Event – Cornerstone eyes swift US approval before catching a cold

Analysis

Investors are hoping for good things from Cornerstone Therapeutics’ cough and cold drug, CRTX 067, as it awaits an FDA decision by the end of this year or early next. The drug is being penned as the first generic alternative to UCB’s $200m-selling cough therapy Tussionex, but with a twice-daily dosing advantage using a delayed release formulation.

Cornerstone's chief executive, Craig Collard, recently said of the pending regulatory verdict: “revenue-wise it’s a game-changing thing for us, and we're getting very close.” Madison Williams' analysts have pencilled in annual revenues of the drug at $65m, although disappointing sales for Tussionex reported by UCB in the first half could dampen spirits somewhat. Nevertheless, FDA approval could see a decent co-promotion deal being signed, or perhaps prompt private Italian group, Chiesi, to extend its stake in Cornerstone beyond the 54% it already owns as it seeks to expand its presence in the US market. 

Product CRTX 067
Company Cornerstone Therapeutics
Market Cap $181m
Product NPV $86m
% of Market Cap 47%
Event type PDUFA
Date Q4 2010 / Q1 2011

Game-changing

According to EvaluatePharma’s NPV Analyzer, CRTX 067, a combination of hydrocodone and chlorpheniramine, is Cornerstone’s most valuable pipeline product with a net present value of $86m, representing 47% of Cornerstone’s $181m market cap.

Indeed the inherent value of the drug could be more than is immediately obvious, as an approval would also validate Cornerstone’s controlled-release liquid technology that underwrites this, and several other pipeline products.

Using a time release suspension technology, CRTX 067 could be dosed just twice a day compared to up to four times a day for most cough/cold products with immediate release formulations. One of the main benefits could be that patients get a better night sleep given that current anti-tussive agents need to be dosed every four hours.

Further, a recent deal to license cough and cold product-related intellectual property from The Cough Company (a division of Altair Pharmaceuticals) also highlights the company’s commitment to the field.

However, the recent downward trend in Tussionex sales is cause for concern. First half sales of Tussionex fell 33% to €45m, which UCB put down to a weak cough and cold season in the US and a general shift in the market to more codeine-based products. The extent of this shift to codeine-based products could cause some fretting by the company, shareholders and analysts alike.

Cash and no debts

The company appears in good financial shape, with minimal debt and $46m in cash at the end of June. Its share price this year has hovered between lows of around $5.00 in mid-February and a $7.52 high at the start of May, closing yesterday at $7.06. The company should also free up some cash by the end of the year, which it will reinvest in its pipeline, when it stops manufacturing and selling its portfolio of marketed unapproved products.

If necessary, it could also fall back on extra pocket money from Chiesi, which acquired its majority stake last year. Certainly if CRTX 067 lives up to its full potential, Chiesi may look to boost US sales by consolidating the company in the region and increasing its presence. Cornerstone has also said it may seek a co-promotion deal in the US, which could add significant value.

For now though the mood at Cornerstone will likely be one of cautious optimism. The company potentially has half its market value tied into the programme, so any delays or a rejection will cause deep share price wounds; there is a need to gain approval and launch as soon as possible to catch the bulk of the seasonal cough/cold season in the early part of the year.

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