HERON THERAPEUTICS INC DE

Previous wording

the impact of our restructuring activities, including the reduced headcount and external spend;

Current wording

the impact of our 2023 restructuring activities, including the reduced headcount and external spend;

Previous wording

In January 2024, we entered into a five-year distributor partnership with CrossLink Life Sciences, LLC (“Crosslink”) to expand the sales network supporting ZYNRELEF. Crosslink will be the lead partner in the U.S. to expand ZYNRELEF promotion for orthopedic indications. The partnership will launch in several phases, initially at a regional level, followed by an expanded national rollout. In total, we anticipate that approximately 650 representatives will be added to Heron’s sales network over 2024.

Current wording

In January 2024, we entered into a five-year distributor partnership with CrossLink to expand the sales network supporting ZYNRELEF. CrossLink will be the lead partner in the U.S. to expand ZYNRELEF promotion for orthopedic indications. The partnership will launch in several phases, initially at a regional level, followed by an expanded national rollout. In total, we anticipate that approximately 650 representatives will be added to Heron’s sales network over 2024.

Previous wording

In March 2022, the Centers for Medicare and Medicaid Services (“CMS”) approved a 3-year transitional pass-through status of ZYNRELEF, which became effective on April 1, 2022, for separate reimbursement outside of the surgical bundle payment in the Hospital Outpatient Department (“HOPD”) setting of care. In addition, in December 2022, H.R. 2617, the omnibus spending bill was approved by Congress that includes a provision requiring CMS to pay for certain non-opioids outside the existing bundled payment for surgeries for the period January 1, 2025 through December 31, 2027.

Current wording

In March 2022, the Centers for Medicare and Medicaid Services (“CMS”) approved a 3-year transitional pass-through status of ZYNRELEF, which became effective on April 1, 2022, for separate reimbursement outside of the surgical bundle payment in the Hospital Outpatient Department setting of care. In addition, in December 2022, H.R. 2617, the omnibus spending bill was approved by Congress. The bill includes the Non-Opioids Prevent Addiction in the Nation (NOPAIN) Act which directs CMS to provide separate Medicare reimbursement for non-opioid treatments that are used to manage pain during surgeries conducted in hospital outpatient departments or in ambulatory surgical centers. To qualify, the non-opioid treatment must demonstrate the ability to replace, reduce, or avoid intraoperative or postoperative opioid use or the quantity of opioids prescribed in a clinical trial or through data published in a peer-reviewed journal. The hospital outpatient prospective payment system and ambulatory surgical center proposed rule for calendar year 2025 includes ZYNRELEF as a qualifying non-opioid requiring CMS to provide separate Medicare reimbursement in both the hospital outpatient department and ambulatory surgical center settings from January 1, 2025 through December 31, 2027.

Previous wording

NK1 receptor antagonists are typically used in combination with 5-HT3 receptor antagonists. The only other injectable NK1 receptor antagonist currently approved in the U.S. for both acute and delayed chemotherapy induced nausea and vomiting (“CINV”), EMEND® IV (fosaprepitant), contains polysorbate 80, a synthetic surfactant, which has been linked to hypersensitivity reactions, including anaphylaxis, and infusion site reactions. The CINVANTI formulation does not contain polysorbate 80 or any other synthetic surfactant. Our CINVANTI data has demonstrated the bioequivalence of CINVANTI to EMEND IV, supporting its efficacy for the prevention of both acute and delayed nausea and vomiting associated with HEC and nausea and vomiting associated with MEC. Results also showed CINVANTI was better tolerated in healthy volunteers than EMEND IV, with significantly fewer adverse events reported with CINVANTI.

Current wording

NK1 receptor antagonists are typically used in combination with 5-HT3 receptor antagonists. Unlike CINVANTI many other injectable NK1 receptor antagonists currently approved in the U.S. for both acute and delayed chemotherapy induced nausea and vomiting (“CINV”), EMEND® IV (fosaprepitant), contains polysorbate 80, a synthetic surfactant, which has been linked to hypersensitivity reactions, including anaphylaxis, and infusion site reactions. The CINVANTI formulation does not contain polysorbate 80 or any other synthetic surfactant. Our CINVANTI data has demonstrated the bioequivalence of CINVANTI to EMEND IV, supporting its efficacy for the prevention of both acute and delayed nausea and vomiting associated with HEC and nausea and vomiting associated with MEC. Results also showed CINVANTI was better tolerated in healthy volunteers than EMEND IV, with significantly fewer adverse events reported with CINVANTI.

Previous wording

The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis, including those related to revenue recognition, investments, inventory and the related reserves, accrued research and development expenses, income taxes and stock-based compensation. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

Current wording

The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis, including those related to revenue recognition, investments, inventory and the related reserves, accrued research and development expenses, income taxes and stock-based compensation. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

Previous wording

Results of Operations for the Three Months Ended March 31, 2024 and 2023

Current wording

Results of Operations for the Three and Six Months Ended June 30, 2024 and 2023

Previous wording

For the three months ended March 31, 2024 and March 31, 2023, net product sales of ZYNRELEF were $5.0 million and $3.5 million, respectively. For the three months ended March 31, 2024 and March 31, 2023, net product sales of APONVIE were $0.5 million and $0.3 million, respectively. The increase in net product sales for both ZYNRELEF and APONVIE is attributed to an increase in the units sold in 2024 as compared to 2023.

Current wording

For the three and six months ended June 30, 2024, net product sales of ZYNRELEF were $5.8 million and $10.8 million, respectively, compared to $4.1 million and $7.7 million, respectively, for the same periods in 2023. For the three and six months ended June 30, 2024, net product sales of APONVIE were $1.0 million and $1.5 million, respectively, compared to $0.3 million and $0.6 million, respectively, for the same periods in 2023. The increase in net product sales for both ZYNRELEF and APONVIE is attributed to an increase in the units sold in 2024 as compared to 2023.

Previous wording

For the three months ended March 31, 2024 and March 31, 2023, net product sales of CINVANTI were $25.6 million and $22.8 million, respectively. For the three months ended March 31, 2024 and March 31, 2023, net product sales of SUSTOL were $3.6 million and $3.0 million, respectively. The increase in net product sales for both CINVANTI and SUSTOL is attributed to an increase in the units sold in 2024 as compared to 2023.

Current wording

For the three and six months ended June 30, 2024, net product sales of CINVANTI were $24.9 million and $50.5 million, respectively, compared to $24.5 million and $47.3 million, respectively, for the same periods in 2023. For the three and six months ended June 30, 2024, net product sales of SUSTOL were $4.3 million and $7.9 million, respectively, compared to $2.9 million and $5.8 million, respectively, for the same periods in 2023. The increase in net product sales for both CINVANTI and SUSTOL is attributed to an increase in the units sold in 2024 as compared to 2023.

Previous wording

For the three months ended March 31, 2024 and March 31, 2023, cost of product sales was $8.4 million and $16.9 million, respectively. Cost of product sales primarily included raw materials, labor and overhead related to the manufacturing of our Products, as well as shipping and distribution costs. For the three months ended March 31, 2023, cost of product sales also included charges of $5.3 million, resulting primarily from the write-off of short-dated ZYNRELEF inventory. There were no charges related to the write-off of inventory during the three months ended March 31, 2024. The remaining decrease in cost of product sales is attributed to a decrease in cost per units for CINVANTI and ZYNRELEF, as large-scale manufacturing was validated and approved in late 2022.

Current wording

For the three and six months ended June 30, 2024, cost of product sales was $10.5 million and $19.0 million, respectively, compared to $20.2 million and $37.0 million, respectively, for the same periods in 2023. Cost of product sales primarily included raw materials, labor and overhead related to the manufacturing of our Products, as well as shipping and distribution costs. For the three and six months ended June 30, 2024, cost of product sales included charges of $1.6 million relating to reserves and write-offs of inventory. For the three and six months ended June 30, 2023, cost of product sales included charges of $7.5 million and $12.8 million, respectively, relating to the write-off of inventory. The remaining decrease in cost of product sales is attributed to a decrease in cost per units for CINVANTI and ZYNRELEF, as large-scale manufacturing was validated and approved in late 2022.

Previous wording

For the three months ended March 31, 2024 and March 31, 2023, research and development expense was $4.6 million and $8.8 million, respectively. The decrease in research and development expense was primarily due to our decreased headcount and related costs as a result of the restructuring implemented in 2023, as well as a decrease in non-cash, stock-based compensation expense. The decrease is also due to decreases in costs related to ZYNRELEF and CINVANTI, as large-scale manufacturing was approved in 2022 and APONVIE as a result of the product becoming commercially available in March 2023.

Current wording

For the three and six months ended June 30, 2024, research and development expense was $4.4 million and $9.0 million, respectively, compared to $13.2 million and $22.0 million, respectively, for the same periods in 2023. The decrease in research and development expense was primarily due to our decreased headcount and related costs as a result of the restructuring implemented in 2023, as well as a decrease in non-cash, stock-based compensation expense. The decrease is also due to decreases in costs related to ZYNRELEF, as large-scale manufacturing was approved in 2022, and APONVIE as a result of the product becoming commercially available in March 2023.

Previous wording

For the three months ended March 31, 2024 and March 31, 2023, general and administrative expense was $15.0 million and $15.8 million, respectively. The decrease was primarily due to our decreased headcount and related costs as a result of the restructuring implemented in 2023.

Current wording

For the three and six months ended June 30, 2024, general and administrative expense was $13.9 million and $28.9 million, respectively, compared to $19.6 million and $35.4 million, respectively, for the same periods in 2023. The decrease was primarily due to our decreased headcount and related costs as a result of the restructuring implemented in 2023 and operational efficiencies.

Previous wording

For the three months ended March 31, 2024 and March 31, 2023, sales and marketing expense was $11.4 million and $21.2 million, respectively. The decrease was primarily due to our decreased headcount and related costs as a result of the restructuring implemented in 2023.

Current wording

For the three and six months ended June 30, 2024, sales and marketing expense was $13.6 million and $25.1 million, respectively, compared to $21.2 million and $42.4 million, respectively, for the same period in 2023. The decrease was primarily due to our decreased headcount and related costs as a result of the restructuring implemented in 2023 and operational efficiencies.

Previous wording

The Company's short-term and long-term liquidity requirements primarily arise from funding (i) sales and marketing expenses, (ii) general and administrative expenses including salaries, bonuses and commissions, (iii) working capital requirements, and (iv) research and development expenses, and (v) payments related to our outstanding convertible notes. As of March 31, 2024, we had cash, cash equivalents and short-term investments of $71.5 million. Based on our current operating plan and projections, management believes that the Company's cash, cash equivalents and short-term investments will be sufficient to meet the Company's anticipated cash requirements for a period of at least the next twelve months from the date this Quarterly Report on Form 10-Q is filed with the SEC. Our future cash requirements and the adequacy of our available funds will depend on many factors, primarily including our ability to generate revenue and the scope and costs of our commercial and research and development activities.

Current wording

The Company's short-term and long-term liquidity requirements primarily arise from funding (i) sales and marketing expenses, (ii) general and administrative expenses including salaries, bonuses and commissions, (iii) working capital requirements, and (iv) research and development expenses, and (v) payments related to our outstanding convertible notes. As of June 30, 2024, we had cash, cash equivalents and short-term investments of $67.3 million. Based on our current operating plan and projections, management believes that the Company's cash, cash equivalents, short-term investments and working capital facility, will be sufficient to meet the Company's anticipated cash requirements for a period of at least the next twelve months from the date this Quarterly Report on Form 10-Q is filed with the SEC. Our future cash requirements and the adequacy of our available funds will depend on many factors, primarily including our ability to generate revenue and the scope and costs of our commercial and research and development activities.

Previous wording

Our net cash used in operating activities for the three months ended March 31, 2024 and March 31, 2023 was $9.5 million, compared to $24.9 million. The decrease in net cash used in operating activities was primarily due to a decrease in net loss as a result of decreases in operating spend, partially offset by changes in working capital, specifically accounts receivable due to timing of collections, inventory as a result of write-offs incurred during Q1 2023 which did not reoccur during Q1 2024, accounts payable due to timing of payments and accrued payroll and employee liabilities due to reduced headcount.

Current wording

Our net cash used in operating activities for the six months ended June 30, 2024 and June 30, 2023 was $14.1 million and $52.1 million, respectively. The decrease in net cash used in operating activities was primarily due to a decrease in net loss as a result of decreases in operating spend, primarily as a result of the restructuring implemented in 2023, partially offset by $3.4 million of write-offs of property and equipment during the six months ended June 30, 2024, changes in working capital, specifically accounts receivable due to timing of collections, inventory as a result of write-offs incurred during the six months ended June 30, 2024, accounts payable and accrued expenses due to timing of payments and accrued payroll and employee liabilities due to reduced headcount.

Previous wording

Our net cash provided by investing activities for the three months ended March 31, 2024 and March 31, 2023 was $1.3 million, compared to $36.8 million. The decrease in cash provided by investing activities was primarily due to net maturities of short-term investments of $37.1 million for the three months ended March 31, 2023 compared to $1.3 million for the three months ended March 31, 2024.

Current wording

Our net cash provided by investing activities for the six months ended June 30, 2024 and June 30, 2023 was $3.3 million, and $50.1 million, respectively. The decrease in cash provided by investing activities was primarily due to net maturities of short-term investments of $4.0 million for the six months ended June 30, 2024 compared to $50.6 million for the six months ended June 30, 2023.