Why Pacira Pharmaceuticals, Inc. Shares Jumped

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 (NASDAQ: PCRX  ) , a biopharmaceutical company developing therapies that are used in a hospital or ambulatory setting, jumped as much as 11% after announcing the pricing of a common stock offering after the closing bell last night.

So what: According to Pacira Pharmaceuticals' press release, the company will price 1.6 million common shares of its stock at $64 each in the hope of raising $96 million in gross proceeds. As per the norm, underwriters of the deal have the option to purchase up to 240,000 additional shares, and Pacira anticipates the deal closing by next Monday. The offering announcement comes just two days after the company entered into a strategic co-production partnership with U.K.-based pharmaceutical service company Patheon to manufacture and package Exparel, its FDA-approved single-dose therapy designed to produce postsurgical analgesia in a surgical site. Less than two weeks ago, Pacira announced an expansion to its manufacturing capacity in the States as well.

Now what: Under normal circumstances, you'd usually see a company get throttled after it announces a common stock offering because of the fear of dilution, but today's minimal dip in the offering price from yesterday's close signifies to me that there was quite a bit of demand for Pacira's shares. With this offering coming on the heels of its expanded manufacturing capacity, shareholders are only left to infer that Pacira expects sales of Exparel to take off.

As for me, with peak sales estimates widely ranging but hovering just shy of $600 million, I don't believe there's a lot of upside wiggle room left in shares of Pacira. Yes, sales of the drug are set to explode higher over the next two years, but Pacira has also missed on its bottom line in three of the past four quarters, which doesn't exactly inspire a lot of confidence. I'd suggest sticking to the sidelines here until we see a very sizable pullback.

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  • Report this Comment On April 09, 2014, at 5:28 PM, StockDidWhat wrote:

    The PACIRA has already taken a pullback from $80+ to $61+ per share. It has now rebounded with the FDA approval for Suite C manufacturing site which should provide higher profit margins. Dave and the boys from MPM Capital have done a great job increasing sales from quarter to quarter. Suite C was necessary for continued sales and profitability. I wouldn't put too much weight on the lack of profit numbers since its FDA approval in Oct 2011. Bottom line, the product has demonstrated its effectiveness which has taken time to demonstrate through Phase 4 studies. Also Exparel used as a nerve block demonstrated its effectiveness in Phase 3 studies.

  • Report this Comment On April 14, 2014, at 12:34 PM, gvans wrote:

    All this makes financial sense. From one who works in the hospital trenches, though, the key point is that Exparel is truly a game-changer of a drug. It's not the company that should makes one bullish on Pacira, it's their product.

    No pain for three days after hemorroidectomy. No pain for three days after bunionectomy. If you've ever had one of these operations, you will realize this is a huge deal. It's just that doctors--and pharmacists--are slow to change.

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