Respiratory drugs company Cornerstone Therapeutics (NASDAQ:CRTX) broke $125 million in annual revenue last year helped by the strength of its two biggest selling products, both of them acquisitions from other companies. Cornerstone is now closing in on another deal that could bring yet another product to its portfolio.
Cornerstone expects to complete a deal “in the very near term” that will fit the Cary, North Carolina-based company’s new, streamlined strategy that focuses on respiratory products sold to specialists, CEO Craig Collard told analysts on a Wednesday conference call. Collard added that the company is also looking at partnerships and strategic alliances that could further grow the specialty pharmaceutical company.
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“We’re back in deal mode and we’re looking at a lot of things,” Collard said.
Pressed for more details about Cornerstone’s impending deal, Collard declined to specify what Cornerstone is acquiring and only said that it could be a product or a company. Either way, Cornerstone is well positioned from a financial standpoint. The company has more than $86 million in cash and no debt. And if a deal calls for more money, the company can turn to a $95 million shelf filing filed last year.
While Cornerstone has seen organic growth of its product line, the company owes much of its position to the acquisition of both companies and products. Asthma drug Zyflo came to Cornerstone from Critical Therapeutics in a 2008 reverse merger that also brought the company a public listing. In 2009, the company acquired rights to Curosurf from Italian company Chiesi. Curosurf treats respiratory distress in premature infants and is now Cornerstone’s top-selling product. Factive, an antibiotic for bronchitis and pneumonia patients, came to Cornerstone from bankrupt Oscient Pharmaceuticals.
Before those deals, most of Cornerstone’s revenue came from older, legacy drugs that do not have U.S. Food and Drug Administration approval. Cornerstone has been steadily shifting its focus away from those legacy products, emphasizing instead its branded drugs. Collard said Wednesday that going forward, Cornerstone will stop supporting the legacy drugs altogether.
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As recently as 2008, legacy drugs represented the more than 60 percent of Cornerstone’s revenue. The tables have turned and as of now, 70 percent of Cornerstone’s revenue comes from FDA-approved, branded products. By 2013, Cornerstone projects that all of its revenue will come from branded products. In doing so, the company is also putting less emphasis on anti-infectives, such as Factive. While the company will still maintain those products, they won’t be regarded as core to Cornerstone’s strategy. That strategy will be to focus on respiratory products prescribed by specialists. The large market of primary care prescribers can be a challenge for a small pharma company with a small sales force. Targeting specialists offers better prospects for success. Collard points to Curosurf’s 45 percent market share, a position achieved with a small and focused sales force. Cornerstone expects similar growth opportunities for asthma drug Zyflo. Collard said that more Zyflo CR prescriptions are written by specialists than primary care physicians because patients are typically on combination therapies under the care of specialists.
Cornerstone could start generating new revenue this year from a product developed in-house. CRTX 067, a drug candidate that will be a generic for UCB‘s top-selling cough and cold drug Tussionex, is expected to receive FDA approval soon. The company has additional allergy and asthma drug candidates in preclinical development. Collard also mentioned interest in working with an orphan drug, though on that matter, he declined to offer details. When an analyst asked about cystic fibrosis –an indication that the company has mentioned previously — Collard said CF is one of Cornerstone’s interests.
Cornerstone has built itself by carefully and strategically acquiring drugs that were either unwanted or underperforming at other companies. Those deals happened when Cornerstone was a smaller company with less available cash. Cornerstone now has a refined drug strategy and more than $86 million in cash. The coming deal could be an indication of just how big a splash the company wants to make in the respiratory therapeutics market.
