Pacira Raises Wall Street Expectations of a New Blockbuster Painkiller

5/19/11Follow @arleneweintraub

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side effects, particularly in the elderly. Pacira’s formulation of the drug is also injected into the wound, but it provides pain relief for up to three days. That may allow patients to reduce their use of opioids—or better, to bypass them all together.

But Pacira’s quest to convince the FDA that its treatment belongs in the crowded market for pain relievers didn’t go well at first. The agency gave Pacira a choice between doing one placebo-controlled trial or two trials of its formulation vs. regular bupivacaine. The company’s original management team chose the second route—a mistake, Stack says, because the trials didn’t shed enough light on whether the Pacira treatment would reduce opioid use post-surgery.

In the new Phase 3 trial, performed under Stack’s watch, patients undergoing bunion or hemorrhoid surgery were randomized to receive placebo or Exparel, but they were all given the choice of receiving opioids like morphine for pain after their surgeries. The study showed that patients on the Pacira drug consistently waited longer to request additional pain relief—and some never requested opioids at all. In the end, Pacira was able to show that overall opioid use was significantly lower with its treatment in both bunion and hemorrhoid patients.

Pacira went public at $7 a share—significantly below the original target of $12 to $14—but the company eventually found a receptive audience on Wall Street. Jonathan Aschoff, an analyst for Brean Murray Carret & Co. wrote in a March report that even if the company’s pain treatment only captures a small portion of the surgical opportunities, “we consider it a likely event that total revenue will eventually exceed $1 billion.” His price target on the stock is $20. Barclay’s, Piper Jaffray, and Wedbush also initiated coverage of Pacira with optimistic outlooks.

Pacira’s sales pitch to hospitals and insurers will be far from easy, however. So Stack is turning his attention to assembling a new set of studies designed to convince healthcare payers that the Pacira product will save them money over the long run. “We’ve written a number of articles on what it cost to control pain in 2010, and a series of articles on opioid adverse events and what the cost of those would likely be,” he says.

Pacira is now teaming up with six large hospital chains to review patients’ charts—similar to what they did when they were launching bivalirudin at The Medicines Company. They plan to pinpoint exactly how inadequate pain control costs hospitals too much money. “We’re determining where post-surgical pain control with morphine leads to inappropriate resource utilization,” Stack says, which often occurs because patients suffer side effects that keep them in the hospital for days on end. “We’re setting the stage for what we’re going to compare ourselves to,” Stack says.

Stack says he’s in the process of rebuilding Pacira, and the company’s headcount has risen from 70 to 100 in advance of Exparel’s expected launch. The company brought in about $42 million in the IPO, roughly half what management was hoping to raise. The offering led the Wall Street Journal to include Pacira in a list inauspiciously titled “Biotech IPOs Continue Bleeding Money,” but Stack wasn’t fazed. “I’m still disappointed with the $7 offering price, but if you ask me if I’m sorry we went public, the answer would be a resounding ‘no,’” Stack says.

Pacira is planning other uses for the DepoFoam platform, including long-acting treatments for cancer and rheumatoid arthritis. Stack also points out that Pacira not only owns the worldwide rights to Exparel for human use, but it also owns the rights to develop it for the veterinary market, where bupivacaine is also the standard of care. Pursuing opportunities like those takes capital. Says Stack: “We have a lot of strategic opportunities to fund the company now that we would not have if we were private.”

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