Pernix Therapeutics Reports Second Quarter 2014 Financial Results

MORRISTOWN, N.J.--()--Pernix Therapeutics Holdings, Inc. (“Pernix” or the “Company”) (NASDAQ: PTX), a specialty pharmaceutical company, today announced financial results for the quarter and year-to-date periods ended June 30, 2014.

Business Update

  • “The second quarter of 2014 saw tremendous progress toward Pernix’s transformation to profitability of its base business. While we expect fiscal year 2014 sales from our non-promoted products to be relatively flat year over year, we expect our insomnia brand, Silenor, to be a key growth driver,” said Doug Drysdale, Chairman, President and Chief Executive Officer.
  • “Silenor weekly prescriptions have increased 18% since we began promoting the product with our original 87 person sales team back in May, just 12 weeks ago, and we have achieved a 52-week high in prescriptions in 4 out of the last 6 weeks. We have just begun the roll out of our revised Silenor promotional campaign and are optimistic about the impact this will have on Silenor growth.
  • In addition, we have recently expanded our sales organization to 100 territories, including the addition of 25 new sales geographies where Pernix was previously absent. This geographic expansion and realignment, which will be fully implemented on August 25th, results in our sales team now covering 97% of our business geographically vs 64% previously. This provides significant upside potential for Silenor and ensures that we are well positioned for the near term addition of Treximet to our CNS portfolio. Supplemental to our promotional efforts, activities focused on managed care access have resulted in an additional 58+ million lives that now have coverage for Silenor.
  • The closing of our transaction to acquire the U.S. rights to Treximet has been delayed due to a short-term supply constraint for the product. We remain committed to closing the transaction and are working collaboratively with GSK to ensure sufficient supply to meet anticipated demand. During the last week, we and our lenders have been performing additional due diligence related to this supply constraint and are optimistic about our ability to close the acquisition of Treximet in the near term. We do not see any material change in the fundamental value of the asset to Pernix at this time and look forward to adding Treximet to our CNS portfolio."

Pernix has added significant experienced talent to its executive leadership team in the areas of Marketing, Legal, Regulatory Affairs, Supply Chain, Sales Operations and Trade Operations. The new and expanded management team has also been working to rapidly evaluate and improve the majority of the Company’s key operating systems and processes, positioning the Company for continued growth. Areas of improvement include:

  • Redesigned Sales Operations system including such components as an updated Incentive Compensation plan for the sales team, Key Performance Indicator Tracking around specific objectives, and a state of the art automated Territory Mapping and Planning system for the sales team that will go live next week.
  • Implementation of new Government Pricing software to improve efficiencies and provide robust calculation documentation in this area.
  • Implementation of a formal Sales and Operations Planning process to manage Pernix’s CMO partnerships and ensure the Company’s supply chain is optimized.

In addition, Pernix announced the appointment of Sanjay Patel as Chief Financial Officer. Mr. Patel was previously an investment banker at Cantor Fitzgerald and brings to Pernix over 15 years of investment banking, institutional investment and public policy experience.

Financial Results – Second Quarter 2014

Net revenues this quarter were $17.4 million, compared to $20.6 million for the second quarter of 2013. Net sales from branded products, including sales to other channels such as authorized generics, were approximately 65% of total, and net sales from generic products made up the balance. Silenor sales were up significantly this quarter. This growth was offset by reductions in other areas, such as: (i) the sale of certain Cypress generic products to Breckenridge in September 2013; (ii) the termination of our co-promotion agreement for Natroba; (iii) the discontinuation of certain generic, cough and cold products; and (iv) the increase in government rebates on certain of our products.

Gross profit margin this quarter was 50% of net product sales, compared to 46% of net product sales for the same quarter last year. On an adjusted basis, excluding the impact of the stepped up basis of acquired inventory for Cypress, Hawthorn, and Somaxon, gross profit margin this quarter was 54%, compared to 50% for same quarter last year.

Total operating expenses, excluding the non-recurring impact of disposals, were $16.4 million this quarter, compared to $17.2 million for the same quarter last year. Second quarter operating expense included SG&A expense of $13.7 million and approximately $2.0 million of depreciation and amortization expense.

On a GAAP basis, net loss this quarter was approximately $6.2 million, or $0.16 per share, compared to a net loss of $5.7 million, or $0.15 per share, for the second quarter of 2013.

Consistent with prior quarters, Pernix has provided adjusted operating results, which are non-GAAP measures that the Company believes are important for evaluating its financial results. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was a loss of approximately $4.0 million for this quarter, compared to a loss of approximately $3.9 million for same quarter last year. A table that reconciles net income to Adjusted EBITDA is provided at the end of this press release.

Financial Results – Six Months ending June 30, 2014

For the six month period ended June 30, 2014, net revenues were $36.4 million compared with net revenues of $42.7 million for the same period last year. Gross profit margin this period was 49% of net product sales, up from 43% for the prior period. On an adjusted basis, excluding the impact of the stepped up basis of acquired inventory for Cypress Hawthorn and Somaxon, gross profit margin was 55% of net product sales this period, compared to 54% for the same period last year. On a GAAP basis, net loss was $15.8 million, or $0.42 per share this period, compared to a net loss of $13.6 million, or $0.38 per share for the same period last year.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was a loss of approximately $5.9 million for the six months ended June 30, 2014, compared to $5.3 million for the same period last year.

Conference Call Information

Management will host a conference call today at 10:00 a.m. EDT to discuss its financial results for the second quarter ended June 30, 2014. The conference call will feature remarks from Douglas Drysdale, Chairman of the Board, President and Chief Executive Officer, and Sanjay Patel, Chief Financial Officer. To participate in the live conference call, please dial (877) 312-8783 (domestic) or (408) 940-3874 (international), and provide conference ID code 67444792. A live webcast of the call will also be available on the investor relations section of the Company’s website, www.pernixtx.com. The passcode is 67444792. Please allow extra time prior to the webcast to register and download and install any necessary audio software.

A replay of the call will be available through August 18, 2014. To access the replay, please dial (855) 859-2056 (domestic) and (404) 537-3406 (international), and provide conference ID code 67444792. An online archive of the webcast will be available on the Company's website for 30 days following the call.

About Pernix Therapeutics Holdings, Inc.

Pernix Therapeutics is a specialty pharmaceutical company primarily focused on the sales, marketing, and development of branded pharmaceutical products. The Company markets a portfolio of branded products including: SILENOR®, the only nonscheduled, non-narcotic prescription medication indicated for maintain patients’ sleep, and KHEDEZLA, as well as CEDAX®, an antibiotic for middle ear infections and a number of treatments for cough and cold conditions including ZUTRIPRO®, REZIRA® and VITUZ®. The Company promotes its branded products to physicians through its Pernix sales force and markets its generic portfolio through its wholly owned subsidiaries, Cypress Pharmaceuticals and Macoven Pharmaceuticals.

Additional information about Pernix is available on the Company’s website located at www.pernixtx.com

Non-GAAP Financial Measures

Pernix is disclosing non-GAAP financial measures in this press release. Primarily due to acquisitions, Pernix believes that an evaluation of its ongoing operations (and comparisons of its current operations with historical and future operations) would be difficult if the disclosure of its financial results were limited to financial measures prepared only in accordance with U.S. generally accepted accounting principles (GAAP). In addition to disclosing its financial results determined in accordance with GAAP, Pernix is disclosing non-GAAP results that exclude items such as amortization expense and certain other expense and revenue items in order to supplement investors' and other readers' understanding and assessment of the Company's financial performance. Whenever Pernix uses a non-GAAP measure, it will provide a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measure. Investors and other readers are encouraged to review the related GAAP financial measures and the reconciliation of non-GAAP measures set forth herein and should consider non-GAAP measures only as a supplement to, not as a substitute for or as a superior measure to, measures of financial performance prepared in accordance with GAAP.

Cautionary Notice Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements including words such as “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions are forward-looking statements. Because these statements reflect the Company’s current views, expectations and beliefs concerning future events, these forward-looking statements involve risks and uncertainties. Investors should note that many factors, as more fully described under the caption "Risk Factors" in our Form 10-K, Form 10-Q and Form 8-K filings with the Securities and Exchange Commission and as otherwise enumerated herein or therein, could affect the Company’s future financial results and could cause actual results to differ materially from those expressed in forward-looking statements contained in the Company’s Annual Report on Form 10-K. The forward-looking statements in this press release are qualified by these risk factors. These are factors that, individually or in the aggregate, could cause our actual results to differ materially from expected and historical results. The Company assumes no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise.

 
PERNIX THERAPEUTICS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
   

June 30,

  December 31,
2014     2013  
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 60,791,476 $ 15,646,963
Accounts receivable, net 22,769,368 25,681,371
Inventory, net 12,545,816 13,809,929
Note receivable, net of unamortized discount of $25,145 and $100,582, respectively 4,824,855 4,749,418
Prepaid expenses and other current assets 6,535,823 5,878,292
Income tax receivable 5,348,137 1,318,446
Deferred income tax assets   11,085,000   9,301,000
Total current assets 123,900,475 76,385,419
Property and equipment, net 1,107,285 6,872,042
Other assets:
Goodwill 41,581,017 42,496,592
Intangible assets, net 76,380,424 80,022,283
Note receivable, net of unamortized discount of $223,087 and $318,696, respectively 4,626,913 4,531,304
Other long-term assets   5,543,590   1,078,655
Total assets $ 253,139,704 $ 211,386,295
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 7,738,240 $ 3,443,629
Accrued personnel expense 3,975,589 3,803,274
Accrued allowances 34,857,336 34,285,578
Other accrued expenses 3,964,389 5,532,549
Put option and contingent consideration - Cypress acquisition 1,330,000
Other liabilities 4,363,751 4,072,933
Debt   13,128,848   16,999,687
Total current liabilities 68,028,153 69,467,650
Long-term liabilities
Other liabilities 11,487,682 14,387,766
Debt

1,309,767
Senior convertible notes 65,000,000
Deferred income taxes   11,284,000   15,499,000
Total liabilities   155,799,835   100,664,183
 
Commitments and contingencies (Note 17)
 
STOCKHOLDERS’ EQUITY
Common stock, $.01 par value, 90,000,000 shares authorized, 40,336,677 and 39,318,301 issued, and 38,024,889 and 37,189,351 outstanding at June 30, 2014 and December 31, 2013, respectively 380,249 371,893
Treasury stock, at cost, 2,311,788 and 2,128,950 shares held at June 30, 2014 and December 31, 2013, respectively (4,754,400 ) (4,001,475 )
Additional paid-in capital 122,691,658 119,553,760
Accumulated deficit   (20,977,638 )   (5,202,066 )
Total stockholders’ equity   97,339,869   110,722,112
 
Total liabilities and stockholders’ equity $ 253,139,704 $ 211,386,295
 
 
PERNIX THERAPEUTICS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
 
    Three Months Ended   Six Months Ended
June 30, June 30,
2014   2013 2014   2013

Net revenues

$ 17,381,984 $ 20,573,401 $ 36,433,536 $ 42,651,274
Costs and operating expenses:
Cost of product sales 8,704,669 11,162,350 18,660,619 24,239,797
Selling, general and administrative expenses 13,743,559 13,141,447 27,367,009 27,220,635
Research and development expense 345,579 1,792,184 1,314,433 2,999,300
Depreciation and amortization expense 1,969,159 2,276,992 4,159,626 4,101,700
Loss on disposal of equipment 152,720 4,880 152,720 4,880
Loss on sale of PML (including impairment charge)   215,401

  6,672,367

Total costs and operating expenses   25,131,087   28,377,853   58,326,774   58,566,312
 
Loss from operations (7,749,103 ) (7,804,452 ) (21,893,238 ) (15,915,038 )
 
Other income (expense):
Change in fair value of put right

(1,830,062 )

(3,970,789 )
Change in fair value of contingent consideration

283,000
Interest expense, net (2,233,082 ) (1,632,569 ) (3,497,334 ) (2,709,184 )
Gain on sale of investment  

3,605,263  

3,605,263
Total (loss) income, net   (2,233,082 )   142,632   (3,497,334 )   (2,791,710 )
 
Loss before income taxes (9,982,185 ) (7,661,820 ) (25,390,572 ) (18,706,748 )
 
Income tax benefit   3,749,000   1,985,000   9,615,000   5,119,000
 
Net loss $ (6,233,185 ) $ (5,676,820 ) $ (15,775,572 ) $ (13,587,748 )
 
Other comprehensive (loss) income

Unrealized gains during period, net of tax of $437,900 and ($411,000) for the three and six months ended June 30, 2013, respectively

 

  746,645  

  (702,000 )

Reclassification adjustment for net realized gain included in net loss, net of tax of ($1,322,000) both for the three and six months ended June 30, 2013

 

  (2,273,118 )  

  (2,273,118 )
 
Comprehensive loss $ (6,233,185 ) $ (7,203,293 ) $ (15,775,572 ) $ (16,562,866 )
 
Net loss per share, basic $ (0.16 ) $ (0.15 ) $ (0.42 ) $ (0.38 )
Net loss per share, diluted $ (0.16 ) $ (0.15 ) $ (0.42 ) $ (0.38 )
Weighted-average common shares, basic   37,828,218   37,114,717   37,551,144   35,738,469
Weighted-average common shares, diluted   37,828,218   37,114,717   37,551,144   35,738,469
 

Supplemental Financial Information

The following table presents a reconciliation of Pernix’s net income to adjusted EBITDA. The Company defines EBITDA as net income plus interest, income tax expense, depreciation and amortization and presents these measures to assist investors in evaluating Pernix’s operating performance and comparing the Company’s results with those of other companies. Adjusted EBITDA should not be considered in isolation from or as a substitute for net income.

 
PERNIX THERAPEUTICS HOLDINGS, INC.
EBITDA Reconciliation Table
 
   

 

Three Months Ended June 30,

 

 

 

Six Months Ended June 30,

2014     2013 2014     2013
Net loss $ (6,233,185 ) $ (5,676,820 ) $ (15,775,572 ) $ (13,587,748 )
Amortization & depreciation 1,969,159 2,276,992 4,159,626 4,101,700
Net interest 2,233,082 1,632,569 3,497,334 2,709,184
Taxes (3,749,000 ) (1,985,000 ) (9,615,000 ) (5,119,000 )
EBITDA $ (5,779,944 ) $ (3,752,259 ) $ (17,733,612 ) $ (11,895,864 )
 
Deal expenses 470,964 116,672 472,917 527,340
Stock compensation 740,143 479,271 2,518,970 1,024,835
Stock compensation – ParaPRO (1,293,720 ) 148,212 (1,174,586 ) 294,796

Increase in basis of acquired inventory included in COGS

774,283 895,440 2,396,514 4,710,700
Increase in value of put right

1,830,062

3,970,789

Change in fair value of contingent Consideration

(283,000 )

Loss on sale of PML (including

impairment charge)

215,401 6,672,367
Loss on disposal of equipment 152,720

152,720

Severance expenses 765,725

765,725

Gain on sale of investment

(3,605,263 )

(3,605,263 )
Adjusted EBITDA $ (3,955,428 ) $ (3,887,865 ) $ (5,928,985 ) $ (5,255,667 )

Contacts

Pernix Therapeutics Holdings, Inc.
Sanjay Patel, 800-793-2145 x1000
Chief Financial Officer
spatel@pernixtx.com

Sharing

Contacts

Pernix Therapeutics Holdings, Inc.
Sanjay Patel, 800-793-2145 x1000
Chief Financial Officer
spatel@pernixtx.com