Irvine-based drug distributor Praxsyn Corp. is reorganizing its operations as it copes with what it calls “a substantial working capital deficit.”
Praxsyn, through its wholly owned subsidiary, Mesa Pharmacy, provides nonnarcotic topical pain medications to doctors, specializing in industrial health and medical clinics. It serves mainly patients covered under workers’ compensation insurance, preferred provider organizations, and other private insurance providers.
The company bills and collects from the insurance companies that cover patients who receive the treatments. It said in a Securities and Exchange Commission filing earlier this year that its workers’ compensation billings are not preapproved, that collections for such billings can take in excess of a year, and also noted in an earlier filing that its net billings were “substantially less” than the gross billings it was allowed to charge.
Praxsyn this month settled litigation with Mission Viejo-based Trestles Pain Specialists LLC, a pain control clinic. Praxsyn sued Trestles and two co-defendants in Orange County Superior Court over alleged nonperformance of a consulting deal in March 2015.
Trestles then sued Praxsyn, Mesa and several other co-defendants in April 2015 “alleging 23 various causes of action,” Praxsyn said in a Securities and Exchange Commission filing, adding that the company didn’t believe there “was any new exposure to us under this suit, as the underlying claims are already reserved for in the [Praxsyn v. Trestles] lawsuit.”
Praxsyn recently went through management changes. The company installed Greg Sundem, who also serves as chief executive of MedCare Finance, a Las Vegas healthcare consultant, as its new chief executive after removing Edward Kurtz at the end of March.
Sundem’s background includes 17 years with Llewellyn Worldwide, a Woodbury, Minn.-based spirituality publisher, serving as its director of information technology and operations.
He recently wrote a letter to shareholders explaining how Praxsyn would reorganize in order to handle its current difficulties and look to new ideas.
Praxsyn is delaying the filing of its 10-K annual report with the SEC in order to finish its reorganization, Sundem said.
His letter highlighted efforts Praxsyn has made to cut its deficit. He did not specify its amount in the letter, but a federal filing showed the company had a “negative working capital deficit” of $16.5 million as of Sept. 30, the latest figure available.
Recent Steps
The company has so far:
• Settled with vendors to reduce its marketing-related debt by at least $5 million.
• “Reduced inefficiencies in executive staff in order to massively reduce overhead.” Sundem said that the company has cut more than $500,000 in annual payroll, and currently “myself, our CFO/COO [Justin Cary] and our general counsel/secretary [Kimberly Brooks] are deferring salaries until the company’s overall cash flow is improved.”
• Written down certain other assets in order to eliminate any income tax liability for 2015.
The company won’t process any workers’ compensation-related prescriptions “unless our costs are fully funded prior to the date of service” in order “to ensure that this situation will not [be] repeated,” Sundem told shareholders.
To-Do List
Sundem’s letter outlined a detailed plan to “increase our shareholder value.”
Praxsyn’s efforts in that vein will include:
• Acquiring a Food and Drug Administration-approved “and fully licensed drug manufacturing facility so that we may offer patients pain management creams (and other products) at massively reduced prices.”
• Pursuing “accretive acquisitions of laboratories and other medical providers who enjoy rapid claims payments,” Sundem said.
• Expanding its sales efforts “more fully into private insurance markets where payment is pre-approved by insurance carriers.”
Praxsyn also will “vastly improve communications with our shareholders,” according to Sundem.
That will be accomplished through regular press releases, holding teleconferences to comment on releases of SEC filings, and hiring “dedicated investor relations staff,” he wrote.
Praxsyn trades on the low-profile bulletin board exchange, and its shares had a recent market value of $4.1 million. The company does not have any analyst coverage.
