Cipher Pharmaceuticals Reports Third Quarter 2019 Financial Results

Revenue increased 20% to $5.8 million

OAKVILLE, ON, Nov. 7, 2019 /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, 2019. Unless otherwise noted, all figures are in U.S. dollars.

Q3 2019 Financial and Corporate Highlights
(All figures compared to Q3 2018, unless otherwise noted)

• Total revenue increased 20% to $5.8 million from $4.8 million
• Licensing revenue increased 11% to $3.6 million from $3.3 million
• Product revenue increased 40% to $2.2 million from $1.6 million
• Selling, general and administrative expenses decreased 58% to $1.3 million from $3 million
• Adjusted EBITDA¹ increased 149% to $3.7 million compared to $1.5 million
• Net loss from continuing operations was $2.2 million, or a loss of $0.08 per basic and diluted share, compared with net income from continuing operations of $0.74 million, or $0.03 per basic and diluted share.
• Accelerated debt prepayment of $2.0 million in addition to the regular scheduled payment of $2.0 million
• Subsequent to quarter end, on October 10, 2019 Cipher received a Notice of Compliance from Health Canada approving the sale of TRULANCE.

Corporate Update

"We continue to make progress on our near-term priorities, including our focus on cost optimization and improving profitability" said Mr. Craig Mull, Interim CEO. "I am pleased that we were able to achieve a 58% decrease in SG&A costs while delivering 20% top line growth.  Net income in the quarter was negatively impacted by restructuring costs and impairment charges related to the strategic review of the business; adjusting for those factors, profitability is trending in the right direction."

As previously announced, the Board of Directors appointed a Special Committee to target distribution partnerships for the Canadian commercial assets.  The strategic review process generated interest from multiple parties and is progressing as anticipated. 

Mr. Mull added: "We are excited about our renewed focus and collaboration with our long-term technology partner Galephar Pharmacutical Research, Inc. ("Galephar"). We look forward to sharing updates on new and exciting products in upcoming months."

On October 10, 2019 Health Canada approved Trulance in the form of a once-daily tablet for the treatment of adults with irritable bowel syndrome. "We are pleased Trulance achieved Health Canada approval and we are excited to be able to bring this new and effective treatment option to Canadians.  said Mr. Mull.

Q3 2019 Financial Review
(All figures are in U.S. dollars, unless otherwise noted)

Total net revenue increased by $1.0 million or 20% to $5.8 million for Q3 2019 compared to $4.8 million for Q3 2018.

Licensing revenue increased by $0.3 million or 11% to $3.6 million for Q3 2019 compared to $3.3 million for Q3 2018.  Licensing revenue from Absorica was $2.6 million for Q3 2019, which remained relatively unchanged from Q3 2018.  Licensing revenue from Lipofen and the authorized generic version of Lipofen was $0.8 million for Q3 2019 compared to $0.6 million for Q3 2018.  Licensing revenue from Conzip was $0.2 million for Q3 2019 an increase of $0.1 million compared to revenue of $0.1 million for Q3 2018.

Product revenue increased by $0.6 million or 40% to $2.2 million for Q3 2019 compared to $1.6 million for Q3 2018.  Product revenue from Epuris increased to $1.9 million for Q3 2019 compared to $1.4 million for Q3 2018.  Epuris had a prescription market share of over 40% in Canada for the three months ended September 30, 2019 compared to 34% for the three months ended September 30, 2018.  Product revenue for the remaining brands, Ozanex, Beteflam, Actikerall, Brinavess, Aggrastat and Vaniqa was $0.3 million for Q3 2019 compared to $0.2 million for Q3 2018.

Total operating expenses increased $2.8 million, primarily due to a $3.5 million of impairment charge and $0.8 million of restructuring costs for  Q3 2019.   During the quarter, the Company re-considered its efforts to out license ASF1096, the remaining asset in the Astion portfolio.  The Company wrote off the net book value of $1.1 million.  Additionally, as part of the Company's strategic review of the business, the licensing agreements for A-101 and Xydalba were terminated.  The Company recorded an impairment charge of $2.4 million, representing the carrying value of those assets.  

Selling, general and administrative ("SG&A") expense was $1.3 million for Q3 2019 a decrease of 58% compared to $3.0 million for Q3 2018.  The decrease in SG&A costs was driven by a reduction in costs associated with human resources and a reduction in sales and marketing spend.

Financial Statements and MD&A

Cipher's Financial Statements for the three and nine months ended September 30, 2019 and Management's Discussion and Analysis ("MD&A") for the three and nine months ended September 30, 2019 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 today, Thursday November 7, 2019, 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 55559849. A live audio webcast will be available at https://event.on24.com/wcc/r/2123093/300675F0AA34903840699AA6550ECDD0 or the Investor Relations section of the Company's website at http://www.cipherpharma.com. A replay of the call will be available until midnight (ET) Thursday, November 14, 2019.

About Cipher Pharmaceuticals Inc.

Cipher (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 markets those products either directly in Canada or indirectly through partners in Canada, the U.S., and South America. Cipher is focused on a three-pronged growth strategy – including acquisitions, in-licensing, and selective investments in drug development – to assemble a broad portfolio of prescription products that serve unmet medical needs. 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 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 and statements relating to the Special Committee's review of the strategic direction of the Company and its strategic priorities including the anticipated benefits thereof.  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 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 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; 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 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 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 this MD&A and the Annual Information Form for the year ended December 31, 2018, 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.

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

(IN THOUSANDS OF U.S. DOLLARS)	Three months ended  Sept 30, 2019	Three months ended Sept 30, 2018	Nine months  ended  Sept 30, 2019	Nine months ended  Sept 30, 2018
	$	$	$	$
Income from continuing operations	(2,182)	738	(7)	1,702
Add back:
Depreciation and amortization	289	181	898	572
Interest expense, net	190	202	633	485
Income taxes	1,268	175	2,169	961
EBITDA	(435)	1,296	3,693	3,720
Change in fair value of derivative financial instrument	1	22	(14)	(420)
Restructuring costs	794	—	1,454	—
Loss (gain) from the translation of Canadian cash and lease balances	20	(53)	36	22
Impairment of intangible assets	3,454	—	3,454	1,832
Share-based compensation	(163)	210	(94)	613
Adjusted EBITDA	3,671	1,475	8,529	5,767

SOURCE Cipher Pharmaceuticals Inc.

James Bowen, CFA, LodeRock Advisors, 416-519-9442

Related Links

http://www.cipherpharma.com