Tuesday January 08, 2013
by John McCamant, editor The Medical Technology Stock Letter
Pacira Pharmaceuticals (PCRX) is our top conservative stock recommendation for 2013. The specialty pharmaceutical company develops, commercializes, and manufactures pharmaceutical products for use in hospitals and ambulatory surgery centers.
The company’s drugs are based on its proprietary DepoFoam drug delivery technology. Its lead drug, Exparel, is a long-acting non-opioid postsurgical analgesic for postsurgical pain management.
The drug fills an enormous void in post-surgical pain management, a multibillion-dollar commercial market currently dominated by narcotic painkillers.
Led by a management team experienced in marketing innovative hospital-based pharmaceuticals, PCRX is well-positioned to deliver strong sales and earnings growth.
PCRX’s CEO, Dave Stack, has more than 25 years of successful industry experience. Mr. Stack is evolving Pacira from a sustained-release injectable technology company into a fully integrated, acute care pharmaceutical company.
Narcotic analgesics present significant challenges for patients and physicians. Among the major side effects are severe constipation and dependence/addiction, the latter has resulted in a healthcare crisis in both the post-surgery and hospital discharge settings.
Exparel offers surgeons a needed alternative – long-acting pain management without the major adverse events associated with opiods.
With a targeted audience of more than 24 million surgical procedures, the potential market for Exparel (avg. cost of $285) exceeds $5 billion.
While forecasts will vary widely due to the early and somewhat unpredictable nature of any new drug launch, Exparel’s big picture continues to expand and all of the metrics point in the right direction.
We are highly comfortable with the following Exparel sales forecasts for 2012-2015E: $14 million, $65 million, $140 million, and $280 million. Leading to EPS in 2014 and 2015 of $1 and $3, respectively.
Hence, we believe our target price of $30 could prove conservative. We are recommending PCRX as a buy under $20 with a target of $30.
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