Cipher Pharmaceuticals Reports Q2 2018 Results
Published: Aug 10, 2018
Canadian product revenue increased 33%
MISSISSAUGA, ON, Aug. 10, 2018 /CNW/ -- Cipher Pharmaceuticals Inc. (TSX:CPH) ("Cipher" or "the Company") today announced its financial and operational results for the three and six months ended June 30, 2018. Unless otherwise noted, all figures are in U.S. dollars.
Q2 2018 Financial and Corporate Highlights
(all figures compared to Q2 2017, unless otherwise noted)
The Company continues to execute on its revised corporate strategy to build a portfolio of prescription products across a broad range of therapeutic areas that meet an unmet medical need. In 2018, Cipher has launched one new product in Canada and completed five transactions that demonstrate meaningful progress in the execution of its growth strategy to assemble a diversified portfolio of prescription products that will deliver reliable growth for shareholders. Key highlights during and subsequent to the quarter are:
- In April, Cipher acquired the exclusive Canadian rights to A-101 40%, a topical solution indicated for the treatment of raised seborrheic keratoses. A-101 40% was approved by the FDA in December 2017 and will be marketed by Aclaris Therapeutics, Inc. in the U.S. under the tradename Eskata™. Cipher plans to file its NDS with Health Canada before the end of 2018.
- In May, Cipher completed the acquisition of the Canadian business portfolio of Cardiome, which included two commercial products (Brinavess® and Aggrastat®) and two late-stage pipeline products (Xydalba™ and Trevyent®). Prior to the end of 2018, Cipher expects to launch Brinavess commercially and obtain Health Canada approval of Xydalba.
- In June, Dr. Diane Gajewczyk joined the team as Vice President, Scientific and Medical Affairs. Dr. Gajewczyk brings more than 25 years of pharmaceutical industry experience in the research, clinical development and commercialization of pharmaceutical, biologics, vaccine and medical device products.
- In July, Cipher amended its distribution and supply agreement with Sun Pharmaceuticals Inc. ("Sun") to provide Sun with the ability to launch new isotretinoin products prior to the expiry of the current agreement in November 2022. Cipher will receive a royalty on net sales of Sun's isotretinoin products.
- Revenue from commercial product sales in Canada increased 33% to $1.7 million up from $1.3 million.
Q2 2018 Financial Review
(All figures are in U.S. dollars)
Total revenue was $7.0 million for Q2 2018, compared to $9.9 million for Q2 2017. The year-over-year decrease mainly reflects lower revenue from Absorica®. As previously disclosed, fiscal 2017 was an unusually strong year for Absorica revenue based on the success of Cipher's partner's promotional program, which drove significant market share gains prior to the end of the program in November 2017.
Licensing revenue for Q2 2018 was $5.2 million, compared to $8.6 million for Q2 2017. Absorica licensing revenue was $4.5 million for Q2 2018, compared with $7.5 million for Q2 2017. Licensing revenue from Lipofen® products decreased as expected to $0.5 million for Q2 2018, compared with $0.8 million in Q2 2017. Licencing revenue from tramadol products (Conzip® and Durela®) was $0.2 million, compared with $0.3 million in Q1 2017.
Product revenue increased by 33% to $1.7 million for Q2 2018, compared to $1.3 million for Q1 2017. The increase was primarily driven by Epuris®, which generated revenue of $1.5 million in the period, compared to $1.1 million in Q2 2017. Epuris achieved market share of more than 33%2 during the quarter, compared with 28% for the same period last year.
Total operating expenses increased to $4.1 million for Q2 2018, compared to $3.5 million for Q2 2017, primarily due to due to additional transaction costs in connection with the acquisition of Cardiome.
Income from continuing operations was $1.9 million, or $0.07 per basic and diluted share, in Q2 2018, compared with income from continuing operations of $4.4 million, or $0.16 per basic and diluted share, in Q2 2017. Adjusted EBITDA1 for Q2 2018 decreased to $3.3 million, compared to $6.6 million in Q2 2017.
The Company has $12.6 million in cash at June 30, 2018, compared with $28.2 million at the end of 2017. The Company used approximately $20 million in cash during the quarter as consideration for the Cardiome Pharma Corp. ("Cardiome") acquisition.
"It was an improved quarter financially as our product revenue increased by 33% and Absorica revenue recovered from a weak first quarter, which drove sequential gains in total revenue and earnings," said Robert Tessarolo, President and CEO of Cipher. "Subsequent to quarter end, we completed an important amendment to our Absorica distribution and supply agreement, which was expanded to include a portfolio royalty through December 2024 on our partner's isotretinoin product portfolio. Effectively managing the lifecycle of Absorica provides Cipher the opportunity to maximize total cumulative revenues from an expanded portfolio of isotretinoin products."
Mr. Tessarolo added: "Our Canadian commercial business continues to grow strongly, led by Epuris, which now has one-third market share. We closed the Cardiome acquisition in the quarter, adding revenue, growth programs and near-term launch opportunities. Looking ahead, we have multiple value-driving regulatory and commercial milestones in the coming quarters and expect to add five new products to our portfolio in 2018 and 2019, including high-potential products in TRULANCE and A-101 40%. We are investing significantly in business development to continue this momentum and grow our Canadian commercial platform."
Cipher is executing a three-pronged growth strategy to deliver reliable growth to shareholders. The Company is particularly focused on building its Canadian commercial business, which has generated significant organic growth over the past several years. Cipher is experiencing continued growth in its key brands and expects to add five new products from its existing pipeline to its Canadian commercial portfolio in 2018 and 2019. Management continues to pursue new in-licensing opportunities and acquisitions to further expand its near-term product pipeline.
The Company expects its licensing business to provide a solid base of high-margin royalty revenue in 2018, which provides non-dilutive financing to support the growth of its Canadian commercial platform.
Financial Statements and MD&A
Cipher's Financial Statements and Management's Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2018 are available on the Company's website at www.cipherpharma.com in the "Investors" section under "Quarterly Reports" and on SEDAR at www.sedar.com.
Notice of Conference Call
Cipher will hold a conference call today, August 10, 2018, at 8:30 a.m. (ET) to discuss its financial results and other corporate developments. To access the conference call by telephone, dial (416) 764-8609 or (888) 390-0605 and use conference ID 25005708. A live audio webcast will be available at https://bit.ly/2mD9mUa or the Investor Relations section of the Company's website at http://www.cipherpharma.com. An archived replay of the webcast will be available for 90 days.
About Cipher Pharmaceuticals Inc.
Cipher (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 markets those products either directly in Canada or indirectly through partners in Canada, the U.S., and South America. Cipher is focused on a three-pronged growth strategy - including acquisitions, in-licensing, and selective investments in drug development - to assemble a broad portfolio of prescription products that serve unmet medical needs. For more information, visit www.cipherpharma.com.
This document includes forward-looking statements within the meaning of certain securities laws, including the "safe harbour" provisions of the Securities Act (Ontario) and other provincial securities law in Canada and U.S. securities laws. These forward-looking statements include, among others, statements with respect to our objectives, 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 Cipher's acquisition of Cardiome Pharma Corp. ("Cardiome") pursuant to which the Company acquired the Canadian business portfolio of Cardiome, including statements in respect of the anticipated strategic and/or financial benefits of the acquisition and the anticipated regulatory approvals of products and the timing 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, our ability to enter into in-licensing, 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; 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; 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; current uncertainty surrounding health care regulation in the United States; 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; 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 it operates; 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; 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 effects of our delisting from the NASDAQ Global Market (the "NASDAQ") and deregistration of our Common Shares under the U.S. Securities Exchange Act of 1934, as amended (the "U.S. Exchange Act"); 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; certain adverse tax rules applicable to U.S. holders of our Common Shares if we are a passive foreign investment company for U.S. federal income tax purposes; 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 actions of a significant shareholder; we do not currently intend to pay dividends; our operating results may fluctuate significantly; our debt obligations will have priority over the Common Shares in the event of a liquidation, dissolution or winding up; and risks associated with the arrangement with Cardiome, including, among others, the failure to satisfy closing conditions and the absence of material adverse changes or other events which may give the parties a basis on which to terminate the arrangement agreement.
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 our Annual Information Form and in our Management's Discussion and Analysis of Operating Results and Financial Position for the year ended December 31, 2017, 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) 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.
2) Source: QuintilesIMS
The following is a summary of how EBITDA and Adjusted EBITDA are calculated:
(IN THOUSANDS OF U.S. DOLLARS) Three months Three months Six months Six months ended ended June 30, 2018 June 30, 2017 ended ended June 30, 2018 June 30, 2017 --- ------------- $ $ $ $ --- --- --- --- Restated Restated Income from continuing operations 1,915 4,404 964 2,812 Add back: Depreciation and amortization 166 240 391 482 Interest expense, net 153 650 283 2,071 Income taxes 927 1,225 786 944 EBITDA 3,161 6,519 2,424 6,309 ------ ----- ----- ----- ----- Change in fair value of derivative financial instrument (121) 92 (442) (6) Loss from the translation of Canadian cash balances 34 8 75 17 Loss of debt extinguishment - - - 5,223 Impairment of intangible assets - - 1,832 - Share-based compensation 246 29 403 238 ------------------------ --- --- --- --- Adjusted EBITDA 3,320 6,648 4,292 11,781 =============== ===== ===== ===== ======
SOURCE Cipher Pharmaceuticals Inc.
Company Codes: OtherOTC:CPHRF, Toronto:CPH, OTC-PINK:CPHRF