Catalyst - Fall 2012 - Pacira’s Innovative Drug and Delivery Method Cheaper, Faster Than the Competition
Some people say that anticipation is the very best and worst part of everything in life. When it comes to some medical procedures, however, the worst part isn’t the “before” and it isn’t even the “during.” It’s the “after” – intense pain and long recovery times – that has been known to scare away even the most needy surgical candidates.
Pacira Pharmaceuticals, based in Parsippany, N.J., wants to be the go-to company when it comes to calming those fears and easing the pain for millions of people who undergo lifesaving and elective surgical procedures, said Jim Scibatta, the company’s CFO. Their secret weapon in the fight against pain is EXPAREL, which was commercially launched in the United States in April 2012. It’s administered directly at the incision site and provides up to 72 hours – three days!—of post-surgical pain in a single dose.
While there are myriad pharma companies trying to take on the enormous pain market, Pacira’s proprietary product delivery technology, DepoFoam, allows pain to be managed with non-opioid products atthe incision site. DepoFoam is a unique platform that encapsulates drugs without altering their molecular structure and then releases them over a desired period of time. Using the DepoFoam technology, Pacira’s EXPAREL® (bupivacaine liposome injectable suspension) is now changing the way doctors and patients view pain.
What makes EXPAREL different? First of all, since the pain of a surgical procedure is mostly created by the surgical incision, it just makes sense to treat the problem at its root – the incision site. Second, until EXPAREL, doctors didn’t have an option for long-lasting pain relief without side effects. Systemic opioids, the common way of dealing with post-surgical pain, have to go throughout the body. That method has side effects and doesn’t last for more than six to eight hours. And, third, the competitor’s option, known as the “pain ball,” is far more costly than EXPAREL.
Scibatta summed it up: it’s cheaper, works faster and it’s more efficacious. Case closed.
AFTER THE LAUNCH…
Moving forward, Pacira is now acting on its comprehensive, targeted commercial strategy, the kingpin of which is a 280-patient clinical trial. In fact, the first patient was recently accepted into the trial, which focuses using EXPAREL as a single-dose injection femoral nerve block for total knee arthroplasty surgery. Results from this study, and a forthcoming second trial focused on intercostal nerve block for thoracotomy, will contribute to a planned U.S. Food and Drug Administration supplemental New Drug Application (sNDA) filing in late 2013 or early 2014.
Scibatta has lived and breathed EXPAREL since joining Pacira in 2008. Now only months after the launch of its lead drug in the U.S., Pacira had a secondary public offering of common stock that generated net proceeds of approximately $63 million, and the refinancing of $27.5 million in debt at a lower, fixed interest rate in May 2012.
“This debt refinancing, coupled with our recently announced equity financing that resulted in $63.2 million of net proceeds, secures the strong balance sheet that we need to fully leverage the value-generating opportunities inherent in EXPAREL,” Scibatta said.
While Pacira executives and stockholders are looking forward to great success with EXPAREL, Scibatta admits the road to market hasn’t been without potholes. In fact, at times, “punny” enough, it’s been downright painful.
WAY BACK IN MARCH 2007…
In a very unlikely investment market, Scibatta explains, four venture capitalists pitched in $20 million for the operating business of SkyePharma PLC, a U.K. company with American assets in San Diego. What they really wanted was one particular asset – the DepoFoam drug delivery technology. By the end of that year, after investing an additional $65 million in the company, the VCs realized that while they had a real promising drug mechanism on their hands, they didn’t have the right management team in place to move forward.
Enter veteran pharma guy Dave Stack. Stack, who ran The Medicines Company from 2001-2004 and propelled the company’s stock through the roof – up 300 percent – came onboard as Pacira’s new CEO. Stack launched hospital-based drug Angiomax, which became a $500 million asset for The Medicines Company. Pacira was betting on him to do the same with its promising pain drug.
As Pacira was getting closer to hearing great new from pivotal trials, Stack wanted to build out his team. He hired Scibatta in 2008 and Pacira donned proverbial life vests and prepared for a fantastic journey – a.k.a. taking a drug to market!
Unfortunately, as Scibatta explained, the ship never left the dock. After learning that there were problems with the design of the clinical trial that resulted in less than favorable results, it was back to dry dock. “Pacira spent 2009 in survival mode,” Scibatta said. “We had to stop and figure out why things had not gone the way we wanted them to go.”
And that they did. During that year, the company made a couple of critical decisions that turned the ship around. First, Stack put together a team to really take look at what went wrong. Gary Patou, then the outside advisor to the team, came onboard as chief medical officer. At the same time, Scibatta was thinking positively.
“While Dave and Gary were figuring out how to fix what was wrong with the trial design, I put a financial plan together that I hoped would take us to the next milestone. Assuming that the drug was as viable as we thought it was, we needed to know how much cash we had, how many liabilities we had, how much it would cost to run another set of trials and where we would get that investment from to get to the next step.”
GETTING THE FINANCIAL HOUSE IN ORDER
Bottom line? Trials cost money and lots of it. Pacira had already spent that and more on the first set of trials that hadn’t panned out. “So we decided to go about it a bit differently. We were negotiating with third party vendors who ran clinical trials. We set up manufacturing in San Diego but made deals with people who agreed to accept delayed or reduced payments,” Scibatta recalled, noting that the inside team took a hit, as well. Staff was cut from 150 to 70 in 2009.
Plus, Pacira went back to the original well. It convinced the original investors to part with another $11 million, based on the fact that Gary Patou agreed to execute the second set of trials at the end of 2009.
While Scibatta is quick to point to Patou’s expertise as a main reason the investors stuck with Pacira, he also believes it was an innate belief in the drug. “We did some very deep due diligence to understand the opportunity that still existed with the drug. When we presented it to our investors, it was clear that they had an instinctive and educated belief that this drug technology works. They saw the value proposition from the start.”
Fast-forward to mid-2010. The company received positive drug trial results and by Q4 an NDA was already in draft form. But then, Scibatta recalled, came one of the biggest hurdles yet. Who would take the company, team and drug over the finish line?
“We considered all the possibilities. We talked with potential partners because we were considering whether it was more advantageous to let another company launch it after approval versus keeping it all in house and going it alone.”
CEO Stack had been there, done that. He was already building a commercial team at Pacira, largely the group that had launched the successful drug at The Medicines.
“It became very clear to all of us that any upfront money from a deal wasn’t going to be worth it for Pacira,” Scibatta said. “We knew that doing that would mean having to rely on the expertise of third parties of other companies to properly position the drug in the market place. We knew we didn’t need outside expertise at that point.
“We felt we had the best team in the world to do it so we decided to go it alone. But then we knew we had to fund the launch. So the only way to do that was to go public.”
Pacira’s February 2011 IPO wasn’t as good as the company had hoped. Scibatta and the Pacira team were hoping for a share price of $13 to $15; it priced at $7. “We knew that was the price of expensive capital in that marketplace and we knew it was a stepping stone to build value,” he said. “It was a means to an end – not an end itself.”
The IPO raised $42 million, far less than they hoped for. And then came more bad news, the July 2011 FDA approval date was pushed back to October. Ever confident, the Pacira team decided to look on the bright side; at least the FDA was seriously reviewing the application. On Oct. 28, 2011, Pacira finally received the FDA approval it had been working toward. And, then, of course, came the successful April 2012 launch.
PAIN NO MORE
Scibatta said things are looking fairly great these days. The investment community is talking to the medical community and EXPAREL is making quite a buzz. The drug is already being widely used throughout the Delaware Valley and in many New Jersey and New York hospitals. “Surgeons have been quick to embrace the concept of long-acting, single dose pain medication because we do considerable training with them to get them on board.”
Further, Pacira will have six quarters of sales behind it by the time its initial monthly principal obligation begins at the end of 2013. The reinforced balance sheet should also allow it to expand the indications for EXPAREL and pursue potential ex-U.S. partnerships from a position of strength.
And, Pacira has big plans for EXPAREL. The current clinical trial for the nerve block indication is quite exciting. It would allow anesthesiologists to use the drug under the guidance of ultrasound – opening up the potential beyond post surgical pain.
Beyond EXPAREL, Pacira has two assets in pipeline. Pacira owns all commercialization rights to DepoNSAID (in preclinical development for acute pain) and DepoMethotrexate (in preclinical development for rheumatoid arthritis and oncology).
“In the future, we may pursue research and development and/or commercial partnerships for these compounds,” the CFO concluded. “Both are exciting endeavors that could ultimately improve the standard of care for millions of patients.”
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