Pernix Therapeutics Holdings Inc (NASDAQ:PTX): Here's A Speculative Thesis

Pernix Therapeutics Holdings Inc (NASDAQ:PTX) is in a bit of a tough position right now and has spent the last six months or so declining from early may highs to current levels.We've covered the stock on a few occasions and tried to put forward an argument for long-term value but – each time we do – the company's management serves up some sort of surprise that either invalidates or delays the accuracy of our thesis.Over the past few months, however, developments at the company have conspired to serve up what we see as a solid path forward for the company.Here's what we're looking at and why we think that we've got it right this time.For those new to this company, it's a commercial-stage biotechnology company that has three primary assets that comprise its sales portfolio. These are Treximet, Silenor and Zohydro ER, with Treximet and Zohydro being pain management assets and Silenor being a depression drug and a sleep aid. PTX Daily ChartTreximet accounts for the vast majority of the company's revenues but Silinor has the potential to dramatically increase its contribution to the company's topline by becoming an over the counter drug as opposed to just a prescription asset. We're talking the difference between $17 million in annual revenues and $100 million in annual revenues.Pernix knows this, yet hasn’t applied to the FDA in the US to get this OTC green light.Why might that be?Well, we think the company has struck a deal with another company that will see a bigger name take Silenor off Pernix's hands and get the OTC approval itself. Further, we think that that company is GlaxoSmithKline plc (ADR) (NYSE:GSK).What makes us think this?Pernix closed out some litigation issues with GSK earlier this year surrounding the former's asset purchase agreement for the above mentioned Treximet, which GSK sold to Pernix a few years ago. The outcome of the litigation favored GSK but the terms on which Pernix has to repay cash to GSK are highly favorable. GSK had no obligation to agree to favorable terms and we think the leniency of the healthcare behemoth is rooted in an agreement that will see it acquire Silenor and benefit from the OTC potential of the drug.Where does this play into our thesis?Well, one of the things that has really been holding Pernix back is the company's necessity to meet millions of dollars a quarter in interest payments and sales royalties associated with Treximet, rooted in some outstanding note. We know that CEO Sedor has tried to renegotiate these terms and hasn’t had much luck doing so.Now, if GSK agrees to buy the Silenor asset, Pernix can use the cash it gets from this sale to pay off the notes in full and – in turn – can lift the weight of the interest and royalties associated with said notes from its bottom line.This would mean two things – first, that the company can essentially restructure as a pain management focused entity and can start to work towards cash flow positivity in this arena and second, that it would become far more attractive to a potential buyer that (as we've mentioned in the past) might want to acquire the company outright but doesn’t want to take on the obligations to noteholders that are tied to the company in its current form.This is all highly speculative, of course, and there's nothing but snippets of communication from management to support our thesis. With that said, however, it's not an unreasonable speculation and there's real potential for things playing out in line with our expectations going forward.We're going to keep an eye on things as they materialize and we'll update as we get any more information.Check out our previous coverage of this one 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 frankieleon via FlickrDisclosure: We have no position in PTX and have not been compensated for this article.