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Actionable news in PTX: Pernix Therapeutics Holdings, Inc.,

Pernix Therapeutics: Turnaround In Progress

Summary

Pernix has restructured management and staff, reducing FTE by over 23%, saving $11 million per year.

Management now focused on shareholder value, eliminating drag and focusing on core brands.

Sequential increases in revenue and prescription growth in 2016.

The Pernix Therapeutics (NASDAQ:PTX) that many investors knew six months ago is long gone. Under the recent leadership of John Sedor, Chairman and CEO, the company has progressed rapidly to transform Pernix into a more focused and streamlined company concentrating on revenue growth, profitability and market share.

To say that the shares of Pernix have been beaten down is an understatement, with longer term shareholders not needing a reminder. The stock peaked at a market cap of roughly $390 million during the prior 52-weeks and is now flirting with the $100 million level after the run up in price during the last few trading sessions.

Now, investors need to consider whether or not the collapse in shareholder wealth has finally opened the door to new opportunity in a company that has demonstrated the ability to take aggressive steps to reconcile the tenuous relationship between Wall Street opinion and company facts.

Moving Forward

First, Pernix has stopped the bleeding in several segments of its core business. Revenues posted a 2Q sequential increase of 13% over the 1Q results in 2016, reporting $36.7 million in gross revenue for the reporting period.

More importantly, management has demonstrated that the company has at the very least stabilized what many investors thought to be a sinking ship, plugging the holes and rebuilding a foundation to support immediate growth in revenue, coupled with a streamlined workforce that will capture additional savings and provide increased margin support.

Prescription volumes for the 2Q increased sequentially for all three of its core brands, namely Zohydro ER with BeadTek, Silenor and Treximet, with gross margins of 66.8% , a slight, but positive, improvement from the 65% margin recorded in Q1 of 2016.

The company also had a substantial improvement in EBIDTA, recording a loss of 1.4 million , compared to the 4.5 million loss in Q1.

As an investor that focuses on emerging biotech companies, I am not shouting out that Pernix has become the value stock of the decade. What I am proposing, however, is that when Wall Street senses that the worst of news is behind a company, investors quickly focus on the future by bidding up stock prices from historically low levels. These idiosyncrasies are apparent almost daily in the trading markets, when good news is bad and bad news is good. Trying to figure out the anticipated movement of a stock based on news has become an algorithm all its own, with a dart board technique often proving just as capable a predictor.

However, what has become more easily recognizable is that when a stock begins a turnaround, it becomes noticeable in a hurry. Further, when a company like Pernix, who has apparently stabilized operations, coupled with its pipeline of products that offer tremendous market opportunity to the company either as a stand alone or through partnerships, the value can climb quickly. The current wild card in the scenario for Pernix is the potential to be acquired, not at all a misguided speculation with John Sedor at the helm, who has historically dressed up and...


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