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Cipher Pharmaceuticals Reports First Quarter 2021 Financial Results

  • Generates Adjusted EBITDA of $3.6 million and EPS of $0.05 (CDN$0.61)
  • Excluding legal provision EPS was $0.10 (CDN$0.12)

OAKVILLE, ON, May 13, 2021 /CNW/ - Cipher Pharmaceuticals Inc. (TSX: CPH) ("Cipher" or "the Company") today announced its financial and operating results for the three months ended March 31, 2021. Unless otherwise noted, all figures are in U.S. dollars.

Q1 2021 Financial Highlights
(All figures in U.S. dollars, compared to Q1 2020, unless otherwise noted)

  • Total revenue was $5.4 million compared to $5.9 million
  • SG&A decreased 16.7% to $1.2 million compared to $1.4 million
  • Adjusted EBITDA2 was $3.6 million compared to $4.1 million
  • Earnings per common share was $0.05 compared to $0.09
  • Earnings per common share excluding legal provision increased to $0.10 compared to $0.09
  • As at March 31, 2021 the company had $13.3 (CAD$16.7) million in cash or $0.49 per share (CDN$0.62)

Management Commentary

Craig Mull, Interim CEO commented, "During this quarter, we continued to execute against our stated strategy to right size the business, optimize our cost structure and broaden our portfolio through key partnerships. Towards that, we entered into co-promotion agreement with Verity Pharmaceuticals for the marketing, sales and co-promotion of Brinavess, Aggrastat, and Trevyent. We believe that working with Verity's experienced sales force will not only drive down costs but also enhance profitability within our hospital business. Our first quarter results were impacted by a legal provision in connection with the impairment of Trulance, excluding this provision EPS would have come in at 10 cents, demonstrating the strong earnings power of the business."

"Subsequent to quarter end, we launched Absorica AG with our marketing partner Sun Pharmaceutical Industries, Inc. ("Sun Pharma"). We believe that this will broaden Cipher's isotretinoin portfolio and ensure we have products to serve each segment of this market and maximize value of this portfolio," added Mr. Mull.

The launch of an authorized generic version of Absorica® was contemplated when Cipher amended its distribution and supply agreement (the "Sun Amendment") with Sun Pharma for Absorica in July of 2018. Sun Pharma launched its Authorized Generic on April 29, 2021, which was triggered by Teva Pharmaceuticals launch of its generic version of Absorica. Cipher will receive a royalty on the net profits of the Authorized Generic version of Absorica. "Currently, in our isotretinoin portfolio, Cipher is receiving royalties from Sun Pharma for the branded product, Absorica, as well as ABSORICA LD," said Craig Mull, Interim CEO of Cipher. "We are confident that working with Sun Pharma is the right economic decision for Cipher and is consistent with our overall strategy to maximize the value of the isotretinoin portfolio," added Mr. Mull.

Outlook

Cipher anticipates several key milestones in 2021 that will continue to enhance long term value, including:

  • Full-year benefit of the cost reduction plan and continued profitability and strong cashflow
  • Improved profitability of our hospital business through our distribution agreement with Verity
  • Advancement of our key development programs including: Lucy product portfolio with our key development partner Galephar; refinements to the MOB-015 program for nail fungus with Moberg with a possible expansion of territories; completion of proof-of-concept studies for our tattoo removal program; negotiation of development agreements for two to three dermatology products.
  • Normal Course Issuer Bid – 383,100 shares repurchased and cancelled to the end of April 30, 2021
  • Selectively pursuing product and business acquisitions in a prudent manner with a focus on high growth potential and near-term profitability

Q1 2021 Financial Review
(All figures are in U.S. dollars)

Total net revenue was $5.4 million for Q1 2021, compared to $5.9 million for Q1 2020.

Licensing revenue decreased by $0.5 million to $2.8 million for the quarter compared to $3.3 million for the three months ended March 31, 2020.

Licensing revenue from Absorica in the U.S. was $2.3 million for the quarter, a decrease of $0.5 million compared to $2.8 million for the three months ended March 31, 2020. Absorica's market share for the three months ended March 31, 2021 was approximately 4.2% compared to 6% for the three months ended March 31, 2020 according to Symphony Health. Market share including Sun Pharma's Absorica LD was approximately 5.4%.

Licensing revenue from Lipofen and the authorized generic version of Lipofen was $0.4 million for the three months ended March 31, 2021, a decrease of $0.1 million compared to $0.5 million for the three months ended March 31, 2020.

Licensing revenue from the extended-release tramadol product (ConZip in the U.S. and Durela in Canada) was $0.1 million which remained relatively unchanged from the comparative period.

Product revenue increased by $0.1 million or 5% to $2.7 million for Q1 2021, compared to $2.6 million for the comparable period in 2020.

Product revenue from Epuris was $2.6 million for the quarter, an increase of $0.2 million from $2.4 million for the comparative period.  According to IQVIA, Epuris had a prescription market share of approximately 42% in Canada for the three months ended March 31, 2021 compared to 40% for the three months ended March 31, 2020.

Product revenue for the remaining brands, Ozanex, Beteflam, Actikerall, Brinavess, Aggrastat and Vaniqa was $0.1 million, compared to $0.2 million for the three months ended March 31, 2020.

Total operating expenses increased to $3.4 million for the quarter compared to $2.3 million for Q1 2020. The increase in operating expenses for the three months ended March 31, 2021 is primarily due to the provision for legal settlement in connection with Trulance. Excluding the provision for legal settlement of $1.2 million, operating expenses decreased by $.2 million or 8.3% to $2.1 million for the quarter compared to $2.3 million for Q1 2020.

Selling, general and administrative expense was $1.2 million for the quarter a decrease of $0.2 million or 17% compared to $1.4 million for the three months ended March 31, 2020. The decrease in SG&A costs was driven by a decrease in costs related to legal and consulting spend.

Income from continuing operations was $1.3 million, or $0.05 per basic and diluted share in Q1 2021, compared to income from continuing operations of $2.5 million, or $0.09 per basic and diluted share in Q1 2020. Income from continuing operations was impacted by the provision for legal settlement of $1.25 million.  Excluding this charge, income from continuing operation increased by $0.1 million or 4.5% to $2.6 million or EPS of $0.10 compared to $2.5 million, or $0.09 per basic and diluted share in Q1 2020. Adjusted EBITDA for the three months ended March 31, 2021 was $3.6 million, a decrease of $0.5 million or 12% compared to $4.1 million for the three months ended March 31, 2020.

The Company had $13.3 (CAD$16.7) million in cash and no debt at March 31, 2021. The Company generated $4.3 million in cash from operating activities in the first quarter of 2021 and used approximately $0.2 million in cash during the quarter for financing activities.

Financial Statements and MD&A

Cipher's Financial Statements for the quarter ended March 31, 2021 and Management's Discussion and Analysis (the "MD&A") for the three months ended March 31, 2021 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 on May 14, 2021, at 8:00 a.m. (ET) to discuss its financial results and other corporate developments.

About Cipher Pharmaceuticals Inc.

Cipher Pharmaceuticals (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 currently 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 applicable securities laws. These forward-looking statements include, among others, statements with respect to the impact of the Company's cost reduction plan, the potential for improved profitability of our hospital business, increased adoption of ABSORICA LD, discussions with Galephar regarding new product opportunities, our objectives and 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, the extent and impact of the coronavirus (COVID-19) outbreak on our business including any impact on our contract manufacturers and other third party service providers, our ability to enter into 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 we operate; 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 fact that we have 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 of the Company 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 Company's Annual Information Form for the year ended December 31, 2020, 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)

At the CAD/USD exchange rate March 31, 2021

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.

The Following is a summary of how EBITDA and Adjusted EBITDA are calculated:

 (IN THOUSANDS OF U.S. DOLLARS)

Three months ended
March 31, 2021

Three months ended
March 31, 2020


$

$

Income from continuing operations

1,339

2,477

Add back:



Depreciation and amortization

196

307

Interest expense, net

37

96

Income taxes

657

1,096

EBITDA

2,229

3,976

Change in fair value of derivative financial instrument

11

(2)

Loss (gain) from the translation of Canadian cash balances

43

54

Provision for legal settlement

1,250

Share-based compensation

44

44

Adjusted EBITDA

3,577

4,072

Adjusted EBITDA per share – basic

0.13

0.15

Adjusted EBITDA per share – dilutive

0.13

0.15

SOURCE Cipher Pharmaceuticals Inc.

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