Cipher Pharmaceuticals Spikes on Absorica Approval

Shares of Cipher Pharmaceuticals (TSX:DND) are pulling back today, but investor interest in the company has spiked since Monday, when the company announced it had received FDA approval for acne treatment Absorica.

Absorica is the third Cipher product to receive regulatory approval. Since 2007, the company has derived most of its revenue from cholesterol treatment drug Lipofen, and in Q3 of last year it began to market ConZip, a Tramadol treatment for moderate to moderately severe chronic pain.

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Absorica, however, could be the first Cipher product to be truly differentiated from its competition. While Lipofen and Conzip have found niche markets with distribution partners such as Kowa Pharmaceuticals, the products were not first to market and competed in relatively crowded spaces.

Cipher management believes Absorica could be a real improvement in its space. Current isisotretinoin formulations, which are mostly generics of the brand original Accutane, have a significant food effect, experiencing a marked falloff when taken while fasting as opposed to while fed. With annual sales topping $1.2-billion, Accutane was one of pharmaceutical giant Roche’s top drug sellers. But the pharma giant exited the isotretinoin market in 2009, as the drug was plagued with scandal, having been linked to birth defects and inflammatory bowel disease.

Mississauga-based Cipher Pharmaceuticals is a spinoff of CML Healthcare, a more than three-decades old medical imaging company that shed its drug development division, which was burning cash, when it decided to convert to an income trust. The resulting spinoff, Cipher, transitioned from being defined by its relative risk to being notable for its comparative safety. Unlike many of its newfound peers, Cipher has carved out a sweet spot in the middle of the drug development process, identifying late stage product candidates with near term market potential.

Cipher CEO Larry Andrews said the company will now begin work with distribution partner Ranbaxy Laboratories to prepare for the U.S. launch of Absorica.

At press time, shares of Cipher were down 21.3% to $1.66.

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