Pernix Therapeutics Reports Fourth Quarter and Full Year 2012 Financial Results

Pernix Therapeutics Reports Fourth Quarter and Full Year 2012 Financial Results

Completed Acquisition of Cypress Pharmaceuticals and Hawthorn Pharmaceuticals

Completed the Acquisition of Somaxon Pharmaceuticals in March 2013


Announced Plans to Launch Dr. Cocoa, an OTC Chocolate Flavored Cough & Cold Product Line

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 fourth quarter and year ended December 31, 2012.

Financial Results

For the fourth quarter of 2012, net revenues were $18.2 million, compared to $21.4 million for the fourth quarter of 2011. Total net product revenues consisted of 53% revenue contribution from branded products and 47% revenue contribution from generic products in the fourth quarter of 2012.

The net loss for the fourth quarter of 2012 was approximately $(1.4) million, or $(0.05) per basic and diluted share, compared to net income of $3.9 million, or $0.15 per basic and diluted share, for the fourth quarter of 2011.

"This past year was a time for investing and building in Pernix's continued success," said Cooper Collins, President and Chief Executive Officer of Pernix. "Looking forward in 2013, we are focused on several key objectives that are expected to drive the Company's future growth, which include the following: integrating Cypress and Hawthorn, re-launching Silenor by our newly-combined Pernix and Hawthorn sales forces, initiating our Phase III clinical trials for our pediatric product, launching Dr. Cocoa, an OTC chocolate flavored cough and cold product for the 2013-2014 cough and cold season, beginning the development of Silenor as an OTC product, and working toward the IND filings of two products in Hawthorn's pipeline. We are also capitalizing on the synergies of our acquisitions, and improving efficiencies across all of our operations."

Adjusted Earnings before interest, taxes, depreciation and amortization (adjusted EBITDA, a non-GAAP measure) was approximately $1.0 million for the fourth quarter of 2012, compared to adjusted EBITDA of $7.6 million for the fourth quarter of 2011. Adjusted EBITDA further eliminates the impact of non-cash stock-based compensation expense and expenses associated with the acquisitions of Cypress Pharmaceuticals, Hawthorn Pharmaceuticals and Somaxon Pharmaceuticals. See the table at the end of this press release for a reconciliation of net income to EBITDA and adjusted EBITDA. For the fourth quarter of 2012, acquisition-related expenses were $0.8 million. Stock compensation expense increased to $0.9 million in the fourth quarter of 2012 as compared to $0.6 million in the prior year quarter primarily related to a restricted stock issuance in March 2012. In total, these investments impacted adjusted EBITDA by approximately $1.7 million for the quarter.

Selling, general and administrative (SG&A) expenses in the fourth quarter of 2012 increased by approximately $4.2 to $11.1 million, compared to $6.9 million for the fourth quarter of 2011. The increase was primarily due to the hiring of the Company's new gastroenterology sales force, and expenses related to the development of the Company's OTC cough and cold product candidate, operating expenses related to Pernix Manufacturing, an increase in stock compensation expense, expenses associated with the acquisitions of Cypress Pharmaceuticals, Hawthorn Pharmaceuticals, and Somaxon Pharmaceuticals as well as an increase in corporate infrastructure costs to support the Company's growth objectives.

Depreciation and amortization expense was $ 0.9 million for the fourth quarter of 2012, compared to $0.6 million for the fourth quarter of 2011. The Company recognized an income tax benefit of $204,000 for the fourth quarter of 2012, compared to income tax expense of $2.1 million in the fourth quarter of 2011.

For the year ended December 31, 2012, net revenues increased 1% to $61.3 million, compared to $60.6 million for the prior year period. Total net product revenues consisted of 55% branded products and 36% generic products for the full year.

The net loss for the year ended December 31, 2012 was approximately $(1.4) million, or $(0.05) per basic and diluted share, compared to net income of approximately $8.3 million, or $0.35 per basic and $0.34 per diluted share, for the prior year period.

Adjusted EBITDA was $5.9 million for the year ended December 31, 2012, compared to adjusted EBITDA of $17.4 million for the prior year period. See the table at the end of this press release for a reconciliation of net income to EBITDA and adjusted EBITDA. For the full year 2012, acquisition-related expenses were $1.0 million. Stock compensation expense increased to $3.3 million in 2012 as compared to $1.6 million in 2011 primarily related to a restricted stock issuance in March and December 2012. In total, these investments impacted adjusted EBITDA by approximately $4.3 million for the quarter.

SG&A expenses in the year ended December 31, 2012 increased by approximately $12.9 million to $35.4 million, compared to $22.5 million for the prior year period. As previously stated, the increase was primarily due to hiring and training of the Company's new gastroenterology sales force, launch expenses associated with Omeclamox-Pak®, development of the Company's OTC cough and cold product, an increase in stock compensation expense and operating expenses related to Great Southern Laboratories, expenses associated with acquisitions of Great Southern Laboratories, Cypress Pharmaceuticals, Hawthorn Pharmaceuticals and Somaxon Pharmaceuticals as well as an increase in corporate infrastructure costs to support the Company's growth objectives.

Depreciation and amortization expense was $3.2 million for the year ended December 31, 2012, compared to $2.3 million for the prior year period. The Company recognized an income tax benefit of $0.4 million for the year ended December 31, 2012, compared to an income tax expense of $4.6 million in the prior year period.

Dr. Cocoa OTC Chocolate Flavored Cough and Cold Product Launch

The Company expects to launch Dr. Cocoa, an OTC chocolate flavored cough and cold product, in time for the 2013-2014 cough and cold season. The Dr. Cocoa product line includes daytime, nighttime, cough, cold and fever formulations.

Completed the Acquisition of Cypress Pharmaceuticals and Hawthorn Pharmaceuticals

On December 28, 2012, Pernix completed its acquisition of Cypress Pharmaceuticals, Inc. ("Cypress"), a privately-owned generic pharmaceutical company, and Hawthorn Pharmaceutical, Inc. ("Hawthorn"), a privately-owned branded pharmaceutical company. Under the terms of the definitive agreement announced on November 14, 2012 and as amended on December 28, 2012, Pernix will pay up to $102 million, including an up-front payment of $52.0 million in cash and $34.3 million in equity (approximately 4,427,084 shares of the Company's common stock) at closing as well as up to $11 million payable in December 2013 and an additional $5 million in a milestone payment. In connection with the closing of the acquisition, the Company entered into a $42 million credit facility with Midcap Funding V, LLC and other lending parties.

New Product Approvals

On February 28, 2013, the Company announced that its subsidiary, Hawthorn Pharmaceuticals, Inc., received U.S. Food and Drug Administration (FDA) approval of a new drug application (NDA) for VITUZ® Oral Solution (hydrocodone bitartrate and chlorpheniramine maleate). VITUZ is indicated for the relief of cough and symptoms associated with upper respiratory allergies or a common cold in adults 18 years of age and older. The product is expected to launch prior to the fall of the current year.

On February 28, 2013, the Company announced that its subsidiary, Cypress Pharmaceuticals, Inc., was granted final approval by the FDA for an abbreviated new drug application (ANDA) for Mefenamic Acid Capsules USP, 250 mg. This product is the generic version of Ponstel Capsules, 250 mg, and is indicated for relief of mild-to-moderate pain in patients 14 years of age and older and the treatment of primary dysmenorrhea. The Company expects to launch the product in the second quarter of 2013.

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 announced on December 11, 2012, Pernix acquired all of the common stock of Somaxon in a stock-for-stock transaction with a total value equity value of $25 million.

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 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 December 31, 2012, the Company had $23.0 million of cash and cash equivalents and working capital of $42.0 million. Pernix had $42 million outstanding on its $42 million term loan facility as of December 31, 2012.

The Company expects net revenues of Pernix, with the addition of the Cypress, Hawthorn and Somaxon acquisitions to be in the range of $125-$135 million for the full year 2013.

Conference Call Information

The Company will host a conference call today at 9:00 a.m. EDT to discuss its financial results for the fourth quarter and full year ended December 31, 2012. Cooper Collins, President and Chief Executive Officer will lead the conference call. To participate in the live conference call, please dial (888) 510-1786 (U.S.) or (719) 785-1753 (International), and provide passcode 5442195. 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 March 25, 2013. To access the replay, please dial (888) 203-1112 (U.S.) or (719) 457-0820 (International), and provide passcode 5442195. 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. A product candidate utilizing cough-related intellectual property 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 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.

CONSOLIDATED BALANCE SHEETS

December 31,

December 31,

2012

2011

ASSETS

Current assets:

Cash and cash equivalents

$

23,022,821

$

34,551,180

Accounts receivable, net

36,647,087

20,601,360

Inventory, net

22,014,405

6,261,162

Prepaid expenses and other current assets

3,888,117

2,144,203

Prepaid income taxes

2,024,411

-

Deferred income tax assets - current

8,118,500

4,552,000

Total current assets

95,715,341

68,109,905

Property and equipment, net

6,946,944

911,948

Other assets:

Investments

5,710,526

4,451,831

Goodwill

37,160,911

1,406,591

Intangible assets, net

104,054,431

7,469,913

Other long-term assets

1,858,534

213,783

Total assets

$

251,446,687

$

82,563,971

LIABILITIES

Current liabilities:

Accounts payable

$

5,045,488

$

2,987,913

Accrued personnel expense

2,881,967

2,044,121

Accrued allowances

30,054,551

17,006,409

Income taxes payable

-

585,931

Other accrued expenses

5,548,084

1,565,918

Contracts payable and other obligations

8,130,664

1,290,000

Debt, short term

2,286,513

-

Line of Credit

-

6,000,000

Total current liabilities

53,947,267

31,480,292

Long-term liabilities

Contracts payable and other obligations

7,765,511

600,000

Debt - long term

41,349,563

-

Deferred income taxes

35,535,500

860,000

Total liabilities

138,597,841

32,940,292

Commitments and contingencies

Temporary Equity

Common stock subject to repurchase (4,427,084 shares)

34,309,901

-

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, 35,723,161 and 27,820,004 issued, and 34,030,351 and 25,749,137 outstanding at December 31, 2012 and December 31, 2011, respectively

296,033

257,491

Treasury stock, at cost (2,072,810 and 2,070,867 shares held at December 31, 2012 and December 31, 2011, respectively)

(3,772,410

)

(3,751,890

)

Additional paid-in capital

58,606,942

30,185,292

Retained earnings

20,433,362

21,843,418

Other comprehensive income

2,975,118

1,089,368

Total stockholders' equity

78,538,945

49,623,679

Total liabilities and stockholders' equity

$

251,446,687

$

82,563,971

PERNIX THERAPEUTICS HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

Three Months Ended December 31,

Year Ended December 31,

2012

2011

2012

2011

Net sales

$

18,197,042

$

21,402,911

$

61,312,559

$

60,606,855

Costs and expenses:

Cost of sales

7,515,434

7,474,799

23,376,895

20,921,233

Selling, general and administrative expenses

11,149,140

6,982,488

35,451,653

22,537,966

Research and development expense

219,971

204,630

731,665

922,432

Loss from the operations of the joint venture

122,486

240,195

814,351

Depreciation and amortization expense

880,894

612,067

3,201,483

2,302,894

Total costs and expenses

19,765,439

15,396,470

63,001,891

47,498,876

Income (loss) from operations

(1,568,397

)

6,006,441

(1,689,332

)

13,107,979

Other income (expense):

Interest expense, net

(34,847

)

(41,414

)

(94,823

)

(171,378

)

Income (loss) before income taxes

(1,603,244

)

5,965,027

(1,784,155

)

12,936,601

Income tax provision (benefit)

(203,999

)

2,089,000

(373,999

)

4,589,000

Net income (loss)

$

(1,399,245

)

$

3,876,027

$

(1,410,156

)

$

8,347,601

Unrealized gain on securities, net of income tax

(401,124

)

1,089,368

1,885,750

1,089,368