Pacira BioSciences, Inc.
Q2 2015 Earnings Call Transcript

Published: 30 Jul 2015

[Operator:]

Thank you for joining the Pacira Pharmaceuticals Second Quarter 2015 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the formal remarks, the Pacira management team will open the lines for a question-and-answer period. Please be advised that this call is being recorded at the company's request and will be archived on the company's website for two weeks from today's date. At this time, I would like to introduce Jessica Cho of Pacira Pharmaceuticals. Ma'am, you may begin.

[Jessica Cho:]

Thank you and good morning, everyone. Joining me on the call today from Pacira are Dave Stack, President, Chief Executive Officer and Chairman; Jim Scibetta, Senior Vice President, Chief Financial Officer and Head of Technical Operations; and Scott Braunstein, Senior Vice President, Strategy and Corporate Development Before I turn the call over to the management team for their prepared remarks, I would like to remind you that certain remarks made by management during this call about the company's future expectations, plans, outlook, and prospects and statements containing the words believes, anticipates, plans, expects, and similar expressions, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are based on assumptions that the company believes are reasonable and that are subject to a wide range of risks and uncertainties. Actual results may differ materially from those expressed or implied by such forward-looking statements. Many of these and other risks and uncertainties are described in the Risk Factors section of Pacira's most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2014, and in other filings with the SEC, which are available through the Investors & Media section of the Pacira website at www.pacira.com or on the SEC website at www.sec.gov. During the course of this call, we will also refer to certain non-GAAP financial measures. Definitions of these non-GAAP financial measures and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the earnings press release for the quarter. And with that, we'll hear first from Dave.

[David M. Stack:]

Thanks, Jess; and good morning, everyone. Before we begin, let me remind you that beyond the clinical evidence demonstrated in our pivotal studies, EXPAREL has proven in practice to be both effective and safe for approximately 1.4 million patients to date, an unparalleled achievement for comparable hospital-based products in the three years since launch. Let me also remind you that EXPAREL is the only multivesicular liposome local analgesic, and the only formulation of bupivacaine providing long-acting postsurgical pain control that is approved for market use. Studies evaluating EXPAREL, many of which we have highlighted on our previous calls, have shown a significant reduction in the need for opioids, leading to a reduction in hospital resource consumption, length of stay, and readmissions, correlating with an increased patient satisfaction across a broad range of surgeries. These outcomes are particularly important when it comes to strategies for reducing length of stay, especially as our customers are forced to innovate and seek outpatient options as a means to improving patient care while reducing overall cost, issues which I will address shortly. On our last earnings call, we suspended guidance due to a lack of visibility around the near-term growth trajectory for EXPAREL as a result of the cumulative effects of recent developments

[James S. Scibetta:]

Thanks, Dave; and good morning, everyone. I'll start with some comments about the quarter and then make some comments about our view of the outlook going forward. The second quarter demonstrated the continued, though comparatively modest, growth of EXPAREL, both year-over-year and quarter-over-quarter. EXPAREL sales in Q2 were $57 million, up 27% from last year's Q2 and up 2% over the number we reported last quarter. From our vantage point, a little more telling is that unit volume or box sales, normalized for a confounding factor, were up approximately 5% in Q2 over Q1. That confounding factor is that, as we discussed in our last call, the Q1 reported numbers benefited from approximately $2 million or approximately 730 boxes of estimated buy-in pulled into Q1 from Q2 as result of the price increase that went into effect on April 1. Absent the impact of that buy-in, the sales trend from Q1 to Q2 would have looked more like $54 million to $59 million, or up 9%. But again, the unit volume component of this normalized increase is 5%. For consistency of metric reporting, to date a total of 3,663 accounts have ordered EXPAREL since launch through Q2, with 938 accounts ordering $100,000, up 12% from Q1; 201 ordering $500,000; up 24% from Q1; and 54 million ordering $1 million worth of product, up 50% from Q1. We introduced this metric early in the launch as a mechanism to show that some customers can indeed become big customers, and that meaningful market share for the surgical procedures is achievable. But because it's a metric anchored by cumulative numbers since launch, the farther we get from launch, the more obsolete it becomes. So we will be looking to sunset and replace this with other metrics that would be more helpful to the investment community as we go forward. We saw a still-robust 165 new accounts order in Q2; and consistent with Dave's earlier point about the EXPAREL-enabled move of high-cost procedures from the inpatient to the outpatient setting, we are seeing strong new account growth among ambulatory surgery centers. I will speak to the outlook in a few minutes, but staying with Q2

[Operator:]

Our first question comes from Liana Moussatos of Wedbush Securities. Your line is open.

[Liana Moussatos:]

Thank you for taking my questions and congratulations on all your progress. Since Pacira is profitable, any consideration of a share buyback program with $170 million cash?

[David M. Stack:]

You know, I'll give Jim a second to think about that, but I'll tell you, Liana, right off the top

[James S. Scibetta:]

Yes, we will take a look at that in the out years as we continue to accumulate cash, but Scott coming on board is to look at moving our internal pipeline and expanding our internal pipeline; looking at external assets; and also, frankly, looking at EXPAREL itself and making sure that we have a strategic view, that we can fully aggrandize that asset and make it a huge brand. So we don't want to be shy with our cash, for the opportunities that we have in front of us.

[Liana Moussatos:]

Thank you very much.

[Operator:]

Thank you. Our next question comes from Dave Amsellem of Piper Jaffray. Your line is open.

[David A. Amsellem:]

Thanks. I have a couple of questions. First, maybe, can you give us some qualitative commentary on what kind of pushback you are getting from hospital pharmacy departments, if any, or pushback and resistance from surgeons, if any, in the wake of your modified communications as part of your resolution of the warning letter? Maybe just provide us with some commentary on how that may or may not have impacted volumes in the second quarter, and how that could be impacting volumes in the current quarter. And then, secondly, this may be a question – this is probably a question for Scott. Just give us some thoughts on how you're thinking about BD. Are you looking at trying to find new ways to optimize the DepoFoam technology with other products? Do you see a healthy list of external opportunities for acquisitions? Maybe give us a sense of what's on your to-do list, what are your top priorities as you get started? Thanks.

[David M. Stack:]

So I'll go first, David, and then, as you suggest, I will ask Scott to make some comments. So, relative to the DOJ and the warning letter, etcetera, I think the first thing we have to acknowledge, and tried to outline this in the script, is that our customers, especially budget holders, are actually in a tough spot. And it's no secret that they are having a tough time. And so, if you are worried about getting through 2015 from a budgetary perspective, then the obvious thing to do is to look at your budgets and see where you might be able to make those budgets stretch. And that's really what we are seeing from pharmacy. I think mostly what we saw from the impact of the warning letter and the DOJ, is at the hospital level, was somebody who already had a predisposition to try to limit the access to EXPAREL, have a couple of additional regulatory tools, if you will, to try to institute that thought process. I would say that, as we've continued to move along and as the marketplace continues to evolve, we have started to see those things modify. And in fact, we've seen some places where restricted access was applied and where it hasn't worked to the satisfaction of care providers. And so we've seen people start to come back to EXPAREL, because they just couldn't achieve the same patient outcomes without it. On the surgeon side, on the anesthesiologist side, when the product is used appropriately, David, we have very little pushback, actually almost no pushback, from customers who treat patients. In fact, if there was no cost pressures, I think it would be pretty safe to say that virtually everybody would like to use EXPAREL virtually everywhere. But that's just not the real world. But we very rarely get pushback from people who treat patients. So I'll ask Scott to...

[James S. Scibetta:]

Just to jump in, Dave, the only thing I'll add to that is, the picture that we are seeing is, as I referenced in my comments, it's a select group of customers who have jumped on that factor related to DOJ and so forth. There are a number of other customers who we continue to grow with and are unaware of, or ignoring, these regulatory factors. So it's a real dichotomy. It's a smaller number of customers that have focused on it, but some of them are large customers. And as you might imagine, the people who take a shorter-term view of cutting costs are the ones that have the most incentive, in this quarter or next quarter, to have cost-cutting activities. So with that as background, Scott, do you want to address the other questions?

[Scott N. Braunstein:]

Sure. Thanks, David. My first question, I'm excited about answering it. I'm trying to take a very long-term view at Pacira as a company, and how our products will fit in over 2016, 2017, 2018, and 2019, as a starting point, and beyond. It's very logical that, from an external business development standpoint, I think about – and we as a company think about, markets where our customers are today. And our sales force is so strong today in the hospital, within the surgical community, in the anesthesia community in 2017 and beyond, and other potential hospital customers. So that's a logical place to continue the activity on the business development side. But I'm also spending a lot of time with the internal pipeline, the team in San Diego, which is terrific. We have some of the smartest people in the world on drug delivery technology in San Diego. We have some of the smartest people making the product in San Diego. So we have world-class manufacturing and we want to utilize that technology to its ultimate ability. I'm very deep in the TXA program today. Meloxicam is right on board. And since I've been with the Company, I'm more enthusiastic about our pipeline products than I've ever been. And certainly I'm spending a lot of time and will be spending more time with the teams, thinking about where else we can apply this technology in a way that's logical and synergistic to our business. So I think I'll stop there.

[David A. Amsellem:]

That's helpful. Thank you.

[David M. Stack:]

Thanks, David.

[James S. Scibetta:]

Thanks David.

[Operator:]

Thank you. Our next question comes from Gary Nachman of Goldman Sachs. Your line is open.

[Gary J. Nachman:]

Hi. Good morning, guys. First, on oral surgery, we were supposed to get data by late 2015. Why the slight push-out to early 2016? Have you started this study already? How big will the trial be? And then would you build your own dental sales force? How do you plan on commercializing that?

[David M. Stack:]

We don't know, Gary, honestly. We don't know that there will be a push-out to 2016. So it's in that timeframe, late 2015/early 2016. So we are talking about a few weeks in terms of how the Gantt chart lays out. There are multiple programs in the dental surgery initiative, and those have been started. And we continue to make progress on going through all of the required regulatory hurdles in order to make sure that happens. So yes, all of those things are in play. When it comes to a separate dental sales force, we don't view that as a requirement under any scenario that has been envisioned so far. The dental surgery market looks to us like a very big plastic surgery opportunity. And so we envision a scenario where we would probably add some more reps, but they will not be specific to the dental surgery program. And you can see a scenario where folks work in a hospital as part of the – as the morning activity; and the early afternoon activity, working with surgeons, etcetera, like we always have. And then you make some dental surgery calls and some plastic surgery calls at the off hours in the hospital. So we would rather see more people, smaller territories, but a full range of EXPAREL opportunities handled in the same bag.

[Gary J. Nachman:]

Okay. And then on the sales force, have there been any changes recently to your current sales force in how they are promoting EXPAREL, or have all the changes been implemented? And Dave, you mentioned partnership discussions outside the US. That's really the first we heard of that. How soon can that materialize?

[David M. Stack:]

Let me answer first the sales force. Gary, the scenario that has been outlined since the warning letter remains in place. So there are no changes there. And the field force is doing extraordinarily well, as Jim outlined in his presentation, relative to their dedication to this opioid-sparing and opioid epidemic solution, if you will. It's really too early for me to tell, Gary. We've initiated discussions with a number of potential partners. But it would be way too early for me to be able to tell you that I think I know when we might be able to close on those. And different territories require different regulatory strategies, so it even gets a little more difficult to tell you exactly when we might generate some revenue from any of these partnerships.

[Gary J. Nachman:]

Okay. Thanks, guys. And welcome, Scott.

[Scott N. Braunstein:]

Thanks.

[Operator:]

Thank you. Our next question comes from Douglas Tsao of Barclays. Your line is open.

[Douglas D. Tsao:]

Hi. Good morning. Dave, maybe to start, in terms of the business and the trends that you are seeing, just curious if you are seeing any different growth rates between orthopedics which is, I think, a little over half the business versus the sort of soft tissue indications? And then also maybe comment on the relative performance of the reps or of the CrossLink partnership and how that has been going. And have you ultimately thought about your sales strategy into the orthopedics market right now?

[David M. Stack:]

Yeah. So the first question, Doug, ortho versus soft tissue, really hard to tell day-to-day, week-to-week, what the business mix is. But there's nothing optically obvious that there is any kind of a dramatic shift there, other than the fact that it is interesting to me that the majority of the ERAS and CQI programs that we are seeing are soft tissue programs. We attribute that to the fact that people in the soft tissue environment have had a longer time course with EXPAREL. It was where the product was adopted first. But no, we don't see any significant shift. What Jim and I referred to in the script really is more customer-based than when the customers have access to the product. You don't really see them think about it in that kind of a way, other than the fact that where they have the biggest issues with opioids, or where the most opioids are used, seem to be the directed way that EXPAREL would be employed, even in a restricted access environment, frankly. The CrossLink question is an interesting one. They've had the same – we've had to train our CrossLink partnership exactly the same way that we train our reps. And so as a result of the warning letter, we've worked with CrossLink exactly the same way that our folks have worked. So we have been able to talk to customers about why are you using customer or catheter-based therapies; making sure folks are fully aware of the opioid epidemics and the different use profiles of different physician groups and different procedure groups from an opioid-prescribing perspective. And the CrossLink's relationship has also been really important to us in terms of KOL development and our presence at national meetings like AAOS and AAHKS and things like that. So I don't know if I'm answering your question, Doug. But even in the warning letter environment, this relationship has proved to be very useful to Pacira.

[Douglas D. Tsao:]

And then maybe just two quick follow-ups

[David M. Stack:]

Yes. Well, so opioid reduction, Doug, is the reason that the patient benefits that you outlined are possible. So I'll just give you a real quick, so let's take a total knee. If you do a femoral nerve block, and you use a morphine PCA machine and those patients receive a significant amount of morphine, both of those modalities lead to a patient who is highly unlikely to ambulate on day one. If you replace those modalities with EXPAREL and a PRN use of an opioid, meaning that you would get much less opioid in most circumstances, then that patient doesn't have nausea and vomiting caused by the opioids; they don't have the urinary retention and the dizziness, etc., that comes from using the opioids. They are not having the motor blockade and the need for a leg brace that comes from the femoral nerve block. And so we see that virtually all EXPAREL low-opioid-based total knee patients ambulate on the day of surgery. And it is the very simple fact that they feel better, meaning they don't have all of the opioid-related adverse events, that when the nurse suggests, or the protocol for a Swift Path delivery program requires, that they ambulate on day one, that is much more likely to happen with an EXPAREL patient then within the traditional treatment modalities. So it is both, right. You can't just say that patients are going to feel better, walk faster, and all those things. We have to tie that to opioid reduction, because that is what makes it all happen.

[Douglas D. Tsao:]

Okay, great. And then just in terms of the impact in terms of the "sales cycle" given the modified communications?

[David M. Stack:]

You know, Doug, it's pretty interesting. I would tell you – I would say more than half of the docs that I talk to don't even know that we got a warning letter or a DOJ investigation. So typically, at the doctor level, it is not an issue. It is an issue where we might have large purchasers, either GPOs or IDNs, who for budget reasons and, again, for profit motivation are trying to limit access to EXPAREL. But that is almost never a physician issue.

[Douglas D. Tsao:]

Dave, I guess maybe my question wasn't clear, because I wasn't really focused on that awareness. But what I meant is that in terms of the sales rep not being able to necessarily talk about specific procedures that were outside the OCI – since you have to refer, then, to the medical CX science liaisons now, does that necessarily mean that the time from when you first engage with the surgeons that they actually start to use it has sort of lengthened to some degree?

[David M. Stack:]

Yes. Impossible for me to tell you, Doug, because it wouldn't be material, in my view. It is not perfect from our perspective. We like to have the old label back and the old way of doing business back. But I can't tell you that I could tie any direct box sales from the last weeks or quarter to that specific issue. It's really hard to tease that out specifically.

[Douglas D. Tsao:]

Okay, great. Thank you very much.

[David M. Stack:]

Thanks, Doug.

[Operator:]

Thank you. Your next question comes from David Steinberg of Jefferies. Your line is open.

[David Michael Steinberg:]

Thanks, good morning. A couple of questions. First, Dave, you talked about the number of times the difficult environment in hospitals and the cost-cutting. I'm just curious, trying to better understand why in 2016 would this improve? Looked at another way, perhaps, why should the value proposition of EXPAREL be different right at the moment versus next year? I know Jim has alluded to we're moving off the bottom. If you could give us a little more commentary on that? Thanks.

[David M. Stack:]

Sure. Thanks, David. So I don't think the environment is going to improve materially, frankly. But what we see is a difference between a visceral reaction to the, my 2015 budget is not appropriate to get me through December 31, to an innovative way to look at how you can actually address these issues strategically rather than budgetarily. And what you are seeing is, these ERAS protocols and these outpatient protocols allowing folks to innovate and to improve or enhance the way that they're providing their pain care, so that you don't have to keep a patient in the hospital because they are tethered to a morphine PCA machine. Or you don't have to provide epidural administration plus-plus, which means that the patient has to be institutionalized. As we see the marketplace move to shorter LOSes and eventually to outpatient care, morphine and many of the other treatment mortalities are the reason that we are where we are. They are not the solution. And so a low-opioid treatment strategy that allows these patients to ambulate sooner, and eventually to be discharged sooner, provides the innovative platform, especially in an environment where we can provide very specific algorithmic guidelines from major medical centers on how exactly to achieve an economic outcome – and, by the way, usually driven by the fact that we can provide non-opioid pain control.

[James S. Scibetta:]

Just to elaborate on that, I think up, until recently, our endeavor has been to work with our customers, particularly the ones who are forward-thinking, about incorporating EXPAREL into the programs that Dave talked about, because it's a win for the patient, and it's a win for them economically. CMS, starting in 2016, is forcing hospitals to think about, and have the economic consequences, related to the care from three days prior to admission to 90 days after admission on lower extremity orthopedic procedures. And 40% of the costs associated with that activity are not when the person is in the hospital. And CMS is basically looking at that and saying

[David Michael Steinberg:]

Fair enough. And then just moving to the oral surgery program, which looks like a major opportunity, you are doing the phase 3 trial for the third molar extraction. What would the ideal label look like, based on this study, for you?

[Scott N. Braunstein:]

It's an infiltration, David, and it will be pain control. The endpoints will be very much (47

[David Michael Steinberg:]

Okay. And finally, it seems like there's an acquisition in this area every five or six business days. Just curious about the Company's point of view – how receptive would you be to some sort of friendly approach to being acquired in the current environment?

[David M. Stack:]

David, I think our shareholders have the great benefit that there's nobody here who is a founder and/or – you know, so we're going to do what's in the best interests of shareholders. I don't know what that is, Vince. If you can make sure that we are not being interrupted with whatever that ring tone is? So David, obviously, from a fiduciary perspective, we would take any kind of reasonable discussion to the board of directors. And we will always act in the best interest of our shareholders, in terms of what we can achieve and what a potential partner could achieve. And who knows? But that is not our strategy, I guess. We are building a long-term business, which is why we have got Scott here and why we anticipate hiring other folks into the leadership team in relatively short order here. If it happens, it happens. But that isn't our plan.

[James S. Scibetta:]

And obviously we – you know, referring back to our comments in the call today, we are bullish about our future. And there has been some dislocation in our stock price. So that's a contextual thing that makes this a suboptimal time for that. And we've got our eyes open about those type of issues.

[David Michael Steinberg:]

Okay. Thanks.

[David M. Stack:]

Thanks, David.

[Operator:]

Thank you. Our next question comes from Jonathan Aschoff of Brean Capital. Your line is open.

[Jonathan M. Aschoff:]

Thank you. I was wondering, guys, have you found that surgeries performed when some sort of significant inflammation is present tend to make it more difficult for a local anesthesia like EXPAREL to work well?

[David M. Stack:]

I'm sorry, Jonathan. I didn't – I'm sorry, I didn't quite understand. Can you go through that again?

[Jonathan M. Aschoff:]

Yeah. So, when there is a decent amount of inflammation at the site -

[David M. Stack:]

Oh, I'm sorry. Okay.

[Jonathan M. Aschoff:]

...so that's what I was asking. Whenever that is kind of high, have you -

[David M. Stack:]

That appears, Jonathan – and this is not my area of expertise, and we could – you could ask some other folks in the organization that have got decade careers in drug delivery. My understanding is that that is technology dependent, that there are some delivery technologies that do not react well in the presence of inflammation. And it's related to pH issues and the ability of that delivery technology to act as anticipated. We don't believe that that's the case with EXPAREL.

[Jonathan M. Aschoff:]

Okay. And I guess there's no other way to maybe get at how the second quarter may have looked without any sort of removals or restrictions on EXPAREL. You've pretty much said what you are going to say about that already?

[David M. Stack:]

Yeah. You know, we've got so many customers, and every one of them really is an N of 1. So we analyze these different scenarios regularly. And if I thought that there was something that made sense that we could communicate with you guys, we certainly would. But it's all over the place, Jonathan. And you know, we have to remember, we have a number of scenarios Jim outlined. We had 165 new customers. We still have places like the DoD where the product is growing well. And so we are not only looking at losses, we are looking at gains; we're looking at new information, we are looking at, when places put out an ERAS protocol, what does that happen, the impact of the Miami breast surgery meeting, and all of that. So it's a very dynamic – situation, and it's really hard for us to tell you that there's any one thing that we could put our finger on that's either really positive or really negative, frankly.

[Jonathan M. Aschoff:]

Okay. Thank you.

[Operator:]

Thank you. Our next question comes from Corey Davis of Canaccord Genuity. Your line is open.

[Corey George Davis:]

Thanks. The first question is, at what point in time do you think you will be in a better position to predict the trajectory of EXPAREL, based on everything you have spoken about, such that you could reinstitute guidance? Do you know it already and just don't want to put guidance out there? Or is it something that you still don't even really know exactly what it's going to look like?

[James S. Scibetta:]

Yeah, Corey, I think our – I guess to sort of step back and maybe state the obvious management's confidence or certainty translating into future numbers is what the investment community wants. Through 2014 we didn't have that in the form of specific revenue guidance. And it still was a working relationship, if you will. Suspending guidance obviously created a tremendous amount of uncertainty, which we thought was ethical and prudent because we had it ourselves. And so you translate it back to today, and we are not putting specific numbers out there. But if you take my comments, we think we bounced off the bottom. We think Q3 should have some growth in it. We want to manage expectations that – you know, in Q2 we were essentially up 5% in unit volume in a seasonally strong quarter. So that's not a lot, and it was almost a little bit better than flat, if you think about it that way. We are not exactly sure what that the amount of procedures were in Q2 relative to Q1. But as we look to Q3, we expect to have some growth. But because it's a softer quarter, the numbers will be up a little bit. And then in Q4, as we said, we expect to see the growth trajectory starting. So I think that's – conceptually, it's soft. It's not specific numbers. But it is saying that's management's confidence that that's what we think will happen at this point.

[Corey George Davis:]

Okay. And then second question, Jim, could I ask you to clarify what you are saying about gross margin? Because it wasn't clear to me. If it was 71% in this quarter, and I think I heard you say without some one-time effects, it would be 78% without those. And then you said that margins would go greater than 70% for the remainder of 2015, and then down again possibly in 2016. So would that mean that in 2016, they could dip into the 60% range? Or are you starting from that 78% that you mentioned first?

[James S. Scibetta:]

Yeah, you have it all. You know, we have proven the 75% to 80% number at least to ourselves, and we would have been in that range this quarter without the one-time impacts. But then – and then, as we noted, we expect at least 70% for the rest of the year. But then as we get into moderated production with a mostly fixed-cost infrastructure next year, they could be down from at least where we are now. I don't really want to put a specific number on it, because that could be somewhat offset by taking Suite A – remember, we've got three manufacturing lines, two that are part of Suite C and one in Suite A. And we are looking to transition Suite A into a clinical line, which would positively impact gross margins as an absolute event by taking some of the costs and putting it there. So everything you said is accurate. I just don't want to put a specific number into 2016 until we get a little bit closer to it and know what our plan is.

[Corey George Davis:]

Okay. And then last question, I don't know...

[James S. Scibetta:]

And then, of course, the fourth thing that we had said was we do know that we can achieve peak gross margins in the 85% in the out years...

[Corey George Davis:]

Right.

[James S. Scibetta:]

Once we get into transitions.

[Corey George Davis:]

Then the last question – I don't know if it would be for Scott or Dave, and I think you kind of answered this. But in the products that you are looking for, are you looking for more pipeline projects to bring in-house, or unmarketed products, or both?

[David M. Stack:]

You know, I think right now we would prefer a marketed product, if something was available that made some sense, as Scott outlined. But I don't think there's any color on anything, Corey. We are looking at a whole bunch of stuff across a wide spectrum.

[Corey George Davis:]

Great. Thanks

[Scott N. Braunstein:]

Yeah, I would just add, Corey that I am really spending my time equally looking externally and internally. But certainly, thinking about the strategic need for the organization, as I mentioned earlier, 2016 and beyond.

[Corey George Davis:]

All right, okay. Thanks, guys.

[David M. Stack:]

Thanks Corey.

[Operator:]

Thank you. Our next question comes from Tazeen Ahmad of Bank of America. Your line is open.

[Tazeen Ahmad:]

Good morning, guys. Thanks for taking my question. Maybe something on your pipeline, earlier this year you had mentioned the possibility of developing a DepoFoam of Meloxicam as part of your pipeline. Can you give us an update on where you might be in development with that compound? And ideally, would you see this particular product being used alone, or would you want to use it in combination with EXPAREL?

[David M. Stack:]

We haven't talked about methotrexate as a DepoFoam product in a couple of years, Tazeen.

[Tazeen Ahmad:]

I'm sorry. I thought it was DepoMeloxicam.

[David M. Stack:]

I'm sorry, Meloxicam – I thought you said methotrexate. My error. So no – we DepoMeloxicam is very much on our radar screen and in development. There's a couple places where the product appears to have utility based on the primary market research. The reason that the product was put into DepoFoam was to provide that anti-inflammatory effect, especially as we see the marketplace move to an outpatient environment, so that we can provide EXPAREL and an anti-inflammatory as the patient in a 23-hour stay was being discharged, so that we wouldn't have to worry about any of the issues of compliance or any of those kinds of things. That's the broad strategy. What we found out when we did the primary market research is that the – especially the orthopedic surgeons and the sports guys were also interested in a more rapid onset of activity from an NSAID. So they are thinking about the retail use of the product where, you know, if you did something dumb over the weekend like trying to ride a snowboard or something, you went in on Monday and you would get a peripheral injection of a DepoMeloxicam product that would allow you to achieve relief from an NSAID much more quickly than if you were relying on a topical or a PO product. And then the real winner in all of those things is our expectation is that the dose that will be provided will be significantly less than if you were going to get the same response from a systemic dose. And so while we know we will have the black box associated with NSAIDs from an AE perspective, our expectation is that those will be greatly modified by the use of a materially lower dose in a peripheral injection.

[Scott N. Braunstein:]

And I'll add, Tazeen, and I think this may be part of your question

[James S. Scibetta:]

And there are – we would never want to obligate our customers to use both products in every procedure, because there are some procedures like spine where they typically don't want an NSAID. So we think giving our customers that choice would be really great.

[Tazeen Ahmad:]

Okay, thanks for that color. And then maybe one on EXPAREL – in the past you have been able to give us breakouts of use by different types of procedures. Is that something that we should still expect to get going forward?

[David M. Stack:]

Oh, yeah. Yeah. So we – as a matter of fact, we are enhancing that database, Tazeen. We were using only a database from a GPO organization. And now we've got some additional data that we think can enhance that and make it more accurate. So we will continue to report that data. It will be part of our corporate presentation, and it's actually on our website. So it will be updated as the corporate presentation is updated.

[Tazeen Ahmad:]

Okay, great. Thanks.

[Operator:]

Thank you. At this time I would like to turn the call back to Mr. Stack for any closing remarks.

[David M. Stack:]

Thank you, Vince. Thanks for tuning in, everyone. Coming up, we will be at the Wedbush PacGrowth Healthcare Conference (sic) [Wedbush PacGrow Healthcare Conference] (1

[Operator:]

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect. Everyone have a great day.