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(Reuters) - Cipher Pharmaceuticals Inc CPH.TO, a Canadian specialty pharmaceuticals manufacturer, has hired an investment bank to review strategic alternatives, including a potential sale, people familiar with the matter said.
The strategic review comes amid increased U.S. scrutiny of specialty drug prices, which has weighed on the valuations of many Canadian specialty pharmaceutical companies with U.S. revenues.
There is no certainty that a sale of Cipher will occur, the people cautioned, asking not to be identified because the deliberations are confidential.
Shares of Cipher shot up as much as 22 percent after the Reuters report. They were up 8.3 percent on Monday afternoon in Toronto.
"The company is working with an advisor to consider various strategic alternatives potentially available to enhance shareholder value, with a focus on the U.S. business," Cipher said in a press statement following the report.
Toronto, Ontario-based Cipher, which has a market capitalization of $89.5 million, specializes in treatments for skin disorders. Its products include Nuvail, a topical film that treats fragile nails, and Bionect, which treats skin irritations. It has about $35 million in debt, according to regulatory filings.
Cipher shares have dropped more than 70 percent from 2015 highs amid a broader pullback in the specialty pharmaceutical sector that has also impacted shares of Valeant Pharmaceuticals International Inc (VRX.TO) and Concordia International Corp CXR.TO.
Concordia explored strategic alternatives earlier this year, before opting to improve liquidity by raising debt. Valeant has said it plans to sell about $8 billion in assets to help pay down its $30 billion debt pile.
Cipher has been in the spotlight since its largest shareholder, John Mull, in July published a letter calling for the company's board to consider trimming its size, replacing some members of the management team and reviewing its business model. He did not call on the company to sell itself.
In August, the board reconstituted itself, with four board members stepping down and three joining. Last month, Mull, who owns nearly 40 percent of the company, was appointed chair of the board of directors and Stephen Lemieux took over from Norman Evans as chief financial officer.
Last year, Cipher acquired dermatology company Innocutis Holdings LLC for $45 million. In May, it bought the rights to a tattoo removal cream from Dalhousie University in Nova Scotia.
Reporting by Carl O'Donnell in New York and John Tilak in Toronto; Editing by Meredith Mazzilli, Bernard Orr