Shares of Pacira Pharmaceuticals PCRX were down 16.6% after the company released disappointing results for the first quarter of 2015. Shares regained marginally thereafter but overall shares have been down 16.2% following the earnings release.
Pacira’s first-quarter net income of 5 cents per share beat the Zacks Consensus Estimate of 2 cents. The company had reported a loss of 31 cents per share in the year-ago quarter.
First-quarter 2015 revenues soared 59.1% year over year to $58.3 million, but missed the Zacks Consensus Estimate of $61 million.
Quarter in Detail
Pacira’s net revenue comprises product revenues, collaborative licensing and development revenues, and royalty revenues. Exparel revenues were $55.9 million, up from $34.4 million in the year-ago quarter. Exparel is a liposome injection of bupivacaine indicated for single-dose administration into the surgical site to produce postsurgical analgesia.
Demand in the first quarter was impacted by the timing of the impact of severe weather patterns on scheduled surgical procedures. Surgical procedure volume was adversely impacted by growing number of high deductible insurance plans with surgeries, especially elective surgeries.
Collaborative licensing and development revenues were $0.3 million.
Research and development expenses increased 14.7% to $6.0 million from the year-ago quarter. Selling, general and administrative expenses however increased 39.1% year over year to $31.4 million.
Pipeline Update
Pacira suffered a few setbacks in the quarter. In Mar 2015, a complete response letter (CRL) was issued by the FDA following a review of the company’s supplemental new drug application (sNDA) for Exparel. Pacira was seeking to expand the label of its lead product Exparel in the U.S. to include femoral nerve block in total knee arthroplasty.
Last month, Pacira received a subpoena from the U.S. Department of Justice, U.S. Attorney’s Office for the District of New Jersey.
The subpoena relates to Pacira’s marketing and promotional practices for its lead product Exparel. The Department of Justice wants the company to produce a broad range of documents related to the same.
Meanwhile, Pacira expects to initiate a phase III study in third molar extractions with data in hand by the end of 2015 and expects to file a sNDA in early in 2016. Pacira’s partner, Aratana Therapeutics, Inc. PETX, is developing extended release of Exparel for use in dogs and is on track for a potent2016 approval in dogs.
2015 Outlook
Given the current setbacks, Pacira suspended its full-year revenue guidance for 2015 for Exparel.
Our Take
Pacira currently carries a Zacks Rank #5 (Strong Sell). Although first-quarter results beat on earnings, the revenue miss was quite disappointing. We note that Pacira is entirely dependent on Exparel for growth. Receipt of the CRL was also a major disappointment as a label expansion of the drug would have further boosted its sales. Moreover, the subpoena will remain a major overhang on the shares.
We expect investor focus on further updates on the CRL and subpoena on Exparel.
Some better-ranked stocks in the health care sector include ArQule, Inc. ARQL and Pharmacyclics Inc. PCYC. Both stocks carry a Zacks Rank #2 (Buy).
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