Pernix Therapeutics Holdings Inc (NASDAQ:PTX) shares are tumbling 25% in after-hours trading after the drug maker said that a failure to raise capital and repay all borrowings under the revolving credit facility on or before July 31, 2017 would constitute an event of default under the revolving credit facility. The Company has engaged in discussions with parties that have expressed interest in refinancing the Company’s revolving credit facility. However, there can be no assurance that these discussions will result in a transaction.

As of March 31, 2017, the Company had $22.7 million of cash.

Total principal amount of debt outstanding at March 31, 2017 was approximately $320.8 million. The total principal amount of debt consisted of approximately $176.8 million of 12% Senior Secured Notes, $130 million of 4.25% convertible notes and $14.0 million under our revolving credit facility. On February 1, 2017, we made the semi-annual principal and interest payment of $24.2 million on our 12% Senior Secured Notes per the terms of the indenture.

First Quarter 2017 Financial Highlights:

  • First quarter 2017 net revenues decreased 8.6% from the first quarter of 2016, to $29.7 million from $32.5 million.
  • First quarter 2017 selling, general and administrative expense decreased by 22% compared to the first quarter of 2016, to $20.3 million from $26.0 million.
  • Net loss for the first quarter of 2017 was $29.5 million, as compared to net loss of $25.9 million for the three months ended March 31, 2016.
  • First quarter 2017 adjusted EBITDA improved to approximately ($0.3 million) from ($4.5 million) in the prior year period.

Business Update

  • Solid year-over-year increases in prescription volumes for Zohydro and Silenor in the first quarter due to continued momentum and focused efforts on highest volume prescribers, while Treximet was slightly lower
    •  Zohydro ER TRx up 3% year-over-year; growth rate was impacted by the 20mg backorder
    •  Silenor TRx up 2% year-over-year
    •  Treximet TRx down 1% year-over-year
  • Amended Wells Fargo credit facility
    •  Company intends to transition to another financing source on or before July 31, 2017

“We continue to be pleased with the trajectory of our business,” said John Sedor, Chairman and Chief Executive Officer of Pernix Therapeutics.  “The first quarter of 2017 was highlighted by year-over-year prescription volume increases for Zohydro ER with BeadTekTM and Silenor, the impact of which was mitigated by less favorable gross-to-nets across all three core brands.  Importantly, the cost savings plan that we implemented last year contributed to a significant improvement in adjusted EBITDA in the first quarter, as compared to the prior year period. We remain focused on growing our core brands and prudent cost management.”

Financial Results

For the first quarter of 2017, net revenues were $29.7 million, a decrease of 9% from the $32.5 million in the first quarter of 2016.  A summary of net revenues is outlined below (US dollars in millions):

Treximet net revenues decreased by $2.5 million, or 15%, during the three months ended March 31, 2017, compared to the three months ended March 31, 2016, due to a decrease in sales volume and lower net sales price.

Zohydro ER net revenues decreased by $0.3 million, or 5%, during the three months ended March 31, 2017, compared to the three months ended March 31, 2016, due to a decrease in sales volume primarily as a result of the 20mg stock out and lower net sales price.

Silenor net revenues decreased by approximately $0.1 million, or 3%, during the three months ended March 31, 2017, compared to the three months ended March 31, 2016.  The decrease was due primarily to lower net price which was partially offset by higher sales volume.

Net product revenues – Other Products increased by $0.1 million, or approximately 1%, during the three months ended March 31, 2017, compared to the three months ended March 31, 2016.  The increase was due primarily to favorable gross-to-nets for our generic products portfolio.

Co-promotion and other revenue remained relatively flat during the three months ended March 31, 2017, as compared to the three months ended March 31, 2016.

Cost of product sales decreased by $1.2 million, or 11%, during the three months ended March 31, 2017, compared to the three months ended March 31, 2016.  The decrease in cost of product sales was primarily due to a reduction in inventory obsolescence costs and lower royalty expenses based on decreased net revenues.

Selling, general and administrative expense decreased by $5.7 million, or 22%, during the three months ended March 31, 2017, compared to the three months ended March 31, 2016.  The decrease was driven primarily by lower selling and marketing expenses as a result of the initiative to restructure our sales force and operations during the three months ended September 30, 2016.

Research and development expense decreased by $0.4 million during the three months ended March 31, 2017, compared to the three months ended March 31, 2016.  The decrease was related to lower spend for Treximet.

Depreciation and amortization expense decreased by $5.1 million, or 22%, during the three months ended March 31, 2017, compared to the three months ended March 31, 2016.  The decrease was primarily related to intangible asset impairments during the year ended December 31, 2016.

Net loss was $29.5 million for the first quarter of 2017, compared to $25.9 million in the first quarter of 2016.

Adjusted EBITDA was ($0.3 million) for the first quarter of 2017, compared to adjusted EBITDA of ($4.5 million) in the first quarter of 2016.

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.