Cipher Pharmaceuticals Inc.

Good morning, ladies and gentlemen, thank you for standing by welcome to the cipher pharmaceutical 2nd, quarter 2022 results conference call at this time all participants are in a listen only mode following today's presentation instructions will be given for the question and answer session. If anyone needs assistance at any time during the call, you may press the star followed by the 0 on your push button phone. As a reminder, this conference is being recorded today, Friday, August 12, 2022. On behalf of the speakers that follow, listeners are cautioned that today's presentation and the responses to questions may contain forward-looking statements within the meaning of the safe harbor provisions of the Canadian provincial securities laws. Forward-looking statements involve risks and uncertainties and undue reliance should not be placed on such statements. Certain material factors or assumptions are implied in making forward-looking statements and actual results may differ materially from those expressed or implied in such statements. For additional information about factors that could cause results to vary, please refer to the risks identified in the company's annual information form and other filings with Canadian regulatory authorities. 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. I would now like to turn the call over to Mr. Craig Mull, Interim Chief Executive Officer of the company. Please go ahead, Mr. Mull.

Thank you, Operator, and good morning, everyone. Joining me today is Scott Langell, CIFRS CFO. On today's call, I will make opening remarks before passing the call over to Scott to review the financial results in detail. Following our prepared remarks, we will open the call for questions and note that all amounts are in U.S. dollars unless otherwise stated. We are pleased to report that Cypher delivered another strong quarter, generating positive net income and cash from operating activities. Our results demonstrate the stability of our business and the benefits of our cost reduction strategy. We ended the quarter with $24.2 million in cash or 31 million Canadian on our balance sheet, which provides us with tremendous financial flexibility as we evaluate a number of profitable product and company acquisitions to accelerate and continue to drive shareholder value. In May, the company's partner, Moberg Pharma, began patient enrollment for the North American Phase III study of MOB015 to treat nail fungus. The purpose of the study is to facilitate market approval by the U.S. Food and Drug Administration, or FDA. Cypher holds the exclusive Canadian rights to MOB015. In Canada, according to Acuvia, the total prescription market for onychomycosis was greater than $75 million Canadian per year, with a single product having over 90% market share. In June, the company partner Canfeet Biopharma announced positive topline results from its phase three comfort study in the treatment of moderate to severe psoriasis. Based on the safety and efficacy data revealed in the trial, Canfeet plans to approach the US FDA and the European EMA with a protocol for a pivotal phase three study for drug approval and registration. We are pleased to see the continued progress that Moberg is making to commercialize MOB015. Patient enrollment is another positive step towards commercialization, and we look forward to competing in this large market with an innovative topical product that would provide a new safe and effective treatment option for many Canadians who suffer from this common nail infection. On the canned feet, Phase 3 comfort results, which were positive indication for CF01-01, an estimated 1.5 million Canadians suffer from psoriasis and rheumatoid arthritis, and Cypher holds the Canadian marketing rights to this new and novel product, which we believe holds substantial commercial potential. We continue to perform formulation and stability testing for our tattoo removal product, ETR001. And we expect to move into animal studies in the very near future. The product has a significant market potential, and it is a highlight and focus of the company to move this product forward. Moving on to the financial results, our second quarter results showed relative relatively stable revenue as we continue to transition through the launch of Absaroka AG. Product revenue increased by 0.2 million, or 7%, to 3.5 million for the second quarter of 2022, compared to 3.3 million for the comparable period in 2021. Product revenue for EPURIS was 3.3 million in the second quarter of 2022, up 9%, from 3.1 million in the comparative period. Product revenue continues to be driven by the strength of Epirus, which generated 3.3 million in revenue. Again, a 9% increase from the comparative period. We are incredibly pleased with the performance of Epirus, which continues to be the most prescribed isotretinoin product in the Canadian market. Licensing revenue from Absaroka in the U.S. was 1.3 million for the three months ended June 30th, compared to 2.4 million for the three months ended June 30th, 2021, but relatively unchanged from 1.4 million in the first quarter of 2022. Absaroka's market share was approximately 4.4 compared to 4.2 in Q2 2021, according to Symphony Health. Market share, market share, including Sun's Absaroka LD, was approximately 5.5%. We believe that the market shares for this portfolio have stabilized, and we expect that we will continue to see the same levels of volume throughout the contract with Sun. Currently, in our isotretinoin portfolio, Cypher is receiving royalties from Sun Pharma for the branded product, Absaroka, the authorized generic, as well as Absorica LD. In addition, we recently announced an extension of this partnership from November 30, 2022 through December 31, 2026 for Absorica and Absorica AG, which will extend our revenue cash flow streams for this portfolio. Overall, CIFR has assembled an attractive portfolio of assets beyond our currently marketed products and will continue to move these products towards commercialization. We continue to strengthen our balance sheet. At June 30th, 2022, our balance sheet had 2.4 million in cash and no debt. And again, 24.2 million US in cash. Placing Cypher in an excellent position to continue to buy back shares and to actively pursue product and business acquisitions in a prudent manner with a focus on near-term profitability. We believe that CIFR now has a stable runway for growth. Aligned with our stated strategy, we remain focused on identifying and evaluating profitable product and company acquisitions that will accelerate our growth and drive shareholder value and are continuing to build cash reserves in anticipation of such transactions. Over the past quarter, CIFR's focus has been on M&A. We have reviewed many deals and opportunities and are advancing our review and analysis of several of these interesting possibilities. Yesterday evening, we announced the appointment of Brian Jacobs to the role of CFO effective August 15th. Brian's extensive experience in M&A and strategic leadership will help fortify our management capabilities and drive our next phase of growth. Brian brings a proven track record of senior financial expertise and enterprise success in the companies that he's been involved with. He also has extensive experience in managing growth, risk management, and cost efficiencies. We believe that his expertise will be valuable and will help us focus in pursuing profitable product and business acquisitions. Brian is an accomplished and strategic financial leader and has extensive experience in public company compliance, financing, as well as mergers and acquisitions. I am pleased to report that Scott Langell will remain with CIFR and will be focusing on business development strategic mergers and acquisitions i would like to thank scott for his contributions and look forward to working with him as he evaluates a number of profitable profitable product acquisitions which will help accelerate the growth of cipher and continue to drive shareholder market value i now would like to turn the call over to scott for a financial review

Thanks, Greg, and good morning, everyone. We'll provide a financial update for our second quarter results. Total revenue was $5.6 million in the quarter compared to $6.1 million for the comparative period. Licensing revenue was $2 million for the quarter compared to $2.8 million for the prior year. Licensing revenue from Zorica in the US was $1.3 million compared to $2.4 million in the prior year. Zorica and the authorized generic version of Zorica market share for the three months ended June 2022 was approximately 4.4% compared to approximately 4.2% for the prior year, according to Symphony Health. Total market share, including the authorized generic and Sun Pharma's Zorica LD was approximately 5.5% compared to 6.2% in the prior year. Licensing revenue from the extended release Tramadol product concept and authorized generic version of concept in the U.S. was $0.02 million for the three months ended June 30, 2022, compared to $0.05 million for the prior quarter. Lipophen and the authorized generic version of Lipophen was $0.07 million for the quarter compared to $0.04 million in the prior quarter. The increase was due to the change in the distribution partners and related terms of the distribution agreement. Product revenue increased by 0.2 million or 7% to 3.5 million for the second quarter compared to 3.3 million for the comparable period in 2021. Selling general and administrative expenses were 1.1 million for the second quarter, a decrease of 6% compared to 1.2 million for the three months ended June 30th, 2021. Total operating expenses for the second quarter were $2.2 million, a decrease of 5% compared to $2.3 million in the prior period. Net income was $2.1 million or $0.08 per diluted share for the quarter compared to a net income of $2.8 million or $0.10 per diluted share in the comparative period. Adjusted EBITDA for the second quarter was $3.6 million compared to $4.1 million for the prior year. The company had $24.2 million in cash and no debt at June 30, 2022. Cypher generated $5.2 million in cash from operating activities for the six months ended June 30, 2022. With a strong balance sheet, a reduced cost structure, and additional visibility from the four-year extension of our relationship with Sun Pharma, we are focused on identifying and evaluating the right assets to drive our growth. We'll now open the call up to questions. Operator?