Pernix Therapeutics Holdings Reports Third Quarter 2011 Financial Results

Pernix Therapeutics Holdings, Inc. (“Pernix”) (NYSE Amex: PTX), a specialty pharmaceutical company primarily focused on the pediatric market, today announced financial results for the three and nine months ended September 30, 2011.

Financial Results

For the third quarter of 2011, net revenues increased by 120% to $17.1 million, compared to $7.8 million for the third quarter of 2010. The increase in net revenues was due primarily to higher volume of product sales resulting from the launch of the Company’s new CEDAX product formulation, Natroba, and certain generic products.

Net income for the third quarter of 2011 was $2.0 million, or $0.08 per basic and diluted share, compared to $2.4 million, or $0.10 per basic and diluted share for the third quarter of 2010. Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA, a non-GAAP measure) increased 34% to $3.6 million for the third quarter of 2011, compared to $2.7 million for the third quarter of 2010. See the table at the end of this press release for a reconciliation of EBITDA and adjusted EBITDA to net income.

Cooper Collins, President and Chief Executive Officer of Pernix, said, “Pernix continued to deliver strong revenue growth, driven by the new CEDAX 180mg formulation, the launch of Natroba, and additional generic products. Going forward, we believe the Company is in a solid financial position and will continue to grow its branded pediatric and generic businesses. We are also currently evaluating licensing and acquisition opportunities to expand into other therapeutic areas that are expected to further broaden our product portfolio and leverage our business platform.”

Selling, general and administrative (“SG&A”) expenses in the third quarter of 2011 increased to $5.4 million, compared to $3.5 million for the third quarter of 2010. The increase was primarily due to higher salaries, bonuses, commissions, incentives and stock compensation expense. The increase in commissions was due to greater gross sales and the higher commission rates paid on sales of Natroba. Depreciation and amortization expense increased to $0.6 million for the third quarter of 2011, compared to $0.3 million for the third quarter of 2010. The increase is due to the amortization under certain acquisition agreements, including CEDAX and Macoven. The Company also recognized $0.1 million in expenses related to its joint venture with SEEK for the development of Theobromine during the third quarter of 2011. The Company recognized an income tax expense of $0.9 million for the third quarter of 2011 and 2010.

For the nine months ended September 30, 2011, net revenues increased by 87% to $39.2 million, compared to $21.0 million for the prior year period. The increase in net revenues was due primarily to higher volume of product sales resulting from the launch of the Company’s new CEDAX product formulation, Natroba, and certain new generic products.

Net income for the nine months ended September 30, 2011 was $4.5 million, or $0.19 per basic and diluted share, compared to $7.9 million, or $0.33 per basic and diluted share, for the prior year period. Adjusted EBITDA increased 17% to $8.8 million for the nine months ended September 30, 2011, compared to $7.5 million for the prior year period. See the table at the end of this press release for a reconciliation of EBITDA and adjusted EBITDA to net income.

SG&A expenses for the nine months ended September 30, 2011 increased to $14.9 million, compared to $9.4 million for the nine months ended September 30, 2010. The increase was primarily due to similar factors that impacted SG&A in the third quarter of 2011. Depreciation and amortization expenses increased to $1.7 million for the nine months ended September 30, 2011, compared to $0.5 million for the prior year period. The Company also recognized $0.7 million in expenses related to its joint venture with SEEK for the development of Theobromine during the nine months ended September 30, 2011. For the nine months ended September 30, 2011, the Company recognized an income tax expense of $2.5 million, compared to an income tax expense of $45,000 for the prior year period.

Business Update

Natroba™ (spinosad) Topical Suspension, 0.9%

Under the exclusive co-promotion agreement with ParaPRO, LLC, Pernix launched Natroba™ with its pediatric sales force in August 2011. Natroba™ received U.S. Food and Drug Administration (FDA) approval in January 2011 as a prescription medication indicated for the topical treatment of head lice infestations in patients four years of age and older.

Natroba™ treats head lice using spinosad, a compound derived from a soil microbe. In Phase III clinical studies, Natroba™ was shown to be more effective at eliminating head lice infestations than permethrin 1%. Natroba™ is a novel therapy that does not require nit combing.

The U.S. Centers for Disease Control and Prevention estimates between 6 to 12 million cases of head lice infestations each year in the United States. Most cases of head lice occur in children ages 3 to 12 years old. It is a highly-communicable condition among school-age children.

Natroba is a prescription, topical treatment for use only on the hair and scalp as directed by a physician. The most common adverse events were: application site redness (3%), redness and irritation of the eyes (2%), and application site irritation (1%).

For additional safety information, see the patient and full prescribing information at www.Natroba.com.

Theobromine (BC 1036)

In March 2011, Pernix and its joint venture partner SEEK, a leading U.K. drug discovery and development group, appointed a financial advisor in connection with an auction of Theobromine (BC 1036), a non-codeine, non-narcotic, antitussive drug candidate in late-stage development for the treatment of persistent cough. While the joint venture has not received an offer to purchase the Theobromine assets that was acceptable by its Board of Directors, the joint venture continues to evaluate opportunities and expects to continue discussions with interested parties to maximize the value of this asset. The joint venture expects to initiate its pivotal Phase III trial in the European Union in the first quarter of 2012, and is currently evaluating over-the-counter strategies in certain countries, including the United States.

Financial Position

As of September 30, 2011, the Company had $27.6 million of cash and cash equivalents.

On July 27, 2011, Pernix completed an underwritten registered direct offering of 4,000,000 shares of common stock at a price of $7.00 per share. The offering, led by Aisling Capital and OrbiMed Advisors LLC, consisted of 3,000,000 shares of primary stock and 1,000,000 shares of secondary stock. Net proceeds from the sale of the shares of common stock sold by the Company, after deducting underwriting commissions and offering expenses, were $19.3 million.

Conference Call Information

Management will host a conference call today at 9:00 am EST to discuss its financial results for the third quarter of 2011. The conference call will feature remarks from Cooper Collins, President and Chief Executive Officer, and Tracy Clifford, Chief Financial Officer. To participate in the live conference call, please dial (877) 604-9674 (U.S.) or (719) 325-4916 (International), and provide passcode 2446267. A live webcast of the call will also be available on the investor relations section of the Company’s website, www.pernixtx.com. Please allow extra time prior to the webcast to register for the webcast and to download and install any necessary audio software.

A replay of the call will be available through November 22, 2011. To access the replay, please dial (888) 203-1112 (U.S.) or (719) 457-0820 (International), and provide passcode 2446267. An online archive of the webcast will be available on the Company's website for 30 days following the call.

About Pernix Therapeutics Holdings, Inc.

Pernix Therapeutics Holdings, Inc. is a specialty pharmaceutical company primarily focused on the sales, marketing, and development of branded and generic pharmaceutical products primarily for the pediatric market. The Company manages a portfolio of branded and generic products, and Theobromine, a non-codeine, cough suppressant product candidate in development. The Company’s branded products include CEDAX®, an antibiotic for middle ear infections, Natroba™, a topical treatment for head lice marketed under an exclusive co-promotion agreement with ParaPRO, LLC, and a family of prescription treatments for cough and cold (Brovex®, Aldex® and Pediatex®). The Company promotes its branded products through an established U.S. sales force and markets generic products through its wholly-owned subsidiary, Macoven Pharmaceuticals. Founded in 1999, the Company is based in The Woodlands, TX.

Additional information about Pernix is available on the Company’s website located at www.pernixtx.com.

Non-GAAP Financial Measures

Pernix is disclosing non-GAAP financial measures in this press release. Primarily due to acquisitions, Pernix believes that an evaluation of its ongoing operations (and comparisons of its current operations with historical and future operations) would be difficult if the disclosure of its financial results were limited to financial measures prepared only in accordance with U.S. generally accepted accounting principles (GAAP). In addition to disclosing its financial results determined in accordance with GAAP, Pernix is disclosing non-GAAP results that exclude items such as amortization expense and certain other expense and revenue items in order to supplement investors' and other readers' understanding and assessment of the Company's financial performance. Whenever Pernix uses a non-GAAP measure, it will provide a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measure. Investors and other readers are encouraged to review the related GAAP financial measures and the reconciliation of non-GAAP measures set forth herein and should consider non-GAAP measures only as a supplement to, not as a substitute for or as a superior measure to, measures of financial performance prepared in accordance with GAAP.

Cautionary Notice Regarding Forward-Looking Statements

The Company wishes to caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. No assurances can be given regarding the future performance of the Company. The Company wishes to advise readers that factors could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake, and specifically declines any obligation, to update any forward-looking statements to reflect events or circumstances occurring after the date such statements are made.

PERNIX THERAPEUTICS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
 

September 30,

2011
December 31, 2010
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 27,563,124 $ 8,260,059
Restricted cash - 501,906
Accounts receivable, net 23,649,809 14,758,240
Inventory, net 7,518,636 4,145,734
Prepaid expenses and other current assets 1,653,244 1,930,062
Deferred tax assets   4,330,000   2,494,000
Total current assets 64,714,813 32,090,001
Property and equipment, net 1,279,233 1,213,850
Other assets:
Investment in joint venture 1,810,949 1,502,814
Intangible assets, net 9,458,971 10,961,900
Other long-term assets   264,967   264,967
Total assets $ 77,528,933 $ 46,033,532
 
LIABILITIES
Current liabilities:
Accounts payable $ 4,767,906 $ 2,248,342
Accrued expenses 3,354,439 2,167,525
Accrued allowances 15,565,888 10,488,674
Income taxes payable 1,278,201 2,149,052
Contract payable   1,290,000   2,200,000
Total current liabilities 26,256,434 19,253,593
Long-term liabilities
Line of credit 6,000,000 5,000,000
Contracts payable 900,000 1,800,000
Deferred income taxes   497,000   1,075,000
Total liabilities   33,653,434   27,128,593
 
Commitments and contingencies
 
EQUITY
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares outstanding - -
Common stock, $.01 par value, 90,000,000 shares authorized, 27,795,931 and 24,698,594 issued, 25,725,064 and 22,627,727 outstanding at September 30, 2011 and December 31, 2010, respectively 257,251 226,277
Treasury stock, at cost (2,070,867 shares held at September 30, 2011 and December 31, 2010, respectively) (3,751,890) (3,751,890)
Additional paid-in capital 29,402,747 8,934,735
Retained earnings   17,967,391   13,495,817
Total equity   43,875,499   18,904,939
 
Total liabilities and equity $ 77,528,933 $ 46,033,532
 

PERNIX THERAPEUTICS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)
 
Three Months Ended September 30,   Nine Months Ended September 30,
2011   2010 2011  

20101
Net sales $ 17,064,196 $ 7,753,086 $ 39,203,944 $ 20,947,836
Costs and expenses:
Cost of product sales 7,815,353 1,410,193 13,699,890 3,269,992
Selling, general and administrative expenses 5,411,154 3,505,467 14,924,749 9,383,584
Research and development expense 147,138 252,737 717,802 839,986
Loss from the operations of the joint venturewith SEEK 100,614 - 691,865 -
Royalties expense, net 32,461 205,306 377,273 205,307
Depreciation and amortization expense   603,528     300,004   1,690,827     558,973  
 
Total costs and expenses   14,110,248     5,673,707   32,102,406     14,257,842  
 
Income from operations   2,953,948     2,079,379   7,101,538     6,689,994  
 
Other income (expense):
Other income - 277,387 - 277,762
Gain from bargain purchase - 881,950 - 881,950
Interest expense, net (37,300 ) 8,803 (129,964 ) 16,447  
Total other income, net (37,300 ) 1,168,140 (129,964 ) 1,176,159  
 
Income before income taxes 2,916,648 3,247,519 6,971,574 7,866,153
Income tax provision   922,000     861,747   2,500,000     45,374  
 
Net income $ 1,994,648   $ 2,385,772 $ 4,471,574   $ 7,820,779  
 
Net income per share, basic $ 0.08   $ 0.10 $ 0.19   $ 0.33  
Net income per share, diluted $ 0.08   $ 0.10 $ 0.19   $ 0.33  
 
Weighted-average common shares, basic   24,862,318     24,389,689   23,793,958     23,634,913  
 
Weighted-average common shares, diluted   25,167,955     24,416,859   24,129,279     23,655,691  
 

1 Net income for the nine months ended September 30, 2010 included one-time benefits associated with the termination of Pernix’s S corporation election and the recognition of net operating loss carry forwards associated with the March 9, 2010 reverse merger with Golf Trust of America, Inc.; therefore, we do not believe net income for the nine month periods ended September 30, 2011 and 2010 are not directly comparable.

Supplemental Financial Information

The following table presents a reconciliation of Pernix’s net income to EBITDA and Adjusted EBITDA. The Company defines EBITDA as net income plus interest, income tax expense, depreciation and amortization and presents these measures to assist investors in evaluating Pernix’s operating performance and comparing the Company’s results with those of other companies. EBITDA and adjusted EBITDA should not be considered in isolation from or as a substitute for net income.
Three Months Ended

September 30,
  Nine Months Ended

September 30,
2011   2010 2011   2010
GAAP Net Income $ 1,994,468 $ 2,385,772 $ 4,471,574 $ 7,820,779
Plus:
Income tax expense 922,000 861,747 2,500,000 45,374
Depreciation and amortization 603,528 300,004 1,690,827 558,973
Interest expense, net   37,300   (8,803 )   129,964   (16,447 )
EBITDA   3,557,296   3,538,720     8,792,365   8,408,679  
Non-recurring items:
Gain from bargain purchase   -   (881,950 )   -   (881,950 )
Adjusted EBITDA $ 3,557,296 $ 2,656,770   $ 8,792,365 $ 7,526,729  

Copyright Business Wire 2010

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