Morning, ladies and gentlemen. Thank you for standing by. Welcome to the Cipher Pharmaceuticals Inc. fiscal 2019 Q1 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, Friday, 10 May 2019. 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 Robert Tessarolo, President and Chief Executive Officer of the company. Please go ahead, Mr. Tessarolo.
Thank you, Joanna. Good morning, everyone. Joining me from Cipher is Nadine Jutlah, our Interim CFO. On today's call, I will make a few opening remarks before Nadine reviews the financial results in more detail, after which we'll open the call for your questions. Please note that all amounts are in US dollars. In the Q1 , we continued to make important progress in executing our strategy to advance our product portfolio and deliver reliable and sustainable growth for Cipher. Importantly, total revenue increased by 12% compared to Q1 2018, largely driven by an increase in Absorica royalty revenue. In Canada, our team continues to generate growth in prescription demand and capture market share for our key brands. Primarily driven by Epuris, our largest product used for the treatment of severe acne, now holds a national market share of over 37%.
Importantly, Epuris is the number one prescribed oral isotretinoin by dermatologists, and as well, in Ontario, Canada's largest market, Epuris is now the market leader and holds 51% market share. In Q1, we saw the positive impact of securing broad public payer reimbursement for Actikerall as prescription demand continued to increase, as evidenced by the 59% growth in TRx compared to Q1 2018. We remain on track to achieve key milestones for our recent transactions. Trulance and A-101 are under review with Health Canada, and we anticipate approval for these products in Q4 2019. Together, these products, if approved, have significant revenue potential and would increase Cipher's total revenue in the coming months. In our U.S. licensing business, we are encouraged to see prescriptions for Absorica have stabilized. According to IQVIA, over the last six months, Absorica prescriptions have been performing at approximately 11,000 prescriptions.
Again, this quarter, our responsible debt retirement practices continued. Through the practical management of our expenses and our ability to generate cash from operations, in Q1, our debt was reduced by $2 million. Many thanks to our Cipher colleagues for delivering meaningful progress across all aspects of our business. I will now turn the call over to Nadine to review the financial results. Nadine?
Thank you, Rob. Good morning, and thank you for joining us. I'll now provide a financial overview of our Q1 results. Total net revenue for the quarter was $5.1 million compared to $4.6 million in the prior year comparative period. The main impact year- over- year was higher licensing revenue of $3.3 million compared to $2.8 million in the comparative period. Licensing revenue from Absorica increased to $2.7 million in the Q1 compared to $2.1 million in Q1 2018. Licensing revenue from Lipofen and the AG remained relatively unchanged at $0.5 million. Product revenue during the quarter was adversely impacted by foreign exchange fluctuations. Adjusting for this impact, product revenue increased by 5% to $1.9 million in the current quarter from $1.8 million in the comparative period.
The growth was led by Epuris, which recorded revenue of $1.6 million, up from $1.4 million in Q1 2018. Total operating expenses, which includes COGS, R&D, and SG&A, decreased in the Q1 to $3.6 million from $5.8 million in the prior year comparative period. The decrease related to a $1.8 million impairment charge on intangible assets and transaction costs of $0.4 million both incurred in Q1 2018. Overall, we finished the quarter with net income from continuing operations of $0.8 million compared to a net loss of $1.0 million in the comparative period. Adjusted EBITDA increased to $1.8 million in the quarter compared to $1.0 million in Q1 2018. The company had $7.9 million in cash as of March 31st, 2019, compared to $10.4 million as of December 31st, 2018.
During the quarter, the company generated $1.6 million in cash from operating activities. The company used approximately $2.3 million in cash to service its credit facility and made a milestone payment of $0.5 million related to A-101. The company has $15.5 million remaining on its credit facility as of 31 March , 2019. I will now turn the call back over to Rob for his closing remarks.
Thanks, Nadine. Over the last 12 months, Cipher's product pipeline has been diversified with the addition of multiple late-stage, highly novel, and differentiated products that have the potential to disrupt their respective markets. With a relatively short period of time between transaction closing and the potential first commercial sale, we'll begin to see the impact on growth by this time next year. With numerous opportunities to create value within our product portfolio and pipeline programs, our company remains focused on execution against three priorities: achieving key value milestones across the portfolio, optimizing resource deployment to strengthen EBITDA and cash, and delivering organic growth and profitability in the Canadian segment.
In 2019, we expect to achieve several important catalysts: potential regulatory approval for Trulance from Health Canada, potential regulatory approval for A-101 from Health Canada, commercial launch of Xydalba in the acute care setting, advance our preclinical tattoo removal technology DTR-001 through IND-enabling studies, and top-line results readout for MOB-015 phase III study in North America. We look forward to reporting on our progress against these milestones throughout the balance of 2019 as we drive for exceptional operational execution and continue to search for opportunities that enhance shareholder value. We'll now be pleased to open up the call for questions. Joanna?
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, and questions are polled in the order received. If you are using a speakerphone, please lift the handset before pressing any keys, and your first question is from Bob Gibson from PI Financial. Please go ahead, Bob.
Good morning.
Good morning, Bob.
Good results and great cash flow. Can you give us maybe some color on how you see this progressing throughout the year with all the things you've got in the pipeline? How does your burn rate compare to your cash generation look?
Yeah. Thanks, Bob, for the question. And so maybe I'll make a comment about the catalysts for the year, and then maybe I'll ask Nadine to speak to our OPEX thoughts for the coming year. So we're focused in the last 24 months on a variety of these calls. We've continued to be very focused on the assembly of a portfolio. And now we are certainly leaning more into the execution against the portfolio that's now within the company. We've got a number of important value catalysts that we're focused on, that we have the resources and that are built into our plans for us to mine and to get to that next stage. And we're focused on that in Canada.
I think the second piece before I turn it over to Nadine is, as we've said, on an ongoing basis, we are hyper-focused on controlling our costs and ensuring that we have a cost structure that's reflective of the size of company we are. With a company that has this many great opportunities in front of us, we need to make sure that we have the right resources deployed against the most important and valuable opportunities, and that's something that we're going through on a regular course of our business on a regular basis. Maybe Nadine could speak a little bit about the OPEX in Q1 and how we're thinking about it for the rest of the year.
Yeah. In terms of our SG&A, our current run rate is at approximately what we expect to spend for the remainder of the year. As Rob suggested, we're focused on optimizing our resource deployment and strengthening our EBITDA and cash balances going forward.
Okay. So I can kind of use Q1 as a template going forward then?
That would be reasonable.
Perfect. Thank you so much.
Thank you. Your next question is from Prasath Pandurangan from Bloom Burton & Co. Please go ahead.
Hi. Good morning. Thanks for taking my question. I had just the one. So related to Bob's question, so as we head into the rest of the year and 2020, as we look at the potential approval and launches of Trulance and Eskata, so I wanted to hear your approach on pricing and securing market access for these products in a potentially challenging pricing environment with the new PMPRB rules.
Yeah. Perfect. Thanks, Prasath . Good morning. I appreciate your question. Yeah. So there's no question that in the Canadian marketplace, pricing and market access is literally the number one priority when we're looking at any transaction. The nice thing about what's been going on in Canada relative to changes to the PMPRB landscape is that's been going on for more than 24 months now. And so as we've done all of these transactions in the past, we certainly have taken that into consideration and risk-adjusted the way we were going to go at these opportunities. I'm not going to comment specifically on pricing, or I'm not going to comment specifically on pricing for competitive purposes.
One of the things that I would say about the reimbursement side of the game, several of the products that we have in our future pipeline don't rely on public reimbursement. When I think about Trulance, the potential approval for Trulance, the potential approval for A-101, as well as the potential approval for MOB-015 for onychomycosis, all three of those markets are predominantly private payer markets, and we're not seeing anywhere near the pressure on gross to net in that reimbursement milieu at the moment. Hopefully, that answers your question.
It did. Thank you.
Thank you. Your next question is from Justin Keywood from GMP Securities. Justin, please go ahead.
Good morning. Thanks for taking my call. Just on the Xydalba, have you had any early indication on the receptiveness for this product? And is there any changes in your outlook on the financial impact both in the near term and then in a peak sales value? Thanks.
Yeah. Good morning, Justin. Thanks for the question. So while Xydalba is approved, it is not in the marketplace as of yet. Our team is planning a launch for later this year. Relative to our projections on Xydalba, we're not guiding specifically on that product. We haven't in the past, and we're not going to start. I would refer you to the performance of Xydalba under a different brand name in the U.S. We have seen innovative. We do believe that it had a nice uptake because of its level of innovation. I would also maybe refer you to its other analogs in the Canadian marketplace where other novel anti-infectives have been launched in the recent three to five years and have again done very well because of the level of novelty and innovation in what they offered.
We believe Xydalba is a very innovative asset in the sense that it will be the only. It is approved. So it is currently the only approved 30-minute single-dose treatment for the treatment of acute bacterial skin and skin structure infections. And so we think that this will have a very great interest to infectious disease departments across the country.
Okay. Thank you for that. And then just on the business development pipeline, has that increased recently? How is that progressing? And are the multiples you're seeing reasonable for the opportunities?
Yeah. So maybe I'll make two or three comments on that. I'll make a macro comment, and it's similar to what we've always said. We think that there's lots of deals out there that can be done. There are lots of innovative companies without infrastructure in different markets that are looking for partners who have those capabilities. So that would be my macro comment about the deal flow. Relative to our own personal deal flow, I'm going to refrain from boasting or bolstering our past comments about that because I would say that the majority of our current activities are focused on releasing value from the deals that we have been very successful in transacting in the last 24 months, and I almost said 24 years, and the last 24 months.
And then the last piece with respect to multiples, multiples are what they are. I think that most processes that we've seen and that we're aware of are very competitive, and while the multiples may be coming down slightly, it's still a very competitive seller's market.
Understood. And thank you for taking my questions.
All right, Justin. Thanks.
Thank you. Ladies and gentlemen, as a reminder, should you have any questions, please press star followed by one. And your next question is from Doug Loe from Echelon Wealth Partners. Please go ahead.
Yeah. Thanks very much. And good morning. Rob, I mean, in the notes to your financial statements, I mean, you've frequently talked about Latin American opportunities for launching Absorica, and you indicated this quarter that it's still not approved in Brazil and Mexico specifically. Just wondered if you had any thoughts on rest-of-world opportunities for Absorica as a way to augment your royalty revenue. And then second of all, just on Trevyent, again, in the notes, you indicated timelines over which you expect United to refile its NDA on Trevyent, but you actually don't indicate your own regulatory strategy there. So just an update on that product would be helpful too. I'll leave it there. Thanks.
Hey, good morning, Doug. Thanks for your questions. And I appreciate your continued interest in what's going on in Latin America. Hey, so you're correct. I mean, we still are not approved in Latin America for Absorica. The Italmex regulatory submission in Mexico is a much different process and quite a bit longer. And we don't expect that to be on the market for a number of years. And relative to Sun Pharma, it's their responsibility to file, and they have not yet filed for regulatory approval. And so we don't really have much of a material update on that aside from if it is going to take additional years for us to get to that.
Relative to Trevyent, the only comment I'm going to make on that is that, well, first of all, you agree that you're accurate in the statement that it's important for us to ensure that United has filed in the U.S. before we can get to our own regulatory strategy. We're contemplating that product at the moment relative to what its value can be in Canada, and at this time, we don't have a regulatory or commercial strategy to share or communicate or disclose publicly.
Okay. Great. Thanks, Rob.
Thank you. There are no further questions at this time. You may proceed.
Thank you, Joanna. Thank you, everyone, for your continued interest in Cipher and joining us this morning. Appreciate your questions and the ongoing interest in our company. Have a wonderful weekend.
Ladies and gentlemen, this concludes the conference call for today. We thank you for participating, and we ask that you please disconnect your lines.