Pacira: Profits in Pain Management

03/09/2017 7:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

Pacira Pharmaceuticals (PCRX) develops non-opioid drugs for postsurgical pain control. The company says that one in 10 patients report dependence or addiction to opioids after surgery, notes Mike Cintolo, growth stock expert and editor of Cabot Top Ten Trader.

Pacira is on a mission to change that. It uses a proprietary delivery technology it calls Depo-Foam to deliver its drugs. Depo-Foam encapsulates drugs without altering their chemistry, then releases them over a time period ranging from one to thirty days.

The company’s sole commercialized drug is Exparel, a sustained release postsurgical analgesia that turns a patient’s pain signal off at the surgical site. It is administered as a shot, and generated $266 million in revenue in 2016 (up 11% over 2015). Exparel is also in a Phase 3 trial for nerve blocking, for postsurgical analgesia in Europe, and for pediatrics. Two new Depo-Foam products are also in development.

Pacira has a lot on the table for 2017, including results for multiple Exparel studies (Phase 4 knee, Phase 4 spine, Phase 3 nerve block, Phase 4 spine), as well as initiation of new studies, and two new partnerships.

Next up are results from Phase 4 knee, which is hoped to show that Exparel is superior to bupivacaine, which has been on the market for decades (and is cheap).

Next comes data from the nerve block trial, which is important since the FDA requested a larger patient population than the previous study.

PCRX bounced around in the $30 to $38 range from October through the end of 2016. It picked up new analyst coverage late in the year (with around 30% estimated upside) and shares quickly rallied to $40.

A little wobble in late January resulted in a quick trip to $36, but PCRX quickly bounced and broke out to $42 in early February, then marched confidently to close at over $45 prior to its Q4 report on March 1.

Solid results and an outlook with multiple potential catalysts drove the stock to $59 the next day. It has moved back near $50 over the last few days. The consensus price target is $58. We think it can probe $60 again relatively soon upon positive trial results.

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