What Cipher Pharmaceuticals (CPH) Said on Its Q3 Earnings Call

Key Points

• Revenue was nearly flat at $12.7 million, down 1% year over year, while net income nearly doubled to $10.9 million. The increase included nonrecurring recoveries from an arbitration award; adjusted EBITDA slipped 1% to $7.2 million.
• Product sales diverged: Natroba revenue fell 12% to $7.1 million amid lower Medicaid-related volume, while Epuris revenue rose 15% in Canada and its isotretinoin market share increased to 48.7%.
• Cipher ended the quarter debt-free with $15.3 million in cash, rising to about $20 million after receiving arbitration proceeds in October. Management is pursuing acquisitions and licensing deals, while continuing efforts to expand Natroba beyond Medicaid.

Cipher Pharmaceuticals TSE: CPH reported nearly flat third-quarter revenue as growth in its Canadian acne treatment Epuris and higher licensing revenue largely offset lower U.S. sales of Natroba. Net income almost doubled, helped by the recognition of proceeds from an arbitration award.

Revenue for the quarter ended Sept. 30, 2026, was $12.7 million, down 1% from a year earlier. Net income rose to $10.9 million, or $0.42 per diluted share, from $5.5 million, or $0.21 per share. Adjusted EBITDA slipped 1% to $7.2 million, with the margin unchanged at 57%.

Interim CEO Craig Mull said the company remains focused on expanding Natroba sales beyond Medicaid, building Epuris’ presence in Canada and pursuing acquisitions and licensing deals. Unless otherwise noted, financial figures discussed on the call were in U.S. dollars.

Arbitration award boosts earnings

CFO Ryan Mailling said a New York federal court affirmed an arbitration award in Cipher’s favor in a contractual dispute involving clinical data and the launch of a product in Canada. The court confirmed that Cipher owns the disputed data.

The remedies included CAD 4.2 million in compensatory damages, a 15% royalty on Canadian net sales of Absorica LD from Jan. 1, 2026, through the end of 2040, and 80% of Cipher’s out-of-pocket attorney fees and certain expenses. The court also awarded interest until the award is satisfied.

Cipher received $5.7 million in October for damages, legal fees, certain other expenses and interest. Mailling said the company recognized portions of the award in third-quarter results, including $2.3 million of other operating income, a $2.2 million recovery within selling, general and administrative expenses, and $0.5 million of interest income.

The recoveries were excluded from adjusted EBITDA because they are expected to be nonrecurring and do not reflect the core business, Mailling said. Mull said the potential royalty had not yet been recognized in the company’s results.

Natroba sales decline, while Epuris gains share

Revenue from Natroba and its authorized generic spinosad fell 12% year over year to $7.1 million. Mull attributed the decline to lower sales volumes to Medicaid-covered patients following reductions in covered lives. Revenue rose 14% from the second quarter, compared with a 4% sequential increase over the same period a year earlier.

Cipher is investing in commercial payer, direct-to-patient and retail pharmacy initiatives to expand Natroba’s reach beyond Medicaid. President Bryan Jacobs said the company continues to discuss Medicaid step-through requirements with states, but he could not provide a timeline for broader implementation.

Asked how much of Natroba’s sequential growth came from initial stocking at Walmart rather than prescription demand, Jacobs declined to provide a figure, citing the retailer relationship and competitive reasons. He said the stocking program covers all Walmart stores.

In Canada, Epuris revenue rose 15% to CAD 3.9 million. The product held 48.7% of the Canadian isotretinoin market as of Sept. 30, up from 47.1% in June, according to IQVIA data cited by the company.

Mull said public funding for Epuris became effective Aug. 17 in British Columbia, Aug. 27 in Quebec and Oct. 1 in Alberta, among other jurisdictions. He expects the expanded coverage to support market-share growth over time.

Health Canada is reviewing Cipher’s application for Natroba to treat head lice and scabies, with a decision expected soon and likely in the first quarter of 2027, Mull said.

Cash position and acquisition plans

Cipher ended the quarter debt-free with $15.3 million in cash, up from $9.1 million at the end of the second quarter. After the October arbitration payment, cash stood at approximately $20 million, Mailling said. The company also had $65 million of undrawn availability under its facility and a $25 million accordion feature subject to lender approval.

Mull said Cipher is pursuing complementary product acquisitions or in-licensing deals, out-licensing opportunities for Natroba and Epuris outside North America, and company acquisitions. A previously discussed acquisition opportunity reached an advanced stage but did not result in a deal.

During the question-and-answer session, Mull said expanding the U.S. business was a priority, although Cipher was also examining opportunities in Canada. He said he expected the company to complete a deal in the short term, while declining to characterize one as imminent.

Mull also said Cipher has considered a substantial issuer bid as a potentially more effective way to repurchase shares, given restrictions on its existing normal course issuer bid. The company may reduce purchases under the existing program if it believes a deal is close, he said.

About Cipher Pharmaceuticals (TSE:CPH)

Cipher Pharmaceuticals TSX: CPH OTCQX: CPHRF is a specialty pharmaceutical company with a robust and diversified portfolio of commercial and early to late-stage products. Cipher acquires products that fulfill unmet medical needs, manages the required clinical development and regulatory approval process, and currently markets those products in Canada, the U.S., and South America.

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