Cipher Pharmaceuticals Reports Second Quarter 2022 Financial Results

(All figures are in U.S. dollars)

• Drove 7% increase in product revenue to $3.5 million
• Generated $3.6 million in Adjusted EBITDA
• Total operating expenses declined 5% to $2.2 million
• Strong balance sheet with $24.2 million in cash at June 30, 2022

MISSISSAUGA, ON, Aug. 11, 2022 /CNW/ - Cipher Pharmaceuticals Inc. (TSX: CPH) ("Cipher" or "the Company") today announced its financial and operating results for the three and six month periods ended June 30, 2022. Unless otherwise noted, all figures are in U.S. dollars.

Q2 2022 Financial Highlights
(All figures in U.S. dollars, compared to Q2 2021, unless otherwise noted)

• As at June 30, 2022, the Company had $24.2 million (CDN$31.2¹ million) in cash or $0.96 (CDN$1.24) per share
• 401,300 shares were repurchased and cancelled under the Normal Course Issuer Bid at an average price of CDN$2.38
• Total operating expenses decreased 5% to $2.2 million, compared to $2.3 million
• Generated $3.6 million in Adjusted EBITDA, compared to $4.1 million in the prior year, up sequentially from $3.1 million in Q1, 2022
• Net income of $2.1 million, compared to $2.8 million
• Earnings per diluted common share for the quarter of $0.08 compared to $0.10 earned in the previous year's period.

Management Commentary

Craig Mull, Interim CEO commented, "We are pleased to report that Cipher delivered another strong quarter, generating positive net income and cash from operating activities. Our results demonstrate the stability of our business and the benefits of our cost reduction strategy. We ended the quarter with a cash balance of CDN$31 million, which represents CDN$1.24 per share ($24.2 million), this provides us with tremendous financial flexibility as we evaluate a number of profitable product and company acquisitions to accelerate growth and continue to drive shareholder value."    

In May, 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 U.S. Food and Drug Administration ("FDA"). Cipher holds the exclusive Canadian rights to MOB-015. In Canada, according to IQVIA, the total prescription market for Onychomycosis was greater than CDN$75 million, with a single product having over 90% market share.

In June, the Company's partner, Canfite Biopharma, ("Canfite") announced positive top-line results from its phase III COMFORT study of Piclidenoson in the treatment of moderate to severe psoriasis. Based on the safety and efficacy data revealed in this trial, Canfite plans to approach the U.S. FDA and the European EMA with a protocol for a pivotal Phase III study for drug approval and registration.

"We are pleased to see the continued progress that Moberg is making to commercialize MOB-015. Patient enrollment is another positive step towards commercialization and we look forward to competing in this large market with an innovative topical product that has the potential to provide a new safe and effective treatment option for the many Canadians who suffer from this common nail infection" Mr. Mull continued, "Canfite's recent phase III COMFORT results are a positive indication for CF-101. An estimated 1.5 million Canadians suffer from psoriasis or rheumatoid arthritis and Cipher holds the Canadian marketing rights to this novel product, which we believe holds substantial commercial potential."

Q2 2022 Financial Review
(All figures are in U.S. dollars)

Total revenue was $5.6 million for Q2 2022, compared to $6.1 million for Q2 2021.

Licensing revenue was $2.0 million for the three months ended June 30, 2022, compared to $2.8 million for the three months ended June 30, 2021, but relatively unchanged from $2.1 million in Q1, 2022.

Licensing revenue from Absorica in the US was $1.3 million for the three months ended June 30, 2022, a decrease of $1.1 million compared to $2.4 million for the three months ended June 30, 2021, but relatively unchanged from $1.4 million in Q1 2022. Absorica's market share was approximately 4.4% compared to 4.2% for Q2 2021, according to Symphony Health.  Market share including Sun's Absorica LD was approximately 5.5%.

Licensing revenue from Lipofen and the authorized generic version of Lipofen was $0.7 million for Q2 2022, an 80% increase compared to revenue of $0.4 million for Q2 2021.

Product revenue increased by $0.2 million or 7% to $3.5 million for Q2 2022, compared to $3.3 million for the comparable period in 2021. Product revenue from Epuris was $3.3 million for Q2 2022, up 9% from $3.1 million in the comparative period.  

Product revenue for Ozanex, Beteflam, Actikerall, Brinavess, Aggrastat and Vaniqa was $0.2 million for Q2, 2022, compared to $0.2 million for the three months ended June 30, 2021.

Selling, general and administrative expenses were $1.1 million for Q2 2022, a decrease of 6% compared to $1.2 million for Q2 2021.  

Total operating expenses were $2.2 million for Q2 2022, a decrease of 5% compared to $2.3 million for Q2 2021.

Net income was $2.1 million, or $0.08 per diluted share, in Q2 2022, compared to $2.8 million, or $0.10 per diluted share, in Q2 2021. Adjusted EBITDA for Q2 2022 was $3.6 million, compared to $4.1 million in Q2 2021.

The Company had $24.2 million in cash and no debt at June 30, 2022. The Company generated $5.2 million in cash from operating activities for the six months ended June 30, 2022.

Outlook

Cipher anticipates several key milestones in 2022 that will continue to enhance long term value, including:

• Full-year benefit of the cost reduction plan
• Reinforced commitment to our hospital business with a distribution partnership that is expected to result in improved growth and profitability
• Continue to repurchase shares for cancellation
• Work closely with Moberg on continued development of MOB-015
• Selectively pursue 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 three and six months ended June 30, 2022, and Management's Discussion and Analysis (the "MD&A") for the three and six months ended June 30, 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 August 12, 2022, 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 7538758.

A live audio webcast will be available at  https://app.webinar.net/871ZpObNzYX

• · 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 August 19, 2022.

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, the impact of the partnership with Verity on the Company's ability to manage its costs efficiently and drive profitability within its hospital business, 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 June 30, 2022 exchange rate – 1.2886
2)	EBITDA and adjusted EBITDA are non-IFRS financial measures.  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, 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 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 June 30, 2022	Three months ended June 30, 2021	Six months  ended June 30, 2022	Six months ended June 30, 2021
	$	$	$	$
Income from continuing operations	2,152	2,816	4,302	4,155
Add back:
Depreciation and amortization	155	197	310	393
Interest expense, net	(33)	37	(40)	74
Income taxes	1,175	1,024	1,948	1,681
EBITDA	3,449	4,074	6,520	6,303
Change in fair value of derivative financial instrument	—	(16)	—	(5)
Loss (gain) from the translation of Canadian cash balances	75	(41)	58	(9)
Provision for legal settlement	—	—	—	1,250
Share-based compensation	47	43	85	87
Adjusted EBITDA	3,571	4,060	6,663	7,626
Adjusted EBITDA per share – basic	0.14	0.15	0.26	0.28
Adjusted EBITDA per share – dilutive	0.14	0.15	0.26	0.28

SOURCE Cipher Pharmaceuticals Inc.

James Bowen, CFA, Investor Relations, 416-519-9442