Pacira Biosciences Inc (PCRX) 2011 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter 2011 Pacira Pharmaceuticals Earnings Conference Call. My name is Lacey and I'll be your coordinator for today.

At this time, all participants are in listen-only mode. Later, we will facilitate a question and answer session towards the end of the presentation.

(Operator Instructions)

I would now like to turn the presentation over to the host for today's call, Jennifer Beugelmans with Pure Communications. Please proceed.

Thank you, Lacey, and good morning, everyone. Welcome to Pacira's third quarter 2011 financial results conference call. With me on the call today are Dave Stack, President and Chief Executive Officer; Jim Scibetta, Chief Financial Officer; and Taunia Markvicka, Vice President Commercial Operations.

Before I turn the call over to the management team for their prepared remarks, I would like to remind you that certain of the remarks made by management during this call about the Company's future expectations, plans, and prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements about the Company's future expectations, plans, and prospects include statements regarding our plans to develop and commercialize EXPAREL, the success and timing of our commercial launch of EXPAREL, the rate and degree of market acceptance of EXPAREL, the size and growth of the potential markets for EXPAREL, and our ability to serve those markets, our commercialization and our marketing capabilities.

Any such forward-ward looking statements are based on assumptions that the Company believes are reasonable, but are subject to a wide range of risks and uncertainties. Actual results may differ materially from those expressed or implied by such forward-looking statements. Many of these and other risks and uncertainties are described in the Risk Factor section, and elsewhere, in the Pacira Pharmaceutical's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2011, and in its other filings with the Securities and Exchange Commission, and are available online at www.sec.gov.

All the information in this conference call is as of October 31, 2011, and should not be relied on as representing the Company's views as of any subsequent date. While the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today.

Please be advised that today's call is being recorded in Web Cast. To Access the Web Cast replay, please visit the Investor Relations section of the Company's website at www.pacira.com. I'd now like to turn the call over to Dave. Dave?

Thanks, Jennifer. Good morning, and thanks everyone for joining us today. As you may have seen this morning, we have a number of very positive developments to share with you. During the past 12 months, Pacira has made tremendous progress in executing our corporate strategy focused on moving the company from a clinical stage to a commercial stage company. We have successfully executed an IPO that has created value for all of our stakeholders, filed an NDA and now we have FDA approval to market EXPAREL in the United States. We are very pleased with the broad label for postsurgical analgesic that FDA has granted EXPAREL.

With this label, EXPAREL has become the first and only multivesicular liposome local anesthetic that can be utilized in the peri- or postsurgical setting in the same fashion as current anesthetics. A single intra-operative dose of EXPAREL delivers bupivacaine for an extended period of time, providing analgesia with reduced opioid requirements for up to 72 hours.

As we have told you in the past, EXPAREL represents an opportunity to improve patient care while reducing opioid consumption. It is reported that up to 50% of surgical patients experience postsurgical pain, even with all of our current local and systemic therapeutic options. In addition, our retrospective health outcome studies have shown that the delay and reduction of opioids for postsurgical pain management can provide overall cost savings to the healthcare system.

With this market paradigm, we believe that there are approximately 24 million surgical procedures in the United States annually where local infiltration of EXPAREL may add value as an alternative to current options that provide prolonged analgesia, such as the elastomeric pump systems that deliver bupivacaine over a period of time through a catheter placed at the surgical site.

We are very excited about this approval, and believe it is further validation of our DepoFoam technology. To remind you, we now have three products approved using DepoFoam technology, and we continue to believe that there will never be a substitutable generic DepoFoam based product, so that we have a long-lived product opportunity for EXPAREL in all of our DepoFoam-based products.

Now that we have successfully moved EXPAREL through the FDA approval process, we are well-positioned to move into our commercial launch state. We are very confident about the work we have done throughout our pre-commercial stage and we believe that we have built the infrastructure and strategy necessary to allow us to successfully execute our commercial launch and ramp for EXPAREL.

We continue to prepare for a broad hospital launch of EXPAREL, which is focused on abdominal soft tissue surgeries typically performed by colorectal surgeons, general surgeons, and OB-GYN. We remain on track to launch into this market in January of 2012.

At this time, we are moving forward with our plan to staff up our sales team. In October, we hired the regional sales directors, as planned, and they are now working closely to identify the rest of our 63-person sales team in line with the plan we articulated to you last quarter. We can cover roughly 81% of the target soft tissue surgery opportunity in our hospitals with our 63 representative sales force. In addition, these regional sales directors will work with our commercial team to initiate the formulary process in the top 200 hospital accounts.

During the third quarter, we announced that we have engaged Quintiles Commercial to assist in the recruitment of our sales force. Based on our relationship with Quintiles, we view this sales force as a strategic asset for Pacira. Our sales force will be exclusively dedicated to selling EXPAREL, and will work directly with the Pacira commercial team. By utilizing Quintiles, we will be able to quickly, efficiently, and cost-effectively engage, train, and mobilize the sales force to focus solely on EXPAREL, while leveraging the expansive G&A infrastructure of Quintiles. In addition, this variable cost sales team can be converted to Pacira employees at our discretion.

In addition to building the necessary sales infrastructure, we have continued to add to the growing body of benefits offered by EXPAREL in the health economic data that showcased the importance of reduced opioid consumption. To that end, we have finalized the analysis of our retrospective health outcome studies focused on identifying patient populations at risk for problems with quality of care and high healthcare costs, when opioid based pain management is utilized.

These studies support our hypothesis regarding the value of opioid reduction. We believe that EXPAREL can bring value to the overall postsurgical pain management paradigm, and we intend to showcase these data at upcoming medical meetings. Specifically, the studies have shown our hospital customers that they themselves employ opioids as a platform to treat postsurgical pain in a higher percentage of cases than they originally thought.

The data also show that opioids add to adverse events more frequently than they believed, and that these opioid-related adverse events have materially increased lengths of stay and caused hospitals to lose money in a significant percentage of their surgical cases.

Data from these health outcome studies form the basis of abstracts that have been submitted and accepted for the American Society of Health Systems Pharmacy meeting in December. We believe these data will be an invaluable tool for our sales team.

As we move forward in partnership with our group purchasing organizations and integrated health network customers, we will publish manuscripts as well as present additional abstracts, presentations, and symposia at major meetings.

This is the first step in our strategy to work closely with our hospital customers to demonstrate that an opioid-sparing postsurgical pain regimen can lead to improved patient care and enhanced hospital economics.

As these hospitals gain a greater understanding of the impact of opioid-based postsurgical pain management, we are also establishing the basis for formulary approval at these institutions for EXPAREL, and bolstering their understanding of the return on investment built into including EXPAREL in their pain management regimen.

As a next step, we are also actively rolling out our prospective studies focused on demonstrating the benefits of incorporating EXPAREL into postsurgical pain management regimen. The data from these studies will be highly complementary to our retrospective studies, and we believe that these studies will be a powerful tool for our sales team as well. We expect to have top line results during the first quarter of 2012.

The prospective clinical program consists of several studies in 15 important influence hospital sites. These studies focused on testing EXPAREL in their specific centers and surgical settings, including laparoscopic colectomy, open colectomy, and ileostomy reversal. These studies will look at the pharmacy-economic benefits of EXPAREL in real world settings.

To be clear, the purpose of these prospective studies is to provide our customers with the opportunity to prove to themselves in their own institutions that an EXPAREL based regimen can materially reduce the use of opioids, and thereby reduce opioid adverse events and the associated costs.

As a reminder, in a pivotal hemorrhoidectomy trial of EXPAREL compared to placebo, where all patients with inadequate pain control received opioids for rescue pain relief, EXPAREL demonstrated significant reductions in cumulative pain scores with an attendant decrease in opioid consumption for up to 72 hours.

We expect all these study data, along with our peer reviewed publication, presentations at medical meetings, and professional education program to help support an accelerated formulary approval strategy at major influence, high-volume hospitals, which are our initial target customers.

As we have discussed in previous calls, we continue to move aggressively forward with our medical education initiatives. Let me provide you with the broad strokes of our recent and upcoming activity. During the month of October, we had several important meetings where we provided data on the clinical development program for EXPAREL. We presented two posters and hosted an advisory board meeting at the American Society of Anesthesia annual meeting in Chicago.

The same week, we also presented two posters at the American College of Clinical Pharmacy annual meeting in Pittsburg, where data on the impact of EXPAREL on time-deferred opioid use was specifically highlighted. Last week, at the American College of Surgeons clinical congress in San Francisco, EXPAREL was featured in two podium presentations which discussed pain control properties of EXPAREL, its related impact on opioid use, and its potential pharmacoeconomic impact.

In addition, Pacira sponsored a breakfast symposium on strategies for improving the management of acute postsurgical pain, featuring a global multi-disciplinary panel of experts, Doctors [Kelleck], [Gann], and Ramamoorthy. We published a review article in Pain Management evaluating the use of DepoFoam in the treatment of postsurgical pain. And we also published our bunionectomy data in Advances in Therapy. In addition, we published multiple papers on pre-clinical data further demonstrating the safety of DepoFoam and EXPAREL.

Next week, we will host a working group advisory board with clinical nurses on patient care in the postsurgical setting to highlight opioid issues in the development of clinical guidelines to reduce opioid treatment paradigm.

In December, we have symposia and several medical presentations at the American Society of Health Systems Pharmacists, the New York State Society of Anesthesia post-graduate assembly in anesthesiology, and the New York School of Regional Anesthesia. Finally, we also have over 30 publications, abstracts, and posters to support our launch program.

Based on the feedback we received from the clinical community, we believe our education initiatives are creating a strong foundation for the commercial activities and highlighting the unmet medical need that EXPAREL satisfies.

In addition to abdominal soft tissue surgeries, we will focus on two other markets, plastic surgery and elastomeric pump replacement. We believe plastic surgeons will have significant interest in the use of EXPAREL for postsurgical pain associated with breast augmentation and abdominoplasty, or tummy tuck.

Because this is a cash market, there are minimal formulary requirements, and we think we can quickly gain momentum with this audience. Our commercial team is finalizing plans for a live simulcast of our KOL plastic surgeons demonstrating use of EXPAREL during plastic surgery procedures. This forum will allow a wide variety of plastic surgeons across the country to see firsthand how EXPAREL can be incorporated into their practices.

In addition, we are preparing for speaker training as a kick-off for activities with this important customer segment. We also have a plastic surgery case series planned, as well as a phase four clinical program to demonstrate the utility of EXPAREL in specific procedures of interest to our plastic surgery customers.

As we have stated before, elastomeric pump replacement should also be an ideal market for EXPAREL. We are working with pharmacy KOLs to identify champions at target hospitals who we believe will assist in achieving expedited formulary access and adoption of EXPAREL to replace these pumps, based on safety, patient compliance, convenience and cost.

We believe all of these recent developments position us to successfully commercialize EXPAREL as we begin to execute on our strategy to drive company values by deploying our additional assets, including FDA approval of EXPAREL in other indications such as nerve block and epidural administration; partnership opportunities for EXPAREL outside the United States and in animal health, where bupivacaine is also the standard of care for pain management; additional product development based on our proprietary DepoFoam technology, such as our NSAID program for infiltration or intra-articular administration, et cetera.

Additional DepoFoam-based partnerships where this flexible and patient-friendly technology can be deployed to enhance the value of products by extending the duration of action. These partnerships provide a free option opportunity for our shareholders since we are fully compensated for our clinical and manufacturing development activities, while participating in the commercial success of these products through clinical and commercial milestones and royalties.

We are excited and prepared for our upcoming launch and we look forward to updating you on our march toward success. With that, I'd like to turn the call over to Jim for a high level review of our Q-3 financial results. Jim?

Thanks, Dave. As Dave mentioned, we're incredibly excited about the EXPAREL approval and the positive impact it has on our future opportunities. As we're now transitioning to an EXPAREL story, I'm going to limit my comments on our Q-3 results to our financial highlights.

As reported during the third quarter of 2011, our net loss was $9.5 million, or $0.55 per share, based on 17.2 million weighted average shares outstanding during the quarter. There was no material equity activity during the quarter, so that 17.2 million number is our outstanding share count as of September 30, 2011. And on a fully diluted basis we had approximately 20.1 million shares outstanding.

For the quarter ended September 30, 2011, our total revenues were $4 million, compared with $4.5 million for Q-3 2010. The decrease was primarily attributable to a $1.1 million decline in supply revenue which reflects fewer life sales to our commercial partners and was partially offset by a $600,000 increase in collaborative licensing and development revenue, which was principally driven by activities performed under our license agreement with Novo Nordisk that was executed in the first quarter of 2011.

Turning to cash. As of September 30, 2011, we reported cash of $37.1 million. Our cumulative cash burn for the nine months ended September 30, 2011, was $27 million. We burned slightly less cash than the $30 million cash burn guidance we had established at the beginning of the year for this nine month period.

Turning to the balance of 2011, we are reiterating our revenue guidance of $14 million to $16 million for the full year ending December 31, 2011. As a reminder, this revenue expectation includes DepoCyte and DepoDur supply revenues and royalties, and collaborative licensing and development revenues resulting from DepoFoam based partnerships. And it continues to exclude the impact of any potential sales of EXPAREL in the fourth quarter of 2011.

We're also reiterating our expectation that cash burn, excluding the impact of any future partnerships, asset monetizations, and other cash-generating activities unrelated to our current operations, but including expenditures related to our EXPAREL commercial strategy will be approximately $15 million in Q-4. Included in this Q-4 activity is a $2 million milestone recently achieved and due from our partner, Novo Nordisk. I'll now turn the call back to Dave.

Thanks, Jim. As you have heard, we are well prepared for our upcoming launch of EXPAREL. From our commercial infrastructure to support EXPAREL sales to our growing body of positive clinical and hospital economic data that demonstrate the efficacy, utility, and cost benefits of EXPAREL, we are ready.

We look forward to an exciting launch and to bringing to market a novel therapeutic that we believe can change the management of postsurgical pain. We look forward to updating you on our success. With that, I'd like to open the call for questions. Lacey?

(Operator Instructions)

Our first question will come from the line of Richard Lau with Wedbush. Please proceed.

Hi, guys. Thanks for taking the question, and congrats on the approval.

I haven't had a chance to read through the entire label, but I know you guys got the broad label you were seeking. But were there any surprises in the label at all that you guys weren't expecting, or is it pretty much as you anticipated?

It's pretty much what we were hoping for, Richard.

Great. And then in terms of how we should think about the launch and the launch trajectory, what sort of metrics do you guys anticipate maybe updating the [straight-on]? In terms of maybe formulary approval wins, or...

You know, as we have in the past, Richard, we will talk about formulary approvals and hopefully we'll have a reliable source of information so that we can report on purchases and reorders, and that kind of information. And that would be our expectation as we sit here today.

Do you guys know if IMS or [Walter Skluru] will be tracking the sales?

We believe that both, actually, will be tracking the sales. We will, as you know, we will have a single point of distribution here from ICS. So at Pacira, we will be able to track sales on a daily basis and the individual hospital customers. But it's our expectation that both would be tracking sales.

Just in terms of the status of your sales force hiring, when you expect to have that sort of completed in?

Yes. We've initiated. We've completed the hire of our managers, the regional directors that we have in place. And we're actively recruiting for the field force now. We anticipate having them on board at the beginning of December to support the January launch.

Great. That's it for me. Thanks.

Thanks, Richard.

The next question will come from the line of David Amsellem with Piper Jaffray. Please proceed.

Thanks. Just a couple. Any color on EXPAREL pricing, any changes in how you're thinking about the price per injection? I think you had talked about it in the sort of [$250] or higher range. How should we think about that? And when are you planning to announce pricing? Thanks.

Hi, David. Thanks for the question. We are currently thinking, based on the quality of the health economics data and some of the pricing work that Taunia has just completed that we would charge slightly more than the $250. And we're very much hanging out in that same range. I don't think we intend to actually announce a price until the drug is stocked into the wholesalers and the systems go live. But in the same range that we've been talking about for the last couple for months is what the pricing surveys that have recently been collated support.

That's helpful. And then another question on the hospital formulary process. I think it would be helpful if you can walk us through the formulary adoption process. And more specifically, what kind of timeline do you think is appropriate for getting large hospitals on board?

As we've talked about several times in the past, there is no real paradigm that you can lay against the marketplace here. Every hospital is an N of one in terms of how you approach the individual needs.

I will tell you that Taunia and her team have roughly 20 dedicated resources here who will be responsible for deploying internal resources, physicians, and health economists, and nurse educators, and national accounts folks who will work with our regional directors and with our sales reps in order to achieve formulary approval at these big hospitals. So, a key learning from our days at the medicines company is that in these large academic centers it is very difficult for a rep to achieve formulary approval. They just don't have the critical mass. So, we're prepared to deploy that critical mass from the center.

To answer your question more specifically, we've got a list of top 50, top 100, and top 200 hospital customers in the United States; and our intention will be to work through that list deploying these resources and working with our field force to address the most important and as referred to as the biggest hospital customers first. You know, we can work on three or four of these things at a time with this team, and we'll knock them off top to bottom as fast as we can, David.

And then one last question, you'd mentioned previously that one source of low-hanging fruit is cash pay procedures, cosmetic surgery. So, can you talk about your detailing efforts in the cosmetic surgery and Duro markets? And how should we think about those promotional efforts initially? And what the kind of trajectory in terms of number of calls and number of doctors you're going to call on in that market will look like? Thanks.

We've actually kicked off a fair amount of activity in the plastic surgery arena. We've recently submitted data and were featured at the American Society of Plastic Surgeons in their Hot Topics forum. And we were selected as best of Hot Topics as well. So, we've gotten a lot of press because of the coverage that we received at this recent meeting. And then we also have a webinars kicking off in December to the plastic surgery audience. We believe we can cover about 83% of the plastic surgeons with our current field force alignment. And our efforts will be to focus on those plastic surgeons that are primarily doing the cosmetic surgery.

Okay. Very helpful. Thanks, and congratulations.

Thanks, David.

(Operator Instructions)

Our next question will come from the line of Matt Duffy with Concept Capital Markets. Please proceed.

Good morning everybody and congratulations.

Thanks, Matt.

Dave, I wonder if you or Taunia could walk through your specific positioning sort of procedure by procedure; and then the market opportunity for each of those? And also, I don't think in our discussions in the past, but could you go on a little bit more - is there an opportunity for multiple doses in your planning?

Hey, Matt. This is Dave. I'll start out here and then T can chip in.

In the strategy for the launch focus there are roughly a million of the plastic surgery procedures that Taunia just discussed. And these are all single use applications, Matt. So there is no multiple use in a single patient other than if there was a bilateral application. We don't see this as being anything that would be used for chronic pain, at least as the current label is constructed by the FDA. So, I think that answers your first question.

We also see roughly a million elastomeric bags. Not all of those are used for infiltration, Matt; but a number of - a significant percentage of those are.

And then the reason for the focus on abdominal soft tissue surgery is that there's roughly 14 million - and that's a Thompson reference - procedures where we believe that bupivacaine is currently being used and that we can replace that with EXPAREL.

So, the way the launch rolls out - and I think that this is the basis of your question. But come back at me, Matt, if it's not - is that in the early days we expect not only some [interference], but also some wins for our field force that as we go through this process in the plastic surgery marketplace and in replacing the elastomeric bags. And then that sort of gives us the time to go through the formulary process and educate the pain teams in our customer hospitals, et cetera, so that over time the hospital marketplace just overwhelms the plastic surgery and the elastomeric bag marketplace.

Right. That's very helpful. Thanks very much and congratulations again.

Thanks again, Matt.

Ladies and gentlemen, this concludes the question and answer portion of today's call. I would now like to turn the call back over to Dave Stack for any closing remarks.

Thank you, everybody, for joining us today. It's a good day to be at Pacira. We're very excited about the opportunity in front of us. And we look forward to speaking with all of you again. Thanks much.

You're welcome. Thank you for your participation in today's conference. This concludes your presentation. You may now disconnect. Good day, everyone.