Cornerstone Therapeutics Inc. (CRTX) reported fiscal fourth-quarter earnings of 20 cents per share (excluding special items), which was well above the Zacks Consensus Estimate of a loss of 4 cents. The company had earned 34 cents (excluding special items) in the year-ago quarter. The drop in quarterly earnings was attributable to higher operating costs and a tax provision.
 
Quarterly Results
 
Net revenue in the reported quarter was $30.8 million as against $20.8 million in the year-ago quarter, up approximately 48%. Sales of Curosurf, which is used to treat respiratory distress syndrome (RDS) in premature babies, came in at $8.3 million in the reported quarter. Cornerstone acquired the U.S. rights to Curosurf from Chiesi in the third quarter of 2009 and had begun to promote and sell the drug in Sept 2009.
 
The combined revenue from the sale of antibiotics Factive (acquired from Oscient Pharmaceuticals) and Spactracef came in at $3.6 million.  Revenue from the sales of the asthma therapy Zyflo/ Zyflo CR, acquired through the merger with Critical Therapeutics in Oct 2008, stood at $4.1 million for the reported quarter.
 
The non-strategic products of the company, which include the AlleRx dose pack products (oral tablets indicated for the temporary relief of symptoms associated with allergic rhinitis) and the Hyomax product line comprised 48% of net product sales for the reported quarter as against 69% in the year-ago quarter.
 
The total costs and expenses in the quarter climbed 31% year over year to $27.3 million. Cornerstone is continuing to boost its sales force and management team in view of the expanded portfolio. It increased the spending on marketing by approximately 32% to $7.5 million during the reported quarter.
 
Cornerstone has also boosted the marketing campaigns for the launch of Zyflo, Factive and Curosurf. The company had a $3.5 million provision for taxes, compared with a slight benefit the prior year. The gross margin (exclusive of the amortization of product rights) for the quarter was 70% as against 86% in the year-ago quarter.
 
Yearly Results
 
For full year 2009, Cornerstone Therapeutics earned 93 cents per share as against $1.40 in 2008. Revenue in 2009 climbed approximately 69% to $109.6 million from $64.9 million in 2008. The expansion in the product portfolio following the merger with Critical Therapeutics in October 2008 and the acquisition of Factive and the U.S. rights to Curosurf in 2009 contributed to the increase.
 
The total costs and expenses in 2009 climbed approximately 73% year over year to $93.7 million. Sales and marketing expenses increased approximately 62.4% year over year to $27.6 million in 2009.  The gross margin for the year was 82% as against 91% in 2008. The lower gross margin was mainly attributable to Cornerstone’s intentional change in product mix.
 
Cornerstone exited 2009 with approximately $19 million in cash and cash equivalents and no debt.
 
Outlook
 
Cornerstone reaffirmed its earlier outlook for 2010. The company forecasts net revenues exceeding $112 million for the year ending Dec 31, 2010. The guidance for fiscal 2010 assumes that its strategic specialty products will contribute more than 75% of net revenues in 2010, compared to less than 40% in 2009. Cornerstone expects to earn more than $10.2 million or 38 cents per share (excluding special items) in 2010. The Zacks Consensus Estimate for 2010 hints at earnings of 1 cent.
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