Pernix Therapeutics Holdings, Inc's
) first quarter 2013 adjusted loss (including stock-based
compensation expense) of 6 cents per share, compared unfavorably
to the Zacks Consensus Estimate of earnings of 2 cents per
On a reported basis, net loss was 23 cents per share compared
to earnings of 4 cents in the year-ago quarter.
Revenues in the first quarter of 2013 came in at $22.1
million, up 52.4% from the year-ago quarter but missed the Zacks
Consensus Estimate of $28 million.
Quarter In Detail
The year-over-year growth in revenues was primarily due to
recent acquisitions. We note that Pernix 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
In early Mar 2013, Pernix completed the acquisition of Somaxon
Pharmaceuticals, thereby adding insomnia drug Silenor in its
However, the increase in revenues due to recent acquisitions
was partially offset by a decrease in the sales of legacy cough
and cold products. Even though the wholesalers and retailers
worked through their inventories, a stronger-than-normal flu
season which ended earlier than Pernix expected, reduced the
demand for additional stocking in the first quarter of 2013,
thereby impacting sales.
Revenues in the reported quarter were also negatively impacted
by an increase in sales allowances on branded and generic
products related to higher government rebates, increased returns
allowances due to changes in Medicaid coverage impacting demand.
Further, rebates, competitive pressure and other pricing issues
also impacted the top line among others.
Gross margin declined to 57% in the reported quarter from 68%
in the year-ago quarter. The gross margin was negatively impacted
by sale of lower-margin product sales.
Selling, general and administrative (SG&A) expenses in the
first quarter of 2013 increased 106.2% from the year-ago quarter
to $14.1 million. The increase was primarily due to higher
employee costs and other costs related to acquisitions along with
expenses related to the development of the over the counter (OTC)
cough and cold candidate Dr. Cocoa and expenses related to
progress made in ongoing research and development projects, which
were acquired through acquisitions.
2013 Outlook Slashed
Pernix slashed its guidance for 2013 owing to a weak first
quarter. Pernix now projects revenues between $90 million and
$100 million in 2013, down from the previous guidance range of
$125 million - $135 million. The projected revenue range includes
contribution from recent acquisitions of Cypress Pharmaceuticals,
Hawthorn Pharmaceuticals, and Somaxon Pharmaceuticals.
The Zacks Consensus Estimate of $121 million for 2013 is well
ahead of the company's guidance range.
Pernix expects to launch Dr. Cocoa, an OTC chocolate flavored
cough and cold offering, in 2013. The distribution of Dr. Cocoa
has been approved by major retail pharmacy chains such as
CVS Caremark Corp.
) among others. Additionally, Pernix is in the process of
relaunching Silenor and begin the development of Silenor as an
Pernix also plans to initiate phase III trials for its
pediatric product in development, which as per the company
represents a potential market opportunity of over $100
Concurrent with the earnings release, Pernix announced a
change in top management. Mike Pearce will replace Cooper Collins
as the company's President and Chief Operating Officer.
We were disappointed by Pernix's performance in the first
quarter. Nevertheless, we expect investor focus to remain on
Silenor's relaunch as an OTC product and integration of the above
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Pernix currently carries a Zacks Rank #4 (Sell). Right now,
) looks attractive with a Zacks Rank #1 (Strong Buy).