(Mark One)
|
|
þ
|
Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
|
For the quarterly period ended:
March 31, 2014
|
|
o
|
Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
|
For the transition period from: ___________ to ___________
|
Maryland
|
33-0724736
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification Number)
|
10 North Park Place, Suite 201, Morristown, NJ
|
07960
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Large accelerated filer
|
o
|
Accelerated filer
|
þ
|
Non-accelerated filer
|
o
|
Smaller reporting company
|
o
|
(Do not check if a smaller reporting company)
|
●
|
projections of revenues, expenses, income, income per share and other performance measures;
|
●
|
statements regarding expansion of operations, including entrance into new markets and development of products; and
|
●
|
statements preceded by, followed by or that include the words “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions.
|
●
|
changes in general business, economic and market conditions;
|
●
|
volatility in the securities markets generally or in the market price of our stock specifically; and
|
●
|
the risks outlined in the section entitled “Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.
|
Three Months Ended
March 31,
|
||||||||
2014
|
2013
|
|||||||
Net revenues
|
$ | 19,051,552 | $ | 22,077,873 | ||||
Costs and expenses:
|
||||||||
Cost of sales
|
9,955,950 | 13,077,447 | ||||||
Selling, general and administrative expenses
|
13,623,450 | 14,079,188 | ||||||
Research and development expense
|
968,854 | 1,207,116 | ||||||
Depreciation and amortization expense
|
2,190,467 | 1,824,708 | ||||||
Impairment of assets held for sale
|
6,456,966 |
─
|
||||||
Total costs and expenses
|
33,195,687 | 30,188,459 | ||||||
Loss from operations
|
(14,144,135 | ) | (8,110,586 | ) | ||||
Other expense:
|
||||||||
Change in fair value of put right
|
─
|
(2,140,727 | ) | |||||
Change in fair value of contingent consideration
|
─
|
283,000 | ||||||
Interest expense, net
|
(1,264,252 | ) | (1,076,615 | ) | ||||
Total other (loss) income, net
|
(1,264,252 | ) | (2,934,342 | ) | ||||
Loss before income taxes
|
(15,408,387 | ) | (11,044,928 | ) | ||||
Income tax (benefit) provision
|
(5,866,000 | ) | (3,134,000 | ) | ||||
Net loss
|
(9,542,387 | ) | (7,910,928 | ) | ||||
Unrealized loss on securities, net of income tax of approximately
$0 and $946,000 for the three months ended March 31, 2014 and 2013, respectively
|
─
|
(1,448,645 | ) | |||||
Comprehensive loss
|
$ | (9,542,387 | ) | $ | (9,359,573 | ) | ||
Net loss per share, basic
|
$ | (0.26 | ) | $ | (0.23 | ) | ||
Net loss per share, diluted
|
$ | (0.26 | ) | $ | (0.23 | ) | ||
Weighted-average common shares, basic
|
37,270,992 | 35,052,205 | ||||||
Weighted-average common shares, diluted
|
37,270,992 | 35,052,205 |
Common
Stock
Shares
|
Common Stock
Amount
|
Additional
Paid In
Capital
|
Treasury
Stock
|
Retained
Deficit
|
Total
|
|||||||||||||||||||
Balance at December 31, 2013
|
37,189,351 | $ | 371,893 | $ | 119,553,760 | $ | (4,001,475 | ) | $ | (5,202,066 | ) | $ | 110,722,112 | |||||||||||
Stock-based compensation
|
||||||||||||||||||||||||
Restricted stock
|
─
|
─
|
984,705 |
─
|
─
|
984,705 | ||||||||||||||||||
Sto Stock options
|
─
|
─
|
788,122 |
─
|
─
|
788,122 | ||||||||||||||||||
Employee stock purchase plan ─ |
─
|
6,000 |
─
|
─
|
6,000 | |||||||||||||||||||
Is Issuance of stock options for
services from non-employees
|
─
|
─
|
119,134 |
─
|
─
|
119,134 | ||||||||||||||||||
Issuance of common stock upon the exercise of stock options
|
79,000 | 790 | 293,880 |
─
|
─
|
294,670 | ||||||||||||||||||
Issuance of common stock upon vesting of restricted stock
|
404,323 | 4,043 | (4,043 | ) |
─
|
─
|
─
|
|||||||||||||||||
Forfeit of restricted stock in payment of income tax liability
|
(169,766 | ) | (1,697 | ) | 1,697 | (679,091 | ) |
─
|
(679,091 | ) | ||||||||||||||
Income tax benefit on stock based awards
|
─
|
─
|
(131,000 | ) |
─
|
─
|
(131,000 | ) | ||||||||||||||||
Net (loss)
|
─
|
─
|
(9,542,387 | ) | (9,542,387 | ) | ||||||||||||||||||
Balance at March 31, 2014
|
37,502,908 | $ | 375,029 | $ | 121,612,255 | $ | (4,680,566 | ) | $ | (14,744,453 | ) | $ | 102,562,265 |
Three months ended
|
||||||||
March 31,
|
||||||||
2014
|
2013
|
|||||||
Cash flows from operating activities:
|
||||||||
Net (loss) income
|
$ | (9,542,387 | ) | $ | (7,910,928 | ) | ||
Adjustments to reconcile net (loss) income to net cash from operating activities:
|
||||||||
Depreciation
|
149,652 | 143,609 | ||||||
Amortization of intangibles and interest accretion of contingent
consideration
|
2,040,815 | 1,681,099 | ||||||
Amortization of deferred financing costs
|
313,134 | 114,118 | ||||||
Interest accretion on notes receivable
|
(85,523 |
─
|
||||||
Deferred income tax (benefit) provision
|
(6,421,000 | ) | (936,711 | ) | ||||
Impairment on assets held for sale
|
6,456,966 |
─
|
||||||
Stock-based compensation expense
|
1,778,827 | 545,256 | ||||||
Expense from stock options issued in exchange for services
|
119,134 | 146,584 | ||||||
Change in fair value of put right
|
─
|
2,140,727 | ||||||
Change in fair value of contingent consideration
|
─
|
(283,000 | ) | |||||
Changes in operating assets and liabilities (net of effects of
acquisitions):
|
||||||||
Accounts receivable
|
(6,202,808 | ) | 7,293,284 | |||||
Inventory
|
1,836,100 | 4,837,327 | ||||||
Prepaid expenses and other assets
|
416,921 | (560,613 | ) | |||||
Accounts payable
|
2,528,978 | (815,034 | ) | |||||
Income taxes
|
188,557 | (3,434,796 | ) | |||||
Accrued expenses
|
304,873 | (449,926 | ) | |||||
Net cash from operating activities
|
(6,117,761 | ) | 2,510,996 | |||||
Cash flows from investing activities:
|
||||||||
Acquisition of Cypress
|
─
|
(309,589 | ) | |||||
Purchase of equipment
|
(115,256 | ) | (135,427 | ) | ||||
Net cash from investing activities
|
(115,256 | ) | (445,016 | ) | ||||
Cash flows from financing activities:
|
||||||||
Cash acquired in connection with acquisition of Somaxon
|
─
|
2,880,837 | ||||||
Payments on contracts payable
|
─
|
(900,000 | ) | |||||
Payments on term loan
|
─
|
(525,000 | ) | |||||
Net payments on revolving credit facility
|
(11,812,041 | ) |
─
|
|||||
Proceeds from issuance of convertible senior notes
|
65,000,000 |
─
|
||||||
Payments on financing costs
|
(6,201,149 | ) | (60,731 | ) | ||||
Payments on mortgages and capital leases
|
(34,120 | ) | (43,344 | ) | ||||
Proceeds from issuance of stock
|
294,670 |
─
|
||||||
Tax benefit on stock-based awards
|
(131,000 | ) | (84,000 | ) | ||||
Payment of employee income tax liability with surrender of
employee restricted stock
|
(679,091 | ) | (96,705 | ) | ||||
Net cash from financing activities
|
46,437,269 | 1,171,057 | ||||||
Net increase in cash and cash equivalents
|
40,204,252 | 3,237,037 | ||||||
Cash and cash equivalents, beginning of period
|
15,646,963 | 23,022,821 | ||||||
Cash and cash equivalents, end of period
|
$ | 55,851,215 | $ | 26,259,858 | ||||
Supplemental disclosure:
|
||||||||
Cash paid for income taxes
|
$ | 497,443 | $ | 1,321,507 | ||||
Interest paid during the period
|
447,845 | 761,007 | ||||||
Non-cash transactions
|
||||||||
Acquisition of license and supply agreement – contract payable
|
2,500,000 | 500,000 | ||||||
Acquisition of Cypress – purchase price adjustment
|
─
|
3,250,000 | ||||||
Acquisition of Somaxon - Fair value of common stock
|
─
|
23,840,424 |
Note 1.
|
Company Overview
|
Note 2.
|
Basis of Presentation and Summary of Significant Accounting Policies
|
Three Months Ended
March 31,
|
||||||||
2014
|
2013
|
|||||||
Gross product sales
|
$
|
40,571,782
|
$
|
38,583,976
|
||||
Sales allowances
|
(23,041,185
|
)
|
(18,673,243
|
)
|
||||
Net product sales
|
17,530,597
|
19,910,733
|
||||||
Manufacturing revenue
|
871,215
|
1,184,032
|
||||||
Co-promotion and other revenue
|
649,740
|
983,108
|
||||||
Net revenues
|
$
|
19,051,552
|
$
|
22,077,873
|
Gross Product Sales
|
||||||||
Three Months Ended
March 31,
|
||||||||
2014
|
2013
|
|||||||
McKesson Drug Co.
|
36
|
%
|
36
|
%
|
||||
AmerisourceBergen Drug Corporation
(1)
|
35
|
%
|
12
|
%
|
||||
Cardinal Health, Inc
(1)
|
17
|
%
|
29
|
%
|
||||
Total
|
88
|
%
|
77
|
%
|
Accounts Receivable
|
||||||||
March 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
McKesson Drug Co.
|
27
|
%
|
35
|
%
|
||||
AmerisourceBergen Drug Corporation
|
32
|
%
|
23
|
%
|
||||
Cardinal Health, Inc.
|
21
|
%
|
16
|
%
|
||||
Total
|
80
|
%
|
74
|
%
|
Three Months Ended
March 31,
|
||||||||
2014
|
2013
|
|||||||
Numerator:
|
||||||||
Net loss income
|
$ | (9,542,387 | ) | $ | (7,910,928 | ) | ||
Denominator:
|
||||||||
Weighted-average common shares, basic
|
37,270,992 | 35,052,205 | ||||||
Dilutive shares
|
─
|
─
|
||||||
Weighted-average common shares, diluted
|
37,270,992 | 35,052,205 | ||||||
Net loss per share, basic
|
$ | (0.26 | ) | $ | (0.23 | ) | ||
Net loss per share, diluted
|
$ | (0.26 | ) | $ | (0.23 | ) |
As of March 31,
|
||||||||
(in thousands)
|
2014
|
2013
|
||||||
Conversion of the Notes
|
18,056 | − |
Note 3.
|
Fair Value Measurement
|
December 31, 2013
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Liabilities
|
||||||||||||||||
Contingent consideration
(1)
|
—
|
—
|
1,330
|
1,330
|
||||||||||||
Total Liabilities
|
$
|
—
|
$
|
—
|
$
|
1,330
|
$
|
1,330
|
(1)
|
Contingent consideration consists of certain holdback payments and contingent cash and equity payments with respect to our acquisition of Cypress. The fair value of the contingent consideration is included in put option and contingent consideration on the accompanying condensed consolidated balance sheets. The fair value of contingent consideration was originally estimated using probability weighted discounted cash flow models (DCF). The DCF incorporates Level 3 inputs including estimated discount rates that the Company believes market participants would consider relevant in pricing and the projected timing and amount of cash flows, which are estimated and developed, in part, based on the requirements specific to the Cypress acquisition agreement. The Company analyzes and evaluates these fair value measurements quarterly to determine whether valuation inputs continue to be relevant and appropriate or whether current period developments warrant adjustments to valuation inputs and related measurements. Any increases or decreases in discount rates would have an inverse impact on the value of related fair value measurements, while increases or decreases in expected cash flows would result in a corresponding increase or decrease in fair value measurements. The Company settled the matter of contingent consideration and paid the former shareholders of Cypress $1,330,000 in January 2014.
|
Note 4.
|
Accounts Receivable
|
March 31,
2014
|
December 31,
2013
|
|||||||
Trade accounts receivable
|
$
|
32,542,615
|
$
|
25,585,112
|
||||
Less allowance for prompt pay discounts
|
(693,728
|
)
|
(531,722
|
)
|
||||
Less allowance for doubtful accounts
|
(86,199
|
)
|
(84,328
|
)
|
||||
Total trade receivables
|
31,762,688
|
24,969,062
|
||||||
Other miscellaneous receivables
|
46,422
|
57,475
|
||||||
Receivables from third parties – revenue sharing arrangements
|
75,069
|
654,834
|
||||||
Total accounts receivable, net
|
$
|
31,884,179
|
$
|
25,681,371
|
Note 5.
|
Notes Receivable
|
Note 6.
|
Inventory
|
March 31,
2014
|
December 31,
2013
|
|||||||
Raw materials
|
$
|
584,751
|
$
|
1,459,742
|
||||
Packaging materials
|
—
|
841,492
|
||||||
Samples
|
673,469
|
731,677
|
||||||
Finished goods
|
13,435,730
|
13,411,007
|
||||||
14,693,950
|
16,443,918
|
|||||||
Reserve for obsolescence
|
(3,862,667
|
)
|
(2,633,989
|
)
|
||||
I Inventory, net
|
$
|
10,831,283
|
$
|
13,809,929
|
March 31,
2014
|
December 31,
2013
|
|||||||
Prepaid expenses
|
$
|
3,527
,
222
|
$
|
4,123,087
|
||||
Deposits on inventory and prepaid royalties
|
445,169
|
235,956
|
||||||
Prepaid contracts
|
43,000
|
65,733
|
||||||
Capitalized financing costs
|
1,822,887
|
786,662
|
||||||
Deposits
|
227,154
|
227,154
|
||||||
Deferred expenses
|
137,224
|
439,700
|
||||||
Total
|
$
|
6,202
,
656
|
$
|
5,878,292
|
Note 8.
Property, Plant, and Equipment
|
March 31,
2014
|
December 31,
2013
|
||||||
Land
|
$
|
572
,
342
|
$
|
1,356,042
|
||||
Buildings and improvements
|
43,988
|
3,986,126
|
||||||
Vehicles
|
—
|
15,000
|
||||||
Equipment
|
771,960
|
2,343,601
|
||||||
Furniture and fixtures
|
150,232
|
189,034
|
||||||
Computer software and website
|
93,900
|
93,900
|
||||||
Less accumulated depreciation
|
(576,369
|
) |
(1,111,661
|
) | ||||
Total
|
$
|
1,056,053
|
$
|
6,872,042
|
March 31, 2014
|
||||
Inventory, net
|
$
|
1,450,919
|
||
Prepaid expenses and other current assets
|
294,940
|
|||
Property and equipment, net
|
5,781,591
|
|||
Goodwill
|
915,575
|
|||
Intangible assets, net
|
1,308,800
|
|||
Total Held for Sale – Assets
|
9,751,825
|
|||
Impairment charge
|
(6,456,966
|
)
|
||
Held for Sale – assets, net
|
$
|
3,294,859
|
||
Accounts payable
|
(93,945
|
)
|
||
Accrued personnel expense
|
(119,934
|
)
|
||
Other accrued expenses
|
(272,420
|
)
|
||
Debt – short-term
|
(142,036
|
)
|
||
Debt – long-term
|
(1,273,407
|
)
|
||
Held for sale – liabilities
|
$
|
(1,901,742
|
)
|
Note 10.
|
Intangible Assets and Goodwill
|
Cost basis:
|
Weighted Average Life
|
March 31,
2014
|
December 31,
2013
|
||||||
Patents
|
11 years
|
$
|
500,000
|
$
|
500,000
|
||||
Brand
|
8 years
|
3,887,000
|
3,887,000
|
||||||
Product licenses
|
11.4 years
|
18,155,421
|
15,963,794
|
||||||
Customer relationships
|
—
|
—
|
1,848,000
|
||||||
Non-compete and supplier contract
|
5.3 years
|
5,194,571
|
5,194,571
|
||||||
Trademark rights
|
Indefinite
|
399,805
|
399,805
|
||||||
In-process research and development
|
Indefinite
|
25,300,000
|
25,300,000
|
||||||
Developed technology
|
9.6 years
|
40,000,000
|
40,000,000
|
||||||
93,436,797
|
93,093,170
|
||||||||
Accumulated amortization
|
(14,572,502
|
)
|
(13,070,887
|
)
|
|||||
$
|
78,864,295
|
$
|
80,022,283
|
Accumulated amortization:
|
March 31,
2014
|
December 31,
2013
|
||||||
Patents
|
$
|
(320,825
|
)
|
$
|
(305,625
|
)
|
||
Brand
|
(1,943,508
|
)
|
(1,822,038
|
)
|
||||
Product licenses
|
(2,785,891
|
)
|
(2,383,518
|
)
|
||||
Customer relationships
|
—
|
(462,204
|
)
|
|||||
Non-compete and supplier contract
|
(3,722,321
|
)
|
(3,609,071
|
)
|
||||
Trademark rights
|
—
|
—
|
||||||
In-process research and development
|
—
|
—
|
||||||
Developed technology
|
(5,799,957
|
)
|
(4,489,431)
|
|||||
$
|
(14,572,502
|
)
|
$
|
(13,070,887
|
)
|
Amount
|
||||
2014 (April – December)
|
$
|
5,739,501
|
||
2015
|
7,676,977
|
|||
2016
|
7,676,977
|
|||
2017
|
5,783,808
|
|||
2018
|
4,746,651
|
|||
Thereafter
|
21,540,576
|
|||
Total
|
$
|
53,164,490
|
March 31,
2014
|
December 31,
2013
|
|||||||
Beginning Balance
|
$
|
42,496,592
|
$
|
37,160,911
|
||||
Goodwill acquired – Somaxon
|
─
|
10,748,243
|
||||||
Goodwill impairment – PML (see Note 9)
|
(915,575
|
)
|
─
|
|||||
Adjustments
(1)
|
─
|
(5,412,562
|
) | |||||
Total
|
$
|
41,581,017
|
$
|
42,496,592
|
Note 11.
|
Accrued Allowances
|
March 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Accrued returns allowance
|
$
|
11,303,900
|
$
|
12,049,040
|
||||
Accrued price adjustments
|
23,055,190
|
18,300,788
|
||||||
Accrued government program rebates
|
4,644,720
|
3,935,750
|
||||||
Total
|
$
|
39,003,810
|
$
|
34,285,578
|
Note 12.
|
Other Liabilities
|
March 31,
2014
|
December 31,
2013
|
|||||||
Product license contracts (see Note 10)
|
$
|
2,500,000
|
$
|
─
|
||||
Settlement obligations (see Note 17)
|
11,426,000
|
14,115,000
|
||||||
Deferred revenue
|
4,227,870
|
4,279,350
|
||||||
Other
|
─
|
66,349
|
||||||
Total contracts payable and other obligations
|
$
|
18,153,870
|
$
|
18,460,699
|
||||
OtOther liabilities – current
|
$
|
6,398,751
|
$
|
4,072,933
|
||||
OtOther liabilities – long term
|
$
|
11,755,119
|
$
|
14,387,766
|
Note 13.
|
Debt
|
March 31,
2014
|
December 31,
2013
|
|||||||
Amounts outstanding under the Credit Facility – MidCap Funding V, LLC
|
$
|
5,047,850
|
$
|
16,859,891
|
||||
Stancorp Mortgage
|
─
|
1,449,563
|
||||||
Convertible senior notes
|
65,000,000
|
─
|
||||||
Total debt
|
$
|
70,047,850
|
$
|
18,309,454
|
||||
Debt – current
|
$
|
5,047,850
|
$
|
16,999,687
|
||||
Debt – long term
|
$
|
65,000,000
|
$
|
1,309,767
|
Note 14.
|
Stockholders’ Equity
|
Note 15.
|
Employee Compensation and Benefits
|
Three Months
|
||||
Ended
|
||||
March 31,
2014
|
||||
Weighted average expected stock price volatility
|
74.0
|
%
|
||
Estimated dividend yield
|
0.0
|
%
|
||
Risk-free interest rate
|
1.8
|
%
|
||
Expected life of option (in years)
|
6.1
|
|||
Weighted average fair value per share
|
$
|
2.60
|
Option Shares
|
Shares
|
Average
Exercise
Price
|
||||||
Outstanding at December 31, 2013
(1)
|
1,604,500
|
$
|
4.45
|
|||||
Granted
|
2,265,000
|
2.68
|
||||||
Exercised
|
(79,300
|
)
|
3.73
|
|||||
Cancelled
|
(26,166
|
)
|
6.18
|
|||||
Expired
|
─
|
|||||||
Outstanding at March 31, 2014
|
3,764,034
|
$
|
3.39
|
|||||
Vested and exercisable, end of period
|
1,015,863
|
$
|
4.49
|
Options Outstanding
|
Options Exercisable
|
|||||||||||||||||
Range of Exercise Price
($)
|
Shares
|
Remaining Contractual Life
(years)
|
Shares
|
Price
($)
|
||||||||||||||
2.09 – 2.20
|
1,505,000
|
9.8
|
5,000
|
$
|
2.20
|
|||||||||||||
3.08
|
50,000
|
9.9
|
─
|
─
|
||||||||||||||
3.31 – 4.20
(1)
|
1,831,367
|
8.1
|
801,367
|
3.62
|
||||||||||||||
5.66
|
75,000
|
10.0
|
─
|
─
|
||||||||||||||
6.10
|
124,333
|
7.4
|
87,828
|
6.10
|
||||||||||||||
7.75 – 9.02
|
128,334
|
8.2
|
75,001
|
8.59
|
||||||||||||||
10.13 – 10.14
|
50,000
|
7.1
|
46,667
|
10.14
|
||||||||||||||
3,764,034
|
8.8
|
1,015,863
|
$
|
4.49
|
Weighted Average
|
||||||||
Grant Date
|
||||||||
Restricted Stock Shares
|
Shares
|
Fair Value
|
||||||
Nonvested at December 31, 2013
|
628,854
|
$
|
5.60
|
|||||
Granted
|
100,000
|
3.05
|
||||||
Vested
|
(20,999
|
) |
5.88
|
|||||
Forfeited
|
(404,323
|
)
|
4.91
|
|||||
Nonvested at March 31, 2014
|
303,532
|
$
|
6.95
|
Three Months Ended
March 31,
|
||||||||
2014
|
2013
|
|||||||
Employees
|
$
|
1,698,523
|
$
|
424,910
|
||||
Non-employees/Directors
|
80,304
|
120,346
|
||||||
Total
|
$
|
1,778,827
|
$
|
545,256
|
Note 16.
|
Income Taxes
|
Three Months Ended
March 31,
|
||||||||
2014
|
2013
|
|||||||
Expected taxes at statutory rates
|
(35.0
|
)
|
(35.0
|
)%
|
||||
State taxes, net of federal tax benefit
|
(2.0
|
)%
|
(1.4
|
)%
|
||||
Nondeductible expenses, including merger related expenses
|
0.1
|
%
|
1.6
|
%
|
||||
Put right expense
|
0.0
|
%
|
6.8
|
%
|
||||
Other
|
(1.2
|
)%
|
(0.4
|
)%
|
||||
(38.1
|
)%
|
(28.4
|
)%
|
Note 17.
|
Commitments and Contingencies
|
2014 (April – December)
|
$
|
231,000
|
||
2015
|
39,000
|
|||
2016
|
4,000
|
|||
Total
|
$
|
274,000
|
Note 18.
|
Correction of an Error
|
|
Three Months Ended
|
|||||||||||||||
|
March 31,
2013
|
June 30,
2013
|
September 30,
2013
|
December 31,
2013
|
||||||||||||
|
(in thousands, except per share data)
|
|||||||||||||||
|
(unaudited)
|
|||||||||||||||
Net revenues
|
|
$
|
22,078
|
|
$
|
20,573
|
|
$
|
18,295
|
|
$
|
23,926
|
|
|||
Operating expenses
|
|
30,188
|
|
28,378
|
|
24,259
|
|
56,708
|
|
|||||||
(Loss) Income from operations
|
|
(8,110
|
)
|
(7,805
|
)
|
(5,964
|
)
|
(32,782
|
)
|
|||||||
Other (expense) income, net
|
|
(2,934
|
)
|
143
|
(2,406
|
)
|
13,466
|
|||||||||
Income tax (benefit) provision
|
(3,134
|
)
|
(1,985
|
)
|
(2,547
|
)
|
(13,090
|
)
|
||||||||
Net (loss) income
|
|
$
|
(7,910
|
)
|
$
|
(5,677
|
)
|
$
|
(5,823
|
)
|
$
|
(6,226
|
)
|
|||
Net (loss) income per share—basic
|
|
$
|
(0.23
|
)
|
$
|
(0.15
|
)
|
$
|
(0.16
|
)
|
$
|
(0.17
|
)
|
|||
Net (loss) income per share - diluted
|
$
|
(0.23
|
)
|
$
|
(0.15
|
)
|
$
|
(0.16
|
)
|
$
|
(0.17
|
)
|
|
Three Months Ended
|
|||||||||||||||
|
March 31,
2013
|
June 30,
2013
|
September 30,
2013
|
December 31,
2013
|
||||||||||||
|
(in thousands, except per share data)
|
|||||||||||||||
|
(unaudited)
|
|||||||||||||||
Net revenues
|
|
$
|
22,078
|
|
$
|
20,573
|
|
$
|
18,295
|
|
$
|
23,926
|
|
|||
Operating expenses
|
|
30,864
|
|
29,088
|
|
24,969
|
|
54,612
|
|
|||||||
(Loss) Income from operations
|
|
(8,786
|
)
|
(8,515
|
)
|
(6,674
|
)
|
(30,686
|
)
|
|||||||
Other (expense) income, net
|
|
(2,934
|
)
|
143
|
(2,406
|
)
|
13,466
|
|||||||||
Income tax (benefit) provision
|
(3,263
|
)
|
(2,121
|
)
|
(2,676
|
)
|
(12,696
|
)
|
||||||||
Net (loss) income
|
|
$
|
(8,457
|
)
|
$
|
(6,251
|
)
|
$
|
(6,404
|
)
|
$
|
(4,524
|
)
|
|||
Net (loss) income per share—basic
|
|
$
|
(0.24
|
)
|
$
|
(0.17
|
)
|
$
|
(0.17
|
)
|
$
|
(0.12
|
)
|
|||
Net (loss) income per share - diluted
|
$
|
(0.24
|
)
|
$
|
(0.17
|
)
|
$
|
(0.17
|
)
|
$
|
(0.12
|
)
|
Cash and cash equivalents totaled $55.9 million as of March 31, 2014.
|
Net revenues were approximately $19.1 million and $22.1 million for the three months ended March 31, 2014 and 2013, respectively.
|
Net loss before taxes was approximately $15.4 million and $11.0 million for the three months ended March 31, 2014 and 2013, respectively. Net loss was approximately $9.5 million and $7.9 million for the three months ended March 31, 2014 and 2013, respectively. For the three months ended March 31, 2014, the net loss included an impairment charge associated with the PML assets held for sale of approximately $6.5 million.
|
|
●
net product sales generated from our existing products;
●
acquisition of products and product rights that align with our strategy and that offer potential for sustainable growth;
|
|
●
revenues generated from revenue sharing arrangements; and,
|
●
our ability to effectively streamline and improve the operating effectiveness and efficiencies of our business.
|
|
Three Months Ended
March 31,
|
||||||||
2014
|
2013
|
|||||||
(in thousands)
|
||||||||
Upper respiratory, allergy and antibiotic products
|
$
|
19,832
|
$
|
17,172
|
||||
Gastroenterology products
|
877
|
1,701
|
||||||
Dietary supplements and medical food products
|
5,596
|
9,384
|
||||||
Analgesics
|
8,003
|
4,551
|
||||||
Sleep maintenance
|
4,164
|
1,119
|
||||||
Dermatology products
(1)
|
156
|
1,105
|
||||||
Other products
|
1,944
|
3,553
|
||||||
Gross Product Sales
|
40,572
|
38,585
|
||||||
Sales Allowances
|
(23,041
|
)
|
(18,673
|
)
|
||||
Net Product Sales
|
17,531
|
19,912
|
||||||
Manufacturing revenue
|
871
|
1,184
|
||||||
Co-promotion and other revenue
|
650
|
983
|
||||||
Net Revenues
|
$
|
19,052
|
$
|
22,079
|
Product
Returns
|
Government
Program
Rebates
|
Price
Adjustments
|
||||||||||
(in thousands)
|
||||||||||||
Balance at December 31, 2012
|
$
|
12,057
|
$
|
7,037
|
$
|
10,960
|
||||||
Allowances assumed in acquisition of Somaxon
|
776
|
479
|
1,113
|
|||||||||
Post-closing opening balance sheet adjustments
|
1,374
|
391
|
416
|
|||||||||
Allowances for certain co-promotion agreements
(1)
|
58
|
110
|
483
|
|||||||||
Reclass from contingent consideration
|
3,934
|
─
|
─
|
|||||||||
Current provision:
|
||||||||||||
Adjustments to provision for prior year sales
|
1,611
|
(921
|
)
|
(300
|
)
|
|||||||
Provision – current year sales
|
9,394
|
6,335
|
48,567
|
|||||||||
Payments and credits
|
(17,155
|
)
|
(9,495
|
)
|
(42,938
|
)
|
||||||
Balance at December 31, 2013
|
12,049
|
3,936
|
18,301
|
|||||||||
Increase in allowances for certain co-promotion agreements
(1)
|
57
|
131
|
84
|
|||||||||
Current provision:
|
||||||||||||
Adjustments to provision for prior year sales
|
─
|
475
|
─
|
|||||||||
Provision – current year sales
|
2,643
|
2,327
|
16,740
|
|||||||||
Payments and credits
|
(3,446
|
)
|
(2,223
|
)
|
(12,071
|
)
|
||||||
Balance at March 31, 2014
|
$
|
11,303
|
$
|
4,646
|
$
|
23,054
|
(1)
|
Allowances for certain co-promotion agreements represent allowances for which the expense is the responsibility of the other party to the co-promotion agreement. However, since we are responsible for the remittance of the payment of these deduction items to the billing third party, these items are included in accrued allowances on our balance sheet.
|
March 31,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
Cash and cash equivalents
|
$
|
55,851,215
|
$
|
15,646,963
|
Working capital (current assets less current liabilities)
|
$
|
57,960,466
|
$
|
6,917,769
|
||||
Current ratio (multiple of current assets less current liabilities)
|
1.87
|
1.10
|
||||||
Revolving line of credit availability
|
$ |
34,952,150
|
$ |
3,140,109
|
Three Months Ended
|
||||||||
March 31,
|
||||||||
2014
|
2013
|
|||||||
Cash provided by (used in)
|
||||||||
Operating activities
|
$
|
(6,117,761
|
)
|
$
|
2,510,996
|
|||
Investing activities
|
(115,256
|
)
|
(445,016
|
)
|
||||
Financing activities
|
46,437,269
|
1,171,057
|
||||||
Net increase in cash and cash equivalents
|
$
|
40,204,252
|
$
|
3,237,037
|
Payments Due by Period
|
||||||||||||||||||||
Total
|
Less than
1 Year
|
1-3 Years
|
3-5 Years
|
More than
5 Years
|
||||||||||||||||
Operating leases
(1)
|
$
|
1,405
|
$
|
398
|
$
|
207
|
$
|
188
|
$
|
612
|
||||||||||
Professional services agreements
(2)
|
1,536
|
1,424
|
94
|
19
|
—
|
|||||||||||||||
Supply agreements and purchase obligations
(3)
|
244
|
244
|
—
|
—
|
—
|
|||||||||||||||
License and development agreements
(4)
|
2,500
|
2,500
|
—
|
—
|
—
|
|||||||||||||||
Long-term debt obligations
(5)
|
65,000
|
—
|
—
|
65,000
|
—
|
|||||||||||||||
Settlement obligations
(6)
|
13,800
|
2,910
|
2,910
|
2,910
|
5,070
|
|||||||||||||||
Total contractual obligations
|
$
|
84,485
|
$
|
7,476
|
$
|
3,211
|
$
|
68,117
|
$
|
5,682
|
(1)
|
Operating leases include minimum payments under leases for our facilities and certain equipment.
|
(2)
|
Professional service agreements include agreements with a specific term for consulting, information technology, telecom and software support, data and sales reporting tools and services.
|
(3)
|
Supply agreements and Purchase obligations include fixed or minimum payments under manufacturing and supply agreements with third-party manufacturers and other providers of goods and services. The contractual obligations table set forth above does not reflect certain minimum sales requirements related to our co-promotion agreements. Our failure to satisfy minimum sales requirements under our co-promotion agreements generally allows the counterparty to terminate the agreement and/or results in a loss of our exclusivity rights. In addition to minimum sales requirements under our co-promotion agreements, the table above does not include commitments under open purchase orders for inventory that can be cancelled without penalty, which are approximately $5.0 million.
|
(4)
|
Future scheduled or specific payments pursuant to license or development agreements. Future payments for which the date of payments or amount cannot be determined are excluded.
|
(5)
|
The long-term debt obligations represent the payment due on the senior convertible notes that were issued during the first quarter of 2014.
|
(6)
|
Settlement obligations represent remaining payments due under settlement agreements.
|
ITEM 6.
|
EXHIBITS
|
Exhibit No.
|
Description
|
|
4.1
|
Indenture, dated February 21, 2014, by and between Pernix Therapeutics Holdings, Inc. and Wilmington Trust, National Association (previously filed as Exhibit 4.1 to our Current Report on Form 8-K filed on February 26, 2014 and incorporated herein by reference).
|
|
4.2
|
Form of 8.00% Convertible Senior Note due 2019 (included in Exhibit 4.1) (previously filed as Exhibit 4.2 to our Current Report on Form 8-K filed on February 26, 2014 and incorporated herein by reference).
|
|
10.1
|
Form of Securities Purchase Agreement, dated February 4, 2014 (previously filed as Exhibit 99.1 to our Current Report on Form 8-K filed on February 7, 2014 and incorporated herein by reference).
|
|
10.2†
|
Employment Agreement dated as of February 5, 2014 by and between Pernix Therapeutics Holdings, Inc. and Douglas Drysdale (previously filed as Exhibit 99.2 to our Current Report on Form 8-K filed on February 7, 2014 and incorporated herein by reference).
|
|
10.3
|
Amendment No. 1 to the Amended and Restated Credit Agreement, dated February 21, 2014, between Pernix Therapeutics Holdings, Inc. and MidCap Funding IV, LLC, as Agent and as a lender, and the other lenders from time to time parties thereto (previously filed as Exhibit 10.1 to our Current Report on Form 8-K filed on February 26, 2014 and incorporated herein by reference).
|
|
10.4
|
Amended and Restated Security and Pledge Agreement, dated February 21, 2014, by and between Pernix Therapeutics Holdings, Inc. and MidCap Funding IV, LLC, as Agent (previously filed as Exhibit 10.2 to our Current Report on Form 8-K filed on February 26, 2014 and incorporated herein by reference).
|
|
10.5
|
Form of Representation Agreement, dated February 21,2014, by and between Pernix Therapeutics Holdings, Inc. and the Investors party thereto (previously filed as Exhibit 10.3 to our Current Report on Form 8-K filed on February 26, 2014 and incorporated herein by reference).
|
|
10.6
|
Form of Registration Rights Agreement, dated February 21,2014, by and between Pernix Therapeutics Holdings, Inc. and the Investors party thereto (previously filed as Exhibit 10.4 to our Current Report on Form 8-K filed on February 26, 2014 and incorporated herein by reference).
|
|
10.7†
|
Amendment No. 1 to the Pernix Therapeutics Holdings, Inc. 2009 Stock Incentive Plan (previously filed as Exhibit 10.21 to our Annual Report on Form 10-K filed on March 17, 2014 and incorporated herein by reference).
|
|
10.8*†
|
Corrected Employment Offer Letter between the Company and Terence Novak dated March 9, 2014.
|
|
10.9*
|
Amendment No. 2 to Amended and Restated Credit Agreement by and among Pernix Therapeutics Holdings, Inc. and its subsidiaries, on the one hand, and MidCap Funding IV, LLC, on the other hand, dated April 23, 2014.
|
|
31.1*
|
Certification of the Registrant’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
*
|
Certification of the Registrant’s Principal Financial Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
*
|
Certification of the Registrant’s Chief Executive Officer and Principal Financial Officer and Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101*
|
Attached as Exhibit 101 to this report are the following items formatted in XBRL (Extensible Business Reporting Language):
|
|
(i) Condensed Consolidated Balance Sheets as of March 31, 2014 and December 31, 2013;
|
||
(ii) Condensed Consolidated Statements of Income and Comprehensive Income for the Three Months Ending March 31, 2014 and 2013;
|
||
(iii) Condensed Consolidated Stockholders’ Equity as of March 31, 2014;
|
||
(iv) Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013; and
|
||
(v) Notes to Condensed Consolidated Financial Statements.
|
PERNIX THERAPEUTICS HOLDINGS, INC.
|
|||
Date: May 12, 2014
|
By:
|
/s/ Douglas Drysdale
|
|
Douglas Drysdale
|
|||
Chief Executive Officer and President
|
|||
Date: May 12, 2014
|
By:
|
/s/ Tracy S. Clifford
|
|
Tracy S. Clifford
|
|||
Principal Financial Officer and
Principal Accounting Officer
|
●
|
Base salary will be set at $425,000 annually and will not be subject to reduction.
|
●
|
500,000 stock options on the first day of your employment. These options have a four year annual cliff vesting of 25% per year.
|
●
|
40% annual bonus subject to achieving objectives set by the CEO.
|
BORROWERS:
|
PERNIX THERAPEUTICS HOLDINGS, INC.
, a Maryland corporation
By:
/s/ Douglas Drysdale
(SEAL)
Douglas Drysdale
President and Chief Executive Officer
Address:
10 North Park Place
Suite 201
Morristown, New Jersey, 07960
Facsimile: (800) 793-2145
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MACOVEN PHARMACEUTICALS, LLC
,
a Louisiana limited liability company
By: Pernix Therapeutics, LLC, a Louisiana
limited liability company
Its: Sole Member and Sole Manager
By: Pernix Therapeutics Holdings, Inc., a
Maryland corporation
Its: Sole Member and Sole Manager
By:
/s/ Douglas Drysdale
(SEAL)
Douglas Drysdale
President and Chief Executive Officer
|
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PERNIX MANUFACTURING, LLC
, a Texas limited liability company
By: Pernix Therapeutics Holdings, Inc., a
Maryland corporation
Its: Sole Member
By:
/s/ Douglas Drysdale
(SEAL)
Douglas Drysdale
President and Chief Executive Officer
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BORROWERS:
|
PERNIX THERAPEUTICS, LLC
, a Louisiana limited liability company
By: Pernix Therapeutics Holdings, Inc., a
Maryland corporation
Its: Sole Member and Sole Manager
By:
/s/ Douglas Drysdale
(SEAL)
Douglas Drysdale
President and Chief Executive Officer
|
CYPRESS PHARMACEUTICALS, INC.
,
a Mississippi corporation
By:
/s/ Douglas Drysdale (
SEAL)
Douglas Drysdale
President and Chief Executive Officer
|
BORROWERS:
|
GTA GP, INC.
, a Maryland corporation
By:
/s/ Douglas Drysdale (
SEAL)
Douglas Drysdale
President and Chief Executive Officer
|
GTA LP, INC.
, a Maryland corporation
By:
/s/ Douglas Drysdal (
SEAL)
Douglas Drysdale
President and Chief Executive Officer
|
|
GAINE, INC.
, a Delaware corporation
By:
Cooper C. Collins
President and Chief Executive Officer
|
|
RESPICOPEA INC.
, a Delaware corporation
By:
/s/ Douglas Drysdale (
SEAL)
Douglas Drysdale
President and Chief Executive Officer
|
|
HAWTHORN PHARMACEUTICALS, INC.
, a Mississippi corporation
By:
/s/ Douglas Drysdale (
SEAL)
Douglas Drysdale
President and Chief Executive Officer
|
|
PERNIX SLEEP, INC.
, a Delaware corporation
By:
/s/
Douglas Drysdale (
SEAL)
Douglas Drysdale
President and Chief Executive Officer
|
LENDER:
|
MIDCAP FUNDING IV, LLC
, a Delaware limited liability company
By:
/s/ Maurice Amsellem (
SEAL)
Maurice Amsellem
Managing Director
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AGENT:
|
MIDCAP FUNDING IV, LLC
, a Delaware limited liability company
By:
/s/ Maurice Amsellem (
SEAL)
Maurice Amsellem
Managing Director
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May 12, 2014
|
/s/ DOUGLAS L. DRYSDALE
|
||
Douglas L. Drysdale
|
|||
Chief Executive Officer and President
|
May 12, 2014
|
/s/ TRACY S. CLIFFORD
|
||
Tracy S. Clifford
|
|||
Principal Financial Officer and Principal Accounting Officer
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Date: May 12, 2014
|
/s/ DOUGLAS L. DRYSDALE
|
||
Douglas L. Drysdale
|
|||
Chief Executive Officer and President
|
|||
Date: May 12, 2014
|
/s/ TRACY S. CLIFFORD
|
||
Tracy S. Clifford
|
|||
Principal Financial officer and Principal Accounting Officer
|