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|Cipher Pharmaceuticals Reports 2016 Q4 & Year-End Financial Results|
Financial Highlights for Q4 2016
"The overall sales results for the fourth quarter were good, with total revenue rising 10%, and our cash increased by close to $4 million over the third quarter," said Stephen Lemieux, Interim Chief Executive Officer of Cipher. "Despite a slower fourth quarter in our licensing business, we generated almost $26 million in high-margin licensing revenue for the full year. In addition, our Canadian operation continues to experience steady gains, highlighted by 42% growth in Epuris sales in 2016. We now have four products in the market and a platform we can continue to build on with new products."
Mr. Lemieux added: "While the U.S. operation delivered better sales performance in the fourth quarter, we have taken steps to reduce our cost structure and improve operating performance. Through these initiatives, we expect to achieve cash savings of approximately $3 million on an annualized basis. At the same time, we continue to pursue strategic options for the U.S. business, which remains a priority. We are highly focused on improving the overall profitability of the business."
Total revenue increased to $10.7 million for Q4 2016, compared to $9.7 million for Q4 2015. An increase in product revenue of $2.3 million was partially offset by a decrease of $1.3 million in licensing revenue.
Product revenue increased to $5.3 million for Q4 2016, compared to $3.1 million for Q4 2015. Product revenue from the U.S. operations was $4.3 million in Q4 2016, compared to $2.2 million for Q4 2015. The increase of $2.1 million mainly relates to an increase in net revenue from Bionect® of $0.9 million, Sitavig® of $0.7 million and Nuvail® of $0.3 million. Product revenue from Canadian products increased to $1.1 million in Q4 2016, compared with $0.8 million in Q4 2015. Canadian product revenue performance was driven primarily by Epuris®, which had net sales of $0.9 million in Q4 2016. Vaniqa®, Actikerall® and Beteflam® made up the balance of product revenue. Actikerall and Beteflam were both launched in 2016 in the Canadian market.
Licensing revenue decreased by 19% to $5.4 million in Q4 2016, compared to $6.6 million for Q4 2015. Licencing revenue from tramadol products (Conzip® and Durela®) decreased to $0.4 million in Q4 2016, compared to $1.0 million in Q4 2015. Absorica® licensing revenue decreased to $3.8 million for Q4 2016, compared with $4.3 million for Q4 2015. Revenue from Lipofen and the authorized generic version of Lipofen decreased to $1.2 million for Q4 2016, compared to $1.3 million for Q4 2015.
Total operating expenses for Q4 2016 were $20.0 million, an increase of $9.4 million compared to $10.6 million for Q4 2015. The significant increase relates to a $9.7 million impairment charge for intangible assets and goodwill related to the U.S. operation and a $1.2 million increase in cost of products sold related to higher product sales in the current period. Partially offsetting this increase was a $1.2 million decrease in G&A expenses, driven by a reduction in amortization of intangible assets due to the impairment charge recorded in the third quarter of 2016.
Adjusted EBITDA1/Net Income (loss)
Adjusted EBITDA for Q4 2016 was $1.3 million, compared to $1.8 million in Q4 2015. Net loss in Q4 2016 was $11.3 million, or $0.45 per basic share, compared to net income of $2.0 million, or $0.08 per basic share in Q4 2015.
Financial Statements and MD&A
Cipher's Financial Statements and Management's Discussion and Analysis ("MD&A") for the three and 12 months ended December 31, 2016 will be available on the Company's website at www.cipherpharma.com in the "Investors" section under "Quarterly Reports" and on SEDAR at www.sedar.com.
Notice of Conference Call
Cipher will hold a conference call today, March 2, 2017, 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 will be available at http://bit.ly/2kOtP5S or the Investor Relations section of the Company's website at http://www.cipherpharma.com. An archived replay of the webcast will be available for 90 days.
Cipher (TSX:CPH) is a specialty pharmaceutical company, with a robust and diversified portfolio of commercial and early to late-stage products. Cipher acquires products that fulfill unmet medical needs, manages the required clinical development and regulatory approval process, and markets those products either directly in Canada and the U.S. or indirectly through partners in Canada, the U.S., and South America.
This document includes forward-looking statements within the meaning of certain securities laws, including the "safe harbour" provisions of the Securities Act (Ontario) and other provincial securities law in Canada and U.S. securities laws. These forward-looking statements include, among others, statements with respect to our objectives, goals and strategies to achieve those objectives and goals, as well as statements with respect to our beliefs, plans, objectives, expectations, anticipations, estimates and intentions. 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.
By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, which give rise to the possibility that predictions, forecasts, projections and other forward-looking statements will not be achieved. 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. We caution readers not to place undue reliance on these statements as a number of important factors, many of which are beyond our control, could cause our actual results to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to, there is no certainty that the consideration of strategic alternatives will result in any transaction or alternative being undertaken or pursued; our ability to enter into in-licensing, development, manufacturing and marketing and distribution agreements with other pharmaceutical companies and keep such agreements in effect; our dependency on a limited number of products; integration difficulties and other risks if we acquire or in-license technologies or product candidates; reliance on third parties for the marketing of certain products; the product approval process is highly unpredictable; the timing of completion of clinical trials; reliance on third parties to manufacture our products; we may be subject to product liability claims; unexpected product safety or efficacy concerns may arise; we generate license revenue from a limited number of distribution and supply agreements; the pharmaceutical industry is highly competitive; requirements for additional capital to fund future operations; dependence on key managerial personnel and external collaborators; no assurance that we will receive regulatory approvals in the U.S., Canada or any other jurisdictions; certain of our products are subject to regulation as controlled substances; limitations on reimbursement in the healthcare industry; limited reimbursement for products by government authorities and third-party payor policies; various laws pertaining to health care fraud and abuse; reliance on the success of strategic investments and partnerships; the publication of negative results of clinical trials; unpredictable development goals and projected time frames; rising insurance costs; ability to enforce covenants not to compete; risks associated with the industry in which it operates; we may be unsuccessful in evaluating material risks involved in completed and future acquisitions; we may be unable to identify, acquire or integrate acquisition targets successfully; operations in the U.S.; inability to meet covenants under our long term debt arrangement; compliance with privacy and security regulation; our policies regarding returns, allowances and chargebacks may reduce revenues; certain regulations could restrict our activities; additional regulatory burden and controls over financial reporting; reliance on third parties to perform certain services; general commercial litigation, class actions, other litigation claims and regulatory actions; our delisting from the NASDAQ Global Market and deregistration of our Common Shares under the U.S. Securities Exchange Act of 1934, as amended; the difficulty for shareholders to realize in the United States upon judgments of U.S. courts predicated upon civil liability of the Company and its directors and officers; certain adverse tax rules applicable to U.S. holders of our Common Shares if we are a passive foreign investment company for U.S. federal income tax purposes; the potential violation of intellectual property rights of third parties; our efforts to obtain, protect or enforce our patents and other intellectual property rights related to our products; changes in U.S., Canadian or foreign patent laws; litigation in the pharmaceutical industry concerning the manufacture and supply of novel and generic versions of existing drugs; inability to protect our trademarks from infringement; shareholders may be further diluted; volatility of our share price; a significant shareholder; we do not currently intend to pay dividends; our operating results may fluctuate significantly; and our debt obligations will have priority over the Common Shares in the event of a liquidation, dissolution or winding up.
We caution that the foregoing list of important factors that may affect future results is not exhaustive. When reviewing our forward-looking statements, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Additional information about factors that may cause actual results to differ materially from expectations, and about material factors or assumptions applied in making forward-looking statements, may be found in the "Risk Factors" section of our Annual Information Form and in our Management's Discussion and Analysis of Operating Results and Financial Position for the year ended December 31, 2016, and elsewhere in our filings with Canadian securities regulators. Except as required by Canadian securities laws, we do not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by us or on our behalf; such statements speak only as of the date made. The forward-looking statements included herein are expressly qualified in their entirety by this cautionary language.
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1) EBITDA is a non-IFRS financial measure. The term EBITDA (earnings before interest, taxes, depreciation and amortization,) does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. The Company defines Adjusted EBITDA as earnings before interest expense, income taxes, depreciation of property and equipment, amortization of intangible assets, non-cash share-based compensation, changes in fair value of derivative financial instruments, impairment of intangible assets and goodwill and foreign exchange gains and losses from the translation of Canadian cash balances.