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Pacira(PCRX) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and related disclosures for the reporting period Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements and comprehensive notes for the quarter and six months ended June 30, 2025 Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Cash and cash equivalents | $300,484 | $276,774 | +$23,710 | | Short-term available-for-sale investments | $145,380 | $207,841 | -$62,461 | | Accounts receivable, net | $114,367 | $113,304 | +$1,063 | | Inventories, net | $148,163 | $125,282 | +$22,881 | | Total current assets | $745,613 | $745,130 | +$483 | | Goodwill | $20,300 | $— | +$20,300 | | Total assets | $1,537,262 | $1,553,516 | -$16,254 | | Total current liabilities | $313,164 | $309,920 | +$3,244 | | Total liabilities | $779,495 | $775,168 | +$4,327 | | Total stockholders' equity | $757,767 | $778,348 | -$20,581 | - Total Assets decreased slightly from $1,553,516 thousand at December 31, 2024, to $1,537,262 thousand at June 30, 20259 - Goodwill increased significantly from $0 to $20,300 thousand, primarily due to the GQ Bio Acquisition9 Condensed Consolidated Statements of Operations This statement details the company's revenues, expenses, and net income or loss over specific reporting periods | Metric (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net product sales | $180,347 | $176,387 | $347,941 | $342,211 | | Total revenues | $181,099 | $178,023 | $350,022 | $345,140 | | Cost of goods sold | $40,866 | $44,262 | $75,172 | $91,678 | | Research and development | $28,200 | $20,338 | $53,893 | $38,576 | | Selling, general and administrative | $88,578 | $68,126 | $175,354 | $140,152 | | Total operating expenses | $172,600 | $149,783 | $339,533 | $303,688 | | Income from operations | $8,499 | $28,240 | $10,489 | $41,452 | | Total other (expense) income, net | $(10,426) | $8,344 | $(3,710) | $8,772 | | (Loss) income before income taxes | $(1,927) | $36,584 | $6,779 | $50,224 | | Income tax expense | $(2,920) | $(17,698) | $(6,814) | $(22,359) | | Net (loss) income | $(4,847) | $18,886 | $(35) | $27,865 | | Basic net (loss) income per common share | $(0.11) | $0.41 | $(0.00) | $0.60 | | Diluted net (loss) income per common share | $(0.11) | $0.39 | $(0.00) | $0.58 | - The company reported a net loss of $(4,847) thousand for the three months ended June 30, 2025, compared to a net income of $18,886 thousand for the same period in 202412 - For the six months ended June 30, 2025, the net loss was $(35) thousand, a significant decrease from $27,865 thousand net income in 202412 - Income from operations decreased substantially by 70% to $8,499 thousand for Q2 2025 (from $28,240 thousand in Q2 2024) and by 75% to $10,489 thousand for the six months ended June 30, 2025 (from $41,452 thousand in 2024)12 Condensed Consolidated Statements of Comprehensive (Loss) Income This statement presents net income or loss alongside other comprehensive income or loss components | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income | $(4,847) | $18,886 | $(35) | $27,865 | | Net unrealized loss on investments, net of tax | $(45) | $(52) | $(131) | $(160) | | Foreign currency translation adjustments | $2,756 | $5 | $3,850 | $18 | | Total other comprehensive income (loss) | $2,711 | $(47) | $3,719 | $(142) | | Comprehensive (loss) income | $(2,136) | $18,839 | $3,684 | $27,723 | - The company reported a comprehensive loss of $(2,136) thousand for the three months ended June 30, 2025, a significant decline from a comprehensive income of $18,839 thousand in the prior year period15 - Total other comprehensive income was $2,711 thousand for Q2 2025, primarily driven by foreign currency translation adjustments of $2,756 thousand, contrasting with a loss of $(47) thousand in Q2 202415 Condensed Consolidated Statements of Stockholders' Equity This statement outlines changes in the company's equity accounts over specific reporting periods | Metric (in thousands) | December 31, 2024 | June 30, 2025 | | :-------------------- | :---------------- | :------------ | | Common Stock | $47 | $48 | | Treasury Stock | $(25,121) | $(75,515) | | Additional Paid-In Capital | $1,009,435 | $1,035,563 | | Accumulated Deficit | $(206,356) | $(206,391) | | Accumulated Other Comprehensive Income | $343 | $4,062 | | Total Stockholders' Equity | $778,348 | $757,767 | - Total Stockholders' Equity decreased from $778,348 thousand at December 31, 2024, to $757,767 thousand at June 30, 202520 - Treasury Stock increased significantly from $(25,121) thousand at December 31, 2024, to $(75,515) thousand at June 30, 2025, reflecting substantial share repurchases20 Condensed Consolidated Statements of Cash Flows This statement summarizes the cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income | $(35) | $27,865 | | Net cash provided by operating activities | $47,471 | $102,337 | | Net cash provided by (used in) investing activities | $36,534 | $(30,745) | | Net cash (used in) provided by financing activities | $(60,499) | $22,163 | | Net increase in cash and cash equivalents | $23,710 | $93,755 | | Cash and cash equivalents, end of period | $300,484 | $247,053 | - Net Cash Provided by Operating Activities decreased significantly to $47,471 thousand for the six months ended June 30, 2025, from $102,337 thousand in the prior year period23 - Net Cash Provided by (Used in) Investing Activities shifted from a net outflow of $(30,745) thousand in 2024 to a net inflow of $36,534 thousand in 202523 Notes to Condensed Consolidated Financial Statements This section provides detailed disclosures and explanations for the condensed consolidated financial statements NOTE 1—DESCRIPTION OF BUSINESS This note describes Pacira BioSciences, Inc.'s core business, product portfolio, and strategic acquisitions - Pacira BioSciences, Inc. focuses on innovative, non-opioid pain therapies, with key products including EXPAREL, ZILRETTA, and iovera° cryoanalgesia device28 - The company is developing PCRX-201, a gene therapy for OA of the knee, utilizing its proprietary high-capacity adenovirus (HCAd) vector platform28 - In February 2025, Pacira acquired the remaining 81% equity interest in GQ Bio Therapeutics GmbH, gaining the HCAd platform, preclinical assets, and R&D talent28 NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the key accounting principles and policies applied in preparing the financial statements - The interim condensed consolidated financial statements are prepared in accordance with GAAP and SEC rules for interim reporting, with certain information condensed or omitted compared to annual statements29 - The financial statements are unaudited but include all necessary normal recurring adjustments30 - The December 31, 2024 balance sheet is derived from the audited annual report30 Concentration of Major Customers This section highlights the company's reliance on a few major wholesalers for a significant portion of its revenue | Wholesaler | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Largest wholesaler | 31% | 34% | 32% | 35% | | Second largest wholesaler | 26% | 22% | 26% | 23% | | Third largest wholesaler | 21% | 19% | 21% | 19% | | Total | 78% | 75% | 79% | 77% | - The company has a high concentration of revenue from its three largest wholesalers, accounting for 78% of total revenues for the three months ended June 30, 2025 (up from 75% in 2024) and 79% for the six months ended June 30, 2025 (up from 77% in 2024)32 Recently Adopted Accounting Pronouncements This section details recently adopted accounting standards and their impact on financial reporting - The company adopted ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures, retrospectively for all prior periods presented33 Recent Accounting Pronouncements Not Adopted as of June 30, 2025 This section discusses new accounting pronouncements not yet adopted and their potential future impact - The company is evaluating the impact of ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures, effective for fiscal years beginning after December 15, 202434 - The company is also evaluating ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), effective for annual reporting periods beginning after December 31, 202635 NOTE 3—GQ BIO THERAPEUTICS ACQUISITION This note details the acquisition of GQ Bio Therapeutics GmbH and its strategic implications for the company - On February 27, 2025, Pacira acquired the remaining 81% equity interest in GQ Bio Therapeutics GmbH for $30.6 million, net of working capital adjustments36 - The acquisition included a novel high-capacity, local-delivery platform for genetic medicines, a preclinical portfolio of HCAd-based assets, and R&D talent, with PCRX-201 as the lead program38 Fair Value of Purchase Price Consideration (in thousands) | Fair Value of Purchase Price Consideration (in thousands) | Amount | | :------------------------------------------------------ | :----- | | Cash consideration paid at closing | $17,604 | | Indemnification holdback | $5,676 | | Cash payment of GQ Bio Acquisition transaction expenses | $919 | | Settlement of previously invested note receivable | $5,322 | | Settlement of pre-existing receivable | $1,055 | | Purchase price consideration of 81% of GQ Bio | $30,576 | | Prior 19% equity investment ownership of GQ Bio realized upon business combination | $8,315 | | Total fair value of the GQ Bio Acquisition | $38,891 | NOTE 4—REVENUE This note provides a breakdown of the company's revenue streams and recognition policies - Net product sales include EXPAREL (U.S., E.U., U.K.), ZILRETTA (U.S.), iovera° (U.S., Canada, Europe), and bupivacaine liposome injectable suspension for veterinary use46 - Revenue is recognized when control of promised goods is transferred to the customer, net of returns, discounts, fees, rebates, and chargebacks, which are estimated as variable consideration49 Disaggregated Revenue This table presents a detailed breakdown of net product sales by individual product lines | Net Product Sales (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | EXPAREL | $142,917 | $136,852 | $279,446 | $269,282 | | ZILRETTA | $31,334 | $30,707 | $54,672 | $56,546 | | iovera° | $5,588 | $5,674 | $10,711 | $10,704 | | Bupivacaine liposome injectable suspension | $508 | $3,154 | $3,112 | $5,679 | | Total net product sales | $180,347 | $176,387 | $347,941 | $342,211 | - EXPAREL net product sales increased by 4% for both the three and six months ended June 30, 2025, compared to 202455 - ZILRETTA net product sales increased by 2% for the three months ended June 30, 2025, but decreased by 3% for the six months ended June 30, 202555 NOTE 5—INVENTORIES This note details the composition and valuation of the company's inventory balances | Component (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Raw materials | $40,932 | $50,800 | | Work-in-process | $11,080 | $27,384 | | Finished goods | $96,151 | $47,098 | | Total | $148,163 | $125,282 | - Total inventories, net, increased to $148,163 thousand at June 30, 2025, from $125,282 thousand at December 31, 202456 - In July 2025, the company decommissioned its 45-liter EXPAREL batch manufacturing suite, resulting in a $1.0 million raw materials reserve during the six months ended June 30, 202556 NOTE 6—FIXED ASSETS This note provides information on the company's property, plant, and equipment, including depreciation | Category (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Machinery and equipment | $173,729 | $160,643 | | Leasehold improvements | $97,408 | $86,034 | | Computer equipment and software | $25,232 | $23,473 | | Office furniture and equipment | $1,952 | $1,952 | | Construction in progress | $9,632 | $27,996 | | Total | $307,953 | $300,098 | | Less: accumulated depreciation | $(152,775) | $(132,929) | | Fixed assets, net | $155,178 | $167,169 | - Fixed assets, net, decreased to $155,178 thousand at June 30, 2025, from $167,169 thousand at December 31, 202457 - The company recognized $5.5 million of accelerated depreciation expense during the six months ended June 30, 2025, due to the decommissioning of its 45-liter EXPAREL batch manufacturing suite61 NOTE 7—LEASES This note describes the company's lease arrangements and associated expenses - The company leases all its facilities, including manufacturing sites in San Diego and Swindon, U.K., and new principal executive offices in Brisbane, California62 - European offices in Germany and Belgium were assumed as part of the GQ Bio Acquisition in February 202562 - Total operating lease expense, net, for the three months ended June 30, 2025, was $3,789 thousand (up from $3,688 thousand in 2024), and for the six months, it was $7,573 thousand (up from $7,548 thousand in 2024)64 NOTE 8—GOODWILL AND INTANGIBLE ASSETS This note details the company's goodwill and other intangible assets, including changes from acquisitions | Intangible Assets (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Developed technologies, net | $362,426 | $391,066 | | Customer relationships, net | $34 | $38 | | Acquired IPR&D | $60,103 | $34,866 | | Total intangible assets, net | $422,563 | $425,970 | - Goodwill increased from $0 at December 31, 2024, to $20,300 thousand at June 30, 2025, primarily due to the GQ Bio Acquisition ($18,099 thousand) and foreign currency adjustments67 - Acquired In-Process Research and Development (IPR&D) increased to $60,103 thousand at June 30, 2025, from $34,866 thousand at December 31, 2024, due to the GQ Bio Acquisition68 NOTE 9—DEBT This note outlines the company's outstanding debt obligations and recent financing activities | Debt (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------ | :------------ | :---------------- | | Term loan A facility maturing March 2028 | $97,828 | $104,211 | | 2.125% Convertible senior notes due May 2029 | $280,267 | $279,334 | | 0.750% Convertible senior notes due August 2025 | $202,397 | $201,776 | | Total | $580,492 | $585,321 | - Total outstanding debt decreased slightly to $580,492 thousand at June 30, 2025, from $585,321 thousand at December 31, 202471 - In July 2025, the company entered into a new $300.0 million senior secured revolving credit facility, replacing the TLA Credit Agreement72173 NOTE 10—FINANCIAL INSTRUMENTS This note provides disclosures on the fair value and carrying amounts of the company's financial instruments | Financial Instrument (in thousands) | Carrying Value (June 30, 2025) | Fair Value (Level 2) (June 30, 2025) | | :---------------------------------- | :----------------------------- | :----------------------------------- | | Term loan A facility due March 2028 | $97,828 | $98,256 | | 2.125% convertible senior notes due 2029 | $280,267 | $281,419 | | 0.750% convertible senior notes due 2025 | $202,397 | $201,113 | - An impairment of an equity investment and convertible note receivable totaling $11.0 million was recorded in other, net, during the three and six months ended June 30, 2025101 - Acquisition-related contingent consideration decreased to $17,209 thousand at June 30, 2025, from $20,241 thousand at December 31, 2024, due to fair value adjustments102106 NOTE 11—STOCKHOLDERS' EQUITY This note details changes in stockholders' equity, including share repurchases and comprehensive income components | Accumulated Other Comprehensive Income (in thousands) | December 31, 2024 | June 30, 2025 | | :---------------------------------------------------- | :---------------- | :------------ | | Net Unrealized Gain (Loss) From Available For-Sale Investments | $190 | $59 | | Unrealized Foreign Currency Translation | $153 | $4,003 | | Total Accumulated Other Comprehensive Income | $343 | $4,062 | - Accumulated other comprehensive income increased to $4,062 thousand at June 30, 2025, from $343 thousand at December 31, 2024, primarily due to foreign currency translation adjustments114 - In April 2025, the Board approved a new share repurchase program authorizing up to $300.0 million of common stock repurchases, replacing the previous $150.0 million program116 NOTE 12—STOCK PLANS This note describes the company's stock-based compensation plans and related expenses | Stock-Based Compensation (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Stock options | $4,309 | $5,796 | $8,749 | $12,525 | | Restricted stock units | $10,681 | $6,517 | $20,287 | $12,727 | | Employee stock purchase plan share options | $482 | $211 | $989 | $423 | | Total | $15,472 | $12,524 | $30,025 | $25,675 | - The 2011 Stock Incentive Plan was amended in June 2025, increasing authorized shares for equity awards by 2,500,000120 - Total stock-based compensation expense increased by 25% to $15,472 thousand for the three months ended June 30, 2025, and by 25% to $30,025 thousand for the six months ended June 30, 2025, compared to 2024124 NOTE 13—NET (LOSS) INCOME PER COMMON SHARE This note presents the calculation of basic and diluted net income or loss per common share | Metric (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income—basic | $(4,847) | $18,886 | $(35) | $27,865 | | Adjusted net (loss) income—diluted | $(4,847) | $19,648 | $(35) | $29,655 | | Weighted average common shares outstanding—basic | 45,459 | 46,174 | 45,867 | 46,337 | | Weighted average common shares outstanding—diluted | 45,459 | 50,539 | 45,867 | 51,366 | | Basic net (loss) income per common share | $(0.11) | $0.41 | $(0.00) | $0.60 | | Diluted net (loss) income per common share | $(0.11) | $0.39 | $(0.00) | $0.58 | - Basic net (loss) income per common share was $(0.11) for Q2 2025 (down from $0.41 in Q2 2024) and $(0.00) for the six months ended June 30, 2025 (down from $0.60 in 2024)129 - For Q2 2025, 14,483 thousand potential common shares were excluded from diluted EPS as they were antidilutive, compared to 8,615 thousand in Q2 2024129 NOTE 14—INCOME TAXES This note provides details on the company's income tax expense, effective tax rate, and related components | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Domestic (Loss) income before income taxes | $(4,214) | $36,996 | $6,459 | $50,653 | | Foreign (Loss) income before income taxes | $2,287 | $(412) | $320 | $(429) | | Total (loss) income before income taxes | $(1,927) | $36,584 | $6,779 | $50,224 | | Income tax expense | $2,920 | $17,698 | $6,814 | $22,359 | | Effective tax rate | (152)% | 48% | 101% | 45% | - Income tax expense for Q2 2025 was $2,920 thousand, down 84% from $17,698 thousand in Q2 2024130 - For the six months, it was $6,814 thousand, down 70% from $22,359 thousand in 2024130 - The effective tax rate for 2025 was primarily impacted by non-deductible stock-based compensation, non-deductible executive compensation, and a non-U.S. valuation allowance131 NOTE 15—CONTINGENT CONSIDERATION (GAINS) CHARGES, ACQUISITION-RELATED EXPENSES, RESTRUCTURING AND OTHER This note details various non-recurring charges and gains, including acquisition-related costs and legal settlements | Category (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Contingent consideration (gains) charges | $(357) | $1,509 | $(3,032) | $(2,297) | | Restructuring charges | $— | $996 | $— | $6,531 | | Acquisition-related expenses | $991 | $230 | $2,502 | $404 | | Legal settlement | $— | $— | $7,000 | $— | | Total | $634 | $2,735 | $6,470 | $4,638 | - Total net charges decreased by 77% to $634 thousand for Q2 2025 but increased by 39% to $6,470 thousand for the six months ended June 30, 2025134 - A $7.0 million legal settlement cost was recognized during the six months ended June 30, 2025, related to patent infringement suits134142 NOTE 16—COMMITMENTS AND CONTINGENCIES This note outlines the company's significant contractual commitments, legal proceedings, and contingent liabilities - In April 2025, the company settled patent infringement suits against ANDA filers, agreeing to license generic bupivacaine liposome injectable suspension starting in early 2030 for volume-limited amounts, and unlimited quantities in 2039149 - A $7.0 million payment was made to the ANDA filers149 - In June 2025, the U.S. District Court for the District of Nevada ruled that the Research Development Foundation (RDF) must repay Pacira $23.1 million in royalties on EXPAREL sales, plus $5.2 million in statutory interest, which was received in July 2025155 - In July 2025, Pacira entered a co-promotion agreement with Johnson & Johnson MedTech (J&J MedTech) to expand ZILRETTA's market reach in the U.S., with Pacira paying tiered commissions156158 NOTE 17—SEGMENT INFORMATION This note explains the company's operating segments and how performance is evaluated by management - The company operates as a single business segment focused on non-opioid pain management and regenerative health solutions, managed at a consolidated level by the Chief Executive Officer (CODM)168 - GAAP net income is the key measure used by the CODM to evaluate performance, allocate resources, and forecast financial results169 Expense Category (in thousands) | Expense Category (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Adjusted cost of goods sold | $32,663 | $43,003 | $65,253 | $89,291 | | Adjusted research and development | $24,686 | $18,413 | $47,787 | $34,848 | | Adjusted selling and marketing | $50,964 | $39,047 | $106,535 | $78,482 | | Adjusted general and administrative | $26,231 | $19,937 | $46,840 | $44,266 | | Stock-based compensation | $15,472 | $12,524 | $30,025 | $25,675 | | Amortization of acquired intangible assets | $14,322 | $14,322 | $28,644 | $28,644 | | Changes in the fair value of contingent consideration | $(357) | $1,509 | $(3,032) | $(2,297) | | Other | $8,619 | $1,028 | $17,481 | $4,779 | | Total operating expenses | $172,600 | $149,783 | $339,533 | $303,688 | NOTE 18—SUBSEQUENT EVENTS This note discloses significant events that occurred after the reporting period but before the financial statements were issued - On July 3, 2025, the company entered into a new $300.0 million senior secured revolving credit facility with Wells Fargo Bank, replacing the existing Term Loan A facility172173176 - $101.0 million was borrowed under this new facility176 - On August 1, 2025, the 0.750% Convertible Senior Notes due 2025 matured, and the remaining $202.5 million principal balance was settled in cash179 - In July 2025, the company initiated a workforce reduction impacting 71 employees (8% of total workforce) and decommissioned its 45-liter EXPAREL manufacturing suite due to improved efficiencies from larger-scale suites180181182 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, and future outlook Overview This section provides a high-level summary of Pacira's mission, product portfolio, and strategic objectives - Pacira's mission is to deliver innovative, non-opioid pain therapies, with key products EXPAREL, ZILRETTA, and iovera° forming a complementary portfolio192 - The company is advancing PCRX-201, a gene therapy for OA of the knee, from its proprietary HCAd vector platform, enhanced by the GQ Bio Acquisition in February 2025192 - Future plans include expanding product use, progressing the pipeline, advancing regulatory activities, investing in sales/marketing, enhancing manufacturing, and supporting legal matters193 Global Economic Conditions, Inflation and Tariffs This section discusses the potential impact of macroeconomic factors on the company's business and operations - Global economic conditions, including inflation and tariffs, may negatively impact the business by increasing costs for raw materials, equipment, and services, and potentially causing patients to defer medical procedures194 - The active pharmaceutical ingredients for EXPAREL and ZILRETTA are sourced internationally, making the company susceptible to tariffs195 - A July 2025 trade deal between the U.S. and E.U. sets a 15% tariff on E.U. imports, including branded pharmaceuticals, which could increase manufacturing and operating expenses195196 Recent Highlights This section summarizes key corporate developments and achievements during the reporting period - In July 2025, the company entered into a new $300.0 million senior secured revolving credit facility, refinancing its existing term loan A facility198 - The USPTO issued two new EXPAREL patents, '483 (composition from enhanced large-scale process, expires July 2044) and '047 (EXPAREL composition, expires January 2041), bringing the total Orange Book listed patents to 20198 - In July 2025, a strategic collaboration with Johnson & Johnson MedTech was announced to expand ZILRETTA's market reach in the U.S.203 Science Center Campus Reduction in Force This section details the recent workforce reduction and its anticipated impact on operating expenses - In July 2025, Pacira initiated a workforce reduction at its San Diego Science Center Campus, impacting 71 employees (approximately 8% of the total workforce)199200 - This reduction is a result of improved manufacturing efficiencies from two large-scale 200+ liter EXPAREL batch manufacturing suites, which are four-fold greater in capacity than the decommissioned 45-liter suite199 - Pre-tax employee termination benefit charges of approximately $2.4 million to $2.8 million are estimated for Q3 2025, with an anticipated annual reduction in operating expenses of approximately $13.0 million200201 EXPAREL This section provides an overview of EXPAREL, its indications, and ongoing development programs - EXPAREL is a long-acting, non-opioid local analgesic indicated for postsurgical local analgesia via infiltration in patients aged six years and older, and regional analgesia via specific nerve blocks in adults in the U.S.204 - The company is advancing a registration program for EXPAREL in pediatric patients under six years of age, having completed Part 1 of a study in children aged two to less than six years204206 - Clinical data indicates EXPAREL significantly reduces opioid usage while improving postsurgical pain management205 ZILRETTA This section describes ZILRETTA, its therapeutic use for osteoarthritis knee pain, and label expansion efforts - ZILRETTA is the first and only extended-release, single-shot corticosteroid intra-articular (IA) injection therapy for osteoarthritis (OA) knee pain, providing relief for up to 12-16 weeks207 - The company is conducting a Phase 3 registration study to evaluate ZILRETTA for OA pain of the shoulder, aiming to expand its label208 - The American Association of Orthopaedic Surgeons (AAOS) updated its guidelines in August 2021, finding ZILRETTA can improve patient outcomes over traditional immediate-release corticosteroids209 iovera° This section introduces the iovera° cryoanalgesia device, its clearances, and clinical applications - The iovera° system is a non-opioid, handheld cryoanalgesia device cleared by FDA (510(k)), with a CE mark in the E.U., and cleared in Canada for blocking pain211 - Clinical data shows iovera° treatment for knee OA pain provided relief up to 150 days and reduced opioid consumption and pain scores in patients undergoing Total Knee Arthroplasty (TKA)212213 - In December 2024, FDA clearance was received for a new iovera° Smart Tip for chronic low back pain, with a pilot trial showing greater improvements than radiofrequency ablation215 Innovations in Genicular Outcomes Registry (IGOR) This section describes a real-world registry evaluating outcomes for knee osteoarthritis treatments - IGOR is a prospective, real-world registry sponsored by Pacira, evaluating clinical, economic, and health-related patient-reported outcomes for knee OA treatments, including TKA, over a minimum of 18 months218 - Early IGOR outcomes indicate that patients receiving iovera° prior to TKA experienced less pain, improved function, and better sleep for six months post-surgery compared to those who did not218 The Osteoarthritis Market This section provides an overview of the prevalence and impact of osteoarthritis in the U.S. - Osteoarthritis (OA) is the most common form of arthritis, affecting over 32.5 million adults in the U.S., causing pain, stiffness, swelling, and reduced function219 - The lifetime risk of symptomatic knee OA is 45%, with 14 million individuals in the U.S. having symptomatic knee OA, nearly two million of whom are under 45220 The HCAd Vector Platform This section details Pacira's proprietary high-capacity adenovirus vector platform for genetic medicines - Pacira's proprietary High-Capacity Adenovirus (HCAd) vector platform addresses challenges in genetic medicine for common diseases like OA222 - Key features include high efficiency in delivering genes into cells, capacity to carry up to 30,000 base pairs of DNA, and potential for local administration and redosing222223 Clinical Development Programs This section outlines the company's clinical pipeline, including the lead program PCRX-201 for knee OA - PCRX-201, the lead program from the HCAd platform, targets the IL-1 pathway to reduce inflammation and pain in OA of the knee by boosting cellular IL-1Ra production224 - Phase 1 data for PCRX-201 showed it was well tolerated with sustained improvements in knee pain, stiffness, and function for at least 2 years from a single injection225 - A Phase 2 clinical study (ASCEND) for knee OA is underway, involving approximately 135 patients across two doses of PCRX-201 or saline, with concurrent IA corticosteroid pretreatment226227 Product Portfolio and Internal Pipeline This section summarizes the company's commercial products and pipeline candidates with anticipated milestones - The company's product portfolio includes commercialized products EXPAREL, ZILRETTA, and iovera°, along with the clinical development candidate PCRX-201231 - The report includes a table summarizing the current product portfolio and internal product candidate pipeline, along with anticipated milestones over the next 12 to 18 months231232 Results of Operations This section details the financial performance for the three and six months ended June 30, 2025, compared to prior periods Revenues This section analyzes the company's total revenues and net product sales by individual product lines | Revenue (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | EXPAREL | $142,917 | $136,852 | $279,446 | $269,282 | | ZILRETTA | $31,334 | $30,707 | $54,672 | $56,546 | | iovera° | $5,588 | $5,674 | $10,711 | $10,704 | | Bupivacaine liposome injectable suspension | $508 | $3,154 | $3,112 | $5,679 | | Total net product sales | $180,347 | $176,387 | $347,941 | $342,211 | | Royalty revenue | $752 | $1,636 | $2,081 | $2,929 | | Total revenues | $181,099 | $178,023 | $350,022 | $345,140 | - Total revenues increased by 2% to $181,099 thousand for Q2 2025 and by 1% to $350,022 thousand for the six months ended June 30, 2025, compared to the prior year periods235 - EXPAREL revenue increased 4% in both periods, driven by a 6% (Q2) and 4% (six months) increase in gross vial volume and a 1% increase in net selling price per unit235 Cost of Goods Sold This section discusses the cost of goods sold and its impact on gross margin | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of goods sold | $40,866 | $44,262 | $75,172 | $91,678 | | Gross margin | 77% | 75% | 79% | 73% | - Cost of goods sold decreased by 8% to $40,866 thousand for Q2 2025 and by 18% to $75,172 thousand for the six months ended June 30, 2025, compared to the prior year periods242 - The improvements in gross margin were primarily due to lower EXPAREL inventory reserves and improved product costs from higher manufacturing volumes, partially offset by accelerated depreciation from the decommissioning of the 45-liter EXPAREL manufacturing suite242 Research and Development Expenses This section details the company's R&D expenditures across various clinical and product development programs | R&D Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Clinical and preclinical development | $14,119 | $8,172 | $26,726 | $14,518 | | Product development | $7,921 | $7,318 | $15,999 | $14,713 | | Regulatory and other | $2,646 | $2,923 | $5,062 | $5,617 | | Key employee holdback | $1,107 | $— | $1,458 | $— | | Stock-based compensation | $2,407 | $1,925 | $4,648 | $3,728 | | Total research and development expense | $28,200 | $20,338 | $53,893 | $38,576 | | % of total revenues | 16% | 11% | 15% | 11% | - Total R&D expense increased by 39% to $28,200 thousand for Q2 2025 and by 40% to $53,893 thousand for the six months ended June 30, 2025, compared to the prior year periods246 - Clinical and preclinical development expense increased significantly by 73% (Q2) and 84% (six months), driven by ongoing site start-up and enrollment in PCRX-201 Phase 2, ZILRETTA shoulder, EXPAREL pediatric, and iovera° spasticity trials, plus additional personnel247 Selling, General and Administrative Expenses This section analyzes the company's SG&A expenses, including sales, marketing, and administrative costs | SG&A Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales and marketing | $50,964 | $39,047 | $106,535 | $78,482 | | General and administrative | $26,231 | $20,231 | $46,840 | $44,837 | | Stock-based compensation | $11,383 | $8,848 | $21,979 | $16,833 | | Total selling, general and administrative expense | $88,578 | $68,126 | $175,354 | $140,152 | | % of total revenues | 49% | 38% | 50% | 41% | - Total selling, general and administrative (SG&A) expense increased by 30% to $88,578 thousand for Q2 2025 and by 25% to $175,354 thousand for the six months ended June 30, 2025, compared to the prior year periods254 - Sales and marketing expense increased by 31% (Q2) and 36% (six months), driven by investments in customer awareness, education programs, and expansion of the sales force255 Amortization of Acquired Intangible Assets This section reports the amortization expense related to acquired intangible assets | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Amortization of acquired intangible assets | $14,322 | $14,322 | $28,644 | $28,644 | - Amortization expense for acquired intangible assets remained constant at $14,322 thousand for both the three months ended June 30, 2025 and 2024258 Contingent Consideration (Gains) Charges, Acquisition-related Expenses, Restructuring and Other This section details non-recurring charges and gains impacting operating expenses | Category (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Contingent consideration (gains) charges | $(357) | $1,509 | $(3,032) | $(2,297) | | Restructuring charges | $— | $996 | $— | $6,531 | | Acquisition-related expenses | $991 | $230 | $2,502 | $404 | | Legal settlement | $— | $— | $7,000 | $— | | Total | $634 | $2,735 | $6,470 | $4,638 | - Total net charges decreased by 77% to $634 thousand for Q2 2025 but increased by 39% to $6,470 thousand for the six months ended June 30, 2025259 - A $7.0 million legal settlement cost was recognized during the six months ended June 30, 2025, related to patent infringement suits264 Other (Loss) Income, Net This section explains the components of other income and expense, including interest and impairment charges | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest income | $5,008 | $4,749 | $11,903 | $8,652 | | Interest expense | $(4,695) | $(3,884) | $(9,275) | $(7,200) | | Gain on early extinguishment of debt | $— | $7,518 | $— | $7,518 | | Other, net | $(10,739) | $(39) | $(6,338) | $(198) | | Total other (loss) income, net | $(10,426) | $8,344 | $(3,710) | $8,772 | - Total other (loss) income, net, shifted from income to a loss of $(10,426) thousand for Q2 2025 and $(3,710) thousand for the six months ended June 30, 2025267 - An $11.0 million impairment of an equity investment and convertible note receivable was the primary driver of the $10.7 million (Q2) and $6.3 million (six months) other net loss in 2025271 Income Tax Expense This section discusses the company's income tax expense and effective tax rate | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax expense | $2,920 | $17,698 | $6,814 | $22,359 | | Effective tax rate | (152)% | 48% | 101% | 45% | - Income tax expense decreased by 84% to $2,920 thousand for Q2 2025 and by 70% to $6,814 thousand for the six months ended June 30, 2025, compared to the prior year periods272 - The effective tax rate was (152)% for Q2 2025 and 101% for the six months ended June 30, 2025, significantly different from 48% and 45% in 2024, respectively272 Liquidity and Capital Resources This section discusses the company's cash position, sources of funding, and future capital requirements Summary of Cash Flows This section provides a summary of cash flows from operating, investing, and financing activities | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $47,471 | $102,337 | | Net cash provided by (used in) investing activities | $36,534 | $(30,745) | | Net cash (used in) provided by financing activities | $(60,499) | $22,163 | | Net increase in cash and cash equivalents | $23,710 | $93,755 | - Net cash provided by operating activities decreased to $47,471 thousand for the six months ended June 30, 2025, from $102,337 thousand in 2024277 - Net cash used in financing activities shifted to an outflow of $(60,499) thousand in 2025, from an inflow of $22,163 thousand in 2024277 Operating Activities This section details the cash generated or used by the company's core business operations - Net cash provided by operating activities decreased by $54.9 million to $47.5 million for the six months ended June 30, 2025, compared to $102.3 million in the prior year278 - The decrease was attributed to increased operating expenses from investments in customer awareness, marketing, market access, and reimbursement teams, as well as higher clinical and preclinical expenses for pipeline development, and a higher investment in inventory278 Investing Activities This section outlines cash flows related to the purchase and sale of investments and capital expenditures - Net cash provided by investing activities was $36.5 million for the six months ended June 30, 2025, a significant shift from net cash used of $30.7 million in 2024279 - The 2025 inflow reflected $65.7 million from available-for-sale investment sales (net of purchases), partially offset by $16.7 million for the GQ Bio Acquisition and $11.2 million in capital expenditures279 Financing Activities This section describes cash flows associated with debt, equity transactions, and share repurchases - Net cash used in financing activities was $60.5 million for the six months ended June 30, 2025, a shift from $22.2 million provided in 2024280281 - The 2025 outflow primarily consisted of $50.0 million in treasury stock purchases under the new $300.0 million share repurchase program, $6.6 million in voluntary prepayments on the TLA Term Loan, and $5.5 million for employee tax withholding on restricted stock unit vests280 Debt This section provides details on the company's debt instruments, refinancing, and repayment activities - On July 3, 2025, the company entered into a new $300.0 million senior secured revolving credit facility, replacing the TLA Credit Agreement, and borrowed $101.0 million283285 - The TLA Term Loan, with $98.8 million outstanding at June 30, 2025, was repaid and terminated in July 2025, resulting in a $0.9 million loss on extinguishment of debt287 - The 2025 Convertible Senior Notes, with $202.5 million principal outstanding at June 30, 2025, matured and were settled in cash on August 1, 2025290 Future Capital Requirements This section discusses the company's anticipated capital needs and funding strategies - The company believes existing cash, cash equivalents, available-for-sale investments, and product sales will fund operating expenses, capital expenditures, and debt payments for the next 12 months291 - Future capital needs depend on potential milestone payments (up to $372.3 million for Flexion Acquisition), global economic conditions (inflation, tariffs), timing of 2029 Notes conversions, and costs for commercialization, manufacturing, R&D, legal matters, and share repurchases291 - Additional debt or equity financing may be required, but availability on acceptable terms is not guaranteed, especially with capital market disruptions292 Critical Accounting Estimates This section highlights key accounting estimates and their potential impact on financial reporting - There have been no significant changes to the company's critical accounting policies or material impacts from recently issued accounting pronouncements since December 31, 2024293 Contractual Obligations This section outlines the company's significant contractual commitments and obligations - In July 2025, the company entered into a non-cancelable contractual commitment of approximately $4.0 million in 2025 and $5.5 million in 2026294 - No other material changes in contractual obligations (indebtedness, lease obligations, purchase obligations) were reported since the 2024 Annual Report294 Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, primarily interest rate and credit risks Interest Rate Risk This section analyzes the company's exposure to fluctuations in interest rates on its investments and debt - The company's cash equivalents and investments are subject to interest rate risk; a hypothetical 100 basis point increase in interest rates would reduce the fair value of available-for-sale securities by approximately $0.3 million at June 30, 2025295 - The fair value of the 2025 Notes (matured August 1, 2025) and 2029 Notes (fixed rate, $287.5 million outstanding) are impacted by common stock fair value and interest rate fluctuations296297 - The TLA Term Loan (variable interest rate, $98.8 million outstanding at June 30, 2025) was repaid and terminated in July 2025, replaced by a new Revolving Credit Facility298 Credit Risk This section discusses the risks associated with customer concentration and potential non-payment - The company's accounts receivable are primarily concentrated with four large wholesalers of pharmaceutical products300 - Non-performance or non-payment by these major customers could have a material adverse impact on the company's financial condition, results of operations, or net cash flow300 Item 4. Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and internal control over financial reporting Evaluation of Disclosure Controls and Procedures This section confirms management's assessment of the effectiveness of disclosure controls and procedures - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025302 Changes in Internal Control over Financial Reporting This section reports on any material changes to internal control over financial reporting during the quarter - There have been no changes in internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting303 Inherent Limitations on Effectiveness of Controls This section acknowledges the inherent limitations of any control system in preventing all errors or fraud - Management acknowledges that no control system can prevent or detect all errors and fraud, providing only reasonable, not absolute, assurance304 - Limitations include resource constraints, faulty judgments, breakdowns from simple errors, and circumvention by individual acts, collusion, or management override304 PART II. OTHER INFORMATION This section includes additional information not covered in the financial statements, such as legal matters and equity transactions Item 1. Legal Proceedings This section refers to detailed disclosures regarding the company's legal and regulatory matters Item 1A. Risk Factors This section confirms no material changes to the company's previously disclosed risk factors Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activities and equity security transactions Purchases of Equity Securities by the Registrant This table summarizes the company's common stock repurchases during the quarter | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs | | :----------------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :--------------------------------------------------------------------------------------- | | April 1, 2025 – April 30, 2025 | — | $— | — | $300,000,000 | | May 1, 2025 – May 31, 2025 | 1,955,589 | $25.59 | 1,955,589 | $249,999,997 | | June 1, 2025 –June 30, 2025 | — | $— | — | $249,999,997 | | Total | 1,955,589 | $25.59 | 1,955,589 | $249,999,997 | - During May 2025, the company repurchased 1,955,589 shares of its common stock at an average price of $25.59 per share, totaling approximately $50.0 million308 - This repurchase was part of a $300.0 million share repurchase program authorized in April 2025, which replaced a previous program and expires on December 31, 2026308 Item 3. Defaults Upon Senior Securities This section confirms no defaults on senior securities during the reporting period Item 4. Mine Safety Disclosures This item is not applicable to the company's operations Item 5. Other Information This section provides disclosures on Rule 10b5-1 trading plans adopted by company insiders Rule 10b5-1 Trading Plans This table lists Rule 10b5-1 trading arrangements adopted by directors and executive officers | Name and Position | Action | Date | Rule 10b5-1 | Non-Rule 10b5-1 | Total Number of Shares to be Sold | Expiration Date | | :---------------- | :----- | :--------- | :---------- | :-------------- | :-------------------------------- | :-------------- | | Abraham Ceesay Director | Adopt | 6/3/2025 | x | | 2,354 | 9/4/2025 | | Shawn M. Cross Chief Financial Officer | Adopt | 6/9/2025 | x | | To Be Determined (1) | 5/29/2026 | | Lauren Riker Principal Accounting Officer | Adopt | 6/13/2025 | x | | To Be Determined (1) (2) | 2/3/2026 | - During Q2 2025, Abraham Ceesay (Director), Shawn M. Cross (CFO), and Lauren Riker (Principal Accounting Officer) adopted Rule 10b5-1 trading arrangements314 - The number of shares to be sold by the CFO and Principal Accounting Officer is "To Be Determined," as it depends on tax withholding requirements upon RSU vesting314315 Item 6. Exhibits This section lists all exhibits filed or furnished as part of the quarterly report Signatures This section contains the official certifications by the company's principal executive and financial officers - The report is signed by Frank D. Lee, Chief Executive Officer and Director, and Shawn M. Cross, Chief Financial Officer, on August 5, 2025321