DOMA Perpetual Sends Letter to Board of Directors of Pacira Biosciences to Immediately Accelerate and Increase its Share Buyback Program to Enhance Return to Shareholders
Believes Pacira's Cash Balance of
Emphasizes the Current Stock Price Offers an Extraordinary Opportunity to Create Meaningful Return for Shareholders
The letter can be downloaded here
The full text of the letter follows:
To the Board Members of
In our view, Pacira's Board demonstrates an ineffective capital allocation strategy, maintains a dismal M&A track record and lacks strategic oversight. As shareholders, it is not our preference to discuss these issues publicly nor to endeavor to overhaul the Board. Present circumstances – including the dramatic collapse of Pacira's stock price and how the Company has handled patent litigation and its communication to shareholders regarding the situation thus far – have pushed us to publish this letter.
We believe this Board must re-focus on enhancing shareholder return, giving back hundreds of millions of dollars to shareholders in the form of accelerated buybacks while quickly expanding Exparel to blockbuster status. Additionally, the Board should pause all future M&A activity until proper shareholder return has been achieved. This Board's track record plainly illustrates why it should not be allowed to continue to roll the dice on any strategy that amounts to gambling with shareholder money.
Before considering any other capital-intensive activities, all cash flow should be utilized for buying back stock. After completing the currently approved
We do not perceive the current legal situation with the pessimism and dread favored by some analysts. Following a studied analysis, we believe the combined independent probabilities of Pacira winning at least one of its future patent cases and/or a potential settlement of the current case to be the most likely outcome and we maintain a high degree of confidence in Pacira's promising future. The fact that this view does not match the current market capitalization of the Company presents a large – and fleeting – opportunity to increase the speed and size of the currently approved buyback program.
If Management and the Board believe in the Company's IP – as recent stock purchases made by the CEO and Board members would indicatev – they should aggressively push to finish the
We believe there are several incorrect assumptions affecting Pacira's stock price. The market is factoring in a scenario in which the generic-drug developer is willing to risk hundreds of millions or billions of dollars to engage in a multi-year legal battle, develop production capabilities and attempt an "at risk" entrance into the market. An at risk entrance requires that same company to have cash reserves in the billions for potential legal liabilities in the event Pacira wins just one future patent case. The scenario also assumes providers will overwhelmingly choose to purchase a generic version of Exparel from a foreign company with no history of manufacturing or developing the drug at scale. Finally, this scenario requires Pacira to lose every single patent case in the pipeline, including appeals. Many of the patent cases still to be argued are for in-process patents, which have yet to be fully granted, as well as patent cases that will go to trial outside of
We believe Pacira's current stock price represents an enormous opportunity for shareholder return – a potential return so significant it could rival the rollout of the NOPAIN Act. Pacira has
To underscore the magnitude of the current opportunity of this stock price, let's look at the numbers. We can use
We expect Pacira to experience massive growth in sales and net income as Medicare coverage from the NOPAIN Act drives up access from 2.3 million annual procedures to about 6 millionxiv. Private insurance coverage, which typically follows Medicare by about twelve months, may arrive ahead of schedule; coverage for safe, effective, non-opioid pain management is good for patients, good for providers and an effective tool for curtailing the opioid epidemic that the US is working hard to overcomexv. Private insurance coverage of Exparel will open the door to an additional 12 million procedures annuallyxvi, a number that should fully impact the Company in 2026 and 2027. By the end of 2027, Pacira's revenues will likely have more than doubled – if not tripled – along with its net incomexvii. This would put the Company's net income to north of
Pacira's Board – despite its legal and fiduciary duty to its shareholders – has failed to generate any shareholder return. The fear in the market has provided the Company with an immense opportunity. It would be a critical mistake if Management and the Board do not buy back stock aggressively, finishing the approved
Management and this Board must act to take advantage of Pacira's irrationally depressed stock price, buying back as many shares as possible at the fastest pace allowed. Choosing to ignore the golden opportunity created by timing, share price, market fear and potential revenue growth would be a clear indication that we need to take a more active role.
Sincerely,
Pedro Escudero
CEO & CIO
Disclaimer
This letter has been prepared by
For the avoidance of doubt, this press release was not produced by any person that is affiliated with
Some of the materials in this press release contain forward-looking statements. All statements contained herein that are not clearly historical in nature or that necessarily depend on future events are forward-looking, and the words "anticipate," "believe," "expect," "potential," "could," "opportunity," "estimate," "plan," "once again," "achieve," and similar expressions are generally intended to identify forward-looking statements. The projected results and statements contained herein that are not historical facts are based on DOMA's current expectations, speak only as of the date of these materials and involve risks, uncertainties and other factors that may cause actual results, performances or achievements to be materially different from any future results, performances or achievements expressed or implied by such projected results and statements. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of DOMA.
i
ii Pacira Biosciences Company Filings
iii DOMA Perpetual Internal Calculations
iv Pacira Biosciences Jefferies Global Healthcare Conference 2024 Presentation
v Pacira Biosciences Company Filings
vi Pacira Biosciences Company Filings
vii
viii DOMA Perpetual Internal Calculations
ix DOMA Perpetual Internal Calculations
x Bloomberg L.P. (2024). Retrieved
xi DOMA Perpetual Internal Calculations
xii DOMA defines a "non-demanding PE" as a PE multiple that is below Pacira's historical average 1-year forward P/E ratio of 29x derived from data on Bloomberg
xiii DOMA Perpetual Internal Calculations
xiv Pacira Biosciences Jefferies Global Healthcare Conference 2024 Presentation
xv Centers for Disease Control and Prevention. (2024,
xvi
xvii DOMA Perpetual Internal Calculations
xviii DOMA Perpetual Internal Calculations
xix DOMA Perpetual Internal Calculations
xx DOMA defines a "non-demanding PE" as a PE multiple that is below Pacira's historical average 1-year forward P/E ratio of 29x derived from data on Bloomberg
xxi DOMA Perpetual Internal Calculations
Media Contact: eric@domaperpetual.com
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