Pernix Therapeutics Names Doug Drysdale CEO; Settles Pending Legal Liabilities

(RTTNews) - Pernix Therapeutics Holdings Inc. (PTX) announced that it has appointed Doug Drysdale as Chief Executive Officer. Drysdale has also been appointed to the Company's Board of Directors and shall serve as Chairman.

Drysdale's appointment is supported by a group of institutional investors led by Athyrium Capital Management, who have agreed to purchase $65 million aggregate principal amount of 8.00% Convertible Senior Notes due 2019 from Pernix, providing the company with expansion capital for the acquisition of accretive specialty products to be added to the Company's portfolio, as well as for working capital and general corporate purposes.

Drysdale most recently served as Chief Executive Officer of Alvogen Inc., from 2008 to 2013, building the company from inception to become a global leader in pharmaceuticals.

Mike Pearce, who has resigned as chief executive officer, has agreed to remain with the company through a transition period. Further changes to the Company's board of directors will be announced in due course as the Company looks to add additional industry talent to its board.

The Notes, which mature in 2019 unless earlier converted, carry a coupon of 8% and are convertible into shares of Pernix common stock at an initial conversion price of $3.60 per share, representing a conversion premium of more than 70% over the last reported sale price of Pernix's common stock on the NASDAQ Global Market on February 4, 2014.

The purchase of the Notes is expected to close as soon as practicable, subject to the satisfaction of customary closing conditions. The Notes will be issued at a price equal to 100% of the principal amount thereof.

Pernix today also announced favorable resolution of pending legal matters.

On January 29, 2014, a Stipulation of Dismissal was filed with the United States District Court for the Southern District of Texas in connection with the settlement of all claims brought against Pernix by the former shareholders of Cypress Pharmaceuticals, Inc. and all claims brought against the former shareholders of Cypress by Pernix in connection with the purchase of Cypress by Pernix pursuant to the Securities Purchase Agreement by and among Pernix and the former Cypress shareholders.

As part of the settlement, Pernix has agreed to pay $1.33 million to the former Cypress shareholders on or before February 7, 2014, which Pernix accrued at the time of the Cypress acquisition as a contingent consideration in the Company's financial statements.

In exchange for this payment, both parties released all claims against the other parties, which includes the former Cypress shareholders waiving any rights to the put obligation of Pernix included in the Purchase Agreement.

Additionally, the payment repays in full all currently existing obligations by Pernix to fund the escrow account or to pay the holdback amount under the Purchase Agreement. The settlement also modified the language relating to a prospective product milestone payment to the former Cypress shareholders pursuant to the Purchase Agreement with an aim toward greater product development flexibility, but still reflects a one-time payment of $5 million, payable in cash or stock, upon the achievement of an NDA acceptance by the FDA of any one of the four pipeline products transferred in the acquisition of Cypress.

In resolution of a separate and unrelated matter, Pernix also reports that it has reached an agreement with the Attorney General of the State of Texas to settle all claims arising from certain actions by Cypress prior to its acquisition by Pernix under the Texas Medicaid Fraud Protection Act in conjunction with a Civil Investigative Demand made on Cypress and referencing a $42 million preliminary claim.

In settlement, Pernix has agreed to pay $12 million to the State of Texas, which the Company accrued and charged to expense in the Company's financial statements at December 31, 2013. An initial payment of $2 million, which has already been paid to the Company's counsel, is due and payable within ten business days of the effective date of the final settlement agreement. Thereafter, Pernix shall make subsequent payments of $2 million on each of the first five anniversaries of the effective date of the settlement agreement.