Cipher Pharmaceuticals Reports Fourth Quarter and Full Year 2018 Financial Results
Canadian product revenue increased 30% to $6.9 million for the year
Completed six (6) strategic business transactions enhancing long-term value
OAKVILLE, ON, March 19, 2019 /CNW/ - Cipher Pharmaceuticals Inc. (TSX:CPH) ("Cipher" or "the Company") today announced its financial and operating results for the three and twelve months ended December 31st, 2018. Unless otherwise noted, all figures are in U.S. dollars.
(all figures compared to the relative prior-year period, unless otherwise noted)
The Company continues to execute on its revised corporate strategy focusing on long-term growth. Utilizing cash flows from its profitable, global licensing business, the Company continues to invest in, and build a diversified portfolio of prescription products, across a select range of therapeutic areas that address unmet medical needs. In 2018, Cipher completed six transactions that demonstrate meaningful progress in the execution of its growth strategy, launched two new products in Canada and advanced pipeline products through regulatory events. Key highlights during the year include:
- Revenue from Canadian products increased 30% to $6.9 million.
- Cash generated from operating activities was $11.3 million.
- In January, Cipher launched OZANEX™, a novel bactericidal topical antibiotic cream indicated for impetigo in patients aged 2 months and older.
- In February, Cipher acquired the exclusive Canadian rights from Synergy Pharmaceuticals Inc. to TRULANCE®, an FDA-approved once-daily tablet for adults with chronic idiopathic constipation and irritable bowel syndrome with constipation. Cipher filed a New Drug Submission (NDS) that was accepted for review by Health Canada in December.
- In April, Cipher acquired the exclusive Canadian rights to A-101 40%, a topical solution indicated for the treatment of raised seborrheic keratoses. A-101 40% was approved by the FDA in December 2017 and is marketed by Aclaris Therapeutics, Inc. in the U.S. under the tradename Eskata™. Cipher filed an NDS that was accepted for review by Health Canada in December.
- In May, Cipher closed a transaction pursuant to which it acquired the Canadian business portfolio of Cardiome Pharma Corp., which included two commercial products (Brinavess® and Aggrastat®) and two late-stage pipeline products (Xydalba™ and Trevyent®) used in hospitals.
- In July, Cipher amended its distribution and supply agreement with Sun Pharmaceuticals Inc. ("Sun") to provide Sun with the ability to launch new isotretinoin products used to treat severe acne prior to the expiry of the current agreement in November 2022. Cipher will receive a royalty on net sales of all Sun's isotretinoin products launched prior to December 2024.
- In September, Cipher acquired the exclusive rights to MOB-015 from Moberg Pharma AB ("Moberg"). MOB-015 is a patented proprietary formulation of terbinafine for the topical treatment of onychomycosis, a fungal infection of the nail.
- In September, Cipher received Health Canada approval of Xydalba (dalbavancin hydrochloride), the first and only one-dose treatment option for acute bacterial skin and skin structure infections in adults available in Canada.
- In October, Cipher re-launched Brinavess (vernakalant hydrochloride) for the rapid conversion of recent onset atrial fibrillation (AF) to sinus rhythm (SR), for patients in both the surgical and non-surgical setting.
"2018 was a transformational year for Cipher with exceptional operational execution and solid financial results," said Robert Tessarolo, President and CEO of Cipher. "Our Canadian Commercial business posted outstanding 30% organic growth in product revenue powered by Epuris which now holds 35% market share nationally and is the #1 prescribed isotretinoin by Dermatologists. In our Licensing business, albeit a challenging year for this business, we were pleased Absorica TRx levels stabilized over the last 4 months. While investing in our future growth we continued our debt retirement practices through practical management of expenses and our ability to generate significant cash from operations."
"In 2018 we diversified our portfolio through the execution of several strategic business transactions. Most importantly, we advanced product approvals, launches and Health Canada filings and have added five (5) highly innovative assets with clear advantages vs. current standards of care, with low regulatory risk given prior FDA approval and promising commercial and reimbursement profiles.
Mr. Tessarolo added, "By amending our distribution and supply agreement for Absorica with Sun Pharmaceuticals we achieved our objective of extending the marketing of Absorica and bringing innovative new isotretinoin products to the U.S. market. Addressing this key enterprise risk was the capstone on our transformation."
Q4 and Full Year 2018 Financial Review
(All figures are in U.S. dollars)
Total revenue was $6.4 million for Q4 2018 compared to $12.1 million for Q4 2017. The year-over-year decrease mainly reflects lower licensing revenue from Absorica®. As previously disclosed, fiscal 2017 was an unusually strong year for Absorica revenue based on the success of Cipher's partner's promotional program, which drove significant market share gains prior to the end of the program in November 2017. Total revenue was $22.7 million for the year end December 31, 2018 compared to $40.1 million for the year ended December 31, 2017.
Licensing revenue for Q4 2018 was $4.6 million compared to $10.6 million for Q4 2017. Absorica licensing revenue was $3.7 million for Q4 2018, compared to $9.4 million for Q4 2017. Licensing revenue from Lipofen® products decreased as expected to $0.7 million for Q4 2018 compared to $0.9 million in Q4 2017. Licencing revenue from tramadol products (Conzip® and Durela®) was $0.1 million compared to $0.4 million in Q4 2017. Licensing revenue was $15.9 million for the year end December 31, 2018 compared to $34.9 million for the year ended December 31, 2017.
Product revenue increased by 18% to $1.8 million for Q4 2018 compared to $1.5 million for Q4 2017. The increase was primarily driven by Epuris®, which generated revenue of $1.5 million in the period compared to $1.3 million in Q4 2017. Epuris achieved market share of more than 35% during the quarter, compared to 28% for the same period last year. Product revenue was $6.9 million for the year end December 31, 2018 compared to $5.3 million for the year ended December 31, 2017.
Total operating expenses increased to $5.8 million for Q4 2018 compared to $4.3 million for Q4 2017. The increase related to costs associated with launching a new product in the fourth quarter of 2018, regulatory submissions for plecanatide and A-101 40% and costs related to the 2019 launch of Xydalba. Total operating expenses were $19.4 million for the year end December 31, 2018 compared to $15.6 million for the year ended December 31, 2017 and included an impairment of intangible assets of $1.8 million and transaction and integration costs of $1.2 million.
Loss from continuing operations was $0.5 million, or $0.02 per basic and diluted share in Q4 2018, compared to income from continuing operations of $3.9 million, or $0.14 per basic and diluted share in Q4 2017. Adjusted EBITDA for Q4 2018 decreased to $1.1 million, compared to $8.1 million in Q4 2017. Income from continuing operations was $1.2 million, or $0.04 per basic and diluted share for the year ended December 31, 2018, compared to income from continuing operations of $10.6 million, or $0.40 per basic and diluted share for the year ended December 31, 2017. Adjusted EBITDA for the year ended December 31, 2018 decreased to $6.9 million, compared to $26.5 million for the year ended December 31, 2017.
The Company has $10.4 million in cash at December 31, 2018 compared with $28.2 million at the end of 2017. The Company generated $11.3 million in cash from operating activities and used approximately $26.1 million in cash during the year as consideration for the multiple transactions that were completed and repaid $5.7 million in debt. The Company has $17.6 million in debt at December 31, 2018.
On December 19, 2018, the Company received notice of a Paragraph IV Certification in an Abbreviated New Drug Application (ANDA) No. 212333 advising Sun Pharmaceuticals Industries, Ltd., Sun Pharmaceutical Industries, Inc., and Galephar Pharmaceuticals Research, Inc. (Galephar) that Upsher Smith Laboratories, LLC (Upsher Smith) has filed an ANDA with the FDA seeking approval to manufacture, use, or sell a generic version of Absorica (10 mg, 20 mg, and 30 mg) prior to the expiration of U.S. Patent Nos. 7,435,427; 8,367,102; 8,952,064; 9,078,925; and 9,089,534. On January 30, 2019, Sun, Cipher and Galephar filed a complaint against Upsher Smith asserting infringement of the five patents. On February 12, 2019, Upsher Smith filed its answer to the complaint.
Cipher anticipates several key milestones in 2019 that will continue to enhance long term value, including:
- Xydalba launch in first half of 2019
- DTR-001 pre-clinical results in Q2 2019
- Regulatory approval for plecanatide from Health Canada in Q4 2019
- Regulatory approval for A-101 from Health Canada in Q4 2019
- Top line results for MOB-015 Phase 3 study in North America expected in late Q4 2019
The Company expects its licensing business to provide a solid base of high-margin royalty revenue which provides non-dilutive financing to support future growth and the identification of opportunities that enhance shareholder value.
Board of Directors
The Board of Directors of Cipher has granted Mr. Craig Mull observation rights to attend Cipher board meetings. Mr. Craig Mull is a representative of 1207407 Ontario Limited, a significant shareholder of Cipher. Mr. Mull is the son of Dr. John Mull, a director of the Company.
Financial Statements and MD&A
Cipher's Financial Statements for the year ended December 31, 2018 and Management's Discussion and Analysis ("MD&A") for the three and twelve months ended December 31, 2018 are available on the Company's website at www.cipherpharma.com in the "Investors" section under "Financial Reports" and on SEDAR at www.sedar.com.
Notice of Conference Call
Cipher will hold a conference call today, March 19, 2019, at 8:30 a.m. (ET) to discuss its financial results and other corporate developments. To access the conference call by telephone, dial (416) 764-8609 or (888) 390-0605 and use conference ID 05671895. A live audio webcast will be available at https://event.on24.com/wcc/r/1961627/A8608EF7931C988866CBF1E7013080C9 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. Cipher is focused on a three-pronged growth strategy – including acquisitions, in-licensing, and selective investments in drug development – to assemble a broad portfolio of prescription products that serve unmet medical needs. For more information, visit www.cipherpharma.com.
This document includes forward-looking statements within the meaning of applicable 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; our dependency on protection from patents that will expire; 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, regulatory submissions and regulatory approvals; reliance on third parties to manufacture our products and events outside of our control that could adversely impact the ability of our manufacturing partners to supply products to meet our demands; 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; products in Canada may be subject to pricing regulation; 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 and current uncertainty surrounding health care regulation in the U.S.; 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; products may not be included on list of drugs approved for use in hospitals; hospital customers may make late payments or not make any payments; 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; legacy risks from operations conducted in the U.S.; 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 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; 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 the Management's Discussion & Analysis and the Annual Information Form for the year ended December 31, 2018, 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.
|2)||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.|
|(IN THOUSANDS OF U.S. DOLLARS)||2018||2017|
|Income from continuing operations||1,201||10,625|
|Depreciation and amortization||828||967|
|Interest expense, net||712||5,292|
|Change in fair value of derivative financial instrument||(530)||(34)|
|Loss from the translation of Canadian cash balances||87||35|
|Loss on debt extinguishment||-||5,223|
|Impairment of intangible assets||1,832||561|
|(1)||Amounts have been restated upon the full retrospective adoption of IFRS 15, Revenue from Contracts with Customers.|
SOURCE Cipher Pharmaceuticals Inc.