Cipher reports record financial results for Q3 2013

Revenue increases to $5.6 million and earnings per share rise to $0.14 

Toronto Stock Exchange Symbol: DND

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

Q3 2013 Highlights

• Net revenue increased to $5.6 million, from $2.1 million in Q3 2012.
• EBITDA¹ of $3.6 million versus $1.0 million in Q3 2012.
• Net income was $3.4 million, or $0.14 per share, compared with net income of $0.08 million, or $0.03 per share, in Q3 2012.
• Cash balance increased to $20.0 million at quarter end, compared with $15.8 million at December 31, 2012 and $17.8 million at June 30, 2013.
• Launched Epuris^™ (isotretinoin) capsules in the Canadian market.

"Absorica^™ performed well again in the third quarter, with market share increasing to 17.3%² by September from 13.1% in June, resulting in strong increases in our revenue, earnings and cash," said Larry Andrews, President and CEO of Cipher. "While Epuris^™ was only launched recently, feedback from the Canadian dermatology community has been very encouraging. With a healthy financial position, we continue to pursue growth through product portfolio expansion and new out-licensing agreements for our current products in other regions."

Financial Review

Net revenue for Q3 2013 was $5.6 million, compared with $2.1 million in Q3 2012.  The year-over-year increase was mainly driven by the success of Absorica^™, which contributed $4.5 million of net revenue in Q3 2013 versus $0.5 million in Q3 2012.  Net revenue from Lipofen^® was $0.6 million in Q3 2013, compared with $1.3 million in Q3 2012. The comparable period in 2012 benefited from $0.4 million in revenue from a retroactive increase in Cipher's royalty percentage. Net revenue from the Company's extended release tramadol product (ConZip^®/Durela^®) increased to $0.5 million in Q3 2013, compared with $0.3 million in Q3 2012.

Research and Development expense in Q3 2013 was $0.4 million, a slight increase over $0.3 million in Q3 2012. Selling, General and Administrative ("SG&A") expenses for Q3 2013 increased to $1.7 million, compared to $0.8 million in Q3 2012. The year-over-year increase in SG&A reflects the build out of the Company's commercial infrastructure in Canada to support the launch of Epuris^™ and future products. 

Net income in Q3 2013 grew to $3.4 million, or $0.14 per share ($0.13 per share on a fully diluted basis), compared with net income of $0.8 million, or $0.03 per share, in Q3 2012.

The Company's cash position increased at quarter end. As at September 30, 2013, Cipher had cash and cash equivalents of $20.0 million, compared with $15.8 million at December 31, 2012.

^{___________________________
1} EBITDA - Non-IFRS Financial Measure: the term EBITDA (earnings before interest, taxes, depreciation and amortization) does not have any standardized meaning under International Financial Reporting Standards ("IFRS") and therefore may not be comparable to similar measures presented by other companies. The Company defines EBITDA as earnings before interest expense, income taxes, depreciation of property and equipment, amortization of intangible assets and non-cash share-based compensation.

² 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 well to date, achieving 17.3% market share by September 2013, compared to 13.1% in June 2013, based on total isotretinoin prescriptions.  In addition, the overall U.S. isotretinoin market continues to show growth. Prescriptions increased by 15%³ in the nine months of 2013 and by 19%⁴ in Q3 2013, over the comparable periods in the prior year. While total U.S. prescriptions increased year-over-year, they declined from Q2 2013 to Q3 2013. This is consistent with the historical seasonal pattern that has seen total U.S. isotretinoin prescriptions decrease by approximately 11% from Q2 (the summer months) to Q3. Based on Absorica's strong sales performance to-date, Cipher expects to achieve a US$10.0 million milestone payment by the end of Q1 2014 at the latest (50% of which would be shared with its technology partner, Galephar Pharmaceutical Research).

In September 2013, Cipher's partner Ranbaxy received a Paragraph IV Certification Notice of filing from Watson Laboratories Inc. ("Watson") of an Abbreviated New Drug Application ("ANDA") to the FDA for a generic version of Absorica^™. Ranbaxy and Cipher intend to vigorously defend Absorica's intellectual property rights and pursue all available legal and regulatory pathways in defense of the product.  Cipher has been advised by Ranbaxy that this development has no impact on current sales and marketing plans for the product, and that Ranbaxy plans to continue to invest in Absorica^™ to increase sales and market penetration.

CIP-ISOTRETINOIN was approved by Health Canada in Q4 2012 under the trade name Epuris^™. Cipher launched Epuris^™ in early July 2013, supported by a field sales force of six full-time representatives and one part-time representative.

Lipofen^® (CIP-FENOFIBRATE)
In Q3 2013, new prescriptions for Lipofen^® were 6% below Q3 2012 levels. Kowa Pharmaceuticals America, Cipher's U.S. marketing partner for Lipofen^®, plans to continue to promote the product in a second detail position for 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 modestly improved performance. In Q3 2013, prescriptions grew 3% compared to Q3 2012.  In Canada, Medical Futures launched the product in March 2012 under the trade name Durela^®, with a dedicated sales force comprising 22 representatives. Following its strong performance in Q2 2013, the product continued to demonstrate steady improvement, with a 25% growth in sales during Q3 2013.

In Q2 2013, Cipher out-licensed the Latin American distribution rights for CIP-TRAMADOL ER to Tecnofarma International Ltd. Cipher is working closely with Tecnofarma in preparing regulatory submissions for certain countries in Latin America.

Cipher is also actively pursuing marketing partners for CIP-TRAMADOL ER and CIP-ISOTRETINOIN in other territories.

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 with its partner, Institut Biochimique SA, on 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.

^{___________________
3} Source: IMS Health

⁴ Source: IMS Health

Notice of Conference Call
Cipher will hold a conference call today, October 30, 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) 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.
Balance Sheets
As at September 30, 2013 and December 31, 2012
(in thousands of Canadian dollars - unaudited)
		September 30,		December 31,
		2013		2012
		$		$
ASSETS
Current assets
	Cash and cash equivalents	20,035		15,843
	Accounts receivable	9,220		3,185
	Inventory	318		-
	Prepaid expenses and other assets	200		212
		29,773		19,240
	Property and equipment, net	21		25
	Intangible assets, net	1,859		2,690
		31,653		21,955
LIABILITIES
Current liabilities
	Accounts payable and accrued liabilities	5,747		2,808
	Current portion of deferred revenue	2,392		2,392
		8,139		5,200
	Deferred revenue	2,611		4,349
		10,750		9,549
SHAREHOLDERS' EQUITY
	Share capital	9,514		50,339
	Contributed surplus	3,464		33,227
	Retained earnings (Deficit)	7,925		(71,160)
		20,903		12,406
		31,653		21,955

Cipher Pharmaceuticals Inc.
Statements of Operations and Comprehensive Income
Three and nine month periods ended September 30, 2013 and 2012
(in thousands of Canadian dollars, except per share data - unaudited)
		Three months				Nine months
		September 30,		September 30,		September 30,		September 30,
		2013		2012		2013		2012
		$		$		$		$
Revenues
	Licensing revenue	5,592		2,118		14,344		5,558
	Product revenue	44		-		132		-
		5,636		2,118		14,476		5,558
Expenses
	Cost of product sold	12		-		39		-
	Research and development	388		335		1,037		1,154
	Selling, general and administrative	1,660		799		4,823		2,676
	Amortization of intangible assets	277		277		831		747
	Interest income	(64)		(47)		(179)		(108)
		2,273		1,364		6,551		4,469
Income before income taxes		3,363		754		7,925		1,089
Provision for (recovery of) income taxes
	Current	891		225		2,100		352
	Deferred	(891)		(225)		(2,100)		(352)
Income and comprehensive income for the period		3,363		754		7,925		1,089
Basic earnings per share		0.14		0.03		0.32		0.04
Diluted earnings per share		0.13		0.03		0.31		0.04

 

Cipher Pharmaceuticals Inc.
Statements of Changes in Equity
Nine month periods ended September 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	-		-		7,925		7,925
Exercise of stock options	194		(93)		-		101
Shares issued under the share purchase plan	141		-		-		141
Share-based compensation - stock option plan	-		330		-		330
Reduction of stated capital	(41,160)		(30,000)		71,160		-
Balance, September 30, 2013	9,514		3,464		7,925		20,903
Balance, January 1, 2012	50,172		33,032		(73,704)		9,500
Income and comprehensive income for the period	-		-		1,089		1,089
Exercise of stock options	8		(8)				-
Shares issued under the share purchase plan	114		-		-		114
Share-based compensation - stock option plan	-		151		-		151
Balance, September 30, 2012	50,294		33,175		(72,615)		10,854

 

Cipher Pharmaceuticals Inc.
Statements of Cash Flows
Three and nine month periods ended September 30, 2013 and 2012
(in thousands of Canadian dollars - unaudited)
			Three months				Nine months
			September 30,		September 30,		September 30,		September 30,
			2013		2012		2013		2012
			$		$		$		$
Cash provided by (used in)
Operating activities
	Income for the period		3,363		754		7,925		1,089
	Items not affecting cash:
		Depreciation of property and equipment	3		3		12		16
		Amortization of intangible assets	277		277		831		747
		Share-based compensation - share purchase plan	7		6		21		17
		Share-based compensation - stock option plan	141		51		330		151
			3,791		1,091		9,119		2,020
	Changes in non-cash operating items:
		Accounts receivable	(1,158)		(417)		(6,035)		(975)
		Inventory	10		-		(318)		-
		Prepaid expenses and other assets	(130)		(27)		12		170
		Accounts payable and accrued liabilities	227		795		2,939		898
		Deferred revenue	(607)		(698)		(1,738)		4,018
Net cash generated from operating activities			2,133		744		3,979		6,131
Investing activities
	Purchase of property and equipment		(3)		-		(8)		(12)
	Acquisition of intangible rights		-		(100)		-		(771)
Net cash used in investing activities			(3)		(100)		(8)		(783)
Financing activities
	Proceeds from shares issued under the share purchase plan		41		34		120		97
	Proceeds from exercise of stock options		89		-		101		-
Net cash generated from financing activities			130		34		221		97
Increase in cash and cash equivalents			2,260		678		4,192		5,445
Cash and cash equivalents, beginning of period			17,775		14,403		15,843		9,636
Cash and cash equivalents, end of period			20,035		15,081		20,035		15,081

 

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]