Mr. Craig Mull reports

CIPHER PHARMACEUTICALS REPORTS FOURTH QUARTER AND FULL YEAR 2023 RESULTS

Cipher Pharmaceuticals Inc. has released its financial and operating results for the year ended Dec. 31, 2023 (all figures presented in U.S. dollars).

Full-year 2023 financial highlights (all figures in U.S. dollars, compared with 2022, unless otherwise noted):

• Total revenue was $21.2-million in 2023, compared with $20.7-million in 2022, an increase of 2.4 per cent.
• Total gross profit was $17.1-million in 2023, compared with $16.7-million in 2022, an increase of 2.5 per cent.
• EBITDA (earnings before interest, taxes, depreciation and amortization) was consistent year over year at $12.0-million.
• Adjusted EBITDA was $12.7-million, compared with $12.4-million, an increase of 2.2 per cent.
• Under the company's normal course issuer bid, 257,221 common shares were repurchased and cancelled at an average price of $4.56 (Canadian) per share.
• In October, 2023, the company completed a substantial issuer bid (SIB), under which it offered to purchase for cancellation up to $6-million (Canadian) of its outstanding common shares, resulting in the repurchase and cancellation of 1,290,321 common shares at a purchase price of $4.65 (Canadian) per share.

Q4 2023 financial highlights (all figures in U.S. dollars, compared with Q4 2022, unless otherwise noted):

• Total revenue was $4.9-million, consistent with Q4 2022.
• EBITDA was $3.4-million, compared with $3.0-million in Q4 2022, an increase of 13.0 per cent.
• Adjusted EBITDA was $2.9-million, compared with $3.1-million in Q4 2022, a decrease of 9.1 per cent.
• Net income and earnings per common share were $7.7-million and 32 cents, respectively, compared with $19.7-million and 78 cents in Q4 2022, largely attributable to the recognition of previously unrecognized deferred tax losses in Q4 2022.

Management commentary

"In 2023, Cipher's performance has clearly demonstrated that the company's base business is, and will continue to be, a reliable generator of free cash flow. Our cash balance grew by $11-million or 38.1 per cent, now totalling nearly $40-million, putting the company on strong footing as it enters a period of substantial growth ahead, both organically through our pipeline and our strategy to pursue accretive acquisitions from our growing list of opportunities in what we believe is a buyer's market," stated Craig Mull, interim chief executive officer.

Cipher's chief financial officer, Bryan Jacobs, added: "Cipher's priorities continue to be focused on profitability and capital allocation strategies that benefit our shareholders. We had several position catalysts in 2023, including a highly successful substantial issuer bid, as well as secured a credit facility with the Royal Bank of Canada at favourable terms to the present day market. We continue to work diligently for our shareholders and we are excited to execute on our growth strategy in 2024 and beyond."

2023 corporate highlights

Pipeline highlights

In 10 months, Moberg Pharma expects top-line results from its phase 3 study in January, 2025. Cipher holds the exclusive Canadian rights to this novel product in treating nail fungus where there is a large unmet need. In Canada, the total prescription market for onychomycosis was approximately $91-million (Canadian) at Dec. 31, 2023, according to IQVIA, with a single product having over 95-per-cent market share.

On Feb. 7, 2024, Moberg announced that its partner, Allderma AB, launched MOB-015 under the Terclara brand in Sweden, with significant interest for the product in the local market.

On Oct. 6, 2023, the company's partner, Moberg, announced it had completed the enrolment requirement of 384 patients with onychomycosis (nail fungus) for the continuing MOB-015 phase 3 study in North America. The patients are evaluated over 52 weeks and the primary end point is the proportion of subjects achieving complete cure of their target nail. The purpose of the study is to facilitate market approval by the U.S. Food and Drug Administration (FDA).

On July 5, 2023, the company announced that its partner, Moberg obtained European Union approval for MOB-015, a new topical treatment of onychomycosis (nail fungus), as a result of demonstrating superior levels of mycological cure (76 per cent versus 42 per cent for comparators) and a significantly better complete cure rate. MOB-015 has been recommended for national approval in 13 European countries with planned commercialization through partners such as Bayer and Allderma AB.

Other highlights

On March 1, 2023, the company announced the completion and closing of a credit facility with Royal Bank of Canada, effective Feb. 28, 2023. The credit facility provides the company with up to $35-million, which is primarily intended to support the company's future M&A (merger and acquisition) growth strategy and may also be drawn upon for general corporate purposes and working capital requirements.

On Sept. 6, 2023, the company commenced a substantial issuer bid, whereby it offered to purchase for cancellation up to $6-million (Canadian) of its outstanding common shares by way of a modified Dutch auction. Upon expiry of the SIB on Oct. 11, 2023, the company took up and paid for 1,290,321 common shares at a purchase price of $4.65 (Canadian) per common share, equivalent to the maximum aggregate purchase price of $6-million (Canadian). The common shares taken up by the company represented 5.1 per cent of the total issued and outstanding common shares.

Q4 2023 financial review (all figures in U.S. dollars)

Total revenue was $4.9-million for Q4 2023, consistent with Q4 2022.

Licensing revenue was $1.5-million for Q4 2023, compared with $2.0-million in Q4 2022.

Licensing revenue from the Absorica portfolio in the United States was $1.0-million for Q4 2023, a decrease of $300,000 or 17.8 per cent compared with $1.3-million for Q4 2022.

Licensing revenue from Lipofen and the authorized generic version of Lipofen was $500,000 for Q4 2023, a decrease of $200,000 compared with revenue of $700,000 for Q4 2022.

Product revenue increased by $500,000 or 15.4 per cent to $3.4-million for Q4 2023, compared with $2.9-million for the comparable period in 2022, mainly due to growth of Epuris by 10.1 per cent.

Total operating expenses were $2.6-million for Q4 2023, compared with $2.3-million for Q4 2022. The increase was mainly attributable to the contract sales force and other marketing initiatives focused on Epuris.

Net income was $7.7-million or 32 cents per common share in Q4 2023, compared with $19.7-million or 78 cents per common share in Q4 2022. Adjusted EBITDA for Q4 2023 was $2.9-million, compared with $3.1-million in Q4 2022. Net income and net income per common share in Q4 2022 were significantly higher than Q4 2023 as a result of the Q4 2022 income tax recovery associated with recognizing previously unrecognized tax losses.

Business strategy and outlook

Cipher anticipates that the company continues to execute on its business strategy in 2024 and remains focused on profitability and driving shareholder value. Key focuses include:

• Near-term strategic focus on product and business acquisitions that will generate cash flow, high growth and near-term profitability;
• Developing the MOB-015 commercial launch plan and pro-actively readying the Health Canada regulatory submission, for the novel product and treatment of nail fungus, and whereby Cipher has the exclusive Canadian market rights;
• Continue to collaborate with partner Moberg Pharma on its MOB-015 phase 3 clinical trial in the U.S., whereby results are expected by January, 2025;
• Continue to collaborate with the company's partner, Can-Fite Biopharma, on its phase III Comfort study of piclidenoson used in the treatment of moderate to severe psoriasis which met its previous clinical trial primary end point of superiority and achieved a better tolerability profile in a comparative analysis and whereby Cipher has the exclusive Canadian market rights.

Financial statements and MD&A (the management's discussion and analysis)

Cipher's financial statements for the year ended Dec. 31, 2023, and the MD&A for the three and 12 months ended Dec. 31, 2023, are available on the company's website in the investors section under financial reports and on SEDAR+.

Notice of conference call

Cipher will hold a conference call on March 15, 2024, at 8:30 a.m. ET, to discuss its financial results and other corporate developments.

To access the conference call by telephone, dial 416-764-8650 or 888-664-6383 and use conference ID No. 08128854.

A live audio webcast will be available.

An archived replay of the webcast will be available until March 22, 2024, and can be accessed by dialling 416-764-8677 or 888-390-0541 and entering conference replay code 128854 followed by the pound key.

About Cipher Pharmaceuticals Inc.

Cipher is a specialty pharmaceutical company with a robust and diversified portfolio of commercial and early-stage 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.

We seek Safe Harbor.