Pacira Biosciences Inc (PCRX) 2012 Q3 法說會逐字稿

A very good day to you, ladies and gentlemen. And welcome to the -- thank you for joining us for the Pacira Pharmaceuticals Third Quarter 2012 Financial Results Conference Call. At this time all participants are in a listen-only mode.

Following the formal remarks, Pacira management team will open the line 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 2 weeks on today's date.

At this time, I would like to introduce Keri Mattox of Pure Communications. Please, go ahead.

Thank you, and good morning, everyone. Welcome, again, to Pacira's Third Quarter 2012 Financial Results Conference Call. Joining me on the call today from Pacira are Dave Stack, President and Chief Executive Officer; and Jim Scibetta, Chief Financial Officer.

Before I turn the call over to the management team for their prepared remarks, I would like to remind you that certain other 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 of EXPAREL, the rate and degree of market acceptance of EXPAREL, the size and growth of the potential market for EXPAREL and the Company's ability to serve those markets, Pacira's commercialization and marketing capabilities and other statements containing the words believe, anticipate, plans, expect and similar expressions.

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

All of the information in this conference call is as of today, November 1, 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.

I will now turn the call over to Dave Stack. Dave?

Thanks, Keri. Good morning, everyone, and thank you for joining us for this review of our third quarter results. On the call today, I will review our commercialization success to date with EXPAREL, followed by an update on our manufacturing capabilities and also our continued EXPAREL label and commercial expansion efforts; then Jim will provide a summary of our third quarter 2012 financials and update our general outlook for the rest of the year. We will then open up the call for questions.

On the call today, we will be primarily talking about EXPAREL, our novel treatment for postsurgical pain management, which we launched commercially in the United States in April of this year. Using our proprietary DepoFoam technology, EXPAREL delivers bupivacaine over 72 hours. EXPAREL is approved for administration into the surgical site to produce postsurgical anesthesia, a target market that we estimate to be approximately 45 million inpatient procedures and approximately 30 million outpatient procedures in the US per year.

EXPAREL is now the first and only multivesicular liposome local anesthetic for use in the peri or postsurgical setting using the same infiltration technique as currently marketed local anesthetic for providing analgesia for up to 72 hours with a reduced need for opioids.

During this quarter, our second quarter sales following our launch in April, we successfully doubled our EXPAREL revenues from $2.3 million in the first launch quarter to $4.6 million. We continue to feel very good about the launch and our sales outlook as we head into the fourth quarter.

In fact, several new marketing initiatives that we launched in September have resulted in accelerated sales growth in October -- a trend that we expect to continue over time. We will provide more color on these initiatives in just a moment, but we would like to share our excitement that in October we see sales growing over 40% month-on-month.

To update you on the metrics we have been providing since launch, as of Friday, October 26th, 628 accounts have ordered EXPAREL. This is an increase of 47% from the 428 accounts we reported on August 3rd just prior to our last conference call. We have a good mix of customers who are continuing to expand their use of EXPAREL and new users.

58% of total customers have reordered and 63% of hospital customers have reordered, with 115 hospital customers ordering 6 times or more. In addition, we continue to average more than 22 new customers a week for the quarter and the month of October, so we have a nice mix of growth within our customer base and new customers ordering and using EXPAREL.

In addition, we now have access and orders from 64% of our top 100 accounts and 43% of our top 500 accounts. As a reminder, our market share of 4% in only abdominal and cranial surgical procedures in our top 500 hospital accounts alone would provide a $100 million EXPAREL revenue opportunity.

We are also excited to share with you the news that our new and expanded manufacturing facility is now fully installed ahead of schedule. When operational and FDA approved, this facility will significantly impact -- expand our manufacturing capacity. This expanded capacity enables additional initiatives of Pacira that we feel we can now approach with much greater confidence.

The first of these initiatives is a significant expansion of the studies investigating additional therapeutic indications for EXPAREL. As you know, we announced the launch of Phase II/III studies in femoral nerve block in September. The dose ranging portion of this trial has now been rolling nicely, and we expect [to] continue into Phase III portion of the trial early next year.

We are also exploring EXPAREL use in Phase IV clinical trials in ileostomy reversal, open colectomy, and laparoscopic colectomy procedures as well as a wide range of plastic surgery indications and TAP infiltration procedures. We will speak more about these programs and the top line data seen to-date a little later in the call.

Our expanded capacity has also strengthened our position as we continue discussions with potential strategic partners, both for ex-US commercialization rights to EXPAREL for human use, as well as for its use in animal health indications. We have had strong interest from a wide range of potential collaborators.

Strategically, we've also implemented several new and planned marketing programs that have met with great success. With two quarters of selling experience in the field, we have learned a great deal more about the current market dynamics and onsite usage of healthcare practitioners, and have evolved our strategies accordingly. We have been successful in achieving formulary access and adoption with abdominal soft tissue surgeries with colorectal and general surgeons.

Once this use is established, we often see that the orthopedic and spine surgeons adopt the use of EXPAREL in their patients based on their ability to control pain with reduced opioid consumption. This advocacy is important as we continue to grow the base of EXPAREL surgeons beyond abdominal soft tissue procedures.

With this expanding base, we have expanded our internal teams of clinical nurses and scientific affairs personnel during the month of September. These resources, along with our existing hospital specialists, invested significant time at key institutions, where we had recent formulary wins, in order to access and train healthcare professionals on the appropriate use of EXPAREL, and to educate them on the clinical and economic benefits that can be achieved when a low opioid postsurgical pain regimen is instituted, especially in patients known to be most problematic with opioid-based therapy.

These investments in training and education have been successful to-date and we are hearing very positive feedback. Some of these centers are considering eliminating their patient controlled analgesia, or PCA systems, and elastomeric pain pumps altogether. These health efforts have helped drive accelerated sales growth during the month of October.

On our past calls, we have talked at length about pharmacoeconomic and patient satisfaction benefits. Today, we'd like to touch again on this important topic, as we feel we can't emphasize enough the importance of the data we are currently generating through our Phase IV and other case studies and their positive impacts on EXPAREL sales.

I hope that you have all seen the recent press release on top line data from our first completed Phase IV IMPROVE study conducted by Dr. Stephen Cohen at Southern Regional Medical Center. In this study of open colectomy patients, the EXPAREL-based regimen achieved a statistically significant reduction in each of the primary endpoints, including a 60% reduction in hospital length of stay from 4.9 days to 2 days.

The full data from this study have now been submitted for publication and we hope to report more detailed results shortly.

Importantly, Dr. Cohen has now used EXPAREL in more than 75 patients. And he is not a unique user, nor are these data proving to be unique. We are concluding additional IMPROVE studies in laparoscopic colectomy and ileostomy reversal procedures. Initial results look good, with reductions in length of stay and reduced opioids similar to the Cohen data. We expect to share this clinical information over the next few weeks as the final data becomes available.

Turning to plastic surgery, we are in the process of locking the data base from our 50-patient prospective observational study to assess patient reported outcomes and ease-of-use of EXPAREL in subjects undergoing breast augmentation, breast reduction and abdominal plastic surgery. This [EXCLAIM] collected data on the severity of postsurgical and subsequent pain, time to first postsurgical opioid administration, quality of life and ease-of-use of EXPAREL.

The plastic surgery market has helped tremendously in creating a positive patient experience with the use of EXPAREL. And this positive experience leads to expanded use in so-called, Mommy Makeovers, and use in reconstructive surgeries, often with the plastic surgeon using EXPAREL in the inpatient hospital setting.

Throughout the rest of the fall, you should expect to see a steady flow of data presentations at key society meetings and publications and several of the top peer reviewed pain, pharmacy, and surgical journals. We fully expect these data to have a direct impact on sales, as we have already seen immediate results in the form of orders from physicians attending presentations at national and regional meetings as well as local peer meetings.

Some highlights over the next quarter include important information on the opioid problem, especially in specific patient populations known to be most problematic with opioids, as well as important safety and efficacy information specific to clinical and commercial development of EXPAREL.

Topics include publications such as program-wide safety, a publication on 72 hours duration of activity and a separate publication on extended release of pharmacokinetics of EXPAREL, as well as a publication on the time to onset of EXPAREL administered by infiltration.

We also have a publication on motor versus sensory blockade and nerve block procedures as well as the previously mentioned IMPROVE open colectomy manuscript from the Southern Regional Medical Center and Dr. Cohen. We also expect to see abstracts from the IMPROVE ileostomy reversal trial and a laparoscopic colectomy trial, as well as the EXCLAIM plastic surgery trial.

From our health outcomes programs, you will see four publications on various group purchasing organizations and hospital groups on risk factors and outcomes of adverse drug events among patients receiving opioid-based pain management, as well as publications on specific surgical populations and procedures such as total abdominal hysterectomy.

We also had a number of podium presentations at recent plastic surgery meetings, and we have posters accepted for the American Society of Regional Anesthesia later this month in Miami. We also expect to continue to benefit from this convergence in key industry trends. We are currently witnessing a groundswell of advocacy against the use of opioids as a result of their adverse event profile, their addictive characteristics and result in overall cost burden to the healthcare system.

Since our last call, we have had another joint commission alert on the dangers of using opioids in the hospital setting, especially in these patient populations known to be most problematic. In addition, our hospital customers are increasingly interested in a government initiative known as the Hospital Consumer Assessment of Healthcare Providers and System or HCAHPS.

HCAHPS measures patient satisfaction for their own hospital experience with pain management as an important component of the HCAHPS initiatives, with the goal of allowing the opportunity for patients to compare hospitals on topics important to them. As a reminder, in the pivotal soft tissue hemorrhoid trial with a pre-specified secondary endpoint, EXPAREL enabled 30% of the patient to achieve pain relieve without morphine rescue with a P value of 0.0008 for patient satisfaction.

We believe EXPAREL represents a timely and valuable solution to a number of society and governmental concerns regarding the use of opioids in a platform for postsurgical pain control. With these concerns in mind, through our efforts -- and through our efforts, we continue to build a solid foundation that we believe will result in EXPAREL reaching blockbuster status in the longer term.

Overall, we continue to be pleased with the launch of EXPAREL. While not providing formal guidance based on our sales in October, we do expect to have a strong fourth quarter.

With that, I will turn it over to Jim to discuss our financials in more detail. Jim?

Thanks, Dave, and good morning, everyone. For the third quarter ended September 30, our total revenues were $8.5 million and, most important, as Dave discussed, EXPAREL revenue in the second launch quarter was $4.6 million.

As a reminder, and sorry to be repetitive to those familiar with the story, but there's no wholesale stocking of EXPAREL as we ship products in boxes of 10 vials for overnight direct delivery to end-user customers not through wholesales and we recognize the revenue upon shipment. In addition, based on our initial customer order sizes and customer reorder patterns, we continue to believe there is on material amount of stocking at the customer level either.

We're now seven full months into the launch, so I want to comment briefly on the results of our sales analytics and how we interpret sales trends to-date. Today, we're in the 30th week of the launch. And applying statistics to weekly box sales, we see a positively sloping trend that's either linear or, as time will tell, and recent numbers might suggest, trending towards a soft exponential curve.

We have enough sales data to confidently confirm that we're following the trend liens of hospital-based products that have ultimately achieved peak sales in the hundreds of millions of dollars.

We're facing the typical hospital-based launch challenges where it takes time and resources to gain each new customer, but, when we do, because of the unique attributes of EXPAREL in the hospital selling environment, we have a recurring and growing revenue stream to continue to build upon indefinitely.

I think it's important to recognize these statistical trend lines because, at this stage of the launch, other metrics are inherently burdened by some noise. So, for example, month-to-month sales, of course, are important at one level, but, at this point in the launch, they're also impacted at an exaggerated level by factors like the number of selling days, seasonal issues, one-off events, et cetera.

I also want to reiterate that we really caution reliance on the sales tracking -- sales data tracking services at this juncture or either a look at historical results and trends for near term visibility on our activity.

As you know, the two tracking services do not get their data directly from us. And now that we have six months to look back at their capture rate, meaning the rate at which their monthly reported sales of EXPAREL captures our actual sales, unfortunately, there are no discernible trends toward a consistent or meaning capture rate from either of them.

So, as Dave noted, Q4 started well with October's activity. But on an even bigger picture level, our overall sales growth trends support our belief that EXPAREL is on its way to being a very significant product.

Turning to DepoCyt, our product that we manufacture and sell through commercial partners in Europe and the U.S., we started the quarter addressing the EMA's remediation issues and, as a result, did not manufacture or sell any lots to our partners. We expect to resume DepoCyt manufacturing in Q4 for the US market and in early 2013 for the European market, pending regulatory confirmation around our remediation activities.

Collaborative licensing and development revenue increased by $2.1 million, primarily due to the recognition of revenue resulting from Novo Nordisk terminating a development agreement, where they were using our DepoFoam technology with one of their proprietary products.

Cost of goods sold, which pertains to both EXPAREL and DepoCyt, was $9.3 million in the quarter up from $6.7 million last quarter. The COGS increase reflects the recognition of the increase of EXPAREL inventory actually sold in Q3, and also includes additional expenses for periods in the quarter when all the fixed manufacturing infrastructure was immediately expensed, rather than capitalizing the inventory for future sales because of non-routine shutdown periods which occurred, for DepoCyt for the remediation efforts and for EXPAREL on a voluntary basis for repairs and maintenance and deployment of the manufacturing skids.

We spent $3.5 million on R&D in the quarter, about two thirds of which was for the initiation of our EXPAREL Pivotal Nerve Block studies. We also incurred $900,000 on the development of the potential new spray manufacturing process for EXPAREL. SG&A expenses were $11.4 million in the quarter, which is materially similar to the past few quarters, but slightly higher because of compensation expenses that run through our G&A line primarily related to non-recurring recruiting and severance costs.

Net loss for the quarter was $15.7 million or $0.49 per share based on 32.4 million weighted average shares outstanding. We can confirm our 2012 non-EXPAREL revenue guidance of $21 million to $23 million. As of September 30, we had 32.5 million shares outstanding and we reported a cash position of $68.7 million.

So with approximately $70 million in the bank, we remain in a good position to continue to make the necessary investments in the commercialization of EXPAREL to build the very significant brand we expect it to be.

So with that, I'll now turn the call back to Dave.

Thanks, Jim.

We'll now open up the call for questions.

Nancy?

Thank you.

(Operator Instructions)

Okay. We have our first question from the line of David Amsellem from Piper Jaffray. Please, go ahead.

Hi. This is Rebecca Forest for David. Could you please give us some color on the kind of traction you're getting with ambulatory surgical centers, and how much of the EXPAREL mix coming from this source of business?

Yes. It has not been a focus of our activity yet, Rebecca. There's really -- let me give a little bit of color on the question if you don't mind. There are really two very different ambulatory surgery markets; one is ambulatory centers that are associated with hospitals, and we are getting some business in those institutions as we move procedures from an inpatient setting to an outpatient setting based on our ability to control pain.

The different marketplace is physician-owned freestanding surgery centers, and in those marketplaces we've gotten -- we've had no focus from a strategic perspective for a very good reason in my view at least. We have an APC code, or Ambulatory Procedure Code, for EXPAREL that allows for an additional payment outside of the ambulatory DRG. We have not yet achieved a J-code which would provide separate payment for EXPAREL.

So in an environment where the physician owns the center and has a high profit motivation -- and until we are able to get a J-code and have a separate payment for EXPAREL, there really is very little for us -- reason for us strategically to focus on that marketplace.

So, we are getting some use where plastic surgeons are working in ambulatory centers and we are getting a fair amount of use in hospital-owned ambulatory centers. But we have not had a focus on freestanding ambulatory centers yet at all.

Okay. Thanks. And I guess just one more question. Did you guys experience any seasonality during the summer? And going forward for modeling purposes how much lumpiness should we expect to see as a result of holiday seasons and seasonality in the future?

Yes. We definitely saw that procedures and, therefore, volume was slow in August. Frankly, September was slow as well -- slower than we had projected as well. And we're assuming that that was a seasonality, but I haven't actually seen procedure numbers yet, Rebecca, that would confirm that for me.

So, August for sure, the first couple of weeks of September for sure, and then we see October doing pretty much what we thought it was going to do. Going forward through Q4, we don't expect to see any unexpected seasonality, I guess. You know, Christmas and New Year's being on a Tuesday certainly are not friendly to a business model.

And so, we are clearly going to be [slaves] to the number of days in a selling cycle or the month. I don't think there's anything unusual there. The only potential seasonality in -- I say this somewhat tongue-in-cheek but we see it very clearly, is that there is absolutely a tickup in plastic surgery around Christmas time, where it is fashionable to give people plastic surgery for gifts. And so, you do see quite a significant tickup and especially in certain plastic surgery procedures during the holiday season.

Okay. Great. Thank you. That's helpful.

Thanks, Rebecca.

Thank you for your questions.

(Operator Instructions)

You have a next question from the line of Ann Trimble. Please go ahead -- from Barclays.

Hi. Good morning, and thanks for taking the question.

Good morning, Ann. How are you?

I'm good. Thanks.

Great.

Along the lines of the previous question, what was the month-over-month EXPAREL sales growth for August and September?

The actual dollar sales, Ann, were slightly down. I don't actually have them in front of me but September was slightly down on August. If you follow that logic of the last questioner on a day basis, they were slightly up, but there were fewer days in October than there were in September so that the month by month was slightly less. So, let's see.

So I'm having --

Dave, I think -- we haven't provided that information, (Ann).

Okay.

We did 4.6 in the month and the number--

In a quarter.

-- were fairly flat through month-by-month. But then there were -- as we sort of alluded to -- there were some things that affected that -- selling days and other things that when you get to that level of granularity, you realize you've got to take a big picture look here, which we did. And on a week-by-week basis, the box sales are continuing to trend up through that quarter and then obviously much more significantly in October as we alluded to.

Okay. Thanks. And then my second question is, in terms of strategic partnerships when should we think about hearing an announcement?

You know, I wish I could give you more clarity on that, Ann. You know, we can move pretty quickly here with a relatively small staff and -- but we are very much dependent on the pace of our potential collaborators.

And so, we're a little bit frustrated at the pace, but I think there are a number of meaningful discussions that continue to move forward and we're just going to have to -- we're just going to have to move at their pace. It would be really awkward for me to give you any kind of a firm date when, frankly, we're not in charge of it.

Right. Okay. And thanks very much.

Okay. And, Ann, maybe I'll pick-up on what Jim just said just to give you a little bit more color. I mean, if you look at October through last Friday, we had 152 orders from our top 100 accounts. And the order size went up by a little more than 35%. So, we're getting more orders from our big customers and the order size is going up.

And then, we continue to see this number of 22 new orders a week. So, I don't think that we've got anything that is strange about how the product is growing and why it's growing. I think we're growing both at the base and vertically inside the big accounts, which is exactly what we were hoping for.

Great. And sorry, you said it was 152 orders for what timeframe?

In the month of, well, with -- through October 26th for the month of October.

Okay. Got it.

So, that's exactly what I'd be looking for. As you know, we've made a fairly big deal about focusing on these big accounts because in the surgical world, then that halo effect goes out to the places to the places where their surgeons go and where their fellows and residents go, et cetera, et cetera.

Perfect. Thanks very much.

Thank you, Ann.

Thank you for your questions.

And we have our next question from the line of Richard Lau from Wedbush Securities. Please, go ahead.

Good morning, guys.

Good morning.

Congrats, on a good quarter. And it sounds like a lot of market dynamics are sort of lining up for you guys here. First question is just sort of digging into the adoption patterns you're seeing among hospitals -- if there's a certain timeframe you're seeing them try the product before they start to increase their order size, if there's any sort of discernible pattern, I guess, in when they increase order size.

I'll tell you what, Richard, nothing that you could write down with -- in anything other than pencil. You know, they're very different. I mean, we have places where we have significant EXPAREL being used in reconstructive surgery in the inpatient basis. We have places where total knees have just taken off.

We've had places where the spine surgeons are very interested in the use of the product. And then we've got places where we're growing nicely, and we don't have any of that. It is blocking and tackling where the colorectal surgeon and the general surgeons start using it in the abdomen and then the urologist picks it up and then the OB/GYN guy picks it up.

And so, I would say that we see the explosive growth when we get the TK and the spine guys involved. But I think, we're also growing nicely in the abdominal/soft tissue space. You know, we haven't really talked about TAP infiltration. It's very early days. But we are seeing some really interesting data from TAP infiltration and the neat thing about that is it's largely an anesthesiologist procedure so we get that anesthesiology community engaged in EXPAREL.

And then you start to see the real viral measure of their informing folks about the ability to extend duration of action of bupivacaine. But I can't tell you that I could -- if you were a new rep working for us and you were going into a hospital, it would be virtually impossible for me to tell you what you're going to find.

All right. Got it. Thanks for that. Second, as hospitals, I guess, start to do their budgeting for 2013, is there anything you guys can speak to in terms of EXPAREL being included in their budgeting and if it's helped you guys at all in terms of getting on formulary? Because I know having launched in April hospitals just didn't put you guys in their budget for 2012.

Yes. We've got some [DUE] initiatives, Richard, that we're working with a number of pharmacy customers with and, frankly, C-suite executives -- CEOs of hospitals and folks in the C-suite on demonstrating the impact of EXPAREL. Those programs are being rolled out, and I didn't say a lot about it here but really dependent on our ability to work with these folks to demonstrate that there are specific patients who we can predict will have -- will obtain maximum benefit from the institution of EXPAREL.

So we're working hard not only to make sure that they adopt EXPAREL but in the appropriate patients where we're going to see the best benefit and that's really intricate to the DUE. We are just starting to see DUEs come in now. As a matter of fact, we got one yesterday, where hospitals are demonstrating to themselves that when they use an EXPAREL, they are seeing [a day] plus length of stay reduction. And that's really the trump card. That sort of eliminates all barriers to extending the use.

And when we see those kinds of things, you actually see the hospital then aggressively go to different surgical populations and say, why aren't you using this drug? Especially viral when the nurses start saying, how come this patient didn't get EXPAREL?

So, it's still early -- most of those were timed at six months post launch, and so the number of people that have achieved that time point is still fairly small, Richard. But we're aggressively rolling a DUE program out with their scientific affairs folks and our critical nurses.

Okay. Great. That's good to hear. And then just in terms of this Hurricane Sandy, is there anything we should be thinking about in terms of -- for the fourth quarter? Have you guys seen much disruption with it?

You know, I'm going to finish the call with that, Richard. But I will tell you it's really -- it's surreal living here. I mean, so everybody on the phone we're having this call from Parsippany, New Jersey. I would tell you in a word that this is one time you can actually believe all the newscasts. Actually, in some areas it's a lot worse than you've seen because you can't get to a lot of these places still.

We -- yes, haven't seen -- so yesterday, we talked with ICS, our specialty wholesaler and they did ship product to Ogdensburg and Niagara Falls and Syracuse and Albany and Saratoga and places like that. But we haven't seen any shipments to Philadelphia, New Jersey, the metropolitan New York City area, Connecticut or Boston. I don't remember seeing any this week, Richard.

So, yes, there will be a -- there will be a modest impact. I don't think it's huge but there clearly will be a modest impact on this week's sale.

Okay. Got it. And then, final question in terms of your new manufacturing facility. Is there any sort of timeframe, you would expect that to be inspected by the FDA and actually up and running?

You know, we have consistently told folks to be thinking about the end of this year or the beginning -- or the first quarter of next year. And the reason that I can't provide any more specific guidance is the FDA has six months to inspect.

You know, if they come in early, it's the earlier. If they come in later, it's the later. But, we're -- it came in ahead of schedule which we think is really important and that gives us more time to work on it and to get everything up and running so that the commissioning goes smoothly.

And so, that timeline -- there is some additional fluff in there. Fluff is not the right word. But there's some additional time in there to make sure that we're successful with the FDA audit.

Okay, great. Thanks, guys.

Thanks, Richard.

Thank you.

(Operator Instructions)

We have our next question in the queue from the line of Corey Davis from Jefferies. Please, go ahead.

Thanks. It sounds like the end-user demand, at least among physicians, is -- if not there already, but on its way to being what you need. But my question is, what's it really going to take to accelerate the rate of formulary access?

And, how many places are just saying, no, and don't ask again, versus how many just need more time and -- versus how many are looking for more information? I didn't follow all of those publications and studies that you went through. But, how much is that the gating factor to getting broader access?

Well, we have a few, no and don't come backs, Corey, and I don't think -- no, that wouldn't be anything unusual and would be fully expected, frankly.

I'm going to answer your question in a couple of different ways. We continue to work through with some places who are looking for specific data on indications of interest to them which is why the laparoscopic colectomy data and the ileostomy reversal data is so important and why publication of the open-collective data is so important. So, we see that as sort of one aspect to providing additional information and achieving a broader access inside the institution.

I'll make a completely separate point, that when a colorectal surgeon and a general surgeon are asking for the drug in an environment where they're looking at primarily the surgical procedures, the perirectal and the abdominal procedures that I just referenced, a pharmacy seems to have fairly powerful position to be able to push back and control that group of customers.

On the other hand, when a spine surgeon gets involved or when an important anesthesiologist gets involved, we see the drug being made available fairly rapidly even in an environment where we have had previous lack of success. And so, I think that's another aspect of the expansion of this that is important.

So, I think, Corey, that we're doing fine. There will always be some places that the drug is never available and never put on formulary. But I think generally, the adoption of the product, the fact that we continue to win six or seven formularies every week is important and we're really where we need to be.

I'll answer your question maybe in a very different way with the way I think about it for sure, because there're two completely separate efforts here. One is getting the drug on formulary, and the other is monetizing that formulary access and approval and selling boxes. The fact that we're available at 64% of the top 100 accounts, just to give you a sense, those top 100 accounts do a little over 19% of all the surgeries in America.

And we're available at 43% of the top 500 accounts, and those 500 accounts do over 50% of all the surgery in America. So I'll double back and tell you that if we had a market share of 4 just on abdominal and perineal procedures, just in those top 500 hospitals where we have 10 times the access now, this would be a $100 million revenue opportunity.

So, we continue to work through formulary approvals, especially in big places and especially in important reference places where people want to know whether the drug's on formulary or not. But I'm at least as interested and pulling through sales and making sure that we monetize the places where we currently have access, if that makes sense to you.

Yes, it does. So, on those two different efforts, which one right now do you think is more important? It sounds like that you have got enough access.

Yes.

And it seems like it would be easier to just drive the pull-through demand because the drug is behaving the way it should.

I think that's -- that's what you're seeing in October, Corey. That's [where] many of the new programs are. And then, as I mentioned during the call, we've added some additional nurse practitioners because there are places where they want somebody from Pacira to come in and be there when they do the first few procedures. You know, we needed some additional resource to be able to accomplish that.

We added some additional scientific affairs people which are a much higher level of resource in terms of being able to answer questions. So, we now have the complement of hospital specialists who can pull through on a daily basis. And then, when we have a big opportunity in a major teaching system or a major integrated health network, we've got a higher level of resource that can take that opportunity on.

So is there any reason to not expect another 40% in November and another 40% in December? Or, is that getting a little too aggressive?

You know, those are a little more aggressive than my numbers, Corey. But, you know, we're doing everything we can.

Okay. I'll leave it at that. Thanks, Dave.

You know, I'm happy to -- I don't know for sure. I mean, yes, we're doing everything we can think of.

Thank you very much for your questions, Corey.

Ladies and gentlemen, we have time for one more question from the line of Douglas Tsao from Barclays. Please go ahead.

Hi, good morning. So, Dave, I'm just hoping you perhaps provide some clarity in terms of the formularies that you have won. How many would you characterize as having very good, unrestricted use, versus some that have restricted use? And in those that have some kinds of restrictions, what is the roadmap for having those restrictions lifted over time?

Yes. I would say that's a good -- well, first of all, hey, Doug, how are you? And second of all, that's a great question and I'll validate your question by saying that as you track boxes and orders, there is a very perceptible difference between places that have significant restrictions and those that don't.

So, the restrictions, when they're well-instituted actually do work. And so, I would say right now that we probably have free access at more than half, and we have some restrictions at probably 40%. But you have to be careful there, Doug, because some of the restrictions are that it can only be used in the OR.

Well, that's fine with us. I mean, it's an operating procedure. So there are restrictions and then, there're restrictions, if you will.

When we have more significant restrictions like it's restricted to colorectal surgery, in some cases, it's restricted to a group of colorectal surgeons, generally, what they're looking for is some type of a short experience in the local treatment population. And for that group of people to report back either to the executive committee or to the [P&T] committee, so that they can then determine whether they want to open up access or not.

So, I would say the traditional route is to do exactly what they're looking for us to do, and we see that happening and we do see the drug being made available and broadening. But also, don't lose sight of the fact that if we get eight spine surgeons that had dinner with a spine surgeon who's using the drug with great success and their laminectomy patients are going home the next day, all of that stuff seems to go away. And they, for whatever reason, can get the drug tomorrow and we start to see that as well. So we are attacking it on several different fronts.

Okay, great. Thank you very much.

Thanks.

Thank you.

We do have one more question in the queue, from the line of [Patty Banks] from Discern Security. Please go ahead, Patty.

Hey, Dave, and Jim. How are you?

We're good. How are you?

Just two clarifying questions -- any evidence on the vials per patient that that might be increasing to more than one per patient?

No, none, Patty, actually, quite the opposite. I think it's really important that all of the data and all of the KOL interactions around abdominoplasty which you guys know well is a very significant wound size, suggest that one vial is the appropriate dose in those patients.

And we also see that -- and total knees which again would be the -- one of the procedures where you would think that a drug like this would be challenged through an infiltration technique, we are getting great success.

The only places that you're seeing more than one vial per patient is where you're seeing bilateral total knees. I know it sounds harsh, but there are -- actually, there are quite a few places that actually do both knees at once.

And then, we actually were concerned that we might see bilateral use in breast augmentations. Again, tongue-in-cheek, I would tell you it's very rare that somebody would do just one, but we are seeing people gaining experience in doing an infiltration technique where they inject directly into the muscle rather than an installation technique where they just basically fill the cavity with drug. And in those environments, it appears that we have a one vial dose as well.

So, I frankly -- I don't know of anybody who is using two vials with any routine. Every once in a while, in a morbidly obese bariatric patient, we'll see somebody who did a rectus sheath block and a TAP procedure and in that patient, you might see a two-vial dose. But, I mean, we're talking about patients that are over 400 pounds. And, frankly, doctors don't know what the heck to do with some of these patients.

Okay. That's helpful. And then, just one other clarifying question -- in the recent press release that you guys put out, you mentioned about more than 20,000 patients being treated. But you've also said that -- you also commented that you surpassed that number.

Do you have any guidance on, you know, exactly how many patients have been treated to-date or a range?

No, we have not, Patty. And let me tell you first, they may have (inaudible) from a dopey CEO. I mean, there's no way that that press release should have gone out with that number. It's just -- it was -- that was not my finest hour.

And, as you can tell from the numbers, we've treated many more patients than that and when the press release went out, it was an attempt to demonstrate that we had a lot of patient exposures and our database is clean from a safety perspective. It wasn't accepted in the community -- in the financial community the way it was intended by Pacira and that's purely my fault.

So -- but, to answer your question specifically -- no, we've not given specific items.

Okay. And then, just lastly for Jim, at some point, are you going to give EXPAREL guidance from a quarterly basis going forward or -- ?

I'm actually going to let Dave -- to that question.

So just so everybody knows, Jim and I are not together. You know, the answer to that is probably, yes, if Jim Scibetta has anything to say about it, but probably, no, if Dave Stack is still the CEO.

How's that for an answer?

So, we'll wait and see.

What we have talked about, Patty, is not anytime soon. You know it's just too premature in the launch to do it anytime soon.

Okay. Thanks.

Thank you.

Thank you, ladies and gentlemen for your questions today. I would now like to turn the call over to Dave Stack for closing remarks. Please, go ahead.

Thanks, Nancy. And thank you again for joining us today. We'd like to note that upcoming, we will be attending the Brean Murray Life Sciences Summit in New York on November 7th. We'll also be presenting at the Jefferies Health Care Conference in London on November 15th and we'll be presenting at the Piper Jaffray Healthcare Conference in New York on November 27th.

As Richard raised, I would be remiss without mentioning the many folks on this call and our employees in New York and New Jersey who are having a very difficult week, especially those living on the shore -- no power, no home, no -- significant transportation issues, no gas stations that are open. So even people who can get their car started, can't -- don't have any gas and can't get anywhere.

Our thoughts and prayers are with all of our employees and everybody who's been impacted by this disaster.

And with that, I'd say thank you for joining. Thanks, everybody.

Thank you, ladies and gentlemen, for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a good day.