Press Releases
Toronto Stock Exchange Symbol: DND
MISSISSAUGA, ON, July 28 /CNW/ - Cipher Pharmaceuticals Inc. (TSX: DND) today announced its financial and operational results for the three and six months ended June 30, 2010.
Q2 2010 Summary
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- Net revenue increased to $2.2 million from $0.7 million in Q2 2009,
driven mainly by the achievement of a US$1 million commercial
milestone for Lipofen(R).
- Net income for the quarter was $0.7 million, or $0.03 per share,
compared with a loss of $0.8 million, or $0.03 per share, for
Q2 2009.
- Achieved final FDA approval for CIP-TRAMADOL ER, the Company's
extended-release tramadol product.
- Reached 75% enrolment (over 700 patients) in CIP-ISOTRETINOIN
Phase III safety study.
- Strong balance sheet at quarter end with cash of $10.3 million and no
debt, compared with cash of $9.0 million at December 31, 2009.
"The second quarter was highlighted by final FDA approval of our extended-release tramadol - our second product approved in the U.S. market," said Larry Andrews, President and CEO of Cipher. "We are working diligently to finalize a marketing partnership as we prepare for commercial launch, targeted for the first quarter of 2011. Achievement of a sales milestone for Lipofen(R) during the quarter reflects Kowa's continued commercial success in the U.S. and further strengthens our financial position."
Financial Review
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Net revenue in Q2 2010 was $2.2 million, compared with $0.7 million in Q2 2009. The improved performance reflects a continuing trend of higher royalty revenue for the product during the quarter, as well as the achievement of a one-time US$1 million commercial milestone for Lipofen(R).
Gross Research and Development ("R&D") expenditures for Q2 2010 rose to $3.5 million, compared with $1.5 million in Q2 2009, driven by the CIP-ISOTRETINOIN clinical study. The reported R&D expenditure amount of $0.2 million for Q2 2010 is net of $3.3 million of reimbursed expenses by Cipher's U.S. marketing partner. Operating, General and Administrative ("OG&A") expenses for Q2 2010 were $1.1 million, consistent with the prior year.
For the three months ended June 30, 2010, the Company recorded net income of $0.7 million ($0.03 per basic and diluted share), compared with a loss of $0.8 million ($0.03 per basic and diluted share) for Q2 2009.
For the first half of 2010, the Company recorded net revenue of $3.1 million, compared with $1.3 million in the first half of 2009. Net income for the first six months of 2010 was $0.2 million ($0.01 per basic and diluted share), compared with a net loss of $1.6 million ($0.06 per basic and diluted share) in the first half of 2009.
The Company's financial position remained solid at quarter-end. As at June 30, 2010, Cipher had cash of $10.3 million, compared with $9.0 million as at December 31, 2009 and continued to have no debt.
Product Update
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During Q2 2010, Lipofen(R) monthly prescriptions showed steady growth, as Kowa increased coverage of the primary care physicians in its targeted regions and expands its sales force. Kowa's sales force grew to approximately 250 at the end of the second quarter to support the recent launch of its pitavastatin product, LIVALO(R).
During Q3 2009, Cipher commenced its Phase III safety trial for CIP-ISOTRETINOIN under a Special Protocol Assessment ("SPA") with the U.S. Food and Drug Administration ("FDA"). The 800-patient study is a double-blind, randomized trial comparing CIP-ISOTRETINOIN to an FDA-approved, commercially available isotretinoin product. The study is being conducted in the U.S. and Canada over an 18-month period. The study is progressing well with enrolment having reached more than 700 patients at the end of Q2 2010. The Company is expecting to complete enrolment toward the end of Q3 2010.
In May 2010, Cipher announced that the FDA has approved CIP-TRAMADOL ER, the Company's extended-release tramadol product, for the treatment of moderate to moderately severe chronic pain in adults. Also during Q2 2010, the United States Court of Appeals upheld the lower court's original decision on patent infringement litigation initiated by Pharma Products L.P against Par Pharmaceutical Companies, Inc. relating to Ultram(R) ER, the reference product in Cipher's New Drug Application for CIP-TRAMADOL ER. This affirmed the invalidity of the asserted claims of the Orange Book-listed patents for Ultram(R) ER. These are the same patents that were originally asserted against Cipher and for which Cipher was granted summary judgment in January 2010. This decision confirms Cipher's long-held view that these patents are invalid, and further mitigates any remaining risk of patent litigation on these patents against CIP-TRAMADOL ER. Cipher is currently preparing for the U.S. commercial launch of the product, which includes securing a marketing partner and finalizing commercial manufacturing requirements. The Company is targeting Q1 2011 for commercial launch.
Cipher continues to actively pursue new early stage pipeline product candidates and advance out-licensing discussions for its current products.
Conference Call and Webcast
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Cipher will hold a conference call today, July 28, 2010, 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 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 commercial-stage 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 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 (FDA approval in May 2010) 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. 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. 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 Financial Statements
For the Three Months Ended June 30, 2010
Cipher Pharmaceuticals Inc.
Unaudited Balance Sheets
(in thousands of dollars)
As at
June 30, December 31,
2010 2009
ASSETS
Current assets
Cash and cash equivalents $ 10,310 $ 9,006
Accounts receivable (note 2) 2,851 967
Prepaid expenses and other current assets 153 457
Loan receivable (note 3) - 800
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13,314 11,230
Property and equipment, net 72 86
Intangible assets, net (note 4) 3,490 3,507
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$ 16,876 $ 14,823
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LIABILITIES
Current liabilities
Accounts payable and accrued liabilities $ 2,784 $ 1,570
Current portion of deferred revenue 1,405 1,956
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4,189 3,526
Deferred revenue 1,224 329
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5,413 3,855
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SHAREHOLDERS' EQUITY
Share capital (note 5) 49,977 49,948
Contributed surplus (note 5) 32,503 32,268
Deficit (71,017) (71,248)
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11,463 10,968
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$ 16,876 $ 14,823
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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 Income
(in thousands of dollars, except per share amounts)
For the three months ended For the six months ended
June 30 June 30
2010 2009 2010 2009
Revenues
Licensing revenue $ 2,218 $ 678 $ 3,136 $ 1,280
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Expenses
Research and
development 245 225 523 454
Operating, general
and
administrative 1,052 1,057 2,020 2,046
Amortization of
property and
equipment 14 18 28 37
Amortization of
intangible
assets 176 189 352 377
Interest income (12) (27) (18) (73)
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1,475 1,462 2,905 2,841
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Income (loss) and
comprehensive
income (loss)
for the period $ 743 $ (784) $ 231 $ (1,561)
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Basic and diluted
earnings (loss)
per share
(note 6) $ 0.03 $ (0.03) $ 0.01 $ (0.06)
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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 months ended For the six months ended
June 30 June 30
2010 2009 2010 2009
Deficit, beginning
of period $ (71,760) $ (69,310) $ (71,248) $ (68,533)
Income (loss) for
the period 743 (784) 231 (1,561)
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Deficit, end of
period $ (71,017) $ (70,094) $ (71,017) $ (70,094)
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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 months ended For the six months ended
June 30 June 30
2010 2009 2010 2009
Cash provided by
(used in)
Operating activities
Income (loss) $ 743 $ (784) $ 231 $ (1,561)
Items not affecting
cash
Amortization of
property and
equipment 14 18 28 37
Amortization of
intangible
assets 176 189 352 377
Stock-based
compensation
expense 130 164 249 325
Imputed interest - (19) - (47)
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1,063 (432) 860 (869)
Net change in
non-cash
operating
items 458 968 (22) 137
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1,521 536 838 (732)
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Investing activities
Proceeds from loan
receivable - - 800 612
Purchase of property
and equipment (13) (5) (14) (5)
Acquisition of
intangible
rights
(note 4) (335) - (335) (122)
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(348) (5) 451 485
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Financing activities
Proceeds from
exercise of
stock
options
(note 5) 15 - 15 -
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Increase (Decrease)
in cash 1,188 531 1,304 (247)
Cash and cash
equivalents,
beginning of
period 9,122 9,103 9,006 9,881
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Cash and cash
equivalents,
end of
period $ 10,310 $ 9,634 $ 10,310 $ 9,634
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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, 2010
(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,
2010 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 2010.
There have been no changes to the accounting policies as described in
Note 1 to the financial statements for the year ended December 31,
2009.
2 FOREIGN EXCHANGE FORWARD CONTRACT
During the second quarter of 2010, the Company entered into a foreign
exchange forward contract related to the net sales milestone of
US$1 million under the Lipofen licensing and distribution agreement
which was achieved at the end of the quarter. The contract matures on
July 30, 2010 at an exchange rate of $1.031 against the US dollar.
This foreign exchange forward contract is considered as an effective
hedge to the US$1 million milestone and as such has been included in
Accounts Receivable at the hedge rate.
3 LOAN RECEIVABLE
During the quarter ended March 31, 2010, the Company received the
final instalment of $800 as part of the deferred payment agreement
from the sale of Pharma Medica Research Inc. in February 2005.
4 INTANGIBLE ASSETS
The Company has 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 $1,145 (US$1,080) 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.
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. Lipofen was
launched in the U.S. market in 2007. During the second quarter of
2010, the Company reached a cumulative net sales level for the
product that resulted in a contract milestone of US$1 million being
achieved.
CIP-ISOTRETINOIN - 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 the product in the
United States. To date, the Company has received an up-front
licensing payment of US$1 million and a milestone payment of
US$2 million as a result of reaching 50% of the patient enrolment
level for the clinical trial. Under the terms of the the agreement
the Company could receive additional pre- and post-commercialization
milestone payments of up to US$21 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
associated with 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 and after the recovery of
Cipher's investment in the preferred shares of Galephar,
approximately 50% of all milestone and royalties received by the
Company under the agreement will be paid to Galephar.
CIP-TRAMADOL ER - In May 2010, the Company received final approval
from the FDA for its extended-release tramadol product for the
treatment of moderate to moderately severe chronic pain in adults.
The achievement of FDA approval triggers additional milestone
payments to Galephar as the Company prepares for commercial
manufacturing. During the second quarter of 2010 a payment of $335
was made to acquire additional intangible rights for CIP-TRAMADOL ER.
5 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, 2008 to June 30, 2010:
Number of
common shares Amount
(in thousands) $
Balance outstanding - December 31, 2008
and December 31, 2009 24,055 49,948
Options exercised during Q2 2010 25 29
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Balance outstanding - June 30, 2010 24,080 49,977
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Stock option plan
The following is a summary of the changes in the stock options
outstanding from December 31, 2008 to June 30, 2010:
Weighted
Number of average
options exercise
(in price
thousands) $
Balance outstanding - December 31, 2008 1,376 2.51
Granted in 2009 224 0.60
Expired in 2009 (20) 4.33
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Balance outstanding - December 31, 2009 1,580 2.22
Granted during the three months ended
March 31, 2010 (a) 222 1.60
Exercised during the three months
ended June 30, 2010 (b) (25) 0.61
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Balance outstanding - June 30, 2010 1,777 2.17
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At June 30, 2010, 1,054,560 options were fully vested and exercisable
(766,974 at June 30, 2009).
(a) During the three months ended March 31, 2010, the Company issued
221,500 stock options under the employee and director stock option
plan, which have an exercise price of $1.60, 25% of which vest on
February 19 of each year, commencing in 2011, and expire in 2020.
Total compensation cost for these stock options is estimated to be
$317. This cost will be recognized over the vesting period of the
stock options.
The stock options issued during the three months ended March 31, 2010
were valued using the Black-Scholes option pricing model with the
following assumptions:
Risk-free interest rate 3.50%
Expected life 10 years
Expected volatility 97%
Expected dividend Nil
(b) During the three months ended June 30, 2010, 25,000 stock options
were exercised for a total cash consideration of $15. Capital stock
increased by $29 representing the cash consideration of $15 and a $14
reduction in contibuted surplus. No stock options were exercised in
the three months ended June 30, 2009.
6 EARNINGS PER SHARE
Earnings per share is calculated using the weighted average number of
shares outstanding. The weighted average number of shares outstanding
for the three and six month periods ended June 30, 2010 was
24,071,087 and 24,063,027 respectively (for both the three and six
month periods ended June 30, 2009 the amount was 24,054,878). The
dilutive impact on earnings per share for the three and six month
periods ended June 30, 2010 is not significant.
Basic and diluted loss per share for prior year comparative figures
are the same because the exercise of stock options would have an
anti-dilutive effect due to the net losses incurred in 2009.
%SEDAR: 00020415E