PCRX

Pacira Pharmaceuticals, Inc. (PCRX)

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Start Time: 09:00

End Time: 09:33

Pacira Pharmaceuticals, Inc. (PCRX)

Q3 2013 Earnings Conference Call

October 31, 2013, 09:00 AM ET

Executives

Dave Stack – President and CEO

Jim Scibetta – CFO

Jessica Cho – IR Associate

Analysts

Richard Lau - Wedbush Securities

David Amsellem - Piper Jaffray & Co.

Presentation

Operator

Thank you for joining Pacira Pharmaceuticals Third Quarter 2013 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 Jessica Cho of Pacira Pharmaceuticals. Please go ahead.

Jessica Cho

Thank you and good morning, everyone. Welcome to Pacira's third quarter 2013 financial results conference call. Joining me on the call today from Pacira are Dave Stack, President and Chief Executive Officer and Chairman; 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 remarks made by management during this call about the company's future expectations, plans and prospects including those regarding EXPAREL, production in Suite A and Suite C, approval of Suite C, anticipated fixed cost and gross margins and potential conversion of the company's convertible debt constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements may be identified by the words believe, anticipate, plans, expects, will and similar expressions. Any such forward-looking statements are based on the assumptions that the company believes are reasonable, but are subject to a wide range 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, 2012 and in 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.

During the course of this call, we will also refer to certain non-GAAP financial measures including adjusted EPS. Definitions of these non-GAAP financials measures and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the earnings release for the quarter.

I'll now turn the call over to Dave.

Dave Stack

Thanks, Jessica. Good morning, everyone, and thank you for joining us today. Our novel treatment for postsurgical pain, EXPAREL, continues to be the primary focus of Pacira today. EXPAREL was launched commercially in the United States in April 2012 and we continue to driver on the promise of pain management with reduced reliance on opioids. As you know, EXPAREL is the first and only long-acting multivesicular liposome local anesthetic for use in the peri or postsurgical setting. We utilize our proprietary DepoFoam technology to provide local analgesia for up to 72 hours.

Now halfway through the second year of launch with robust quarter-over-quarter growth and increasing market penetration, we continue to build upon the EXPAREL brand through clinical trials, commercial initiatives, talented surgical specialty and strategic partnerships that support EXPAREL use among key hospitals, ambulatory surgery audiences as well as the expansion of the current label.

The third quarter of 2013 represented another quarter of upward growth for EXPAREL. We reported net sales of $20 million for EXPAREL, up 32% from the $15.2 million in the previous quarter. We also announced 297 new customers in the third quarter, an average of 23 new customers per week. As of the end of the third quarter, 1,732 distinct customers have ordered EXPAREL since launch, a 21% increase over Q2.

In addition to the breadth of new customers adopting EXPAREL, we continue to see growth within hospitals which adopted the product earlier in the launch with 165 total hospitals ordering more than $100,000 worth of EXPAREL, a 65% increase from Q2.

Overall, we continue to build momentum in the third quarter not only within our existing customer base, but also across surgical specialties and hospitals as a result of our surgery and anesthesia customers expanding their use in new customer settings and institutions.

Our initial launch audience of colorectal, general and plastic surgeons with whom we saw a real opportunity to change the standard of care to a non-opioid EXPAREL base postsurgical pain platform continues to represent the majority of our market demand.

In Q3, EXPAREL continued to be used in open and laparoscopic procedures in the abdomen and perineal areas, while plastic surgery uptake has grown from initial success in the cosmetic retail market to reconstruct the surgery procedures performed in the in-patient hospital setting.

At launch, formulary approvals with restrictions have been commonplace, but we saw Q2's steady trend of early adopters removing existing restrictions in addition to new formulary approvals without restrictions, accelerated by our traction with TAP infiltration and orthopedic initiatives.

TAP, short for procedures where customers infiltrate EXPAREL into the transversus abdominis plane under ultrasound guidance has importantly widen the EXPAREL audience from surgeons to anesthesiologists in support of a reduced opioid pain management strategy.

Orthopedics remains a source of rapid adoption in growth with hip and knee procedures expanding to spine, foot and ankle, hand, wrist and trauma surgery. In addition, the success of EXPAREL and the Department of Defense institutions has been an important – has been important in many geographies as the first opportunity for surgeons to utilize EXPAREL and take their experience back to institution in their local area.

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