Pernix Therapeutics Reports Third Quarter 2017 Financial Results
MORRISTOWN, N.J., Nov.07, 2017(GLOBE NEWSWIRE) -- Pernix Therapeutics Holdings, Inc. (NASDAQ:PTX) ("Pernix" or the "Company"), a specialty pharmaceutical company, announced today financial results for the third quarter ended September 30, 2017.
Third Quarter 2017 Financial Highlights:
- Third quarter 2017 net revenues were $40.5 million, an 18% increase sequentially from $34.3 million recorded in the second quarter of 2017, and a 2% decrease from $41.5 million in the third quarter of 2016.
- Third quarter 2017 selling, general and administrative expense decreased by 9% to $20.2 million, as compared to the third quarter of 2016.
- Net income for the third quarter of 2017 was $6.4 million as compared to a net loss of $26.4 million for the three months ended September 30, 2016.
- Third quarter 2017 adjusted EBITDA was $11.6 million, a 104% increase sequentially from $5.7 million recorded in the second quarter of 2017, and a 38% increase from $8.4 million in the prior year period.
Business Update:
- During the third quarter, as previously reported, Pernix completed a series of financing transactions intended to improve liquidity, extend debt maturities and enable the Company to create value for stakeholders.In addition, Pernix and GlaxoSmithKline ("GSK") agreed to an amended settlement agreement under which Pernix will pay approximately $6.7 million to GSK, which is a reduction of up to approximately $14.5 million from the initial settlement agreement. During the third quarter, Pernix made an initial payment of $3.45 million and is obligated to make a payment of $3.2 million on or before December 31, 2017.
- Zohydro ER TRx up 4% in the third quarter of 2017 as compared to the second quarter, and down 7% year-over-year; growth rate was impacted by the previously announced 20mg backorder.
- Silenor TRx up 4% in the third quarter of 2017 as compared to the second quarter, and were flat year-over-year.
- Treximet TRx were flat in the third quarter of 2017 as compared to the second quarter, and decreased 11% year-over-year.
"We believe the Company is well positioned for future success following the series of financing transactions completed in the third quarter," said John Sedor, Chairman and Chief Executive Officer of Pernix Therapeutics."These transactions helped drive improvements in profitability during the quarter, including positive Net Income of $6.4 million and a more than doubling of Adjusted EBITDA as compared to the second quarter.Going forward, our key priorities are expanding and diversifying our product portfolio, driving net sales, improving profitability and maximizing cash flow."
Financial Results
Three-Months Ended September 30, 2017 vs. September 30, 2016
For the third quarter of 2017, net revenues were $40.5 million, a 2% decrease from the $41.5 million in the third quarter of 2016 and an 18% increase sequentially from the $34.3 million recorded in the second quarter of 2017.A summary of net revenues is outlined below (US dollars in millions):
| Three Months Ended | |||||||||||||||
| September 30, | Increase | ||||||||||||||
| 2017 | 2016 | (Decrease) | Percent | ||||||||||||
| Net Revenues: | |||||||||||||||
| Treximet | $ | 19.8 | $ | 24.0 | $ | (4.2 | ) | -18 | % | ||||||
| Zohydro ER | 6.3 | 6.1 | 0.2 | 3 | % | ||||||||||
| Silenor | 6.9 | 4.6 | 2.3 | 50 | % | ||||||||||
| Other products | 7.4 | 6.7 | 0.7 | 10 | % | ||||||||||
| Net product revenues | 40.4 | 41.4 | (1.0 | ) | -2 | % | |||||||||
| Co-promotion and other revenue | 0.1 | 0.1 | 0.0 | 0 | % | ||||||||||
| Total net revenues | $ | 40.5 | $ | 41.5 | $ | (1.0 | ) | -2 | % | ||||||
Treximet revenues decreased by $4.2 million, or 18%, during the three months ended September 30, 2017, compared to the three months ended September 30, 2016 due primarily to lower sales volume, which was partially offset by higher net price.
Zohydro ER revenues increased by $0.2 million, or 3%, during the three months ended September 30, 2017, compared to the three months ended September 30, 2016.The increase was due to an increase in net price, which was partially offset by lower sales volume.
Silenor revenues increased by $2.3 million, or 50%, during the three months ended September 30, 2017 compared to the three months ended September 30, 2016.Of this increase, $1.0 million was due to a favorable settlement with one of our customers, while the remaining increase was due primarily to favorable gross-to-net rates.
Other net product revenues increased by $0.7 million, or 10%, during the three months ended September 30, 2017, compared to the three months ended September 30, 2016.The increase was due primarily to higher sales in the Company's generic products portfolio.
Cost of product sales decreased by $0.3 million, or 2%, during the three months ended September 30, 2017, compared to the three months ended September 30, 2016.The decrease in cost of product sales was due primarily to a reduction in inventory obsolescence costs of $0.2 million, as well as a reduction in product costs due to product mix.
Selling, general and administrative expense decreased by $2.0 million, or 9%, during the three months ended September 30, 2017, compared to the three months ended September 30, 2016.The decrease was driven primarily by lower selling and marketing expenses as a result of the restructuring of the Company's sales force and operations, which was implemented in the third quarter of 2016, as well as reduced legal costs.
Research and development expense decreased by $1.6 million during the three months ended September 30, 2017, compared to the three months ended September 30, 2016.The decrease was related to lower spending on Treximet and Zohydro research projects.
The Company recorded a gain from a legal settlement of $10.5 million during the three months ended September 30, 2017 as a result of completing Amendment No. 2 with GSK as previously reported.
The Company recorded a gain from exchange of debt of $14.7 million during the three months ended September 30, 2017 related to the July 2017 financing transactions in which certain holders of the 4.25% Convertible Notes exchanged $51.8 million in principal notes for $36.2 million in Exchangeable Notes.
Net income was $6.4 million for the three months ended September 30, 2017, compared to a net loss of $26.4 million in the same period last year. The prior period Net Loss included $2.3 million of restructuring costs.
Adjusted EBITDA was $11.6 million for the three months ended September 30, 2017, compared to adjusted EBITDA of $8.4 million for the three months ended September 30, 2016, an improvement of $3.2 million or 38%.
Nine-Months Ended September 30, 2017 vs. September 30, 2016
For the nine months ended September 30, 2017, net revenues were $104.5 million compared to $110.7 million for the nine months ended September 30, 2016, a decrease of 6%.A summary of net revenues is outlined below (US dollars in millions):
| Nine Months Ended | ||||||||||||||
| September 30, | Increase | |||||||||||||
| 2017 | 2016 | (Decrease) | Percent | |||||||||||
| Net revenues: | ||||||||||||||
| Treximet | $ | 50.4 | $ | 58.1 | $ | (7.7 | ) | -13 | % | |||||
| Zohydro ER | 18.0 | 17.5 | 0.5 | 3 | % | |||||||||
| Silenor | 15.6 | 12.4 | 3.2 | 26 | % | |||||||||
| Other products | 20.3 | 22.4 | (2.1 | ) | -9 | % | ||||||||
| Net product revenue | 104.3 | 110.4 | (6.1 | ) | -6 | % | ||||||||
| Co-promotion and other revenue | 0.2 | 0.3 | (0.1 | ) | -33 | % | ||||||||
| Total net revenues | $ | 104.5 | $ | 110.7 | $ | (6.2 | ) | -6 | % | |||||
Treximet revenues decreased by $7.7 million, or 13%, during the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, due primarily to lower sales volume, which was partially offset by higher net price.
Zohydro ER revenues increased by $0.5 million, or 3%, during the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016.The increase was due a higher net price.
Silenor revenues increased by $3.2 million, or 26%, during the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016.Of this increase, $1.0 million was due to a favorable settlement with one of our customers. The remaining increase was due to an increase in sales volume and higher net price.
Other net product revenues decreased by $2.1 million, or 9%, during the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016.The decrease was due primarily to lower sales in the Company's generic products portfolio and Pernix's decision to cease sales of certain less profitable products.
Cost of product sales decreased by $3.2 million, or 9%, during the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016.The decrease in cost of product sales was due primarily to a reduction in inventory obsolescence costs of $1.8 million, as well as a reduction in product costs due to product mix.
Selling, general and administrative expense decreased by $14.1 million, or 19%, during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016.The decrease was driven primarily by lower selling and marketing expenses as a result of the restructuring of our sales force and operations which was implemented in the third quarter of 2016 as well as reduced legal costs.
Research and development expense decreased by $4.4 million during the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016.The decrease was related to lower spending on Treximet and Zohydro research projects.
The Company recorded a gain from a legal settlement of $10.5 million during the nine months ended September 30, 2017 as a result of completing Amendment No. 2 with GSK as previously discussed.
The Company recorded a gain from exchange of debt of $14.7 million during the nine months ended September 30, 2017 related to the July 2017 financing transaction, in which certain holders of the 4.25% Convertible Notes exchanged $51.8 million in principal notes for $36.2 million in Exchangeable Notes.
Net loss was $44.7 million for the nine months ended September 30, 2017, compared to a net loss of $83.5 million in the same period last year.
Adjusted EBITDA was $17.0 million for the nine months ended September 30, 2017, compared to adjusted EBITDA of $2.5 million for the nine months ended September 30, 2016, or an improvement of $14.5 million.
Liquidity
As of September 30, 2017, the Company had total liquidity of $51.1 million, consisting of cash and cash equivalents of approximately $27.2 million and revolver availability of $23.9 million.
| Conference Call | ||
| Date: | Tuesday, November 7 | |
| Time: | 4:30 PM ET | |
| Toll free (U.S.): | 888-599-8667 | |
| International: | 719-325-4793 | |
| Conference ID: | 8272424 | |
| Webcast: | http://public.viavid.com/index.php?id=126501 |
About Pernix Therapeutics
Pernix Therapeutics is a specialty pharmaceutical business with a focus on acquiring, developing and commercializing prescription drugs primarily for the U.S. market.The Company is currently focused on the therapeutic areas of Neurology and Pain, and has an interest in expanding into additional specialty segments.The Company promotes its branded products to physicians through its internal sales force and markets its generic portfolio through its wholly owned subsidiaries, Macoven Pharmaceuticals, LLC and Cypress Pharmaceutical, Inc.
To learn more about Pernix Therapeutics, visit www.pernixtx.com.
Non-GAAP Financial Measures
To supplement our financial results determined by GAAP, we have disclosed in the table below adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
Adjusted EBITDA is a non-GAAP financial measure that excludes the impact of certain items and, therefore, has not been calculated in accordance with GAAP.This non-GAAP financial measure excludes from net loss interest expense, depreciation and amortization, income tax expense, deal costs, stock compensation expense, severance expenses, arbitration and litigation settlement expenses, change in fair value of contingent consideration, gain from exchange of debt and derivative liabilities, loss from disposal and impairment of assets, foreign currency transactions and restructuring costs.In addition, from time to time in the future there may be other items that we may exclude for the purposes of our use of adjusted EBITDA; likewise, we may in the future cease to exclude items that we have historically excluded for the purpose of adjusted EBITDA.We believe that adjusted EBITDA provides meaningful supplemental information regarding our operating results because it excludes or adjusts amounts that management and the board of directors do not consider part of core operating results or that are non-recurring when assessing the performance of the organization.We believe that inclusion of adjusted EBITDA provides consistency and comparability with past reports of financial results and provides consistency in calculations by outside analysts reviewing our results.Accordingly, we believe that adjusted EBITDA is useful to investors in allowing for greater transparency of supplemental information used by management.
We believe that this non-GAAP financial measure is helpful in understanding our past financial performance and potential future results, but there are limitations associated with the use of these non-GAAP financial measures.This non-GAAP financial measure is not prepared in accordance with GAAP, does not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies.Adjustment items that are excluded from our non-GAAP financial measure can have a material impact on net earnings.As a result, this non-GAAP financial measure has limitations and should not be considered in isolation from, or as a substitute for, net loss, cash flow from operations or other measures of performance prepared in accordance with GAAP.We compensate for these limitations by using this non-GAAP financial measure as a supplement to GAAP financial measures and by reconciling the non-GAAP financial measure to its most comparable GAAP financial measure.Investors are encouraged to review the reconciliations of the non-GAAP financial measure to its most comparable GAAP financial measure that is included below in this Quarterly Report on Form 10-Q.
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.These statements reflect the Company's current views, expectations and beliefs concerning future events.In addition, any financial projections and other estimates contained herein are forward-looking statements with respect to the anticipated performance of the Company. Such financial projections and estimates are as to future events and are not to be viewed as facts, and reflect various assumptions of management of the Company and are subject to significant business, financial, economic, operating, competitive and other risks and uncertainties and contingencies (many of which are difficult to predict and beyond the control of the Company) that could cause actual results to differ materially from the statements included herein. The inclusion of forward-looking statements should not be regarded as a representation by Pernix that any of its plans will be achieved.Investors should note that many factors, including the risks and uncertainties inherent in Pernix's business, as more fully described in Pernix's filings with the SEC (including, but not limited to, its Annual Report on Form 10-K for the year ended December 31, 2016 and subsequent filings with the SEC), could affect the Company's future financial results and could cause actual results to differ materially from those expressed in forward-looking statements, such as those contained in this press release.The forward-looking statements in this press release are qualified by risk factors identified by the Company.These risk factors, individually or in the aggregate, could cause our actual results to differ materially from expected and historical results.You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.The Company assumes no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise.
CONTACT
Investor Relations
Bob Yedid
LifeSci Advisors, LLC
Bob@LifeSciAdvisors.com
| PERNIX THERAPEUTICS HOLDINGS, INC. AND SUBSIDIARIES | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (In thousands, except share and per share data) | ||||||||
| (Unaudited) | ||||||||
| September 30, | December 31, | |||||||
| Assets | 2017 | 2016 | ||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 27,241 | $ | 36,375 | ||||
| Accounts receivable, net | 48,368 | 50,729 | ||||||
| Inventory, net | 8,130 | 7,775 | ||||||
| Prepaid expenses and other current assets | 8,814 | 12,617 | ||||||
| Income tax receivable | 429 | 1,414 | ||||||
| Total current assets | 92,982 | 108,910 | ||||||
| Property and equipment, net | 831 | 1,103 | ||||||
| Goodwill | 30,600 | 30,600 | ||||||
| Intangible assets, net | 114,783 | 169,571 | ||||||
| Other | 2,408 | 257 | ||||||
| Total assets | $ | 241,604 | $ | 310,441 | ||||
| Liabilities and Stockholders' Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 22,699 | $ | 21,343 | ||||
| Accrued allowances | 58,254 | 60,961 | ||||||
| Interest payable | 5,871 | 10,897 | ||||||
| Treximet Secured Notes - current, net | - | 11,103 | ||||||
| Other liabilities - current | 6,789 | 5,224 | ||||||
| Total current liabilities | 93,613 | 109,528 | ||||||
| Convertible notes - long-term, net | 64,879 | 104,071 | ||||||
| Exchangeable notes - long-term, net | 8,266 | - | ||||||
| Delayed draw term loan - long-term, net | 27,584 | - | ||||||
| Derivative liability | 178 | 230 | ||||||
| Contingent consideration | 2,747 | 2,403 | ||||||
| Treximet Secured Notes - long-term, net | 168,833 | 172,250 | ||||||
| Credit facility - long-term, net | 14,185 | 14,000 | ||||||
| Arbitration award | 2,000 | 17,522 | ||||||
| Other liabilities - long-term | 2,567 | 4,500 | ||||||
| Total liabilities | 384,852 | 424,504 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders' deficit: | ||||||||
| Preferred stock, $0.01 par value, authorized 10,000,000 shares; no shares issued and outstanding | - | - | ||||||
| Common stock, $0.01 par value, 140,000,000 shares authorized, 11,532,423 | ||||||||
| 10,015,641 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 115 | 100 | ||||||
| Additional paid-in capital | 259,794 | 244,309 | ||||||
| Accumulated other comprehensive loss | (46 | ) | (79 | ) | ||||
| Accumulated deficit | (403,111 | ) | (358,393 | ) | ||||
| Total stockholders' deficit | (143,248 | ) | (114,063 | ) | ||||
| Total liabilities and stockholders' deficit | $ | 241,604 | $ | 310,441 | ||||
| PERNIX THERAPEUTICS HOLDINGS, INC. AND SUBSIDIARIES | ||||||||||||||||
| Condensed Consolidated Statements of Operations and Comprehensive Loss | ||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net revenues | $ | 40,469 | $ | 41,468 | $ | 104,527 | $ | 110,683 | ||||||||
| Costs and operating expenses: | ||||||||||||||||
| Cost of product sales | 10,580 | 10,840 | 31,113 | 34,272 | ||||||||||||
| Selling, general and administrative expense | 20,226 | 22,173 | 59,519 | 73,615 | ||||||||||||
| Research and development expense | 99 | 1,712 | 709 | 5,139 | ||||||||||||
| Depreciation and amortization expense | 18,214 | 20,700 | 54,976 | 65,426 | ||||||||||||
| Change in fair value of contingent consideration | 884 | 516 | 344 | (8,958 | ) | |||||||||||
| Loss from disposal and impairments of assets | 25 | 652 | 25 | 2,423 | ||||||||||||
| Gain from legal settlement | (10,476 | ) | - | (10,476 | ) | - | ||||||||||
| Restructuring costs | (97 | ) | 2,277 | 34 | 2,277 | |||||||||||
| Total costs and operating expenses | 39,455 | 58,870 | 136,244 | 174,194 | ||||||||||||
| Income (loss) from operations | 1,014 | (17,402 | ) | (31,717 | ) | (63,511 | ) | |||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (9,323 | ) | (8,857 | ) | (27,491 | ) | (26,818 | ) | ||||||||
| Change in fair value of derivative liability | 46 | (209 | ) | (38 | ) | 6,744 | ||||||||||
| Gain from exchange of debt | 14,650 | - | 14,650 | - | ||||||||||||
| Foreign currency transaction (loss) gain | - | 31 | - | 98 | ||||||||||||
| Total other income (expense), net | 5,373 | (9,035 | ) | (12,879 | ) | (19,976 | ) | |||||||||
| Income (loss) before income tax expense | 6,387 | (26,437 | ) | (44,596 | ) | (83,487 | ) | |||||||||
| Income tax expense | 27 | 1 | 122 | 26 | ||||||||||||
| Net income (loss) | 6,360 | (26,438 | ) | (44,718 | ) | (83,513 | ) | |||||||||
| Other comprehensive gain (loss): | ||||||||||||||||
| Unrealized gain during period, net of tax of $0 and $0, respectively | 9 | - | 33 | - | ||||||||||||
| Comprehensive gain (loss) | $ | 6,369 | $ | (26,438 | ) | $ | (44,685 | ) | $ | (83,513 | ) | |||||
| Net income (loss) per common share | ||||||||||||||||
| Basic | $ | 0.57 | $ | (2.99 | ) | $ | (4.31 | ) | $ | (11.57 | ) | |||||
| Diluted | $ | 0.42 | $ | (2.99 | ) | $ | (4.31 | ) | $ | (11.57 | ) | |||||
| Weighted-average common shares outstanding: | ||||||||||||||||
| Basic | 11,117 | 8,842 | 10,387 | 7,215 | ||||||||||||
| Diluted | 16,520 | 8,842 | 10,387 | 7,215 | ||||||||||||
Reconciliation of GAAP reported net loss to adjusted EBITDA is as follows (in thousands):
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||
| GAAP net income (loss) | $ | 6,360 | $ | (26,438 | ) | $ | (44,718 | ) | $ | (83,513 | ) | |||||||
| Adjustments: | ||||||||||||||||||
| Interest expense | 9,323 | 8,857 | 27,491 | 26,818 | ||||||||||||||
| Depreciation and amortization | 18,243 | 20,730 | 55,064 | 65,475 | ||||||||||||||
| Income tax expense | 27 | 1 | 122 | 26 | ||||||||||||||
| EBITDA | 33,953 | 3,150 | 37,959 | 8,806 | ||||||||||||||
| Selling, general and administrative adjustments (1) | 1,985 | 1,606 | 3,720 | 4,766 | ||||||||||||||
| Change in fair value of contingent consideration | 884 | 516 | 344 | (8,958 | ) | |||||||||||||
| Loss from disposal and impairments of assets (2) | 25 | 652 | 25 | 2,423 | ||||||||||||||
| Gain from legal settlement | (10,476 | ) | - | (10,476 | ) | - | ||||||||||||
| Change in fair value of derivative liability | (46 | ) | 209 | 38 | (6,744 | ) | ||||||||||||
| Restructuring costs (3) | (97 | ) | 2,277 | 34 | 2,277 | |||||||||||||
| Gain from exchange of debt | (14,650 | ) | - | (14,650 | ) | - | ||||||||||||
| Foreign currency transaction gain | - | (31 | ) | - | (98 | ) | ||||||||||||
| Adjusted EBITDA | $ | 11,578 | $ | 8,379 | $ | 16,994 | $ | 2,472 | ||||||||||
- Selling, general and administrative adjustments exclude deal costs of $1.3 million and $0; stock compensation expense of $531,000 and $(159,000); severance expense of $173,000 and $431,000; and litigation settlement expenses of $20,000 and $1.3 million for the three months ended September 30, 2017 and 2016, respectively.Also, to exclude deal costs of $1.5 million and $18,000; stock compensation expense of $1.9 million and $2.1 million; severance expense of $217,000 and $1.6 million; and arbitration and litigation settlement expenses of $38,000 and $1.0 million for the nine months ended September 30, 2017 and 2016, respectively.
- To exclude the impairment of assets related to our cough and cold product line.
- To exclude the cost related to the initiative to restructure our sales force and operations in 2016.