Pernix Therapeutics Holdings Inc (NASDAQ:PTX) is a potentially undervalued micro cap pharmaceutical company on the rise. Investors are growing increasingly optimistic that New Jersey-based specialty pharmaceutical company PTX could be the subject of a buyout deal within the first quarter of 2017. That could make Pernix Therapeutics worth significantly more than it is now.
As a potential buyout target, PTX would give investors a final endgame after a wild rollercoaster stock ride over the past year.
Pernix Therapeutics Holdings Inc (NASDAQ:PTX) shares are currently trading at $2.83, giving the company an implied market capitalization of $27.80 million. YTD, shares of PTX are up 40.21%. That reflects the overall investor sentiment that PTX could fetch a premium price in a buyout deal.
Over a longer term horizon, though, shares of PTX have declined precipitously ever since March 2016. At that time, the company’s shares were trading close to their 52-week high of $24.40. Over the most recent 52-week period, shares of the company are down more than 86% and even over the most recent three-month period, shares of PTX are down more than 30%.
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So what’s the evidence that PTX is getting ready to be bought by a larger pharmaceutical company? Investors point to the appointment of a new CEO, John Sedor, in mid-2016. He has a track record of turning around battered biotech companies and preparing them for a sale. Then, on January 6, the company announced that it had hired Ken Pina as a new SVP, General Counsel and Chief Compliance Officer. In that role, Pina would be absolutely critical to managing any and all acquisition offers and making sure that everything goes smoothly in a deal.
And there’s one more piece of evidence that investors are considering – the resolution of a legal case involving pharmaceutical giant GlaxoSmithKline. On January 31, Pernix announced that the case had been finally resolved. While the terms are relatively onerous for Pernix – the payment of nearly $35 million in damages to GlaxoSmithKline, in addition to another $2-5 million in interest charges – the key point is that there is no longer a major legal case hanging over the company. In a sense, that clears the deck for a buyout deal. Of the nearly $40 million owed, $16.5 million has already been paid into an escrow account, and as of February 1, the company had a cash balance of $26 million.
Taking a big picture view, Pernix manages a portfolio of both branded and generic drugs for one major therapeutic area: central nervous system (CNS), which includes both neurology and psychiatry. The company’s major focus is on three branded products – Treximet, Zohydro BR and Silenor. Treximet – the drug at the center of the GlaxoSmithKline legal case – is a treatment for acute migraine. Zohydro BR is an extended release opioid for the management of severe pain. Silenor is a treatment for insomnia. Of these three, Treximet is the most important product. There’s another branded drug, Khedezla, which is a treatment for major depressive disorder. Finally, there are non-core branded products for cough and cold that are sold via co-promotion arrangements.
Going forward, PTX is almost certain to continue getting ready for a merger or acquisition of some kind. Therefore, continue to look for signs that the company is addressing operational efficiency and addressing liquidity needs via asset sales or refinancing deals. In 3Q 2016, the company posted $41.4 million in revenue, but still posted a huge net loss of $26 million.
2016 was a difficult year for the company, but 2017 is shaping up to be much better. The company has a new CEO and a new Compliance Officer, and has finally settled a major court case that created a big legal overhang over the company. The company also has a relatively large institutional shareholder base (20%), which is rare for a microcap stock. That fact shows that many big money investors have confidence that PTX will find a way out of the wilderness in 2017. If that happens, investors could see some significant upside in their stock positions. For more news on fast-moving stocks like Pernix Therapeutics Holdings, please subscribe to OracleDispatch.com below.