ptxPernix Therapeutics Holdings Inc (NASDAQ:PTX) announced financial results for the three and nine months ended September 30, 2016.

Third Quarter 2016 Financial and Product Highlights:

  • Net Revenues were $41.5 million, an increase of 13% over the second quarter and a decrease of 15% compared to the same period in the prior year.
  • Prescription volumes grew sequentially and year-over-year for all three core brands, Treximet, Zohydro ER with BeadTek, and Silenor.
  • Gross Margin was 73.9%, an improvement of 710 basis points over the second quarter 2016 and a decrease of 130 basis points over the same prior year period.
  • Net loss was $26.4 million for the three months ended September 30, 2016, as compared to $31.1 million for the three months ended June 30, 2016 and $10.7 million for the prior year period.
  • Adjusted EBITDA improved to $8.4 million as compared with ($1.4 million) in the second quarter 2016 and decreased $0.3 million from the prior year period.

Business Update:

  • Solid increases in prescription volumes in the third quarter due to continued momentum and focused efforts on highest volume prescribers
    • Treximet TRx up 4% sequentially and 2% year-over-year
    • Zohydro ER TRx up 5% sequentially and 16% year-over-year
    • Silenor TRx up 0.3% sequentially and 7% year-over-year
  • Began distributing Treximet pediatric dose for patients age 12 and older
    • Provides important therapeutic option to pediatric migraine sufferers
  • Issued two new Orange Book patents for Zohydro ER® with BeadTekTM strengthening intellectual property protection through 2033
    • Company has 6 Orange Book listed patents valid through 2033 broadly directed to methods of dosing patients with mild or moderate hepatic impairment with hydrocodone
  • Initiated new clinical development efforts to strengthen abuse-deterrent characteristics of Zohydro ER
    • Focused on the development of a next-generation version of Zohydro ER
  • Implemented a 1-for-10 reverse stock split effective on October 14th in order to raise the per share trading price of the Company’s common stock and comply with NASDAQ continued listing requirements
  • Announced the appointment of Graham G. Miao, Ph.D. and Dennis H. Langer, M.D., J.D. to the Company’s Board of Directors on November 7, 2016, effective immediately. Accordingly, Pernix regained compliance with NASDAQ Listing Rule 5605(c)(2)(A), which requires Pernix to have at least three independent directors on its Audit Committee for continued listing on The NASDAQ Global Market

“We are encouraged with the progress of our turnaround efforts, especially the reorganization of our salesforce, which we expect will increase the efficiency of our company, drive us toward profitability and position us well for future growth,” said John Sedor, Chairman and Chief Executive Officer of Pernix Therapeutics Holdings.  “Importantly, in the face of the workforce reductions, sales force reorganization and efforts to improve our operating efficiency, we are seeing solid increases in prescription trends across each of our core brands, Treximet, Zohydro ER and Silenor.  In addition, our prescription fulfillment program, Pernix Prescriptions Direct, continues to gain increased traction as more patients utilize this program.”

“We are pleased to have returned to positive Adjusted EBITDA for the first time since the fourth quarter of 2015, having delivered Adjusted EBITDA of $8.4 million in the third quarter, a solid increase over the second quarter of 2016,” said Graham Miao, President and Chief Financial Officer.  “We continue to focus on improving our financial flexibility and strengthening our balance sheet.  We are actively exploring options to improve operating cash flow generation through the optimization of our product portfolio and cost structure.  Along with our financial advisors, we are engaging with lenders to proactively restructure existing debt in a constructive manner that we believe will ultimately benefit all stakeholders.”

Three Months Ended September 30, 2016 vs. Three Months Ended June 30, 2016

For the three months ended September 30, 2016, net revenues were $41.5 million compared to $36.7 million for the three months ended June 30, 2016, an increase of 13%.  A summary of net revenues is outlined below (US dollars in millions):

Treximet net sales decreased by $4.6 million, or 16%, during the three months ended September 30, 2016, compared to the three months ended September 30, 2015, due primarily to inventory changes at the wholesaler level and a decrease in net selling price.

Silenor net sales decreased by approximately $0.5 million, or 10%, during the three months ended September 30, 2016, compared to the three months ended September 30, 2015.  The decrease in net sales of Silenor was primarily driven by a lower net selling price.

Zohydro ER was acquired in April 2015 with the first sale occurring on May 4, 2015.  Zohydro ER net sales increased by $0.7 million, or approximately 14%, during the three months ended September 30, 2016, compared to the three months ended September 30, 2015.  The increase was primarily due to an increase in demand and an increase in the net selling price.  These increases were partially offset by a decrease due to inventory changes at the wholesaler level.

Net product sales – other decreased by $1.8 million, or approximately 22%, during the three months ended September 30, 2016, compared to the three months ended September 30, 2015.  Declining net product sales – other was due to (i) the discontinuation of certain less profitable products, primarily generics, and certain OTC monograph seasonal cough and cold products and (ii) the termination of certain contracts pursuant to which we marketed and distributed products for others and invoiced those sales.

Co-promotion and other revenue decreased by $0.9 million during the three months ended September 30, 2016, compared to the three months ended September 30, 2015.  The decrease in co-promotion and other revenue was primarily attributable to the termination of a co-promotion agreement.

Gross Margin was 74% in the third quarter of 2016 as compared to 75% in the third quarter 2015.

Selling, general and administrative expense decreased by $5.2 million, or 19%, during the three months ended September 30, 2016, compared to the three months ended September 30, 2015.  The decrease was driven primarily by lower selling and marketing costs for Treximet and Silenor, partially offset by higher legal expenses.

Research and development expense decreased by $1.5 million during the three months ended September 30, 2016, compared to the three months ended September 30, 2015.  The decrease was related to the timing of work for Zohydro ER.

Depreciation and amortization expense decreased by $5.0 million during the three months ended September 30, 2016, compared to the three months ended September 30, 2015.  The decrease was primarily a result of an extension of the estimated useful life of Zohydro ER with BeadTek during the three months ended March 31, 2016, due to the additional patents that were issued in February 2016, and intangible asset impairments during the nine months ended September 30, 2016 and the fourth quarter of 2015.

Restructuring costs were $2.3 million during the three months ended September 30, 2016, which were related to the initiative to restructure the Company’s sales force and operations.

Interest expense decreased by $0.8 million, or 9%, during the three months ended September 30, 2016, compared to the prior year period.  The decrease was primarily due to the lower principal balance on the Treximet Secured Notes.

Net loss was $26.4 million for the third quarter of 2016, compared to $10.7 million in the third quarter of 2015.

Adjusted EBITDA was $8.4 million for the third quarter of 2016 compared to $8.7 million in the third quarter of 2015.  See the table at the end of this press release for a reconciliation of net loss to Adjusted EBITDA.

Nine Months Ended September 30, 2016 vs. Nine Months Ended September 30, 2015

For the nine months ended September 30, 2016, net revenue was $110.7 million compared to $129.5 million for the nine months ended September 30, 2015, a decrease of 15%.  A summary of net revenue is outlined below (US dollars in millions):

Treximet net sales decreased by $16.9 million or approximately 22% during the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015, due to inventory changes at the wholesaler level, a decrease in the net selling price and a decrease in demand.

Silenor net sales decreased by $3.8 million, or 23%, during the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015.  The decrease in sales of Silenor was primarily driven by a decrease in the net selling price and inventory changes at the wholesaler level.  These decreases were partially offset by an increase in demand.

Zohydro ER was acquired in April 2015 with the first sale occurring on May 4, 2015.  Zohydro ER net sales increased by $8.2 million during the nine months ended September 30, 2016, compared to the prior period, which consisted of five months of sales.

Net product sales – other decreased by $5.1 million, or approximately 18%, during the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015.  This decrease was due the discontinuation of certain cough and cold products.

Co-promotion and other revenue decreased by $1.2 million during the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015, due to the termination of a co-promotion agreement.

Gross Margin decreased to 69% in the nine months ended September 30, 2016 from 71% in the nine months ended September 30, 2015.  This decrease was due primarily to a contractual minimum royalty incurred for sales of Treximet.

Selling, general and administrative expense increased by $0.4 million for the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015.  The increase was driven primarily by selling and marketing costs for Zohydro ER with BeadTek, which was acquired in April 2015 and we began to promote in May 2015.

Research and development expense decreased by $0.5 million during the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015.  The decrease was related to the timing of work for Zohydro ER.

Depreciation and amortization expense decreased by $1.1 million during the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015.  The decrease was primarily related to intangible asset impairments during the nine months ended September 30, 2016 and the fourth quarter of 2015.  These decreases were partially offset by the amortization of Treximet pediatrics developed technology, which began in May 2015.

Restructuring costs were $2.3 million and $1.2 million during the nine months ended September 30, 2016 and 2015, respectively.  Restructuring costs during the nine months ended September 30, 2016 were related to the initiative to restructure the Company’s sales force and operations.  Restructuring costs during the nine months ended September 30, 2015 were related to the initiative to close the operating site in Charleston, South Carolina, in 2015.

Interest expense decreased by $2.0 million, or 7%, during the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015.  The decrease was primarily due to the lower principal balance on the Treximet Secured Notes.

Net loss was $83.5 million for the nine months ended September 30, 2016, compared to $66.6 million in the same period last year.

Adjusted EBITDA was $2.5 million for the nine-month period of 2016 compared to $21.2 million in the same period of 2015.  This decrease is primarily due to lower net sales and gross profit year-over-year.  See the table at the end of this press release for a reconciliation of net loss to Adjusted EBITDA.

Liquidity

As of September 30, 2016, the Company had total liquidity of $39.9 million, consisting of $28.5 million of cash and approximately $11.4 million available to draw under its $50.0 million revolving credit facility.

Total principal amount of debt outstanding at the end of the third quarter was $333.6 million and net debt was $305.1 million. The total principal amount of debt consisted of $189.6 million of 12% Senior Secured notes, $130.0 million of 4.25% convertible notes and $14.0 million under the Company’s revolving credit facility.

To improve financial flexibility, the Company has retained advisors to explore options to restructure its debt and assess other potential alternatives in order to maximize value for all stakeholders.

During the three months and nine months ended September 30, 2016, the Company raised $6.2 million and $18.3 million in net proceeds through the issuance of 984,148 and 3,376,284 shares of common stock, respectively, under the at-the-market Sales Agreement. As of September 30, 2016, approximately $81.1 million of common stock remained available under this facility. (Original Source)

Shares of Pernix Therapeutics are down nearly 4% to $4.00 in after-hours trading. PTX has a 1-year high of $35 and a 1-year low of $3.11. The stock’s 50-day moving average is $5.49 and its 200-day moving average is $5.79.

On the ratings front, Aegis Capital Corp. analyst Difei Yang downgraded PTX to Hold, in a report issued on August 12. According to TipRanks.com, Yang has a yearly average loss of 3.9%, a 35% success rate, and is ranked #3862 out of 4205 analysts.

Pernix Therapeutics Holdings, Inc. engages in the research, development, and manufacture of biopharmaceutical products. It focuses on therapeutics for diseases on central nervous system, neurology, pain, and psychiatry. Its products include treatment of migraine pain and inflammation, insomnia, and depressive disorder. The firm distributes its products under the following brands: Treximet, Silenor, Zohydro ER with BeadTek, and Khedezla.