CPEX Pharmaceuticals' fourth-quarter 2009 revenues up 23%

CPEX Pharmaceuticals, Inc. (NASDAQ: CPEX) today reported financial results for the fourth quarter and year ended December 31, 2009. For the quarter CPEX reported revenues of $5.2 million and a net loss of $498,000. For the year CPEX reported revenues of $18.7 million and a net loss of $3.0 million.

“We are pleased with our progress during 2009, our first full year as a stand-alone company”

Operating expenses for the year ended December 31, 2008 include a $1.2 million non-cash charge resulting from the modification of equity awards and $2.5 million of expenses related to the spin-off from Bentley Pharmaceuticals on June 30, 2008.

Fourth-Quarter Highlights

For the fourth quarter of 2009 compared to the fourth quarter of 2008:

• Revenues increased 23% to $5.2 million from $4.2 million.
• Operating expenses increased 45% to $5.8 million from $4.0 million.
• Net loss was $498,000, or $0.20 per share, compared to net income of $292,000, or $0.12 per share.

The growth in revenues for the fourth quarter of 2009 was due to increased royalties on sales of Testim^®. This growth is due to a reported 13.2% increase in prescriptions for Testim during the fourth quarter of 2009 compared to the same period in 2008.

General and administrative expenses for the fourth quarter of 2009 increased $1.1 million compared to the fourth quarter of 2008 due to $1.2 million in costs relating to the Upsher-Smith litigation. Research and development expenses for the fourth quarter of 2009 increased $627,000 compared to the fourth quarter of 2008 largely due to a $489,000 increase in expenses related to the Nasulin clinical program. Research and development expenses are expected to vary from period to period, primarily due to the number, size and recruitment levels of clinical trials in any given reporting period.

Year-to-Date Highlights

For the year ended December 31, 2009 compared to the comparable period in 2008:

• Revenues increased 20% to $18.7 million from $15.6 million.
• Operating expenses increased 16% to $21.9 million from $18.8 million.
• Net loss increased to $3.0 million, or $1.21 per share, from $2.9 million, or $1.25 per share.

The increase in revenues for the twelve months ended December 31, 2009 was due to increased royalties on sales of Testim^®. For the year ended December 31, 2009, Testim prescriptions were reported to have grown 14.9% compared to the same period in 2008. General and administrative expenses increased $2.4 million in the year ended December 31, 2009 compared to the same period in 2008. The increase was primarily due to increased litigation costs of $2.8 million partially offset by a $674,000 decrease in non-cash share-based compensation expense. Research and development expenses increased $3.2 million during the year ended December 31, 2009 compared to 2008 due to a $3.7 million increase in clinical trial expenses, primarily related to the Nasulin clinical program, which were partially offset by lower non-cash share-based compensation expense of $494,000.

On June 30, 2008, CPEX had approximately 2,274,000 common shares outstanding after the spin-off. The same number of shares is being used for the basic and diluted loss per share computation for all periods presented prior to June 30, 2008 because no CPEX equity awards were outstanding prior to the spin-off.

As of December 31, 2009, CPEX had unrestricted cash of approximately $13.7 million, working capital of $16.6 million and no debt.

Business Update

Ongoing Clinical Trials: CPEX’s intranasal insulin product candidate for the treatment of hyperglycemia in patients with Type 1 and Type 2 diabetes, Nasulin, is continuing in clinical trials evaluating the efficacy and safety profile of the product. CPEX has completed enrollment in its Phase 2a study designed to assess the efficacy and safety of Nasulin versus placebo over a 6-week treatment period. This study was conducted at multiple sites in the U.S. and randomized 94 patients. Data analysis is ongoing and preliminary results are expected this month. Earlier clinical studies of Nasulin indicated that CPEX’s intranasal insulin candidate achieved a faster time to peak plasma insulin levels when compared to other approved rapid-acting insulin therapies, thereby more closely mimicking the natural response of the pancreas to meals.

Patent Infringement Lawsuit Update: CPEX and Auxilium Pharmaceuticals, Inc. continue to vigorously pursue their lawsuit against Upsher-Smith for infringement of CPEX’s patent that covers Testim. In August 2009, the U.S. Food and Drug Administration (FDA) responded to a Citizen Petition filed by Auxilium. The FDA agreed with some of the statements made in the Citizen Petition regarding the testing required for generic versions of Testim, while disagreeing with other statements. While the FDA did not comment upon any particular filing, the agency stated that: “The practical effect of this determination is that any application for a testosterone gel product that has different penetration enhancers than the reference listed drug cannot be submitted as an ANDA [(i.e., an abbreviated new drug application)] and, instead, will have to be submitted as an NDA under section 505(b) of the Act.” (FDA’s August 26, 2009, Response to Auxilium’s Citizen Petition)

Partnering Update: Serenity Pharmaceuticals, CPEX’s licensing and development partner, continues to recruit patients in multiple Phase 3 clinical trials of their undisclosed urology drug, which is delivered using CPEX’s intranasal technology for the treatment of nocturia. These randomized, double blind, placebo controlled studies are being conducted at multiple sites in the United States.

New Chief Scientific Officer: On February 1, 2010, CPEX announced the appointment of Nils Bergenhem, Ph.D. as its Chief Scientific Officer. Prior to joining CPEX, Dr. Bergenhem served as Chief Scientific Officer at Escoublac, Inc., the first biotechnology company in the Biogen Idec Innovations Incubator, where he was responsible for development and execution of the research plan for human osteocalcin in metabolic disease, Type 2 diabetes and obesity. Dr. Bergenhem succeeds Fred Feldman, Ph.D., who is retiring after a 35 year career in research and drug development.

Management Comments

“We are pleased with our progress during 2009, our first full year as a stand-alone company” stated John A. Sedor, CPEX President and Chief Executive Officer. “We are enthusiastic about the recent completion of enrollment in our Phase 2a study of Nasulin and we look forward to finalizing our analysis and announcing the results. Royalties on sales of Testim are continuing to grow, and we are encouraged by the continued advancement of Serenity’s urology program and the pipeline opportunities that lie ahead.”