All eyes on launch as Exparel gains approval

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With a compound and reformulation technology familiar to regulators, Exparel’s approval by the FDA is not a huge surprise. Now developer Pacira Pharmaceuticals needs to execute on a strategy to market the long-acting version of bupivacaine as a way to reduce opioid consumption.

The New Jersey group has brought on board the commercial division of clinical research organisation Quintiles to hire a sales of staff of 70 to ready Exparel for launch in January 2012. The aim is to primarily target hospitals performing a high volume of abdominal soft-tissue surgeries. As with any product requiring inclusion in hospital formularies, growth can be slower than those prescribed by physicians; thus hospital adoption will be a closely watched figure.

Modest gains

As a sign that much remains to be proved, shares rose a modest 3% to $10.47 in early trading today in generally negative markets. Given the history of the active ingredient and the technology, approval was expected, suggesting that there was much more to be lost by a negative decision from the regulator than there was to be gained by approval (Event - Pacira awaits verdict on pain medication, September 30, 2011).

The current price represents a significant gain of 49% over the price it floated at in February, and its consistent gains have made it one of the big small-cap success stories in the biotech field space this year (Pharmasset continues to lead small cap gainers so far in 2011, October 4, 2011).

Still, though investors may be somewhat satisfied with its performance, expectations have been building given the market and the medical need it is targeting. Analysts from Brean Murray forecast sales of $409m and Wedbush predicts $329m by 2016, giving it a potential net present value of $1.31bn, many times the group’s current market capitalisation of $175m, according to EvaluatePharma’s NPV Analyzer. Both of those firms have set bullish price targets of $20 for Pacira's stock.

Thus, attention is already squarely on Pacira’s plans to promote its biggest growth driver and the third marketed product after DepoDur and DypoCyte using the DepoFoam technology pioneered by SkyePharma before it spun off its injectables business to create Pacira in 2007. Skye will earn a $10m (£6m) milestone on the first commercial sale of Exparel and 3% royalties on global sales - shares in the UK biotech gained 19% today to 58p.

Top hospitals

In a call with investors, Pacira chief executive Dave Stack said the main target will be the top 200 hospitals in volume for abdominal soft tissue surgeries, of which there are 14 million a year. At a price that will exceed $250, that represents potential sales that exceed the blockbuster threshold, but whether the company can come anywhere close to that will depend on adoption rates.

Mr Stack said the sales force will be able to address 80% of the total market opportunity, which includes replacement of anaesthetic wound infiltration and use in cosmetic surgery – as those patients are cash-pay and not subject to formulary rules, adoption may occur more quickly.

Seven regional managers are on board and the company hopes to have its sales representatives on staff by the beginning of December to prepare for the January launch.

A sales force of such a size represents a commitment in the range of $14m-$21m, assuming each rep costs $200,000 to $300,000 in total costs. The three-year contract with Quintiles calls for the 70 rep staffing level to remain until at least the end of 2012, with Pacira paying a daily fee to Quintiles for administering the sales force. As the company had $37m at September 30, it has a runway into 2012 but really needs some early sales wins to support further financing initiatives.

According to EvaluatePharma projections, the company should start turning in a profit by 2013, but that is based on a forecast in which Exparel achieves $40m in sales in 2012 and $102m in 2013. Thus early signs of success will be needed in order for Pacira to sustain positive sentiment.

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