SOURCE: Cornerstone Therapeutics Inc.

Cornerstone Therapeutics Inc.

March 03, 2011 07:00 ET

Cornerstone Therapeutics Reports Fiscal Year 2010 Financial Results

-- Net Revenues Increased 14% Year-Over-Year to a Record $125.3 Million

-- Curosurf® Achieved New Market Share High for Full Year 2010

-- Cash Balance at Year End Grew to $50.9 Million

CARY, NC--(Marketwire - March 3, 2011) - Cornerstone Therapeutics Inc. (NASDAQ: CRTX) today reported full year and fourth quarter 2010 results. Total net revenues were $125.3 million for the full year of 2010, representing a 14% increase over the $109.6 million reported for the full year of 2009. Total net revenues for the fourth quarter of 2010 were $32.5 million representing a 6% increase over the $30.8 million for the fourth quarter of 2009. Net product sales from strategic products were 60% of total net revenues, or $74.7 million, for the full year of 2010, an increase from the 36% of total net revenues, or $39.0 million, for the full year of 2009. Net product sales from strategic products were 66% of total net revenues, or $21.4 million, for the fourth quarter of 2010, an increase from the 52% of total net revenues, or $16.0 million, for the fourth quarter of 2009.

Net income for 2010 was $6.2 million, or $0.24 per diluted share, compared to net income of $10.2 million, or $0.54 per diluted share in 2009. Fourth quarter net income was $0.8 million, or $0.03 per diluted share, compared to $2.7 million, or $0.10 per diluted share, for the fourth quarter of 2009. On a non-GAAP basis, net income for 2010 was $18.9 million, or $0.73 per diluted share, compared to non-GAAP net income of $17.4 million, or $0.93 per diluted share in 2009. On a non-GAAP basis, fourth quarter net income was $5.2 million, or $0.20 per diluted share, compared to non-GAAP net income of $5.5 million, or $0.21 per diluted share for the fourth quarter of 2009. Non-GAAP net income and net income per diluted share exclude amortization of product rights, acquisition-related expenses in connection with the 2009 transaction with Chiesi Farmaceutici S.p.A., and stock-based compensation.

"Cornerstone ended 2010 with record net sales, a strong cash position and a more focused product portfolio," said Craig A. Collard, Cornerstone's President and Chief Executive Officer. "As a result of the efforts of the company's dedicated employees, we achieved another record year in net revenues, including a new market share high with Curosurf; we also successfully distributed the remaining inventory as the final phase in our plan to cease manufacturing and distribution of AlleRx® and HyoMax® and generated significant cash."

Mr. Collard continued, "We believe that the momentum built in 2010 positions us to build a portfolio of products that will leverage our presence in the respiratory and hospital markets while we continue to advance our internal pipeline."

A breakdown of net revenues by product for the fourth quarter and year ended December 31, 2010 (in thousands, except percentages) follows:


                 Three Months
                    Ended                      Year Ended
                 December 31,     Change       December 31,      Change
               --------------- -----------  ----------------- ------------
                2010    2009     $      %     2010     2009      $      %
               ------- ------- ------ ----  -------- -------- ------- ----
Net Product
 Sales
  Curosurf     $ 9,854 $ 8,310 $1,544   19% $ 33,621 $ 10,463 $23,158  221%
  Zyflo(R)
   product
   family        8,764   4,122  4,642  113    30,619   17,959  12,660   70
  Factive(R)       963   1,087   (124) (11)    5,126    1,178   3,948  335
  Spectracef(R)
   product
   family        1,849   2,494   (645) (26)    5,327    9,390  (4,063) (43)
  AlleRx Dose
   Pack
   products      5,200   8,722 (3,522) (40)   27,305   31,707  (4,402) (14)
  HyoMax
   product
   family        2,270   3,131   (861) (27)   10,071   28,148 (18,077) (64)
  Other
   Products(1)   3,582   2,883    699   24    11,675   10,443   1,232   12
               ------- ------- ------ ----  -------- -------- ------- ----
  Total net
   product
   sales        32,482  30,749  1,733    6   123,744  109,288  14,456   13
License and
 royalty
 agreement
 revenues           32      39     (7) (18)    1,573      276   1,297  470
               ------- ------- ------ ----  -------- -------- ------- ----
Net Revenues   $32,514 $30,788 $1,726    6% $125,317 $109,564 $15,753   14%
               ======= ======= ====== ====  ======== ======== ======= ====

(1) Primarily propoxyphene/acetaminophen products.


Gross margin percentage for the full year of 2010 was 74% compared to 82% for the full year of 2009. The lower gross margin percentage compared to the prior period was due to a relatively higher portion of our net product sales in 2010 derived from products that have lower gross margins, specifically Curosurf. Gross margin percentage for the fourth quarter was 70%, similar to the fourth quarter of 2009.

Selling, general and administrative expenses increased $7.5 million, or 16%, for the full year of 2010 compared to 2009. The increase was primarily related to our incurring a full year of expenses in 2010 for our hospital sales force that we created in September 2009, co-promotion expenses relating to Zyflo CR and increased sample usage for both Zyflo CR and Factive, partially offset by lower stock compensation and reduced legal and consulting costs during 2010 as compared to 2009 when we incurred significant expenses related to the Chiesi transaction. Selling, general and administrative expenses during the fourth quarter increased $4.0 million, or 36%, compared to the fourth quarter of 2009. The increase was primarily related to co-promotion expenses relating to Zyflo CR and AlleRx and increased sample usage for both Zyflo CR and Factive.

Royalty expenses decreased $6.1 million, or 32%, during 2010 compared to 2009. The reduction in royalty expense was primarily due to lower net revenues from our HyoMax products, partially offset by increased royalties for Zyflo CR and Factive. Royalty expenses increased $0.6 million, or 28% during the fourth quarter of 2010 compared to the fourth quarter of 2009 primarily due to product mix.

As of December 31, 2010, the Company had $50.9 million in cash and cash equivalents, an increase of 170%, compared to $18.9 million as of December 31, 2009.

Conference Call Information

Cornerstone Therapeutics will host a conference call today at 8:30 AM ET to discuss its financial results for the quarter and twelve months ended December 31, 2010. To participate in the live conference call, please dial 866-730-5770 (U.S. callers) or 857-350-1594 (international callers), and provide passcode 99190634. A live webcast of the call will also be available through the "Investors -- Webcasts & Presentations" section of the Company's website at http://www.crtx.com. Please allow extra time prior to the webcast to register for the webcast and to download and install any necessary audio software.

The conference call and the webcast will be archived for 30 days. The telephone replay of the call will be available today at 11:30 AM ET, by dialing 888-286-8010 (U.S. callers) or 617-801-6888 (international callers), and providing passcode 56948345.

About Cornerstone Therapeutics

Cornerstone Therapeutics Inc. (NASDAQ: CRTX), headquartered in Cary, N.C., is a specialty pharmaceutical company focused on acquiring, developing and commercializing products for the respiratory and related markets. Key elements of the Company's strategy are to leverage commercial capabilities by promoting respiratory and related products to high prescribing physicians through its respiratory sales force and to hospital-based healthcare professionals through its hospital sales force; acquire rights to existing patent- or trade secret-protected, branded products, which can be promoted through the same channels to generate on-going high-value earnings streams; advance its development projects and further build a robust pipeline; and generate revenues by marketing approved generic products through its wholly owned subsidiary, Aristos Pharmaceuticals, Inc.

Use of Non-GAAP Financial Measures

This press release highlights the Company's financial results on both a GAAP and a non-GAAP basis. The GAAP results include certain costs and charges that are excluded from non-GAAP results. By publishing the non-GAAP financial measures, management intends to provide investors with additional information to further analyze the Company's performance and underlying trends. Management evaluates results and makes operating decisions using both GAAP and non-GAAP measures included in this press release. Non-GAAP results are not prepared in accordance with GAAP, and non-GAAP information should be considered a supplement to, and not a substitute for, financial statements prepared in accordance with GAAP. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures to their most directly comparable GAAP measures attached to this press release.

Safe Harbor Statement

Statements in this press release regarding the progress and timing of our product development programs and related trials; our future opportunities; our strategy, future operations, anticipated financial position, future revenues and projected costs; our management's prospects, plans and objectives; and any other statements about management's future expectations, beliefs, goals, plans or prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Any statements that are not statements of historical fact (including, without limitation, statements containing the words "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "should," "target," "will," "would" and similar expressions) should also be considered to be forward-looking statements.

There are a number of important factors that could cause our actual results or events to differ materially from those indicated by such forward-looking statements, including risks relating to our ability to develop and maintain the necessary sales, marketing, supply chain, distribution and manufacturing capabilities to commercialize our products; our ability to replace the revenues from our marketed unapproved products, which we ceased manufacturing and distributing at the end of 2010, and from our propoxyphene products, which we voluntarily withdrew from the U.S. market in November 2010 at the request of the U.S. Food and Drug Administration, or FDA; patient, physician and third-party payor acceptance of our products as safe and effective therapeutic products; our heavy dependence on the commercial success of a relatively small number of currently marketed products; our ability to maintain regulatory approvals to market and sell our products with FDA-approved marketing applications; our ability to obtain FDA approval to market and sell our products under development; our ability to enter into additional strategic licensing product acquisition, collaboration or co-promotion transactions on favorable terms, if at all; our ability to maintain compliance with NASDAQ listing requirements; adverse side effects experienced by patients taking our products; our ability to develop and commercialize our product candidates before our competitors develop and commercialize competing products; difficulties relating to clinical trials, including difficulties or delays in the completion of patient enrollment, data collection or data analysis; the results of preclinical studies and clinical trials with respect to our product candidates and whether such results will be indicative of results obtained in later clinical trials; our ability to satisfy FDA and other regulatory requirements; our ability to obtain, maintain and enforce patent and other intellectual property protection for our products and product candidates and the other factors described in Item 1A (Risk Factors) of our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the SEC) on March 4, 2010 and in our subsequent filings with the SEC. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements.

In addition, the statements in this press release reflect our expectations and beliefs as of the date of this release. We anticipate that subsequent events and developments will cause our expectations and beliefs to change. However, while we may elect to update these forward-looking statements publicly at some point in the future, we specifically disclaim any obligation to do so, whether as a result of new information, future events or otherwise. Our forward-looking statements do not reflect the potential impact of any acquisitions, mergers, dispositions, business development transactions, joint ventures or investments that we may make or enter into. These forward-looking statements should not be relied upon as representing our views as of any date after the date of this release.

Trademarks

Curosurf® is owned by Chiesi Farmaceutici S.p.A. Spectracef® is owned by Meiji Seika Kaisha Ltd. Factive® is owned by LG Life Sciences, Ltd. Curosurf, Spectracef and Factive are licensed to Cornerstone Therapeutics for sales and marketing purposes in the United States and, with respect to Factive, certain other countries.

FINANCIAL TABLES FOLLOW


                      CORNERSTONE THERAPEUTICS INC.
                    CONSOLIDATED STATEMENTS OF INCOME
              (In thousands, except share and per share data)


                              Three Months Ended         Year Ended
                                 December 31,            December 31,
                            ----------------------  ----------------------
                               2010        2009        2010        2009
                            ----------  ----------  ----------  ----------
                                  (Unaudited)
Net revenues                $   32,514  $   30,788  $  125,317  $  109,564
Costs and expenses:
  Cost of product sales
   (exclusive of
   amortization of product
   rights)                       9,599       9,212      32,313      19,457
  Selling, general and
   administrative               15,109      11,112      53,198      45,731
  Royalties                      2,856       2,240      12,702      18,775
  Research and development         740       1,163       4,488       3,608
  Amortization of product
   rights                        3,943       3,587      14,728       6,115
                            ----------  ----------  ----------  ----------
    Total costs and expenses    32,247      27,314     117,429      93,686
                            ----------  ----------  ----------  ----------
Income from operations             267       3,474       7,888      15,878
                            ----------  ----------  ----------  ----------
Other expenses:
  Interest expense, net            (38)        (15)        (85)       (128)
  Other expense, net                --          --         (25)         --
                            ----------  ----------  ----------  ----------
    Total other expenses           (38)        (15)       (110)       (128)
                            ----------  ----------  ----------  ----------
Income before income taxes         229       3,459       7,778      15,750
Benefit from (provision
 for) income taxes                 563        (771)     (1,609)     (5,547)
                            ----------  ----------  ----------  ----------
Net income                  $      792  $    2,688  $    6,169  $   10,203
                            ==========  ==========  ==========  ==========
Net income per share, basic $     0.03  $     0.11  $     0.24  $     0.58
                            ==========  ==========  ==========  ==========
Net income per share,
 diluted                    $     0.03  $     0.10  $     0.24  $     0.54
                            ==========  ==========  ==========  ==========
Weighted-average common
 shares, basic              25,463,467  24,972,954  25,412,636  17,651,668
                            ==========  ==========  ==========  ==========
Weighted-average common
 shares, diluted            26,093,755  25,751,756  26,036,544  18,776,588
                            ==========  ==========  ==========  ==========





                       CORNERSTONE THERAPEUTICS INC.
                        CONSOLIDATED BALANCE SHEETS
              (In thousands, except share and per share data)


                                                December 31,   December 31,
                                                    2010           2009
                                                ------------   ------------

Assets
Current assets:
  Cash and cash equivalents                     $     50,945   $     18,853
  Accounts receivable, net                            76,476         16,548
  Inventories, net                                    15,174         18,106
  Prepaid and other current assets                     5,111          4,808
  Income tax receivable                                  197             --
  Deferred income tax asset                            6,599          3,507
                                                ------------   ------------
    Total current assets                             154,502         61,822
                                                ------------   ------------
Property and equipment, net                            1,486          1,312
Product rights, net                                  112,328        126,806
Goodwill                                              13,231         13,231
Amounts due from related parties                          38             38
Long-term accounts receivable and other assets         8,553            113
                                                ------------   ------------
    Total assets                                $    290,138   $    203,322
                                                ============   ============
Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                              $      7,671   $      7,172
  Accrued expenses                                    46,599         23,703
  Current portion of license agreement
   liability                                           1,368          1,019
  Current portion of capital lease                        83             10
  Current portion of deferred revenue                 37,616             --
  Income taxes payable                                    --          1,606
                                                ------------   ------------
    Total current liabilities                         93,337         33,510
                                                ------------   ------------
License agreement liability, less current
 portion                                                  --          1,341
Capital lease, less current portion                      146             39
Deferred revenue, less current portion                19,578             --
Deferred income tax liability                          4,679          4,564
                                                ------------   ------------
    Total liabilities                                117,740         39,454
                                                ------------   ------------
Stockholders' equity
  Preferred stock -- $0.001 par value,
   5,000,000 shares authorized; no shares
   issued and outstanding                                 --             --
  Common stock -- $0.001 par value, 90,000,000
   shares authorized; 25,472,963 and 25,022,644
   shares issued and outstanding as of December
   31, 2010 and December 31, 2009, respectively           25             25
  Additional paid-in capital                         160,106        157,745
  Retained earnings                                   12,267          6,098
                                                ------------   ------------
    Total stockholders' equity                       172,398        163,868
                                                ------------   ------------
    Total liabilities and stockholders' equity  $    290,138   $    203,322
                                                ============   ============






                      CORNERSTONE THERAPEUTICS INC.
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In thousands)


                                                  Year Ended December 31,
                                                 -------------------------
                                                     2010          2009
                                                 -----------   -----------

Cash flows from operating activities
Net income                                       $     6,169   $    10,203
Adjustments to reconcile net income to net cash
 provided by operating activities:
  Amortization and depreciation                       14,778         6,392
  Provision for prompt payment discounts               3,903         3,157
  Provision for inventory allowances                   1,340         1,474
  Loss on sale of property and equipment                  25            --
  Impairment of product rights                           350            --
  Stock-based compensation                             1,339         3,291
  Benefit from deferred income taxes                  (2,977)       (3,632)
Changes in operating assets and liabilities:
  Accounts receivable                                (63,831)       (6,718)
  Inventories                                          1,592        (8,202)
  Prepaid expenses, long-term accounts receivable
   and other assets                                   (8,743)       (3,121)
  Accounts payable                                       499        (3,116)
  Accrued expenses                                    23,154         2,053
  Income taxes payable/receivable                     (1,803)       (1,331)
  Deferred revenue                                    57,194            --
                                                 -----------   -----------
  Net cash provided by operating activities           32,989           450
                                                 -----------   -----------
Cash flows from investing activities
Proceeds from sale of marketable securities               --           300
Proceeds from sale of property and equipment               2            --
Purchase of property and equipment                      (375)        (635)
Purchase of product rights                              (250)      (5,169)
                                                 -----------   -----------
  Net cash used in investing activities                 (623)       (5,504)
                                                 -----------   -----------
Cash flows from financing activities
Proceeds from exercise of common stock options
 and warrants                                            544           437
Proceeds from issuance of shares of common stock          --        15,465
Payments for cancellation of warrants                     --           (41)
Excess tax benefit from stock-based compensation         478         1,269
Principal payments on license agreement liability     (1,250)       (2,500)
Principal payments on capital lease obligation           (46)           (9)
                                                 -----------   -----------
  Net cash (used in) provided by financing
   activities                                           (274)       14,621
                                                 -----------   -----------
  Net increase in cash and cash equivalents           32,092         9,567
Cash and cash equivalents as of beginning of year     18,853         9,286
                                                 -----------   -----------
Cash and cash equivalents as of end of year      $    50,945   $    18,853
                                                 ===========   ===========

Supplemental disclosure of cash flow information
Cash paid during the year for interest           $       318   $       531
                                                 ===========   ===========
Cash paid during the year for income taxes       $     6,780   $     9,260
                                                 ===========   ===========
Supplemental schedule of non-cash investing and
 financing activities
Purchase of property and equipment with capital
 leases                                          $       226   $         -
                                                 ===========   ===========
Acquisition of product rights through equity
 issued and liabilities assumed                  $        --   $   110,050
                                                 ===========   ===========





                      CORNERSTONE THERAPEUTICS INC.
              RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
        (In thousands, except share and per share data - unaudited)


The following table shows the non-GAAP financial measures used in this
press release reconciled to the most directly comparable GAAP financial
measures.

                              Three Months Ended          Year Ended
                                 December 31,             December 31,
                               2010        2009        2010        2009
                            ----------  ----------  ----------  ----------
GAAP income from Operations $      267  $    3,474  $    7,888  $   15,878
  Add: stock-based
   compensation(1)                 369         321       1,339       1,478
  Add: amortization of
   product rights                3,943       3,587      14,728       6,115
  Add: acquisition-related
   expenses(2)                      --          --          --       3,563
                            ----------  ----------  ----------  ----------
Non-GAAP income from
 operations                 $    4,579  $    7,382  $   23,955  $   27,034
                            ==========  ==========  ==========  ==========

GAAP net income             $      792  $    2,688  $    6,169  $   10,203
  Add: stock-based
   compensation(1)                 369         321       1,339       1,478
  Add: amortization of
   product rights                3,943       3,587      14,728       6,115
  Add: acquisition-related
   expenses(2)                      --          --          --       3,563
  Less: tax effects related
   to above items(3)                58      (1,108)     (3,324)     (3,927)
                            ----------  ----------  ----------  ----------
Non-GAAP net income         $    5,162  $    5,488  $   18,912  $   17,432
                            ==========  ==========  ==========  ==========

GAAP net income per share,
 diluted                    $     0.03  $     0.10  $     0.24  $     0.54
                            ==========  ==========  ==========  ==========
Non-GAAP net income per
 share, diluted             $     0.20  $     0.21  $     0.73  $     0.93
                            ==========  ==========  ==========  ==========

Shares used in diluted net
 income per share
 calculation:
  GAAP net income           26,093,755  25,751,756  26,036,544  18,776,588
                            ==========  ==========  ==========  ==========
  Non-GAAP net income       26,093,755  25,751,756  26,036,544  18,776,588
                            ==========  ==========  ==========  ==========


(1) Stock-based compensation excludes stock-based compensation charges
    incurred in connection with the Chiesi transaction, which are included
    in acquisition-related expenses.

(2) Acquisition-related expenses include stock-based compensation charges
    and legal, accounting and related costs that resulted from or were
    incurred in connection with the Chiesi transaction. During 2009,
    acquisition-related stock-based compensation charges include $1.8
    million of charges that were included in selling, general and
    administrative expenses.

(3) Tax effects for the three months ended December 31, 2010 and 2009 are
    calculated using effective tax rates of (1.3)% and 28.4%, respectively.
    Tax effects for 2010 and 2009 are calculated using effective tax rates
    of 20.7% and 35.2%, respectively.

Contact Information

  • Contacts

    Investor Relations Contacts:
    Westwicke Partners
    John Woolford
    +1-443-213-0506
    Email Contact

    or

    Westwicke Partners
    Stefan Loren, Ph.D.
    +1-443-213-0507
    Email Contact

    Media Relations Contact:
    Fleishman-Hillard
    Andrea Moody
    +1-919-457-0743
    Email Contact