Cipher Pharmaceuticals Inc.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Cypher Pharmaceuticals Quarterly Conference call for the company's Q1 2024 results. 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 star followed by the zero on your push-button phone. As a reminder, this conference is being recorded today, Friday, May 10, 2024. 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 the 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 conference call over to Mr. Craig Mull, Interim Chief Executive Officer of the company. Please go ahead, Mr. Mull.

Good morning, everyone, and thank you for joining us today. Before I begin, I would like to remind everyone that all figures discussed on today's call are expressed in US dollars, unless otherwise specified. Cypher's first quarter 2024 results have followed through very nicely from how the business performed in 2023. Profitability and predictable cash generation continue to drive results, and we see this trend continuing throughout 2024. Cypher exited the first quarter with $42 million in cash on the balance sheet, no debt, and substantial liquidity to drive future growth of the business. Looking forward, Cypher is focused on two areas of growth, organic growth through our pipeline products and inorganic growth through acquisition. To start, I would like to touch on Moberg Pharma and its exciting nail fungus treatment, MOB015, a product that Cypher holds the exclusive Canadian rights to market and distribute We are more and more excited about the product as we are eight months away from results of the pivotal Phase III clinical trial being conducted in the U.S. But more importantly, this is a product that has already received regulatory approval in countries outside North America. Four months ago, on May 6, Moberg announced the product received national approvals across 13 European countries. which we believe has further paved the path forward and de-risked the eventual Canadian approval by Health Canada. In Canada, current nail fungus therapies are inadequate as complete cure rates are well below 20%. The existing treatment protocols are long, inconvenient, and most importantly, ineffective. Where MOB 015 meets this unmet need is it has already shown a comparatively high mycological cure rate of 76%, which provides rapid and visible improvement of curing nail fungus. The phase three trial underway has adjusted the dosing to a once per week treatment after eight weeks of treatment, which is expected to increase the complete cure rates to the rate that is far greater than the market leading existing product. Most recent Canadian market share data indicates a total market of $91 million Canadian, whereby one product currently has over 90%, 95% of that market. On February 7th, Aldermera AB launched MOB015 in Sweden under the brand name Terclara. And on April 23rd, Moberg Pharma provided an update provided a launch update to the market. To quote the release, Moberg stated, interest in the product exceeds the pharmacy change forecasts and chains are increasing their orders given Terclara has occasionally stocked out or sold out at several of the pharmacy chains. The news release went on to say, patients are also verifying the need, the great need for new treatment options for nail fungus and we are receiving patient inquiries from many countries, as Sweden is the first country where the drug is being launched. Hearing these results in countries where MOB015 has recently been launched provides our business and management team comfort in what we have been saying from the beginning. We believe there is a large unmet need in nail fungus treatments. and are confident that the launch of MOB015 in Canada will allow Cypher to capture significant market share quickly when launched in 2026. Our second pipeline product, piclodenicin, continues to make regulatory progress with our partner, CanFeed Biopharma. Piclodenicin's pivotal Phase III trial has been approved by both the U.S., FDA, and the European Medicines Agency. Canfeet believes the trial will commence later in 2024. Upon positive conclusion of the trial, Canfeet will submit both a new drug application to the FDA and a marketing authorization plan to the EMA. Cypher has in-licensed this product for the distribution in Canada, and it represents a market opportunity to the company in excess of $40 million Canadian per year. Moving on to our current M&A initiatives, we remain very positive about the progress that we've made thus far in 2024. We continue to advance work and discussions on a number of acquisition opportunities, and we are becoming more optimistic that we will be able to share the details of one or a combination of these opportunities soon. However, I feel like this statement needs to be balanced with expectations as M&A tends to take more time than everyone would like and we continue to progress activities in this area. We have been in this position before. In the summer of 2023, we were close to executing a transaction. However, in late stages of that process, things took a turn and we decided to move in a different direction. This change, of course, led us to initiate a substantial issuer bid, which turned out to be a strong use of capital for the business and our shareholders. Which brings me to an important point that I want to emphasize. When CIFR is evaluating a transaction or any other material corporate action, the impact of our shareholders will always be a critical consideration to our decision making. As we have previously stated, We are spending most of our time on CIFR's M&A strategy and remain confident in our ability to execute in this area. Thank you again for joining us here today, and I look forward to answering your questions after our prepared remarks. I will now pass the call over to our CFO, Brian Jacobs. Please go ahead, Brian.

Thank you, Craig, and good morning, everyone. As Craig mentioned at the beginning of today's call, all amounts are provided in U.S. dollars unless otherwise noted. Today, Cypher Pharmaceuticals is reporting results from the company's first quarter of 2024. In the three-month period ended March 31st, 2024. Total net revenue was $5.9 million in the first quarter of 2024, an increase of $1 million, or 20%, when compared to the same period in 2023. Licensing revenue was $2.6 million for the first quarter of 2024, compared to $1.7 million in the prior year quarter, representing a 55% increase. Licensing revenue from Absaroka in the U.S. was $1.9 million for the first quarter of 2024, an increase of $0.9 million or 90% when compared to the same period in 2023. This increase was driven by $1.1 million in higher product shipments and slightly offset by a $0.2 million lower net sales royalty. Market share from the Absorica portfolio, which includes the brand Absorica, the authorized generic or AG in Absorica LD in the US of approximately 6.5% for the three months ended March 31st, 2024, which decreased by 0.3% compared to the same period last year, according to market data. Licensing revenue from Lipothin in the AG of Lipothin was $0.7 million for the first quarter of 2024, which was effectively flat year over year. Moving to our Canadian-based product portfolio, total product revenue was $3.3 million for the first quarter of 2024, an increase of $0.1 million, or 2%, from the comparable period in 2023. Sales from APIRIS in the first quarter of 2024 was $2.9 million, an increase of $0.2 million or 7% from the prior year quarter. As we've continued to invest in the sales activities related to APIRIS, we're proud to see the third consecutive growth in sales of the product. Total market share for APIRIS was approximately 45% as at March 31st, 2024, representing the leading prescribed isotretinoin product in the treatment of acne across Canada. Selling general and administrative expenses were 1.5 million for the first quarter of 2024, an increase of 0.3 million or 21% from the compared period in the prior year. The increase is primarily attributable to higher salaries and benefit costs, as well as higher other selling and general admin costs incurred in the first quarter of 2024. Net revenue for the three months ended March 31st, 2024 was, sorry, net income for the first three months ended March 31st, 2024 was 4.9 million. or 20 cents per diluted common share compared to 2.6 million or 10 cents per diluted common share for the same period in the prior year. The increase in net income of approximately 2.3 million was primarily attributable to 2 million of income tax recovery in the first quarter of 2024 arising from a change in the company's deferred tax assets associated with unused loss carry forwards. Safer's income before taxes, which excludes the earnings attributable to income tax recovery, was approximately $3 million, or $0.12 per diluted share, for the first three months ended March 31, 2024. Adjusted EBITDA for the first quarter of March, ended March 31, 2024, was $3.6 million, compared to $3.2 million for the prior year quarter. This very strong increase of 13% was mainly driven by the previously mentioned increase in licensing revenue I described. The company had $42 million in cash at the end of the quarter, no debt, and continues to generate strong free cash flow from operations. Cypher continues to remain strongly capitalized with solid financial footing, which really sets us out among our peers. With a fortified balance sheet, available credit facilities, this places us in a very strong and enviable position to be opportunistic to drive our next leg of growth. Now we'll open up the call to questions.