Praxsyn Corp (PXYN)

[Drugdoctor]

$PXYN-Praxsyn Pharma-Pre-Earnings-Run-Explained

In the often maligned world of penny stocks, occasionally a real gem of a company appears and I believe that OTCQB:PXYN is such a company.

Previously I found and blogged on ELTP - Elite Pharmaceuticals - in the .07 to .10 range on Seeking Alpha, and eventually sold a lot of my position in the .94 cent area earlier this year. That said, we may have found another undervalued drug stock with Praxsyn Pharmaceuticals.

A little history here, as most people have not heard of Praxsyn Pharma. It is a REVERSE MERGER company that just went public this year. Pharmacy Development Company (PDC) and Mesa Pharmacy, used the old PAWS shell to accomplish this going public, and in order to comply with SEC rules and FINRA rules, it took over 8 months for the company to accomplish updated 10K annual reports and accomplish the name change and updated symbol change to Praxsyn Pharmaceuticals PXYN.

Also with the old shell came some convertible debt and the PDC company also had some debts and it appears that some of those debts were exchanged for shares, and many of those were diluted into the markets over the summer and drove the stock price down from the .20 area to the .03 area in early fall. However, that selling appears to be done, and now anticipation over 3rd quarter earnings reports has attracted a new group of investors to the stock and buying has been strong recently. You can see this recent move on the attached stock chart.




From looking at the above chart you can see that PXYN has more than doubled in the last month, but is still well below the .20 range achieved in Feb. 2014. Also you can see that the MFI = Money Flow Index is strongly bullish indicating money coming into this stock before earnings, RSI is in the (powerzone-near or above 70), and MACD continues a very bullish rise.

So that brings us back to the premise of why all the excitement and anticipation for a .075 cent penny stock? The answer is MASSIVE GROWTH in REVENUES and GROSS PROFITS. I put this in caps and bold to make it clear, this is a growth story like none I have seen in awhile. I am posting the chart showing the SEC 10Q filed growth in revenues and profits from the first two quarters. These numbers are real and have stood the test of time on the investors hub board, and have not been challenged.



When you look at the above table, there are several missing items that need to be pointed out. First, the gross revenues (amount actually billed to Workman's Compensation Claims) is not on this table, because it would be too confusing to a new viewer to try to understand. However for the second quarter, the amount billed was closer to 50 million dollars, net revenue, as shown, was 23.2 million dollars. The second item missing is Net Profits or Losses on the 8.5 million dollars in operating Income. And, because there was stock based compensation used to pay an agent to find those huge revenue increases, it resulted in a loss of about 800,000 dollars for the quarter after charges. What is notable about the above table, is that GROSS PROFIT MARGINS are over 90%, and that NET REVENUES grew from 9.2 million dollars to 23.2 million dollars in just one quarter! But why are expenses so high? In the workers compensation business, you mail the prescriptions to the client, and then you wait for reimbursement from the insurance payer. Work Comp claims are notorious for sometimes taking months or years to settle, and PXYN has needs for immediate cash flow to continue operations, therefore they use outside collection agencies, called factoring agents, to collect the claims. These factoring agencies will pay from 20 to 35% of the amounts outstanding to PXYN for the right to collect as much of the claims as possible and keep the remaining amounts over their fees to PXYN as their profits. Thus, PXYN gets immediate payment for 20% of their gross billings only, and never gets to collect the remainder....

Now you may begin to understand the anticipation for the third quarter report. We know that several things have happened in the third quarter that very well could have turned Praxsyn into a NET PROFITABLE company. The first is that the TPC company that has found all this business was collecting about 17% of the NET REVENUE as a fee, thus only leaving about 3% of the revenue as profits for PXYN. However, for the third quarter, they have agreed to decrease this fee to only about 13% as long as factoring is at 20% for PXYN. This would double the amount of GROSS PROFITS that PXYN would make in the third quarter alone! However, there are two other significant developments that have occurred in the 3rd quarter that have investors anticipating improved earnings results. The second development is that there was a limit to the amount of PREFERRED STOCK that was being paid to TPC as finders fees for new business... That limit would have been reached in the third quarter, and no more charges for this preferred stock will be on the books after the third quarter. So will TPC quit finding new business for PXYN since they are not getting stock based compensation? Well, since they now are one of the largest shareholders in the company, do you think they have any incentive to increase the value of PXYN stock? With 12 new states licensed to sell Praxsyn Pharmacy products, do you think TPC has any new territory to conquer, and remember... they are getting 17% of the revenue! So they have all the reason in the world to keep growing the business.

Now the third and most major development, is the fact that Praxsyn has set up an internal collections company, a new division of Praxsyn, called NextGen Med, and will now be able to decrease factoring and internalize collections.

To conclude:

For a newcomer to Praxsyn, all these gross billings, net revenue, factoring deals, and preferred stock deals must seem very confusing. However, keep in mind, we are now talking about a company that will likely generate 200 to 300 million dollars in GROSS BILLINGS in 2015, and will likely be able to generate NET PROFITS measured in the tens of millions of dollars. The stock price is at .075.

With this internal collections, the growth rate that we have seen this year, the launch of 12 new states, the incentive for TPC to continue the growth rate and increase the stock price, and the fact that the company has the STATE OF CALIFORNIA as it's largest customer, is run mostly by Pharmacists and Doctors, anticipation of the third quarter earnings report is very high and growing, as is the stock price. The Investorshub stock board is a good source for more information and discussion of this company.

http://finance.yahoo.com/news/praxsyn-appoints-kelly-reynolds-ceo-131500221.html


http://finance.yahoo.com/news/praxsyn-now-licensed-dispense-medication-192547337.html