Cipher Pharmaceuticals Reports Fourth Quarter and Full Year 2022 Financial Results

(All figures are in U.S. dollars)

• Product revenue increased 9% to $12.5 million in 2022
• EBITDA of $12.0 million, relatively flat YoY
• Cash at December 31, 2022 was $28.8 million (CDN$39 million) or $1.15 per share (CDN $1.56)

MISSISSAUGA, ON, March 16, 2023 /CNW/ - Cipher Pharmaceuticals Inc. (TSX:CPH) ("Cipher" or "the Company") today announced its financial and operating results for the year ended December 31, 2022.

Full Year 2022 Financial Highlights
(All figures in U.S. dollars, compared to 2021, unless otherwise noted)

• As at December 31, 2022, the Company had $28.8 million in cash on hand (CDN$39¹ million) or $1.15 (CDN$1.56) per share
• Total revenue was $20.7 million in 2022, compared to $21.9 million in 2021, a decrease of 6%
• Total operating expenses decreased 5% to $9.6 million, compared to $10.1 million
• EBITDA² increased to $12.0 million, compared to $11.8 million
• Adjusted EBITDA² of $12.4 million, compared to $13.9 million
• 1.1 million shares were repurchased and cancelled under the Normal Course Issuer Bid at an average price of CDN$2.34

Q4 2022 Financial Highlights

(All figures in U.S. dollars, compared to Q4 2021, unless otherwise noted)

• Total revenue was $4.9 million compared to $5.9 million in Q4 2021
• EBITDA² was $3.0 million compared to $4.1 million in Q4 2021
• Adjusted EBITDA² was $3.1 million compared to $4.1 million in Q4 2021
• Net income increased to $19.7 million compared to $2.8 million in Q4 2021
• Earnings per common share were $0.78 compared to $0.11 in Q4 2021

Management Commentary

"In 2022, Cipher continued to demonstrate its cash generating ability with EBITDA² margins of 58%. Our continued cash positive and solid financial performance strengthened our balance sheet and has positioned us for our next phase of growth. Cipher ended the year in an enviable financial position, with $28.8 million in cash and no debt. Subsequent to year-end, we secured a non-dilutive credit facility with the Royal Bank of Canada, which provides us with up to USD$35 million of additional funding to opportunistically capitalize on favorable market conditions we feel are ahead of us," said Mr. Craig Mull, Interim CEO. 

"Cipher has built an efficient business platform, laying the foundational necessary to transition towards a growth-oriented strategy. This has included the successful re-negotiation and extension of key distribution and supply agreements, the launch of co-promotion initiatives and the strengthening of our management team. Having completed these foundational changes, we are confident we have positioned the business to capitalize on opportunities ahead," Mr. Mull added.

"As we enter 2023, Cipher's primary focus remains on effectively allocating our capital in order to maximize value for our shareholders. This involves a continued emphasis on investing in our commercial products to drive organic growth, assessing opportunities for profitable product and company acquisitions and working with our partners on advancing our development pipeline. With these levers at our disposal, and with the recent addition of our Royal Bank of Canada credit facility, we are confident in our ability to drive shareholder value while maintaining a disciplined approach to cost management," said Mr. Bryan Jacobs, CFO.

2022 Corporate Highlights

In September, the Company's partner, Canfite Biopharma, ("Canfite") announced its Phase III COMFORT study of Piclidenoson used in the treatment of moderate to severe psoriasis met its primary endpoint of superiority and achieved a better tolerability profile in a comparative analysis. Based on the safety and efficacy data revealed in this trial, Canfite plans to approach the U.S. Food and Drug Administration ("FDA") and the European EMA with a protocol for a pivotal Phase III study for drug approval and registration. Previously in June 2022, Canfite had announced positive top-line results from its phase III COMFORT study of Piclidenoson.

On September 19, 2022, the Company announced that it received approval from the Toronto Stock Exchange ("TSX") for its intention to commence a normal course issuer bid (the "NCIB") for its common shares.

In August, Cipher strengthened the leadership team with the appointment of Bryan Jacobs, as the Chief Financial Officer.

In May 2022, the Company's partner, Moberg Pharma AB, ("Moberg") began patient enrollment for the North American Phase 3 study for MOB-015 to treat nail fungus. The purpose of the study is to facilitate market approval by the FDA. Cipher holds the exclusive Canadian rights to MOB-015. In Canada, according to IQVIA, the total prescription market for Onychomycosis was greater than $86 million CDN at September 30, 2022, with a single product having over 90% market share.

On March 10, 2022, the Company announced that it had entered into a second amended and restated distribution and supply agreement with Sun Pharmaceutical Industries, Inc. ("Sun"). Under the terms of the amendment, Cipher and Sun have agreed to extend Sun's exclusive right to market, sell and distribute the isotretinoin product portfolio, Absorica and Absorica AG in the United States through December 31, 2026 and Absorica LD through December 31, 2024.  

Q4 2022 Financial Review
(All figures are in U.S. dollars)

Total revenue was $4.9 million for Q4 2022, compared to $5.9 million for Q4 2021.

Licensing revenue was $2.0 million for the three months ended December 31, 2022, compared to $2.8 million for the three months ended December 31, 2021. 

Licensing revenue from Absorica in the US was $1.3 million for the three months ended December 31, 2022, a decrease of $0.3 million or 19% compared to $1.6 million for the three months ended December 31, 2021.

Licensing revenue from Lipofen and the authorized generic version of Lipofen, was $0.7 million for Q4 2022, a decrease of $0.4 million compared to revenue of $1.1 million for Q4 2021.

Product revenue decreased by $0.2 million or 6% to $2.9 million for Q4 2022, compared to $3.1 million for the comparable period in 2021.

Total operating expenses were $2.3 million for Q4 2022 compared to $2.0 million for Q4 2021. The entire increase was driven by the increase in non-cash amortization of intangible assets of $0.3 million, while all other total operating costs remained flat quarter over quarter.

Net income was $19.7 million, or $0.78 per common share, compared to $2.8 million, or $0.11 per common share, in Q4 2021. Adjusted EBITDA for Q4 2022 was $3.1 million, compared to $4.1 million in Q4 2021.

Business Strategy & Outlook

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

• Continue to collaborate with our partner Moberg Pharma on its phase III clinical trial in the U.S. for MOB-015, which started in May 2022, a novel product for the treatment of foot fungus, and whereby Cipher has the exclusive Canadian market rights
• Pursue product and business acquisitions in a prudent manner with a focus on high growth potential and near-term profitability
• Actively progressing and supporting studies for our DTR-001 topical product treatment for the removal of tattoos
• Continue to collaborate with the Company's partner, Canfite Biopharma on its phase III COMFORT study of Piclidenoson used in the treatment of moderate to severe psoriasis which met its 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 year ended December 31, 2022, and Management's Discussion and Analysis (the "MD&A") for the three and twelve months ended December 31, 2022, 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 17, 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 02194569.
• A live audio webcast will be available at https://app.webinar.net/VDZxNRGzWPq
• 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 March 24, 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 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, 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; certain of our products are subject to regulation as controlled substances; limitations on reimbursement in the healthcare industry; 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; compliance with privacy and security regulation; our policies regarding 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; 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 our MD&A 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)  At the December 31, 2022 exchange rate – 1.3544

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.

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

Annual Period ending Dec. 31, 2022 & 2021
(IN THOUSANDS OF U.S. DOLLARS)			2022	2021
			$	$
Net income			26,636	7,758
Add back:
Depreciation and amortization			989	701
Interest (income) expense			(464)	92
Income taxes			(15,157)	3,301
EBITDA			12,004	11,852
Change in fair value of derivative financial instrument			—	(5)
Unrealized foreign exchange loss (gain)			35	(83)
Provision for legal settlement			—	1,250
Loss on disposal of assets and extinguishment of lease			—	758
Share-based compensation			403	139
Adjusted EBITDA			12,442	13,911
Adjusted EBITDA per share – basic			0.49	0.52
Adjusted EBITDA per share – dilutive			0.48	0.52
Quarterly period ending Dec. 31, 2022 & 2021
(IN THOUSANDS OF U.S. DOLLARS)			Q4 2022	Q4 2021
			$	$
Net Income			19,681	2,807
Add back:
Depreciation and amortization			341	153
Interest (income) expense			(267)	5
Income taxes			(16,747)	1,105
EBITDA			3,008	4,070
Unrealized foreign exchange loss (gain)			(95)	(16)
Share-based compensation			234	18
Adjusted EBITDA			3,147	4,072
Adjusted EBITDA EPS – basic			0.13	0.16
Adjusted EBITDA EPS – diluted			0.12	0.15

Selected Financial Information

Consolidated statements of financial position
(IN THOUSANDS OF U.S. DOLLARS)
	As at December 31, 2022		As at December 31, 2021
	$		$
Assets
Cash and cash equivalents	28,836		20,548
Accounts receivable	6,802		6,658
Inventory	2,152		1,650
Prepaid expenses and other assets	371		471
Total current assets	38,161		29,327
Property and equipment, net	481		501
Intangible assets, net	2,754		3,647
Goodwill	15,706		15,706
Deferred tax assets	16,674		2,470
Total assets	73,776		51,651
Current liabilities
Accounts payable and accrued liabilities	4,107		5,555
Income taxes payable	4,904		6,233
Contract liability	257		450
Current portion of lease obligation	101		56
Total current liabilities	9,369		12,294
Lease obligation	327		460
Total liabilities	9,696		12,754
Share capital	17,719		18,121
Contributed surplus	5,358		5,092
Accumulated other comprehensive loss	(9,514)		(9,514)
Retained earnings	50,517		25,198
Total shareholders' equity	64,080		38,897
Total liabilities and shareholders' equity	73,776		51,651

Consolidated statements of income
(IN THOUSANDS OF U.S. DOLLARS)
	For the years ended December 31,
	2022	2021
	$	$
Revenue
Licensing revenue	8,145	10,408
Product revenue	12,530	11,535
Net revenue	20,675	21,943
Operating expenses
Cost of products sold	3,992	3,684
Research and development	98	88
Selling, general and administrative	5,535	5,112
Provision for legal settlement	—	1,250
Total operating expenses	9,625	10,134
Other expenses (income)
Change in fair value of derivatives	—	(5)
Extinguishment of lease	—	758
Interest (income) expense	(464)	80
Unrealized foreign exchange loss (gain)	35	(83)
Total other expenses (income)	(429)	750
Income before income taxes	11,479	11,059
Current income tax (recovery) expense	(847)	3,413
Deferred income tax (recovery) expense	(14,310)	(112)
Total income tax (recovery) expense	(15,157)	3,301
Net income and comprehensive income	26,636	7,758
Earnings per share
Basic earnings per share	$                       1.05	$                       0.29
Basic weighted average number of shares outstanding	25,376,290	26,597,842
Diluted earnings per share	$                       1.03	$                       0.29
Diluted weighted average number of shares outstanding	25,799,159	26,830,021

SOURCE Cipher Pharmaceuticals Inc.

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