Pernix Therapeutics Holdings, Inc.
) were down 12.4% on the release of third quarter earnings but
were up 10.50% in the next trading session. Overall, shares
dropped 1.3% since the company reported third quarter
Pernix reported a third quarter 2013 loss of 12 cents
per share, narrower than the Zacks Consensus Estimate of a loss
of 13 cents, but wider from the year-ago loss of a penny.
Revenues in the third quarter of 2013 came in at $18.3
million, up 0.9% from the year-ago quarter but missed the Zacks
Consensus Estimate of $23 million.
Quarter in Detail
Sales of products, both branded and generic, that Pernix
acquired from Cypress Pharma, Hawthorn Pharma and Somaxon Pharma
registered an increase.
We note that Pernix has completed the acquisitions of Cypress
Pharmaceuticals (a privately-owned generic pharmaceutical
company) and Hawthorn Pharmaceuticals (a privately-owned branded
pharmaceutical company) at the end of Dec 2012.
In early Mar 2013, Pernix completed the acquisition of Somaxon
Pharmaceuticals, thereby adding insomnia drug Silenor to its
However, the increase in revenues due to recent acquisitions
was partially offset by a decrease in the sales of legacy
products. This, in turn, was attributed to the discontinuation of
the sale of certain generic products as a result of related
litigation settlement terms along with the recall of certain
During the reported quarter, Pernix completed the sale of some
of its non-core assets (generic assets owned by its subsidiary,
Cypress Pharma) to privately-held Breckenridge Pharmaceutical,
Gross margin declined to 50.0% in the reported quarter from
57.0% in the year-ago quarter. Gross margin was negatively
impacted by the sale of products subject to revenue-sharing
Selling, general and administrative (SG&A) expenses
increased 19.3% from the year-ago quarter to $11.7 million.
Pernix expects to realize annualized savings of approximately
$2.0 million from headcount reductions as well as savings from
cost reductions in areas of manufacturing, logistics,
distribution, supply chain, sales process and corporate overhead
in the coming three quarters.
2013 Outlook Lowered
Pernix lowered its guidance for 2013. Pernix now projects
revenues of $80.0 million in 2013, down from the previous
projection of $90 million - $100 million.
The decrease in guidance was due to a recent modification of
the company's agreement with ParaPRO. The modification is
estimated to reduce revenues from the sale of Natroba and
authorized generic products by $2.0 million in the fourth quarter
of 2013. Moreover, Pernix has recently entered into a
co-promotion agreement with Cumberland Pharmaceuticals Inc. for
its gastroenterology drug, Omeclamox-Pak. This agreement is
expected to reduce revenues by $1.5 million.
The Zacks Consensus Estimate of $86 million for 2013 is above
the company's forecast of $80 million.
We remind investors that Pernix decided not to launch Dr.
Cocoa, an OTC chocolate flavored cough and cold offering, on its
retail channels due to lack of resources. The company licensed
rights of Dr. Cocoa in the U.S. and Canada to Infirst Healthcare
in exchange for a net sales royalty, effective Aug 30, 2013.
Pernix is on track to start patient dosing for the trial on in
its late stage pediatric candidate, in late Nov/early Dec 2013.
Pernix is also working on the Silenor OTC switch.
Pernix currently carries a Zacks Rank #3 (Hold). We were
disappointed by the sales miss and lowered guidance.
) look attractive with a Zacks Rank #1 (Strong Buy).
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