Press Releases
Cipher reports first quarter fiscal 2008 results
Toronto Stock Exchange Symbol: DND
MISSISSAUGA, ON, May 1 /CNW/ - Cipher Pharmaceuticals Inc. (TSX: DND)
today announced its financial and operational results for the three months
ended March 31, 2008.Q1 2008 Summary
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- Initiated discussions with the U.S. Food and Drug Administration
(FDA) regarding the design of a potential Phase III safety study of
CIP-ISOTRETINOIN
- Recorded licensing revenue of $177,000 from Lipofen(R)
- Net loss decreased to $1.1 million, or $0.04 per share, compared with
$1.7 million, or $0.07 per share, in the first quarter of 2007
- Cash of $10.3 million at quarter end, compared with $11.0 million at
the end of fiscal 2007"During the first quarter, we initiated discussions with the FDA
regarding the design of a potential Phase III safety study of
CIP-ISOTRETINOIN, while also advancing discussions with potential marketing
partners for the product," said Larry Andrews, President and CEO of Cipher.
"Lipofen sales continued to trend positively during the quarter, which we
expect will provide a steadily increasing revenue stream to help offset our
operating costs this year. Advancing our two other high-potential products,
CIP-ISOTRETINOIN and CIP-TRAMADOL ER, through the remaining regulatory and
commercialization milestones remains our top priority this year."
Financial Review
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In the first quarter of 2008, Cipher recorded total revenue of $177,000,
compared with nil in the same period last year. Research and development (R&D)
expenses decreased from $0.7 million in the first quarter of fiscal 2007 to
$0.3 million in the first quarter of 2008, reflecting the advanced stage of
development of the Company's current products. Operating, general and
administrative (OG&A) expenses for the first quarter of 2008 were
$1.0 million, compared with $1.1 million in the same period last year. While
Cipher expects to add select resources to the management team this year to
support continued growth, the Company's fixed operating costs will be
partially offset by revenue from Lipofen. Net loss for the three months ended
March 31, 2008 was $1.1 million ($0.04 per basic and diluted share), compared
with a net loss of $1.7 million ($0.07 per basic and diluted share) in the
same period last year.
As at March 31, 2008, Cipher had cash of $10.3 million, compared with
$11.0 million at December 31, 2007.
Drug Development Update
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In July 2007, Cipher entered into a licensing and distribution agreement
with ProEthic Pharmaceuticals under which ProEthic was granted the exclusive
right to market, sell and distribute Lipofen in the United States. In late
September 2007, ProEthic launched Lipofen 150 mg and 50 mg capsules in the
U.S. market with the full effort of its sales and marketing teams. Lipofen is
the lead product for ProEthic as it seeks to build its presence in the
important primary care space. Since the product was launched, weekly
prescriptions have shown steady growth and the Company is encouraged by the
progress to date.
During the second quarter of 2007, Cipher received a second approvable
letter from the FDA pertaining to its CIP-ISOTRETINOIN NDA. In the letter, the
FDA indicated that Cipher's application is approvable subject to the
resolution of two remaining issues. In addition to one question related to
chemistry, manufacturing and controls, which the Company responded to, the FDA
requested that Cipher provide additional clinical safety data. The Company
appealed the position taken by the FDA in its approvable letter using the
formal dispute resolution process. Subsequently, the Company had two meetings
with the FDA as part of the first stage of the formal dispute resolution
process. In its most recent response to Cipher, the representative from the
FDA agreed with the Division of Dermatology and Dental Product's original view
that a Phase III safety study is needed to further demonstrate the safety of
CIP-ISOTRETINOIN. In the appeal response and subsequent discussions with the
FDA, Cipher was encouraged to work closely with the Division should the
Company choose to pursue a Phase III safety study. Cipher and its advisors are
currently in discussions with the Division regarding the appropriate design of
a safety study. Cipher may still choose to continue the formal dispute
resolution process, however, regulations do not allow the Company to pursue
both options concurrently. Should Cipher choose to pursue the study, the
Company may look to a commercial partner to assist in financing the study.
During the second quarter of 2007, Cipher received an approvable letter
from the FDA pertaining to its NDA for CIP-TRAMADOL ER, the Company's
extended-release formulation of tramadol. In its letter, the FDA indicated
that Cipher's application is approvable subject to the resolution of certain
issues, including a request for an additional adequate clinical trial to
provide further efficacy data. In subsequent discussions, the FDA indicated
that the statistical methods used to analyze data from Cipher's clinical
trials did not adequately address missing data relating to subjects who
dropped out of the trials. In December 2007, Cipher announced that it had
appealed the position taken by the FDA using the FDA's formal dispute
resolution process. In the written response, the Acting Director of the Office
of Drug Evaluation II, Center for Drug Evaluation and Research supported the
original approvable action. In a subsequent discussion, the FDA suggested an
additional statistical sensitivity analysis of existing clinical data on
CIP-TRAMADOL ER as a means to potentially satisfy the requirements for
approval. As a consequence, the Company suspended its appeal and conducted the
additional statistical analysis. Cipher and its advisors are currently
planning the optimal regulatory path forward for the product, and the Company
expects to be in a position to provide further details during the second
quarter.
Notice of Conference Call
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Cipher will hold a conference call today, May 1, 2008, at 8:30 a.m. (ET)
to discuss its financial results and other corporate developments. To access
the conference call by telephone, dial 416-644-3418 or 1-800-731-5319. A live
audio webcast of the call will be available at www.cipherpharma.com. The
webcast will be archived for 90 days.
About Cipher Pharmaceuticals Inc.
Cipher Pharmaceuticals is a drug development company focused on
commercializing novel formulations of successful, currently marketed molecules
using advanced drug delivery technologies. Cipher's strategy is to in-license
products that incorporate proven drug delivery technologies and advance them
through the clinical development and regulatory approval stages, after which
the products are out-licensed to international partners. Because Cipher's
products are based on proven technology platforms applied to currently
marketed drugs, they are expected to have lower approval risk, shorter
development timelines and significantly lower development costs. The Company's
lead compound, CIP-FENOFIBRATE, received final approval from the U.S. Food and
Drug Administration and Health Canada in the first quarter of 2006. The
product is being marketed in the United States by ProEthic Pharmaceuticals
under the label Lipofen(R). In addition, Cipher is developing formulations of
the pain reliever tramadol (FDA approvable letter in May 2007) and the acne
treatment isotretinoin (FDA approvable letter in April 2007).
Cipher is listed on the Toronto Stock Exchange under the symbol 'DND' and
has approximately 24 million shares outstanding. For more information, please
visit www.cipherpharma.com.
Forward-Looking Statements
Statements made in this news release, other than those concerning
historical financial information, may be forward-looking and therefore subject
to various risks and uncertainties. Some forward-looking statements may be
identified by words like "may", "will", "anticipate", "estimate", "expect",
"intend", or "continue" or the negative thereof or similar variations. 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. Factors that could cause results to vary include
those identified in the Company's Annual Information Form and other filings
with Canadian securities regulatory authorities, such as the applicability of
patents and proprietary technology; possible patent litigation; regulatory
approval of products in the Company's pipeline; changes in government
regulation or regulatory approval processes; government and third-party payer
reimbursement; dependence on strategic partnerships for product candidates and
technologies, marketing and R&D services; meeting projected drug development
timelines and goals; intensifying competition; rapid technological change in
the pharmaceutical industry; anticipated future losses; the ability to access
capital to fund R&D; and the ability to attract and retain key personnel. All
forward-looking statements presented herein should be considered in
conjunction with such filings. The Company does not undertake to update any
forward-looking statements; such statements speak only as of the date made.Cipher Pharmaceuticals Inc.
Unaudited Consolidated Balance Sheets
(in thousands of dollars)
As at
March 31, December 31,
2008 2007
ASSETS
Current assets
Cash $ 10,270 $ 10,961
Accounts receivable 1,299 1,396
Income taxes receivable 7 128
Prepaid expenses and other current assets 20 56
Current portion of loan receivable (note 4) 734 -
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12,330 12,541
Property and equipment, net 191 208
Loan receivable (note 4) 684 1,377
Intangible assets, net (note 5) 4,475 4,592
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$ 17,680 $ 18,718
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LIABILITIES
Current liabilities
Accounts payable and accrued liabilities $ 1,060 $ 1,059
Deferred revenue 863 790
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1,923 1,849
Deferred revenue 1,043 1,192
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2,966 3,041
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SHAREHOLDERS' EQUITY
Share capital (note 6) 49,948 49,948
Contributed surplus 31,149 31,032
Deficit (66,383) (65,303)
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14,714 15,677
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$ 17,680 $ 18,718
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The accompanying notes are an integral part of these consolidated
financial statements
Cipher Pharmaceuticals Inc.
Unaudited Consolidated Statements of Operations and Comprehensive Loss
(in thousands of dollars, except per share amounts)
For the three months ended
March 31, March 31,
2008 2007
Revenues
Licensing revenue $ 177 $ -
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Expenses
Research and development 250 657
Operating, general and administrative 1,011 1,104
Amortization of property and equipment 17 5
Amortization of intangible assets 117 116
Interest income (138) (187)
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1,257 1,695
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Loss and comprehensive loss for the period $ (1,080) $ (1,695)
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Basic and diluted loss per share (note 7) $ (0.04) $ (0.07)
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The accompanying notes are an integral part of these consolidated
financial statements
Cipher Pharmaceuticals Inc.
Unaudited Consolidated Statements of Deficit
(in thousands of dollars)
For the For the
three months ended year ended
March 31, March 31, December 31,
2008 2007 2007
Deficit, beginning of period $ (65,303) $ (58,858) $ (58,858)
Loss for the period (1,080) (1,695) (6,445)
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Deficit, end of period $ (66,383) $ (60,553) $ (65,303)
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The accompanying notes are an integral part of these consolidated
financial statements
Cipher Pharmaceuticals Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands of dollars)
For the three months ended
March 31, March 31,
2008 2007
Cash provided by (used in)
Operating activities
Loss $ (1,080) $ (1,695)
Items not affecting cash
Amortization of property and equipment 17 5
Amortization of intangible assets 117 116
Stock-based compensation expense 117 159
Imputed interest (note 4) (41) (54)
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(870) (1,469)
Net change in non-cash operating items 179 (540)
Drawdown of loan receivable - 577
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(691) (1,432)
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Investing activities
Purchase of property and equipment - (6)
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Decrease in cash (691) (1,438)
Cash, beginning of period 10,961 15,077
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Cash, end of period $ 10,270 $ 13,639
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The accompanying notes are an integral part of these consolidated
financial statements
Cipher Pharmaceuticals Inc.
Notes to Unaudited Consolidated Financial Statements
March 31, 2008
(in thousands of dollars, except per share amounts)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited interim consolidated financial statements
of the Company have been prepared in accordance with accounting
principles generally accepted in Canada for interim reporting.
Accordingly, these financial statements do not include all of the
disclosures required by generally accepted accounting principles for
annual financial statements and should be read in conjunction with
the annual financial statements of the Company. In the opinion of
management, all adjustments considered necessary for fair
presentation have been included. All such adjustments are of a
normal recurring nature. Operating results for the three months
ended March 31, 2008 are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 2008.
There have been no changes to the accounting policies as described in
Note 1 and Note 2 to the consolidated financial statements for the
year ended December 31, 2007, except as explained in Note 2 below.
Basis of consolidation
These consolidated financial statements include the accounts of
Cipher Pharmaceuticals Inc. (the "Company") and its subsidiaries.
All intercompany balances with subsidiaries have been eliminated. As
part of the simplification of its corporate structure, the Company's
wholly-owned subsidiaries Cipher Canada Inc., Cipher Holdings
(Barbados) Ltd. and Cipher Pharmaceuticals Ltd. are in the process of
being wound up by way of voluntary dissolution.
2 ADOPTION OF NEW ACCOUNTING POLICIES
Effective January 1, 2008 the Company adopted the following new CICA
accounting standards: Section 3862, Financial Instruments -
Disclosures and Section 1535, Capital Disclosures.
CICA Section 3862, Financial Instruments - Disclosures, establishes
standards for the disclosure of financial instruments including
disclosing the significance of financial instruments and the nature
and extent of risks arising from financial instruments.
CICA Section 1535, Capital Disclosures, establishes standards for
disclosing aspects of the entity's capital management strategy. This
standard requires disclosure of both quantitative and qualitative
disclosures around the entity's objectives, policies and processes
for managing capital requirements and the consequences of non-
compliance.
The adoption of these new standards had no impact on the Company's
financial position or results of operations.
3 RISK MANAGEMENT
Financial risk management
In the normal course of business, the Company is exposed to a number
of financial risks that can affect its operating performance. These
risks are; credit risk, liquidity risk and market risk. The
Company's overall risk management program and prudent business
practices seek to minimize any potential adverse affects on the
Company's financial performance.
(i) Credit risk
Cash - the Company places its cash with Canadian Schedule I banks.
Accounts receivable - the Company licenses its products to
distribution partners in major markets. The credit risk associated
with the accounts receivable pursuant to these agreements is
evaluated during initial negotiations and on an ongoing basis. There
have been no events of default under these agreements. As of
March 31, 2008, no accounts receivable balances were considered
impaired, nor past due.
Loan receivable - the loan receivable is payable in annual
instalments over a five year period, with two payments remaining as
at March 31, 2008. All prior instalments have been received on
schedule and there have been no events of default under the loan
agreement.
(ii) Liquidity risk
The Company has no long term debt with specified repayment terms.
Accounts payable and accrued liabilities are settled in the regular
course of business, based on negotiated terms with trade suppliers.
All components of the balance of $1,060 as at March 31, 2008 will be
settled in less than one year. The carrying value of the balances
approximate their fair value as the impact of discounting is not
significant.
(iii) Market risk
Currency risk - the majority of the Company's revenue is denominated
in US currency and a portion of its expenses are denominated in US
currency. At March 31, 2008, the accounts receivable balance
included a total of US$1,215 and accounts payable and accrued
liabilities included a total of US$315. There is no active hedging
program currently in place due to the relatively short time frame for
settlement of these balances. A 10% change in the US/CDN exchange
rate on the March 31, 2008 balances would have a $90 impact on net
income.
Interest rate risk - the fair value of the loan receivable is based
upon a discounted cash flow method, whereby a risk premium is added
to the Bank of Canada risk-free interest rate. A 10% change in the
risk-free interest rate would not have a significant impact on
imputed interest.
Capital risk management
Shareholders' equity is managed as the capital of the Company. The
Company's objective when managing capital is to safeguard the
Company's ability to continue as a going concern in order to provide
returns for common shareholders and to maintain an optimal capital
structure to minimize the cost of capital. In order to maintain or
adjust the capital structure, the Company may issue new common
shares from time to time.
4 LOAN RECEIVABLE
On February 28, 2005, the Company completed the sale of its wholly-
owned pharmaceutical research services business, Pharma Medica
Research Inc. (Pharma Medica). Consideration consisted of a cash
payment of $14,000 and a deferred payment of $4,000. The deferred
payment is non-interest bearing and is repayable in annual
installments of $800 over a five year period. As the deferred
payment is non-interest bearing, it was recorded at its fair value of
$3,112 based on a discount rate of 9%. Imputed interest of $41 has
been recorded on this deferred payment during the three months ended
March 31, 2008 ($54 during the three months ended March 31, 2007).
In accordance with the terms of the deferred payment agreement,
$800 of clinical services purchased from Pharma Medica during
2007 were offset against the annual payment that was due on
January 30, 2008.
5 INTANGIBLE ASSETS
During fiscal 2001, the Company entered into certain agreements with
Galephar Pharmaceutical Research Inc. ("Galephar") for the rights to
to package, test, obtain regulatory approvals and market certain
products in various countries around the world. In accordance with
the terms of the agreements, the Company has acquired these
intangible rights through an investment in three separate series of
preferred shares of Galephar. The Company may be required to pay
additional amounts to Galephar in respect of the CIP-ISOTRETINOIN and
CIP-TRAMADOL ER intangible rights of up to $1,542 (US$1,500) if
certain future milestones are achieved as defined in the agreements.
These additional payments will be made in the form of additional
Galephar preferred share purchases. The recoverability of these
intangible rights is dependant upon sufficient revenues being
generated from the related products currently under development and
commercialization.
Upon receipt of FDA approval in January 2006, the Company began
amortizing the intangible rights related to CIP-FENOFIBRATE.
Currently, no other products have received FDA approval.
With regard to CIP-FENOFIBRATE, in July 2007 the Company entered into
a licensing and distribution agreement with ProEthic
Pharmaceuticals, Inc. ("ProEthic") under which ProEthic was granted
the exclusive right to market, sell and distribute Lipofen in the
United States. Under the terms of the agreement, the Company
received an initial payment of US$1 million in July 2007 and received
the second payment of US$1 million on April 4, 2008 related to the
US $2 million up-front licensing fee. In addition, under the terms
of the agreement, the Company could receive additional milestone
payments of up to US$20 million based on the achievement of certain
net sales targets. The Company also receives a royalty based on a
percentage of net sales. These elements are reflected in licensing
revenue, which also incorporates direct product-related expenses and
amounts due to Galephar, the Company's technology partner. Revenue
from licensing and distribution agreements is presented on a net
basis. Over the term of the Galephar agreement, after direct
product-related expenses are deducted and including payments to
Galephar, the Company anticipates that it will retain approximately
50% of revenue. In late September 2007, ProEthic launched Lipofen in
the U.S. market.
The Company's US$2 million investment in Galephar preferred shares
related to CIP-FENOFIBRATE is being repaid by Galephar in a series
of quarterly payments. The first payment of US$350 was received in
December 2007. Subsequent to year-end, the repayment schedule
was amended and a second payment of US$225 was received in
March 2008. The next two quarterly payments will be in the amount of
US$225. These payments are included in revenue based on the
remaining amortization period of the related intangible asset.
6 SHARE CAPITAL
Authorized share capital
The authorized share capital consists of an unlimited number of
preference shares, issuable in series, and an unlimited number of
voting common shares.
Issued share capital
The following is a summary of the changes in share capital from
December 31, 2006 to March 31, 2008:
Number of
common shares Amount
(in thousands) $
Balance outstanding - December 31, 2006 24,036 49,891
Options exercised during 2007 19 57
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Balance outstanding - December 31, 2007
and March 31, 2008 24,055 49,948
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During 2007, 19,277 shares were issued as a result of the exercise of
37,500 options. The Company's stock option plan provides that an
option holder may elect to receive an amount of shares equivalent to
the growth value of vested options, which is the difference between
the market price and the exercise price of the options. There is no
cash consideration for the shares issued when this election is chosen
by an option holder.
Stock option plan
The following is a summary of the changes in the stock options
outstanding from December 31, 2006 to March 31, 2008:
Weighted
average
Number of exercise
options price
(in thousands) $
Balance outstanding - December 31, 2006 889 2.96
Options granted during 2007 274 3.90
Options exercised during 2007 (38) 1.90
Options cancelled during 2007 (127) 2.16
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Balance outstanding - December 31, 2007 998 3.36
Options granted during the three months ended
March 31, 2008 263 1.05
Options cancelled during the three months
ended March 31, 2008 (50) 3.90
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Balance outstanding - March 31, 2008 1,211 2.83
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At March 31, 2008, 500,482 options were fully vested and exercisable.
During the three months ended March 31, 2008, the Company issued
263,000 stock options under the employee and director stock option
plan, which have an exercise price of $1.05, 25% of which vest on
February 28 of each year, commencing in 2009, and expire in 2018.
Total compensation cost for these stock options is estimated to be
$242. This cost will be recognized over the vesting period of the
stock options.
The stock options issued during the three months ended March 31,
2008 were valued using the Black-Scholes option pricing model
with the following assumptions:
Risk-free interest rate 3.14%
Expected life 10 years
Expected volatility 93%
Expected dividend Nil
7 LOSS PER SHARE
Loss per share is calculated using the weighted average number of
shares outstanding. The weighted average number of shares
outstanding for the three months ended March 31, 2008 was
24,054,878 (for the three months ended March 31, 2007 - 24,035,601).
As the Company had a loss for each of the periods presented, basic
and diluted loss per share are the same because the exercise of all
stock options would have an anti-dilutive effect.%SEDAR: 00020415E
For further information:
For further information: Craig Armitage, Investor Relations, The Equicom Group, (416) 815-0700 ext 278, (416) 815-0080 fax, carmitage@equicomgroup.com; Larry Andrews, President and CEO, Cipher Pharmaceuticals, (905) 602-5840 ext 324, (905) 602-0628 fax, landrews@cipherpharma.com