Cipher Pharmaceuticals Reports First Quarter 2024 Results

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

• Adjusted EBITDA in Q1 2024 was $3.6 million, an increase of 12.5% over Q1 2023
• Epuris sales volumes grew 7.2% in the quarter over Q1 2023, continuing growth trajectory for the third consecutive quarter
• Licensing revenue increased 55.1% to $2.6 million over Q1 2023
• Cash at March 31, 2024 was $42.0 million (CDN$56.9 million) or $1.74 per outstanding common share (CDN$2.36)

MISSISSAUGA, ON, May 9, 2024 /CNW/ - Cipher Pharmaceuticals Inc. (TSX: CPH) (OTCQX: CPHRF) ("Cipher" or the "Company") today announced its financial and operating results for the three months ended March 31, 2024.

First Quarter 2024 Financial Highlights
(All figures in U.S. dollars, compared to Q1 2023, unless otherwise noted)

• Total revenue was $5.9 million in Q1 2024, an increase of 20.0%
• Licensing revenue increased 55.1% to $2.6 million in Q1 2024, due to higher licensing product sales from Absorica and its authorized generic
• Epuris product revenue increased by 7.2%, to $2.9 million in Q1 2024 compared to $2.7 million in Q1 2023
• Total gross profit increased 23.1% to $4.8 million in Q1 2024
• Adjusted EBITDA² increased 12.5% to $3.6 million in Q1 2024

Management Commentary

Craig Mull, Interim CEO, commented: "We are pleased to report that Cipher's first quarter 2024 results are a continuation of strong results we experienced in 2023. Cipher's base business continues to be very profitable and a reliable generator of free cash flow. The Company has $42 million in cash, no debt, and significant liquidity. We continue to be highly focused on growth. This growth will be achieved through our product pipeline and specifically, MOB-015, which we expect to launch in the second half of 2026, and acquisitions of products and companies in North America, which would fit well into our existing portfolio.

Over the past few months, we have found a number of opportunities which we are currently pursuing and are becoming more optimistic that we will be successful in acquiring one or a combination of these opportunities."

Bryan Jacobs, CFO, commented: "We are proud of continued year-over-year growth from our key Canadian product Epuris, evidencing our investments in the brand are paying off. Epuris continues to be the leading isotretinoin in Canada with 45% market share. We continue to actively manage the business and produce consistently strong earnings, in line with shareholder expectations."

Q1 2024 Corporate Highlights

• In January 2024, common shares of the Company commenced trading on the OTCQX® Best Market ("OTCQX") under the ticker symbol CPHRF. The OTCQX is the highest market tier of OTC Markets and provides U.S.-based investors with easier access to purchase Cipher's common shares.
• In February 2024, Cipher partner, Moberg Pharma AB ("Moberg") (OMX:MOB), officially launched its much anticipated MOB-015 product in Sweden under the brand name Terclara®.
• On April 23, 2024, Moberg announced demand for MOB-015 Terclara® has been strong in Sweden, and initial sales are very encouraging as demand has far outpaced supply at the pharmacy level, resulting in pharmacies increasing orders to ensure the product is readily available. Cipher holds the Canadian rights for MOB-015, a product which will serve the prescription market for the Onychomycosis indication, representing a total market of approximately CDN$92.4 million³, of which greater than 95% of the market is served by one main product.
• On May 6, 2024, Moberg announced MOB-015 received national approval for all 13 countries included in the European decentralized procedure. Cipher believes this further de-risks the eventual approval of MOB-015 in Canada, whereby Cipher holds the exclusive distribution rights.

Q1 2024 Financial Review
(All figures in U.S. dollars, compared to Q1 2023, unless otherwise noted)

• Total revenue was $5.9 million in Q1 2024, compared to $4.9 million in Q1 2023, an increase of 20.0%
• Licensing revenue increased 55.1% to $2.6 million in Q1 2024 compared to $1.7 million in Q1 2023
• Product revenue marginally increased to $3.3 million in Q1 2024 up from $3.2 million in Q1 2023
• Total gross profit was $4.8 million in Q1 2024, compared to $3.9 million in Q1 2023, an increase of 23.1%
• Net income and earnings per common share were $4.9 million and $0.21, respectively, in Q1 2024, compared to $2.6 million and $0.10 in Q1 2023, largely attributable to the recognition of previously unrecognized deferred tax losses in Q1 2024
• EBITDA² was consistent year-over-year at $2.7 million for the quarter
• Adjusted EBITDA² in Q1 2024 was $3.6 million, compared to $3.2 million in Q1 2023, an increase of 12.5%

Business Strategy & Outlook

Cipher expects to continue to execute on its business strategy in 2024 and remains focused on profitability and driving shareholder value. Key focuses include:

• Near-term strategic focus on product and business acquisitions that will generate cash flow, high growth and near-term profitability.
• Developing our MOB-015 commercial launch plan and proactively readying our Health Canada regulatory submission, for the novel product and treatment of nail fungus, and whereby Cipher has the exclusive Canadian market rights.
• Continue to collaborate with our partner Moberg Pharma on its MOB-015 phase III clinical trial in the U.S., whereby results are expected by January 2025.
• Continue to collaborate with the Company's partner, Can-Fite Biopharma on its phase III COMFORT study of Piclidenoson used in the treatment of moderate to severe psoriasis which met its previous clinical trial primary endpoint of superiority and achieved a better tolerability profile in a comparative analysis, and whereby Cipher has the exclusive Canadian market rights.

Financial Statements and MD&A

Cipher's Financial Statements for the three months ended March 31, 2024, and Management's Discussion and Analysis (the "MD&A") for the three months ended March 31, 2024, 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 May 10, 2024 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]
• A live audio webcast will be available at https://app.webinar.net/ZQPqmBaVGEn
• An archived replay of the webcast will be available until May 17, 2024 and can be accessed by dialing [phone] or [phone] and entering conference replay code 196164#

About Cipher Pharmaceuticals Inc.

Cipher Pharmaceuticals (TSX:CPH) (OTCQX:CPHRF) 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 the timing of the receipt of the topline results from MOB-015 Phase 3 North American study, the expectation of approval of MOB-015 in the U.S. and Canada, 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.  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 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, publication of negative results of clinical trials; 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 by regulators which can be 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 with new competing product entrants; requirements for additional capital to fund future operations; products may be subject to pricing regulation; dependence on key managerial personnel and external collaborators; certain of our products are subject to regulation as controlled substances; limitations on reimbursement in the healthcare industry; extent and impact of health pandemic outbreaks on our business; unpredictable development goals and projected time frames; rising insurance costs; ability to enforce covenants not to compete; 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; compliance with privacy and security regulation; our policies regarding product returns, allowances and chargebacks may reduce revenues; additional regulatory burden and controls over financial reporting; 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; 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; 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 our MD&A for the year ended December 31, 2023 and the Company's Annual Information Form, 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 March 31, 2024 exchange rate – 1.3550

2)     EBITDA and adjusted EBITDA are non-IFRS financial measures.  These non-IFRS measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are unlikely to be comparable to similar measures presented by other companies. Management uses non-IFRS measures such as Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") and Adjusted EBITDA to provide investors with supplemental measures of the Company's operating performance and thus highlight trends in the Company's core business that may not otherwise be apparent when relying solely on IFRS financial measures.  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 unrealized foreign exchange gains and losses.

3)     IQVIA market data as at March 31, 2024.

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

(IN THOUSANDS OF U.S. DOLLARS,	Three months ended March 31, 2024	Three months ended March 31, 2023
except for per share amounts)	$	$
Net income and comprehensive income	4,923	2,626
Add back:
Depreciation and amortization	289	343
Interest income	(555)	(355)
Income taxes	(1,955)	82
EBITDA	2,702	2,696
Unrealized foreign exchange loss (gain)	642	(7)
Restructuring costs	—	38
Share-based compensation	224	444
Adjusted EBITDA	3,568	3,171
Adjusted EBITDA per share – basic	0.15	0.12
Adjusted EBITDA per share – dilutive	0.15	0.12

Consolidated statements of income and comprehensive income

	Three months ended March 31,
(IN THOUSANDS OF U.S. DOLLARS,	2024	2023
except for per share amounts)	$	$
Revenue
Licensing revenue	2,600	1,676
Product revenue	3,267	3,210
Net revenue	5,867	4,886
Operating expenses
Cost of products sold	1,055	977
Research and development	—	3
Depreciation and amortization	289	343
Selling, general and administrative	1,468	1,217
Total operating expenses	2,812	2,540
Other (income) expenses
Interest income	(555)	(355)
Unrealized foreign exchange loss (gain)	642	(7)
Total other (income) expenses	87	(362)
Income before income taxes	2,968	2,708
Current income tax expense	—	97
Deferred income tax recovery	(1,955)	(15)
Total income tax (recovery) expense	(1,955)	82
Net income and comprehensive income for the year	4,923	2,626
Income per share
Basic	0.21	0.10
Diluted	0.20	0.10

Consolidated statements of financial position

	As at March 31,	As at December 31,
	2024	2023
(IN THOUSANDS OF U.S. DOLLARS)	$	$
Assets
Current assets
Cash and cash equivalents	41,981	39,825
Accounts receivable	8,433	5,088
Inventory	2,768	2,982
Prepaid expenses and other assets	419	378
Total current assets	53,601	48,273
Property and equipment, net	377	402
Intangible assets, net	1,503	1,763
Goodwill	15,706	15,706
Deferred tax assets	21,365	19,887
Total assets	92,552	86,031
Liabilities and shareholders' equity
Current liabilities
Accounts payable and accrued liabilities	6,141	4,639
Contract liability	494	519
Current portion of lease obligation	95	94
Total current liabilities	6,730	5,252
Lease obligation	228	259
Total liabilities	6,958	5,511
Shareholders' equity
Share capital	18,391	18,012
Contributed surplus	5,687	5,755
Accumulated other comprehensive loss	(9,514)	(9,514)
Retained earnings	71,030	66,267
Total shareholders' equity	85,594	80,520
Total liabilities and shareholders' equity	92,552	86,031

SOURCE Cipher Pharmaceuticals Inc.

Graham Farrell, Investor Relations - Cipher Pharmaceuticals, [email protected], 416-842-9003