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Craig Collard

Thanks, Melissa. Good morning, everyone, and welcome to Heron Therapeutics fourth quarter of 2024 earnings call. Today we're extremely excited to share our results for the quarter as well as our performance for the full year 2024.
Since joining the company in April 2023, our goal as a management team has been to reposition the business for future growth and achieve profitability by the fourth quarter of 2024. As we focused on positioning the company for growth, we successfully expanded the product labeling for ZYNRELEF, doubling the number of approved indicator procedures.
We also signed, trained, and integrated our crosslink partnership, which includes over 800 distributor representatives focused on the orthopedic space. Additionally, we secured inclusion in the NOPAIN Act, which expands reimbursement for ZYNRELEF outside of the surgical bundle, allowing more patients access to a non-opioid alternative for postoperative pain.
In late September we received approval of the vile Access Needle or VAN and launched the new device in mid-December. The VAN significantly improves the preparation time and may enhance the safe use of our product.
We are already receiving positive feedback with many noting that this is a dramatic improvement over the previously used Volpi. Lastly, in early December 2024, the US District Court ruled in favor of Heron in our patent lawsuit against Fresenius Kabi.
Upholding the validity of the CINVANTI patents which are set to expire in 2035. Despite all the changes in accomplishments over the past 18 months, we successfully achieved profitability not only for the fourth quarter of 2024, but also for the full year. We finished the quarter with a net income of $3.6 million.
For the full year 2024, net revenues reached $144.2 million reflecting a 14% year over year increase, and we delivered an adjusted EBITDA of $8.6 million. CINVANTI net revenues rebounded from a slight downturn in Q3, finishing the fourth quarter at $26.9 million compared to $22.7 million in Q3.
For the full year 2024, CINVANTI generated just over $100 million in net revenues, up from $94.8 million in 2023. ZYNRELEF achieved record net revenues of $8.5 million in Q4 of 2024, a 33% increase from $6.3 million in Q3.
This growth was achieved with minimal impact from the van launch as it was introduced in mid-December. To highlight the progress since we joined Heron in April 2023, it is helpful to reflect on the financials from 2022 through 2024. Net revenues grew by 14% from 23 to 24%, while gross margin improved by 24%, increasing from 49% to approximately 73%.
Operating expenses have been reduced by over $80 million since 2022. We ended 2024 with a cash balance of just over $59 million. This has been a long journey, but I am extremely proud of all here and team members for their sacrifices and turning this business around and achieving profitability in 2024.
Now shifting to product performance, our oncology franchise, which includes both CINVANTI and SUSTOL, continues to show growth despite a highly competitive environment. As mentioned in our last quarterly earnings call, these products can experience quarterly fluctuations, but historically have maintained annual growth.
For 2025, we have taken a more conservative approach to our outlook for CINVANTI, given the increased competition entering the market and the potential pressure on our average selling price. While we still anticipate growth in unit sales for 2025, this may come at a lower price point which could impact net revenues for the ecology franchise.
Moving on to the acute hospital side of our business, both the APONVIE and CINVANTI have seen significant growth, up over 31% and 48% respectively in Q4 of 2024 compared to the same period last year.
With a APONVIE we are beginning to see a dramatic shift in trends, particularly in average daily units and the number of Orient counts. We believe this growth will continue in 2025 and beyond as our pull through efforts expand product usage within hospital institutions.
Additionally, we anticipate further growth as we as we continue adding new accounts through PNT wins and system-wide conversions. A similar trend is emerging with Inlet. Our daily unit sales are steadily increasing, and we are onboarding new accounts at a much faster rate than in the past.
We achieved record net revenues this quarter despite the van not officially launching until mid-December and our team still finalizing training for some of our crossing partners.
We're excited about the strong momentum we have with ZYNRELEF as we head into 2025. The efforts and accomplishments of the past 18 months are already yielding results, and we believe that as the year progresses, ZYNRELEF will experience a significant upward inflection, ultimately exceeding performance expectations.
I will now turn the call over to Ira Duarte, our CFO, to cover our financials and update our financial guidance. Go ahead.

Ira Duarte

Thank you, Craig. We continue to improve on our financial efficiency while growing revenues. Over the past 12 months, during a time of change and disruption at the company, we grew revenues 13.6%, improved gross margin from 48.8% to 73.2%, and grew gross profit by almost 71%.
More importantly, we did this and burned only approximately $21 million in cash for 2024. Our product gross profit for the three months ended December 31, 2024, was $30.6 million, or 74.9%, which increased from 71.1% for the same period in 2023.
This was primarily due to the fact that the current quarter did not see the significant inventory write-offs we experienced in the comparable quarter of 2023. Year-to-date our product gross profit was $105.6 million or 73.2% as compared to $43.7 million or 48.8% for the same period in 2023.
SG&A expenses for the three months and 12 months ended December 31, 2024, with $23.2 million and $100.5 million respectively, compared to $26.8 million and $133.4 million respectively in the same period in 2023.
The decrease was primarily related to decreases in personnel and related costs due to the reductions in force in prior years, as well as improved cost efficiencies among all departments. These decreases were offset by increased legal expenses related to the patent litigation.
Research and development expenses were $3.2 million and $16.7 million for the three months and 12-months end of December 31, 2024, compared to $7.8 million and $39.1 million in the comparable periods in 2023. The decrease was primarily related to decreases in personnel and related costs due to the reductions in force implemented in previous years, as well as decrease in development activities.
We achieved net income for the three months end of December 31, 2024, of $3.7 million and had a net loss for the for the year ended December 31, 2024, of $13.6 million. During the comparable periods in 2023, we had net losses of $10.7 million and $110.6 million respectively.
Cash and short-term investments on December 31, 2024, was $59.3 million. Year-to-date, we incurred inventory write-outs of $2.5 million. In addition, as mentioned on previous calls, we also recorded as impairment write-outs of $2.2 million primarily related to projects no longer part of the company's forward-looking strategy.
If we had excluded depreciation, stock-based compensation, inventory write-offs, and the asset impairment write-offs, our adjusted EBITDA results would have been a positive $8.6 million operating income, which represents a substantial turnaround in the financial management of the business.
We are providing products revenues net guidance range of $153 million to $163 million and adjusted EBITDA guidance range of 0 to $8 million.
And now we would like to open the call for any questions.

Question and Answer Session

Operator

Thank you. (Operator Instructions)
And our first question comes from the line of Brandon Fuchs of Frogman Run Show. Your line is now open.

Hi, thanks for taking my question and congratulations on a very good quarter. Firstly, maybe just on ZYNRELEF's performance in the quarter.
Any stocking there or anything or was that sort of how we should think about ZYNRELEF going forward and then staying on ZYNRELEF, have you had any accounts come back that were perhaps not general users prior to the van launch and sort of inquire about the van launch? You talked about onboarding new accounts at a at a very strong level, in 2025 strategically. Are you focusing on driving deeper usage in the current sort of high user accounts or should we think about growing the breadth of accounts or both? Thank you.

Craig Collard

Thanks, Brendon. Yeah, let me first speak just to Zen performance in in Q4. There's really no stocking, anything like that as far as in those revenues. Actually, inventories have been quite low. We're in sort of this, two weeks to three weeks inventory level, and Van really didn't launch fully until about mid-December of 24, so I think the impact was fairly minimal.
What I can tell you is what we're seeing is the reception so far to Van has been exceptional from a standpoint of just being much more user friendly and just a better customer experience, but we've to date, I think we've had at least 15 accounts that we either saved or that have come back as part of launching the van and again that's more in the kind of January time frame that we've sort of seen that and so.
I anticipate that we're going to continue to see, pretty strong growth as if you think about, the tailwinds we have with the product with Mil Pay Act, with the cross link, partnership really starting to kind of come on board and get going and then the launch of the van and also, with the expanded label and so we've been extremely pleased, kind of how that has gone so far. We really see this product inflecting as we kind of move.
Later in the year, the other thing I'll mention about Van is that we've only launched the 400 mg to date. We have kits where you can switch over the 200 mg, but the 200 mg won't fully launch until right around the April time frame to give us time to sort of bleed out the old inventory that was out there. So I think as we kind of move into kind of mid-year, you're really going to see a change as there'll be complete van, no more valve spike in the market.

Great, thanks very much. And then maybe just one on the sort of cash flow just at Ibida, obviously, a very positive year on that aspect. I appreciate the guidance for 2025. How should we think about it sort of on a quarterly basis, could there be sort of a bit of lumpiness just in terms of swinging between positive and negative cash flow in the first half of the year and sort of as that van ramps up, we see exiting the year with consistent positive cash flow, or do you feel like you're at a stage now where we should be thinking about positive cash flow every quarter?

Ira Duarte

Yeah, Brandon, thank you for the question. Yes, it will be a little bit lumpy, primarily because of some of the legal spend in the PFS. It's really what is impacting our quarters a little bit overall, the results and the spend will not change significantly from this year, but those are the two factors that could provide a little bit of lumpiness in the beginning of the year.

Craig Collard

Yeah, Brandon, I would add too, I mean, the one thing we've been a bit conservative on is with CINVANTI.
I mean, as we see the product now, we're tracking pretty close to where we were last year. I mean we typically have about 78% to 80% market growth in that space, and we've been maintaining roughly around 27% share. We've anticipated, some competition later in the year and with ASP dipping a bit, but As we sit today, we're tracking pretty close to where we were last year, so we've tried to be a bit conservative there, so that's another, part that could move a bit.

Great, thanks very much and congrats on the good quarter.
Thank you.

Operator

Thank you so much. And one moment for your next question. Our next question comes from the line of Serge Ballinger of NETAM. Your line is now open.

Hi, good morning. A couple questions on Zynrilef. Looks like the product is gaining momentum here. Maybe just talk about what's been driving that momentum and what you expect from Nopain once it kicks in for Zynrilef, which I believe is in March or April.

Craig Collard

Yes, that's correct. I think we've been really pleased with the momentum we've had. Again, I mentioned the tailwinds before, but from a reimbursement standpoint, it will fully come into play on April 1st. But I think the bigger thing we're getting from that is really just the noise around no pain and the push, if you will, to look at non-opioid alternatives. That's going to help us and really anybody that's in this market selling those type of products. So I think that's been going to be hugely helpful for us. What was the last part of your question?

I'm sorry. Yeah, the momentum we saw in the fourth quarter, what was it driven by and whether it would accelerate?

Craig Collard

Yeah, no I'm sorry. I was going to speak to cross-link. So I think, look, the cross-link relationship is starting to really come into play. The way we look at our data, anytime we've had an overlap with a Crosslink counterpart, we view that as a Crosslink account versus an account that we're in, let's say, or a hospital system we're in where Crosslink is not.
And what I can tell you is that those accounts are growing at about a 30% higher rate than our sort of normal, you know, standalone business, if you will. And so we think that's just going to continue. I mean, with van, and again, as we get better at this and we better coordinate with our crossing counterparts, we see, you know, sort of upside as we move into the 200-milligram launching later in the year. And as we kind of move into kind of mid-year, the third quarter,
I think this is really going to start to get much more efficient. I mean, again, we just, we've got 800 people out there that are just really starting with the van pretty much now. and the coordination of all that I think is coming together nicely. But the growth we've experienced so far has been much different than we had in the past, and I think that's going to continue.

Okay. And then from an OpEx perspective for 2025, should we expect some slattish growth versus 2024? Yeah.

Ira Duarte

It will be a little higher than 2024 just because of the R&D spend for PFS that we didn't see in 2024, and then some of the legal expenses as we are trying to settle some of these cases that we have outstanding. So overall, the remaining business really remains flat, but those are the two items that might increase office a little bit in 2025 or 2024. Got it. Thank you.

Operator

Thank you so much. And one moment for our next question. Our next question comes from the line of Carl Burns of Northland Capital Markets. Your line is now open.

Congratulations on the progress and thanks for the question, or questions rather. So you had a really nice bump with Zimberlab at $8.5 million. Do you expect kind of a similar bump in the first quarter given the timing of no pain and given the timing of the van approval?
And then if you can maybe sort of extrapolate a little bit more with the number of crosslink reps that have been trained to market the van, and how you see that potentially hitting an inflection point in the second half of the year in terms of significantly accelerating ZYNRELEF sales. And to the same extent with respect at Pombing. Thanks.

Craig Collard

Yeah, no, Carl, as we had said, I think currently we're at right around 800 or approximately 800 crosslink reps, and that last sort of 100-ish were sort of coming together in Q4. So again, as we come out of, into 25, this is when this is beginning to, we think it's starting to hit on all cylinders that we kind of move into the year. So that's kind of where that sits currently.
Again, as Crosslink is coming on board and we kind of look at from Q4 to to Q1, I mean you typically have some seasonality and co-pay resets and that type of thing that you know that. Have historically flattened the market. What I can tell you is that we are currently, when I look at like daily average sales, we are actually higher thus far in Q1 than we were in Q4.
So again, we're hoping that continues. Obviously, the market's a little bit less in surgeries as a whole in Q1, but I mean we're anticipating continuing to grow.
And so, as we kind of look more towards, mid-year, again, I think as we launched the 200 mg van. A with the no pain really starting to kick in, I think getting more noise. This is really where we see the inflection happening. And so the other thing that Crosslink does for us is that as they come on board more and can take our places in the surgeries and are more comfortable with the product, it allows for our reps to really get out of these, surgeries on a daily basis, and Crosslink becomes our eyes and ears.
And so therefore it really allows our reps to get out and not only find more surgeons. And other folks in the hospital, going as far as deeper and wider, if you will, in an institution, but it also allows us to spend more time with the Pon B. And again, we're feeling very confident we're going to continue to grow the Pon B at a much different rate.
And if you think about the ability with the Poni to really do systematic wins, our issue has been thus far is really getting our representatives out of the OR and allow them to do more pull through with the product. And again, we think with crossing that's going to, help with that extremely.

Excellent. So I mean, it's very clear that there's a shift in terms of obviously the growth coming from the acute care products with the CAMD products really being kind of a cash cow that supports cash flow and just one follow on question if you've got any thoughts with respect to the Baker Brothers debt. Thanks.

Craig Collard

Yeah, no, we've, I mean, with the Baker brothers, obviously they're a large demo for us and we've been a great partner. We've continued to meet with them on a quarterly basis. I think as we now approach, sort of the May 26th time frame, we intend to meet with them again we wanted to get, our quarter announcement and so forth and really feel like with the where the business is going.
We're hoping all of our investors will be excited, but we should be meeting with them very soon and to talk about options with the convert and sort of where we can go from there.

Yeah, and I would imagine with the symbiotic litigation largely out of the way, that kind of opens the door to discussions.

Craig Collard

Thanks. Yeah, no, that's been a, you know, obviously it was an unknown, but I think now that we have clarity around that, and again, even, you know, the Milan case is very similar to what we faced with Fresenius, and so we feel very confident about that. But yeah, it's certainly going to help those discussions.

Excellent. Thanks for the questions, and congrats again.

Craig Collard

Thanks.

Operator

Thank you so much. And again, if you would like to ask a question, please press star one, one. And our next question comes from the line of Clara Dong of Jefferies. Your line is now open.

Hi, team. Congrats on the progress for the quarter. So just wondering, you know, Since the launch of Xenrolab then in mid-December, it seems like the ramp-up is going pretty well. So, could you give us an update on where you're at for the pre-fill syringe for Xenrolab? Thank you.

Craig Collard

Yes, thanks, Claire. Bill Forbes is dialing into the call. I'll let Bill answer that as far as the development path there and where that stands.

William Forbes

Hi, good morning. Thank you for your question.
Yeah, just as a form of update, obviously we're extremely pleased with the rollout of the van. I mean, the device development people that we have have been have been watching that very closely as their commercial partners have been moving that through. As we turn our attention to the prefilled syringe, I'll just kind of recap a little bit about what I spoke on at the investor day meeting last year.
So one of the things that we have to be careful of with ZYNRELEF is moisture content. So, about a year ago we put up a kind of a demo batch on stability, and we've reached the nine-month part of that, and we've been extremely happy with how that stability and that demo batch has been going.
So, with that we've increased our confidence in this program greatly. But we're looking for trying to launch it to the market somewhere near the end of 2026 in the first half of 2027. So, I mean, we continue to make progress on that and if you have any other questions, happy to entertain them.
Appreciate. It. Thank you.

Operator

Thank you so much, Clara. And I don't see any questions on cue. I would like to turn the conference back to Craig Collard, CEO for closing remarks.

Craig Collard

Thank you, operator. Look, we appreciate everyone joining the call today. We're obviously very excited about where we are, as a company and, the foundation we've built here and how we move into 2025. So, we look forward to talking to everyone next quarter. Thank you.

Operator

Thank you so much for centers and this includes today's conference calls. Thank you for participating. You may now disconnect. Have a great day.