Heron Therapeutics : Q4 2023 Earnings Call Presentation

Heron Therapeutics

Q4 Earnings Call

March 12, 2024

Forward-looking Statements and non-GAAP Disclosures

This presentation contains "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995. Heron cautions readers that forward-looking statements are based on management's expectations and assumptions as of the date of this news release and are subject to certain risks and uncertainties that could cause actual results to differ materially. Therefore, you should not place undue reliance on forward-looking statements. Examples of forward-looking statements include, among others, statements we make regarding the potential market opportunities for ZYNRELEF, APONVIE, CINVANTI and SUSTOL; revenue, adjusted EBITDA and other financial guidance provided by the Company; the results of the commercial launch of APONVIE; the potential additional market opportunity for the expanded U.S. label for ZYNRELEF; the timing of the Company's development of the VAN program and receipt of required regulatory approvals; our ability to establish and maintain successful commercial arrangements like our co-promotion agreement CrossLink Life Sciences; the outcome of the Company's pending ANDA litigation; whether the Company is required to write-off any additional inventory in the future; the expected future balances of Heron's cash, cash equivalents and short-term investments; the expected duration over which Heron's cash, cash equivalents and short-term investments balances will fund its operations and the risk that future equity financings may be needed; any inability or delay in achieving profitability. Important factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q, and in our other reports filed with the Securities and Exchange Commission, including under the caption "Risk Factors." Forward-looking statements reflect our analysis only on their stated date, and Heron takes no obligation to update or revise these statements except as may be required by law.

In addition to the company's financial results determined in accordance with U.S. GAAP, the company provides non-GAAP measures that it determines to be useful in evaluating its operating performance and liquidity. Management believes that presentation of operating results using non-GAAP financial measures provides useful supplemental information to investors and facilitates the analysis of the Company's core operating results and comparison of operating results across reporting periods. Management uses non-GAAP financial measures to establish budgets, manage the Company's business, and set incentive and compensation arrangements. The company presents adjusted EBITDA and adjusted operating expenses. Reconciliations of adjusted EBITDA and adjusted operating expenses to the most directly comparable GAAP financial measures are included in this presentation. The Company has not provided a reconciliation of its full-year 2024 guidance for adjusted EBITDA or adjusted operating expenses to the most directly comparable forward-looking GAAP measures, in reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, because the Company is unable to predict, without unreasonable efforts, the timing and amount of items that would be included in such a reconciliation, including, but not limited to, stock-based compensation expense, acquisition related expense and litigation settlements. These items are uncertain and depend on various factors that are outside of the Company's control or cannot be reasonably predicted. While the Company is unable to address the probable significance of these items, they could have a material impact on GAAP net income and operating expenses for the guidance period.

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Executive Summary

Heron Therapeutics 2023 Achievements

New management team and cost cutting measures in place;

• Operating expenses (excluding stock compensation and depreciation and amortization) reduced from $182M (2022), $135M (2023), $108-116M (2024)

Gross margin improvement from the 50% range historically to over 70%

• Completed capital raise - $30M in Equity and $50M in debt, pulled down $25M ($55M in total); Current cash and cash equivalents/investments at the end of December was over $80M

• Vial Access Needle (VAN) and Prefilled Syringe (PFS) are all budgeted and making progress

4	2023 oncology care franchise revenue was $107.9 million, exceeding full-year 2023 guidance
ZYNRELEF achieved quarterly record of $5.6 million in Q4 Net Product Sales

• Announced partnership with CrossLink Life Sciences, LLC to expand ZYNRELEF promotional efforts on January 7, 2024; January 23, 2024 label expansion

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Product

Performance

Update

Oncology Care Franchise Net Sales

3 months ended December 31, 2023: $28.1 million

12 months ended December 31, 2023: $107.9 million

		CINVANTI Net Sales				SUSTOL Net Sales
25.0 M						4.0 M
									3.8 M
24.5 M			24.5 M							3.4 M
				24.3 M	3.5 M
24.0 M						3.0 M	3.0 M
					3.0 M	2.8 M
23.5 M
			23.3 M
	23.1 M					2.5 M
23.0 M		22.9 M
22.5 M						2.0 M
22.0 M						1.5 M
21.5 M
					1.0 M
21.0 M
					0.5 M
20.5 M
20.0 M						0.0 M
2022-Q4	2023-Q1	2023-Q2	2023-Q3	2023-Q4	2022-Q4	2023-Q1	2023-Q2	2023-Q3	2023-Q4

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Acute Care Franchise Net Sales

3 months ended December 31, 2023: $6.1 million

12 months ended December 31, 2023: $19.1 million

		APONVIE Net Sales				ZYNRELEF Net Sales
0.60 M					6.0 M
							5.6 M
0.50 M				0.50 M
				5.0 M
						4.4 M
						3.9 M		4.1 M
0.40 M					4.0 M
		0.35 M			3.5 M
		0.32 M
0.30 M					3.0 M
0.24 M
0.20 M					2.0 M
0.10 M					1.0 M
0.00 M					0.0 M
2023-Q1	2023-Q2	2023-Q3	2023-Q4	2022-Q4	2023-Q1	2023-Q2	2023-Q3	2023-Q4

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CrossLink Launch

【 AE/PQC	【 CL First Cases Complete
Collaboration
	【 CL Leadership Mtg

	【 HeronU Wave 1					【 Mercury Med Training
【 Training Plans	【 AAOS			【 Cary Training	【 SMS Training
Complete		【 Heron Co-Lead
	【 Compliance		Placed	【 Columbia Training
	Collaboration
【 Contract		【 CL Leadership	【 NSM w/ CL	【 Macon		【 CL Distributor
【 Medical	Live Training	【 Charlotte, NC Training	Evaluations
Signed	Collaboration			Co-leads	Training

• CL Co-leads Placed

【 Atlanta Training	【 CL Network
			Expansion
			Begins

		January					February							March					Aoril
6	13		23	31	1	8	19	23	31	1	10	11	12	15	23	29	1	12		20	31

Summary

• January: Contract Executed, Phase 1 and Phase 2 Training Plan Complete, Medical/Legal/Quality Consulted
• February: Crosslink Leadership Trained (20), AAOS Networking and Momentum
• March 3-6: NSM CL Co-leads Join, Trust & Collaboration
• March 7-28: NC, SC, GA Joint Teams Trained, 150 Sales/Clinical Reps (Atlanta 38, Columbia 40, Macon 24, Cary 20, Charlotte 28)

• • April: First non CL Legacy Distributors Trained, Existing Regional Groups Evaluated

CrossLink Network	Rollout
	• CL Legacy Southeast - April 1 (NC, SC, GA, 250 reps)
	• 13 ancillary distributor with current working relationships
	through 2027
	• Midwest - 250 reps across 16 states
	• Each month add 1-2 distributors groups
	• Northeast - relationships with Zimmer, all 1099 reps

Pipeline

• SMS April 17-18 (Michigan, 36 Sales Reps)

• Mercury Medical April 24-25 (Kansas, Missouri, Southern

Illinois, 50 Sales Reps)

• MSA, Inc. Dallas (Greater Dallas, 37 Sales Reps)

• ZB Solutions (Louisiana, Mississippi, FL Panhandle,

Tennessee, Alabama, 186 Sales Reps)

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Ambulatory Surgery Center (ASC) Opportunity

• Total number of ASCs in the country - 6000+
• • ASC's are independent centers operating outside the hospital setting, a majority physician-owned
  • 60% of all outpatient surgical procedures were performed at ASCs in 2020

	Orthopedics Among Fastest Growing
80%	Segment of ASC Procedures
70%	66%	68%

	61%
60%	58%
52%
50%	44%

• CrossLink has a significant footprint in this setting and strong relationships
• Orthopedic procedure volume is trending toward ASCs

40%	33%
	30%
30%
20%
10%	10%	7%10%
	4%
0%
Cardiology	Spine	Other	Othopedics
		2015 2018	Mid 2020s

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