Mr. Robert Tessarolo reports
CIPHER PHARMACEUTICALS REPORTS FOURTH QUARTER AND FULL YEAR 2018 FINANCIAL RESULTS
Cipher Pharmaceuticals Inc. has released its financial and operating results for the three and 12 months ended Dec. 31, 2018. Unless otherwise noted, all figures are in U.S. dollars.
2018 highlights (all figures compared with 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 per cent 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 two months and older.
In February, Cipher acquired the exclusive Canadian rights from Synergy Pharmaceuticals Inc. to Trulance, a Food and Drug Administration-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 per cent, a topical solution indicated for the treatment of raised seborrheic keratoses. A-101 40 per cent was approved by the FDA in December, 2017, and is marketed by Aclaris Therapeutics Inc. in the United States under the trade name 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. 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. 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 relaunched 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.
"Two thousand eighteen was a transformational year for Cipher with exceptional operational execution and solid financial results," said Robert Tessarolo, president and chief executive officer of Cipher. "Our Canadian commercial business posted outstanding 30-per-cent organic growth in product revenue powered by Epuris which now holds 35-per-cent market share nationally and is the No. 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 four 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 highly innovative assets with clear advantages versus 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."
Fourth quarter and full-year 2018 financial review
Total revenue was $6.4-million for the fourth quarter of 2018 compared with $12.1-million for the fourth quarter of 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 ended Dec. 31, 2018, compared with $40.1-million for the year ended Dec. 31, 2017.
Licensing revenue for the fourth quarter of 2018 was $4.6-million compared with $10.6-million for the fourth quarter of 2017. Absorica licensing revenue was $3.7-million for the fourth quarter of 2018, compared with $9.4-million for the fourth quarter of 2017. Licensing revenue from Lipofen products decreased as expected to $700,000 for the fourth quarter of 2018 compared with $900,000 in the fourth quarter of 2017. Licensing revenue from tramadol products (Conzip and Durela) was $100,000 compared with $400,000 in the fourth quarter of 2017. Licensing revenue was $15.9-million for the year ended Dec. 31, 2018, compared with $34.9-million for the year ended Dec. 31, 2017.
Product revenue increased by 18 per cent to $1.8-million for the fourth quarter of 2018 compared with $1.5-million for the fourth quarter of 2017. The increase was primarily driven by Epuris, which generated revenue of $1.5-million in the period compared with $1.3-million in the fourth quarter of 2017. Epuris achieved market share of more than 35 per cent during the quarter, compared with 28 per cent for the same period last year. Product revenue was $6.9-million for the year ended Dec. 31, 2018, compared with $5.3-million for the year ended Dec. 31, 2017.
Total operating expenses increased to $5.8-million for the fourth quarter of 2018 compared with $4.3-million for the fourth quarter of 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 per cent and costs related to the 2019 launch of Xydalba. Total operating expenses were $19.4-million for the year ended Dec. 31, 2018, compared with $15.6-million for the year ended Dec. 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 $500,000, or two cents per basic and diluted share in the fourth quarter of 2018, compared with income from continuing operations of $3.9-million, or 14 cents per basic and diluted share in the fourth quarter of 2017. Adjusted EBITDA for the fourth quarter of 2018 decreased to $1.1-million, compared with $8.1-million in the fourth quarter of 2017. Income from continuing operations was $1.2-million, or four cents per basic and diluted share for the year ended Dec. 31, 2018, compared with income from continuing operations of $10.6-million, or 40 cents per basic and diluted share for the year ended Dec. 31, 2017. Adjusted EBITDA for the year ended Dec. 31, 2018, decreased to $6.9-million, compared with $26.5-million for the year ended Dec. 31, 2017.
The company has $10.4-million in cash at Dec. 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 Dec. 31, 2018.
On Dec. 19, 2018, the company received notice of a Paragraph 4 certification in an abbreviated new drug application (ANDA) No. 212333 advising Sun Pharmaceuticals Industries Ltd., Sun Pharmaceutical Industries Inc. and Galephar Pharmaceuticals Research Inc. that Upsher Smith Laboratories LLC has filed an ANDA with the FDA seeking approval to manufacture, use or sell a generic version of Absorica (10 milligrams, 20 mg and 30 mg) prior to the expiration of U.S. patent No. 7,435,427, No. 8,367,102, No. 8,952,064, No. 9,078,925 and No. 9,089,534. On Jan. 30, 2019, Sun, Cipher and Galephar filed a complaint against Upsher Smith asserting infringement of the five patents. On Feb. 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 preclinical results in the second quarter of 2019;
Regulatory approval for plecanatide from Health Canada in the fourth quarter of 2019;
Regulatory approval for A-101 from Health Canada in the fourth quarter of 2019;
Top-line results for MOB-015 phase 3 study in North America expected in late fourth quarter of 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 Craig Mull observation rights to attend Cipher board meetings. Mr. Mull is a representative of 1207407 Ontario Ltd., a significant shareholder of Cipher. Mr. Mull is the son of Dr. John Mull, a director of the company.
Financial statements and management's discussion and analysis
Cipher's financial statements for the year ended Dec. 31, 2018, and management's discussion and analysis (MD&A) for the three and 12 months ended Dec. 31, 2018, 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 today, March 19, 2019, at 8:30 a.m. Eastern Time 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 on the investor relations section of the company's website. An archived replay of the webcast will be available for 90 days.
About Cipher Pharmaceuticals Inc.
Cipher 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 United States and South America.
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