Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Cipher Pharmaceuticals Inc fiscal 2019 fourth quarter results conference call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question-and-answer session. If anyone needs assistance at any time during the call, you may press star followed by the zero on your push-button phone. As a reminder, this conference is being recorded today, Thursday, March 26th, 2020. On behalf of the speakers that follow, listeners are cautioned that today's presentation and the responses to questions may contain forward-looking statements within the meaning of the safe harbor provisions of the Canadian provincial securities laws. Forward-looking statements involve risks and uncertainties, and undue reliance should not be placed on such statements.
Certain material factors or assumptions are implied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. For additional information about factors that could cause results to vary, please refer to the risks identified in the company's annual information form and other filings with Canadian regulatory authorities. Except as required by Canadian Securities Laws, the company does not undertake to update any forward-looking statements. Such statements speak only as of the date made. I would now like to turn the call over to Mr. Craig Mull, Interim Chief Executive Officer of the company. Please go ahead, Mr. Mull.
Thank you, Operator. And good morning, everyone. Joining me from Cipher is Nadine Jutlah, Interim CFO. On today's call, I will make opening remarks before passing the call over to Nadine to review the financial results in detail. Following our prepared remarks, we will open the call for questions. Please note that all amounts are in U.S. dollars. 2019 has been a transformational year for Cipher. At a high level, we have successfully reduced the cost structure of our organization. We have initiated a strategic review of the Canadian commercial assets, and we have terminated underperforming assets. One of the key priorities we announced earlier this year was our renewed focus on cost optimization and improving profitability to ensure a self-funding business model. We are pleased to announce that the fourth quarter results showed strong progress.
Total operating expenses decreased by 62% in the fourth quarter, which translated into a 282% improvement in Adjusted EBITDA and $2.6 million of net income during the quarter, or CAD 3.4 million. We believe the cost structure of the business has now been right-sized, and we're focusing on managing our existing portfolio while looking for attractive new assets to drive growth. We are pleased that Epuris is showing strong growth, with annual revenue up 26% to CAD 7.3 million. Epuris finished the year with a 38% market share in the Canadian market, up from 33% the previous year. Subsequent to year-end, Sun Pharmaceutical Industries, Cipher's marketing partner for Absorica, launched Absorica LD capsules in the U.S. for the management of severe acne.
In addition to the benefits Absorica LD will bring to the patient population, we are thrilled that the launch will trigger an extension of our agreement with Sun, providing us with two additional years of royalties on Sun's isotretinoin product portfolio. As previously communicated, the royalty rate on Absorica LD will be identical to the royalty on Absorica until December 2021. The extension allows for a reduced royalty rate in subsequent years. On December 9th, the company's licensing partner, Moberg for MOB-015, Moberg Pharma, announced that MOB-015 met the primary endpoints as well as secondary endpoints in their North American phase III study. MOB-015 is an internally developed topical formula for the treatment of onychomycosis, a common nail fungus. According to IQVIA, in Canada, the prescription market for the product was CAD 97 million in 2019.
84% of the market is topical drugs, growing at a five-year CAGR of 24% for the period of 2014- 2019. Results from the phase III trial in Europe are expected in the second quarter of 2020. In October, Cipher received Health Canada approval for Trulance. As part of the strategic review of the Canadian commercial assets, we are in the process of selecting a distribution partner for Trulance to bring this novel product to market. Subsequent to year-end, Cipher announced it had received a notice of termination from Bausch Health in connection with the license, development, and commercialization agreement of Trulance. Cipher believes the notice is without merit and is currently working with Bausch to resolve the matters contained within. The notice from Bausch has impacted the timing of the strategic review process.
At the onset of the strategic review, the board of directors contemplated two scenarios for the Canadian commercial assets. The first was to sell the assets to a single buyer or multiple buyers. The second option was to find the most cost-effective means to distribute the Canadian commercial products. Progress has been made on both fronts, but the legal dispute with Bausch has extended the timeline of the process. The company continues to remain confident in the process despite timing issues created by the notice from Bausch. Cipher has assembled an attractive portfolio of assets beyond the currently marketed products, and we are committed to moving our current pipeline products through the regulatory process. We will partner these assets once they've received regulatory approvals. In addition, Cipher will continue to work with our technology partner, Galephar, to bring new, exciting products to market with a focus on the U.S.
and international markets. We look forward to providing you with updates on the status of our partnership initiatives as we transition the commercial portfolio. Before passing the call over to Nadine, I wanted to briefly touch on the COVID-19 outbreak that continues to emerge around the world. While the precise impacts of the virus on the company remain unknown, rapid spread of the virus may have a material effect on global economic activity and can result in volatility and disruption to global supply chains, operations, the mobility of patients and people, and the financial markets. I will now turn the call over to Nadine to review the financial results. Nadine?
Thank you, Craig. Good morning, and thank you for joining us. Total net revenue for the quarter was $5.9 million, a decrease from $6.4 million in the prior year comparative period. Licensing revenue decreased to $3.8 million in the fourth quarter, compared to $4.6 million in the comparative period. The decrease was primarily due to lower licensing revenue from Absorica, which was $3.1 million in Q4 2019, compared to $3.7 million in Q4 2018. Product revenue increased by 21% to $2.2 million in the current quarter, from $1.8 million in the comparative period. The increase was attributable to Epuris, which grew to $2 million in Q4 2019, compared to $1.5 million in Q4 2018. Epuris had a prescription market share of over 38% in Canada for the three months ended December 31st, 2019, compared to 35% for the three months ended December 31st, 2018.
Total operating expenses decreased 62% in the fourth quarter to $2.2 million, compared to $5.8 million in the prior year comparative period. Selling general and administrative expenses, in particular, decreased by 73% to $1.3 million in the current period, from $5 million in Q4 2018. Managing OpEx for 2020 will remain a priority to ensure that our credit facility is paid down as scheduled. Overall, we finished the quarter with income from continuing operations of $2.6 million, or $0.10 per basic and diluted share, compared to a loss from continuing operations of $0.5 million, or $0.02 per basic and diluted share in Q4 2018. Adjusted EBITDA increased by $3 million for the quarter to $4.1 million, compared to $1.1 million in Q4 2018. Cipher generated $8.9 million in cash from operating activities for the year-ended December 31st, 2019, and used approximately $12.5 million in cash.
This included $10 million in principal repayments against the credit facility. We had $6.3 million in cash and $7.6 million in debt at December 31st, 2019. I will now turn the call back to Craig for his closing remarks.
Thanks, Nadine. With our rationalized cost structure in place, Cipher will now focus on several key milestones that will enhance long-term value, including the full-year benefit of the cost reduction plan, the conclusion of the strategic review process, increased adoption of the Absorica LD, and discussions with Galephar regarding new product opportunities. We will now open the call up to questions. Operator?
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request. Should you wish to decline from the polling process, please press star followed by two. And if you are using a speakerphone, please lift the handset before pressing any keys. And your first question comes from Andre Uddin at Mackie Research Capital. Please go ahead.
Morning, Craig. Just had a couple of questions. Could you provide some more details on your Canadian licensing plans and where you are in the process, and if you have any LOIs leading right now? And then in terms of your Canadian product portfolio, if you exclude the Bausch, I guess, suit that's going on, are you breaching any of the licensing agreements by not having enough sales reps, or are you missing any certain sales levels that you need to meet those licensing agreements?
You mean besides the Trulance issue? Is that what you're speaking to? Right. Well, no, we're not in breach of any of the other licensing agreements for the Canadian portfolio. I can't speak in any real detail about letters of intent that we may have received as we're under a confidentiality agreement with everybody that we may be speaking to with regards to that portfolio. Was there any other specific questions, Andre? I know you asked a number of them in that.
Yeah, I just wanted to get a better sense on how, because it's been a, I know business development always takes a bit of time, but I was just wondering where you are on the process road?
We've had a healthy response, and we've been approached by a number of companies, Canadian companies and U.S. companies interested in the portfolio. We've had ongoing discussions with them. We're looking for the best method to distribute that product, that set of products, which may be a partnering or out-licensing to a third party, or it could be the employment of a contract sales organization, and we're reviewing and analyzing the options there, and they look quite attractive.
That's great. Thank you.
Thank you. The next question comes from Doug Loe of Echelon Wealth Partners. Please go ahead.
Yeah, thanks very much, and good morning. Thanks for the Q4 update. Craig, just sticking with the Canadian portfolio and specifically on the basket of acute care products you acquired from Correvio, I mean, I know that you would clearly be looking to explore strategic options for that basket of assets as you would be for the rest of the portfolio. But maybe just specifically on Trevyent, for which United has already refiled its NDA in the U.S. Any intentions to perhaps enhance the value of that asset through filing your own NDS, filing with Health Canada, or maybe just how you're conceptualizing that product would be helpful feedback? Thanks.
Yeah, we are in the process of going through the process for Health Canada approval. I don't have much to report as to the progress of that as it's sitting with the FDA or, sorry, the Health Canada at the moment. And we haven't had a response from our submission of documentation.
Okay. Thanks.
Thank you. The next question comes from Prasath Pandurangan from Bloom Burton. Please go ahead.
Hi, good morning. Thanks for taking my questions. I had a couple. First, what's the essence of the dispute with Bausch as it stands now? And are discussions likely to resolve this, or do you see it going to arbitration? And secondly, I know it's early days, but do you have any insight on where the Absorica LD prescriptions are coming from? Are these new prescribers, or is it predominantly switching from the prior formulation? Thanks.
Okay. Dealing with the first question, I believe that it was related to the Bausch dispute. Again, Cipher's under a confidentiality agreement there, so there's a limited amount of information that I can provide to you on that matter. We are hopeful to resolve the matter. I think it would be in everybody's best interest to do that. We've got a product that could be on the market. And the sooner it's resolved and that product is being sold in the Canadian market, the better for all parties involved. The second question, I believe, related to Absorica and the uptake of the LD product. The idea there was that it's part of the life cycle management of Absorica, whereby Sun would be out converting prescribing physicians to the LD product, which is a patented product that would be able to defend itself against a generic entry.
In other words, the product couldn't be genericized. And the idea is that there would be a conversion or a transition from the basic Absorica product to Absorica LD. And that would be a defense against genericization.
Got it. Thank you.
Ladies and gentlemen, as a reminder, should you have any questions, please press star followed by one, and the next question comes from Adrian Smith an investor . Please go ahead.
Yeah. Hey, Craig. Congratulations. Amazing quarter. And thank you for right-sizing the company and creating some incredible positive cash flows. My question to you is, you're still carrying a bit of debt on your balance sheet, and clearly the world's in a bit of a financial crisis right now. I think as a small company, you're in a very unique position to sort of delay capital projects or spend, and really just to potentially pay off the debt and accumulate cash over the next couple of quarters and maybe even into the end of the year with the pandemic. So just wondered how you're sort of thinking about cash flows and debt levels, and are you moving right ahead with business plans, or are you kind of holding back and taking care of the books? Thank you.
We certainly have a focus on costs here, and you can see that in the results of the fourth quarter. We're in a good position to pay back the debt, which I believe is due at the end of this year. We're in a close, if not in a net positive cash position when you take the debt off. So I think that we're in the right position to weather this situation with the virus. And we want to maintain our profitability. And to do that, we've got a very close eye on expenses.
Right. Well, thank you very much. I mean, I appreciate it as a private investor. It gives me a lot of confidence that my money is safe. And I clearly think your share values are ridiculously underpriced at this point. But I guess that's the nature of the world. Markets at this point. So congratulations. Look forward to your next quarters.
Appreciate that you came on the line. Thank you.
Thank you. There are no further questions. I will now turn the call back over to Craig Mull for closing comments.
Thank you for joining us today. We look forward to reporting our progress throughout the balance of 2020 as we execute on the priorities discussed today. Thank you, and have a great day.
Ladies and gentlemen, this concludes our conference call for today. We thank you for participating, and we ask that you please disconnect your lines.