Cipher Pharmaceuticals Reports Third Quarter 2024 Results
(All figures are presented in U.S. Dollars)
Successfully closed the acquisition of the U.S. based Natroba™ business on July 26, 2024
Epuris sales volumes grew 29% compared to Q3 2023, continuing growth trajectory for the fifth consecutive quarter
Strong product gross margin from the acquired Natroba products of 85%
Added management depth with appointment of Dr. Hamed Ghanei, Chief Business Officer
MISSISSAUGA, ON, Nov. 7, 2024 /CNW/ - Cipher Pharmaceuticals Inc. (TSX:CPH) (OTCQX:CPHRF) ("Cipher" or the "Company") today announced its financial and operating results for the three and nine months ended September 30, 2024.
Third Quarter 2024 Financial Highlights(All figures in U.S. dollars, compared to Q3 2023, unless otherwise noted)
Total revenue was $10.4 million in Q3 2024, an increase of 71%
Total product revenue increased by 213% to $9.3 million in Q3 2024 compared to $3.0 million in Q3 2023
Epuris product revenue increased by 32% to $3.4 million in Q3 2024 compared to $2.5 million in Q3 2023
Natroba™ and its authorized generic contributed $5.4 million in product revenue in Q3 2024
Licensing revenue decreased by 66% to $1.1 million in Q3 2024, compared to $3.1 million in an unusually strong Q3 2023, due to lower product shipments and royalties from the Absorica portfolio
Gross margin on product revenue increased by 15% to 79% in Q3 2024, compared to 64% in Q3 2023, due to higher gross margin from the acquired Natroba business
Adjusted EBITDA1 was $4.1 million in Q3 2024, an increase of 13%
Acquisition of Natroba
On July 29, 2024, Cipher announced the signing of a definitive asset purchase agreement with ParaPRO LLC ("ParaPRO") and the closing of the acquisition of the global rights of Natroba™ (Spinosad), as well as the commercial sales team in the U.S. for total consideration of $89.5 million (the "Natroba Acquisition").
Cipher plans to use the commercial footprint acquired from ParaPRO north of Indianapolis in Carmel, Indiana as its U.S. headquarters and a platform to launch unique dermatology and infectious disease products complementary to Natroba™ across the U.S.
Cipher paid $80 million in cash (satisfied from $40 million from cash on hand and $40 million from a new credit facility) and issued $9.5 million in common shares of Cipher to ParaPRO (1,474,097 shares at a deemed issue price of CDN$8.91).
Cipher entered into a new credit agreement and partnership with the National Bank of Canada, with a $65 million revolving credit facility which was partially drawn to fund the Natroba™ transaction and will be available to provide financing to fuel Cipher's continued future growth plans. Under the terms of the credit agreement, Cipher also has access to an optional $25 million accordion feature. The credit facility matures three years after July 26, 2024 and has an optional annual extension clause. As a result of entering into the new credit facility, Cipher terminated its previous undrawn credit facility with the Royal Bank of Canada.
Management Commentary
Craig Mull, Interim CEO, commented: "During the third quarter, we took great steps forward to close the acquisition of the Natroba business from ParaPRO LLC. We have been diligently integrating the business into the existing Cipher infrastructure, and have established our U.S. based headquarters in Carmel, Indiana. We believe this integration will be complete by the end of the year.
Having now spent in depth time with our U.S. sales team, we are highly impressed with the talent and motivation of our new Cipher employees and are highly confident in our ability to both grow the Natroba business and scale the business in the future with additional complementary products."
Bryan Jacobs, President, U.S. Operations, commented: "Head lice and scabies greatly impacts families and ensuring parents and physicians have access to the FDA designated complete cure that Natroba offers is our focus. Our main market competitor permethrin is no longer effective due to evolving resistance over time, so we are confident in our ability to grow the Natroba business and market share.
We have recently added new territory managers and sale team members as part of a strategy to insource sales in certain states away from a prior co-promotion partner of ParaPRO LLC. While this transition will take a few months, we believe this strategy will result in a highly trained sales footprint and grow sales while achieving an overall reduction in costs in future periods."
Ryan Mailling, CFO, commented: "Since my transition to Chief Financial Officer during the third quarter, I have dedicated a large portion of my time executing an efficient financial structuring of our Natroba Acquisition, managing our new bank financing relationship, and supporting the financial and administrative integration of the Natroba business into the existing Cipher infrastructure. I look forward to continuing to progress these activities, while also driving other efficiencies in the business."
Q3 2024 Corporate Highlights
Effective August 10, 2024, and as a result of the Natroba Acquisition, the Company's Chief Financial Officer, Bryan Jacobs, assumed the title of President of the Company. His mandate will be to manage the transition and integration of the U.S. operations and commercial sales team. The Company's Vice President, Finance, Ryan Mailling, was in turn been appointed as the Chief Financial Officer of the Company, taking over from Mr. Jacobs.
On September 26, 2024, Cipher presented at the Planet MicroCap Showcase: Vancouver 2024 conference and participated in one-on-one meetings with stakeholders.
On October 8, 2024, the Company announced the appointment of Dr. Hamed Ghanei as Chief Business Officer. Dr. Ghanei has expertise in business development, including extensive experience with licensing deals and other M&A opportunities in the specialty pharmaceuticals and healthcare industries, which is expected to provide Cipher with further capabilities for its next phase of substantial growth.
Q3 2024 Year-to-Date Financial Review(All figures in U.S. dollars, compared to the year-to-date Q3 2023, unless otherwise noted)
Total revenue was $21.5 million in Q3 2024, an increase of 33%
Product revenue increased by 75% to $16.3 million year-to-date Q3 2024 compared to $9.3 million for the same period in the previous year
Licensing revenue decreased by 24% to $5.3 million year-to-date Q3 2024 compared to $6.9 million for the same period in the previous year, largely resulting from a decline in revenue from product shipments to Cipher's commercial partners
Total gross profit was $17.4 million year-to-date Q3 2024, compared to $13.1 million for the same period in the previous year, due to higher total gross profit from the acquired Natroba business
Net income and earnings per common share were $8.2 million and $0.34, respectively, year-to-date Q3 2024, compared to net income of $12.7 million and earnings per common share of $0.50 for the same period in the previous year, impacted primarily by transaction costs associated with the acquisition of the Natroba business, increased amortization associated with acquired intangible assets, and a year-over-year reduction in licensing revenue
EBITDA1 decreased by 14% to $7.4 million year-to-date Q3 2024, compared to $8.6 million for the same period in the previous year
Adjusted EBITDA1 for the year-to-date Q3 2024 was $10.7 million, an increase of 9% compared $9.9 million for the same period in the previous year
Business Strategy & Outlook
Cipher's near term business strategy includes the following key focuses:
Integrating the acquired Natroba business with the existing Cipher business.
Driving growth of Natroba in the anti-parasitic market in the U.S. where its current market share is approximately 23%2, in a market where market leader "Permethrin" is no longer an effective treatment but still holds 75%2 market share.
Out-licensing Natroba globally where there is high unmet need, such as warm climate regions.
Acquiring complementary dermatology products to add to our North American platform to enhance the profitability, size and scale of the business.
Continue to collaborate with our partner Moberg Pharma on its MOB-015 Phase III clinical trial in the U.S., where results are expected by January 2025.
Assessing the Canadian market potential for MOB-015 with both the new U.S. Phase III clinical trial data and the existing EU approved MOB-015 product.
Financial Statements and MD&A
Cipher's Financial Statements for the three and nine months ended September 30, 2024, and Management's Discussion and Analysis (the "MD&A") for the three and nine months ended September 30, 2024, are available on the Company's website at www.cipherpharma.com in the "Investors" section under "Financial Reports" and on SEDAR+ at www.sedarplus.ca.
Notice of Conference Call
Cipher will hold a conference call on November 8, 2024 at 8:30 a.m. (ET) to discuss its financial results and other corporate developments.
To access the conference call by telephone, dial (416) 945-7677 or (888) 699-1199
A live audio webcast will be available at https://app.webinar.net/BxoA3Pp3dnP
An archived replay of the webcast will be available until November 15, 2024 and can be accessed by dialing (289) 819-1450 or (888) 660-6345 and entering conference replay code 02131#
About Cipher Pharmaceuticals Inc.
Cipher Pharmaceuticals (TSX:CPH) (OTCQX:CPHRF) is a specialty pharmaceutical company with a robust and diversified portfolio of commercial and early to late-stage products, mainly in dermatology. Cipher acquires products that fulfill unmet medical needs, manages the required clinical development and regulatory approval process, and currently markets those products in Canada, the U.S., and South America. For more information, visit www.cipherpharma.com.
Forward-Looking Statements and Non-IFRS Measures
This document includes forward-looking statements within the meaning of applicable securities laws. These forward-looking statements include, among others, statements with respect to the integration of the Natroba business into the Cipher infrastructure, the impact of insourcing sales in certain states, the timing of the receipt of the topline results from MOB-015 Phase III North American study, our plans and intentions with respect to commercializing, out-licensing and marketing Natroba™ in Canada and elsewhere, our plans and intentions with respect to the introduction of additional dermatological and infectious disease products in Canada, the ...
