Cipher Reports Strong Q2 2012 Financial Results

- Results highlighted by solid revenue growth and FDA approval of CIP-ISOTRETINOIN -

Toronto Stock Exchange Symbol: DND

MISSISSAUGA, ON, July 25, 2012 /CNW/ - Cipher Pharmaceuticals Inc. (TSX: DND; OTC: CPHMF) today announced its financial and operational results for the three and six months ended June 30, 2012 ("Q2 2012").

Q2 2012 Summary

• Achieved quarterly net revenue of $1.6 million, a 124% increase over Q2 2011.
• Net income in Q2 2012 was $0.2 million, compared with a loss of $0.5 million in Q2 2011.
• Achieved final FDA approval of CIP-ISOTRETINOIN; product to be launched by the Company's U.S. partner Ranbaxy in Q4 2012 as Absorica™.
• Received a US$4.5 million net milestone for final FDA approval of CIP-ISOTRETINOIN.
• Cash balance increased strongly to $14.4 million, compared with $10.1 million as at March 31, 2012.

"It was an excellent quarter for the Company both financially and from a product development perspective, highlighted by final FDA approval of our high-potential acne product, Absorica™," said Larry Andrews, President and CEO of Cipher. "Revenue from Lipofen® was solid and we had early contributions from our once-daily tramadol product which is now marketed both in the U.S. and Canada as ConZip® and Durela™. With the pending launch of Absorica™ in Q4 of this year, we will have three product revenue streams, no debt and a strong cash position to fund future growth opportunities."

Financial Review

Net revenue in Q2 2012 was $1.6 million, an increase of 124% compared with $0.7 million in Q2 2011. Net revenue from Lipofen® increased to $0.9 million during Q2 2012, compared with $0.6 million in Q2 2011. Net revenue from ConZip® was $0.4 million in Q2 2012.  No revenue was recognized in Q2 of the prior year as the product was launched in Q3 2011. Revenue from Durela™ was not significant during Q2 2012 as the product was only launched in mid-March 2012. Absorica™ contributed $0.3 million of net revenue reflecting recognition of milestones received to date.

Research and Development expense decreased during Q2 2012 to $0.3 million, compared with $0.6 million in Q2 2011. Operating, General and Administrative expenses for Q2 2012 were $0.9 million, compared to $0.6 million in Q2 2011. Net income in Q2 2012 was $0.2 million, or $0.01 per share, compared with a net loss of $0.5 million, or $0.02 per share, in Q2 2011.

The Company's financial position remained strong at quarter end. As at June 30, 2012, Cipher had cash and cash equivalents of $14.4 million, compared with $10.1 million as at March 31, 2012. During Q2 2012, the Company received a $4.5 million milestone payment (net of the amount shared with its partner) for final FDA approval of CIP-ISOTRETINOIN.

Product Update

Lipofen®
During Q2 2012, Kowa's solid promotional effort resulted in Lipofen® monthly prescriptions and sales increasing significantly as reflected in a 50% increase in the Cipher's net revenue over Q2 2011. Subsequent to quarter end, Cipher achieved another contractual sales goal for the product and as a result, the royalty percentage for Lipofen® increases by three percentage points on a go-forward basis.  This change is retroactive to October 2011 and will result in a one-time "catch-up" payment to Cipher, which will be recorded in Q3 2012.

CIP-TRAMADOL ER (ConZip®/Durela™)
Cipher's extended-release tramadol was launched in the U.S. by Vertical Pharmaceuticals in September 2011 under the trade name ConZip®. Vertical's dedicated sales force comprises 60 representatives, with plans for further expansion in Q4 2012. Product sales have increased steadily during 2012 and the Company expects continued growth as U.S. physicians gain more experience with the product and Vertical expands its coverage.

In Canada, Medical Futures launched the product in March 2012 under the trade name Durela™, with a dedicated sales force comprising 22 representatives.

CIP-ISOTRETINOIN (Absorica™)
During Q2 2012, Cipher achieved a major milestone with final FDA approval of CIP-ISOTRETINOIN for the treatment of severe recalcitrant nodular acne. The product will be launched in the U.S. market under the name Absorica™ and pre-commercial activities are underway with the Company's partner, Ranbaxy Pharmaceuticals, for a planned U.S. launch in Q4 2012.  As a result of the FDA approval of Absorica™, Cipher received a US$9.0 million milestone from Ranbaxy, approximately 50% of which was shared with Galephar. Going forward, Cipher will also receive royalties on net U.S. sales and is eligible for future milestone payments based on sales targets. Under the agreement with Ranbaxy, Cipher is responsible for product supply and manufacturing.

Cipher completed a New Drug Submission to Health Canada in Q4 2011.  This has been accepted for review, with a response from Health Canada expected by Q1 2013.  Once approved, the Company plans to market the product in Canada on its own.

New Products and Out-Licensing Activities
Cipher is actively pursuing out-licensing discussions for its current products in other territories and is seeking late-stage to commercial-stage product candidates to complement its Canadian commercialization plans for CIP-ISOTRETINOIN.

Notice of Conference Call

Cipher will hold a conference call today, July 25, 2012, 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 (TSX: DND; OTC: CPHMF) is a growing specialty pharmaceutical company that commercializes novel formulations of successful, currently marketed molecules.  Cipher's strategy is to in-license clearly differentiated products, advance them through the clinical development and regulatory approval stages, and out-license to international marketing partners.  The Company's first product is a fenofibrate formulation marketed in the United States as Lipofen®. Cipher's second product, an extended-release tramadol, is marketed in the United States as ConZip® and is marketed in Canada as Durela™.  Cipher's third product, a novel formulation of the acne treatment isotretinoin, was recently approved by the FDA and is expected to be launched in Q4 2012 as Absorica™.  The product is also currently being reviewed by Health Canada. 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. These factors include, but are not limited to losses; the applicability of patents and proprietary technology; possible patent litigation; approval of products in the Company's pipeline; marketing of products; meeting projected drug development timelines and goals; product liability and insurance; dependence on strategic partnerships and licensees; concentration of the Company's revenue; substantial competition and rapid technological change in the pharmaceutical industry; the publication of negative results of clinical trials of the Company's products; the ability to access capital; the ability to attract and retain key personnel; changes in government regulation or regulatory approval processes; dependence on contract research organizations; third party reimbursement; the success of the Company's strategic investments; the achievement of development goals and time frames; the possibility of shareholder dilution; market price volatility of securities; and the existence of significant shareholders. 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.

Financial Statements

For the Six Months Ended June 30, 2012
(Unaudited)

Cipher Pharmaceuticals Inc.
Balance Sheets
As at June 30, 2012 and December 31, 2011
(in thousands of Canadian dollars - unaudited)
									June 30,							December 31,
									2012							2011
									$							$
ASSETS
Current assets
	Cash and cash equivalents											14,403				9,636
	Accounts receivable											2,340				1,782
	Prepaid expenses and other assets											75				272
												16,818				11,690
	Property and equipment, net											24				25
	Intangible assets, net											3,145				2,944
												19,987				14,659
LIABILITIES
Current liabilities
	Accounts payable and accrued liabilities											2,015				1,912
	Current portion of deferred revenue											2,409				917
												4,424				2,829
	Deferred revenue											5,554				2,330
												9,978				5,159
SHAREHOLDERS' EQUITY
	Share capital											50,254				50,172
	Contributed surplus											33,124				33,032
	Deficit											(73,369)				(73,704)
												10,009				9,500
												19,987				14,659

Cipher Pharmaceuticals Inc.
Statements of Operations and Comprehensive Income (Loss)
Three and six month periods ended June 30, 2012 and 2011
(in thousands of Canadian dollars, except per share data - unaudited)
					Three months				Six months
					June 30,		June 30,		June 30,		June 30,
					2012		2011		2012		2011
					$		$		$		$
Revenues
	Licensing revenue				1,629		727		3,440		1,402
Expenses
	Research and development				348		578		819		1,125
	Operating, general and administrative				861		618		1,877		1,795
	Amortization of intangible assets				245		60		470		119
	Interest income				(35)		(20)		(61)		(43)
					1,419		1,236		3,105		2,996
Income (loss) before income taxes					210		(509)		335		(1,594)
Provision for (recovery of) income taxes
	Current				127		-		127		-
	Deferred				(127)		-		(127)		-
Income (loss) and comprehensive income (loss) for the period					210		(509)		335		(1,594)
Basic and diluted earnings (loss) per share					0.01		(0.02)		0.01		(0.07)

 

Cipher Pharmaceuticals Inc.
Statements of Changes in Equity
Six month periods ended June 30, 2012 and 2011
(in thousands of Canadian dollars - unaudited)
														Total
				Share			Contributed							Shareholders'
				Capital			Surplus				Deficit			Equity
				$			$				$			$
Balance, January 1, 2012				50,172			33,032				(73,704)			9,500
Income and comprehensive income for the period				-			-				335			335
Exercise of stock options				8			(8)				-			-
Shares issued under the share purchase plan				74			-				-			74
Share-based compensation - stock option plan				-			100				-			100
Balance, June 30, 2012				50,254			33,124				(73,369)			10,009
Balance, January 1, 2011				49,977			32,890				(71,393)			11,474
Loss and comprehensive loss for the period				-			-				(1,594)			(1,594)
Exercise of stock options				90			(43)				-			47
Share-based compensation - stock option plan				-			81				-			81
Balance, June 30, 2011				50,067			32,928				(72,987)			10,008

Cipher Pharmaceuticals Inc.
Statements of Cash Flows
Three and six month periods ended June 30, 2012 and 2011
(in thousands of Canadian dollars - unaudited)
			Three months				Six months
			June 30,		June 30,		June 30,		June 30,
			2012		2011		2012		2011
			$		$		$		$
Cash provided by (used in)
Operating activities
	Income (loss) for the period		210		(509)		335		(1,594)
	Items not affecting cash:
		Depreciation of property and equipment	6		8		13		21
		Amortization of intangible assets	245		60		470		119
		Share-based compensation - share purchase plan	5		-		11		-
		Share-based compensation - stock option plan	51		53		100		81
			517		(388)		929		(1,373)
	Changes in non-cash operating items:
		Accounts receivable	(403)		(238)		(558)		(22)
		Prepaid expenses and other assets	105		158		197		258
		Accounts payable and accrued liabilities	(197)		(247)		103		(611)
		Deferred revenue	4,911		96		4,716		(48)
Net cash generated from (used in) operating activities			4,933		(619)		5,387		(1,796)
Investing activities
	Purchase of property and equipment		(2)		(2)		(12)		(6)
	Acquisition of intangible rights		(671)		-		(671)		-
Net cash generated from (used in) investing activities			(673)		(2)		(683)		(6)
Financing activities
	Proceeds from shares issued under the share purchase plan		30		-		63		-
	Proceeds from exercise of stock options		-		47		-		47
Net cash generated from (used in) financing activities			30		47		63		47
Increase (Decrease) in cash and cash equivalents			4,290		(574)		4,767		(1,755)
Cash and cash equivalents, beginning of period			10,113		9,147		9,636		10,328
Cash and cash equivalents, end of period			14,403		8,573		14,403		8,573

 

SOURCE: Cipher Pharmaceuticals Inc.

Craig Armitage
Investor Relations
The Equicom Group
[phone] ext 278
[phone] fax
[email protected]

Larry Andrews
President and CEO
Cipher Pharmaceuticals
[phone] ext 324
[phone] fax
[email protected]