Pacira Shares Look Expensive, Stifel Says In Bearish Initiation

Despite the recent upward momentum in Pacira Pharmaceuticals Inc PCRX shares, Stifel is taking a bearish stance on the stock. 

The Analyst

Analyst Derek Archila initiated coverage of Pacira with a Sell rating and $41 price target.

The Thesis

The recent rally in Pacira shares was supported by upward revisions to 2018 sales guidance for Exparel, its non-opioid, post-operative pain medication; positive reports regarding CMS unbundling of non-opioid products; and the potential for an Exparel J-code in 2019, Archila said in the initiation note. 

Exparel sales have improved, primarily due to the company's partnership with Johnson & Johnson JNJ, the analyst said. 

The rally could run through the latter part of 2018 and possibly into early 2019 based on sentiment alone, he said. 

Yet Archila sees medium- to long-term headwinds from the potential approval of a rival drug from Heron Therapeutics Inc HRTX.

Pacira could find it tough to expand margins once Heron's HTX-011 is on the market, potentially resulting in $3-$8 downside to Stifel's price target, the analyst said. 

Additional risk could stem from the company's inability to execute on its gross margin initiatives as well as the potential consequences of a generic filing on Exparel, especially as Pacira is a one-product company, Archila said. 

"With that said, we believe Pacira's Exparel is ill-positioned relative to the competition long-term, and given its concentration risk, think shares look expensive at current levels." 

The Price Action

Pacira shares have gained about 4 percent year-to-date. The stock was trading down 1.48 percent at $46.65 before the close Friday. 

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