Cipher Pharmaceuticals Reports Q4 & FY2017 Results

90% increase in revenue and 214% increase in income from continuing operations for Q4 2017
Canadian launch of OZANEX™ in Jan 2018
Acquired Canadian rights to TRULANCE^® in Feb 2018

MISSISSAUGA, ON, Feb. 28, 2018 /CNW/ - Cipher Pharmaceuticals Inc. (TSX:CPH) ("Cipher" or "the Company") today announced its financial and operational results for the three and 12 months ended December 31, 2017. Unless otherwise noted, all figures are in U.S. dollars.

Q4 2017 Financial & Business Highlights
(all figures compared to Q4 2016, unless otherwise noted)

• Total net revenue increased by 90% to $12.2 million from $6.4 million.
• Licensing revenue of $10.7 million, up 99% from $5.4 million.
• Product revenue of $1.5 million, up 43% from $1.1 million.
• Income from continuing operations of $5.2 million, or $0.14 per basic share, compared with income from continuing operations of $0.1 million, or $0.00 per basic share.
• Adjusted EBITDA¹ increased more than 300%, from $1.9 million in Q4 2016 to $8.1 million in Q4 2017.
• $28.2 million in cash at year end, compared with $24.3 million at the end of Q3 2017.
• Completed agreement with Canadian Imperial Bank of Commerce for a new $20.0 million credit facility that bears interest at LIBOR plus 1.5% to 2.5%; the proceeds were used to fully repay the remaining balance of the senior secured notes.

Full-Year 2017 Financial & Business Highlights 
(all figures compared to Fiscal 2016, unless otherwise noted)

• Total net revenue increased by 36% to $40.3 million from $29.7 million.
• Licensing revenue of $35.0 million, up 37% from $25.6 million.
• Product revenue of $5.3 million, up 29% from $4.1 million.
• Income from continuing operations of $10.7 million, an increase of 155% compared with income from continuing operations of $4.2 million.
• Adjusted EBITDA¹ increased by 80%, from $14.8 million in 2016 to $26.6 million in 2017.
• Executed on plan to improve operations and financial position: Strengthened the management team; streamlined and simplified business; rationalized pipeline; reduced debt and improved cost of capital; significantly reduced expenses and improved profitability.

"Led by the continued strong performance of Absorica^® and Epuris^®, we delivered 90% growth in revenue and 300% growth in Adjusted EBITDA in the fourth quarter, while adding $4 million to our cash balance," said Robert Tessarolo, President and CEO of Cipher. "This strong fourth quarter closed off a very successful year for Cipher, in which we executed on our plan to significantly improve our operations, profitability and financial position, highlighted by 80% increase in Adjusted EBITDA and 155% growth in income for the full year."  

Mr. Tessarolo added: "While we are early in the execution of our new growth strategy, we are making excellent progress toward building a diversified portfolio of prescription products that will deliver robust and reliable growth for our shareholders. In recent months, we have expanded our royalty territories by out-licensing our isotretinoin product in Mexico; expanded our Canadian commercial portfolio with the launch of OZANEX^™; and in-licensed a new prescription product in TRULANCE^®. Supported by our strong financial position and cash flow generation, we are deploying significant resources toward business development, and this effort is yielding results."

Q4 2017 Financial Review
(All figures are in U.S. dollars)

Total revenue increased by 90% to $12.2 million for Q4 2017, compared to $6.4 million for Q4 2016.

Licensing revenue increased by 99% to $10.7 million in Q4 2017, compared to $5.4 million for Q4 2016. Absorica licensing revenue increased to $9.4 million for Q4 2017, a 154% increase compared with $3.7 million for Q4 2016, based on higher prescriptions in the period. The growth in Absorica revenue was partially offset by a $0.3 million decrease in licensing revenue from Lipofen^® and the authorized generic version of Lipofen, from $1.2 million for Q4 2016 to $0.9 million in Q4 2017. Licencing revenue from tramadol products (Conzip^® and Durela^®) was unchanged at $0.4 million.

Product revenue increased by 43% to $1.5 million for Q4 2017, compared to $1.1 million for Q4 2016.  The increase was driven by Epuris, which generated revenue of $1.3 million in Q4 2017, compared to $1.0 million in Q4 2016. Epuris had a prescription market share of over 30% in Canada for the three months ended December 31, 2017 compared to 25% for the three months ended December 31, 2016.

Total operating expenses decreased slightly to $4.3 million for Q4 2017, compared to $4.4 million for Q4 2016. Total other expenses were $2.7 million in Q4 2017, compared to $1.4 million in Q4 2016. Other expenses for Q4 2017 primarily reflects accelerated interest accretion in addition to a prepayment penalty of $1.0 million, from the early repayment of the senior secured notes. 

Income from continuing operations was $3.9 million, or $0.14 per basic share, in Q4 2017, compared with loss from continuing operations of less than $0.1 million, or $0.00 per basic share, in Q4 2016. Adjusted EBITDA¹ for Q4 2017 increased over 300% to $8.1 million, compared to $1.9 million in Q4 2016.

Other Corporate Developments

In 2017, Cipher introduced a revised corporate strategy to build a portfolio of prescription products across a broad range of therapeutic areas that meet an unmet medical need. The focus on the Company's strategy is to:

1. Acquire or in-license prescription medicines for the Canadian market;
2. Acquire businesses with commercial products, proven capabilities or where substantial synergies are available; and
3. Selectively invest in drug development programs where we see a favourable risk-return profile.

In terms of the Company's product pipeline, there were several developments in Q4 2017 and subsequent to year end:

• OZANEX™: Launched OZANEX in Canada (ozenoxacin cream, 1%), a novel topical treatment for adult and pediatric patients with impetigo.
• Isotretinoin: In January 2018, announced an agreement with Italmex Pharma S.A. to market, sell and distribute Cipher's isotretinoin product in Mexico.
• TRULANCE: In February 2018, acquired the exclusive Canadian rights from Synergy Pharmaceuticals Inc. (NASDAQ: SGYP) to TRULANCE (plecanatide), a once-daily tablet for adults with chronic idiopathic constipation (CIC) and irritable bowel syndrome with constipation (IBS-C).

Financial Statements and MD&A

Cipher's Financial Statements and Management's Discussion and Analysis ("MD&A") for the three and 12 months ended December 31, 2017 will be available on the Company's website at www.cipherpharma.com in the "Investors" section under "Quarterly Reports" and on SEDAR at www.sedar.com.

Notice of Conference Call

Cipher will hold a conference call today, February 28, 2018, at 8:30 a.m. (ET) to discuss its financial results and other corporate developments. To access the conference call by telephone, dial 647-427-7450 or 1­-888-231-8191. A live audio webcast will be available at http://bit.ly/2Bfo3oU or the Investor Relations section of the Company's website at http://www.cipherpharma.com. An archived replay of the webcast will be available for 90 days.

About Cipher Pharmaceuticals Inc.

Cipher (TSX:CPH) is a specialty pharmaceutical company with a robust and diversified portfolio of commercial and pre-commercial products. Cipher acquires products that fulfill unmet medical needs, manages the required clinical development and regulatory approval process, and markets those products either directly in Canada or indirectly through partners in Canada, the U.S., and Latin America.  For more information, visit www.cipherpharma.com.

Forward-Looking Statements

This document includes forward-looking statements within the meaning of certain securities laws, including the "safe harbour" provisions of the Securities Act (Ontario) and other provincial securities law in Canada and U.S. securities laws. These forward-looking statements include, among others, statements with respect to our objectives, 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, our ability to enter into in-licensing, 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; 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; 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; 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; current uncertainty surrounding health care regulation in the United States; 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; 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 it operates; 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; 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 effects of our delisting from the NASDAQ Global Market (the "NASDAQ") and deregistration of our Common Shares under the U.S. Securities Exchange Act of 1934, as amended (the "U.S. Exchange Act"); 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; certain adverse tax rules applicable to U.S. holders of our Common Shares if we are a passive foreign investment company for U.S. federal income tax purposes; 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 actions of 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 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 this AIF and in our Management's Discussion and Analysis of Operating Results and Financial Position for the year ended December 31, 2017, 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 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.
2)	Source: QuintilesIMS

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

(IN THOUSANDS OF U.S. DOLLARS)		2017	2016
		$	$
Income from continuing operations		10,747	4,219
Add back:
	Depreciation and amortization	967	1,121
	Interest expense, net	5,292	7,723
	Income taxes	3,518	1,492
EBITDA		20,524	14,555
Change in fair value of derivative financial instrument		(34)	(1,175)
Loss (gain) from the translation of Canadian cash balances		35	(10)
Loss on debt extinguishment		5,223	-
Impairment of intangible assets		561	-
Share-based compensation		338	1,405
Adjusted EBITDA		26,647	14,775

SOURCE Cipher Pharmaceuticals Inc.

Craig Armitage, LodeRock Advisors, [phone], [email protected]

Related Links

http://www.cipherpharma.com