Why Pacira Pharmaceuticals, Inc. Shares Are Collapsing

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.

Source: Pacira Pharmaceuticals,

What: Shares in Pacira Pharmaceuticals (PCRX -2.50%) fell by more than 15% earlier today after the company reported first quarter earnings results and guidance that disappointed investors.

So What: In the first quarter, Pacira Pharmaceuticals reported that sales totaled $58.32 million and that its earnings per share reached $0.23. Although the EPS number beat Wall Street forecasts by $0.03 per share, Pacira Pharmaceuticals' revenue came in $2.79 million below forecasts.

Pacira Pharmaceuticals' revenue comes from sales of the post-surgical pain reliever Exparel. In 2011, the FDA approved Exparel for use as a single dose treatment at the surgical site to reduce pain for up to 72 hours post-surgery.

Although Exparel sales grew markedly from $34.4 million last year to $56 million in the first quarter, the company has suspended its full year sales guidance.

The company's decision to eliminate its guidance comes after it received an FDA complete response letter in March for a hoped-for label expansion and following news in April that the New Jersey Attorney General's office has launched an investigation into the company's marketing practices.

Now What: While disappointing, it's not that surprising that the FDA wants additional information from Pacira before granting the Exparel label expansion. The FDA has become concerned over the misuse of and growing prescription volume for pain medications, and that's leading to increased scrutiny of applications for these drugs.

Since competitors have also been investigated for marketing practices, it's also probably not that shocking to learn that New Jersey's Attorney General has launched its probe.

Regardless, both of these events means that there's considerably more uncertainty surrounding Pacira than there was previously, and that makes Pacira shares far riskier to own.