Heron Therapeutics: A Guidance Beat, But Is the Momentum Priced In?

The numbers were a mixed bag, but the market's reaction was clear: the good news was already priced in. Heron Therapeutics reported a narrow beat on the headline line, with revenue of $40.59 million edging past the $40.32 million estimate. Yet the year-over-year context tells a different story, with sales declining 0.5% from the prior quarter. The EPS surprise was more pronounced, with a loss of -$0.02 per share beating the -$0.03 estimate by 33%. But that's a beat on a negative number; the company remains unprofitable.

Digging deeper, the real story is the Acute Care franchise, which drove the growth narrative. For the full year, this segment saw 65.1% year-over-year net revenue growth to $154.9 million. The Q4 results for its key products were a study in contrasts: APONVIE sales of $3.81 million crushed the estimate, while ZYNRELEF sales of $12.53 million also beat, though both were down sharply from a year ago. The Oncology franchise, however, showed continued pressure, with CINVANTI sales falling 14.7% year-over-year.

The expectation arbitrage here is straightforward. The Q4 beat was real, but it was a beat on a weak base. The market had already priced in the Acute Care growth story, as evidenced by the stock's -18.8% decline over the past month even after the earnings release. The real catalyst for the stock now shifts squarely to the forward view. The company's 2026 guidance of $173 to $183 million in net revenue and $10 to $20 million in adjusted EBITDA is the new benchmark. The market will now judge whether this guidance is conservative or optimistic, and whether the Acute Care momentum can sustain itself to hit those targets.

The Guidance Gap: Sandbagging or Realistic Reset?

The 2026 guidance presents a classic expectation reset. The numbers imply a significant deceleration from the explosive growth of the prior year. The revenue target of $173 to $183 million represents 12% to 18% growth over the $154.9 million achieved in 2025. That's a clear slowdown from the 65.1% year-over-year surge in the Acute Care franchise that powered the full-year results. More telling is the adjusted EBITDA guidance of $10 to $20 million, which is a step down from the $14.7 million the company actually delivered in FY25.

This creates a clear expectation gap. The market's prior whisper number for 2026 growth was likely anchored to the 2025 momentum, perhaps even higher given the Q4 peak. The guidance now sets a lower bar, suggesting management sees near-term headwinds or is choosing to be conservative. The language from the CEO, highlighting "exceptional momentum" and "continued share gains," frames this as a deliberate reset to a more sustainable path, not a retreat.

The bottom line is that the guidance is a meaningful beat on the prior year's actuals, but it's a conservative beat on the prior year's trajectory. For the stock to rally, the market needs to see evidence that this guidance is too low. The recent Q4 results, with the Acute Care franchise delivering its strongest quarter ever, provide a foundation for that optimism. The key will be whether the company can demonstrate that the commercial engine is still accelerating, not just maintaining its pace. If execution meets the bullish narrative, the guidance could become the new floor for expectations. If not, it may simply be a sandbagged baseline that sets up for another disappointment.

Catalysts and Risks: What's Next for the Expectation Gap

The stock's next move hinges on a handful of forward-looking events that will test the new guidance baseline. The primary catalyst is the quarterly progression of the Acute Care engine. After a 48% and 97% year-over-year surge in ZYNRELEF and APONVIE sales last quarter, the market will watch for signs that this momentum can sustain itself through 2026. Any deceleration would validate the guidance's conservative tone. Conversely, if sales continue to outpace the low end of the $173–$183 million revenue target, it would signal the guidance is too low and set up for an upward revision.

A critical risk to monitor is the performance of the Oncology franchise, which generated over $105 million in revenue last year but is not part of the Acute Care growth narrative. Its stability or decline will impact the company's overall financial health and cash position, which stood at $46.6 million at year-end. Any deterioration here could pressure the adjusted EBITDA guidance, which is already a step down from the prior year's actuals.

The bottom line is that the guidance reset creates a clear setup. The company has given itself a lower bar to clear, framing it as a deliberate, sustainable path. The market's next expectation gap will open if execution exceeds that bar. Investors should watch for quarterly sales data that shows the Acute Care products maintaining their explosive growth rates, while also keeping an eye on the Oncology segment to ensure it doesn't become a drag. If both conditions hold, the current guidance could become the new floor, and the stock's recent underperformance may finally reverse.