Pernix fourth quarter net revenues increase 74% to $21.4 million

Pernix Therapeutics Holdings, Inc.Mar 29 2012

Pernix Therapeutics Holdings, Inc. ("Pernix" or the "Company") (NYSE Amex: PTX), a specialty pharmaceutical company, today announced financial results for the quarter and year ended December 31, 2011.

Financial Results

For the fourth quarter of 2011, net revenues increased by 74% to $21.4 million, compared to $12.3 million for the fourth 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 fourth quarter of 2011 was $3.9 million, or $0.15 per basic and diluted share, compared to $1.5 million, or $0.07 per basic and diluted share, for the fourth quarter of 2010. Excluding a $0.4 million impairment charge on land owned by Pernix based on an updated appraisal, net income for the quarter ended December 31, 2011 was $4.3 million, or $0.16 per diluted share.

Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA, a non-GAAP measure) increased 94% to $7.0 million for the fourth quarter of 2011, compared to $3.6 million for the fourth quarter of 2010. See the table at the end of this press release for a reconciliation of EBITDA and adjusted EBITDA to net income.

Selling, general and administrative ("SG&A") expenses in the fourth quarter of 2011 increased to $7.0 million, compared to $5.3 million for the fourth quarter of 2010. The increase was primarily due to the addition of several key management positions, bonuses, commissions, incentives and stock compensation expense. The increase included the $0.4 million impairment charge on the land owned by Pernix. Depreciation and amortization expense was $0.6 million for the fourth quarter of 2011, compared to $0.7 million for the fourth quarter of 2010. The Company recognized an income tax expense of $2.1 million for the fourth quarter of 2011, compared to $1.4 million in the fourth quarter of 2010.

Cooper Collins, President and Chief Executive Officer of Pernix, said, "We achieved significant growth in net revenues and adjusted EBITDA during the fourth quarter and full year 2011, despite a soft cough and cold season. This strong growth was primarily due to the launches of the new CEDAX 180 mg formulation in January 2011, several generic products throughout 2011, and NATROBA in August 2011. The management team remains focused on expanding our branded prescription and generic product portfolios and launching our new gastroenterology product by mid-year 2012. We expect to continue to execute on our growth strategy, which includes the horizontal integration of our branded prescription, generic, and over-the-counter (OTC) businesses."

For the year ended December 31, 2011, net revenues increased by 82% to $60.6 million, compared to $33.2 million for the prior year period, which is attributed to the new product launches described above.

Net income for the year ended December 31, 2011 was $8.3 million, $0.35 per basic and $$0.34 per diluted share, compared to $9.3 million, or $0.40 per basic and diluted share, for the prior year period. Excluding a $0.4 million impairment charge related to land owned by Pernix based on an updated appraisal, net income for the year ended December 31, 2011 was $8.7 million, or $0.36 per diluted share. For the year ended December 31, 2011, the Company recognized an income tax expense of $4.6 million (effective tax rate of 35%), compared to an income tax expense of $1.5 million (effective tax rate of 14%) for the prior year period.

Adjusted EBITDA increased 45% to $15.8 million for the year ended December 31, 2011, compared to $10.9 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 year ended December 31, 2011 increased to $22.5 million, compared to $15.2 million for the year ended December 31, 2010. The increase was primarily due to the non-recurring impairment charge on the land, the addition of several key management positions, bonuses, commissions, incentives and stock compensation expense. Depreciation and amortization expenses increased to $2.3 million for the year ended December 31, 2011, compared to $1.2 million for the prior year period. The Company also recognized $0.8 million in expenses related to its joint venture with SEEK for the development of Theobromine during the year ended December 31, 2011.

Business Update

New Gastroenterology Product Launch On Track for Mid-Year of 2012

In January 2012, Pernix entered into a license and supply agreement with a private company for a new FDA-approved prescription product to treat gastroenterology disease. Under the terms of the agreement, Pernix paid an up-front license fee of $2.0 million to obtain exclusive marketing rights to this gastroenterology product in the United States. Pernix also expects to pay an additional fee of $2.0 million upon commercial launch of the product. This new product will be positioned as a first-line therapy in a niche market of more than $100 million annually in the U.S. As previously announced, Pernix remains on track to launch the product in mid-year of 2012. Prior to launching the product, the Company plans to establish a sales force of up to 30 representatives dedicated to gastroenterology.

Generic Products

Pernix markets generic products through its wholly-owned subsidiary, Macoven Pharmaceuticals. In 2011, the generic product portfolio made a significant contribution to the Company's consolidated net revenue growth. Sales of generic products represented 32% of the consolidated net revenues of Pernix for the year ended December 31, 2011.

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. In March 2012, Pernix introduced a nationwide Point-of-Sale (POS) coupon for NATROBA.

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 is currently planning to initiate its pivotal Phase III trial in the European Union in the first half of 2012, and is currently evaluating over-the-counter strategies in the United States.

Guidance

In 2012, the Company plans to invest in the launch of its Gastroenterology product, which includes establishing a new gastroenterology sales force of up to 30 sales representatives. Additionally, the Company plans to invest in the development of Theobromine and the recently announced prescription product in development for the pediatric market. The Company expects these investments along with the expansion of the corporate infrastructure will increase operating expenses in the range of $12 to $15 million for the full year 2012. In terms of revenue, the Company expects that 2012 quarterly revenues will have a similar percentage relationship to the full year 2012 revenues as was experienced in 2011. For example, in 2011 the third and fourth quarters comprised 63% of total net revenues. The Company anticipates similar quarterly net revenue percentages in 2012.

Financial Position

As of December 31, 2011, the Company had $34.6 million of cash and cash equivalents.

In February 2012, Pernix initiated an At-the-Market (ATM) equity offering sales program. Under the ATM sales agreement, Pernix may from time to time offer and seek to sell up to $25 million of its common stock through Cantor Fitzgerald & Co. at prevailing market prices, at prices related to prevailing market prices, or at negotiated prices. As of March 23, 2012, the Company has sold 264,000 shares of common stock under its ATM program for total net proceeds of approximately $2.5 million.