Cipher Pharmaceuticals (TSE:CPH) reported lower second-quarter revenue and earnings as sales of its U.S. Natroba treatment declined, while its Canadian Epuris product posted growth and market-share gains. Management said the company remains focused on expanding commercial channels for Natroba, widening public reimbursement for Epuris and pursuing business-development opportunities.
Total net revenue was $12.1 million for the quarter ended June 30, down $1.3 million, or 10%, from the prior-year period. Revenue for the first six months of 2026 was $24.6 million, a 3% decline from a year earlier.
Natroba Sales Decline Tied to Medicaid Volumes
Natroba revenue totaled $6.3 million in the second quarter, compared with $7.8 million in the same quarter of 2025. Cipher attributed the decline to lower sales volumes to state Medicaid programs. CFO Ryan Mailling said reduced product shipments to distribution partners, which can vary by period, also contributed to lower licensing revenue during the quarter.
President of U.S. Operations Bryan Jacobs said Cipher has historically maintained strong Medicaid coverage, but the business must adapt to changes in Medicaid covered lives. He said the company has been building commercial sales channels over the past year to reduce its dependence on those dynamics.
Among those efforts, Cipher has launched a direct-to-patient model designed to enable patients to obtain a prescription within an hour and arrange product delivery or pharmacy pickup. The company is also expanding retail availability. Jacobs said Natroba and its authorized generic, Spinosad, are now available at every Walmart location in the U.S.
Mull said Cipher is also working with direct-mail and same-day-delivery partners to make Natroba easier for patients to access. Management expects Natroba performance to improve in future quarters as these commercial initiatives take effect.
Epuris Gains Market Share and Pursues Broader Coverage
Epuris revenue rose to $4.1 million in the second quarter from $3.6 million a year earlier, an increase of $0.5 million, or 14%. Sales volumes increased 8% from the prior-year quarter.
According to IQVIA data cited by the company, Epuris held 47.1% of the Canadian isotretinoin market as of June 30, following a 1.3 percentage-point increase during the first half of 2026. Mull said Epuris continues to hold the position of market-leading isotretinoin product in Canada.
Cipher also announced a letter of intent with the pan-Canadian Pharmaceutical Alliance that establishes a path toward additional public drug-plan coverage for Epuris. The company said it has been working with federal, provincial and territorial drug plans to finalize product listing agreements, which it expects to complete within 30 to 60 days.
Management said expanded public reimbursement could broaden patient access, particularly in markets where a significant share of patients rely on publicly funded drug plans rather than private insurance. Mull said the additional listings could support meaningful market-share growth over time.
Profitability Remains Strong Despite Lower Quarterly Earnings
Gross margin was 80% in the second quarter, down from 81% a year earlier, reflecting reduced licensing revenue and lower Natroba revenue. For the first half, gross margin increased to 81% from 79%, although Mailling said that improvement was largely related to non-recurring acquired-inventory fair-value adjustments recorded in the prior-year period. Excluding those adjustments, gross margin was consistent year over year at 81%.
Selling, general and administrative expense fell 16% to $3.4 million in the second quarter and declined 30% to $6.3 million for the first half. The company cited lower non-recurring legal costs related to arbitration proceedings concluded in Cipher’s favor, along with operational efficiencies in the U.S. business, including employment-cost savings and lower selling and marketing expenses.
Cipher recorded $0.3 million in professional-services and due-diligence expenses in the second quarter tied to an acquisition opportunity it had evaluated. Mull said the company had reached advanced stages on a potential acquisition but ultimately decided not to proceed because it was not the right transaction at that time, citing concerns involving products and price.
Net income was $4 million, or $0.15 per diluted share, compared with $5.9 million, or $0.22 per diluted share, in the prior-year quarter. The company attributed the decline to lower gross profit and an unrealized foreign-exchange loss related to the U.S. dollar’s appreciation against the Canadian dollar.
Adjusted EBITDA declined 10% to $6.8 million in the quarter, while the adjusted EBITDA margin remained 57%. For the first six months, adjusted EBITDA increased 6% to $14.6 million, and the adjusted EBITDA margin was 59%, compared with 54% in the prior-year period.
Cash Position Supports Business Development
Cipher ended the quarter with $9.1 million in cash and generated $7.6 million of operating cash flow in the first half of 2026. The company said it is debt-free after repaying its revolving credit facility balance at the end of the first quarter and has access to up to $90 million in potential financing, including a $65 million revolver and a $25 million accordion feature.
Management said it is pursuing three growth avenues: acquiring or in-licensing complementary products, out-licensing Epuris and Natroba outside North America, and acquiring companies that could add scale or strategic value. Mull said Cipher is in discussions with potential international partners for Epuris and continues to evaluate markets and partners for Natroba, while also sourcing additional acquisition opportunities.
About Cipher Pharmaceuticals (TSE:CPH)
Cipher Pharmaceuticals (TSX: CPH) (OTCQX: CPHRF) is a specialty pharmaceutical company with a robust and diversified portfolio of commercial and early to late-stage products, mainly in dermatology. Cipher acquires products that fulfill unmet medical needs, manages the required clinical development and regulatory approval process, and currently markets those products in Canada, the U.S., and South America.
