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Cipher Posts Solid 2012 Financial Results

By Jason Napodano, CFA

On March 1, 2013, Cipher Pharmaceuticals (DND.TO) / (OTC Markets:CPHMF) reported financial results for the fourth quarter and full year ended December 31, 2012. Total revenues in the fourth quarter were $2.9 million, up 177% over the fourth quarter 2011 and nicely ahead of our estimate for revenues of $2.4 million. The revenue up-tick was driven by milestone recognition and royalties from Ranbaxy on the newly launched Absorica (CIP-Isotretinoin), which hit the market in November 2012.

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For the full year 2012, total revenues were $8.5 million, up 137% over revenues for the full year 2011. The growth in revenues year-over-year reflects the strong performance of Lipofen (CIP-fenofibrate), including an increase in product shipments and the achievement of a $1.0 million sales milestone in the first quarter 2012. Lipofen contributed $4.6 million in revenues in 2012, up from $2.2 million in 2011. ConZip and Durela (CIP-Tramadol-ER) contributed another $1.4 million in revenues in 2012, up from $0.8 million in 2011. Absorica contributed $2.6 million in revenues in 2012, up from $0.6 million in 2011.

Operating expenses for the full year 2012 totaled approximately $6.0 million, flat with 2011. R&D expense at $1.5 million was down meaningfully from $2.2 million in 2011. OG&A expense at $3.5 million was up slightly from $3.2 million in 2011. Net income for the fourth quarter 2012 totaled $1.6 million, or $0.06 per share. This was nicely ahead of our forecast for net income of $1.2 million, or $0.4 per share. Net income in the fourth quarter 2012 compared to a loss of $0.5 million in the fourth quarter 2011. For the full year 2012, net income totaled $2.5 million, or $0.10 per share. This compared to a loss of $2.3 million in 2011.

We are impressed that the company can grow its top-line by 137% while keeping expenses essentially flat. Cipher now has 3 products on the market with Lipofen, ConZip/Durela, and the recently launched Absorica. In the past we’ve written that Absorica is a game-changer for Cipher. Cipher plans to launch Epuris in Canada during the second half of 2013, and should be in position to file for approval of Betesil Pa that they do not expect any significant revenues from this agreement until at least Q1 2014 and potentially substantially later.  This is largely in-line with our prior and current expectations and reflected in our assumptions in our financial model for ILIU.  And while the agreement probably provides somewhat substantial wiggle-room as far as timing of the launch of the dental plans (notwithstanding the milestones), we view consummation of this agreement as clear positive as it marks the most tangible step towards tying the PST to dental insurance reimbursement.  Given that the PST test is what we expect to be a major catalyst to ILIU's long-term revenue growth (assuming reimbursed by insurance), this is a meaningful event.  

We cover ILIU with an Outperform rating.  See here for our most recent report on ILIU.

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