Stock Update (NASDAQ:IPCI): Intellipharmaceutics Intl Inc (USA) Announces First Quarter 2015 Results


Intellipharmaceutics Intl Inc (USA) (NASDAQ:IPCI), a pharmaceutical company specializing in the research, development and manufacture of novel and generic controlled-release and targeted-release oral solid dosage drugs, reported the results of operations for the three months ended February 28, 2015. All dollar amounts referenced herein are in United States dollars unless otherwise noted.

During the three months ended February 28, 2015, the Company enhanced its cash management efforts, which helped cash on hand at the end of the first quarter of 2015 to remain substantially the same as was reported for the end of November 2014. This conservative approach to cash management partially mitigated the impact of lower revenues in the quarter ended February 28, 2015 from the sales of generic Focalin XR. At this point in the Company’s development cycle, given its previously-reported increased emphasis on specialty drug products, the Company believes a prudent cash management practice is warranted as the Company awaits FDA guidance on its 505(B)(2) product candidates. At the same time, in order to meet currently projected funding requirements, inclusive of Phase III trials, the Company is continuing to seek sources of significant additional capital. We further discuss our cash position and licensing revenues below.

Revenue related to the Company’s license and commercialization agreement with Par Pharmaceutical, Inc. (“Par”) in the three months ended February 28, 2015 was $1.1 million versus $4.7 million in the three months ended February 28, 2014. The $4.7 million revenue in the three months ended February 28, 2014 derived principally from a full quarter of commercial sales of the Company’s first product, 15 and 30 mg strengths of generic Focalin XR® (dexmethylphenidate hydrochloride extended-release) capsules, which received final United States Food and Drug Administration (“FDA”) approval in November 2013. As the first-filer for the drug product in the 15 mg strength, we had 180 days (up to May 19, 2014) of exclusivity of sales for the generic product of that strength on November 19, 2013 in the United States by our partner, Par. The higher revenue in the first quarter of 2014 represented the commercial sales in the early stages of marketing the generic product in those strengths. Consequently, the pricing environment in the first quarter of 2014 was quite favourable, as was our market share. In the three months ended February 28, 2014, we also recognized milestone revenue of $0.2 million under the Par agreement, which was tied to the achievement of our product being either the only generic in the market or having only one generic competitor. Subsequent to May 19, 2014, we no longer retained generic exclusivity of the 15 mg strength. In the first quarter of 2015, we faced four generic competitors, and to a lesser extent, a softening of pricing conditions and market share, consistent with industry post-exclusivity experience. The most recent quarter was also impacted by wholesaler buying patterns, with January and February showing lower than average unit sales into the wholesale network.

Research and development (“R&D”) expenditures in the three months ended February 28, 2015 decreased to $1.0 million compared to $1.4 million in the three months ended February 28, 2014, primarily due to a decrease in stock-based compensation for R&D employees and the U.S. dollar strengthening by 13% versus the Canadian dollar (local salaries are paid in Canadian funds) relative to the prior period. After adjusting for the stock-based compensation expenses, R&D expenditures for the three months ended February 28, 2015 were lower by $0.3 million compared to the 2014 period. During the quarter ended February 28, 2014 we incurred increased expenses on furthering the development of several generic and NDA 505(B)(2) product candidates, and paid bonuses to certain non-management employees in R&D departments.

Selling, general and administrative expenses for the three months ended February 28, 2015 decreased to $0.9 million versus $1.0 million in the three months ended February 28, 2014. Expenditures for selling, general and administrative expenses were lower by $0.1 million during the 2015 period, primarily due to strengthening of the US dollar by 13% versus the Canadian dollar in the first quarter of 2015, relative to the prior period. In addition, the decrease is also due in part to a decrease in travel expenditures related to business development activities.

The Company recorded net loss for the three months ended February 28, 2015 of $0.9 million or $0.04 per diluted common share, compared with a net income of $2.2 million or $0.09 per common share for the three months ended February 28, 2014. For the three months ended February 28, 2015, the net loss was attributed to lower licensing revenues compared to the prior period. Revenue in the three months ended February 28, 2015, was $1.1 million versus $4.7 million in the prior period. This is primarily due to the loss of exclusivity on the 15mg strength of our generic Focalin XR® (dexmethylphenidate hydrochloride extended-release) capsules. In the first quarter of 2015, we faced increased competition consistent with post-exclusivity experience as explained above.

At February 28, 2015, cash totaled $4.2 million, compared with $4.2 million at November 30, 2014. Cash during the three months ended February 28, 2015 remained effectively the same as a result of higher cash collections relating to the Company’s licensing revenue, an increase in cash flows related to the exercise of options and deferred milestone revenue.

For the three months ended February 28, 2015, net cash flows used in operating activities decreased to $0.1 million as compared to net cash flows provided from operating activities for the three months ended February 28, 2014 of $0.2 million. The February 28, 2015 decrease was primarily due to lower cash receipts relating to commercial sales of generic Focalin XR® (dexmethylphenidate hydrochloride extended-release) capsules.

For the three months ended February 28, 2015, net cash flows provided from financing activities of $0.1 million related to the exercise of options, partially offset by capital lease payments. For the three months ended February 28, 2014, net cash flows provided from financing activities of $4.7 million related principally to the Company’s at-the at-the-market issuances of its common shares sold on NASDAQ.

Corporate Highlights

  • On February 2, 2015, we announced that we entered into an agreement with Teva Pharmaceuticals USA, Inc. (“Teva”) by which we have granted Teva an exclusive license to market in the United States an extended release drug product candidate for which we have an Abbreviated new Drug Application (“ANDA”) pending FDA approval. Under the agreement with Teva, subject to certain conditions, we have agreed to manufacture and supply the product exclusively for Teva and Teva has agreed that we will be its sole supplier of the product to be marketed in the U.S.
  • On March 30, 2015, the Company announced it recently submitted an Investigational New Drug Application (“IND”) to the FDA for Rexista™ Oxycodone XR in anticipation of the commencement of Phase III clinical trials. Planning has begun for the Phase III trials that will examine the efficacy and safety of Rexista™ Oxycodone XR in individuals with chronic low back pain. The Company also announced it had recently conducted and analyzed the results of three definitive open label, blinded, randomized, crossover, Phase I pharmacokinetic clinical trials in which Rexista™ Oxycodone XR was compared to Oxycontin™ under single dose fasting, single dose steady-state fasting and single dose fed conditions in healthy volunteers. Intellipharmaceutics has received topline data results from all three studies. The results from the studies suggest that Rexista™ Oxycodone XR met the bioequivalence criteria relative to Oxycontin ® (90 percent confidence interval of 80 to 125 percent) for all matrices (i.e., on the measure of maximum plasma concentration or Cmax, on the measure of area under the curve time or steady state (AUCt or AUCss) and on the measure of area under the curve infinity (AUCinf) as applicable. These positive results of the Phase I studies form a basis for the Company to move forward, subject to FDA guidance and availability of funding, to Phase III trials.
  • Also on March 30, 2015 the Company reported that the FDA accepted a Pre-Investigational New Drug (“Pre-IND”) meeting request for its once-a-day Regabatin™ XR non-generic controlled release version of pregabalin under the new drug application (“NDA”) 505(b)(2) regulatory pathway, with a view to possible commercialization in the United States at some time following the December 30, 2018 expiry of the patent covering the pregabalin molecule. Regabatin™ XR is based on the Company’s controlled release drug delivery technology platform which utilizes the symptomatology and chronobiology of fibromyalgia in a formulation intended to provide a higher exposure of pregabalin during the first 12 hours of dosing. This Pre-IND request with the FDA is focused on the Company’s proposed Phase III clinical program.
  • In April 2015, we received notice that our Abbreviated New Drug Submission (“ANDS”) for Quetiapine fumarate extended release tablets (a generic of Seroquel XR®) was accepted for review by Health Canada. This submission consists of 5 strengths, similar to our previous ANDA filing with the FDA.
  • Teva launched their own 5 mg and 10 mg strengths of generic Focalin XR® capsules on November 11, 2014 and February 2, 2015, respectively. We believe that Par intends to launch the 5mg strength in May 2015 and the 10mg strength in August 2015, upon the expiry of the Teva exclusivity periods, but there can be no assurance as to when or if any launch will occur.

There can be no assurance that additional clinical trials will meet our expectations, that we will have sufficient capital to conduct such trials, that we will be successful in submitting any additional ANDAs, ANDSs or NDAs with the FDA or similar applications with Health Canada, that the FDA or Health Canada will approve any of our current or any future product candidates for sale in the U.S. market and Canadian market, or that they will ever be successfully commercialized and produce significant revenue for us.

“I am pleased with the first quarter progress the Company made in cash management, followed by positive topline results in its Phase I Rexista™ Oxycodone XR trials and in submitting an IND with the FDA. This is in addition to positive news on the FDA`s acceptance of a Pre-IND meeting request for Regabatin™ XR,” stated Dr. Isa Odidi, CEO and co-founder of Intellipharmaceutics. “Intellipharmaceutics is on a clearer path to realizing its objective of participating in the specialty new drug space. We are also proud of our first ANDS filing with Health Canada for the Canadian market.” (Original Source)

Shares of Intellipharmaceutics closed yesterday at $2.89 . IPCI has a 1-year high of $4.71 and a 1-year low of $1.94. The stock’s 50-day moving average is $2.63 and it’s 200-day moving average is $2.59.

On the ratings front, Intellipharmaceutics has been the subject of a number of recent research reports. In a report issued on March 31, Brean Murray Carret analyst Jonathan Aschoff reiterated a Buy rating on IPCI, with a price target of $8, which implies an upside of 176.8% from current levels. Separately, on February 2, Maxim Group’s Jason Kolbert maintained a Buy rating on the stock and has a price target of $7.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Jonathan Aschoff and Jason Kolbert have a total average return of 12.1% and 11.7% respectively. Aschoff has a success rate of 57.0% and is ranked #234 out of 3574 analysts, while Kolbert has a success rate of 48.8% and is ranked #233.

IntelliPharmaCeutics International Inc is a pharmaceutical company specializing in the research, development and manufacture of novel and generic controlled-release and targeted-release oral solid dosage drugs.