Event - Pacira awaits verdict on pain medication

Analysis

Pacira Pharmaceuticals’ first big test as a public company, US approval of post-surgical pain reliever Exparel, is scheduled for the end of October, and the odds seem good for a yes from the FDA. The reformulation of bupivacaine is hoped to win endorsement based on its performance in reducing complications and accelerating recovery.

Whilst reformulated pain medications can get a rough ride at the regulator, observers believe Exparel will get a pass because of its effectiveness to 72 hours and ability to significantly reduce opioid use. As Pacira's biggest value driver and a wholly owned product, much is riding on the FDA’s decision.

Product  Exparel
Company Pacira Pharmaceuticals
Market Cap $169m
Product NPV $1.27bn
% of Market Cap 756%
Event PDUFA
Date 28 Oct 2011

Familiarity helps

Exparel uses Pacira’s DepoFoam technology, which encapsulates the active ingredient in a honeycomb-like structure composed of lipid membranes. The membranes erode over time and release the active ingredient – over up to 30 days, according to Pacira.

It has been used successfully in DepoCyt, a cytarabine reformulation used to treat a complication of lymphoma called lymphomatous meningitis. DepoCyt is licensed to Sigma Tau in North America and MundiPharma in Europe. The DepoFoam technology also is used in morphine reforumation DepoDur, licensed to EKR Therapeutics in the Americas and Flynn Pharma in Europe, South Africa and the Middle East.

The former of those was out-licensed by SkyePharma before it spun Pacira off as a private company in 2007. Pacira went public in February this year, raising $42m from the sale of six million shares at $7, having initially priced the IPO at $14 to $16 per share.

Thus, with existing approvals of bupivacaine and DepoFoam-based products, the expectation is that FDA officials will be comfortable with both product and technology – bupivacaine was introduced in 1963.

On efficacy, Phase III trials in patients with bunionectomies and haemorrhoidectomies showed Exparel significantly improved pain relief compared with placebo at 24 hours and significantly reduced the use of opioid rescue medication.

If approved, it would be the third non-narcotic analgesic reforumulation to target the hospital market in the past three years, as alternatives to opioid-based pain relievers have been sought. Intravenous ibuprofen Caldolor and IV acetaminophen Ofirmev paved the way in the last few years - specifically for management of pain and fever reduction, rather than post-surgical pain.

But Exparel also has been shown to have longer-lasting effects than Caldolor and Ofirmev – it is administered via injection rather than IV, and has been shown to significantly reduce pain through 72 hours after the operation.

Expectations

Analysts have put ambitious forecasts of $369m sales by 2016 and are pencilling in price targets on the company's shares ranging from $11 to $20, above where the $9.70 the New Jersey company is trading at in early trade today. Thus investors have yet to be convinced that it will be quite the rousing success.

For now, Pacira has retained the entire value of the product and it plans to launch solo in the US; it recently signed agreements with Quintiles Commercial to secure a sales team of 70 through the end of 2012. It would not be surprising, however, to see a licensing deal follow a positive US decision.

To meet such high expectations Exparel will need to succeed where others have disappointed - Caldolor and Ofirmev have had difficulty carving a place in the market in spite of a desire to reduce the risks associated with opioid use. Take up in the hospital market is dictated in part by hospital formulary adoption, something Ofirmev has struggled with – expectations for its first-year sales have been trimmed, with Leerink Swann today nearly halving its forecast from $20.2m to $11.5m.

Thus, despite the excitement, Exparel has much to prove.

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