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Stock Update (NASDAQ:IPCI): Intellipharmaceutics Announces 2014 Year End Results With a 48% Reduction in Operating Loss


Intellipharmaceutics International Inc. (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 year ended November 30, 2014. All dollar amounts referenced herein are in United States dollars unless otherwise noted.

Dr. Isa Odidi, Chairman and CEO, stated, “2014 was a pivotal year for Intellipharmaceutics. It represents the first full year of sales under our commercialization agreement with Par for dexmethylphenidate hydrochloride extended-release capsules. We are also excited about the progress we continue to make in the development of our Rexista™ abuse-deterrent delivery technologies including a variant under development which holds promise in mitigating against the likelihood of opioid overdose. The Company is now expanding the use of its complex generic drug delivery capabilities by increased focus on innovative applications in the specialty new-drug space.”

Domenic Della Penna, Chief Financial Officer, stated, In 2014 we reduced our operating losses by 48%, and while we are not cash flow positive, we are moving towards commercial readiness should any pending generic drug applications be approved in the near term. The recent achievement of an ‘acceptable’ rating from the FDA for our Toronto manufacturing facility is an important part of that readiness.”

Full Year Financial Results

Revenue related to the Company’s license and commercialization agreement with Par Pharmaceutical, Inc. (“Par”) in the year ended November 30, 2014 was $8.8 million versus $1.5 million in the prior year. The $8.8 million revenue in the year ended November 30, 2014 reflects a full year of commercial sales of the 15 and 30 mg strengths of the Company’s dexmethylphenidate hydrochloride extended-release generic of Focalin XR® capsules, while the $1.5 million revenue in the year ended November 30, 2013 was derived principally from 12 days of commercial sales of 15 and 30 mg strengths of dexmethylphenidate hydrochloride extended-release generic of Focalin XR® capsules. In November 2013, we received a conditional approval from the U.S Food and Drug Administration (“FDA”) to launch our generic Focalin XR® 5 mg capsules. It is understood by the Company that the conditional approval could be made final upon the expiry of six months from the date of marketplace launch in the United States by the Company first to file for approval of the 5 mg strength with the FDA. We believe that Teva Pharmaceuticals USA, Inc. (“Teva”) is the Company with that first-to-file exclusivity status. Should we receive final approval to launch the 5mg strength of our generic Focalin XR ® capsules six months after the date of launch of the 5 mg strength by Teva, we believe that Par, our manufacturing, marketing and distribution partner for our generic Focalin XR ® products intends to launch this strength immediately upon the expiry of the exclusivity period in May 2015, but there can be no assurance as to when or if any launch will occur.

Loss from operations for the year ended November 30, 2014 was $3.5 million compared with loss from operations of $6.8 million for the year ended November 30, 2013, or a 48% reduction. Research and development (“R&D”) expenditures in the year ended November 30, 2014 increased to $8.0 million versus $5.1 million for the prior year, or a 57% increase, due to an overall increase in R&D expense over the prior year, including stock-based compensation for R&D employees. After adjusting for stock-based compensation, expenditures for R&D were 59% higher than in the prior year. Selling, general and administrative expenses in the year ended November 30, 2014 increased to $3.9 million versus $2.9 million in the prior year. After adjusting for stock-based compensation expense, expenditures for selling, general and administrative expenses were slightly higher due to an increase in the number of management and non-management employees.

The Company recorded a net loss for the year ended November 30, 2014 of $3.9 million, or $0.17 per common share, compared with a loss of $11.5 million, or $0.58 per common share for the year ended November 30, 2013. The decreased loss can be attributed to an increase in revenue recognized from the payments received from the commercial sales of dexmethylphenidate hydrochloride extended-release generic of Focalin XR® capsules in the year ended November 30, 2014 compared to the prior year. In addition, there was no adjustment to the fair value adjustment of derivative liabilities compared to a loss in the fair value adjustment of derivative liabilities in the prior year. The fair value adjustment of derivative liabilities in the year ended November 30, 2014 was $Nil versus a loss of $3.9 million in the prior year. Stock-based compensation expense in the year ended November 30, 2014 was $1.7 million versus $1.2 million in the prior year.

At November 30, 2014, Intellipharmaceutics’ cash and cash equivalents totaled $4.2 million, compared with $0.8 million at November 30, 2013.  The increase in cash during the year ended November 30, 2014 is mainly a result of the decrease in cash flows used in operating activities due to payments received from the commercial sales of our generic Focalin XR ® (dexmethylphenidate hydrochloride extended-release) capsules for the 15 and 30 mg strengths; the cash flows from financing activities which are mainly from our at-the-market financing together with several warrant exercises partially offset by purchases of production, laboratory and computer equipment.

For the year ended November 30, 2014, net cash flows used in operating activities decreased to $1.7 million as compared to $6.9 million for the year ended November 30, 2013. The decrease was due to the payments received from the commercial sales of generic Focalin XR ® (dexmethylphenidate hydrochloride extended-release) capsules by Par for the 15 and 30 mg strengths, partially offset by the increase in R&D expenses and increase in selling, general and admin. For the year ended November 30, 2014, net cash flows provided from financing activities were $6.0 million compared to $7.3 million in the year ended November 30, 2013. In the year ended November 30, 2014 financing was principally from our at-the-market issuances of 1,689,500 common shares sold on NASDAQ for gross proceeds of $6.6 million with net proceeds to us of $6.4 million. For the year ended November 30, 2014 net cash flows used in investing activities was $0.7 million compared to $0.1 million in the year ended November 30, 2013. This increase was mainly the result of purchases of production, laboratory and computer equipment during the year due to the acceleration of product development activities.

Corporate Highlights

  • In August 2014, we announced an enhancement of our Rexista™ abuse-deterrence technologies incorporating our novel Point of Divergence Drug Delivery System (nPODDSTM) release profile, together with a significant improvement, branded Paradoxical OverDose Resistance Activating System (PODRAS™), designed to reduce the likelihood of overdose when more pills than prescribed are swallowed intact. Preclinical studies of this enhanced Rexista™ oxycodone suggested that, unlike other third-party abuse-deterrent oxycodone products, if more tablets than prescribed are deliberately or inadvertently swallowed, the amount of drug active released over 24 hours may be substantially less than expected. Subject to the availability of funds, we expect to begin a series of clinical trials in Canada and the United States in the coming months to further evaluate Rexista™ incorporating our PODRAS™ platform. There can be no assurance as to whether or when the FDA will approve any Intellipharmaceutics Rexista™ oxycodone application.
  • In October 2014, we announced an update on the progress of our Regabatin™ XR product development program.  We conducted and analyzed the results of six Phase I clinical trials involving a twice-a-day formulation and a once-a-day formulation. The results suggested that Regabatin™ XR 82.5 mg twice-a-day (“BID”) dosage was comparable in bioavailability to Lyrica® 50 mg (immediate-release pregabalin) three-times-a-day (“TID”) dosage, and that Regabatin™ XR 165 mg once-a-day dosage was comparable in bioavailability to Lyrica® 75 mg BID dosage. The results also suggested that Regabatin™ XR 165mg once-a-day has a higher exposure during the first 12 hours than Lyrica® 75mg BID. This could prove to be advantageous with evening meal dosing and suggests that Regabatin™ XR 165mg once-a-day may confer a compliance advantage over Lyrica ® 75mg BID. We are in discussion with the FDA with a view to having an investigational new drug application submitted under the new drug application (“NDA”) 505(b)(2) regulatory pathway, for possible commercialization in the United States following the December 30, 2018 expiry of the patent covering the pregabalin molecule.  There can be no assurance that any additional Phase I or other clinical trials we conduct will meet our expectations, that we will have sufficient capital to conduct such trials, that we will be successful in submitting a NDA 505(b)(2) filing with the FDA, that the FDA will approve this product candidate for sale in the U.S. market, or that it will ever be successfully commercialized.
  • In October 2014, the FDA provided the Company with written notification that its Toronto, Canada manufacturing facility had received an “acceptable” classification.  Such inspections are carried out on a regular basis by the FDA, and an “acceptable” classification is necessary to permit the Company to be in a position to receive final approvals for Abbreviated New Drug Applications (“ANDAs”) and for NDAs, and to permit manufacturing of drug products intended for commercial sales in the United States after any such approvals.
  • On February 2, 2015 we announced that we had entered into an agreement with Teva in which we granted Teva an exclusive license to market in the United States an extended release drug product candidate for which we have an 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.  There can be no assurance as to when or if the product will be approved by the FDA or that, if so approved, it will be successfully commercialized and produce significant revenue for us.

Shares of Intellipharmaceutics International closed last Friday at $2.48 . IPCI has a 1-year high of $5.18 and a 1-year low of $1.94. The stock’s 50-day moving average is $2.28 and it’s 200-day moving average is $2.64.

On the ratings front, Intellipharmaceutics International has been the subject of a number of recent research reports. In a report issued on February 3, Brean Murray Carret analyst Jonathan Aschoff maintained a Buy rating on IPCI, with a price target of $8, which implies an upside of 222.6% 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.

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.