Cipher Pharmaceuticals announces fourth-quarter and fiscal year 2009 results

Feb 17 2010

Cipher Pharmaceuticals Inc. (TSX: DND) today announced its financial and operational results for the fourth quarter and fiscal year ended December 31, 2009.

Fiscal 2009 Summary

- Total revenue more than doubled to $3.2 million, driven by growth of Lipofen(R) prescriptions.

- Strong balance sheet at year end with cash of $9.0 million and no debt, compared with cash of $9.9 million at December 31, 2008.

- Commenced CIP-ISOTRETINOIN Phase III safety trial in Q3; with 176 patients enrolled at year-end.

- Achieved tentative FDA approval for CIP-TRAMADOL ER; subsequent to year end, received favourable summary judgment motion relating to patent litigation.

- Strengthened Board of Directors with the addition of Dr. William Claypool.

"The continued steady growth of Lipofen(R) prescriptions helped us deliver a strong year-over-year increase in revenue and reduce our cash burn, ensuring that our financial position remains solid," said Larry Andrews, President and CEO of Cipher. "From a clinical perspective, we commenced enrolment on our Phase III safety trial for CIP-ISOTRETINOIN, and this continues to progress well. On the regulatory front, 2009 saw us obtain tentative FDA approval for CIP-TRAMADOL ER. More recently, we received a favourable judgment in pending patent litigation for this product, clearing the way for us to pursue final FDA approval."

Financial Review ----------------

Total revenue in 2009 was $3.2 million, compared with $1.5 million in 2008. Revenue from Lipofen(R) totalled $2.9 million in 2009, reflecting the continued market penetration by Lipofen(R) as Kowa increases the sales and promotion effort behind the product. Revenue from CIP-ISOTRETINOIN was $0.3 million in 2009, which relates to revenue recognized on the Company's share of the US$1 million upfront milestone payment received from Ranbaxy in 2008.

Gross Research and Development ("R&D") expenditures for 2009 were $5.4 million, compared with $2.2 million in 2008. The reported R&D amount of $1.0 million for 2009 is net of reimbursements of $4.4 million from Ranbaxy related to the CIP-ISOTRETINOIN clinical study. As previously disclosed, the Company's U.S. marketing partner, Ranbaxy Pharmaceuticals, is reimbursing Cipher for all costs associated with the clinical studies required to obtain FDA approval, up to a predetermined cap. Any additional development costs associated with initial FDA approval will be shared equally.

Operating, General and Administrative ("OG&A") expenses for 2009 were $4.3 million, compared with $3.6 million in 2008. The year-over-year change reflects the increased level of activity related to pursuing pipeline expansion opportunities. The loss for the 12 months ended December 31, 2009 decreased to $2.7 million ($0.11 per basic and diluted share), compared with a net loss of $3.2 million ($0.13 per basic and diluted share) in 2008.

In Q4 2009, Cipher recorded licensing revenue of $0.8 million, compared with $0.4 million in Q4 2008. Gross R&D expenditures for the fourth quarter were $3.0 million, and reported R&D expenses were $0.3 million. OG&A expenses for Q4 2009 were $1.1 million, compared with $0.9 million in the same period last year. Loss for the three months ended December 31, 2009 was $0.6 million ($0.03 per basic and diluted share), compared with a loss of $0.5 million ($0.02 per basic and diluted share) in the same period last year.

The Company's financial position remained solid at year-end. As at December 31, 2009, Cipher had cash of $9.0 million, compared with $9.9 million as at December 31, 2008.

Product Update --------------

During 2009, Lipofen(R) monthly prescriptions showed steady growth, and Cipher is hopeful that this trend will continue as Kowa increases penetration of the primary care physicians in its targeted regions and expands its sales force. Kowa's sales force reached approximately 200 at the end of the year, and additional increases are expected in Q1 2010 to support the launch of Kowa's pitavastatin product, LIVALO(R), in the second quarter of 2010.

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 reaching 176 patients at year end and currently nearing the mid-point.

Cipher received tentative FDA approval for CIP-TRAMADOL ER, the Company's extended-release formulation of tramadol, in February 2009. During Q4 2009, the Company announced that Purdue Pharma Products L.P. and Napp Pharmaceutical Group Ltd. filed a complaint against Cipher in the United States District Court for the Eastern District of Virginia, for alleged infringement of two U.S. patents. Under the applicable provisions of the Hatch-Waxman Act, this patent challenge can delay final FDA approval of Cipher's NDA by 30 months, or until the patent challenge is resolved, whichever occurs first. Subsequent to year end, the Company announced that a final judgment on the above litigation suit has been entered in favour of Cipher. The judgment removes any further stay of FDA approval of Cipher's NDA under the applicable provisions of the Hatch-Waxman Act. Cipher is moving forward to obtain FDA final approval as part of its broader CIP-TRAMADOL ER commercialization strategy.

The final judgment in favour of Cipher holds that the patents-in-suit are invalid for obviousness based on a prior decision of the United States District Court for the District of Delaware, invalidating the Orange Book-listed patents for Ultram(R) ER in litigation filed by Purdue against Par Pharmaceutical, Inc. ("Par"). That decision in the Par litigation is currently on appeal before the United States Court of Appeals for the Federal Circuit. The Court's decision is not expected until the latter half of 2010. If Par is successful in its appeal, Cipher believes CIP-TRAMADOL ER will no longer face any further risk of litigation from Purdue in connection with the Orange Book-listed patents that were asserted against Cipher.

Cipher continues to actively pursue new early stage pipeline product candidates and advance out-licensing discussions for its current products.