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

Thank you, operator, and hello, everyone. Thank you for joining us on the Heron Therapeutics conference call today to discuss the company's financial results for the quarter ended June 30, 2025. With me today from Heron are Craig Collard, Chief Executive Officer; Ira Duarte, Executive Vice President, Chief Financial Officer; Bill Forbes, Executive Vice President, Chief Development Officer; Mark Hensley, Chief Operating Officer; and Kevin Werner, Senior Vice President, Medical Affairs, Strategy and Engagement. For those of you participating via conference call, slides are made available via webcast and can also be accessed via the Investor Relations page of our website following the conclusion of today's call. Before we begin, let me quickly remind you that during the course of this conference call, the company will make forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company's projections, expectations, plans, beliefs and future performance, all of which constitute forward-looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. These statements are based on judgment and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties associated with the forward-looking statements made in this conference call and webcast are described in the safe harbor statement in today's press release and in Heron's public periodic filings with the SEC. Except as required by law, Heron assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. And with that, I would now like to turn the call over to Craig Collard, Chief Executive Officer of Heron.

Thanks, Melissa. Hello, everyone, and welcome to Heron Therapeutics Second Quarter 2025 Earnings Call. Today, we're thrilled to share results and progress for the second quarter and first half 2025. It's been an incredibly active and transformative period for team Heron, and I want to begin by recognizing the tremendous effort and dedication our team has demonstrated. One of the most significant milestones this quarter was the successful completion of our new financing. This was a complex and critical undertaking, and I'm proud to say our team executed it with precision and focus as usual. The financing strengthens our balance sheet, enhances our financial flexibility and positions us to accelerate our strategic initiatives with confidence. This achievement reflects not only our commitment to operational excellence, but also the strong belief our partners and investors have in Heron's long-term vision. With this new capital in place, we're better equipped to drive innovation, expand our commercial initiatives and continue delivering value to both patients and shareholders. Beyond the successful financing, team Heron delivered strong operational and financial performance in the second quarter. We generated total net revenues of $37.2 million for the quarter and $76.1 million for the first half of 2025. This performance resulted in adjusted EBITDA of $7.9 million for the first half of the year, reflecting our continued focus on disciplined execution and operational efficiency. Importantly, we're seeing consistent product demand growth with ZYNRELEF and APONVIE, which has outpaced net revenue growth over the past 2 quarters. This is a key indicator of the underlying strength of our business and the growing adoption of our products. Mark will provide more detail on this dynamic later in our prepared remarks. Another major milestone this quarter was the transition from a C-code to a permanent J-code for ZYNRELEF that will become effective October 1. This is a significant win for Heron and for the providers who rely on ZYNRELEF in their practice. The J-code will streamline reimbursement processes and reduce administrative burden, especially as a NOPAIN act continues to gain traction. We believe this change will improve the access and coverage across both government and commercial payers, ultimately supporting broader adoption and better patient outcomes. Taken together, these achievements underscore the momentum we're building across the organization. We're executing on our strategy, strengthening our financial foundation and positioning Heron for long-term growth. I'd now like to turn the call over to Mark Hensley, our Chief Operating Officer, to cover product performance and many of the new initiatives we believe will be catalysts for future growth. Go ahead, Mark.

Thanks, Craig. Q2 was a transitional quarter for Heron as we implemented several key commercial changes designed to strengthen execution in the second half of the year and beyond. Combined net revenues from APONVIE and ZYNRELEF totaled $10.7 million for the second quarter and $20.9 million year-to-date. This reflects strong year-over-year growth of 55.5% for the quarter and 70.5% for the first half of '25 compared to the same periods in 2024. Across the Acute Care franchise, demand growth was encouraging with unit growth across both ZYNRELEF and APONVIE. While reported revenue was relatively flat quarter-over-quarter, this masks meaningful progress in foundational work that will support growth in the second half of the year. Let me walk you through the drivers in more detail, beginning with ZYNRELEF. ZYNRELEF adoption continues to accelerate with growth in average daily units and total ordering accounts now more than 700 through the month of June. ZYNRELEF demand units grew 6.3% over Q1, signaling continued momentum in provider adoption. However, Q2 revenue was impacted by a transient inventory drawdown at our wholesalers. Primarily related to the transition to the 400-milligram VAN. This type of wholesaler inventory swing is common in new product transitions, and we estimate it reduced net sales by approximately $400,000 in the quarter. Importantly, this drawdown occurred while end-user demand continued to increase, and we expect wholesaler ordering patterns to normalize in Q3. Operationally, we focused the ZYNRELEF team on targeted pull-through in accounts where we already have formulary access. This alignment ensures our reps are focused on converting approved access into actual utilization. In addition, we made several enhancements to drive long-term growth. We launched a significantly enhanced per unit compensation program with CrossLink. Beginning in July, CrossLink reps were allowed to nominate up to 4 accounts per territory with little…

Thanks, Mark. Now moving to our financial performance. Our product gross profit for the 3 months ended June 30, 2025, was $27.3 million or 73.5%, which increased from 70.8% for the same period in 2024. For the 6 months ended June 30, 2025, our product gross profit was $57.8 million or 75.9%, which increased from 73.2% for the same period in 2024. This was due to an increase in units sold at a higher cost per unit sold than in 2024 due to the supplier mix, offset by lower inventory reserves and write-offs. SG&A expenses for 3 and 6 months ended June 30, 2025, was $26 million and $51.1 million, respectively, compared to $27.5 million and $53.9 million, respectively, for the same periods in 2024. For the 3 months ended June 30, 2025, the decrease in SG&A expense is primarily attributed to a decrease in personnel and related expenses of $1.8 million due to terminations and onetime stock expense in 2024. For the 6 months ended June 30, 2025, the decrease in SG&A expense is primarily attributed to a decrease in personnel and related expenses of $3.5 million due to the terminations and onetime stock expense in 2024. These decreases were offset by an increase in marketing costs of $600,000, primarily related to ZYNRELEF. Research and development expenses were $2.9 million and $5.2 million, respectively, for the 3 and 6 months ended June 30, 2025, compared to $4.4 million and $9 million, respectively, for the comparable periods in 2024. The decrease in research and development expense for the 3 months ended June 30, 2025, is primarily due to $1.2 million more of write-offs of property and equipment in 2024 than in 2025 and a decrease in personnel and related expenses of $300,000 due to terminations. The decrease in research and…

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

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

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

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

Clara, this is Craig. No, look, we were excited to get the J-code. What we've sort of seen over time as we have passed through reimbursement with the C-code, it's not that that's not recognized, but the J-code is much more sort of universally recognized, if you will. And certainly, with commercial payers, they're a lot more sort of used to dealing with that. So I think with NOPAIN, what you're going to see over time, and we're beginning to see this with certain payers is that they're going to pick up what CMS or Medicare is doing. And if that happens more, we think, again, having a J-code is just going to make it more conducive for reimbursement and make it simpler. So we don't necessarily see an impact immediately. But as this plays out and commercial payers come on board and reimbursement gets more synonymous with, basically these products being paid for outside of the surgical bundle. I think you're going to see a shift that where this J-code really does help us longer term.

Congrats on all the progress.

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

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

Brandon, thanks for the question. So on the ZYNRELEF sales force, prior to July 1, we were -- we had one team that was essentially comp 50-50 on APONVIE and ZYNRELEF. But as we evaluated the team, we think that the profiles of those 2 teams should be different in terms of their skill set, where a ZYNRELEF rep is primarily focused in the OR on surgeons. And APONVIE rep is typically your traditional hospital sales rep. And so for that reason, we've divided the teams up. The ZYNRELEF team stayed relatively similar to what it was. The APONVIE team is small. It's only 6 IBMs today or Institutional Business Managers today, but we think the team that we put in place there will have a meaningful impact on APONVIE long term. As it relates to CrossLink, we've had a really nice agreement in place with them. We started that in 2024. We've built out a really nice network across the country. But what we wanted to do was really engage them focused on specific accounts. And so we've allowed them to pick 4 accounts from a list that we provide, primarily accounts where we already have formulary access. And we've significantly enhanced the incentive around those accounts on a per unit basis. And so we've aligned that with our current ZYNRELEF sales team's targets as well. And so we feel like we're much better targeted in terms of overlap between the 2 teams, and we have the incentives in place right now to really drive momentum on the back half of the year. As it relates to the APONVIE sales, it's primarily a wholesaler inventory adjustments as we pared down inventory coming out of Q4 and Q1. There is a bit of gross to net in there where we had 2 or 3 large academic centers come online in the quarter. And there was some kind of skew in the amount of 340B that they were acquiring, but we do expect that to normalize over the second half as more and more accounts are added.

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

I guess a follow-up regarding the sales force changes. Is this just a refocusing on the 2 specific products? Or is there an expansion in numbers that comes along with the restructuring? And then secondly, regarding ZYNRELEF, I believe NOPAIN for Heron came into effect in April. So just curious if you've noticed any changes in usage or uptake of ZYNRELEF during that transition from your original pass-through reimbursement to NOPAIN. Maybe one last one for Ira. Just the new overall share count after the transactions this morning.

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

Yes, Serge, I would just add to that. I think that if you think of the country and what we've done here with ZYNRELEF and the overlap with CrossLink, think of sort of pods, if you will, or poster stamps around the country. With us cleaning up the balance sheet and some of the extra money we've raised, what we think -- and we're already beginning to see this a little bit with CrossLink really being a lot more engaged based on some of the incentives we're doing is that we're going to see pockets where this really begins to take off. And so as far as expansion and that type of thing, if we do see that, obviously, we're going to add more support to those areas. And so that's where we could expand possibly in the future. But again, this is kind of a wait and see. And instead of just sort of blanketly sort of throwing out monies and putting 100 reps out there and what have you, we'd like to do this sort of systematically and a little bit more efficiently. I think we've shown at least over the last 2 years, we've tried to be very, I guess, consistent in how we manage the financial picture of the company and so forth. We want to continue to do that going forward. And if you think about -- to your point about NOPAIN and how this plays out, we haven't seen an immediate impact yet. What we are seeing is that the conversations at pharmacy are just a little different than they have traditionally been in the past. And what I mean by that, generally, a representative walks in and its branded product, park in the last park -- last parking space in the parking lot type of thing. But I think what we're beginning to see now is that it's a little more open because everyone is talking reimbursement, and they realize that these products can actually be a profit versus a cost. And so I think, as I said before about commercial payers coming on board, I think you're going to see a real shift over the next year or so where commercial payers come on board, everyone systematically sort of accepts this type of thing as far as reimbursement and looks at it a little bit differently than maybe it had in the past. And so again, you throw that in, VAN, the CrossLink incentive, the things we're doing here from a structure standpoint, we just feel like we have a lot of tailwinds that are pushing us in the right direction. And Ira, I'll let you take the last piece of that.

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

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

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

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

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

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

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