Cornerstone Therapeutics Inc., which has taken some interesting turns on the road to building a portfolio of hospital and respiratory products, expanded its acute care franchise with an agreement to acquire EKR Therapeutics Inc., which specializes in drugs used in the critical care setting.

Cornerstone, of Cary, N.C., will make an initial cash payment of approximately $125 million and up to an additional $25 million in milestone payments over three years contingent on regulatory approval of a new active ingredient supplier for EKR's Retavase (reteplase recombinant) and on sales of the drug during the first three years following a planned commercial relaunch in 2013.

Retavase is a non-glycosylated deletion mutein of tissue-plasminogen activator (tPA) containing the kringle 2 and the protease domains of human tPA. The drug is designed to improve ventricular function following acute myocardial infarction (AMI) and to reduce the incidence of congestive heart failure and mortality associated with AMI.

However, Retavase has suffered manufacturing shortages since 2009, leaving the $330 million intravenous thrombolytic market to Activase and TNKase (Genentech Inc./Roche AG). Cornerstone hopes Retavase can grab a market share of $40 million to $50 million annually, Craig Collard, the company's CEO, said during a conference call early Tuesday morning.

Cornerstone also obtained rights to EKR's Cardene (nicardipine hydrochloride), a calcium ion influx inhibitor marketed in capsule and intravenous formulations. The drug is indicated for the short-term treatment of hypertension when oral therapy is not feasible or desirable.

"In 2011, EKR generated $58 million in net revenues, primarily from sales of Cardene, [which] is a highly recognizable brand name and expands our footprint within the hospital," Collard said.

EKR picked up both cardiovascular products in 2008 in a potential $170 million deal with PDL BioPharma Inc., which was selling off assets a chunk at a time. (See BioWorld Today, Feb. 6, 2008.)

The EKR products complement Cornerstone's hospital products Curosurf, a surfactant indicated for neonatal respiratory distress syndrome in preterm infants, and CRTX 080, a hyponatremia candidate. The acquisition also enhances Cornerstone's sales and marketing efforts.

"Cornerstone is in the midst of expanding its product portfolio for the hospital and specialty market, and the addition of EKR marks an important transaction that is fully aligned with our strategic growth plan," Collard said.

A newly formed, wholly owned subsidiary of Cornerstone will merge with Bedminster, N.J.-based EKR, which will become the surviving Cornerstone subsidiary.

EKR's board of directors approved the merger agreement. The transaction is expected to close in late June and to be accretive in the third quarter on a non-GAAP earnings-per-share basis.

Stifel Nicolaus Weisel acted as financial advisor and Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan LLP acted as legal advisor to Cornerstone, while Lazard acted as financial advisor and Foley & Lardner LLP acted as legal advisor to EKR.

In connection with the transaction, Cornerstone and majority shareholder Chiesi Farmaceutici SpA entered a debt financing commitment, with Chiesi providing a senior secured term loan arrangement that includes a five-year term loan A of up to $60 million at 7.5 percent annually and a five-year term loan B of up to $30 million at 6.5 percent annually.

Cornerstone said term loan B may be converted into its common stock at $7.098 per share at Chiesi's option at any time during the 24 months following the closing of the debt financing.

Chiesi's terms provided a more attractive option for Cornerstone than tapping the public markets, according to Vincent Morgus, the company's executive vice president of finance and chief financial officer.

"Our ability to access Chiesi as a financing source positions us well as we continue to take advantage of potential inorganic growth opportunities in the U.S.," Morgus added.

Parma, Italy-based Chiesi gained its majority interest in 2009 through a $70 million stock deal that gave Cornerstone the rights to Curosurf. In that agreement, Cornerstone issued 11.9 million shares of common stock in exchange for an exclusive 10-year license to Curosurf with options to renew the commercial U.S. rights to the drug, as well as first rights to license any other products and technologies Chiesi seeks to market in the U.S. (See BioWorld Today, May 8, 2009.)

Collard and another Cornerstone executive sold an additional 1 .6 million shares to give the Italian company a 51 percent stake in the company.

Cornerstone, which emerged in 2008 from the somewhat acrimonious merger of Critical Therapeutics Inc. and Cornerstone BioPharma Holdings Inc., subsequently picked up the antibiotic Factive (gemifloxacin mesylate) when Oscient Pharmaceuticals Corp. filed for bankruptcy. (See BioWorld Today, May 5, 2008, and July 15, 2009.)

In reviewing the company's first-quarter performance, Collard said Cornerstone eliminated its primary care product line with the March sale of Factive to Merus Labs International Inc., of Toronto, and Spectracef (cefditoren pivoxil) to Vansen Pharma Inc.

On the flip side, Cornerstone boosted its specialty product line with the December 2011 acquisition of Cardiokine Inc., of Philadelphia, which had completed a series of Phase III trials for lead compound lixivaptan in hyponatremia and filed a new drug application (NDA) for the orally active, selective vasopressin 2 receptor antagonist. The acquisition gave Cornerstone worldwide rights to the investigational therapy, which Cardiokine licensed from Wyeth (now part of Pfizer Inc.) in 2004 and partnered with Biogen Idec Inc. in 2007, though the big biotech later restructured and exited the cardiovascular space. (See BioWorld Today, April 14, 2004, July 3, 2007, and Nov. 5, 2010.)

Collard said the FDA accepted the NDA in March and scheduled a PDUFA date of Oct. 29, giving lixivaptan a potential 2013 commercial launch.

Collard predicted more growth for Cornerstone, including additional acquisitions, in the coming months. To that end, the company reported a war chest of $74.2 million in cash and equivalents as of March 31.

On Tuesday, Cornerstone's shares (NASDAQ:CRTX) closed at $5.47, down 21 cents.