Earnings call transcript: Heron Therapeutics Q4 2024 beats EPS forecast, stock surges

Heron Therapeutics (NASDAQ:HRTX) (market cap: $260 million) reported a profitable fourth quarter for 2024, surpassing earnings expectations with an EPS of $0.02 against a forecast of -$0.03. The company's revenue also exceeded forecasts, reaching $40.78 million compared to the anticipated $37.3 million. Following the announcement, Heron Therapeutics' stock surged 8.04% in premarket trading, reflecting investor optimism driven by strong financial results and positive future guidance. According to InvestingPro data, the stock has shown significant volatility, with a beta of 1.61, making it more reactive to market movements than average.

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Key Takeaways

• Heron Therapeutics achieved profitability in Q4 2024, with net income reaching $3.6 million.
• The company reported a significant improvement in gross margin, rising from 49% to 73%.
• Stock price increased by 8.04% in premarket trading following the earnings announcement.
• Heron anticipates continued growth with product revenue guidance set between $153 million and $163 million for 2025.

Company Performance

Heron Therapeutics delivered a robust performance in Q4 2024, achieving profitability for the quarter and the full year. The company reported net revenues of $144.2 million for the year, marking a 14% increase from the previous year. With a strong current ratio of 2.28 and an overall financial health score rated as "GOOD" by InvestingPro , Heron's strategic initiatives, including the launch of the Vial Access Needle for Zenabis and the expansion of product labeling, have bolstered its competitive position in the oncology and acute hospital markets.

Financial Highlights

• Revenue: $40.78 million (exceeded forecast of $37.3 million)
• Earnings per share: $0.02 (beat forecast of -$0.03)
• Gross margin: Improved from 49% to 73%
• Net income for Q4 2024: $3.6 million
• Adjusted EBITDA: $8.6 million

Earnings vs. Forecast

Heron Therapeutics surpassed expectations with an EPS of $0.02, compared to a forecast of -$0.03, representing a positive surprise. The revenue also exceeded projections by approximately 9.5%, highlighting strong operational execution and cost management.

Market Reaction

The stock of Heron Therapeutics experienced a notable increase of 8.04% in premarket trading, reaching a price of $1.847. This movement reflects the positive investor sentiment driven by the company's better-than-expected financial performance and optimistic guidance for 2025. Based on InvestingPro 's Fair Value analysis, the stock appears to be trading near its fair value. The stock's current price remains above its 52-week low of $1.04, with a year-to-date return of 11.76%, indicating a recovery trend.

Outlook & Guidance

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For 2025, Heron Therapeutics has set a product revenue guidance range of $153 million to $163 million and an adjusted EBITDA guidance of $0 to $8 million. Analyst consensus remains optimistic, with targets ranging from $4 to $9 per share, suggesting significant potential upside. The company plans to launch a 200mg Vial Access Needle in April 2025, which is expected to contribute to future growth.

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Executive Commentary

CEO Craig Collard stated, "We successfully achieved profitability not only for the fourth quarter of twenty twenty four, but also for the full year," underscoring the company's financial turnaround. CFO Ira Duarte highlighted the impressive growth in gross profit, noting, "We grew revenues 13.6%, improved gross margin from 48.8% to 73.2% and grew gross profit by almost 71%."

Risks and Challenges

• Increased competition in the oncology market could pressure market share.
• Variability in cash flow may affect financial stability.
• Macroeconomic pressures could impact overall market growth.

Q&A

During the earnings call, analysts inquired about the growth potential of Zenabis and the impact of the CrossLink partnership. Executives addressed concerns about cash flow variability and provided updates on the development of prefilled syringes, emphasizing the company's commitment to innovation and market expansion.

Full transcript - Heron Therapeuti (HRTX) Q4 2024:

Conference Operator: Good day and thank you for standing by and welcome to the Heron Therapeutics Q4 twenty twenty four Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. And please be advised that today's conference call is being recorded. I would now like to hand the conference over to your speaker today, Melissa Jarrell, Executive Director of Siegel.

Please go ahead.

Melissa Jarrell, Executive Director of Siegel, Heron Therapeutics: Thank you, operator, and good morning, everyone. Thank you for joining us on the Heron Therapeutics conference call this morning to discuss the company's financial results for the fourth quarter ended 12/31/2024. With me today from Huron are Craig Collard, Chief Executive Officer Ira Duarte, Executive Vice President, Chief Financial Officer Bill Forbes, Executive Vice President, Chief Development Officer and Kevin Warner, Senior Vice President, Medical (TASE:BLWV) 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 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, Huron 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.

Craig Collard, Chief Executive Officer, Heron Therapeutics: Thanks, Melissa. Good morning, everyone, and welcome to Heron Therapeutics' fourth quarter twenty twenty four 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 twenty twenty four. As we focused on positioning the company for growth, we successfully expanded the product labeling for XENOLF, 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 No Pain Act, which expands reimbursement for Zener Lev outside of the surgical bundle, allowing more patients access to a non opioid alternative for post op roof pain. In late September, we received approval of the vial 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 VINNOVAL spike.

Lastly, in early December twenty twenty four, the U. S. District Court ruled in favor of Heron and our patent lawsuit against Fresenius Kavi, upholding the validity of the Symvante patents, which are set to expire in 02/1935. Despite all the changes and accomplishments over the past eighteen months, we successfully achieved profitability not only for the fourth quarter of twenty twenty four, but also for the full year. We finished the quarter with a net income of $3,600,000 For the full year 2024, net revenues reached $144,200,000 reflecting a 14% year over year increase and we delivered an adjusted EBITDA of $8,600,000 Cinvanti net revenues rebounded from a slight downturn in Q3, finishing the fourth quarter at $26,900,000 compared to $22,700,000 in Q3.

For the full year of 2024, Cymbalti generated just over $100,000,000 in net revenues, up from $94,800,000 in 2023. Zenerife achieved record net revenues of $8,500,000 in Q4 of twenty twenty four, a 33% increase from $6,300,000 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%, percent, while gross margin improved by 24%, increasing from 49% to approximately 73%.

Operating expenses have been reduced by over $80,000,000 since 2022. We ended 2024 with a cash balance of just over $59,000,000 This has been a long journey, but I am extremely proud of all Heron team members for their sacrifices in turning this business around and achieving profitability in 2024. Now shifting to product performance, our oncology franchise, which includes both Cymbanti 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 Cymbalti 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 oncology franchise. Moving on to the acute hospital side of our business, both APONAVY and ZENOLAF have seen significant growth, up over 31048% respectively in Q4 of twenty twenty four compared to the same period last year. With Aponvi, 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 continue adding new accounts through PNT wins and system wide conversions.

A similar trend is emerging with ZinnerLab. 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 is still finalizing training for some of our crosslink partners. We are excited about the strong momentum we have with XINRALEF as we head into 2025. The efforts and accomplishments of the past eighteen months are already yielding results, and we believe that as the year progresses, XINRALEF 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.

Ira Duarte, Executive Vice President, Chief Financial Officer, Heron Therapeutics: Thank you, Craig. We continue to improve on our financial efficiency while growing revenues. Over the past twelve 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 $21,000,000 in cash for 2024. Our product gross profit for the three months ended 12/31/2024 was $30,600,000 or 74.9 percent, 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 vitals we experienced in the comparable quarter of 2023. Year to date, our product gross profit was $105,600,000 or 73.2% as compared to $43,700,000 or 48.8% for the same period in 2023. SG and A expenses for the three and twelve months ended 12/31/2024 were $23,200,000 and $100,500,000 respectively compared to $26,800,000 and $133,400,000 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 litigations.

Research and development expenses were 3,200,000 and $16,700,000 for the three and twelve months ended 12/31/2024, compared to $7,800,000 and $39,100,000 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 ended 12/31/2024 of $3,700,000 and had a net loss for the year ended 12/31/2024 of $13,600,000 During the comparable periods in 2023, we had net losses of $10,700,000 and $110,600,000 respectively. Cash and short term investments at 12/31/2024 was $59,300,000 Year to date, we incurred inventory write offs of $2,500,000 In addition, as mentioned on previous calls, we also recorded asset impairment write offs of $2,200,000 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 $8,600,000 operating income, which represents a substantial turnaround in the financial management of the business.

We are providing product revenues net guidance range of $153,000,000 to $163,000,000 and adjusted EBITDA guidance range of $0 to $8,000,000 And now we would like to open the call for any questions.

Conference Operator: Thank And our first question comes from the line of Brandon Folkes of Rodman and

Brandon Folkes, Analyst, Rodman and Renshaw: Renshaw. Firstly, maybe just on Zenerleaf's performance in the quarter. Any stocking there or anything or was that sort of how we should think about Zenerleaf going forward? And then staying on Zenerleaf, have you had any accounts come back that were perhaps not synergies users prior to the van launch and sort of inquire about the van launch? You talked about onboarding new accounts at a very strong level.

In 2025, strategically, are you focusing on driving deeper usage in the current sort of high user, high user accounts? Or should we think about growing the breadth of accounts or both? Thank you.

Craig Collard, Chief Executive Officer, Heron Therapeutics: Thanks, Brent. Yes, let me first speak just to ZenoLife performance 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 week to three week inventory level.

And Van really didn't launch fully until about mid December of twenty twenty four. 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 a 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 timeframe 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 Mill Pain Act, with the CrossLink 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 four hundred milligram to date.

We have kits where you can switch over the two hundred milligram, but the two hundred milligram won't fully launch until right around the April timeframe 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 VIN valve spike in the market.

Brandon Folkes, Analyst, Rodman and Renshaw: Great. Thanks very much. And then maybe just one on the sort of cash flow adjusted EBITDA. Obviously, a very positive year on that aspect. 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 EBITDA 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, Executive Vice President, Chief Financial Officer, Heron Therapeutics: Yes, Brandon, thank you for the question. Yes, it will be a little bit lumpy, primarily because of some of the legal spend and 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.

Serge Belanger, Analyst, Needham: Yes. Brandon, I would add too. I mean,

Craig Collard, Chief Executive Officer, Heron Therapeutics: the one thing we've been a bit conservative on is with Cymbanti. 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 7% to 8% 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.

Brandon Folkes, Analyst, Rodman and Renshaw: Great. Thanks very much and congrats on the good quarter.

Craig Collard, Chief Executive Officer, Heron Therapeutics: Thank you.

Conference Operator: Thank you so much. And one moment for your next question. Our next question comes from the line of Serge Belanger of Needham. Your line is now open.

Serge Belanger, Analyst, Needham: Hi, good morning. A couple of questions on ZINRILOF. Looks like the product is gaining momentum here. Maybe just talk about what's been driving that momentum and what you expect from no pain once it kicks in for ZINRA LEFT, which I believe is in March or April?

Craig Collard, Chief Executive Officer, Heron Therapeutics: Yes, that's correct. Look, I think we've been really pleased with the momentum we've had. I mean, again, I mentioned the tailwinds before, but from a reimbursement standpoint, it will fully come into play on April 1. But I think the bigger thing we're getting from that is really just the noise around no pain and sort of the push, if you will, to look at non opioid alternatives. I mean, 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.

Serge Belanger, Analyst, Needham: Yes. The momentum we saw in the fourth quarter, what was it driven by and whether it would accelerate with North America?

Craig Collard, Chief Executive Officer, Heron Therapeutics: Yes. No, no, no, I'm sorry. I was going to speak to CrossLink. So I think, look, the CrossLink relationship is starting to really come into play. When we 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 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 CrossLink counterparts, we see sort of upside as we move into the two hundred milligram launching later in the year. And as we kind of move into kind of midyear in 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.

Serge Belanger, Analyst, Needham: Okay. And then from an OpEx perspective for 2025, should we expect some flattish growth versus 2024?

Ira Duarte, Executive Vice President, Chief Financial Officer, Heron Therapeutics: Yes. It will be a little higher than 2024 just because of the R and 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 OpEx a little bit in 2025 or 2024.

Serge Belanger, Analyst, Needham: Got it. Thank you.

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

Paul Burns, Analyst, Northland Capital Markets: Congratulations on the progress and thanks for the question or questions rather. So you had a really nice bump with ZEMRALEV at $8,500,000 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

Brandon Folkes, Analyst, Rodman and Renshaw: you can

Paul Burns, Analyst, Northland Capital Markets: maybe sort of extrapolate a little bit more with the number of cross linked reps that have been trained to market the band and how you see that potentially hitting an inflection point in the second half of the year in terms of significantly accelerating ZEMBLAVE sales and to the same extent with respect to Pompey? Thanks.

Craig Collard, Chief Executive Officer, Heron Therapeutics: Yes. 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 2025, this is when this is beginning to we think it's starting to hit on all cylinders as 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 Q1, I mean, you typically have some seasonality and co pay resets and that type of thing 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 to continue to grow. And so, as we kind of look more towards midyear, again, I think as we launched the two hundred milligram band 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, than an institution, but it also allows us to spend more time with the PON V. And again, we're feeling very confident. We're going to continue to grow PON V at a much different rate. And if you think about the ability with the PONVIE 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 CrossLink that's going to help with that extremely.

Paul Burns, Analyst, Northland Capital Markets: Excellent, excellent. So I mean, it's very clear that there is 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 other follow on question, if you've got any thoughts with respect to the Baker Brothers debt? Thanks.

Craig Collard, Chief Executive Officer, Heron Therapeutics: Yes. No, we've I mean, with the Baker Brothers, obviously, they're a large demo for us and have 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 26 timeframe, we intend to meet with them again. Again, we wanted to get our quarter announced and so forth and really feel like with 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.

Paul Burns, Analyst, Northland Capital Markets: Yes. I would imagine with the Symbony litigation largely out of the way that kind of opens the door to the discussions. Thanks.

Craig Collard, Chief Executive Officer, Heron Therapeutics: Yes. No, that's been obviously it was an unknown, but I think now that we have clarity around that and again, even the Mylan (NASDAQ:VTRS) case is very similar to what we face with Fresenius. And so we feel very confident about that. But yes, it's certainly going to help those discussions.

Paul Burns, Analyst, Northland Capital Markets: Excellent. Thanks for the questions and congrats again.

Craig Collard, Chief Executive Officer, Heron Therapeutics: Thanks, Carlton.

Conference Operator: Thank you so much. And our next question comes from the line of Clara Dung of Jefferies. Your line is now open.

Serge Belanger, Analyst, Needham: Hi, team. Congrats on the progress for the quarter. So just wondering, since the launch of ZENERALAV VAN in mid December, it seems like the ramp up is going pretty well. So wondering, could you give us an update on where you're at for the peripheral syringe for ZimuraLAV? Thank you.

Craig Collard, Chief Executive Officer, Heron Therapeutics: 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.

Bill Forbes, Executive Vice President, Chief Development Officer, Heron Therapeutics: Hi, good morning. Thank you for your question. Yes, 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 watching that very closely as our 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 Zenerife 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 twenty twenty six in the first half of twenty twenty seven. So, I mean, we continue to make progress on that.

And if you have any other questions, happy to entertain them.

Serge Belanger, Analyst, Needham: Appreciate it. Thank you.

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

Craig Collard, Chief Executive Officer, Heron Therapeutics: 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 '25. So we look forward to talking to everyone next quarter. Thank you.

Conference Operator: Thank you so much, Potenters. And this concludes today's conference call. Thank you for participating. You may now disconnect. Have a great day.

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