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 expressed in US dollars, unless otherwise specified.

Cipher's first quarter results were a combination of continued strength from Cipher's base business and strong momentum from our recently acquired US Natroba business. First, I would like to spend some time commenting on the US Natroba business.

Revenues were $6.7 million during the first quarter of 2025, which was consistent with our expectations when we acquired the business this past July. Given the seasonality for the product generally lower during colder months of the calendar year and higher demand in the incoming -- upcoming warmer months of the year we believe this revenue result has positioned the business well to start 2025.

Additionally, the business generated gross margins of $5.8 million or approximately 87% when excluding non-cash adjustments. As I previously described in our results from the business in 2024, we have completed the transition of the business from legacy arrangements, which have benefited the business in the first quarter of 2025 with this strong gross margin result, but more importantly, are expected to provide a strong benefit to the business for the remainder of 2025 and beyond.

Our growth strategy related to the Natroba continues to be four-fold, building the business in the US, where studies have shown Permethrin-based products are no longer effective due to resistance issues. Second, launch Natroba Canada through our existing Canadian infrastructure.

And thirdly, out-license the product globally as the resistance issue is not unique to North America, but rather a global issue. And lastly, in-license or acquire complementary products to be sold by the existing US sales force.

Demonstrating momentum on the first area of our strategy, we are proud to announce that recently the State of Illinois made Natroba the preferred product of choice given its one-dose complete care for scabies and whereby the incumbent treatment, Permethrin 5%, is now non-preferred under Medicaid. As a greater number of physicians in Illinois will become familiar with the safety and efficacy of Natroba, we believe this will be a catalyst in their prescribing habits moving forward.

We will be continuing to work with various states as we have a large number of Medicaid reimbursement arrangements across the US, to look to build upon this great development in Illinois this past month. With respect to the second area of our strategy, launching Natroba in Canada, we had previously indicated that our earnings call on the fourth quarter of 2024, a pre-meeting with Health Canada related to our new drug submission is planned to take place before the end of the second quarter of 2025.

We are continuing to make progress with respect to our plans to bring Natroba to Canada and we'll provide updates as developments occur. For the third area of our strategy, we are also continuing to pursue opportunities for Natroba globally.

As we have mentioned in the past earnings call, we 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 in warm climate regions. We currently have ongoing out-licensing discussions with seven parties that are interested in Natroba in different territories.

As developments occur with respecting to out-licensing of Natroba globally, we will continue to provide updates. I will speak further on our fourth leg of growth later in my discussion.

Turning now to our base business. Although our revenue and earnings were lower than a year ago, the business continues to deliver reliable results and cash generation.

Total revenues of $5.3 million from our base business of Canadian product revenue and US licensing revenue were 9% lower than the first quarter of 2024. However, we were able to grow our Canadian-based product sales to partially offset declines in our licensing revenue.

As Ryan Mailling will describe in further detail, revenue from the Canadian product portfolio was 41% higher than this quarter a year ago. The US licensing business experienced a decline due to lower contractual royalty rates; continuing generic competition including new generic entrants to the market associated with the products in the US; and reduced shipments as Cipher earns revenue from supplying product to our distribution partners.

Adjusted EBITDA from the base business was $2.9 million and continues to be a reliable source of cash flow. Included in the adjusted EBITDA are one-time legal costs associated with defending our product portfolio through a contractual arbitration process.

While these one-time costs of $1 million are significant, we believe it was prudent to defend our base business through the contractual mechanisms available to us and expect results from the arbitration process when reporting our second quarter results. Lastly, I want to highlight our $6.2 million total adjusted EBITDA during the first quarter of 2025 and our cash balance of $22 million at the end of the quarter.

As we have shown a track record of strong capital allocation in the past, we will continue to do so going forward. We will be using our available cash as well as future cash generated from the business and a balanced approach in the following areas: repay portions of the debt outstanding on our revolving credit facility; number two, as announced on May 1, we have recommenced our normal course issuer bid with an intention to utilize block repurchases; and thirdly, continue to focus on accretive acquisitions such as our recent Natroba acquisition to deliver strong shareholder returns.

Finally, I would like to highlight that we are continuing to pursue 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 Chief Business Officer continues to be focused on identifying, evaluating and pursuing various business development opportunities and we are in active discussions with several parties.

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. As we demonstrated with our recent Natroba acquisition, we will continue to be selective in our approach to pursuing these opportunities to ensure that we are executing on the right opportunities.

Thank you again for joining us here today, and I look forward to answering your questions after our prepared remarks. I will now pass the call over to our CFO, Ryan Mailling.

Please go ahead, Ryan.

Thanks, Craig. 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 first quarter of 2025 being the three-month period ended March 31 2025.

Total net revenue was $12 million in the first quarter of 2025, an increase of $6.1 million or 105% when compared to the same period in 2024. The increase was due to the addition of the Natroba business at the end of July 2024.

Overall licensing revenue was $700,000 for the first quarter of 2025 compared to $2.6 million in the same quarter of the prior year, representing a 72% decrease. The decrease is due to lower year-over-year product shipments of $1 million whereby we earn revenue from supplying product to the distribution partner.

The remaining decrease of $900,000 is due to lower contractual royalty rates and increasing generic competition in the US related to the US licensing products. Licensing revenue from Absorica in the US was $300,000 in the first quarter of 2025, a decrease of $1.6 million or 84% when compared to the same period in 2024.

Revenue from Absorica was primarily impacted by the year-over-year decline in product shipments that I previously mentioned. Market share from Absorica and the authorized generic of Absorica was $5.6 million – 5.6% at March 31, 2025, representing a decrease of 0.2% compared to March 31, 2024.

Licensing revenue from Lipofen and the authorized generic of Lipofen was $400,000 for the first quarter of 2025, representing a decrease of $300,000 compared to the same period in the prior year. Moving to our product portfolio.

Total product revenue was $11.3 million for the first quarter of 2025, an increase of $8 million compared to the first quarter of 2024. Product revenue from the Natroba business comprised of the brand Natroba and its authorized generic spinosad was $6.7 million in the first quarter of 2025, representing a significant portion of the $8 million total increase in product revenue I described.

Product revenue from the Canadian portfolio in the first quarter of 2025 was $4.6 million, an increase of $1.3 million or 41% compared to the same quarter in the prior year. Additionally, as sales for our Canadian product portfolio are denominated in Canadian dollars.

When translated on a constant currency basis the Canadian product portfolio revenue increased by $1.6 million, representing an increase of 50% over the first quarter of 2024. All products in our Canadian product portfolio saw increased sales compared to the same quarter in the prior year, contributing to the overall increase in revenue.

Selling, general and administrative expenses were $5 million for the first quarter of 2025, an increase of $3.5 million from the comparable period in the prior year. The increase is attributable to higher SG&A costs from the acquired Natroba business of $2.6 million as well as the $1 million of onetime costs associated with the arbitration process that was previously described in Craig's remarks.

Net income for the three months ended March 31, 2025 was $2.6 million or $0.10 per diluted common share compared to $4.9 million or $0.20 per diluted common share for the same period in the prior year. The decrease in net income of $2.3 million was primarily attributable to $4.3 million of higher total gross profit, which was offset by a $1.5 million of higher amortization on the recently acquired Natroba intellectual property, $1.3 million lower income tax recovery in the first quarter of 2025, $1.1 million higher interest costs resulting from interest expense of $500,000 in the first quarter of 2025 compared with net interest income of $600,000 in the first quarter of 2024 and the $1 million of one-time costs associated with the arbitration process.

Adjusted EBITDA for the first quarter ended March 31, 2025 was $6.2 million compared to the $3.6 million for the same quarter in the prior year. This meaningful increase of 73% was mainly driven by the previously mentioned addition of the Natroba business and growth from our Canadian product portfolio, which was partially offset by declines experienced in the U.S.

licensing revenue. The company had $22 million in cash and $40 million in debt as at March 31, 2025 and continues to generate free cash flow from our operations.

Subsequent to the first quarter of 2025 yesterday, on May 8, 2025, Cipher allocated a portion of the cash that is accumulated from free cash flows to make a repayment of $15 million of the outstanding balance on its revolving credit facility. Accordingly, after making this payment, the company now has a reduced debt balance of $25 million outstanding on its revolving credit facility.

Cipher's base business, particularly its Canadian product portfolio combined with the Natroba business is performing well and contributing to meaningful cash generation. We've also taken steps to further delever the balance sheet subsequent to quarter end, which is already at a comparatively low leverage, while retaining the availability of this financing.

With a strong financial posture and established growth levers, Cipher is well positioned to execute on further growth opportunities providing further value for our shareholders. We'll now open the call up to questions.

Bryan and Ryan, I just had a few quick questions. Can we get an update on how many US sales reps you currently have?

Hey, Andre. Our current field rep complement is just running a quick math in my head is about 36 reps.

And have you hired any MSLs or are you going to hire any MSLs?

MSL?

Yes, like medical science liaisons?

We have – we don't – we have like consultants that help us on that. They're for a long period of time have been very strong KOLs, dermatologists mainly, as well as nurse practitioners that specialize in dermatology that help us with speaking at conferences.

They are very bullish on the product. They love it because it's the only thing that works.

So that's usually how we use the medical liaison. We don't have a full-time head associated with that but our consultants fill that role.

Okay. And can you just also remind us in terms of what regions your sales force is focused on in the U.S.?

Yes. So, if you take a look at the TRx for the antiparasitic market, the majority -- the major states where the majority of the scripts are in order are Texas, followed by California, followed by Florida, followed by New York State.

That is -- that's where you would have about 40% of the total TRx and the other 60% is kind of scattered through the remainder of the states.

Many thanks.

Good morning. Thanks for taking my call.

So, a follow-up on the preferred Medicaid status in Illinois. How should we interpret that?

Should we expect additional states to follow? And is this impactful on the overall financials?

Hey, this is Bryan here. When you look at it on an individual basis, it certainly contributes wins.

When we're on formulary for Medicaid, you'll typically have a pretty strong share, but you won't get it all. So, when you then climb up and you'd say okay the incumbent like 5% Permethrin is now non-preferred then you kind of get all of the Medicaid business in the state.

That's the kind of the way to look at it. So, it's each state where it occurs and how much of that incremental Medicaid market share do you get as a result of what a state might implement like Illinois.

The opportunity going forward is obviously when you have one state that the pharmacy directors look at the product and say clearly this is what should be prescribed and not 5% Permethrin, we do believe that it's an opportunity where other states can follow. So, Medicaid contracts typically come up for renewal like a new bid process either -- it varies by state but it's typically annually or biannually.

So, what we're doing is now when those bids come up for their natural renewal, we're going with them with options on pricing in the same regard as Illinois if they make Natroba the sole preferred product in the category. And we think that's compelling because again it will already have some good volume and demand in the state.

They'll see that when the bid comes up for renewal. And then they'll see they get preferred pricing if they're willing to do what Illinois did.

So, it's a good compelling story. So, we do believe that it can -- that we're going to be able to replicate it in more states.

But I can't promise when and where.

Great context. Thank you.

And we look forward to those developments. And then on the debt repayment -- or the credit facility repayment of $15 million just trying to understand just the use of capital and capital allocation going forward.

Is that indication that there may not be a near-term M&A and the most prudent use of capital is to pay down the debt? Or how should we be interpreting that?

Justin, it's Craig here. Yes, we examined different options of what to do with the cash that we had.

Sitting in our bank account wasn't the best use of that. But our credit facilities with National Bank allow us to draw upon a $65 million credit facility at any point in time without cost.

So, we don't have a deal that we could see closing in the next couple of months, so we thought that it would be best to pay that down and lower our interest costs. We can re-access that money at any point in time.

Understood. And how is the pipeline?

I know there is a few active files. Have the multiples changed at all just given the market backdrop?

We haven't seen a significant change in pricing of deals. I said -- I think I said in my remarks that we've got a number of targets that we're working on now.

That's after sifting through at least a dozen opportunities that the majority of them didn't fit with our plans. So, we'll continue to be disciplined in our approach here.

But I'm still optimistic that there's deals out there that are at the right price level and would fit well with our strategy.

And would these assets be in derm? And would they be cross-border assets or U.S.

or Canada?

Well our first priority is the U.S. where we've got the existing infrastructure and the sales group that Bryan talked about the 36 reps.

So, that would be our top priority. In at least two cases, the products would be for North America.

So we would -- if we decided to move forward and we've got a deal that we would focus on the US, but bring the product to Canada as well.

Great. Thank you.

Thanks very much. Congratulations gents on the quarter.

Just with regard to your earlier commentary about Natroba sales perhaps exhibiting some seasonality and targeting a higher incidence of head lice and scabies infestations in the summer months, is it all possible to sort of quantify the magnitude of seasonality that we might expect on the revenue bump in Q2 and Q3?

Hi Doug, it's Bryan here. The one area that I would probably point you to is I think is part of the bar reporting.

We adapt some historic financial information and that would have been actuals from ParaPRO. I think that's a good basis to take a look at because they really just -- you would have seen the seasonality in some of those peak times.

So that would be the easiest way. What do I expect?

I expect high performance from the US, as does our Board, as do our shareholders. So you're going to see revenue kind of step up on a quarterly basis certainly through Q2 and Q3.

Your magnitude of that is probably going to be in the high singles, low doubles.

Okay. Good context.

And then maybe just kind of building on Justin's question with regard to the kinds of assets that you might deem to be suitable to bring into your North American pharma portfolio. Head lice is sort of derm-adjacent more than derm specifically and it's kind of a unique market in that way.

So I'm just kind of wondering, how are you thinking about what target therapeutic indication sort of might make sense in order to leverage the US and Canadian marketing infrastructure that you have in place? Like is exclusively derm sort of where you're looking?

Or are there other adjacent medical markets that might make sense? Just kind of talk me through that a little bit.

Yes. Doug, thanks for bringing that up and I should have mentioned this in responding to Justin's question as well earlier.

Our sales force again, we've got some geographic focus to them. But they're calling on -- they're not necessarily calling on derms very often just given the difficulties in waiting list to see a derm.

We're focused more on nurse practitioners, physician assistants who often deal with cases related to lice and scabies. So products that we're looking for would be complementary to that call point and that's really our focus at the moment.

And it doesn't have to be strictly derm, it could be for other indications that these particular professionals are prescribing.

Great. Okay.

Good feedback there. And I'd be remiss not to sort of ask a question about Absorica which years ago was doing $3 million, $4 million, $5 million in quarterly royalties and now it's trending to nothing.

Just wonder, if there was any unusual factors other than lower shipments in the quarter? Or if there is some mechanism by which the trajectory there can be reversed or supplemental to that question are there any sort of contractual elements that you could bring to bear so that you might be able to acquire marketing rights for Absorica yourself so that you can generate better success that more -- is more comparable to what you're achieving in Canada with Epuris?

And I'll leave it there. Thanks.

Doug, we're disappointed in Sun's performance with Absorica. We think that they could be more aggressive with their pricing because it's very much a pricing issue now for Absorica given the generic segment that it's in.

And we're meeting with Sun and have met with Sun to bring pressure to them to bring more efforts to this product. So we continue to work with them and we'd like to reverse this trend.

At the end of the day, the contract expires at the end of December of 2026 and we're looking at several options around what will happen when that contract expires including the idea of bringing it in-house and bringing on people that can focus on the distribution of that product including more competitive pricing. So, it's not forever and at the very least, we'll be taking the product back at the end of December 2026.

Understood. Thanks, guys.

That’s it for me.

Thank you very much for attending our call today. We feel that we are doing a good job executing on our plans here and look forward to giving you future updates in the coming months.

Thanks again for joining.