Business Overview and History
Heron Therapeutics was founded in 1983 and has since developed a diverse portfolio of acute care and oncology products. The company's focus is on developing and commercializing therapeutic innovations that improve medical care for patients, particularly in the areas of acute care and oncology. Heron's flagship offerings include ZYNRELEF, a dual-acting local anesthetic for postoperative pain management, APONVIE, an intravenous formulation for the prevention of postoperative nausea and vomiting (PONV), as well as CINVANTI and SUSTOL, both approved for the prevention of chemotherapy-induced nausea and vomiting (CINV).
In May 2021, Heron achieved a significant milestone with the FDA approval of ZYNRELEF (bupivacaine and meloxicam) extended-release solution for the management of postoperative pain. ZYNRELEF is the first and only modified-release local anesthetic to be classified by the FDA as an extended-release product, delivering a fixed-dose combination of the local anesthetic bupivacaine and a low dose of the nonsteroidal anti-inflammatory drug meloxicam.
Another notable achievement came in September 2022 when the FDA approved APONVIE (aprepitant) injectable emulsion for the prevention of PONV in adults. APONVIE is the first and only intravenous formulation of a substance P/neurokinin-1 (NK1) receptor antagonist indicated for PONV.
Heron's oncology care product portfolio expanded earlier with the approval of SUSTOL in August 2016 for the prevention of acute and delayed nausea and vomiting associated with initial and repeat courses of moderately emetogenic chemotherapy (MEC) or anthracycline and cyclophosphamide (AC) combination chemotherapy regimens. This was followed by the approval of CINVANTI in November 2017 for the prevention of acute and delayed nausea and vomiting associated with initial and repeat courses of highly emetogenic cancer chemotherapy (HEC) including high-dose cisplatin, delayed nausea and vomiting associated with initial and repeat courses of MEC, and nausea and vomiting associated with initial and repeat courses of MEC.
Throughout its history, Heron has faced various challenges, including competition from other companies developing products for postoperative pain management and CINV prevention. The company has had to navigate a complex regulatory landscape to secure necessary approvals for its products. Despite these obstacles, Heron has remained committed to its mission of developing and commercializing innovative therapies to improve patient care.
Financial Performance and Ratios
Heron's financial performance has been mixed in recent years. For the full year 2024, the company reported net revenues of $144.2 million, a 14% year-over-year increase. This growth was driven primarily by strong performance from the company's Acute Care portfolio, including ZYNRELEF and APONVIE, which saw net revenues of $17.1 million and $2.6 million, respectively, in 2024.
The company's gross profit margin improved significantly in 2024, increasing from 48.8% in 2023 to 73.2%, reflecting more efficient manufacturing and inventory management. However, Heron's profitability remains a concern, as the company reported a net loss of $13.6 million for the full year 2024.
In the most recent quarter (Q4 2024), Heron reported revenue of $40.78 million, representing a 19.1% year-over-year growth compared to Q4 2023. The company also achieved a net income of $3.7 million for the quarter, showing signs of improving profitability.
Liquidity
Heron's current ratio, a measure of liquidity, stood at 2.29 as of the end of 2024, indicating a strong ability to meet short-term obligations. The company's quick ratio was 1.70, further demonstrating its liquidity position. The cash and short-term investments balance was $59.3 million at the end of 2024, providing a solid foundation for future growth initiatives.
The company's debt-to-equity ratio was -5.28, reflecting a negative shareholders' equity position. To support its working capital needs, Heron has a $50 million working capital facility agreement with Hercules Capital, Inc. as of August 2023.
Operational Highlights and Challenges
One of Heron's key achievements in 2024 was the expansion of ZYNRELEF's label, which now covers a broader range of surgical procedures. The company also launched the ZYNRELEF Vial Access Needle (VAN) in mid-December 2024, which has been well-received by customers and is expected to further drive ZYNRELEF's adoption.
Additionally, Heron's partnership with CrossLink Life Sciences, LLC, which added approximately 800 distributor representatives focused on the orthopedic space, has been a significant contributor to ZYNRELEF's growth. The company has noted that accounts with CrossLink representatives are growing at a 30% higher rate than standalone Heron accounts.
However, Heron has also faced challenges, including ongoing patent litigation and increased competition in the CINV market, which has put pressure on its Oncology Care portfolio. The company has taken a more conservative outlook for its CINVANTI product, anticipating potential pricing pressure and market share erosion due to new entrants.
Product Portfolio Performance
Acute Care Product Portfolio: ZYNRELEF: For the nine months ended September 30, 2024, net product sales of ZYNRELEF were $17.1 million, compared to $12.0 million for the same period in 2023. The increase in net product sales is attributed to an increase in the units sold in 2024 as compared to 2023.
APONVIE: For the nine months ended September 30, 2024, net product sales of APONVIE were $2.6 million, compared to $0.9 million for the same period in 2023. The increase in net product sales is attributed to an increase in the units sold in 2024 as compared to 2023.
Oncology Care Product Portfolio: SUSTOL: For the nine months ended September 30, 2024, net product sales of SUSTOL were $10.6 million, compared to $9.3 million for the same period in 2023. The increase is attributed to an increase in units sold.
CINVANTI: For the nine months ended September 30, 2024, net product sales of CINVANTI were $73.2 million, compared to $70.6 million for the same period in 2023. The increase is attributed to an increase in units sold.
Guidance and Outlook
For the full year 2025, Heron has provided a revenue guidance range of $153 million to $163 million and an adjusted EBITDA guidance range of $0 to $8 million. This guidance reflects the company's expectations for continued growth in its Acute Care portfolio, partially offset by a more cautious outlook for the Oncology Care segment.
The successful launch of the ZYNRELEF VAN, the expansion of the CrossLink partnership, and the potential benefits from the NOPAIN Act, which provides separate Medicare reimbursement for non-opioid treatments, are all expected to contribute to Heron's growth in the coming year.
The company noted that the guidance for CINVANTI in 2025 was more conservative compared to 2024 due to increased competition and potential pressure on average selling prices, despite anticipating growth in unit sales. Heron also highlighted the strong momentum they are seeing with ZYNRELEF and APONVIE, expecting significant growth in these products as they continue to onboard new accounts and expand usage within existing hospitals.
Risks and Challenges
Heron Therapeutics faces several key risks and challenges, including:
- Intense competition in the postoperative pain management and CINV/PONV prevention markets, which could pressure pricing and market share.
- Ongoing patent litigation and the potential for generic competition, particularly for its CINVANTI product.
- Regulatory and reimbursement hurdles, which could impact the commercialization of its products.
- Reliance on a limited number of large customers, which could expose the company to concentration risk.
- The need to effectively manage its operations and reduce costs to achieve profitability.
Proprietary Technology
Heron's proprietary Biochronomer Technology is designed to deliver therapeutic levels of a wide range of otherwise short-acting pharmacological agents over a period from days to weeks with a single administration. The Biochronomer Technology consists of polymers that have been the subject of comprehensive animal and human toxicology studies that have shown evidence of the safety of the polymer. When administered, the polymers undergo controlled hydrolysis, resulting in a controlled, sustained release of the pharmacological agent encapsulated within the Biochronomer-based composition.
Conclusion
Heron Therapeutics has navigated a tumultuous period, but the company appears to be on a path towards improved financial performance and profitability. The successful launch of the ZYNRELEF VAN, the expansion of the CrossLink partnership, and the potential benefits from the NOPAIN Act are all positive catalysts that could drive growth in the company's Acute Care portfolio.
However, Heron still faces significant challenges, including intense competition, patent litigation, and the need to effectively manage its operations and costs. The company's ability to execute on its strategic initiatives, particularly in growing its Acute Care portfolio while managing the competitive pressures in its Oncology Care segment, will be crucial in achieving its financial targets for 2025 and beyond.
Investors will be closely watching Heron's progress in expanding its market share, improving operational efficiency, and moving towards sustained profitability. The company's innovative product portfolio and proprietary Biochronomer Technology provide a strong foundation for future growth, but successful commercialization and market penetration will be key to realizing this potential.