Columbia Laboratories' total revenues increase 15% to $7.2 million in first quarter 2014

Columbia Laboratories, Inc. (Nasdaq: CBRX) ("Columbia" or "the Company") today announced financial results for the three-month period ended March 31, 2014.

First Quarter 2014 Financial Highlights

• Total revenues grew 15% to $7.2 million compared to $6.3 million in the first quarter of 2013;
• Cash flow from operations increased to $0.9 million as compared with $0.7 million in the first quarter of 2013;
• Repurchased Actavis' 1.4 million share block of CBRX common stock for $8.5 million; and,
• $12.2 million in cash and equivalents as of March 31, 2014. 

"This quarter highlighted one of the many benefits from our recent acquisition of Molecular Profiles.  With our newly diversified revenue stream, we were able to post strong revenue growth as a result of the addition of the services business despite the expected decline in product revenue from Merck Serono this quarter," stated Frank Condella, CEO.

"With this strong platform in place, we are seeing additional new business development opportunities as well as leveraging our existing client relationships to drive growth.  We made progress this quarter on our extended release lidocaine gel product candidate, and are on track to pursue a 505 (b)(2) pathway later this year pending completion of our regulatory and clinical diligence.  Our expanded pharmaceutical development and clinical trial manufacturing services are well-positioned to benefit from the growing trend of pharmaceutical companies to outsource formulation development.  To accelerate this process, we recently hired a senior level executive as head of U.S. sales to help us expand our pharmaceutical development business here," continued Mr. Condella.

First Quarter Financial Results

For the first quarter of 2014, revenues were $7.2 million as compared with $6.3 million for the same period in 2013. 

Product revenues were $3.5 million for the three months ended March 31, 2014, a decrease of $1.9 million or 36% from the first quarter of 2013.  The decrease primarily reflects the absence of CRINONE^® (progesterone gel) orders from one of Merck Serono S.A.'s ("Merck Serono") higher-volume, higher-margin markets during the first quarter of 2014.  During the first three quarters of 2013, Merck Serono increased product shipments for this market in order to meet anticipated inventory requirements during a routine license renewal period, during which product cannot be imported without special agreement.  It is expected that shipments to this market will occur in the second and third quarters of 2014.

Service revenues were $2.7 million for the three months ended March 31, 2014.  There were no service revenues in the first quarter of 2013, as Columbia acquired Molecular Profiles Ltd ("Molecular Profiles") in September 2013. 

Gross profit for the first quarter of 2014 was $3.0 million, compared to $3.5 million for the same period in 2013.  Gross profit as a percentage of total revenues was 41% for the first quarter of 2014, compared to 55% in the first quarter of 2013.  The lower gross profit and margin primarily reflect the absence of sales to Merck Serono for one of its higher-volume, higher-margin markets and the impact, during the first quarter of 2014, of the new tiered pricing provisions of the renewed Merck Serono agreement. 

Total operating expenses increased to $2.9 million for the first quarter of 2014, compared to $2.5 million for the first quarter of 2013.  Operating expenses as a percentage of sales were approximately 39% for both this quarter and the prior year quarter.

The Company recorded net income of $0.4 million, or $0.01 per diluted share, for the first quarter of 2014, compared to net income of $1.2 million, or $0.09 per diluted share, for the first quarter of 2013.  Non-GAAP Adjusted EBITDA was $0.8 million for the 2014 period versus $1.9 million in the first quarter of 2013.

Cash and cash equivalents were $12.2 million as of March 31, 2014.  Cash flows from operations generated during the three month period ended March 31, 2014 were $0.9 million.  On March 6, 2014, the Company used approximately $8.5 million to repurchase 1.4 million shares of its common stock, par value $0.01 per share, from Coventry Acquisition, LLC, a subsidiary of Actavis Inc. ("Actavis"), at $6.08 per share, which represented a 10.75% discount to that day's closing price.  As of March 31, 2014, there were 10,758,505 shares of the Company's common stock outstanding.

Business Highlights

• Completed commercial and intellectual property assessment on COL-1077 extended-release lidocaine vaginal gel.  Pending completion of ongoing diligence on the regulatory and clinical pathway, COL-1077 is expected to advance to full development later this year with its target indication planned to be gynecological procedure related pain, a sizeable market opportunity with no approved products.
• Expanded the capabilities of our pharmaceutical development and clinical trial manufacturing services through investments in new enabling technologies and appointed Charles D. Maher as head of U.S. sales, a newly created position. Mr. Maher has extensive senior commercial experience in the global contract services market, and most recently served as Vice President of Global Business Development at Sundia MediTech.
• Completed the transfer of operations and quality management of CRINONE to our Nottingham site, paving the way for savings of up to $400,000 as previously disclosed.
• Completed a significant investment into additional equipment as part of a wider project focusing on enabling technologies that facilitate processing of difficult-to-progress molecules,  including GMP hot melt extrusion (HME) technology along with further milling equipment.
• Appointed Donald H. Hunter, an executive and technology consultant with over 25 years of public company experience, to the Board of Directors of the Company.  Mr. Hunter qualifies as a financial expert under the SEC guidelines, and will serve on the Company's audit committee.  Mr. Hunter previously served as Chief Operating Officer and Chief Financial Officer of Harbor Global Company Limited from 2000 until 2006.  Prior to that, he was a senior executive with The Pioneer Group, Inc. for 12 years.  

Financial Outlook 

"While we expect underlying CRINONE worldwide in-market sales will continue increasing in 2014 and beyond as Merck Serono continues to promote it in existing markets and enters new markets, our revenue from Merck Serono will continue to fluctuate throughout the year due in part to the timing of shipments.  Though we had not expected any shipments to Merck Serono in the first half of 2014 due to their previously announced build-up of inventory in advance of a routine license renewal, they recently placed an order with us for this market which will be shipped in the second and third quarters of 2014.  This order is part of a one-time exception during the renewal process, and we expect that normal shipments to this high-volume, high-margin market will resume once this renewal process has been completed," concluded Mr. Condella.

Based on current market conditions and visibility, the Company expects total revenues for fiscal 2014 to increase between 8% to 12%.  The Company expects to continue receiving a 10% royalty on Actavis' U.S. net sales of CRINONE through mid-2020, and anticipates maintaining positive cash flows from operations going forward.