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Pernix Therapeutics Holdings (PTX) Q2 2016 Results - Earnings Call Transcript

Pernix Therapeutics Holdings, Inc. (NASDAQ:PTX)

Q2 2016 Earnings Conference Call

August 11, 2016 4:30 PM ET

Executives

Graham Miao - President and Chief Financial Officer

George Jones - Vice President of Sales and Marketing

Angus Smith - Vice President, Business Development and Strategic Planning

Analysts

Difei Yang - Brean Capital

Serge Belanger - Needham & Company, LLC

Operator

Good afternoon, ladies and gentlemen. Welcome to the Pernix Therapeutics’ Second Quarter 2016 Earnings Conference Call. My name is Gwen, and I will be your event specialist today. At this time, all participants are in a listen-only mode. We will conduct a Q&A session at end of the prepared remarks, and additional instructions will be provided at that time. As a reminder, this call is being recorded for replay purposes.

On the call today are Graham Miao, President and Chief Financial Officer; George Jones, Vice President of Sales and Marketing; and Angus Smith, Vice President, Business Development and Strategic Planning of Pernix Therapeutics.

Please be advised that Pernix issued a press release this afternoon containing financial results for the quarter ending June 30, 2016. The release, including the financial tables and reconciliation of non-GAAP financial results is available on the company’s website at www.pernixtx.com. The company also expects to file its Quarterly Report on Form 10-Q with the SEC later today.

During today’s call, the company will be making forward-looking statements and actual results may differ from current expectations. Please note that under Safe Harbor rules, Pernix has no obligation to update the information contained in these forward-looking statements, even if actual results or future expectations change materially.

The company recommends that you refer to the cautionary statements contained in the SEC filings for a more detailed explanation of the inherent limitations of such forward-looking statements.

I would now like to turn the call over to Graham Miao. Please go ahead, sir.

Graham Miao

Thank you, Gwen. Good afternoon and thank you for joining us today. I apologize John Sedor, our Chairman and CEO is not able to join us today due to a family emergence. Let me begin by saying that John and I are very excited to join Pernix. We look forward to working with the talented and dedicated Pernix team to create new growth opportunities and move the company forward.

Earlier today, we released our financial results for the second quarter of 2016. As you know, John was appointed Chairman and Interim CEO of Pernix in early May and had previously served as a Board member for the company for two years. Just a few weeks ago, we announced a reorganization of the company’s senior management team, intended to improve Pernix’s efficiency, drive profitability, and position the company for future growth.

As part of those changes, John is now serving as CEO on a permanent basis. After serving as a senior advisor to Pernix’s Board of Directors, since May, I’m now serving as President and CFO. I have the responsibility for finance, operations, regulatory, and a scientific affairs. John Sedor has a distinguished career of over 40 years in specialty and generic pharmaceuticals and biotech.

Specifically, John has been a senior leader and deeply involved in a turnaround of multiple pharmaceutical companies. His prior experience includes roles as President and the CEO of Sandoz, North America; CEO of Cangene Corporation; President and CEO of Bentley Pharmaceuticals, President and CEO of Centeon Pharmaceuticals, a joint venture between Rhône-Poulenc and Hoechst and President of Armour Pharmaceutical.

Over the last 20 years, I have been CFO and held other senior management roles at several publicly traded healthcare company, including Pharmacia and Schering-Plough I have extensive experience in running public companies and the leading global chain with responsibilities in finance and operations, mostly recently at PDI and a prior to that at Delcath Systems, a specialty pharmaceutical and a medical device company. I look forward to working with John and the rest of the Pernix team to move the company forward and to build shareholder value.

Since John joined as CEO, we have worked hard with our team to undertake an in-depth review of Pernix’s products, sales trend, productivity of our sales and marketing efforts, internal cost structure and personnel. In parallel, we are conducting an analysis of financial condition and identifying potential actions that we could execute on in order to improve our financial flexibility and strengthen our balance sheet.

While all this works that is ongoing, we’re beginning to achieve important progress on several fronts, including improving script trend for our core products and increasing the adoption of a Pernix Prescription Direct or our PPD program, which we will discuss shortly.

First, let me discuss our in-depth review of Pernix’s operations, which led us to take a number of actions that we believe will position Pernix more advantageously for the future.

When reviewing our commercial operations, we identified several opportunities to better align our sales force and improve commercial execution. As a result, we have taken several actions to realign the organization and improve the company’s ability to execute on our growth strategy. Specifically, we reorganized Pernix’s sales force, including a reduction of 54 positions, with most of these reductions from neurology team.

Overall, we’ll reduce the company’s total full-time workforce by approximately 23%. We increased our focus on the highest prescribing specialist and deemphasized the less productive primary care audience to maximize the value of Treximet. In the pain area, which will become a greater emphasis for Pernix, we have retained our sales force headcount and increased our coverage for Zohydro ER prescription.

Similar to our strategy for Treximet, we are refocusing our efforts on the highest prescribing specialist with whom we have a significant opportunity to accelerate our growth. Additionally, we have flattened our sales and the marketing organization to improve efficiency and execution, which we believe will not compromise our ability to grow our key brands.

Going forward, our focus will be on enhancing revenue growth for our current brand, especially Zohydro ER with BeadTek, which we view as a major value driver for Pernix, as well as pursing other growth opportunities.

We anticipate that this restructuring combined with the reorganization of our senior management team will result in annualized cost of savings of approximately $11 million. We believe our management and sales force structure now optimally position Pernix for future revenue growth and profitability.

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

George Jones

Thank you, Graham. Since John and Graham came on Board, we’ve addressed a number of challenges. Importantly, after our review, we determined that our sales territories were extremely large and not optimally aligned.

Our sales force is spending a significant amount of time driving from prescriber to prescriber, which led to substantial inefficiencies and sales force on prescriber with lower – prescribers with lower prescribing volume. We also evaluated our sales management structure that consisted of two distinct management team covering the same geographies, within this structure, inefficient and suboptimal for execution, especially for company our size.

As a result, we have optimized our sales force and fully implemented these changes. We now have one fully integrated sales management team and a national sales force with specialists focusing on either Zohydro ER or Treximet as their primary product. Every sales specialists promotes Silenor as a secondary product.

As part of the optimization, we have focused our sales specialists on the highest volume prescribers who have the greatest potential for growth. It’s worth nothing that despite the sales force – neurology sales force reduction, we expect to sustain the coverage of a large majority of high-volume Treximet prescribers, with only about 14% of Treximet prescriptions expected to be impacted.

Moving to our pain sales force, we expect the optimization will enable us to increase our coverage of Zohydro ER with BeadTek prescriptions by 19%, while shifting our focus to the highest value pain specialist, with whom we have a significant opportunity to accelerate our brand growth.

With that, I would like to highlight some of our key commercial accomplishments for the second quarter.

First, we saw accelerating prescription growth for our three core brands during the quarter. Treximet prescriptions increased by approximately 7% compared to the first quarter of 2016. While prescriptions decreased by 1% compared to the second quarter of 2015, prescriptions for the month of June increased 1% compared to June 2015 consistent with the improving trend we have observed since April 2015.

This marks the first time since 2010 that Treximet have shown year-over-year growth on a monthly basis and is significant considering the brand was declining 25% year-over-year for the quarter [ph]. Silenor TRx grew 7% sequentially from Q1 2016, and had year-over-year growth of 15% in Q2 2016 versus Q2 2015. We want to highlight for our investors that we were recently...


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