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Item 2. Management’s Discussion and Analysis

2025-08-08 compared with 2025-05-06 · 83 added, 89 removed, 83 unchanged (67% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the U.S.

Securities and Exchange Commission (“SEC”) on February 27, 2025 (the "2024 Annual Report").

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws.

We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws.

In some cases, you can identify forward-looking statements by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “will,” “would,” “could,” “should,” “may,” “might,” “plan,” “assume” and other expressions that predict or indicate future events and trends and which do not relate to historical matters.

All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business and commercialization strategy, products and product candidates, research pipeline, ongoing and planned preclinical studies and clinical trials, regulatory submissions and approvals, addressable patient population, research and development expenses, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements.

You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, some of which are beyond our control.

These risks, uncertainties and other factors may cause our actual results, performance or achievements to be materially different from our anticipated future results, performance or achievements expressed or implied by the forward-looking statements.

Factors that might cause these differences include the following:

• our ability to successfully commercialize, market and achieve market acceptance of ZYNRELEF ® (bupivacaine and meloxicam) extended-release solution (“ZYNRELEF”), APONVIE ® (aprepitant) injectable emulsion (“APONVIE”), CINVANTI ® (aprepitant) injectable emulsion (“CINVANTI”), and SUSTOL ® (granisetron) extended-release injection (“SUSTOL” and together with ZYNRELEF, APONVIE and CINVANTI, our "Products") in the United States (“U.S.”) , and our positioning relative to products that now or in the future compete with our Products or product candidates;

• our estimates regarding the potential market opportunities for our Products and our product candidates, if approved, and our ability to capture the potential additional market opportunity from the expanded ZYNRELEF label approved in the U.S.;

• our ability to establish and maintain successful commercial arrangements like our co-promotion agreement with CrossLink Network, LLC ("CrossLink Network");

• the realization of anticipated benefits from our co-promotion agreement with CrossLink Network;

• the outcome of our pending abbreviated new drug application litigation;

• whether we are required to write-off any additional inventory in the future;

• our ability to establish satisfactory pricing and obtain adequate reimbursement from government and third-party payors of our Products and product candidates that receive regulatory approvals;

• whether study results of our Products and product candidates are indicative of the results in future studies;

• our ability to successfully launch VAN in the US;

• the potential regulatory approval for, and commercial launch of, our product candidates, if approved;

• our competitors’ activities, including decisions as to the timing of competing product launches, generic entrants, pricing and discounting;

• whether safety and efficacy results of our clinical studies and other required tests for expansion of the indications for our Products and approval of our product candidates provide data to warrant progression of clinical trials, potential regulatory approval or further development of any of our Products or product candidates;

• our ability to develop, acquire and advance product candidates into, and successfully complete, clinical studies, and our ability to submit for and obtain regulatory approval for product candidates in our anticipated timing, or at all;

• our ability to meet the postmarketing study requirements within the mandated timelines of the U.S.

Food and Drug Administration ("FDA") and to obtain favorable results and comply with standard postmarketing requirements, including U.S.

federal advertising and promotion laws, federal and state anti-fraud and abuse laws, healthcare information privacy and security laws, safety information, safety surveillance and disclosure of payments or other transfers of value to healthcare professionals and entities for Products or any of our product candidates;

• our ability to successfully develop and achieve regulatory approval for any product candidates utilizing our proprietary Biochronomer ® drug delivery technology (“Biochronomer Technology”);

• our ability to establish key collaborations and vendor relationships for our Products and our product candidates;

• our ability to successfully develop and commercialize any technology that we may in-license or products we may acquire;

• our reliance on third-party contract manufacturers to supply our Products and product candidates, if approved;

• unanticipated delays due to manufacturing difficulties, supply constraints or changes in the regulatory environment, including as a result of geopolitical uncertainty;

• our ability to successfully operate in non-U.S.

jurisdictions in which we may choose to do business, including compliance with applicable regulatory requirements and laws;

• uncertainties associated with obtaining and enforcing patents and trade secrets to protect our Products, our product candidates, our Biochronomer Technology and our other technology;

• our ability to successfully defend ourselves against unforeseen third-party infringement claims and other litigation involving our Products and product candidates;

• our estimates regarding our capital requirements;

• our inability or delay in achieving profitability;

• the impacts of general business, financial market, and economic conditions, including the impact of conflicts in Ukraine and the Middle East, global pandemics such as COVID-19, tariffs and other trade protection measures, and other sources of volatility, which could adversely affect our financial condition, results of operations and cash flows;

• the impact of evolving legal and regulatory requirements and interpretations thereof, including the U.S.

Supreme Court decision regarding deference to federal administrative agencies' interpretations of federal statutes;

• our ability to obtain additional financing and raise capital as necessary to fund operations or pursue business opportunities;

• the impact of global economic and political developments on our business, including economic slowdowns or recessions and market disruptions that may result from, among others, global conflicts, economic sanctions, an inflationary environment, which could harm our commercialization effort, as well as the value of our common stock and our ability to access capital markets, and

• those risks listed under the section entitled "Risk Factors" in Part I, Item 1A "Risk Factors" of the 2024 Annual Report and Part II, Item IA "Risk Factors" in this Quarterly Report on Form 10-Q.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance.

Given these uncertainties, you should not place undue reliance on these forward-looking statements.

These forward-looking statements were based on information, plans and estimates as of the date of this Quarterly Report on Form 10-Q, and except as required by law, we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

These risk factors may be updated by our future filings under the Securities Exchange Act of 1934, as amended (“Exchange Act”).

You should carefully review all information therein.

The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes included in our 2024 Annual Report.

Some information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, include forward-looking statements that involve risks and uncertainties.

You should review the sections entitled "Forward-Looking Statements" and "Risk Factors" in our 2024 Annual Report, Quarterly Reports on Form 10-Q and other reports for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Management's discussion and analysis of financial condition and results of operations is provided as a supplement to the consolidated financial statements and notes, included in this Quarterly Report on Form 10-Q to help provide an understanding of our financial condition, the changes in our financial condition and our results of operations.

Our discussion is organized as follows:

This section provides a general description of our business and operating expenses, as well as other matters that we believe are important to understanding our results of operations and financial condition and in anticipating future trends.

• Critical Accounting Estimates .

This section contains a discussion of the accounting estimates that require a significant level of estimation uncertainty, and changes in which are reasonably likely to have a material effect on our financial condition or results of operations.

In addition, all of our significant accounting policies are summarized in Note 3—Accounting Policies to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

• Results of Operations.

This section provides an analysis of our results of operations presented in the accompanying condensed consolidated statements of operations and comprehensive loss by comparing the results for the three and six months ended June 30, 2025 and 2024.

• Liquidity and Capital Resources .

This section provides a discussion of our financial condition and liquidity, an analysis of our cash flows for the six months ended June 30, 2025 and 2024, and a discussion of our outstanding commitments and contingencies that existed as of June 30, 2025.

We are a commercial-stage biotechnology company focused on improving the lives of patients by developing and commercializing therapeutic innovations that improve medical care.

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ZYNRELEF is approved for use in adults for postsurgical analgesia for up to 72 hours after soft tissue and orthopedic surgical procedures including foot and ankle, and other orthopedic surgical procedures in which direct exposure to articular cartilage is avoided.

In September 2024, the FDA approved the prior approval supplement (“PAS”) application for ZYNRELEF Vial Access Needle ("VAN"), which will replace the current vented vial spike.

In September 2024, the FDA approved the prior approval supplement ("PAS") application for ZYNRELEF Vial Access Needle ("VAN"), which is replacing the current vented vial spike.

In March 2022, the Centers for Medicare and Medicaid Services ("CMS") approved a 3-year transitional pass-through status of ZYNRELEF, which became effective on April 1, 2022, for separate reimbursement outside of the surgical bundle payment in the Hospital Outpatient Department ("HOPD") setting of care.

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Furthermore, our Biochronomer Technology is designed to permit more than one pharmacological agent to be incorporated, such that multimodal therapy can be delivered with a single administration.

Material Trends and Developments

There are no material changes to our material trends and developments disclosures included in our 2024 Annual Report during the three and six months ended June 30, 2025.

Critical Accounting Estimates

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revenue recognition, investments, inventory and the related reserves, accrued clinical and manufacturing liabilities, income taxes, and stock-based compensation.

There have been no material changes to our critical accounting estimates disclosures included in our 2024 Annual Report.

There are no material changes to our critical accounting estimates disclosures included in our 2024 Annual Report, during the three and six months ended June 30, 2025.

Recent Accounting Pronouncements

See Note 3 to the condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.

Results of Operations for the Three Months Ended March 31, 2025 and 2024

Comparison of Results of Operations

Three Months Ended March 31,

See Note 3 - Accounting Policies - Recent Accounting Pronouncements to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Results of Operations for the Three and Six Months Ended June 30, 2025 and 2024

The following table summarizes the results of our operations for the three and six months ended June 30, 2025 and 2024 (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

($ in thousands)

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Sales and marketing

Income (loss) from operations

(Loss) income from operations

Net Product Sales

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Acute Care Net Product Sales

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Total Net Product Sales

Total acute care net product sales increased 89.4% or $4.9 million during the three months ended March 31, 2025, as compared to the comparable period in 2024, primarily driven by an increase in the units sold due to an increase in market share and new customers for both ZYNRELEF and APONVIE, which contributed approximately $4.1 million of the total increase in acute care net product sales.

Total oncology net product sales decreased 2.2% during the three months ended March 31, 2025, as compared to the comparable period in 2024.

The decrease is attributed to market competition and is expected to continue through 2025.

Cost of Product Sales

Cost of product sales increased by 0.2% during the three months ended March 31, 2025, as compared to the comparable period in 2024 and as a percentage of sales decreased 2.7% during the same period.

Gross profit for the three months ended March 31, 2025 was 78.3%, compared to 75.6% for the comparable period ended March 31, 2024.

The increase in gross profit without a corresponding increase in cost of product sales is attributed to a lower cost per unit for the units sold in the three months ended March 31, 2025 as a result of production efficiencies compared to the same period ended March 31, 2024, partially offset by an increase in the units sold.

Total acute care net product sales increased 55.5% or $3.8 million during the three months ended June 30, 2025, as compared to the comparable period in 2024.

Total acute care net product sales increased 70.5% or $8.7 million during the six months ended June 30, 2025, as compared to the comparable period in 2024.

These increases were primarily attributable to an increase in the units sold as a result of an increase in market share and new customers for both ZYNRELEF and APONVIE.

Total oncology net product sales decreased 9.0% or $2.6 million during the three months ended June 30, 2025, as compared to the comparable period in 2024.

Total oncology net product sales decreased 5.6% or $3.3 million during the six months ended June 30, 2025, as compared to the comparable period in 2024.

These decreases were primarily attributable to market competition from branded products and generics.

The competition and decreases in oncology net product sales are expected to continue for the foreseeable future.

Cost of Product Sales and Gross Profit

Cost of product sales decreased by 6.3% or $0.7 million during the three months ended June 30, 2025, as compared to the comparable period in 2024 and as a percentage of sales decreased 2.7% during the same period.

Cost of product sales decreased by 3.4% or $0.6 million during the six months ended June 30, 2025, as compared to the comparable period in 2024 and as a percentage of sales decreased by 2.8% during the same period.

Gross profit for the three months ended June 30, 2025 was 73.5%, compared to 70.8% for the comparable period ended June 30, 2024.

Gross profit for the six months ended June 30, 2025 was 75.9%, compared to 73.2% for the comparable period ended June 30, 2024.

The increase in gross profit with a corresponding decrease in cost of product sales for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024 is due to an increase in units sold, at a higher cost per unit due to supplier mix, offset by lower inventory reserves and write-offs.

Research and Development Expense

Reclassification of Certain Expenses

The table of research and development expense below for the three and six months ended June 30, 2024 reflect reclassification of certain expenses amongst products to align with the Company's presentation for the three and six months ended June 30, 2025 as a result of further review of the nature of the expenses.

This presentation results in no change to total operating expenses, loss from operations or net loss and no pro forma financial information is necessary.

Research and development expense consisted of the following (in thousands):

Three Months Ended

Six Months Ended

ZYNRELEF-related costs

SUSTOL-related costs

CINVANTI-related costs

APONVIE-related costs

SUSTOL-related costs

Personnel costs and other expenses

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Total research and development expense

Research and development expense decreased by 50.5% or $2.3 million during the three months ended March 31, 2025, compared to the comparable period in 2024 and as a percentage of sales, decreased 7.4% during the same period.

The decrease is primarily related to decreases in headcount and related costs, as well as a decrease in development activities.

Research and development expense decreased by $1.5 million or 33.8%, during the three months ended June 30, 2025 compared to the same period in 2024.

The decrease in costs is primarily attributable to $1.2 million more of write-off of property and equipment in 2024 than in 2025, and a decrease in personnel and related expenses of $0.3 million due to terminations.

Research and development expense decreased by $3.8 million or 42.3%, during the six months ended June 30, 2025 compared to the same period in 2024.

General and Administrative Expense

General and administrative expense decreased by 15.2% or $2.3 million during the three months ended March 31, 2025, compared to the comparable period in 2024 and as a percentage of sales, decreased 10.5% during the same period.

The decrease is primarily related to decreased headcount in 2024 and related costs, which represents approximately $1.5 million of the total decrease, and decreased legal expenses of $0.5 million related to the timing of patent litigations.

General and administrative expense increased by $0.6 million or 4.1%, during the three months ended June 30, 2025 compared to the same period in 2024.

The increase in costs is primarily attributable to $0.3 million increase in personnel and related expenses due to net new hires and a $0.4 million increase in contract services due to timing.

These increases were offset by a decrease of $0.2 million in legal expenses due to timing of litigation.

General and administrative expense decreased by $1.7 million or 5.9%, during the six months ended June 30, 2025 compared to the same period in 2024.

The decrease in costs is primarily attributable to a $1.6 million decrease in personnel and related costs due to terminations.

Sales and Marketing Expense

Sales and marketing expense increased by 7.6% or $0.9 million during the three months ended March 31, 2025, compared to the comparable period in 2024, and as a percentage of sales, decreased by 1.4% during the same period.

The increase in sales and marketing expense is attributed to increased marketing and sales spend to support revenue growth of the acute care products, of approximately $1.0 million.

Other (Expense) Income, Net

Other (expense) income, net decreased 131.7% during the three months ended March 31, 2025, compared to the comparable period in 2024, primarily due to the one time settlement gain contingency related to a legal dispute in 2024.

Sales and marketing expense decreased by $2.0 million or 15.0%, during the three months ended June 30, 2025 compared to the same period in 2024.

The decrease is primarily attributable to a decrease in personnel and related expenses of $2.1 million as a result of terminations and a one-time stock compensation expense in 2024, which did not reoccur in 2025.

The decrease is offset by an increase in marketing costs of $0.2 million, primarily related to ZYNRELEF.

Sales and marketing expense decreased by $1.2 million or 4.7%, during the six months ended June 30, 2025 compared to the same period in 2024.

The decrease is primarily attributable to a $1.9 million decrease in personnel and related costs as a result of terminations and a one-time stock compensation expense in 2024, which did not reoccur in 2025.

The decrease is offset by an increase in marketing costs of $0.6 million, primarily related to ZYNRELEF.

Other Expense, Net

For the three months ended June 30, 2025, other expense, net was $0.7 million, compared to $2.8 million, for the same period in 2024.

The decrease in expense is related to a one-time settlement in 2024 which did not reoccur in 2025.

For the six months ended June 30, 2025, other expense, net, was $1.3 million compared to $1.2 million for the same period in 2024.

Liquidity and Capital Resources

As of March 31, 2025, we had cash, cash equivalents and short-term investments of $50.7 million.

Based on our current operating plan and projections, management believes that the Company's cash, cash equivalents, and short-term investments, will be sufficient to meet the Company's anticipated cash requirements for a period of at least the next twelve months from the date this Quarterly Report on Form 10-Q is filed with the SEC.

However, we expect these financing sources will not be sufficient to repay the $150.0 million of Senior Convertible Notes coming due in May 2026.

We expect to finance our future cash needs, including refinancing of our indebtedness through a combination of debt financing transactions, equity offerings, collaborations or a combination of these approaches.

If we issue additional equity securities or securities convertible into equity securities to raise funds, our stockholders will suffer dilution of their investment, and in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock, and such issuances may adversely affect the market price of our common stock.

Our ability to raise additional funds may also be adversely impacted by negative global economic conditions and disruptions to, and volatility in, the credit and financial markets in the U.

and worldwide or other factors, including those addressed under the section entitled "Risk Factors" in Part I, Item 1A "Risk Factors" of the 2024 Annual Report and Part II, Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q.

There can be no assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable or acceptable to us, if at all.

If adequate funds are not available, we may default on our indebtedness, be required to further delay, reduce the scope of, or eliminate one or more of our product development programs and reduce personnel-related and other costs, which would have a negative impact on our business.

Sources of Liquidity

As of June 30, 2025, we had cash, cash equivalents and short-term investments of $40.6 million.

Our net loss for the three months ended June 30, 2025 was $2.4 million, or $0.02 per share, compared to a net loss of $9.2 million, or $0.06 per share, for the same period in 2024.

Our net income for the six months ended June 30, 2025 was $0.3 million, or nil per share, compared to a net loss of $12.4 million, or $0.08 per share for the same period in 2024.

We have incurred significant operating losses and negative cash flows from operations and had an accumulated deficit of $1.9 billion as of June 30, 2025.

From our inception through June 30, 2025, we have financed our growth and operations, including technology and product research and development, primarily through the issuance of common stock, convertible notes and warrants, product sales and debt financings.

Future Funding Requirements

As of June 30, 2025, we had cash, cash equivalents and short-term investments of $40.6 million.

Subsequent to entering into the closing of the Refinancing Transactions, and based on our current operating plan and projections, management believes that our cash, cash equivalents, and short-term investments, will be sufficient to meet our anticipated cash requirements for a period of at least one year from the date that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are issued.

We continuously evaluate our liquidity and capital resources, including access to external capital, in light of current economic and market conditions and our operational performance.

Our future cash requirements and the adequacy of our available funds will depend on many factors, primarily including our ability to generate revenue and the scope and costs of our commercial and research and development activities.

Our net income for the three months ended March 31, 2025 was $2.6 million, or $0.02 per share, compared to a net loss of $3.2 million, or $0.02 per share, for the same period in 2024.

Our net cash used in operating activities for the three months ended March 31, 2025 and March 31, 2024 was $8.9 million and $9.5 million, respectively.

The decrease in net cash used in operating activities was primarily due to the net income for the three months ended March 31, 2025, compared to the net loss for the prior period in 2024, decreases in operating spend and stock-based compensation expenses, and changes in working capital, specifically accounts receivable due to timing of collections, prepaid assets due to the timing of payments, and accounts payable and accrued expenses, including payroll and employee related liabilities due to the timing of payments and reduced headcount.

Our net cash provided by investing activities for the three months ended March 31, 2025, and March 31, 2024 was $2.3 million, and $1.3 million, respectively.

The increase in net cash provided by investing activities was primarily due to net maturities of short-term investments of $2.3 million for the three months ended March 31, 2025 compared to $1.3 million for the three months ended March 31, 2024.

Our net cash provided by financing activities for the three months ended March 31, 2025, and March 31, 2024 was $0.06 million, and $0.01 million, respectively.

Historically, we have financed our operations, including technology and product research and development, primarily through sales of our common stock, product sales and debt financings.

The net change in cash and cash equivalents consisted of the following:

Our net cash used in operating activities for the six months ended June 30, 2025 and June 30, 2024 was $19.7 million and $14.1 million, respectively.

The increase in net cash used in operating activities of $5.6 million or 39.8%, was primarily attributable to payments for inventory, offset by a decrease in net loss for the six months ended June 30, 2025 compared to the same period in 2024.

Our net cash provided by investing activities for the six months ended June 30, 2025, and June 30, 2024 was $9.6 million, and $3.3 million, respectively.

The increase in net cash provided by investing activities of $6.3 million or approximately two-fold, was primarily attributable to net maturities of short-term investments of $9.9 million for the six months ended June 30, 2025 compared to $4.0 million for the three months ended June 30, 2024.

Our net cash provided by financing activities for the six months ended June 30, 2025, and June 30, 2024 was $0.8 million, and $0.5 million, respectively.

Material Cash Requirements

There are no material changes to our material cash requirements disclosures included in our 2024 Annual Report during the three and six months ended June 30, 2025.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK

Quantitative and qualitative disclosures about market risk appear in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Quantitative and Qualitative Disclosures about Market Risk” in the Company’s 2024 Annual Report on Form 10-K.

There were no material changes to this information during the three months ended March 31, 2025.

Quantitative and qualitative disclosures about market risk are included in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Quantitative and Qualitative Disclosures about Market Risk" in our 2024 Annual Report.

There are no material changes to the quantitative and qualitative disclosures included in our 2024 Annual Report during the three and six months ended June 30, 2025.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis