Executive Summary / Key Takeaways

• Pacira BioSciences is executing a focused 5x30 strategy aimed at accelerating growth in its commercial non-opioid pain portfolio (EXPAREL, ZILRETTA, iovera) and advancing a novel pipeline, positioning the company as a leader in musculoskeletal pain and adjacencies.
• The recent settlement of EXPAREL patent litigation provides significant long-term exclusivity visibility through 2039, de-risking the company's primary cash flow driver and supporting the rationale for an increased $300 million share repurchase authorization.
• Implementation of the NOPAIN Act in 2025 offers a substantial market opportunity for EXPAREL and iovera in outpatient settings with separate CMS reimbursement (ASP+6% for EXPAREL, up to $255 add-on for iovera), though meaningful uptake is expected to ramp in the second half of the year.
• The acquisition of GQ Bio Therapeutics adds the promising HCAd gene therapy platform and preclinical assets, bolstering the pipeline (led by PCRX-201 for OA) and justifying increased R&D investment aimed at developing potentially transformative therapies for prevalent diseases.
• Despite a Q1 2025 revenue increase of only 1% year-over-year, driven by EXPAREL volume growth but offset by ZILRETTA sales impacted by sales force transition, management reiterates full-year 2025 guidance ($725M - $765M revenue, 76%-78% non-GAAP gross margin) based on anticipated NOPAIN ramp and strategic investments yielding returns.

A New Chapter: Pacira's Strategic Pivot for Growth

Pacira BioSciences, Inc. operates at the forefront of non-opioid pain management and regenerative health, a critical area addressing the ongoing opioid crisis and the significant unmet needs of patients suffering from acute and chronic pain. Founded in 2006, the company established its initial market presence with the 2012 launch of EXPAREL, a long-acting local analgesic leveraging its proprietary multivesicular liposome (pMVL) drug delivery technology. Subsequent acquisitions of MyoScience (iovera) and Flexion Therapeutics (ZILRETTA, PCRX-201) expanded its portfolio, creating a multi-product offering targeting different facets of the pain management pathway.

The company is currently undergoing a strategic transformation, articulated through its "5x30" plan. This ambitious framework sets five key objectives to be achieved by 2030: benefiting over 3 million patients annually, achieving double-digit product revenue CAGR, expanding gross margins by 5 percentage points over 2024, developing five novel clinical pipeline programs, and establishing five clinical or commercial partnerships. This strategy represents a dual focus: accelerating growth in the established commercial business and building an innovative pipeline, aiming to position Pacira as a leader in musculoskeletal pain and adjacent therapeutic areas.

Central to Pacira's differentiated approach is its pMVL technology. This platform encapsulates drugs without altering their molecular structure, enabling controlled release over an extended period. For EXPAREL, this translates to long-lasting local or regional analgesia, offering a non-opioid alternative for postsurgical pain management. Clinical data highlight its ability to significantly reduce opioid usage and improve pain control compared to traditional bupivacaine. The technology's tangible benefits include providing up to 72 hours of pain control from a single dose, facilitating multimodal pain regimens, and supporting faster recovery times. This technological edge is a key component of EXPAREL's value proposition to both clinicians and healthcare systems.

In the competitive landscape, Pacira faces a diverse set of players. Direct competitors include companies like Heron Therapeutics (HRTX) with Zynrelef, another non-opioid local anesthetic, and Collegium Pharmaceutical (COLL), which offers both abuse-deterrent opioids and non-opioid candidates. Larger pharmaceutical companies like Johnson & Johnson (JNJ) have broad pain management portfolios, while generic manufacturers like Teva Pharmaceutical Industries (TEVA) offer lower-cost alternatives, including standard bupivacaine formulations.

Compared to Heron Therapeutics, Pacira's EXPAREL holds a larger market share in the non-opioid injectable space. While HRTX's Zynrelef is also a long-acting option, EXPAREL's established market penetration, particularly in ambulatory surgery centers, and its broader label for various infiltration and nerve block procedures provide a competitive advantage. Pacira's Q1 2025 EXPAREL sales of $136.5 million significantly outpaced HRTX's recent Zynrelef revenue (estimated around $30.5 million in Q3 2024). However, HRTX has demonstrated agility in product launches.

Against Collegium Pharmaceutical, Pacira differentiates itself through its exclusive focus on non-opioid therapies and its unique pMVL technology, which enables extended release for both analgesics (EXPAREL) and corticosteroids (ZILRETTA). While COLL has a presence in pain management, including long-acting formulations, its portfolio includes opioids, which face increasing regulatory and market pressure. Pacira's strategy aligns more directly with the secular trend towards opioid-sparing interventions. Financially, Pacira's gross margins (81% in Q1 2025) are comparable to COLL's (around 90%), but Pacira's operating and net margins have been impacted by significant R&D and SG&A investments, whereas COLL has demonstrated moderate profitability.

Compared to large players like Johnson & Johnson, Pacira operates in a more specialized niche. While J&J has vast resources and a broad portfolio, Pacira's proprietary drug delivery technology provides a specific competitive moat in the long-acting injectable space. J&J's scale allows for potential cost advantages in manufacturing and distribution, but Pacira's focused R&D on its platform aims for efficiency in its specific technology.

Generic manufacturers like Teva pose a pricing threat with standard bupivacaine. However, EXPAREL's extended duration of action and clinical benefits differentiate it from these short-acting alternatives, supporting a premium price point. The recent patent settlement provides a significant barrier against generic liposomal bupivacaine entry for the foreseeable future.

Pacira's competitive positioning is further influenced by customer dynamics, particularly its reliance on a limited number of wholesalers (three largest accounted for 80% of revenue in Q1 2025) and the complex decision-making processes within hospitals and ambulatory surgery centers. Strategic initiatives like GPO partnerships and direct engagement with healthcare systems are crucial for navigating these dynamics and expanding market access.

Strategic Execution and Recent Performance

The first quarter of 2025 demonstrated Pacira's ongoing strategic execution, albeit with mixed financial results reflecting transitional impacts. Total revenue increased by a modest 1% year-over-year to $168.9 million. This was primarily driven by a 3% increase in EXPAREL gross vial volume, partially offset by a shift in product mix and higher sales-related allowances stemming from expanded GPO contracting efforts. EXPAREL net sales specifically grew 3% to $136.5 million. Management highlighted encouraging early indicators for EXPAREL, including a 7% increase in average daily sales and volumes (adjusted for selling days) and over 30% growth in new and reactivated accounts across sites of care, signaling initial traction from NOPAIN readiness efforts.

ZILRETTA sales, however, saw a 10% decline year-over-year to $23.3 million, attributed by management largely to the restructuring of the field-based sales team in late 2024. This transition, aimed at creating a more focused sales force structure for each product, temporarily impacted ZILRETTA's performance as it is considered promotionally sensitive. Iovera net sales saw slight growth of 2% to $5.1 million.

Despite the mixed top-line performance, profitability showed improvement. Non-GAAP gross margin expanded significantly to 81% in Q1 2025 from 72% in the prior year period. This was primarily driven by lower inventory reserves for ZILRETTA and EXPAREL and improved product costs resulting from higher manufacturing volumes. A favorable court ruling in April 2025, eliminating a low single-digit royalty obligation to the Research Development Foundation (RDF) for EXPAREL manufactured under the enhanced process, is expected to further benefit future EXPAREL gross margins.

Operating expenses increased year-over-year, reflecting strategic investments. Non-GAAP R&D expense rose 39% to $23.1 million, driven by startup costs for the PCRX-201 Phase 2 ASCEND trial, ongoing clinical trial enrollment for ZILRETTA shoulder and iovera spasticity, and increased R&D headcount. Non-GAAP SG&A expense increased 20% to $76.2 million, reflecting investments in the commercial, medical, and market access organizations, targeted marketing initiatives (including planned DTC pilots), and sales force expansion. These investments are aligned with the 5x30 strategy and are intended to support future growth acceleration, particularly leveraging the NOPAIN opportunity.

A significant development impacting the financial outlook and strategic confidence was the settlement of the EXPAREL patent infringement litigation with the ANDA filers (eVenus, Jiangsu Hengrui, Fresenius) in April 2025. This agreement establishes a clear exclusivity runway for EXPAREL in the U.S., with volume-limited generic entry permitted starting in early 2030 and unlimited entry from 2039. While the settlement involved a $7.0 million payment to the ANDA filers, it resolves a major uncertainty and provides long-term visibility for EXPAREL's cash flow generation potential, which management expects to be significant for the next 14 years. This resolution, coupled with the favorable RDF royalty ruling, underpins the company's confidence and supports the recently authorized $300 million share repurchase program, signaling management's belief that the current valuation presents an attractive opportunity.

The acquisition of the remaining 81% of GQ Bio Therapeutics in February 2025 for $30.3 million (net) plus contingent compensation was a key step in advancing the pipeline. This transaction brought the novel HCAd gene therapy platform, a preclinical asset portfolio, and R&D talent in-house. It also eliminated up to $64 million in potential future milestone and royalty payments, including a $4.5 million milestone that would have been due upon initiating the PCRX-201 Phase 2 trial. The acquisition resulted in a preliminary goodwill of $20.8 million and a realized gain of $4.2 million on the company's prior equity investment in GQ Bio.

Outlook and Future Catalysts

Pacira reiterates its full-year 2025 guidance, projecting total revenue between $725 million and $765 million. This outlook is based on the expectation that revenue growth will accelerate throughout the year, driven by increasing EXPAREL utilization as the market adapts to the NOPAIN Act's separate reimbursement policies. While early indicators are positive, management anticipates a more meaningful impact from NOPAIN in the second half of 2025 as customers integrate the new J code and reimbursement processes. The guidance also factors in the anticipated return to growth for ZILRETTA following the sales force transition and continued performance from iovera, bolstered by its own separate CMS reimbursement code under NOPAIN (C-9809), providing an add-on payment of up to $255.

Non-GAAP gross margins are guided to be between 76% and 78% for the full year, reflecting the benefits of manufacturing efficiencies and the elimination of the RDF royalty, although management acknowledges potential quarter-to-quarter variability. Non-GAAP R&D expense is projected between $90 million and $105 million, representing a significant increase driven by investments in the pipeline, particularly the PCRX-201 program and the HCAd platform. Non-GAAP SG&A expense is guided between $290 million and $320 million, reflecting continued investment in commercial capabilities and targeted marketing initiatives.

The company's liquidity position remains strong, with $493.6 million in cash and investments as of March 31, 2025, and positive operating cash flow ($35.5 million in Q1 2025). This financial strength, bolstered by the long-term cash flow visibility from EXPAREL, provides the flexibility to fund strategic investments, manage debt obligations (including the $202.5 million principal outstanding on the 0.75% convertible senior notes due August 2025 and the 2.12% convertible senior notes due May 2029), and execute the share repurchase program.

Key catalysts for the remainder of 2025 and 2026 include:

• Increasing uptake and financial impact from the NOPAIN Act implementation for EXPAREL and iovera.
• Potential signing of the third and final GPO partnership.
• Readout of 3-year follow-up data from the PCRX-201 Phase 1 study (2025).
• Presentation of PCRX-201 immunogenicity data (2025), providing insights into redosing potential.
• Advancement of the PCRX-201 Phase 2 ASCEND study, with top-line results from Part A expected late 2026.
• Top-line results from the ZILRETTA Phase 3 shoulder OA study (2026).
• Top-line results from the iovera spasticity registration study (2026).
• Potential approval and launch of the new iovera SmartTip for chronic low back pain.
• Identification and potential advancement of new preclinical candidates from the acquired GQ Bio portfolio and HCAd platform.
• Execution of the authorized share repurchase program, returning capital to shareholders.

Risks to the outlook include the pace of NOPAIN adoption by healthcare systems, potential impacts from global economic conditions (inflation, interest rates), ongoing legal matters (Argentum reexamination, securities class action), reliance on key products and suppliers, and the successful execution of clinical trials and pipeline development. However, the settlement of the primary patent litigation significantly reduces a major overhang.

Conclusion

Pacira BioSciences is embarking on a transformative phase, leveraging its established commercial success and proprietary technologies to pursue accelerated growth and pipeline innovation. The recent settlement of the EXPAREL patent litigation provides a crucial layer of certainty, securing the company's primary revenue stream for the long term and enabling a focus on strategic expansion. The implementation of the NOPAIN Act presents a significant market opportunity, and Pacira's investments in its commercial infrastructure and market access initiatives are designed to capitalize on this tailwind, although the pace of adoption will be a key factor to monitor. Concurrently, the acquisition of the HCAd platform and the advancement of the PCRX-201 program signal a commitment to developing novel, potentially disease-modifying therapies for large, underserved markets like osteoarthritis. While increased operating expenses reflect these strategic investments, the company's solid financial position and positive cash flow generation provide the necessary resources. For investors, the narrative centers on the successful execution of the 5x30 plan, translating market opportunities and pipeline potential into sustainable revenue growth, margin expansion, and ultimately, enhanced shareholder value, underpinned by the de-risked EXPAREL franchise and the promise of the innovative HCAd platform.