Intellipharmaceutics Intl. Inc. (IPCIF)

[Golden Cross]

News out - Intellipharmaceutics Announces Third Quarter 2019 Results
Press Release | 10/11/2019

News Link
https://www.otcmarkets.com/stock/IPCIF/news/Intellipharmaceutics-Announces-Third-Quarter-2019-Results?id=243051

TORONTO, ON / ACCESSWIRE / October 11, 2019 / Intellipharmaceutics International Inc. (OTCQB:IPCIF) and (TSX:IPCI) ("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 and nine months ended August 31, 2019. All dollar amounts referenced herein are in United States dollars unless otherwise noted.

On October 4, 2019 we announced that following the filing of a bankruptcy stay by Purdue Pharma L.P., the Company's ongoing litigation cases, number 1:17-cv-00392-RGA and 1:18-cv-00404-RGA-SRF between Purdue Pharma L.P. et al and Intellipharmaceutics, have been stayed and the existing trial dates in both cases have been vacated by orders issued in each case by the judge in the District of Delaware on October 3, 2019. No new dates were given for reinstatement; however, the parties are required to provide a further status report to the judge in each case no later than December 15, 2019. The previous 30-month stay date of March 2, 2020, remains unchanged at this time, absent a further order of the judge. There can be no assurance when the now-vacated dates will be reinstated. The Company and its management intend to continue to vigorously defend against the claims of patent infringement made by Purdue Pharma L.P. in the above cases. However, there can be no assurance that the above cases can be resolved in the Company's favor.
On September 30, 2019, pursuant to an Abbreviated New Drug Application ("ANDA") Sale Agreement (the "ANDA Agreement") we sold Levetiracetam extended-release tablets 500mg and 750 mg to the ANDA Repository, LLC (the "Purchaser") in exchange for a purchase price of $1.00 for "Transferred ANDA". "Transferred ANDA" is defined as all of the assets relating to the ANDA for Levetiracetam extended-release tablets 500mg and 750 mg. Additionally, pursuant to the ANDA Agreement, we agreed to pay the Purchaser an annual fee for each fiscal year, equal to 50% of the difference between our United States Food and Drug Administration ("FDA") Program Fee tier based on the total number of our approved ANDAs plus the Transferred ANDA. and our Program Fee based on the total number of our approved ANDAs less the Transferred ANDA. Further, under the ANDA Agreement, we have the option to repurchase the Levetiracetam ANDA for a purchase price of $1 .at any time according to the terms of the agreement.
On September 5, 2019 we announced that the Company has entered into a license and commercial supply agreement with Tris Pharma, Inc. ("Tris"), by which the Company has granted Tris an exclusive license to market, sell and distribute in the United States, Desvenlafaxine Succinate ER in the 50 and 100 mg strengths (the "licensed products") approved for sale in the U.S. market by the U.S. Food and Drug Administration FDA.
On August 15, 2019 we announced that the Company has entered into a license and commercial supply agreement with Tris, by which the Company has granted Tris an exclusive license to market, sell and distribute in the United States, Quetiapine ER in the 50, 150, 200, 300 and 400 mg strengths (the "licensed products") approved for sale in the US market by the FDA.
On July 24, 2019 we announced that the Company has been advised by the FDA that the FDA "is postponing product-specific advisory committee meetings for opioid analgesics," including the one previously scheduled to discuss the Company's NDA, "while it continues to consider a number of scientific and policy issues relating to this class of drugs." According to the FDA, the reason for the postponement is not unique to our Product and the Anesthetic and Analgesic Drug products Advisory Committee ("AADPAC") meeting earlier planned by the FDA, to discuss our NDA will be rescheduled at a future date. The FDA informed the Company that it would continue to review the Company's NDA according to the existing Prescription Drug User Fee Act ("PDUFA") timeline, but noted that, due to the postponement of the AADPAC meeting, it is possible that the FDA may be unable to meet the PDUFA goal date of August 28, 2019. A previously scheduled Advisory Committee meeting in respect of the NDA, was postponed by the FDA. The FDA did not meet the goal date of August 28, 2019, and the Company is awaiting to hear back from the FDA for an Advisory Committee meeting date and a new PDUFA goal date.
On July 8, 2019 we announced that the Company has obtained an equity financing commitment of up to $10,000,000 from Silverback Capital Corporation, a private investment firm ("Silverback Capital"). During the 36-month term of the equity financing commitment, we may sell shares of its common stock to Silverback Capital up to the $10,000,000 total commitment at a 25% discount to the volume weighted average price of the Company's common stock for the five trading days prior to the date the Company provides notice to Silverback Capital, or if the maximum discount rate allowed by the Company's principal exchange is less than 25%, the maximum discount rate allowed. The Company will determine, in its sole discretion, the timing and amount of any sales of its stock, subject to certain conditions. Upon notice by the Company, Silverback Capital is required to purchase the shares, subject to certain conditions, including, but not limited to, that there is an effective U.S. registration statement covering resale of the shares. There can be no assurance that the equity financing commitment from Silverback Capital can be completed as planned, or at all.
On June 4, 2019, the Company presented at the 9th annual LD Micro Invitational. LD Micro was founded in 2006 with the sole purpose of being an independent resource in the microcap space and now hosts several influential events annually.
On May 30, 2019 we announced that the Company's pre-existing license to conduct activities with Cannabidiol ("CBD") has been migrated by Health Canada to a Cannabis Drug License ("CDL") under the Cannabis Regulations. Our new Cannabis Drug License allows the Company to continue to possess cannabis, produce a drug containing cannabis and sell a drug containing cannabis. The CDL is unique from other forms of cannabis licenses in Canada as, according to Health Canada, it is a requirement for any company that intends to produce and sell a prescription drug containing cannabis or cannabinoids. Only companies, such as ours, with a Health Canada issued Drug Establishment License are eligible to apply for a Cannabis Drug License. There can be no assurance that we will be able to develop cannabis-based products or that any cannabis-based product candidates we develop will ever be successfully commercialized or produce significant, or any, revenue for us.
The Company held its Annual Meeting of its shareholders at which the Company's shareholders voted to ratify the reappointment of MNP LLP, Chartered Professional Accountants ("MNP"), as the auditor of the Company and to authorize the directors to fix the auditor's remuneration for MNP and re-electing the following members of the Company's Board of Directors Dr. Isa Odidi, Dr. Amina Odidi, Bahadur Madhani, Kenneth Keirstead, Norman Betts and Shawn Graham.
On May 10, 2019 we announced that the Company has received approval from the FDA for the Company's ANDA for desvenlafaxine extended-release tablets in the 50 and 100 mg strengths. The approved product is a generic equivalent of the branded product Pristiq®. Desvenlafaxine extended-release tablets are a serotonin and norepinephrine reuptake inhibitor ("SNRI") indicated for the treatment of major depressive disorder ("MDD"). There can be no assurance that the Company's desvenlafaxine extended-release 50 mg, and 100 mg tablets will be successfully commercialized and produce significant revenue for us.
On April 24, 2019, an order was issued, setting the trial date for the Company's ongoing Purdue litigation case, case number 17-392 in the District of Delaware, with the trial is scheduled to begin on November 12, 2019 and a decision is expected by March 2, 2020. The 30-month stay date is now March 2, 2020. On April 4, 2019, the U.S. Federal Circuit Court of Appeals affirmed the invalidity of one Purdue Oxycontin formulation patent, subject to further appeal to the U.S. Supreme Court. The Company and its management intend to continue to vigorously defend against these claims and firmly believe that we do not infringe the subject patents.
On April 12, 2019, we and Mallinckrodt LLC ("Mallinckrodt") mutually agreed to terminate our license and commercial supply agreement, effective no later than August 31, 2019. Under the terms of our mutual agreement, Mallinckrodt was released from certain obligations under the license and commercial supply agreement as of April 12, 2019. Effective August 15, 2019 the Mallinckrodt agreement was terminated.
On April 4, 2019, a tentative approval from TSX was received for a proposed refinancing of the 2013 Debenture subject to certain conditions being met. As a result of the proposed refinancing, the principal amount owing under the 2013 Debenture was refinanced by a new debenture (the "2019 Debenture"). On May 1, 2019, the 2019 Debenture was issued with a principal amount of $1,050,000, that will mature on November 1, 2019, bear interest at a rate of 12% per annum and be convertible into 1,779,661 common shares of the Company at a conversion price of $0.59 per common share. Dr. Isa Odidi and Dr. Amina Odidi, who are shareholders, directors, and executive officers of the Company, are the holders of the 2019 Debenture.
In March 2019, we announced that we had resubmitted, and, that the FDA acknowledged receipt of our resubmission of the Oxycodone ER NDA filed on February 28, 2019. The FDA informed us that it considers the resubmission a complete response to the September 22, 2017, action letter it issued in respect of the NDA. The FDA also assigned a PDUFA goal date of August 28, 2019 A previously scheduled Advisory Committee meeting in respect of the NDA, was postponed by the FDA. The FDA did not meet the goal date of August 28, 2019, and the Company is awaiting to hear back from the FDA for an Advisory Committee meeting date and a new PDUFA goal date. However, there can be no assurance that the Company will not be required to conduct further studies for Oxycodone ER, that the FDA will approve any of the Company's requested abuse-deterrent label claims or that the FDA will meet its deadline for review and ultimately approve the NDA for the sale of Oxycodone ER in the U.S. market, or that it will ever be successfully commercialized.
As more fully described below (under the heading "NASDAQ DELISTING AND OTCQB QUOTATION"), in March 2019, the Nasdaq Hearings Panel (the "Nasdaq Panel") determined to delist our shares from Nasdaq based upon our non-compliance with the $1.00 minimum bid price requirement, as set forth in Nasdaq Listing Rule 5550(a)(2). The suspension of trading on Nasdaq took effect at the open of business on March 21, 2019. Our shares began trading on the OTCQB, which is operated by OTC Markets Group Inc., commencing on March 21, 2019. The Company is also listed on the Toronto Stock Exchange and the Company's non-compliance with Nasdaq's bid price requirement does not impact the Company's listing or trading status on that exchange.
On February 21, 2019, we and our CEO, Dr. Isa Odidi (the "Defendants"), were served with a Statement of Claim filed in the Superior Court of Justice of Ontario (the "Court") for a proposed class action under the Ontario Class Proceedings Act (the "Action"). The Action was brought by Victor Romita, the proposed representative plaintiff (the "Plaintiff"), on behalf of a class of Canadian persons (the "Class") who traded shares of the Company during the period from February 29, 2016 to July 26, 2017 (the "Period"). The Statement of Claim, under the caption Victor Romita v. Intellipharmaceutics International Inc. and Isa Odidi, asserts that the Defendants knowingly or negligently made certain public statements during the Period that contained or omitted material facts concerning Oxycodone ER abuse-deterrent oxycodone hydrochloride extended release tablets. The Plaintiff alleges that he and the Class suffered loss and damages as a result of their trading in the Company's shares during the Period. The Plaintiff seeks, among other remedies, unspecified damages, legal fees and court and other costs as the Court may permit. On February 26, 2019, the Plaintiff delivered a Notice of Motion seeking the required approval from the Court, in accordance with procedure under the Ontario Securities Act, to allow the statutory claims under the Ontario Securities Act to proceed with respect to the claims based upon the acquisition or disposition of the Company's shares on the TSX during the Period. No date has been set for the hearing of the Notice of Motion. No date has been set for the hearing of the certification application. The Defendants intend to vigorously defend the action and have filed a Notice of Intent to Defend.
In January 2019, we announced that we had commenced a research and development ("R&D") program of pharmaceutical CBD based products. As part of this R&D program, we filed provisional patent applications with the United States Patent and Trademark Office pertaining to the delivery and application of cannabinoid-based therapeutics, began talks with potential commercialization partners in the cannabidiol industry, and identified a potential supplier of CBD. We hold a Health Canada Drug Establishment License (or "DEL") and a dealer's license under the Narcotics Control Regulations ("NCR"). Under the NCR license, we are currently authorized to possess, produce, sell and deliver drug products containing various controlled substances, including CBD, in Canada. We also have a CDL from Health Canada.
Results of Operations

The Company recorded net loss for the three months ended August 31, 2019 of $1.4 million or $0.07 per common share, compared with a net loss of $4.0 million or $0.91 per common share for the three months ended August 31, 2018. In the three months ended August 31, 2019, the lower net loss is attributed to the higher recognition of Mallinckrodt upfront fees due to the change in contract term with Mallinckrodt which expired August 31, 2019 compared to the original ten-year term and to a greater extent, sales of generic Seroquel XR® shipped to Mallinckrodt, combined with increased administrative expense related to professional and legal fees and decreased R&D expenses. In the three months ended August 31, 2018, the net loss was attributed to lower recognition of Mallinckrodt upfront fees combined with increased R&D expenses.

The Company recorded revenues of $1.7 million for the three months ended August 31, 2019 versus $0.4 million for the three months ended August 31, 2018. Such revenues consisted primarily of licensing revenues from commercial sales of the 15, 30 and 40 mg strengths of our generic Focalin XR® under the Par agreement. The higher increased revenue for the three months ended August 31, 2019 is primarily due to the change in contract term with Mallinckrodt that expired on August 31, 2019 compared to the original ten-year term. Beginning in early 2018, we began to see a significant impact from aggressive pricing by competitors, resulting in a marked increase in gross-to-net deductions such as wholesaler rebates, chargebacks and pricing adjustments. While the gross-to-net deductions fluctuate on a quarter over quarter basis, profit share payments for the last quarter has been consistent over the same period in 2018.

Expenditures for R&D for the three months ended August 31, 2019 were lower by $1.7 million compared to the three months ended August 31, 2018. The decrease is primarily due to significantly lower Biostudies and patent litigation expenses partially offset by higher third-party consulting fees.

Selling, general and administrative expenses were $1.3 million for the three months ended August 31, 2019 in comparison to $0.8 million for the three months ended August 31, 2018, resulting in an increase of $0.5 million. The increase is due to higher expenses related to administrative costs and marketing cost, partially offset by a decrease in wages and benefits.

The Company had cash of $0.05 million as at August 31, 2019 compared to $1.3 million as at May 31, 2019. The decrease in cash was mainly due to expenditures for R&D and selling, general, and administrative expenses which are partially offset by receipt from Par and cash inflow provided from financing activities. The decrease in cash during the three months ended August 31, 2019 was mainly a result of our ongoing expenditures in R&D and selling, general, and administrative expenses, which included increased legal fees.

As of August 31, 2019, our cash balance was $54,359. We currently expect to satisfy our operating cash requirements from cash on hand and quarterly profit share payments supplemented by proceeds from equity issuances as necessary. The Company may need to obtain additional funding prior to that time as we further the development of our product candidates. Potential sources of capital may include payments from licensing agreements, cost savings associated with managing operating expense levels, equity and/or debt financings and/or new strategic partnership agreements which fund some or all costs of product development. We intend to utilize the capital markets to bridge any funding shortfall and to provide capital to continue to advance our most promising product candidates. Our future operations are highly dependent upon our ability to source additional capital to support advancing our product pipeline through continued R&D activities and to fund any significant expansion of our operations. Our ultimate success will depend on whether our product candidates receive the approval of the FDA or Health Canada and whether we are able to successfully market approved products. We cannot be certain that we will be able to receive FDA or Health Canada approval for any of our current or future product candidates, that we will reach the level of sales and revenues necessary to achieve and sustain profitability, or that we can secure other capital sources on terms or in amounts sufficient to meet our needs or at all.

There can be no assurance that we will enter into new license and commercial supply agreement for the marketing and distribution of products which have been licensed under the Mallinckrodt agreement, that our products will be successfully commercialized or produce significant revenues for us. Also, there can be no assurance that we will not be required to conduct further studies for our Oxycodone ER product candidate, that the FDA will approve any of our requested abuse-deterrent label claims or that the FDA will meet its deadline for review and ultimately approve the NDA for the sale of our Oxycodone ER product candidate in the U.S. market, that we will be successful in submitting any additional ANDAs or NDAs with the FDA or Abbreviated New Drug Submissions ("ANDSs") 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, that any of our products or product candidates will receive regulatory approval for sale in other jurisdictions, or that any of our products will ever be successfully commercialized and produce significant revenue for us. Moreover, there can be no assurance that any of our provisional patent applications will successfully mature into patents, or that any cannabidiol-based product candidates we develop will ever be successfully commercialized or produce significant revenue for us.

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 a wide range of existing and new pharmaceuticals. Intellipharmaceutics has developed several drug delivery systems based on this technology platform, with a pipeline of products (some of which have received FDA approval) in various stages of development. The Company has ANDA and NDA 505(b)(2) drug product candidates in its development pipeline. These include the Company's Oxycodone ER based on its proprietary nPODDDS™ novel Point Of Divergence Drug Delivery System (for which an NDA has been filed with the FDA), and Regabatin™ XR (pregabalin extended-release capsules).