Cipher Pharmaceuticals Reports Strong First Quarter 2022 Financial Results

(All figures are in U.S. dollars)

• Drove 60% increase in EPS to $0.08
• Demonstrated a focus on execution as EBITDA increased 38% to $3.1 million
• Total operating expenses declined 25% to $2.5 million
• Bolstered isotretinoin portfolio through extended distribution and supply agreement with Sun Pharmaceutical to December 31, 2026
• Partner, Moberg Pharma AB, submitted regulatory filling for clinical Phase 3 study
• Strong balance sheet with $21.9 million in cash at March 31, 2022

MISSISSAUGA, ON, May 12, 2022 /CNW/ - Cipher Pharmaceuticals Inc. (TSX: CPH) ("Cipher" or "the Company") today announced its financial and operating results for the three months ended March 31, 2022. Unless otherwise noted, all figures are in U.S. dollars.

Q1 2022 Financial Highlights
(All figures in U.S. dollars, compared to Q1 2021, unless otherwise noted)

• As at March 31, 2022, the Company had $21.9 million (CDN$27.3¹ million) in cash or $0.85 (CDN$1.06) per share
• 463,100 shares were repurchased and cancelled under the Normal Course Issuer Bid at an average price of CDN$2.05
• Total operating expenses decreased 25% to $2.5 million, compared to $3.4 million
• EBITDA² increased 38% to $3.1 million, compared to $2.2 million
• Net income increased to $2.1 million from $1.3 million
• Earnings per common share increased 60% to $0.08 from $0.05

Management Commentary

Craig Mull, Interim CEO commented, "We are pleased to report that our first quarter results delivered a meaningful increase in profitability, highlighted by a 60% increase in our earnings per share. Our strong results have been driven by our reduced cost structure in addition to improved distribution and supply agreements."

Through 2021 and continuing into 2022, a key focus for Cipher was to negotiate extended distribution and supply agreements with key partners for the Company's portfolio, with an emphasis on improving visibility and long-term profitability. During the first quarter, Cipher announced an extension of the distribution and supply agreement with Sun Pharmaceutical Industries ("Sun Pharma") through December 31, 2026. This extension will provide Cipher with an additional four years of visibility into stable revenue and cashflow on the isotretinoin portfolio.

In March, the Company's partner, Moberg Pharma AB, ("Moberg") submitted a regulatory filing for the next clinical Phase 3 study for MOB-015 (nail fungus treatment) to 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 $75 million CDN at December 31, 2021, with a single product having over 90% market share.

Commenting on the Moberg filing, Mr. Mull said, "We are pleased to see the continued progress that Moberg is making to commercialize MOB-015. The product is showing promising results and we look forward to competing in this large market with an innovative topical product that would provide a new safe and effective treatment option for the many Canadians who suffer from this common nail infection."

"With disciplined cost reductions and the extension of the agreement with Sun Pharma, we believe that that Cipher now has a stable runway for growth. Aligned with our stated strategy, we remain focused on identifying and evaluating profitable product and company acquisitions that will accelerate our growth and drive shareholder value and are continuing to build cash reserves in anticipation of such transactions," concluded Mr. Mull.

Q1 2022 Financial Review
(All figures are in U.S. dollars)

Total revenue was $5.4 million for Q1 2022, compared to $5.4 million for Q1 2021.

Licensing revenue was $2.1 million for the three months ended March 31, 2022, compared to $2.8 million for the three months ended March 31, 2021. 

Licensing revenue from Absorica in the US was $1.4 million for the three months ended March 31, 2022, a decrease of $0.9 million or 39% compared to $2.3 million for the three months ended March 31, 2021. Licensing revenue in Q1 2021 contained a full quarter of Brand Absorica sales.  Absorica's market share was approximately 4.3% compared to 4.2% for the Q1 2021, according to Symphony Health.  Market share including Sun's Absorica LD was approximately 5.2%.

Licensing revenue from Lipofen and the authorized generic version of Lipofen was $0.7 million for Q1 2022, a 73% increase compared to revenue of $0.4 million for Q1 2021.

Product revenue increased by $0.6 million or 24% to $3.3 million for Q1 2022, compared to $2.7 million for the comparable period in 2021. Product revenue from Epuris was $3.1 million for Q1 2022, an increase of 19% from $2.6 million in the comparative period.  

Product revenue for Ozanex, Beteflam, Actikerall, Brinavess, Aggrastat and Vaniqa was $0.2 million for Q1, 2022, compared to $0.1 million for the three months ended March 31, 2021.

Selling, general and administrative expenses were $1.3 million for Q1 2022, compared to $1.2 million for Q1 2021.  

Total operating expenses were $2.5 million for Q1 2022, compared to $3.4 million for Q1 2021.

Net income was $2.1 million, or $0.08 per basic and diluted share, in Q1 2022, compared to $1.3 million, or $0.05 per basic and diluted share, in Q1 2021. Adjusted EBITDA for Q1 2022 was $3.1 million, compared to $3.6 million in Q1 2021.

The Company had $21.9 million in cash and no debt at March 31, 2022. The Company generated $2.1 million in cash from operating activities for the three months ended March 31, 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
• Collaboration with Galephar on key products in the Lucy product portfolio
• Continue to repurchase shares for cancellation under our normal course issuer bid
• 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 year ended March 31, 2022, and Management's Discussion and Analysis (the "MD&A") for the three months ended March 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 May 13, 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 6137413.

A live audio webcast will be available at  https://produceredition.webcasts.com/starthere.jsp?ei=1548662&tp_key=a2eab0e46f 

• 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 May 20, 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 March 31, 20221 exchange rate – 1.2496

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 March 31, 2022	Three months ended March 31, 2021
	$	$
Income and comprehensive income from continuing operations	2,149	1,339
Add back:
Depreciation and amortization	155	196
Interest expense, net	(7)	37
Income taxes	774	657
EBITDA	3,071	2,229
Change in fair value of derivative financial instrument	—	11
Loss (gain) from the translation of Canadian cash balances	(17)	43
Provision for legal settlement	—	1,250
Share-based compensation	38	44
Adjusted EBITDA	3,092	3,577
Adjusted EBITDA per share – basic	0.12	0.13
Adjusted EBITDA per share – dilutive	0.12	0.13

SOURCE Cipher Pharmaceuticals Inc.

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