Hospital Adoption And Scale Will Transform Post-Surgical Care

Key Takeaways

• Rising hospital adoption and favorable regulatory trends bolster Heron’s pain management products, driving revenue growth, margin improvement, and long-term stability.
  
• Operational efficiencies, expanded product reach, and oncology franchise strength support reduced risk and improved overall profitability.
  
• Heavy reliance on a few key products, shrinking R&D investment, and external industry pressures expose Heron to revenue concentration risk and uncertain long-term profit sustainability.

Catalysts

A commercial-stage biotechnology company, engages in developing and commercializing therapeutic that enhances medical care.

• Strong momentum from newly onboarded and soon-to-launch hospital accounts for ZYNRELEF and APONVIE, driven by formulary wins, expanded labels, and strategic partnerships (e.g., Crosslink), positions Heron to capture a greater share of post-surgical pain management as surgical volumes rise with an aging population—supporting sustained revenue growth and improved gross margins by leveraging operational scale.
  
• Societal and regulatory push for opioid-sparing solutions creates tailwinds for ZYNRELEF’s non-opioid pain relief profile, with the NOPAIN Act approval and expanded coverage fostering increased adoption, which should boost volumes and enhance net margins as ASP (Average Selling Price) discipline is maintained.
  
• Broader hospital adoption of APONVIE supported by its safety profile, differentiated IV push mechanism, and targeted pull-through in systems with large surgical caseloads, allows for deeper penetration into moderate-to-severe PONV cases and provides long-term growth potential for revenue and cash flow stability.
  
• Continued outperformance in the oncology supportive care franchise, especially with growing unit sales and new account acquisition for CINVANTI (helped by the recent litigation settlement), reduces revenue concentration risk and improves EBITDA through consistent, high-margin sales.
  
• Ongoing operational efficiencies—cost restructuring, focused commercial expansion, increased production scale, and reduced R&D and legal expenses—support sustainable margin improvement and are expected to translate into positive net income and robust adjusted EBITDA going forward.

Heron Therapeutics Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Heron Therapeutics's revenue will grow by 12.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from -5.2% today to 22.8% in 3 years time.
• Analysts expect earnings to reach $48.3 million (and earnings per share of $0.23) by about May 2028, up from $-7.8 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $54 million in earnings, and the most bearish expecting $30.7 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 24.9x on those 2028 earnings, up from -37.6x today. This future PE is greater than the current PE for the US Biotechs industry at 16.3x.
• Analysts expect the number of shares outstanding to grow by 0.59% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.0%, as per the Simply Wall St company report.

Heron Therapeutics Future Earnings Per Share Growth

Risks

• Heron Therapeutics remains heavily reliant on a small number of key products (notably CINVANTI, ZYNRELEF, and APONVIE); any underperformance, loss of market share, or potential future generic/biosimilar competition in these platforms would significantly impact both revenue and net margins.
  
• The long-term sustainability of profit margins is uncertain—current elevated gross margins are partly attributed to production efficiencies and some large-scale manufacturing, but these are expected to normalize (potentially decreasing to the mid-70s%) as different manufacturing lots are introduced, pressuring future earnings.
  
• The decrease in R&D spending and commercial investment (noted as a result of cost-cutting and lower personnel expenses) could constrain future product pipeline development, limiting the company’s ability to diversify revenues and exposing it to greater risk if current products underperform.
  
• Despite improving profitability, the company’s rising reliance on expanded sales and marketing spend to drive revenue growth signals that ongoing commercial execution risk remains; if targeted expansion and adoption (via partnerships like Crosslink) do not deliver as expected, both top-line revenue and EBITDA guidance may fall short.
  
• Secular industry trends—including intensifying pressure on US healthcare reimbursement, potential regulatory uncertainty from future drug pricing reform, and increasing buyer consolidation—could squeeze average selling prices across Heron's portfolio, negatively impacting future revenue growth and operating margins.

Valuation

• The analysts have a consensus price target of $6.333 for Heron Therapeutics based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $9.0, and the most bearish reporting a price target of just $4.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $212.0 million, earnings will come to $48.3 million, and it would be trading on a PE ratio of 24.9x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of $1.92, the analyst price target of $6.33 is 69.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.