Cornerstone Therapeutics' fourth-quarter net revenues increase 48%

Mar 4 2010

Cornerstone Therapeutics Inc. (Nasdaq CM: CRTX) today reported financial results for the three and 12 months ended December 31, 2009.

Highlights

• Annual net revenues exceeded $100 million for the first time in Company history

• Fourth quarter net revenues increased $10.0 million, or 48%, to $30.8 million, compared to the fourth quarter of 2008

• Non-GAAP income from operations for the fourth quarter of $7.4 million based on GAAP income from operations of $3.5 million, compared to non-GAAP income from operations of $730,000 based on a GAAP operating loss of $140,000 in the fourth quarter of 2008  

• Successful integration of Curosurf® and relaunch of Factive® expanding our base of strategic specialty products

• Enhanced management team by appointing Andrew K. W. Powell, Esq. as Executive Vice President, General Counsel and Secretary

"2009 was a year of strong financial performance and significant strategic importance for Cornerstone," said Craig A. Collard, Cornerstone's Chairman and Chief Executive Officer.  "We achieved over $100 million in annual sales for the first time in 2009.  At the same time, we acquired our two lead specialty products, Curosurf and Factive, as a key part of our strategy to transition our business to focus on strategic specialty products.  We are committed to building a leading specialty pharmaceutical company focused on diseases associated with respiratory disorders.  Importantly, we began 2010 with approximately $19 million in cash and no debt.  We believe that this financial flexibility should allow us to focus on acquiring and developing further specialty products with the goal of generating consistent long term earnings growth."

Fourth Quarter and Full year Financial Results

Net revenue for the fourth quarter of 2009 was $30.8 million, a 48% increase compared to $20.8 million for the fourth quarter of 2008.  Net revenue for the 12 months ended December 31, 2009 was $109.6 million compared to $64.9 million, a 69% increase over the 12 months ended in December 31, 2008.

Curosurf net product sales were $8.3 million for the three months ended December 31, 2009.  The Company acquired an exclusive ten year U.S. license to the Curosurf product rights from Chiesi Farmaceutici S.p.A. (Chiesi) during the third quarter of 2009 and began promoting and selling Curosurf in September 2009.

Our two antibiotics, Factive and Spectracef®, generated combined revenue of $3.6 million for the three months ended December 31, 2009.  During the same period of 2008, Spectracef generated revenues of $5.5 million.  Factive and Spectracef, generated combined revenue of $10.6 million for the 12 months ended December 31, 2009 and Spectracef generated revenues of $7.0 million over the same period in 2008. Factive product rights and related inventory were acquired through an asset purchase agreement with Oscient Pharmaceuticals Corporation 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.

Zyflo CR® and Zyflo®, our leukotriene synthesis inhibitor drugs, generated revenues of $4.1 million and $18.0 million for the three and 12 months ended December 31, 2009, respectively.  As noted below, net product sales in 2008 for Zyflo and Zyflo CR do not include sales by Critical Therapeutics prior to the completion of our October 31, 2008 merger.

Our non-strategic products, including our AlleRx® Dose Pack products and our HyoMAX products, comprised 48% of net product sales for the three months ended December 31, 2009, as compared to 69% during the same period of 2008.  Non-strategic products comprised 64% of net product sales for the 12 months ended December 31, 2009, compared to 88% for the same period in 2008.

Gross margin (exclusive of the amortization of product rights) was 70% and 86% for the three months ended December 31, 2009 and 2008, respectively.  Gross margin was 82% and 91% for the 12 months ended December 31, 2009 and 2008, respectively.  The lower gross margins resulted primarily from the Company's intentional change in product mix.  Cornerstone expects gross margins to continue to be in excess of 70% in 2010.

Sales and marketing expenses increased $10.6 million for the 12 months ended December 31, 2009 compared to the 12 months ended December 31, 2008 and $1.8 million for the three months ended December 31, 2009 compared to the same period in 2008.  These increases were primarily attributable to increases in labor and benefits-related costs as a result of the growth of Cornerstone's sales forces, including the addition of our hospital sales force and management team; marketing and promotional spending relating to the launches of Zyflo CR, Factive and Curosurf; and co-promotion expenses relating to Zyflo CR.

General and administrative expenses increased $7.5 million for the 12 months ended December 31, 2009 compared to the 12 months ended December 31, 2008.  This increase was primarily due to increases in labor and benefits-related employee expenses and travel-related expenses; legal and accounting costs related to Cornerstone 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 were $3.3 million, which included $1.5 million of additional stock-based compensation expense due to acceleration of certain stock options and shares of restricted stock and $1.8 million of legal, accounting and related fees.  For the three months ended December 31, 2009, these expenses decreased by $1.2 million compared to the same period in 2008.  This decrease was primarily due to reductions in stock-based compensation expense, regulatory fees, insurance and uncapitalized merger-related expenses in the three months ended December 31, 2009 compared to the same period in 2008.

Research and development expenses increased $0.5 million, or 12%, for the 12 months ended December 31, 2009 compared to the 12 months ended December 31, 2008.  This increase was driven by an increase in expenses related to our product candidate, CRTX 067, and other projects.  For the three months ended December 31, 2009, these expenses decreased by $1.4 million compared to the same period in 2008.  This decrease was primarily due to the write-off of acquired in-process research and development costs of $1.9 million in the fourth quarter of 2008, partially offset by an increase in expenses related to CRTX 067.  Cornerstone expects to continue incurring significant development and commercialization expenses as it seeks to advance the development and seek FDA approval of its product candidates.

2010 Outlook

Cornerstone is reiterating the 2010 revenue guidance it provided in January of this year of in excess of $112 million.  This estimate assumes that revenue contribution from strategic specialty products will increase from less than 40% of net revenues in 2009 to in excess of 75% of net revenues in 2010.  In addition, the Company continues to anticipate achieving income from operations on a GAAP basis of $1.0 million and on a non-GAAP basis of $16.4 million.