Pernix Buyout Ends Generic Nightmare for Sleeping Pill Maker Somaxon
Embattled Somaxon Pharmaceuticals (Nasdaq: SOMX), which came under pressure from generic rivals just eight months after launching its first commercial drug, has agreed to merge with Pernix Therapeutics Holdings (NYSE: PTX) in a deal valued at $25 million.
Pernix, based in suburban Houston, agreed to issue $25 million in shares of its common stock to Somaxon shareholders, based on a 30-day, volume-weighted average price. The stock has been trading in recent days between $7 and $8.
In a statement yesterday, Pernix CEO Cooper Collins said acquiring Somaxon would help to expand its product portfolio. Last month Pernix acquired generic drugmaker Cypress Pharmaceutical and branded drugmaker Hawthorn Pharmaceuticals, both based in Madison, MS, for roughly $101 million. Collins said adding Somaxon’s insomnia drug doxepin (Silenor) would broaden the company’s line of branded drugs, and he noted doxepin also holds potential as an over-the-counter drug.
Pernix said it expects to generate between $10 million and $15 million in doxepin sales, with estimated earnings before interest, taxes, depreciation, and amortization of $5 million to $10 million.
Somaxon’s revenue from the sleeping drug amounted to $2.1 million in the third quarter ending Sept. 30, a 40 percent decline from the $3.7 million in sales during the same quarter of 2011, according to the company’s quarterly financial report. Total sales through the first nine months amounted to $8.2 million, a third less than the $12.2 million total during the same period in 2011. The company narrowed its net loss to $4.5 million during the third quarter.
Somaxon also said it had about $8.2 million in available cash at the end of September.
Somaxon persevered through two regulatory delays before winning FDA approval in March 2010 to market doxepin. Commercial sales began six months later, and investor buzz at the time speculated that doxepin could generate as much as $250 million in annual sales for the company.
But in May 2011, four generic rivals asked the FDA for permission to sell lower-cost versions of doxepin. Somaxon and its partner, ProCom One, responded by filing patent infringement lawsuits against the four—Par Pharmaceutical of Woodcliff Lake, N.J.; Zydus Pharmaceuticals of Pennington, N.J.; Mylan of Canonsburg, Pa.; and Actavis of Morristown, N.J.
The company’s outlook dimmed. In its 2011 annual report, Somaxon included a statement from its independent auditors that raised substantial doubt about Somaxon’s ability to continue as a going concern.
In its financial statement for the third quarter ending September 30, Somaxon said it had entered into settlement agreements with Mylan, Par, and Zydus that would enable the generic drug makers to sell an authorized generic version of doxepin in 2020 or sooner, depending on specific circumstances. (Actavis was acquired last month by Watson Pharmaceuticals.)
The deal is subject to approval by Somaxon shareholders.