Cipher grants Vertical exclusive U.S. distribution rights to CIP-TRAMADOL ER

Cipher Pharmaceuticals Inc. (TSX: DND) ("Cipher" or "the Company") today announced that it has entered into a definitive distribution and supply agreement with Vertical Pharmaceuticals, Inc. ("Vertical"), a U.S.-based specialty pharmaceutical company, under which Cipher has granted Vertical the exclusive right to market, sell and distribute CIP-TRAMADOL ER in the United States.

CIP-TRAMADOL ER is a patent-protected, extended-release formulation of tramadol, which is used for the treatment of moderate to moderately severe chronic pain in adults. The product received approval from the U.S. Food and Drug Administration in 2010.

"Completing a commercial supply agreement for our extended-release tramadol represents another important achievement for our organization and provides an additional revenue stream to support our continued growth," said Larry Andrews, President and Chief Executive Officer of Cipher Pharmaceuticals. "With its experienced, entrepreneurial leadership team and strong promotional commitment behind this product, we believe Vertical is well positioned to penetrate the U.S. tramadol market."

Under the terms of the agreement with Vertical, Cipher received an initial upfront payment of US$0.5 million with additional payments totaling US$1.0 million due upon the first commercial sale of the product. Cipher is also eligible to receive future payments of approximately US$4.0 million contingent upon the achievement of certain sales milestones. In addition, Cipher will receive a royalty on net sales in the mid-teens. Cipher is responsible for product supply and manufacturing, which will be fulfilled by its partner, Galephar Pharmaceutical Research.

Vertical plans to launch the product in Q3 2011 under the trade name ConZip™. Vertical's dedicated sales force will comprise 60 representatives at the time of product launch, with plans for further expansion in the first half of 2012.

Steve Squashic, President of Vertical, said, "We are excited about the opportunity in the large and growing U.S. tramadol market, where there were more than 36 million tramadol prescriptions written last year. ConZip's unique capsule formulation comprising an immediate-release tablet and sustained-release beads, combined with having no food effect, will make it an attractive alternative for clinicians and chronic pain sufferers. It will immediately become our flagship product."

VelocityHealth Securities, Inc. acted as the exclusive financial advisor to Vertical on this transaction.

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