Cipher Pharmaceuticals reports Q2 2017 financial results
Company achieves important strategic milestones, delivers strong financial results
MISSISSAUGA, ON, Aug. 11, 2017 /CNW/ - Cipher Pharmaceuticals Inc. (TSX:CPH) ("Cipher" or "the Company") today announced its financial and operational results for the three months ended June 30, 2017. Unless otherwise noted, all figures are in U.S. currency.
Financial & Business Highlights for Q2 2017
(all figures compared to Q2 2016, unless otherwise noted)
-- Total net revenue increased 16% to $9.9 million, from $8.5 million in Q2
2016.
-- Licensing revenue of $8.6 million, an increase of 16% compared with
$7.4 million in Q2 2016.
-- Product revenue of $1.3 million, up 18% from $1.1 million in Q2
2016.
-- Income from continuing operations of $4.4 million, or $0.17 per basic
share, compared with income from continuing operations of $0.2 million,
or $0.01 per basic share, in Q2 2016.
-- Total operating expenses decreased by 25% to $3.5 million for Q2 2017.
-- Adjusted EBITDA(1) from continuing operations increased 40% to $6.7
million, compared with $4.8 million in Q2 2016.
-- Closed the sale of Cipher Pharmaceuticals US LLC and completed the
operational transition to EPI Health.
-- Amended the debt agreement with Athyrium Capital Management, allowing
the Company to prepay half of its outstanding debt, resulting in a
significant reduction in cash interest expense.
-- Appointed experienced pharmaceutical executive Chris Watters as Vice
President, Corporate Development.
"The second quarter marked an important turning point for Cipher. We sold and transitioned our U.S. business, reduced our debt, and better aligned the cost structure, which greatly improved the financial performance and position of the organization," said Robert Tessarolo, President and CEO of Cipher. "In the second quarter, we delivered double-digit growth in revenue and adjusted EBITDA that generated $4.4 million in cash flow from operations. Our global licensing business had another very strong quarter, led by better-than-expected revenue from Absorica, and our Canadian business continued to deliver steady growth, underpinned by the performance of Epuris."
Mr. Tessarolo added: "Looking ahead, we have a strong foundation to achieve the full potential of our business and deliver reliable growth. We plan to build a portfolio of prescription products across a broad range of therapeutic areas. To achieve this, we are pursuing multiple growth strategies, including acquiring or in-licensing prescription medicines for the Canadian market; acquiring businesses with commercial products, proven capabilities and where substantial synergies are available; and continuing to selectively invest in drug development programs where we see a favourable risk-return profile."
Financial Review
(All figures are in U.S. dollars)
Total revenue increased by 16% to $9.9 million for Q2 2017, compared to $8.5 million for Q2 2016.
Licensing revenue increased by 16% to $8.6 million in Q2 2017, compared to $7.4 million for Q2 2016. Absorica(®) licensing revenue increased to $7.5 million for Q2 2017, a 32% increase compared with $5.7 million for Q2 2016, mainly on the strength of an effective promotional campaign implemented during the second quarter by Cipher's marketing partner. Revenue from Lipofen(®) and the authorized generic version of Lipofen was $0.8 million compared to $1.0 million for Q2 2016. Licencing revenue from tramadol products (Conzip(®) and Durela(®)) was $0.3 million from $0.7 million in Q2 2016.
Product revenue increased by 18% to $1.3 million for Q2 2017, compared to $1.1 million for Q2 2016. The increase was driven by Epuris(®), which generated revenue of $1.1 million in Q2 2017, compared to $1.0 million in Q2 2016. Epuris had prescription growth of 17% in the second quarter and 33% year to date
Total operating expenses decreased by 25% to $3.5 million for Q2 2017, compared to $4.7 million for Q2 2016, mainly due to a $1.0 million decrease in selling, general and administrative expense.
Total other expenses were $0.7 million in Q2 2017, compared to $3.1 million in Q2 2016. The decrease in the three-month period is attributable to a reduction in interest expense on the senior secured notes.
Income from continuing operations was $4.4 million, or $0.17 per basic share, compared with income from continuing operations of $0.2 million, or $0.01 per basic share, in Q2 2016. Adjusted EBITDA(1) from continuing operations for Q2 2017 increased by 40% to $6.7 million, compared to $4.8 million in Q2 2016.
At quarter end, the Company had $19.7 million in cash, compared with $34.5 million at December 31, 2016. The decrease is attributable to the previously announced $22.5 million prepayment of outstanding debt.
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 six months ended June 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, August 11, 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/2uqaLR8 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, expectation 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, (gain) 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:
Three months Three months Six months ended Six months ended
ended ended June 30, 2017 June 30, 2016
June 30, 2017 June 30, 2016
------------- -------------
$ $ $ $
--- --- --- ---
Income from continuing operations 4,437 234 2,875 2,016
Add back:
Depreciation and amortization 240 388 482 637
Interest expense, net 650 3,132 2,071 4,428
Income taxes 1,237 460 967 622
------------ ----- --- --- ---
EBITDA 6,564 4,214 6,395 7,703
------ ----- ----- ----- -----
Change in fair value of derivative
financial instrument 92 44 (6) 126
(Gain) loss from the translation of
Canadian cash balances 8 20 17 (1,421)
Loss of debt extinguishment - - 5,223 -
Share-based compensation 29 486 238 1,000
------------------------ --- --- --- -----
Adjusted EBITDA 6,693 4,764 11,867 7,408
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SOURCE Cipher Pharmaceuticals Inc.
