MONTREAL, CANADA -- 08/02/07 --
Paladin Labs Inc. (TSX: PLB), a leading Canadian specialty pharmaceutical company, today reported its 2007 second quarter financial results.
Second Quarter Highlights
- Revenues reached $15.4 million, an increase of 37% versus last year
- EBITDA(1) reached a record $5.1 million, a 43% increase over the same period last year
- Acquired Zincofax® from Johnson & Johnson
- Acquired a basket of pharmaceutical products from Shire
- Acquired BioEnevelop Inc., a wholly owned subsidiary of BioEnvelop Technologies Inc.
- Approval by Health Canada of a new one-step dosing regimen for Plan B ®
Subsequent to Second Quarter
- Acquired the Canadian license to a once-daily tramadol from Labopharm
- Obtained a Notice of Compliance from Health Canada for the sale of Seasonale(TM)
"The second quarter was a particularly productive quarter for us. We licensed Labopharm's once-daily tramadol product for Canada. Tramadol, indicated for the treatment of persistent pain of moderate severity, recorded approximately $1.2 billion of sales last year worldwide. Both tramadol and Seasonale(TM) will be launched in the second half of 2007. We also obtained Canadian regulatory approval for Seasonale(TM), Canada's only approved extended-cycle oral contraceptive. Seasonale(TM) recorded approximately $110 million in the U.S. market last year. As evidenced by ex-Canadian sales, these are exciting, significant product opportunities for Paladin and will require us to scale up our marketing and sales activities to maximize the value of these assets. Our promotional efforts behind the launch of Testim®, Trelstar®, Twinject®, Metadol® and the continued support behind Pennsaid® and Oxytrol® are driving strong organic growth and give us the stability to further expand our business," said Jonathan Ross Goodman, President and CEO of Paladin Labs.
Financial Results
Revenue for the second quarter of 2007 increased 37% or $4.2 million to $15.4 million, compared to $11.2 million in the second quarter of 2006. These increases are due primarily to strong performance from the Company's key promoted products, including Twinject®, Testim®, Oxytrol®, Plan B®, Trelstar®, Pennsaid® and Metadol® which increased by 63% in the second quarter of 2007 compared to the corresponding period a year ago. For the six-month period ended June 30, 2007, revenue reached $28.3 million, an increase of 33% from $21.3 million for the same period last year.
Paladin's 2007 second quarter earnings before interest expense, taxes, depreciation, amortization, and unusual items (EBITDA(1)) increased 43% to $5.1 million, compared to EBITDA(1) of $3.6 million in the second quarter of 2006. For the six months ended June 30, 2007, EBITDA(1) increase 55% to $9.9 million from $6.4 million.
Net income before extraordinary gain was $1.0 million or $0.07 per fully diluted share for the quarter and $2.3 million or $0.15 per fully diluted for the six months ended June 30, 2007. Net income for the quarter was $5.9 million or $0.38 per fully diluted share, compared to net income of $1.2 million or $0.08 per fully diluted share in the second quarter a year ago. Net income for the six months ended June 30, 2007 was $7.2 million or $0.47 per fully diluted share, compared to $2.4 million or $0.16 per fully diluted share for the same period last year. This increase in net income includes non-cash extraordinary gain of $4.9 million related to the accounting treatment of the BioEnvelop acquisition.
Selling and marketing expense for the second quarter of 2007 increased 27% to $4.8 million from $3.8 million in the second quarter of 2006. For the six months ended June 30, 2007, selling and marketing expenses were $9.2 million an increase of 28% from $7.1 million for the same period last year. This increase was primarily attributed to increased promotion activities relating to Paladin's launch of Pennsaid®, Testim®, Metadol®, Trelstar® and PravASA®, and continuing promotion activities behind for Twinject®, Plan B® and Oxytrol®. With the additional launches of Tramadol® and Seasonale(TM), over the next 12 months we expect to invest an additional $7 - $8 million versus the prior 12 months.
At June 30, 2007, Paladin's cash, cash equivalents and investments in marketable securities totalled $32.6 million. From this strong cash position, Paladin continues to pursue product acquisition and development opportunities.
Product Developments
During the quarter, Paladin purchased Zincofax®, one of Canada's leading diaper rash creams, from Johnson & Johnson, Inc. According to IMS Canada, 2006 Canadian sales of Zincofax® amounted to approximately $1.5 million. Zincofax®, launched in 1945, has strong brand recognition with physicians and consumers.
Paladin also received approval by Health Canada for a new one-step dosing regimen for Plan B®. Plan B® is an emergency contraceptive that prevents pregnancy from occurring when taken within 72 hours of unprotected sex. This new one-step dosing will allow women to take both pills at the same time, thereby increasing ease of use without any increase in side effects or loss of efficacy.
In addition, Paladin acquired a total of eight products from Shire BioChem Inc., Shire US Inc. Shire US Manufacturing Inc. and Shire LLC. According to IMS Canada, in 2006, Canadian sales of the portfolio of products amounted to approximately $6.7 million.
Subsequently, Paladin completed a licensing and distribution agreement under which Labopharm granted Paladin the exclusive right to market and sell Labopharm's once-daily tramadol product in Canada. Studies have shown that tramadol provides relief from both acute and chronic pain conditions, including osteoarthritis pain, low back pain, cancer pain, post-operative pain and dental pain. Tramadol avoids the potentially serious side effects such as gastrointestinal bleeding that may be caused by NSAIDs and the potential cardiovascular events recently attributed to COX-2 inhibitors.
Lastly, we obtained Health Canada's approval for Seasonale(TM) - the first and only extended-cycle oral contraceptive available in Canada. With Seasonale, Canadian women now have a new contraceptive option that will allow them to have just four periods per year. Seasonale(TM), (levonorgestrel and ethinyl estradiol 0.15mg/0.03 mg tablets), is a safe and effective contraceptive option for women, striking a balance between the benefits of having fewer periods with the reassurance of still having some periods.
Corporate Developments
Paladin acquired all the issued and outstanding shares of BioEnvelop Inc. a wholly owned subsidiary of BioEnvelop Technologies Inc. (TSX VENTURE: BIE). BioEnvelop Inc. has expertise in developing and manufacturing rapidly dissolving edible films for the nutraceutical and pharmaceutical markets. Its products are currently generating revenue in both Canada and the United States.
BioEnvelop's rapidly dissolving film strip technology provides Paladin with a platform from which to develop innovative nutraceutical, OTC and prescription products. Paladin also believes that there exists potential to increase BioEnvelop's performance through focused promotion of its existing film-based product line.
Paladin received regulatory approval from the Toronto Stock Exchange to carry out a normal course issuer bid effective February 27, 2007 to purchase up to 810,000 of its common shares by February 26, 2008. To date, Paladin has repurchased 245,300 common shares at an average price of $10.59.
(1) EBITDA does not have any standardized meaning prescribed by generally accepted accounting principles (GAAP) and therefore may not be comparable to similar measures presented by other public issuers. EBITDA is defined as earnings before interest expense, taxes, depreciation, amortization and unusual items; such as write-downs and gains (losses) on intellectual property and investments. EBITDA performance and guidance is presented herein because Paladin management believes that, in addition to net income, EBITDA is a useful supplemental measure of the Company's financial performance.
Conference Call Notice
Paladin will host a conference call to discuss its second quarter results on Thursday, August 2, 2007, at 10:00 a.m. EST. The dial-in number for the conference call is 1-800-587-1893 or 416-644-3424. The call will be audio-cast live and archived for 30 days at www.paladinlabs.com.
About Paladin Labs
Paladin Labs Inc., headquartered in Montreal, Canada, is a specialty pharmaceutical company focused on acquiring or in-licensing innovative pharmaceutical products for the Canadian market. With this strategy, a focused national sales team and proven marketing expertise, Paladin has evolved into one of Canada's leading specialty pharmaceutical companies. Paladin's shares trade on the Toronto Stock Exchange under the symbol PLB. For more information about Paladin, please visit the Company's web site at www.paladinlabs.com.
This news release may contain forward-looking statements and predictions. These forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. The Company considers the assumptions on which these forward-looking statements are based to be reasonable at the time they were prepared, but cautions that these assumptions regarding the future events, many of which are beyond the control of the Company and its subsidiaries may ultimately prove to be incorrect. Factors and risks, which could cause actual results to differ materially from current expectations, are discussed in the annual report as well as in the Company's Annual Information Form for the year ended December 31, 2006. The Company disclaims any intention or obligation to update or revise any forward-looking statements whether a result of new information, future events, or except as required by law. For additional information on risks and uncertainties relating to these forward-looking statements, investors should consult the Company's ongoing quarterly fillings, annual report and Annual Information Form and other fillings found on SEDAR at www.sedar.com
CONSOLIDATED BALANCE SHEETS
(In thousands of Canadian dollars)
June 30 December 31
2007 2006
$ $
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(unaudited)
ASSETS
Current
Cash and cash equivalents 3,853 2,769
Marketable securities 28,708 33,305
Accounts receivable 10,283 9,495
Inventory 4,581 3,635
Other current assets 2,410 1,306
Investment tax credits receivable 831 831
Future income tax asset 4,940 2,550
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Total current assets 55,606 53,891
Property, plant and equipment 181 151
Pharmaceutical product licenses and
rights 28,340 21,482
Deferred charges 2,525 3,476
Investments 3,371 3,217
Future income tax asset 6,218 3,634
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Total assets 96,241 85,851
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LIABILITIES AND SHAREHOLDERS'
EQUITY
Current
Accounts payable and accrued
liabilities 7,871 8,208
Accounts payable to related parties 1,962 1,274
Income taxes payable 953 279
Balance of license agreements payable - 231
Balance of sale payable 376 227
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Total current liabilities 11,162 10,219
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Long-term
Balance of sale payable 506 494
Future income tax liability 927 1,397
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Total liabilities 12,595 12,110
Shareholders' equity
Capital stock 60,860 58,807
Other paid-in capital 1,602 1,223
Retained earnings 20,678 13,711
Accumulated other comprehensive
income 506 -
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Total shareholders' equity 83,646 73,741
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Total liabilities and shareholders'
equity 96,241 85,851
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CONSOLIDATED STATEMENTS OF INCOME
(In thousands of Canadian dollars except for share and per share amounts)
(unaudited)
Three-month period ended Six-month period ended
June 30 June 30
2007 2006 2007 2006
$ $ $ $
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Revenues 15,436 11,241 28,329 21,373
Cost of sales 3,734 2,696 6,206 5,261
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Gross profit 11,702 8,545 22,123 16,112
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Expenses (income)
Selling and marketing 4,823 3,808 9,171 7,146
General and adminis-
trative 1,557 1,057 2,662 2,371
Research and development 584 476 1,115 788
Interest income, net (356) (366) (739) (600)
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Earnings before under-
noted items 5,094 3,570 9,914 6,407
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Amortization of
intangible assets and
deferred charges 3,274 1,734 5,892 3,611
Net unrealized loss on
derivative instruments 34 - 244 -
Gain on disposal of
investment - - (74) -
Other income - - - (724)
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Income before income
taxes 1,786 1,836 3,852 3,520
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Provision for income
taxes
Current 520 - 674 -
Future 229 622 877 1,156
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749 622 1,551 1,156
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Net income before
extraordinary gain 1,037 1,214 2,301 2,364
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Extraordinary gain
(net of $nil taxes) 4,874 - 4,874 -
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Net income for the period 5,911 1,214 7,175 2,364
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Earnings per share
before extraordinary
gain
Basic 0.07 0.08 0.15 0.16
Diluted 0.07 0.08 0.15 0.16
Earnings per share
Basic 0.39 0.08 0.48 0.16
Diluted 0.38 0.08 0.47 0.16
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Weighted average number
of shares outstanding
Basic 15,100,003 14,891,946 15,052,122 14,830,676
Diluted 15,437,995 15,112,323 15,382,160 15,026,206
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian dollars)
(unaudited)
Three-month period ended Six-month period ended
June 30 June 30
2007 2006 2007 2006
$ $ $ $
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Operating activities
Net income 5,911 1,214 7,175 2,364
Add items not affecting
cash
Amortization 3,292 1,750 5,930 3,644
Stock based compensation
expense 391 212 520 346
Future income taxes (5,541) 620 (4,893) 1,166
Unrealized foreign
exchange gain (2) (3) (2) (3)
Stock dividends - - - (724)
Gain on disposal of
investment - - (74) -
Net unrealized loss on
derivative instruments 34 - 244 -
Accreted interest (13) - (24) -
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4,072 3,793 8,876 6,793
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Net change in non-cash
balances relating to
operations (218) (939) (519) (1,602)
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Cash flows from operating
activities 3,854 2,854 8,357 5,191
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Investing activities
Additions to
pharmaceutical
product licenses and
rights, and deferred
charges (11,758) (202) (11,758) (3,654)
Purchases of short-
term marketable
securities - (27,133) (25,986) (29,712)
Maturities of short-
term marketable
securities 9,292 20,076 41,062 30,055
Purchases of long-term
marketable securities - - (10,378) -
Proceeds from the
disposal of investment - - 232 -
Investment in portfolio
company - - - (500)
Business acquisition (650) - (650) -
Acquisition of property,
plant and equipment (32) - (71) (39)
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Cash flows (used in)
investing activities (3,148) (7,259) (7,549) (3,850)
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Financing activities
Common shares issued for
cash 552 227 880 847
Accounts payable related
to the acquisition of
intellectual property
and deferred charges - (234) (231) (234)
Repurchase of shares - - (373) -
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Cash flows from (used in)
from financing activities 552 (7) 276 613
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Net change in cash and
cash equivalents during
the period 1,258 (4,412) 1,084 (1,954)
Cash and cash equivalents,
beginning of period 2,595 9,201 2,769 2,835
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Cash and cash equivalents,
end of period 3,853 4,789 3,853 4,789
-------------------------------------------------------------------------
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Cash and cash equivalents 3,853 4,789
Short-term marketable
securities 28,708 39,141
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32,561 43,930
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Contacts:
Paladin Labs Inc.
Samira Sakhia, Chief Financial Officer
514-340-5067
514-344-4675 (FAX)
info@paladin-labs.com
www.paladinlabs.com
