Q & A Highlights

Q: Can you elaborate on your confidence in meeting the updated debt covenants should a CINVANTI generic come to market? A: Craig Collard (CEO) stated that the company took a very conservative approach when modeling the potential generic launch with its lender, Hercules. He noted several factors that could delay a generic launch, including manufacturing challenges with the sterile emulsion product and the need to scale up to meet the ~750,000-800,000 unit annual demand. He also mentioned reimbursement questions, such as whether a generic would fall under the same J-code, as factors that could alter the market dynamic. He expressed confidence that the covenants are well-covered, as the launch may take longer than modeled.

Q: If and when a generic does launch, any reason the erosion should not look like the SUSTOL erosion curve? A: Craig Collard (CEO) did not directly compare it to SUSTOL but reiterated the conservative approach taken with the lender. He emphasized the uncertainty around the timing of a generic launch, citing the complexity of manufacturing the product at scale and potential reimbursement dynamics as key variables that make forecasting difficult. The company is preparing a defense strategy built around the clinical profile, customer relationships, and contracting position.

Q: Can you help us think about what is driving the below-expectation performance on ZYNRELEF? Are surgeons just not warm to the detail, or are they very sticky on alternatives? A: Mark Hensley (COO) attributed the shortfall to execution rather than product-specific issues. He noted that while Q1 market volumes were down, the expected strong recovery in Q2 did not fully materialize. He pointed to seasonal patterns, noting that the back half of the year typically shows a strong run-up in the market and for ZYNRELEF. He took responsibility for the Q2 execution and stated the team is working to rectify it in Q3.

Q: What is the hurdle on ZYNRELEF, and what can a well-capitalized strategic partner do differently? A: Mark Hensley (COO) did not specify a single hurdle but reiterated that the issue is about pull-through and execution. He noted that the company continues to make progress on P&T wins and that the slower-than-expected performance is related to the pace of converting access into cases and protocols. He expects the back half of the year to see continued pull-through from these wins.

Q: What impact would a potential Azurity generic launch have on other players with settlement agreements around CINVANTI? A: Craig Collard (CEO) clarified that a launch by Azurity would have no impact at all on the existing settlement agreements with other players. The settlements remain unchanged regardless of whether a generic product enters the market.

Q: Regarding ZYNRELEF, what are you seeing in terms of surgical volumes and overall procedure volumes in Q2, given competitor reports of macro volatility impacting healthcare spending? A: Mark Hensley (COO) stated that the company did not feel as impacted by the macro volatility as competitors may have been. He noted that P&T wins continued to progress throughout the quarter. The slower performance was attributed to the timing of pull-through rather than a broad market downturn, and he expects those wins to contribute to growth in the back half of the year.

Q: Why did the company withdraw its full-year 2026 guidance? A: Ira Duarte (CFO) explained that the withdrawal was a forecasting decision based on three factors: the June court decision creating uncertainty around the timing and terms of potential generic entry for CINVANTI, the company's own actions to pause salesforce expansion and tighten spending (which the prior guidance was built on), and the ongoing review of strategic alternatives. He emphasized that the decision was not a statement about the underlying business but a reflection of the unreliability of any annual number under these circumstances.

Q: What are the key terms of the amended credit facility with Hercules? A: Ira Duarte (CFO) detailed that the amendment waives the June 30 covenants and resets the schedule to match the operating plan. It includes a principal reduction of $13.5 million paid at execution, with a potential further $4 million reduction due on or before September 15, for a total potential reduction of $17.5 million. The amendment sets monthly minimum revenue and EBITDA covenants through December 2027, along with a minimum cash covenant.

Q: What is the company's current cash position after the credit facility amendment payments? A: Ira Duarte (CFO) stated that the company ended Q2 with $42.7 million in cash. After reflecting the $13.5 million payment made at the amendment's execution, pro forma cash is approximately $28.5 million. After the potential $4 million September payment, cash would be approximately $24.3 million.

Q: Can you provide more color on the strategic alternatives review process? A: Craig Collard (CEO) confirmed the company is considering strategic alternatives while continuing to execute its current plan. He stated there is no timetable for the process and no assurances it will result in a transaction. The company does not intend to comment further unless and until additional disclosure is appropriate or required by law.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .