Cipher reports Q1 2009 financial results



    Toronto Stock Exchange Symbol: DND

    MISSISSAUGA, ON, May 13 /CNW/ - Cipher Pharmaceuticals Inc. (TSX: DND)
today announced its financial and operational results for the three months
ended March 31, 2009.

    
    Q1 2009 Summary
    ----------------

    -   Received tentative U.S. Food and Drug Administration ("FDA") approval
        for CIP-TRAMADOL ER for distribution in the United States.
    -   Total revenue of $0.6 million, driven by growing sales of Lipofen(R)
        and contribution from the CIP-ISOTRETINOIN licensing agreement.
    -   Solid balance sheet at quarter end with cash of $9.1 million and no
        debt.
    -   Subsequent to quarter end, finalized FDA Special Protocol Assessment
        ("SPA") for CIP-ISOTRETINOIN Phase III safety trial.
    

    "The first quarter was highlighted by tentative FDA approval of our
extended-release tramadol product - an important regulatory milestone for the
Company," said Larry Andrews, President and CEO of Cipher. "We were pleased
with the continued steady growth of Lipofen prescriptions in the quarter as
our partner Kowa expands its salesforce. With the CIP-ISOTRETINOIN study
protocol now finalized, we look forward to beginning the trial in the coming
months. We are also working diligently on new product in-licensing activity."

    
    Financial Review
    -----------------
    
    Total revenue in Q1 2009 was $0.6 million, compared with $0.2 million in
Q1 2008, driven by the continued market penetration of Lipofen(R) as Kowa
expands its sales force.
    Research and Development ("R&D") expenses for Q1 2009 were $0.2 million,
a decrease of $0.2 million compared with the same period in 2008, which
reflects the advanced stage of development of the Company's current products.
Operating, General and Administrative ("OG&A") expenses for Q1 2009 were $1.0
million, compared with $0.8 million in Q1 2008. The increase reflects the
addition of new business development resources late in 2008 to support the
Company's in-licensing and out-licensing activities. The loss for the three
months ended March 31, 2009 was $0.8 million ($0.03 per basic and diluted
share), a decrease of 28% compared with the loss of $1.1 million ($0.04 per
basic and diluted share) in Q1 2008. The improved performance was primarily a
result of increased revenue generated from the Lipofen(R) U.S. distribution
agreement and reduced R&D expenditures.
    The Company's financial position remained solid at quarter end. As at
March 31, 2009, Cipher had cash of $9.1 million, compared with $9.9 million as
at December 31, 2008.

    
    Product Update
    ---------------
    
    During Q1 2009, Lipofen(R) monthly prescriptions showed steady growth,
and Cipher expects this trend to continue as Kowa increases penetration of the
primary care physicians in its targeted regions and expands its sales force.
Since the Kowa acquisition, the number of sales reps has increased from
approximately 65 to 140 at the end of April, with further increases planned in
2010.
    During Q1 2009, Cipher and its advisors continued their dialogue and
discussions with the FDA regarding the appropriate design of a Phase III
safety trial for CIP-ISOTRETINOIN. Subsequent to quarter end, the Company
finalized the study protocol under a Special Protocol Assessment ("SPA") and
plans to begin trial enrolment in early Q3 2009.
    During Q2 2008, Cipher submitted a revised NDA to the FDA for
CIP-TRAMADOL ER, the Company's extended-release formulation of tramadol. In
February 2009, the Company received tentative approval from the FDA. While the
product meets all the FDA's requirements for manufacturing quality, clinical
safety and efficacy, the Company must resolve certain patent issues associated
with the reference product, Ultram(R) ER, before CIP-TRAMADOL ER is
commercialized.
    Cipher continues to actively pursue new pipeline products and advance
out-licensing discussions for its current products.

    
    Notice of Conference Call
    --------------------------
    
    Cipher will hold a conference call today, May 13, 2009, at 8:30 a.m. (ET)
to discuss its financial results and other corporate developments. To access
the conference call by telephone, dial 416-644-3424 or 1-800-731-5319. 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 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. Some forward-looking statements may be
identified by words like "may", "will", "anticipate", "estimate", "expect",
"intend", or "continue" or the negative thereof or similar variations. 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 Balance Sheets
    (in thousands of dollars)

                                                              As at
                                                      March 31,  December 31,
                                                        2009          2008

    ASSETS

    Current assets
    Cash                                             $   9,103     $   9,881
    Accounts receivable                                    754           512
    Income taxes receivable                                  6             6
    Prepaid expenses and other current assets              285           380
    Current portion of loan receivable (note 2)            741           608
    -------------------------------------------------------------------------
                                                        10,889        11,387

    Property and equipment, net                            128           147

    Loan receivable                                          -           717

    Intangible assets, net (note 3)                      4,060         4,126
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                     $  15,077     $  16,377
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES

    Current liabilities
    Accounts payable and accrued liabilities         $     595     $   1,178
    Current portion of deferred revenue                  1,247         1,177
    -------------------------------------------------------------------------
                                                         1,842         2,355

    Deferred revenue                                       823           994
    -------------------------------------------------------------------------
                                                         2,665         3,349
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY

    Share capital (note 4)                              49,948        49,948
    Contributed surplus                                 31,774        31,613
    Deficit                                            (69,310)      (68,533)
    -------------------------------------------------------------------------
                                                        12,412        13,028
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                     $  15,077     $  16,377
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    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
                                                      March 31,     March 31,
                                                        2009          2008

    Revenues
      Licensing revenue                              $     602     $     177
    -------------------------------------------------------------------------

    Expenses
      Research and development                             229           450
      Operating, general and administrative                989           811
      Amortization of property and equipment                19            17
      Amortization of intangible assets                    188           117
      Interest income                                      (46)         (138)
    -------------------------------------------------------------------------

                                                         1,379         1,257
    -------------------------------------------------------------------------

    Loss and comprehensive loss for the period       $    (777)    $  (1,080)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted loss per share (note 5)        $   (0.03)    $   (0.04)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    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          For the
                                             months ended        year ended
                                        March 31,     March 31,  December 31,
                                          2009          2008          2008

    Deficit, beginning of period       $ (68,533)    $ (65,303)    $ (65,303)

    Loss for the period                     (777)       (1,080)       (3,230)
    -------------------------------------------------------------------------
    Deficit, end of period             $ (69,310)    $ (66,383)    $ (68,533)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    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
                                                      March 31,     March 31,
                                                        2009          2008

    Cash provided by (used in)

    Operating activities
      Loss                                           $    (777)    $  (1,080)
      Items not affecting cash
        Amortization of property and equipment              19            17
        Amortization of intangible assets                  188           117
        Stock-based compensation expense                   161           117
        Imputed interest (note 2)                          (28)          (41)
    -------------------------------------------------------------------------
                                                          (437)         (870)
      Net change in non-cash operating items              (831)          179
    -------------------------------------------------------------------------

                                                        (1,268)         (691)
    -------------------------------------------------------------------------

    Investing activities
      Proceeds from loan receivable (note 2)               612             -
      Acquisition of intangible rights (note 3)           (122)            -
    -------------------------------------------------------------------------

                                                           490             -
    -------------------------------------------------------------------------

    Decrease in cash                                      (778)         (691)
    Cash, beginning of period                            9,881        10,961
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash, end of period                              $   9,103     $  10,270
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The accompanying notes are an integral part of these unaudited financial
    statements



    Cipher Pharmaceuticals Inc.
    Notes to Unaudited Financial Statements
    March 31, 2009
    (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 three months
    ended March 31, 2009 are not necessarily indicative of the results that
    may be expected for the fiscal year ending December 31, 2009.

    There have been no changes to the accounting policies as described in
    Note 1 and Note 2 to the financial statements for the year ended December
    31, 2008.

    2   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 recorded
    at its fair value of $3,112 based on a discount rate of 9%. Imputed
    interest of $28 has been recorded on this deferred payment during the
    three months ended March 31, 2009 ($41 during the three months ended
    March 31, 2008). In accordance with the terms of the deferred payment
    agreement, $188 of clinical services purchased from Pharma Medica in 2008
    were offset against the annual instalment received on January 30, 2009.

    3   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
    $1,764 (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 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.

    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, which also
    incorporates product-related expenses and amounts due to Galephar, the
    Company's technology partner. Revenue from licensing and distribution
    agreements is presented on a net basis. 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, distribution 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 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. 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.

    4   SHARE CAPITAL

    Authorized share capital

    The authorized share capital consists of an unlimited number of 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 March 31, 2009. The following is a
    summary of the Company's share capital as at March 31, 2009:

                                                   Number of
                                                 common shares       Amount
                                                 (in thousands)         $

    Balance outstanding - March 31, 2009                24,055        49,948
                                                -----------------------------
                                                -----------------------------

    Stock option plan

    The following is a summary of the changes in the stock options
    outstanding from December 31, 2007 to March 31, 2009:

                                                                    Weighted
                                                                     average
                                                   Number of        exercise
                                                    options            price
                                                 (in thousands)          $

    Balance outstanding - December 31, 2007                998          3.36
      Options granted during 2008                          483          0.78
      Options that expired or were cancelled
       during 2008                                        (105)         2.55
                                                 --------------
    Balance outstanding - December 31, 2008              1,376          2.51

      Options granted during the three months
       ended March 31, 2009                                204          0.61
                                                 --------------
    Balance outstanding - March 31, 2009                 1,580          2.27
                                                 --------------
                                                 --------------

    At March 31, 2009, 721,974 options were fully vested and exercisable
    (500,418 at March 31, 2008).

    During the three months ended March 31, 2009, the Company issued 204,375
    stock options under the employee and director stock option plan, which
    have an exercise price of $0.61, 25% of which vest on February 20 of each
    year, commencing in 2010, and expire in 2019. Total compensation cost for
    these stock options is estimated to be $114. This cost will be recognized
    over the vesting period of the stock options.

    The stock options issued during the three months ended March 31, 2009
    were valued using the Black-Scholes option pricing model with the
    following assumptions:

        Risk-free interest rate                                        3.14%
        Expected life                                               10 years
        Expected volatility                                              99%
        Expected dividend                                                Nil


    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 months ended March 31, 2009 and March 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.
    

    %SEDAR: 00020415E




For further information:

For further information: Craig Armitage, Investor Relations, The Equicom
Group, (416) 815-0700 ext 278, (416) 815-0080 fax, carmitage@equicomgroup.com;
Larry Andrews, President and CEO, Cipher Pharmaceuticals, (905) 602-5840 ext
324, (905) 602-0628 fax, landrews@cipherpharma.com


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