Press Releases
Cipher reports Q2 2009 financial results
Toronto Stock Exchange Symbol: DND
MISSISSAUGA, ON, July 29 /CNW/ - Cipher Pharmaceuticals Inc. (TSX: DND)
today announced its financial and operational results for the three and six
months ended June 30, 2009.Q2 2009 Summary
---------------
- Finalized FDA Special Protocol Assessment ("SPA") for CIP-
ISOTRETINOIN Phase III safety trial.
- Continued steady growth of Lipofen(R) prescriptions.
- Total revenue of $0.7 million, compared with $0.3 million in Q2 2008.
- A strengthened balance sheet at quarter end with cash of $9.6 million
and no debt."The second quarter was highlighted by continued steady growth in Lipofen
prescriptions as our partner Kowa expands its sales team," said Larry Andrews,
President and CEO of Cipher. "We were also pleased to finalize the study
protocol and make important progress in preparation for our CIP-ISOTRETINOIN
safety study, which will begin enrolling patients shortly. Given our solid
financial position, we continue to focus on in-licensing activity to expand
our pipeline."Financial Review
----------------Total revenue in Q2 2009 was $0.7 million, compared with $0.3 million in
Q2 2008, driven by the continued market penetration of Lipofen(R) as Kowa
expands its sales force.
Gross Research and Development ("R&D") expenditures for Q2 2009 were $1.5
million, an increase of $0.4 million compared with the same period in 2008.
The reported amount of $0.2 million for Q2 is net of reimbursements of $1.3
million from Ranbaxy related to the CIP-ISOTRETINOIN clinical study.
Operating, General and Administrative ("OG&A") expenses for Q2 2009 were $1.1
million, compared with $1.0 million in Q2 2008. The increase reflects the
addition of new business development resources in late 2008 to support the
Company's in-licensing and out-licensing activities. The loss for the three
months ended June 30, 2009 was $0.8 million ($0.03 per basic and diluted
share), a decrease of 57% compared with the loss of $1.8 million ($0.08 per
basic and diluted share) in Q2 2008. The improved performance was primarily a
result of increased revenue generated from the Lipofen(R) U.S. distribution
agreement and reduced R&D expenditures.
For the six months ended June 30, 2009, the Company recorded revenue of
$1.3 million, compared with $0.5 million in the first half of 2008. The loss
for the first six months of 2009 was $1.6 million ($0.06 per basic and diluted
share), compared with $2.9 million ($0.12 per basic and diluted share) in the
first half of 2008.
The Company's financial position remained solid at quarter end. As at
June 30, 2009, Cipher had cash of $9.6 million, compared with $9.9 million as
at December 31, 2008 and $9.1 million at the end of Q1 2009. During the second
quarter of 2009 Cipher received a US$1 million payment from Kowa in return for
the partial waiver of a non-compete covenant in the licensing and distribution
agreement for Lipofen. The waiver relates to a combination product and not a
fenofibrate only formulation that would compete with Lipofen. Cipher will
receive additional payments under the revised agreement should Kowa be
successful in commercializing its combination product, which Cipher
anticipates to be 2013 at the earliest. The revised agreement includes
provisions to ensure Lipofen(R) royalty revenue is not negatively impacted
once the combination product reaches the market.Product Update
--------------During Q2 2009, Lipofen(R) monthly prescriptions showed steady growth,
and Cipher expects this trend to continue as Kowa increases penetration of the
primary care physicians in its targeted regions and expands its sales force.
Since the Kowa acquisition, the number of sales reps has increased from
approximately 65 to 140 currently, with further increases planned in 2010.
During Q2 2009, the Company finalized the study protocol for its Phase
III safety trial for CIP-ISOTRETINOIN under a Special Protocol Assessment
("SPA"). The Company has commenced the study, with enrolment expected to begin
in Q3 2009. The 800-patient study will be a double-blind, randomized trial
comparing CIP-ISOTRETINOIN to an FDA-approved, commercially available
isotretinoin product. The study will be conducted in the U.S. and Canada over
an 18-month period.
During Q2 2008, Cipher submitted a revised NDA to the FDA for
CIP-TRAMADOL ER, the Company's extended-release formulation of tramadol. In
February 2009, the Company received tentative approval from the FDA. While the
product meets all the FDA's requirements for manufacturing quality, clinical
safety and efficacy, the Company must resolve a patent issue associated with
the reference product, Ultram(R) ER, before CIP-TRAMADOL ER is commercialized.
Cipher continues to actively pursue new early stage pipeline products and
advance out-licensing discussions for its current products.Notice of Conference Call
-------------------------Cipher will hold a conference call today, July 29, 2009, at 8:30 a.m.
(ET) to discuss its financial results and other corporate developments. To
access the conference call by telephone, dial 416-644-3422 or 1-800-591-7539.
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 Kowa Pharmaceuticals America
under the label Lipofen(R). In addition, Cipher is developing formulations of
the pain reliever tramadol (tentative FDA approval in February 2009) 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. Except as required by Canadian securities laws,
the Company does not undertake to update any forward-looking statements; such
statements speak only as of the date made.Cipher Pharmaceuticals Inc.
Unaudited Balance Sheets
(in thousands of dollars)
As at
June 30, December 31,
2009 2008
ASSETS
Current assets
Cash $ 9,634 $ 9,881
Accounts receivable 851 512
Income taxes receivable 6 6
Prepaid expenses and other current assets 287 380
Current portion of loan receivable (note 2) 760 608
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11,538 11,387
Property and equipment, net 115 147
Loan receivable - 717
Intangible assets, net (note 3) 3,871 4,126
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$ 15,524 $ 16,377
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LIABILITIES
Current liabilities
Accounts payable and accrued liabilities $ 833 $ 1,178
Current portion of deferred revenue 1,932 1,177
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2,765 2,355
Deferred revenue 967 994
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3,732 3,349
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SHAREHOLDERS' EQUITY
Share capital (note 4) 49,948 49,948
Contributed surplus 31,938 31,613
Deficit (70,094) (68,533)
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11,792 13,028
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$ 15,524 $ 16,377
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The accompanying notes are an integral part of these unaudited financial
statements
Cipher Pharmaceuticals Inc.
Unaudited Statements of Operations and Comprehensive Loss
(in thousands of dollars, except per share amounts)
For the three For the six
months ended months ended
June 30 June 30
2009 2008 2009 2008
Revenues
Licensing revenue $ 678 $ 277 $ 1,280 $ 454
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Expenses
Research and
development 225 1,092 454 1,542
Operating, general
and
administrative 1,057 967 2,046 1,778
Amortization of
property and
equipment 18 18 37 35
Amortization of
intangible assets 189 116 377 233
Interest income (27) (113) (73) (251)
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1,462 2,080 2,841 3,337
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Loss and comprehensive
loss for the period $ (784) $ (1,803) $ (1,561) $ (2,883)
-------------------------------------------------------------------------
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Basic and diluted
loss per share
(note 5) $ (0.03) $ (0.08) $ (0.06) $ (0.12)
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The accompanying notes are an integral part of these unaudited financial
statements
Cipher Pharmaceuticals Inc.
Unaudited Statements of Deficit
(in thousands of dollars)
For the three For the six
months ended months ended
June 30 June 30
2009 2008 2009 2008
Deficit, beginning
of period $ (69,310) $ (66,383) $ (68,533) $ (65,303)
Loss for the period (784) (1,803) (1,561) (2,883)
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Deficit, end of
period $ (70,094) $ (68,186) $ (70,094) $ (68,186)
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The accompanying notes are an integral part of these unaudited financial
statements
Cipher Pharmaceuticals Inc.
Unaudited Statements of Cash Flows
(in thousands of dollars)
For the three For the six
months ended months ended
June 30 June 30
2009 2008 2009 2008
Cash provided by (used in)
Operating activities
Loss $ (784) $ (1,803) $ (1,561) $ (2,883)
Items not affecting
cash
Amortization of
property and
equipment 18 18 37 35
Amortization of
intangible
assets 189 116 377 233
Stock-based
compensation
expense 164 161 325 278
Imputed interest
(note 2) (19) (32) (47) (73)
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(432) (1,540) (869) (2,410)
Net change in
non-cash operating
items 968 1,013 137 1,192
Drawdown of loan
receivable - 111 - 111
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536 (416) (732) (1,107)
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Investing activities
Proceeds from loan
receivable
(note 2) - - 612 -
Acquisition of
intangible rights - - (122) -
Purchase of
property and
equipment (5) (3) (5) (3)
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(5) (3) 485 (3)
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Increase (Decrease)
in cash 531 (419) (247) (1,110)
Cash, beginning of
period 9,103 10,270 9,881 10,961
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Cash, end of period $ 9,634 $ 9,851 $ 9,634 $ 9,851
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The accompanying notes are an integral part of these unaudited financial
statements
Cipher Pharmaceuticals Inc.
Notes to Unaudited Financial Statements
June 30, 2009
(in thousands of dollars, except per share amounts)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited interim 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 six months ended June 30,
2009 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 2009.
There have been no changes to the accounting policies as described in
Note 1 and Note 2 to the financial statements for the year ended
December 31, 2008.
2 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
instalments of $800 over a five year period. As the deferred payment
is non-interest bearing, it was originally recorded at its fair value
of $3,112 based on a discount rate of 9%. Imputed interest of $47 has
been recorded on this deferred payment during the six months ended
June 30, 2009 ($73 during the six months ended June 30, 2008). In
accordance with the terms of the deferred payment agreement, $188 of
clinical services purchased from Pharma Medica were offset against
the annual instalment received on January 30, 2009.
3 INTANGIBLE ASSETS
During fiscal 2001, the Company entered into certain agreements with
Galephar Pharmaceutical Research Inc. ("Galephar") for the rights 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 $1,628 (US$1,400) 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 recovery of these intangible
rights is dependant upon sufficient revenues being generated from the
related products currently under development and commercialization.
The Company is currently amortizing the intangible rights related to
CIP-FENOFIBRATE and CIP-ISOTRETINOIN.
With regard to CIP-FENOFIBRATE, in July 2007 the Company entered into
a licensing and distribution agreement with Kowa Pharmaceuticals
America, Inc. ("Kowa"), under which Kowa was granted the exclusive
right to market, sell and distribute Lipofen in the United States.
The Company received an up-front licensing payment of US$2 million
and, under the terms of the agreement, 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 product-related expenses
and amounts due to Galephar, the Company's technology partner. During
the second quarter of 2009, the Company received a US$1 million
payment from Kowa in return for the partial waiver of a non-compete
covenant in the licensing and distribution agreement for Lipofen. The
waiver relates to a combination product and not a fenofibrate only
formulation that would compete with Lipofen. Under the revised
agreement the Company will receive additional payments should Kowa be
successful in commercializing its combination product and it includes
to ensure Lipofen revenue is not impacted once the combination
product reaches the market. Revenue is being recognized on this
payment using a straight-line amortization method over the estimated
commercial life of the product. After product-related expenses are
deducted, approximately 50% of all milestone and royalty payments
received by the Company under the agreement will be paid to Galephar.
Lipofen was launched in the U.S. market in 2007.
In August 2008, the Company entered into a development, distribution
and supply agreement with Ranbaxy Pharmaceuticals Inc. ("Ranbaxy")
under which Ranbaxy was granted the exclusive right to market, sell
and distribute CIP-ISOTRETINOIN in the United States. Under the terms
of the agreement, the Company received an up-front licensing payment
of US$1 million and could receive additional pre- and post-
commercialization milestone payments of up to US$23 million, based on
the achievement of certain milestone targets. Once the product is
commercialized, the Company will also receive a royalty based on a
percentage of net sales. In addition, Ranbaxy will reimburse the
Company for the costs of the clinical studies required by the FDA to
secure NDA approval, up to a predetermined cap. Any additional
development costs associated with initial FDA approval will be shared
equally. The Company is responsible for all product development
activities, including management of the clinical studies required by
the FDA to secure NDA approval and is also responsible for product
supply and manufacturing, which will be fulfilled by Galephar. After
product-related expenses are deducted, approximately 50% of all
milestone and royalty payments received by the Company under the
agreement will be paid to Galephar.
4 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
There have been no changes in the Company's share capital during the
period from December 31, 2007 to June 30, 2009. The following is a
summary of the Company's share capital as at June 30, 2009:
Number of
common shares Amount
(in thousands) $
Balance outstanding - June 30, 2009 24,055 49,948
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----------------------------
Stock option plan
The following is a summary of the changes in the stock options
outstanding from December 31, 2007 to June 30, 2009:
Weighted
average
Number of exercise
options price
(in thousands) $
Balance outstanding - December 31, 2007 998 3.36
Options granted during 2008 483 0.78
Options that expired or were cancelled
during 2008 (105) 2.55
---------------
Balance outstanding - December 31, 2008 1,376 2.51
Options granted during the three months
ended March 31, 2009 204 0.61
---------------
Balance outstanding - June 30, 2009 1,580 2.27
---------------
---------------
At June 30, 2009, 766,974 options were fully vested and exercisable
(545,482 at June 30, 2008).
During the three months ended March 31, 2009, the Company issued
204,375 stock options under the employee and director stock option
plan, which have an exercise price of $0.61, 25% of which vest on
February 20 of each year, commencing in 2010, and expire in 2019.
Total compensation cost for these stock options is estimated to be
$114. This cost will be recognized over the vesting period of the
stock options.
The stock options issued during the three months ended March 31, 2009
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 99%
Expected dividend Nil
5 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 six and three month periods ended June 30, 2009
and for the six and three month periods ended June 30, 2008 was
24,054,878.
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