Columbia closes sale of progesterone related assets and 11.2M shares to Watson

Jul 6 2010

Columbia Laboratories, Inc. (Nasdaq: CBRX) announced today that it has closed the sale of its progesterone related assets and 11.2 million shares of common stock to Watson Pharmaceuticals, Inc. (NYSE: WPI) (the "Watson Transaction"). Columbia's business now consists of its royalty and manufacturing revenues, potential milestone payments, its collaboration with Watson on the development of next-generation progesterone products, and its novel bioadhesive drug delivery technologies and other products.

“In the near term, Columbia will focus on the smooth transfer of domestic commercial operations for CRINONE® 8% (progesterone gel) to Watson, completing the PREGNANT Study of PROCHIEVE® 8% (progesterone gel), and developing with Watson the next generation progesterone product.”

"We are very pleased to complete this transaction with Watson, and to emerge a debt free company with a significantly improved outlook," said Frank C. Condella, Jr., Columbia's president and chief executive officer. "In the near term, Columbia will focus on the smooth transfer of domestic commercial operations for CRINONE^® 8% (progesterone gel) to Watson, completing the PREGNANT Study of PROCHIEVE^® 8% (progesterone gel), and developing with Watson the next generation progesterone product."

At the closing, Columbia received from Watson $47 million in cash. In addition, Watson forgave all principal and accrued interest on the $15 million subordinated term loan dated June 1, 2010. Columbia will receive royalties of 10 to 20 percent of annual net sales of certain progesterone products. The Company is also eligible for additional amounts of up to $45.5 million based on success milestones in the potential preterm birth indication. Watson will fund the development of second-generation vaginal progesterone products as part of a comprehensive life-cycle management strategy.

Columbia retains certain assets and rights to its progesterone business, including all rights necessary to perform its obligations under its agreement with Merck Serono S.A. Merck Serono holds marketing rights to and makes payments to Columbia related to CRINONE^® (progesterone gel) sales in all countries outside the United States.

Columbia used approximately $16 million of the initial proceeds of the Watson Transaction to pre-pay the balance of the minimum royalty payments due in November 2010 to PharmaBio Development, and $26 million, together with stock and warrants, to pre-pay 100% of the $40 million in convertible notes due December 31, 2011. As a result, Columbia is now debt-free with over $25 million in cash and approximately 84 million common shares outstanding.