Critical Therapeutics Reports Financial Results for the Third Quarter Ended September 30, 2008

Business Wire, Oct 20, 2008

Special Meeting of Stockholders to Approve the Merger with Cornerstone Scheduled for October 31, 2008

LEXINGTON, Mass. -- Critical Therapeutics, Inc. (NASDAQ: CRTX), a biopharmaceutical company focused on developing and commercializing innovative products for respiratory and inflammatory diseases, today reported financial results for the third quarter ended September 30, 2008.

Financial Results for the Three Months Ended September 30, 2008 and 2007

Total revenue for the third quarter of 2008 was $6.0 million, compared with $3.2 million in the third quarter of 2007. Total revenue for the third quarter of 2007 included collaboration and license revenue of $93,000, whereas no collaboration or license revenue was recorded in the third quarter of 2008.

Net product sales of ZYFLO CR([R]) (zileuton) extended-release tablets and ZYFLO([R]) (zileuton tablets) totaled approximately $6.0 million in the third quarter of 2008, compared with $3.1 million of net product sales of ZYFLO and ZYFLO CR in the third quarter of 2007, an increase of 92 percent. Twice-daily ZYFLO CR was approved by the U.S. Food and Drug Administration (FDA) in May 2007 and commercially launched in September 2007. Critical Therapeutics and Dey, L.P. ("DEY"), a subsidiary of Mylan Inc., currently market ZYFLO CR in the U.S. The increase in net product sales during the third quarter of 2008 is primarily attributable to a 15 percent increase in prescription volume and a 5 percent increase in the wholesale acquisition price over the same period in 2007 as well as the result of an increase in the amount of ZYFLO CR purchased by wholesalers to replenish their available supplies following the shortage of commercial product that occurred in the second quarter of 2008 due to the previously disclosed supply chain issues with ZYFLO CR.

Operating expenses for the three months ended September 30, 2008 totaled $8.0 million, compared with $11.4 million in the third quarter of 2007, a decrease of approximately 30 percent.

* Cost of products sold in the third quarter of 2008 totaled $2.3 million, compared with $1.2 million in the third quarter of 2007. Gross margin from product sales was 61 percent in both the third quarter of 2008 and 2007.

* Research and development expenses decreased approximately 87 percent to $497,000 in the third quarter of 2008 from $3.9 million in the third quarter of 2007. This decrease was primarily due to lower expenses in the third quarter of 2008 associated with the Company's Phase IV clinical trial for ZYFLO CR, its Phase II zileuton injection clinical trial and its alpha-7 preclinical program.

* Sales and marketing expenses declined approximately 51 percent to $1.8 million in the third quarter of 2008 from $3.6 million in the third quarter of 2007. This decrease was primarily due to lower expenses related to promotional materials and advertising costs and a decrease in salary and other employee related expenses following the Company's personnel reductions in the first half of 2008.

* General and administrative expenses increased approximately 28 percent to $3.4 million in the third quarter of 2008 from $2.7 million in the third quarter of 2007. This increase was primarily attributable to an increase in legal, printing and production fees related to the Company's proposed merger with Cornerstone BioPharma Holdings, Inc.

For the three months ended September 30, 2008, the Company posted a net loss of $2.0 million, or $0.05 per share. This compares with a net loss of $7.8 million, or $0.18 per share, for the same period in 2007. As of September 30, 2008, the Company had 43.1 million common shares outstanding, excluding warrants and stock options.

Cash and investments totaled $7.3 million at September 30, 2008, compared with $11.2 million at June 30, 2008 and $34.1 million at December 31, 2007. Net cash expenditures were $3.9 million in the third quarter of 2008, compared with net cash expenditures of $6.4 million in the third quarter of 2007.

Financial Results for the Nine Months Ended September 30, 2008 and 2007

Total revenue for the nine months ended September 30, 2008 increased approximately 30 percent to $13.2 million from $10.1 million for the same period in 2007. Total revenue for the first nine months of 2007 included collaboration and license revenue of $1.8 million, whereas no collaboration or license revenue was recorded in 2008.

Total operating expenses for the nine months ended September 30, 2008 totaled $32.8 million, compared with $37.0 million for the same period in 2007. For the nine months ended September 30, 2008, the Company posted a net loss of $19.4 million, or $0.45 per share, compared with a net loss of $25.4 million, or $0.60 per share, for the same period in 2007.

Proposed Merger with Cornerstone BioPharma

On May 1, 2008, Critical Therapeutics announced the signing of a definitive merger agreement with Cornerstone BioPharma Holdings, Inc. ("Cornerstone"), a privately-held specialty pharmaceutical company focused on developing and commercializing prescription medications for respiratory disorders. Under the terms of the agreement, all outstanding shares of Cornerstone's common stock will be converted into and exchanged for shares of Critical Therapeutics' common stock and all outstanding Cornerstone options and warrants will be assumed by Critical Therapeutics and become options and warrants to acquire Critical Therapeutics' common stock. Immediately following the effective time of the merger, the holders of Cornerstone's common stock, options and warrants will own approximately 70 percent, and Critical Therapeutics' stockholders will own approximately 30 percent, of the combined company's common stock, after giving effect to shares issuable under outstanding Cornerstone options and warrants, but excluding shares issuable under outstanding Critical Therapeutics' options and warrants. Consummation of the merger is subject to a number of closing conditions, including the approval of both Critical Therapeutics' stockholders and Cornerstone's stockholders, approval by NASDAQ of the re-listing of Critical Therapeutics' common stock in connection with the merger, the continued availability of Critical Therapeutics' products and other customary closing conditions.