Why Analysts See Pacira Pharma in a Night and Day Contrast

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Pacira Pharmaceuticals, Inc. (NASDAQ: PCRX) has found itself in the middle of a great opportunity but not being able to make the last mile of the race. Unfortunately, pain management in a non-opioid treatment has become an elusive target. And it’s too bad when you consider how many people have become addicted to opioids in America.

The Food and Drug Administration approved Pacira’s Supplemental New Drug Application for Exparel as a nerve block to produce regional analgesia. The drug is a bupivacaine liposomal injectable solution that goes back to a 2011 approval. With a more limited focus, Pacira’s dream and opportunity of a major revenue increase may have been dashed for the time being. That said, it’s not a total write-off and the company may still have further approval targets to treat pain down the road.

Pacira Pharma shares did rise handily on Friday’s approval, rising from roughly $29 to $35 before settling in at $33.30 by Friday’s close. And the shares were up another 3.6% at $34.50 on Monday and on triple-normal trading volume.

One dividing factor is that Pacira’s short interest has been more elevated, without being a massive short interest, coming into the FDA event. The NASDAQ showed a mid-March short interest of 4.055 million shares at almost 5 days to cover. That was lower than the peak short interest for 2017 at over 5.2 million shares, but it was the highest short interest since December.

24/7 Wall St. has tracked two key analyst calls around Pacira’s news, and they views are polar opposites. We have included two other mixed analyst notes as well for a further comparison and contrast.

It is important to understand that Pacira has only a $1.4 billion market cap. That said, the revenues of $286.6 million in 2017 were supposed to grow 8% in 2018 and another 14% in 2019 if the expanded approvals went well.

Wedbush Securities rates Pacira as Outperform and it raised its price target to $80 from $72 in the call. That’s a call for the stock to double and then some. Here is what the firm sees as the opportunity ahead of the April 17 launch:

FDA approved a new indication for EXPAREL (bupivacaine liposome injectable suspension) for use as an interscalene brachial plexus nerve block to relieve pain associated with upper extremity surgeries in adults (total shoulder arthroplasty and rotator cuff repair) for a period of 48-72 hours following administration. Approval was based on efficacy demonstrated in a pivotal Phase 3 study for upper extremity surgeries. Additionally, the positive benefit-risk profile of EXPAREL was further boosted by its opioid-sparing potential. Although the FDA extended EXPAREL’s label as nerve block in only upper extremity surgeries and not in the lower extremity surgeries, we expect upside for Pacira as we believe the Street was not expecting approval due to a negatively split Advisory Committee vote (6 no, 4 yes) on February 15th, 2018. We see several clinical and regulatory catalysts for PCRX in 2018 and recommend shares of Pacira in front of these events.

Janney is on the other end of the spectrum with a Sell rating, and Janney has a $27 price target on Pacira Pharma. The Janney research report said:

Pacira won a major victory by getting the FDA to approve Exparel for a single type of nerve block (interscalene), which came as a surprise after the FDA advisory panel voted 6-4 against approval. At the same time the FDA sent a clear signal by not approving the product for broad use as a nerve block agent. Any approval is better than no approval, but we believe the approved indication only holds the potential for $90 million to$100 million and that assumes 100% penetration. For reasons we explain below, we think off label use in nerve block will be limited. While Pacira should clearly see a benefit from this approval, it will not be realized until the second half of 2018 at the earliest. More importantly PCRX faces potential competition for the vast majority of its existing business in 2019 from HTRX, which just reported extremely positive data for HTX-011.

A third analyst report came from Canaccord Genuity. The firm has a Hold rating, but it did at least raise its price target to $34 from $32 in its call. They called the approval as being better than nothing, and noted a surprise approval in shoulder gives some value to its nerve block.

And lastly, JMP Securities has a Market Outperform rating and a $65 price target. They view the news as very bullish with approximately 1 million brachial plexus procedures per year and with this mostly not having been in the consensus estimates. JMP further believes that anything for post-operation pain that is not an opioid will help the company publicly and may lead to further approval indications.

It sometimes looks funny to see the same analysts with such differing views when they are competing for the same investor commissions and loyalty. That said, this looks like one of those instances where some analysts are going to look extremely right and others are going to look extremely wrong. Stay tuned.