In what some are describing as a monumental climb, Pacira Pharmaceuticals Inc (NASDAQ: PCRX) saw gains in the amount of 12.55% by the closing bell. The gains came after a price target increase at H.C. Wainwright & Co. caught the attention of investors. The real question is, “Did H.C. Wainwright get it right?” While the answer is yet to be seen, there is a real arguement that the company’s flagship treatment may face serious competition relatively soon. Let’s dig in:

H.C. Wainwright Increases PCRX Price Target

H.C. Wainwrights news is the only news that appeared today. So it’s safe to say that this was the cause of the gains. In a note, the firm increased Pacira’s price target from $45.00 per share to $48.00 per share, reaffirming their buy stance on the stock. This implies a potential upside of 32% when compared to the closing price on the stock as of July 24, 2018. The firm believes that growth in Exparel sales will continue, leading to continued growth in revenue and earnings; and therefore, the value fo the stock.

About Exparel

Exparel is the flagship product at Pacira Pharmaceuticals. The treatment has been FDA approved as a pain reliever in the post-surgical setting. The product also generates a massive amount of money for PCRX and its investors. In 2017, it generated nearly $290 million, and that number is projected to continue growing. That is, should competition not come in and put a damper on things. Which leads us to:

There’s A Potential Threat To Exparel On The Horizons

While PCRX has a smash hit treatment in the area of acute pain, some are concerned that this flagship product will be threatened soon. That’s because Heron Therapeutics (NASDAQ: HRTX) has what could be a competing treatment in development. Unfortunately for Pacira, that treatment may be better.

In fact, recently, the United States Food and Drug Administration granted HTX-011, Heron’s acute pain candidate, Breakthrough Therapy designation. As a result, many are expecting that the New Drug Application surrounding the treatment isn’t far off. Considering the Breakthrough Therapy designation, the treatment could be approved in  matter of months, and by this time next year, it could be competing with Exparel.

Is This Threat A Real Concern?

Any threat to a flagship product is worth paying attention to, but is HTX-011 really a threat to Pacira and its flagship product? There are a few things to think about here:

It’s Not Just A Flagship Treatment, It’s The Only Treatment – One thing to consider here is that if HTX-011 really poses a threat to Exparel, it poses a threat to the company as a whole. While the company has a proprietary DepoFoam delivery system, that system revolves around Exparel. If a more effective, lower cost, and safer treatment were to come along, reductions in Exparel sales could be damning for PCRX.

HTX-011 Data Is Promising – The data produced through clinical trials surrounding HTX-011 has been overwhelmingly promising. The data suggests that the treatment may be supperior to Exparel, which could become a problem. The data also has led to a clear path to FDA approval being outlined. Considering the strong data, Breakthrough Therapy designation, and expert opinions surrounding HTX-011, I don’t think it’s a question of whether or not the treatment will be approved, but when this catalystic event will take place.

The Market Is Massive – Perhaps, there is one saving grace for PCRX here. With millions of patients needing treatment for acute pain every year, the bulls argue that regardless of what seems like an indefinite coming competitive force, the market is big enough to share.

Is PCRX A Good Buy At These Levels?

While H.C. Wainwright seems to have a bullish opinion, that opinion is not shared here. The stock has fallen around 15% since the beginning of the year, and that’s counting in today’s gains. The declines aren’t just a strange market trend. The reality is that while the acute pain market is a big one, a strong competitor does threaten the sales growth the company is currently experiencing. Since Exparel isn’t just the flagship product, but the only commercial product at the company, a threat to its sales is a major red flag. Although I have great respect for H.C. Wainwright and its staff, everyone gets it wrong at some point. I believe this is one of those points for the firm.

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