Cipher Pharmaceuticals Reports Strong Sales & Earnings Growth in Q3 2023

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

• Revenue increased 27% quarter-over-quarter to $6.1 million
• EPS grew 155% to $0.28 per share in the quarter
• Cash on hand of US$42.1 million, generated US$5.7 million in Q3 2023
• Repurchased 1.3 million or 5% of common shares through an efficient SIB process

MISSISSAUGA, ON, Nov. 9, 2023 /CNW/ - Cipher Pharmaceuticals Inc. (TSX: CPH) ("Cipher" or "the Company") today announced its financial and operating results for the three and nine months ended September 30, 2023.

Q3 2023 Key Highlights
(All figures in U.S. dollars, compared to Q3 2022, unless otherwise noted)

• Epuris product revenue grew 11% on a constant currency basis.
• Cipher's pipeline candidate MOB-015 (nail fungus treatment) completed its Phase 3 study enrollment ahead of plan in early October 2023, as announced by Moberg Pharma AB.
• Total revenue increased 27% to $6.1 million compared to $4.8 million in Q3 2022.
• Licensing revenue increased 54% to $3.1 million due to royalty income from the Absorica portfolio.
• Adjusted EBITDA¹ increased 37% to $3.6 million compared to $2.6 million in Q3 2022.
• Ended the quarter with $42.1 million in cash (CDN$56.9 million²) or $1.66 per share (CDN$2.25²).

Management Commentary

Craig Mull, Interim CEO, commented: "Cipher's third quarter results are a clear demonstration of positive growth with a focus on continued cash generation and profitability.

During the quarter, we commenced a Substantial Issuer Bid ("SIB") to repurchase shares, and we were successful in deploying CAD$6 million of capital. At these valuation levels, we believe this represented an attractive use of capital and an excellent lever to drive long-term shareholder value."

Mr. Mull added: "As we continue to advance our near term product pipeline, we were pleased to see that Moberg, our partner on MOB-015, achieved an important milestone well ahead of its previously expected timeline, with the completion of patient recruitment and enrolment for its Phase 3 North American study. We look forward to the topline results from the study, which Moberg expects to be available in January 2025. This high-potential product, which Cipher holds the exclusive Canadian rights to, targets an attractive market in Canada that is in excess of CDN$80 million annually."

Bryan Jacobs, CFO, commented: "During the third quarter, our business performed exceptionally well, with robust year-over-year growth in revenue and earnings, driven by the strength of our licensing revenue and our ongoing focus on operational efficiency. We continued to execute on our plan to deliver strong and continued profitability, highlighted by a 37% increase in Adjusted EBITDA¹ this quarter, compared to the same quarter last year. Additionally, we generated year to date $13.3 million in cash and ended the period with $42.1 million in cash and cash equivalents, and no debt. Combined with an undrawn $35 million revolving credit facility, we have substantial resources and financial flexibility to drive future growth." 

Q3 2023 Financial Review  
(All figures are in U.S. dollars)

• Total revenue was $6.1 million in Q3 2023, an increase of 27%, compared to $4.8 million in Q3 2022.
• Licensing revenue was $3.1 million in Q3 2023, an increase of 54%, compared to $2.0 million in Q3 2022.
• Product revenue was $3.0 million in Q3 2023, an increase of 7%, compared to $2.8 million in Q3 2022.
• Net income was $7.0 million, or $0.27 per diluted share, an increase of 165%, compared to $2.7 million, or $0.10 per diluted share in Q3 2022.
• Adjusted EBITDA¹ in Q3 2023 was $3.6 million, an increase of 37%, compared to $2.6 million in Q3 2022.

Corporate Developments

• On September 5, 2023, the Company announced its intention to commence a Substantial Issuer Bid. Upon expiry on October 11, 2023, Cipher repurchased 1.29 million common shares at CDN$4.65 per common share, for an aggregate purchase price of CDN$6 million, representing 5.1% of the total common shares outstanding.
• On July 5, 2023, Cipher announced that Moberg obtained European Union approval for MOB-015, paving the way for their commercial launch across 13 countries in Europe. Cipher believes this is an important precursor to the eventual approval in the U.S. and Canada.
• On October 6, 2023, Moberg announced it had completed the recruitment and enrollment of 384 patients with Onychomycosis (nail fungus) ahead of plan for its ongoing MOB-015 Phase 3 Study in North America. Moberg expects topline results in January 2025.

Business Strategy & Outlook

Cipher continues to focus on enhancing long-term shareholder value, through the following strategies:

• Operating the business in an efficient and prudent manner to deliver continued earnings
• Continuing to collaborate with our partners to advance our product pipeline, including MOB-015 for the treatment of nail fungus and CF-101 for the treatment of moderate to severe plaque psoriasis
• Advancing our studies on DTR-001, our pipeline product for the removal of tattoos
• Acquiring cash flow positive pharmaceutical assets to further diversify our product portfolio
• Continuing to pursue opportunities to effectively allocate capital to enhance long-term shareholder value

Financial Statements and MD&A

Cipher's Financial Statements for the three- and nine-month periods ended September 30, 2023, and Management's Discussion and Analysis (the "MD&A") for the three and nine month periods ended September 30, 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 November 10, 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 ID 74393673.

A live audio webcast will be available at the Investor Relations section of the Company's website  at http://www.cipherpharma.com or at https://app.webinar.net/AMLJYMeYrlE. An archived replay of the webcast will be available until November 17, 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 the timing of the receipt of the topline results from MOB-015 Phase 3 North American study, the expectation of approval of MOB-015 in the U.S. and Canada, 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 health pandemic outbreaks 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; 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 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; 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; and our operating results may fluctuate significantly. 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 MD&A and the Annual Information Form 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)  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.

2)  At the September 29, 2023 exchange rate – 1.3520

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 September 30, 2023	Three months ended September 30, 2022	Nine months ended September 30, 2023	Nine months ended September 30, 2022
	$	$	$	$
Net income and comprehensive income	7,031	2,654	12,728	6,955
Add back:
Depreciation and amortization	269	338	954	648
Interest income	(533)	(157)	(1,315)	(197)
Income taxes	(3,909)	(359)	(3,728)	1,590
EBITDA	2,858	2,476	8,639	8,996
Unrealized foreign exchange loss (gain)	434	72	(21)	130
Restructuring costs	—	—	269	—
Share-based compensation	315	84	968	169
Adjusted EBITDA	3,607	2,632	9,855	9,295
Adjusted EBITDA per share – basic	0.14	0.10	0.39	0.37
Adjusted EBITDA per share – dilutive	0.14	0.10	0.38	0.36

Condensed interim consolidated statements of income and
comprehensive income

	Three months ended September 30,			Nine months ended September 30,
	2023	2022	2023		2022
	$	$	$		$
Revenue
Licensing revenue	3,090	2,013	6,936		6,158
Product revenue	2,978	2,779	9,306		9,608
Net revenue	6,068	4,792	16,242		15,766
Operating expenses
Cost of products sold	1,076	860	3,114		3,056
Research and development	10	—	110		66
Depreciation and amortization	269	338	954		648
Selling, general and administrative	1,690	1,384	4,400		3,518
Total operating expenses	3,045	2,582	8,578		7,288
Other (income) expenses
Interest income	(533)	(157)	(1,315)		(197)
Unrealized foreign exchange loss (gain)	434	72	(21)		130
Total other (income) expenses	(99)	(85)	(1,336)		(67)
Income before income taxes	3,122	2,295	9,000		8,545
Current income tax expense (recovery)	116	(586)	328		1,237
Deferred income tax (recovery) expense	(4,025)	227	(4,056)		353
Total income tax (recovery) expense	(3,909)	(359)	(3,728)		1,590
Net income and comprehensive income for the period	7,031	2,654	12,728		6,955
Income per share
Basic	0.28	0.11	0.50		0.27
Diluted	0.27	0.10	0.50		0.27

Condensed interim consolidated statements of financial position

	As at September 30,	As at December 31,
	2023	2022
	$	$
Assets
Current assets
Cash and cash equivalents	42,086	28,836
Accounts receivable	6,701	6,802
Inventory	2,528	2,152
Prepaid expenses and other assets	447	371
Total current assets	51,762	38,161
Property and equipment, net	412	481
Intangible assets, net	1,885	2,754
Goodwill	15,706	15,706
Deferred tax assets	20,764	16,674
Total assets	90,529	73,776
Liabilities and shareholders' equity
Current liabilities
Accounts payable and accrued liabilities	7,110	4,107
Income taxes payable	5,237	4,904
Contract liability	281	257
Current portion of lease obligation	101	101
Total current liabilities	12,729	9,369
Lease obligation	252	327
Total liabilities	12,981	9,696
Shareholders' equity
Share capital	18,486	17,719
Contributed surplus	5,697	5,358
Accumulated other comprehensive loss	(9,514)	(9,514)
Retained earnings	62,879	50,517
Total shareholders' equity	77,548	64,080
Total liabilities and shareholders' equity	90,529	73,776

SOURCE Cipher Pharmaceuticals Inc.

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