Company Update (NASDAQ:PTX): Pernix Therapeutics Holdings Inc Reports Second Quarter 2015 Financial Results


Pernix Therapeutics Holdings Inc (NASDAQ:PTX), a specialty pharmaceutical company, today announced financial results for the second quarter ended June 30, 2015.

Second Quarter and Recent Business Highlights:

  • Treximet sales and volumes increased significantly, arresting a multi-year decline and demonstrating a clear trend reversal:
    • Total prescriptions increased 10% since sampling was initiated at the end of March
    • New prescriptions increased by 15% over the same time period
    • Total retail prescription dollars increased 100% in Q2 2015 versus Q2 2014
    • Total retail prescription dollars increased 109% on a rolling four-week basis, as of July 17, compared to the same period in 2014
  • Re-launched Zohydro® ER with BeadTek™ abuse deterrent technology
  • Zohydro ER with BeadTek was removed by Express Scripts from their 2016 Exclusion List for its National Preferred Formulary on July 31, 2015;
  • Completed successful human pharmacokinetic equivalence study with ZX007, an innovative abuse deterrent tablet formulation and next generation formulation of Zohydro ER
  • Silenor total prescriptions increased 73%, and new prescriptions increased 77% compared to the second quarter of 2014

Second Quarter Financial Highlights:

  • Net revenues on a normalized basis, increased 151% year-over-year, and 29% sequentially versus Q1 2015 levels
  • Adjusted EBITDA increased to $7.9 million, compared to a loss of $4.0 million last year
  • Priced $130 million of 4.25% Convertible Senior Notes due 2021
  • Completed exchange offer for $65 million, 8% convertible notes, removing this obligation from Company’s capital structure
  • Improved blended cost of capital to approximately 9%

“Pernix is focused on driving value. During the quarter, we continued to positively direct the trajectory of the Treximet business and we are encouraged by the product’s recent performance as we continue to take aggressive steps to grow this franchise. We have dealt with the issues we faced at the re-launch, including the lack of samples, and the perception by physicians of limited insurance coverage. While navigating an increasingly challenging managed care environment, we maintained good commercial coverage for over 86% of prescriptions, while stabilizing gross-to-nets. As a result of these efforts, combined with improved promotional efforts by our field force, volumes are increasing, and we are pleased by the recent prescription growth, said Doug Drysdale, Chairman and Chief Executive Officer.

“We executed a successful re-launch of Zohydro ER with BeadTek in the second quarter. Today, all major US pharmacy chains are filling prescriptions for Zohydro ER with BeadTek and our efforts on the payer access front continue. To date, we have submitted over 30 managed care proposals and responses to date have been encouraging. We remain optimistic about our ability to obtain broad and favorable coverage. The removal of Zohydro ER with BeadTek from Express Scripts’ 2016 Exclusion List for its National Preferred Formulary is also a significant step. This will eliminate a significant hurdle to growth for the Zohydro ER franchise next year.

“As we move into the second half of the year, we will continue our focus on positioning our branded portfolio for continued growth, maximizing the potential of our sales force and strengthening the Company’s balance sheet,” concluded Drysdale.

Financial Results – Second Quarter 2015
For the second quarter of 2015, net revenues were $47.0 million, an increase of $29.6 million, or 151%, versus $17.4 million for the second quarter of 2014. A summary of net revenues is outlined below (in millions):

Q2 2015 Product Revenue

The year over year comparison benefits from the September Treximet and May Zohydro launches, and a continued focus on our Silenor selling and marketing strategy, which included a price increase in April of 2014. These increases were partially offset by increased rebates for managed care, the discontinuation of certain less profitable products, and the termination of certain distribution contracts.

We recorded no manufacturing revenue during the second quarter of 2015 compared with $154,000 for the same period in 2014, due to the sale of our manufacturing subsidiary PML in April 2014. Co-promotion and other revenue decreased by $490,000 to $223,000 due to the Natroba co-promotion agreement termination.

Gross profit margin as a percentage of net revenues was 71% versus 46% in the second quarter of 2014, excluding the impact of acquired inventory step up. The increase was primarily due to the Treximet and Zohydro ER launches. Cost of product sales will increase with Silenor, Treximet, and Zohydro ER sales growth, as well as associated higher royalty expenses.

Selling, general and administrative (SG&A) expenses in the second quarter of 2015 increased to $24.9 million, compared to $13.2 million for the same period in 2014, driven primarily by higher Silenor, Treximet, and Zohydro marketing costs, and increases in personnel due to the addition of nearly 100 sales representatives through the acquisition of Zohydro ER, legal settlement, and training. These increases were partially offset by savings related to the sale of our manufacturing facility in April 2014. Bad debt expense, consulting and insurance costs decreased in the quarter.

Research and Development expenses grew to $1.5 million, versus $345,000 last year, in the second quarter of 2015. The increase was mostly due to on-going work related to Treximet lifecycle management and Zohydro ER.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, a non-GAAP measure) was $7.9 million for the second quarter of 2015 and a loss of $4.0 million in the second quarter of 2014. See the table at the end of this press release for a reconciliation of net income to Adjusted EBITDA.

Depreciation and amortization expense was $22.3 million versus $2.0 million in the same period last year. The increase was primarily a result of $17.5 million in Treximet acquisition amortization and $2.7 million in Zohydro ER acquisition amortization, partially offset by a decline in depreciation expense, mostly due to the PML sale in April 2014.

Interest expense for the three months ended June 30, 2015 was $9.9 million compared to $2.3 million last year. The increase was primarily driven by $6.6 million in interest related to our $220.0 million Treximet Notes, issued in August 2014 and $1.7 million in interest related to our $130 million 4.25% Convertible Notes, issued in April 2015. This increase was partially offset by the conversion of the outstanding 8.00% Convertible Notes, which reduced interest expense by $1.0 million.

Pernix recognized an income tax benefit of $3.6 million in the second quarter of 2015, versus a $3.7 million income tax benefit for the same period last year.

The net loss for the second quarter of 2015 was $32.2 million, or $0.62 per basic and diluted share, compared to net loss of $6.2 million, or $0.16 per basic and diluted share, last year. Weighted average common shares outstanding were 52.4 million and 37.8 million per basic and diluted shares in the second quarter of 2015 and 2014, respectively. On a non-GAAP basis, 2Q 2015 adjusted net loss was $5.4 million versus an adjusted net loss of $3.6 million in 2Q 2014.

Financial Results – Six Months ending June 30, 2015
For the six month period ended June 30, 2015, net revenues were $80.9 million versus net revenues of $36.4 million for the same period last year. Gross profit margin was 69% of net revenues, up from 46% for the prior period. On a GAAP basis, net loss was $55.9 million, or $1.23 per share versus a net loss of $15.8 million, or $0.42 per share last year.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $12.5 million for the six months ended June 30, 2015, compared to a loss of $5.9 million for the same period last year.

Liquidity
As of June 30, 2015, the Company had $66.8 million of cash and approximately $11.3 million available under its revolving line of credit, subject to borrowing base capacity. Total principal amount of debt outstanding at the end of the quarter was $357.9 million, including $18.0 million of current debt and $339.9 million of long term debt.

Guidance
Pernix announced that it is revising its full year financial guidance based on the Company’s performance to date, and what Pernix believes is a reasonable estimate for the balance of the year. The Company now expects net revenue for 2015 to be in the range of $170 to $180 million. Adjusted EBITDA is expected to be in the range of $30 to $35 million.

2015 represents an investment year for Pernix. While these investments are expected to impact the Company’s 2015 performance, Pernix anticipates their effectiveness towards driving long-term value will begin in 2016. These investment actions include:

  • Realigning and improving the efficiency of the Company’s recently-expanded sales organization through cross training of all 200 sales professionals to sell all three major brands. The implementation of this alignment is expected to cause some disruption to sales effectiveness in 2015 while positioning the Company to be more competitive in 2016;
  • Continuing to expand managed care access across all products, which should drive positive Zohydro ER sales growth in 2016; and
  • Rolling out its Pernix Pharmacy Direct program over the coming months in order to be fully effective at the beginning of 2016.

Consistent with the Pernix’s regular practice, its guidance does not account for one-time charges, legal settlements and other non-cash items. (Original Source)

Shares of Pernix Therapeutics closed yesterday at $4.72. PTX has a 1-year high of $12.88 and a 1-year low of $4.57. The stock’s 50-day moving average is $5.47 and its 200-day moving average is $7.71.

On the ratings front, Pernix Therapeutics has been the subject of a number of recent research reports. In a report issued on August 3, Brean Murray Carret analyst Difei Yang reiterated a Buy rating on PTX, with a price target of $17, which implies an upside of 260.2% from current levels. Separately, on July 28, Oppenheimer’s Akiva Felt reiterated a Buy rating on the stock and has a price target of $13.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Difei Yang and Akiva Felt have a total average return of 21.4% and 37.8% respectively. Yang has a success rate of 58.4% and is ranked #179 out of 3727 analysts, while Felt has a success rate of 64.7% and is ranked #23.

Pernix Therapeutics Holdings Inc is a specialty pharmaceutical company focused on the sales, marketing and development of branded and generic pharmaceutical products for sleep, bacterial infections and cough and cold conditions.