TORONTO, Oct. 15, 2014 (GLOBE NEWSWIRE) -- Intellipharmaceutics International Inc. (Nasdaq:IPCI) (TSX:I), a pharmaceutical company specializing in the research, development and manufacture of novel and generic controlled-release and targeted-release oral solid dosage drugs, today reported the results of operations for the three and nine months ended August 31, 2014. All dollar amounts referenced herein are in United States dollars unless otherwise noted.
Revenue related to the Company’s license and commercialization agreement with Par Pharmaceutical, Inc. (“Par”) in the three months ended August 31, 2014 was $1.1 million versus $Nil in the three months ended August 31, 2013. The revenue in the three months ended August 31, 2014 derived principally from commercial sales of its first product, 15 and 30 mg strengths of dexmethylphenidate hydrochloride extended-release capsules (“generic Focalin XR®"). We believe sales of dexmethylphenidate hydrochloride extended-release capsules are subject to seasonal fluctuations. These products are indicated for conditions including attention deficit hyperactivity disorder, which we expect may see increases in prescription rates during the school term and declines in prescription rates during summer vacations and other school holidays. We believe that during the quarter ended August 31, 2014, for the 15 and 30 mg strengths, we maintained approximately 40% and 25% market shares of the total prescriptions dispensed, respectively.
Loss from operations for the three months ended August 31, 2014 was $1.6 million compared with loss from operations of $1.7 million for the three months ended August 31, 2013. Research and development (“R&D”) expenditures in the three months ended August 31, 2014 increased to $1.7 million compared to $1.0 million in the three months ended August 31, 2013. After adjusting for stock-based compensation, expenditures for R&D were higher by $0.7 million during the 2014 period, primarily due to the on-going development of several generic and New Drug Application (“NDA”) 505(B)(2) product candidates, an increase in the number of non-management employees, and salary increases for certain non-management employees. Selling, general and administrative expenses for the three months ended August 31, 2014 increased to $0.9 million versus $0.6 million in the comparable prior year period. After adjusting for stock-based compensation expense, expenditures for selling, general and administrative expenses were higher by $0.2 million during the 2014 period, primarily due to an increase in the number of management and non-management employees, and salary increases for certain non-management employees.
Intellipharmaceutics CEO Dr. Isa Odidi commented, “Subsequent to our generic Focalin XR® approval, we have expanded operations and increased R&D activities, specifically around our Rexista™ oxycodone and other NDA 505(b)(2) product candidates. Such increased R&D in relation to these product candidates may require additional cash outlays. In recognition of the anticipated R&D expenditures and of the Company’s current cash position, as well as our continuing commitment to the Company, Dr. Amina Odidi and I agreed to extend the maturity date of the convertible debenture relating to our loan of $1.5 million to the Company from January 1, 2015 to July 1, 2015. We believe that further growth in revenues could be realized after the exclusivity periods for the 5, 10 and 20mg doses of generic Focalin XR® expire and additional ANDA approvals are granted, but there can be no assurance as to if or when any such approvals, or expiry of any exclusivity period, will occur.”
The Company recorded a net loss for the three months ended August 31, 2014 of $1.7 million, or $0.07 per common share, compared with a net loss of $2.0 million, or $0.10 per common share for the three months ended August 31, 2013. The Company recorded a net loss for the nine months ended August 31, 2014 of $2.6 million or $0.11 per common share, compared with a net loss of $5.2 million or $0.27 per common share for the nine months ended August 31, 2013. The net loss for the three months ended August 31, 2014 is attributed to the ongoing R&D and selling, general and administrative expense, and salary increases to certain non-management employees; partially offset by licensing and milestone revenue. For the three months ended August 31, 2013, the net loss was attributed to the ongoing R&D and selling, general and administrative expenses, and the loss in fair value adjustment of derivative liabilities related to warrants and the convertible debenture. Revenue in the three months ended August 31, 2014 was $1.1 million versus $Nil in the comparable prior year period. The fair value adjustment of derivative liabilities in the three months ended August 31, 2014 was $Nil versus a loss of $0.2 million in the comparable prior year period. In view of the final approval of generic Focalin XR® for the 15 and 30 mg strengths, and the generation and collection of U.S. dollar revenues in the nine months ended August 31, 2014 which represents a significant and material change in economic facts and circumstances, the Company had assessed the functional currency for the fiscal year commencing December 1, 2013 and concluded that the Company and its wholly owned operating subsidiaries should be measured using the U.S. dollar as the functional currency. Prior to the change in functional currency, U.S. GAAP required the fair values of the derivative liabilities to be re-valued at the end of every reporting period with the change in value reported in the consolidated statements of operations and comprehensive loss. Subsequent to the change in functional currency, U.S. GAAP reclassifies the derivative liabilities to equity and there is no further re-valuation at the end of every reporting period.
At August 31, 2014, Intellipharmaceutics’ cash totaled $5.5 million, compared with $0.8 million at November 30, 2013. The increase in cash during the nine months ended August 31, 2014 is mainly a result of licensing revenue and an increase in cash flows provided from financing activities which are mainly from common share sales under our at-the-market offering program, partially offset by cash used in operating activities which were reduced by licensing revenue and milestone revenue, and cash used in investing activities from an increase in purchases of production, laboratory and computer equipment. As at October 15, 2014, we had a cash balance of $3.3 million as compared to $5.5 million at August 31, 2014. The decrease in cash since August 31, 2014 was due to cash used in operating activities.
For the three months ended August 31, 2014, net cash flows used in operating activities decreased to $1.4 million as compared to net cash flows used in operating activities of $1.8 million for the three months ended August 31, 2013. The decrease was due to the receipt of $1.6 million relating to commercial sales of generic Focalin XR® by Par for the 15 and 30 mg strengths of the drug product for the period April 1, 2014 to June 30, 2014.
For the three months ended August 31, 2014, net cash flows used in financing activities of $0.05 million related principally to at-the-market financing costs. No shares were sold under the at-the-market program in the three months ended August 31, 2014. For the three months ended August 31, 2013, net cash flows provided from financing activities of $2.6 million include for net proceeds of approximately $2.5 million from the July 2013 underwritten public offering.
For the three months ended August 31, 2014, net cash flows used in investing activities was $0.3 million compared to $0.02 million in the comparable prior year period. The increase was mainly the result of purchases of production equipment due to the acceleration of product development activities.
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