Pernix Therapeutics Holdings Inc (NASDAQ: PTX) was surprisingly not brought to our attention by our partners at Trade Ideas. Instead, today’s article on the topic is one that was requested by one of our StockTwits friends, BullyBee. A simple request really. BullyBee simply wanted to know our opinion of whether PTX would be bought out or if it would go bankrupt. Before we get into the story here, don’t forget to connect with us on StockTwits to get your questions answered.
The PTX Situation
Pernix Therapeutics is an incredibly interesting company. A couple of years ago, the company was struggling in a big way before John Sedor took over as the CEO. When he took over, he made several changes, many of which seem to be geared toward preparing the company for an acquisition. However, with no buyout as of yet, investors are getting cold feet, and for good reason.
Looking at the PTX balance sheet says a lot, and truth be told, the story isn’t a great one. In fact, for some time now, the company has been operating at a loss. At the end of the day, the company has far more liabilities than it does assets. With this fact in mind, combined with the fact that PTX is operating at a loss, well, the first thing that might come to mind is bankruptcy. However, Pernix may have a saving grace.
The Buyout Argument Is A Very Strong One
I know that a lot of people won’t like the fact that I’m saying this, but the truth is that PTX is a struggling company. There’s no denying that, even on the bullish side, and if you are denying it, you’re kidding yourself. However, while the company is indeed crippled, it’s not dead, and it happens to have a very, very good thing going for it. Well, two very good things to be quite honest.
#1: Sedor – Listen, Sedor is no spring chicken. He has been around the block, through the woods, and back again. He knows this sector like the back of his hand and has a history of taking struggling companies and turning them into great takeover targets. If he didn’t believe that he could positively impact PTX, he wouldn’t have taken on the job, and my friends, he hasn’t been sitting idly by waiting for a miracle to happen either. No, Sedor has been working to make PTX the great buyout target he knows it can be. By restructuring the company, focusing on sales, and working on the balance sheet (it’s not great, but has improved), Sedor is painting a pretty picture for would-be suitors.
#2: Zohydro® ER – The other great thing that Pernix Therapeutics has going for it is Zohydro. The bottom line is that we have an opiod issue in the United States. There’s no denying that fact. I have personally watched as prescription pain killers have destroyed the lives of two people that were very close to me. The truth is, I’m not alone. Chances are that you’ve watched the same or know someone who has. At the end of the day, Zohydro is a solution to that issue. The pain medication doesn’t cause the effects that lead to a dependency. Instead, users could take 5 times as much without getting the high that has them chasing the magic dragon!
At the moment, there’s a legislative change that needs to be made. Something needs to be done to stop the opiod issue, and Zohydro can be that something. Imagine, you go to the doctor with a broken leg. After putting the cast on, you’re given a pain medication that doesn’t cause a high, that doesn’t cause an addiction, and that doesn’t put you in danger of taking a ride on what the kids are calling the roxy train. Isn’t that the way you’d like your pain treated?
A Buyout Is Possible, But Not A Definite
At the end of the day, I wrote this article to answer a simple question asked by BullyBee. The question was whether a buyout was likely or a bankruptcy is going to be the end of this run? In my opinion, both scenarios are probable. With a market cap of under $40 million, PTX isn’t an expensive asset to purchase for the big guys. The question now becomes who wants to and whether or not they’d rather wait to see if bankruptcy happens to try and get a larger discount than they already would if they purchased the company today.
Let’s be real here. I don’t have a crystal ball that allows me to see into the future. I’m far from a psychic, and at the end of the day, on this topic, your guess is as good as mine. However, I am a glass half full kind of guy. At the end of the day, there’s a real reason that a company would want to buy PTX. Hell, I know if I had that kind of cash floating around, I’d be taking it public and finding my way to D.C. for some lobbying. Nonetheless, there are no guarantees in buyouts. While it is a strong possibility, if it doesn’t happen, so too is bankruptcy. So, if you’re going to get involved, make sure that you weigh the risks!
Never Miss The News Again
Do you want real-time, actionable news delivered to your inbox? Join the CNA Finance mailing list below!