Cipher Pharmaceuticals Reports First Quarter 2020 Financial Results

 

OAKVILLE, ON, May 7, 2020 /CNW/ - Cipher Pharmaceuticals Inc. (TSX:CPH) ("Cipher" or "the Company") today announced its financial and operating results for the three months ended March 31, 2020. Unless otherwise noted, all figures are in U.S. dollars.

Q1 2020 Financial and Corporate Highlights
(All figures in U.S. dollars, compared to Q1 2019, unless otherwise noted)

  • Total revenue increased 15% to $5.9 million from $5.1 million
  • Product revenue increased 41% to $2.6 million compared to $1.8 million
  • SG&A decreased 51% to $1.4 million from $2.9 million
  • Total operating expenses decreased 36% to $2.3 million from $3.6 million
  • Net income increased 224% to $2.6 million from $0.8 million
  • Earnings per common share increased to $0.10 ($ 0.13 in Canadian Dollars) from $0.03
  • Adjusted EBITDA2 increased 132% to $4.1 million from $1.8 million
  • ABSORICA LDlaunched by the Company's US marketing partner

 

Corporate Update

"We are pleased to report that our first quarter results showed strong top line growth and excellent expense management. The benefit of simultaneously achieving these goals, is the impressive operating leverage we achieved in the first quarter. Total revenue was up 15%, while Adjusted EBITDA grew 132% and net income increased 224%. The business delivered material increases in profitability in the first quarter" said Mr. Craig Mull, Interim CEO. "Epuris continues to show solid growth, with first quarter revenue of $2.4 million compared to $1.6 million in the comparative period. Epuris finished the quarter with 40% market share in the Canadian market." 

As previously announced, Sun Pharmaceutical Industries Ltd. ("Sun Pharma"), the Company's U.S. marketing partner for Absorica®, launched ABSORICA LD (isotretinoin) capsules in the U.S for the management of severe recalcitrant nodular acne in patients 12 years of age and older. The launch of ABSORICA LD will trigger an extension of Cipher's agreement with Sun Pharmaceuticals.

Subsequent to quarter end, the Company concluded its binding arbitration with Upsher-Smith.  This arbitration was related to the patent infringement lawsuit alleging Upsher-Smith had infringed on at least one or more of Cipher's patents by filing an Abbreviated New Drug Application with the Federal Drug Administration to market a generic version of Absorica.

"We believe the launch of ABSORICA LD and the conclusion of the arbitration with Upsher-Smith  improves and extends the competitive position of our products, placing the Company in a strong position to benefit from the future revenue stream associated with Absorica and ABSORICA LD," Added Mr. Mull.

Cipher would also like to take this opportunity to announce that its Board of Directors has concluded the Strategic review process previously announced on June 29, 2019. A Special Committee was formed to review and evaluate the strategic direction of the Company and consider various alternatives to maximize shareholder value. During the process, focus was shifted to targeting the most cost-efficient manner to distribute the Canadian commercial assets.  After extensively reviewing all alternatives, including offers for multiple products, and taking into account the demonstrated strength in Epuris, the Board has determined that at this time, shareholder value would be maximized by retaining the Canadian Commercial portfolio and distributing the Canadian Commercial assets through a distribution partner.

"The Board of Directors and Management team remain committed to enhancing shareholder value. We have taken substantial costs out of the business and we will continue to keep a close eye on our cost structure and profitability.  With our cost structure largely optimized, our focus for the rest of the year will be to look for the right opportunities for long term growth," added Mr. Mull.

Q1 2020 Financial Review
(All figures are in U.S. dollars)

Total revenue was $5.9 million for Q1 2020, compared to $5.1 million for the prior period.  The main driver for the 15% increase in revenue was Canadian commercial product revenues.

Licensing was $3.3 million for the three months ended March 31, 2020, essentially unchanged from the three months ended Mar 31, 2019. Licensing revenue from Absorica in the U.S. was $2.7 million for the three months ended March 31, 2020, unchanged from the prior period.  Absorica ended the quarter with 6.2% market share.

Licensing revenue from Lipofen and the authorized generic version of Lipofen, was $0.5 million for Q1 2020, unchanged from $0.5 million for the three months ending March 31, 2019.

Licensing revenue from the extended-release tramadol product (Conzip and Durela) was $0.1 million which remained relatively unchanged from the comparative period.

Product revenue increased by $0.7 million or 41% to $2.6 million for Q1 2020, compared to $1.8 million for the comparable period in 2019. The increase in product revenue was attributable to Epuris, which increased to $2.4 million, compared to $1.6 million in the comparative period.  According to IQVIA, Epuris had a prescription market share of over 40% in Canada for the three months ended March 31, 2020, compared to 37% for the three months ended March 31, 2019.

Product revenue for Ozanex, Beteflam, Actikerall, Brinavess, Aggrastat and Vaniqa was $0.2 million in aggregate, compared to $0.2 million for the comparative period.

Total operating expenses decreased to $2.3 million for Q1 2020 compared to $3.6 million for Q1 2019. The decrease was primarily driven by a decrease in selling, general and administrative ("SG&A") expense.

SG&A expense was $1.4 million for Q1 2020, a decrease of $1.5 million or 51% compared to the prior period. The decrease in SG&A was primarily driven by an overall reduction in costs related to human resources.

Net income was $2.6 million, or $0.10 per basic and diluted share ($0.13 in Canadian Dollars), in Q1 2020, compared to $0.8 million, or $0.03 per basic and diluted share, in Q1 2019. Adjusted EBITDA for Q1 2020 increased to $4.1 million, compared to $1.7 million in Q1 2019.

The Company generated $5.4 million dollars in cash from operating activities during the quarter and cash increased $2.5 million dollars in the first quarter.  As of March 31, 2020, the Company had cash of $8.8 million dollars and $5.7 million of debt.

Financial Statements and MD&A

Cipher's Financial Statements for the first quarter ended March 31, 2020 and Management's Discussion and Analysis (the "MD&A") for the three months ended March 31, 2020 are available on the Company's website at www.cipherpharma.com in the "Investors" section under "Financial Reports" and on SEDAR at www.sedar.com.

Notice of Conference Call

Cipher will hold a conference call on May 8, 2020, at 8:30 a.m. (ET) to discuss its financial results and other corporate developments.

 

About Cipher Pharmaceuticals Inc.

Cipher Pharmaceuticals (TSX: CPH) is a specialty pharmaceutical company with a robust and diversified portfolio of commercial and early to late-stage products. Cipher acquires products that fulfill unmet medical needs, manages the required clinical development and regulatory approval process, and currently markets those products either directly in Canada or indirectly through partners in Canada, the U.S., and South America. For more information, visit www.cipherpharma.com.

Forward-Looking Statements

This document includes forward-looking statements within the meaning of applicable securities laws. These forward-looking statements include, among others, statements with respect to our objectives and goals and strategies to achieve those objectives and goals, as well as statements with respect to our beliefs, plans, expectations, anticipations, estimates and intentions and statements relating to the Special Committee's review of the strategic direction of the Company and its strategic priorities including the anticipated benefits thereof.  The words "may", "will", "could", "should", "would", "suspect", "outlook", "believe", "plan", "anticipate", "estimate", "expect", "intend", "forecast", "objective", "hope" and "continue" (or the negative thereof), and words and expressions of similar import, are intended to identify forward-looking statements.

By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, which give rise to the possibility that predictions, forecasts, projections and other forward-looking statements will not be achieved. Certain material factors or assumptions are applied in making forward-looking statements and actual results may differ materially from those expressed or implied in such statements. We caution readers not to place undue reliance on these statements as a number of important factors, many of which are beyond our control, could cause our actual results to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to, the extent and impact of the coronavirus (COVID-19) outbreak on our business including any impact on our contract manufacturers and other third party service providers, our ability to enter into development, manufacturing and marketing and distribution agreements with other pharmaceutical companies and keep such agreements in effect; our dependency on a limited number of products; our dependency on protection from patents that will expire; integration difficulties and other risks if we acquire or in-license technologies or product candidates; reliance on third parties for the marketing of certain products; the product approval process is highly unpredictable; the timing of completion of clinical trials, regulatory submissions and regulatory approvals; reliance on third parties to manufacture our products and events outside of our control that could adversely impact the ability of our manufacturing partners to supply products to meet our demands; we may be subject to future product liability claims; unexpected product safety or efficacy concerns may arise; we generate license revenue from a limited number of distribution and supply agreements; the pharmaceutical industry is highly competitive; requirements for additional capital to fund future operations; products in Canada may be subject to pricing regulation; dependence on key managerial personnel and external collaborators; no assurance that we will receive regulatory approvals in the U.S., Canada or any other jurisdictions and current uncertainty surrounding health care regulation in the U.S.; certain of our products are subject to regulation as controlled substances; limitations on reimbursement in the healthcare industry; limited reimbursement for products by government authorities and third-party payor policies; products may not be included on list of drugs approved for use in hospitals; hospital customers may make late payments or not make any payments; various laws pertaining to health care fraud and abuse; reliance on the success of strategic investments and partnerships; the publication of negative results of clinical trials; unpredictable development goals and projected time frames; rising insurance costs; ability to enforce covenants not to compete; risks associated with the industry in which we operate; we may be unsuccessful in evaluating material risks involved in completed and future acquisitions; we may be unable to identify, acquire or integrate acquisition targets successfully; legacy risks from operations conducted in the U.S.; inability to meet covenants under our long term debt arrangement; compliance with privacy and security regulation; our policies regarding returns, allowances and chargebacks may reduce revenues; certain current and future regulations could restrict our activities; additional regulatory burden and controls over financial reporting; reliance on third parties to perform certain services; general commercial litigation, class actions, other litigation claims and regulatory actions; the difficulty for shareholders to realize in the United States upon judgments of U.S. courts predicated upon civil liability of the Company and its directors and officers who are not residents of the United States; the potential violation of intellectual property rights of third parties; our efforts to obtain, protect or enforce our patents and other intellectual property rights related to our products; changes in U.S., Canadian or foreign patent laws; litigation in the pharmaceutical industry concerning the manufacture and supply of novel and generic versions of existing drugs; inability to protect our trademarks from infringement; shareholders may be further diluted if we issue securities to raise capital; volatility of our share price; the fact that we have a significant shareholder; we do not currently intend to pay dividends; our operating results may fluctuate significantly; and our debt obligations will have priority over the common shares of the Company in the event of a liquidation, dissolution or winding up.
We caution that the foregoing list of important factors that may affect future results is not exhaustive. When reviewing our forward-looking statements, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Additional information about factors that may cause actual results to differ materially from expectations, and about material factors or assumptions applied in making forward-looking statements, may be found in the "Risk Factors" section of this MD&A and the Annual Information Form for the year ended December 31, 2019, and elsewhere in our filings with Canadian securities regulators. Except as required by Canadian securities law, we do not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by us or on our behalf; such statements speak only as of the date made. The forward-looking statements included herein are expressly qualified in their entirety by this cautionary language.

  1. At the Q1 2020 average exchange rate.
     
  2. EBITDA is a non-IFRS financial measure.  The term EBITDA (earnings before interest, taxes, depreciation and amortization,) does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement IFRS measures by providing a further understanding of operations from management's perspective. The Company defines Adjusted EBITDA as earnings before interest expense, income taxes, depreciation of property and equipment, amortization of intangible assets, loss on debt extinguishment, non-cash share-based compensation, changes in fair value of derivative financial instruments, impairment of intangible assets and goodwill and foreign exchange gains and losses from the translation of Canadian cash balances.

 

The Following is a summary of how EBITDA and Adjusted EBITDA are calculated:

     

 (IN THOUSANDS OF U.S. DOLLARS) 

Three months ended
March 31, 2020

Three months ended
March 31, 2019

 

$

$

Income from continuing operations

2,477

816

Add back:

   

Depreciation and amortization

307

299

Interest expense, net

96

222

Income taxes

1,096

423

EBITDA

3,976

1,760

Change in fair value of derivative financial instrument

(2)

(12)

Loss (gain) from the translation of Canadian cash balances

54

(26)

Share-based compensation

44

32

Adjusted EBITDA

4,072

1,754

Adjusted EBITDA per share – basic

0.15

0.07

Adjusted EBITDA per share – dilutive

0.15

0.07

 

SOURCE Cipher Pharmaceuticals Inc.

 
 
Company Codes: OtherOTC:CPHRF, Toronto:CPH
 

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