Pernix Therapeutics Reports Second Quarter 2013 Financial Results
Pernix Therapeutics Reports Second Quarter 2013 Financial Results
Pernix Enters into Agreement to Sell Certain Generic Assets to Breckenridge for $30 Million
Revenues Increased 96% to $20.6 Million Compared to $10.5 Million in the Second Quarter of 2012.
Reaffirms Full Year 2013 Revenue Guidance of $90 - $100 Million
THE WOODLANDS, Texas--(BUSINESS WIRE)-- Pernix Therapeutics Holdings, Inc. ("Pernix" or the "Company") (NASDAQ MKT: PTX), a specialty pharmaceutical company, today announced financial results for the quarter and year-to-date period ended June 30, 2012.
The Company also announced today that it has entered into an agreement to sell certain generic assets owned by its subsidiary, Cypress Pharmaceuticals, to Breckenridge Pharmaceutical, Inc. for $30 million. Under the terms of the agreement, Breckenridge will pay Pernix $20 million in an upfront payment and $10 million which is to be paid in two equal installments over the next two years. The assets include 7 previously marketed Abbreviated New Drug Applications (ANDAs), 11 ANDAs filed at the FDA, and certain other ANDAs in various stages of development. The agreement contains customary representations, warranties, covenants and indemnities by the parties, and the closing of the transactions contemplated by the agreement is subject to the satisfaction of certain customary conditions described therein. This transaction is expected to close no later than mid-September 2013.
Michael Pearce, Chairman, President and CEO, said, "We are executing on critical deliverables. By continuing to integrate and consolidate our recent acquisitions of Cypress Hawthorn and Somaxon, reducing costs, improving sales force productivity, and selling certain non-core assets, the Company has regained financial footing and is repositioned for growth."
For the second quarter 2013, net sales increased by approximately 96% to $20.6 million, compared to $10.5 million for the same period in the prior year. The growth in net revenues was due primarily to sales of branded and generic products acquired from Cypress Hawthorn and Silenor products 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 net product revenues for the second quarter of 2013 consisted of 53% from generic product sales and 47% from brand product sales.
The net loss for the second quarter of 2013 was approximately $5.9 million, or $0.16 per basic and diluted share, compared to net loss of $0.9 million, or $0.03 per basic and diluted share, for the second quarter of 2012.
Earnings before interest, taxes, depreciation and amortization (EBITDA, a non-GAAP measure) was a loss of $3.8 million for the second quarter of 2013, compared to EBITDA of $0.7 million for the second quarter of 2012. See the table at the end of this press release for a reconciliation of net income to EBITDA.
Selling, general and administrative (SG&A) expenses in the second quarter of 2013 were approximately $13.1 million, compared to $7.6 million for the second quarter of 2012. $2.6 million of the increase relates to an increase in overall compensation expense that was primarily attributable to the addition of Cypress employees, effective Janaury 1, 2013, the addition of Pernix Manufacting employees in July 2012, partially offset by a decrease in bonus and incentive compensation. This remaining increase was primarily due to the incremental increase of the SG&A expenses from the acquisitions of Cypress, Somaxon and Pernix Manufacturing. In addition, we incurred approximately $0.1 million in transaction expenses in connection with the acquisitions of Cypress Hawthorn and Somaxon and realized an increase of approximately $0.7 million in legal fees related to certain litigation that has now been settled.
Depreciation and amortization expense was $2.6 million for the second quarter of 2013, compared to $0.8 million for the second quarter of 2012. The Company recognized an income tax benefit of $2.1 million for the second quarter of 2013, compared to income tax expense of $0.5 million in the second quarter of 2012.
For the six months ended June 30, 2013, net revenues increased by approximately 71% to $42.7 million, compared to $25.0 million for the prior year period. The increase in net revenues was due primarily to a higher volume of sales from Cypress and Hawthorn.
The net loss for the six months ended June 30, 2013 was approximately $14.0 million, or $0.39 per basic and diluted share, compared to net income of approximately $0.3 million, or $0.01 per basic and diluted share, for the prior year period.
EBITDA was $11.9 million for the six months ended June 30, 2013, compared to EBITDA of $2.0 million for the prior year period. See the table at the end of this press release for a reconciliation of net income to EBITDA.
SG&A expenses in the six months ended June 30, 2013 were approximately $27.2 million, compared to $14.4 million for the prior year period. As previously stated, 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 $0.5 million in transaction expenses in connection with the acquisitions of Cypress Hawthorn and Somaxon and realized an increase of approximately $1.8 million in legal fees from product related litigation. The Company incurred expenses related to advancing the in-process research and development projects acquired in the acquisition of Cypress Hawthorn.
Depreciation and amortization expense was $4.8 million for the six months ended June 30, 2013, compared to $1.4 million for the prior year period. The Company recognized an income tax benefit of $5.4 million for the six months ended June 30, 2013, compared to an income tax provision of approximately $0.2 million in the prior year period.
Financial Position and Guidance
As of June 30, 2013, the Company had $9.0 million of cash and cash equivalents. The Company reaffirms its previously announced net revenue guidance for the full year 2013 to be in the range of $90 to $100 million. In the second half of 2013, the Company expects to record higher net revenues in the fourth quarter than the third quarter.
Conference Call Information
Management will host a conference call today at 9:00 a.m. EST to discuss its financial results for the second quarter and six months ended June 30, 2013. The conference call will feature remarks from Michael Pearce, President, Chairman and Chief Executive Officer, and Tracy Clifford, VP of Finance and Accounting. To participate in the live conference call, please dial (877) 312-8783 (domestic) or (408) 940-3874 (international), and provide passcode 18730492. 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 August 16, 2013. To access the replay, please dial (855) 859-2056 (domestic) and (404) 537-3406 (international), and provide passcode 18730492. An online archive of the webcast will be available on the Company's website for 30 days following the call.
VelocityHealth Securities. acted as a financial advisory to Pernix on the sale of certain Cypress assets to Breckenridge.
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 ZUTRIPRO® for the treatment of cough and cold. 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. 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 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.|
|CONDENSED CONSOLIDATED BALANCE SHEETS|
|June 30,||December 31,|
|Cash and cash equivalents||$||9,048,119||$||23,022,821|
|Accounts receivable, net||26,689,761||36,647,087|
|Prepaid expenses and other current assets||4,655,948||3,888,117|
|Prepaid income taxes||5,506,105||2,024,411|
|Deferred income taxes||6,942,000||8,118,500|
|Total current assets||71,810,252||95,715,341|
|Property and equipment, net||7,200,041||6,946,944|
|Intangible assets, net||102,414,440||104,054,431|
|Assets held for sale||29,000,000||─|
|Other long-term assets||1,384,055||1,858,534|
|Accrued personnel expenses||2,595,489||2,881,967|
|Other accrued expenses||5,117,497||5,548,084|
|Total current liabilities||85,431,784||53,947,267|
|Deferred income taxes||43,844,000||35,535,500|
|Commitments and contingencies (Note 16)|
|Common stock subject to repurchase (3,773,079 and 4,427,084 shares as of June 30, 2013 and December 31, 2012, respectively)||29,241,362||34,309,901|
|Common stock, $.01 par value, 90,000,000 shares authorized, 39,240,781 and 34,994,828 issued and 37,195,090 and 33,301,818 outstanding at June 30, 2013 and December 31, 2012, respectively)||333,478||296,033|
|Treasury stock, at cost (2,119,891 and 2,072,810 shares held at June 30, 2013 and December 31, 2012, respectively)||(3,980,629||)||(3,772,410||)|
|Additional paid-in capital||88,943,737||58,606,942|
|Accumulated other comprehensive income||─||2,975,118|
|Total liabilities and stockholders' equity||$||264,454,193||$||251,446,687|
|PERNIX THERAPEUTICS HOLDINGS, INC.|
|CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME|
Three Months Ended
Six Months Ended
|Costs and operating expenses:|
|Cost of product sales||11,162,350||3,411,117||24,239,797||8,101,700|
|Selling, general and administrative expenses||13,141,447||7,636,227||27,220,635||14,465,296|
|Research and development expense||1,792,184||108,717||2,999,300||178,723|
|Loss from the operations of the joint venture with SEEK||─||─||─||240,195|
|Depreciation and amortization expense||2,631,992||796,535||4,794,700||1,434,607|
|Loss on sale of assets||4,880||─||4,880||─|
|Total costs and operating expenses||28,732,853||11,952,596||59,259,312||24,420,521|
|Income (loss) from operations||(8,159,452||)||(1,453,262||)||(16,608,038||)||560,838|
|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||(1,632,569||)||(27,470||)||(2,709,184||)||(67,407||)|
|Gain on sale of investment||3,605,263||─||3,605,263||─|
|Total other (loss) income, net||142,632||(27,470||)||(2,791,710|