Pernix® Therapeutics Reports Third Quarter 2018 Financial Results

MORRISTOWN, N.J., Nov. 08, 2018 (GLOBE NEWSWIRE) -- Pernix Therapeutics Holdings, Inc. (PTX), a specialty pharmaceutical company, announced today its financial results for the three and nine months ended September 30, 2018.

Third Quarter 2018 Financial Highlights

• The third quarter of 2018 represented the first quarter that fully consolidated the financial results of Nalpropionâ„¢ Pharmaceuticals, Inc., which are discussed in more detail below.
• Third quarter 2018 net revenues were $37.2 million, an 8% decrease from $40.5 million in the third quarter of 2017.  
• Net loss for the third quarter of 2018 was $11.8 million, as compared to net income of $6.4 million in the prior year period.
• Third quarter 2018 adjusted EBITDA was ($0.7) million, as compared to adjusted EBITDA of $11.6 million in the third quarter of 2017.

Business Update

• Nalpropion Pharmaceuticals, Inc., capitalized by Pernix and two leading investment management firms, acquired certain assets of Orexigen® Therapeutics, Inc., including worldwide rights to Contrave®, a market-leading, prescription-only weight loss medication, for $73.5 million. 
  • Pernix generated net revenues of $16.4 million related to approximately two months of sales of Contrave in the third quarter of 2018.
• Zohydro® ER total prescriptions (TRx) increased 7% year-over-year in the third quarter of 2018.
• On August 1, 2018, Pernix announced that it had entered into a series of transactions aimed at strengthening its balance sheet and improving financial flexibility:
  • The exchange of approximately $4.2 million aggregate principal amount of Senior Secured Notes plus accrued and unpaid interest thereon by the Exchange Holders for 1,854,980 shares of the Company’s Common Stock. 
  • The exchange of $8 million aggregate principal amount of Senior Secured Notes, plus a portion of accrued and unpaid interest thereon, by certain Exchange Holders for 81,000 shares of the Convertible Preferred Stock.
  • In addition, the Exchange Agreement permits additional exchanges until February 1, 2020, at the option of certain Exchange Holders, of approximately $65 million aggregate principal amount of Senior Secured Notes for Convertible Preferred Stock.
• Appealed ruling in patent litigation concerning Zohydro ER with BeadTekâ„¢ following the United States District Court for the District of Delaware decision that found the asserted claims of U.S. Patent Nos. 9,265,760 and 9,339,499, which relate to methods of treating patients with mild and moderate hepatic impairment with hydrocodone bitartrate, to be infringed, but invalid.

“We are focused on stabilizing our business and laying the foundation for growth,” said John Sedor, Chairman and Chief Executive Officer of Pernix Therapeutics.  “Zohydro ER generated its third consecutive quarter of year-over-year net revenue growth in the third quarter. In addition, we view Contrave as a critical element of our strategic plan.  We are pleased with the initial results from Contrave, which is the market-leading branded weight loss prescription drug.  Contrave sales were $16.4 million in the third quarter, which included only two months of sales from this product.”

Financial Results
Pernix determined that Nalpropion qualifies as a Variable Interest Entity, or VIE, based on the governance structure and contractual relationship with Pernix, since Pernix has the power to direct activities that most significantly impact Nalpropion’s economic performance. Pernix is therefore consolidating Nalpropion’s financial results into its financial statements. On its income statement, Pernix adjusts, through a line entitled “Net gain or loss from non-controlling interests”, for the amount of gain or loss associated with Nalpropion that is proportional to the amount of Nalpropion that Pernix does not own. In other words, 90% of the gains or losses are adjusted out of Pernix’s Net Income / Loss. On the balance sheet, the net assets / liabilities that are attributable to other Nalpropion shareholders are adjusted out within shareholders equity in a line entitled “noncontrolling interests”. For more detailed information see Note 4, Variable Interest Entity, to the Financial Statements of the Company’s Quarterly Report on Form 10-Q for the Quarterly Period ended September 30, 2018.

Three Months Ended September 30, 2018 vs. September 30, 2017

For the third quarter of 2018, net revenues were $37.2 million, an 8% decrease from the $40.5 million in the third quarter of 2017.  A summary of net revenues is outlined below:

The increase in Contrave net revenues of $16.4 million during the three months ended September 30, 2018, is attributable to Nalpropion’s acquisition of Orexigen, which closed on July 27, 2018.

Treximet® brand net revenues decreased by $16.4 million, or 83%, during the three months ended September 30, 2018, compared to the three months ended September 30, 2017, due to the loss of exclusivity of Treximet in February 2018, as Pernix experienced generic competition, including the Company’s own authorized generic (“AG”), which was launched on February 15, 2018. Pernix expects that future Treximet brand revenues will continue to decrease year-over-year due to the loss of exclusivity.

Treximet AG net revenues were $2.3 million during the three months ended September 30, 2018. There were no sales in the prior year period, as Treximet AG was launched on February 15, 2018.  The sales of Treximet AG in the first quarter of 2018 were $1.8 million, which included less than two months of sales, and were $3.0 million in the second quarter of 2018.

Zohydro ER net revenues increased by $0.4 million, or 6%, during the three months ended September 30, 2018, as compared to the three months ended September 30, 2017. The increase was due to an increase in net price of $0.6 million (related to both favorable price and gross-to-net accrual rates), partially offset by lower sales volume of $0.2 million.

Silenor® net revenues decreased by $1.3 million, or 19%, during the three months ended September 30, 2018, compared to the three months ended September 30, 2017. The decrease was due to a decrease in net price of $1.6 million (primarily related to unfavorable gross-to-net accrual rates), partially offset by higher sales volume of $0.3 million.

Net product revenues – other decreased by $4.8 million, or 65%, during the three months ended September 30, 2018, compared to the three months ended September 30, 2017, principally due to the discontinuation of products no longer sold by Pernix.

Cost of product sales increased by $1.2 million, or 12%, during the three months ended September 30, 2018, compared to the three months ended September 30, 2017. The increase in cost of product sales was primarily attributable to Nalpropion’s acquisition of Contrave of $5.4 million and increased Zohydro ER, and Treximet AG product costs of $0.8 million and $0.3 million, respectively, due to increased volume.  This increase was partially offset by a $3.3 million decrease reflecting lower Treximet brand sales as a result of generic competition, as well as a $2.0 million decrease in the Company’s other product revenue (primarily related to discontinued products).

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