Last week, we reported on Pernix Therapeutics Holdings Inc (NASDAQ:PTX) releasing preliminary results for the second quarter of this year and subsequently taking a hit on the numbers reported. We suggested that the dip might be a nice opportunity to pick up an exposure to this company at a discount and in anticipation of a longer-term revaluation throughout late 2017 and beyond.Our argument was based on the fact that, while the preliminary numbers might not quite have been what markets were hoping for or expecting, and while they may have represented what looks like a down tick in sales activity from the same period a year earlier, the company has plenty going for it right now when looked at from a top-down perspective and that it is tough to see Pernix going anywhere but North as it builds on its current positioning.We just got the numbers in question (the actual numbers for the quarter for which management put our preliminary figures last week) and – as expected – markets are disappointed with the news. The company is trading a few percentage points down on its Thursday open.However, we are also seeing the start of what might be a recovery (or at least might represent some degree of loading up) premarket on Friday. The company is up 5% on out-of-hours activity and we think that this bounce is rooted in a couple of key details revealed as part of a conference call held by management in conjunction with the second quarter release.First, we are looking at a comment made by VP Sales and Marketing George Jones related to Treximet sales. For those that missed the release, total prescriptions for Treximet were up less than 1% in the second quarter of 2017 as compared to the first quarter of 2017, and down 7% as compared to corresponding periods of 2016.At a glance, that's not great. Scratch the surface, however, and things don't look as bad as they initially seem. Here's what Jones had to say on the year over year decline:
"The overall decline of 7% represents year-over-year growth of 14% within the health care professionals we actively promote to and a decline of 19% amongst prescribers we did not call on."
In other words, among the physicians towards which Pernix allocated sales resources, prescriptions grew 14%. This was offset, of course, by the 19% decline among physicians that the company didn’t try and sell to, but for us, the important thing here is that this metric shows that when the company allocates capital towards a sales push it translates to an increased top line for the assets in question.Why is this important now? Because Pernix just completed a refinancing that sees it cash rich and it intends to allocate a large portion of the cash that it now has on hand towards advancing sales among high rate prescribers.The second part of the call that interests us came from President and CFO Graham Miao:
"The year-over-year decrease was primarily attributable to lower sales in the company's generic products portfolio, Pernix' decision to cease sales of certain less profitable products."
The financial restructuring was just one part of what we saw as a major overhaul of the company's operations, with said overall designed to clean up the balance sheet and drive Pernix towards cash flow positivity. We already have plenty of detail on the restructuring, but this comment confirms that management has also taken steps to offload non-core assets – something that we see as central to the process.Importantly, the impact of this offloading won't become clear until some point over next 12 months, when we get third and fourth quarter earnings for 2017. As such, we see these releases as major catalysts for Pernix rooted in the clarity they will offer as to the overall impact of the entire restructuring process on Pernix as a company.It is important to recognize that Pernix isn't out of the woods just yet but, as we noted last time, the company is making strides towards cash flow positivity and we think it's a far more attractive allocation right now than it was just six months ago. Share price reflects the opposite of this statement, meaning current prices could be a great opportunity to load up ahead of this one picking up.Don’t act without getting the whole story: check out our previous coverage of this stock here.We will be updating our subscribers as soon as we know more. For the latest updates on PTX, sign up below!Image courtesy of NEC Corporation of America via FlickrDisclosure: We have no position in PTX and have not been compensated for this article.
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