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Cipher Pharmaceuticals reported a strong second quarter for 2025, exceeding earnings expectations with an EPS of $0.22 against a forecast of $0.1679, a 31.03% surprise. The company’s revenue also surpassed predictions, reaching $13.38 million compared to the anticipated $12.88 million. Following the earnings announcement, Cipher’s stock price soared by 13.74%, reflecting investor confidence in the company’s performance and future prospects. According to InvestingPro data, this surge contributed to an impressive 11.26% return over the past week, with the stock currently trading at $11.22.
Key Takeaways
- Cipher Pharmaceuticals delivered a 31.03% EPS surprise, significantly exceeding forecasts.
- Revenue increased by 152% year-over-year, driven by the Natroba business.
- The stock surged 13.74% post-earnings, indicating strong investor sentiment.
- Strategic initiatives include expanding Natroba’s market presence and pursuing Medicaid preferred status.
Company Performance
Cipher Pharmaceuticals demonstrated robust financial performance in Q2 2025, with revenue reaching $13.4 million, marking a 152% increase from the previous year. This growth was largely attributed to the successful integration of the Natroba business, which contributed $7.8 million in revenue. The company’s net income rose to $5.9 million, or $0.22 per diluted share, compared to $3 million, or $0.12 per share, in the prior year. InvestingPro analysis reveals the company maintains a healthy gross profit margin of 71.95% and operates with a moderate level of debt, with a debt-to-equity ratio of 0.38. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading above its intrinsic value. For detailed valuation insights and 8 additional ProTips, visit InvestingPro.
Financial Highlights
- Revenue: $13.4 million, a 152% increase year-over-year.
- Earnings per share: $0.22, up from $0.12 in the previous year.
- Adjusted EBITDA: $7.6 million, a 148% increase.
- Cash position: $11.3 million.
- Debt reduction: From $25 million to $18 million post-quarter.
Earnings vs. Forecast
Cipher Pharmaceuticals exceeded analyst expectations with an EPS of $0.22, surpassing the forecast of $0.1679, resulting in a 31.03% surprise. Revenue also beat estimates, coming in at $13.38 million against a forecast of $12.88 million, a 3.88% surprise. This strong performance underscores the company’s effective cost management and operational efficiency.
Market Reaction
Following the earnings release, Cipher Pharmaceuticals’ stock price increased by 13.74%, closing at $15.40. This surge reflects positive investor sentiment and confidence in the company’s strategic direction and financial health. The stock’s performance stands out against broader market trends, highlighting Cipher’s strong quarterly results as a key catalyst.
Outlook & Guidance
Looking ahead, Cipher Pharmaceuticals is focused on expanding the Natroba business in the U.S. and exploring potential global markets. The company aims to achieve Medicaid preferred status in multiple states and is preparing for a Health Canada submission in 2025. Additionally, Cipher is exploring direct-to-consumer marketing strategies and potential out-licensing agreements expected in 2026. The company’s strong financial health is evidenced by its current ratio of 2.28, indicating ample liquidity to fund these growth initiatives. Want deeper insights? Access Cipher’s comprehensive Pro Research Report, part of InvestingPro’s coverage of 1,400+ US equities, offering expert analysis and actionable intelligence for smarter investing decisions.
Executive Commentary
Craig Mull, CEO, highlighted the record-breaking revenue for Q2 2025, stating, "Cipher’s second quarter of twenty twenty five yielded the highest earnings quarter for total net revenue in Cipher’s history." Brian Jacobs, US President, emphasized the strategic focus on direct-to-consumer channels, saying, "We see an area where we can invest in a bit of a direct-to-consumer channel."
Risks and Challenges
- Debt management remains a concern, despite recent reductions.
- Regulatory hurdles in expanding market presence, particularly in Canada.
- Competitive pressures in the anti-parasitic and scabies treatment markets.
- Execution risks associated with strategic initiatives and market expansion.
Q&A
During the earnings call, analysts inquired about the company’s strategy for achieving Medicaid preferred status and expanding market share. Discussions also covered potential pricing and marketing strategies, highlighting the company’s focus on optimizing its market position and exploring new growth opportunities.
Full transcript - Cipher Pharmaceuticals Inc (CPH) Q2 2025:
Conference Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Cipher Pharmaceuticals Quarterly Conference Call for the company’s Q2 twenty twenty five 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.
As a reminder, this conference is being recorded today, Friday, 08/08/2025. 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 call over to Mr. Craig Mull, Interim Chief Executive Officer of the company. Please go ahead, Mr.
Mull.
Craig Mull, Interim Chief Executive Officer, Cipher Pharmaceuticals: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Cipher’s quarterly conference call for the company’s Q2 twenty twenty five 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 the star button followed by the zero on your push button phone.
As a reminder, this conference is being recorded today, Friday, 08/08/2025. 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 security 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 the 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 the Canadian securities laws, the company does not undertake to update any forward looking statements. Such statements speak only as to the date made. I’m sorry, I shouldn’t have repeated all that. Again, good morning, and thanks for joining us. Before I begin, I would like to remind everyone that all figures discussed on today’s call are expressed in U.
S. Dollars unless otherwise specified. Cipher’s second quarter of twenty twenty five yielded the highest earnings quarter for total net revenue in Cipher’s history. This was achieved by strong performance from The U. S.
Natroba business that exceeded our initial expectations from acquisition of the business one year ago, combined with Cypher’s base business performing slightly ahead of the same quarter last year. First, I’d like to spend some time on highlights from the U. S. Natroba business. Revenues were $7,800,000 during the 2025, which was ahead of our expectations when we acquired the business a year ago in July 2024.
Given the seasonality of the product and the second quarter demonstrated a lead up to the higher demand warmer months of the year, and therefore sales in the quarter meaningfully saw meaningful increases from the first quarter. We believe the second quarter has positioned the business well for further success as we enter the third quarter, which is traditionally a high demand quarter for the products. Revenues for the six months of the fiscal year to date were $14,400,000 for the Natrova products. Additionally, the Natroba business generated gross profit of $6,600,000 and gross margin of 86% when excluding non cash adjustments. As I may as I had mentioned on our previous earnings calls, we have completed the acquisition of the business from legacy arrangements that were in place at the time of acquisition, the results of which continue to benefit the business in Q2 twenty twenty five with a strong gross margin result.
As we previously outlined in our first quarter earnings call, our growth strategy related to Natrova continues to be fourfold. Number one, building the business in The U. S. Where studies have shown permethrin based products are no longer effective due to the resistance issues. Secondly, add complementary products to The U.
S. Sales platform through in licensing, co promote agreements or acquisition. Thirdly, launch Nutroba in Canada through our existing Canadian infrastructure. And lastly, out license the product globally as the resistance issues is not unique to North America, but rather a global issue. In the first area of our strategy, we announced during the quarter in April that the state of Illinois made Natrova the preferred product of choice given its one dose complete cure for scabies and whereby the incumbent treatment, Permethrin five percent, is now non preferred under Medicaid.
We are continuing to work with various states to look to build upon this favorable development in Illinois as we have a large number of Medicaid reimbursements arrangements across The U. S. On the second prong of our strategy, adding complementary products to The U. S. Sales platform, we’re making progress in identifying these products and have entered into negotiations with a number of potential opportunities.
With respect to the third area of our strategy, launching Natroba in Canada, during the second quarter we continued to make progress on preparations for our submission to Health Canada for approval of Natroba. And based on these activities, we intend to make our new drug submission in the 2025. We believe Natroba will fill an unmet need in Canada for a highly effective treatment of head lice and scabies and we will continue to provide updates as developments occur with respect to the launching of Natroba in Canada. For the fourth area of our strategy, we are also continuing to pursue opportunities for Natroba globally, as we have mentioned in past earnings calls. We continue to believe there is a high unmet need for a highly effective product like Natroba to address lice and scabies indications in other territories globally, with the product being particularly well suited for warm climate regions.
As we have said previously, business development activities take time and may or may not come to realization as we believe it is important to find the right fit for out licensing of Natrova. Therefore, we continue to exercise patience in this area of our strategy to ensure we are executing on opportunities that will provide growth for Cipher. As developments occur with respecting to out licensing of Natrova globally, we will continue to provide updates. Turning now to our base business consisting of the Canadian product portfolio and The U. S.
Licensing portfolio. Revenues and earnings were higher than a year ago, and the business continues to deliver reliable results and cash generation. Total revenues of $5,600,000 from our base business of Canadian product revenue and U. S. Licensing revenue were $300,000 or 6% higher than the 2025 sorry, 2024.
Growth in our Canadian based product sales were partially offset by declines in licensing revenue. As Ryan Mailing will describe in more detail in his remarks, revenue from the Canadian product portfolio was $400,000 or 12% higher than the same quarter a year ago. The U. S. Licensing business experienced a decline of $100,000 or 9%, contributed to by a lower royalty revenues resulting from lower sales volumes and net revenues realized by our licensing partner due to a generic competition, including new generic entrants to the market associated with the products in The U.
S, which was combined with lower royalty rates. The decline in licensing revenue associated with royalties was partially offset by increased shipments in the quarter compared to the same quarter last year, as Cipher earns revenue from supplying products to our distribution partners. Adjusted EBITDA from the base business was CAD3.2 million for the 2025, an increase of 4% from the same quarter last year and continues to be a reliable source of cash flow. I also want to highlight our total adjusted EBITDA of CAD7.6 million for the 2025 and CAD13.8 million for the year to date. Included in the adjusted EBITDA for the year to date are onetime legal costs of $1,200,000 associated with defending our product portfolio through a contractual arbitration process.
We continue to await a decision from the arbitrator. However, we believe it was prudent to defend our base business through the contractual mechanisms available to us and await the outcome of this process. Lastly, as our operations continue to be a reliable source of cash generation, we will further demonstrate our track record of strong capital allocation going forward. Consistent with our existing approach to managing capital and our business strategy, we will be using our available cash as well as future cash generated from the business in a balanced approach in the following areas. Number one, repurchases of our common share through our normal course issuer bid.
Secondly, repay portions of the debt outstanding on our revolving credit facility and continue to focus on accretive acquisitions to deliver strong shareholder returns. Finally, I’d like to highlight that we remain very active in continuing to pursue other strategic business development opportunities with a particular focus on U. S.-based opportunities, including acquiring or in licensing products that are complementary to our existing portfolio and company acquisitions that are either accretive or that have a specific strategic purpose. We continue to be focused on identifying, evaluating and pursuing various business development opportunities, and we are in active discussions with various partners. However, as we have said before, these discussions do take time and the opportunities may or may not come to realization, but we will continue to provide updates as developments occur.
We will continue to be selective in our approach to pursuing these opportunities to ensure that we are executing on the right opportunities, as we successfully demonstrated with our Natrova acquisition only a year ago. Thank you again for joining us today, and I look forward to answering your questions after our prepared remarks. I will now pass the call over to our CFO, Ryan Mailing. Please go ahead, Ryan.
Ryan Mailing, Chief Financial Officer, Cipher Pharmaceuticals: Thanks, Craig, and good morning, everyone. As Craig mentioned at the beginning of today’s call, all amounts provided are expressed in US dollars unless otherwise noted. Today, Cipher Pharmaceuticals is reporting results from the company’s second quarter and year to date 2025, the three and six month periods ended 06/30/2025. Total net revenue for the three and six month periods ended 06/30/2025 was 13,400,000.0 and 25,400,000.0 respectively. Net revenue for the 2025 increased by 8,100,000.0 or 152 percent compared to the same quarter in the prior year.
Net revenue for the six month period ended 06/30/2025 increased by 14,200,000.0 or 127% over the same period in 2024. The increases were largely attributable to the addition of the Natrobo business at the July 2024, combined with increased revenue from our Canadian product portfolio in the current year. Product revenue from the Natrobo business, which is comprised of the brand Natroba and its authorized generic Spinosad, was $7,800,000 and $14,400,000 respectively for the three and six month periods ended 06/30/2025, representing a significant portion of the total increase in product revenue as I just described. Product revenue from the Canadian product portfolio for the second quarter and six months ended 06/30/2025 was 4,100,000.0 and 8,700,000.0 respectively. Canadian product portfolio revenue of 4,100,000.0 increased by 400,000.0 or 12% for the 2025 compared to 3,700,000 in the 2024.
For the six months ended 06/30/2025 product revenue for the Canadian portfolio of 8,700,000.0 represented an increase of 1,700,000.0 or 26% compared to 7,000,000 in the same period of the prior year. Additionally, as the sales for our Canadian product portfolio are denominated in Canadian dollars, when translated on a constant currency basis, Canadian product portfolio revenue for the six months ended 06/30/2025 was impacted by changes in the US dollar relative to the Canadian dollar. The impact was nominal for the 2025. When translated on a constant currency basis, Canadian product portfolio revenue increased by $2,000,000 representing an increase of 30% over the six months ended 06/30/2024. The products comprising our Canadian product portfolio benefited from increased sales volumes for the three and six months ended 06/30/2025 compared to the same periods in the prior year contributing to the overall increase in revenue.
Moving on to our US licensing revenue, total licensing revenue for the three and six months ended 06/30/2025 was 1,500,000.0 and 2,200,000.0 respectively. Licensing revenue decreased by 100,000.0 and 2,000,000 respectively for the second quarter and six months ended 06/30/2025 compared to the same periods in 2024. The overall licensing revenue of $1,500,000 for the 2025 represented a 9% decrease compared to $1,600,000 in the same quarter of 2024. The decrease is due to the Absorica portfolio in The US, which contributed 1,000,000 licensing revenue in the 2025, a decrease of 100,000.0 when compared to 1,100,000.0 of revenue for the same quarter in 2024. The decline in the Absorica portfolio licensing revenue resulted from lower royalty revenue contributed to by lower sales volumes and net sales realized by our distribution partner on which Cypher earns a net sales royalty combined with lower contractual royalty rates year over year.
However, the decrease in royalty revenue in the Azurica portfolio was partially offset by higher product shipments by 400,000 during the 2025 compared to the same quarter last year, whereby we earned revenue from supplying product to the distribution partner. Overall licensing revenue for the six months ended 06/30/2025 was 2,200,000 compared to 4,200,000.0 for the same period in the prior year, representing a 48% decrease. The decrease for the six months ended 06/30/2025 was contributed to by the Zorica portfolio and Lipofen including the authorized generic. Licensing revenue from Zorica was $1,300,000 for the six months ended 06/30/2025, a decrease of 1,700,000.0 or 56% when compared to the same period in the prior year. Revenue from Zorica for the six month period was impacted by a year over year decline in product shipments on which we earn revenue from supplying the product to our partner.
The decline in the Absorica portfolio licensing revenue for the six months ended 06/30/2025 was also impacted by lower royalty revenue contributed to by lower sales volumes and net sales realized by our distribution partner on which we earn a net sales royalty. This was further contributed to by lower contractual royalty rates year over year. Market share for Absorica and the authorized generic of Absorica was 3% at 06/30/2025 according to Symphony Health market data, representing a decrease of 3.4% compared to 6.4% at 06/30/2024. Licensing revenue from LipoFin and the authorized generic was 800,000.0 for the six months ended 06/30/2025, representing a decrease of 300,000.0 compared to the same period in the prior year. Selling, general and administrative expenses for the three and six months ended 06/30/2025 were 4,100,000.0 and 9,000,000 respectively.
Selling, general and administrative expenses for the 2025 of $4,100,000 represented an increase of $2,500,000 compared to the same quarter in the prior year. The increase was primarily attributable to the incremental selling, general and administrative expenses from the acquired Natrova business. Selling, general and administrative expenses for the six months ended 06/30/2025 of $9,000,000 increased by $5,900,000 compared to the same period in the prior year. Increase is attributable to the additional selling, general and administrative expenses from the acquired Natroba business of 4,800,000.0 as well as 1,200,000.0 in one time legal costs associated with defending our product through a contractual arbitration process. Net income for the three months ended 06/30/2025 was 5,900,000.0 or $0.22 per diluted common share compared to 3,000,000 or $0.12 per diluted common share for the same period in the prior year.
Net income for the six months ended 06/30/2025 was 8,500,000.0 or $0.32 per diluted common share compared to 7,900,000.0 or $0.32 per diluted common share for the same period in 2024. Net income for the six months ended 06/30/2025 was adversely impacted by the previously mentioned 1,200,000.0 in one time legal costs associated with the contractual arbitration process, as well as 800,000.0 of non cash fair value adjustments associated with inventory acquired in the Natrova acquisition that were recognized in cost of products sold during the period. Adjusted EBITDA for the three and six months period ended 06/30/2025 was 7,600,000.0 and 13,800,000.0 respectively compared to the 3,100,000.0 and 6,600,000.0 respectively for the same periods ended 06/30/2024. This represents an increase of 148108% respectively for the second quarter and six months ended 06/30/2025 when compared to the same periods in 2024. The increase in adjusted EBITDA was mainly driven by the previously mentioned addition of the Natroba business and growth of our Canadian product portfolio, which is partially offset by declines experienced in our US licensing revenue.
Company had 11,300,000.0 in cash and 25,000,000 in debt as of the end of the 2025. The company continues to generate meaningful free cash flow from operations with 6,000,000 in operating cash flow during the 2025 and 10,200,000.0 generated from operations for the six months ended 06/30/2025. During the 2025, Cipher allocated 15,000,000 of its accumulated cash to make a repayment on its revolving credit facility and utilized an additional 2,100,000.0 of accumulated cash for repurchases of common shares under our normal course issuer bid. Subsequent to the 2025 on 08/06/2025, Cipher further allocated a portion of the cash that is accumulated from free cash flows to make an additional repayment of 7,000,000 on the outstanding balance of our revolving credit facility. Accordingly, after making this payment the company now has a reduced debt balance of 18,000,000 outstanding on its revolving credit facility.
With the strong performance from Cypher’s Natrobo business combined with Cypher’s base business particularly its Canadian product portfolio performing well, the overall business continues to have meaningful cash generation. During and subsequent to the quarter we demonstrated effective allocations of our capital, returning capital to shareholders through the normal course issuer bid and further delevering the balance sheet with two debt repayments totaling 22,000,000. We also retain the availability of financing due to the revolving nature of our credit facility whereby after making these debt repayments, Cypher has 47,000,000 of financing available plus a 25,000,000 accordion option which in total 72,000,000 of total potential financing available. Accordingly, with Cypher’s strong cash generation from operations and available financing, the company continues to be well positioned to execute on further growth opportunities to provide further value for our shareholders. We’ll now open the call up to questions.
Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. You. Your first question comes from Andre Udin with Research Capital. Your line is now open.
Andre Udin, Analyst, Research Capital: Thank you, operator. Hi, Craig, Brian and Ryan. Good quarter. I have a few questions. Do you know what the annual sales of permethrin are in Canada roughly?
Brian Jacobs, US President, Cipher Pharmaceuticals: Hey, Andre, it’s Brian. I don’t we we haven’t really done an analysis on permethrin, obviously, because it’s a generic product. You know, the sales the sales level of it, we don’t believe would necessarily be indicative of, you know, what we would be able to take once we bring to Canada. You
Andre Udin, Analyst, Research Capital: also mentioned on some of this on the call, how are your out licensing discussions going for Natrova? And I know it’s always hard to predict business development, but do you think we should begin to expect these out licensing agreements in 2026?
Craig Mull, Interim Chief Executive Officer, Cipher Pharmaceuticals: That’s possible, Andre, it’s Craig here. We’ve got lots of interested parties. I think the main issue there is, you know, what can we sell the product for in other jurisdictions? And that’s something we’ve had a lot of focus on. We’re also, you know, monitoring what is going on with this the Trump’s administration’s plan or discussions around most favored nation pricing.
So, you know, we don’t want to get trapped into that by entering into an agreement where we’re selling the product at a substantially lower price in another country, and then being subject to this most favored nation concept. So, things are going well. We definitely have lots of interest from various countries and a number of different pharmaceutical companies that specialize in this area. And I would say that it’s likely that we will have an agreement in place by the 2026 for certain.
Andre Udin, Analyst, Research Capital: And you also mentioned a little bit of this on the call, but if you could just elaborate a little bit more outside of Illinois, how are the preferred step through status discussions going for Medicaid in terms of Neutrola?
Brian Jacobs, US President, Cipher Pharmaceuticals: Andre, usually we get the opportunity to get in front of each state Medicaid. I think as you’re aware of the way that that is administered on this is administered on a state by state basis. And they have the term they call you’ve seen one Medicaid plan in a state, you’ve seen one Medicaid plan. So they all operate differently. Our best opportunity to have that discussion with them is when the contracts come up for the a bid, a renewal.
So most of them will typically they come up for renewal annual or biannual. So it’s at that time that we submit it and here’s an example of a strategy is you know you try and renew the con you you work with them to renew the contract the there’s sizable volume and demand for the product in the state, so they want to keep it on. Clearly we would negotiate a price increase or some type of an increase. They try and cram down on that increase. So one of the areas that we’re giving an opportunity is saying, here would be your price, you call it an abnormal bid renewal, but also here’s your price if you want to consider making our product the single preferred on the formulary like Illinois.
So that’s how we’re going about that strategy. So it’s not just as easy as kind of, I want to say, just kind of knocking on the door to ask about it. The best time to do it is in the bid renewal process.
Andre Udin, Analyst, Research Capital: Thanks, Brian. That’s useful. And that’s it for me.
Craig Mull, Interim Chief Executive Officer, Cipher Pharmaceuticals: Andre, just back to your first question about the size of the market for permethrin in Canada. In Canada, both 15% permethrin are OTC products. And they’re difficult to it’s difficult to get that type of data on these products because they’re OTC. But from our estimates, the market is probably in the range of CAD10 million.
Andre Udin, Analyst, Research Capital: Thanks, Craig.
Conference Operator: Your next question comes from Doug Loe with Leap Financial. Your line is now open.
Doug Loe, Analyst, Leap Financial: Yes. Thanks, operator, and good morning, gents. Congratulations on the strong EBITDA quarter and the quarter. I just wanted to follow-up on Andre’s line of questioning about your preferred drug listing status across The U. S.
Illinois is one of 50 states and presumably you could pursue that similar listing in the other 49 states. But if you could just kind of quantify what the lift in the Troba revenue could be from seeking out such listings in other states. I mean, example, we’re not actually aware of what other states you might already have preferred drug listing already in place. So maybe just kind of quantify what the potential revenue opportunity could be from sort of enhancing your Medicaid reimbursement status in comparison to what it currently is across the entire national platform.
Brian Jacobs, US President, Cipher Pharmaceuticals: Thanks, Doug. Thanks for the question and for calling in today. The way that I would approach the question is it’s less about kind of on a state by state basis. But if you say, you know, the market has got, call it a third of it, know, call it 30% is Medicaid. And then, you know, what is 5% permethrin have, you know, it’s probably the five percent permethrin’s total market share at the 30%.
And then that would be nationwide. And then as we add then, you know, states moving them off of the preferred versus non preferred based on the relative size of the state, that’s probably the way I think about or quantifying it. And I think we’ve put out there what our market share versus 5% per month, there’s market share is.
Doug Loe, Analyst, Leap Financial: Yeah, fair enough. Okay, that’s good context. Thanks, Brian. And then shifting gears a little bit to your existing pipeline independent of future licensing deals. I mean, certainly noticed during your last month and last conference call that CanFeed now has capital to fund a pivotal Phase III plaque psoriasis trial with Piclidenoson and the details for that trial are now in the public domain.
Just wondered if you had any recent conversations with CAMPFIT and how that what the status of that trial is. We haven’t seen them announce their patient enrolled or anything, timelines to data sort of mid to late twenty twenty eight. I just wondered if that public information conforms with your notions based on conversations with them.
Craig Mull, Interim Chief Executive Officer, Cipher Pharmaceuticals: Yeah, we haven’t got a lot of information on how the existing trial is going and I know that we have another call scheduled next week with them. We believe that it’s going quite well. Mean, we were quite surprised to see them raise that type of money. I think it was in the range of $75,000,000 if I’m correct. So I think that, you know, they’ve got the funds to complete the work that they need to do.
We hope to get a more wholesome update this coming week.
Doug Loe, Analyst, Leap Financial: Fair enough. That’s it for me. Thanks, Greg.
Conference Operator: Your next question comes from Justin Keywood with Stifel. Your line is now open.
Justin Keywood, Analyst, Stifel: Good morning. Exceptional quarter and nice see the integration activities start to pay off. So just on the Natrova market share 25% versus the incumbent 75%, I believe that’s been relatively stable. I realize the integration activities are pretty early, but has there been any market share gains and how should we look at that going into next year?
Brian Jacobs, US President, Cipher Pharmaceuticals: It’s been pretty steady, you’re right, Justin. So I mean, a lot of it was we integrated the business, focused in a lot of making sure that we renew state Medicaid like I was we were talking about with the other questions. And we’ve had the ability to negotiate on price. So we have had some price benefits. I still see us being able to get there’s more opportunities ahead of us on pricing.
An example is that the products haven’t had any price increases for historically for a period of time and we think that there’s some opportunity there. That’s going to be limited by some of the contractual arrangements with Medicaid, you can’t you know, are those are set. So one of the areas I would say is, you know, we do plan on taking market share and gaining market share from a volume perspective. So I think in the single digits is achievable. But we also have that that lever on price where it’s kind of unusual when you acquire a product that hasn’t seen price increases over a period of time.
A lot of times a seller will actually pump out price just before they offload it in order to make it look good. Whereas we actually that didn’t occur with our product and we have some opportunity there. So there’s a couple levers there.
Justin Keywood, Analyst, Stifel: Understand a few dynamics to consider. Has there been any type of analysis on potentially increasing sales and marketing to increase the market share and what that ROI could be? Or is it still early on in the integration activities?
Conference Operator: Yeah,
Brian Jacobs, US President, Cipher Pharmaceuticals: in in full transparency, one of the things that we’re taking a look at is trying to think about the business model. So it has what you call a bit of a traditional model where we have sales reps both outside and inside reps managing a lot of call it business development and growth. We also think that there’s other avenues to go to market such as quite clearly for a head lace product a lot of your competition are pharmacy aisle OTC type products. So we see an area where we can invest in a bit of a direct to consumer channel. And that can that’s going to be something that obviously if you do that, it’s a bit a lot more measurable from an ROI perspective.
You always ask the very diff it’s always a difficult question because sometimes when you invest in a marketing activity, the ROI, trying to figure out the ROI on that is very difficult. Whereas this one, would be able to measure very tightly. So for example, if you had a platform that your people out there or struggling families need to get our product quickly, We have a channel that can distribute that, say online, you’re able to measure how many click throughs, how many people come through your system, what’s your ROI on that. So that’s something that we’re going to be taking a look at in order to contribute to our growth in the future. Because we think it just makes sense based on the nature of the product and the acute nature because when you need it, you really, you you need it desperately.
Craig Mull, Interim Chief Executive Officer, Cipher Pharmaceuticals: And just to add Justin to Brian’s comments, the company really and the product has an overall market share of about 25%, as you indicated, in the anti parasitic market. But if you drill down a little further, we have a much higher percentage of the head lice market, but a relatively low percentage of the scabies market. And that’s an area that we’ve focused on. We think that we can increase the share in that particular category significantly. And to do that, we need to make sure that we have good Medicare coverage.
And Brian and his team has been working hard on that, and I think it will open up what effectively is a relatively new market for Natrova.
Justin Keywood, Analyst, Stifel: Absolutely. Lots of levers to potentially pull there. Just moving on to capital allocation, very strong deleveraging in the quarter and subsequent. Just with the balance sheet where it is, are you able to describe the capital allocation priorities of yet M and A, share buybacks or further debt repayment?
Craig Mull, Interim Chief Executive Officer, Cipher Pharmaceuticals: Yeah, just I’ll add something then Ryan, you can add as well. Yeah, we’re generating a lot of cash. We have this $65,000,000 revolver in place that we can access at any time. So, without an acquisition that is close, like near term, we felt it best to pay down that debt, reduce our interest expense, still have the availability of the $65,000,000 to draw upon at any time. Obviously, our top priority is acquisition and which would involve in licensing as well.
And, you know, beyond that, we’ve got kind of a balanced approach of buying back stock through the NCIB or through bulk purchases and paying down our debt. And I think that we’ll continue to do that. When the right acquisition comes along, we will draw on the $65,000,000 And if we need additional financing, then we’ll seek that out at that time.
Justin Keywood, Analyst, Stifel: Great. Thank you for taking my questions.
Craig Mull, Interim Chief Executive Officer, Cipher Pharmaceuticals: Thanks, Justin.
Conference Operator: There are no further questions at this time. I will now turn the call over to Craig Moe for closing remarks.
Craig Mull, Interim Chief Executive Officer, Cipher Pharmaceuticals: Thank you. I’d like to take this opportunity to thank our US team led by Brian Jacobs, our US President, for a great performance this quarter. Congratulations and much appreciated. Please keep up the good work. We look forward to reporting our next quarter and our continued progress in meeting Cypher’s objectives.
Thanks for joining us today.
Conference Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
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