Cipher reports fiscal 2009 financial results
Toronto Stock Exchange Symbol: DND
MISSISSAUGA, ON, Feb. 17 /CNW/ - Cipher Pharmaceuticals Inc. (TSX: DND) today announced its financial and operational results for the fourth quarter and fiscal year ended December 31, 2009.
Fiscal 2009 Summary
-------------------
- Total revenue more than doubled to $3.2 million, driven by growth of
Lipofen(R) prescriptions.
- Strong balance sheet at year end with cash of $9.0 million and no
debt, compared with cash of $9.9 million at December 31, 2008.
- Commenced CIP-ISOTRETINOIN Phase III safety trial in Q3; with 176
patients enrolled at year-end.
- Achieved tentative FDA approval for CIP-TRAMADOL ER; subsequent to
year end, received favourable summary judgment motion relating to
patent litigation.
- Strengthened Board of Directors with the addition of Dr. William
Claypool.
"The continued steady growth of Lipofen(R) prescriptions helped us deliver a strong year-over-year increase in revenue and reduce our cash burn, ensuring that our financial position remains solid," said Larry Andrews, President and CEO of Cipher. "From a clinical perspective, we commenced enrolment on our Phase III safety trial for CIP-ISOTRETINOIN, and this continues to progress well. On the regulatory front, 2009 saw us obtain tentative FDA approval for CIP-TRAMADOL ER. More recently, we received a favourable judgment in pending patent litigation for this product, clearing the way for us to pursue final FDA approval."
Financial Review
----------------
Total revenue in 2009 was $3.2 million, compared with $1.5 million in 2008. Revenue from Lipofen(R) totalled $2.9 million in 2009, reflecting the continued market penetration by Lipofen(R) as Kowa increases the sales and promotion effort behind the product. Revenue from CIP-ISOTRETINOIN was $0.3 million in 2009, which relates to revenue recognized on the Company's share of the US$1 million upfront milestone payment received from Ranbaxy in 2008.
Gross Research and Development ("R&D") expenditures for 2009 were $5.4 million, compared with $2.2 million in 2008. The reported R&D amount of $1.0 million for 2009 is net of reimbursements of $4.4 million from Ranbaxy related to the CIP-ISOTRETINOIN clinical study. As previously disclosed, the Company's U.S. marketing partner, Ranbaxy Pharmaceuticals, is reimbursing Cipher for all costs associated with the clinical studies required to obtain FDA approval, up to a predetermined cap. Any additional development costs associated with initial FDA approval will be shared equally.
Operating, General and Administrative ("OG&A") expenses for 2009 were $4.3 million, compared with $3.6 million in 2008. The year-over-year change reflects the increased level of activity related to pursuing pipeline expansion opportunities. The loss for the 12 months ended December 31, 2009 decreased to $2.7 million ($0.11 per basic and diluted share), compared with a net loss of $3.2 million ($0.13 per basic and diluted share) in 2008.
In Q4 2009, Cipher recorded licensing revenue of $0.8 million, compared with $0.4 million in Q4 2008. Gross R&D expenditures for the fourth quarter were $3.0 million, and reported R&D expenses were $0.3 million. OG&A expenses for Q4 2009 were $1.1 million, compared with $0.9 million in the same period last year. Loss for the three months ended December 31, 2009 was $0.6 million ($0.03 per basic and diluted share), compared with a loss of $0.5 million ($0.02 per basic and diluted share) in the same period last year.
The Company's financial position remained solid at year-end. As at December 31, 2009, Cipher had cash of $9.0 million, compared with $9.9 million as at December 31, 2008.
Product Update
--------------
During 2009, Lipofen(R) monthly prescriptions showed steady growth, and Cipher is hopeful that this trend will continue as Kowa increases penetration of the primary care physicians in its targeted regions and expands its sales force. Kowa's sales force reached approximately 200 at the end of the year, and additional increases are expected in Q1 2010 to support the launch of Kowa's pitavastatin product, LIVALO(R), in the second quarter of 2010.
During Q3 2009, Cipher commenced its Phase III safety trial for CIP-ISOTRETINOIN under a Special Protocol Assessment ("SPA") with the U.S. Food and Drug Administration ("FDA"). The 800-patient study is a double-blind, randomized trial comparing CIP-ISOTRETINOIN to an FDA-approved, commercially available isotretinoin product. The study is being conducted in the U.S. and Canada over an 18-month period. The study is progressing well, with enrolment reaching 176 patients at year end and currently nearing the mid-point.
Cipher received tentative FDA approval for CIP-TRAMADOL ER, the Company's extended-release formulation of tramadol, in February 2009. During Q4 2009, the Company announced that Purdue Pharma Products L.P. and Napp Pharmaceutical Group Ltd. filed a complaint against Cipher in the United States District Court for the Eastern District of Virginia, for alleged infringement of two U.S. patents. Under the applicable provisions of the Hatch-Waxman Act, this patent challenge can delay final FDA approval of Cipher's NDA by 30 months, or until the patent challenge is resolved, whichever occurs first. Subsequent to year end, the Company announced that a final judgment on the above litigation suit has been entered in favour of Cipher. The judgment removes any further stay of FDA approval of Cipher's NDA under the applicable provisions of the Hatch-Waxman Act. Cipher is moving forward to obtain FDA final approval as part of its broader CIP-TRAMADOL ER commercialization strategy.
The final judgment in favour of Cipher holds that the patents-in-suit are invalid for obviousness based on a prior decision of the United States District Court for the District of Delaware, invalidating the Orange Book-listed patents for Ultram(R) ER in litigation filed by Purdue against Par Pharmaceutical, Inc. ("Par"). That decision in the Par litigation is currently on appeal before the United States Court of Appeals for the Federal Circuit. The Court's decision is not expected until the latter half of 2010. If Par is successful in its appeal, Cipher believes CIP-TRAMADOL ER will no longer face any further risk of litigation from Purdue in connection with the Orange Book-listed patents that were asserted against Cipher.
Cipher continues to actively pursue new early stage pipeline product candidates and advance out-licensing discussions for its current products.
Notice of Conference Call
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Cipher will hold a conference call today, February 17, 2010, 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 of the call will be available at www.cipherpharma.com. The webcast will be archived for 90 days.
About Cipher Pharmaceuticals Inc.
Cipher Pharmaceuticals is a commercial-stage drug development company focused on commercializing novel formulations of successful, currently marketed molecules using advanced drug delivery technologies. Cipher's strategy is to in-license products that incorporate proven drug delivery technologies and advance them through the clinical development and regulatory approval stages, after which the products are out-licensed to international partners. Because Cipher's products are based on proven technology platforms applied to currently marketed drugs, they are expected to have lower approval risk, shorter development timelines and significantly lower development costs. The Company's lead compound, CIP-FENOFIBRATE, received final approval from the U.S. Food and Drug Administration and Health Canada in the first quarter of 2006. The product is being marketed in the United States by Kowa Pharmaceuticals America under the label Lipofen(R). In addition, Cipher is developing formulations of the pain reliever tramadol (tentative FDA approval in February 2009) and the acne treatment isotretinoin (FDA approvable letter in April 2007).
Cipher is listed on the Toronto Stock Exchange under the symbol 'DND' and has approximately 24 million shares outstanding. For more information, please visit www.cipherpharma.com.
Forward-Looking Statements
Statements made in this news release, other than those concerning historical financial information, may be forward-looking and therefore subject to various risks and uncertainties. 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. 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. Factors that could cause results to vary include those identified in the Company's Annual Information Form and other filings with Canadian securities regulatory authorities, such as the applicability of patents and proprietary technology; possible patent litigation; regulatory approval of products in the Company's pipeline; changes in government regulation or regulatory approval processes; government and third-party payer reimbursement; dependence on strategic partnerships for product candidates and technologies, marketing and R&D services; meeting projected drug development timelines and goals; intensifying competition; rapid technological change in the pharmaceutical industry; anticipated future losses; the ability to access capital to fund R&D; and the ability to attract and retain key personnel. All forward-looking statements presented herein should be considered in conjunction with such filings. Except as required by Canadian securities laws, the Company does not undertake to update any forward-looking statements; such statements speak only as of the date made.
Cipher Pharmaceuticals Inc.
Balance Sheets
(in thousands of dollars)
As at
December 31, December 31,
2009 2008
ASSETS
Current assets
Cash $ 9,006 $ 9,881
Accounts receivable 967 512
Income taxes receivable - 6
Prepaid expenses and other current assets 457 380
Current portion of loan receivable (note 5) 800 608
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11,230 11,387
Property and equipment, net (note 4) 86 147
Loan receivable (note 5) - 717
Intangible assets, net (note 6) 3,507 4,126
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$ 14,823 $ 16,377
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LIABILITIES
Current liabilities
Accounts payable and accrued liabilities $ 1,570 $ 1,178
Current portion of deferred revenue 1,956 1,177
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3,526 2,355
Deferred revenue 329 994
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3,855 3,349
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SHAREHOLDERS' EQUITY
Share capital (note 7) 49,948 49,948
Contributed surplus (note 8) 32,268 31,613
Deficit (71,248) (68,533)
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10,968 13,028
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$ 14,823 $ 16,377
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The accompanying notes are an integral part of these financial statements
Cipher Pharmaceuticals Inc.
Statements of Operations and Comprehensive Loss
(in thousands of dollars, except per share amounts)
For the year ended
December 31, December 31,
2009 2008
Revenues
Licensing revenue $ 3,179 $ 1,543
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Expenses
Research and development (note 9) 956 1,303
Operating, general and administrative 4,252 3,565
Amortization of property and equipment 69 71
Amortization of intangible assets 741 466
Recovery of legal fees and court costs - (176)
Interest income (124) (456)
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5,894 4,773
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Loss and comprehensive loss for the year $ (2,715) $ (3,230)
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Basic and diluted loss per share (note 11) $ (0.11) $ (0.13)
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The accompanying notes are an integral part of these financial statements
Cipher Pharmaceuticals Inc.
Statements of Deficit
(in thousands of dollars)
For the year ended
December 31, December 31,
2009 2008
Deficit, beginning of year $ (68,533) $ (65,303)
Loss for the year (2,715) (3,230)
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Deficit, end of year $ (71,248) $ (68,533)
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The accompanying notes are an integral part of these financial statements
Cipher Pharmaceuticals Inc.
Statements of Cash Flows
(in thousands of dollars)
For the year ended
December 31, December 31,
2009 2008
Cash provided by (used in)
Operating activities
Loss for the year $ (2,715) $ (3,230)
Items not affecting cash
Amortization of property and equipment 69 71
Amortization of intangible assets 741 466
Stock-based compensation expense 655 581
Imputed interest (note 5) (87) (136)
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(1,337) (2,248)
Net change in non-cash operating items
(note 12) (20) 990
Drawdown of loan receivable - 188
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(1,357) (1,070)
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Investing activities
Proceeds from loan receivable (note 5) 612 -
Acquisition of intangible rights (note 6) (122) -
Purchase of property and equipment (8) (10)
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482 (10)
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Decrease in cash (875) (1,080)
Cash, beginning of year 9,881 10,961
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Cash, end of year $ 9,006 $ 9,881
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The accompanying notes are an integral part of these financial statements
Cipher Pharmaceuticals Inc.
Notes to Financial Statements
December 31, 2009
(in thousands of dollars, except per share amounts)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with
Canadian generally accepted accounting principles. Significant
accounting policies used in the preparation of these financial
statements are as follows:
Translation of foreign currencies
Revenues and expenses denominated in foreign currencies are
translated into Canadian dollars using the exchange rate in effect at
the transaction date. Monetary assets and liabilities are translated
using the rate in effect at the balance sheet date and non-monetary
items are translated at historical exchange rates. Related exchange
gains and losses are included in the determination of the loss for
the year.
Use of estimates
The preparation of these financial statements requires management to
make estimates and assumptions that could affect the reported amounts
of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
periods presented. Significant areas requiring the use of management
estimates include the valuation of intangible assets and measurement
of income taxes. By their nature, these estimates are subject to
measurement uncertainty. Actual results could differ from the
estimates and assumptions.
Property and equipment
Property and equipment are recorded at cost less accumulated
amortization. Amortization is computed using the straight-line method
using the following estimated useful lives of the assets or lease
terms:
Computer equipment 3 years
Computer software 3 years
Furniture and fixtures 5 years
Leasehold improvements over the term of the lease
Impairment of long-lived assets
Long-lived assets are tested for recoverability whenever events or
changes in circumstances indicate the carrying value may not be
recoverable. An impairment loss is recognized when the carrying
amount of a long-lived asset exceeds the sum of the estimated
undiscounted cash flows from the long-lived asset. An impairment loss
is measured as the amount by which the carrying amount of the
long-lived asset exceeds the estimated fair value.
Intangible assets
Intangible assets consist of marketing and other rights relating to
products and are initially recorded at cost. Intangible assets have a
finite life and are amortized using the straight-line method over
their estimated period of useful life. Amortization commences on the
earlier of the date of regulatory (generally, U.S. Food and Drug
Administration ("FDA")) approval for marketing the related product or
upon substantive revenue being generated from the product under a
commercial licensing agreement. The estimated period of useful life
has been determined to be 3.5 years from the date of regulatory
approval for marketing the related product. Should amortization
commence as a result of generating revenue, the amortization period
would include the time prior to regulatory approval. Intangible
assets are reviewed for impairment when events or other changes in
circumstances indicate that the carrying amount of the assets may not
be recoverable.
Revenue recognition
The Company recognizes revenue from product sales contracts and
licensing and distribution agreements, which may include multiple
elements. The individual elements of each agreement are divided into
separate units of accounting, if certain criteria are met. The
applicable revenue recognition approach is then applied to each unit.
Otherwise, the applicable revenue recognition criteria are applied to
combined elements as a single unit of accounting.
Product sales - revenue from product sales contracts is recognized
when the product is shipped to the Company's customers, at which time
ownership is transferred.
Licensing revenues - for up-front licensing payments and
pre-commercialization milestones, revenue is deferred and recognized
on a straight-line basis over the estimated term that the Company
maintains substantive contractual obligations. Post-commercialization
milestone payments are recognized as revenue when the underlying
condition is met, the milestone is not a condition to future
deliverables and collectability is reasonably assured. Otherwise,
these milestone payments are recognized as revenue over the remaining
term of the underlying agreement or the term over which the Company
maintains substantive contractual obligations. Royalty revenue is
recognized in the period in which the Company earns the royalty.
Amounts received in advance of recognition as revenue are included in
deferred revenue. Revenue from licensing and distribution agreements
is presented on a net basis.
Research and development
The Company conducts research and development programs and incurs
costs related to these activities, including employee compensation,
materials, professional services and services provided by contract
research organizations. Research and development costs, net of
related tax credits, are expensed in the periods in which they are
incurred.
Income taxes
The Company uses the asset and liability method of accounting for
income taxes. Under this method, future tax assets and liabilities
are determined based on differences between the financial reporting
and income tax bases of assets and liabilities and are measured using
enacted or substantively enacted tax rates and laws that will be in
effect when the difference is expected to reverse. The Company
provides a valuation allowance for future tax assets when it is more
likely than not that some or all of the future tax assets will not be
realized.
Stock-based compensation
The fair value of stock options granted after October 1, 2002 is
recognized as compensation expense on a straight-line basis over the
applicable stock option vesting period. Stock-based compensation
expense is included in operating, general and administrative expense
in the statements of operations and contributed surplus in the
balance sheets. The consideration received on the exercise of stock
options is credited to share capital at the time of exercise.
Financial instruments
Financial instruments are measured at fair value except for loans and
receivables, held-to-maturity investments and other financial
liabilities, which are measured at cost or amortized cost. Gains and
losses on held-for-trading financial assets and liabilities are
recognized in net earnings in the period in which they arise.
Unrealized gains and losses, including changes in foreign exchange
rates on available-for-sale financial assets, are recognized in
comprehensive income until the financial assets are derecognized or
impaired, at which time any unrealized gains or losses are recorded
in net earnings.
The following is the basis of classification and measurement of the
Company's financial instruments:
- Cash is classified as held-for-trading and is measured at fair
value;
- Accounts receivable and loan receivable are classified as loans
and receivables and recorded at cost, which at initial
measurement corresponds to fair value. After initial fair value
measurement, they are measured at amortized cost; and
- Accounts payable and accrued liabilities are classified as
other financial liabilities. They are initially measured at
fair value and, if necessary, subsequent revaluations are
recorded at amortized cost.
2 CHANGES IN ACCOUNTING POLICIES
Goodwill and Intangible Assets
As required by The Canadian Institute of Chartered Accountants
("CICA"), on January 1, 2009, the Company adopted CICA Handbook
Section 3064, Goodwill and Intangible Assets, which establishes
standards for the recognition, measurement, presentation and
disclosure of goodwill and intangible assets. Application of this
pronouncement had no impact on the reported results of operations.
International Financial Reporting Standards ("IFRS")
Commencing in the first quarter of 2011, the Company's financial
statements will be prepared in accordance with IFRS, with 2010
comparative figures and the January 1, 2010 opening balance sheet
restated to conform with IFRS, along with reconciliations from GAAP
to IFRS, as per the guidance provided in IFRS 1, First-Time Adoption
of International Financial Reporting Standards.
As part of its transition to IFRS, the Company has developed an
implementation plan which includes an analysis of accounting
differences between GAAP and IFRS and the assessment of the expected
impact of the accounting differences on its financial statements. The
Company continues to assess the IFRS component evaluation for those
areas of the financial statements that have identified accounting
differences between GAAP and IFRS. As part of its IFRS implementation
plan, the Company will continue to review the impact on its business
activities, its disclosure and internal controls over financial
reporting and its financial reporting systems.
3 RISK MANAGEMENT
Financial risk management
In the normal course of business, the Company is exposed to a number
of financial risks that can affect its operating performance. These
risks are: credit risk, liquidity risk and market risk. The Company's
overall risk management program and prudent business practices seek
to minimize any potential adverse affects on the Company's financial
performance.
(i) Credit risk
Accounts receivable - the Company licenses its products to
distribution partners in major markets. The credit risk associated
with the accounts receivable pursuant to these agreements is
evaluated during initial negotiations and on an ongoing basis. There
have been no events of default under these agreements. As of
December 31, 2009, no accounts receivable balances were considered
impaired or past due.
Loan receivable - the loan receivable is repaid in annual instalments
over a five year period, with one instalment remaining as at
December 31, 2009, which was received subsequent to year end.
(ii) Liquidity risk
The Company has no long term debt with specified repayment terms.
Accounts payable and accrued liabilities are settled in the regular
course of business, based on negotiated terms with trade suppliers.
All components of the balance of $1,570 as at December 31, 2009 are
expected to be settled in less than one year. The carrying value of
the balances approximate their fair value as the impact of
discounting is not significant.
(iii) Market risk
Currency risk - the majority of the Company's revenue and a portion
of its expenses are denominated in US currency. The accounts
receivable balance at December 31, 2009 includes a total of US$864
and accounts payable and accrued liabilities includes a total of
US$882. There is no currency hedging program currently in place due
to the relatively short time frame for settlement of these balances.
A 10% change in the US/CDN exchange rate on the net December 31, 2009
balances would have had a $2 impact on net income.
Capital risk management
Shareholders' equity is managed as the capital of the Company. The
Company's objective when managing capital is to safeguard its ability
to continue as a going concern in order to provide returns for
shareholders and to maintain an optimal capital structure to minimize
the cost of capital. In order to maintain or adjust the capital
structure, the Company may issue new common shares from time to time.
4 PROPERTY AND EQUIPMENT
The following is a summary of property and equipment as at
December 31, 2009:
December 31, 2009 December 31, 2008
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Accumulated Accumulated
Cost Amortization Cost Amortization
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Computer equipment $ 106 $ 97 $ 101 $ 79
Computer software 38 34 35 24
Furniture and fixtures 126 85 126 58
Leasehold improvements 67 35 67 21
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337 $ 251 329 $ 182
Accumulated
amortization (251) (182)
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$ 86 $ 147
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5 LOAN RECEIVABLE
On February 28, 2005, the Company completed the sale of its
wholly-owned pharmaceutical research services business, Pharma Medica
Research Inc. (Pharma Medica). Consideration consisted of a cash
payment of $14,000 and a deferred payment of $4,000. The deferred
payment is non-interest bearing and is repayable in annual
instalments of $800 over a five year period. As the deferred payment
is non-interest bearing, it was originally recorded at its fair value
of $3,112 based on a discount rate of 9%. Imputed interest of $87 has
been recorded on this deferred payment during the year ended
December 31, 2009 ($136 during the year ended December 31, 2008). In
accordance with the terms of the deferred payment agreement, $188 of
clinical services purchased from Pharma Medica were offset against
the annual instalment received on January 30, 2009. The final
instalment of $800 was received on January 30, 2010.
6 INTANGIBLE ASSETS
During fiscal 2001, the Company entered into certain agreements with
Galephar Pharmaceutical Research Inc. ("Galephar") for the rights to
package, test, obtain regulatory approvals and market certain
products in various countries around the world. In accordance with
the terms of the agreements, the Company has acquired these
intangible rights through an investment in three separate series of
preferred shares of Galephar. The Company may be required to pay
additional amounts to Galephar in respect of the CIP-ISOTRETINOIN and
CIP-TRAMADOL ER intangible rights of up to $1,465 (US$1,400) if
certain future milestones are achieved as defined in the agreements.
These additional payments will be made in the form of additional
Galephar preferred share purchases. The recoverability of these
intangible rights is dependant upon sufficient revenues being
generated from the related products currently under development and
commercialization. The Company is currently amortizing the intangible
rights related to CIP-FENOFIBRATE and CIP-ISOTRETINOIN.
With regard to CIP-FENOFIBRATE, in July 2007 the Company entered into
a licensing and distribution agreement with Kowa Pharmaceuticals
America, Inc. ("Kowa"), under which Kowa was granted the exclusive
right to market, sell and distribute Lipofen in the United States.
The Company received an up-front licensing payment of US$2 million
and, under the terms of the agreement, could receive additional
milestone payments of up to US$20 million based on the achievement of
certain net sales targets. The Company also receives a royalty based
on a percentage of net sales. These elements are reflected in
licensing revenue, net of product-related expenses and amounts due to
Galephar, the Company's technology partner. During the second quarter
of 2009, the Company received a US$1 million payment from Kowa in
return for the partial waiver of a non-compete covenant in the
licensing and distribution agreement for Lipofen. The waiver relates
to a combination product and not a fenofibrate-only formulation that
would compete with Lipofen. Under the revised agreement, the Company
will receive additional payments should Kowa be successful in
commercializing its combination product and it includes provisions to
ensure Lipofen revenue is not impacted once the combination product
reaches the market. Revenue is being recognized on this payment using
a straight-line amortization method over the estimated commercial
life of the product. After product-related expenses are deducted,
approximately 50% of all milestone and royalty payments received by
the Company under the agreement will be paid to Galephar. Lipofen was
launched in the U.S. market in 2007.
In August 2008, the Company entered into a development and supply
agreement with Ranbaxy Pharmaceuticals Inc. ("Ranbaxy") under which
Ranbaxy was granted the exclusive right to market, sell and
distribute CIP-ISOTRETINOIN in the United States. Under the terms of
the agreement, the Company received an up-front licensing payment of
US$1 million and could receive additional pre- and
post-commercialization milestone payments of up to US$23 million,
based on the achievement of certain milestone targets. Once the
product is successfully commercialized, the Company will also receive
a royalty based on a percentage of net sales. In addition, Ranbaxy
will reimburse the Company for all costs associated with the clinical
studies required by the FDA to secure NDA approval, up to a
predetermined cap. Any additional development costs associated with
initial FDA approval will be shared equally. The Company is
responsible for all product development activities, including
management of the clinical studies required by the FDA to secure NDA
approval and is also responsible for product supply and
manufacturing, which will be fulfilled by Galephar. During 2009, a
payment of $122 was made to acquire additional intangible rights for
CIP-ISOTRETINOIN. After product-related expenses are deducted,
approximately 50% of all milestone and royalty payments received by
the Company under the agreement will be paid to Galephar.
The following is a summary of intangible assets as at December 31,
2009:
December 31, 2009 December 31, 2008
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Accumulated Accumulated
Cost Amortization Cost Amortization
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CIP-FENOFIBRATE $ 2,332 $ 1,865 $ 2,332 $ 1,398
CIP-ISOTRETINOIN 1,579 274 1,457 -
CIP-TRAMADOL ER 1,735 - 1,735 -
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5,646 $ 2,139 5,524 $ 1,398
Accumulated
amortization (2,139) (1,398)
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$ 3,507 $ 4,126
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7 SHARE CAPITAL
Authorized share capital
The authorized share capital consists of an unlimited number of
preference shares, issuable in series, and an unlimited number of
voting common shares.
Issued share capital
There have been no changes in the Company's share capital during the
period from December 31, 2007 to December 31, 2009. The following is
a summary of the Company's share capital as at December 31, 2009:
Number of
common shares Amount
(in thousands) $
Balance - December 31, 2009 24,055 49,948
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Stock option plan
The following is a summary of the changes in the stock options
outstanding from December 31, 2007 to December 31, 2009:
Weighted
average
Number of exercise
options price
(in thousands) $
Balance - December 31, 2007 998 3.36
Granted in 2008 483 0.78
Expired or cancelled in 2008 (105) 2.55
--------------
Balance - December 31, 2008 1,376 2.51
Granted in 2009 224 0.60
Expired in 2009 (20) 4.33
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Balance - December 31, 2009 1,580 2.22
--------------
--------------
At December 31, 2009, 806,974 options were fully vested and
exercisable (540,482 at December 31, 2008).
During 2009, the Company issued 224,375 stock options under the
employee and director stock option plan, with exercise prices of
$0.61 and $0.55, 25% of which vest on either February 20 or
November 6 of each year for the next four years, commencing in 2010,
and all of which expire in 2019. Total compensation cost for these
stock options is estimated to be $125. This cost will be recognized
over the vesting period of the stock options.
The stock options issued during 2009 were valued using the
Black-Scholes option pricing model with the following assumptions:
Risk-free interest rate 2.87% and 3.52%
Expected life 10 years
Expected volatility 106% and 114%
Expected dividend Nil
The following is a summary of the outstanding options as at
December 31, 2009:
Exercise
Expiry date price Number of options (in thousands)
----------------------------------
$ Vested Unvested Total
January 11, 2012 1.09 125 - 125
September 17, 2014 2.35 125 - 125
March 23, 2016 4.12 150 50 200
June 28, 2016 4.00 135 45 180
September 13, 2016 2.90 52 17 69
March 9, 2017 3.90 112 112 224
February 28, 2018 1.05 53 160 213
November 7, 2018 0.45 45 135 180
December 3, 2018 0.50 10 30 40
February 20, 2019 0.61 - 204 204
November 6, 2019 0.55 - 20 20
----------------------------------
807 773 1,580
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8 CONTRIBUTED SURPLUS
The following is a summary of the changes in contributed surplus from
December 31, 2007 to December 31, 2009:
Amount
$
Balance - December 31, 2007 31,032
Stock-based compensation expense in 2008 581
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Balance - December 31, 2008 31,613
Stock-based compensation expense in 2009 655
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Balance - December 31, 2009 32,268
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9 RESEARCH AND DEVELOPMENT
A total of $5,381 of research and development costs were incurred in
2009 ($2,239 in 2008). The research and development expense reflected
in the Statement of Operations is presented net of Ontario Innovation
Tax Credit ("OITC") program credits of $53 ($440 in 2008) for
qualifying research and development expenditures and an amount of
$4,372 reimbursed by Ranbaxy ($496 in 2008). Under the terms of the
agreement with Ranbaxy, research and development costs incurred for
clinical studies required by the FDA to secure approval for
CIP-ISOTRETINOIN are reimbursed to the Company and as a result, there
was a nil impact to research and development expense with respect to
these costs.
10 INCOME TAXES
The provision for income taxes differs from the amount computed by
applying the statutory income tax rate to the loss for the year. The
sources and tax effects of the differences are as follows:
For the year ended
December 31,
2009 2008
$ $
Statutory income tax rate of 33% applied
to loss for the year (2008 - 33.5%) (896) (1,082)
Permanent differences 192 57
Change in enacted income tax rates and other
items 3,382 (599)
Change in valuation allowance (2,678) 1,624
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Provision for income taxes - -
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The significant components of future income tax assets are summarized
as follows:
As at
December 31,
2009 2008
$ $
Non-capital losses 9,811 10,776
Excess of tax value of property and equipment
over book value 59 49
SR&ED expenditure pool 3,097 3,466
Excess of tax value of intangible assets over
book value 6,194 7,581
Benefit of investment tax credits 2,038 2,057
Capital losses 177 93
Deductible share issue costs 55 127
Ontario harmonization tax credit 120 -
Other temporary differences 407 487
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21,958 24,636
Valuation allowance (21,958) (24,636)
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- -
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The Company has non-capital loss carry forwards of $39,300 as at
December 31, 2009 that expire in varying amounts from 2014 to 2029.
The Company has Scientific Research and Experimental Development
("SR&ED") expenditures of $12,400 which can be carried forward
indefinitely to reduce future years' taxable income.
The Company has approximately $2,700 of investment tax credits on
SR&ED expenditures that are available to be applied against federal
taxes otherwise payable in future years and expire in varying amounts
from 2012 to 2029.
11 LOSS PER SHARE
Loss per share is calculated using the weighted average number of
shares outstanding. The weighted average number of shares outstanding
for the year ended December 31, 2009 and the year ended December 31,
2008 was 24,054,878.
As the Company had a loss for each of the periods presented, basic
and diluted loss per share are the same because the exercise of all
stock options would have an anti-dilutive effect.
12 SUPPLEMENTAL CASH FLOW INFORMATION
The following is a summary of the changes in non-cash operating
items:
For the year ended
December 31,
2009 2008
$ $
Accounts receivable (455) 884
Income taxes receivable 6 122
Prepaid expenses and other current assets (77) (324)
Accounts payable and accrued liabilities 392 119
Deferred revenue 114 189
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(20) 990
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13 SEGMENTED INFORMATION
The Company's operations are categorized into one industry segment,
being specialty pharmaceuticals. All of the Company's assets,
including capital and intangible assets, are in Canada, while all
licensing revenue is derived from the United States.
%SEDAR: 00020415E
For further information: Craig Armitage, Investor Relations, The Equicom Group, (416) 815-0700 ext 278, (416) 815-0080 fax, [email protected]; Larry Andrews, President and CEO, Cipher Pharmaceuticals, (905) 602-5840 ext 324, (905) 602-0628 fax, [email protected]
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