Cipher Pharmaceuticals Reports Q3 2017 Operating & Financial Results
- Strong Q3 performance
- 29% revenue growth and 77% growth in income from continuing operations
- Production resumes at Puerto Rico manufacturing facilities
MISSISSAUGA, ON, Nov. 3, 2017 /CNW/ - Cipher Pharmaceuticals Inc. (TSX:CPH) ("Cipher" or "the Company") today announced its financial and operational results for the three months ended September 30, 2017. Unless otherwise noted, all figures are in U.S. currency.
Financial & Business Highlights for Q3 2017
(all figures compared to Q3 2016, unless otherwise noted)
- Total net revenue increased 29% to $10.1 million, from $7.8 million in Q3 2016.
- Licensing revenue of $8.9 million, an increase of 30% compared with $6.8 million in Q3 2016.
- Product revenue of $1.2 million, up 24% from $1.0 million in Q3 2016.
- Income from continuing operations of $3.9 million, or $0.15 per basic share, compared with income from continuing operations of $2.2 million, or $0.08 per basic share, in Q3 2016.
- Total operating expenses decreased by 15% to $3.8 million for Q3 2017 and by 21% for the fiscal year to date.
- Adjusted EBITDA1 from continuing operations increased 62% to $6.7 million, compared with $4.1 million in Q3 2016.
- Cash increased to $24.3 million from $19.7 million at the end of Q2 2017.
"We delivered another outstanding quarter, with continued double-digit growth in revenue powered by the strong performance of our Absorica® and Epuris® products," said Robert Tessarolo, President and CEO of Cipher. "Our third-quarter EBITDA also increased significantly, underscoring our exceptional execution to return the business to higher levels of profitability. Our cash position continues to strengthen, increasing by $4.7 million over the balance at the end of second quarter of 2017."
Mr. Tessarolo added: "With our growing cash balance and improved cash flow from operations, Cipher is even better positioned to execute on its growth plans. We are deploying significant resources toward business development, and are seeing this reflected in an expanding number of transaction opportunities for each of our growth strategies."
Financial Review
Total revenue increased by 29% to $10.1 million for Q3 2017, compared to $7.8 million for Q3 2016.
Licensing revenue increased by 30% to $8.9 million in Q3 2017, compared to $6.8 million for Q3 2016. Absorica® licensing revenue increased to $7.6 million for Q3 2017, a 46% increase compared with $5.2 million for Q3 2016, based on higher prescriptions in the period. Absorica achieved market share of 20.2% at quarter end, compared with 14.3% at the same time last year. Licensing revenue from Lipofen® and the authorized generic version of Lipofen was $1.0 million compared to $1.2 million for Q3 2016. Licencing revenue from tramadol products (Conzip® and Durela®) was $0.3 million, compared with $0.4 million in Q3 2016.
Product revenue increased by 24% to $1.2 million for Q3 2017, compared to $1.0 million for Q3 2016. The increase was driven by Epuris®, which generated revenue of $1.1 million in Q3 2017, compared to $0.9 million in Q3 2016. Prescriptions for Epuris during the nine months ended September 30, 2017 increased by approximately 33%2 over the comparative period in the prior year and had a prescription market share of over 28% in Canada for the three months ended September 30, 2017 compared to 24% for the three months ended September 30, 2016.
Total operating expenses decreased by 15% to $3.8 million for Q3 2017, compared to $4.5 million for Q3 2016, mainly due to a $0.7 million decrease in selling, general and administrative expense.
Total other expenses were $1.1 million in Q3 2017, compared to $0.8 million in Q3 2016. Other expenses for Q3 2017 reflect primarily a reduction in interest expense on the senior secured notes and a one-time impairment charge of $0.6 million for the Melanovus assets.
Income from continuing operations was $3.9 million, or $0.15 per basic share, compared with income from continuing operations of $2.2 million, or $0.08 per basic share, in Q3 2016. Adjusted EBITDA1 from continuing operations for Q3 2017 increased by 62% to $6.7 million, compared to $4.1 million in Q3 2016.
At quarter end, the Company had $24.3 million in cash, compared with $34.5 million at December 31, 2016. The decrease is primarily attributable to the $22.5 million prepayment of outstanding debt during Q2 2017.
Other Corporate Developments
In Q3 2017, Cipher introduced a revised corporate strategy to build a portfolio of prescription products across a broad range of therapeutic areas that meet an unmet medical need. The focus on the Company's strategy is to:
- Acquire or in-license prescription medicines for the Canadian market;
- Acquire businesses with commercial products, proven capabilities or where substantial synergies are available; and
- Selectively invest in drug development programs where we see a favourable risk-return profile.
In terms of the product pipeline, the Company had several developments in Q3 2017:
- OZANEX™: Cipher continued to prepare for the launch of OZANEX (ozenoxacin cream, 1%), a novel topical treatment for adult and pediatric patients with impetigo, following Health Canada approval earlier this year. The Company is targeting a product launch in the first quarter of 2018.
- Nanolipolee-007/Melanovus: Based on the risk-return profile of Nanolipolee-007, the lead product candidate from the Melanovus assets that Cipher acquired in 2014, Cipher made a strategic decision not to move forward with the program. Cipher provided notice to terminate the agreement.
- CF101: Can-Fite Biopharma, which is developing CF101, a novel chemical entity for moderate to severe plaque psoriasis and rheumatoid arthritis, is commencing two phase III programs, one for rheumatoid arthritis ("RA") and one for psoriasis ("PSO"). Can-Fite is currently enrolling patients into the phase III RA program and expects to start patient enrolment in the PSO phase III program in the first quarter of 2018. Cipher has the Canadian distribution rights to CF101.
Update on Supply Chain Impact from Hurricane Maria
On October 10, 2017, Cipher commented on the on the impact from Hurricane Maria to its manufacturing partner's facilities in Puerto Rico. Galephar Pharmaceutical Research ("Galephar") operates two manufacturing facilities in Puerto Rico. The facility in Humacao manufactures Absorica, Epuris, and Lipofen products, and the facility in Juncos manufactures Conzip and Durela products.
On November 2, 2017 Galephar confirmed the resumption of production at both Juncos and Humacao manufacturing facilities and a stable long-term plan for power generation. Cipher does not anticipate any impact to product supply resulting from the interruption of manufacturing at Galephar's facilities in Puerto Rico.
Financial Statements and MD&A
Investors are encouraged to review Cipher's complete Financial Statements and Management's Discussion and Analysis ("MD&A") for the three and nine months ended September 30, 2017, which are available on the Company's website at www.cipherpharma.com and on SEDAR at www.sedar.com.
Notice of Conference Call
Cipher will hold a conference call today, November 3, 2017, 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 will be available at http://bit.ly/2zbTEna or the Investor Relations section of the Company's website at http://www.cipherpharma.com. An archived replay of the webcast will be available for 90 days.
About Cipher Pharmaceuticals Inc.
Cipher (TSX:CPH) is a specialty pharmaceutical company with a robust and diversified portfolio of commercial and early to late-stage products. Cipher acquires products that fulfill unmet medical needs, manages the required clinical development and regulatory approval process, and markets those products either directly in Canada or indirectly through partners in Canada, the U.S., and South America. For more information, visit www.cipherpharma.com.
Forward-Looking Statements
This document includes forward-looking statements within the meaning of certain securities laws, including the "safe harbour" provisions of the Securities Act (Ontario) and other provincial securities law in Canada and U.S. securities laws. These forward-looking statements include, among others, statements with respect to our objectives, goals and strategies to achieve those objectives and goals, as well as statements with respect to our beliefs, plans, expectations, anticipations, estimates and intentions. 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.
By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, which give rise to the possibility that predictions, forecasts, projections and other forward-looking statements will not be achieved. 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. We caution readers not to place undue reliance on these statements as a number of important factors, many of which are beyond our control, could cause our actual results to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to, our ability to enter into in-licensing, development, manufacturing and marketing and distribution agreements with other pharmaceutical companies and keep such agreements in effect; our dependency on a limited number of products; integration difficulties and other risks if we acquire or in-license technologies or product candidates; reliance on third parties for the marketing of certain products; the product approval process is highly unpredictable; the timing of completion of clinical trials; reliance on third parties to manufacture our products; we may be subject to future product liability claims; unexpected product safety or efficacy concerns may arise; we generate license revenue from a limited number of distribution and supply agreements; the pharmaceutical industry is highly competitive; requirements for additional capital to fund future operations; dependence on key managerial personnel and external collaborators; no assurance that we will receive regulatory approvals in the U.S., Canada or any other jurisdictions; current uncertainty surrounding health care regulation in the United States; certain of our products are subject to regulation as controlled substances; limitations on reimbursement in the healthcare industry; limited reimbursement for products by government authorities and third-party payor policies; various laws pertaining to health care fraud and abuse; reliance on the success of strategic investments and partnerships; the publication of negative results of clinical trials; unpredictable development goals and projected time frames; rising insurance costs; ability to enforce covenants not to compete; risks associated with the industry in which it operates; we may be unsuccessful in evaluating material risks involved in completed and future acquisitions; we may be unable to identify, acquire or integrate acquisition targets successfully; inability to meet covenants under our long term debt arrangement; compliance with privacy and security regulation; our policies regarding returns, allowances and chargebacks may reduce revenues; certain current and future regulations could restrict our activities; additional regulatory burden and controls over financial reporting; reliance on third parties to perform certain services; general commercial litigation, class actions, other litigation claims and regulatory actions; the effects of our delisting from the NASDAQ Global Market (the "NASDAQ") and deregistration of our Common Shares under the U.S. Securities Exchange Act of 1934, as amended (the "U.S. Exchange Act"); the difficulty for shareholders to realize in the United States upon judgments of U.S. courts predicated upon civil liability of the Company and its directors and officers who are not residents of the United States; certain adverse tax rules applicable to U.S. holders of our Common Shares if we are a passive foreign investment company for U.S. federal income tax purposes; the potential violation of intellectual property rights of third parties; our efforts to obtain, protect or enforce our patents and other intellectual property rights related to our products; changes in U.S., Canadian or foreign patent laws; litigation in the pharmaceutical industry concerning the manufacture and supply of novel and generic versions of existing drugs; inability to protect our trademarks from infringement; shareholders may be further diluted if we issue securities to raise capital; volatility of our share price; the actions of a significant shareholder; we do not currently intend to pay dividends; our operating results may fluctuate significantly; and our debt obligations will have priority over the Common Shares in the event of a liquidation, dissolution or winding up.
We caution that the foregoing list of important factors that may affect future results is not exhaustive. When reviewing our forward-looking statements, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Additional information about factors that may cause actual results to differ materially from expectations, and about material factors or assumptions applied in making forward-looking statements, may be found in the "Risk Factors" section of our Annual Information Form and in our Management's Discussion and Analysis of Operating Results and Financial Position for the year ended December 31, 2016, and elsewhere in our filings with Canadian securities regulators. Except as required by Canadian securities law, we do not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by us or on our behalf; such statements speak only as of the date made. The forward-looking statements included herein are expressly qualified in their entirety by this cautionary language.
1) EBITDA is a non-IFRS financial measure. The term EBITDA (earnings before interest, taxes, depreciation and amortization,) does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement IFRS measures by providing a further understanding of operations from management's perspective. The Company defines Adjusted EBITDA as earnings before interest expense, income taxes, depreciation of property and equipment, amortization of intangible assets, loss on debt extinguishment, non-cash share-based compensation, changes in fair value of derivative financial instruments, impairment of intangible assets and goodwill and foreign exchange gains and losses from the translation of Canadian cash balances.
2) Source: IMS
The following is a summary of how EBITDA and Adjusted EBITDA are calculated:
| Three months |
Three months |
Nine months |
Nine months |
||
| $ |
$ |
$ |
$ |
||
| Income from continuing operations |
3,923 |
2,222 |
6,798 |
4,238 |
|
| Add back: |
|||||
| Depreciation and amortization |
246 |
242 |
728 |
879 |
|
| Interest expense, net |
631 |
1,854 |
2,702 |
6,282 |
|
| Income taxes |
1,253 |
327 |
2,220 |
949 |
|
| EBITDA |
6,053 |
4,645 |
12,448 |
12,348 |
|
| Change in fair value of derivative |
(81) |
(1,122) |
(87) |
(996) |
|
| financial instrument |
|||||
| (Gain) loss from the translation of |
77 |
20 |
70 |
(55) |
|
| Canadian cash balances |
|||||
| Loss of debt extinguishment |
- |
- |
5,223 |
- |
|
| Impairment of intangible assets |
561 |
- |
561 |
- |
|
| Share-based compensation |
84 |
580 |
321 |
1,580 |
|
| Adjusted EBITDA |
6,694 |
4,123 |
18,536 |
12,877 |
|
SOURCE Cipher Pharmaceuticals Inc.
For further information: Craig Armitage, LodeRock Advisors, (416) 347-8954, [email protected]
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