Pernix Therapeutics Holdings Inc (NASDAQ: PTX)
Not only do the markets work in mysterious ways, the court system does as well. Still reeling from PTX''s most recent legal setback regrading its marketing rights for drugs just over a week ago, the U.S. District Court in Delaware provided a ray of sunshine, and the effects can have a far reaching and lasting effect for PTX shareholders.
Pernix Gets A Break And Value
For smarties like me, there was never any doubt that the '096 and '742 patents were being infringed. It was just plain obvious, and why it took hundreds of thousands of dollars to litigate beats the little bit of sense out of me. I was only a phone call away and could have settled this case months ago for a #4 Double Quarter Pounder meal at McD's.
Seriously, Pernix, as the licensee, had the goods in the bag, clearly distinguishing its proprietary value in Zohydro ER, proving it was distinct in both technology and abuse deterrent compound, as well as in mechanism. The patents in question involved the abuse deterrent compounds and it mechanism to inhibit potential abuse. Both the '742 and '096 patents are well written, with original claims dating back to 1998 for '742 and 2015 for '096. The patents are protected until 2019 and 2034, receptively. The active ingredient is hydrocodone bitartrate, part of a widely abused family of pain killing drugs. The real case, though, was about the the technology and abuse deterrent compounds that surround that hydrocodone, making that good stuff hard to get to if the patient does not follow proper dosing instructions..
As with all court decisions, the decision is lengthy and somewhat confusing at times, and while the court makes reference to parts of the whole not necessarily being infringed, the sum of the parts, stated by the court read as , "having considered the entire case, the substantial evidence in the record, the parties post-trial submissions, and the applicable law, the court concludes that Activis' proposed products infringe the asserted claims of the '096, but do not infringe the asserted claims of the '742 patents". HOWEVER, because no ruling can be quite so simple, parts of the '742 stand, causing the court to publish the following remedy, ".....Under 35 U.S.C. 271(e)(4)(A), the effective date of any FDA approval of Activis' ANDA No. 20-6952 shall be a date not earlier than the later expiration date of the '096 and '742 patents, including any extensions and marketing exclusivities (September 2034)
(Civil Action No. 14-1118-GMS)
In a nutshell, Actavis, its officers, agents, employees, et al, shall be enjoined from engaging in the commercial manufacture, use, offer to sell, or sale with the United States, or importation into the United States of Activis' ANDA product prior to the expiration of the '096 and '742 patents.
So, as PTX shareholders, perhaps we may rejoice for a day or two, and even enjoy a possible new trend higher, one that drives the price high enough to attract hungry pharmaceutical investors to bid the stock to a potential buyout at double digit levels, instead of the "Lincoln" that many of us fear.
But, one step at a time. While this is a great victory, and a much needed breath of fresh air, PTX still has some work to do. It's time for management to harness the value within this decision, and make the company real pretty, with shiny bells and whistles. From there, maybe they can consider packaging the company for sale to an interested party that is willing to pay fair value for PTX. Fair value for most is the price they paid, assuming an investment was made prior to six months ago. I'll take the highest fair value available, by the way.
As long as the respirator is removed, shareholders stand a solid chance of PTX regaining its footing and marching forward into greener pastures. The drugs under management are strong, and with this issue no longer hanging over their head, shareholders hold hope that better times are ahead.
Disclosure: This article was written by Kenny Soulstring, and it reflects my own opinions and unique articulation. This article is not intended to offer investing advice, guarantee 100% accurate predictions or to be interpreted as providing a personal recommendation. What I can guarantee, though, is accurate research, thoughtful analysis and an enthusiasm about any stock that I cover.
While I seek to uncover emerging companies that I feel have true value and potential, it's important that investors assign an appropriate time horizon to each of their investments, understanding that emerging companies need time to mature.
I wrote this article myself and it includes my own research and expresses my own opinions. I am not receiving compensation for it (other than from CNA Finance). I have no business relationship with any company whose stock is mentioned in this article.
Additional Disclosure: I have no position in any stock mentioned, but may initiate a long position in PTX within the next 72 hours.
Update Feb 23, 11:14 EST - PTX is having a great day following yesterday's news. While the stock is seeing some ups and some downs, strong gains seem to be here to stay. At the moment, the stock is trading at $3.92 per share after a gain of $1.18 per share or 43.06% thus far today.
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