SCHEDULE: Activist Investor Doma Pushes Pacira BioSciences for Immediate Sale

Doma Perpetual Capital Management, holding a 6.8% stake in Pacira BioSciences, is demanding the company immediately hire bankers to explore a sale, citing management underperformance and excessive spending.

Summary

• Doma Perpetual Capital Management LLC and its affiliates have increased their beneficial ownership in Pacira BioSciences, Inc. to 2,936,794 common shares, representing 6.83% of the outstanding class.
• The reporting persons purchased an additional 161,706 common shares for $4,285,796 between September 10-24, 2025, and 76,470 common shares for $1,817,594 between October 6-7, 2025.
• Doma Perpetual has sent a letter to Pacira's Board of Directors, recommending they immediately engage bankers to explore a sale of the business.
• The activist investor criticizes Pacira's management for "unrelenting underperformance," "out-of-control spending," and a "lack of prudent financial control," leading to unacceptable shareholder returns.
• Specific concerns include executive stock-based compensation (estimated at 6% of market capitalization for FY2025), year-to-date stock-based compensation exceeding operating income, a 2% year-over-year decline in Zilretta sales through Q3, and disproportionate expenditure growth (R&D up 36% YoY, SG&A up 25% YoY) compared to revenue growth (up 3% YoY).
• Doma estimates a potential sale valuation of approximately $2.7 billion, translating to about $66 per share or more, which is roughly three times the current stock price.
• Doma also recommends a strategy to cut costs, a halt on new M&A and development programs, and the immediate completion of the current $300 million share repurchase program, followed by a new $300 million buyback.

Sentiment

Score: 2

Explanation: The sentiment is overwhelmingly negative, driven by Doma's severe criticism of Pacira's management and Board for underperformance, excessive spending, lack of financial control, and shareholder dilution. The only positive aspects relate to the potential value of Exparel if the company were sold, which is contingent on management changes.

Positives

• Exparel is highlighted as a "great product" and the leading non-opioid pain medication for surgical settings, with potential to address the opioid epidemic and lower healthcare costs.
• A potential sale of the business could unlock significant shareholder value, with an estimated valuation of $66 per share or more, representing approximately three times the current stock price.
• The company has a $300 million share repurchase program in place, which Doma advocates for immediate completion and expansion.

Negatives

• Management's "unrelenting underperformance" and "out-of-control spending" are cited as major issues.
• Lack of prudent financial control and unacceptable shareholder returns.
• The Board allowed management to spend millions on an "ill-advised and wasteful manner," including moving headquarters and acquiring expensive new offices.
• Executive stock-based compensation is considered "out of control," estimated at approximately 6% of Pacira's market capitalization for full-year 2025 guidance, and year-to-date stock-based compensation is larger than the firm's entire operating income.
• Zilretta sales declined 2% year-over-year through Q3.
• Revenues increased only 3% year-over-year, while R&D increased 36% year-over-year and SG&A increased 25% year-over-year, indicating "fiscal recklessness."
• Despite a commitment to efficiency and margin expansion in April 2025, the company reported losses at the pretax income level in Q2 and "barely any profitability" in Q3.
• Management is accused of underperforming and decreasing revenue guidance.
• The Board is criticized for diluting shareholders by issuing shares without approval and issuing a convertible bond at the company's lowest valuation.
• Pacira's stock valuation is hovering near an all-time low, with an absence of financial or stock price returns.
• The Flexion acquisition is cited as an example of the Board destroying shareholder value, with no return yet seen.

Risks

• Continued underperformance by management and the Board, leading to further erosion of shareholder value.
• Failure of the Board to act on Doma's recommendations, including exploring a sale of the business, cutting costs, or halting M&A.
• Potential for further shareholder dilution if the Board continues to issue shares or convertible bonds without prudent financial consideration.
• The company's stock price may remain at an "all-time low" if current operational and financial trends persist.
• The Board's potential breach of fiduciary duties if they ignore shareholder concerns and continue to defend underperformance.

Future Outlook

Doma Perpetual Capital Management intends to continue evaluating the possibility of substantially increasing its position in Pacira BioSciences. It strongly recommends that the Board of Directors immediately engage a banker to explore a sale of the business, aiming for a conclusion by the end of Q1 2026. Doma also expects the company to implement a strategy to cut costs, halt all new M&A and development programs, and use all free cash flow for share buybacks, including completing the current $300 million program without delay and initiating a new $300 million buyback. Doma may contemplate changes in the Issuer's management or board composition if the common shares continue to underperform.

Management Comments

• "We continue to evaluate the possibility of substantially increasing our position in the future."
• "Due to what we believe is managements unrelenting underperformance, out-of-control spending, and lack of prudent financial control, we now believe Paciras Board should immediately hire bankers and conduct a formal sales process for the business."
• "We find Paciras continued lack of shareholder return unacceptable."
• "Our position is this represents a wholly irresponsible way to manage the companys finances, and the Board must rectify this complete lack of prudent financial conduct."
• "Why should investors tolerate minimal returns if Paciras assets, and Exparel in particular, are worth more than three times the current stock price?"
• "In our experience, under current management, shareholders only get excuses."
• "Given these facts, we don't see how management can continue to be trusted to generate shareholder return."
• "Why would board members not want to maximize shareholder return and hire bankers after this very visible multi-year underperformance? The only explanation we can think of is that they want to continue to receive their compensation from the firm and they are willing to ignore their legal and fiduciary duties to shareholders."
• "The Boards decision to essentially print money by issuing shares, without shareholder approval for each increase, was another blow to stakeholders."
• "We think it is common fiscal sense that a company should not issue a convertible bond at the lowest valuation in its history when the business maintains plenty of free cash flow."
• "As large stakeholders, we are tired of Paciras unrelenting underperformance and managements continued excuses; shareholders have suffered enough."

Industry Context

The filing highlights Exparel's role as a leading non-opioid pain medication in surgical settings, positioning it as a crucial tool in combating the opioid epidemic in the U.S. This suggests a significant market need and potential for growth, especially under a larger company with broader sales capabilities and pricing power. The criticism of Pacira's management for failing to capitalize on this product's potential, particularly with declining Zilretta sales and disproportionate spending, contrasts with the broader industry's focus on addressing critical health issues efficiently.

Comparison to Industry Standards

• Doma implies that Pacira's executive stock-based compensation, estimated at 6% of market capitalization for FY2025 and exceeding operating income year-to-date, is "out of control" and "wholly irresponsible" compared to prudent financial management practices in the industry.
• The disproportionate increase in R&D (36% YoY) and SG&A (25% YoY) relative to revenue growth (3% YoY) is presented as "fiscal recklessness" and not a prudent way to operate, suggesting a deviation from industry best practices for cost control and efficiency.
• The Board's decision to issue a convertible bond at the company's lowest valuation, despite having "plenty of free cash flow," is criticized as a "critical lack of understanding of basic financial concepts" compared to standard capital management strategies.
• Doma's valuation estimate of $66/share (3x current price, 15x 2027 projected earnings) for a potential sale suggests that Pacira's assets, particularly Exparel, are significantly undervalued compared to what a larger, more efficient industry player could achieve.

Stakeholder Impact

• Shareholders: Potential for significant value creation if the company is sold at Doma's estimated valuation of $66/share; current shareholders are suffering from "unrelenting underperformance," "negative shareholder returns," and "dilution" due to management's actions and the Board's decisions.
• Employees: Potential for job reductions, particularly in SG&A and R&D, if a large buyer acquires the company and implements cost-cutting measures as suggested by Doma.
• Customers/Patients: Potential for faster expansion of Exparel and its quicker adoption as a standard of care under a larger company, which could benefit medical providers and patients by offering better, safer healthcare and helping manage the opioid epidemic.
• Creditors: The issuance of a convertible bond at a low valuation could impact the company's capital structure and potentially the risk profile for creditors, though Doma notes the company has "plenty of free cash flow."

Next Steps

• The Board of Directors should immediately hire bankers and conduct a formal sales process for the business, aiming to conclude by the end of Q1 2026.
• The Board and management must lay out a strategy to cut costs to enhance shareholder returns.
• All M&A and new development programs that have not yet started must be put on hold.
• All free cash flow must be used for buybacks, including completing the current $300 million share repurchase without delay.
• A new $300 million buyback should be issued immediately after completing the current buyback program.
• Doma may contemplate changes in the Issuer's management or board composition if the common shares continue to underperform.

Key Dates

Recommendation

Doma Perpetual Capital Management, a significant activist investor, has increased its stake and is aggressively pushing for an immediate sale of Pacira BioSciences, estimating a potential valuation of $66 per share, which is approximately three times the current stock price. While current management performance is heavily criticized, the activist pressure and the clear path to unlocking substantial value through a sale, particularly given the strong underlying asset (Exparel), present a compelling 'strong buy' opportunity for investors willing to bet on the activist thesis and potential M&A.

Keywords

Pacira BioSciences, PBYI, Doma Perpetual Capital Management, Activist Investor, Shareholder Activism, Company Sale, M&A, Biotechnology, Pharmaceuticals, Exparel, Zilretta, SEC Filing, Schedule 13D, Corporate Governance, Financial Performance, Stock-based Compensation, Capital Allocation, Share Repurchase