We've covered Pernix Therapeutics Holdings Inc (NASDAQ:PTX) on numerous occasions over the last six months. The company has been a tough one to hold from a long-term shareholder perspective, but as we have said in the past, there looks to be a light at the end of the tunnel in the form of a potential acquisition.We come to this conclusion based on a number of factors, which we will look at in a little more detail shortly, but before we do, there's an update worth addressing. Namely, a just announced release detailing some outstanding arbitration that – unfortunately – hasn't gone the way that the company or its shareholders might have preferred.For us, this isn't too much of a big deal, however.Here is why.First, for those not familiar with this company, Pernix is a biotechnology company with a focus on CNS, pain management and neurology related drugs. It has a portfolio of both branded and generic drugs, of which three core brands account for the majority of revenues – Treximet, Silenor and Zohydro ER, heavily weighted towards Treximet. Revenue during the third quarter of 2016 hit $41.4 million, for a gross profit of $30.6 million. The company recorded a net loss of a little over $26 million for the period.Anyway, Pernix has been in a long standing legal dispute with biotech giant GlaxoSmithKline plc (ADR) (NYSE:GSK) over Treximet. The letter claimed that the former owed it money related to an initial asset purchase agreement from 2014 – the purchase agreement under which Pernix picked up the rights to Treximet from GSK initially) and the outcome of this dispute is what has just hit press. As mentioned, it's not gone particularly well for Pernix. A tribunal issued opinions in favor of GSK, awarding it damages and fees in the amount of approximately $35 million, plus interest of an estimated further $2-5 million. The company has put $16.5 million in an escrow account already, so there's another $24 million (estimated) left to pay off, and this is weighed against a cash balance (at last count, unaudited) of around $26 million.So, that's obviously not an ideal outcome, but for us, it doesn't really matter. What is more important is that the situation is resolved. Why? Because no company would think about putting an acquisition price on Pernix (or perhaps a better way to put this would be that no company would be able to put an acquisition price on Pernix) while the GSK arbitration was hanging over the company's head. Our primary bull thesis on this stock for the last six months has been that it is dressing itself up for a buyout, and we think this is one of the final developments required before said buyout could go forward. Yes, a large cash outlay like this is not a perfect situation, but it now makes Pernix a great acquisition target, and given its current market capitalization, we think it can demand a large premium on any acquisition offer.So, what is next?As we noted in our previous coverage of this company, management communication has – to some degree – put an outside limit on any potential buyout time frame. Specifically, we highlighted a quote from an end of year 8-K that suggested the end of the first quarter as the period within which management expects to have some offers on the table. As a result, the end of this quarter is going to be a key focus time frame for this company.Cash may be low, but current annual revenues (looking to come in at somewhere around $150 million for full year 2016) dramatically outweigh current market capitalization of a little over $20 million, and we are expecting an attractive offer to initiate some immediate upside near term.We will be updating our subscribers as soon as we know more. For the latest updates on PTX, sign up below!Disclosure: We have no position in PTX and have not been compensated for this article.
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