Pacira BioSciences, Inc. (PCRX) Earnings

Management highlights

### Strategic Execution & Overall Progress - The company continues to execute its 5x30 strategy to transition into an innovation-driven biopharmaceutical company, with strong shareholder endorsement of strategy and director nominees at the June 2026 annual meeting. - The Iovera divestiture to Zimmer Biomet closed on July 31, 2026, sharpens the company's strategic focus, improves margin profile, frees capital for higher-return pipeline opportunities, and preserves up to $140 million in total consideration ($70 million upfront plus $70 million in revenue-based milestones) and participation in Iovera's future growth. ### Commercial Performance & Market Access - Expiril achieved continued penetration and share gains across all segments despite macroeconomic-driven softness in deferrable inpatient elective soft tissue procedures. It now has over 150 million covered lives with separate out-of-bundle reimbursement after a major coverage win with UnitedHealthcare, putting the full-year 160 million covered lives goal well within reach. - UnitedHealthcare added Zolretta to its preferred drug list and eliminated prior authorization requirements, creating a competitive advantage over rival early osteoarthritis (OA) interventions. Zolretta and Iovera both delivered solid growth in the quarter from 2025 commercial investments. - Expiril is seeing particularly strong momentum in 23-hour/outpatient care settings, supported by the ongoing industry shift to outpatient surgery and favorable reimbursement dynamics. ### Pipeline Development - The company established a scalable, commercially viable U.S.-based manufacturing process for PCRx201, its lead pipeline candidate for knee OA. Enrollment is open in Part B of the Phase II Ascent Study for PCRx201, with Part A top-line results expected by end of 2026. - Enrollment is complete for the Iovera spasticity registrational study, with top-line results expected before end of 2026, to be advanced in partnership with Zimmer Biomet. - The Phase III study of Zolretta for shoulder OA is on track to report top-line results later in 2026; if approved, Zolretta would be the first FDA-approved drug specifically for shoulder OA. - Phase II development of PCRx2002, a novel long-acting analgesic hydrogel, is scheduled to begin in late 2026. Preclinical HCaT-based candidates for degenerative disc disease, dry eye disease, and canine OA are advancing, with a canine OA pilot efficacy study now initiating. - A Phase 1 manuscript for PCRx201 was accepted for publication in *Annals of Rheumatic Diseases*, highlighting positive 104-week results. ### Partnerships - LG Chem filed for regulatory approval of Expiril in South Korea, with revenue from the partnership expected to start in 2027. Additional non-U.S. commercial partnership updates are planned for the second half of 2026. - The company's partnership strategy extends market reach, improves capital efficiency, and unlocks future collaborative opportunities across the portfolio. Expiril patent exclusivity extends into the 2040s.

Guidance

- Full year 2026 total revenue guidance is revised downward to $735-$760 million, from the prior range of $745-$770 million, to account for the Iovera divestiture. - Full year 2026 non-GAAP SG&A guidance is revised downward to $310-$330 million, from the prior range of $320-$340 million. - All prior guidance ranges for other line items are maintained: non-GAAP gross margin is expected to come in at 77-79%, non-GAAP R&D expense is expected to be $105-$115 million, and 2026 depreciation expense is expected to be ~$30 million. - The guidance includes ~$7 million in expected revenue from the company's veterinary market licensing agreement. - Quarterly trends are expected to follow historical patterns, with the fourth quarter 2026 as the largest revenue contributor, and an uptick in R&D expense in Q4 driven by ongoing PCRx201 and product development work. Fourth quarter non-GAAP gross margin is expected to be slightly below the full-year range due to higher-cost inventory sales and shutdown-related costs.

Segment performance

Pacera BioSciences reported total Q2 2026 revenues of $192.4 million, a 6% increase year-over-year (YoY). - Expiril: Net sales of $147.8 million, a 3% increase YoY. Volume grew 4% partially offset by vial mix shifts and GPO discounting. Expiril contributes 76.8% of total Q2 2026 revenue, with 60% of its volume coming from orthopedic procedures and 40% from soft tissue procedures. - Zolretta: Net sales of $32.6 million, a 4% increase YoY. Zolretta contributes 17.0% of total Q2 2026 revenue. - Iovera: Net sales of $6.8 million, a 21% increase YoY. Iovera contributed 3.5% of total Q2 2026 revenue, prior to its July 31, 2026 divestiture to Zimmer Biomet. Non-GAAP consolidated gross margin was 78% in Q2 2026, down from 82% YoY. Non-GAAP R&D expense increased to $27.1 million from $24.7 million YoY, while non-GAAP SG&A expense increased to $81.3 million from $77.2 million YoY, driven by one-time annual meeting contested director election costs. GAAP net income was $4.7 million ($0.12 per basic/diluted share), and adjusted EBITDA was ~$48.7 million.

Risks & headwinds

- Macroeconomic pressures and broader economic uncertainty have reduced consumer healthcare spending and led to declines in deferrable elective soft tissue procedures, particularly in the hospital inpatient setting, where Expiril cannot receive separate reimbursement outside of surgical bundles. - The federal NoPain reimbursement program for Expiril is scheduled to expire at the end of 2027, and congressional renewal is expected to be attached to larger legislation rather than moving as a standalone bill, introducing timing uncertainty. - Pipeline candidates face inherent clinical, regulatory, and manufacturing risks that could prevent successful approval and commercialization. - Volume growth for Expiril has moderated relative to prior quarters, and sustained macro weakness could pressure results through the second half of 2026.

Analyst Q&A

• Q: Dennis Ding (Jefferies) asked two questions: 1) Is there risk the NoPain reimbursement program expires at end-2027, how will renewal work, and what legislative vehicle will it use? 2) Why is management confident in full-year guidance despite soft Q2 results, what will drive growth, and will NoPain drive volume acceleration in H2 despite macro headwinds? /

  A: Management noted commercial payers including UnitedHealthcare, the largest U.S. insurer, are already adopting separate out-of-bundle reimbursement for Expiril, with a clear health economic value story supporting broader adoption. For legislative renewal, CMS can extend the policy via annual rulemaking, and congressional renewal will likely be attached to a larger year-end 2027 spending bill, as in prior cycles. For growth, management is optimistic for H2, noting Expiril has grown penetration across all segments; key H2 drivers include fast-growing ASC and hospital outpatient segments, recent major payer coverage wins that have pushed covered lives well past 150 million, and higher reimbursement rates from commercial payers versus CMS that create a strong tailwind.

• Q: Serge Belanger (Needham) asked: Has the Q2 softness in Expiril volume continued into Q3, and does the Iovera divestiture change the company's appetite for business development (BD) acquisitions? /

  A: Management noted it is early in Q3, but Expiril is substantially outperforming the broader market in outpatient settings with strong commercial payer tailwinds, and penetration has increased across all segments. Inpatient soft tissue procedure volumes have historically fluctuated with macro conditions. For BD, the company will continue its disciplined capital allocation approach focused on accretive, shareholder-value-maximizing opportunities; the divestiture sharpens the company's focus on its biopharma strategy, but has not changed its thoughtful, risk-managed approach to pipeline expansion.

• Q: Hardik Parikh (JP Morgan) asked: Does the full-year Expiril guidance require a macroeconomic recovery to meet targets, and would the company consider a U.S. distribution partnership for Expiril? /

  A: Management noted guidance assumes current softness in inpatient procedures continues, and the company is focused on growing in more macro-resilient outpatient segments where it has secured strong recent payer coverage wins. For partnerships, the company remains open to cost-effective partnership models (similar to its existing LG Chem and Johnson & Johnson partnerships) for Expiril in the U.S. and abroad to extend reach, as partnerships are a core pillar of the 5x30 strategy, but any deal would need to deliver mutual value for both parties.

• Q: Sahil Dhingra (RBC) asked: Can you share volume growth splits by care setting, and can you confirm timing and disclosure plans for PCRx201 Part A top-line data? /

  A: Management does not typically disclose detailed volume splits by care setting, but noted that hospital procedure volumes are down, impacted by deferred soft tissue procedures, while Expiril significantly outpaced overall market growth in ASC (outpatient) settings, supported by procedure migration to outpatients and recent payer wins. For PCRx201, top-line Part A results are still on track to be reported at the end of 2026, alongside top-line results from the Iovera spasticity registrational study and Zolretta shoulder OA Phase III study; additional data sets will be released throughout 2027.