12:00 AM
May 18, 2009
 |  BioCentury  |  Finance

Ebb & Flow

Just after reporting its first profitable quarter, respiratory specialist Cornerstone Therapeutics Inc. (NASDAQ:CRTX) decided to exchange half the company for the right to become the U.S. marketing arm of Italian drug company Chiesi Farmaceutici S.p.A.

The deal gives Cornerstone immediate access to one marketed respiratory product, and potential rights to a pipeline of products with about $1 billion in European sales, several of which are in late-stage development in the U.S.

Cornerstone was formed last year through the reverse merger of Critical Therapeutics Inc. and privately held Cornerstone BioPharma. After dropping most development activities in favor of marketing a portfolio of prescription and OTC respiratory products, the newco posted $10.4 million in operating income for 1Q09.

Cornerstone now has the right to market Chiesi's Curosurf poractant alfa for 10 years in the U.S. to treat respiratory distress syndrome (RDS) in premature infants. Last year, Curosurf had $31.8 million in net revenue in the U.S.

Cornerstone also will receive $15.5 million in cash from Chiesi and the right of first offer to license U.S. marketing rights to Chiesi's other products, none of which are marketed in the U.S.

On Cornerstone's 1Q09 earnings call, President and CEO Craig Collard said the alliance would fit well with Cornerstones' "strategy to acquire, develop and commercialize prescription products for the respiratory market."

He said 46% of Chiesi's products in development are respiratory treatments.

Neither company has disclosed whether any Chiesi candidates are in registration in the U.S. But the Italian company has completed a dozen U.S. Phase II and Phase III trials in respiratory indications for candidates including CHF 4226 (carmoterol); CHF 5188 (carmoterol/budesonide); and Foster inhaled beclomethasone dipropionate/formoterol fumarate.

Chiesi is enrolling a Phase II trial and two Phase III trials in the U.S. for inhaled beclomethasone dipropionate/formoterol fumarate to treat asthma.

Chiesi will own 51% of Cornerstone and get four board seats. "Chiesi could do a marketing deal with pretty much anybody," CFO David Price said, but the majority stake allows the Italian company "to have a say in the way their drugs were marketed in the U.S."

The remaining board seats are occupied by Collard and three independent directors. The companies have agreed to a two-year lock-up on the shares.

Building on breakeven

At last week's close of $6.71, Cornerstone is valued at $83.9 million. It posted 1Q sales of $30.5 million, up 239% from $9 million in 1Q08.

The increase was driven by two product launches: the HyoMax line of products, which combine four generic antispasmodic medications to treat gastrointestinal disorders, and Spectracef cefditoren antibiotic to treat community-acquired pneumonia (CAP), acute bacterial exacerbation of chronic bronchitis (ABECB), pharyngitis/tonsillitis and uncomplicated skin and skin-structure infections (SSSIs).

The completion of the Critical Therapeutics deal last Oct. 31 added Zyflo immediate-release zileuton and Zyflo CR tablets for asthma.

Based on 1Q sales, Cornerstone upped its FY09 net revenue and operating income guidance to $90-$95 million from $80 million and to $17 million from $10 million, respectively. The figures exclude any impact from the Chiesi deal.

Cornerstone, which has 85 sales reps focused on primary care physicians, will absorb the 15 U.S. sales reps that market Curosurf.

Money tree

While many private biotechs are bemoaning the scarcity of funding, PTC Therapeutics Inc. has been sustaining itself solely through partnerships and grants since 2005, when the genetic disorder company had its last venture round.

PTC added to its coffers last week by expanding its research collaboration with the Spinal Muscular Atrophy Foundation. Up to $8.5 million in additional funds are now committed to the partners' efforts to identify and optimize compounds that increase production of the survival motor neuron protein, the lack of which causes SMA.

The latest tranche is intended to move the project from a lead candidate to a clinical candidate, according to Meg Winberg, the foundation's director of discovery...

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