Edited Transcript of PTX earnings conference call or presentation 7-Nov-17 9:30pm GMT

In addition to business development, we are assessing value creation opportunities in our existing product portfolio. We are excited about a possible Rx to OT switch for Silenor and continue to evaluate options to bring this product to the OTC market through potential partnerships or internal development. Silenor could address a significant unmet need in the OTC environment for an effective suite therapy with more -- minimal morning aftereffects and the risk of dependence.

We also have a number of products in our portfolio that have been discontinued that we believe may have value to potential partners, and we are constantly evaluating opportunities to monetize these products. Along these lines, we announced this week that we had completed the divestiture of CEDAX, a product that we have not distributed since 2016 for $2 million.

Moving on to the key financial highlights for the quarter. The financing and settlement transactions drove positive net income of $6.4 million as compared to a net loss of $26.4 million for the 3 months ended September 30, 2016. Of note, the quarter -- the third quarter results included both the gain on legal settlement with GSK and a gain from exchange of debt. These items totaled approximately $25 million.

Additionally, our adjusted EBITDA more than doubled sequentially from the second quarter from $5.7 million to $11.6 million and improved substantially year-over-year from $8.4 million in the third quarter of 2016, an increase of approximately 38%.

Lastly, I'd like to take an opportunity to acknowledge Graham Miao, our President and CFO. As you know, Graham will leave the company at the end of the year in order to pursue other opportunities. We have begun a search to identify a successor to Graham. We are pleased that he will provide support to Pernix during a transition period. I would like to thank Graham for his dedication to the company and wish him success in his future endeavor. We are in a better financial position with the financing transactions and well prepared for a seamless transition.

Let me now turn the call over to George Jones, our Vice President of Sales and Marketing, to discuss our commercial progress.

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George P. Jones, Pernix Therapeutics Holdings, Inc. - VP of Sales & Marketing [3]

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Thank you, John. As mentioned on the prior call, we continue to focus our effort on growing our business. As a result of these efforts, total prescriptions for Zohydro ER and Silenor each grew 4% compared to the second quarter of 2017. Meanwhile, prescriptions for Treximet remained flat from the second quarter 2017.

Looking at Zohydro ER in the space of the previously disclosed backorder of the 20-milligram strength, total prescriptions increased 4% sequentially in the third quarter of 2017, while decreasing 7% year-over-year. And taking a deeper look at overall Zohydro ER prescription trends, we have been able to show growth within the prescribers that our sales force actively engages with growing 4.2% year to date through August versus the same period in 2016. Our sales specialists focus on the prescribers that generate approximately 73% of the Zohydro ER total prescriptions, so we are making an impact on the most important prescribers.

With regard to Silenor prescriptions, we experienced growth of 4% sequentially, and Silenor was flat on a year-over-year basis. I'm pleased to report that our efforts to reaccelerate Silenor growth are having an impact as Silenor has demonstrated significant year-over-year growth in each of the last 5 weeks.

With Silenor, the health care professionals we focus on with our sales force effort, have shown a 16.6% year-over-year growth through August of this year versus the same time period last year. This compares to a decline of 11.2% for the prescribers that -- with whom we don't actively promote to. We believe that Silenor continues to be promotionally sensitive and remain confident that our increased focus on health care professionals that have a profile that indicates they treat a significant number of patients with insomnia will lead to increased growth for this product.

I'd also like to highlight that the results of our Arousability Study with Silenor were published online in the third quarter in the peer-reviewed journal SLEEP. The publication of results of this study highlights the favorable safety profile of Silenor and could be impactful to prescribers and in our dialogue with PBMs and payers regarding formulary access.

Taking a closer look at Treximet. Our sales effort improved year-over-year with an increase of 16.7% within the health care professionals we actively promote to and a decline of 17.9% amongst prescribers we don't call on. Pernix continues to prepare for the launch of our authorized generic as well as other generic competitors to Treximet, which are likely to enter the market in the first quarter of 2018.

In addition, we believe Pernix Prescriptions Direct, or PPD, our prescription fulfillment program, which I will discuss in greater detail momentarily, should help us transition a significant percentage of Treximet patients over to the Pernix authorized generic on loss of exclusivity. We are also pleased to report an ongoing strong uptake of PPD, which continues to gain traction with all 3 core brands.

Treximet prescriptions through the program have increased by 44%, and Silenor prescriptions have increased by more than 38% compared to the third quarter 2016. As a percentage of total prescriptions, PPD for Treximet has reached 32% the recently, and Silenor has reached 15%. We continue to evaluate the PPD rollout for Zohydro ER and have received initial positive feedback from [discounters].

Before I pass the call over to Graham, I'd like to provide an update on our access outlook for 2018. We are pleased with the fact that we are able to maintain our managed care coverage for Zohydro ER and Silenor, and we believe we will remain on all key formularies without any exclusions from major PBMs. Therefore, we do not expect any negative impact on our business from a formulary and patient access standpoint from 2017 into 2018.

In conclusion, we remain confident that we have the right strategy in place and look forward to executing on our growth initiatives.

I will now turn the call over to our President and CFO, Graham Miao, for his review of the financials. Graham?

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Graham G. Miao, Pernix Therapeutics Holdings, Inc. - Former President & CFO [4]

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Thank you, George. Good afternoon, everyone. As John mentioned, we provided a detailed overview of the recent financing transactions on our last earnings call, so I won't repeat specifics here. However, I will say that we are clearly in a much better financial position today than we were at the end of the second quarter.

With that, let me begin with our financial results for the 3-month period ended September 30, 2017. For the third quarter of 2017, net revenues were $40.5 million, an 18% increase sequentially from $34.3 million in the second quarter of 2017 and a 2% decrease from $41.5 million in the third quarter of 2016. The year-over-year decrease was primarily attributable to an 18% decrease in Treximet sales to $19.8 million. This was partially offset by a 50% increase in Silenor sales to $6.9 million.

Let's review the specifics for each major product. Treximet revenues decreased by $4.2 million or 18% during the third quarter of 2017 compared to the same period in the prior year due primarily to lower sales volume, partially offset by higher net price. Gross to nets for the third quarter for Treximet were 42%, down from 47% in the prior year period. The decrease in gross to net year-over-year is due primarily to higher managed care rebates. For the full year 2017, we expect gross to nets for Treximet to remain in the low 40s.

Silenor revenues increased by $2.3 million or 50% during the third -- 3 months ended September 30, 2017, compared to the third quarter last year. Of this increase, $1 million was due to a favorable settlement with 1 of our customers. The remaining increase was due primarily to favorable gross-to-net rate.

Excluding the favorable adjustment discussed above, gross to net for the third quarter were 35%, an improvement from 29% in the prior year period. The improvement in gross to nets was primarily due to lower managed care rebates. For the full year 2017, we expect gross to nets for Silenor to be in the low 30s.

Zohydro ER revenues increased by $0.2 million or 3% during the third quarter this year compared to the third quarter last year. The increase was due to an increase in nets price, partially offset by lower sales volume.