PDRX - PD-Rx Pharmaceuticals

[oddballstocks]

I'd value them like a private buyer would, EV/OI.

I like that they're paying dividends, and I like the age of their senior execs.  I believe they're strongly correlated.  My prediction is this company is sold in the next 3-5 years.

The dividend has the smell of a "honey, let's spend some money now that the kids are out of the house" type feel.  The CEO is a family physician, still has a practice. Doctors seem to hang up the robe in their late 60s or early 70s.  A few go on forever, but I don't think that'll happen here.

I value this on a terminal value basis. Expect earnings will plug along, you get the cash back and the value of the company.  If you're curious as to what a company like this sells for call a few business brokers.  Depending on operations 8-10x EV/OI isn't unheard of, if someone can absorb them it might be a lot higher.  I don't think it goes for more than 1x sales, so say $10/share?  Things will continue as they have and then one day we'll be talking about the buyout with cash consideration.

[no_free_lunch]

Thanks for the feedback.  1x sales would be amazing!

Reading through the annual report, I found this tidbit:

I am happy to report to you that we have done things well this year; sales are up, profit margins are difficult to hold but profits are up as well and we paid a dividend last year too.
I can report to you that sales for the FY 2018 were $24,967,418 down from last year’s sales of $25,987,783. 
We continue to be profitable with net earnings of $621,163 down from last year’s earnings of $626,966.

Why would they say sales are up and profits are up?   Their FY 2018 numbers clearly show sales and profit are down marginally.  Either this is a typo (very unlikely) or they are signalling that sales and profit for the year in progress are up..   2018 ended june 30, the special dividend was paid in December.  It is still very plausible that there was an improvement in the business which has lead to this substantial distribution..

Incidentally, I got a fill.  It is now a real position for me.

[Hielko]

Yeah, noticed that one as well in the annual report. I'm hoping that it's signaling something positive, and that it's not just a weird mistake.

[benchmark]

Yeah, noticed that one as well in the annual report. I'm hoping that it's signaling something positive, and that it's not just a weird mistake.

Maybe this is what they mean? gross profit is up?

Net sales $ 24,967,418 $ 25,987,783
Cost of sales 16,432,161 18,149,421
 Gross profit 8,535,257 7,838,362

[no_free_lunch]

I looked at their 2017 report.  That line is exactly the same in 2017.  I am now thinking this was just a copy and paste error.  Microcaps..   Still in, but a little disappointed.

[Hielko]

I looked at their 2017 report.  That line is exactly the same in 2017.  I am now thinking this was just a copy and paste error.  Microcaps..   Still in, but a little disappointed.

Yes, you are right. Looks like they were pretty lazy by copy and pasting the whole first paragraph...

[no_free_lunch]

PDRX no longer sells opioid drugs.  They claim it caused insurance issues.  Does that play a role in the sales slowdown?

Please note:  PD-Rx will no longer offer opiate-based products as a result of the insurance carrier’s refusal to include all opiate-based products from its product liability policy.  You will be notified in the event of any future changes.

https://www.aaomsservices.org/asi_programs/view/pd_rx_pharmaceuticals



I saw this, that they are being sued for selling oxycodone, so I assume this switch was relatively recent.

A Kanawha County lawsuit is alleging HOPE Clinic, four medical professionals and two pharmacies are responsible for one man’s addiction and overdose death.

The case, filed June 29 by Inez Lewis, argues Timothy Jason Lewis, of Floyd County, Ky., was prescribed “highly addictive and potentially lethal drugs,” including oxycodone and methadone, with no medical purpose.
..
Inez filed another suit May 3 in Kanawha County Circuit Court on behalf of Timothy. Nine pharmaceutical companies, along with John Doe Doctors 1-25 and John Doe Health Care Facilities 1-25, were named as defendants.

The suit alleges the manufacturer defendants failed to warn about the risk of abuse, addiction and overdose death from the use of oxycodone and methadone.

The pharmaceutical defendants are: West-Ward Pharmaceuticals Corp. of Eatontown, N.J.; Roxane Laboratories Inc. of Columbus, Ohio; KVK-Tech Inc. of Newtown, Pa.; PD-RX Pharmaceuticals of Oklahoma City, Okla.;

https://www.bdtonline.com/news/lawsuit-claims-hope-clinics-are-responsible-for-overdose-addiction/article_c66f50de-8184-11e8-8f98-7380d7f5b2bd.html

That article is from July 2018.   

I am not really worried about this lawsuit, I assume this is just part of business in the US.  It's just one piece of the puzzle and may explain stalled sales.

[no_free_lunch]

I'd value them like a private buyer would, EV/OI.

I like that they're paying dividends, and I like the age of their senior execs.  I believe they're strongly correlated.  My prediction is this company is sold in the next 3-5 years.

The dividend has the smell of a "honey, let's spend some money now that the kids are out of the house" type feel.  The CEO is a family physician, still has a practice. Doctors seem to hang up the robe in their late 60s or early 70s.  A few go on forever, but I don't think that'll happen here.

I value this on a terminal value basis. Expect earnings will plug along, you get the cash back and the value of the company.  If you're curious as to what a company like this sells for call a few business brokers.  Depending on operations 8-10x EV/OI isn't unheard of, if someone can absorb them it might be a lot higher.  I don't think it goes for more than 1x sales, so say $10/share?  Things will continue as they have and then one day we'll be talking about the buyout with cash consideration.

I found this little nugget on glass door, it relates to a sale of the company.  I have no idea if this is legit or some kind of plant but given it's 4 or 5 months old and hasn't surfaced yet, I assume it's the real deal.

I have been working at Pd-Rx Pharmaceuticals full-time

Pros

Management encourages a family atmosphere. Lots of long-tenured employees. Expectations are not too demanding. Co-workers and management are all pleasant, easy-going people.

Cons

The pay could be better. Rumor is the company is in the process of being sold. Hopefully the new ownership will maintain the company strong culture and ethics.

[justanotherinvestor]

I looked at their 2017 report.  That line is exactly the same in 2017.  I am now thinking this was just a copy and paste error.  Microcaps..   Still in, but a little disappointed.

Yes, you are right. Looks like they were pretty lazy by copy and pasting the whole first paragraph...

They changed their annual report. They had first updated a different annual report (see attached). I was lucky to snoop around on their website on New Years holiday.
Overall it  was well written, appreciated the candor with respect to Opiods.  I am slightly offended that they removed it and did a copy-paste on the previous year, but its likely profits in 2019 will suffer.

[no_free_lunch]

Thanks so much for the attachment.

It looks like someone bailed, volume the past few days is almost as high as the prior 9 months!

I will hold it for a year or two.  Let's see what happens.  I see they are hiring multiple sales positions so can't be all bad.