Columbia Labs Q4: Lumpy Merck sales and loss of Actavis contract mars strong year

06-Mar-2014 - Last updated on 06-Mar-2014 at 11:33 GMT

Progesterone - the hormone in Merck Serono's Crinone, manufactured by Columbia

Columbia Laboratories has reported strong annual results despite a fourth quarter affected by Actavis taking the manufacture of vaginal gel Crinone in-house and the “lumpiness” of Merck Serono.

Total revenue rose 19% on 2012 to $21.3m (€15.5m) for the full year. Net profit dropped 32% to $6.7m partially due to expenses of $1.6m relating to the $25m acquisition of formulation specialists Molecular Profiles in September.

However, for the fourth quarter, revenues fell 29% on the same period last year due to a decrease in orders for the progesterone containing infertility gel Crinone, Columbia’s largest revenue source, which it manufacturing for Merck Serono and – until recently – Actavis.

“Actavis is manufacturing Crinone in-house following our November agreement to early terminate the exclusive manufacturing agreement,” Columbia’s CEO Frank Condella said during a conference call to discuss results yesterday.

Net revenue was boosted by a $300,000 payoff from Actavis in connection with the termination of the supply agreement. CFO Jonathan Lloyd Jones told investors the figure “made us whole for the assumed number of batches we might have shipped to them in the period.”

Furthermore, Columbia continues to receive 10% royalties on net sales of Crinone by Actavis, who holds the marketing authority in the US. “We expect this royalty revenue will grow as Actavis continues its effort behind the product,” Condella said.

Merck Serono

Whilst Actavis has moved in-house, Columbia extended its contract to manufacturing Crinone for Merck Serono until 2020. However, irregular demand for the product meant though there was increased shipments during the first three quarter of 2013, the fourth quarter saw an absence of sales to one of Merck Serono’ higher volume, higher margin market, in anticipation of a routine license renewal.

When asked about the next twelve months, Lloyd Jones said: “We don’t tend to give guidance on revenues and because of the historic lumpiness of Merck Serono, and unfortunately the future looks no less lumpy than the past.”

“We expect underlying growth of Merck Serono’s in-market sales to continue in that vein,” he continued, adding “as for the time we have orders, it's always very difficult to judge, so we don’t provide guidance.”

However, the firm anticipates a strong second half of 2014 with “Merck Serono coming back in that high margin, high volume market,” and growth opportunities in China, where the government is easing its one child rule.

Molecular Profiles

When Columbia bought Molecular Profiles, the firm said on top of diversifying revenue streams it would see “improvements in efficiencies and greater responsiveness to Merck Serono” by transitioning elements of Crinone production to the UK-based acquisition.

Also speaking yesterday was Molecular Profiles CEO Nikin Patel who told stakeholders significant progress had been made integrating the two teams.

“[Molecular Profiles has] taken onboard the quality and the supply chain aspects of the Crinone,” he said. “We’re also progressing on infrastructure IT initiatives that will bring the two companies closer together, but so far it's been very smooth in terms of the transition.”