Why Pacira Pharmaceuticals, Inc. Shares Popped

Is this meaningful or just another movement?

Mar 31, 2014 at 2:16PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Pacira Pharmaceuticals, Inc. (NASDAQ:PCRX) are up 8% this afternoon after starting the trading day with an 11% pop. The pharmaceutical company is enjoying waves of positive investor reaction after announcing the expansion of manufacturing capacity for its post-surgical pain management drug EXPAREL. 

So what: Pacira's expansion to "Suite C" in its main San Diego campus will be what appears to be the third manufacturing line for EXPAREL, and it will proceed now that the FDA has given its approval. EXPAREL is a useful alternative to opioid painkillers, as it can be injected at the end of surgery to help manage pain for up to three days in patients who might have adverse reactions to the typical suite of opiates prescribed for surgical pain.

Now what: EXPAREL brought in $76.2 million in revenue for the company last year, with the bulk of it ($30.5 million) generated in the fourth quarter. That's the vast majority of Pacira's revenue, and if we use the very basic assumption that Pacira was producing EXPAREL at full capacity in the fourth quarter on two manufacturing lines, each line produced about $15.25 million worth of EXPAREL that quarter. Extrapolating out for a full year gives us estimated annual revenue of $183 million. If the company maintains a similar gross margin (though it should improve with greater capacity) doesn't significantly jack up its expenses, particularly on the sales and marketing side, this boost in output might be enough to move Pacira to profitability in 2014. Take this with a big grain of salt, though, as these are only back-of-the-envelope calculations.

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