Intellipharmaceutics International Inc.
(NASDAQ:IPCI) (TSX:I) (“Intellipharmaceutics” or the
“Company”), a pharmaceutical company specializing in the
research, development and manufacture of novel and generic
controlled-release and targeted-release oral solid dosage drugs,
today reported the results of operations for the three months ended
February 29, 2016. All dollar amounts referenced herein are
in United States dollars unless otherwise noted.
First Quarter Key Highlights
- Announced that pivotal bioequivalence trials for
Rexista™ Oxycodone XR demonstrated bioequivalency to
Oxycontin®.
- Plan to file New Drug Application (“NDA”) for
Rexista™ Oxycodone XR within three months on basis that no
Phase III studies required.
- Progress on Rexista™ Oxycodone XR continues, NDA user fee
waiver request filed.
- Secured final United States Food and Drug Administration
(“FDA”) approval to market generic Keppra XR®. Commercial
options under review.
Corporate Developments
- In February 2016, the Company announced that the FDA granted
final approval of its Abbreviated New Drug Application (“ANDA”) for
levetiracetam extended release tablets for the 500 mg and 750 mg
strengths. The Company’s newly approved product is the generic
equivalent of the branded product Keppra XR® sold in the United
States by UCB, Inc. Keppra XR®, and the drug active
levetiracetam, are indicated for use in the treatment of partial
onset seizures associated with epilepsy. According to Symphony
Health Solutions, sales in the United States for the 12 months
ended February 2016 of the 500 mg and 750 mg strengths of Keppra
XR® and all generic equivalents were approximately $156 million (in
TRx MBS Dollars, as defined in our latest Form 20-F). The
Company is actively exploring the best approach to maximize its
commercial returns from the new approval.
- In January 2016, the Company announced that pivotal
bioequivalence trials of the Company’s Rexista™ Oxycodone XR (abuse
deterrent oxycodone hydrochloride) extended release tablets, dosed
under fasted and fed conditions, had demonstrated bioequivalence to
Oxycontin® (oxycodone hydrochloride) extended release tablets as
manufactured and sold in the United States by Purdue Pharma LP. The
study design was based on FDA recommendations and compared the
lowest and highest strengths of exhibit batches of the Company’s
Rexista™ Oxycodone XR to the same strengths of Oxycontin®. The
results show that the ratios of the pharmacokinetic metrics, Cmax,
AUC0-t and AUC0-f for Rexista™ vs. Oxycontin®, are
within the interval of 80% - 125% required by the FDA with a
confidence level exceeding 90%. Having now demonstrated such
bioequivalence for its Rexista™ Oxycodone XR product we expect to
market assuming FDA approval, the Company intends to complete the
regulatory filing requirements and file an NDA for Rexista™
Oxycodone XR with the FDA within the next 3 months in accordance
with the NDA 505(b)(2) regulatory pathway. The Company also
applied for an NDA user fee waiver from the FDA. If granted,
this waiver could reduce the full user fee amount of
$1,187,100. The Company expects a response from the FDA prior
to filing the NDA for Rexista™ Oxycodone XR.
There can be no assurances that we will not be required to
conduct further studies for Rexista™ Oxycodone XR, that we will be
successful in filing an NDA for Rexista™ Oxycodone XR in three
months’ time, that the FDA will grant the full user fee waiver for
Rexista™ Oxycodone XR, that our approved generic of Keppra XR®
will be successfully commercialized, that we will be successful in
submitting any additional ANDAs, Abbreviated New Drug Submissions
(“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 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.
2016 First Quarter Financial Results
Revenue related to the Company’s license and commercialization
agreement with Par Pharmaceutical, Inc. (“Par”) was $0.6 million
for the three months ended February 29, 2016 versus $1.1 million
for the three months ended February 28, 2015. These revenues are
principally from sales of its generic Focalin XR®
(dexmethylphenidate hydrochloride extended-release capsules) for
the 15 and 30 mg strengths. The decrease in revenues is primarily
due to increased competition and a softening of pricing conditions
on our generic Focalin XR® capsules. A fifth generic
competitor entered the market in the second half of 2015, resulting
in increased price competition and lower market share. Based
on the recent trends, we believe our market share has stabilized at
approximately 33% for the combined strengths of our generic Focalin
XR® capsules.
The Company recorded net loss for the three months ended
February 29, 2016 of $2.1 million or $0.09 per diluted common
share, compared with a net loss of $0.9 million or $0.04 per common
share for the three months ended February 28, 2015. For the three
months ended February 29, 2016, the net loss was attributed to
lower licensing revenues and higher stock option expense as a
result of certain performance based stock options that vested with
the FDA approval of generic Keppra XR®. The lower revenues, as
discussed above, resulted in margin compression and lower market
share with the fifth generic competitor entering in the second half
of 2015. Stock option expense for the three
months ended February 29, 2016 and February 28, 2015 was $0.7
million and $Nil (rounded), respectively. Stock option
expense is a non-cash item.
Research and development (“R&D”) expenditures in the three
months ended February 29, 2016 were $1.8 million in comparison to
$1.0 million in the three months ended February 28, 2015. The
increase over the prior period is due to $0.7 million in expenses
related to performance-based stock options which vested on FDA
approval of our generic Keppra XR® in February 2016, compared to
$Nil (rounded) in the comparable prior period. We also
incurred higher expenses on furthering the development of our
Rexista™ Oxycodone XR NDA product candidate.
Selling, general and administrative expenses were $0.8 million
for the three months ended February 29, 2016 in comparison to $0.9
million for the three months ended February 28, 2015. The decrease
is primarily due to lower expenses related to wages and
administrative costs and lower professional fees, partially offset
by an increase in marketing costs.
The Company had cash of $0.4 million as at February 29, 2016
compared to $1.8 million as at November 30, 2015. The decrease in
cash during the three months ended February 29, 2016 was mainly a
result of lower cash receipts relating to commercial sales of our
generic Focalin XR® capsules, an increase in cash flow used in
operating activities related to Rexista Oxycodone XR® development
work, partially offset by a decrease in purchases of production,
laboratory and computer equipment and an increase in cash flows
provided from financing activities which were mainly from common
share sales under the Company’s at-the-market offering program. For
the three months ended February 29, 2016, net cash flows provided
from financing activities of $0.5 million related principally to
at-the-market issuances of 193,043 of our common shares sold on
NASDAQ and the exercise of 58,139 warrants, partially offset by
capital lease payments.
About Intellipharmaceutics
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. The Company's patented
Hypermatrix™ technology is a multidimensional controlled-release
drug delivery platform that can be applied to the efficient
development of a wide range of existing and new pharmaceuticals.
Based on this technology platform, Intellipharmaceutics has
developed several drug delivery systems and a pipeline of products
(which have received final FDA approval) and product candidates in
various stages of development, including ANDAs filed with the FDA
(and one ANDS filed with Health Canada) in therapeutic areas that
include neurology, cardiovascular, gastrointestinal tract, diabetes
and pain.
Intellipharmaceutics also has NDA 505(b)(2)
specialty drug product candidates in its development pipeline.
These include Rexista™ Oxycodone XR, an abuse deterrent oxycodone
based on its proprietary nPODDDS™ novel Point Of Divergence Drug
Delivery System and PODRAS™ Paradoxical OverDose Resistance
Activating System, and Regabatin™ XR pregabalin extended-release
capsules. Our current development effort is increasingly directed
towards improved difficult-to-develop controlled-release drugs
which follow an NDA 505(b)(2) regulatory pathway. The Company has
increased its research and development emphasis towards new product
development, facilitated by the 505(b)(2) regulatory pathway, by
advancing the product development program for both Rexista™ and
Regabatin™. The 505(b)(2) pathway (which relies in part upon the
approving agency's findings for a previously approved drug) both
accelerates development timelines and reduces costs in comparison
to NDAs for new chemical entities. An advantage of our strategy for
development of NDA 505(b)(2) drugs is that our product candidates
can, if approved for sale by the FDA, potentially enjoy an
exclusivity period which may provide for greater commercial
opportunity relative to the generic ANDA route.
Cautionary Statement Regarding
Forward-Looking Information
Certain statements in this document constitute
“forward-looking statements” within the meaning of the United
States Private Securities Litigation Reform Act of 1995 and/or
“forward-looking information” under the Securities Act (Ontario).
These statements include, without limitation, statements expressed
or implied regarding our plans, goals and milestones, status of
developments or expenditures relating to our business, plans to
fund our current activities, statements concerning our partnering
activities, health regulatory submissions, strategy, future
operations, future financial position, future sales, revenues and
profitability, projected costs, and market penetration. In some
cases, you can identify forward-looking statements by terminology
such as “may,” “will,” “should,” “expects,” “plans,” “plans to,”
“anticipates,” “believes,” “estimates,” “predicts,” “potential,”
“continue,” “intends,” “could,” or the negative of such terms or
other comparable terminology. We made a number of assumptions in
the preparation of our forward-looking statements. You should not
place undue reliance on our forward-looking statements, which are
subject to a multitude of known and unknown risks and uncertainties
that could cause actual results, future circumstances or events to
differ materially from those stated in or implied by the
forward-looking statements. Risks, uncertainties and other factors
that could affect our actual results include, but are not limited
to, the effects of general economic conditions, securing and
maintaining corporate alliances, our estimates regarding our
capital requirements, and the effect of capital market conditions
and other factors, including the current status of our product
development programs, on capital availability, the potential
dilutive effects of any future financing and the expected use of
any proceeds from any offering of our securities, our ability to
maintain compliance with the continued listing requirements of the
principal markets on which our securities are traded, our programs
regarding research, development and commercialization of our
product candidates, the timing of such programs, the timing, costs
and uncertainties regarding obtaining regulatory approvals to
market our product candidates and the difficulty in predicting the
timing and results of any product launches, and the timing and
amount of any available investment tax credits, the actual or
perceived benefits to users of our drug delivery technologies,
products and product candidates as compared to others, our ability
to establish and maintain valid and enforceable intellectual
property rights in our drug delivery technologies, products and
product candidates, the scope of protection provided by
intellectual property for our drug delivery technologies, products
and product candidates, the actual size of the potential markets
for any of our products and product candidates compared to our
market estimates, our selection and licensing of products and
product candidates, our ability to attract distributors and
collaborators with the ability to fund patent litigation and with
acceptable development, regulatory and commercialization expertise
and the benefits to be derived from such collaborative efforts,
sources of revenues and anticipated revenues, including
contributions from distributors and collaborators, product sales,
license agreements and other collaborative efforts for the
development and commercialization of product candidates, our
ability to create an effective direct sales and marketing
infrastructure for products we elect to market and sell directly,
the rate and degree of market acceptance of our products, delays
that may be caused by changing regulatory requirements, the
difficulty in predicting the timing of regulatory approval and
launch of competitive products, the difficulty in predicting the
impact of competitive products on volume, pricing, rebates and
other allowances, the inability to forecast wholesaler demand
and/or wholesaler buying patterns, the seasonal fluctuation in the
numbers of prescriptions written for our Focalin XR®
(dexmethylphenidate hydrochloride extended-release) capsules which
may produce substantial fluctuations in revenues, the timing and
amount of insurance reimbursement for our products, changes in the
laws and regulations, including Medicare and Medicaid, affecting
among other things, pricing and reimbursement of pharmaceutical
products, the success and pricing of other competing therapies that
may become available, our ability to retain and hire qualified
employees, the availability and pricing of third party sourced
products and materials, difficulties or delays in manufacturing,
the manufacturing capacity of third-party manufacturers that we may
use for our products, the successful compliance with FDA, Health
Canada and other governmental regulations applicable to the Company
and its third party manufacturers' facilities, products and/or
businesses, difficulties, delays or changes in the FDA approval
process or test criteria for ANDAs and NDAs, risks associated with
cyber-security and the potential for vulnerability of the digital
information of the Company or a current and/or future drug
development or commercialization partner of the Company and risks
arising from the ability and willingness of our third-party
commercialization partners to provide documentation that may be
required to support information on revenues earned by us from those
commercialization partners. Additional risks and uncertainties
relating to the Company and our business can be found in the “Risk
Factors” section of our latest annual information form, our latest
Form 20-F, and our latest Form F-3 (including any documents forming
a part thereof or incorporated by reference therein), as well as in
our reports, public disclosure documents and other filings with the
securities commissions and other regulatory bodies in Canada and
the U.S., which are available on www.sedar.com and
www.sec.gov. The forward-looking statements reflect our current
views with respect to future events and are based on what we
believe are reasonable assumptions as of the date of this document,
and we disclaim any intention and have no obligation or
responsibility, except as required by law, to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Nothing contained in this document should be construed to imply
that the results discussed herein will necessarily continue or that
any conclusion reached herein will necessarily be indicative of
actual operating results of the Company.
The condensed unaudited interim consolidated financial
statements, accompanying notes to the condensed unaudited interim
consolidated financial statements, and Management Discussion and
Analysis for the three months ended February 29, 2016 will be
accessible on Intellipharmaceutics’ website at
www.intellipharmaceutics.com and will be available on SEDAR
and EDGAR.
Summary financial tables are provided
below.
|
|
|
Intellipharmaceutics International Inc. |
|
|
Condensed
unaudited interim consolidated balance sheets |
|
|
As at |
|
|
|
|
(Stated in U.S. dollars) |
|
|
|
|
|
|
|
|
|
|
February 29, |
|
|
|
November 30, |
|
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
Current |
|
|
|
|
|
Cash |
|
|
424,684 |
|
|
|
1,755,196 |
|
|
Accounts receivable, net |
|
|
286,345 |
|
|
|
478,674 |
|
|
Investment tax credits |
|
|
540,583 |
|
|
|
458,021 |
|
|
Prepaid
expenses, sundry and other assets |
|
|
298,801 |
|
|
|
229,225 |
|
|
|
|
|
|
|
1,550,413 |
|
|
|
2,921,116 |
|
|
|
|
|
|
|
|
|
Deferred offering costs |
|
|
547,139 |
|
|
|
543,745 |
|
Property and
equipment, net |
|
|
1,716,520 |
|
|
|
1,759,438 |
|
|
|
|
|
|
|
3,814,072 |
|
|
|
5,224,299 |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
Current |
|
|
|
|
|
Accounts payable |
|
|
2,449,093 |
|
|
|
3,027,974 |
|
|
Accrued liabilities |
|
|
570,757 |
|
|
|
454,290 |
|
|
Employee costs payable |
|
|
182,188 |
|
|
|
175,172 |
|
|
Current portion of capital lease
obligations |
|
|
20,741 |
|
|
|
20,460 |
|
|
Convertible
debenture |
|
|
1,485,165 |
|
|
|
1,518,429 |
|
|
|
|
|
|
|
4,707,944 |
|
|
|
5,196,325 |
|
|
|
|
|
|
|
|
|
Capital lease obligations |
|
|
10,057 |
|
|
|
15,660 |
|
Deferred revenue |
|
|
150,000 |
|
|
|
150,000 |
|
|
|
|
|
|
|
4,868,001 |
|
|
|
5,361,985 |
|
|
|
|
|
|
|
|
|
Shareholders' equity
(deficiency) |
|
|
|
|
Capital stock |
|
|
|
|
|
Authorized |
|
|
|
|
|
|
Unlimited common shares without par
value |
|
|
|
|
|
|
Unlimited preference shares |
|
|
|
|
|
Issued and outstanding |
|
|
|
|
|
|
24,495,232 common shares |
|
|
22,115,155 |
|
|
|
21,481,242 |
|
|
|
|
(2015 - 24,244,050) |
|
|
|
|
Additional paid-in capital |
|
|
31,538,977 |
|
|
|
30,969,093 |
|
Accumulated other comprehensive
income |
|
|
284,421 |
|
|
|
284,421 |
|
Accumulated
deficit |
|
|
(54,992,482 |
) |
|
|
(52,872,442 |
) |
|
|
|
|
|
|
(1,053,929 |
) |
|
|
(137,686 |
) |
Contingencies |
|
|
|
|
|
|
|
|
|
|
3,814,072 |
|
|
|
5,224,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Intellipharmaceutics International Inc. |
|
|
|
Condensed
unaudited interim consolidated statements of operations |
|
|
and
comprehensive loss |
|
|
|
|
for the
three months ended February 29, 2016 and February 28, 2015 |
|
|
|
|
|
|
|
|
|
|
|
(Stated in
U.S. dollars) |
|
|
|
|
|
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
Revenue |
|
|
|
|
|
Licensing |
|
|
566,937 |
|
|
|
1,139,685 |
|
|
|
|
|
|
|
|
566,937 |
|
|
|
1,139,685 |
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
Research
and development |
|
|
1,812,608 |
|
|
|
1,018,322 |
|
|
Selling,
general and administrative |
|
|
756,428 |
|
|
|
883,955 |
|
|
Depreciation |
|
|
92,235 |
|
|
|
84,674 |
|
|
|
|
|
|
|
|
2,661,271 |
|
|
|
1,986,951 |
|
|
|
|
|
|
|
|
|
|
Loss from
operations |
|
|
(2,094,334 |
) |
|
|
(847,266 |
) |
Net foreign
exchange gain |
|
|
29,895 |
|
|
|
30,202 |
|
Interest
income |
|
|
140 |
|
|
|
- |
|
Interest
expense |
|
|
(55,741 |
) |
|
|
(97,596 |
) |
Net loss and comprehensive loss |
|
|
(2,120,040 |
) |
|
|
(914,660 |
) |
|
|
|
|
|
|
|
|
|
Net loss
per common share, basic and diluted |
|
|
|
|
Basic |
|
|
(0.09 |
) |
|
|
(0.04 |
) |
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding |
|
|
|
Basic |
|
|
24,431,202 |
|
|
|
23,474,055 |
|
|
|
|
|
|
|
|
|
|
Intellipharmaceutics International Inc. |
|
|
|
Condensed
unaudited interim consolidated statements of cash flows |
|
|
for the
three months ended February 29, 2016 and February 28, 2015 |
|
|
(Stated in
U.S. dollars) |
|
|
|
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
Net
loss |
|
(2,120,040 |
) |
|
|
(914,660 |
) |
Items not
affecting cash |
|
|
|
|
Depreciation |
|
92,235 |
|
|
|
84,674 |
|
|
Stock-based
compensation |
|
660,109 |
|
|
|
25,512 |
|
|
Deferred
share units |
|
8,051 |
|
|
|
3,759 |
|
|
Accreted
interest on convertible debt |
|
8,831 |
|
|
|
51,306 |
|
|
Unrealized
foreign exchange gain |
|
(18,046 |
) |
|
|
(2,321 |
) |
Change in
non-cash operating assets & liabilities |
|
|
|
|
Accounts
receivable |
|
192,329 |
|
|
|
592,260 |
|
|
Investment
tax credits |
|
(82,562 |
) |
|
|
(56,625 |
) |
|
Prepaid
expenses, sundry and other assets |
|
(69,576 |
) |
|
|
109,640 |
|
|
Accounts
payable and accrued liabilities |
|
(455,398 |
) |
|
|
(171,092 |
) |
|
Deferred
revenue |
|
- |
|
|
|
150,000 |
|
Cash flows used in operating activities |
|
(1,784,067 |
) |
|
|
(127,547 |
) |
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
Issuance of
common shares on option exercise |
|
- |
|
|
|
159,267 |
|
|
Repayment
of capital lease obligations |
|
(5,322 |
) |
|
|
(10,119 |
) |
|
Issuance of
common shares on at-the-market financing |
|
397,244 |
|
|
|
- |
|
|
Financing
cost |
|
(11,142 |
) |
|
|
- |
|
|
Proceeds
from issuance of shares on exercise of warrants |
|
122,092 |
|
|
|
- |
|
Cash flows provided from financing activities |
|
502,872 |
|
|
|
149,148 |
|
|
|
|
|
|
|
|
|
Investing activity |
|
|
|
|
Purchase of
property and equipment |
|
(49,317 |
) |
|
|
(31,493 |
) |
|
|
|
|
|
|
|
|
Cash flows used in investing activities |
|
(49,317 |
) |
|
|
(31,493 |
) |
|
|
|
|
|
|
|
|
Decrease in
cash and cash equivalents |
|
(1,330,512 |
) |
|
|
(9,892 |
) |
Cash,
beginning of period |
|
1,755,196 |
|
|
|
4,233,975 |
|
|
|
|
|
|
|
|
|
Cash, end of period |
|
424,684 |
|
|
|
4,224,083 |
|
|
|
|
|
|
|
|
|
Supplemental cash flow information |
|
|
|
|
Interest
paid |
|
15,277 |
|
|
|
44,353 |
|
|
Taxes
paid |
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Company Contact :
Intellipharmaceutics International Inc.
Domenic Della Penna
Chief Financial Officer
416-798-3001 ext. 106
investors@intellipharmaceutics.com
Investor Contact:
ProActive Capital
Kirin Smith
646-863-6519
ksmith@proactivecapital.com
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