CIPHER REPORTS Q3 2010 FINANCIAL RESULTS
Toronto Stock Exchange Symbol: DND
MISSISSAUGA, ON, Oct. 27 /CNW/ - Cipher Pharmaceuticals Inc. (TSX: DND) today announced its financial and operational results for the three and nine months ended September 30, 2010.
Q3 2010 Summary
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- Net revenue of $1.1 million for Q3 2010, consistent with Q3 2009, and
$4.2 million for the 2010 fiscal year to date, an increase of 80% over
the same nine-month period last year.
- Net loss for the third quarter was $0.3 million ($0.01 per share),
compared with a loss of $0.5 million ($0.02 per share) for Q3 2009.
- Increased cash to $10.5 million at quarter end, compared with cash of
$9.0 million at December 31, 2009.
- Announced that the U.S. Patent and Trademark Office issued a Patent
Notice of Allowance for the Company's extended-release tramadol
product, CIP-TRAMADOL ER.
- Subsequent to quarter end, also received Patent Notice of Allowance
from the Canadian Intellectual Property Office.
"We are pleased to see continued strength in Lipofen(R) prescriptions, which is providing a steadily increasing royalty stream that is substantially offsetting our operating expenses," said Larry Andrews, President and CEO of Cipher. "In the past several months, we achieved another important commercialization milestone as we received patent Notice of Allowances in the U.S. and Canada for our extended-release tramadol, providing important IP protection as we prepare to launch the product. In addition, we made excellent progress with our Phase III CIP-ISOTRETINOIN safety study during the quarter, and patient enrolment is expected to be completed this month - ahead of our original schedule. With more than 800 patients, this is the most comprehensive trial ever conducted on isotretinoin."
Financial Review
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Net revenue in Q3 2010 was $1.1 million, the same as in Q3 2009. However, royalty revenue from Lipofen(R) product sales increased by $0.4 million year-over-year as revenue for Q3 2009 included a one-time $0.4 million payment from Cipher's marketing partner related to a minimum guarantee on Lipofen(R) sales.
Gross Research and Development ("R&D") expenditures for Q3 2010 were $2.7 million, which represents an increase of $2.2 million compared with Q3 2009, driven by the CIP-ISOTRETINOIN clinical study. The reported R&D expenditure amount of $0.2 million for Q3 2010 is net of $2.5 million ($0.2 million in Q3 2009) of reimbursed expenses from Cipher's U.S. marketing partner. Operating, General and Administrative expense for Q3 2010 was $1.0 million, $0.2 million lower than the same period in the prior year.
For the three months ended September 30, 2010, the Company recorded a net loss of $0.3 million ($0.01 per share), compared with a loss of $0.5 million ($0.02 per share) in Q3 2009.
Net revenue for the first nine months of 2010 was $4.2 million, an increase of 80% over the $2.3 million recorded in first nine months of 2009. Net loss for the first nine months of 2010 was $0.03 million ($0.00 per share), compared with a net loss of $2.1 million ($0.09 per share) for the corresponding period last year.
Cipher's financial position remained solid at quarter-end. As at September 30, 2010, the Company had cash of $10.5 million, compared with $9.0 million as at December 31, 2009 and $10.3 as at June 30, 2010.
Product Update
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During Q3 2010, Lipofen(R) monthly prescriptions in the U.S. market remained strong. Total monthly prescriptions for Q3 2010 rose 7% over Q2 2010.
During Q3 2009, Cipher commenced its final 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. During Q3 2010, the Company completed patient screening, and enrolment is expected to be completed in October 2010. Following an approximate six-month treatment period and two months to compile and review the data, Cipher expects to disclose top-line study results in Q3 2011.
In May 2010, Cipher announced that the FDA has approved CIP-TRAMADOL ER, the Company's extended-release tramadol product, for the treatment of moderate to moderately severe chronic pain in adults. Also during Q2 2010, the United States Court of Appeals upheld the lower court's original decision on patent infringement litigation initiated by Pharma Products L.P against Par Pharmaceutical Companies, Inc. relating to Ultram(R) ER, the reference product in Cipher's New Drug Application for CIP-TRAMADOL ER. This decision further mitigates any remaining risk of litigation on these patents against CIP-TRAMADOL ER.
During Q3 2010, Cipher announced that the U.S. Patent and Trademark Office issued a Patent Notice of Allowance for CIP-TRAMADOL ER. Subsequent to quarter end, the Company also received Patent Notice of Allowance from the Canadian Intellectual Property Office. Both patents are expected to be issued this quarter. Cipher is currently preparing for the U.S. commercial launch of CIP-TRAMADOL ER, which includes securing a marketing partner and finalizing commercial manufacturing requirements. Cipher is targeting the first half of 2011 for commercial launch, at which point the product will provide a second royalty revenue stream to the Company.
Cipher continues to actively pursue new early stage pipeline product candidates and advance out-licensing discussions for its current products.
Conference Call and Webcast
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Cipher will hold a conference call today, October 27, 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 is being marketed in the United States by Kowa Pharmaceuticals America under the label Lipofen(R). Cipher's second product, an extended-release version of the pain reliever tramadol, received FDA approval in May 2010 and the Company's third product, a novel formulation of the acne treatment isotretinoin, is in its final Phase III safety study.
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.
Unaudited Financial Statements
For the Three Months Ended September 30, 2010
Cipher Pharmaceuticals Inc.
Unaudited Balance Sheets
(in thousands of dollars)
As at
September 30, December 31,
2010 2009
ASSETS
Current assets
Cash $ 10,538 $ 9,006
Accounts receivable 1,545 967
Prepaid expenses and other current assets 93 457
Loan receivable - 800
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12,176 11,230
Property and equipment, net 62 86
Intangible assets, net (note 3) 3,683 3,507
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$ 15,921 $ 14,823
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LIABILITIES
Current liabilities
Accounts payable and accrued liabilities $ 2,566 $ 1,570
Current portion of deferred revenue 928 1,956
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3,494 3,526
Deferred revenue 1,131 329
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4,625 3,855
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SHAREHOLDERS' EQUITY
Share capital (note 4) 49,977 49,948
Contributed surplus 32,596 32,268
Deficit (71,277) (71,248)
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11,296 10,968
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$ 15,921 $ 14,823
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The accompanying notes are an integral part of these unaudited financial
statements
Cipher Pharmaceuticals Inc.
Unaudited Statements of Operations and Comprehensive Loss
(in thousands of dollars, except per share amounts)
For the three months ended For the nine months ended
September 30 September 30
2010 2009 2010 2009
Revenues
Licensing revenue $ 1,081 $ 1,067 $ 4,217 $ 2,347
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Expenses
Research and
development 220 247 743 701
Operating, general
and administrative 955 1,157 2,975 3,203
Amortization of
property and
equipment 12 19 40 56
Amortization of
intangible assets 176 188 528 565
Interest income (22) (26) (40) (99)
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1,341 1,585 4,246 4,426
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Loss and comprehensive
loss for the period $ (260) $ (518) $ (29) $ (2,079)
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Basic and diluted
loss per share
(note 5) $ (0.01) $ (0.02) $ 0.00 $ (0.09)
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The accompanying notes are an integral part of these unaudited financial
statements
Cipher Pharmaceuticals Inc.
Unaudited Statements of Deficit
(in thousands of dollars)
For the three months ended For the nine months ended
September 30 September 30
2010 2009 2010 2009
Deficit, beginning
of period $ (71,017) $ (70,094) $ (71,248) $ (68,533)
Loss for the period (260) (518) (29) (2,079)
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Deficit, end of
period $ (71,277) $ (70,612) $ (71,277) $ (70,612)
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The accompanying notes are an integral part of these unaudited financial
statements
Cipher Pharmaceuticals Inc.
Unaudited Statements of Cash Flows
(in thousands of dollars)
For the three months ended For the nine months ended
September 30 September 30
2010 2009 2010 2009
Cash provided by
(used in)
Operating activities
Loss $ (260) $ (518) $ (29) $ (2,079)
Items not affecting
cash
Amortization of
property and
equipment 12 19 40 56
Amortization of
intangible assets 176 188 528 565
Stock-based
compensation
expense 93 165 342 490
Imputed interest - (20) - (67)
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21 (166) 881 (1,035)
Net change in
non-cash
operating items 578 (123) 556 14
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599 (289) 1,437 (1,021)
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Investing activities
Proceeds from loan
receivable - - 800 612
Purchase of property
and equipment (2) (3) (16) (8)
Acquisition of
intangible rights
(note 3) (369) - (704) (122)
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(371) (3) 80 482
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Financing activities
Proceeds from
exercise of stock
options - - 15 -
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Increase (Decrease)
in cash 228 (292) 1,532 (539)
Cash, beginning of
period 10,310 9,634 9,006 9,881
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Cash, end of period $ 10,538 $ 9,342 $ 10,538 $ 9,342
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The accompanying notes are an integral part of these unaudited financial
statements
Cipher Pharmaceuticals Inc.
Notes to Unaudited Financial Statements
September 30, 2010
(in thousands of dollars, except per share amounts)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited interim financial statements of the
Company have been prepared in accordance with accounting principles
generally accepted in Canada for interim reporting. Accordingly,
these financial statements do not include all of the disclosures
required by generally accepted accounting principles for annual
financial statements and should be read in conjunction with the
annual financial statements of the Company. In the opinion of
management, all adjustments considered necessary for fair
presentation have been included. All such adjustments are of a normal
recurring nature. Operating results for the nine months ended
September 30, 2010 are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 2010.
There have been no changes to the accounting policies as described in
Note 1 to the financial statements for the year ended December 31,
2009.
2 LOAN RECEIVABLE
During the quarter ended March 31, 2010, the Company received the
final instalment of $800 as part of the deferred payment agreement
from the sale of Pharma Medica Research Inc. in February 2005.
3 INTANGIBLE ASSETS
The Company has 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 preferred shares are redeemable by the Company from
amounts received under licensing agreements for the products. 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 $747 (US$725) 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
recovery 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. After product-related expenses are deducted and
after the recovery of Cipher's investment in the preferred shares of
Galephar, approximately 50% of all milestone and royalties received
by the Company under licensing agreements will be paid to Galephar.
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. Lipofen was
launched in the U.S. market in 2007. During the second quarter of
2010, the Company reached a cumulative net sales level for the
product that resulted in a contract milestone of US$1 million being
achieved.
CIP-ISOTRETINOIN - in August 2008, the Company entered into a
development, distribution and supply agreement with Ranbaxy
Pharmaceuticals Inc. ("Ranbaxy") under which Ranbaxy was granted the
exclusive right to market, sell and distribute the product in the
United States. To date, the Company has received an up-front
licensing payment of US$1 million and a milestone payment of
US$2 million as a result of reaching 50% of the patient enrolment
level for the clinical trial. Under the terms of the agreement the
Company could receive additional pre- and post-commercialization
milestone payments of up to US$21 million, based on the achievement
of certain milestone targets. Once the product is commercialized, the
Company will also receive a royalty based on a percentage of net
sales. In addition, Ranbaxy will reimburse the Company for the 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.
CIP-TRAMADOL ER - In May 2010, the Company received final approval
from the FDA for its extended-release tramadol product for the
treatment of moderate to moderately severe chronic pain in adults.
The achievement of FDA approval triggers additional milestone
payments to Galephar as the Company prepares for commercial
manufacturing. During the third quarter of 2010 payments of $369
($704 for the nine months ended September 30, 2010) were made to
acquire additional intangible rights for CIP-TRAMADOL ER.
4 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
The following is a summary of the changes in share capital from
December 31, 2008 to September 30, 2010:
Number of
common shares Amount
(in thousands) $
Balance outstanding - December 31, 2008
and December 31, 2009 24,055 49,948
Options exercised during Q2 2010 25 29
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Balance outstanding - September 30, 2010 24,080 49,977
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Stock option plan
The following is a summary of the changes in the stock options
outstanding from December 31, 2008 to September 30, 2010:
Weighted
average
Number of exercise
options price
(in thousands) $
Balance outstanding - December 31, 2008 1,376 2.51
Granted in 2009 224 0.60
Expired in 2009 (20) 4.33
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Balance outstanding - December 31, 2009 1,580 2.22
Granted during the three months ended
March 31, 2010 (a) 222 1.60
Exercised during the three months
ended June 30, 2010 (b) (25) 0.61
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Balance outstanding - September 30, 2010 1,777 2.17
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At September 30, 2010, 1,054,560 options were fully vested and
exercisable (766,974 at September 30, 2009).
(a) During the three months ended March 31, 2010, the Company issued
221,500 stock options under the employee and director stock option
plan, which have an exercise price of $1.60, 25% of which vest on
February 19 of each year, commencing in 2011, and expire in 2020.
Total compensation cost for these stock options is estimated to be
$317. This cost will be recognized over the vesting period of the
stock options.
The stock options issued during the three months ended March 31, 2010
were valued using the Black-Scholes option pricing model with the
following assumptions:
Risk-free interest rate 3.50%
Expected life 10 years
Expected volatility 97%
Expected dividend Nil
(b) During the three months ended June 30, 2010, 25,000 stock options
were exercised for a total cash consideration of $15. Capital stock
increased by $29 representing the cash consideration of $15 and a $14
reduction in contributed surplus.
5 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 three and nine month periods ended September 30, 2010 was
24,079,878 and 24,068,706 respectively (for both the three and nine
month periods ended September 30, 2009 the amount 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.
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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