, right, in a surgical bundle type of scenario, to actually something where they actually make money. There's incentive there. What we've learned is, as we've gone through this, some of the coding, just the awareness of that, it's just gone a little bit slower. I think it's now happening, you know, much faster. We were a little bit surprised by that. We're expanding some of our team that handle that, so we can answer questions and help with some of that as well.

That was a bit of a surprise. You know, Mark can kinda chime in on some things specifically we're doing that, you know, are creating more awareness and helping us on that side.

Mark Hensley (COO)

No, I think kind of to your, to your kind of second part of your question on the industry, you know, it's not just us focused on the NOPAIN and education. Obviously, you know, you know that there are several other large companies that, you know, have a vested interest in making sure that there's awareness and understanding of how the reimbursement works. You know, it isn't complicated. It's, it's relatively simple. It's just...

It's a lot of, you know, there are a lot of players here that have to kind of understand it, you know, and seek that reimbursement. You know, it's more just an awareness issue, but certainly where we're, where we're getting business, where they're, you know, where we're focused on and targeted, they're aware of the NOPAIN Act and understanding that reimbursement. We're beginning to see, you know, more and more commercial plans also follow suit, which I think, you know, early on was, you know, some of the kind of lag in, in adoption. Whereas, you know, as we turn into the new year, we're starting to see a lot more, you know, kind of alignment between commercial and CMS on NOPAIN.

Carl Byrnes (Senior Research Analyst)

Excellent. Thanks. That's very helpful as well. Then just one real final, quick question, and apologies if this is somewhat redundant. With the inclusion of this consensus guidelines with respect to PONV, you know, what's a realistic time frame where you think that takes hold and has a material effect in terms of the PONV growth trajectory? Thanks.

Mark Hensley (COO)

Yeah, I mean, we were certainly, you know, very excited to see what, you know, the new guidelines had to say, and certainly we're confident that they will be a significant tailwind for PONV. You know, the guidelines are certainly a good educational tool for us, especially as you think about when a PONV gets taken to P&T, you know, for potential approval. Those guidelines are what pharmacy will likely reference in many cases. Prior to that, you know, we had good clinical data. There's certainly a lot behind IV aprepitant and its use, you know, in the setting. The guidelines are robust enough that we believe they'll have a significant impact. You know, timeline to that is probably back half of the year.

You know, the cycle of kind of P&T approvals and additions is, you know, a typically a six-month cycle, and so I wouldn't expect it to be, you know, impacting much today. As we move and progress through the year, we do believe it'll have a significant impact.

Carl Byrnes (Senior Research Analyst)

Excellent. Thanks again, and congrats.

Mark Hensley (COO)

Sure.

Kevin Warner (SVP of Medical Affairs Strategy and Engagement)

Hey, this is Kevin Warner. I'll just add a little bit of color there from Mark's comments as in regards to the consensus guidelines. Guidelines really change the paradigm, if you will, as what is accepted in the institutions and what we take a look at. They bring a lot of credibility and validity to the information and the data. It goes a long way in changing clinical decision tools, order sets, the protocols, and driving that long-term adoption. Right now, when the guidelines are initially released, obviously, you're gonna create awareness, education around the clinical impact of PONV and how we should be supporting these patients in the acute phase and the extended phase. As people adopt it'll be slow at first.

You'll get what I call soft adoption, with individual providers recognizing the information, recognizing best practices, you get the full implementation. With the credibility of a guideline, the consensus statement, the level of evidence, the quality of evidence within the guidelines, it brings it to all these P&T tables as a necessity for the best patient outcomes. As they go through that, implementing it into order sets, protocols, so that all high-risk patients receive appropriate therapy, that really changes the trajectory, and you get the sustainable long-term adoption. Specifically for PONV within the guidelines, we were very happy with the guidelines and how it laid out the NK1 antagonist class.

Really highlighted their long, durable efficacy throughout that entire phase of the post-op recovery for the patients, the rapid onset with the IV push of PONV, and the clinical efficacy of the NK1 class with a great safety profile. The guidelines are gonna go a long way as far as bringing credibility when we walk into an institution to educate them on best practices for patients. It's not just product driven then. This is a consensus statement from 25 societies endorsing this information. A great driver to the future, and like Mark said, it's probably at six to nine months until we roll it out into these order sets and these protocols that really changes trajectory and sustained growth.

Carl Byrnes (Senior Research Analyst)

Great. Thanks again. Thanks so much.

Operator (participant)

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

Craig Collard (CEO)

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

Operator (participant)

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