SOURCE: Cornerstone Therapeutics

Cornerstone Therapeutics

August 04, 2011 07:30 ET

Cornerstone Therapeutics Reports Second Quarter 2011 Financial Results

CARY, NC--(Marketwire - Aug 4, 2011) - Cornerstone Therapeutics Inc. (NASDAQ: CRTX)

  • Management introduced a new strategic vision in the second quarter with the goal of focused growth in the respiratory, hospital and related specialty markets
  • The balance sheet continued to strengthen providing capital to fund the growth strategy as cash increased 82% to $92.8 million as of June 30, 2011 compared to December 31, 2010
  • Strategic products' net product sales grew 3% and 11% for the three and six months ended June 30, 2011, respectively, compared to the same periods in 2010
  • Curosurf® volume achieved an all-time high in the month of June and increased 6.2% in the second quarter compared to the second quarter of 2010

Cornerstone Therapeutics Inc. (NASDAQ: CRTX) today reported net product sales from strategic products were 67% of total net product sales, or $18.7 million, for the second quarter of 2011, an increase from the 64% of total net product sales, or $18.1 million, for the second quarter of 2010. Net product sales from strategic products were 68% of total net product sales, or $39.7 million, for the first six months of 2011, an increase from the 55% of total net product sales, or $35.6 million, for the first six months of 2010. Overall, total net revenues were $28.0 million for the second quarter of 2011, compared to $28.5 million for the second quarter of 2010, and total net revenues for the first six months of 2011 were $58.0 million, compared to $64.9 million for the same period in 2010.

Net income was $0.2 million, or $0.01 per diluted share, for the second quarter of 2011, compared to a net loss of $0.4 million, or negative $0.02 per diluted share, for the second quarter of 2010. For the first six months of 2011, net income was $1.9 million, or $0.07 per diluted share, compared to net income of $4.6 million, or $0.18 per diluted share, for the first six months of 2010. On a non-GAAP basis, net income was $2.8 million, or $0.11 per diluted share, for the second quarter of 2011, compared to non-GAAP net income of $2.5 million, or $0.10 per diluted share, for the second quarter of 2010. For the first six months of 2011, on a non-GAAP basis, net income was $8.8 million, or $0.34 per diluted share, compared to non-GAAP net income of $9.4 million, or $0.36 per diluted share, for the first six months of 2010. Non-GAAP net income and net income per diluted share exclude amortization of product rights and stock-based compensation expense.

"During the second quarter, we made advances in the execution of our strategy as we increased market penetration with our strategic products and focused our development pipeline," said Craig A. Collard, Cornerstone's President and Chief Executive Officer. "With available cash exceeding $92 million and no debt, we continue to evaluate opportunities to invest funds to drive our future growth."

A breakdown of net revenues for the second quarter and first half of 2011 (in thousands, except percentages) follows:

Three Months Ended
June 30,
Change Six Months Ended
June 30,
Change
2011 2010 $ % 2011 2010 $ %
Net Product Sales
Curosurf $ 8,547 $ 8,619 $ (72 ) -1 % $ 16,055 $ 15,716 $ 339 2 %
Zyflo(R) product family 6,585 8,007 (1,422 ) (18 ) 13,997 14,281 (284 ) (2 )
Factive(R) 1,664 1,206 458 38 4,464 3,313 1,151 35
Spectracef(R) product family 1,892 307 1,585 516 5,169 2,284 2,885 126
Total strategic products 18,688 18,139 549 3 39,685 35,594 4,091 11
AlleRx(R) Dose Pack products 9,173 5,924 3,249 55 20,754 18,293 2,461 13
HyoMax(R) product family 623 1,900 (1,277 ) (67 ) 1,411 5,799 (4,388 ) (76 )
Other products (520 ) 2,497 (3,017 ) (121 ) (3,911 ) 5,166 (9,077 ) (176 )
Total net product sales 27,964 28,460 (496 ) (2 ) 57,939 64,852 (6,913 ) (11 )
License and royalty agreement revenues 75 5 70 1,400 97 19 78 411
Net Revenues $ 28,039 $ 28,465 $ (426 ) -1 % $ 58,036 $ 64,871 $ (6,835 ) -11 %

Gross margin (exclusive of license and royalty agreement revenues and amortization of product rights) was 75% for the second quarter of 2011, compared to 71% for the comparable period of 2010. The lower gross margin for the second quarter of 2010 was due to additional reserves for potential product returns of approximately $3.0 million.

Selling, general and administrative expenses decreased $1.2 million, or 9%, in the second quarter of 2011 compared to the second quarter of 2010. The decrease was primarily due to reduced marketing and promotional spending for FACTIVE and decreases in co-promotion expenses related to our propoxyphene/acetaminophen products, which were withdrawn from the market in November of 2010.

Royalty expenses decreased $0.5 million, or 19%, during the second quarter of 2011 compared to the second quarter of 2010. The reduction in royalty expense was primarily due to the reduction in net product sales from our HYOMAX products and the voluntary withdrawal of our propoxyphene/acetaminophen products, partially offset by increased net product sales of ALLERX Dose Pack products.

Research and development expenses decreased $1.2 million, or 66%, during the second quarter of 2011 compared to the second quarter of 2010. The reduction in R&D expense was primarily due to decreased expenses related to CRTX 067 and the timing of other product development expenses, consistent with our development plan.

As of June 30, 2011, we had $92.8 million in cash and cash equivalents, an increase of $41.8 million compared to December 31, 2010. The increase in cash for the first half of 2011 was driven primarily by collections of receivables in connection with the ALLERX Dose Pack products.

Conference Call Information

Cornerstone Therapeutics will host a conference call today at 8:30 AM ET to discuss its financial results for the quarter ended June 30, 2011. To participate in the live conference call, please dial 800-817-8867 (U.S. callers) or 913-981-5572 (international callers), and provide passcode 8822874. 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 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 888-203-1112 (U.S. callers) or 719-457-0820 (international callers), and providing passcode 8822874.

About Cornerstone Therapeutics

Cornerstone Therapeutics Inc. (NASDAQ: CRTX), headquartered in Cary, N.C., is a specialty pharmaceutical company focused on developing, acquiring, and commercializing products for the respiratory, hospital and related specialty markets. Key elements of the Company's strategy are to focus on identifying therapeutic niches within respiratory, hospital and related specialty markets to leverage existing business and create new opportunities; promote the Company's current products to high prescribing physicians through the Company's respiratory sales force and to hospital-based healthcare professionals through the Company's hospital sales force; license or 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 the Company's development projects and further build a robust pipeline; and generate revenues by marketing approved generic products through the Company's 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 and compensation 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. For more information about these non-GAAP measures, please see Part I, Item 2 of our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission, or SEC, on May 12, 2011.

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 "critical accounting estimates"; 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 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 develop and commercialize our product candidates before our competitors develop and commercialize competing products; 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 SEC on March 3, 2011 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 only 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, except as required by law. 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.

CORNERSTONE THERAPEUTICS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
Three Months Ended
June 30,
Six Months Ended
June 30,
2011 2010 2011 2010
(Unaudited) (Unaudited)
Net revenues $ 28,039 $ 28,465 $ 58,036 $ 64,871
Costs and expenses:
Cost of product sales (exclusive of amortization of product rights) 7,041 8,153 14,578 14,972
Selling, general and administrative 11,604 12,814 24,874 25,239
Royalties 2,148 2,648 4,645 7,246
Research and development 614 1,795 1,173 2,701
Amortization of product rights 6,092 3,595 9,686 7,190
Total costs and expenses 27,499 29,005 54,956 57,348
Income (loss) from operations 540 (540 ) 3,080 7,523
Other expenses:
Interest expense, net (42 ) (9 ) (83 ) (10 )
Total other expenses (42 ) (9 ) (83 ) (10 )
Income (loss) before income taxes 498 (549 ) 2,997 7,513
(Provision for) benefit from income taxes (301 ) 149 (1,058 ) (2,900 )
Net income (loss) $ 197 $ (400 ) $ 1,939 $ 4,613
Net income (loss) per share, basic $ 0.01 $ (0.02 ) $ 0.08 $ 0.18
Net income (loss) per share, diluted $ 0.01 $ (0.02 ) $ 0.07 $ 0.18
Weighted-average common shares, basic 25,673,667 25,405,165 25,577,314 25,377,575
Weighted-average common shares, diluted 26,246,073 25,405,165 26,167,997 25,997,176
CORNERSTONE THERAPEUTICS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
June 30, December 31,
2011 2010
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 92,793 $ 50,945
Accounts receivable, net 25,833 76,476
Inventories, net 14,043 15,174
Prepaid and other current assets 3,343 5,111
Income tax receivable 1,409 197
Deferred income tax asset 5,490 6,599
Total current assets 142,911 154,502
Property and equipment, net 1,576 1,486
Product rights, net 102,642 112,328
Goodwill 13,231 13,231
Amounts due from related parties 38 38
Long-term accounts receivable 7,866
Other assets 1,312 687
Total assets $ 261,710 $ 290,138
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 9,029 $ 7,671
Accrued expenses 38,593 46,599
License agreement liability 1,449 1,368
Current portion of capital lease 86 83
Current portion of deferred revenue 30,871 37,616
Total current liabilities 80,028 93,337
Capital lease, less current portion 102 146
Deferred revenue, less current portion 1,558 19,578
Deferred income tax liability 4,038 4,679
Total liabilities 85,726 117,740
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; 25,769,664 and 25,472,963 shares issued and outstanding as of June 30, 2011 and December 31, 2010, respectively 26 25
Additional paid-in capital 161,752 160,106
Retained earnings 14,206 12,267
Total stockholders' equity 175,984 172,398
Total liabilities and stockholders' equity $ 261,710 $ 290,138
CORNERSTONE THERAPEUTICS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended June 30,
2011 2010
(Unaudited)
Cash flows from operating activities
Net income $ 1,939 $ 4,613
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation 7,429 7,365
Provision for prompt payment discounts 1,998 2,049
Recovery of inventory allowances (235 ) (367 )
Impairment of product rights 2,500 -
Stock-based compensation 884 655
Benefit from (provision for) deferred income taxes 468 (2,431 )
Changes in operating assets and liabilities:
Accounts receivable 48,645 323
Inventories 1,366 (1,659 )
Prepaid expenses, long-term accounts receivable and other assets 9,009 2,086
Accounts payable 1,358 (1,809 )
Accrued expenses and license agreement liability (7,925 ) 4,305
Income taxes receivable (1,212 ) 954
Deferred revenue (24,765 ) 10,822
Net cash provided by operating activities 41,459 26,906
Cash flows from investing activities
Purchase of property and equipment (333 ) (278 )
Net cash used in investing activities (333 ) (278 )
Cash flows from financing activities
Proceeds from exercise of common stock options and warrants 311 516
Excess tax benefit from stock-based compensation 452 455
Principal payments on capital lease obligation (41 ) (6 )
Net cash provided by financing activities 722 965
Net increase in cash and cash equivalents 41,848 27,593
Cash and cash equivalents as of beginning of year 50,945 18,853
Cash and cash equivalents as of end of year $ 92,793 $ 46,446

CORNERSTONE THERAPEUTICS INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands, except share and per share data - unaudited)
The following tables show the non-GAAP financial measures used in this press release reconciled to the most directly comparable GAAP financial measures.
Three Months Ended
June 30,
Six Months Ended
June 30,
2011 2010 2011 2010
GAAP income (loss) from operations $ 540 $ (540 ) $ 3,080 $ 7,523
Add: stock-based compensation 505 375 884 655
Add: amortization of product rights 6,092 3,595 9,686 7,190
Non-GAAP income from operations $ 7,137 $ 3,430 $ 13,650 $ 15,368
GAAP net income (loss) $ 197 $ (400 ) $ 1,939 $ 4,613
Add: stock-based compensation 505 375 884 655
Add: amortization of product rights 6,092 3,595 9,686 7,190
Less: tax effects related to above items1 (3,987 ) (1,077 ) (3,731 ) (3,028 )
Non-GAAP net income $ 2,807 $ 2,493 $ 8,778 $ 9,430
GAAP net income (loss) per share, diluted $ 0.01 $ (0.02 ) $ 0.07 $ 0.18
Non-GAAP net income per share, diluted $ 0.11 $ 0.10 $ 0.34 $ 0.36
Shares used in diluted net income per share calculation:
GAAP net income 26,246,073 25,405,165 26,167,997 25,997,176
Non-GAAP net income 26,246,073 26,042,093 26,167,997 25,997,176
1 Tax effects for the three months ended June 30, 2011 and 2010 are calculated using effective tax rates of 60.4% and 27.1% respectively. Tax effects for the six months ended June 30, 2011 and 2010 are calculated using effective tax rates of 35.3% and 38.6% respectively.

Contact Information

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

    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