Columbia Laboratories net revenues increase 65% to $6.3 million in first quarter 2013

Columbia Laboratories, Inc. (NasdaqCM: CBRX) today reported financial results for the three-month period ended March 31, 2013. Highlights of the first quarter include:

“Our first quarter results mark Columbia's fourth consecutive quarter of profitability and third consecutive quarter of positive operating cash flows, and reflect the ongoing promotion and growth of CRINONE® by Actavis and Merck Serono in their respective territories”

• Total net revenues increased 65% to $6.3 million in the first quarter of 2013, compared to $3.8 million in the first quarter of 2012, driven primarily by a $2.6 million increase in net product revenues from Merck Serono S.A. ("Merck Serono") and, to a lesser extent, higher royalty revenues from Actavis, Inc. ("Actavis").
• Total operating expenses decreased to $2.5 million, compared to $3.1 million in the first quarter of 2012.
• Operating income was $1.0 million, versus an operating loss of $1.3 million in the first quarter of 2012, reflecting the higher revenues and lower operating expenses.
• Cash, cash equivalents and short-term investments increased by $0.6 million in the quarter to $29.2 million at March 31, 2013.

"Our first quarter results mark Columbia's fourth consecutive quarter of profitability and third consecutive quarter of positive operating cash flows, and reflect the ongoing promotion and growth of CRINONE^® by Actavis and Merck Serono in their respective territories," said Frank Condella, Columbia's President and CEO. "In April, we extended our agreement with Merck Serono for another five-year term, which provides long-term stability for Columbia and surety of supply for Merck Serono through May 2020. We look forward to continued positive cash flow from our core business going forward while we explore Columbia's strategic options."

First Quarter Financial Results

Total net revenues for the first quarter of 2013 were comprised of net product revenues primarily for international sales of CRINONE (progesterone gel) to Merck Serono, and royalties from Actavis on Actavis' total net sales of CRINONE in the U.S.

Net product revenues increased by $2.3 million to $5.4 million in the first quarter of 2013, compared to $3.1 million in the first quarter of 2012.

• Net revenues from CRINONE sold to Merck Serono increased by $2.6 million, or 93%, as compared to the first quarter of 2012. The higher revenues reflect a 74% increase in volume quarter over quarter coupled with shipments to countries with higher net selling prices. The 74% volume increase was based off lower product shipments in the first quarter of 2012 due to a production run failure in that period.
• There were no net revenues from product sold to Actavis, compared to $0.2 million in the first quarter of 2012. Columbia does not expect any material orders for CRINONE during 2013, as Actavis currently has sufficient inventory of CRINONE.

Total royalty revenues were $0.9 million in the first quarter of 2013, compared to $0.7 million in the first quarter of 2012, reflecting increased royalty revenues from Actavis on CRINONE products. Columbia expects to continue to receive from Actavis royalty revenues of 10% of U.S. net sales of certain progesterone products, including CRINONE and the next-generation CRINONE product, for the foreseeable future.

As a result, total net revenues for the first quarter of 2013 were $6.3 million, compared to $3.8 million for the first quarter of 2012, an increase of 65%.

Gross profit increased by $1.6 million to $3.5 million in the three months ended March 31, 2013 as compared to $1.8 million in the three months ended March 31, 2012. Gross profit as a percentage of total net revenues was 55% for the first quarter of 2013, compared to 48% in the first quarter of 2012. Gross profit as a percentage of net product revenues was 47% for the first quarter of 2013, versus 36% for the same period in 2012. The higher profit margins in the 2013 quarter resulted primarily from the shift in sales mix to Merck Serono in favor of higher-margin country markets.

General and administrative expenses decreased by $0.1 million to $2.5 million for the three months ended March 31, 2013 compared with $2.6 million for the three months ended March 31, 2012. Our ongoing general and administrative expenses decreased by $0.4 million, or 20%, from $2.2 million to $1.8 million. We incurred $0.2 million in severance and retention expenses in the three months ended March 31, 2013 compared with $0.4 million in severance expenses for the three months ended March 31, 2012. This decrease was offset by an increase of $0.5 million in professional fees associated with business development activities.

There were no research and development costs in the first quarter of 2013, compared to $0.6 million in the 2012 quarter. The decrease reflects the elimination of our R&D activities in 2012.

As a result, total operating expenses decreased to $2.5 million in the first quarter of 2013 as compared to $3.1 million for the corresponding quarter in 2012.

Operating income was $1.0 million in the first quarter of 2013, compared to an operating loss of $1.3 million in the prior year period. The change primarily reflects the $1.6 million increase in gross profit and a $0.6 million decrease in total operating expenses in the first quarter of 2013.

Other income aggregated to $0.2 million for the first quarter of 2013, compared to $6.2 million in the first quarter of 2012. Other income primarily reflects the recognition of the change in the fair value of the warrants issued in conjunction with the October 2009 stock issuance. During the quarter ended March 31, 2013, the decrease in Columbia's stock price resulted in a gain of $0.2 million as compared with a gain of $6.3 million for the corresponding quarter in 2012.

As a result, the Company reported net income of $1.2 million, or $0.01 per basic and diluted share, compared to net income of $5.0 million, or $0.06 per basic and $(0.01) per diluted share, for the first quarter of 2012.

Cash and Equivalents

At March 31, 2013, Columbia had cash, cash equivalents and short-term investments of $29.2 million, compared to cash, cash equivalents and short-term investments of $28.6 million at December 31, 2012.

Subsequent Material Events

Extension of Agreement with Merck Serono

On April 4, 2013, Columbia amended its license and supply agreement with Merck Serono for CRINONE through May 2020, representing an extension of five years beyond the current term. Under the terms of the amended license and supply agreement, Columbia will remain the sole supplier of CRINONE to Merck Serono and will continue to sell CRINONE to Merck Serono on a country by country basis. From 2014 through 2020, the sourcing conditions for Merck Serono will include incremental volume discounts to incentivize Merck Serono to continue developing existing markets and investing in entry into new markets.