Cipher Pharmaceuticals Reports Fourth Quarter and Full Year 2020 Financial Results

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Cipher Pharmaceuticals Inc.

Mar 18, 2021, 17:00 ET

Adjusted EBITDA increases 9% to $13.7 million and EPS increases 60% to $0.16 (CDN$0.211) for the full year

OAKVILLE, ON, March 18, 2021 /CNW/ - Cipher Pharmaceuticals Inc. (TSX: CPH) ("Cipher" or "the Company") today announced its financial and operating results for the three and twelve months ended December 31, 2020. Unless otherwise noted, all figures are in U.S. dollars.

Full Year 2020 Financial Highlights
(All figures in U.S. dollars, compared to 2019, unless otherwise noted)

  • Total revenue was $21.6 million in 2020 compared to $22.5 million
  • SG&A decreased 18.2% to $6.3 million compared to $7.6 million
  • Total operating expenses decreased 6.2% to $14.9 million compared to $15.9 million
  • Total operating expense excluding impairment charges declined 22.6%
  • Adjusted EBITDA2 increased 8.6% to $13.7 million from $12.6 million
  • Earnings per common share increased 60% to $0.16 from $0.10
  • Earnings per common share excluding impairment charges increased 57% to $0.36 from $0.23

Q4 2020 Financial Highlights
(All figures in U.S. dollars, compared to Q4 2019, unless otherwise noted)

  • Total revenue increased 3.4% to $6.1 million from $5.9 million
  • SG&A increased to $1.9 million from $1.3 million
  • Total operating expenses increased to $8.0 million from $2.2 million
  • Total operating expenses excluding impairment increased to $2.7 million from $2.2 million
  • Adjusted EBITDA2 decreased to $3.9 million from $4.2 million
  • Net income decreased to ($0.1) million from $2.6 million
  • Earnings per common share decreased to ($0.00) from $0.10
  • Earnings per common share excluding impairment increased 90% to $0.19 compared to $0.10

Management Commentary

"Fiscal 2020 results showed stable revenue and strong cost control which translated into a 8.6% improvement in adjusted EBITDA and a 60% increase in earnings per common share," said Mr. Craig Mull, Interim CEO.  "We continue to execute on our priorities, including reducing our cost structure, buying back our stock, utilizing cash flow to pay-off our credit line and establishing the right partnerships to drive growth.

Subsequent to year end, Cipher entered into a co-promotion agreement with Verity Pharmaceuticals for the marketing, sales & co-promotion of Brinavess, Aggrastat, and Trevyent. We are excited to be working with Verity and believe their sales force will help to manage our costs efficiently and drive growth and profitability within our hospital business," added Mr. Mull. 

"Net income for the quarter and full year was negatively impacted by a $5.3 million non-cash impairment of intangible assets related to the arbitration process with Bausch. Despite this impact, EPS for the year was still up 60%; If you exclude this charge, Cipher saw strong earnings growth in both the quarter and the year."     

2020 Corporate Highlights

On October 31, 2020 the Company paid the last installment of $1.7 million towards the balance of its credit facility, concluding the Company's obligation of the credit facility with its Canadian lender and leaving the company debt free.

On October 14, 2020, Moberg Pharmaceuticals AB announced its decision to request pre-submission meetings with regulatory agencies, with the goal of submitting a registration application for MOB-015, a topical formulation of terbinafine for treatment of onychomycosis, a common and destructive nail infection caused predominately by dermatophyte fungi, in the second half of 2021 in Europe. With a normal processing time of about 1.5 years, approval is expected in early 2023 and launch in Europe by the end of 2023.  The Company has the exclusive Canadian rights to commercialize, promote, sell and distribute MOB-015 in Canada. 

On October 8, 2020, the Company announced that shareholders of the Company had elected Cathy Steiner to the Board of Directors at the annual meeting of shareholders. Ms. Steiner has over 20 years' experience as an investment banker and strategic advisor working with healthcare companies. 

On August 12, 2020, the Company announced that it has filed, and the Toronto Stock Exchange had accepted, a Notice of Intention to Make a Normal Course Issuer Bid (the "Notice"). Pursuant to the Notice, Cipher may, during the 12-month period commencing August 17, 2020 and ending on August 16, 2021, purchase for cancellation under the normal course issuer bid up to 1,613,592 of its common shares, representing 10% of its public float of 16,135,923 common shares as of August 5, 2020 (a total of 27,046,396 common shares were issued and outstanding as of such date).  Cipher's ability to execute on its NCIB in a more material fashion were limited due to restrictions associated with the NCIB. During the year ended December 31, 2020, the Company purchased for cancellation 103,500 common shares at an average price of CDN$1.00 per common share.

On July 2, 2020, Cipher announced that it has appointed seasoned Financial Executive Scott Langille as its new Chief Financial Officer (CFO). Mr. Langille has an extensive background in corporate and operational finance with strong experience in both branded and generic pharmaceuticals, medical devices and biotechnology.

On February 6, 2020, Cipher announced that Sun Pharmaceutical Industries Ltd., the Company's U.S. marketing partner for Absorica®, had 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.

On January 13, 2020, the Company received a notice of termination from Bausch Health for alleged breach of contract in respect of its licensing agreement for Trulance.  In January 2021, Cipher received the results of an arbitration hearing, in which Cipher was found to be in breach of the agreement and therefore the licensing agreement was terminated. As a result, the Company recorded a non-cash impairment charge of $5.275 million as of December 31, 2020.

Subsequent to year end, the Company entered into an exclusive co-promotion agreement with Verity Pharmaceuticals Inc. for the marketing, sales and co-promotion of Brinavess, Aggrastat and Trevyent.

Q4 2020 Financial Review
(All figures are in U.S. dollars)

Total revenue was $6.1 million for Q4 2020, compared to $5.9 million for Q4 2019.

Licensing revenue increased by 3% to $3.9 million for the three months ended Dec 31, 2020, compared to $3.8 million for the three months ended Dec 31, 2019. 

Licensing revenue from Absorica in the US was $3.0 million for the three months ended December 31, 2020 a decrease of $0.1 million or 3% compared to $3.1 million for the three months ended December 31, 2019.

Licensing revenue from Lipofen and the authorized generic version of Lipofen, was $0.8 million for Q4 2020, an increase of $0.2 million compared to revenue of $0.6 million for the Q4 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 $0.1 million or 5% to $2.3 million for Q4 2020, compared to $2.2 million for the comparable period in 2019. 

The increase in product revenue was attributable to Epuris, in respect of which revenue increased to $2.1 million, compared to $2.0 million in the comparative period. According to IQVIA, Epuris had a prescription market share of over 40% in Canada for the three months ended Dec 31, 2020, compared to 39% for the three months ended December 31, 2019.

Product revenue for Ozanex, Beteflam, Actikerall, Brinavess, Aggrastat and Vaniqa was $0.3 million in aggregate, compared to $0.2 million for the comparative period.

Total operating expenses were $8.0 million for Q4 2020 compared to $2.2 million for Q4 2019. The increase was primarily driven by the impairment of intangible assets related to Trulance of $5.3 million.

Loss from continuing operations was $0.1 million, or a loss of $0.00 per basic and diluted share, in Q4 2020, compared to income from continuing operations of $2.6 million, or $0.10 per basic and diluted share, in Q4 2019. Income from continuing operations was impacted by the impairment of intangible assets of $5.3 million.  Adjusted EBITDA for Q4 2020 was $3.9 million, compared to $4.2 million in Q4 2019.

The Company had $9.1 million in cash and no debt at December 31, 2020. The Company generated $11.7 million in cash from operating activities for the year ended December 31, 2020 and used approximately $8.9 million in cash during the year which included $7.7 million in principal repayments.

Outlook

Cipher anticipates several key milestones in 2021 that will continue to enhance long term value, including:

  • Full-year benefit of the cost reduction plan
  • Improved profitability of our hospital business
  • Collaboration with Galephar on key products in the Lucy product portfolio
  • Implementation of an authorized share repurchase plan to allow for more effective execution of our NCIB
  • Working closely with Moberg on continued development of MOB-015
  • Selectively pursuing product and business acquisitions in a prudent manner with a focus on high growth potential and near-term profitability

Financial Statements and MD&A

Cipher's Financial Statements for the year ended December 31, 2020 and Management's Discussion and Analysis (the "MD&A") for the three and twelve months ended December 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 March 19, 2021, 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 the impact of the Company's cost reduction plan, the potential for improved profitability of our hospital business, increased adoption of ABSORICA LD, discussions with Galephar regarding new product opportunities, 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 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, 2020, 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 2020 average exchange rate – 1.3415


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 

December 31, 2020

Three months ended 
December 31, 2019

Year ended

  December 31, 2020

Year ended

  December 31, 2019

$

$

$

$

Income from continuing operations

(100)

2,646

4,386

2,639

Add back:



Depreciation and amortization 

299

289

1,206

1,187

Interest expense, net

85

153

363

786

Income taxes

(1,705)

902

2,150

3,071

EBITDA

(1,421)

3,990

8,105

7,683

Change in fair value of derivative financial instrument

(8)

3

(4)

(11)

Restructuring costs

7

—

154

1,454

Loss (gain) from the translation of Canadian cash  and lease balances

43

120

32

77

Impairment of intangible assets 

5,275

—

5,275

3,454

Share-based compensation

(18)

34

122

(60)

Adjusted EBITDA

3,878

4,147

13,684

12,597

 

SOURCE Cipher Pharmaceuticals Inc.

James Bowen, CFA, LodeRock Advisors, 416-519-9442

Related Links

http://www.cipherpharma.com

Organization Profile

Cipher Pharmaceuticals Inc.