CIPHER PHARMACEUTICALS INC.Detailed Chart...Cipher reports Q3 2009 financial results
MISSISSAUGA, ON,
Q3 2009 Summary
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- Total revenue increased 59% to $1.1 million, compared with $0.7
million in Q3 2008.
- Continued steady growth of Lipofen(R) prescriptions.
- Commenced CIP-ISOTRETINOIN Phase III safety trial.
- A strong balance sheet at quarter end with cash of $9.3 million and
no debt.
- Subsequent to quarter end, strengthened Board of Directors with the
addition of Dr. William Claypool.
"The third quarter saw us deliver a solid year-over-year increase in revenue from Lipofen(R) and enroll our first patient in the phase III safety trial for CIP-ISOTRETINOIN, reaching an important clinical milestone for this product after significant trial planning and preparation," said
Financial Review
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Total revenue in Q3 2009 was
Gross Research and Development ("R&D") expenditures for Q3 2009 were
For the year-to-date period, revenue was
The Company's financial position remained solid at quarter end. As at
Product Update
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During Q3 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 180 currently, with further increases planned in 2010.
During Q3 2009, the Company 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
During Q2 2008, Cipher submitted a revised NDA to the FDA for CIP-TRAMADOL ER, the Company's extended-release formulation of tramadol. Cipher's revised NDA received tentative FDA approval in Cipher management believes that this type of litigation is common and considers it to be within the ordinary course of business. Cipher intends to vigorously defend itself against the suit and is confident in the strength of its application. Cipher continues to actively pursue new early stage pipeline products and advance out-licensing discussions for its current products.
Notice of Conference Call
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Cipher will hold a conference call today, 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
Cipher is listed on the 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
September 30, December 31,
2009 2008
ASSETS
Current assets
Cash $ 9,342 $ 9,881
Accounts receivable 1,353 512
Income taxes receivable - 6
Prepaid expenses and other current assets 135 380
Current portion of loan receivable (note 2) 780 608
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11,610 11,387
Property and equipment, net 99 147
Loan receivable - 717
Intangible assets, net (note 3) 3,683 4,126
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$ 15,392 $ 16,377
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LIABILITIES
Current liabilities
Accounts payable and accrued liabilities $ 1,394 $ 1,178
Current portion of deferred revenue 1,932 1,177
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3,326 2,355
Deferred revenue 627 994
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3,953 3,349
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SHAREHOLDERS' EQUITY
Share capital (note 4) 49,948 49,948
Contributed surplus 32,103 31,613
Deficit (70,612) (68,533)
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11,439 13,028
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$ 15,392 $ 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 nine
months ended months ended
September 30 September 30
2009 2008 2009 2008
Revenues
Licensing revenue $ 1,067 $ 672 $ 2,347 $ 1,126
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Expenses
Research and
development 247 (220) 701 1,322
Operating, general
and
administrative 1,157 879 3,203 2,657
Amortization of
property and
equipment 19 18 56 53
Amortization of
intangible assets 188 117 565 350
Recovery of legal
fees and court
costs - (176) - (176)
Interest income (26) (119) (99) (370)
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1,585 499 4,426 3,836
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Income (loss) and
comprehensive
income (loss)
for the period $ (518) $ 173 $ (2,079) $ (2,710)
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Basic and diluted
earnings (loss)
per share (note 5) $ (0.02) $ 0.01 $ (0.09) $ (0.11)
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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 nine
months ended months ended
September 30 September 30
2009 2008 2009 2008
Deficit, beginning
of period $ (70,094) $ (68,186) $ (68,533) $ (65,303)
Income (loss) for
the period (518) 173 (2,079) (2,710)
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Deficit, end
of period $ (70,612) $ (68,013) $ (70,612) $ (68,013)
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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 nine
months ended months ended
September 30 September 30
2009 2008 2009 2008
Cash provided by (used in)
Operating activities
Income (loss) $ (518) $ 173 $ (2,079) $ (2,710)
Items not affecting
cash
Amortization of
property and
equipment 19 18 56 53
Amortization of
intangible assets 188 117 565 350
Stock-based
compensation
expense 165 149 490 427
Imputed interest
(note 2) (20) (31) (67) (104)
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(166) 426 (1,035) (1,984)
Net change in
non-cash operating
items (123) (73) 14 1,119
Drawdown of loan
receivable - 77 - 188
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(289) 430 (1,021) (677)
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Investing activities
Proceeds from loan
receivable
(note 2) - - 612 -
Acquisition of
intangible rights - - (122) -
Purchase of
property and
equipment (3) (4) (8) (7)
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(3) (4) 482 (7)
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Increase (Decrease)
in cash (292) 426 (539) (684)
Cash, beginning of
period 9,634 9,851 9,881 10,961
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Cash, end of period $ 9,342 $ 10,277 $ 9,342 $ 10,277
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The accompanying notes are an integral part of these unaudited financial
statements
Cipher Pharmaceuticals Inc.
Notes to Unaudited Financial Statements
September 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 nine months ended
September 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 $67 has
been recorded on this deferred payment during the nine months ended
September 30, 2009 ($104 during the nine months ended September 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 $1,501 (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
provisions 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 September 30, 2009. The following is
a summary of the Company's share capital as at September 30, 2009:
Number of
common shares Amount
(in thousands) $
Balance outstanding - September 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 September 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
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Balance outstanding - December 31, 2008 1,376 2.51
Options granted during the three months
ended March 31, 2009 204 0.61
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Balance outstanding - September 30, 2009 1,580 2.27
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At September 30, 2009, 766,974 options were fully vested and
exercisable (540,482 at September 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 three and nine month periods ended September 30,
2009 and for the three and nine month periods ended September 30,
2008 was 24,054,878. Due to rounding, earnings per share for the
individual quarters in the current year may not sum to earnings per
share year to date.
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: 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
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