Pacira Biosciences Inc (PCRX) 2012 Q1 法說會逐字稿

Thank you for joining us for the Pacira Pharmaceuticals First Quarter 2012 Financial Results Conference call. At this time, all participants are in a listen-only mode. Following the formal remarks, Pacira's management team will open the lines for a question-and-answer period. Please be advised that this call is being recorded at the Company's request and will be archived on the Company's website for two weeks from today's date.

At this time, I'd like to introduce [Jennifer LaVin] of Pure Communications. Please go ahead, ma'am.

Thanks, Jeff, and good morning, everyone. Welcome to Pacira's First Quarter 2012 Financial Results Conference Call. Joining me on the call today from Pacira are David Stack, President and Chief Executive Officer; Jim Scibetta, Chief Financial Officer; and Taunia Markvicka, Vice President of Commercial Operations.

Before I turn the call over to the management team for their prepared remarks, I'd 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 the Company's plans to develop and commercialize EXPAREL, the success of the commercialization at EXPAREL, the rate and degree of market acceptance of EXPAREL, the size and growth of the potential markets for EXPAREL, and the Company's ability to serve those markets, Pacira's commercialization and marketing capabilities, and other statements stating the word believes, anticipates, plans, expects, and similar expressions.

Any such forward-looking statements are based on assumptions that the Company believes are reasonable, but are subject to a wide variety 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 Factors section of Pacira's most recent annual report on Form 10-K for the fiscal year ended December 31, 2011 and in its other filings with the SEC, which are available through the Investors section of the Pacira website at www.pacira.com or on the SEC website at sec.gov.

All the information in this conference call is as of today, May 9, 2012, and should not be relied upon 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 Company views as of any date subsequent to today.

Please be advised that today's call is being recorded and webcast. To access the webcast replay, please visit the Investor Relations section of the Company's website. I will now turn the call over to Dave Stack. Dave?

Thanks, Jennifer. Good morning, everyone, and thank you for joining us.

On the call today, I will first be making some remarks about our activities in the first quarter and key events subsequent to the end of the first quarter, including our launch of EXPAREL in the United States. Taunia will then provide some color on our post-launch activities and Jim will provide a summary of our first quarter 2012 financials and update our general outlook for the rest of the year. We will then open the call for questions.

As you all know, the majority of our focus since January has been on successfully commercializing EXPAREL in the United States. As a reminder, EXPAREL is our novel treatment for post-surgical pain management, for which we received FDA approval in late 2011. The approval provides us with a broad indication, administration into the surgical site to produce post-surgical analgesia.

With product available in April, EXPAREL is now the first and only multivesicular liposome local anesthetic for use in the peri or post surgical setting, using the same infiltration technique as currently marketed local anesthetics, but providing analgesia for up to 72 hours with reduced need for opioids.

While it is early in the launch, we are seeing daily progress based on our commercial efforts and working with our healthcare provider/customers, surgeons, nurses, pharmacists, and anesthesiologists on the potential benefits of extending the duration of local analgesia with EXPAREL to replace the current use of short-acting products such as bupivacaine, lidocaine, or ropivacaine.

On the ground since January, our sales team has been executing a targeted approach for the commercialization of EXPAREL. Our efforts continue in gaining formulary access and medical education and in training on the use of EXPAREL in a variety of surgical settings based on the soft tissue data demonstrated in our package insert.

Specifically, since launch we have had 164 customers order EXPAREL and we continue to gain new customer orders every day. Notably, we have seen 23% of these customers reorder within two weeks and have had 13 customers order three times or more -- a very encouraging signal.

We also have a significant number of pharmacy and therapeutics, or P&T, committee meeting dates coming in May and June; and therefore, anticipate continued growth over the coming months as we gain access to a growing number of top 100 and top 500 surgical hospital customers. Our strategy continues to be working with high surgical volume medical centers to ensure appropriate use and maximum benefit from the adoption of EXPAREL. As a reminder, it is routine for a hospital specialist to spend several days educating hospital staff and working with key hospital customers when a hospital is adopting EXPAREL.

Going forward, we expect to report sales of EXPAREL for each preceding quarter in our earnings call. Looking immediately ahead, however, we are aware that the first quantitative indication of our sales progress will come through the prescription tracking services, IMS and Wolters Kluwer, later this month. We can't be certain, but we anticipate in April that our actual boxes sold and recorded revenue may be higher than what is reported by IMS and Wolters Kluwer due to hospital groups that do not report, surgical specialties who order through specialty distributors not tracked by these services, and ambulatory care centers that order from non-traditional distribution networks.

As you can understand, this early into launch, these services can struggle to accurately capture sales for these type of hospital-based acute care products. As a result, in order to avoid marketplace confusion, we thought it made sense for us to convey that we expect our EXPAREL sales for the month of April alone to be greater than $400,000. Keep in mind that we drop ship product from ICS, our third-party logistics provider, directly to our end user customers, and only then do we recognize revenue.

Because our wholesalers never take possession of physical product, there is no revenue related to wholesaler stocking. We are very pleased with this initial launch performance, recognizing that we launched on April 9.

With that, I will now turn it over to Taunia Markvicka to discuss further details of our EXPAREL launch. Taunia?

Thanks, Dave. Since launch, we've been focusing our energy on expanding visibility and access to EXPAREL. In the past month, we have sponsored several major educational programs, including two simulcast webinar events where more than 1,000 healthcare providers heard from key opinion leaders regarding the current challenges in post-surgical pain management, the burden of opioids on total hospital cost, length of stay, and patient satisfaction, and the opportunity for EXPAREL to serve as a new foundation to extend the duration of local pain management and to lower the need for systemic opioids.

In addition, we held six regional speaker training programs with more than 100 healthcare providers in order to support local and regional speaker programs, and additional web-based training programs have also been held.

We've also hosted a successful nurse advisory board at the American Society of PeriAnesthesia Nursing Meeting, where 25 leading nurses reviewed the opportunity to work with the nursing community for improved patient care with EXPAREL as a foundation of a multimodal approach to pain management.

As part of our overall 2012 publication plan, we recently published the EXPAREL program-wide efficacy in a multimodal hemorrhoidectomy trial, comparing EXPAREL to bupivacaine in the May issues of the Journal of Pain Research and the American Surgeon. Importantly, these data demonstrate improved pain control and time to first opioid use when patients are randomized to bupivacaine or EXPAREL -- eight hours for bupivacaine and 19.3 hours for EXPAREL, with 32% of patients treated with EXPAREL not requiring any opioid therapy versus 8% in the bupivacaine patients. Based on a 66% reduction in opioid required to achieve pain control, 35% of the bupivacaine patients experienced an opioid-related adverse event versus 4% of the patients treated with EXPAREL.

Finally, last week we hosted a symposium introducing a series of health outcomes data presentation at the annual meeting of the Society of Ambulatory Anesthesia, or SAMBA. These data show that in a premier database examining total abdominal hysterectomy patients where patients experienced an opioid-related adverse event, which was 6.6% of the patients, there was an increased length of stay of 4.5 days versus 2.6 days and an increased mean total cost of $11,000 versus $7,492.

Over the next three months, we expect to publish a number of additional manuscripts outlining the true costs associated with the use of opioids as a platform for post-surgical pain management at meetings including Digestive Disease Week, American Society for Colon and Rectal Surgeons, International Anesthesia Research Society, and the International Society for Pharmacoeconomics and Outcomes Research, or ISPOR.

We expect these data will play a key role in focusing our hospital customers and GPO partners on patients who are most problematic when opioids are used and in specific surgeries where opioid-related adverse events have a negative impact on quality of care, patient satisfaction, and hospital economics.

Our extensive ongoing Phase IV program includes prospective studies focused on demonstrating the benefits of incorporating EXPAREL into post-surgical pain management protocols in ileostomy reversals as well as open and laparoscopic colectomy. We expect to have results from these studies starting over the next few months with further publications expected throughout this year and next to support our educational efforts. We believe this comprehensive commercial strategy is positioning us well to expand awareness and access to EXPAREL as we look forward to reporting on the progress of this launch as it advances.

I will conclude with a quote from one of our attendees at our speaker training program last week in Chicago, a quote that we believe sums up what we've been hearing more broadly over the past few weeks. "The speaker training was excellent. I'm quite enthusiastic about EXPAREL and think that it could be a game-changer in my practice."

With that, I'll now turn it over to Jim Scibetta for a review of our first quarter 2012 financial results. Jim?

Thanks, Taunia. As reported for Q1 of 2012, our net loss was $11.9 million, or $0.45 per share, based on 25.4 million weighted average shares outstanding. Note with the additional shares from the secondary offering completed in April, we now have 32.3 million shares outstanding.

For the first quarter ended March 31, 2012, our total revenues were $7.8 million, compared with $3.9 million for the first quarter of 2011. The increase primarily resulted from the recognition of $5.8 million of revenue in connection with the termination of the DepoDur license we had with EKR Therapeutics. As noted in our previous call, we're recognizing the remaining unamortized deferred revenue related to milestones received under that agreement over the remaining contract period through Q2 of this year.

As of March 31, 2012, we reported cash of $54.8 million, and including the $63 million we received the April common stock offering, our pro forma cash as of March 31 was approximately $118 million. We also subsequently made a $10 million milestone payment to SkyePharma as a result of the launch of EXPAREL in the US.

As discussed previously, we will not be providing cash guidance for 2012. On the revenue side for activities excluding EXPAREL, we're reiterating our revenue guidance of between $23 million and $25 million for the full year of 2012.

Note again that $11 million of that will be GAAP-based, but non-cash generating revenue through the aforementioned recognition of deferred revenue resulting from the termination of the EKR agreement for DepoDur. And again, this revenue guidance pertains only to the legacy product [activity] associated with DepoCyt(e) and DepoDur, and for collaborative licensing and development revenues resulting from the DepoFoam-based partnerships. And, of course, it does not include any sales estimates for EXPAREL.

From a financial perspective, 2012 is about EXPAREL revenue visibility. With EXPAREL product now being sold in the marketplace, we look forward to reporting on our Q2 sales of EXPAREL in early August. With that, I'll now turn the call back to Dave.

Thanks, Jim. This is truly an exciting time for Pacira. We are very proud of our accomplishments over the past four months and continue to be very optimistic on the potential for EXPAREL to meet a significant unmet medical need in post-surgical pain management. Now that the launch is underway, we are fully realizing our vision and look forward to continuing to update you on our progress.

We will now open the call for questions. Jeff?

Thank you very much. (Operator Instructions). Our first question comes from the line of David Amsellem with Piper Jaffray. Please proceed.

Thanks. A couple of questions for you, Dave. How are you?

Good morning, David.

Good. So starting off with the $400,000 in April that you cited, can you talk about what portion of the amount, if any, is a function of just hospitals just building their initial inventory stocks of the product, or is it more of a function of just steady-state demand? How should we think about that?

We think about it more as steady-state demand, David. The package here is a unit of 10, and I think that's why we wanted to call out that almost a quarter of the hospitals that ordered again, coming up on 10% of the hospitals have ordered three times or more. We do see people going through this pretty quickly, so there is no doubt, David, part of this is stocking the Pyxis machines and stocking satellite pharmacies and the OR and things like that. We are seeing people reorder fairly consistently and fairly quickly after the initial order.

Okay, that's helpful. And the second question, can you give us some color on the kind of hospitals that have been buying EXPAREL? Is it community or large academic hospitals or a mix? And also, have you been seeing strong demand from ambulatory surgical centers?

Yes. Most of this so far, David, has come from where we've placed most of our effort. So they are people that have had previous experience either with EXPAREL or in the opioid-sparing program, and so that would lean more towards the larger centers, following our top-down approach here [and we believe] that part of the aspect of getting this right [is technique], and so we want to make sure that we're working with KOLs who can then teach other people in the community how to do this well.

So they would tend to be large hospitals and then hospitals where you've got surgeons who see the product being used in a major medical center and then take that experience back to a smaller hospital. But our commercial team in general is focusing on the major centers.

And there is a mix of ambulatory surgery in there, David, and I would tell you that it's very much the same thing. Typically, somebody is learning how to use this product in the hospital and then seeing that they can carry that experience forward into the ambulatory care marketplace.

Okay, that's helpful. And then last question, if I may, regarding the market shortages of the immediate-release bupivacaine, how much of that has had an impact on ordering patterns? And has that played a role at all?

Not much, David. We hear about it every once in a while from a pharmacist that has a limited supply of one of the short-acting caines and doesn't want to use that material to fill up an elastomeric pump. But short of that, we've actually been pretty careful that when the product is put into a hospital, that we're true to our word and working with the pharmacy and making sure that we're getting appropriate use.

So our reps are detailing in places where we can replace elastomeric pumps and where we have the best opportunity to have the drug utilized in patients known to be most problematic with opioids so that we can maximize the benefit of this new technology, especially in the early days. So we might get some short-term wins if we went with a broader strategy and just tried to get the drug used everywhere, but it would be a short-term strategy and it would cause us all kinds of grief downstream, so we've avoided that.

Okay, great. Thanks.

Thanks.

Our next question comes from the line of Richard Lau with Wedbush. Please proceed.

Hi, guys. Good morning.

Good morning, Richard. How are you?

Good. I just had a question in terms of how physicians seem to be adopting the product, whether they're trying it out in a few patients first and how long sort of the education process is there.

I would tell you that it's hard to find the same thing happening twice exactly. But I would tell you generally there is a person or two people in a hospital that used the product; they have a positive experience. And, for example, we've got places where they are now putting EXPAREL and their use of EXPAREL up on their website as an advertising tool.

And so generally, it is somebody who either has some intense desire to reduce opioids and maybe a patient who's a reformed drug addict or somebody who would foster that kind of a thought process. Or somebody who has had previous experience with EXPAREL, and it is their positive experience that generally not only accelerates the use with other surgeons, but also is generally really important in getting the drug through the formulary process and available for broad use.

Okay, thanks. That's helpful.

Richard, this is one shovel full of sand at a time and you just keep going until you have a beach.

Nice. Okay. And then, of the 164 customers, were there any plastic surgeons in there? And what sort of inroads are you making in that market?

Yes, there are plastic surgeons in there, Richard, although we've endeavored to try to split that out so that we could get some color, but I would tell you that we're seeing plastic surgeons that are ordering through ambulatory care centers. We're seeing plastic surgeons order in their practice and we're also seeing some plastic surgery used in the hospitals.

So it's very difficult for me to tell you exactly what the percentage of use is in plastic surgery, other than to say that it has been an important market segment for us. And we're just starting to see, Richard, a number of plastic surgeons put EXPAREL up on their website, and so we now have plastic surgeons using their web-based media and their blogs to promote their use of EXPAREL.

Okay, that's great. And then, DDW is coming up here in a couple of weeks. Could you maybe give a little bit more details in terms of what you'll be presenting there? And actually, if you know what day it's being presented yet?

Sure, absolutely. I don't have the exact date and time yet for the presentation, but where it's actually a subset analysis of our opioid health outcomes data, and it will actually be a presentation of the impact of opioids in open versus laparoscopic colectomy patients.

Okay.

And that's going to be presented by Dr. Sonia Ramamoorthy.

Okay.

And, Richard, when we get that date we can email that to you.

Okay, great. Thanks. And then last question for Jim on the expense side. In terms of R&D, is this sort of the run rate we can expect going forward? And then, I think in Q3 you plan to initiative the nerve block trial. Can you remind us how much that costs and over what timeframe?

Yes. So, with the caveat that we're not providing guidance on expense items, what I can say is you'll notice the sort of change in geography of some expenses that were previously in R&D that are now up in the cost of goods line now that we have an approved product. So this is sort of a steady-state R&D number. And then, you're accurate that we plan to start the pivotal studies for nerve block in Q3, and maybe I'll let Dave talk about that a little bit.

So there is a little bit of nerve block, that Phase I dose finding and separating motor from sensory, Richard, has started in the quarter that we reported and is in this current quarter. We expect to start the Phase II/III program in the third quarter. You can think the total expenses of that program in the $12 million to $13 million range and lasting roughly four quarters, but it is not an equal distribution. It will start up in a much more modest way and then you would expect the next three quarters to soak up the bulk of that.

Okay, great. Thanks, guys.

(Operator Instructions). Up next, we have Douglas Tsao with Barclays. Please proceed.

Hi. Good morning. Thanks for taking the questions. I was wondering, obviously we're still very in the early stages of the commercialization of EXPAREL, but just given the experience you've had so far, both after the launch or even ahead of just getting back from the reps going out and talking to customers, have you been able to refine or get a sense of your strategy and your target audience and who in the early stages might seem to be a little more receptive?

Yes, sure. There's no doubt, Doug, that when we are talking to colorectal surgeons, especially in the environment of pharmacy and therapeutics committee and especially where we're in a dynamic environment around costs or any issues with pharmacy, having a colorectal surgeon in the room is a huge positive for us.

So we continue to do what we said we were going to do. We're working with plastics and all of the opportunities that are presented there. In the hospital, it's pretty clear to us after the early days that colorectal surgery carries the day more often than not. It doesn't mean we don't win when we're in other scenarios, but when we have a few colorectal surgeons at a P&T committee, it's a very positive time for us.

And so I guess sort of what you're saying is that the message seems to really resonate with them. And so has that led to you, in terms of a greater focus in terms of your detailing and who you're trying to identify as champions right now?

No, our focus -- well, it certainly doesn't hurt, but our focus remains on these top hospitals. And it's not just the reps, remember. When we're allocating resources from the middle here and we're sending in our pharmacoeconomic team and our scientific affairs folks and our medical affairs folks, those people are highly skilled.

And these opioid-sparing trials, especially in what Taunia just talked about, if you go back to the work that was just done at SAMBA with total abdominal hysterectomy, the work that will be done at DDW is open and lap colectomy, the issue, I think, at the very highest level, Doug, is that colorectal surgeons currently use bupivacaine -- if they use it, they use it all the time and so --

Okay.

-- that audience understands the conversion from an 8-hour therapy to a 3-day therapy that doesn't require them to do anything else in the OR, a lot easier than most of the other audiences who still use bupivacaine but they might not use it on every case. So that is the obvious place for us to go, but we're still going -- we think that it really remains important for us to focus on the top of the experience curve and make sure that when people are using this product they're using it correctly, and that really dictates us to go to the major centers.

Okay, great. And then just one final question. In terms of the data that will be sort of available in terms of monthly sales through Wolters Kluwer, I was just wondering if you were aware of any technical or mechanical things that we should consider that might, for any reason, make that data source not representative of the actual performance of the product.

I think, Doug, there's -- well, as traditional with all hospital products, and I know you guys know all about all these things -- there are hospital groups that don't report at all, so by definition there's going to be an under-reporting characteristic here. I think what makes this one even more difficult is that we see from our current patterns that there are specialty distributors and there are non-traditional houses that are providing product to not only the plastic surgery audiences but also the ambulatory surgery centers. And at least our best information is that some of these specialty distribution networks don't report to these tracking services at all, Doug.

Okay, great. Thank you.

Our next question comes from the line of Cliff Murray with Empire Asset Management. Please proceed.

Good morning, Cliff.

Good morning, Dave. How are you?

Good. How are you?

Good. Well, it sounds really good. I was wondering two things. The first one is while I'm well aware that you're focused on the EXPAREL launch, I'm wondering if there have been any advancements in potential partnering talks for O-US. That's number one. And number two, do you have a feel, just expanding a little bit on the tracking, for the percentage of sales that might actually be captured?

Let me take them one at a time. So, we have multiple discussions ongoing with partners for global opportunities as well as for some regional opportunities for both human health and for animal health. So all those are ongoing. The way you asked the question about making progress, that's a more difficult question. But I can tell you that we have a number of them ongoing. And then in terms of tracking --

-- what percent of sales they capture.

We just don't know. I think the reason that we spent as much as time as we spent is we expect that they're going to struggle pretty mightily here, and that's why we wanted to put out exactly what we have seen. And ours is data; ours isn't a projection at all.

Okay, thank you very much.

Yes.

Ladies and gentlemen, since there are no further questions, I'd now like to turn the presentation back over to Mr. Dave Stack for closing remarks.

Thank you, Jeff. Thanks, everybody, for joining us today. As a reminder, we'll be presenting at the Bank of America Merrill Lynch Investor Conference next week in Las Vegas and at the Jefferies Conference in early June in New York. We hope to see you all at those or at other upcoming meetings in the months ahead. Thanks very much.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a wonderful day.