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Target Price Boosted on Canadian Pharma Co.
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This company, undergoing a business model shift, is doing well and remains Buy rated despite a weaker-than-expected Q3/22, noted a Research Capital Corp. report.

Research Capital Corp. raised its target price on Cipher Pharmaceuticals Inc. (CPHR:NASDAQ; CPH:TSX) to CA$4 per share from CA$3.10 because the company "has been performing well," reported analyst Dr. Andre Uddin in a November 11, 2022 research note. In comparison, the Buy-rated specialty pharma firm's current price is about CA$3.44 per share.

Strong Balance Sheet

Uddin presented three noteworthy factors to keep in mind about Cipher as it transitions "to a company with a lean structure and a revenue base totally made of royalties from product sales in the U.S. and Canada."

1) Cipher has something few Canadian specialty pharmas have: a clean balance sheet with no debt. This affords Cipher downside protection. The pharma ended Q3/22 with US$27.52 million (US$27.52M) in cash.

2) Cipher has the financial means to acquire new assets. "Management continues to hunt actively for a product(s) that can diversify its revenue base and add to its cash flow base. Investors should wait for this," Uddin wrote.

3) Cipher has a buyback program that has helped lift its share price.

Q3/22 Results Fall Short

That said, Cipher's Q3/22 results missed expectations, Uddin noted, but the company's third quarters tend to be weaker.

"We may see some near-term share price weakness based on Q3/22, but we believe investors should wait and see what the company nibbles on," Uddin commented.

This is due to decreased purchases of isotretinoin products in general during the summer months, which negatively impacts sales of Cipher's two primary drugs, Absorica in the U.S. and Epuris in Canada.

"We may see some near-term share price weakness based on Q3/22, but we believe investors should wait and see what the company nibbles on," Uddin commented.

Cipher's Q3/22 revenues were US$4.8M, below Research Capital's US$5.4M forecast but above Q3 revenue last year of US$4.5M.

Similarly, Q3/22 adjusted EBITDA was US$2.6M versus Research Capital's US$3.5M estimate and last year's US$2.2M.

Net income in Q3/22 was US$2.7M, higher than Research Capital's projected US$2.1M and last year's US$0.8M.

Cipher's U.S. portfolio fared better than its Canadian counterpart during Q3/22, Uddin noted. Licensing revenues in the States were US$2M, higher than Research Capital's US$1.8M forecast but the same as last year's.

Sales of Canadian products yielded US$2.8M in Q3/22, less than Research Capital's US$3.4M estimate but more than last year's sales of US$2.5M.

Progress With Drug Candidates

During Q3/22, two products to which Cipher owns the Canadian marketing rights advanced: piclidenoson and MOB-015.

As for piclidenoson, topline results were positive from the Phase 3 COMFORT study of the drug in moderate psoriasis. Can-Fite BioPharma, which owns piclidenoson, plans to seek approval from the U.S. Food and Drug Administration and European Medicines Agency to proceed with a pivotal Phase 3 trial.

Regarding MOB-015, the drug owner Moberg Pharma began a Phase 3 trial evaluating it as a treatment for nail fungus, the Canadian prescription market for which is at least CA$75M, according to the U.S. pharma company IQVIA.

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Disclosures For Research Capital Corp., Cipher Pharmaceuticals Inc., November 11, 2022

Analyst Certification: I, Andre Uddin, Ph.D., certify the views expressed in this report were formed by my review of relevant company data and industry investigation, and accurately reflect my opinion about the investment merits of the securities mentioned in the report. I also certify that my compensation is not related to specific recommendations or views expressed in this report. Research Capital Corporation publishes research and investment recommendations for the use of its clients. Information regarding our categories of recommendations, quarterly summaries of the percentage of our recommendations which fall into each category and our policies regarding the release of our research reports is available at or may be requested by contacting the analyst. Each analyst of Research Capital Corporation whose name appears in this report hereby certifies that (i) the recommendations and opinions expressed in this research report accurately reflect the analyst’s personal views and (ii) no part of the research analyst’s compensation was or will be directly or indirectly related to the specific conclusions or recommendations expressed in this research report.

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