Press Releases

CIPHER REPORTS FISCAL 2010 FINANCIAL RESULTS

- Results highlighted by 70% increase in revenue -

Toronto Stock Exchange Symbol: DND

MISSISSAUGA, ON, March 9 /CNW/ - Cipher Pharmaceuticals Inc. (TSX: DND) today announced its financial and operational results for the fourth quarter and fiscal year ended December 31, 2010.

Fiscal 2010 Summary

Net revenue increased 70% to $5.4 million versus $3.2 million in 2009.
Total royalties from Lipofen® increased 64% over 2009.
Recorded positive annual net income for the first time in the Company's history.
Strong balance sheet at year end with cash of $10.3 million and no debt.
Received final FDA approval of CIP-TRAMADOL ER.
Received Patent Notice of Allowance for CIP-TRAMADOL ER from the U.S. Patent and Trademark Office and Canadian Intellectual Property Office.
Completed patient enrolment in CIP-ISOTRETINOIN Phase III safety trial.

"Increased royalties from Lipofen® helped drive a substantial increase in revenue this year, enabling the Company to achieve profitability and strengthen our cash balance," said Larry Andrews, President and CEO of Cipher. "The year was also highlighted by important product milestones, including final FDA approval on our extended-release tramadol and excellent progress with our pivotal Phase III safety study for CIP-ISOTRETINOIN - the largest, most comprehensive trial conducted on isotretinoin. We expect to disclose top-line data in early Q3 2011 followed by an FDA submission in Q4 2011. Among other milestones, we are also working to finalize a U.S. partnership for CIP-TRAMADOL ER and commercialize that product, adding another revenue stream to support our growth plans."

Financial Review

Net revenue in 2010 was $5.4 million, compared with $3.2 million in 2009, mainly reflecting increased royalty and milestone revenues from Lipofen®. Revenue from Lipofen® totalled $5.0 million, an increase of $2.1 million over 2009. The increase was primarily a result of higher Lipofen® royalty revenues and a US$1 million milestone in Q2 2010 for the achievement of a cumulative net sales milestone. Revenue from CIP-ISOTRETINOIN was $0.4 million in 2010, which relates to revenue recognized on Cipher's share of the three milestone payments received from its U.S. marketing and distribution partner.

Gross Research and Development ("R&D") expenditures for 2010 were $12.8 million, compared with $5.4 million in 2009. The reported R&D expense of $0.7 million, which does not include the reimbursement of $11.8 million from Cipher's U.S. partner related to the CIP-ISOTRETINOIN Phase III clinical study, decreased by $0.2 million compared to 2009, reflecting the advanced stage of development of the Company's current products.

Operating, General and Administrative ("OG&A") expenses for 2010 were $3.9 million, compared with $4.3 million in 2009. Net income for the 12 months ended December 31, 2010 increased to $0.1 million ($0.00 per share), compared with a net loss of $2.7 million ($0.11 per share) in 2009.

In Q4 2010, Cipher recorded licensing revenue of $1.2 million, compared with $0.8 million in Q4 2009. Gross R&D expenditures during Q4 2010 were $2.3 million, which represents a decrease of $0.7 million compared to Q4 2009. The reported amount of R&D expense of $0.0 million for Q4 2010 is net of $2.3 million of reimbursed R&D costs related to the CIP-ISOTRETINOIN Phase III clinical study. OG&A expenses for Q4 2010 were $0.9 million, compared with $1.1 million in the same period last year. Net income for the three months ended December 31, 2010 was $0.1 million or ($0.00 per share), compared with a loss of $0.6 million ($0.03 per share) in the same period last year.

The Company's financial position remained solid at year-end. As at December 31, 2010, Cipher had cash of $10.3 million, compared with $9.0 million as at December 31, 2009.

Product Update

During 2010, Cipher saw steady growth in royalty revenue from Lipofen® as Kowa continued its penetration of primary care physicians in its targeted regions and expanded its sales force to approximately 250. Total royalties from Lipofen® increased 64% over 2009. In addition, a cumulative net sales milestone was achieved in 2010 resulting in a US$1 million payment to Cipher.

During Q4 2010, Cipher completed patient enrolment in a Phase III safety trial for CIP-ISOTRETINOIN. The study is a double-blind, randomized trial comparing CIP-ISOTRETINOIN to an FDA-approved, commercially available isotretinoin product. A total of 934 patients were enrolled and 61 patients are still in the process of completing the study, which the Company expects will occur in early Q2 2011. A trial-related milestone achieved in Q4 2010 resulted in the receipt of a US$1 million payment from the Company's U.S. partner. Cipher expects to publish top-line results in early Q3 2011 and complete its FDA submission in Q4 2011. The FDA review is expected to take six months.

Cipher received FDA approval for CIP-TRAMADOL ER, the Company's extended-release formulation of tramadol, in Q2 2010. In Q3 2010, Cipher received Patent Notice of Allowances for CIP-TRAMADOL ER from the U.S. Patent and Trademark Office and Canadian Intellectual Property Office. Cipher is currently preparing for the U.S. commercial launch of CIP-TRAMADOL ER, which includes securing a marketing partner and finalizing commercial manufacturing requirements.

Notice of Conference Call

Cipher will hold a conference call today, March 9, 2011, 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®. Cipher's second product, an extended-release version of the pain reliever tramadol, received FDA approval in May 2010 and the Company's third product, a novel formulation of the acne treatment isotretinoin, is in its final Phase III safety study.

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.
Balance Sheets
(in thousands of dollars)

			As at
		December 31,		December 31,
		2010		2009

ASSETS

Current assets
Cash	$	10,328	$	9,006
Accounts receivable		1,808		967
Prepaid expenses and other current assets		465		457
Loan receivable (note 4)		-		800
		12,601		11,230

Property and equipment, net (note 5)		50		86

Intangible assets, net (note 6)		3,522		3,507

	$	16,173	$	14,823

LIABILITIES

Current liabilities
Accounts payable and accrued liabilities	$	2,440	$	1,570
Current portion of deferred revenue		567		1,956
		3,007		3,526

Deferred revenue		1,692		329
		4,699		3,855

SHAREHOLDERS' EQUITY

Share capital (note 7)		49,977		49,948
Contributed surplus (note 8)		32,689		32,268
Deficit		(71,192)		(71,248)
		11,474		10,968

	$	16,173	$	14,823

The accompanying notes are an integral part of these financial statements

Cipher Pharmaceuticals Inc.
Statements of Operations and Comprehensive Income (Loss)
(in thousands of dollars, except per share amounts)


		For the year ended
		December 31,		December 31,
		2010		2009

Revenues
Licensing revenue	$	5,385	$	3,179

Expenses
Research and development (note 9)		743		956
Operating, general and administrative		3,895		4,252
Depreciation of property and equipment		53		69
Amortization of intangible assets		704		741
Interest income		(66)		(124)

		5,329		5,894

Income (loss) before income taxes		56		(2,715)

Provision for (recovery of) income taxes (note 10)
Current		171		-
Future		(171)		-

Income (loss) and comprehensive income (loss) for the year	$	56	$	(2,715)


Basic and diluted earnings (loss) per share (note 11)	$	0.00	$	(0.11)

The accompanying notes are an integral part of these financial statements


Statements of Deficit
(in thousands of dollars)


		For the year ended
		December 31,		December 31,
		2010		2009

Deficit, beginning of year	$	(71,248)	$	(68,533)

Income (loss) for the year		56		(2,715)

Deficit, end of year	$	(71,192)	$	(71,248)

The accompanying notes are an integral part of these financial statements

Cipher Pharmaceuticals Inc.
Statements of Cash Flows
(in thousands of dollars)

		For the year ended
		December 31,		December 31,
		2010		2009

Cash provided by (used in)

Operating activities
Income (loss) for the year	$	56	$	(2,715)
Items not affecting cash
Depreciation of property and equipment		53		69
Amortization of intangible assets		704		741
Stock-based compensation expense		435		655
Imputed interest		-		(87)
		1,248		(1,337)
Net change in non-cash operating items (note 12)		(5)		(20)

		1,243		(1,357)

Investing activities
Proceeds from loan receivable (note 4)		800		612
Acquisition of intangible rights (note 6)		(719)		(122)
Purchase of property and equipment		(17)		(8)

		64		482

Financing activities
Proceeds from exercise of stock options		15		-


Increase (Decrease) in cash		1,322		(875)
Cash, beginning of year		9,006		9,881
Cash, end of year	$	10,328	$	9,006

The accompanying notes are an integral part of these financial statements

Cipher Pharmaceuticals Inc.
Notes to Financial Statements
December 31, 2010
(in thousands of dollars, except per share amounts)


1	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

	These financial statements have been prepared in accordance with Canadian generally accepted accounting principles. Significant
	accounting policies used in the preparation of these financial statements are as follows:

	Translation of foreign currencies
	Revenues and expenses denominated in foreign currencies are translated into Canadian dollars using the exchange rate in effect at the
	transaction date. Monetary assets and liabilities are translated using the rate in effect at the balance sheet date and non-monetary items
	are translated at historical exchange rates. Related exchange gains and losses are included in the determination of the income for the year.

	Use of estimates
	The preparation of these financial statements requires management to make estimates and assumptions that could affect the reported
	amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
	reporting periods presented. Significant areas requiring the use of management estimates include the valuation of intangible assets and
	measurement of income taxes. By their nature, these estimates are subject to measurement uncertainty. Actual results could differ
	from the estimates and assumptions.

	Property and equipment
	Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method
	and the following estimated useful lives of the assets or lease terms:

	Computer equipment		3 years
	Computer software		3 years
	Furniture and fixtures		5 years
	Leasehold improvements		over the term of the lease

	Impairment of long-lived assets
	Long-lived assets are tested for recoverability whenever events or changes in circumstances indicate the carrying value may not be
	recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset exceeds the sum of the estimated
	undiscounted cash flows from the long-lived asset. An impairment loss is measured as the amount by which the carrying amount of the
	long-lived asset exceeds the estimated fair value.

	Intangible assets
	Intangible assets consist of marketing and other rights relating to products and are initially recorded at cost. Intangible assets have a
	finite life and are amortized using the straight-line method over their estimated period of useful life. Amortization commences on the
	earlier of the date of regulatory (generally, U.S. Food and Drug Administration ("FDA")) approval for marketing the related product or upon
	substantive revenue being generated from the product under a commercial licensing agreement. The estimated period of useful life has
	been determined to be 3.5 years from the date of regulatory approval for marketing the related product. Should amortization commence as
	a result of generating revenue, the amortization period would include the time prior to regulatory approval. Intangible assets are reviewed
	for impairment when events or other changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

	Revenue recognition
	The Company recognizes revenue from product sales contracts and licensing and distribution agreements, which may include multiple
	elements. The individual elements of each agreement are divided into separate units of accounting, if certain criteria are met. The
	applicable revenue recognition approach is then applied to each unit. Otherwise, the applicable revenue recognition criteria are applied to
	combined elements as a single unit of accounting.

	Product sales - revenue from product sales contracts is recognized when the product is shipped to the Company's customers, at which
	time ownership is transferred.

	Licensing revenues - for up-front licensing payments and pre-commercialization milestones, revenue is deferred and recognized on a
	straight-line basis over the estimated term that the Company maintains substantive contractual obligations. Post-commercialization
	milestone payments are recognized as revenue when the underlying condition is met, the milestone is not a condition to future deliverables
	and collectability is reasonably assured. Otherwise, these milestone payments are recognized as revenue over the remaining term of the
	underlying agreement or the term over which the Company maintains substantive contractual obligations. Royalty revenue is recognized
	in the period in which the Company earns the royalty. Amounts received in advance of recognition as revenue are included in deferred
	revenue. Revenue from licensing and distribution agreements is presented on a net basis.

	Research and development
	The Company conducts research and development programs and incurs costs related to these activities, including employee
	compensation, materials, professional services and services provided by contract research organizations. Research and development
	costs, net of related tax credits, are expensed in the periods in which they are incurred.

	Income taxes
	The Company uses the asset and liability method of accounting for income taxes. Under this method, future tax assets and liabilities are
	determined based on differences between the financial reporting and income tax bases of assets and liabilities and are measured using
	enacted or substantively enacted tax rates and laws that will be in effect when the difference is expected to reverse. The Company provides
	a valuation allowance for future tax assets when it is more likely than not that some or all of the future tax assets will not be realized.

	Stock-based compensation
	The fair value of stock options granted after October 1, 2002 is recognized as compensation expense on a straight-line basis over the
	applicable stock option vesting period. Stock-based compensation expense is included in operating, general and administrative expense
	in the statements of operations and contributed surplus in the balance sheets. The consideration received on the exercise of stock
	options is credited to share capital at the time of exercise.

	Financial instruments
	Financial instruments are measured at fair value except for loans and receivables, held-to-maturity investments and other financial
	liabilities, which are measured at cost or amortized cost. Gains and losses on held-for-trading financial assets and liabilities are
	recognized in net earnings in the period in which they arise. Unrealized gains and losses, including changes in foreign exchange rates
	on available-for-sale financial assets, are recognized in comprehensive income until the financial assets are derecognized or impaired,
	at which time any unrealized gains or losses are recorded in net earnings.

	The following is the basis of classification and measurement of the Company's financial instruments:
	- Cash is classified as held-for-trading and is measured at fair value;
	- Accounts receivable and loan receivable are classified as loans and receivables and recorded at cost, which at initial measurement
	corresponds to fair value. After initial fair value measurement, they are measured at amortized cost; and
	- Accounts payable and accrued liabilities are classified as other financial liabilities. They are initially measured at fair value and, if
	necessary, subsequent revaluations are recorded at amortized cost.


2	CHANGES IN ACCOUNTING POLICIES

	International Financial Reporting Standards ("IFRS")
	Commencing in the first quarter of 2011, the Company's financial statements will be prepared in accordance with IFRS, with 2010
	comparative figures and the January 1, 2010 opening balance sheet restated to conform with IFRS, along with reconciliations from GAAP
	to IFRS, in accordance with the guidance provided in IFRS 1, First-Time Adoption of International Financial Reporting Standards.


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
	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
	default events under these agreements. As of December 31, 2010, no accounts receivable balances were considered impaired or past due.

	(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 $2,169 as at December 31, 2010
	are expected to 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 and a portion of its expenses are denominated in US currency. The accounts
	receivable balance at December 31, 2010 includes a total of US$994 and accounts payable and accrued liabilities includes a total of
	US$1,115. A 10% change in the US/CDN exchange rate on the net December 31, 2010 balance would have had a $12 impact on net
	income.

	Capital risk management
	Shareholders' equity is managed as the capital of the Company. The Company's objective when managing capital is to safeguard its
	ability to continue as a going concern in order to provide returns for 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
	During the quarter ended March 31, 2010, the Company received the final instalment of $800 as part of the deferred payment
	agreement for the sale of Pharma Medica Research Inc. in February 2005.


5	PROPERTY AND EQUIPMENT
	The following is a summary of property and equipment as at December 31, 2010:

			December 31, 2010		December 31, 2009
			Cost	Accumulated Depreciation	Cost	Accumulated Depreciation

	Computer equipment		$ 123	$ 106	$ 106	$ 97
	Computer software		38	38	38	34
	Furniture and fixtures		126	112	126	85
	Leasehold improvements		67	48	67	35
			354	$ 304	337	$ 251
	Accumulated depreciation		(304)		(251)
			$ 50		$ 86


6	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 preferred shares are redeemable by the Company from amounts received under the licensing agreements for the products.
	The Company may be required to pay additional amounts to Galephar in respect of the CIP-ISOTRETINOIN intangible rights of up to
	$646 (US$650) if certain future milestones are achieved as defined in the agreement. These additional payments will be made in the form
	of 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. The Company is currently amortizing the intangible rights
	related to CIP-FENOFIBRATE and CIP-ISOTRETINOIN. 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 royalty payments received by the Company
	under the licensing agreements will be paid to Galephar.

	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 product reached a cumulative net sales
	level that resulted in a contract milestone of US$1 million being achieved.

	CIP-ISOTRETINOIN - in August 2008, the Company entered into a development 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.
	The Company has received an up-front licensing payment of US$1 million and in 2010 received two milestones totaling US$3 million
	related to the progress of the clinical trial. Under the terms of the agreement, the Company could receive additional pre- and
	post-commercialization milestone payments of up to US$20 million, based on the achievement of certain milestone targets. Once the
	product is successfully commercialized, the Company will also receive a royalty based on a percentage of net sales. Ranbaxy has
	agreed to 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.

	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. Achieving FDA approval triggered additional milestone payments to
	Galephar as the Company prepares for commercial manufacturing. During 2010, payments of $719 were made with respect to the
	intangible rights for CIP-TRAMADOL ER.


	The following is a summary of intangible assets as at December 31, 2010:

			December 31, 2010		December 31, 2009
			Cost	Accumulated Amortization	Cost	Accumulated Amortization

	CIP-FENOFIBRATE		$ 2,332	$ 2,332	$ 2,332	$ 1,865
	CIP-ISOTRETINOIN		1,579	511	1,579	274
	CIP-TRAMADOL ER		2,454	-	1,735	-
			6,365	$ 2,843	5,646	$ 2,139
	Accumulated amortization		(2,843)		(2,139)
			$ 3,522		$ 3,507


7	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 December 31, 2010:

				Number of
				common shares	Amount
				(in thousands)	$

	Balance outstanding - December 31, 2008 and December 31, 2009			24,055	49,948
	Options exercised in 2010			25	29
	Balance outstanding - December 31, 2010			24,080	49,977

	Stock option plan
	The following is a summary of the changes in the stock options outstanding from December 31, 2008 to December 31, 2010:

				Number of	Weighted average
				options	exercise price
				(in thousands)	$

	Balance outstanding - December 31, 2008			1,376	2.51
	Granted in 2009			224	0.60
	Expired in 2009			(20)	4.33
	Balance outstanding - December 31, 2009			1,580	2.22

	Granted in 2010			222	1.60
	Exercised in 2010			(25)	0.61
	Balance outstanding - December 31, 2010			1,777	2.17

	At December 31, 2010, 1,114,560 options were fully vested and exercisable (806,974 at December 31, 2009).

	During 2010, the Company issued 221,500 stock options under the employee and director stock option plan, with 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 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

	During 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 contributed surplus.


	The following is a summary of the outstanding options as at December 31, 2010:

	Expiry date	Exercise price	Number of options (in thousands)
		$	Vested	Unvested	Total

	January 11, 2012	1.09	125	-	125
	September 17, 2014	2.35	125	-	125
	March 23, 2016	4.12	200	-	200
	June 28, 2016	4.00	180	-	180
	September 13, 2016	2.90	69	-	69
	March 9, 2017	3.90	168	56	224
	February 28, 2018	1.05	107	106	213
	November 7, 2018	0.45	90	90	180
	December 3, 2018	0.50	20	20	40
	February 20, 2019	0.61	26	153	179
	November 6, 2019	0.55	5	15	20
	February 19, 2020	1.60	-	222	222
			1,115	662	1,777


8	CONTRIBUTED SURPLUS
	The following is a summary of the changes in contributed surplus from December 31, 2008 to December 31, 2010:

			Amount
			$

	Balance - December 31, 2008		31,613
	Stock-based compensation expense in 2009		655
	Balance - December 31, 2009		32,268

	Options exercised in 2010		(14)
	Stock-based compensation expense in 2010		435
	Balance - December 31, 2010		32,689


9	RESEARCH AND DEVELOPMENT
	A total of $12,835 of research and development costs were incurred in 2010 ($5,381 in 2009). The research and development expense
	reflected in the Statement of Operations is presented net of provincial tax credits of $328 ($53 in 2009) for qualifying research and
	development expenditures and an amount of $11,764 reimbursed by Ranbaxy ($4,372 in 2009). Under the terms of the agreement with
	Ranbaxy, research and development costs incurred for clinical studies required by the FDA to secure approval for CIP-ISOTRETINOIN
	are reimbursed to the Company and as a result, there was a nil impact to research and development expense with respect to these
	expenditures.


10	INCOME TAXES
	The provision for income taxes differs from the amount computed by applying the statutory income tax rate to the loss for the year. The
	sources and tax effects of the differences are as follows:

				For the year ended
				December 31,
				2010	2009
				$	$

	Statutory income tax rate of 31% applied to loss for the year (2009 - 33%)			17	(896)
	Permanent differences			154	192
	Change in enacted income tax rates and other items			(740)	3,382
	Change in valuation allowance			569	(2,678)
	Provision for income taxes			-	-


	The significant components of future income tax assets are summarized as follows:
				As at
				December 31,
				2010	2009
				$	$

	Non-capital losses			11,290	9,811
	Excess of tax value of property and equipment over book value			28	59
	SR&ED expenditure pool			4,186	3,097
	Excess of tax value of intangible assets over book value			3,422	6,194
	Benefit of investment tax credits			2,673	2,038
	Capital losses			217	177
	Deductible share issue costs			-	55
	Provincial tax credits			289	120
	Other temporary differences			422	407
				22,527	21,958
	Valuation allowance			(22,527)	(21,958)
				-	-

	The Company has non-capital loss carry forwards of $45,200 as at December 31, 2010 that expire in varying amounts from 2014 to 2030.

	The Company has Scientific Research and Experimental Development ("SR&ED") expenditures of $16,700 which can be carried forward
	indefinitely to reduce future years' taxable income.

	The Company has approximately $3,500 of investment tax credits on SR&ED expenditures that are available to be applied against federal
	taxes otherwise payable in future years and expire in varying amounts from 2022 to 2030.


11	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 year ended December 31, 2010 was 24,071,522 (for the year ended December 31, 2009 - 24,054,878). The dilutive
	impact on earnings per share for the year ended December 31, 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.


12	SUPPLEMENTAL CASH FLOW INFORMATION
	The following is a summary of the changes in non-cash operating items:

			For the year ended
			December 31,
			2010	2009
			$	$

	Accounts receivable		(841)	(455)
	Prepaid expenses and other current assets		(8)	(71)
	Accounts payable and accrued liabilities		870	392
	Deferred revenue		(26)	114
			(5)	(20)


13	SEGMENTED INFORMATION
	The Company's operations are categorized into one industry segment, being specialty pharmaceuticals. All of the Company's assets,
	including capital and intangible assets, are in Canada, while all licensing revenue is derived from the United States.

For further information:

Craig Armitage	Larry Andrews
Investor Relations	President and CEO
The Equicom Group	Cipher Pharmaceuticals
(416) 815-0700 ext 278	(905) 602-5840 ext 324
(416) 815-0080 fax	(905) 602-0628 fax
carmitage@equicomgroup.com	landrews@cipherpharma.com