Pernix in talks with creditors about debt restructuring -sources

Pernix Therapeutics Holdings Inc has started negotiations with creditors to restructure its debt, according to people familiar with the matter, in the latest sign of distress in the specialty pharmaceutical sector.

Pernix is struggling to cope with $340 million of debt after borrowing to buy a pain medication franchise called Zohydro in 2015 and the rights to migraine drug Treximet in 2014.

The Morristown, New Jersey-based company, which focuses on central nervous system medicines, is working with restructuring advisors at investment bank Perella Weinberg Partners LP to explore a solution with its creditors that would boost liquidity, the people said this week.

The sources asked not to be identified because the matter is confidential. Pernix declined to comment, while Perella Weinberg did not immediately respond to a request for comment.

Some makers of high-cost specialty drugs that treat complex conditions rely on debt-fueled acquisitions to boost revenues. Heightened political and regulatory scrutiny of drug prices has curbed their plans to hike prices.

Moody’s Investors Service cited Valeant International Inc, Canadian company Concordia International Corp and Endo International Plc as examples of companies grappling with these issues.

“Because of the challenges of Valeant, this strategy is not a viable one going forward,” Michael Levesque, an analyst at Moody’s, said in a phone interview.

Pernix, with a market capitalization of $35 million, said last week it would make a payment on bonds due Aug. 1, and that it was in compliance with requirements set by its lenders. To cut costs, the company slashed its total full-time work force by 23 percent, it said last week.

The company’s convertible notes maturing in 2021 traded at 20 cents on the dollar on Friday, according to Thomson Reuters data, signaling investor expectations that they will not be repaid in full.

Pernix said in 2015 its acquisitions would push revenue higher, estimating eventual annual sales of as much as $1 billion for Zohydro alone. But by the end of 2015, sales were about $175 million, as insurance companies pushed for higher-than-expected rebates on its drugs, some of which compete with multiple generic alternatives.

Reuters had reported in February that Pernix was working with Perella Weinberg to explore a sale.

(Reporting by Jessica DiNapoli and Carl O’Donnell in New York; Editing by Richard Chang)