XNAS:PCRX Pacira Pharmaceuticals Inc Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

XNAS:PCRX Fair Value Estimate
Premium
XNAS:PCRX Consider Buying
Premium
XNAS:PCRX Consider Selling
Premium
XNAS:PCRX Fair Value Uncertainty
Premium
XNAS:PCRX Economic Moat
Premium
XNAS:PCRX Stewardship
Premium
 

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 


 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended June 30, 2012

 

Commission File Number: 001-35060

 


 

PACIRA PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in its Charter)

 


 

Delaware

 

51-0619477

(State or Other Jurisdiction of
Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

 

5 Sylvan Way, Suite 100

Parsippany, New Jersey 07054

 (Address of Principal Executive Offices) (Zip Code)

 

(973) 254-3560

(Registrant’s Telephone Number, Including Area Code)

 


 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) x Yes o No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company x

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

 

As of August 1, 2012, 32,419,407 shares of the registrant’s common stock, $0.001 par value per share, were outstanding.

 

 

 



Table of Contents

 

PACIRA PHARMACEUTICALS, INC.

TABLE OF CONTENTS

 

 

 

Page

 

PART I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

 

Consolidated Balance Sheets

1

 

Consolidated Statements of Operations

2

 

Consolidated Statements of Comprehensive Loss

3

 

Consolidated Statement of Stockholders’ Equity

4

 

Consolidated Statements of Cash Flows

5

 

Condensed Notes to Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

Item 4.

Controls and Procedures

23

 

 

 

 

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

24

Item 1A.

Risk Factors

24

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

26

Item 3.

Defaults upon Senior Securities

26

Item 4.

Mine Safety Disclosures

26

Item 5.

Other Information

26

Item 6.

Exhibits

27

Signatures

 

28

 



Table of Contents

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

 

PACIRA PHARMACEUTICALS, INC.

CONSOLIDATED BALANCE SHEETS

 

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

June 30,

 

December 31,

 

 

 

2012

 

2011

 

 

 

 

 

(Note 2)

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

21,445

 

$

46,168

 

Restricted cash

 

1,847

 

1,299

 

Short-term investments

 

62,840

 

29,985

 

Accounts receivable, net of allowances

 

3,214

 

2,113

 

Inventories

 

9,299

 

1,245

 

Prepaid expenses and other current assets

 

1,431

 

1,839

 

Total current assets

 

100,076

 

82,649

 

Fixed assets, net

 

29,966

 

25,103

 

Goodwill

 

7,992

 

 

Intangibles, net

 

4,233

 

5,259

 

Other assets

 

586

 

479

 

Total assets

 

$

142,853

 

$

113,490

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

440

 

$

3,440

 

Accrued expenses

 

9,279

 

7,159

 

Current portion of royalty interest obligation

 

1,164

 

1,219

 

Current portion of deferred revenue

 

4,353

 

13,054

 

Current portion of long-term debt

 

 

7,039

 

Total current liabilities

 

15,236

 

31,911

 

Long-term debt

 

24,670

 

18,537

 

Royalty interest obligation

 

1,270

 

1,537

 

Deferred revenue

 

4,634

 

8,416

 

Contingent purchase liability

 

 

2,042

 

Other liabilities

 

2,538

 

2,778

 

Total liabilities

 

48,348

 

65,221

 

Commitments and contingencies

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock, par value $0.001; 5,000,000 shares authorized, none issued and outstanding

 

 

 

Common stock, par value $0.001 par value; 250,000,000 shares authorized, 32,420,472 shares issued and 32,419,407 shares outstanding at June 30, 2012; 25,340,103 shares issued and 25,339,038 shares outstanding at December 31, 2011

 

32

 

25

 

Additional paid-in capital

 

294,806

 

228,470

 

Accumulated deficit

 

(200,429

)

(180,239

)

Accumulated other comprehensive income

 

98

 

15

 

Treasury stock at cost, 1,065 shares

 

(2

)

(2

)

Total stockholders’ equity

 

94,505

 

48,269

 

Total liabilities and stockholders’ equity

 

$

142,853

 

$

113,490

 

 

See accompanying condensed notes to consolidated financial statements.

 

1



Table of Contents

 

PACIRA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Revenues:

 

 

 

 

 

 

 

 

 

Net product sales

 

$

4,981

 

$

1,469

 

$

5,427

 

$

3,185

 

Collaborative licensing and development revenue

 

6,600

 

1,283

 

13,090

 

2,493

 

Royalty revenue

 

763

 

884

 

1,631

 

1,822

 

Total revenues

 

12,344

 

3,636

 

20,148

 

7,500

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Cost of revenues

 

6,685

 

3,115

 

13,180

 

6,781

 

Research and development

 

1,872

 

4,586

 

3,166

 

8,382

 

Selling, general and administrative

 

10,413

 

4,466

 

21,565

 

7,988

 

Total operating expenses

 

18,970

 

12,167

 

37,911

 

23,151

 

Loss from operations

 

(6,626

)

(8,531

)

(17,763

)

(15,651

)

 

 

 

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

Interest income

 

68

 

37

 

131

 

65

 

Interest expense

 

(494

)

(676

)

(1,008

)

(3,157

)

Loss on early extinguishment of debt

 

(1,062

)

 

(1,062

)

 

Royalty interest obligation

 

(143

)

429

 

(425

)

118

 

Other, net

 

(39

)

(22

)

(63

)

88

 

Total other expense, net

 

(1,670

)

(232

)

(2,427

)

(2,886

)

Net loss

 

$

(8,296

)

$

(8,763

)

$

(20,190

)

$

(18,537

)

 

 

 

 

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per common share

 

$

(0.27

)

$

(0.51

)

$

(0.72

)

$

(1.36

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic and diluted

 

30,953,635

 

17,233,146

 

28,160,471

 

13,623,668

 

 

See accompanying condensed notes to consolidated financial statements.

 

2



Table of Contents

 

PACIRA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Net loss

 

$

(8,296

)

$

(8,763

)

$

(20,190

)

$

(18,537

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

Net unrealized gain on investments

 

81

 

 

83

 

 

Total other comprehensive income

 

81

 

 

83

 

 

Comprehensive loss

 

$

(8,215

)

$

(8,763

)

$

(20,107

)

$

(18,537

)

 

See accompanying condensed notes to consolidated financial statements.

 

3



Table of Contents

 

PACIRA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

For the Six Months Ended June 30, 2012

(Unaudited)

(In thousands)

 

 

 

Common Stock

 

Additional
Paid-In

 

Accumulated

 

Treasury

 

Accumulated
Other
Comprehensive

 

 

 

 

 

Shares

 

Amount

 

Capital

 

Deficit

 

Stock

 

Income

 

Total

 

Balances at December 31, 2011

 

25,339

 

$

25

 

$

228,470

 

$

(180,239

)

$

(2

)

$

15

 

$

48,269

 

Exercise of stock options

 

180

 

 

383

 

 

 

 

383

 

Stock-based compensation

 

 

 

1,751

 

 

 

 

1,751

 

Unrealized gain on short-term investments

 

 

 

 

 

 

83

 

83

 

Follow-on offering, net of issuance costs

 

6,900

 

7

 

62,848

 

 

 

 

62,855

 

Debt discount on issuance of warrants

 

 

 

1,354

 

 

 

 

1,354

 

Net loss

 

 

 

 

(20,190

)

 

 

(20,190

)

Balances at June 30, 2012

 

32,419

 

$

32

 

$

294,806

 

$

(200,429

)

$

(2

)

$

98

 

$

94,505

 

 

See accompanying condensed notes to consolidated financial statements.

 

4



Table of Contents

 

PACIRA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Unaudited)

(In thousands)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2012

 

2011

 

Operating activities:

 

 

 

 

 

Net loss

 

$

(20,190

)

$

(18,537

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

Depreciation and amortization

 

2,785

 

2,001

 

Amortization of unfavorable lease obligation and deferred financing costs

 

(116

)

21

 

Amortization of end of term fee and warrants

 

310

 

1,291

 

Loss on extinguishment of debt

 

1,062

 

 

Stock-based compensation

 

1,751

 

1,523

 

Changes in operating assets and liabilities:

 

 

 

 

 

Restricted cash

 

(548

)

(755

)

Accounts receivable, net of allowances

 

(1,101

)

136

 

Inventories

 

(8,054

)

(279

)

Prepaid expenses and other assets

 

430

 

(659

)

Accounts payable and accrued expenses

 

(1,256

)

77

 

Royalty interest obligation

 

(322

)

(892

)

Other liabilities

 

(42

)

696

 

Deferred revenue

 

(12,483

)

467

 

Net cash used in operating activities

 

(37,774

)

(14,910

)

Investing activities:

 

 

 

 

 

Purchase of fixed assets

 

(7,267

)

(2,035

)

Proceeds from sales of fixed assets

 

1

 

 

Net purchases of short-term investments

 

(32,772

)

(19,755

)

Payment of contingent consideration

 

(10,034

)

 

Net cash used in investing activities

 

(50,072

)

(21,790

)

Financing activities:

 

 

 

 

 

Proceeds from exercise of stock options

 

383

 

1

 

Proceeds from borrowings on long-term debt

 

27,500

 

 

Proceeds from offering, net

 

62,855

 

38,016

 

Repayment of debt

 

(26,250

)

 

Payment of debt issuance and financing costs

 

(1,365

)

 

Net cash provided by financing activities

 

63,123

 

38,017

 

Net (decrease) increase in cash and cash equivalents

 

(24,723

)

1,317

 

Cash and cash equivalents, beginning of period

 

46,168

 

26,133

 

Cash and cash equivalents, end of period

 

$

21,445

 

$

27,450

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

Cash paid for interest, including royalty interest obligation

 

$

2,282

 

$

2,360

 

Initial public offering costs paid in 2010

 

 

907

 

Non cash investing and financing activities:

 

 

 

 

 

Conversion of notes to common stock

 

 

51,222

 

Conversion of preferred stock to common stock

 

 

6

 

Value of warrants issued with debt

 

1,354

 

 

 

See accompanying condensed notes to consolidated financial statements.

 

5



Table of Contents

 

PACIRA PHARMACEUTICALS, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

(Unaudited)

 

Note 1—DESCRIPTION OF BUSINESS

 

Pacira Pharmaceuticals, Inc. and its subsidiaries (collectively, the “Company” or “Pacira”) is an emerging specialty pharmaceutical company focused on the development, commercialization and manufacture of proprietary pharmaceutical products, based on its proprietary DepoFoam extended release drug delivery technology, for use in hospitals and ambulatory surgery centers. The Company’s lead product EXPAREL®, which consists of bupivacaine encapsulated in DepoFoam, was approved by the United States Food and Drug Administration, or FDA, on October 28, 2011. The Company commercially launched EXPAREL in April 2012. DepoFoam is also the basis for the Company’s other FDA-approved commercial product, DepoCyt(e), which the Company manufactures for its commercial partners.

 

Pacira Pharmaceuticals, Inc. is the holding company for the California operating subsidiary of the same name, also referred to as PPI-California, which was acquired from Skyepharma Holding, Inc., or Skyepharma, in March 2007, referred to herein as the Acquisition.

 

Note 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation and Principles of Consolidation

 

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission, or SEC, for interim reporting. Pursuant to these rules and regulations, certain information and footnote disclosures normally included in complete annual financial statements have been condensed or omitted. Therefore, these interim financial statements should be read in conjunction with the audited annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, filed with the SEC on March 27, 2012.

 

The consolidated financial statements at June 30, 2012 and for the three and six months ended June 30, 2012 and 2011 are unaudited, but include all adjustments (consisting of only normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial information set forth herein in accordance with GAAP. The balance sheet as of December 31, 2011 has been derived from the audited financial statements included in the Form 10-K for that year. Certain reclassifications were made to conform to the current presentation. Specifically, for the three and six months ended June 30, 2011, the Company reclassified $0.2 million and $0.5 million, respectively, of stock-based compensation expense from selling, general and administrative expense to research and development expense. This reclassification had no impact on net loss or stockholders’ equity as previously reported. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

 

The results of operations for the interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. The Company has incurred losses and negative operating cash flow since inception and future losses are anticipated.

 

Liquidity

 

In April 2012, the Company sold 6,900,000 shares of common stock at a price of $9.75 per share in a registered public offering, which includes the underwriter’s exercise of the overallotment option. The Company raised approximately $62.9 million in net proceeds after deducting underwriting discounts and offering expenses.

 

Management believes that the Company’s existing cash and cash equivalents, short-term investments and revenue from product sales will be sufficient to enable the Company to meet its planned operating expenses, capital expenditure requirements and service its indebtedness through the next twelve months. However, changing circumstances may cause the Company to expend cash significantly faster than currently anticipated, and the Company may need to spend more cash than currently expected because of circumstances beyond its control. The Company expects to continue to incur substantial additional operating losses as it commercializes EXPAREL and develops and seeks regulatory approval for its product candidates.

 

Revenue Recognition

 

The Company sells EXPAREL mostly to wholesalers based on orders of the product from hospitals and other end user customers such as ambulatory surgery centers and doctors. The Company recognizes revenue when there is persuasive evidence that an arrangement exists, title has passed, collection is reasonably assured and the price is fixed or determinable. Sales to wholesalers provide for selling prices that are fixed on the date of sale. EXPAREL is delivered directly to the end user with the wholesaler never

 

6



Table of Contents

 

taking physical possession of the product. The Company records revenue at the time the product is delivered to the end-user.

 

At the time the Company recognizes revenue, it also records certain sales reserves and allowances as a reduction of revenue. These reserves and allowances include a prompt payment reserve, product return reserve, volume rebate discount, chargeback reserve and wholesaler service fee. Due to estimates and assumptions inherent in determining some of the sales reserves, the actual amount of volume rebates, chargebacks and returns may be different from estimates, at which time the Company would adjust reserves accordingly.

 

Prompt pay reserve

 

The prompt payment reserve is based upon discounts offered to wholesalers as an incentive to meet certain payment terms. The Company accounts for these discounts at the time the sale is made and reduces accounts receivable accordingly.

 

Returns reserve

 

The Company allows customers to return product that is damaged or received in error. In addition, the Company allows for product to be returned beginning six months prior to, and twelve months following product expiration. As EXPAREL is a new commercially available product, the Company is estimating its sales return reserve based on return history from other hospital-based products with similar distribution models, which management believes is the best estimate of the anticipated product to be returned. The returns reserve is recorded at the time of sale as a reduction to sales and an increase in returns liability.

 

Volume rebates and chargeback reserve

 

Volume rebates and chargeback reserve are based upon contracted discounts and promotional offers the Company provides to certain end users, including hospitals and ambulatory surgery centers, who are members of group purchasing organizations. The volume rebates and chargeback reserve are recorded as a reduction to sales and a customer payable and reduction to receivables, respectively.

 

Wholesaler fee payable

 

The Company’s customers include major and regional wholesalers with whom the Company has contracted a fee for service based on a percentage of sales.  This fee for service is recorded as a reduction to gross sales and a liability is established at the time the sale is recorded based on the contracted percentage.

 

Reserve for doubtful accounts

 

The Company evaluates accounts receivable to determine if a provision for an allowance for doubtful accounts is appropriate.  The Company’s sales to date are primarily to established customers. As of June 30, 2012, the accounts receivable was considered collectible and no allowance for doubtful accounts was recorded.

 

Concentration of Major Customers

 

The Company’s customers are its commercial, distribution and licensing partners and major and regional wholesalers. The table below includes the percentage of revenue comprised by the three largest customers in each year presented.

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

June 30,

 

June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Largest customer

 

48

%

45

%

58

%

43

%

Second largest customer

 

17

%

21

%

13

%

22

%

Third largest customer

 

11

%

19

%

10

%

19

%

 

 

76

%

85

%

81

%

84

%

 

No other individual customer accounted for more than 10% of the Company’s revenues for these periods. The Company is dependent on its commercial partners to market and sell DepoCyt(e), from which a substantial portion of its revenues is derived.

 

On January 3, 2012, EKR Therapeutics, Inc., or EKR, delivered a notice to the Company to terminate the licensing, distribution and marketing agreement relating to DepoDur. Pursuant to the terms of the agreement, the termination of the agreement is effective 180 days from the date of the notice, or July 1, 2012. The associated supply agreement also terminates concurrently with the termination of the licensing, distribution and marketing agreement. Both parties agreed to terminate the agreements effective June 8, 2012. As a result of the termination, the Company recognized any unamortized deferred revenue relating to the agreement on a straight-line basis through the termination date in June 2012. During the three and six months ended June 30, 2012, the Company recognized $5.8 million and $11.6 million, respectively, of milestone revenue relating to these EKR agreements in collaborative licensing and development revenue on the consolidated statements of operations.

 

On June 29, 2012, the Company received a notice of termination from Novo Nordisk AS, or Novo, of the Development and License Agreement, dated January 14, 2011.  Pursuant to the terms of the agreement, the termination of the agreement is effective 60 days from the date of the notice, or August 28, 2012. Under the agreement, the Company granted exclusive rights to Novo under

 

7



Table of Contents

 

certain of the Company’s patents and know-how to develop, manufacture and commercialize formulations of a Novo proprietary drug using the Company’s DepoFoam drug delivery technology. The agreement was terminated due to Novo’s decision to discontinue development of the proprietary drug subject to the agreement. As a result of the termination, the Company is recognizing any unamortized deferred revenue relating to the agreement on a straight-line basis through the termination date in August 2012.

 

Note 3— FINANCIAL INSTRUMENTS

 

Fair Value Measurements

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction. To increase consistency and comparability in fair value measurements, the Financial Accounting Standards Board, or FASB, established a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels are:

 

·            Level 1—Values are unadjusted quoted prices for identical assets and liabilities in active markets.

 

·            Level 2—Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument.

 

·            Level 3—Certain inputs are unobservable (supported by little or no market activity) and significant to the fair value measurement.

 

The carrying value of financial instruments including cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate their respective fair values due to the short-term maturities of these instruments and debts. The fair value of the Company’s long-term debt is calculated using a discounted cash flow analysis factoring in current market borrowing rates for similar types of borrowing arrangements under a similar credit profile. The carrying amount and fair value of the Company’s long-term debt is as follows (in thousands):

 

 

 

Carrying

 

Fair Value Measurements Using

 

Financial Liabilities

 

Value

 

Level 1

 

Level 2

 

Level 3

 

June 30, 2012

 

 

 

 

 

 

 

 

 

Long-term debt- current and long-term *

 

$

27,500

 

$

 

$

27,500

 

$

 

December 31, 2011

 

 

 

 

 

 

 

 

 

Long-term debt- current and long-term

 

$

26,250

 

$

 

$

27,929

 

$

 

 


*The carrying value of the long-term debt at June 30, 2012 approximates its fair value since the interest rate approximates the current market rate for similar instruments.

 

Short-term investments consist of investment grade commercial paper, asset-backed securities collateralized by credit card receivables, and corporate bonds with initial maturities of greater than three months at the date of purchase but less than one year. The net unrealized gains (losses) from the Company’s short-term investments are captured in other comprehensive gain (loss). All of the Company’s short-term investments are classified as available for sale investments and determined to be Level 2 instruments. The fair value of the commercial paper is measured based on a standard industry model that uses the 3-month Treasury bill rate as an observable input. The fair value of the corporate bonds and asset-backed securities is principally measured or corroborated by trade data for identical issues or that of comparable securities in which related trading activity is not sufficiently frequent to be considered a Level 1 input. At June 30, 2012, the Company had $62.8 million invested in short-term investments which were rated A or better by Standard & Poor’s and had maturities ranging from 122 to 356 days from date of purchase.

 

The following summarizes the Company’s short-term investments at June 30, 2012 and December 31, 2011 (in thousands):

 

8



Table of Contents

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair Value

 

June 30, 2012

 

Cost

 

Gains

 

Losses

 

(Level 2)

 

Debt securities:

 

 

 

 

 

 

 

 

 

Commercial Paper

 

$

35,040

 

$

93

 

$

 

$

35,133

 

Corporate Bonds

 

21,529

 

4

 

(4

)

21,529

 

Asset-backed Securities

 

6,173

 

5

 

 

6,178

 

Total

 

$

62,742

 

$

102

 

$

(4

)

$

62,840

 

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair Value

 

December 31, 2011

 

Cost

 

Gains

 

Losses

 

(Level 2)

 

Debt securities:

 

 

 

 

 

 

 

 

 

US Treasury Securities

 

$

1,000

 

$

 

$

 

$

1,000

 

Commercial Paper

 

11,476

 

23

 

 

11,499

 

Corporate Bonds

 

17,494

 

2

 

(10

)

17,486

 

Total

 

$

29,970

 

$

25

 

$

(10

)

$

29,985

 

 

Credit Risk

 

Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable. The Company maintains its cash and cash equivalents with high-credit quality financial institutions. At times, such amounts may exceed Federal insured limits.

 

As of June 30, 2012, three customers accounted for 38%, 24% and 17% of the Company’s accounts receivable. As of December 31, 2011, two customers accounted for 56% and 41% of the Company’s accounts receivable.  No other individual customer accounted for more than 10% of the Company’s accounts receivable for these periods.

 

Note 4— INVENTORIES

 

The components of inventories were as follows (in thousands):

 

 

 

June 30,

 

December 31,

 

 

 

2012

 

2011

 

Raw materials

 

$

3,339

 

$

862

 

Work-in-process

 

1,432

 

96

 

Finished goods

 

4,528

 

287

 

Total

 

$

9,299

 

$

1,245

 

 

Note 5—FIXED ASSETS

 

Fixed assets, summarized by major category, consist of the following (in thousands):

 

 

 

June 30,

 

December 31,

 

 

 

2012

 

2011

 

Machinery and laboratory equipment

 

$

12,481

 

$

12,188

 

Computer equipment and software

 

1,405

 

1,133

 

Office furniture and equipment

 

430

 

352

 

Leasehold improvements

 

6,135

 

6,056

 

Construction in progress

 

19,656

 

13,656

 

Total

 

40,107

 

33,385

 

Less accumulated depreciation

 

(10,141

)

(8,282

)

Fixed assets, net

 

$

29,966

 

$

25,103

 

 

9



Table of Contents

 

Depreciation expense was $0.9 million and $0.4 million for the three months ended June 30, 2012 and 2011, respectively. Depreciation expense was $1.8 million and $0.9 million for the six months ended June 30, 2012 and 2011, respectively. For the three and six months ended June 30, 2012, the Company capitalized interest of $0.5 million and $0.9 million, respectively, on the construction of its manufacturing sites. Capitalized interest was $0.3 million during each of the three and six months ended June 30, 2011.

 

Note 6—GOODWILL AND INTANGIBLE ASSETS

 

The Company applies Accounting Standards Codification (“ASC”) Topic 350, Intangibles - Goodwill and Other Intangible Assets, to record goodwill and intangible assets.  In accordance with ASC 350, certain intangible assets are to be assessed periodically for impairment using fair value measurement techniques. Goodwill is tested for impairment on an annual basis as of the end of the Company’s fiscal year, or more frequently when impairment indicators arise. The Company evaluates the recoverability of intangible assets periodically and takes into account events and circumstances which indicate that impairment exists.

 

The Company’s goodwill as of June 30, 2012 and December 31, 2011 was $8.0 million and $0, respectively.  Goodwill arose from the triggering in April 2012 of a contingent milestone payment to Skyepharma in connection with the Acquisition. The Acquisition was accounted for under Statement of Financial Accounting Standards 141, Accounting for Business Combinations, which was the effective GAAP at the Acquisition date.  In connection with the Acquisition, the Company agreed to certain earn-out payments based on a percentage of net sales of EXPAREL collected and certain other yet-to-be-developed products, as well as milestone payments for EXPAREL as follows:

 

(a)          $10.0 million upon first commercial sale in the United States;

(b)          $4.0 million upon first commercial sale in a major EU country (United Kingdom, France, Germany, Italy and Spain);

(c)          $8.0 million when annual net sales collected reach $100.0 million;

(d)          $8.0 million when annual net sales collected reach $250.0 million; and

(e)          $32.0 million when annual net sales collected reach $500.0 million.

 

The first contingency was resolved in April 2012 resulting in a $10.0 million payment to Skyepharma. The Company recorded this payment net of the $2.0 million contingent consideration liability recognized at the time of the Acquisition resulting in $8.0 million recorded as goodwill. Additionally, as of June 30, 2012, the Company also recorded less than $0.1 million as goodwill for the percentage payments on net sales of EXPAREL collected. Any remaining earn-out payments will also be treated as additional cost of the Acquisition and, therefore, recorded as goodwill if and when each contingency is resolved.

 

Intangible assets are summarized as follows (in thousands):

 

 

 

June 30,

 

December 31,

 

 

 

 

 

2012

 

2011

 

Estimated Useful Life

 

Core Technology

 

 

 

 

 

 

 

Gross amount

 

$

2,900

 

$

2,900

 

9 years

 

Accumulated amortization

 

(1,691

)

(1,530

)

 

 

Net

 

1,209

 

1,370

 

 

 

Developed Technology

 

 

 

 

 

 

 

Gross amount

 

11,700

 

11,700

 

7 years

 

Accumulated amortization

 

(8,775

)

(7,939

)

 

 

Net

 

2,925

 

3,761

 

 

 

Trademarks and trade names

 

 

 

 

 

 

 

Gross amount

 

400

 

400

 

7 years

 

Accumulated amortization

 

(301

)

(272

)

 

 

Net

 

99

 

128

 

 

 

Intangible assets, net

 

$

4,233

 

$

5,259

 

 

 

 

Amortization expense for intangibles was $0.5 million and $0.6 million for the three months ended June 30, 2012 and 2011, respectively. Amortization expense for intangibles was $1.0 million and $1.1 million for the six months ended June 30, 2012 and 2011, respectively.

 

The approximate amortization expense for intangibles, all of which are subject to amortization on a straight-line basis, is as

 

10



Table of Contents

 

follows (in thousands):

 

 

 

Core
Technology

 

Developed
Technology

 

Trademarks
and
Tradenames

 

Total

 

2012 (remaining six months)

 

$

161

 

$

836

 

$

29

 

$

1,026

 

2013

 

322

 

1,671

 

57

 

2,050

 

2014

 

322

 

418

 

13

 

753

 

2015

 

322

 

 

 

322

 

2016

 

82

 

 

 

82

 

Total

 

$

XNAS:PCRX Pacira Pharmaceuticals Inc Quarterly Report 10-Q Filling

Pacira Pharmaceuticals Inc XNAS:PCRX Stock - Get Quarterly Report SEC Filing of Pacira Pharmaceuticals Inc XNAS:PCRX stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

XNAS:PCRX Pacira Pharmaceuticals Inc Quarterly Report 10-Q Filing - 6/30/2012
Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol |  Title Star Rating |  Category |  Total Assets |  Top Holdings |  Top Sectors |  Symbol |  Name Title |  Date |  Author |  Collection |  Interest |  Popularity Topic |  Sector |  Key Indicators |  User Interest |  Market Cap |  Industry Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol / Ticker |  Title Star Rating |  Category |  Total Assets |  Symbol / Ticker |  Name Title |  Date |  Author |  Collection |  Popularity |  Interest Title |  Date |  Company |  Symbol |  Interest |  Popularity Topic |  Sector |  Key Indicators |  User Interest |  Market Cap |  Industry Name |  Ticker |  Popularity |  Our Choices |  Most Recent Title |  Date |  Company |  Symbol |  Interest |  Popularity

Previous: XNAS:PCRX Pacira Pharmaceuticals Inc Quarterly Report 10-Q Filing - 3/31/2012  |  Next: XNAS:PCYC Pharmacyclics Inc Annual Report 10-K Filing - 6/30/2012