Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
CBRX > SEC Filings for CBRX > Form 10-Q on 1-Aug-2014All Recent SEC Filings

Show all filings for COLUMBIA LABORATORIES INC

Form 10-Q for COLUMBIA LABORATORIES INC


1-Aug-2014

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

This Quarterly Report on Form 10-Q contains information that may constitute forward-looking statements. Generally, forward-looking statements can be identified by words such as "may," "will," "plan," "believe," "expect," "intend," "anticipate," "potential," "should," "estimate," "predict," "project," "would," and similar expressions, which are generally not historical in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future - including statements relating to our future operating or financial performance or events, our strategy, goals, plans and projections regarding our financial position, our liquidity and capital resources, and our product development - are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. Our Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain known and unknown risks, uncertainties and factors that may cause actual results to differ materially from our Company's historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in our Annual Report on Form 10-K for the year ended December 31, 2013, those described in this Quarterly Report on Form 10-Q, and those described from time to time in our future reports filed with the Securities and Exchange Commission (the "SEC").

You should read this Quarterly Report and the documents that we have filed as exhibits to the Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. While we may elect to update forward-looking statements at some point in the future, we do not undertake any obligation to update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise.

Company Overview

We provide pharmaceutical development, clinical trial manufacturing, product supply, and advanced analytical and consulting services to the pharmaceutical industry.

Historically we have been in the business of developing, licensing, manufacturing and selling to our marketing partners pharmaceutical products that utilize proprietary drug delivery technologies to treat various medical conditions.

To date we have developed six prescription and "over-the-counter" pharmaceutical products: five bioadhesive vaginal gel products that provide patient-friendly solutions for infertility, pregnancy support, amenorrhea, and other women's health conditions, and a testosterone bioadhesive buccal system for male hypogonadism. Our primary product is CRINONE 8% (progesterone gel). We have licensed CRINONE to Merck Serono, internationally, and sold the rights to CRINONE to Actavis in the United States.

Presently, our focus is on:

the supply of CRINONE to our marketing partner;

the growth of our pharmaceutical development services; and

building an in-house proprietary product pipeline of new therapeutic entities.

Supply of CRINONE:

We manufacture and supply our internally-developed product, CRINONE, to our marketing partner, Merck Serono. For the 2013 period, we sold CRINONE 8% to Merck Serono at a price determined on a country-by-country basis that is the greater of (i) cost plus 20% or (ii) thirty percent (30%) of the net selling price in the country. Certain quantity discounts applied to annual purchases over 10 million, 20 million, and 30 million units.

In April 2013, our license and supply agreement with Merck Serono for the sale of CRINONE 8% outside the U.S. was renewed for an additional five year term, extending the expiration date to May 2020.

Under the terms of this amendment, we will continue to sell CRINONE to Merck Serono on a country-by-country basis at the greater of (i) cost plus 20% or
(ii) a percentage of Merck Serono's net selling price. From 2014 through 2020, the percentage of net selling price will be determined based on a tiered structure. As sales volumes increase, our percentage of incremental sales will decrease.


Table of Contents

During the six months ended June 30, 2014, we completed the transfer of operations and quality management of CRINONE to our Nottingham site, resulting in annual savings of approximately $0.4 million.

Pharmaceutical Development Services:

We are expanding our pharmaceutical development and clinical trial manufacturing services and focusing on enabling technologies that facilitate processing of difficult-to-progress molecules. In April 2014, we completed a significant investment in GMP hot melt extrusion (HME) technology along with further milling equipment, enabling us to accelerate formulation development for our clients. Also, in April 2014, we expanded our business development team with the addition of a U.S. sales person.

In-house Proprietary Product Pipeline:

In March 2014, we completed our commercial and intellectual property assessment on COL-1077, extended-release lidocaine vaginal gel. Pending completion of our regulatory and clinical diligence of this potential product, we remain on track to pursue a 505(b)(2) development program later this year with its target indication planned to be gynecological procedure related pain, a sizeable market opportunity with no approved products.

Sources of Revenue:

We generate revenues from the sale of products, services and certain royalties. During the three months ended June 30, 2014, we derived approximately 51% of our revenues from sales of our products, 34% of our revenues from the sale of our services and 15% of our revenues from royalties. During the three months ended June 30, 2013, we derived approximately 88% of our revenues from the sales of our products and 12% of our revenues from royalties and certain other revenues. During the six months ended June 30, 2014, we derived approximately 49% of our revenues from sales of our products, 36% of our revenues from the sale of our services and 15% of our revenues from royalties. During the six months ended June 30, 2013, we derived approximately 87% of our revenues from the sales of our products and 13% of our revenues from royalties and certain other revenues. Generally, we recognize revenue from the sale of our products upon shipment to our customers, revenues from services as the work is performed and revenues from royalties as sales are made by the licensees.

We expect that future recurring revenues will be derived from product sales to Merck Serono, royalty streams from Actavis and from pharmaceutical development, clinical trial manufacturing, and analytical and consulting services. Revenue results are difficult to predict, and any shortfall in revenue or delay in recognizing revenue could cause operating results to vary significantly from quarter to quarter. Because products shipped to Merck Serono occur only in full batches, quarterly sales can vary widely and affect comparisons with prior periods and may not correlate to our customer's in-market sales. Likewise, our service revenues are driven by obtaining and retaining our customer contracts and may vary widely from quarter to quarter.

CRINONE is manufactured in Europe by third parties under contract on behalf of our foreign subsidiaries who sell the products to our worldwide licensees. We oversee CRINONE manufacturing and quality assurance and provide our pharmaceutical development, clinical trial manufacturing, and analytical and consulting services from our facility in Nottingham, U.K.


Table of Contents

Results of Operations

The following tables contain selected consolidated statement of operations
information, which serves as the basis of the discussion surrounding the results
of our operations for the three months ended June 30, 2014 and 2013:



                                                         Three Months Ended
                                                              June 30,
                                                 2014                          2013
                                                     As a % of                     As a % of
(in thousands, except for                              Total                         Total            $             %
percentages)                           Amount        Revenues        Amount        Revenues         Change       Change
Product revenues                       $ 3,508               51 %    $ 7,019               88 %    $ (3,511 )        (50 )%
Service revenues                         2,313               34           -                -          2,313          100
Royalties                                1,036               15          928               12           108           12
Other revenues                              -                -            31               -            (31 )       (100 )

Total revenues                           6,857              100        7,978              100        (1,121 )        (14 )
Cost of product revenues                 1,953               28        2,831               35          (878 )        (31 )
Cost of service revenues                 1,916               28           -                -          1,916          100

Total cost of revenues                   3,869               56        2,831               35         1,038           37
Gross profit                             2,988               44        5,147               65        (2,159 )        (42 )
Operating expenses:
Sales and marketing                        467                7           -                -            467          100
Acquisition related expenses                -                -             9               -             (9 )       (100 )
General and administrative               2,239               33        2,310               29           (71 )         (3 )

Total operating expenses                 2,706               39        2,319               29           387           17

Income from operations                     282                4        2,828               35        (2,546 )        (90 )
Interest (expense) income, net             (29 )             -            43                1           (72 )       (167 )
Change in fair value of common stock
warrant liability                           70                1         (155 )             (2 )         225         (145 )
Other income (expense), net                 36                1          (56 )             (1 )          92         (164 )

Income before income taxes                 359                5        2,660               33        (2,301 )        (87 )
Provision for income taxes                 166                2            3               -            163         5433

Net income                             $   193                3 %    $ 2,657               33 %    $ (2,464 )        (93 )%

Revenues



                                            Three Months Ended
                                                 June 30,                $             %
 (in thousands, except for percentages)      2014          2013        Change       Change
 Product revenues                         $    3,508      $ 7,019     $ (3,511 )        (50 )%
 Service revenues                              2,313           -         2,313          100
 Royalties                                     1,036          928          108           12
 Other revenues                                   -            31          (31 )       (100 )

 Total revenues                           $    6,857      $ 7,978     $ (1,121 )        (14 )%

Revenues in the three months ended June 30, 2014 decreased from the three months ended June 30, 2013 by $1.1 million, or 14%. The decrease was attributable to a number of factors including the following:

Revenues from the sale of products decreased by approximately $3.5 million, or 50%, from the 2013 period primarily due to the temporary absence of CRINONE orders in the three months ended June 30, 2014 from one of Merck Serono's higher-volume markets during a routine license renewal; which were partially offset by

Service revenues of $2.3 million in the 2014 period were from our pharmaceutical development, consulting and analytic services portfolio, which began in September 2013 with our acquisition of Molecular Profiles; and

Royalty revenues increased by $0.1 million, or 12%, primarily due to higher sales of progesterone products by Actavis for the three months ended June 30, 2014 as compared to the three months ended June 30, 2013.


Table of Contents

Cost of revenues

                                                  Three Months Ended
                                                       June 30,                  $             %
(in thousands, except for percentages)           2014            2013         Change         Change
Cost of product revenues                       $   1,953        $ 2,831       $  (878 )          (31 )%
Cost of service revenues                           1,916             -          1,916            100

Total cost of revenues                         $   3,869        $ 2,831       $ 1,038             37 %

Total cost of revenues (as a percentage of
total revenues)                                       56 %           35 %

Total cost of revenues was $3.9 million and $2.8 million for the three months ended June 30, 2014 and 2013, respectively. Cost of product revenues decreased due to lower volume shipped to higher margin markets in the 2014 period. Cost of service revenues consist mainly of personnel costs, external consultant fees, depreciation and materials used in connection with generating our service revenues. There were no costs of service revenues in the three months ended June 30, 2013 as the acquisition of Molecular Profiles occurred in September 2013.

Sales and marketing expenses

                                                  Three Months Ended
                                                       June 30,                   $              %
(in thousands, except for percentages)           2014             2013          Change         Change
Sales and marketing                            $     467          $  -         $    467            100 %
Sales and marketing (as a percentage of
total revenues)                                        7 %           -  %

Sales and marketing expenses generated during the three months ended June 30, 2014 are attributable to the sales and marketing activities associated with our services portfolio, which we acquired in September 2013 with our acquisition of Molecular Profiles. These expenses consist of personnel costs for our sales force as well as marketing costs consisting of tradeshows and conference fees.

Acquisition-related expenses

                                                   Three Months Ended
                                                        June 30,                   $              %
(in thousands, except for percentages)           2014             2013          Change         Change
Acquisition-related expenses                    $    -           $     9        $    (9 )         (100 )%
Acquisition-related expenses (as a
percentage of total revenues)                        -  %             -  %

There were no acquisition-related expenses for the three months ended June 30, 2014. Acquisition-related expenses for the three months ended June 30, 2013 related to transaction costs for the acquisition of Molecular Profiles.

General and administrative expenses

                                                 Three Months Ended
                                                      June 30,                    $               %
(in thousands, except for percentages)          2014             2013           Change         Change
General and administrative                    $   2,239         $ 2,310        $    (71 )           (3 )%
General and administrative (as a
percentage of total revenues)                        33 %            29 %

Total general and administrative expenses decreased by $0.1 million to $2.2 million for the three months ended June 30, 2014, compared with $2.3 million for the three months ended June 30, 2013. This decrease is primarily due to lower personnel costs associated with the workforce reduction in the prior year offset by administrative costs related to our facility in the United Kingdom, which we acquired in September 2013.


Table of Contents

Non-operating income and expense

                                                  Three Months Ended
                                                       June 30,                   $               %
(in thousands, except for percentages)           2014            2013           Change         Change
Interest (expense) income, net                 $    (29 )       $    43        $    (72 )         (167 )%
Change in fair value of common stock
warrant liability                              $     70         $  (155 )      $    225           (145 )%
Other income (expense), net                    $     36         $   (56 )      $     92           (164 )%

The decrease in interest (expense) income, net, primarily relates to interest paid in the 2014 period on the debt assumed in the Molecular Profiles acquisition, compared to the realized gain recognized on the sale of our marketable securities during the 2013 period. The debt assumed is secured by a mortgage on our facilities in Nottingham, United Kingdom.

The income of $0.1 million associated with the change in fair value of stock warrant liability for the three months ended June 30, 2014 is related to the October 2009 stock issuance and resulted from a stabilization of the volatility rate used in our Black-Scholes model as the warrants approach their expiration date. The change in fair value of stock warrant liability for the period ended June 30, 2013 resulted in a charge of $0.2 million associated with an increase in our stock price during the three months ended June 30, 2013.

Other income (expense), net, for the three months ended June 30, 2014 increased primarily due to income associated with the Regional Growth Fund grant recognized in the 2014 period as compared to net foreign currency transaction losses related to the strengthening of the Euro and the British pound against the U.S. dollar in the 2013 period.

Provision for income taxes

                                                  Three Months Ended
                                                       June 30,                   $              %
(in thousands, except for percentages)           2014             2013          Change        Change
Provision for income taxes                     $    166          $    3        $    163          5433 %
Provision for income taxes (as a
percentage of income before income taxes)            46 %           0.1 %

The 2014 effective tax rate represents federal alternative minimum tax, state minimum taxes owed, a one-time clawback provision under a New Jersey Economic Development Authority program relating to the sale of the Company's state net operating losses partially offset by a foreign tax benefit calculated on the investment in a foreign subsidiary. The 2013 effective tax rate represents state minimum tax expenses. Currently we have a full valuation allowance that offsets our net domestic deferred tax asset.


Table of Contents

The following tables contain selected consolidated statement of operations information, which serves as the basis of the discussion surrounding the results of our operations for the six months ended June 30, 2014 and 2013:

                                                       Six Months Ended
                                                           June 30,
                                             2014                           2013
                                                  As a % of                      As a % of
(in thousands, except for                           Total                          Total            $             %
percentages)                        Amount        Revenues         Amount        Revenues         Change       Change
Product revenues                   $  6,969               49 %    $ 12,392               87 %    $ (5,423 )        (44 )%
Service revenues                      5,023               36            -                -          5,023          100
Royalties                             2,113               15         1,814               12           299           16
Other revenues                           -                -             88                1           (88 )       (100 )

Total revenues                       14,105              100        14,294              100          (189 )         (1 )
Cost of product revenues              4,379               31         5,672               40        (1,293 )        (23 )
Cost of service revenues              3,762               27            -                -          3,762          100

Total cost of revenues                8,141               58         5,672               40         2,469           44
Gross profit                          5,964               42         8,622               60        (2,658 )        (31 )
Operating expenses:
Sales and marketing                     868                6            -                -            868          100
Acquisition related expenses             -                -            492                3          (492 )       (100 )
General and administrative            4,690               33         4,288               30           402            9

Total operating expenses              5,558               39         4,780               33           778           16

Income from operations                  406                3         3,842               27        (3,436 )        (89 )
Interest (expense) income, net          (63 )             -             95                1          (158 )       (166 )
Change in fair value of common
stock warrant liability                 379                3            50               -            329          658
Other income (expense), net              78                1           (82 )             (1 )         160         (195 )

Income before income taxes              800                6         3,905               27        (3,105 )        (80 )
Provision for income taxes              178                1             6               -            172         2867

Net income                         $    622                4 %    $  3,899               27 %    $ (3,277 )        (84 )%

Revenues



                                             Six Months Ended
                                                 June 30,               $             %
  (in thousands, except for percentages)     2014         2013        Change       Change
  Product revenues                         $  6,969     $ 12,392     $ (5,423 )        (44 )%
  Service revenues                            5,023           -         5,023          100
  Royalties                                   2,113        1,814          299           16
  Other revenues                                 -            88          (88 )       (100 )

  Total revenues                           $ 14,105     $ 14,294     $   (189 )         (1 )%

Revenues in the six months ended June 30, 2014 decreased from the six months ended June 30, 2013 by $0.2 million, or 1%. The decrease was attributable to a number of factors including the following:

Revenues from the sale of products decreased by approximately $5.4 million, or 44%, from the 2013 period primarily due to the temporary absence of CRINONE orders in the six months ended June 30, 2014 from one of Merck Serono's higher-volume markets during a routine license renewal; which were partially offset by

Service revenues of $5.0 million in the 2014 period were from our pharmaceutical development, consulting and analytic services portfolio, which began in September 2013 with our acquisition of Molecular Profiles; and

Royalty revenues increased by $0.3 million, or 16%, primarily due to higher sales of progesterone products by Actavis for the six months ended June 30, 2014 as compared to the six months ended June 30, 2013.


Table of Contents

Cost of revenues

                                                  Six Months Ended
                                                      June 30,                 $              %
(in thousands, except for percentages)           2014          2013          Change         Change
Cost of product revenues                       $  4,379       $ 5,672       $ (1,293 )          (23 )%
Cost of service revenues                          3,762            -           3,762            100

Total cost of revenues                         $  8,141       $ 5,672       $  2,469             44 %

Total cost of revenues (as a percentage of
total revenues)                                      58 %          40 %

Total cost of revenues was $8.1 million and $5.7 million for the six months ended June 30, 2014 and 2013, respectively. Cost of product revenues decreased due to lower product revenues in the 2014 period offset by lower volume shipped to higher margin markets in the 2013 period. Cost of service revenues consist mainly of personnel costs, external consultant fees, depreciation and materials used in connection with generating our service revenues. There were no costs of service revenues for the six months ended June 30, 2014 as the acquisition of Molecular Profiles occurred in September 2013.

Sales and marketing expenses

                                                    Six Months Ended
                                                        June 30,                 $             %
(in thousands, except for percentages)             2014           2013         Change        Change
Sales and marketing                              $    868         $  -        $    868           100 %
Sales and marketing (as a percentage of total
revenues)                                               6 %          -  %

. . .

  Add CBRX to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for CBRX - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.