Cipher Pharmaceuticals Releases Q2 2023 Results, Announces Launch of Epuris in Mexico

(All figures are presented in U.S. dollars)

• Strong growth capital available with $36.3 million in cash and cash equivalents
• Net income increased by 32% year-over-year to $5.7 million
• EPS increased 35% year-over-year to $0.23 per share

MISSISSAUGA, ON, Aug. 10, 2023 /CNW/ - Cipher Pharmaceuticals Inc. (TSX: CPH) ("Cipher" or "the Company") today announced its financial and operating results for the three and six month periods ended June 30, 2023.

Q2 2023 Financial Highlights
(All figures in U.S. dollars, compared to Q2 2022, unless otherwise noted)

• MOB-015 pipeline product for nail fungus treatment obtained European Union approval
• Commercial launch of Epuris in Mexico through partnerships with Italmex & Galephar
• Total revenue was $5.3 million compared to $5.6 million in Q2 2022
• Licensing revenue increased 6% to $2.2 million compared to $2.0 million in Q2 2022
• Adjusted EBITDA¹ was $3.1 million compared to $3.6 million in Q2 2022
• Ended the quarter with $36.3 million in cash (CDN$48.1²) or $1.43 per share (CDN $1.90²)

Management Commentary

Craig Mull, Interim CEO commented, "I am proud to announce further developments on our product pipeline, whereby Moberg Pharma recently obtained a significant European Union regulatory milestone, paving the way for commercial launch of their MOB-015 nail fungus treatment across 13 countries in Europe. Cipher holds the exclusive rights to MOB-015 in Canada and we believe approval in the European Union highly de-risks the eventual regulatory approval in Canada, which is a market opportunity in excess of CDN $80 million.

We also are proud to announce the official launch of Epuris in Mexico, making our isotretinoin product available to the many Mexicans who suffer from severe acne. In May 2023, Epuris was commercially launched through Cipher's strong established partnerships with Galephar Pharmaceutical Research and Italmex Pharma S.A. Epuris has established itself as the #1 prescribed isotretinoin product dermatologists rely on in Canada, and we believe this is a tremendous step in further growth of the Epuris brand."

Bryan Jacobs, CFO commented, "During the second quarter, our business performed as expected with sequentially strong revenue, earnings and cash flows from operations compared to trailing quarters. Our EBITDA and Adjusted EBITDA of $3.1 million during the quarter was highly correlated to the increase of our cash on hand by $2.9 million, which is indicative of a well managed business. Cipher ended the quarter with $36.3 million in cash with access to a $35 million revolving credit facility, placing us in a formidable position to drive future growth of our business." 

Q2 2023 Financial Review
(All figures are in U.S. dollars)

• Total revenue was $5.3 million in Q2 2023, compared to $5.6 million in Q2 2022.
• Licensing revenue was $2.2 million in Q2 2023, compared to $2.0 million in Q2 2022.
• Product revenue was $3.1 million in Q2 2023, compared to $3.5 million in Q2 2022.
• Net income was $3.1 million, or $0.12 per diluted share in Q2 2023, compared to $2.2 million, or $0.08 per diluted share in Q2 2022.
• Adjusted EBITDA for Q2 2023 was $3.1 million, compared to $3.6 million in Q2 2022.
• The Company had $36.3 million in cash and no debt as of the end Q2 2023.
• Cipher generated $2.9 million of additional cash on hand in Q2 2023 (YTD $7.5 million).

Business Strategy & Outlook

Cipher anticipates executing on its business strategy in 2023 to enhance long term value, including:

• Focusing on acquiring cash flow positive pharmaceutical assets to further diversity our product portfolio
• Continuing to collaborate with our partners to further development on our product pipeline, including MOB-015 for the treatment of nail fungus and CF-101 for the treatment of moderate to severe plaque psoriasis
• Advancing our studies on DTR-001, our pipeline product for the removal of tattoos
• Continuing to pursue opportunities to enhance long-term shareholder value
• Operating the business in an efficient and prudent manner to deliver continued earnings, being our management philosophy

Corporate Developments

• On July 5, 2023, Cipher announced that its partner, Moberg Pharma AB, has obtained European Union approval for its product MOB-015 for the treatment of nail fungus, paving the way for their commercial launch across 13 countries in Europe. Cipher believes this is an important precursor to the eventual approval in North America and Canada
• In May 2023, the Epuris product was launched commercially by Galephar's commercial partner in Mexico, Italmex. For the three months ended June 30, 2023, royalty revenue of $0.1 million was earned on initial sales of Epuris in Mexico
• In June 2023, Cipher's partner, Canfite Biopharma announced it had received a positive view from the FDA with respect to its registration plan for the pivotal Phase III clinical trial of CF-101 for the treatment of moderate to severe psoriasis
• In June 2023, the Company bolstered the pharmaceutical experience and expertise of its board with the appointment of two new directors to the Company's board of directors, Mr. Douglas Deeth and Dr. Hubert Walinski

Financial Statements and MD&A

Cipher's Financial Statements for the three and six month periods ended June 30, 2023, and Management's Discussion and Analysis (the "MD&A") for the three and six month periods ended June 30, 2023, are available on the Company's website at www.cipherpharma.com in the "Investors" section under "Financial Reports" and on SEDAR+ at www.sedarplus.ca.

Notice of Conference Call

Cipher will hold a conference call on August 11, 2023, at 8:30 a.m. (ET) to discuss its financial results and other corporate developments. To access the conference call by telephone, dial [phone] or [phone] and use conference ID 71994934.

A live audio webcast will be available at https://app.webinar.net/l8n1YB8qokM

• or the Investor Relations section of the Company's website at http://www.cipherpharma.com.
• An archived replay of the webcast will be available until August 18, 2023.

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 and Non-IFRS Measures

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 beliefs, plans, expectations, anticipations, estimates and intentions. 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 the Company's Annual Information Form for the year ended December 31, 2022, 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 and adjusted EBITDA are non-IFRS financial measures. 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, non-cash share-based compensation, changes in fair value of derivative financial instruments, provision for legal settlement, loss on disposal of assets and loss on extinguishment of lease, impairment of intangible assets, restructuring costs and foreign exchange gains and losses from the translation of Canadian cash balances.
2. At the June 30, 2023 exchange rate – 1.3240

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

(IN THOUSANDS OF U.S. DOLLARS, except for per share amounts)	Three months ended June 30, 2023	Three months ended June 30, 2022	Six months ended June 30, 2023	Six months ended June 30, 2022
	$	$	$	$
Income and comprehensive income	3,071	2,152	5,697	4,302
Add back:
Depreciation and amortization	342	155	685	310
Interest income	(427)	(33)	(782)	(40)
Income taxes	99	1,175	181	1,948
EBITDA	3,085	3,449	5,781	6,520
Unrealized foreign exchange (gain) loss	(448)	75	(455)	58
Restructuring costs	231	—	269	—
Share-based compensation	209	47	653	85
Adjusted EBITDA	3,077	3,571	6,248	6,663
Adjusted EBITDA per share – basic	0.12	0.14	0.25	0.26
Adjusted EBITDA per share – dilutive	0.12	0.14	0.24	0.26

Condensed interim consolidated statements of income and comprehensive income

	Three months ended June 30,		Six months ended June 30,
	2023	2022	2023	2022
	$	$	$	$
Revenue
Licensing revenue	2,170	2,046	3,846	4,144
Product revenue	3,118	3,512	6,328	6,829
Net revenue	5,288	5,558	10,174	10,973
Operating expenses
Cost of products sold	1,061	1,072	2,038	2,195
Research and development	97	1	100	66
Depreciation and amortization	342	155	685	310
Selling, general and administrative	1,493	961	2,710	2,134
Total operating expenses	2,993	2,189	5,533	4,705
Other (income) expenses
Interest income	(427)	(33)	(782)	(40)
Unrealized foreign exchange (gain) loss	(448)	75	(455)	58
Total other (income) expenses	(875)	42	(1,237)	18
Income before income taxes	3,170	3,327	5,878	6,250
Current income tax (recovery) expense	115	1,099	212	1,823
Deferred income tax (recovery) expense	(16)	76	(31)	125
Total income tax (recovery) expense	99	1,175	181	1,948
Net income and comprehensive income for the period	3,071	2,152	5,697	4,302
Income per share
Basic	0.12	0.08	0.23	0.17
Diluted	0.12	0.08	0.22	0.16

Condensed interim consolidated statements of financial position

	As at June 30,	As at December 31,
	2023	2022
	$	$
Assets
Current assets
Cash and cash equivalents	36,338	28,836
Accounts receivable	5,824	6,802
Inventory	2,864	2,152
Prepaid expenses and other assets	224	371
Total current assets	45,250	38,161
Property and equipment, net	441	481
Intangible assets, net	2,126	2,754
Goodwill	15,706	15,706
Deferred tax assets	17,089	16,674
Total assets	80,612	73,776
Liabilities and shareholders' equity
Current liabilities
Accounts payable and accrued liabilities	4,504	4,107
Income taxes payable	5,230	4,904
Contract liability	292	257
Current portion of lease obligation	104	101
Total current liabilities	10,130	9,369
Lease obligation	282	327
Total liabilities	10,412	9,696
Shareholders' equity
Share capital	18,281	17,719
Contributed surplus	5,471	5,358
Accumulated other comprehensive loss	(9,514)	(9,514)
Retained earnings	55,962	50,517
Total shareholders' equity	70,200	64,080
Total liabilities and shareholders' equity	80,612	73,776

SOURCE Cipher Pharmaceuticals Inc.

James Bowen, CFA, Investor Relations, 416-519-9442