Columbia Laboratories' revenues increase 11% to $32.5 million in 2014

Mar 18 2015

Columbia Laboratories, Inc. (Nasdaq: CBRX) ("Columbia" or the "Company"), today announced financial results for the three- and twelve-month periods ended December 31, 2014.

"The 11% growth in our 2014 full year revenues was driven in large part by a full year of service revenue, which helped offset the anticipated temporary decline in CRINONE® sales. During this transitional year we restarted our drug development activities, significantly strengthened our management team, and generated a substantial amount of cash," stated Frank Condella, CEO.

"Our strategy going forward is to utilize cash generated by our CRINONE® franchise and service business to fund our proprietary product development programs. We look forward to initiating the Phase II study of COL-1077, a lidocaine bioadhesive gel intended as an acute use anesthetic for minimally invasive gynecological procedures, in the second quarter of 2015. In addition, we are close to finalizing our scientific advisory board, which will support our experienced team in evaluating other new product candidates in women's health. Successful execution of this strategy will materially change our growth prospects over time," continued Mr. Condella.

Full Year 2014 Financial Results
Revenues increased 11% year-over-year to $32.5 million in the year ended December 31, 2014, as compared to $29.2 million in the previous year. The increase is driven by the full-year contribution of the diversified revenue stream of Columbia's service business, offsetting a temporary decline in product revenues from Merck Serono caused by a routine marketing license renewal for CRINONE® (progesterone gel) in a large market. Inventory for this market was mainly delivered in 2013 and consumed in 2014, as product importation was not allowed during the license renewal period in 2014.

Product revenues were $17.4 million in 2014, compared with $21.3 million in the prior year due to the previously mentioned CRINONE® license renewal. Normalized shipments to Merck Serono resumed in the fourth quarter and are expected to continue throughout 2015.

Service revenues were $8.8 million for the twelve months ended December 31, 2014, as compared with $3.6 million in the prior year. Columbia acquired Molecular Profiles on September 12, 2013, resulting in a shortened year-over-year comparison.

Royalty revenues totaled $6.3 million in 2014, compared with $3.8 million in the prior year. The increase is largely due to a one-time benefit from the sale of intellectual property rights and technology for Legatrin PM®, which contributed $2.2 million to royalty revenues.

Gross profit was $14.8 million in the year ended December 31, 2014, as compared with $16.0 million in the prior year. Gross profit as a percentage of total revenues was 46% for the full year 2014, compared to 55% in the prior year. Excluding the impact of the Legatrin PM sale, the gross margin was 42%. The higher gross profit and gross profit percentage for 2013 primarily reflects the higher sales to Merck Serono in 2013 as it built up inventory in a large overseas market preceding a 2014 license renewal period.

Operating expenses increased to $11.0 million in 2014, up from $10.1 million in the prior year. The increase reflects higher sales and marketing and other administrative costs associated with a full year of operations for our service business, combined with $0.7 million of research and development spending to advance COL-1077 and the Company's drug development capabilities. While there were no research and development expenses in 2013, there were acquisition related expenses during that year that did not recur in 2014.

The Company recorded net income of $3.4 million, or $0.27 per diluted share, in the twelve months ended December 31, 2014. The result compares with net income of $6.7 million, or $0.52 per diluted share, for the twelve months ended December 31, 2013. The 2014 financial results include a non-cash tax charge of $0.9 million for the establishment of a valuation allowance against the Company's foreign net deferred tax assets. Non-GAAP Adjusted EBITDA was $7.0 million for the 2014 period compared to $9.5 million for the 2013 period, which included a non-recurring adjustment of $1.6 million related to the acquisition of the services business in September 2013.

Fourth Quarter Financial Results
Fourth quarter revenues were $7.3 million, as compared with $7.8 million in the year-ago period. The decrease resulted largely from the deferral of expected services projects from the 2014 fourth quarter into 2015. This decline was offset in part by a $1.0 million increase in product revenues as compared to 2013. The reduction in anticipated revenue lowered gross margin for the quarter as compared to the prior year quarter. The service cost structure is largely fixed and gross margin performance is expected to fluctuate periodically based upon capacity utilization and project revenue timing.

Total operating expenses were $0.1 million lower in the fourth quarter of 2014 as compared to the prior year quarter, with reductions in G&A expense and acquisition-related expenses more than offsetting the R&D spending in the fourth quarter of 2014. Operating income was $0.3 million compared to operating income of $0.8 million in the fourth quarter of 2013.

In the fourth quarter of 2014, the Company recorded non-cash charges of $1.1 million, the majority of which was $0.9 million for the establishment of a valuation allowance against its foreign net deferred tax assets.

As a result, the Company recorded a net loss of $0.5 million, or ($0.05) per diluted share, in the fourth quarter of 2014 compared to net income of $1.1 million, or $0.06 per diluted share, in the same period of 2013.

Liquidity
Cash and cash equivalents were $16.8 million at December 31, 2014 compared with $20.7 million at the end of 2013. The Company used $8.5 million in cash during the year to buy back all outstanding shares held by Actavis. Cash flow from operations generated during the three- and twelve-month periods ended December 31, 2014 was $1.0 million and $6.9 million, respectively.

Recent Business Highlights

• Received FDA feedback on the clinical plan for COL-1077, a lidocaine bioadhesive gel intended as an acute use anesthetic for minimally invasive gynecological procedures. The Company expects to submit an investigational new drug application in March and commence a Phase II clinical trial in the second quarter of 2015.
• Dr. Bridget Martell was appointed to the newly-created position of Chief Medical Officer, effective January 6, 2015. Dr. Martell was the founder and managing director of BAM Consultants, which provides clinical development and medical affairs consulting services to a broad array of specialty pharmaceutical companies. Prior to that, she oversaw the product development activities of Purdue Pharma and several business units within Pfizer Worldwide's biopharmaceutical business. The Company believes her appointment is an important step in advancing COL-1077 and evaluating new product opportunities for advancement into development.
• Molecular Profiles announced a collaboration with Maryland-based Xceleron that assists drug developers with improved efficiency during clinical development. The partnership extends Molecular Profiles' ROADMAP to Clinical Trials enabling technologies platform, which supports customers with the rapid development of both standard and complex drug products.

Financial Outlook
Columbia is actively moving forward as a women's health specialty pharmaceutical company focused on 505(b)2 products. The Company's next product will enter the clinic during the second quarter, and the Company is active in identifying and advancing additional, promising drug candidates.

"We see a robust product portfolio as the primary driver in creating long-term value for shareholders. We will use our operating cash flows to fund product development, and leverage Molecular Profiles' expertise in formulation, pharmaceutical development, and clinical trials manufacturing to expedite our drug development agenda," said Mr. Condella.

"In-market sales of CRINONE® continue to be strong and the resumption of normalized shipments should result in higher product sales. We also expect growth in our services revenues in 2015 as well," concluded Mr. Condella.

The Company expects low double-digit total net revenue growth for the full year 2015.

Other Events
In its Form 10-K filed today with the U.S. Securities and Exchange Commission, the Company reported the revision of the consolidated interim financial statements, as well as quarterly financial data, for the first three quarters of 2014. Full year 2014 results are unaffected by the revisions. These revisions had the cumulative effect of reducing the Company's previously reported total revenues during the first three quarters of 2014 by $0.4 million, from $25.6 million to $25.2 million. After thorough analysis, the Company determined that the previously issued financial statements could continue to be relied upon and are representative of the performance during that time period.