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.

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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