Brean Downgrades Pernix Therapeutics, Warns Of Unclear Path To Profitability

Pernix Therapeutics Holdings Inc PTX reported its 2Q revenue short of expectations. Brean Capitals’ Difei Yang downgraded the rating on the company from Buy to Hold, expressing concern regarding the unclear path to sustainable revenue growth and profitability.

Revenue Miss

Pernix Therapeutics reported its revenue at $36.8 million, lower than the Street’s $40.3 million, although its GAAP EPS was broadly in-line at about ($0.47). Although Treximet and Zohydro ER achieved sequential growth in net sales, this was partly offset by inventory destocking at the wholesaler level, Yang mentioned.

Treximet Discontinued

News of progress on the sNDA of Treximet being halted was disappointing. “We believed asset life extension for Treximet vs. generics via the timely filing of a sNDA was an important step for Pernix’s future,” the analyst said. She added that the delay in the development timeline adversely affects the drug's ROI.

Management has now turned their R&D focus away from Treximet and towards new versions of Zohydro ER.

Dilutive Capital Raise

During Q2, the company sold 23.921 million shares to raise about $12.4 million. Another dilutive capital raise possibly lies ahead, Yang stated.

“With the pending negotiation with a debt holder, in particular, the $195.1 million of 12% Senior Secured notes, it is unclear when and how the final terms would materialize. Given the shortened asset life of Treximet and high infrastructure cost, it is difficult to see a reasonable path to profitability,” the analyst commented.

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