On Monday, Pacira Pharmaceuticals (NASDAQ:) experienced a downgrade in its stock rating by Piper Sandler from Overweight to Neutral. The firm also significantly reduced the price target for the company’s shares from $42.00 to $11.00.
This decision follows a recent legal setback for the pharmaceutical company, where the U.S. District Court for the District of New Jersey declared a key patent for its drug Exparel invalid.
The patent in question, number 11,033,495, covers Exparel, a local analgesic used in post-surgical pain management. This ruling comes at a time when Pacira faces competitive pressures, as eVenus received FDA approval for its abbreviated new drug application (aNDA) last month. Moreover, Fresenius Kabi, a leader in the injectables market, is set to handle the distribution, adding to the challenges for Pacira.
Piper Sandler’s revised valuation of Pacira’s stock is based on a discounted cash flow (DCF) analysis. This analysis suggests a scenario where Pacira and Fresenius Kabi could potentially split the market volumes for their respective products approximately equally. It also factors in a moderate price erosion of about 30%, which leads to a fair value estimate in the range of $10 to $12 per share for Pacira.
The downgrade reflects the increased uncertainty surrounding Pacira’s financial outlook, particularly in light of the current intellectual property litigation. The court ruling and subsequent FDA approval of a competing product have complicated the market landscape for Exparel, making the company’s shares a difficult recommendation, according to Piper Sandler.
This change in the stock’s outlook indicates a notable shift in expectations for Pacira’s future revenue and market share, as the company grapples with legal and competitive hurdles. The new price target represents a substantial decrease from the previous target, underscoring the impact of these recent developments on the perceived value of Pacira’s shares.
In other recent news, Pacira Pharmaceuticals is facing significant challenges following the invalidation of its ‘495 patent on Exparel, a product that accounts for roughly 80% of the company’s revenue. The ruling allows competitor eVenus to launch a generic version of Exparel, potentially impacting Pacira’s revenue significantly.
This development led JPMorgan to downgrade Pacira’s shares from Overweight to Underweight and slash the price target to $10.00 from the previous $45.00.
In response to the court ruling, Pacira’s CEO Frank D. Lee stated the company’s intent to consider an appeal and emphasized their robust pipeline of intellectual property. Amid these developments, Pacira reported Q1 2024 revenue of $149 million, slightly below consensus estimates, with Exparel contributing $118 million.
The company also launched a private placement of $250 million in convertible senior notes due in 2029, projected to yield net proceeds of approximately $242 million.
Analysts’ perspectives vary, with Barclays downgrading its stance from ‘Overweight’ to ‘Equalweight’, Jefferies lowering the price target on the company’s shares to $30.00 but maintaining a ‘Buy’ rating, and both Piper Sandler and H.C. Wainwright maintaining their positive outlook on Pacira. These recent developments highlight the evolving situation at Pacira Pharmaceuticals.
InvestingPro Insights
In light of the recent downgrade and legal challenges faced by Pacira Pharmaceuticals, investors may find the latest data from InvestingPro to be particularly relevant. According to InvestingPro, management at Pacira has been actively buying back shares, signaling potential confidence in the company’s value despite current setbacks. Additionally, the company has been identified as having liquid assets that exceed its short-term obligations, which may provide some financial stability amidst the competitive and legal pressures.
InvestingPro Data also shows a revenue growth of 3.15% over the last twelve months as of Q2 2024, with a gross profit margin of 62.99%, indicating some operational efficiency that could be a positive sign for investors. However, the stock has experienced significant price declines over various periods, with a 1-week total return of -42.02% and a 1-year total return of -68.86% as of the same quarter, reflecting the impact of the recent challenges on the stock’s performance.
For those looking for a deeper dive into Pacira’s prospects, InvestingPro offers additional tips, including expectations for net income growth this year and several analysts revising their earnings estimates upwards for the upcoming period. It’s worth noting that there are 13 additional InvestingPro Tips available for Pacira, which can be accessed for further insights into the company’s performance and outlook.
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