Cipher Pharmaceuticals Reports Fourth Quarter and Full Year 2023 Results

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

• Cash at December 31, 2023 was $39.8 million (CDN$52.7 million) or $1.66 per outstanding common share (CDN$2.20)
• Full year adjusted EBITDA of $12.7 million, an increase of 2.2% over fiscal 2022
• Epuris revenue grew by 10% in Q4 2023 compared to Q4 2022
• Licensing revenue increased 4.1% to $8.5 million in 2023
• Product revenue increased 1.2% to $12.7 million in 2023

MISSISSAUGA, ON, March 14, 2024 /CNW/ - Cipher Pharmaceuticals Inc. (TSX: CPH) (OTCQX: CPHRF) ("Cipher" or the "Company") today announced its financial and operating results for the year ended December 31, 2023.

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

• Total revenue was $21.2 million in 2023, compared to $20.7 million in 2022, an increase of 2.4%
• Total gross profit $17.1 million in 2023, compared to $16.7 million in 2022, an increase of 2.5%
• EBITDA was consistent year-over-year at $12.0 million
• Adjusted EBITDA of $12.7 million, compared to $12.4 million, an increase of 2.2%
• Under the Company's Normal Course Issuer Bid, 257,221 common shares were repurchased and cancelled at an average price of CDN$4.56 per share
• In October 2023, the Company completed a substantial issuer bid ("SIB") under which it offered to purchase for cancellation up to CDN$6 million of its outstanding common shares, resulting in the repurchase and cancellation of 1,290,321 common shares at a purchase price of CDN$4.65 per share

Q4 2023 Financial Highlights
(All figures in U.S. dollars, compared to Q4 2022, unless otherwise noted)

• Total revenue was $4.9 million, consistent with Q4 2022
• EBITDA was $3.4 million compared to $3.0 million in Q4 2022, an increase of 13.0%
• Adjusted EBITDA was $2.9 million compared to $3.1 million in Q4 2022, a decrease of 9.1%
• Net income and earnings per common share were $7.7 million and $0.32, respectively, compared to $19.7 million and $0.78 in Q4 2022, largely attributable to the recognition of previously unrecognized deferred tax losses in Q4 2022

Management Commentary

"In 2023, Cipher's performance has clearly demonstrated that the Company's base business is, and will continue to be, a reliable generator of free cash flow. Our cash balance grew by $11 million or 38.1%, now totaling nearly $40 million, putting the Company on strong footing as it enters a period of substantial growth ahead, both organically through our pipeline and our strategy to pursue accretive acquisitions from our growing list of opportunities in what we believe is a buyer's market." stated Mr. Craig Mull, Interim CEO.

Cipher's CFO Bryan Jacobs added, "Cipher's priorities continue to be focused on profitability and capital allocation strategies that benefit our shareholders. We had several position catalysts in 2023, including a highly successful substantial issuer bid, as well as secured a credit facility with the Royal Bank of Canada at favorable terms to the present day market. We continue to work diligently for our shareholders and we are excited to execute on our growth strategy in 2024 and beyond."

2023 Corporate Highlights

Pipeline Highlights

In ten months Moberg Pharma ("Moberg") expects topline results from its Phase 3 Study in January 2025. Cipher holds the exclusive Canadian rights to this novel product in treating nail fungus where there is a large unmet need. In Canada, the total prescription market for Onychomycosis was approximately CDN$91 million at December 31, 2023 according to IQVIA, with a single product having over 95% market share.

On February 7, 2024, Moberg announced that its partner, Allderma AB launched MOB-015 under the Terclara® brand in Sweden, with significant interest for the product in the local market.

On October 6, 2023, the Company's partner, Moberg announced it had completed the enrollment requirement of 384 patients with onychomycosis (nail fungus) for the ongoing MOB-015 Phase 3 Study in North America. The patients are evaluated over 52 weeks and the primary endpoint is the proportion of subjects achieving complete cure of their target nail. The purpose of the study is to facilitate market approval by the U.S. Food and Drug Administration ("FDA").

On July 5, 2023, the Company announced that its partner, Moberg obtained European Union approval for MOB-015, a new topical treatment of Onychomycosis (nail fungus), as a result of demonstrating superior levels of mycological cure (76% vs. 42% for comparators) and a significantly better complete cure rate. MOB-015 has been recommended for national approval in 13 European countries with planned commercialization through partners such as Bayer and Allderma AB.

Other Highlights

On March 1, 2023, the Company announced the completion and closing of a credit facility (the "Credit Facility") with Royal Bank of Canada, effective February 28, 2023. The Credit Facility provides the Company with up to $35 million, which is primarily intended to support the Company's future M&A growth strategy and may also be drawn upon for general corporate purposes and working capital requirements.

On September 6, 2023, the Company commenced a substantial issuer bid, whereby it offered to purchase for cancellation up to CDN$6 million of its outstanding common shares by way of a 'modified Dutch auction'. Upon expiry of the SIB on October 11, 2023, the Company took up and paid for 1,290,321 common shares at a purchase price of CDN$4.65 per common share, equivalent to the maximum aggregate purchase price of CDN$6 million. The common shares taken up by the Company, represented 5.1% of the total issued and outstanding common shares.

Q4 2023 Financial Review
(All figures are in U.S. Dollars)

Total revenue was $4.9 million for Q4 2023, consistent with Q4 2022.

Licensing revenue was $1.5 million for Q4 2023, compared to $2.0 million in Q4 2022. 

Licensing revenue from the Absorica portfolio in the US was $1.0 million for Q4 2023, a decrease of $0.3 million or 17.8% compared to $1.3 million for Q4 2022.

Licensing revenue from Lipofen and the authorized generic version of Lipofen, was $0.5 million for Q4 2023, a decrease of $0.2 million compared to revenue of $0.7 million for Q4 2022.

Product revenue increased by $0.5 million or 15.4% to $3.4 million for Q4 2023, compared to $2.9 million for the comparable period in 2022, mainly due to growth of Epuris by 10.1%.

Total operating expenses were $2.6 million for Q4 2023 compared to $2.3 million for Q4 2022. The  increase was mainly attributable to the contract sales force and other marketing initiatives focused on Epuris.

Net income was $7.7 million, or $0.32 per common share, in Q4 2023, compared to $19.7 million, or $0.78 per common share in Q4 2022. Adjusted EBITDA for Q4 2023 was $2.9 million, compared to $3.1 million in Q4 2022. Net income and net income per common share in Q4 2022 was significantly higher than Q4 2023 as a result of the Q4 2022 income tax recovery associated with recognizing previously unrecognized tax losses.

Business Strategy & Outlook

Cipher anticipates that the Company continues 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 year ended December 31, 2023, and Management's Discussion and Analysis (the "MD&A") for the three and twelve months ended December 31, 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 March 15, 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] and use conference ID 08128854
• A live audio webcast will be available at https://app.webinar.net/YqROVOGVJeP 
• An archived replay of the webcast will be available until March 22, 2024 and can be accessed by dialing [phone] or [phone] and entering conference replay code 128854#

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 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 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; 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 December 31, 2023 exchange rate – 1.3226
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:

(IN THOUSANDS OF U.S. DOLLARS, except for per share amounts)	Three months ended December 31, 2023	Three months ended December 31, 2022	Year ended December 31, 2023	Year ended December 31, 2022
	$	$	$	$
Net income and comprehensive income	7,655	19,681	20,383	26,636
Add back:
Depreciation and amortization	273	341	1,227	989
Interest income	(555)	(267)	(1,870)	(464)
Income taxes	(3,974)	(16,747)	(7,702)	(15,157)
EBITDA	3,399	3,008	12,038	12,004
Unrealized foreign exchange loss (gain)	(757)	(95)	(778)	35
Restructuring costs	—	—	269	—
Share-based compensation	222	234	1,190	403
Adjusted EBITDA	2,864	3,147	12,719	12,442
Adjusted EBITDA per share – basic	0.13	0.13	0.51	0.49
Adjusted EBITDA per share – dilutive	0.12	0.12	0.50	0.48

Consolidated statements of income and comprehensive income

	Three months ended December 31,			Year ended December 31,
	2023	2022	2023		2022
	$	$	$		$
Revenue
Licensing revenue	1,547	1,987	8,483		8,145
Product revenue	3,373	2,922	12,679		12,530
Net revenue	4,920	4,909	21,162		20,675
Operating expenses
Cost of products sold	955	963	4,069		3,992
Research and development	29	32	139		98
Depreciation and amortization	273	341	1,227		989
Selling, general and administrative	1,294	1,028	5,694		4,546
Total operating expenses	2,551	2,337	11,129		9,625
Other (income) expenses
Interest income	(555)	(267)	(1,870)		(464)
Unrealized foreign exchange (gain) loss	(757)	(95)	(778)		35
Total other (income) expenses	(1,312)	(362)	(2,648)		(429)
Income before income taxes	3,681	2,934	12,681		11,479
Current income tax recovery	(5,293)	(2,084)	(4,965)		(847)
Deferred income tax (recovery) expense	1,319	(14,663)	(2,737)		(14,310)
Total income tax (recovery) expense	(3,974)	(16,747)	(7,702)		(15,157)
Net income and comprehensive income for the year	7,655	19,681	20,383		26,636
Income per share
Basic	0.32	0.78	0.82		1.05
Diluted	0.30	0.77	0.80		1.03

Consolidated statements of financial position

	As at December 31,	As at December 31,
	2023	2022
	$	$
Assets
Current assets
Cash and cash equivalents	39,825	28,836
Accounts receivable	5,088	6,802
Inventory	2,982	2,152
Prepaid expenses and other assets	378	371
Total current assets	48,273	38,161
Property and equipment, net	402	481
Intangible assets, net	1,763	2,754
Goodwill	15,706	15,706
Deferred tax assets	19,887	16,674
Total assets	86,031	73,776
Liabilities and shareholders' equity
Current liabilities
Accounts payable and accrued liabilities	4,639	4,107
Income taxes payable	—	4,904
Contract liability	519	257
Current portion of lease obligation	94	101
Total current liabilities	5,252	9,369
Lease obligation	259	327
Total liabilities	5,511	9,696
Shareholders' equity
Share capital	18,012	17,719
Contributed surplus	5,755	5,358
Accumulated other comprehensive loss	(9,514)	(9,514)
Retained earnings	66,267	50,517
Total shareholders' equity	80,520	64,080
Total liabilities and shareholders' equity	86,031	73,776

SOURCE Cipher Pharmaceuticals Inc.

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