x min read

Pernix Therapeutics Holdings Inc (NASDAQ:PTX): Heading In The Right Direction

Pernix Therapeutics Holdings Inc (NASDAQ:PTX): Heading In The Right Direction
Written by
Chris Sandburg
Published on
July 21, 2017
Copy URL
Share on LinkedIn
Share on Reddit
Share on Twitter/X
Share on Facebook
InsidrFinancial

It's only been a few days since we suggested Pernix Therapeutics Holdings Inc (NASDAQ:PTX) might be in line for a breakout. The company is coming off the back of a pretty decent early to mid-July run and seems to be consolidating in and around the $4.50-80 range right now. We highlighted a near term refinancing announcement as potentially causing a break out of this range and getting the stock moving in line with its overarching 2017 momentum.We just got a double feature of announcements and – as yet – the company is still to break out. In fact, we’ve seen a modest decline in market capitalization on the back of one of he releases. In response to this action, we are going to reiterate our thesis on the stock – however markets interpret the recent news and whatever the two releases in question do to near term sentiment, Pernix remains a strong candidate for upside revaluation between now and the end of 2017.We can’t say this without backing it up of course, so here goes.The reason that the company has taken a modest hit over the last twenty-four hours is that the preliminary revenues figures it released after hours on Thursday show flat or down top line based on pervious quarters.Specifically, second quarter 2017 net revenues are expected to be between $33.0 million and $35.0 million. That's a between 5% and 10% decrease on the same period a year earlier. Looking at the assets that comprise these revenues, Silenor revenues are up 1% in the second quarter of 2017 as compared to the first quarter and down 4% year-over-year; Treximet revenues were flat in the second quarter of 2017 as compared to the first quarter and down 7% year-over-year; and Zohydro ER revenues were down 3% in the second quarter of 2017 as compared to the first quarter and down 7% year-over-year.At a glance, then, that's not great. For us, however, it's not an accurate representation of what's going on behind the scenes here. The company is actively trying to reduce costs to push towards cash flow positivity. If this involves a dip in top line, no big deal. We'd rather see a company making money than paying out of its nose to support revenue growth while not returning any value for investors. To this aim, the cost cutting aim, the company is doing well. As per the just released estimates, second quarter 2017 sell, gen and admin is expected to be between $18.0 million and $22.0 million, which would represent a decrease of between 14% and 29% on the same period last year. Net loss is expected to improve by between 21% and 34% across the period.In other words, forget about sales. Bottom line is what’s going to drive value in this one and markets are ignoring the improvement in this number (and those that factor into it) in their interpretation of the latest news. So long as costs decrease to a higher degree than sales do, we're happy.To quickly touch on the second bit of news (this is something we'll likely take a look at in a bit more detail once everything becomes clear), the company has just refinanced a bunch of debt and freed up some operational cash by way of this transaction. It's not perfect and there's some convertible in there that might take the shine off any response, but it's very much needed and something that was essentially unavoidable. It's also far more attractive that what was going on with the balance sheet prior to the refinancing.We're going to keep an eye on this one as it moves forward. As mentioned, we'll take another look at the financing transaction near term when we get a bit more detail on its layout.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 Jamie via FlickrDisclosure: We have no position in PTX and have not been compensated for this article.

Discover Hidden Gems

Don't miss the next big opportunity. Subscribe for timely alerts on potential market movers.