Edited Transcript of PTX earnings conference call or presentation 10-May-18 8:30pm GMT

The second prong of our strategy to be achieved over the following 18 months is to acquire new assets and solidify our path forward for Silenor OTC. And the third prong is to build sustainable long-term enterprise value.

As you can see, we have a clearly defined plan. We are executing on it, and I believe, the potential transaction involving Contrave is a key step towards advancing this strategy. With that, let's discuss the Contrave transaction in further detail.

Last month, we announced our participation in a newly formed special-purpose vehicle, called Nalpropion Pharmaceuticals Inc. to be completed, comprised of a wholly-owned subsidiary of Pernix and financial co-investors. Nalpropion has entered into a stalking horse asset purchase agreement to acquire a certain asset of Orexigen Therapeutics, including worldwide rights to Contrave, the

#1 branded prescription weight loss medication in the United States, for $75 million in cash. Should the transaction be completed, Pernix next will own 10% of Nalpropion, receive a fee equal to 5% of net sales for managing the business for an interim term of 2 years, and receive reimbursements for certain shared services at cost.

Pernix will contribute 10% or $7.5 million of the capital required for the purchase price, furnished through our existing delayed draw term loan facility.

In addition, Pernix will receive 2 options to acquire up to 49.9% and 100% of Nalpropion at specific time periods and purchase prices. The transaction remains subject to higher or better offers at the auction to be conducted on June 26, but if Nalpropion prevails, the transactions is expected to close in July of this year.

I'll let George Jones, our Vice President of Sales and Marketing, provide further details on Contrave shortly. But let me say a few things about this product and the transaction, so you better understand why we're so excited about it. We are attracted to Contrave because it's a market-leading product. It's approaching $100 million of annual global net sales. It has a long IP runway, and has differentiated clinical profile.

Further, we believe the structure of the announced transaction will provide an attractive risk-reward profile [per pond] Pernix that will allow us to capture significant upside if we continue to grow the trajectory for the product.

Simply put, we believe this transaction has the potential to create significant shareholder value.

Now turning to our current business. I'd like to highlight the launch of our authorized generic version of Treximet, which occurred on February 15.

The authorized generic provides a lower cost option to patients and providers that will compete with any version of Treximet, as well as other prescription migraine treatments.

George will provide additional information here, but this launch is off to a great start, as prescriptions for the authorized generic captured 56% of the Treximet generic market during the first quarter since its launch.

Before I turn the call over to George, I'd like to review some of the key financial results for the first quarter.

Net revenues for both Zohydro ER and Silenor experienced solid year-over-year growth of 35% and 51%, respectively.

Additionally, adjusted EBITDA improved to $2.5 million in the first quarter of this year, compared to a negative $300,000 in the period prior year.

Importantly, this represents the first time we've reported positive EBITDA in the first quarter of a year since 2015. With that, let me turn the call over to George to discuss our commercial progress.

--------------------------------------------------------------------------------

George P. Jones, Pernix Therapeutics Holdings, Inc. - VP of Sales and Marketing [4]

--------------------------------------------------------------------------------

Thank you, John. I'm very pleased with the results that we achieved in Q1 for our core branded business. But before I discuss those results, I'd like to provide you with some key metrics on Contrave that make us optimistic about the prospects for this brand.

Driven by its strong sales and marketing effort, that included a robust direct-to-consumer campaign, Contrave prescriptions increased 23% year-over-year in 2017.

More recently, Contrave prescriptions were up approximately 17% in Q1 2018, as compared to the same period 2017.

Importantly, this growth is off a much higher base. In addition, Contrave recently achieved all-time highs in weekly prescriptions in branded market share at 49%.

Beyond the U.S., Contrave or Mysimba, as it's known in certain markets, has been launched with 25 of 68 partnered companies with additional launches currently planned for 2018. If Pernix prevails in the auction, we will provide you with further details on our commercialization plans for commercial -- for Contrave upon the closing of this transaction.

Moving on to our current portfolio of branded products. Our business is off to a strong start in 2018.

Of significance, we are seeing strong continued demand for Silenor, which demonstrated 4.5% year-over-year growth in total prescriptions in the first quarter.

As for Zohydro ER, the backorder of the 20-milligram strength announced in May of 2017, led to a 3% year-over-year decline in total prescriptions in the first quarter of 2018.

As previously announced, we resumed distribution of the 20-milligram strength during the last week of the quarter. It is important to point out that our sales specialist provide product education on the appropriate use of opioids and on the transition of patients from other forms of hydrocodone. Within the universe of health care professionals, where they provide such education, Zohydro ER prescriptions were up 24%.

In recent weeks, we have begun to see year-over-year growth in overall Zohydro ER prescriptions for the first time since August 2017.

We are highly encouraged by this and believe that the product is positioned for continued growth during the remainder of 2018 and beyond.

Also, as a reminder, early in the first quarter of 2018, we entered into a settlement agreement with Actavis related to our patent litigation surrounding the proposed generic version of Zohydro ER that provides Pernix many years of product exclusivity and removes some of the patent litigation overhang on Zohydro ER.

Under the terms of the license agreement between the parties, unless certain circumstances arise, Actavis cannot begin selling a generic version of Zohydro ER until March 1, 2029.

Regarding Silenor, our initiatives aimed at reaccelerating growth for this product continue to positively impact our business.

To reiterate, in the first quarter of 2018, Silenor experienced a 4.5% year-over-year growth.

This represents the second consecutive quarter of year-over-year growth for this product and includes 33% growth within our targeted prescribers.

This growth also highlights the effectiveness of our recently restructured sales force.

As I said before, from a life cycle management standpoint, we believe that Silenor can add significant potential in the OTC market.

We continue to have meaningful partnership discussions with global pharmaceutical companies with deep Rx-to-OTC switch capabilities and remain in active negotiations with interested parties. Simultaneously, we will continue to evaluate an internal development strategy.

Taking a closer look at Treximet, we've been planning for the loss of exclusivity for some time now and working on plans to mitigate the impact of that loss via the launch of our own authorized generic version of Treximet, which launched on February 15.

As a review of the market conditions for our authorized generic, while we are initially expecting 1 generic entrant in January and 2 entrants in February, only one of these competitors has entered the market to date.

With that said, branded Treximet prescriptions decreased 45% year-over-year in the first quarter, due to the loss of exclusivity.

Digging a little deeper into the overall market for Treximet and its related generics, there were approximately 42,000 total prescriptions of Treximet and its generic equivalence dispensed in the first quarter, down 13% year-over-year.

Pernix was able to retain 88% of this market on a total perception basis, which includes 56% of the generic market. It's important to note that prescriptions through our pharmacy direct program, Pernix Prescriptions Direct or PPD, are not included in Symphony Health or IMS data but are included in the data that I just discussed.