Pacira Pharmaceuticals Receives New Coverage From Canaccord Analyst Corey Davis


In a research report released today, Canaccord analyst Corey Davis initiated coverage with a “Buy” rating on Pacira Pharmaceuticals (PCRX) and a price target of $109.00 a share, representing a potential upside of 23% from where the stock is currently trading. The following bullets contain some highlights from that call:

  • There is only one drug to worry about, Exparel, and we believe it should show tremendous growth well past 2020. Given the patents, the fact that no other manufacturing facility exists in the world (yet) that can make “multi-vesicular liposomes,” and the inherent difficulties in proving sameness for a locally acting drug like bupivacaine, we see a generic threat anytime soon as highly unlikely.
  • There is virtually no competition for Exparel except for currently used old immediate release bupivacaine, and Exparel has obvious and proven differentiation over that product.
  • The market is somewhere between 24-70 million surgical procedures per year for Exparel and therefore at $300 per patient per procedure we believe the market is easily large enough to support it becoming a $1B product.
  • The drug has already been on the market for eight quarters and therefore it is largely an execution story from here. Although we are still waiting on two FDA approvals, these too seem like very low-risk events.
  • Beyond just the data that Pacira has generated, the real secret to its success, in our opinion, has been that it is truly working as advertised – the pain relief lasts significantly longer, patients are using less opioids, and they are leaving the hospital sooner.
  • The drug has consistently grown from $2.3M in its first quarter of launch to $34M eight quarters later. And gaining an average of 27 new accounts per week suggests to us this growth is unlikely to slow anytime soon and could perhaps even accelerate. And one of our favorite sayings in the drug industry is: “Usually the more people that use a drug, the more people start to use a drug.”
  • We have now been involved with Pacira since well before the drug was even approved, and this management team has consistently (although we somewhat loathe this cliché) under-promised and over-delivered – a recipe the Street loves for a successful stock. We think that trend is likely to continue.
  • With 40M shares (fully diluted), every $40M in net income is a dollar in EPS. Even fully taxed, with roughly $100M in fixed operating costs and eventual 80% gross margins, once the company passes a breakeven point of about $150M in revenue, every incremental $100M in annual sales would generate $1.50 in incremental EPS (after tax)
  • Pro forma for the recent offering, Pacira has $175M in cash on its balance sheet – which should be more than enough to get it to profitability, which we have projected to occur on an adjusted basis starting in Q3 of this year. Hence, we do not anticipate any further dilution from equity offerings and are now using a fully diluted share count of 41M shares starting in Q3 of this year.
  • The next regulatory milestone is approval of the nerve block indication (PDUFA date March 5, 2015). This would help dramatically expand the user base into anesthesiologists and accounts for roughly a third of our peak Exparel revenue forecasts.
  • The next regulatory milestone is approval of the nerve block indication (PDUFA date March 5, 2015). This would help dramatically expand the user base into anesthesiologists and accounts for roughly a third of our peak Exparel revenue forecasts.

According to TipRanks, which measures analysts and bloggers success rate based on how their calls perform, analyst Corey Davis currently has an average return of 41.3% and a 48% success rate. He is ranked #25 out of 3133 analysts. PCRX Chart

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