Seeking Alpha
Long/short equity, insider ownership
Profile| Send Message|
( followers)

Cornerstone Therapeutics (NASDAQ:CRTX), headquartered in Cary, N.C., is a specialty pharmaceutical company focused on commercializing products for the hospital, niche respiratory and related specialty markets. Key elements of the company's strategy are to focus its commercial and internal development efforts in the hospital and related specialty product sector within the U.S. pharmaceutical marketplace; continue to seek out opportunities to acquire companies and marketed and/or registration-stage products that fit within the company's focus areas; and generate revenues by marketing approved generic products through the company's wholly-owned subsidiary, Aristos Pharmaceuticals.

I see at least 4 reasons to buy the stock currently

1. CRTX 080 has a PDUFA date on October 29th

On March 13th the company announced that the U.S. Food and Drug Administration (FDA) accepted a New Drug Application (NDA) for CRTX 080, Cornerstone's product candidate for the treatment of hyponatremia. The FDA has assigned a Prescription Drug User Fee Act (PDUFA) goal date of October 29, 2012.

"This event marks another critical milestone in the focused execution of our strategic plan," said Craig A. Collard, Cornerstone's Chief Executive Officer. "CRTX 080 is an important addition to our hospital product portfolio. The hyponatremia market increased 86% in 2011, and we look forward to launching CRTX 080 into this rapidly expanding market."

Hyponatremia affects up to six million people in the U.S. with direct medical costs estimated to range between $1.6 and $3.6 billion annually. CRTX 080 is a highly potent, non-peptide, oral capsule that works by reducing the action of a hormone (vasopressin) that blocks fluid excretion. CRTX 080 acts specifically on the vasopressin-2 receptor in the kidneys, causing water to be excreted while sparing sodium without affecting other electrolytes.

2. The stock has seen insider buying during the past two months

Chiesi Farmaceutici Spa has acquired 1.46 million shares since March 2012. Alessandro Chiesi has served on our board of directors since the closing of the Chiesi Transaction in 2009.

Craig A. Collard sold 1,443,913 shares to Chiesi Farmaceutici Spa on April 3rd 2012. Craig A. Collard has served as our President and Chief Executive Officer and the chairman of board of directors since the consummation of merger with Cornerstone BioPharma, on October 31, 2008.

3. Strong Financials

Total net revenues were $22.2 million for the first quarter of 2012 versus $30.0 million reported for the first quarter of 2011, a decline of 26%, reflecting the divestiture of two product lines in March 2012 and the discontinued marketing of unapproved products.

Net loss for the first quarter of 2012 was $1.8 million, or a loss of $0.07 per diluted share, compared to net income of $1.7 million, or $0.07 per diluted share, for the first quarter of 2011.

The company had cash of $74 million as of March 31st.

4. Two new products coming through acquisition

Cornerstone Therapeutics and EKR Therapeutics announced on May 14th that they have entered into a definitive merger agreement whereby Cornerstone Therapeutics will acquire EKR Therapeutics, a privately-held specialty pharmaceutical company focused on the acute-care hospital setting. The acquisition expands Cornerstone's product offerings and commercial infrastructure in the hospital market. The transaction is subject to customary closing conditions, including adoption of the merger agreement by EKR's stockholders and expiration or termination of any waiting period under U.S. anti-trust laws. The transaction is currently expected to close in late June 2012.

As part of the transaction, Cornerstone will acquire product rights to Cardene and Retavase. Cardene is indicated for the short-term treatment of hypertension when oral therapy is not feasible or desirable. Retavase is indicated for use in the management of acute myocardial infarction (AMI) in adults, for the improvement of ventricular function following AMI, the reduction of the incidence of congestive heart failure and the reduction of mortality associated with AMI. In 2011, EKR generated $58 million in net revenue, primarily from sales of Cardene. In 2013, Cornerstone is targeting FDA approval of a new active ingredient supplier and relaunch of Retavase, which could increase revenues significantly versus 2012. These products complement Cornerstone's existing hospital products: Curosurf, which is indicated for the treatment of neonatal respiratory distress syndrome (RDS) in preterm infants, as well as CRTX 080, a product candidate for treatment of hyponatremia.

Conclusion

I like this stock as a runup play into October PDUFA date of CRTX 080. The proposed acquisition looks promising to me especially because it is done without dilution to existing shareholders.

Disclosure: I am long CRTX.