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Cornerstone Therapeutics (NASDAQ:CRTX)

Q1 2013 Earnings Call

May 09, 2013 8:30 am ET

Executives

Amy Diebler

Craig A. Collard - Chairman and Chief Executive Officer

Alastair McEwan - Chief Financial Officer and Treasurer

Analysts

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

Timothy P. Lynch - Stonepine Capital Management LLC

Jason M. Aryeh - Jalaa Equities, L.P.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Cornerstone Therapeutics First Quarter 2013 Financial Results Call. [Operator Instructions] As a reminder, today's call is being recorded. With that said, I'll turn the call over to Amy Diebler of Cornerstone Therapeutics. Please go ahead.

Amy Diebler

Thank you, operator. Good morning, everyone, and welcome to Cornerstone Therapeutics conference call to discuss our first quarter 2013 results. We are glad to have you with us. I'm Amy Diebler, Senior Director of Corporate Finance and Development for Cornerstone Therapeutics. We are joined by Craig Collard, Cornerstone's Chief Executive Officer; and Alastair McEwan, Cornerstone's Chief Financial Officer. Craig will provide perspective on -- both on the quarter and on our 2013 outlook, and Alastair will cover the financial and operational results. Both Craig and Alastair will be available to answer your questions. Cornerstone issued a press release this morning containing financial results for the quarter ending March 31, 2013.

Before we proceed with the call, please let me remind everyone that the following discussions and responses to your questions reflect management's view only as of today, May 9, 2013. Any statements about future expectations, plans and prospects, including without limitation, statements regarding our business strategy, future operations, financial position, anticipated regulatory approval of our products, possible therapeutic benefits, market acceptance, prospects and management's plans and objectives, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Actual results and events may differ materially from those indicated by our forward-looking statements. Additional information about factors that could cause actual results or events to differ materially from those indicated by our forward-looking statements is included in the Safe Harbor statement in today's press release and in our filings with the Securities and Exchange Commission, including Item 1A to our annual report on Form 10-K filed on March 14, 2013, and in our subsequent Form 10-Q and other filings with the SEC. Cornerstone disclaims any obligation to update its forward-looking statements except as required by law.

In addition, please note that Cornerstone's remarks contain supplementary non-GAAP financial measures, including non-GAAP income from operations, non-GAAP net income and non-GAAP net income per share diluted. A reconciliation of these measures to the comparable GAAP numbers is included in the press release, which is posted on our website.

With that, I will now turn the call over to Craig.

Craig A. Collard

Thank you, Amy, and good morning, everyone. Thank you for joining us on this call. Throughout 2012, we promised to become a real player in the specialty hospital market with multiple products, and in the first quarter of 2013, we experienced significant momentum from a strategic focus. This was a strong quarter for us as the increased sales of our key products and improved profitability demonstrate that with this strategy in place, we are well positioned for the future.

The highlights from this quarter include net revenues reached $38 million, which is the highest quarterly revenue in the company's history and a testament to the strength of our products and everyone who's supporting them at Cornerstone.

Gross margins increased 7 percentage points compared to the third quarter of 2012, primarily due to the addition of CARDENE to our product portfolio and improved margins on CUROSURF. We believe we will be able to maintain or continue to improve our gross margins that we experienced this quarter.

Profitability greatly improved as net income per diluted share reached to $0.09, representing an increase of $0.16 per share compared to the first quarter of 2012. Our market products all continued to perform well and achieved continued growth.

Let me give you a quick overview of each one. I'd like to start with CUROSURF, our market-leading natural lung surfactant for the treatment of Respiratory Distress Syndrome or RDS in premature infants. CUROSURF continues to be a strong product. And in the last quarter, we made strides to further improve product margins and our bottom line, which reflected in this quarter's results.

We are encouraged to find that there are clear signs that the market climate of the past years is stabilizing, with total market volume for the past 6 months being roughly equal to that of the same period in the prior year.

As a result, we anticipate that for the first time in several years, we will more fully recognize results from our efforts to grow market share and volume in 2013 and beyond. As in previous periods, we are largely focused on conversion of account, and we are pleased to report both a higher number of converted accounts and a higher total converted ML volume in the first quarter compared to the same quarter last year.

Ultimately, I think it is fair to say that the integration of EKR, which resulted in a substantial increase in sales for size has resulted in enhanced account conversion and overall growth despite the expansion of the portfolio.

Now moving to CARDENE. CARDENE is indicated for the short-term treatment of hypertension in the hospital market when oral therapy is not feasible or desirable. We acquired the worldwide rights to this product in June 2012 with the acquisition of EKR Therapeutics. And we are pleased with the positive impact it has had on our business, including our gross margins.

CARDENE continues to perform well, especially when we review the average selling price, which continues to hold steady. Due to the superb efforts of our national account managers, we signed new agreements during the quarter with several key accounts. We also, as mentioned in the last call, continued to build our relationships with key opinion leaders and recently executed several key commercial activities, leveraging our expertise and guidance to drive CARDENE's educational efforts.

Last, ZYFLO, which is a niche product indicated for the prophylaxis and chronic treatment of asthma in adults and children 12 years of age and older, continues to perform as predicted. Demand for ZYFLO remained relatively steady throughout Q1, continuing to prove that this unique drug is strongly supported by difficult-to-treat asthmatics.

We also continue to make gains in moving products in our pipeline forward while at the same time, keeping a keen eye out for licensing and acquisition opportunities that fit with our core strategy. I'll provide more detail on this in our outlook for the remainder of 2013 in a moment.

First, though, I'll turn things over to our CFO, Alastair McEwan, to comment on our financial and operational performance in the first quarter. Go ahead, Alastair.

Alastair McEwan

Thanks, Craig, and good morning, everyone. As Craig said that we're very pleased with first quarter performance with strong top and bottom line growth.

Revenue grew 71% year-over-year, bringing us to $38 million compared with $22.2 million in the first quarter of 2012. Looking at the market products that Craig mentioned, CUROSURF net product sales totaled $9.5 million, represent an increase of 25% compared to the first quarter of 2012. The rise in sales was driven by greater unit volume and decreases in chargebacks and price adjustments. This confirms CUROSURF's strong market performance and supports our ongoing confidence in that product.

For the first quarter, CARDENE net sales were $13.8 million. As a reminder, this is the third quarter that we have marketed CARDENE as we acquired the product in June 2012 as part of the EKR transaction. We continue to be pleased with its performance, which is largely in line with our expectations at the time of the transaction.

Lastly, net sales of ZYFLO family of products totaled $14.6 million during first quarter, representing an increase of 17% over the same period of 2012. This product family continues to be a solid performer. Growth this quarter was largely due to the value generated as we position this product as a niche specialty drug for a select group of patients.

Gross margin for the first quarter of 2013 was 68%, up from 61% in the comparable quarter of 2012. This sharp increase was primarily due to the addition of CARDENE whose gross margin significantly exceeded gross margin from CUROSURF. A decrease in estimated rates of chargebacks and price adjustments for CUROSURF also aided gross margin.

Looking to expenses, SG&A costs were $13.1 million during the first quarter of 2013, a 20% increase over $10.9 million in 2012. This was driven by increases in compensation, travel and other related employee benefits due to the continued growth of the company's product and related sales force, as well as timing of advertising and promotional expenses related to CARDENE and BETHKIS.

You recall that the EKR transaction closed at the end of June 2012, and so although higher than prior year period, our Q1 expenses are very favorable when considering the overall increase in scale of our business.

Our R&D costs decreased to $827,000 versus $1 million in the first quarter of 2012, due mainly to costs related to LIXAR incurred during the first quarter of 2012. These are partially offset by ongoing R&D expenses for RETAVASE as we continue with its rehabilitation. Craig will mention more on this later in the call.

For the quarter, we recorded net income of $2.4 million or $0.09 per diluted share compared to a net loss of $1.8 million or a loss of $0.07 per diluted share in 2012. On a non-GAAP basis, net income for the quarter was $7.1 million or $0.24 per diluted share, up $5.8 million from $1.3 million or $0.05 per diluted share in the same quarter of 2012.

For clarity, non-GAAP net income and net income per diluted share exclude stock-based compensation expense, amortization of product rights, transaction-related expenses, acquisition adjustments related to inventory sold, the change in acquisition-related contingent payments, and the gain on the divestiture of certain product rights.

Moving on to our cash position. At the end of first quarter, we had $63.4 million cash and cash equivalents on hand, an increase of $7.1 million from December 31, 2012.

Now I'll turn it back to Craig for a look into the remainder of 2013. Craig?

Craig A. Collard

Thanks, Alastair. We will now take a look at what lies ahead. As we have said, in addition to our market products, we develop and maintain a promising pipeline and are working diligently to move these products forward to approval in commercial launch.

Leveraging our commercial strength and all the know-how from growing the products already in our portfolio, we are confident in our prospect. I'd like to include a few additional updates regarding our pipeline.

Let's start with our hydrocodone polistirex and chlorpheniramine polistirex extended release suspension, which is a generic equivalent of Tussionex used for the relief of cough and upper respiratory symptoms associated with allergy or a cold in adults and children 6 years of age and older.

We are pleased with the significant progress of the manufacturing efforts in the most recent quarter and continue to look forward to entering the market for the upcoming 2013 cough and cold season.

Moving to BETHKIS, which is a Tobramycin Inhalation Solution and is indicated for the management of cystic fibrosis patients with Pseudomonas aeruginosa. This is a very common condition in patients with CF, and nebulized tobramycin is considered the gold standard in treatment. This product is progressing as previously stated and remains on track to launch in Q3.

Looking at RETAVASE, the quality of developmental efforts continue toward qualifying a new raw material supplier and transfer of certain aspects of the manufacturing process. We are making good progress on the FDA request from December 2012 and pending the outcome of certain investigational and schedule activities plan to initiate manufacture of new developmental batches this year. We remain positive on our ability to resolve the open issues. Expect to hear more detailed information from us on future calls, and we still anticipate the relaunch of RETAVASE in 2015.

In parallel, using the current API RETAVASE, we plan to develop experimental batches and move forward our discussions with the FDA in regards to our catheter clearance program. We believe we can leverage key learnings from the current development program on RETAVASE to increase our probability of a success with catheter clearance.

In regards to LIXAR, we continue to evaluate the viability of this investigational product candidate. Following the FDA's issuance of a complete response letter and request for additional clinical studies, we have committed to have a meeting with the FDA to discuss the path forward. The planning and statistical evaluation needed to support this meeting request is nearing completion. There remains our goal to request this meeting with the FDA very soon.

As you can see by the financial and operational progress we've made in the first quarter of 2013, we feel more confident than ever that we have the right strategy in place to ensure that Cornerstone is well positioned for future growth.

This morning, we announced the product deal with Digestive Care, Inc. to acquire exclusive U.S. rights to market the product PERTZYE for cystic fibrosis patients. We are excited about the addition of PERTZYE. It is a market-ready treatment for a difficult and common condition faced by an estimated 90% of cystic fibrosis patients called exocrine pancreatic insufficiency or EPI.

For patients with EPI, food is not properly digested in their intestines, causing malabsorption and nutrient deficiency. PERTZYE is administered in a delayed-release capsules containing a mixture of the digestive enzymes amylase, lipase and protease, which are necessary for food digestion in patients with EPI.

PERTZYE is the only FDA-approved pancreatic enzyme replacement therapy or PERT, containing bicarbonate-buffered enteric coated microspheres designed to optimize the pH environment for enzyme activity and nutrient absorption. We believe this is a strong differentiator for this product.

We also believe that PERTZYE will have an immediate positive impact on our net sales. Additionally, with net sales of all PERT products reaching approximately $200 million in the CF category, we see significant opportunity for growth. It is also worth noting that PERTZYE is protected by exclusivity rights from the said FDA approval until 2017, along with other patent and certain know-how that will make this product extremely difficult to mimic, which should lead to market exclusivity for years to come.

For those of you not familiar with the PERT category, I think it will be helpful to provide some additional color. Prior to April 2008, PERT products were marketed in the full knowledge of the regulatory authorities, absent NDA approval. In that period, there were approximately 40 PERT products on the market. These products were grandfathered in and fell into what we call the DESI category.

Between April 2008 and April 2010, FDA practiced enforcement discretion for those firms who had either filed an IND or a New Drug Application, and we're earnestly working toward FDA approval. As of April 2010, the FDA required that all PERT products must have an approved NDA, and subsequently, only 6 products obtained NDA approval.

Since these changes have taken place, the average price in the category has increased approximately 57%. The entire PERT market is now doing over $600 million in sales between the cystic fibrosis and GI markets.

Although PERTZYE did not obtain NDA approval until May of 2012, PANCRECARB, the previous name of the product, achieved sales of approximately $20 million in 2009. Given the market dynamics, PERTZYE's clear differentiation from other PERT products with Cornerstone's demonstrated effectiveness in commercialization, we believe that peak sales of PERTZYE in the CF market to easily exceed $40 million.

By itself, PERTZYE is a strong product. However, what we are really excited about is the synergy and interest that this product combined with BETHKIS will bring into the market. In general, patients with CF experience a significant treatment burden, and we are pleased to bring 2 options, which we believe represent rare steps in the right direction for improving small but meaningful aspects of their lives.

As of now, we are one of the only companies that will be providing treatments for the lung and digestive issues associated with CF, which are the 2 major issues that most CF patients deal with on a daily basis. With the acquisition of PERTZYE and the upcoming launch of BETHKIS, we are building a strong portfolio in the CF space, and we'll have 2 new products on the market by Q3 2013.

It's important to note that both therapies will be promoted by our specialized hospital sales force, which we plan to expand by 10 to 15 reps. This is yet another strategic step in our commitment to building a portfolio of industry-leading brands for the growing U.S. hospital market. We also believe this further illustrates our commitment to the CF community in helping to ease the treatment burden for those living with this disease.

Before I close, I want to let everyone know we realize there are many questions that investors would like answered about the Chiesi proposed buyout. However, we are neither positioned at this time to answer any questions or address this topic.

With this, we are ready to take your questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] We'll take our first question from Matt Kaplan with Ladenburg Thalmann.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

Can you give me a little bit more detail and thank you for the detail you provided on pancreatic lipase and the market in general. In terms of your strategy and how this really fits with BETHKIS and oh, in terms of the pancreatic enzyme market as well, are there -- is there one dominant player there, or how does that look in terms of the market share? And what type of market share do you think you guys can grab in the CF market and, I guess, in the GI market as well?

Craig A. Collard

Yes. So to be clear, we will not be promoting the GI market. We only have rights for the CF market. So however, obviously with the focus that we have with BETHKIS, very rarely do you find a product that absolutely fits perfectly strategically. And where literally every call your representatives walk into, they can talk about both products that literally affect every patient that walks through that door. And that's what we have here. It's a perfect synergy and strategic fit. And in a market that's growing and in a market that's obviously gone from sort of DESI now to approved, which, obviously Cornerstone, is very familiar with, the dynamics of that market is, CREON, which is an avid product, obviously, is the market leader, and you've got VIMPAT and Pancrease. Those are so your 3 top products. And those 3, if you just base on IMS sales, you got a total market of around $650 million approximately. But between those 3, you're also approaching $550 million, $600 million. So they do really make the majority of the market share and, again, CREON being the leader. But one thing that we really like about PERTZYE is the fact that it does have a story that's a bit different. The bicarbonate that increases this pH level in the stomach really does lead to improvement in absorption. And it's really a nice marketing piece for our representatives to talk about that we think will really help differentiate the product in the market versus the other competitors.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

Fair enough. And can you tell us a little bit about your -- the terms of your deal in terms of the licensing agreement? And what type of -- do you have to pay a royalty back, or how does that work in the structure in the agreement?

Craig A. Collard

Yes. It just -- in sort of broad terms, we want to maintain similar margins to what we have or where we're going with the other products. So if you think about our margins being in the sort of 68% now, think about this product from a cost of good and a royalty that basically total roughly 30%. So we will be -- again, I've sort of stated before that we want to continue to improve those margins, and this product will fit within that. So that's, I guess, first and foremost. Secondly, as far as the deal structure, we did typical things where we give monies upfront, and then there's some monies based on milestones. It's sort of how this is laid out. The monies upfront will total roughly, depending on a few things that have to be done still with the product, will be roughly around $10 million, and that's sort of split between 2 payments, $2 million and $8 million. And then everything else is really milestone-based.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

And what triggers the $8 million payment?

Craig A. Collard

We're doing some things audit-wise, just with the suppliers and so forth, that will trigger that. So in a sense, we're -- that's kind of where we stand at this point.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

And in aggregate, the milestone payments, are those sales-based? Or how does that work?

Craig A. Collard

Yes, they're sales based. And where the -- I think the total payments, all in. Again, this is over a number of years, and milestones would -- could equate to around $30 million.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

Up to the $39 million?

Craig A. Collard

Yes.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

Okay. Great. Now looks like a great addition to your portfolio in terms of the CF focus. Congratulations on that. And just going back to your currently marketed products, ZYFLO, particularly and specifically, with its -- the IT issue, I guess, in September of this year third quarter, what's your sense in terms of competition out there, potential ANDAs and that kind of thing at this point?

Craig A. Collard

Well, I guess, one, we're very happy with how ZYFLO continues to perform because we've got this niche of patients, if you will, that are difficult to control asthmatics. They continue to use the product, and so the unit volume remains relatively flat. And obviously, we've been able to do some other things with pricing and sales force, so we continue -- I think net sales are up over 17% from last year. From a future standpoint, again, we're trying to do some other things that I don't want to disclose here for the fact that they're confidential, but we're trying to do some other things that would obviously protect the product. But outside of that, we really -- this a difficult product to make at a high loading dose. And at this point, although we've modeled in our budget and so forth that a generic could happen in September based on patent expiry, we really feel that this product could go above and beyond that just based on the nature of it. Again, I think I've said on earlier calls that in 2009, this product was doing roughly $13 million in sales, and again, it's a difficult product to make. And so now where we sit, with the product doing call it north of 50%, you're certainly going to have folks interested. But it is difficult to make, and just from a timing perspective with generic approval that I think it's more likely than not that we may give it a bit of extra time.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

Okay. And now kind of a pipeline question, BETHKIS and planned launch in the third quarter. Does the agreement on PERTZYE at all impact that planned launch, and then do you -- I guess how does it -- how do you plan to integrate the PERTZYE, I guess, marketing effort and the launch of BETHKIS?

Craig A. Collard

Well, actually, PERTZYE, we will be -- literally, we could have to market tomorrow. I mean, it's a -- it's ready to go. There's inventory. The product has some current sales. We have a national launch meeting that's planned kind of mid-year in July. And that would be really the official kickoff of the products and also would be more training, that type of thing within our -- the CF category. So I think that's when things would really get kicked off, but -- so PERTZYE will go first, and the rest will get some experience with the client base and so forth, and then BETHKIS shortly after that. Matt, I do want to mention something about ZYFLO that I think is worth noting. And this is -- again, this is just based on timing. But as you know, we've got co-pro agreements and so forth there in place, and a lot of that expires by the end of the year. And so again, from a financial standpoint, if ZYFLO were to go past December and stay a brand at the current price, what it equates to bottom line is approximately about $4 million per month to Cornerstone in cash. And so I think it's worth noting that it's fairly significant if this goes -- again, once things change in December, we have around -- from a co-promotion standpoint, we pay quite a bit back for that today. They all expires by the end of the year. So again, things just continue to improve financially with the product sort of post that date.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

The expiration of those co-promotes would add an additional $4 million per month?

Craig A. Collard

Well that and the fact that, obviously, the product stay in a brand. I mean, there's a few things that have to happen. But it's important to note that it could be significant. Those 2 events could be really important.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

Sure, sure. Great. And then just finally on the pipeline, RETAVASE, how is the progress going in terms of adjusting the manufacturing issue? And where are you on that?

Craig A. Collard

Yes. No. it's going well. I mean, obviously, it's something we'd like to correct yesterday. But obviously, things take time. I will say that one of the things that we have as an internal goal that we, I think, we've also said a bit publicly is that we wanted to improve our regulatory structure, and we've hired a Head of Regulatory and Development, named Andreas Metpul [ph], whose actually in the room today. And we've also had -- hired another medical affairs person. And so we're trying to build structure within our group to really have more expertise and more folks internally to work on these things. So I think that's all moving in the right direction. But if things are really moving as planned with RETAVASE now -- I mean, we've obviously had the issue with stability. But again, I'll sort of go back to say I think this could have been a blessing in disguise in a lot of ways because had this happened post launch, it would've been a lot worse. So I think we're going to learn a few things here, and what may help us as well, we now have a group of folks who, consultant-wise, who have had some experience in this category that are helping us and, I think, are going to further the catheter clearance program as well. And so we're really getting ready to start moving that forward. We're hoping to have some FDA meetings later this year. And so I'm hoping these next few quarters, the updates we did -- I'm hoping to grab something substantial to talk about from that standpoint to be able to give data or at least where we are in the process. But so far, things are progressing nicely. And we think we've solved their issue.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

Great. So if they progress on plan as you expect, when could you launch the catheter clearance clinical development?

Craig A. Collard

I think if -- the only determining factor in that is we have a plan, if you will, that was fairly similar to what it'd done or have been done before with this type of trials. We believe that there's a possibility that we may be able to shorten some of that. So our timeframe currently is sort of a 2016 timeframe that we would launch that. We're hoping that if we can negotiate with the FDA based on some things that we've learned and reduce that trial time at all, then -- or the patient -- the number of patients and so forth, that may help us not only from the cost perspective but also a bit from the timing. But I think 2016 is a fair number.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

Okay. So you could have some visibility to in terms of what's necessary with that program later this year?

Craig A. Collard

Yes. That's what we're hoping, it's that we'll be able to say that we're kind of on track here and here's what we're going to have to do and that type of thing.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

Great, great. And then 2 final questions. One, on business development, congrats on the PERTZYE deal, what's your sense in terms of additional deals of share from a business development point of view?

Craig A. Collard

Matt, you sound like my mother. It's like she's never satisfied with when I clean my room, she wants it cleaner. No. One, I think kudos to our business development folks. Joshua Franklin who leads that. We've continued to -- we constantly have deals flow in here, and I think one of the things we've continued to tell the market is that, look, we're a company that has proven that we can do this. So I think there may have been some questions considering the process that we're in, that things would stall and it wouldn't be business as usual. And I think this is a very good example that we're continuing to move forward, whether a deal happens or not, and looking at new things. So we're going to continue to do that. And I think the other point I would make is that we're building a substantial cash base in order to go fund more products. So I think the fact that cash is up over $63 million now also points to the fact that we're bringing new products, but we're also executing on our commercial business. And I think a lot of that obviously goes to what our reps do every day and so forth. So I mean, really, and think I said this last time, we couldn't be happier with where we sit now from a position standpoint. It's as strong as the company has ever been.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

Yes. And I guess final question, the elephant in the room, so to speak. The Chiesi overture in terms of to acquire the remainder of the company, what's the timeline there, what's the process? Can you give us any kind of updates in terms of how that's going on with what's happening?

Craig A. Collard

Well, I guess, the thing that I would say is, which -- I'm not involved in the process, so I don't -- other than what I've said before as far as there's negotiations going back and forth, that's really all I can say at this point. I'm not involved in it, and I'm really just not prepared to comment on this point because I just don't know.

Operator

[Operator Instructions] We'll hear next from Tim Lynch with Stonepine Capital.

Timothy P. Lynch - Stonepine Capital Management LLC

I'll give it up a little more easily than Matt Kaplan did. I thought you just had a fantastic quarter and give you guys all the kudos for it, especially when a lot of companies are having tough Q1s with overstocking in Q4 and things like that. You guys really came through, and impressed that you're earning that dollar share run rate now on a non-GAAP basis. Couple of questions about PERTZYE is, can you give us a sense, was it relaunched by the predecessor company in CF at all since receiving NDA approval? I think you mentioned spring of 2012.

Craig A. Collard

Yes, sort of. So the Digestive Care is a great little company. They're private. And they were on the market before as a DESI product doing extremely well. But as you know, going through an NDA process like this because these were -- this wasn't a bile study. This was in a real -- it's the real-deal studies and unlike some of the DESI things that have happened in the past. But -- so it took quite a bit of money. And so I think they were at the point where they have commercialized this sort of a, let's call it a bit of a launch, just getting the product back out and going to some customers that had used the product in the past and that type of thing. And they have used some representatives that are sort of called the multiproduct reps but are not their reps internally. And so we viewed that as a real opportunity because, again, the product has a differentiation in the market. It's been there before, it's had existing sales. But we really felt like we could bring -- I think what DCI felt about is that we could really bring something special from a commercial standpoint just based on what we've done historically. So we really think this is going to be a great fit. Sort of we understand what these guys have went through. And we think what they want to do with us was let us grow this in the CF market. And I think they'll be looking to do other things maybe themselves in the GI market, which is a bigger market, but for us, it fits so well strategically. It just really made a lot of sense for both companies.

Timothy P. Lynch - Stonepine Capital Management LLC

Okay. So kind of a limited launch in CF by the predecessor company. What -- is the DESI product -- was it removed prior to the spring of 2012 for the market? Or did it stay out of the market until this subsequent approval?

Craig A. Collard

No, it was removed. This was very similar with what we went through in the cough cold situation. Once the FDA sort of put the gauntlet down, all products were removed. And I think the first one out was CREON. And obviously, if the market leader and then other subsequent approvals still after that. So PERTZYE has been a later approval to this, and so they've been really off the market. So again, it's probably called create a new product and relaunch.

Timothy P. Lynch - Stonepine Capital Management LLC

Yes. And I know the market's changed then with all the NDAs. And I apologize if you mentioned this, but did you say what the predecessor product was doing in terms of revenue years ago before it was removed?

Craig A. Collard

Yes. The last full year of sales in '09, the product was doing roughly $20 million. And again, so what sort of be happened in these situations, and that we've seen it time and time again where you've kind of had DESI products removed, new products come out, you see sort of a price increase in the market as a whole because now you've got fewer competitors that have gone through and actually spent monies to get approval. And I think that's exactly what happened here. So the only difference is PERTZYE was named -- the trade name was PANCRECARB before. So you've got a different product name, but you've got a sales history with the compound and now higher price, fewer competitors, and now a company that obviously had a lot more commercial strength and resources, I guess, to relaunch. So that's why we feel very comfortable with what we're talking about as far as the market view, I guess.

Timothy P. Lynch - Stonepine Capital Management LLC

And just in general, how much higher is the pricing in the market with actual NDAs drugs versus prior with the DESI product?

Craig A. Collard

Roughly around 57%. So the total if you sort of took from then to now...

Timothy P. Lynch - Stonepine Capital Management LLC

Okay. So for you guys to -- I know you've been off the market for a while. But to get this to $30 million or $40 million, is not that far from where it was prior, albeit in a different kind of environment with the -- with DESI products?

Craig A. Collard

Yes. And the other thing too is without as many competitors, we see, as far as typical price increases and that type of thing, will be a little bit more normal, I guess, in this case. And also to -- from a category standpoint, reimbursement within this category is very good because the alternative is, if these patients don't get the therapy, you're looking at hospitalization and obviously more costs. So I think the ability to take your typical price increases per year are there, and so we continue to see the market going up, not only in volume because patients are living longer but also from the standpoint of pricing.

Timothy P. Lynch - Stonepine Capital Management LLC

Great. And last question, I know you can't comment on discussions going on, but do you think the special committee will ever reach out to major shareholders or shareholders in general just to hear their opinions as part of this process? It's been about 2.5 months. As you know, we wrote a letter to the special committee, and we still have heard nothing even if it's just to hear our opinions on things in more detail.

Craig A. Collard

Yes. Tim, at this point, I just -- I really don't know. I mean, I would think that, that would be something that probably happened at some point, and I guess it's just a timing thing. And again, I know it's difficult to be patient in this. And we're -- I'm in the same ballpark as you. I know nothing. And so it's very difficult for us because we've always been involved in everything, certainly me personally. So I would just add, be patient, and I think that hopefully, the committee will do their job, and we'll get to a decision either way.

Timothy P. Lynch - Stonepine Capital Management LLC

Yes. And we're perfectly happy to be patient. We just hope that the special committee doesn't make the final decisions here in a vacuum with their advisors without speaking to the owner of the company a little bit. Not to relay information to us but just to hear our opinion, so that's just one comment that makes it.

Operator

[Operator Instructions] And we'll take our next question from Jason Aryeh with Jalaa Equities.

Jason M. Aryeh - Jalaa Equities, L.P.

Just a follow-up on the strategic process. Is -- can you tell us, Craig, is the special committee and their advisors, are they looking at a broad strategic process? Or are they just looking at negotiations with Chiesi?

Craig A. Collard

Again, that's probably even less than what I know, Jason. I just don't know. Sorry. I wish I could be more helpful there, but I just don't know.

Jason M. Aryeh - Jalaa Equities, L.P.

But there's not a mandate for the special committee to open up the strategic process beyond Chiesi and let potentially all bidders in as products and companies with approved products seem to be more in favor than ever? I would think there would be a lot of strategic interest beyond simply Chiesi's, and we would hope that the special committee and their advisors would run a broad strategic process and allow all comers to bid on these assets, which I think would drive the highest price for shareholders.

Craig A. Collard

No. Jason, I completely agree. Again, I just don't quite know what to say, so I don't -- I just don't know.

Operator

At this time, I show there are no further questions. I'd like to turn the call back over to Craig Collard for closing remarks.

Craig A. Collard

We'd like to thank everyone today for joining the call and look forward to speaking to you next quarter.

Operator

Ladies and gentlemen, this does conclude today's conference. We thank you for your participation. You may now disconnect.

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