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I am writing to explain why Pacira Pharmaceuticals (NASDAQ:PCRX) will continue to rise and possibly double (again) in value. As a physician, I see the value in its product, Exparel, and will give insight as to why this product will almost certainly succeed.

I will begin by briefly discussing what Pacira Pharmaceuticals produces, why it is not unreasonable to double in the coming year, and a few counter-point to some arguments made as to why it should be shorted.

What they produce

Briefly, the company has developed long-acting bupivicaine, a local anesthetic. There is nothing like this currently being used. The value of this in surgery and anesthesiology is tremendous, and this company will continue to grow as the product becomes approved for multiple uses (rather than just post-surgical pain following the removal of hemorrhoids and bunions). Later in this article I will discuss why I see this approval happening.

So how are local anesthetics used in anesthesiology? If you've ever been to the dentist, you probably appreciate the dentist numbing your mouth before the procedure. These dentists often use lidocaine, which is a local anesthetic that wears off within a few hours. In anesthesiology and for major surgeries, a long acting anesthetic is often needed. I frequently perform nerve blocks of the lower or upper extremity (analogous to the dentist numbing the mouth). If a patient were to have a total knee replacement, however, he/she has a few options for pain-control following the surgery. He/she can have systemic opioids which have numerous side effects. They affect the entire body and result in a lower drive to breathe, constipation, etc. This is where the value of local anesthetics comes into effect. A patient can have a nerve block on the lower extremity to essentially numb the area with pain so the patient does not need the opioids that can affect the whole body. The patient currently has two options for this: 1) a "single-shot" injection which often uses ropivicaine and wears off within 24 hours, or 2) have a catheter (essentially a plastic tube) which constantly delivers the medication to the nerve to have pain relief. This catheter is connected to a device (which is expensive in itself) that has to follow the patient wherever he goes for the next 72 hours, or until the catheter is removed.

This is where the value of Exparel comes into effect: if approved (as I am very confident it will be, briefly outlined below) for certain nerve blocks and likely for epidural injection it will be used rampantly in the peri-operative setting. The medicine can allow the anesthesiologist to provide his/her patient with long-lasting pain control without subjecting the patient to a catheter constantly delivering medicine to the nerve and prevent the patient from the side-effects of systemic pain treatments.

Why I feel the product will be approved for broader use (as opposed to just bunion and hemorrhoid pain)

As mentioned, the drug is currently approved for limited use. However, the company has recently completed numerous studies in 2012 and has been approved by the NIH for further studies. In all honesty, I doubt the NIH would be approving so many studies if the results of these studies have not been absolutely stellar. One simply has to look on the NIH page to see the large number of studies:

1: EXPAREL Infiltrated Into the TAP for Postoperative Analgesia in Unilateral Abdominal Hernia Repair - This study was completed in December 2012 and highlights the company looking into pain control for hernia repairs.

2: EXPAREL Dose-Response for Single-Injection Femoral Nerve Blocks -The potential of this drug to be used for lower extremity surgery.

3: A Health Economic Trial in Adult Patients Undergoing Ileostomy Reversal - The potential of the drug to reduce opioid use for post-surgical pain.

4: Study of EXPAREL in Patients Undergoing Breast Augmentation - The potential of this drug to be used for pain following breast augmentation.

5: A Health Economic Trial in Adult Patients Undergoing Ileostomy Reversal - The potential of the drug to reduce total opioid consumption.

6. A Phase 3b Health Economic Trial in Adult Patients Undergoing Laparoscopic Colectomy (IMPROVE-Lap Colectomy) MA402S23B602 - The potential to reduce total opioid consumption therefore possibly reducing total hospitalization costs.

The following does not represent all the studies that have already been completed. Additionally, more studies are pending as the company seeks broader use of this drug.

Additionally, a very significant study in the Journal of Pain Research highlights that Exparel resulted in less opioid consumption, lower hospital costs, and a shorter length of stay than a standard opioid-based analgesic regiment for post-surgical pain in patients undergoing open colectomy.

Why the stock will continue to rise, and why others are wrong about why the stock should be shorted

  1. The FDA only has the product approved for post-surgical pain management for bunionectomy and hemorrhoidectomy. Undoubtedly, the company is pushing for wider-range approval of their product. Given the number of studies completed, the number in progress, and the result of journal articles touting its use for "off-label" surgical pain, once the product gains approval for wider uses, the stock price will undoubtedly rise and the product will be used vastly in the hospital setting. I would like to stress that I am not saying that the product will, without a doubt, be approved. I am saying, however, that I anticipate the product being approved for wider uses and the "off-label" use may be increased resulting in more demand before that happens.
  2. A recent article on SA stated that after one year of the product being on the market, their product is "slow to be adopted." The fact is that pain medicine is not like technology (take the iPhone or iPad) that a product comes in and revolutionizes the field. With my patients, I will only use medications I am comfortable with. The fact that the quarterly sales have increased from $2.3 million to $7.4 million in 3 quarters is astonishing in the medical field and shows that more physicians are becoming comfortable with it. I see this continuing and expanding into more hospitals in the near future.
  3. Analysts project $1 billion in revenue. I agree with these statements and believe that once it is approved by the FDA and used for a wider application of procedures (especially femoral nerve blocks), this estimate in revenue will undoubtedly increase.

The president and CEO of the company, Dave Stack, stated that "we don't believe we have any off-label utilization," indicating the product is not being used for a femoral nerve block, for example. The company is currently doing a Phase III program "for inclusion into the product insert" for use in femoral nerve blocks, which I believe will be the catalyst needed to propel Exparel to become mainstream in the operating room.

Source: Why Pacira Will Continue To Soar