Cipher reports record financial results for Q2 2013

Revenue increases to $5.5 million; Company records earnings per share of $0.13

Toronto Stock Exchange Symbol: DND

 

MISSISSAUGA, ON, July 31, 2013 /CNW/ - Cipher Pharmaceuticals Inc. (TSX: DND) ("Cipher") today announced its financial and operational results for the three and six months ended June 30, 2013.

Q2 2013 Highlights

• Net revenue increased to $5.5 million, from $1.6 million in Q2 2012.
• EBITDA of $3.3 million versus $0.4 million in Q2 2012.
• Net income was $3.1 million, or $0.13 per basic share, compared with net income of $0.02 million, or $0.01 per basic share, in Q2 2012.
• Cash balance increased to $17.8 million at quarter end, compared with $15.8 million at December 31, 2012 and $16.5 million at March 31, 2013.
• Out-licensed Latin American distribution rights for CIP-TRAMADOL ER to Tecnofarma International Ltd.
• Subsequent to quarter end, announced the Canadian launch of Epuris^™ (isotretinoin) capsules.

"The continued strong growth of Absorica^™ drove significant gains in our revenue, earnings and cash for the second quarter," said Larry Andrews, President and CEO of Cipher. "The product was up to 13.1% share of the U.S. isotretinoin market by June, from 7.5% at the end of Q1¹, and the feedback from our marketing partner Ranbaxy has been very positive. We launched the product in Canada in late June with our own sales force and are pursuing out-licensing agreements in other markets. We are also looking at opportunities to expand our product portfolio."

Financial Review and Outlook

Net revenue for Q2 2013 was $5.5 million, compared with $1.6 million in Q2 2012.  The year-over-year increase was mainly driven by the success of Absorica^™, which contributed $4.2 million of net revenue in Q2 2013 versus $0.3 million in Q2 2012.  Net revenue from Lipofen^® was $0.8 million in Q2 2013, compared with $0.9 million in Q2 2012. Net revenue from the Company's extended release tramadol product (ConZip^®/Durela^®) increased to $0.5 million in Q2 2013, compared with $0.4 million in Q2 2012.

Research and Development expense in Q2 2013 was $0.3 million, the same level as incurred in Q2 2012. Selling, General and Administrative ("SG&A") expenses for Q2 2013 increased to $1.9 million, compared to $0.9 million in Q2 2012. The year-over-year increase in SG&A reflects the planned build out of the Company's commercial infrastructure in Canada to support the launch of Epuris^™ and future products.  The Company incurred approximately $0.5 million of one-time costs to support the June 2013 launch of Epuris^™. 

Net income in Q2 2013 grew to $3.1 million, or $0.13 per basic share ($0.12 per diluted share), compared with net income of $0.2 million, or $0.01 per basic and diluted share, in Q2 2012.

The Company's cash position increased at quarter end. As at June 30, 2013, Cipher had cash and cash equivalents of $17.8 million, compared with $15.8 million at December 31, 2012.

For the second half of fiscal 2013, Cipher expects continued aggregate revenue growth from its currently marketed products and the recent introduction of Epuris^™ in Canada. In particular, the Company expects the full-year contribution of Absorica^™ to be a primary revenue driver.  In 2013, Cipher will be investing in commercial sales and marketing capabilities in Canada. The Company expects an increase in operating expenses of approximately $1.0 million to $1.5 million during the balance of 2013, compared to the same period in 2012, related to the launch of Epuris^™ in Canada. Cipher expects its revenue growth to continue to offset the additional spending required to build its commercial infrastructure in Canada.

____________________

¹ Source: IMS Health. Market share calculated based on total isotretinoin prescriptions.

Product Update

Absorica^™/Epuris^™ (CIP-ISOTRETINOIN)
Absorica^™ was released in the U.S. market in late November 2012.  The product has performed strongly to date, achieving 13.1% market share by June 2013, based on total isotretinoin prescriptions.  In addition, the overall U.S. isotretinoin market continues to show growth. Prescriptions increased by 15%² in the first half of 2013 and by 17%³ in Q2 2013, over the comparable periods in the prior year.

The product was also approved by Health Canada in Q4 2012 under the trade name Epuris^™. Cipher launched Epuris^™ in June 2013, supported by a field sales force of six fully dedicated representatives.

Lipofen^® (CIP-FENOFIBRATE)
In Q2 2013, Lipofen^® prescriptions were 6% below Q2 2012 levels, however, Cipher's royalty increased over the period due to the 3% increase in the royalty rate compared to prior year. Kowa Pharmaceuticals America, Cipher's U.S. marketing partner for Lipofen^®, plans to continue to promote the product in a second detail position throughout the remainder of 2013.

ConZip^®/Durela^® (CIP-TRAMADOL ER)
Cipher's extended-release tramadol is marketed in the U.S. by Vertical Pharmaceuticals under the trade name ConZip^®. In Q1 2013, Vertical expanded its sales force from 60 to 75 representatives, which has contributed to improved performance. In Q2 2013, prescriptions grew 5% compared to Q2 2012.  In Canada, Medical Futures launched the product in March 2012 under the trade name Durela^®, with a dedicated sales force comprising 22 representatives. The product demonstrated steady improvement and market share growth during Q2 2013.

Cipher is actively pursuing marketing partners for CIP-TRAMADOL ER and CIP-ISOTRETINOIN in other territories, including Latin America. During Q2 2013, Cipher granted the Latin American distribution rights to CIP-TRAMADOL ER to Tecnofarma International Ltd. Tecnofarma, headquartered in Uruguay, operates in 18 Latin American countries and following regulatory approval, plans to launch the product in several jurisdictions, including Brazil and Mexico.

Other Products
In Q3 2012, Cipher obtained exclusive license and distribution rights in Canada to market the Betesil^® Patch, a novel, patent-protected, self-adhesive medicated plaster for the treatment of inflammatory skin conditions such as plaque psoriasis. The efficacy and safety of the Betesil^® Patch has been established in three successful phase III trials, and the product is currently marketed in several European countries. Cipher is working toward completion of a New Drug Submission for the product and will provide additional detail on expected timelines and plans in the coming months.

In addition, the Company is seeking other late-stage to commercial-stage product candidates targeting specialty markets to support its commercial marketing and sales presence in Canada.

____________________

² Source: IMS Health
³ Source: IMS Health

Notice of Conference Call

Cipher will hold a conference call today, July 31, 2013, 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 with three commercial products and a fourth in development. Our product candidates are typically improved formulations of successful, currently marketed drugs. We in-license a product, manage the required clinical development and regulatory approval process, and either out-license it to a marketing partner, or, in Canada, we may market the product ourselves. Our core capabilities are in clinical and regulatory affairs, product licensing, supply chain management, and marketing and sales. Since the Company was founded in 2000, we have achieved final regulatory approval in the U.S. and Canada for all three of our original products and completed six marketing partnerships, generating growing licensing revenue.

Cipher Pharmaceuticals Inc.

Condensed Interim Financial Statements

For the Three Months Ended June 30, 2013
(Unaudited)

Cipher Pharmaceuticals Inc.
Balance Sheets
As at June 30, 2013 and December 31, 2012
(in thousands of Canadian dollars - unaudited)
		June 30,		December 31,
		2013		2012
		$		$
ASSETS
Current assets
	Cash and cash equivalents	17,775		15,843
	Accounts receivable	8,062		3,185
	Inventory	328		-
	Prepaid expenses and other assets	70		212
		26,235		19,240
	Property and equipment, net	21		25
	Intangible assets, net	2,136		2,690
		28,392		21,955
LIABILITIES
Current liabilities
	Accounts payable and accrued liabilities	5,520		2,808
	Current portion of deferred revenue	2,400		2,392
		7,920		5,200
	Deferred revenue	3,210		4,349
		11,130		9,549
SHAREHOLDERS' EQUITY
	Share capital	9,298		50,339
	Contributed surplus	3,402		33,227
	Retained earnings (Deficit)	4,562		(71,160)
		17,262		12,406
		28,392		21,955

Cipher Pharmaceuticals Inc.
Statements of Operations and Comprehensive Income
Three month periods ended June 30, 2013 and 2012
(in thousands of Canadian dollars, except per share data - unaudited)
		Three months			Six months
		June 30,	June 30,		June 30,	June 30,
		2013	2012		2013	2012
		$	$		$	$
Revenues
	Licensing revenue	5,459	1,629		8,752	3,440
	Product revenue	88	-		88	-
		5,547	1,629		8,840	3,440
Expenses
	Cost of product sold	27	-		27	-
	Research and development	341	348		649	819
	Selling, general and administrative	1,901	861		3,163	1,877
	Amortization of intangible assets	277	245		554	470
	Interest income	(60)	(35)		(115)	(61)
		2,486	1,419		4,278	3,105
Income before income taxes		3,061	210		4,562	335
Provision for (recovery of) income taxes
	Current	811	127		1,209	127
	Deferred	(811)	(127)		(1,209)	(127)
Income and comprehensive income for the period		3,061	210		4,562	335
Basic earnings per share		0.13	0.01		0.19	0.01
Diluted earnings per share		0.12	0.01		0.18	0.01

Cipher Pharmaceuticals Inc.
Statements of Changes in Equity
Three month periods ended June 30, 2013 and 2012
(in thousands of Canadian dollars - unaudited)
					Retained		Total
	Share		Contributed		Earnings		Shareholders'
	Capital		Surplus		(Deficit)		Equity
	$		$		$		$
Balance, January 1, 2013	50,339		33,227		(71,160)		12,406
Income and comprehensive income for the period	-		-		4,562		4,562
Exercise of stock options	26		(14)		-		12
Shares issued under the share purchase plan	93		-		-		93
Share-based compensation - stock option plan	-		189		-		189
Reduction of stated capital	(41,160)		(30,000)		71,160		-
Balance, June 30, 2013	9,298		3,402		4,562		17,262
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

Cipher Pharmaceuticals Inc.
Statements of Cash Flows
Three month periods ended June 30, 2013 and 2012
(in thousands of Canadian dollars - unaudited)
			Three months				Six months
			June 30,		June 30,		June 30,		June 30,
			2013		2012		2013		2012
			$		$		$		$
Cash provided by (used in)
Operating activities
	Income for the period		3,061		210		4,562		335
	Items not affecting cash:
		Depreciation of property and equipment	4		6		9		13
		Amortization of intangible assets	277		245		554		470
		Share-based compensation - share purchase plan	9		5		14		11
		Share-based compensation - stock option plan	121		51		189		100
			3,472		517		5,328		929
	Changes in non-cash operating items:
		Accounts receivable	(2,720)		(403)		(4,877)		(558)
		Inventory	(328)		-		(328)		-
		Prepaid expenses and other assets	69		105		142		197
		Accounts payable and accrued liabilities	1,236		(197)		2,712		103
		Deferred revenue	(533)		4,911		(1,131)		4,716
Net cash generated from operating activities			1,196		4,933		1,846		5,387
Investing activities
	Purchase of property and equipment		-		(2)		(5)		(12)
	Acquisition of intangible rights		-		(671)		-		(671)
Net cash generated from (used in) investing activities			-		(673)		(5)		(683)
Financing activities
	Proceeds from shares issued under the share purchase plan		49		30		79		63
	Proceeds from exercise of stock options		12		-		12		-
Net cash generated from financing activities			61		30		91		63
Increase in cash and cash equivalents			1,257		4,290		1,932		4,767
Cash and cash equivalents, beginning of period			16,518		10,113		15,843		9,636
Cash and cash equivalents, end of period			17,775		14,403		17,775		14,403

SOURCE: Cipher Pharmaceuticals Inc.

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

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