No pain, no gain? That's not the mantra for small-cap Pacira Pharmaceuticals (NAS: PCRX) . Pacira hopes that no pain means big gains. The company announced this week the initiation of phase 2/3 clinical trials for its nerve block injection, Exparel, for use in total knee arthroplasty surgery.

Blocking
Knee surgery isn't the first target for Exparel. Neither will it be the last.

Pacira obtained FDA approval for the drug in October 2011 for post-surgical pain management. This approval followed a successful trial of Exparel in reducing pain after hemorrhoidectomy surgery. The company launched commercial sale of the product in April of this year. Clinical trials of Exparel are also planned for use in thoracotomy (lung surgery).


A single-dose injection of the drug close to a nerve provides pain reduction that lasts for several days. This alternative should appeal to physicians and patients who would rather not risk the potential for infection and leakage associated with external catheters and other devices.

Tackling
Pacira could have to tackle some competitors to score big with Exparel, though. It would need to displace the aforementioned external catheters used to deliver drugs such as Sensorcaine, made by AstraZeneca (NYS: AZN) .

Commonly prescribed drug for reducing pain after surgeries include Percocet, made by Endo Pharmaceuticals (NAS: ENDP) , and Johnson & Johnson (NYS: JNJ) sells Nucynta, another popular pain medication. Exparel doesn't have the degree of adverse side effects that these opioid drugs have -- a key advantage.

Pacira should not have to slam these competitors to the ground, either. Physicians could elect to use Exparel along with opioids, but with lesser quantities of the other drugs.

Fumbling
The company has experienced a few fumbles in recent months despite some success with Exparel. In June, Novo Nordisk AS (NYS: NVO) terminated a multi-million dollar agreement with Pacira to use its DepoFoam drug delivery technology in the development of a new drug.

In August, the European Medicines Agency recommended a recall of Pacira's cancer drug DepoCyte. The agency cited problems with a manufacturing plant operated by the company in San Diego.

Punting
Some investors appear to be emphasizing Pacira's stumbles over its successes. Short interest currently stands at nearly 25% of the company's float. This level reflects an increase of around 25% in the past month.

Although the company appears to have solid potential for Exparel, investors probably should punt for now. There is still a considerable level of risk in investing in Pacira. Watch sales numbers for Exparel, though. If they take off in a dramatic way, the short-sellers will run to cover their short positions. If this occurs, we will have an entirely different ball game.

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The article No Pain, Big Gains for This Pharma Stock? originally appeared on Fool.com.

Fool contributor Keith Speights owns no shares in the stocks mentioned above. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of and creating a diagonal call position in Johnson & Johnson. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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