Columbia Laboratories, Inc. (Nasdaq: CBRX) ("Columbia" or "the Company") today announced financial results for the three and six-month periods ended June 30, 2014.
"Second quarter results benefited from the contribution of the Molecular Profiles services business, as its diversified revenue stream partially offset an anticipated and temporary decline in product revenues from Merck Serono during a routine license renewal in one high-volume, high-margin market. Throughout the renewal process, no product shipments are permitted in this market. As a result, we experienced a 44% year-over-year decrease in first-half CRINONE product revenues, our largest business. Nevertheless, the contribution of the newly acquired services business meant we were able to maintain stable first-half consolidated revenues on a year-over-year basis," stated Frank Condella, CEO.
"As predicted at the time of the purchase of Molecular Profiles, the combined platform is generating increased business development opportunities and in the second quarter we were successful in adding twelve new clients, versus four in the first quarter. One source of competitive differentiation has been the Company's recent investment in enabling technologies that facilitate processing of difficult-to-progress molecules. These technologies resulted in several second quarter contract wins, with the size of new client engagements expected to increase over time. We also remain on track to pursue a 505(b)(2) development program later this year for our extended release lidocaine gel product, pending completion of regulatory and clinical diligence," continued Mr. Condella.
Second Quarter Financial Results
For the second quarter of 2014, revenues were $6.9 million as compared with $8.0 million for the same period in 2013.
Product revenues were $3.5 million for the three months ended June 30, 2014, a decrease of $3.5 million or 50% from the second quarter of 2013. The decrease is primarily due to the absence of CRINONE® (progesterone gel) orders from one of Merck Serono S.A.'s ("Merck Serono") higher-volume, higher-margin markets. As previously disclosed, Merck Serono built up its inventory of CRINONE during the first three quarters of 2013 in anticipation of a routine license renewal in this one market. During the renewal period, which commenced in the fourth quarter of 2013, product cannot be shipped without special agreement. Merck Serono has made one such agreement and a one-time shipment is expected to be made in the third quarter. Normalized shipments to this market are expected to resume at the beginning of 2015.
Service revenues were $2.3 million in the second quarter. Revenues in the services business rely on the completion of a number of phases of individual contracts, which may change, be, cancelled, delayed or accelerate depending on the needs of the project and the client. As a result, revenues can vary on a quarterly basis. There were no service revenues in the second quarter of 2013, as Columbia acquired Molecular Profiles Ltd ("Molecular Profiles") in September 2013.
Royalty revenues were $1.0 million in the quarter, up from $0.9 million in the year-ago period, due to higher sales of CRINONE by Actavis in the U.S.
Gross profit for the second quarter of 2014 was $3.0 million, compared to $5.1 million for the same period in 2013. Gross profit as a percentage of total revenues was 44% for the second quarter of 2014, compared to 65% in the second quarter of 2013. The higher gross profit and gross profit percentage in the 2013 period primarily reflects the sales to Merck Serono to build inventory in the high-volume, high-margin market to meet demand during the license renewal period.
Total operating expenses increased to $2.7 million for the second quarter of 2014, compared to $2.3 million for the second quarter of 2013. The increase in operating expenses reflects sales and marketing costs related to the recently acquired services business and administrative costs related to the U.K. facility acquired in September 2013, partially offset by lower head office personnel costs associated with a workforce reduction in the U.S. in the previous year.
The Company recorded net income of $0.2 million, or $0.01 per diluted share, for the second quarter of 2014, compared to net income of $2.7 million, or $0.24 per diluted share, for the same period of 2013. Non-GAAP Adjusted EBITDA was $1.0 million for the 2014 period versus $3.4 million in the second quarter of 2013.
Cash and cash equivalents were $11.8 million as of June 30, 2014.
- Columbia expanded its intellectual property portfolio following the receipt of a patent covering bioadhesive progressive hydration tablets. The issued patent, U.S. Patent 8,765,177, pertains to a controlled, extended release delivery system for pharmaceutical compounds and can be used by the Company to develop proprietary products.
- Columbia was added to the Russell Microcap Index, which measures the performance of the microcap segment of the U.S. equity market. Membership in the Russell Microcap Index, which remains in place for one year, means automatic inclusion in the appropriate growth and value style indexes.
- Columbia undertook significant business development activities focused on the Japanese market, with a view towards working with more Japanese clients in the services business.
"In-market sales of CRINONE continue to be strong, growing at a low double-digit annualized rate. The routine license renewal by Merck Serono for one of its high-volume, high-margin markets is expected to be complete in the second half of 2014, whereupon normal shipments will then resume at the beginning of 2015. The new license will be in place for five years, thereby restoring the predictability of this long-term revenue stream. In the interim, Merck Serono placed an order with us as part of a one-time exception during the renewal process. The order will be shipped in the third quarter of 2014 and benefit that quarter's revenues. In terms of the services business, we expect a sequential improvement in third quarter revenues due to successful recent business development activities and customer interest in our comprehensive suite of advanced technologies," concluded Mr. Condella.
The Company's prior earnings guidance for potential full year 2014 revenues assumed that the routine license renewal would conclude in first half of the year, with normalized CRINONE shipments resuming in the second half of the year. As normalized shipments are now not expected to resume until early 2015, Columbia is lowering its expected total revenue growth range for fiscal 2014 from an increase of 8% to 12% to an increase of 6% to 8%.
As previously announced, Columbia's management will hold a conference call to discuss financial results for the second quarter ended June 30, 2014, as follows:
The teleconference replay will be available approximately one hour after completion through Thursday, August 7, 2014, at (877) 344-7529 (U.S.) or (412) 317-0088 (International). The conference ID for the replay is 10049906. The archived webcast will be available for one year via the aforementioned URLs.
Columbia Laboratories, Inc.