Pacira at Barclays Conference: Strategic Growth and Challenges

On Wednesday, 12 March 2025, Pacira Pharmaceuticals Inc (NASDAQ: PCRX) presented at the Barclays 27th Annual Global Healthcare Conference. The company outlined its strategic vision, highlighting both promising developments and ongoing challenges. While Pacira is poised for growth with new acquisitions and product expansions, it faces hurdles such as patent litigation and competitive pressures.

Key Takeaways

• Pacira reported revenue exceeding $700 million and adjusted EBITDA of over $220 million.
• The company ended the year with $485 million in cash and cash equivalents.
• A strategic acquisition of GQ Bio for $32 million aims to bolster Pacira’s gene therapy platform.
• Patent litigation remains a significant focus, with ongoing legal proceedings.
• The "five by 30" plan targets double-digit CAGR and a 5-point gross margin improvement by 2030.

Financial Results

• Revenue: Just over $700 million
• Adjusted EBITDA: Exceeded $220 million
• Cash and Cash Equivalents: $485 million at year-end
• ZILRETTA Revenue: Approximately $120 million
• GQ Bio Acquisition: $32 million, avoiding $64 million in potential milestones

Operational Updates

• Modernization of sales and marketing infrastructure into a "marketing medical and market access powerhouse."
• Two GPO partnerships secured, impacting net pricing with a mid-single-digit effect.
• J code secured for EXPAREL; C code for ioverao.
• Expectation of increased EXPAREL volume in the second half of the year.
• EXPAREL Business Breakdown: 40% inpatient, 40% HOPD, 20% ASC

Future Outlook

• "Five by 30" plan focuses on innovation and growth, targeting a double-digit CAGR.
• Aiming for a 5-percentage point increase in gross margins over the next five years.
• Anticipated uptake in EXPAREL volume as part of the No Pain Act implementation.
• Ongoing trials for ZILRETTA and ioverao, with potential label expansions.

Q&A Highlights

• Patent Litigation: Three ongoing legal tracks, with a trial date awaited for the second patent infringement lawsuit.
• GQ Bio Acquisition: Acquired the remaining 81% stake for $32 million to avoid $64 million in potential milestones.
• Ivera Launch: Targeting medial branch blocks for low back pain, with a launch expected soon.
• ZILRETTA Expansion: Phase III data for shoulder osteoarthritis expected in 2026.

For a detailed understanding, readers are encouraged to refer to the full transcript below.

Full transcript - Barclays 27th Annual Global Healthcare Conference:

Balaji Prasad, Senior Analyst, Barclays: Good morning, everyone. Thanks for joining us on day two of Barclays Healthcare Conference. My name is Balaji Prasad. I’m the Senior Analyst for the Specialty Pharmaceutical Sector. I’m delighted today to kick start our session this morning, the management team from Pacira, Sean Kraus, the CFO and Jonathan Slogan, the CMO.

Sean and John, thank you so much for joining us this morning. Thanks for having us. So Sean, you recently reported Q4 results, provided some outlook towards the year two. Can you walk us through the key points there and would love to discuss each of those points?

Sean Kraus, CFO, Pacira: Sure. Happy to. So we made tremendous progress in 2024 with frankly our new CEO coming on board early in the year. And we feel like we’re in a pretty good spot for that continued momentum into 2025 and beyond. So from a financial highlight perspective, we generated just over $700,000,000 in revenue, north of $220,000,000 of adjusted EBITDA and ended the year with $485,000,000 of cash and cash equivalents.

So we’re in a good spot financially. On the commercial front, we made similar encouraging progress where we modernize our sales and marketing infrastructure into what Frank calls a marketing medical and market access powerhouse. We entered into two GPO partnerships. We secured a J code for EXPAREL, a new C code for ioverao, and we also made similar progress on the R and D side of things, on the clinical front in particular. And I know Jonathan, if you want to make any comments or add to what the CFO has to say at least where we received RMAT designation for PCRX-two zero one, unveiled, announced encouraging very encouraging data for our 72 patient Phase one trial for that particular program, two year data.

We’ll be announcing three year data at some point this year. And then we’re also moving forward with, I think pretty exciting opportunities for existing products in clinical trials that would provide the opportunity for indication expansion. So for example, we’re running a Phase III for ZILRETTA in shoulder OA. We have a pilot study in osteoarthritis of the hip and then also moving forward ioverao in an important indication called spasticity. So really ended the year with some significant momentum and feel like we’re set up for success in 2025 and 2026 and beyond.

Balaji Prasad, Senior Analyst, Barclays: Thank you for that, Sean. And John, do you want to provide an overview around the R and D programs and then we could dig into that?

Jonathan Slogan, CMO, Pacira: Yes. So we’re excited about the future with Pacira as far as our pipeline, as Sean mentioned. In addition with our acquisition of GQ Bio, they have numerous preclinical a preclinical pipeline and we’re currently evaluating that. In addition, they have an exceptional platform that we’re well familiar with. So the high capacity adenovirus is going to really be the delivery platform for gene therapy of the future.

Whereas most drugs today are adeno associated viruses, there’s limitations as far as payload and transduction. So they really focus on rare monogenetic disorders. The HCAD platform allows us to focus on complex genomic diseases as well as common chronic non genomic non gene diseases. A great example is PCRX-two zero one, which we just started our Phase II trial for osteoarthritis. So we’re really excited about that acquisition and what that holds as far as the future is concerned.

Great. Thank you

Balaji Prasad, Senior Analyst, Barclays: for that. Vishal, maybe just starting with your 2025 outlook and some of the milestones that you achieved last year and the traction that you expect for this year, can we discuss the key priorities that you have now for 2025 to continue on this momentum and what more we should be expecting?

Sean Kraus, CFO, Pacira: Sure. Yes. So for 2025, the key objectives are to take advantage to continue the momentum from 2024, particularly on the commercial side, so driving our base business and reinvigorating that growth. So as you recall, with the success that we had in 2024 and putting in place this medical marketing and market access powerhouse concept, we unveiled a big picture five by 30 plan that provides some key elements of how we plan to evolve into a more innovative biopharmaceutical company, but at the same time really reinvigorate growth of the base business. And on the back of that, we’re starting to see some take advantage of some tailwinds with regard to no pain.

As you recall, the No Pain Act went live on January one of this year. And we’re starting to see some really encouraging signs with regard to uptake, with regard to no pain. So in particular from the field force, we’ve seen some formulary wins in addition to greater awareness of the J code. And but at the same time, just want to be very clear in messaging that it’s going to take time for our customers to integrate this new reimbursement code into their system. I mean, I saw that firsthand.

The management senior leadership team has been doing field rides with the field force, in particular in customers where we can be helpful in securing or but it was interesting this is just an anecdote, interesting to me to see that even in mid February, we were helping prepare the field force was helping prepare a team at a hospital in Central California, get together all the thought leaders and the key decision makers to have conversations about no pain. And they’ve been having them last year, but now that it’s live, it’s really much more tangible for them. And so just but still emphasizing, it’s one anecdote that we see early signs of progress, but we anticipate really an uptick in EXPAREL volume in the second half of the year. And then on the payer side, we continue to message the value proposition of EXPAREL. Again, maybe Jonathan can chime in here, but we have a lot of work going on with regard to health economics and outcomes data that can help the payers see beyond no pain the value proposition of EXPAREL in terms of health economics and patient outcomes.

Balaji Prasad, Senior Analyst, Barclays: John?

Jonathan Slogan, CMO, Pacira: Yes. In combination with no pain where our HRER group is working quite diligently, as Sean mentioned, to deliver that message. I think the biggest barrier to utilization has been access and no pain really opens up that door again and that’s what we’re seeing. As an anesthesiologist, it’s great to get calls my colleagues saying, hey, I heard about no pain. How do I talk to my hospital pharmacist about implementation of that?

So as it takes time to progress through the system implementation, that’s sort of what we’re seeing as far as uptake. But we’re really excited about the potential that no pain opens up additional doors and opportunities for us.

Balaji Prasad, Senior Analyst, Barclays: Understood. And this is something that we’ve now been discussing for the past two plus years. And good to see that it’s finally here. And I hear you when you say it’s not going to be immediate and that we’ll see a more gradual uptake and gradual and resilient is probably what market investors are looking for. But digging a bit more into this, at this point of time, how much of the current business, expert business is coming from the hospital outpatient versus ASCs versus inpatient?

If you can break down those volumes further.

Sean Kraus, CFO, Pacira: Sure. I’d like to think about it as fortyfortytwenty. So inpatient for EXPAREL is roughly forty percent, HOPD forty percent and ASC is twenty percent. And that’s a little bit different than the total addressable market where it’s roughly 25% inpatient and then 40% on the outpatient and even skewed towards the ASC. So to the extent that we continue to focus on the ASC that could be some upside for us in the future.

Balaji Prasad, Senior Analyst, Barclays: Got it. And you spoke about the two GPOs that you won last year. So help us understand, one, how do the GPO contracts both the VIZIET and Premier impact the net pricing for EXPAREL this year? And then the timeline to when we can expect the third partnership for information more information on this?

Sean Kraus, CFO, Pacira: Sure. Yeah. So just recall, we entered into two GPO contracts last year. One was earlier in the year and one was towards the end of the year. We anticipate our third and final will happen in the first half here in the coming months.

Once that happens, about 80% of the EXPAREL business will be covered under the GPO partnerships. In terms of gross to net, it’s roughly a mid single digit impact to net selling price, which I think is pretty standard. And these are sort of standard group purchasing agreements that most companies enter into. I think the reason why we’re talking about it now is that Pacira hadn’t done that previously.

Balaji Prasad, Senior Analyst, Barclays: Right.

Sean Kraus, CFO, Pacira: And so now we’ve given our customers an opportunity for improved pricing, which we hope will drive growth here in the future.

Jonathan Slogan, CMO, Pacira: Yes. So an exciting opportunity when you combine no pain and the GPOs for hospital systems to make EXPAREL available to their patients, especially as they were facing shifting surgical volumes to ASCs. This is a great opportunity for them to capitalize in the HOPD space with some of the additional programs that we’re offering and participating in.

Balaji Prasad, Senior Analyst, Barclays: Got it. Maybe just shifting to another point, which was which weighed pretty heavily on the stock last year and it seems like some clarity is emerging there as the patent litigation. So, I mean, we know that there are multiple patents that are being litigated and walk us through where each of these cases stand, where each of these patents and cases stand and how should the investors really try to set this to rest?

Sean Kraus, CFO, Pacira: Sure. So, the question we get in every meeting, as you would anticipate and is a very serious focus of ours, So, we have three ongoing legal tracks. And the first is the appeal process as it relates to the four ninety five patent that was very well sort of publicized last year, and I think a surprise to us with regard to the outcome in the district court in New Jersey. So we filed that appeal in September. And what I understand from our legal team is that will take approximately fifteen to eighteen months for that to run its course.

Secondly, we have secondly and thirdly, we have two patent infringement lawsuits that we have filed against the generic company and its U. S. Distribution partner. The first is with regard to our five seventy four patent and we are awaiting a trial date for that particular process. And then the third is a more recent patent litigation filing that we’ve that we filed late last year based upon our a new family of patents and a new patent in particular called the nine forty patent, which is a completely new family that came out of some unexpected findings as it relates to the new manufacturing process on our 200 liter skid in San Diego.

So it’s a very long winded way of saying that. We’re also waiting a trial date for the second patent infringement lawsuit. So fifteen to eighteen months from last September for the appeal process and the other two, infringement lawsuits will take longer. So that’s where we stand on the litigation side. And I think maybe just the big picture and you sort of implied, we had a very significant downdraft in the share price last year for obvious reasons with regard to the initial patent ruling.

But we are we continue to innovate, which is something Frank is emphasizing in many recent communications. The team’s done a great job. We have this new intellectual property and there’s more IP forthcoming. So we’re doing what we can and whatever we can to defend our business interests for the company and our stakeholders. And I don’t think and we wouldn’t have put out this five by 30 plan if we thought particularly on the double digit CAGR side of things on the product, where if we didn’t think a generic launch was imminent, which we based upon the court proceedings and information we received there, we do not believe a generic launch is imminent and we wouldn’t have put forth this five by 30 plan if we didn’t believe in the intellectual property of the company.

Balaji Prasad, Senior Analyst, Barclays: Understood. And so with all of these and the new patent family also that they expect to come, I know it’s stating the obvious, but even as we’ll then have to litigate and file against each of these patents if they want to launch.

Sean Kraus, CFO, Pacira: I’m sorry, I missed that.

Balaji Prasad, Senior Analyst, Barclays: Even as we’ll have to litigate and against each of these patents that will be coming up too.

Sean Kraus, CFO, Pacira: Yes. We’re going to continue to litigate and feel that we’re in a pretty good position.

Balaji Prasad, Senior Analyst, Barclays: Understood. And so you say that you clearly don’t anticipate an at risk launch from the generic side. What gives you that confidence? And would you have any visibility or advance visibility into a potential at risk launch?

Sean Kraus, CFO, Pacira: Yes. So you’ll forgive me for being vague because this is an active legal proceeding and tipping our hand with one way or the other I think would not be prudent. So, appreciate your patience with my response. But it’s information gathered from the legal proceedings over the past several months, if not longer, where we’re confident that there will not be an Atris launch imminently. Now that said, of course, we’ve gone through multiple iterations of scenario planning internally.

That’s only the right thing to do. So we’re prepared for virtually every situation. But again, we don’t anticipate an at risk launch. But just also as a reminder, in case that were to happen, this is not a genericized market. It’s a pretty unusual situation in that we would have one competitor entering and it would become more of a competitive market as opposed to kind of a race to the bottom.

Balaji Prasad, Senior Analyst, Barclays: Got it. Understood. Shifting towards the business side of things, I mean, Sean, you spoke about GQ Bio. So can you speak a bit more about this acquisition and to acquire the remaining 81 percent stake? And what led you to this decision?

And what could we expect from this conclusion? Yes.

Sean Kraus, CFO, Pacira: I’m happy to start. And then, Jonathan, you want to add some color. So we announced the acquisition of the 81% stake of GQ Bio that we did not already own. Just as a reminder, GQ Bio was sort of the genesis of PCRX-two zero one, our Phase II program. And we acquired it for a number of reasons, both on the sort of R and D side and the platform side and then from a business perspective.

And I can talk about the business side of things. So, we paid $32,000,000 for the remaining stake with $18,000,000 of cash upfront. The delta between the $32,000,000 and $18,000,000 is related to some holdbacks and employee retention that will be paid over time for some of the key shareholdersemployees. And also it enables us to avoid $64,000,000 or up to $64,000,000 of potential milestones associated with PCRX201, including one $4,500,000 milestone associated with the Phase two program that was going to be paid imminently, I mean like literally in a matter of months. So without being tricky, you can almost view the $18,000,000 upfront as $13,500,000 So there were some real business reasons behind acquiring this platform.

And I don’t know, Jonathan, you want to spend a little bit

Jonathan Slogan, CMO, Pacira: more time on that? Yes. So in addition to the financial benefits that Sean talked about, they have some really innovative pipeline assets that we’re currently evaluating and more to come on that. In addition, the platform delivery. So we’re in the business of developing innovative non opioid solutions and the HCAD platform is an exciting platform that we’re going to be able to build on.

And you see the success of that with our PCRX201 data, which we presented recently two year data on that. And then also a great team of scientists as well. So it was really a great acquisition for us. And so you put what we’re doing with the HCAV platform as far as development in addition to our additional current asset indication expansions, a lot of great readouts coming in the next in the future.

Balaji Prasad, Senior Analyst, Barclays: Got it. We look forward to updates towards that. Maybe in the interest of time, shifting very quickly towards some of the other parts of the business like Iveragh. Can you speak a bit more about the Iveragh Smart Tape and what this means for future growth trajectory? I mean, this has had its starts and stops over the last few years.

How should we think about the next five years for Ivera?

Jonathan Slogan, CMO, Pacira: Yes. So we’re really excited about Ivera. It provides a unique solution for people suffering from chronic pain. The our newest approval, which as you mentioned is a longer tip, It was approved last year and the launch is coming in the next couple of months. And we’re targeting medial branch blocks.

So that’s low back pain. There’s about twenty eight million to thirty million Americans that suffer from low back pain. It’s a very debilitating condition with a high societal cost to it. Yet only about two million to three million patients seeking interventional treatment for that, meaning that there’s a big need for a much better treatment and we think the ioverao will be able to offer that. So we’re really excited with that.

In addition, we’re currently enrolling for our spasticity trial and hopefully we’ll have some readout on that next year. That is a really debilitating condition not just for the patient, but for the caregivers as well. And there’s really not a good long term solution for that. So we’re really excited about that as well. So a great future with ioverao.

Got it, John.

Balaji Prasad, Senior Analyst, Barclays: And on ZILRETTA, you spoke about shoulder osteoarthritis and that you would expect to see Phase III data sometime in 2026. Help us understand what you’re looking for and what would you be happy to see in the data there? And how should we think about the shoulder OEA market and its contribution towards ZILRETTA?

Jonathan Slogan, CMO, Pacira: Yes. So there’s currently about one million intra articular injections occurring annually. And with the success of ZILRETTA for shoulder, that would be the first extended release steroid approved for shoulder OA. So we’re really excited about that readout coming next year.

Sean Kraus, CFO, Pacira: And then we have the hip pilot program, which is roughly?

Jonathan Slogan, CMO, Pacira: Yes. So we’re we just kicked off a hip OA pilot as well to see the benefits of ZILRETTA in that space as well. So after we conduct these studies, we’ll have a discussion with the FDA as far as how many joints do we need to do, but we have knee, shoulder and we’ll see what that hip data shows as well. So go

Balaji Prasad, Senior Analyst, Barclays: ahead. Yes.

Sean Kraus, CFO, Pacira: I think from ZILRETTA from a big picture perspective, it’s a we know it’s a meaningful contributor. Did about 100 and almost $120,000,000 in revenue for us last year. We have these indication expansion opportunities that we’re excited about. But it’s a we also know it’s a very promotional responsive product. So the field force is focused on increasing reach, share of voice and frequency and then promoting the benefits of being the only FDA approved long acting steroid for knee OA.

So that’s the focus of this year and then we’ll see what happens with the trials next year.

Balaji Prasad, Senior Analyst, Barclays: Got it. Maybe a quick question around the gross margin side of things. Again, you had a couple of step downs over the last couple of years. And how should we think about this gross margin promotion now? And what are the factors which will drive the stabilization of those?

Sean Kraus, CFO, Pacira: Yeah. We’re actually pretty encouraged by and recognized the past, but we’re pretty encouraged by the progress the team’s made in San Diego. We have a terrific Chief Technical Officer and a phenomenal team, very dedicated team in San Diego and Swindon. So encouraged and just great people working very hard. So from a part of the five by 30 is a goal to increase gross margins by five percentage points over the next five years, so roughly a point per year.

And we intend to achieve that through a couple of very sort of natural ways as we see EXPAREL volume increase will benefit from natural economies of scale. But then also as we’ve recall we began creating commercial supply out of our 200 liter suite mid last year in San Diego. That manufacturing process has a meaningful improvement in cost of goods compared to the 45 liter. So as you see EXPAREL volumes shift from the 45 liter suite to the 200 liter suite, what we should see some improvement in margins there. And then finally, and this is more on the blocking and tackling side, perhaps a little bit less sexy, but we have a new head of procurement and a great team in place there that’s really working hard to drive down costs of the supply chain.

Balaji Prasad, Senior Analyst, Barclays: Understood. Sean, maybe final question around capital allocation and share buybacks and any kind of potential future BD. How are you thinking about capital allocation overall for the firm?

Sean Kraus, CFO, Pacira: Sure. Yeah. Capital allocation is a continual discussion at the leadership team and the board level. And we think about it in four buckets and with the five by 30 framework as sort of the overlay in our evolution to a more innovative biopharmaceutical company. But number one is reinvesting in the business to reinvigorate and accelerate top growth.

The second is to invest in the future with Jonathan’s team and the pipeline. The third, just a reminder, we do have some debt outstanding, so we’re being mindful of a convert coming due and balancing that. And then finally, we have 125,000,000 left on the share buyback. So all of those four buckets sort of go into the decision making process and that’s how we think about capital allocation.

Balaji Prasad, Senior Analyst, Barclays: Got it. I think that will be a good spot to leave this discussion at Sean. And Jonathan, thank you so much for joining us today. I wish you a very productive day at the Barclays of the conference. Thank you.

Jonathan Slogan, CMO, Pacira: Thanks for having us.

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