Pernix Therapeutics Reports Third Quarter 2013 Financial Results

  Pernix Therapeutics Reports Third Quarter 2013 Financial Results

 Pernix Completes Sale of Non-Core Generic Assets to Breckenridge; Term Loan
                                   Retired

                   Dr. Cocoa OTC Rights Licensed to Infirst

                      Revenue Increases to $18.3 Million

                      Expense Reduction Program in Force

                   Revises Full Year 2013 Revenue Guidance

Business Wire

HOUSTON -- November 12, 2013

Pernix Therapeutics Holdings, Inc. (“Pernix” or the “Company”) (NASDAQ MKT:
PTX), a specialty pharmaceutical company, today announced financial results
for the quarter and year-to-date period ended September 30, 2013.

During the quarter, the Company completed its previously announced agreement
to sell certain generic assets owned by its subsidiary, Cypress
Pharmaceuticals, to Breckenridge Pharmaceutical, Inc. for $29.7 million. Under
the terms of the agreement, Breckenridge paid Pernix approximately $20 million
at closing and $9.7 million which is to be paid in two equal installments over
the next two years on the anniversary date of the closing. The Company used a
portion of the proceeds to pay the balance outstanding under its term loan
with MidCap Financial of $7.7 million

Effective August 30, 2013, Pernix licensed rights to the Dr. Cocoa OTC cough
product candidate in the United States and Canada to Infirst Healthcare in
exchange for a net sales royalty and an opportunity for its subsidiary, Pernix
Manufacturing, to supply specified products to Infirst.

Michael Pearce, Chairman and CEO, said, “Q3 was a transitional quarter for
Pernix. We bolstered the balance sheet as a result of the Breckenridge
non-core asset sale and simplified our business model. We are excited about
the prospects for Dr. Cocoa under the auspices of Infirst CEO Manfred Scheske,
formerly the president of consumer health for Glaxo Smith Kline, and backed by
investment giant Invesco.” Regarding Pernix financial performance, Pearce
added, “We made important progress on expense reduction. Sequentially, SG&A in
Q3 decreased significantly from Q2 and there will be more gains to come.
Revenue performance was not satisfactory and is being addressed
organizationally and from a product perspective.”

Financial Results

For the third quarter 2013, net sales increased by approximately 1% to $18.3
million, compared to $18.1 million for the same period in the prior year. The
Company experienced growth in net revenues due to sales revenues of branded
and generic products that the Company acquired from Cypress Hawthorn and the
Silenor product acquired in the merger with Somaxon. The increase from the
acquired products was offset by a decrease in the Company’s legacy portfolio
of products which was due in part to the discontinuation of certain brand and
generic cough and cold products that had been recalled and of certain generic
products as a result of related litigation settlement terms. As it relates to
revenue contribution, 50% of our revenue was from generic product sales and
50% was from brand product sales.

The net loss for the third quarter of 2013 was approximately $6.0 million, or
$0.16 per basic and diluted share, compared to net loss of $0.3 million, or
$0.01 per basic and diluted share, for the third quarter of 2012.

Adjusted EBITDA (earnings before interest, taxes, depreciation and
amortization, a non-GAAP measure) was a loss of $2.0 million for the third
quarter of 2013, compared to adjusted EBITDA of $1.2 million for the third
quarter of 2012. See the table at the end of this press release for a
reconciliation of net income to EBITDA.

Selling, general and administrative (SG&A) expenses in the third quarter of
2013 were approximately $11.7 million, compared to $9.8 million for the third
quarter of 2012. Approximately $1.6 million of the increase relates to an
increase in overall compensation expense that was primarily attributable to
the addition of Cypress Hawthorn employees, effective January 1, 2013,
partially offset by decreases resulting from the reorganization of the
consolidated company and the elimination and consolidation of certain
management level and staff positions as part of our expense reduction program.
The remaining increase was primarily due to the incremental increase of the
facility and overhead operating expenses from the acquisitions of Cypress
Hawthorn and Somaxon subsequent to September 30, 2012, offset by certain
synergistic savings in the operations of the consolidated business. In
addition, during the three months ended September 30, 2013, we incurred deal
expenses of approximately $0.6 million related to the sale of certain Cypress
assets to Breckenridge in September 2013.

Depreciation and amortization expense was $2.7 million for the third quarter
of 2013, compared to $0.9 million for the third quarter of 2012. The Company
recognized an income tax benefit of $2.7 million for the third quarter of
2013, compared to an income tax benefit of $0.4 million in the third quarter
of 2012.

For the nine months ended September 30, 2013, net revenues increased by
approximately 41% to $60.9 million, compared to $43.1 million for the prior
year period. The increase in net revenues was due primarily to sales of
Cypress Hawthorn products acquired offset by reduced revenue resulting from
discontinued products in the Pernix legacy portfolio.

The net loss for the nine months ended September 30, 2013 was approximately
$20.1 million, or $0.55 per basic and diluted share, compared to net loss of
approximately $0.01 million, or $0.00 per basic and diluted share, for the
prior year period.

Adjusted EBITDA was a loss of $7.3 million for the nine months ended September
30, 2013, compared to adjusted EBITDA of $4.9 million for the prior year
period. See the table at the end of this press release for a reconciliation of
net income to EBITDA.

SG&A expenses in the nine months ended September 30, 2013 were approximately
$39.0 million, compared to $24.3 million for the prior year period.
Approximately $7.9 million of the increase relates to an increase in overall
compensation primarily due to the addition of Cypress employees effective
January 1, 2013, and the addition of Pernix Manufacturing employees in July
2012, offset by decreases resulting from the reorganization of the
consolidated company and the elimination and consolidation of certain
management level and staff positions as part of our expense reduction program.
The remaining increase was primarily due to the incremental increase of
expenses from the acquisitions of Cypress Hawthorn, Somaxon and the
manufacturing facility subsequent to September 30, 2012. In addition, we
incurred approximately $1.1 million in transaction expenses related to the
acquisitions of Cypress Hawthorn and Somaxon and to the sale of certain
Cypress assets in September 2013, approximately $0.7 million in increased
expenses related to our OTC division and approximately $1.2 million in
increased legal fees from product related litigation that has now been
settled.

Depreciation and amortization expense was $7.5 million for the nine months
ended September 30, 2013, compared to $2.3 million for the prior year period.
The Company recognized an income tax benefit of $8.1 million for the nine
months ended September 30, 2013, compared to an income tax benefit of
approximately $0.2 million in the prior year period.

Expense Reduction Program

SG&A expenses during the three months ended September 30, 2013 were $11.7
million, adjusted to $11.2 million when excluding approximately $0.6 million
of one-time expenses related to the Breckenridge transaction, compared to SG&A
expenses during the three months ended June 30, 2013 of $13.1 million,
equating to a sequential period reduction of approximately $2.0 million.

The Company has also implemented net personnel reductions which will generate
additional annualized savings of approximately $2.0 million as separation
costs abate at the conclusion of 2013.

As part of a continuing review of operations, the Company believes that
significant expense reduction opportunities will be realized in areas of
manufacturing, logistics, distribution, supply chain, sales process and
corporate overhead during the balance of 2013 and the quarter ending March 31,
2014.

Financial Position and Guidance

As of September 30, 2013, the Company had $9.7 million of cash and cash
equivalents. The Company revises its previously announced net revenue guidance
for the full year 2013 to $80.0 million, from the previous range of $90.0 to
$100.0 million. Net revenue for the three months ending December 31, 2013 is
anticipated to be approximately $22.0 million. The adjusted revenue guidance
is a reflection of year to date results and other factors, including a recent
modification of the Company’s agreement with ParaPRO, which will likely lead
to a $2.0 million reduction in net revenue recognized from the sale of Natroba
and authorized generic spinosad head lice products sold during the three month
period ending December 31, 2013, but which are anticipated to have minimal
negative impact on gross profit contribution. Finally, the recently announced
Omeclamox co-promotion agreement between the Company and Cumberland
Pharmaceuticals, while cash positive, is anticipated to negatively impact net
revenues during the three month period ending December 31, 2013 in the amount
of approximately $1.5 million.

Conference Call Information

Management will host a conference call today at 9:00 a.m. EST to discuss its
financial results for the third quarter and nine months ended September 30,
2013. The conference call will feature remarks from Michael Pearce, Chairman
and Chief Executive Officer, and Tracy Clifford, Principal Accounting Officer.
To participate in the live conference call, please dial (877) 312-8783
(domestic) or (408) 940-3874 (international), and provide conference ID code
75172136. A live webcast of the call will also be available on the investor
relations section of the Company’s website, www.pernixtx.com. Please allow
extra time prior to the webcast to register and download and install any
necessary audio software.

A replay of the call will be available through November 19, 2013. To access
the replay, please dial (855) 859-2056 (domestic) and (404) 537-3406
(international), and provide conference ID code 75172136. An online archive of
the webcast will be available on the Company's website for 30 days following
the call.

About Pernix Therapeutics Holdings, Inc.

Pernix Therapeutics is a specialty pharmaceutical company primarily focused on
the sales, marketing, manufacturing and development of branded, generic and
OTC pharmaceutical products. The Company’s branded products for the pediatrics
market include CEDAX®, an antibiotic for middle ear infections, NATROBA™, a
topical treatment for head lice marketed under a co-promotion agreement with
ParaPRO, LLC, and ZUTRIPRO® for the treatment of cough and cold. The Company’s
branded products for gastroenterology include OMECLAMOX-PAK®, which is now
being co-promoted with Cumberland Pharmaceuticals, a 10-day treatment for H.
pylori infection and duodenal ulcer disease, and REZYST™, a probiotic blend to
promote dietary management. The Company also markets the branded product,
SILENOR, for the treatment of insomnia. The Company promotes its branded
pediatric and gastroenterology products through its sales force. Pernix
markets its generic products through its wholly-owned subsidiaries, Cypress
Pharmaceutical and Macoven Pharmaceuticals. The Company’s wholly-owned
subsidiary, Pernix Manufacturing, LLC, manufactures and packages products for
the pharmaceutical industry in a wide range of dosage forms. Founded in 1996,
the Company is based in Houston, TX.

Additional information about Pernix is available on the Company’s website
located atwww.pernixtx.com.

Non-GAAP Financial Measures

Pernix is disclosing non-GAAP financial measures in this press release.
Primarily due to acquisitions, Pernix believes that an evaluation of its
ongoing operations (and comparisons of its current operations with historical
and future operations) would be difficult if the disclosure of its financial
results were limited to financial measures prepared only in accordance with
U.S. generally accepted accounting principles (GAAP). In addition to
disclosing its financial results determined in accordance with GAAP, Pernix is
disclosing non-GAAP results that exclude items such as amortization expense
and certain other expense and revenue items in order to supplement investors'
and other readers' understanding and assessment of the Company's financial
performance. Whenever Pernix uses a non-GAAP measure, it will provide a
reconciliation of non-GAAP financial measures to the most closely applicable
GAAP financial measure. Investors and other readers are encouraged to review
the related GAAP financial measures and the reconciliation of non-GAAP
measures set forth herein and should consider non-GAAP measures only as a
supplement to, not as a substitute for or as a superior measure to, measures
of financial performance prepared in accordance with GAAP.

Cautionary Notice Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Statements including
words such as “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,”
“anticipate,” “believe,” “seek,” “target” or similar expressions are
forward-looking statements. Because these statements reflect the Company’s
current views, expectations and beliefs concerning future events, these
forward-looking statements involve risks and uncertainties. Investors should
note that many factors, as more fully described under the caption "Risk
Factors" in our Form 10-K, Form 10-Q and Form 8-K filings with the Securities
and Exchange Commission and as otherwise enumerated herein or therein, could
affect the Company’s future financial results and could cause actual results
to differ materially from those expressed in forward-looking statements
contained in this press release, the Company’s Annual Report on Form 10-K and
the Company’s other filings with the Securities and Exchange Commission. The
forward-looking statements in this press release are qualified by these risk
factors. The Company assumes no obligation to publicly update any
forward-looking statements, whether as a result of new information, future
developments or otherwise.


PERNIX THERAPEUTICS HOLDINGS,INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

                                        September 30,     December 31,
                                           2013                2012
ASSETS                                     (unaudited)
Current assets:
Cash and cash equivalents                  $ 9,690,898         $ 23,022,821
Accounts receivable, net                     23,336,704          36,647,087
Inventory, net                               16,517,332          22,014,405
Prepaid expenses and other current           6,694,481           3,888,117
assets
Note Receivable                              4,711,700           -
Prepaid income taxes                         847,382             2,024,411
Deferred income taxes                       6,156,000          8,118,500
Total current assets                         67,954,497          95,715,341
Property and equipment, net                  7,249,810           6,946,944
Other assets:
Investments                                  -                   5,710,526
Goodwill                                     53,825,276          37,160,911
Intangible assets, net                       100,312,371         104,054,431
Note Receivable                              4,483,500           -
Other long-term assets                      1,226,329          1,858,534
Total assets                               $ 235,051,783       $ 251,446,687
LIABILITIES
Current liabilities:
Accounts payable                           $ 7,089,259         $ 5,045,488
Accrued personnel expenses                   3,419,925           2,881,967
Accrued allowances                           29,196,317          30,054,551
Other accrued expenses                       5,063,980           5,548,084
Put option and contingent                    15,649,369          6,562,169
consideration – Cypress acquisition
Other liabilities                            1,300,793           1,568,495
Debt                                        13,883,224         2,286,513
Total current liabilities                   75,602,867         53,947,267
Long-term liabilities
Put option and contingent                    4,494,800           7,765,511
consideration – Cypress acquisition
Other liabilities                            3,103,406           -
Debt                                         1,345,554           41,349,563
Deferred income taxes                       34,918,000         35,535,500
Total liabilities                           119,464,627        138,597,841
                                                                             
Commitments and contingencies
                                                                             
Temporary Equity
Common stock subject to repurchase
(3,565,692 and 4,427,084 shares as
of September                                 27,634,113          34,309,901
30, 2013 and December 31, 2012,
respectively)
                                                                             
STOCKHOLDERS’ EQUITY
Common stock, $.01 par value,
90,000,000 shares authorized,
39,903,469 and
34,994,828 issued and 37,783,578 and         335,549             296,033
34,030,351 outstanding at September
30, 2013
and December 31, 2012, respectively)
Treasury stock, at cost (2,119,891
and 2,072,810 shares held at                 (3,980,629  )       (3,772,410  )
September 30, 2013 and
December 31, 2012, respectively)
Additional paid-in capital                   91,229,563          58,606,942
Retained earnings                            368,560             20,433,262
Accumulated other comprehensive             -                  2,975,118
income
Total equity                                 87,953,043          78,538,945
                                                              
Total liabilities and stockholders’        $ 235,051,783       $ 251,446,687
equity

                                                      
PERNIX THERAPEUTICS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)
                                                           
                     Three Months Ended                    Nine months ended

                     September 30,                         September 30,
                     2013             2012               2013              2012
Net revenues         $ 18,295,130       $ 18,134,158       $ 60,946,404        $ 43,115,517
Costs and
operating
expenses:
Cost of product        9,571,818          7,759,761          33,811,615          15,861,461
sales
Selling, general
and                    11,739,675         9,837,217          38,960,310          24,302,513
administrative
expenses
Research and
development            633,419            332,971            3,632,719           511,694
expense
Loss from the
operations of
the joint              -                  -                  -                   240,195
venture

with SEEK
Depreciation and
amortization           2,672,291          885,982            7,466,991           2,320,589
expense
(Gain) loss on        (3,601     )      -                1,279             -          
sale of assets
Total costs and
operating             24,613,602       18,815,931       83,872,914        42,236,452 
expenses
                                                                               
Loss from              (6,318,472 )       (681,773   )       (22,926,510 )       (120,935   )
operations
                                                                               
Other income
(expense):
Change in fair
value of put           (2,145,700 )       -                  (6,116,489  )       -
right
Change in fair
value of               522,000            -                  805,000             -
contingent
consideration
Interest               (782,782   )       7,431              (3,491,966  )       (59,976    )
expense, net
Gain on sale of       -                -                3,605,263         -          
investment
Total other
(loss) income,        (2,406,482 )      7,431            (5,198,192  )      (59,976    )
net
                                                                               
Loss before            (8,724,954 )       (674,342   )       (28,124,702 )       (180,911   )
income taxes
                                                                               
Income tax
(benefit)             (2,676,000 )      (404,000   )      (8,060,000  )      (170,000   )
provision
                                                                               
Net Loss             $ (6,048,954 )     $ (270,342   )     $ (20,064,702 )     $ (10,911    )
                                                                               
Reclassification
adjustment for
net realized
gain included         -                808,374          (2,975,118  )      2,286,874  
in net income
(loss), net of
income tax
                                                                               
Comprehensive        $ (6,048,954 )     $ 538,032         $ (23,039,820 )     $ 2,275,963  
(Loss) income
                                                                               
Net Loss per         $ (0.16      )     $ (0.01      )     $ (0.55       )     $ -          
share, basic
Net Loss per         $ (0.16      )     $ (0.01      )     $ (0.55       )     $ -          
share, diluted
Weighted-average
common shares,        37,120,890       29,069,119       36,204,340        27,765,275 
basic
Weighted-average
common shares,        37,120,890       29,069,119       36,204,340        27,765,275 
diluted
                                                                                            

Supplemental Financial Information

The following table presents a reconciliation of Pernix’s net income to
adjusted EBITDA. The Company defines EBITDA as net income plus interest,
income tax expense, depreciation and amortization and presents these measures
to assist investors in evaluating Pernix’s operating performance and comparing
the Company’s results with those of other companies. Adjusted EBITDA should
not be considered in isolation from or as a substitute for net income.


PERNIX THERAPEUTICS HOLDINGS, INC.

EBITDA Reconciliation Table

                Three Months Ended September     Nine Months Ended September 30,
                  30,
                  2013            2012              2013             2012
Net (loss)        $ (6,048,954 )   $ (270,342  )     $ (20,064,702 )   $ (10,911   )
income
Amortization
&                   2,672,291        885,982           7,466,991         2,320,589
depreciation
Net interest        782,782          (7,431    )       3,491,966         59,976
Taxes              (2,676,000 )    (404,000  )      (8,060,000  )    (170,000  )
EBITDA            $ (5,269,881 )   $ (204,209  )     $ (17,165,745 )   $ 2,199,654 
                                                                       
Deal expenses       576,371          186,502           1,103,712         224,131
Stock               491,418          678,149           1,516,253         1,901,568
compensation
Stock
compensation        131,234          163,520           426,030           540,252
– ParaPRO
Increase in
basis of
acquired            412,368          -                 5,123,068         -
inventory
included in
COGS
Increase in
value of put        2,145,700        -                 6,116,489         -
right
Change in
fair value of       (522,000   )     -                 (805,000    )     -
contingent
consideration
Gain on sale       -              -               (3,605,263  )    -         
of investment
Adjusted          $ (2,034,790 )   $ 1,232,380      $ (7,290,456  )   $ 4,865,605 
EBITDA

Contact:

Pernix Therapeutics Holdings, Inc.
Michael Pearce, (800) 793-2145 ext. 7407
President and CEO
mpearce@pernixtx.com
 
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