Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Pernix Theraputics Holdings Inc. (NASDAQ:PTX) closed the trading day with a gain of nearly 10%, after topping out at a near-12% pop in the mid-afternoon, following an analyst upgrade.
So what: Analysts at Aegis boosted their rating on Pernix to a buy from the earlier "hold," citing the company's $250 million acquisition of the U.S. rights to Treximet -- a migraine treatment -- from GlaxoSmithKline (NYSE:GSK). Aegis' price target is now $9, which offers a further 25% upside from current levels, based on Treximet's sales base and room for growth, as the drug accounted for $79 million in net sales during GlaxoSmithKline's 2013 fiscal year, and Pernix expects the drug to nearly double its revenue in 2014, eventually leading to an estimated $230 million in revenue for 2015, which will produce an EBITDA margin topping 40%.
Now what: Pernix already has several drugs on the market, but none are as successful as Treximet, and the company's ramp-up in marketing resources -- the company will have 90 salespeople pushing the drug once the deal closes -- makes it a good source of future cash flows for the unprofitable company. Pernix shares had already doubled this year following a string of good news that culminated in the company's Treximet rights acquisition earlier this month, so this is hardly the first sign of investor optimism, but a 40% EBITDA margin could quite easily translate to positive earnings for the first time in years. Pernix certainly isn't the bargain it was in 2013, but it might have more upside left beyond the 25% Aegis expects. Dig in a little deeper and you might find a good growth-stock opportunity here.
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