Shares of Pernix Therapeutics Holdings Inc (NASDAQ:PTX) are finally bouncing as investors start betting on a turnaround. The company finally showed Doug Drysdale the door and board member John Sedor became interim CEO until a permanent replacement can be found. While we applaud the board and this decision, we just wish it would have occurred a lot sooner. It certainly would have saved shareholders grief. Now shareholders are asking if the bounce will continue.
Pernix describes itself as a “specialty pharmaceutical business with a focus on acquiring, developing and commercializing prescription drugs primarily for the U.S. market. The company targets underserved therapeutic areas such as CNS, including neurology and pain management, and has an interest in expanding into additional specialty segments. The company promotes its branded products to physicians through its Pernix sales force and markets its generic portfolio through its wholly owned subsidiaries, Macoven Pharmaceuticals LLC and Cypress Pharmaceutical Inc.”
One thing we like about John Sedor is that he has an excellent bio and plenty of experience in the pharma business. He has been involved with several pharma companies that have been sold and we’re hoping that he can maybe do the same with Pernix. According to the announcement, “Mr. Sedor has been Chairman and Chief Executive Officer of SEDOR Pharmaceuticals, LLC since 2014 and served as President, CEO and a Director of Cangene Corporation, a fully integrated developer and manufacturer of immune therapeutics, from 2011 until its acquisition by Emergent Biosolutions in February 2014. Prior to that, from 2008 until 2011, Mr. Sedor served as Chief Executive Officer and President of CPEX Pharmaceuticals since its spin-off from Bentley in 2008 until its acquisition by Footstar. Mr. Sedor was President of Bentley from 2005 until the spin-off of CPEX. From 2001 to May 2005, he was President and CEO of Sandoz, Inc. (a division of Novartis AG) and prior to that served in a number of senior executive capacities with other healthcare companies.”
Another thing that we like about PTX is the share ownership of Stevie Cohen. According to a new Schedule 13G filing, Steve Cohen’s Point72 Asset Management L.P. currently owns 3.72 million shares of Pernix, which constitute 5.8% of the company’s outstanding common stock. This represents an increase from the stake of 1.05 million shares revealed in Point72’s 13F filing for the final quarter of 2015. In addition, Kevin Kotler’s Broadfin Capital was the owner of 6.09 million shares of Pernix at the end of December.
What we’re hoping is that CEO Sedor can build off the company’s foundation and continue expanding the Pernix Prescriptions Direct (PPD) program. As of Q1, over 10,000 patients have enrolled in the program since inception. PPD currently represents 11% of Treximet and 6% of Silenor weekly total prescriptions.
In terms of financial engineering, he needs to reduce interest expense and SG&A expenses. Selling, general and administrative expense (SG&A) in the first quarter 2016 increased by $5.5 million, or 27%, to $26.0 million as compared to $20.5 million in the first quarter of 2015. The increase was driven primarily by selling and marketing costs for Zohydro ER with BeadTek, which was acquired in April 2015. Interest expense for the three months ended March 31, 2016 was $9.0 million compared to $9.4 million last year. As of March 31, 2016, the company had total liquidity of $47.4 million, consisting of $36.6 million of cash and approximately $10.8 million available to draw under its $50.0 million revolving credit facility. Total principal amount of debt outstanding at the end of the quarter was $339.1 million and net debt was $302.5 million. The total principal amount of debt consists of $195.1 million of 12% Senior Secured notes, $130.0 million of 4.25% convertible notes and $14.0 million under its revolving credit facility. The company added:
Pernix continues to pursue a number of actions to improve its financial flexibility and strengthen its balance sheet. These actions include improving the Company’s operating cash flow generation by optimizing its product portfolio, continuing to examine its cost structure, engaging with lenders to constructively restructure existing debt and exploring strategic partnerships and collaborations. While Pernix is committed to actively pursuing these activities, there can be no assurance that these initiatives will result in any transaction.
Currently trading with a market cap of $29 million, PTX is looking to turn things around and we feel that the makings of a turnaround are in motion. What we liked about last Friday’s market action was that shares rose 19% on over 13 million shares, which was over four times normal daily trading volume. This action also happened when there was no news so that tells us new money was being put to work. Could it be Steve Cohen adding to his position? We’ll certainly be looking at his next 13G filing. We will be updating Insider Financial as soon as we know more. For continuing coverage on PTX, sign up for our free newsletter today and get our next hot stock pick!
Disclosure: We have no position in PTX and have not been compensated for this article.