Cipher Pharmaceuticals, a quiet player in the Canadian specialty pharma market, might be on the brink of something big. While analysts focus on the upcoming MOB-015 Phase III data and the potential for accretive M&A, a subtle but significant shift is underway in the company's core Canadian business: Epuris is undergoing a resurgence.

For years, Epuris, Cipher's oral retinoid for severe acne, has been a steady, if somewhat uninspiring, revenue generator. The product, launched in 2012, quickly captured a significant portion of the Canadian isotretinoin market, peaking at a commanding 47.2% market share in 2015. However, subsequent years saw a gradual erosion of this dominance, with market share dipping to 42.8% by 2021. Analysts, attributing this decline to generic competition, seemed to have written off Epuris as a fading star.

But a closer look at the recent transcripts reveals a change in the narrative. Instead of resignation to a shrinking market, there's a newfound optimism, even excitement, about Epuris' prospects. Craig Mull, Cipher's CEO, notes in the Q4 2023 transcript that Epuris has seen 'the third consecutive growth in sales.' This trend continued into Q1 2024, with Epuris sales jumping 7% year-over-year, as mentioned in the Q1 2024 transcript.

What's Driving the Epuris Turnaround?

The answer, it seems, lies in a renewed focus on sales and marketing initiatives. Cipher, known for its lean operations, has traditionally been cautious about investing in commercial activities. However, the recent transcripts suggest a more aggressive approach. Mull mentions reviewing 'proposals from our commercial people' to 'invest more' in Epuris. The impact of these investments, however modest, is already evident in the rising market share, which climbed back to 45% by the end of 2023.

Cipher's Multi-Pronged Growth Strategy

This shift in strategy is potentially game-changing. While MOB-015 and M&A are undoubtedly crucial to Cipher's future growth, the potential of a reinvigorated Epuris shouldn't be overlooked. Consider this: Epuris, even with a declining market share, consistently generated over CA$10 million in annual revenue. If Cipher can regain its lost market share and push Epuris back to its peak performance, the revenue potential is significant.

Hypothetical Epuris Revenue Scenarios

This resurgence of Epuris creates a fascinating dynamic for Cipher in 2024. The company is simultaneously pursuing three distinct avenues for growth: organic growth through Epuris, pipeline development with MOB-015 and piclidenoson, and inorganic growth through M&A. This multi-pronged approach, combined with a robust balance sheet and substantial tax loss carryforwards, makes Cipher an intriguing prospect for investors.

MOB-015 Launch Timeline

Based on the information provided in the Q1 2024 transcript:

Epuris Market Share Trend

Cipher's Financial Strength

As per the Q1 2024 earnings call:

Cipher's Origins

Fun Fact: Cipher's origins lie in a partnership with the Spanish pharmaceutical company, Galephar. This collaboration resulted in the development of three products that form the foundation of Cipher's current Canadian portfolio.

Conclusion

Cipher's future might be more dynamic and multifaceted than the market anticipates. The potential for Epuris, often overshadowed by the upcoming pipeline and M&A activities, could prove to be a significant driver of value in the coming years. This often-overlooked aspect of Cipher's business deserves close attention as the company embarks on its next chapter of growth.