Brian Marckx, CFA
Q2 Gross Sales, EPS Dead-On With Our Estimates
Pernix Therapeutics (PTX) reported financial results for the second quarter on August 16th. While gross product sales came in almost dead-on with our estimate, net sales were well ahead as a result of relatively strong collaboration revenue and lower than expected Medicaid rebates. Despite the better net sales number, EPS of $0.07 was right where we had it modeled as a result of lower than estimated product margin and higher operating expenses.
Gross product sales came in at $15.6 million compared to our $15.5 million estimate and was up 127% y-o-y. Net sales were $12.1 million (+176% y-o-y) versus our $9.5 million estimate due to a beat of almost $1 million in collaboration revenue ($1.72MM A vs. $725k E) and significantly lower than modeled Medicare rebates, which came in at about 8% of gross product sales ($1.2MM) compared to our 20% ($3.0MM) estimate. Pernix's Medicare rebates can fluctuate significantly from quarter to quarter (they were almost 28% of gross product sales in Q1 2011) which makes modeling them difficult.
Operating expenses of $6.1 million were well above our $5.4 million estimate, although on a percentage of net sales basis they came in below our estimate (50% A vs. 56% E). Pernix began ramping up their sales force in anticipation of the Natroba launch (which commenced earlier this week) which pushed SG&A up in the quarter but management indicated on the call that there should not be significant additions throughout the remainder of the year.
Cash
Pernix exited the quarter with $16.6 million in cash and equivalents. Pro forma for the July sale of 3 million common shares, cash balance was approximately $36 million. Cash flow from operations was $3.5 million and $8.5 million in the three and six month periods ending 6/30/2011.
OUR REVISED 2011 OUTLOOK
We have made updates to our model based on today's results. For 2011 we now look for gross product sales of $72.8MM (up from $72MM prior to Q2 results), net sales of $51.8MM (revised up from $47.6MM) and EPS of $0.38 (revised down from $0.40 – revised down due to the additional share count from the July stock issuance).
We are maintaining our $13 price target and Outperform rating on Pernix. We value PTX using a comp average PE/G ratio of 1.08. We look for PTX to grow EPS at a CAGR of 32% over the next five years, which using the comp PE/G, values PTX at approximately $13/share.
For a free copy of the full research report, please email scr@zacks.com with PTX as the subject.
Follow Zacks Small Cap Research on Twitter at Twitter.com/ZacksSmallCap
PERNIX THERAPTC (PTX): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment