Thank you for joining Pacira Pharmaceuticals Third Quarter 2013 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the formal remarks, Pacira's management team will open the lines for a question-and-answer period. Please be advised that this call is being recorded at the company's request and will be archived on the company's website for two weeks from today's date. At this time, I'd like to introduce Jessica Cho of Pacira Pharmaceuticals. Please go ahead.

Thank you and good morning, everyone. Welcome to Pacira's third quarter 2013 financial results conference call. Joining me on the call today from Pacira are Dave Stack, President and Chief Executive Officer and Chairman; and Jim Scibetta, Chief Financial Officer. Before I turn the call over to the management team for their prepared remarks, I would like to remind you that certain remarks made by management during this call about the company's future expectations, plans and prospects including those regarding EXPAREL, production in Suite A and Suite C, approval of Suite C, anticipated fixed cost and gross margins and potential conversion of the company's convertible debt constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the words believe, anticipate, plans, expects, will and similar expressions. Any such forward-looking statements are based on the assumptions that the company believes are reasonable, but are subject to a wide range of risks and uncertainties. Actual results may differ materially from those expressed or implied by such forward-looking statements. Many of these and other risks and uncertainties are described in the Risk Factors section of Pacira's most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2012 and in other filings with the SEC, which are available through the investor section of the Pacira website at www.pacira.com or on the SEC website at www.sec.gov. During the course of this call, we will also refer to certain non-GAAP financial measures including adjusted EPS. Definitions of these non-GAAP financials measures and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the earnings release for the quarter. I'll now turn the call over to Dave.

Thanks, Jessica. Good morning, everyone, and thank you for joining us today. Our novel treatment for postsurgical pain, EXPAREL, continues to be the primary focus of Pacira today. EXPAREL was launched commercially in the United States in April 2012 and we continue to driver on the promise of pain management with reduced reliance on opioids. As you know, EXPAREL is the first and only long-acting multivesicular liposome local anesthetic for use in the peri or postsurgical setting. We utilize our proprietary DepoFoam technology to provide local analgesia for up to 72 hours. Now halfway through the second year of launch with robust quarter-over-quarter growth and increasing market penetration, we continue to build upon the EXPAREL brand through clinical trials, commercial initiatives, talented surgical specialty and strategic partnerships that support EXPAREL use among key hospitals, ambulatory surgery audiences as well as the expansion of the current label. The third quarter of 2013 represented another quarter of upward growth for EXPAREL. We reported net sales of $20 million for EXPAREL, up 32% from the $15.2 million in the previous quarter. We also announced 297 new customers in the third quarter, an average of 23 new customers per week. As of the end of the third quarter, 1,732 distinct customers have ordered EXPAREL since launch, a 21% increase over Q2. In addition to the breadth of new customers adopting EXPAREL, we continue to see growth within hospitals which adopted the product earlier in the launch with 165 total hospitals ordering more than $100,000 worth of EXPAREL, a 65% increase from Q2. Overall, we continue to build momentum in the third quarter not only within our existing customer base, but also across surgical specialties and hospitals as a result of our surgery and anesthesia customers expanding their use in new customer settings and institutions.…

Thanks, Dave. Good morning, everyone. As Dave noted, our EXPAREL revenue for the quarter was $20 million, a robust 32% increase over the previous quarter Q2. Let me frame why we are more than pleased with this performance. First, in the short 18-month history of our launch, really the only puzzling period for us was the comparable period a year ago, Q3 2012, when we felt that the summer seasonality combined with the short amount of selling days in September resulted in a less robust performance against our internal standards. So we were cautious about the possible impact of exogenous factors in Q3 that might impede our growth, but in fact the growth was very healthy. And the predominant factor driving it was simply the increasingly broad awareness of the value of the EXPAREL brand. In addition, we look at the growth curves of the most successful hospital-based products, which tend to be more linear but also far more enduring than non-hospital launches. In terms of sales, the EXPAREL results in Q3, the sixth quarter of launch, is right in line with the sixth quarter of the launch of the industry's standard bearer for hospital-based products that went on to become an $800 million brand, while the EXPAREL growth rate is materially higher in this comparable sixth launch quarter. Year-to-date 2013, EXPAREL sales are now up to $45.7 million. Our annual run rate of sales implied from the Q3 results, in other words our rolling four-quarter sales without any growth is at $80 million. And while we don't disclose monthly or weekly numbers, we experienced growth throughout the quarter. So we exited Q3 with an annualized run rate north of $80 million. Our gross to net off of the $285 per vial price has remained at approximately 5%. And our…

Thanks, Jim. Thank you, everybody, for joining us today. We appreciate your support – I'm sorry. I'd like to turn the call back over to Benny. Benny, are you around for Q&A?

Thank you. (Operator Instructions). Okay, we have a question that comes from Rich Lau from Wedbush Securities. Please go ahead.

Morning, guys, and congrats on another solid quarter. First question is on your new customer adds. While still a very solid number there, slightly slower than the rate you guys saw in Q2. Is that a function more or less of timing of P&T committees, or how should we think about this?

I'll go back to the beginning, Richard. Our launch has been focused on – our initial launch program was focused on roughly a 100 hospitals that do around 20% of the surgeries and the 500 hospitals, they do a little over 50% of the surgeries. So I think it maybe even a different notion than what you're talking about. I mean our growth really is from word of mouth from the places where we've spent a lot of time and resource educating and training and it's those surgeons and anesthesiologists going to other hospitals where they practice. I think eventually, Richard, we're just going to run out of major centers that have significant ORs that are capable of being trained to use a product such as EXPAREL. So I would tell you frankly we're surprised from this side that it's still as high as it is and then we've got at the end of the third quarter, over 1,700 customers who have not only provided P&T access to the product but ordered the product, which is our definition of a customer as you know. So I think you're going to have to see it go down just because there just aren't that many places that we're targeting for use. And as we've talked on these calls several times, we have way more access than we need in order to meet our objectives for this year and next year. So our focus is really on educating, training and making this product available to as many patients as we can in places where we have access rather than spending our resource trying to convert folks where there might be some obstacle for whatever reason.

Okay, great. Thanks for that. And one more question just on your manufacturing. I guess you guys said that you still expect it to be approved in Q1 of next year. Can you maybe go into a little bit more details in terms of what steps you guys still need to complete before the FDA comes in to inspect it?

Yes, I'll go first and I'll ask Jim to comment. There's a formal process, Richard, that is a four-month PDUFA cycle and we will file a formal application and that will trigger the four-month cycle from the FDA. Where we need to be to meet all of the timelines that come with the end of the first quarter is probably the most appropriate way to couch it. But I think what's more important to us frankly is that we've got sufficient inventory to take us well beyond that date even if there is some delay for whatever environmental reason from the regulators. So I don't know, Jim, anything you want to add to that?

I mean the only thing I would add is that just as a reminder that what we're asking or seeking approval for is a manufacturing line that is at the same scale as the current approved line [indiscernible] in the same manufacturing facility. So the bar is – you have to put that in context relative to other approval processes that folks pursue.

Okay, great. Thanks for taking my question.

Thanks, Richard.

Thank you. Next question comes from David Amsellem from Piper Jaffray. Please go ahead.

Thanks. Wanted to start with a question on the bupivacaine recalls and shortages. We've seen some recalls of lots of Marcaine, Hospira being one example. Bupivacaine is on the shortage list. So I guess given that backdrop, has that been in any way helpful to your order flow on EXPAREL?

David, it certainly hasn't hurt but I can't tell you that I think it's been materially helpful. I think it does help us in some places where pharmacy has bupivacaine in short supply and does not want to use that supply to fill elastomeric pumps. But I don't think that that is materially important to the growth of the product in the last couple of quarters to be perfectly honest.

Okay. And then just on the manufacturing, I know that you're going to be making product out of both suites. But longer term is the plan eventually to make all product out of Suite C? And then as you think about peak sales, which is a good bit higher than the 400 million capacity that you cited, can you give us some sort of timelines on other steps you're putting in place to get your capacity beyond that 400 million longer term? Thanks.

Thanks, David. And this I think is an appropriate place for me rather than confusing the issue to just ask Jim to comment.

Sure. So as you pointed out, I mean our planning horizon certainly expects peak sales above the capacity that we think we'll have approved with Suite C. So in the – as we've said previously, we'll manufacture our product pretty much 24x7 in Suite A and Suite C to create as much runway toward the next need for capacity expansion. We've got a great situation with growth in our product here, and we're going to make sure that we manufacture it to supply that product. And it's easier to slow down production in the long run, so – if we ever had to do that, so we're just going to – in 2014 we're going to get Suite C online and we're going to make product in both Suite A and Suite C to build inventory to bridge us to the longer period. And then we're – as Dave mentioned in his remarks, we're in a planning cycle now and I think we'll be able to provide a little more information on that in the coming quarters. But we're looking at different alternatives for different capacity in different places. And I think at this point we're just – what we can say is that we're ahead of the schedule in terms of our planning horizon to be able to have something in place a couple of years down the road when we think we'll need additional capacity beyond what we'll have right now.

Okay. Thanks.

Thank you, David.

Thank you. There are no further questions. I'll now pass over to Dave. Thank you.

Thanks, Benny. Thank you, everyone, for joining us today. We appreciate your support and help and look forward to reporting updates on EXPAREL as we go forward. We'd also like to note that coming up we'll be presenting at the Goldman Sachs U.S. Emerging and Small and Mid Cap Growth Conference in New York City on November 14 and at the Jefferies 2013 Global Healthcare Conference in London on November 21. We'll also be attending the Brean Capital Life Sciences Summit in New York City on November 25. Thank you very much and we look forward to doing good things going forward. Thanks for all your help.

Ladies and gentlemen, that concludes our call for today. You may now disconnect.