Pacira BioSciences, Inc. (PCRX) Q1 2021 Earnings Call Transcript

Pacira BioSciences, Inc. (PCRX -2.50%)
Q1 2021 Earnings Call
May 4, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2021 Pacira BioSciences Earnings Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Susan Mesco, Head of Investor Relations. Please go ahead.

Susan Mesco -- Head of Investor Relations

Thank you, Tina. And good morning, everyone. Welcome to today's conference call to discuss our first quarter 2021 financial results. Joining me as speakers on today's call are Dave Stack, Chairman and Chief Executive Officer; and Charlie Reinhart, Chief Financial Officer. Additional members of the Pacira executive leadership team are also here for our question-and-answer session.

Before we begin, let me remind you that today's call will include forward-looking statements based on current expectations. Such statements represent our judgment as of today and may involve risks and uncertainties. For information concerning risk factors that could affect the company, please refer to our filings with the SEC, which are available from the SEC or our website.

With that, I will now turn the call over to Dave Stack.

David Stack -- Chief Executive Officer and Chairman

Thank you, Susan. Good morning everyone, and thank you for joining us. One year ago when we reported our first quarter results, we were facing significant challenges in the face of an expanding pandemic, in the blink of an eye a moratorium was placed on hospitals performing elective procedures and the notion of COVID-19 treatments and vaccines seemed a long way off. I cannot tell you how proud I am of our entire Pacira team, as they have truly risen to the occasion over the past year to ensure that we continued our important work to provide non-opioid pain management to patients in need, in a difficult and dynamic environment.

Consequently, I'm delighted to report the significant progress we have made thus far in 2021 highlighted by the US approval and launch of EXPAREL in the pediatric setting, and its growing utilization across a wide range of long-acting regional blocks for low or no opioid pain control. Our first quarter financial performance was strong with a total sales of $119 million and EXPAREL average daily sales coming in at 115% of prior-year levels, despite ongoing COVID- related challenges with the elective surgery market.

Today, we also reported adjusted EBITDA of $36.2 million and we remain well-positioned to deliver sustained and accelerating profitability. Before turning now to a more detailed strategic review of our business, I would like to quickly cover the recently filed lawsuit against the American Society of Anesthesiology, seeking damages and the retraction of three articles published in the February issue of their journal Anesthesiology. These articles create a false and misleading impression that EXPAREL is not an effective analgesic. Not only were these article scientifically and statistically unsound, but also failed to disclose that certain authors were accepting payments from competing pharmaceutical or drug-device manufacturers, which is not only an ethical violation, but very likely and still an apparent bias into this body of work.

The decision was not one taken lightly. We reached out to the society and the editor multiple times to discuss the shortcomings of the articles and our concerns around lack of proper author disclosure. These requests were repeatedly dismissed. As you know, EXPAREL is a critical piece of our business and we initiated this legal action to protect the clinical integrity of EXPAREL and ensure that false and misleading information is not inappropriately cited as an accurate reference in other scientific manuscripts, and is not used to limit access to patients and providers who need a safe, effective opioid alternative like EXPAREL.

We would encourage you to review the declarations related to these studies, including Brown University's professor and meta-analysis expert Dr. Thomas Trikalinos, whose statement discussed the serious methodological and statistical failings of the meta-analysis. These documents are all available on the Pacira website.

Now on to our first quarter business update, we continue to execute across our state of global growth strategies. First, expanding the use of EXPAREL and iovera for opioid-sparing pain management, while enabling the migration of large, painful and profitable procedures to the ASC. And second, pursuing innovation by investing in our internally and externally sourced portfolio of non-opioid pain management and regenerative health solutions, while simultaneously investing in educational programs to revolutionize medical practice through opioid-sparing ERAS protocols.

I'll start with EXPAREL. With more than 8.3 million patients treated since launch, an excellent safety profile, a growing body of satisfied customers achieving favorable outcomes, and a long exclusivity runway, EXPAREL is well-positioned to remain the market leader, as the only long-acting local analgesic approved for infiltration, field block and brachial plexus nerve block. In March, FDA approved the expansion of EXPAREL label to include use in patients six years of age and older for single-dose infiltration to produce post-surgical local analgesia. With this approval, EXPAREL is now the first and only FDA-approved long-acting local analgesic for patients as young as age six.

Importantly, our label is not limited to cardiovascular and spinal surgeries, but rather a broad label that encompasses all surgical procedures for pediatric patients ages six and older. The broad label is really a testament to EXPAREL's established safety and efficacy and excellent safety profile with approximately 1 million pediatric procedures per year. We envision this to be at least a $100 million market opportunity.

Our initial launch in pediatrics is under way and we are very encouraged by the high level of receptivity and enthusiasm for replacing current standards of care, opioids, epidurals, and IV PCA pumps, elastomeric pumps, and off-label use for local analgesics with EXPAREL. We also see a halo effect in adult procedures. For instance, Spine is a tight knit group of like-minded surgeons, many ad practices that include adults, and the technique for Spine infiltration or an erector spinae block is the same for children and adults. This opportunity provides a rapid transfer of best practice for a erector spinae regional blocks as part of enhanced recovery path rate for both adults and children.

The unmet need in this population is clear as physicians understand the difficulties of placing indwelling catheters in pediatric patients. Just imagine trying to keep catheter on a seven-year-old on top of the well-known catheter and pump issues such as dislodgement, leaking, wound healing, and dose-dumping. A recent article in the Journal of Health Economics and Outcomes Research highlighted clinical and economic outcomes associated with the use of EXPAREL versus the standard of care for the management of post-surgical pain in pediatric patients undergoing spine surgery.

Dr. Robert Ballock and his colleagues at Cleveland Clinic concluded pediatric patients undergoing spine surgery who received EXPAREL had significantly reduced inpatient post-surgical opioid consumption, length of stay, and hospital cost compared with those who did not. The study was a retrospective cohort analysis of 10,189 pediatric patients undergoing in-patient spine surgery. We will also be highlighting EXPAREL and the pediatric setting at IMAST, the Annual Meeting of the Scoliosis Research Society, where we will be discussing new and advanced techniques for the treatment of spine conditions with leading surgeons.

Additional near-term commercial initiatives include POSNA, the Annual Meeting of the Pediatric Orthopedic Society of North America, new, a key opinion leader and fellows training programs, and ask the expert panels, all of which we are launching this quarter. As I've said before, we are [Technical Issues] we are deploying a thoughtful gated approach to ensure providers understand the nuances of EXPAREL versus short-acting generic bupivacaine and are well prepared to achieve the best outcomes for their pediatric patients age six and up.

Our goal is to quickly onboard key opinion leaders at the most sophisticated children's hospitals to ensure that they are well equipped to deploy education across their networks and spheres of influence.

Next, I'll turn to an update of the role of EXPAREL in playing -- EXPAREL is playing in regional anesthesia and the market shift to outpatient setting. The regional anesthesia field is poised for rapid expansion, given the advances and ultrasound guidance, newer techniques, and improved outcomes. In 2020, only 20% of procedures requiring anesthesia used a regional approach. Given the tremendous upside potential to broaden the use of regional approaches, we have invested significantly in education and training to further expand clinician adoption of regional blocks, as they represent the most important growth driver for our business in 2021 and beyond.

EXPAREL-based enhanced recovery after surgery or ERAS protocols continue to revolutionize regional anesthesia by enabling earlier discharge and accelerating the migration of electric procedures to outpatient sites of care. Long-acting EXPAREL based blocks have reliably and reproducibly extended the duration of pain control from hours to several days, establishing institutional protocols that directly enable the migration of procedures such as total joint arthroplasty spine and rotator cuff repair to outpatient markets.

The COVID-19 pandemic has further shifted the mindset of patients, physicians, and institutions to establish safe outpatient environments, providing a reliable continuity of care. By doing so, patients will be able to obtain the care they need. Importantly, we expect this transition to become permanently embedded in the healthcare systems, given the improved patient outcomes, satisfaction rates, and economic advantages and being driven by payers determining the site of care. These market dynamics along with EXPAREL utilization significantly and consistently outpacing the recovery of elective surgery markets leave us well-positioned for long-term growth as the COVID crisis results and elective surgery demand normalizes with the continued rollout of vaccines.

Now turning to our Pacira Innovation and Training Center in Tampa or the PITT, which is driving -- delivering best practice knowledge transfer in near real-time for our key EXPAREL markets. Momentum and uptake of newer regional blocks continue to drive significant demand from both new and existing customers for education and training through live and virtual programs as a test. We recently hosted two regional anesthesia workshops designed for healthcare professionals, who are seeking to advance a platform that enhances patients' post-surgical experience. Techniques are taught by expert instructors using didactic presentations, banner model screening, state of the art 3D virtual cadaver imaging, and ultrasound-guided hands-on life model scanning.

In February, we featured a webinar and multi-specialty panel discussing, the migration of breast surgery to the ambulatory surgery center. This was also featured recently at the Annual Meeting of the American Society of Breast Surgeons with over 150 healthcare providers in attendance. In March, we hosted two cardio programs, a cardiothoracic Bioskills Lab were key thought leaders from leading cardiac programs around the country collaborated to determine the optimal EXPAREL technique and volume to adequately treat pain following cardiothoracic surgery.

The lab involved ultrasound-guided parasternal blocks such as the pectoral, intercostal, and transverse thoracic plane blocks, while capturing the spread and distribution of EXPAREL via live fluoroscopy and dissection of cadaver models. These findings will help enhance the educational offerings to both cardiac surgeons and anesthesiologists when implementing enhanced recovery pathway using these newer regional blocks for cardiac procedures.

The second cardio event featured a panel of emerging regional of -- the second cardio event featured a panel on the emerging role of regional anesthesia cardiac ERAS protocols and included both discussion and live demonstration. This program was highlighted at the Society of Cardiovascular Anesthesiology Annual Meeting last month. In March, we hosted an interactive workshop entitled heart blocks, you need to know in 2021. This workshop was broadcast live from the PITT and focused on Pericapsular Nerve Group or PENG blocks and Erector Spinae or ESP blocks and was featured during the American Osteopathic College of Anesthesia annual meeting with over 100 healthcare providers.

It is important to note that each of these events focused on significant on-label opportunities. So they are driving real-time demand. Approximately three-quarters of the the attendees of PITT events already have experience with EXPAREL. Clinicians are eager to expand the use and generate data and new procedures after seeing the positive outcomes and consistent results of regional blocks such as erector spinae for scoliosis and cardiac surgeries.

Beyond these on-label educational programs, we have a key label expansion milestone on the near-term horizon with our STRIDE lower extremity nerve block study that is evaluating EXPAREL as a regional block for knee as well as foot and ankle surgeries. Enrollment in STRIDE is now complete and database lock is under way with topline results on track for this month, if positive, we will move forward with an sNDA submission seeking expansion of the EXPAREL label to include lower extremity nerve block, which we believe to be as significant as an upper extremity market.

Next, let's turn to our continued progress in the markets outside of the United States. We remain on track to launch EXPAREL along with iovera in Europe in the third quarter of this year, a slight delay based on continued COVID-19 issues in key EU markets. The EU launch will focus on only those markets where we can secure pricing that closely aligns with the US price.

COVID has caused a tremendous backlog of orthopedic procedures in Europe with waiting lists as long as two years. In addition, the typical length of stay in Europe is several days. These circumstances provide an important opportunity for both EXPAREL and iovera. There is great interest in using EXPAREL to improve throughput by accelerating recovery times and discharge, while iovera can play a key role in long-term pain management, especially as doctors worked through the significant waiting list. We would expect the United Kingdom, to be our largest contributor in Europe, driving more than 50% of the total business in that market.

Importantly, our broad efficacy label, which covers EXPAREL administration via infiltration field blocks and importantly both upper and lower extremity nerve blocks, along with a superior safety profile, give us a clear competitive advantage in Europe where iovera is already approved. For Canada, we remain in labeling discussions with healthcare authorities. Given the current status, it is not likely that we will launch EXPAREL in Canada as we will not jeopardize the brand with labeling that is not in harmony with major country regulators, authorities.

As for the China market, we recently terminated our agreement with our partner Nuance due to the lack of regulatory pathway that make strategic sense and protects our intellectual property without presenting the risk that our proprietary data would be used to develop a generic competitor. We made a payment of $2.8 million to Nuance in connection with this termination.

Switching gears now to iovera, we remain highly confident in the innovative iovera system. Since our acquisition in 2019, we have significantly improved the reliability of the device and launched new clinical initiatives to demonstrate its potential to improve patient care using novel cold technology to administer a non-pharmacologic nerve block to safely and immediately deliver months of non-opioid pain control. We have great confidence in the long-term opportunity for this important addition to our commercial portfolio.

With our dedicated iovera sales team along with recently implemented commercial enhancements now driving new customers and expanded use, iovera sales increased by 44% in the first quarter and average number of ordering accounts is up 48% year-over-year. As with EXPAREL, the PITT is providing a valuable training and educational tool for iovera. So far in 2021, we have posted four iovera simulation labs that all focused on introducing the product to new customers. Participants of these programs learned how to target superficial genicular nerves using the iovera smart tips with ultrasound guidance led by healthcare professionals, the lab includes didactic lectures and hands on training, including live model scanning with nerve identification using ultrasound and peripheral nerve stimulation, virtual 3D cadavers, smart tips treatment steps, and reviews of the iovera system set up and handpiece operation. We recently hosted a bio -- I'm sorry, we recently hosted an iovera Bioskills Cadaver Lab that investigated the utilization of iovera as a medial branch block for back pain. During this session, a multi-disciplinary team comprised of an interventional pain management physician, neurosurgeon, and research engineer evaluated the current modalities of medial branch blocks and the potential for iovera blocks as an opioid-free option for the 14 million Americans suffering from low back pain.

These educational and commercial efforts are driving significant increase in our iovera our customer base, approximately 90% in the first quarter of 2021 with a growing presence in the ASC setting. In fact, ASCs represented roughly 60% of our new iovera customers in the first quarter. On the clinical front, PREPARE is enrolling patients to evaluate iovera and EXPAREL for opioid-sparing pain management for patients undergoing total knee arthroplasty.

We continue to expect enrollment to conclude before the end of this year. In parallel, we are launching an iovera registry to capture real-world evidence for use in TKA procedures with leading academic and orthopedic centers of excellence. We are also encouraged by the excitement around using iovera in other areas. Key opinion leaders in orthopedics, spine and anesthesia are interested in replacing key-based radio frequency ablation with iovera cold therapy with interest across a wide range of treatment opportunities such as low back pain, spine spasticity, and rib fracture. We will use investigator-initiated studies and grants to develop data across these areas.

Turning now to business development, our team is leading a robust effort to thoughtfully pursue opportunities of interest to our surgical and anesthesiologists we serve today. We believe our growing leadership position in opioid-sparing pain control provides us with a significant opportunity to build a differentiated portfolio to improve the patient journey along the neural pain pathway.

Earlier this year, we announced a strategic investment in GeneQuine, a gene therapy for osteoarthritis of the knee and recently invested $3 million in spine biopharma to support their advancement of a regenerative approach to treating low back pain caused by degenerative disc disease. Spine BioPharma's lead product candidate is Remedisc, a 7-amino acid chain peptide that binds to and induces down-regulation of transforming growth factor beta 1 or TGF beta 1, which is often highly expressed in the degenerative disc of patients with low back pain.

We also recently made a $10 million equity investment in a privately held company with an exciting gene therapy platform. We will share more details in the coming weeks.

Finally, to augment our business development efforts, our in-house team is focused on leveraging the proven safety, efficacy, and customizability of our DepoFoam platform.

With that, I'll turn the call over to Charlie to review the financials. Charlie?

Charles Reinhart III -- Chief Financial Officer

Thank you, Dave, and good morning everyone. Before discussing our first quarter financial results, I'd like to remind you that I'll be discussing non-GAAP financial measures this morning, which we believe more accurately reflect our business results. A description of these metrics along with our reconciliation to GAAP can be found in the press release we issued this morning.

Let me begin by reiterating our confidence in what the future holds for our business. Market indicators remain strong with EXPAREL consistently outperforming the elective surgery market. This leaves us on track for accelerating top and bottom line growth as the COVID pandemic continues to subside and the elective surgery volumes begin to recover and normalize. We also continue to see EXPAREL enabling the shift of many procedures to outpatient settings. The COVID pandemic has only accelerated this shift and we are confident that this surgical migration will remain embedded in healthcare practice going forward.

We ended the first quarter with more than $625 million of cash and investments. This strong financial foundation and the cash-generating nature of our business, leave us well equipped to continue to invest in internal and external growth opportunities that align with our vision to become the global leader in innovative non-opioid pain management and regenerative health solutions.

First quarter total revenues of $119 million were driven by $114.7 million in EXPAREL sales. On an average daily basis, this was 115% of the first quarter of 2020 due to the expanding utilization of long-acting EXPAREL based regional approaches. For iovera, we reported net product sales of $3.3 million for the first quarter of 2021, an increase of 44% from the $2.3 million for the first quarter of 2020, primarily due to significant COVID-related shutdowns last year.

Importantly, we're also starting to see many of our new commercial initiatives start to kick in, with the greatest demand for iovera coming from pain relief for patients in advance of the TKA procedure as well as chronic pain management for those with mild-to-severe osteoarthritis of the knee. Our non-GAAP gross margin for the first quarter of 2021 improved to 75% versus 73% for the first quarter of 2020. This was due to sales of lower-cost product manufactured at our custom suite in Swindon UK, as well as the impacts of pricing and biomix.

We continue to expect adjusted gross margins to progress towards 85% as the 200-liter batch facility comes online and our investment in the second-generation iovera products is complete. Non-GAAP research and development expenses were $14.8 million in the first quarter of 2021 versus $14.6 million in 2020. Increases in clinical and regulatory costs were offset by reductions in manufacturing capacity expansion costs with our Swindon-based 200-liter manufacturing suite advancing from the development phase to the registration phase.

Non-GAAP SG&A expenses were $41 million in the first quarter of 2021 versus $38.3 million in 2020, while sales and marketing expenses declined due to the decreased sales commissions to DePuy Synthes with the conclusion of the agreement in January 2021. Our G&A expenses increased on a year-over-year basis due to an insurance recovery of $2.1 million received in early 2020 related to legal expenses for the DOJ claims, all of which were fully resolved in 2020.

With respect to taxes, on a non-GAAP basis, the first-quarter tax rate came in at approximately 25%, which is where we expect to land for the full year. To remind you, we expect to become a cash taxpayer during the second half of 2022. All of this resulted in non-GAAP adjusted EBITDA of $36.2 million in the first quarter of 2021 versus $26.9 million in the first quarter of 2020.

While we are not currently providing 2021 guidance, given the continued uncertainty around COVID-19 and the pace of recovery for electives -- the elective surgery market, we will continue to report preliminary, monthly product sales to share inter-quarter trends with you. We will consider changing this practice as we have more visibility post COVID.

For April 2021, we continue to see strong sales as we saw in March and expect to report a significant year-over-year increase when we report monthly sales next week. To remind you, in 2020, we saw a precipitous drop in sales, beginning in the second half of March and continued through the end of April with a decline in year-over-year EXPAREL sales of approximately 70% during this period.

Lastly, we remain very bullish on our long-term expectations for robust top and bottom line growth. We believe that by the end of our five-year planning period revenues will be approaching $1 billion for EXPAREL and $200 million for iovera. Gross margins will have improved 1,000 basis points and operating margins will exceed 50% for our current base business.

With that financial overview, let me turn the call back to Dave for his closing remarks.

David Stack -- Chief Executive Officer and Chairman

Thank you for that review Charlie. Looking back over the past year, we emerged from this unprecedented global pandemic and lockdown as a stronger company. We have become more resilient as a team and united around the shared sense of purpose for the important work that we are doing. At Pacira, the pandemic accelerated the transition to the ASC setting and has opened the door for a variety of digital interfaces from our meetings with some of you to medical meetings to training physicians and more. These changes are likely here to stay and we have embraced them.

One thing that is not changed with the pandemic is the need for improved opioid -- non-opioid pain management. The pandemic has had a devastating impact on our society with increased opioid adverse events. Here Pacira continues to lead the way by expanding the use of EXPAREL and iovera and by investing in novel innovative technologies that are synergistic with our goal of bringing non-opioid pain management and regenerative health solutions to patients in need.

With that, I'll turn the call over to Tina to begin our Q&A session. Tina?

Questions and Answers:

Operator

[Operator Instructions] And our first question is from David Amsellem with Piper Sandler.

David Amsellem -- Piper Sandler -- Analyst

Hey, thanks. So just a couple. So, first regarding the matter with the American Society of Anesthesiologists, I mean just looking ahead, I mean, obviously, this is a core audience for you, so is there, should we be at all worried that this is something that could in any way, have no unintended consequence of alienating your core constituency, particularly in the context of a competitor that could be coming to market, I realize that the product is not -- cannot be used as a nerve block, but just in terms of creating noise, I mean how do you, how should we think about that and what's your thought process? So that's number one.

And then I joined late, so I apologize if I missed this, but can you just talk about cadence of recovery in elective procedure volumes as the year progresses. And I guess what I'm asking here is in the second half, are you expecting sort of fully normal pace of elective procedure volumes, particularly as we enter the back half of the year? Thanks.

David Stack -- Chief Executive Officer and Chairman

Thanks, David. First, I don't see if anything actually, we think that the legal action against the society is having a positive benefit, the society is -- has done what it has done and we believe that we didn't have any option frankly but to defend ourselves against what was clearly a well thought out attempt to defame EXPAREL. What we've gotten from the medical community is great support for -- there are some questions before people read the Trikalinos's declaration and before they read the declaration on CME and on conflict of interest, etc.

But as soon as folks understand what the legal issues are here, we've had great support from the anesthesia community up to and including several people wrote rebuttals to those articles and asked for them to be published in the same journal and they were told by the editor that he would not publish any of those because they didn't follow the scientific process. So given some of the ways that this has been positioned, I think the folks who are members of the society, who are using EXPAREL not only to enhance their practice by increasing the reliability and the viability of regional blocks but also EXPAREL is making this migration to ambulatory surgery center possible, which is really high value to the anesthesiology community. I think we see a clear separation between the journal and the society and the folks who are actually practicing regional blocks in the marketplace. So if you judge by April and the first few days in May, we don't have anything to worry about in terms of any kind of a retributive action, actually things are going very, very well in addition to what we, what we talked about this morning.

On the second point, and I'll be consistent here, David, with what we said in the past and God knows if we're right, but we are starting to see some of this start to rectify itself. So what we said is Q1 will be pretty much a continuation of Q4, and I think that's pretty much what happened. We think in Q2, we're going to start to see these things start to modify, and at least in our models, we've got 5% of the 4 million procedures in our TAM that were not done in 2020 coming back to the marketplace. And those are almost entirely orthopedic procedures. And then as we go to the back half of the year, we think that something like half of those 4 million procedures will come back. Now, this is just in our TAM by the way, but we think half of those procedures will come back to the marketplace.

And so in our manufacturing forecasts, we have included the opportunity that we will treat the percentage of those patients in addition to what's going on now.

It's not quite as clear as a normalized market where people that have pain, go and get their surgery. You've got these patients coming back to the marketplace and being prioritized in many cases. So there still is an expanded time lag even for new patients today, but I think that that will resolve itself over the next year or so.

Just one extra piece of insight, because I think it is really valuable is we will benefit greatly from our strength in orthopedics, and the reason I say that is that the orthopedic community has an extended relationship with their customers or their patients. In many cases, it's decades-long, and so those patients remain in contact with those surgeons and the waiting list for how you move those patients into an opportunity to do elective procedure is vibrant, very different than the soft tissue, we're talking about colorectal belly where we've had a number of calls with primary care docs and asked them the simple question, would you, would you refer a patient for surgery from a telehealth call and there are some exceptions, but generally speaking, the answer is no.

And so that pathway has to rebuild itself, right, where the patients live go to see the physician, the physician wants to look at the blood work and see the patient and all of those things and then you will see the primary care belly surgery start to go, come back online. We think that will be more of a fourth quarter event. So it's a long answer to a fairly simple question, David. But we think, yes, not all of these patients will be able to come back because we just don't have the capacity, but we think the ambulatory surgery centers will prioritize the high-profit total joints spine rotator cuff, etc.

David Amsellem -- Piper Sandler -- Analyst

Okay. No, that's helpful. Thanks.

David Stack -- Chief Executive Officer and Chairman

Thanks, David.

Operator

Thank you. Your next question is from Daniel Busby with RBC Capital Markets.

Daniel Busby -- RBC Capital Markets -- Analyst

Hey, good morning. Thank you. Two questions. First, we started to see more companies reintroduce full-year financial guidance, clearly you've held off for now. Can you talk a little bit more about what you're waiting to see in the market before doing so, and does uncertainty around a potential competitor approval later this month factor into that decision at all?

Second, if we look at the weekly elective surgery data you provided in your slide deck, there has been a fairly tight correlation between weekly elective surgeries in EXPAREL usage over the last year or so, but that's actually diverged a bit in the last few weeks. Elective surgeries have declined, while EXPAREL has held reasonably steady. Can you discuss what's driving those trends? Thank you.

David Stack -- Chief Executive Officer and Chairman

Sure. The first one is easy. A potential competitor has had no impact on anything that we're doing here, specifically with guidance. I mean, I think more of what we were seeing, as we went through the first quarter, Daniel, was these spikes in COVID-related closures and the marketplace moving around, we had some weeks where some of our bigger states were not performing at the same level that -- there was no consistency in the marketplace, I guess, especially in the states that provide the majority of our business. And so that and really more waiting to see how the pediatric launch was going to go, what kind of reception we were going to get in the marketplace when we were talking to the general pediatric population, etc. I think with what we're seeing now, I think we will be in a much better position for the next call.

But I think coming into this call there were just too many unknowns for us to make a statement. And if we did, it would have been so modified with risk adjustment that it wouldn't have -- nobody would have been happy with us. So it just made sense to keep presenting data on a monthly basis, which has had a really interesting impact because it gives us a lot more opportunity and interact with the marketplace, then only waiting for the Q call on a regular basis. So we probably, I would be surprised if we continue to do both, but right now, yet to be determined. But as I said to David's question, we've had a strong few weeks here, and so I think we're in a much different position when it comes to determining how we, how we provide guidance going forward.

On the IQVIA chart, we just have to be really careful with that data, Daniel, because that's claims-based data. And so you will see that that modifies over weeks. Right. And as more claims for that week that's reported come online, you'll see that the gap narrows between EXPAREL in the elective procedures. What we pay more attention to is how EXPAREL is always on the top of the line and the elective procedure still remain generally, modestly on the bottom of the line, which tells us that we are not only growing of market share but as the electric procedures come back, reference the answer I just gave to David that we will have a share of the market in these elective ASC procedures that is higher than what it is in the hospital marketplace and what it is in the, in the hospital outpatient environment which again goes back to providing guidance with some certainty that we're going to be in the right band.

Daniel Busby -- RBC Capital Markets -- Analyst

Got it. Thank you.

David Stack -- Chief Executive Officer and Chairman

Thanks, Dan. Your next question is from Greg Fraser with Truist Securities.

Greg Fraser -- Truist Securities -- Analyst

Good morning, folks. Thanks for taking the question. I just want to follow up on the anesthesiology matter. Are you aware of any proposed changes, the protocols, or reimbursement stemming from those articles, and can you also comment on whether there's been any discussions between the company and the ASA since you filed the complaint?

David Stack -- Chief Executive Officer and Chairman

There we have some examples, Greg, where and especially, remember we're launching PITT's and so, folks are looking for formulary approvals [Technical Issues] there are some, a modest number not material to our total business, but you could see that there were some folks who were asking questions about why would you want access to a drug that is not superior to plain bupivacaine, etc.

A number of things and reasons that you would want to do that, so we did have a couple of surgeons who stopped using it, they have now returned to using it given the Trikalinos declaration and the appearance that there is, there is more to that story than was published in the anesthesia Journal. More to the point is our field force was being asked a lot of questions about that and obviously didn't have a lot of things that they could say about it, given the stature of the anesthesia Journal. So having the Trikalinos declaration that they can provide to their patients, and having all of this stuff on our website where folks who want to know what's going on, can find out the other side of the story, if you will. I think most pertinent to us is that we couldn't have other articles referencing this as truth. When immediately after these articles came out, we had folks do their own meta-analysis on the same data sets and come to a very different conclusion. So you can, if you're at Pacira, you can't let this be referenced as fact, when we know that it's deeply flawed and came to a negative conclusion, well, there is a whole raft of reasons why that might have happened not to be gotten into here.

Part of your second question, Greg, and I know this will be no surprise to you, I mean, we're not in any position where we're going to negotiate this in the public domain. So there's going to be, there's going to be notifications that come out between the law firms that are in the public domain. I think that'll be the breadth of what we want to share with anybody, other than that the discussions that we're having are, have to be held private.

Greg Fraser -- Truist Securities -- Analyst

Got it. Totally understand. And then on Europe, I was just wondering if you could put some numbers around the EXPAREL opportunity and how you see the launch evolving over the next few years? Thank you.

Charles Reinhart III -- Chief Financial Officer

Yes. So it's very much a specific launch. We're going to launch EXPAREL and something on the order of eight countries and iovera on eight or nine countries. As stated in the script, we really are only going to launch in places where the value that's being created by EXPAREL is recognized and the price that we're able to get. And so we have, well, I guess in a word, I would say that the opportunity appears to be at least as big as we thought it was a couple of months ago, and I say that because we talked to a surgeon in the UK, two weeks ago Friday that actually said he has 5,000 patients on his waiting list.

And so there is a, it will take us several years to work through that, that opportunity. And so, iovera, while patients are waiting for years in order to get their surgery and then EXPAREL and we're working with a number of different hospitals now and a number of different anesthesia and surgery groups, who are interested in the model that’s been established here in the United States and driven by ERAS protocols, where we can move these patients to a shorter timeframe and the idea of addressing this backlog by being way more aggressive with something that approaches an ambulatory surgery center.

These groups with the NHS, the National Health System are forming their own ways and their own throughput programs, and their own opportunities to address this backlog. So I think where we go, we will be very successful. What the model says, what our model says is that we get into 2025 that between the two products, we're pushing the $100 million around in Europe. And on the current model at least, Greg, somewhere in the back half of year three, we become profitable in Europe. So it's not massive in terms of what we are, what our expectations are for in the United States but it's profitable and it supports our mission of providing an opioid alternative to as many patients as possible. So we're happy to be going there.

Operator

And your next question is from David Steinberg with Jefferies.

David Steinberg -- Jefferies -- Analyst

Okay, thanks, and sorry if this question has been asked. I just joined the call, but I've two questions. First is, I know that you indicated, beginning of the year, Dave that you're looking to be active in business development and M&A, and you've done a few smaller type in-licensing or acquisitions. And I'm just curious what your appetite might be for something larger? I know last year around this time the company with the pandemic just hitting indicated that they're going to husband their cash and not really do much in business development for obvious reasons, but that's obviously changed. Are you looking, I guess, I guess how active are you currently, would you be disappointed if you didn't do a few transactions this year and I guess, how big a transaction could you do, given your cash and debt capacity? That's the first question.

And then secondly, this is round three waiting for heritage PDUFA date. It's hard to find a lot of doctors who can talk about 011. We recently held a doctor panel and they were somewhat knowledgeable and these are products more as complementary versus competitive, small surface areas versus large surface areas and the fact that they can't do nerve blocks and things like that. Would you agree with that? And then the related question is, there's some discussion that they get approved, they're going to come in at a much lower price point than yours and I was wondering if you could comment on what your competitive response might be if that -- if that's the case. Thanks.

David Stack -- Chief Executive Officer and Chairman

Thanks, David. First, on the M&A question. We've -- I mean, if you include the gene therapy company that we've most recently made an investment in, we've not made three investments in the last couple of months. I think given the opportunities that we have, and Ron and his team are exhaustively looking at opportunities in the marketplace. We don't have any emotional or financial reason we wouldn't do a transformative larger deal. We just don't have one that we have confidence and David that would meet the objectives of the organization, in terms of finances and all the rest of that stuff.

So there is no reason why we wouldn't do it, there is no stated strategy that we won't do it. It's that most of the things that are coming to us are relatively early gene therapy and cell therapy and things like that. And the best way for us to have a number of shots on goal is to make these financial investments take an observer role or in some cases, taking a board seat with the prescribed opportunity to invest or acquire and it's in a future date based on clinical milestones being met during the development process.

So I think that that model makes a lot of sense to us. We expect that we will announce several more of these over the next couple of quarters. And so we're in a good spot. If you or anybody else has a transformative transaction that they think makes sense for us, please don't keep it a secret, we've got a lot of cash. This would be our slowest quarter for EBITDA and we still had $36 million and so we think we're going to accelerate significantly as we go through the next three quarters. And so I think we're going to a very strong position. It's just that we don't have anything that make strategic sense that we're aware of today. So I think if that doesn't cover the first point, come back to me.

On the second point, as usual, David, a number of mirage has created here, right. If we follow the EU label and for everything that I've ever done in my career, the EU label is strongly [Technical Issues] you're going to get in the United States. There really is no market for this product. It's the first time in my career that I've ever seen a package insert that says this medicine should not be used for serious surgeries. They don't define serious surgeries, of course, but if you ask the patient, I think you're going to find that all surgeries are serious.

And so on your specific topic or question around price, the European label is very clear that this drug is to be used on small wounds. If you use a small wound then you would use the 10-ml dose of EXPAREL and the WACC cost for that is around $180. The 011 company has actually said that they're going to come in the low $200. So if you compare our small vial to their price that they've talked about in the marketplace, we're still cheaper. So the only way that our argument makes any sense is if you use a 20-ml vial for EXPAREL to do a small wound and nobody would do that in the marketplace. In fact, I think you've seen the steady growth of our 10-ml, as we continue to expand and you'll see a fair amount of 10-ml, as we get into the peds market, especially in the younger children as well. So the argument as with everything doesn't make any sense. So I hope that they get approved, I mean we can't lose if they get a CR hopefully they're finally dead, if they get approval and it's a bad label, and it's for sure will be, then they can't sell it to anybody. And that would be our preferred option frankly as we sit here today.

David Steinberg -- Jefferies -- Analyst

Okay, thank you.

David Stack -- Chief Executive Officer and Chairman

Thanks, Dave.

Operator

Our next question is from Serge Belanger with Needham & Company.

Serge Belanger -- Needham & Company -- Analyst

Hey, good morning. Thanks for taking my question. First one is on the pediatric label expansion, Dave you consistently talked about the pediatric opportunity, consisting of about 1 million procedures. Does your pediatric label allow you to capture or target that whole one-way procedure or just segments of that?

And then on the European opportunity, maybe just talk about the, the dynamics of the opportunity, is there a similar movement to the ASC setting and how familiar are the Europeans with Cryoanalgesia?

David Stack -- Chief Executive Officer and Chairman

Yeah. Thanks, Serge. First on peds, so this label is for infiltration which via the Janet Woodcock letter from the legal settlement with the FDA is the same as a field block. So the million, the million surgeries that we reference, –are what's available to us is a result of that label, right? We also are in discussions with the FDA on patients zero to six, it will probably be done in two tranches, two to six and then zero to two, neonates to two, and we're also in discussions with the FDA on a nerve block indication. And interestingly, since we've had the launch, we've talked to a number of major hospitals who do, while we've got one hospital in particular that does 2,000 peripheral nerve blocks in children itself. So we think that we now have a lot more understanding of the market and the opportunity to go back to the FDA with these folks who are doing these nerve blocks everyday, who are using EXPAREL now in order to achieve those. And so the million, a direct answer to your question is the million is the current opportunity with the current label and would be expanded, if we get a nerve block label or as we go below six.

In Europe, yes, their understanding of Cryoanalgesia in many markets, especially the Nordic markets, for example, they actually have more exposure to Cryoanalgesia than we do here in the United States. So this is not a zero-based launch, right, there are folks there who have been asking for EXPAREL or for iovera now for several months and so we will address those same markets with many of the materials we have here in the United States. It's interesting, every country is different.

There are some countries where ASCs and outpatient is favored. It is more the norm to have patients stay in the hospital for an extraordinarily long length of time, five days plus for a total knee arthroplasty which, of course, is a major problem if you've been locked down for two years. And so what's happened specifically in the UK is you have folks who are getting together and approaching the National Health Service with their own models for how they can address this backlog. So we're working with groups of surgeons and anesthesiologists who have said to the NHS, we're going to go with this ERAS protocols, they might still be done in the hospital because they don't have the ASC facilities that we have, right, the freestanding facilities. But you would still set up a model where you could do knees and hips on a same-day basis.

And so, think about it, not quite as COVID resilient because it's actually a separate building but using the same approaches, similar to what we're seeing frankly in some cases in spine in the United States. When we talk about same day spine in a number of cases, those are actually being done in the hospital but the patients are still being discharged without an overnight stay, think about that same kind of a model with an ERAS protocol. And we've got a lot of friends in Europe. There is a lot of folks that have been trained in the United States. We're very strong in the international ERAS society and a lot of our educational programs benefit greatly from some of the folks that are now active in Europe. So I think we're, it's going to be slow. Europe is slower to adopt than the US is. So this year will be modest at the revenue line, but as we've said to the earlier question, I think over the next three years, it will become profitable, and over the next five years, this turns out to be a $90 million to $100 million market. It's well worth doing.

Operator

And your next question is from Anita Dushyanth with Berenberg Capital.

Anita Dushyanth -- Berenberg Capital -- Analyst

Hi, good morning. Thanks for taking my questions. Just a couple here. Just in terms of the iovera sales guidance that you have been mentioning in the past about -- of about $200 million. Can you sort of talk about what drives your confidence of achieving these numbers despite the reimbursement being better in the HOPD versus the ASC? And the next question, just regarding the patents that you have, while for the new manufacturing process related to EXPAREL, are we likely to see anything related to that in 2021, or is it yet to be a work still a bit slower and we're likely to see it maybe next year? Thank you.

Charles Reinhart III -- Chief Financial Officer

No. Thank you. So in terms of iovera, the guidance, the $200 million really comes largely from what we bought, thinking about total knees and the ability to freeze the patient in a cash marketplace for our osteoarthritis, right, the more of a lifestyle kind of a sale in an orthopedic surgeon's office for somebody that wants to play golf or walk on the beach with their grandkids or we hear a lot about, I want to go to on vacation, my daughter is getting married, all of those kinds of things. So that's primarily where the $200 million comes from.

As we get into the marketplace and we start to talk to people about rib fracture and spasticity and spine and shoulder and all the other things, I think our expectations as this product matures and as we develop smart tips, specifically for opportunities for low back pain and spine procedures and things like that, I think you're going to see that number grow. So I would say today $200 million over a five-year plan actually has turned out to be a minimum expectation. And as we get into these different marketplaces, I think you'll see that grow.

On the IP issue, we filed over a dozen additional patents and there is some reason to believe that a couple of those will be, will be prosecuted this year or early next year, as you say, it's impossible to say there is no PDUFA date on IP, right? So we don't have a date, but there is enough interest in this market and some of these things have been structured in such a way that we do expect to have some activity in the back half of this year. Actually, it's not the -- actually in the fourth quarter of this year.

Anita Dushyanth -- Berenberg Capital -- Analyst

Great, thank you. And just one more question. Have you considered using the DepoFoam technology for other drugs besides EXPAREL?

David Stack -- Chief Executive Officer and Chairman

Sure. Yeah. I mean we're looking at another local anesthetic actually, Levobupivacaine is an epidural opportunity now especially after having discussions with the pediatric burn folks, they would like to see a procedure where you're not identifying a specific nerve and it's not actually in a field block and a classic definition of the term. It would be more a opportunity to address a more broad spend, broad -- an extended need for pain control, right, when you're taking the skin off of a patient's scalp and transferring it to this patient's face. For example, how do you address that marketplace, if we could do that in a more broad spectrum way with something like a epidural application that would be the way to go. Yeah, we've continued to look at a number of things, we're looking at anti-inflammatories and in DepoFoam now we've got a number of things against the strategy of any place that use a catheter for a subarachnoid use, can we replace that catheter with EXPAREL and in any place use opioids as a standard of care, can you replace those with EXPAREL? So our group continues, we have an R&D group out in San Diego, they continue to investigate these things and the hope is that we're going to be able to supplement the products that are coming in from the -- from outside with products that are going to be developed with our own DepoFoam technology here, but it's so far. It's, we've looked at antibiotics, very difficult. You've got an infection rate of 0.025%. And if you've got a 30% delta benefit as your -- as your threshold for an efficacy trial, you're talking about 30,000 patients. Those kinds of hurdles make it very difficult to develop in some of the markets that we're currently in.

Anita Dushyanth -- Berenberg Capital -- Analyst

Thank you.

David Stack -- Chief Executive Officer and Chairman

Thanks.

Operator

And we have time for one last question from Christopher Neyor with JP Morgan.

Christopher Neyor -- JP Morgan -- Analyst

Great, thanks for the questions. First one is for the regional anesthesia market, you've talked about fairly low penetration rates for overall surgeries at 20%. When we think about the tailwinds for your business, including the shift to the ASC setting, how should we think about where that number can go over time and the pace of that change?

And then second one, as we think about the recovery of elective procedure market through 2021, what does that mean for the, for your margins near term and should we think about certain expenses coming back into the P&L with the recovery?

Charles Reinhart III -- Chief Financial Officer

Yeah. Thanks, Chris. So, we've said a couple of times that if you look at all of the procedures that are being done by anesthesiologists, only about 20% of them are regional. Remember that before EXPAREL had the claims, the docs had an intense interest in how they make these procedures last longer. They had an intense interest in all of these different blocks that we're investigating now but because they only work for a few hours there was no way to make to have a justification for the time and resources invested in those blocks. I mean, I'll just give you a quick example, four, five years ago, the anesthesiologist would have done what they called the rescue TAP, where they waited for the patient to wake up in pain and then they gave them a TAP block, hoping that they were going to extend the duration of pain control through the first post-surgical night.

Now, when we're doing these blocks into these avascular environments, these blocks are lasting for several days. And so, our own internal thinking is that with the PITT and with our strategic relationships with a number of the big anesthesia groups that over the next 12 months to 15 months, we can double that to 40% and the reimbursement for these regional blocks, because they allow patients to be moved to the outpatient environment, etc. are significantly higher, they are, than when an anesthesiologist performs a traditional procedure. So the regional anesthesia groups themselves are interested in moving this along.

And so to the point where probably the most dramatic example I can give you is, the anesthesia groups have tied a significant part of the physicians' bonuses to their understanding and moving towards regional blocks. And one of the main places that they're learning how to do that is in our facility, the PITT and from our manuscripts that are coming out of the PITT on what's the volume, how many dermatomes do you hit with different volumes, ultrasound neurostimulation, all of those things that are required. So it will never get to a 100%. But I think the guys that are coming and the gals that are coming out of their residency and fellowships are all ultrasound savvy. And so they very much migrate towards regional programs and so you're going to see it increase into something that's over 70% for sure over the next four or five years.

And then I think it's going to be a generational thing where the older guys just, just sort of stopped practicing and it grows from there. Elective procedures in the back half of the year, it doesn't mean, I mean, so the budget is the budget, pretty much. We don't anticipate having any additional expenses to what's currently budgeted for 2021. So one of the beauties of regional programs and our move away from a surgical audience where there were 1,500 different procedures that they were doing to a regional approach where a single block can cover a whole bunch of different procedures is that the ROI per rep day work from our field force goes up dramatically. And so we don't see any additional expenses coming back to the market, to our P&L in 2021. And so beyond the budgeted expenses and just the COGS and the, the cost associated with producing additional medicines, everything will fall to the bottom line, for both products.

Christopher Neyor -- JP Morgan -- Analyst

Perfect. That's, that's super helpful.

David Stack -- Chief Executive Officer and Chairman

Good.

Operator

And I will now hand the call back over to Dave Stack, Chairman and CEO for closing remarks.

David Stack -- Chief Executive Officer and Chairman

Thanks, Tina. I'd like to thank you all for participating and listening to today's conference call. We look forward to keeping you updated on our progress. Next up for us is the RBC conference later this month. Thanks to you all. Stay well. Bye-bye.

Operator

[Operator Closing Remarks]

Duration: 63 minutes

Call participants:

Susan Mesco -- Head of Investor Relations

David Stack -- Chief Executive Officer and Chairman

Charles Reinhart III -- Chief Financial Officer

David Amsellem -- Piper Sandler -- Analyst

Daniel Busby -- RBC Capital Markets -- Analyst

Greg Fraser -- Truist Securities -- Analyst

David Steinberg -- Jefferies -- Analyst

Serge Belanger -- Needham & Company -- Analyst

Anita Dushyanth -- Berenberg Capital -- Analyst

Christopher Neyor -- JP Morgan -- Analyst

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