Pernix Therapeutics Reports First Quarter 2013 Financial Results

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Pernix Therapeutics Reports First Quarter 2013 Financial Results

Revenues Increased 52% to $22.1 million compared to $14.5 million in the First Quarter 2012

Completed Acquisition of Somaxon in March 2013


Michael Pearce, Chairman of the Board, appointed President and Chief Executive Officer

Cooper Collins appointed Chief Strategic Officer and remains on the Board of Directors

THE WOODLANDS, Texas--(BUSINESS WIRE)-- Pernix Therapeutics Holdings, Inc. ("Pernix" or the "Company") (NAS: PTX) , a specialty pharmaceutical company, today announced financial results for the quarter ended March 31, 2013.

Financial Results

For the first quarter of 2013, net revenues increased by approximately 52% to $22.1 million, compared to $14.5 million for the first quarter of 2012. The growth in net revenues was due primarily to sales revenues of branded and generic products that the Company acquired from Hawthorn Pharmaceuticals and Cypress Pharmaceuticals and of Silenor acquired in the merger with Somaxon. Pernix closed on its acquisition of Cypress/Hawthorn on December 31, 2012 and on its merger with Somaxon on March 6, 2013. Total product revenues for the first quarter of 2013 consisted of 41% revenue contribution from generic products and 59% revenue contribution from branded products in the first quarter of 2013.

The net loss for the first quarter of 2013 was approximately $ (8.1) million, or $ (0.23) per basic and diluted share, compared to net income of approximately $1.2 million, or $ 0.05 per basic and $0.04 per diluted share, for the first quarter of 2012.

For the quarter ended March 31, 2013, adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA, a non-GAAP measure) was a non-GAAP net loss of $(1.4) million, or $(0.04) per basic and diluted share. Adjusted EBITDA reflects earnings before $0.7 million of stock compensation expense, $3.8 million in the costs of sales related to the increase in the basis of the acquired inventory in the Cypress/Hawthorn, and Somaxon acquisitions, $2.1 million related to the increase in value of the put right issued in connection with the Cypress/Hawthorn acquisition, and $0.4 million in transaction expenses in connection with the Cypress/Hawthorn and Somaxon acquisitions, offset by a $0.3 million change in the fair value of contingent consideration in connection with the Cypress/ Hawthorn acquisition. For the quarter ended March 31, 2012, adjusted EBITDA, non-GAAP net income was $3.3 million, or $0.13 per basic and diluted share. See the table at the end of this press release for a reconciliation of net income to EBITDA and adjusted EBITDA.

Cooper Collins, President and Chief Executive Officer of Pernix, said, "In the first quarter of 2013, we completed the acquisition of Somaxon, and in May 2013, our sales force will be re-launching Silenor which is a non-seasonal product for insomnia that broadens our product line. We have restructured and refocused our sales force, and we continue to integrate Cypress and Hawthorn, are on track to launch Dr. Cocoa, an OTC chocolate cough and cold product for the 2013-14 cough and cold season, and plan to initiate our phase III clinical trial for our pediatric product in the summer of 2013."

Selling, general, and administrative ("SG&A") expenses in the first quarter of 2013 increased by approximately $7.3 million to $14.1 million, compared to $6.8 million for the first quarter of 2012. The increase was primarily due to the SG&A expenses of Cypress/Hawthorn and Pernix Manufacturing, including the addition of these employees and their related overhead. In addition, we incurred approximately $0.4 million in transaction expenses in connection with the acquisitions of Cypress/Hawthorn and Somaxon and realized an increase of approximately $0.9 million in legal fees from product related litigation. The Company also invested in the development of Dr. Cocoa, the Company's chocolate flavored cough and cold product for the U.S. OTC market, and incurred expenses related to advancing the in-process research and development projects acquired in the acquisition of Cypress/Hawthorn.

Depreciation and amortization was $2.2 million for the first quarter of 2013, compared to $0.6 million for the prior year period. The Company recognized an income tax benefit of $3.3 million in the first quarter of 2013, compared to an income tax expense of $0.8 million in the first quarter of 2012.

Completed Acquisition of Somaxon Pharmaceuticals

On March 6, 2013, Pernix completed its acquisition of Somaxon Pharmaceuticals, Inc. ("Somaxon") following the approval of the transaction by stockholders of Somaxon at the special meeting held on March 6, 2013. Under the terms of the transaction, Pernix acquired all of the common stock of Somaxon in a stock-for-stock transaction resulting in equity consideration of $25 million (with a fair value of approximately $23.8 million on the date of closing).

Somaxon stockholders received 3,665,689 shares of Pernix common stock. The number of shares of Pernix common stock issued to the stockholders of Somaxon was based on the volume-weighted average price of Pernix's common stock over the 30-day trading period ending on the day immediately prior to the closing on March 6, 2013. The volume-weighted average price was $6.82.

Financial Position and Guidance

As of March 31, 2013, the Company had cash balances of approximately $26.3 million and approximately $41.5 million outstanding under it's credit facility.

On May 8, 2013, Pernix entered into an Amended and Restated Credit Agreement (the "Restated Credit Agreement") with MidCap Financial, LLC, as Administrative Agent and as a lender, and additional lenders from time to time party thereto. The Restated Credit Agreement amends and restates in its entirety the Credit and Guaranty Agreement (the "Original Credit Agreement") that the Company and its subsidiaries entered into, effective December 31, 2012, with MidCap Funding V, LLC, as Administrative Agent and as a lender, and certain additional parties thereto.

The Restated Credit Agreement provides for a term loan of $10 million and a revolving loan commitment of $20 million. In connection with the entry into the Restated Credit Agreement, the Company prepaid approximately $12 million of the term loan that had been previously outstanding under the Original Credit Agreement. The Restated Credit Agreement provides for an advance of up to $3 million in excess of the Company's borrowing base until June 8, 2013, at which time all excess amounts, if any, will become due and payable.

Following the closing of the amended and restated credit agreement on May 8, 2013, we had approximately $12 million of cash and $29.5 million outstanding under our amended and restated credit facility.

The Company expects net revenues of Pernix, with the addition of the Cypress/Hawthorn, and Somaxon product portfolios, to be in the range of $90 to $100 million for the full year 2013.

Michael Pearce Appointed President and CEO

Today, the Company announced that the Board of Directors has appointed Mike Pearce, Pernix's Chairman of the Board, to President and CEO of Pernix. Cooper Collins will remain on the Board of Directors and serve as the Company's Chief Strategic Officer. Mr. Pearce will also remain as Chairman of the Board, but will step down as a member of the Company's Audit Committee. Mr. Collins will be primarily responsible for looking at strategic options including potential partnering or strategic opportunities for the Company. Mike Pearce will be focused on further integrating Cypress and Hawthorn, cutting SG&A expenses, and consolidating facilities.

Conference Call Information

The Company will host a conference call today at 9:00 a.m. EST to discuss its financial results for the first quarter ended March 31, 2013. Cooper Collins, President and Chief Executive Officer, will lead the conference call. To participate in the live conference call, please dial (877) 312-8783 (U.S.) or (408) 940-3874 (International), and provide passcode 50828084. A live webcast of the call will also be available on the investor relations section of the Company's website, www.pernixtx.com. 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 May 17, 2013. To access the replay, please dial (855) 859-2056 (U.S.) or (404) 537-3406 (International), and provide passcode 50828084. 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, manufacturing and development of branded, generic and OTC pharmaceutical products. The Company manages a portfolio of branded products, including the recently acquired Hawthorn Pharmaceuticals' product line. The Company's branded products for the pediatrics market include CEDAX®, an antibiotic for middle ear infections, NATROBA™, a topical treatment for head lice marketed under an exclusive co-promotion agreement with ParaPRO, LLC, and a family of treatments for cough and cold (ZUTRIPRO®, BROVEX®, ALDEX® and PEDIATEX®). The Company's branded products for gastroenterology include OMECLAMOX-PAK®, a 10-day treatment for H. pylori infection and duodenal ulcer disease, and REZYST™, a probiotic blend to promote dietary management. The Company also markets the branded product, SILENOR, for the treatment of insomnia. The Company promotes its branded pediatric and gastroenterology products through its sales force. Pernix markets its generic products through its wholly-owned subsidiaries, Cypress Pharmaceutical and Macoven Pharmaceuticals. The Company's wholly-owned subsidiary, Great Southern Laboratories, manufactures and packages products for the pharmaceutical industry in a wide range of dosage forms. Dr. Cocoa, a chocolate flavored cough and cold product, is in development for the U.S. OTC market. Founded in 1996, the Company is based in The Woodlands, TX.

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 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 and Quarterly Report on Form 10-Q. 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 March 31,
2013
 

December
31, 2012

(unaudited)
ASSETS
Current assets:
Cash and cash equivalents$26,259,858$23,022,821
Accounts receivable, net30,561,22436,647,087
Inventory, net18,267,22422,014,405
Prepaid expenses and other current assets4,768,3113,888,117
Prepaid taxes5,459,2072,024,411
Deferred income tax assets 5,658,000 8,118,500
Total current assets90,973,82495,715,341
Property and equipment, net7,247,7376,946,944
Other assets:
Investments3,315,7905,710,526
Goodwill51,159,15537,160,911
Intangible assets, net133,397,076104,054,431
Other long-term assets 1,840,932 1,858,534
Total assets$287,934,514$251,466,687
 
LIABILITIES
Current liabilities:
Accounts payable$6,024,377$5,045,488
Accrued personnel expense3,185,6002,881,967
Accrued allowances34,708,79230,054,551
Other accrued expenses6,706,0375,548,084
Other liabilities13,558,6518,130,664
Debt2,510,2082,286,513
Total current liabilities66,693,66553,947,267
Long-term liabilities:
Other liabilities7,769,0757,765,511
Debt40,527,94341,349,563
Deferred Income Taxes45,311,99935,535,500
Total liabilities160,302,682 138,597,841
Commitments and contingencies
 
 
Temporary Equity
Common stock subject to repurchase (4,042,148 and 4,427,084 shares as of March 31, 2013 and December 31, 2012, respectively)31,326,64734,309,901
 

STOCKHOLDERS' EQUITY

Preferred stock $.01 par value, 10,000,000 shares authorized, no shares outstanding

Common stock, $.01 par value, 90,000,000 shares authorized, 39,615,101 and 35, 723,161 issued, and 37,495,210 and 34,030,351 outstanding at March 31, 2013 and December 31, 2012, respectively330,681296,033
Treasury stock, at cost (2,084,662 and 2,070,810 shares held at March 31, 2013 and December 31, 2012, respectively)(3,980,715)(3,772,410)
Additional paid-in capital86,115,41258,606,942
Retained earnings12,313,33420,433,262
Other comprehensive income 1,526,473 2,975,118
Total stockholders' equity 96,305,185 78,538,945
Total liabilities and stockholders' equity$287,934,514$251,446,687
 
PERNIX THERAPEUTICS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
 
Three Months Ended March 31,
 2013  2012
Net revenues$22,077,873$14,482,025
Costs and expenses:
Cost of sales13,077,4474,690,583
Selling, general and administrative expenses14,079,1886,829,069
Research and development expense1,207,11670,006
Loss from the operations of the joint venture-240,195
Depreciation and amortization expense 2,162,708 638,072
Total costs and expenses 30,526,459 12,467,925
 
(Loss) Income from operations (8,448,586) 2,014,100
 
Other expense:
Change in fair value of put right(2,140,727)
Change in fair value of contingent consideration283,000
Interest expense, net(1,076,615)(39,937)
Total other (loss) income, net(2,934,342)(39,937)
 
(Loss) income before income taxes(11,382,928)1,974,163
Income tax (benefit) provision (3,263,000) 783,000
 
Net (loss) income$(8,119,928)$1,191,163
 
Unrealized (loss) gain on securities, net of income tax of approximately $946,000 and $634,000 for the three months ended March 31, 2013 and 2012, respectively. (1,448,645) 1,023,500
 
Comprehensive (loss) income$(9,568,573)$2,214,663
 
Net (loss) income per share, basic$(0.23)$0.05
Net (loss) income per share, diluted$(0.23)$0.04
 
Weighted-average common shares, basic 35,052,205 25,921,139
Weighted-average common shares, diluted 35,052,205 26,473,364
 

See accompanying notes to condensed consolidated financial statements.

 

Supplemental Financial Information

The following table presents a reconciliation of Pernix's net income to EBITDA and 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 reflects earnings before the effect of stock-based compensation and the increase in the value of the Put Right. EBITDA and 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 March 31,

 2013 2012
Net Income$(8,119,928)$1,191,163
Amortization & Depreciation2,162,708638,072
Net Interest1,076,61639,937
Taxes (3,263,000) 783,000
EBITDA$(8,143,604)$2,652,172
 
Deal Expenses410,668
Stock Compensation545,564496,217
Stock Compensation - ParaPRO146,584183,365
Increase in basis of acquired inventory included in COGS3,815,260
 
Increase in value of put right2,140,727
Change in fair value of contingent consideration (283,000) 
Adjusted EBITDA$(1,367,801)$3,336,754
 



Pernix Therapeutics Holdings, Inc.
Joseph T. Schepers, 800-793-2145 ext. 3002
Director, Investor Relations
jschepers@pernixtx.com

KEYWORDS:   United States  North America  Texas

INDUSTRY KEYWORDS:

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