CRTX was formed as a result of merger between Critical Therapeutics Inc. and Cornerstone BioPharma Holdings Inc. in 2008. The newly formed Company is set to benefit from an extensive respiratory product portfolio; the potential for enhanced future growth and value; and the ability to access additional capital. Following the merger closing, the Company reported a number of key milestones, including the process initiation to seek potential licensees for certain technologies, including the alpha 7 mediated anti-inflammatory pathway program.
The Company has a strong portfolio of respiratory drugs, equally competing with established products of Merck and AstraZeneca. In addition, CRTX has a maturing pipeline with a number of drug candidates to seek FDA clearance within the next two years. Solid growth prospects, merger synergies, and the favorable industry outlook, as well as future expansion plans, prompts our rating of CRTX as a Speculative Buy.
Analyst: Victor Sula, Ph.D.Initial Report
May 28th, 2009
Cornerstone Therapeutics Inc. (Nasdaq: CRTX) 2
CRTX is currently marketing nine product lines in the U.S., including Spectracef, ZYFLO CR and the Allerx Dose Pack family of products. The drugs are oral antibiotics indicated for the treatment of: mild to moderate infections caused by pathogens associated with particular respiratory tract infections; acute bacterial exacerbation of chronic bronchitis; and allergic rhinitis. The Company’s product development pipeline includes two Spectracef line extensions, an anticholinergic and antihistamine combination product candidate - CRTX 058, and two extended-release antitussive and antihistamine combination product candidates - CRTX 067 and CRTX 069. The Company is targeting regulatory and new drug application submissions for the majority of product candidates between 2009 and 2011.
CRTX owns worldwide rights to two FDA-approved drugs: the four-times daily ZYFLO (zileuton tablets) and twice-daily ZYFLO CR tablets. ZYFLO CR and ZYFLO (zileuton tablets) are the only FDA-approved leukotriene synthesis inhibitors for the prophylaxis and chronic treatment of asthma in adults and children 12 years of age and older. Leukotrienes are inflammatory mediators in asthma that can trigger asthma symptoms, including inflammation, swelling, bronchoconstriction and mucus secretion. With combined efforts of its partners, CRTX is promoting ZYFLO to approximately 15,000 allergists, pulmonologists and primary care physicians across the U.S.
As a result of merger, in 2008 the Company’s revenue rose to $64.9 million from $28.1 million in 2007. CRTX’s 2008 net income and diluted earnings per share were $9.0 million and $1.14, respectively. Analysts expect the 2009 and 2010 revenue to reach the $84 million and $98.7 million marks, respectively. They are also looking for the 2009 and 2010 EPS to stand at $1.02 and $1.27 levels.
The Company’s shares experienced a large move higher after the merger in October 2008. Since then, the stock has increased 17-fold to more than $7, hitting new and new 52-week highs. Overall, CRTX’s shares have gained 172% this year being pushed by optimistic outlook for the Company as a result of merger which may create synergies with a stronger product portfolio.
As a result of merger, CRTX’s full-year 2008 revenues more than doubled to $64.9 million or $36.8 million over 2007. The Company’s product sales in 2008 and 2007 mainly consisted of revenues from sales of the CRTX’s AlleRx family of products, which increased $12.9 million to $26.4 million in 2008 compared to 2007, and
Cornerstone Therapeutics (CRTX) is a spe-cialty pharmaceutical company focused on acquiring, developing and commercializing products primarily for the respiratory market. The Company currently markets nine prod-uct lines in the United States. Its marketed products include AlleRx, Balacet, Deconsal, Spectracef and Zyflo CR. CRTX also has a late-stage clinical pipeline with six regulatory ap-proval submissions targeted within the next three years.
The Company outsources the manufacturing of all of its commercially available products and the formulation development of its prod-uct candidates to third parties. CRTX owns or exclusively licenses for 21 issued U.S. patents, 50 issued foreign patents, 25 pending U.S. pat-ent applications and 53 pending foreign pat-ent applications. The Company’s commercial strategy is to grow market share for its cur-rently marketed products using its sales and marketing capabilities, acquire non-promoted or underperforming branded pharmaceutical products, and to implement life cycle manage-ment techniques. CRTX was formed in 2008 as a result of merger between Critical Thera-peutics and privately held respiratory therapy firm Cornerstone BioPharma.
Financial Analysis
Analyst: Victor Sula, Ph.D.Initial Report
May 28th, 2009
Cornerstone Therapeutics Inc. (Nasdaq: CRTX) 3
Analyst: Victor Sula, Ph.D.Initial Report
May 28th, 2009
Cornerstone Therapeutics Inc. (Nasdaq: CRTX) 3
Spectracef, Deconsal and Balacet 325 products. Additionally, net product sales in 2008 also included $23.0 million in sales of the HyoMax line of products, and two months of sales of ZYFLO CR and ZYFLO after the closing of the merger totaling $888,000.
Gross profit was $57.6 million in 2008, compared to $21.6 million, in 2007, translating into 91% and 87% margins in 2007 and 2008, respectively. The Company reported 2008 EPS of $1.14 as compared to $0.08 in 2007.
CRTX reported significant cash flows from operations that neared $12.6 million in 2008. As of December 31, 2008, the Company had $9.3 million in cash and cash equivalents and borrowing availability of $3.9 million under a line of credit with Paragon Commercial Bank. CRTX is currently considering financing alternatives to fund capital expenditures in the future.
According to Business Insights, the prevalence of asthma across the U.S., Japan, France, Germany, Spain, Italy and the UK is estimated at 53.2 million people, corresponding to a prevalence rate of 7.7%. It is forecast that by 2011, the total prevalence of asthma across the seven major markets will be 58.8 million sufferers or 8.0% of the population.
Meanwhile, 56.4 million individuals are estimated to suffer from Chronic obstructive pulmonary disease (COPD) across the seven major markets, although extremely low rates of diagnosis are thought to have resulted in a treated population of less than 10 million individuals. COPD is becoming a major disease burden across the seven major markets, with a forecast patient population of 60.8 million individuals by 2011, indicating high levels of future patient potential.
A population of 1.5 billion is associated with the largest disease burden of any major chronic respiratory disease - allergic rhinitis. The prevalence of allergic rhinitis is forecast to increase to 1.8 billion individuals in 2011, driven by the effect of raised levels of allergenic exposure, in both indoor and outdoor environments.
The prevalence of respiratory diseases such as asthma, in the leading pharmaceutical markets, has increased significantly over the past few decades. In terms of revenue, the asthma and COPD therapeutic area historically ranks as the sixth largest single source of sales for the pharmaceutical industry. The respiratory market alone generated revenues of $30.5 billion in 2006.
Source: Company presentation / LAPP Resources, Inc. geological report, April 2008.
75.2
3 Mo.
n/a
1 Yr.
n/a
3 Yr.(Ann)
STOCK PERFORMANCE (%)
Price Change
2,276n/m
LastQtr.
131.11,337
12 Mo.
272.8n/m
3 YrCAGR
GROWTH (%)
RevenuesEPS
104.99-67.37
CRTX
1.1910.56
Ind Avg
19.2020.35
S&P500
RETURN ONEQUITY (%)
TTM5 Yr. Avg.
Industry analysis
P/E comparison
Source:Reuters.com
Analyst: Victor Sula, Ph.D.Initial Report
May 28th, 2009
Cornerstone Therapeutics Inc. (Nasdaq: CRTX) 4
Collectively, the five largest companies in the asthma and COPD market, GSK, AstraZeneca, Merck, Boehringer Ingelheim and Schering-Plough, control more than 75% of market share. In the term of products, the leader in the large respiratory market is GlaxoSmithKline’s Advair/Serevent asthma inhaler. It does face threats from similar drugs, like Merck’s Singulair and Astrazeneca’s Symbicort.
CRTX is a fast growing specialty pharmaceutical company focused on developing and commercializing prescription medications for respiratory disorders. The Company’s strong portfolio of products is sold by more than 67 sales representatives and plans to increase the number to 150 sales representatives within the next two years. CRTX has entered into a number of license agreements under which it has licensed intellectual property and other rights needed to develop its products or under which it have licensed intellectual property and other rights to third parties, including the license and collaboration agreements.
The Company’s net product sales more than doubled from 2007 and with a strong growth in operating income and cash flow from operations. In 2009, CRTX is targeting net revenues in excess of $84 million and income from operations in excess of $10 million which assumes an increase of approximately $4.5 million in clinical development spending more than 2008.
Year-to-date, CRTX stock surged approximately 170%. Currently, shares are selling at 7 times 2009 EPS estimates of $1.02 and 5.6 times 2010 estimates of $1.27. The Company is traded with a discount to the relative valuations of its peer group, which makes us to rate the stock as a Speculative Buy.
Analyst opinion
INCOME STATEMENTNet Sales ($mil)Gross profit ($mil)EBITDA ($mil)EBIT ($mil)Net Income ($mil)
BALANCE SHEETCash & Equiv. ($mil) Total Assets ($mil) Total Debt ($mil)Equity ($mil)
PROFITABILITYEBITDA MarginOperating MarginSales Turnover Return on AssetsReturn on Equity
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Victor Sula, Ph.D. - Senior Analyst
Victor Sula, Ph.D. has held the position of Senior Analyst with several independent investment research firms since 2004. Prior to 2004, Mr. Sula held Senior Financial Consultant positions within the World Bank sponsored Agency for Restructuring and Enterprise Assistance and TACIS sponsored Center for Produc-tivity and Competitiveness of Moldova, where he was involved in corporate reorganization and liquidation. He is also employed as Associate Professor at the Academy of Economic Studies of Moldova. Mr. Sula earned his Ph.D. degree in 2001 and bachelor’s degree in Finance in 1997 from the Academy of Economic Studies of Moldova. Mr. Sula is currently a level III candidate in the CFA program.
