Heron Therapeutics, Inc. (NASDAQ:HRTX) Q2 2022 Earnings Conference Call August 9, 2022 8:30 AM ET
Company Participants
David Szekeres – Executive Vice President, Chief Operating Officer
Barry Quart – Chief Executive Officer and Chairman
John Poyhonen – President and Chief Commercial Officer
Conference Call Participants
Josh Schimmer – Evercore
Serge Belanger – Needham and Company
Operator
Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Heron Therapeutics Q2 2022 Earnings Conference. As a reminder, this conference is being recorded.
Now I would like to turn the call over to David Szekeres, Executive Vice President, Chief Operating Officer. Please proceed.
David Szekeres
Good afternoon, everyone, and thank you for joining us. With me today from Heron are Barry Quart, Chief Executive Officer and Chairman; and John Poyhonen, President and Chief Commercial Officer.
For those of you participating via conference call, the slides are made available via webcast and can also be accessed by going to the Investor Relations page of our website, following conclusion of today’s call.
Before we begin, I would like to remind you that this call will contain forward-looking statements concerning Heron’s future expectations, plans, prospects, corporate strategy and performance, which constitute forward-looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements, as a result of various important factors, including those discussed in our filings with the SEC.
Any forward-looking statements represent our views only as of the date of this webcast and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statements.
Now, I’ll turn the call over to Barry.
Barry Quart
Thank you, David. Welcome everyone. And thank you for joining us. Second quarter has been extremely productive on a number of fronts. John will discuss details regarding our two commercial franchises, both of which showed good growth in second quarter beating consensus estimates.
During second quarter, we continued to prosecute our NDA for HTX-019 for postoperative nausea and vomiting, which has the potential to be many times larger than our CINV business. Interactions with the FDA remain on track for the September 17th PDUFA date. We’ve also made excellent progress completing enrollment in the four clinical trials with ZYNRELEF planned for inclusion in what we call sNDA-number two, designed to further expand the indications for ZYNRELEF. This sNDA is planned for late this year. Based on our agreement with the FDA sNDA2 should provide the basis for expanding the indication statement to cover essentially all 14 million target procedures.
I’ll now turn the call over to John.
John Poyhonen
Thank you, Barry. I’m excited to share our second quarter commercial results. We continue to make significant progress with the ZYNRELEF launch. During my presentation, I’ll start with a number of updates on key performance metrics related to this progress. With that I’ll finish with an update on our outstanding second quarter commercial results with our oncology care business.
Second quarter net sales were $2.5 million, which was a 140% increase over the prior quarter. We are currently expect third quarter ZYNRELEF net product sales to increase in the range of 40% to 50% over the prior quarter. The level of ZYNRELEF inventory in the distribution channel has been a topic of great interest during the past couple of quarters.
As we previously described in earnings calls, there was excess initial stocking inventory in the distribution channel. In order to better understand the inventory level and the distribution channel, we’ve been reporting the ex-factory reorder rate based on demand unit volume for both SKUs.
Ultimately, our goal is to have ex-factory orders at 100% of demand unit volume, meaning the distribution channel is replenishing their inventory for every unit sold to a hospital or ASC. As you can see on the table provided in Slide number 6, we continue to make meaningful progress and burning through the inventory based on increases in ZYNRELEF demand unit sales.
Results for the third quarter through August 3 indicate we have reached our goal of stabilizing inventory levels at the distribution centers with channel orders mirroring the demand unit results. The 400 milligram SKU reorder rate is 99% of demand unit volume. And the 200 milligram SKU reorder rate is 105%. This should simplify the modeling of future ZYNRELEF net sales at levels consistent with ZYNRELEF demand unit volume.
ZYNRELEF demand unit volume grew by 47% in the second quarter over the first quarter. Thus far in Q3, ZYNRELEF demand units are ahead of the same period in Q2 with an expectation of achieving 40% to 50% growth in Q3.
Next, I’ll summarize the ZYNRELEF launch highlights to-date by sharing our scorecard of leading indicators. During our first year of launch, we’ve continued as strong cadence of adding unique new ordering accounts, which have been growing at about 50 accounts per month. We’re also very encouraged by the increases in account reorder rates that have grown from 50% in the first three months of launch to 84% in the first year of launch.
We continue to gain formulary approvals for ZYNRELEF in targeted hospitals with a run rate of 30 formulary approvals per month since the beginning of our launch. Importantly, we’re also seeing excellent growth with integrated delivering networks or IDNs adding ZYNRELEF to formulary. We believe gaining IDN supporting is a critical component in potential therapeutic interchanges with our key account substituting ZYNRELEF for EXPAREL for indicated procedures in the future.
Slide 9 benchmarks the number of unique ordering accounts during the first year of launch based on Symphony Health data. We continue to rapidly add new accounts ordering ZYNRELEF with 602 ordering accounts in the first 12 months of launch. This represents an increase of 33% from the 451 level in the first nine months of launch. In addition, ZYNRELEF had 84 accounts reordering during the first year represents the greatest reorder percentage of all four products benchmark in this analysis. We believe this growing reorder rate is an excellent indication of the strong real-world experience that surgeons are having with their patients.
While the initial ZYNRELEF results are strong, aggressive expansion and product usage in ordering accounts is a key priority in 2022. New formulary approvals represent our new business pipeline. This slide highlights the continued rapid progress that ZYNRELEF is making with formulary approvals. At the end of April, we reported 319 formulary approvals. This number has continued to grow at about 30 new formulary approvals per month since the launch to 384 total approvals through the end of July.
And those accounts actually making P&T decisions over 90% of hospital P&T committees continue to add ZYNRELEF to formulary. Importantly, an estimated 68% of our formulary approvals are for unrestricted usage of ZYNRELEF. Those accounts with restricted usage typically limit the procedures for their internal trial evaluations of the product.
Many institutions cut back on P&T meetings over the summer to account for vacation schedules. The remainder of the year will remain busy with over 80 additional P&T committees scheduled to review generally before the end of the year. New formulary approvals help us establish a critical pipeline for new ZYNRELEF business and remain a key priority for the commercial team.
Next, I wanted to provide an update on a key top down strategy of targeting integrated delivery networks or IDNs. To create new system-wide opportunities for therapeutic interchange from EXPAREL to ZYNRELEF for indicated procedures. Thus far 57 IDNs have added ZYNRELEF to their formularies with 33% of the approvals for unrestricted use.
In addition, these 57 IDNs account for over 1 million annual ZYNRELEF indicated procedures representing a potential ZYNRELEF net sales opportunity of $200 million annually if we converted all indicated procedures. Of course, no company ever gets 100% share, but the potential with our existing indicated procedures creates a strong opportunity for meaningful ZYNRELEF sales growth.
In addition, our IDN formulary expansion now covers $135 million of annual EXPAREL sales. We also have 15 IDNs at various stages of evaluating switching from Exparel to ZYNRELEF for indicated procedures
Now let’s drill down on the 15 IDNs that are interested in potential therapeutic interchange. With ZYNRELEF’s existing expanded label indications, it’s not surprising that IDNs are looking to save millions of dollars for a product, which demonstrated superior clinical results to the standard of care, bupivacaine. We are excited to be partnering with both, pharmacy and physicians to drive their internal evaluations with ZYNRELEF.
Of the 15 IDNs we are interested, 11 have already initiated their internal trials with ZYNRELEF. Initial feedback on the trials continues to be very positive across a wide variety of surgical procedures. While moving a large IDN certainly takes some time, the first IDN to make their therapeutic interchange decision was positive at the end of the second quarter and they are now switching to ZYNRELEF.
This quarter, we’re introducing a new metric to help evaluate the impact we’re making with IDN. Let’s start by focusing on the 15 IDNs evaluating therapeutic interchange. During the first half of 2022, ZYNRELEF demand units grew by 290% compared to the second half of 2021. Clearly, our expanded label indication is fueling this growth.
Additional new metrics to measure is branded market share. This is simply ZYNRELEF units divided by the total number of Exparel units plus ZYNRELEF units. Overall, in the 57 IDNs with formulary approval, we are demonstrate solid branded market share growth. It’s important to keep in mind adding new IDNs actually lowers our share since we’re just beginning to get new ZYNRELEF business in these accounts.
For example, last quarter, we reported 46 IDNs with formulary approvals, which has now grown to 57 IDNs. Finally, we have also provided ZYNRELEF’s branded unit market share for the top five IDN share accounts out of the 15 IDNs evaluating therapeutic interchange from Exparel to ZYNRELEF.
As this table demonstrates our branded market share can grow very quickly with the high of 41% for Q2. The CMS approval of pass-through status for separate reimbursement of ZYNRELEF for Medicare patients in the hospital outpatient setting of care is a game changer for us. As a reminder, ZYNRELEF is the only local anesthetic separately reimbursed in the hospital outpatient setting for the next three years.
This important approval builds on our existing reimbursement strengths already in place. CMS separate reimbursement for ZYNRELEF in the ASC setting of care affected January 1 of this year, separate reimbursement outside of the surgical bundle payment for ZYNRELEF with more than 123 million covered lives and ASC. And in some cases it’s also reimbursed separately in the hospital outpatient setting.
A key component of our pricing strategy is even without separate reimbursement, our lower acquisition cost benefits customers across all setting of cares where the drug may be paid for under the surgical bundle payment. ZYNRELEF’s value proposition continues to be a critical driver of new business and expansion in the market.
Switching to ZYNRELEF provides a cost savings of 25% to 32% based on wholesale acquisition cost and a savings of 42% to 48% based on our 340B price offering compared to Exparel. This provides a huge financial incentive for customers to switch to ZYNRELEF.
From a reimbursement perspective, using ZYNRELEF is profitable with Medicare patients in the hospital outpatient setting and ASC settings of care. In these challenging financial times 340B accounts can experience financial benefit of over $429 per patient by using ZYNRELEF rather than Exparel. Based on these economic benefits, it’s not surprising that large IDNs are now conducting therapeutic interchange evaluations.
Our key priorities for ZYNRELEF in 2022 remain the same from a commercial perspective. Our top priority is to leverage the new label indications for faster growth. This will be accomplished by expanding existing surgeon usage into new procedures. Our second priority is increased usage within ordering accounts by increasing the number of surgeons routinely using ZYNRELEF. Many accounts initially evaluated ZYNRELEF with only two or three surgeons based on the excellent outcomes with their patients were actively using their experience to support expanded usage of ZYNRELEF with their colleagues.
Our third priority is to continue to gain formulary approvals at new targeted IDNs and hospitals. Increased access in our pipeline is a key opportunity for growth and therapeutic interchange. Finally, we continue to maximize our separate reimbursement outside the surgical bundle payment for ZYNRELEF.
In summary, we’ve already made strong progress with a number of leading indicators, which gives us confidence that 2022 will be a year of significant growth for ZYNRELEF.
Now, I’d like to shift gears and review the second quarter results for our oncology care franchise. During the second quarter, our oncology care team did an outstanding job of growing our CINV portfolio net sales by 12% over the prior quarter. This growth was driven by a 11% increase of CINVANTI and an 18% increase in SUSTOL over the prior quarter. Overall, CINVANTI units – demand units increased by nearly 11% compared to the prior quarter. With a strong 11% increase in the hospital setting of care, which was our third highest demand unit in a quarter ever in the hospital segment.
CINVANTI demand units also remain strong in the clinic setting of care with a 10% increase over the prior quarter. We have a number of ongoing discussions to bring former CINVANTI customers back following the end of the generic fosaprepitant arbitrage period.
The outlook for our CINV products remains positive based on continued improving reimbursement tailwinds over the past year. As shown in the table below on Slide 21 both CINVANTI and SUSTOL are much more favorable – in a much more favorable reimbursement position versus the competition than the same time last year with generic fosaprepitant down to $27 and IV Akynzeo down to $458 based on ASP plus 4% reimbursement.
In addition, the elimination of separate reimbursement for generic fosaprepitant and the hospital outpatient segment effective January 1 of this year made the CINVANTI value proposition much more attractive this year. Our full year 2022 CINV net sales guidance has been increased to a range of $93 million to $95 million representing at 11% to 14% increase over the prior year.
In addition, we expect demand units in the second half of 2022 to be higher compared to the prior year, which will be partially offset by lower net sales for both products. Finally, the new CMS guidelines published in July indicated that effective January 1, 2023, that reimbursement for 340B accounts will increase the ASP plus 6% compared to the current rate of ASP minus 22.5%. With the greatest portion of our CINVANTI hospital demand unit sales in 340B accounts, we believe this new opportunity will help us increase unit sales in the fourth quarter and in 2023.
That completes my prepared remarks. And I’ll now turn the call back over to Barry.
Barry Quart
Thank you, John. In June, we announced a restructuring which included a 34% reduction in headcount by year end. Between the restructuring, improvements in gross margin from the move to large scale manufacturing and other cost cutting measures, we expect to achieve reductions of over $50 million in annual operating expenses in 2023.
These reductions and burn coupled with the private placement financing announced this morning are projected to provide a cash runway through 2024 and to allow us to become cash flow positive in 2024. As of June 30, 2022, Heron had cash, cash equivalents and short-term investments of $83.5 million.
Adjusting for net proceeds of $75.2 million from our August 2022 private placement, Heron had cash, cash equivalents and short-term investments of $158.7 million. Second quarter burn was $28.4 million. While burn will increase in the third quarter due to the restructuring. Fourth quarter burn minus one-time expenses is projected to be approximately $21 million with significant further reductions going into 2023.
I’d like to take a minute to review a few of the key accomplishments and catalysts for the company. As we have discussed, in second quarter, ZYNRELEF demand units increased by 47% compared to first quarter. Our contract manufacture has successfully validated large scale manufacturing for ZYNRELEF. And we’ve completed enrollment in the clinical studies needed to submit sNDA2 to further expand the indications for ZYNRELEF.
One area where we did not meet our goal was to complete a business development deal in the second quarter. Unfortunately, the timing of business development deals are difficult to predict, but we are still laser focused on getting one or more such deals done this year. For each major territory, we have at least one regional company and at least one multinational in active discussions.
The Oncology Care Franchise, we saw good growth in sales, resulting in our raising full year 2022 guidance to $93 million to $95 million. As John mentioned, we are very excited by the recent change in CMS reimbursement for 340B hospitals, which we believe makes CINVANTI an extremely attractive opportunity for these hospitals to generate additional revenue. Slides 24 and 25 contain important safety information for ZYNRELEF. These slides will be available on our website.
With that, we’re ready for questions. Operator?
Question-and-Answer Session
Operator
[Operator Instructions] And your first question comes from the line of Brandon Folkes with Cantor Fitzgerald. Your line is open.
Brandon Folkes
Hi, thanks for taking my questions and congratulations on all the progress. Maybe just two from me. Can you just talk about some of the moving pieces that will drive cash flow positivity by 2024 as we model that? And then secondly, when you look at the 15 IDN evaluating switching that $42 million of Exparel business, what is the hurdle they’re using to evaluate the product? Is it just surgeon and patient experience? And then should they decide to switch? How quickly does that revenue take to shift? Is it a gradual switch or is it something that sort of – as of a certain date they will switch all their business? Thank you.
Barry Quart
Thanks, Brandon. I’ll have John answer the second question first, because it certainly leads into the answer to the first question.
John Poyhonen
Good morning, Brandon. Yes. So regarding your question on the 15 IDNs, generally, there is an evaluation period that will be set based on specific surgical procedures. So what we see frequently is they’ll start if in the lower extremity arthroplasty like TKA or total hip repair, replacement rather. In addition, they’ll look at generally something in a small to medium abdominal surgery, like, bariatric surgery. And what they’re really looking at is key parameters. So they’ll look at pain reduction over three days. They’ll look at the impact on opioid usage.
And importantly, they’ll also look at time to discharge. Those are generally – there may be individual differences amongst each of the IDNs, but those are – what are most typically reviewed. Respect – with respect to time to change, each of these systems is a bit different and some move more rapidly than others.
I think you can see from the report that we provided today on Slide number 13, we’re actually, there’s one IDN – IDM number one that didn’t have any market share in the third or fourth quarter of last year, but went up to 14% and 41% in the second quarter. So they can move pretty quickly once they start making that type of commitment. But it’s certainly a situation where we would never expect to get a 100% of the Exparel business. I think that would be fairly rare, but we do believe that we can get a very significant portion of it. So hopefully that answers your question.
Barry Quart
Thanks, John. Going back to the moving parts associated with becoming cash flow positive, obviously, it is partly associated with decreasing burn. As mentioned, we did a restructuring in June, reducing organization by approximately 34% and taking significant costs out of our base burnt. We’re always continuing to look at ways to be more efficient in that regard, it also an important contributor here is increasing margin.
As we’ve discussed previously Heron has invested significant amount of money in moving to large scale manufacturing for CINVANTI as well as for ZYNRELEF. We have accomplished that now for ZYNRELEF. And we are almost to the end of that process for CINVANTI. So our anticipation is that we will start being able to sell product from large scale manufacturing of CINVANTI in the fourth quarter that improves our margin substantially. And obviously, that just drops to the bottom line with increasing sales of units.
And also over the course of the next two years, we anticipate launching HTX-019 as we bring that product to market, that has a very exciting opportunity in terms of going after approximately 500,000 units of oral aprepitant. That’s currently being used for PONV an IV push product like HTX-019 is certainly set to take a significant portion of that oral market and then expand beyond that.
As we’ve discussed in previous forums, aprepitant has been demonstrated to be certainly one of the most effective molecule molecules for PONV and with a convenient, easy to use, easy to administer product like HTX-019. We believe that – this will become an extremely important component of prophylaxis for PONV. Go on to the next question.
Operator
Your next question comes from the line of Josh Schimmer with Evercore. Your line is open.
Josh Schimmer
Great. Thanks for taking the questions. I have a few if I may, but maybe we can start with the ZYNRELEF launch is about 80% below, where Exparel was at this point in time. Maybe can clearly indicate why you think that’s the case and whether any specific measures or changes to strategy have been put in place to address that.
Barry Quart
Yes. Thanks, Josh. Good question. As you know, the first two quarters of launch were significantly hampered by the very restricted label. And we unfortunately misread the market in terms of surgeons’ willingness to use the product beyond the limited label. Although, market research had indicated that the label would not be an impediment to launching the product, it turned out to be a significant impediment in fact.
So the first two quarters, obviously, the launch was much, much slower than anticipated, obviously, there’s the impact of COVID, particularly in terms of the Omicron surge early this year, right at the time, we were launching the expanded label and the broadening of covered procedures from around 2 million to over 7 million.
I think we’ve now started to hit our stride in terms of moving the product into obviously new institutions starting to see the movement of IDNs to start switching versus Exparel based on both the clinical data that we have showing superiority of ZYNRELEF to bupivacaine as well as the economics associated with ZYNRELEF. So absolutely it has been much slower launch than we would have projected. A lot of factors involved. But I think that we’re now starting to turn the corner on many of the issues that have hampered us. And as noted, we anticipate submitting the sNDA to further expand the indication statement near the end of the year. And with the approval of that sometime next year we’ll finally be in a position to go after the entire market. And I think we’ll start to see between now and then continue good growth.
Josh Schimmer
Got it. I mean, given how obvious the narrow label was, why do you think your market research missed something as obvious as that factor turned out to be?
Barry Quart
Well, I’ll let John give some color on this. But the surgeons that we interviewed for the marker research, which was a large number indicated that they were comfortable with use of a local anesthetic, they understood the pros and cons of using local anesthetics. And the fact that the label specified three specific procedures wasn’t going to be an impediment. One factor that we didn’t take into account early on was that we were actually reinforcing the limited aspect of the label, because we would not permit our sales reps to stay in the OR if the surgeon was using the product in an off label. We really reinforced the concept that the product needed to be only used in those three indicated procedures. John, I don’t know if you have anything else to add.
John Poyhonen
No, I think that you summarized it very well, Barry. The one thing I would add just based on Josh’s initial question, and if you really look at just the past two quarters, which is how we’re evaluating the launch because of the very limited label that we had at launch. During the first two quarters of launch Exparel sold just over 19,000 units. And we sold, if you start at January 1, over 21,000, so, we think we’re tracking much more favorably even with the first expansion of the label. And we think that’ll continue to expand as we get sNDA approved.
Josh Schimmer
Got it. I have another couple of questions. One is on the formulary approvals, I think based on what you’ve indicated in the past, looks like there’s still maybe 700 formularies left to go. Where are you in terms of your initial expectations for formulary adoption? And what progress do you expect to make for the large number of remaining formularies where you’ve not been yet approved?
John Poyhonen
Yes, that’s a great question, Josh. So the first thing I would mention is, is that the way that we evaluate an IDN formulary approval is even if an IDN has 10 or 15 hospital accounts, and some of those IDNs, it only takes the system level approval to get it and you may get the entire number of hospitals within that IDN with just one single approval. So we’re probably undercounting it a bit. Certainly we’re getting a great success rate that we’re seeing in accounts that are evaluating ZYNRELEF with over 90% approval rating. It would – we would like to see it go faster. But I think if you look at the number of ordering accounts that we have, I think we’re in track where we thought we would be, as far as ordering accounts, we just need to increase our usage at those accounts.
And as I talked about in my comments, that’s really by getting surgeons to use ZYNRELEF and additional surgical procedures based on our new label indication. And it’s also getting more surgeons within the existing accounts. But we believe that of the 600 accounts that we have or have tried ZYNRELEF and 84% already ordering, we’ve got a very good base of business. We just need to increase the usage at those accounts right now. And we’ll continue to expand the formulary approvals as we go forward.
Josh Schimmer
So what percent of the addressable market do you have formulary coverage for now or a clear line of sight to coverage behind a year?
John Poyhonen
So if you take a look at the percentage initially we were targeting based on the reps that we had in the field looked to be about 65% of the overall market. So right now, I would say that based on the formulary coverage that we’ve got, we’ve probably got somewhere around a third of that. So we’ve probably got, let’s say 20% to 25% of the opportunity, Josh. And by the end of the year, we would hope to push that over 30%.
Josh Schimmer
That sounds like still fairly long way to go.
John Poyhonen
Well, it’s certainly, as far as getting everything opened up, but if you take a look at the number of ordering accounts and the type of business that we can generate from those ordering accounts, we think that there’ll be significant growth as we move forward. So hospitals tend to move slowly and certainly this is no different than any other hospital launch. But I think the hospitals that are using ZYNRELEF are getting great results in it. And that’s been demonstrated by the growth that we’ve seen in units quarter-over-quarter, as well as the reorder rate from the hospitals.
Unidentified Analyst
Got it. And last question, and thank you for indulging so many. As we think about the 019 PONV opportunity, maybe you can help frame that for us relative to SUSTOL and CINVANTI and ZYNRELEF. What market dynamics and features might make this launch more CINVANTI like than SUSTOL like, or is it really flake?
Barry Quart
John, do you want to take that?
John Poyhonen
Sure. It’s a great question. And from our perspective, we think that it will be much more CINVANTI like, really because if you look at it, number one, ZYNRELEF is a high touch product from a selling procedure where we have to be in to and service the surgeon as well as the support staff on how to prep the product and then how to use it. Everyone in the operating room knows how to use a 30 second IV push. And we just had an advisory board last weekend and talked to orthopedic surgeon to about 019.
And there was very high interest because what they’re really focused on is, is how do we move patients out of the PACU quicker, we get them to discharge with so much of the surgical procedures moving to outpatient. And really 019 is the perfect drug to do that because it’s got the best clinical profile as far as reducing vomiting and emesis of any product on the marketplace. So, from our perspective, we think that we’ve got the right pricing strategy to come out to gain rapid access in the marketplace, as well as rapid uptake since the in-service perspective will be much, much easier than what we’ve seen with ZYNRELEF.
Unidentified Analyst
Great. Thanks very much.
Operator
Your next question comes from the line of Boris Peaker with Cowen. Your line is open.
Unidentified Analyst
Great. Thanks for taking my question. This is Nick on for Boris. I just have a few questions. The first is for the IDN that are evaluating the therapeutic interchange around how long will those individual trials take? I know that you mentioned that they could be in like a different – a couple of different surgeries. Do you know like how long – how many patients, for example, they would need and how many surgeries they would need in each indication? And also on top of that, could the hospital or IND – IDN decide to only have therapeutic interchange for one surgery, for example, or would it have to be a total therapeutic interchange?
Barry Quart
John, do you want to take that?
John Poyhonen
Sure. So really they’re all over the board on the length of time and Nick, as you suggested, it really depends on the number of surgical procedures that they’ll be evaluating. Generally, there’ll be a bony model and a soft tissue in accounts that are looking at it. And it depends on the number of accounts or hospitals within an IDN that may be conducting it. As far as the size, we’ve seen accounts looking at several 100 to make their decision. We’ve seen some that are more in the 50 of each range. So it really depends on an account by account basis. So it’s tough to predict, but what I can say is that during the second quarter, we have the first IDN that really started their evaluation. I would say probably in March. And by the end of the second quarter, they had made their decision and it was positive for ZYNRELEF. So they are actually looking to switch ZYNRELEF for indicated procedures. If you go through that type of process, I think most accounts will look to use ZYNRELEF more broadly than a single surgical procedure. And really that’s why they expanded label is so important in helping our strategy.
Unidentified Analyst
Great. Thank you. And then just a follow-up on that. What would it take for the rest of the IDNs that currently are not actually evaluating therapeutic interchange? But what would it take for them to start evaluating that? Is that something that you would’ve to do on your end or is it more so just takes time for them?
Barry Quart
Based on the feedback that we’re hearing, some of them just want to give a bit more experience with ZYNRELEF before they look at moving that aggressively. I think the other thing that I would point out is if you look at some of the accounts in that 57 IDNs, we already have a 100% market share based on branded products because either they never used Exparel or I’d already quit using it because of the over promising they made on duration of therapy. So I think really it has everything to do with experience and getting good feedback from surgeons and their patients to expand that to a much broader label or a much broader group rather of IDNs considering that.
Unidentified Analyst
Great. Thank you very much.
Barry Quart
Certainly.
Operator
Your next question comes line of Serge Belanger with Needham and Company. Your line is open.
Serge Belanger
Hi, good morning. Couple questions on ZYNRELEF and then a couple on the upcoming PONV, PDUFA. So first on ZYNRELEF, I guess for John, you talked about unit demand increasing to just short of 13,000 units in the second quarter. Can you maybe break that down between the ASC and hospital segments and wondering if at this point you are displacing Exparel or really taking over some of the generic bupivacaine share? And then I guess, secondly, you also discussed expectations that ZYNRELEF sales would be up 40% to 50% quarter-over-quarter in the third quarter. So just maybe talk about the assumptions and maybe what you’ve seen so far in the first five, six weeks of the third quarter? Thanks.
John Poyhonen
Okay. So the first question on where is the business coming from? If you look at it right now, it’s been about 65% coming from hospitals, 35% from ASCs. That would be from an ordering account perspective. So if you convert that into units, it’s about 80% hospital, 20% ASCs. So I think that was your first question. Where’s the business coming from? It’s really coming from both Exparel and bupivacaine as I mentioned in my last response. There were certainly some accounts that had never used Exparel or had stopped using it where we’ve got a 100% share of the branded product there.
What we’re especially excited about is we continue to see good traction against the bupivacaine and the generic cocktails based on the superior clinical results. We’ve got a couple of accounts that have been doing very extensive evaluations of this with several 100 patients that they’ve been doing all on their own. And they’ll be looking to publish in the second half of the year, which we think will be a great benefit for us as we go forward. And finally, on the 40% to 50% growth, there has been some softness in the overall elected surgery market during 2022. But certainly, we continue to see good growth as we enter Q3 with ZYNRELEF and just put together back to back, our two strongest weeks ever. So looking forward to continuing that throughout the third quarter and the remainder of the year.
Serge Belanger
Okay. And then on the upcoming PONV product PDUFA, I don’t know if you’ve mentioned this in the past. But did you require – did the NDA review require a site inspection and has that inspection taking place? Secondly, what kind of marketing – additional marketing expense should we expect with this launch? Just thinking of how that could impact the OpEx progression in 2023? Thanks.
Barry Quart
Yes. Thanks Serge. So this product which is a smaller vial of CINVANTI, which as you know, we’ve made and sold over 2 million vials of CINVANTI to date did not require an inspection. We are in the very end stage here of the review cycle. There’s no indication that that situation will change. And the manufacturer for HTX-019 is also a manufacturer for CINVANTI. So I think there’s a very significant track record of that manufacturer being able to make the product, certainly a larger bio size of it.
In terms of sales – expenses and expansion really excellent question, because it leads to a point that we should have highlighted when the question was asked previously. And that is one of the great things about HTX-019 is it utilizes our resources that are already focused in the acute care setting. And so we don’t anticipate significant additional investment is necessary because we already have the reps out in the field, they’re already talking to surgeons, an anesthesiologist, exactly the target audience for HTX-019.
And so it’s a perfect segue for them to add this into the bag, as they say without the significant additional cost and without the need for any substantial increases in personnel. So very economical and really an exciting product when one looks at the published data on how effective the molecule can be for PONV. And as John mentioned in today’s world, the biggest issue is getting patients out the door because there’s not sufficient staff for patients to be kept in the PACU. And we’re seeing surgeries not being scheduled into the afternoon as they might otherwise be because there’s concern about not having staff or recovery. So if you can use easy to use safe product that helps you get patients out the door in the ASC setting, for example, we think this is going to be extremely attractive.
Serge Belanger
And just one more, I guess, is this a product that’s going to require kind of the same approval process via P&T formularies for adoption?
Barry Quart
Yes, certainly as a hospital product it would still need to go to formulary committee in the hospital setting. Again, however, the molecule itself is very well known. It’s simply a more convenient approach towards administration of a product that’s already being used in over a 0.5 million oral pills for PONV. And so we’re certainly going to press very hard to get that acceptance from P&T committees as quickly as possible in terms of the launch. But it probably has the most similarities to CINVANTI in that regard as well, which certainly required formulary approval. And as you remember back when we launched that product that process went relatively smoothly. And obviously, we took a large portion of the amend market within the first two years of launch.
Serge Belanger
Thanks for taking the questions.
Barry Quart
Yes, certainly.
There are no further questions at this time. I will now turn the call back over to Barry for closing remarks.
Barry Quart
Thank you. And thanks everyone for joining us on the call today. We’re really pleased with the progress this quarter and we look forward to keeping you updated.
Operator
Ladies and gentlemen, that concludes today’s conference call. Thank you for your participation. You may now disconnect.
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