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Pernix Therapeutics Holdings (NASDAQ:PTX)

Q4 2012 Earnings Call

March 18, 2013 9:00 am ET

Executives

Joseph T. Schepers - Director of Investor Relations & Corporate Communications

Cooper C. Collins - Chief Executive Officer, President and Director

David P. Becker - Chief Financial Officer and Principal Accounting Officer

Analysts

Elliot Wilbur - Needham & Company, LLC, Research Division

Louise Alesandra Chen - Guggenheim Partners, LLC

Dana Flanders - Canaccord Genuity, Research Division

Annabel Samimy - Stifel, Nicolaus & Co., Inc., Research Division

Irina Rivkind - Cantor Fitzgerald & Co., Research Division

Raghuram Selvaraju - Aegis Capital Corporation, Research Division

Operator

Good morning, and welcome to the Pernix Therapeutics 2012 Fourth Quarter Conference Call. Today's call is being recorded. [Operator Instructions] At the same time, I'd like to turn the conference over to the company's Director of Investor Relations, Joe Schepers. Please go ahead, sir.

Joseph T. Schepers

Thank you, and welcome to Pernix Therapeutics Fourth Quarter 2012 and Year-end Financial Results Conference Call. On the call today are Cooper Collins, President and CEO; and David Becker, CFO.

Before we begin, I would like to point out that the company issued a press release this morning containing financial results for the quarter and fiscal year-ended December 31, 2012. The release, including the financial tables and reconciliation of non-GAAP financial results, is available on the company's website at www.pernixtx.com. The company also expects to file its annual report on Form 10-K with the SEC by the end of the day.

Before we begin, allow me to read the following Safe Harbor statement. This call may contain forward-looking statements with the meaning of the Private Securities Litigation Reform Act of 1995. Statements include words such as estimate, plan, project, forecast, intend, expect, anticipate, believe, seek, target or similar expressions are forward-looking statements. Because these statements reflect the company's current views, expectations and beliefs concerning future events, these forward-looking statements involve risks and uncertainties. Investors should note that many factors are more fully described under the caption Risk Factors in our Form 10-K, Form 10-Q and 8-K filings with the Securities and Exchange Commission, as otherwise enumerated herein or therein, could affect the company's future financial results and could cause actual results to differ materially from those expressed in forward-looking statements contained in the company's annual report on Form 10-K. The forward-looking statements in this press release are qualified by these risk factors. These are factors that, individually or in aggregate could cause our actual results to differ materially from expected and historical results. The company assumes no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise.

During the call, we may also discuss non-GAAP financial measures, such as EBITDA. The company believes that EBITDA, which we define as earnings before interest, taxes, amortization and depreciation, is a meaningful non-GAAP financial measure. Adjusted EBITDA further eliminates the impact of noncash, stock-based compensation expense and expenses associated with the acquisition of Cypress Pharmaceuticals, Hawthorn Pharmaceuticals and Somaxon Pharmaceuticals.

At this time, I would like to turn the call over to Cooper Collins.

Cooper C. Collins

Thanks, Joe, and good morning. On this morning's call, we'll cover the financial results, key business activities, including the Dr. Cocoa, an OTC chocolate-flavored Cough and Cold Product, and our strategies to drive the company's future growth and increase shareholder value. Later on the call, Dave will provide a more detailed discussion of our fourth quarter and full year financial results. Let me begin by highlighting our key activities during the past 12 months.

The past year was an important time for building and investing in Pernix's future. We believe that these investments will position our company for solid growth over the next several years. Our recent acquisitions are expected to provide revenue growth in the short-term but are expected to have a significantly greater impact on the revenue and earnings in the long term, particularly over the next 3 to 5 years. I will briefly review our business development transactions.

We acquired the exclusive rights from our U.K. joint venture partner, SEEK, in March of 2012 to commercialize and market products utilizing intellectual property in areas of cough, cold, sinus and allergy in the United States and Canada. In July of 2012, we acquired Great Southern Laboratories, a privately held contract-manufacturing company located in Houston, Texas, through our wholly-owned subsidiary, Pernix Manufacturing LLC. Pernix Manufacturing is enabling us to develop products in-house, and we plan to utilize the facility to manufacture certain products currently marketed by Pernix, Cypress, Hawthorn and Macoven and also future OTC products. Pernix Manufacturing will continue to provide its services to our customer base of pharmaceutical companies as well as manufacture certain of our own products, which is expected to improve our gross margin.

At the end of December 2012, we completed the acquisition of Cypress Pharmaceuticals, a privately-owned generic pharmaceutical company, and Hawthorn Pharmaceuticals, a privately-owned branded pharmaceutical company. The Cypress and Hawthorn acquisitions were the most significant acquisitions in Pernix's history. Cypress offers a wide array of generic pharmaceutical products in areas of cough and cold, nutritional supplements, analgesics, urinary tract, women's health, prenatal vitamins, dental health, as well as allergy, respiratory, iron deficiency, nephrology and pain management. Hawthorn offers a broad portfolio of branded products including allergy, respiratory, iron deficiency, nephrology and pain management. Cypress and Hawthorn also provide added clinical and regulatory expertise, receiving approval for more than 10 ANDAs and 3 NDAs in the last 3 years and having 12 ANDAs currently filed at the FDA. We are currently integrating the branded business of Hawthorn and the generic business of Cypress, and we expect to capitalize on the synergies of the combined companies.

As I mentioned, an important benefit of the Cypress and Hawthorn acquisitions are their product pipelines. And we are pleased to receive 2 regulatory approvals in February of 2013 with only 2 months after completing the deal. The FDA approved Hawthorn's new drug application for VITUZ Oral Solution, a hydrocodone bitartrate and chlorpheniramine maleate product. VITUZ is indicated for the relief of cough and cold symptoms associated with upper respiratory allergies or common cold in adults 18 years of age or older. VITUZ is a good complement to ZUTRIPRO syrup [ph], providing doctors with cough and cold product without pseudoephedrine. Cypress received FDA approval for an ANDA for Mefenamic Acid Capsules, this product is a generic version of Ponstel and is indicated for the relief of mild to moderate pain in patients 14 years of age and older and for the treatment of menstrual pain.

In March 2013, we completed the acquisition of Somaxon in a stock-to-stock transaction with a total value of $25 million. The acquisition provided Pernix with Silenor, a branded prescription product which is approved for the treatment of insomnia, characterized by difficulty with sleep maintenance and is not a controlled substance.

In clinical trials, Silenor demonstrated sleep maintenance, including the 7th and 8th hours of the night, with no meaningful evidence of next-day residual effects and an overall adverse-events profile that was comparable to placebo. We believe there is a greater potential for increased sales of Silenor when our targeted primary care sales force begins to market the product. We also plan to develop Silenor as an OTC product.

As most of you know, we launched 2 new products in 2013. In the second quarter of 2012, we launched Omeclamox-Pak for the treatment of H. pylori in adult patients. Omeclamox is a 10-day therapy, triple culmination therapy comprised of omeprazole delayed-release capsules, clarithromycin tablets and amoxicillin capsule. Our initial sales of Omeclamox were lower than expected. However, we're seeing a positive trend in prescriptions in the first quarter of 2013, according to Wolters Kluwer data. In August 2012, Macoven launched Spinosad, a generic version of Natroba, which we expect to be a key product in our generic portfolio.

I want to emphasize that the management team is fully committed and focused on execution of several key objectives for our future growth and success. These objectives include: integrating Cypress and Hawthorn; relaunching Silenor by our newly combined Pernix and Hawthorn sales forces; launching Dr. Cocoa for the 2013 and 2014 cough and cold season; initiating our Phase III clinical trials for our pediatric product, which we believe at a minimum is more than $100 million market opportunity; beginning and development of Silenor as an OTC product; and working toward IND filings on 2 of Hawthorn's pipeline products, one in the area of end-stage renal disease and other in the area of dermatology.

Finally, we intend to continue capitalizing on the synergies provided by our acquisitions and improving efficiencies across all of our operations. Today, as you have seen in our press release, we have revealed the name of our OTC Choco flavored Cough and Cold product, Dr. Cocoa. The launch of Dr. Cocoa is expected for the 2013 and 2014 cough and cold season. The Dr. Cocoa product line include daytime, nighttime, cough and cold and fever formulations.

Our market research has validated Dr. Cocoa's flavor and packaging, and we have received positive feedback and strong interest from retailers. Dr. Cocoa recently won the best new product at the Cold/Cough, Analgesics and Allergy ECRM conference. This award was voted on by major retail pharmacy chains.

Now I'd like to turn the call over to Dave for a view of the financial results.

David P. Becker

Thank you, Cooper, and good morning. During today's call, I'll provide a detailed review of our results for the 3 months and fiscal year-ended December 31, 2012. For the fourth quarter of 2012, net sales decreased approximately 15% to $18.2 million compared to $21.4 million for the same period in the prior year. The decrease was primarily a result of lower sales of our cough and cold product lines due to Medicaid formulary losses on most of our cough/cold products during 2012.

In the fourth quarter of 2012, we increased the net returns and Medicaid rebate reserves by approximately $415,000 related to those Medicaid changes and the potential for product expiration. For 2013, some of these products have regained formulary access on certain state Medicaid formularies; however, they will be at much lower contract pricing. The decrease in cough, cold net revenues was partially offset by sales of CEDAX, Omeclamox-Pak and certain generic products, as well as revenues from Great Southern Laboratories, now known as Pernix Manufacturing.

For the fourth quarter of 2012, we reported a net loss of approximately $1.6 million or $0.05 per basic and diluted share compared to net income of approximately $3.9 million or $0.15 per basic and diluted share for the fourth quarter of 2011. Adjusted EBITDA, a non-GAAP measurement, was approximately $987,000 for the fourth quarter of 2012 compared to approximately $7.6 million for the fourth quarter of 2011. For the fourth quarter of 2012, acquisition-related expenses were $777,000. Stock compensation expense also increased to $897,000 in the fourth quarter of 2012 as compared to $586,000 in the prior year quarter, primarily related to a restricted stock issuance in March and December of 2012. In total, these investments impacted adjusted EBITDA by approximately $1.7 million for the quarter.

Cost of sales was approximately $7.5 million in the fourth quarter of 2012 as compared to approximately $7.5 million in the fourth quarter of 2011. This resulted in gross margin dollars of $10.7 million or approximately 59% of net sales for the current quarter as compared to $13.9 million in gross margin dollars or approximately 65% of net sales for the prior year quarter. Gross margin percentage was lower due to sales of lower margin products in the fourth quarter of 2012 compared to the fourth quarter of 2011. Included in cost of sales in the fourth quarter of 2012 is approximately $478,000 in write-offs of obsolete inventory.

Our selling, general and administrative expenses for the fourth quarter were approximately $11.1 million, which was an increase of $4.2 million from the fourth quarter of 2011. The increase was primarily due to the hiring of the company's new gastroenterology sales force, expenses related to the development of the company's potential OTC cough/cold product, Dr. Cocoa, operating expenses related to Pernix Manufacturing, an increase in stock-based compensation expense, transaction-related expenses associated with the acquisitions of Pernix Manufacturing, Cypress, Hawthorn and Somaxon, as well as increased corporate infrastructure cost to support the company's growth objectives.

The income tax for the fourth quarter of 2012 was a benefit of approximately $204,000 compared to an expense of approximately $2.1 million in the fourth quarter of 2011. The weighted average common shares outstanding for the quarter-ended December 31, 2012, were 29.3 million basic and diluted shares as compared to weighted average common shares outstanding for the prior year quarter of 25.7 million basic and 26.5 million diluted shares.

Now I'd like to discuss our results for the year-ended December 31, 2012. For the year-ended December 31, 2012, net revenues increased 1% to $61.3 million compared to $60.6 million in the prior year. As noted earlier, net revenues in the year-ended December 31, 2012 as compared to the same period in 2011 were impacted significantly by lower sales of our branded and generic cough and cold product lines due to Medicaid formulary changes on some of our products in certain key states. Going forward, some of the products have regained access on certain Medicaid formularies; however, they will be at much lower contract price levels. The lower sales in our branded and generic cough and cold product lines were partially offset by sales of CEDAX, Omeclamox-Pak, certain generic products and revenues from Pernix Manufacturing.

For the year-ended December 31, 2012, our net loss was approximately $1.4 million or $0.05 per basic and diluted share compared to net income of approximately $8.3 million or $0.35 per basic and $0.34 per diluted share in the prior year period. For the year-ended December 31, 2012, adjusted EBITDA was approximately $5.8 million compared to approximately $17.4 million in the prior year period. For the full year 2012, acquisition-related expenses were $1 million. Stock compensation expense increased by approximately $1.7 million to $3.3 million in 2012 as compared to $1.6 million in 2011, primarily related to a restricted stock issuance in March and December of 2012. In total, these investments impacted adjusted EBITDA by approximately $4.3 million.

For the year-ended December 31, 2012, SG&A expenses were approximately $35.4 million, which was an increase of approximately $13.3 million from the prior year period. The increase was primarily due to the hiring and training of our new gastroenterology sales force to promote Omeclamox-Pak, and prelaunch marketing expenses related to this product. Acquisition and operating expenses of Pernix Manufacturing increased stock compensation expense, expenses associated with the acquisitions of Cypress, Hawthorn and Somaxon, as well as increased corporate infrastructure cost to support the company's growth objectives.

For the year-ended December 31, 2012, weighted average common shares outstanding were 28.1 million basic and diluted common shares, and for the prior year period, weighted average common shares outstanding were 24 million basic and 24.5 million diluted shares. Remember that in the second quarter of 2012, we completed an At-the-Market or ATM equity offering, which raised total net proceeds to $23.8 million and increased our average number of common shares outstanding by 3 million common shares.

In December, we issued approximately 4.4 million shares in connection with the acquisition of Cypress and Hawthorn, bringing our total common shares outstanding to approximately 34 million at year-end. And with the recent closing of Somaxon, we issued approximately 3.7 million shares, resulting in current shares outstanding of approximately 37.7 million shares

As of December 31, 2012, we had approximately $23 million in cash and working capital of $42 million. Accounts receivable was approximately $37 million and inventory was approximately $22 million.

Finally, I'd like to make a few comments regarding the guidance for fiscal 2013. With the closing of the acquisitions of Cypress, Hawthorn and Somaxon, we expect net revenues to be in the range of $125 million to $135 million for the full year 2013 compared to $61 million in 2012. This revenue guidance reflects the continued expectation of lower sales of our branded and generic cough and cold products, offset by continued growth in CEDAX, Macoven, Cypress, Hawthorn, Pernix Manufacturing and Somaxon product sales. For 2013, we expect to reinvest our operating cash flows to launch Dr. Cocoa's, initiate the Phase III trial of our pediatric product in development, begin the development of Silenor as an OTC product and work toward the IND filings of 2 products in Hawthorn's pipeline, as well as sales and marketing initiatives.

That concludes my financial review this morning. And I'll now turn the call back over to Cooper.

Cooper C. Collins

In summary, 2012 was a year of building and investing in Pernix's future growth and success. We significantly expanded our product portfolio as well as our manufacturing and development capabilities. We're integrating Cypress and Hawthorn into our overall operation. As most of you know, in January, we restructured and consolidated the Hawthorn and Pernix sales forces almost immediately following the completion of the acquisition. As part of this initiative, we reduced the number of sales representatives to approximately 125 from 198. We expect to continue to transition our branded-product revenues to private and commercial payers from government payers, and further broaden and diversify our generic product portfolio with new product launches by Cypress and Macoven. In 2013, we are continuing to build and invest for our long-term growth and execute on our business strategies.

Looking ahead, we expect to relaunch Silenor in the second quarter of 2013, initiate our Phase III clinical trials of our pediatric product midyear of 2013, launch Dr. Cocoa for the 2013 and 2014 cough and cold season and begin the development of Silenor as an OTC product. These initiatives will require significant additional investment in the short term to realize substantial growth in the longer term.

Before we take questions, I'd like to say that in my 10 years with Pernix, I have never been more enthusiastic about our expanded product portfolio and now more importantly, our branded, generic and OTC product opportunities, which I expect to substantially increase the valuation of our company. Operator, please open the line for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And we'll take our first question from Elliot Wilbur at Needham & Company.

Elliot Wilbur - Needham & Company, LLC, Research Division

My first question is with respect to the delta between your prior top line guidance for 2013 and what you're providing today. Cooper, could you just maybe walk us through the 2 or 3 things that have changed the most that have resulted in a lower overall top line expectations for this year? And then, if at all possible, I know you guys had talked previously about an adjusted EBITDA target of $25 million in 2013. Obviously, that's going lower and it's going to be more impacted by R&D spend perhaps than what was included in the original guidance, but maybe could you just talk to some metric of profitability, whether it be adjusted EBITDA or even operating profitability?

Cooper C. Collins

Sure. So first, as far as the top line growth and projections go, this company's kind of been phasing this transition over the last few years, which is our -- kind of our legacy OTC, professionally labeled cold and cough products. The big drop-off in 2012 was mostly related to that. We've talked in the past how we felt like Natroba and Omeclamox could fill that hole and continue to grow revenues for the company. It didn't quite hit our overall expectations, which moved us forward with other acquisitions -- which causes, I think, to move forward with acquisitions that have worked out nicely. If you look at the -- those kind of legacy cough and cold products that we started the company with, they've declined approximately $24 million, $25 million in gross sales from 2011 to 2012. So that's a big drop-off that you saw there. We expect that drop-off to continue in 2013. Now also, I think an important point about those legacy products is they've just become less and less profitable, not just every year but every quarter. There have been so many changes of that product line but that's one of the reasons we felt the company needed to evolve and acquire certain NDA products, other divisions, getting to generics and OTC and other things like that. So I think you'll continue to see that drop-off.

The other drop in 2013 is we've been able to get in and really dig into some of the additional noncore products, I'd say, Cypress, Hawthorn, also Pernix, Macoven, Silenor -- Somaxon is obviously a product. Somaxon, who has Silenor, obviously has a product that we're going to moving to the front line here, with kind of a relaunch in May. But the other companies had some kind of noncore products that we felt maybe didn't need the level of promotion we thought in the past, or it didn't warrant it because of the profitability or the margins on those products. So what we're doing is kind of refocusing on the bigger opportunity products there.

As far as the bottom line goes, obviously in 2012, our bottom line was affected, I'd say, greatly by the top line of the cough and cold and profitability of those legacy products in the past. Going forward, our profitability is really going to be more affected by our R&D spend. I should say R&D and OTC spends because the OTC spends aren't technically classified as R&D but there will be a substantial expense, we'll see. We have that expense somewhere in the mid-20s for 2013. That's between all of our R&D projects, which I'd also like to mention are very low risk R&D projects. I know Pernix has always been a low-risk company, so I want to point that out. These products, while they do have some nice protection around them for years to come, they also create kind of a base ingredients or the FDA has been familiar with and they've been in the market in various products in the past. So it still is a very low-risk development opportunity there on all of these products are developing in, especially OTC and now with Dr. Cocoa, which I think is a nice opportunity and definitely kudos to our OTC teams, done some great stuff with that plan or with that product. And like we mentioned earlier, we'd won that contest for 2013 at ECRM, which included some of the major retailers like Walgreens, CVS, Rite Aid, all those kind of guys voted on that. So that was -- I'd like to congratulate them as that was a great achievement for us with our first OTC product, look to expanding that going forward. Did you have any -- do you need more specifics on that?

Elliot Wilbur - Needham & Company, LLC, Research Division

Yes. I want to follow-up with you, make sure that I have this clear. Your R&D spend in 2012 standalone was around $700,000. Did I hear you say correctly that you have it budgeted in the mid-20s for the combined entity for the [indiscernible] OTC...

Cooper C. Collins

That also includes -- for 2013, that also includes OTC spends, so that's advertising -- that's what I was trying, I guess, kind of separate there. We just have it all -- when you're thinking about R&D, we're kind of adding that in because it's one of those that's just going to be a straight expense that you're going to lose. So I just want to kind of break that total number out for you guys to think about because these are expenses that Pernix hasn't typically had in the past and will have in the future.

David P. Becker

And Elliot, this is Dave. And you asked about is there any type of guidance that we could give you or clarity on profitability. I think maybe the best way to look at that at the gross margin level. Obviously, you have a sense of the revenue or the top line range. Gross margins should be in kind of in the low-60s% to mid-60% range. So that would imply something in the high 70s to the high 80s in terms of millions of dollars of gross margin.

Elliot Wilbur - Needham & Company, LLC, Research Division

Okay. And, Dave, if I could ask you a couple of questions as well. I'm assuming the balance sheet in the press release reflects the combined entity given that closed on the -- balance sheet closed out on 31st versus the acquisition...

David P. Becker

It does.

Elliot Wilbur - Needham & Company, LLC, Research Division

Okay. But still looking in a couple of these accounts, I mean, there seem to be fairly large jumps for a company that had $50 million revenue and specifically thinking about inventory and receivables. Was there anything unusual about the Cypress business that you encountered once you got in there, maybe a little bit longer dating in receivables than what was originally expected? It just seems like a fairly pretty big jump for a company that's turned around $12.5 million a quarter in revenue.

David P. Becker

The only thing I'd add on that, just for clarity, the -- obviously the balance sheet got consolidated, acquisition on the last day of the calendar year. And then there was no P&L impact for 2012 as a result of the Cypress and Hawthorn acquisitions. But you raise a good point on the inventory going from about $6.3 million to $22 million. Included in that $22 million is almost $9 million of inventory step-up value, which is the -- it's just a GAAP-accounting issue that basically causes you to gross up the implied gross margin that -- in the inventory that you're acquiring. So it's one of those things we'll have to report on as we sell that inventory because it will look like the gross margins are lower. And it's just -- it's a function of booking inventory instead of at cost at effectively sales price or gross margin. So that -- and that was about $9 million, so that's probably what's swinging that a little bit.

And then the receivables, I would say, were right about where we expected. We're right at the end of the year so your billings, cough, colds, as you would expect, would increase. So it went from about $20.6 million on a standalone basis to $36.6 million on a combined basis. That was what we expected.

Operator

[Operator Instructions] .

And we will take our next question from Louise Chen from Guggenheim.

Louise Alesandra Chen - Guggenheim Partners, LLC

I had a few, so maybe just a follow-up on the question that was asked previously on the R&D cost, and maybe if you could isolate the R&D cost versus the SG&A expense, the step up year-over-year, I think that would be helpful. And then I have a couple of other follow-ups, too.

David P. Becker

Okay. So you want to break down kind of R&D versus OTC spend?

Louise Alesandra Chen - Guggenheim Partners, LLC

Yes, I mean was just a little bit...yes, go on

David P. Becker

Yes. So basically, off of that $20 million -- $20-million-to-$22-million number that Cooper talked about, the -- really, the media side of that for Dr. Cocoa is going to be in the kind of that $7-million to $10-million range, and the balance of it then is going to be -- is going to really be what you would consider R&D, including some costs associated with progressing the Silenor OTC switch, which we would consider that as development dollars. So the real media or sales and marketing aspect of this is the Dr. Cocoa's, which we would expect to be in the $7 million to $10 million range.

Cooper C. Collins

But on overall OTC business, you're probably looking at a $10 million to $12 million kind of spend.

Louise Alesandra Chen - Guggenheim Partners, LLC

Okay. And then what about the SG&A then year-over-year? Is there going to -- aside from what you mentioned here, is there going to be an increase over the $36 million that you had in 2012?

David P. Becker

Yes. You would -- as you would expect, there's a couple components to that. One is with the Great Southern Labs or Pernix Manufacturing. We only had about half of the SG&A cost. Those cost that we booked below the gross margin, that was close to $3 million, I believe, for the second half of 2012. The size of the sales force is sitting at about 125 today, growing from 75, so you would expect higher costs there as well. But there's not a lot of -- then there's some cost synergies associated with the acquisition. So I would say that those are probably the 2 biggest items that stand out. And then also having a full year of the G.I. sales force, so G.I. sales force, full year of Great Southern Labs or Pernix Manufacturing G&A, as well as increased sales reps from 75 to 125 for a full year.

Cooper C. Collins

I would also add to that. We made some initial cuts, kind of the easy ones right away after the Cypress, Hawthorn acquisition and right away after the Somaxon acquisition just a couple of weeks ago. So we made kind of the -- some bigger, easier cuts but we think probably through 2000 -- kind of midyear 2014, we should be able to gain kind of another $7 million to $15 million depending on what we decide to do. So -- but we're just going to take it slow and make sure we make the right decisions there. I think it's not going to be as rapid of a integration as you'd see with a company that just comes in and wipes everything out and drops the bottom line. We still want to be very methodical about these decisions, so that's why I think we won't capture all the synergies until kind of mid-2014. So...

Louise Alesandra Chen - Guggenheim Partners, LLC

Okay. And then my next question is just on the -- given you have a lot of moving parts and launches, how should we think about quarterly sales progression? And did you see any benefit from the strong cough/cold season that we might see as an offset to some of these Medicaid issues on the cough/cold drug side?

Cooper C. Collins

So on the -- we kind of, I guess, segment in our offices cough and cold 2 different ways. So we look at legacy the OTC, professionally labeled cough and cold products, which are basically the promoted behind-the-counter OTC products that we've always had; and the new drug approvals, so they have the kind of the Hawthorn-type cough and cold products that we acquired; and then 2 totally different types of products. The Hawthorn products are more focused on private-pay-insured patients, and the OTC products were a mix of all payers and warrants new drug approvals, so the reimbursement was completely different.

So I'd say that we saw a nice jump in the Hawthorn products there earlier when the flu season and really spiked up. We all heard a lot about it and then it kind of went way. The second wave of flu kind of seemed like we're going to take off, but it looks like it's kind of petered out here early. So we wouldn't expect to see any big flu spikes, although ZUTRIPRO, a Hawthorn product, has taken another jump the 2nd week here of March. So -- but now a lot of that had to do with the initial cuts and there was a lot of stuff going on, uncertainty with the Hawthorn employees in who was going to stay, and who was going to go. So I think you had a lot, a lot of that going on with those products. But the overall long-term growth is going to be on the cough and cold side, it's going to be related to those products. As you've seen CEDAX, which is a cyclical product as well, it didn't go exactly hand-in-hand with the flu season because it does have a nice spring growth because it's focused more on otitis media, and you'll still have those kind of issues during the allergy seasons in the spring and the fall. So that product continue to grow again here through the 2nd week of March. And we've refocused that in higher sales force away from government payers. So while I think that whole group of products is very cyclical, they are a little bit different in their own respects. But Silenor will be a product that will really alleviate some of that seasonal pressure. We're planning to relaunch that in May after our April training for their product. So we'd like to see that grow a little bit and be a nice seller product 12 months around the year.

David P. Becker

Yes. Louise, I'd probably just add to that, that no single quarter would probably be less than 20% of the total revenues and no single quarter greater than 30%. And if I had to split it in the year, it's probably 45% in the first half of the year and 55% in the back half. And part of that's just a function of the date in which we acquired Somaxon and the relaunch of Silenor as well as the launch of Dr. Cocoa OTC.

Louise Alesandra Chen - Guggenheim Partners, LLC

Just one more question. So when Dr. Cocoa and also VITUZ, could you give us a sense of -- do you know size of the market opportunity, and where you think you might be in the first year of launch?

Cooper C. Collins

So the -- right now, in our current estimates for Dr. Cocoa, we have basically 0 revenue in there. So where we have a big spend, now we would obviously hope that there is going to be some revenue for Dr. Cocoa. But based on our past, we definitely want to be as conservative as possible. So we're assuming kind of a pay on scan or a 90- to 100-day terms, 90- to 120-day terms on Dr. Cocoa product. I think long term, the market's $400 million. And that's specifically the children's cough and cold market. We're not focusing on the whole cough and cold segment yet, although we do have those opportunities at Dr. Cocoa as well as some of the opportunities outside of cough and cold with that brand. So as far as the market penetration goes, I think it's -- Dave could probably speak better to the OTC market penetration. But we don't have a really large numbers in right now. I don't know that we're prepared to give guidance for 2014 on this product yet until we launch it here in the fall of 2013. And then as far as VITUZ goes, I'd say that that product is basically an immediate release testing X [ph]. So it definitely has -- there's an established market already. I think [indiscernible] had the peak with the $300 million product and so it's hydrocodone, hydrocodone and chlorpheniramine. So there's, I guess, there's already a position targeting base out there that we'll go after with that product. That will be complementary to ZUTRIPRO, so it will be kind of sold as a position 2, 3 with ZUTRIPRO. And mostly in the cold season, we plan to launch it here, I'd say I think we have midyear, something like that, launch, but we expect to see some growth there in the fall. But I mean, I wouldn't expect it to necessarily exceed ZUTRIPRO right now. It does -- the big benefit over ZUTRIPRO is for the -- these are both adult products. And it does not have pseudoephedrine in it. So this is a product we can target for blood-pressure patients, which is an objectionary issue in a lot of physicians.

David P. Becker

Louise, it's Dave. I just kind of add to the OTC side of this. So what we don't know right now is -- well, I think we have a pretty good sense that most retailers on the drug side will pick up Dr. Cocoa and put it on the shelf and allot the shelf space for us, certainly given the results of the ECRM. What we don't know is whether we're going to get paid on invoice or get paid on when the product stands in the sold POS at the store. But I think regardless, there would be some revenue recognition in 2013. I think the question that Cooper really is alluding to is the cash flow of that and maybe cash flow collection in 2014.

Operator

And we'll take our next question from Randall Stanicky at Canaccord Genuity.

Dana Flanders - Canaccord Genuity, Research Division

This is actually Dana Flanders filling in for Randall. First, given the 2 recent deals in integrating the assets, was just wondering on how active you plan to be on the business development front near term? And if you could comment on size of the deals you're looking at in therapeutic areas? And then second, Cooper, bigger-picture question here, with the pipeline now and the 2 acquisitions, can you talk about where you see the mix of business going over the next 2 to 5 years, brand versus generic versus OTC, and if you like where you're at now and if you see that materially changing?

David P. Becker

Okay. Good questions. So I would say, we definitely have our hand full right now with integration, and that's our #1 priority, so we're focusing on that. As I've said before, we're taking our time, making sure everything goes according to plan there. The other deals I'd say we consider are the kind of more drop-in deals, where we're not having a integrated full company similar to may be Somaxon or the company with 1 product that we can just drop the product in. I think those types of deals, baskets of products that we can drop into Cypress, maybe 1 night primary care, pediatric products or even a psych product now, given that Silenor is going to take us into the psych offices as well. So something we can just drop into the bag as just an additional product. Those are the types of deals I think we'd really kind of look at. As far as the breakdown, the pipeline and brand generics going forward, we're going to do a lot of brand development. And as you know, with our horizontal integration strategy, just because we develop it as a brand doesn't mean it's going to stay as a brand, so we like to pick brands like our, specifically, our dermatology product, which I think is important to mention both of those products from Hawthorn and [indiscernible] dermatology projects. They were something we may reconsider divesting or licensing out and keeping certain rights, those kind of things. And the more that we've looked out since the acquisition being complete, the more we really want to keep those products and develop them ourselves. But for example, the dermatology product's a perfect candidate for brand generic and OTC one day. So I think the plan moving forward is continue to develop our acquired brand, where our best case scenario to have potential to run through the whole spectrum. But if not, if it's a product like CEDAX as antibiotic, and we see there's a good growth opportunity, we'll take those and grow them. As far as the specific divisions, I think you could see us jump in other specialties, obviously, like dermatology because we're developing an asset there. So we'll continue to shop in those spaces. And as far as the split, it's hard to say where the split will end up being going forward, because a lot of it's going to depend on what we do with the generic division, how fast we move products over the OTC. Like in the case of Silenor, we think it has its greatest potential as an OTC. So we've decided to kind of fast track that development. So when you move a product like Silenor over that has such great potential in OTC markets, and there's probably a 3-year timeline for that. But you're going to have a big jump in OTC, so I think you can look at us now, we're kind of 60-40 brand generic. But you could also see a big spike in some of these OTC products or when we have a switch like that or when you see us drop products in because there's a good chance we could drop a decent-size product into the primary care bag going forward. So you'll see spike back and forth. But in a perfect world, we kind of like it split up in 3 thirds, but I would say the majority of our revenue will probably -- the great majority of our revenue would be carried between brand and OTC brands. So your long-term, I think, growing in the generic division is more of a marketing strategy and a diversification strategy, I think, than it is value proposal. We understand the value for this company that comes on the brand, the OTC side. But we do think that the generic side is a necessary evil.

Operator

And we'll take our next question from Annabel Samimy with Stifel.

Annabel Samimy - Stifel, Nicolaus & Co., Inc., Research Division

I just want to know, with all these acquisitions that you've done with Cypress and Hawthorn, it seems like it's going back to a little bit more of a cyclical portfolio as opposed to noncyclical. So can you sort of help us understand what's in the pipeline that would take you away from the cyclicality of your business? Is Silenor enough to do that, or do you need to do -- make more efforts in that area in terms of product acquisitions to get away from the cyclicality?

Cooper C. Collins

Ok, that's a great question, and that's something we actually think about a lot here because our business was so cyclical in the past. In our minds, all 3 of the acquisitions that were completed in the second half of the year went together. We felt like there was a need to have our manufacturing facility with the OTC and some of the development projects we had in-house already. But they were also one of -- they were also the largest manufacturer for Cypress-Hawthorn. So those fit together nicely. Cypress-Hawthorn issue was definitely the seasonality of that business with Hawthorn, specifically, the brand division. So adding product like Silenor was something we really wanted to do and had plans to do all of these deals, kind of in conjunction, almost kind of like a domino effect. Line them all up, and knock the first one down. And the other 2 fall. So that's really what we had planned because we definitely did see an issue with the business being so seasonal. And besides, the Silenor launch looks like it's going to work out perfectly. I think of you look at the size of the products, ZUTRIPRO being the lead cough and cold product right now, which is the hydrocodone, pseudoephedrine, chlorpheniramine product that Hawthorn has, very seasonal product, cough and cold liquid for adults. It's kind of a $15 million to $20 million product. And then you look at Silenor, which is probably a $15 million -- it's been as high as $20 million, so probably in that same kind of range going forward. So you'll have your seasonal product that will get, say, 2/3 of its revenue there in the wintertime. And then you'll have your product that's going to be nonseasonal with Silenor, so I think they'll complement each other nicely. And they're both about the same size. You'll probably, because ZUTRIPRO and some other products are so seasonal, you'll probably see us looking to add products like this dermatology development product that is nonseasonal and other in-licensing that are nonseasonal. But we will continue to protect our assets, so products like ZUTRIPRO, we have a line extension plan. VITUZ. VITUZ is just approved, and we already have a line extension plan so we're planning on protecting those seasonal products as well because there is a huge benefit to having those products around. But we will add -- continue to add more nonseasonal products. Good question.

Annabel Samimy - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And in terms of the impact on your cough and cold line, you sort of delineated the legacy products versus some of the newer products. In terms of the legacy products, this decline was expected? Or is there something bigger going on increased competition in the OTC market that causes those declines versus just strictly Medicaid? Because it seems that the quarter should have been helped by an unusually large cough and cold season, or severe cough and cold season, so just if you can give a little more color there.

Cooper C. Collins

Okay, sure. I'd say the decline was expected, but it was greater than we expected. There were a couple of things going on there. We were obviously promoting other products first line where we have in the past, we always have the cough and cold products first line. And literally, like there was a quarter-to-quarter change with that product line where the rebates are getting much higher. Penalties are getting much higher, reimbursement was changing, I mean, across the spectrum with these products. So that's the reason I think it was higher than expected. We always expected a decline, which is the reason we moved forward with some of the other products like Natroba and Omeclamox and on further into OTCs and these other acquisitions we've recently completed. So we always expected a decline but I would say it was a little more than expected. As far as the season goes, what happened, I mean, the season kind of came early, which was great for ZUTRIPRO, but not so great for our legacy cough and cold products, because we weren't really promoting them hard because there were so many formulary change, changes and lack of profitability there at the end of the year. So I would say our legacy products didn't really get to take advantage of that, where ZUTRIPRO did. I'm trying to think if there's any other specifics there with that product line, but I think that's about it. It was really some changes, formulary changes there in the year, a lack of promotion. And a lot of that was due to the profitability of those products. So that was the big jump, and I think that's where -- what caused us to change our numbers kind of in 2012 and also 2013 because we need to focus more on those products that can make this company more profitable. Or in the case of 2013, give us more money to develop other drugs, so when we lose legacy products, we're filling that hole with new development or acquisitions, so that's one of the big reasons for Pernix throwing a lot more money on R&D and OTC launches. Did you have anything to add to that, Dave?

David P. Becker

The only other thing I would add is there's at least $1 million of reductions to net sales associated with returns and Medicaid, rebate allowances associated with those cough/cold products. A lot of that relates to product that was sold in 2011, and we lost the Medicaid coverage. I think you'll recall, we took a $500,000 reserve adjustment in second quarter. The net adjustment for fourth quarter was close to $0.5 million. And part of that is you either -- if the product is getting close to expiration and solved [ph] the channel you even have a returns issue, or if does get filled as a prescription under the new Medicaid rebate, which has gone up significantly for the next selling prices come down, we had to adjust our reserves for that as well. In one particular case, I don't remember the product, but the rebate went from like $25 per unit to over $100 per unit. So to the extent that you got products sitting out in the channel, you have to reflect that in your reserve, so we went through all of that in the fourth quarter. And that was a little bit of a surprise for us as well.

Cooper C. Collins

I would say...

Annabel Samimy - Stifel, Nicolaus & Co., Inc., Research Division

But what you're saying though is that ZUTRIPRO did not come in in time to offset some of the declines in your other line?

David P. Becker

There was no Cypress-Hawthorn revenue or expense, no P&L impact in 2012. It's basically -- the only thing you see is the balance sheet last day of the year.

Cooper C. Collins

I was going to add to that to kind of clarify a little bit on the changes. And I think one of the big drivers behind the change is state level, I think a lot of the states weren't really planning on this health care bill staying intact, or I guess ObamaCare, as a lot of folks are calling it these days. So that will all happen in the second half of the year. Well that became real and states ought to making changes. So I think there's a ton of pressure at the state level right now based on this. So -- and those products were very state specific, so just to kind of clarify more on the pressure that is happening there. But you can go on with your next question.

Annabel Samimy - Stifel, Nicolaus & Co., Inc., Research Division

No, I was just going to ask on the gross margin, just since the new manufacturing facility, the great -- the northern, God, I can't remember the name, but manufacturing facility that you bought in the summer, that doesn't seem to be having an impact on the gross margins. Should we be seeing some of that expansion this year?

David P. Becker

You're talking about on just moving our products in there and enhancing?

Annabel Samimy - Stifel, Nicolaus & Co., Inc., Research Division

Yes.

David P. Becker

Yes, I think you're seeing a little bit of that, but overall, the contract manufacturing margin does bring it down. Those margins are kind of in the high 40s to the low 50s, so that's going to bring it down. And our fourth quarter was higher concentration, somewhere around 40% of our business was in the Generic business, that lower margin. Historically, that number was kind of in the 33% to 35% range, so I think that's what you're seeing. Going forward, 2013, low 60% to the mid-60% range I think is what you should expect. The other thing that Omeclamox sales were a little softer, as you know coming out of the gate. And while they're improving for 2012, we expected higher gross margin dollars from that product, the margin that did -- catch up with an 8 on it. The other point is on the Great Southern. One of the main reasons we made that acquisition was because of Dr. Cocoa. That product was formulated and developed right there at Great Southern. We put a lot of time and attention into that product, particularly in the third and fourth quarter to get the formulation exact, to get the people trained on all the manufacturing with the SOP, so that was really one of the big benefits. That will really help us in that launch. That will save -- that's worth probably 10 to 15 margin points on that product alone.

Operator

And our next question is from Irina Rivkind with Cantor Fitzgerald.

Irina Rivkind - Cantor Fitzgerald & Co., Research Division

Going back to Great Southern, you guys had initially stated that you expected that plant to make about $4 million to $7 million in 2012. Just wondering if you could comment if you got there?

David P. Becker

Yes, you're talking about sales there. The sales for Great Southern were just under $6 million. And so at the end of the third quarter, we announced that the year-to-date loss there was about $0.5 million. And I think there was a little bit of improvement in the fourth quarter but the other thing that happens is now that we're selling to -- basically to internal customers, that revenue recognition gets deferred until the product is ultimately sold. So it does kind of punish the Great Southern results initially.

Irina Rivkind - Cantor Fitzgerald & Co., Research Division

Okay. And then just going back to the 2013 guidance, I mean, is the company going to be profitable in 2013 or not?

David P. Becker

It'll be profitable to the extent that -- it really comes down to controlling the development and the OTC. And I think it's a question of long-term value versus short-term P&L. I mean, if you look at 2011, the net income was $8 million. We got $1 million loss for this year. So I mean it's -- what's more important having, a $5 million of net income or building an OTC franchise that competes in a $400 million to $1 billion marketplace? And then with Silenor, which would compete in $1 billion marketplace, and it would be the best-in-class product. So accelerating these products and getting to the market quickly, I think, is -- it's probably the most important thing here. Obviously, we're cognizant of the fact that we need to produce as much operating profit as we can.

Cooper C. Collins

I would say, also, our short-term goals were always EBITDA and profitability in the past. I would say at this point, our short-term goals are not EBITDA and profitability, but it is definitely in our long-term goals for kind of 2015, 2016, when some of our big projects launch. We'd rather reinvest that into the company so we can kind of control our own destiny a little more as opposed in-licensing products, other folks' products, or relaunching products and those kind of things. We definitely want to control our own destiny. The best way to do that is by investing in our OTC division and our pipeline. Like I said earlier, our pipeline is very low risk. So I think what's changed is maybe the goals of the company, short term and long term. But you've seen the company evolve quite a bit, I'd say, in the last 12 months, so we're going to be more focused on filling gaps and preparing for, like this situation in 2012 where our legacy cough and cold products kind of had a cliff. We all thought it would eventually hit 0, maybe not as fast as it's getting there. So we have to prepare for that. I mean, we have plans for ZUTRIPRO/REZIRA. We have plans for VITUZ on the Hawthorn side and -- all of our products. CEDAX, we have nice line extension plans for all of those. But something does go wrong or -- so we miss something or whatever the situation is, we have to be prepared and be launching products, and our products and development OTC opportunities popping up as these -- we have negative impacts or cliffs. I think the same way other drug companies have to deal with it, like a Lipitor cliff, so to speak. So we have to start looking at some of our products as having cliffs. And the only way we can control our own destiny is to develop some of these low-risk products on the brand and -- brand prescription and OTC side. So I think that's what you're seeing kind of change over the last 6 months with the company, is we want to control our destiny. Well, we'll still kind of deploying the strategy of acquiring assets that we think we can grow rapidly. We still want to have a little more control of our destiny and invest in the company in the projects that are here, because we have some really great opportunities here, especially since completing all these recent acquisitions.

David P. Becker

I think, Irina, I'd say probably the biggest change since we've talked is probably, I know it is, is the OTC part of the business. We had initially looked at Dr. Cocoa's a couple of months ago as, "Well, do we soft launch it in 2013? Do we wait till January of 2014 and get carved in on shelf space?" We didn't know whether we're going to get shelf space. And then we go to the ECRM and it comes back and says this is the best product at the show, and we have retailers talking to us about allocating shelf space for the product. So that tells you, hey, you've got something there. We have to move forward with it. And also just the research and the findings associated with the -- with Silenor post -- after the end of 2012, all combined between marketing, media and the OTC switch development, there's at least $10 million of impact to the P&L.

Irina Rivkind - Cantor Fitzgerald & Co., Research Division

You mean, it sound that you're thinking about really growing the company towards having better quality products in the future. And just looking at this past quarter, you had something like $9 million -- $9 million to $10 million in branded sales and you spent $11 million on SG&A. So it doesn't even seem as if your branded products are profitable. I'm just wondering does it make sense to keep acquiring these smaller opportunities to drop in the basket when it's more like a running to stand still strategy. And wouldn't you be better off just focusing on your bigger opportunities?

Cooper C. Collins

I would say yes on both aspects. The opportunities we've looked at in the past were, I'd say, one thing, smaller than expected, but we thought they will be bigger than they were. But even the size that we expected them to be, we're going to be looking to acquire and in-license larger opportunities, at least on the brand side. And they will be products that we can just drop in and we don't have to add any substantial G&A to that -- to launch those products. So I think you're exactly right, that's kind of what we're looking to do right now is look for bigger opportunities within, bigger opportunities outside. And some of the smaller products are stepping stones to the bigger products where we have -- let's say, the Hawthorn sales force is breakeven right now with the current line of products. You had Silenor, makes it a little more profitable. You drop in another product and it's much more profitable. I think our G&A at least is high. A lot of those related to some OTC expense as we also created a whole OTC division in 2012 that didn't have $1 in revenue associated with it. Just a complete drain, but it looks like it's going to pay off for us. That was a big investment. So we are definitely looking at bigger opportunities and we need bigger opportunities, which I think we have some in-house in development but there will be some outside as well. But you're right on, we need to -- we definitely want to and need to look at much bigger opportunities and we will.

Irina Rivkind - Cantor Fitzgerald & Co., Research Division

And sorry, just one final one. In terms of your bigger opportunities, are you thinking about financing them with equity?

Cooper C. Collins

I would say the equity side, at these prices, it's probably less likely, but we are getting, I'd say, more attention and we have nice-sized opportunities and partners that we're working with. So hopefully there won't be a ton of upfront expense on a lot of these, but we would consider some equity, add in some debt and some of things there, a milestone payment and those types of things. As Pernix has done in the past, we'd be very creative with those acquisitions. You saw a big chunk of, I think, equity deals there with Cypress, Hawthorn also with Somaxon. But we always prefer not to do equity until we feel that the value is there and I think you'll probably see a little bit of a rest on the equity side.

Operator

And we'll take our next question from Raghuram Selvaraju with Aegis Capital.

Raghuram Selvaraju - Aegis Capital Corporation, Research Division

Couple of things. Could you refresh our memory as to when we might see the next data point on theobromine? And also, could you give us an idea of the overall state of the women's health business and what the potential impact might be of the mefenamic acid product launch in that particular segment of your overall business going forward? Or is that not likely to be a significant driver of that product?

Cooper C. Collins

Okay. Great. All right, so let me start with theobromine. As far as drug development on theobromine, we've shifted from the general cough opportunity to some orphan drug opportunity that we've seen out there for that product. However, we do own that IP and we are utilizing portions of that IP, I would say, in Dr. Cocoa. So you will finally start to see a little bit of an ROI as far as theobromine is concerned. I would say, technically, there's no theobromine in the product as an active ingredient drug, but our intellectual property is kind of a wide base and allowed us to do some stuff to protect Dr. Cocoa, which is how that whole idea got formulated. So this Dr. Cocoa launch, it will be a protected product. It is related to that IP, so that you'll find, start to see some ROI there, I think. And then also, moving on to the mefenamic acid product, that was strictly an ANDA approval by Cypress, so we're going to be launching that through our generic division. I think it's a product that if we from the women's health division, we could maybe consider combining that with some other thing to make it a unique brand, kind of like Omeclamox and some other products. But right now, women's health -- building women's health sales force is not on the forefront, but it is a space we like and we'll consider to kind of stack up assets and look at opportunities in that space. But I would say right now, there's nothing we're moving on immediately.

Raghuram Selvaraju - Aegis Capital Corporation, Research Division

Okay. And then just with respect to the financial positioning, can you comment on what you expect the income tax outlook to be for the company, assuming that you're profitable on an EBITDA basis? And whether you were thinking about doing anything to lower the company's effective tax rate at this point in time or if you don't consider that to be a substantial priority at this stage?

Cooper C. Collins

Yes. So as a profitable taxpayer, we would be expecting a 35% to 40% effective tax rate for 2012. Obviously, we're looking at a tax benefit or a refund. So the net income, taxable income that's just based off from what we talked about today is going to be limited for 2013, so it's not an immediate concern of ours. But anything that we can do, the door is always open to look at opportunities to save cost on taxes or any other aspects of our business.

Raghuram Selvaraju - Aegis Capital Corporation, Research Division

Okay. And then just finally, can you give us any guidance on the interest expense line item going forward for 2013?

Cooper C. Collins

Yes, that should be probably somewhere in the $4 million range, I would say.

Operator

And it looks like we have time for one final question. And we'll take that from Elliot Wilbur with Needham & Company.

Elliot Wilbur - Needham & Company, LLC, Research Division

Just a couple of quick follow-ups and I'll fire them off here real quickly. Cooper, with respect to the current sales force constitution, I think you said you're down to 125 reps. Can you just give us a little bit better sense of who is doing what in terms of detailing time and how many bodies are kind of on each of the key products? And then I don't know if you mentioned earlier in your prepared commentary, but some sense of what the new product launch cadence will look like over the course of 2013, both ANDA and potentially NDA? And then finally, I know he's a hard guy to replace, but any update on Dave Becker's potential replacement as CFO?

David P. Becker

Okay. Now I've got all these written down, so let me -- stop me if I don't grab them all. But -- as far as the sales rep count goes, the sales rep count is about 128 right now total. We are going to give you a breakdown of who's promoting what. Our primary care division will have 83 people promoting to that space. Now these numbers are not going to add up to 128 because there are some unique targeting that we do where we'll have certain reps targeting maybe our pediatric reps in smaller territories will also target primary care or vice versa, right? So this is how this -- probably this will break down. The primary care call, so like ZUTRIPRO/REZIRA, we have about 83 folks making those calls, we'll have about 41 reps selling CEDAX and other pediatric products. And then we'll have about 69 reps selling Omeclamox and also specialty products. So going forward, the way you'll see that breakdown is we could have those specialty reps with Omeclamox, kind of the 69 reps, and the primary care reps all combined selling our -- selling Silenor. We may have every single rep selling Silenor. And then other products going forward, depending on how well they sell, like we're looking and considering other psych products that are also -- we'd be also be targeting the, I should say, CNS products, I guess, where we'd also be targeting the high decile sleep [ph] writers that happen to write a lot of this product, too. So we're already in those offices. We'd like to hit those. I think you'll see that moving forward. But that's kind of the breakdown, 83 reps selling ZUTRIPRO/REZIRA, 41 reps selling CEDAX and other feed [ph] products and then you'll have about 69 reps promoting Omeclamox, which is really kind of a lot more than we had in the past. We hope to see that grow, but we're looking at some other marketing strategies for Omeclamox right now, too. As far as the NDA, I was scrambling to write that question down, but can you repeat that NDA, a, [indiscernible] and what NDAs are launching and ANDAs launching, is that right?

Elliot Wilbur - Needham & Company, LLC, Research Division

Right. So just the new product cadence over 2013, whether that speaks specifically to number of ANDA potential launches and NDA.

Cooper C. Collins

I think we're looking forward to having 2 kind of, maybe 2 to 4 launches or product approvals on the ANDA side, I'd say launches/flash approvals in 2013. As far as the NDA side, VITUZ was the one we were really focusing on as well as the launch of Dr. Cocoa on the OTC side. So other than that, we're going to go with what we got, continue to integrate and look for other drop-in opportunities, which I think you could maybe see in 2013 as well. As far as of the CFO search goes, we're down the path with somebody that we like or we'll continuing to kind of finalize that and make sure it's the right decision for all of us, including that candidate obviously. But we are down the path with a certain someone, so we would expect to have some update on that in the next month or so.

Operator

At this time, there are no more questions. This concludes today's Pernix Therapeutics earnings conference call. Thank you, and have a nice day.

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