Cornerstone Therapeutics announces financial results for the third quarter of 2009

Nov 4 2009

Cornerstone Therapeutics Inc. (Nasdaq: CRTX), a specialty pharmaceutical company focused on acquiring, developing and commercializing significant products primarily for the respiratory and related markets, today reported financial results for the three and nine months ended September 30, 2009.

Recent Highlights

• Third quarter net revenues increased $2.5 million to $23.1 million, or 12%, compared to the third quarter of 2008
• Non-GAAP income from operations(1) for the third quarter of $2.8 million, based on a GAAP basis loss from operations of $1 million adjusted primarily for additional expenses related to the strategic transaction with Chiesi Farmaceutici SpA
• Closed acquisition of commercial rights to Factive®
• Completed transaction with Chiesi to acquire rights to Curosurf® and $15.5 million in cash
• FDA accepted for review the Company's filing for an extended-release antitussive product candidate (CRTX 067)

(1) Non-GAAP income from operations is a non-GAAP financial measure that excludes stock-based compensation, amortization of product rights and acquisition-related expenses. See reconciliation tables below for full details.

"In the third quarter, we continued to execute our strategy with the additions of Curosurf and Factive to our product portfolio," said Craig A. Collard, Cornerstone's Chairman and Chief Executive Officer. "We are excited about the potential these products have in the hands of our sales force, and expect them to be strong long-term contributors to our success. In addition, we are pleased that the regulatory filing for our extended-release antitussive product candidate, CRTX 067, was submitted to the FDA in July and has been accepted for review."

Third Quarter Financial Results

Net revenues for the third quarter increased $2.5 million over the same period in 2008, or 12%, to $23.1 million.

Net product sales were $23.1 million in the third quarter, compared to $20.1 million in the same period of 2008, an increase of $3.0 million, or 15%.

AlleRx® Dose Pack family of products net product sales for the three months ended September 30, 2009 decreased by $2.6 million, or 42%, to $3.5 million compared to the three months ended September 30, 2008. The decline in product sales was due primarily to decreased volume of the AlleRx PE and the AlleRx DF formulations as a result of increased competition.

Curosurf net product sales were $2.2 million for the three months ended September 30, 2009. The Company acquired the Curosurf product rights from Chiesi during the third quarter of 2009 and began promoting and selling Curosurf in September 2009.

Factive net product sales were $91,000 for the three months ended September 30, 2009. Factive product rights and related inventory were acquired on September 9, 2009. The Company began earning revenues from Factive in September 2009, but did not initiate marketing and promotional activities until October 2009.

HyoMAX® net product sales decreased $4.9 million, or 39%, to $7.6 million for the three months ended September 30, 2009 compared to the corresponding period of 2008. This decrease was primarily due to increased competition from other manufacturers in the marketplace.

Spectracef® net product sales increased $1.9 million for the three months ended September 30, 2009 compared to the corresponding period of 2008 primarily due to the enhanced promotion of Spectracef by the Company's sales force to targeted physicians.

Zyflo CR® and Zyflo® net product sales were $5.0 million for the three months ended September 30, 2009. As noted below, the Company's historical financial results for the three and nine months ended September 30, 2008 do not include sales of Zyflo CR and Zyflo by Critical Therapeutics prior to the completion of our October 31, 2008 merger.

Gross profit (exclusive of royalty agreement revenues and amortization of product rights) was $18.9 million for the quarter ended September 30, 2009 compared to $18.5 million in the corresponding period of 2008. Gross margin was 82% and 92% for the three months ended September 30, 2009 and 2008, respectively. The reduction in gross margin resulted primarily from a change in the mix of products comprising net product sales.

Sales and marketing expenses increased $4.5 million during the three months ended September 30, 2009 compared to the corresponding period of 2008. This increase was primarily attributable to growth of the sales force and management team; marketing and promotional spending; and co-promotion, travel and consulting-related expenses.

General and administrative expenses increased $3.7 million for the three months ended September 30, 2009 compared to the same period in 2008. This increase was primarily due to increases in our workforce; an increase in legal and accounting costs, most of which relate to increased requirements as a result of becoming a public company and costs associated with the Chiesi transaction; FDA regulatory-related fees; and product liability and other insurance-related expenses. Costs associated with the Chiesi transaction during the three months ended September 30, 2009 included $1.5 million of additional stock-based compensation expense due to the accelerated vesting of certain stock options and shares of restricted stock and $0.3 million of legal, accounting and related expenses.

Financial Results for Nine Months Ended September 30, 2009

Net revenues for the nine months ended September 30, 2009 increased $34.7 million over the same period in 2008, or 79%, to $78.8 million.

Net product sales were $78.5 million for the nine months ended September 30, 2009, compared to $42.9 million in the same period of 2008, an increase of approximately $35.7 million, or 83%.

For the nine months ended September 30, 2009, net product sales of the AlleRx Dose Pack family of products increased by $4.0 million, or 21%, to $23.0 million compared to the nine months ended September 30, 2008. This increase was due primarily to higher AlleRx Legacy prescription volume offset by decreased volume of the AlleRx PE and the AlleRx DF formulations as a result of competition.

HyoMAX net product sales increased $8.0 million, or 47%, to $25.0 million for the nine months ended September 30, 2009 compared to the corresponding period of 2008. This increase was primarily due to the fact that our HyoMAX products were launched in May, June and July 2008, and, therefore, had at most five months of sales during the first nine months of 2008.

Spectracef net product sales increased $5.4 million, or 370%, to $6.9 million for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. This increase was primarily due to the launch of the Spectracef 400 mg Dose Packs in late 2008.

Zyflo CR and Zyflo net product sales were $13.8 million for the nine months ended September 30, 2009.

Gross profit (exclusive of royalty agreement revenues and amortization of product rights) was $68.3 million in the nine months ended September 30, 2009 compared to $39.8 million in the corresponding period of 2008. Gross margin was 87% and 93% for the nine months ended September 30, 2009 and 2008, respectively. The reduction in gross margin resulted primarily from a change in the mix of products comprising net product sales.

Sales and marketing expenses increased $8.8 million for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. This increase was primarily attributable to growth of the sales force and management team; marketing and promotional spending; and co-promotion, travel and consulting-related expenses.

General and administrative expenses increased $8.8 million for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. This increase was primarily due to increases in our workforce; an increase in legal and accounting costs, most of which relate to increased requirements as a result of becoming a public company and costs associated with the Chiesi transaction; FDA regulatory-related fees; and product liability and other insurance-related costs. Costs associated with the Chiesi transaction during the nine months ended September 30, 2009 included $1.5 million of additional stock-based compensation expense due to the accelerated vesting of certain stock options and shares of restricted stock and $1.8 million of legal, accounting and related expenses.