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 in Pacira Pharmaceuticals (NASDAQ:PCRX) dropped by more than 10% earlier today following news that the New Jersey District Attorney's office had issued a subpoena regarding the promotion of Pacira Pharmaceuticals Exparel.
So What: Pacira Pharmaceuticals gets the vast majority of its revenue from Exparel, a non-opioid pain killer with sales of $188.5 million during 2014. As a result, investors are right to worry about any potential threats to Exparel demand, particularly in light of Pacira Pharmaceuticals' recent stumble with the drug.
In March, Pacira Pharmaceuticals reported that the FDA had issued a complete response letter, rather than an approval, for the expanded use of Exparel as a nerve block for post-surgical pain relief. Currently, Exparel is approved as a single-dose treatment at the surgical site to produce post-surgical pain relief for up to 72 hours. Since Exparel is a non-opioid pain reliever, its use can reduce the need for patients to take opioids in the period immediately following surgery.
Now What: The news of a subpoena isn't too surprising given that government agencies have been scrutinizing the marketing practices of other companies that also market drugs for pain; but that doesn't diminish the fact that the subpoena creates uncertainty for investors.
Whether or not Pacira Pharmaceuticals violated marketing rules, there remains a significant need for effective pain medications, particularly those that work differently from opioids. For that reason, this subpoena isn't likely to end up reducing demand for Exparel. However, if wrongdoing is discovered, Pacira Pharmaceuticals could be subject to fines or penalties. For that reason, I'm content to sit on the sidelines, and wait to see how this news plays out.