Earnings call transcript: Cipher Pharmaceuticals Q4 2024 sees stock surge

Cipher Pharmaceuticals Inc. (CPH) reported its fourth-quarter 2024 earnings, revealing a significant increase in revenue and a notable surge in stock price. Despite missing earnings per share (EPS) expectations, the company’s strong revenue performance drove a positive market reaction, with shares rising by 6.11% in after-hours trading. According to InvestingPro data, the company maintains a "GOOD" financial health score of 2.67, though recent analysis shows rapid cash burn that investors should monitor.

Key Takeaways

• Cipher’s Q4 2024 revenue grew by 141% year-over-year.
• The company’s stock price increased by 6.11% following the earnings release.
• Product revenue for 2024 reached $26.7 million, marking a 111% growth.
• Natroba’s revenue contribution was $12 million in 2024.
• Cipher holds a 23% market share in the anti-parasitic market.

Company Performance

Cipher Pharmaceuticals demonstrated robust growth in 2024, with total net revenue reaching $33.4 million, a 58% increase from the previous year. The company’s strategic acquisition of the Natroba business significantly contributed to its revenue, with Natroba alone generating $12 million. Cipher’s market leadership in the Canadian isotretinoin sector and its innovative product offerings, such as Natroba, positioned it favorably against competitors.

Financial Highlights

• Total net revenue for 2024: $33.4 million (58% increase from 2023)
• Q4 2024 revenue: $11.8 million (141% increase from Q4 2023)
• Product revenue in 2024: $26.7 million (111% growth)
• Adjusted EBITDA for 2024: $15.7 million (23% increase)
• Cash generation: $9.9 million in the last five months of 2024 (123% increase)

Earnings vs. Forecast

Cipher reported an EPS of $0.13, missing the forecasted $0.19. However, the company’s actual revenue of $11.82 million slightly surpassed the forecast of $11.77 million. The EPS miss was offset by the stronger-than-expected revenue, which likely contributed to the positive market reaction.

Market Reaction

Following the earnings announcement, Cipher’s stock price rose by 6.11%, closing at $11.98. This movement positions the stock closer to its 52-week high of $19.69, reflecting investor optimism about the company’s growth prospects and strategic initiatives in the anti-parasitic market. InvestingPro analysis reveals that management has been aggressively buying back shares, demonstrating confidence in the company’s future. The stock has shown strong returns over the past five years, despite taking a significant hit over the last week.

Outlook & Guidance

Cipher is actively pursuing business development opportunities, having evaluated over 30 potential in-licensing and acquisition projects. The company plans to file a Normal Course Issuer Bid (NCIB) and continues to explore out-licensing opportunities for Natroba in eight territories. With $17.8 million in cash on hand, Cipher is well-positioned to support its growth initiatives. For deeper insights into Cipher’s financial health and growth potential, investors can access comprehensive analysis and additional ProTips through InvestingPro, which offers exclusive access to detailed financial metrics and expert research reports.

Executive Commentary

Craig Moll, CEO, highlighted Natroba’s significant market share in the head lice segment, emphasizing its potential as a treatment for scabies. Brian, a sales representative, noted the strong reception of Natroba among physicians, stating, "The product really sells itself." CFO Ryan Maling assured investors of the company’s low leverage profile, reinforcing its financial stability.

Risks and Challenges

• Market competition in the anti-parasitic sector could impact growth.
• Regulatory hurdles in expanding Natroba’s indications may delay market entry.
• Economic conditions and currency fluctuations could affect international operations.
• Supply chain disruptions may challenge product availability.
• Dependence on Natroba’s success could expose Cipher to market shifts.

Q&A

During the earnings call, analysts inquired about Cipher’s strategy for Natroba sales and the product’s reception in the market. The company addressed concerns about tax loss utilization, confirming an $11 million benefit in the quarter and a remaining balance of $154 million. These discussions underscored Cipher’s strategic focus and financial planning.

Full transcript - Cipher Pharmaceuticals Inc (CPH) Q4 2024:

Conference Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Cipher Pharmaceuticals Quarterly Conference Call for the Company’s Full Year and Q4 twenty twenty four 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 call is being recorded today, Wednesday, 03/19/2025. 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 Canadian regulatory authority.

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 Moll, Interim Chief Executive Officer of the company. Please go ahead, Mr.

Moll.

Craig Moll, Interim Chief Executive Officer, Cipher Pharmaceuticals: 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 based in U. S. Dollars unless otherwise specified. I would first like to provide an update on Cipher’s base business comprising of product revenue in Canada and licensing revenue in The U.

S. Revenue from the base business for the year ended 12/31/2024 came in higher than 2023. Product revenue in 2024 led by sales of EPUERIS was $2,100,000 or 17% higher than the prior year. However, licensing revenue had a mostly offsetting effect whereby licensing revenue in 2024 largely driven by the Absarica portfolio was 1,900,000 or 22% lower than prior year. The Puris in Canada is the isotretinoin market leader and continues to gain market share, whereas Absorica in The U.

S. Competes in a highly competitive genericized market. Further product shipments of Absorica to our partner on which Cipher earns revenue were lower in 2024 than in 2023. Licensing revenues from Absorica for the second half of twenty twenty four were also impacted by a contractual royalty rate decline. However, overall, our base business continues to be a reliable source of cash flow.

Next, I will provide an update on our Natroba business in The U. S, which now forms a substantial portion of our overall business and provides a platform for further growth for Cipher. We acquired the Natroba business from the former owner ParaPro at the July 2024. Natroba business is comprised of the global product rights for NETROVA, its authorized generic SPINOSAD and The U. S.

Based commercial infrastructure headquartered in Carmel, Indiana. During the approximately five months of 2024, where we own the Natroba business, the business delivered meaningful additional revenue and earnings for the company. We believe the business also provides growth potential with respect to its existing products, Netroba and the authorized generic SPINOSAD and as a platform for future growth in The U. S. Market.

Since acquiring the Netroba business, we have been focusing our efforts on integrating the business with our existing team, developing strategies such as the recent expanded indication of the product in the treatment of scabies in The U. S. Market, as well as exploring and pursuing opportunities to bring NITROBA to other markets outside of The U. S, which I will touch on later in my remarks. Integration activities for the Nootroba business included executing on plans to directly commercialize the product entirely and winding down a co promotion partner contract historically in place in certain regions in The U.

S. In doing so, we are now benefiting from streamlined efficient selling costs for the product, but also we are benefiting from the reduced distribution costs where the former co promotion partner additionally earned a fee. This transition was completed at the end of twenty twenty four and in 2025, Cipher is now selling and distributing directly across The United States. We are very excited about our growth potential moving forward, including expanding our market share in the indication of scabies, which was a key strategic objective of the business acquisition. As we indicated in our third quarter earnings call, the co promotion partner transition had a near term temporary impact on lower sales and earnings in comparison to historical sales and from our expectations for the business towards the end of twenty twenty four.

However, I’m happy to announce the transition is now complete. Entering 2025, our U. S. Nootrovia business is positioned to benefit strongly from this initiative with our commercial efforts directly under our control as well as in positioning the business to grow sales, expand margins and deliver strong earnings in the future. Additionally, we continue to believe the infrastructure we acquired in the Trova acquisition provides Cipher with a strong platform to expand upon for our U.

S. Business. These there are opportunities to cross pollinate our existing portfolio of products as well as to in license new products that fit well into our expertise in dermatology and infectious diseases. Cipher’s business strategy includes both organic growth through increasing sales of Nautrova for the scabies indication, as well as inorganic growth through further acquisitions and we intend to acquire complementary dermatology products to add to our combined North American platform. Accordingly, in addition to a focus on growth of Natroba, we are also putting significant focus into our efforts on pursuing other strategic business development 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.

Our business our Chief Business Officer, who joined us in October of twenty twenty four, is focused on identifying, evaluating and pursuing various business development opportunities to provide additional avenues of growth to Cipher. Since October, we’ve evaluated over 30 in licensing and acquisition opportunities and we are in active discussions with several of those parties. As I mentioned earlier in my remarks, Cipher is pursuing opportunities for Nootroba outside of The U. S. Market, which includes directly marketing and distributing the product in Canada, as well as out licensing the product to partners in markets outside of North America.

Cipher is currently in the process of preparing submissions to Health Canada for approval of Nootroba in Canada, a natural step in our growth of the Nootroba brand given Cipher’s existing footprint in the Canadian market with its business with its base business. We are targeting the second quarter of twenty twenty five for a pre meeting with Health Canada related to our new drug submission. In bringing Nootroba to Canada, we are able to leverage our Canadian sales strategy. Nootroba will fit well with our dermatology product portfolio in Canada, including the Puris, the Canadian market leader for the treatment of severe acne. We have established relationships in dermatology in Canada, which we believe will be a natural fit for Natroba.

We will continue to provide updates on Natroba in Canada as developments occur. In terms of opportunities for Natroba globally, we currently have ongoing out licensing discussions with eight parties that are interested in Natroba in different territories. Natroba is particularly well suited in warm climate regions where there is a high unmet need for a highly effective product like Natroba to address licensed scabies indications. Similar to Natroba in Canada, we will continue to provide updates on growth for Natroba globally as developments occur. The final item I would like to comment on is in respect to the company’s share price.

We believe the current price of Cipher’s common shares do not fully reflect their inherent value. Accordingly, the company intends to file with the Toronto Stock Exchange a notice of its intention to commence a normal course issuer bid or NCIB. Cipher also intends to utilize block purchases in addition to the daily repurchases under the NCIB to repurchase its common shares. We believe that share repurchases at the present pricing levels are an effective allocation of our capital and provides value to our shareholders. We will continue to balance the need for growth capital with returns of capital to our shareholders as we have demonstrated previously.

Repurchases of Cipher’s common shares are expected to begin immediately following firstly, the successful approval by the TSE of Cipher’s notice of intention to commence and NCIB and secondly, the company being permitted to do so following the expiry of any blackout periods in effect due to customary regulatory restrictions. We will provide an update on this item by way of a press release once Cipher has filed its application for approval of the NCIB with the TSE. To wrap up my commentary, I briefly summarized the main items. Our base business was steady and ahead of prior year and despite a decline in licensing revenue in The U. S, Epirus product revenue in Canada experienced growth and our base business continues to be a reliable source of cash flow.

We have put significant focus on integration activities and identifying efficiencies within the Troba business, which positions us strongly entering 2025. We are also advancing our pipeline of opportunities to both organically and inorganically build our North American platform comprised of the existing Canadian business and the Natroba business in The U. S. We do not expect a significant impact on our business at this time from tariffs and trade policies. However, we’re continuing to monitor developments.

Finally, as our shareholders expect, we will continue to make wise choices in capital allocation and as such we intend to file with the Toronto Stock Exchange a notice of intention to commence an NCIB as well as intend to utilize block purchases to repurchase larger quantities of common shares. I thank you for your time this morning and look forward to answering your questions after our prepared remarks. I will now pass the call over to our CFO, Ryan Maling, for an overview of our financial results. Brian, please go ahead.

Ryan Maling, Chief Financial Officer, Cipher Pharmaceuticals: Thank you, Craig, and good morning, everyone. As a reminder, all amounts provided during this call are in U. S. Dollars unless otherwise noted. Today, Cipher Pharmaceuticals is reporting results from the company’s fourth quarter of twenty twenty four being a three month period ended December 31, full fiscal year.

I will first discuss the highlights from our fourth quarter results, then turn my comments to our 2024 annual results. Highlights from our fourth quarter include: total net revenue for the fourth quarter of twenty twenty four was $11,800,000 which represents an increase of $6,900,000 or 141% compared to the same quarter in the prior year. This increase was attributable to an increase in product revenue, partially offset by a slight decline in licensing revenue. Product revenue was $10,500,000 for the fourth quarter of twenty twenty four compared to $3,400,000 in the prior year. This represents an increase of $7,100,000 or 209% compared to the same period in the prior year.

Contributing to this increase in product revenue for the fourth quarter of twenty twenty four was revenue of $6,500,000 from NETROVA and its authorized generic Spinosad, which Cipher acquired the global product rights for during the third quarter of twenty twenty four. Additionally, product revenue from Apirus in Canada was $3,500,000 for the fourth quarter of twenty twenty four, an increase of $600,000 or 21% compared to $2,900,000 during the same period in the prior year. In constant currency, product revenue from Apirus in the fourth quarter of twenty twenty four increased by $700,000 or 27% compared to the same period in the prior year. Market share for Apirus has increased by 2.7% to 47.7% at 12/31/2024, up from 45% market share at 12/31/2023, according to IQVIA market data contributing to an overall increase in sales volumes. Overall licensing revenue was $1,400,000 for the fourth quarter of twenty twenty four, which decreased by $100,000 or 7% compared to $1,500,000 in the prior year.

Licensing revenue from the Absorica portfolio in The U. S. Was $900,000 in the fourth quarter of twenty twenty four, representing a decrease of $100,000 or 10% for the quarter compared to the same period in 2023. This decrease in Absorica licensing revenue was primarily attributable to lower net sales earned on the products by Cipher’s distribution partner on which Cipher earns a net sales royalty combined with a contractual reduction in royalty rates on the Absorica portfolio, which began in the third quarter of twenty twenty four. Market share for the overall Absorica portfolio has decreased by 0.9% to 6% as of 12/31/2024, compared to 6.9% market share at 12/31/2023 according to Symphony Health market data.

We have experienced an increase in gross margin on product revenue of 5% to 77% gross margin for the fourth quarter of twenty twenty four, excluding non cash fair value adjustments on acquired inventory in connection with the acquisition of the Nautropes business. This increase in gross margin is in comparison to 72% for the same period in the prior year due to Natroba and SPINOCID authorized generic products, which had a combined gross margin of 81% in the fourth quarter of twenty twenty four. Selling, general and administrative expenses were $5,700,000 for the fourth quarter of twenty twenty four, an increase of $4,400,000 for the same period in the prior year. The increase is primarily attributable to the Natroba business, including acquisition, restructuring and other costs incurred in connection with the acquisition of this business, as well as incremental operating costs associated with the ongoing operations of the acquired business. Also included within acquisition, restructuring and other costs during the fourth quarter of twenty twenty four were transition costs associated with the contractual wind up from a co promotion and distribution partner in the Natrobo business as previously described in Craig’s remarks.

Further, contributing to the increase in selling, general and administrative expenses for the fourth quarter of twenty twenty four was a $900,000 legal costs incurred as part of the company’s base business in connection with the contractual arbitration process commenced by Cipher. I would also like to highlight an item in connection with the acquisition of the Natroba business, which impacts our reported financial results and gross profits for 2024. Accounting standards surrounding accounting for the acquisitions that involve inventory require that fair value adjustments be made. By applying these required accounting standards, it has resulted in a $2,700,000 non cash adjustment to cost of products sold, which had an impact on our financial results for the fourth quarter and full year of 2024, including but not limited to the cost of products sold, gross profit, net income and earnings per share. Additionally, as this is a non cash required accounting treatment, it has been included as an adjustment to reconcile net income to adjusted EBITDA.

Adjusted EBITDA for the fourth quarter of twenty twenty four was $5,000,000 compared to $2,900,000 for the comparable period in 2023. The increase in adjusted EBITDA of 73% was largely attributable to the addition of the Natrobo business during 2024, partially offset by legal costs incurred in the company’s base business as previously mentioned. Our business generated $8,300,000 in cash during the fourth quarter of twenty twenty four, ending the quarter with $17,800,000 in cash on hand. In addition to continued strong cash flows from our base business, the Natrobo business has contributed to additional operating cash flows during the fourth quarter of twenty twenty four. I will now turn your attention to our results for the full year of 2024.

Total net revenue for the full year of 2024 was $33,400,000 which represents an increase of $12,200,000 or 58% compared to 2023. Revenue in 2024 increased as a result of additions to our product revenue portfolio as well as revenue growth from existing products, which is partially offset by a decline in licensing revenue. Product revenue was $26,700,000 for the year ended 12/31/2024 compared to $12,700,000 in the prior year. This represents an increase of $14,000,000 or or 111 percent compared to 2023. Contributing to this increase in product revenue for the year ended 12/31/2024 was revenue of $12,000,000 from Metrova and its authorized generic Spinosad.

Additionally, product revenue from Apirus in Canada was $13,000,000 for the year ended 12/31/2024, an increase of $2,200,000 or 20% compared to $10,800,000 in the prior year. The increase in revenue from Apirus was attributable to higher sales volumes and on a constant currency basis, Apirus grew by 22%. Overall licensing revenue was $6,600,000 for the year ended 12/31/2024, which decreased by $1,900,000 or 22% compared to $8,500,000 in the prior year. Licensing revenue from the Absorica portfolio in The U. S.

Was $4,500,000 for the year ended 12/31/2024, representing a decrease of $1,600,000 compared to the year ended 12/31/2023. This decrease in Absorica licensing revenue was primarily attributable to greater generic competition experienced in The U. S. Market and lower product shipments in 2024 compared to 2023. The company earns revenue from supplying product to its distribution partner of which the volume and value of these shipments was higher in 2023 due to additional demand for the product in the third quarter of twenty twenty three.

Also contributing to the reduced licensing revenue from the Absorica portfolio in 2024 were lower net sales realized by Cipher’s distribution partner on which Cipher earns a net sales royalty. This was also combined with a contractual reduction in royalty rates on the Absorica portfolio effective at the beginning of the third quarter of twenty twenty four. Licensing revenue from Lipofin and Lipofin authorized generic was $2,000,000 for the year ended 12/31/2024 compared to $2,200,000 in 2023. The decrease of $200,000 or 10% during 2024 was due to lower sales volumes and net sales realized by Cipher’s distribution partner on these products on which the company earns a royalty. Gross margin on our product revenue, excluding non cash fair value adjustments on acquired inventory in connection with the acquisition of the Natroba business has increased by 8% to 76% gross margin for 2024 compared to 68% in the prior year.

The gross margin increase results from the addition of the Natroba and SPINOCID authorized generic products during 2024, which had a combined gross margin of 83% in 2024. Selling, general and administrative expenses was $15,000,000 for the year ended 12/31/2024, an increase of $9,300,000 compared to $5,700,000 in the prior year. The increase is primarily attributable to the Netroba business, including acquisition, restructuring and other costs incurred in connection with the acquisition of this business, as well as incremental operating costs associated with the ongoing operations of the acquired business, which includes salaries and benefits costs for the team of sales representatives. Also included within acquisition restructuring and other costs for the year ended 12/31/2024, were costs associated with the transition of the prior Spinosad authorized generic co promotion and distribution partner that was in place under the former owner of the Natrobo business as we previously discussed. The incremental operating costs associated with the Natrobo business include salary benefits costs for the sales team, selling and marketing costs of $1,200,000 supporting the commercial activities and other general and administrative costs of $500,000 Further contributing to the increase in selling, general and administrative expenses for the year ended 12/31/2024 was $1,600,000 in legal costs related to a contractual arbitration process commenced by Cipher, resulting in an arbitration hearing in the first quarter of twenty twenty five, the arbitration is expected to be decided in the second quarter of twenty twenty five.

Adjusted EBITDA for the year ended 12/31/2024 was $15,700,000 compared to $12,700,000 for 2023. The increase in adjusted EBITDA of 23% was largely attributable to the addition of approximately five months of the acquired Natroba business during 2024, partially offset by the legal costs incurred in the company’s base business as previously mentioned. In 2024, Cipher continued to generate strong cash flows overall. Cipher’s base business generated $8,200,000 of cash prior to completing the Natroba acquisition at the July 2024, representing a 20% increase in cash on hand during the seven month period. The addition of the Natroba business has further contributed to Cipher’s operating cash flows with a total increase in cash of $9,900,000 or 123% during the remaining five months of the year post acquisition.

Our business philosophy continues to be one of growth, while maintaining strong earnings and cash generating business. We’ll not lose focus on this philosophy. Post acquisition, Cipher generates meaningful free cash flows from both Cipher’s base business in the acquired Natrova business. Looking ahead, our strong cash generative business combined with the undrawn portion of our recently secured credit facility with the National Bank of Canada, which is at favorable market terms and whereby we continue to maintain a low leverage profile, provide the company with a substantial capital available to deploy as we continue to execute on our growth strategy and provide further value to our shareholders. We will now open up the call to questions.

Conference Operator: Thank you. And with that, our first question comes from the line of Andre O’Deane with Research Capital. Please go ahead.

Andre O’Deane, Analyst, Research Capital: Thank you, Prader. Hi, Craig, Ryan and Brian. Now that your Natroba co promote is done, how many sales reps and MSLs do you currently have?

Craig Moll, Interim Chief Executive Officer, Cipher Pharmaceuticals: Go ahead, Brian.

Brian, Sales Representative, Cipher Pharmaceuticals: Good morning, Andre. So after we completed the co promotion transition, we had a complement of 30 outside reps at the end of the year, we call external reps, twelve inside sales reps and about five management employees.

Andre O’Deane, Analyst, Research Capital: And based on targeting ipramethrin prescribers, how do they view Neutrova? Like what sort of feedback has your sales force received?

Brian, Sales Representative, Cipher Pharmaceuticals: The reception is very strong when it comes to Natrova because the product really sells itself. As you might know, permethrin is a product that was innovate like it was released forty years ago and there’s been nothing else in a physician’s toolkit to prescribe if they end up indicating that’s what a patient has, which is scabies. So when you’re a physician and you’ve had nothing in your toolkit except for something new and it got designated as a complete cure in a one treatment and it’s done, the reception when our reps get to those physicians is pretty strong.

Craig Moll, Interim Chief Executive Officer, Cipher Pharmaceuticals: Andre, just to add to that, the resistance issue with permethrin is well known and doctors are often searching for something that will work. And just to add to some of the comments that Brian made, Neutrova has got a significant share of the head lice market and it’s well known in that for that particular indication. We have found that it’s not so well known for for scabies. And we see that as a real opportunity because as we’ve told you before the Nootrovert product has a complete cure rate designation from the FDA for scabies and no other product has that. So that’s where I think that we can make a lot of headway is in the scabies market and that is a very clear focus for us at the moment.

Andre O’Deane, Analyst, Research Capital: Great. And just one last one. I know business development is always hard to time, but can you maybe elaborate a little bit on how out licensing of Natroz is going in terms of timing?

Craig Moll, Interim Chief Executive Officer, Cipher Pharmaceuticals: I think that we’re on schedule for that, Andre. Again, we’ve we’re continuing to have discussions with at least eight separate parties in eight different regions. I’d say that we’ve got considerable interest from a potential partner in China and those discussions are probably more advanced than other areas. We also have a strong indication from a Middle Eastern company that spans a number of countries and those discussions are well beyond any CDA. I would put them both in the categories as advanced and we’re quite optimistic that we’ll get a deal there being the first of a series of deals.

Justin Keywood, Analyst, Stifel: Thank you.

Conference Operator: And your next question comes from the line of Justin Keywood with Stifel. Please go ahead.

Justin Keywood, Analyst, Stifel: Good morning. Thanks for taking my call. Nice to see the results. Just on some of the non recurring items, will the fees related to the M and A, will that roll off next quarter or are there still some one time expenses? And same question related to the fair value adjustment of inventory.

Ryan Maling, Chief Financial Officer, Cipher Pharmaceuticals: Yes. So in those will roll off, we’ll have some impact in Q1 of twenty twenty five for both of those items, but that should be the extent of it.

Craig Moll, Interim Chief Executive Officer, Cipher Pharmaceuticals: But far reduced?

Ryan Maling, Chief Financial Officer, Cipher Pharmaceuticals: Yes, that’ll be at a far reduced level than what we were seeing in the past two quarters.

Justin Keywood, Analyst, Stifel: Are you able to thank you. Are you able to quantify that the one time items expected?

Ryan Maling, Chief Financial Officer, Cipher Pharmaceuticals: Unfortunately, can’t really quantify that number for you right now, but it will be reduced over what we were seeing.

Justin Keywood, Analyst, Stifel: Okay, great. And then very healthy cash generation in the quarter. I assume there’s some use of tax loss credits. Are you able to break out what was generated for the business organically, if that’s the way you look at it? And what contributed from the tax loss balance?

And what would be that remaining balance to potentially be used going forward?

Ryan Maling, Chief Financial Officer, Cipher Pharmaceuticals: Yes. So remaining tax losses going forward, and this is in U. S. Dollars. So $154,000,000 of tax losses before any tax effect obviously on that.

Justin Keywood, Analyst, Stifel: And in the quarter, what was are you able to quantify what was utilized of that tax loss balance?

Ryan Maling, Chief Financial Officer, Cipher Pharmaceuticals: Yes. So but $11,000,000 would have been utilized.

Justin Keywood, Analyst, Stifel: Great. And there’s the ability to use that tax loss balance into The U. S. Obviously?

Ryan Maling, Chief Financial Officer, Cipher Pharmaceuticals: Correct. Yes. The way we’ve structured structured the businesses, we’re able to apply those losses for both sides, the Canadian and The U. S. Business.

Justin Keywood, Analyst, Stifel: Okay. Thank you. And then just on the market share of Natrova in the press release, it mentioned 23%. The incumbent which has become ineffective has 75%. Is there a target market share, I guess level that you’re looking to get to in this year or next year or how should we be looking at that?

Brian, Sales Representative, Cipher Pharmaceuticals: Hey, Justin, it’s Brian here. Certainly, our current market share is at 23 and we’re seeing that very steady. We’re commercializing and gaining ground and gaining physician demand, whereas nobody promotes a forty year old product like permethrin. So for those reasons, we’re very strong on being able to gain market share. In terms of how much we’ll be able to get on an annualized basis, that’s a difficult number to target, but we think about it as just total script growth.

And our script growth targets are in kind of the low double digit to mid double digit range. So that’s the way we kind of take a look at the script growth that we’re expecting to see from the business.

Craig Moll, Interim Chief Executive Officer, Cipher Pharmaceuticals: And again, Justin, just the we have a significant share of the head lice market, but scabies is low. The 23% that you’re looking at is for the entire anti parasitic market. So we think that we and we’re very focused on this is gaining shares in the scabies segment of the business.

Justin Keywood, Analyst, Stifel: And by total size of the markets, I understand that scabies is much larger. Are you able to quantify that magnitude?

Brian, Sales Representative, Cipher Pharmaceuticals: The total market of TRx for the anti parasitic market is about 1,100,000 scripts and the SCABES portion of that is somewhere in the range of 500 to 600 TRxs.

Craig Moll, Interim Chief Executive Officer, Cipher Pharmaceuticals: And I believe that the market size is around $165,000,000 Is that correct?

Justin Keywood, Analyst, Stifel: Yes. Great. Thank you very much.

Conference Operator: And I’m showing no further questions at this time. I would like to turn it back to Mr. Craig Moll for closing remarks.

Craig Moll, Interim Chief Executive Officer, Cipher Pharmaceuticals: Thank you. Before signing off, I’d like to take this opportunity to thank everyone for joining us today. We look forward to providing further updates on Cipher’s continued growth. Thank you.

Conference Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you all for participating. You may now disconnect.

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