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Press release from Marketwire

Paladin Reports Third Quarter 2011 Financial Results Achieves Record Quarterly Revenues

Thursday, November 03, 2011

Paladin Reports Third Quarter 2011 Financial Results Achieves Record Quarterly Revenues08:00 EDT Thursday, November 03, 2011MONTREAL, CANADA--(Marketwire - Nov. 3, 2011) -Paladin Labs Inc. ("Paladin") (TSX:PLB), a leading Canadian specialty pharmaceutical company, today reported its third quarter 2011 financial results. 2011 Third Quarter HighlightsRevenues reached a record $36.7 million, an increase of 15% over the same period last year Net income was $9.5 million an increase of 19% over the same period last year EBITDA1 was $18.1 million, an increase of 14% over the same period last year Entered into a definitive agreement to acquire all of the issued and outstanding common shares of Labopharm Inc. ("Labopharm") Acquired common shares of Afexa Life Sciences Inc. ("Afexa") (TSX:FXA) through market purchases on the Toronto Stock Exchange Announced a take-over bid for any and all outstanding shares of Afexa and subsequently increased its offer to $0.81 per share Entered into a distribution agreement with Common Sense Limited, a privately-owned Israeli company, under which Paladin received the exclusive rights to market and sell AL-SENSE OTC and VS-SENSE OTC in Canada, Latin America and Sub-Saharan Africa. Subsequent to the quarter ended September 30, 2011:Completed the acquisition of Labopharm following court and shareholder approval Announced that it would not take up any shares of Afexa due to the non-fulfillment of a condition of its offer and tendered its shares in Afexa to Valeant Pharmaceuticals International Inc. ("Valeant") (NYSE:VRX)(TSX:VRX) resulting in a gain of over $5 million "In the third quarter we continued our commitment to increasing shareholder value through disciplined deal-making. We entered into an agreement to acquire Labopharm which strengthens our top line and provides further opportunities to cultivate important international partnerships. We also tendered our shares of Afexa for a gain of $5.1 million after withdrawing our offer. With our strong, committed management team and our dedicated board of directors we continue to hold true to our values and progress towards our goal of becoming an international specialty pharmaceutical company," said Mark Beaudet, interim President and CEO of Paladin Labs.Financial ResultsRevenues increased $4.9 million or 15% to a record $36.7 million in the third quarter from $31.8 million for the same quarter last year. The increase in revenues for the third quarter of 2011 is attributable to the acquisition of Tempra® and the sales growth of certain significant promoted products, including Tridural®, Trelstar®, Testim®, Metadol®, Plan B® and Abstral® which combined increased by 11%.Third quarter 2011 EBITDA¹ increased 14% to $18.1 million, compared to EBITDA¹ of $15.8 million in the third quarter of 2010. Net income for the quarter was $9.5 million or $0.46 per fully diluted share, compared to net income of $8.0 million or $0.41 per fully diluted share in the third quarter a year ago. At September 30, 2011, Paladin's cash, cash equivalents and investments in marketable securities totalled $226.7 million.Product DevelopmentsDuring the quarter ended September 30, 2011, Paladin entered into a distribution agreement with Common Sense Limited, a privately-owned Israeli company, under which Paladin received the exclusive rights to market and sell AL-SENSE OTC and VS-SENSE OTC in Canada, Latin America and Sub-Saharan Africa. AL-SENSE OTC is a novel diagnostic product that will provide women with a reliable diagnostic test to detect amniotic fluid leakage during pregnancy from the comfort of their own home. If undetected, this condition may cause complications for both the pregnant woman and her fetus. VS-SENSE OTC is a diagnostic product for the detection of bacterial vaginosis or trichomonas infection for women of reproductive age that affords women the option to self-test for potential vaginal infections.Corporate DevelopmentsOn August 18, 2011, the Company announced that its President and CEO, Mr. Jonathan Ross Goodman, was involved in an accident and was hospitalized with serious injuries. As Mr. Goodman was unable to perform his duties as President and CEO, the Board of Directors of Paladin asked Mr. Mark Beaudet, Co-Founder, Director and Vice President Marketing and Sales of Paladin, to assume such duties on an interim basis. Mr. Goodman is pursuing a recovery and rehabilitation program. As a result, Mr. Goodman will remain absent from the Company for an indeterminate period of time. The Company will provide further updates on Mr. Goodman's condition only when a change in circumstance warrants same.In early August, Paladin made an offer to acquire any and all of the issued and outstanding shares of Afexa for $0.55 per share (the "Offer"). On August 30, 2011, Paladin was advised that Valeant, through a subsidiary, had made an offer to acquire the issued and outstanding common shares of Afexa. Following this offer, on September 26, 2011, the Company increased its Offer to $0.81 per share. On September 30, 2011 Valeant announced it increased its bid to $0.85 per share. Subsequent to the third quarter, the Company announced it would not take up any shares under its Offer to acquire any and all of the issued and outstanding common shares of Afexa due to the non-fulfillment of a condition to the Offer. The Company tendered its shares to Valeant and recorded a gain of over $5 million.On August 17, 2011, the Company entered into a definitive agreement pursuant to which the Company would acquire all of the issued and outstanding common shares of Labopharm at a price of $0.2857 per share in cash, representing a 57.4% premium over the volume-weighted average price of Labopharm's shares of $0.1815 for the 30 trading days prior to the August 17, 2011 announcement. On October 7, 2011, following Labopharm shareholder and court approval, Paladin completed the acquisition of Labopharm.Paladin received regulatory approval from the Toronto Stock Exchange to carry out a normal course issuer bid to purchase up to 935,367 of its common shares effective May 30, 2011. To date Paladin has purchased 16,704 shares under this normal course issuer bid.1EBITDA – Non-IFRS Financial Measures The term EBITDA (earnings before interest, taxes, depreciation and amortization) does not have any standardized meaning under International Financial Reporting Standards ("IFRS") and therefore may not be comparable to similar measures presented by other companies. The Company defines EBITDA as earnings before interest expense, other finance (income) expense, taxes, amortization, foreign exchange gains (losses), share of net income in an associate and unusual items; such as write-downs and gains (losses) on intellectual property and investments. EBITDA is calculated and presented consistently from period to period and agrees, on a consolidated basis, with the amount disclosed as "Earnings before under-noted items" on the consolidated statements of income. The Company believes EBITDA to be an important measurement that allows it to assess the operating performance of its ongoing business on a consistent basis without the impact of amortization expenses. The Company excludes amortization expenses because their level depends substantially on non-operating factors such as the historical cost of intangible assets. The Company's method for calculating EBITDA may differ from that used by other issuers and, accordingly, this measure may not be comparable to EBITDA used by other issuers. Conference Call Notice Paladin will host a conference call to discuss its third quarter results on Thursday, November 3, 2011, at 10:00 a.m. ET. The dial-in number for the conference call is 800-694-6012 or 416-641-6670. The call will be audio-cast live and archived for 30 days at www.paladinlabs.com. About Paladin LabsPaladin Labs Inc., headquartered in Montreal, Canada, is a specialty pharmaceutical company focused on acquiring or in-licensing innovative pharmaceutical products. With this strategy, a focused national sales team and proven marketing expertise, Paladin has evolved into one of Canada's leading specialty pharmaceutical companies. For more information, please visit the Company's web site at www.paladinlabs.comThis press 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, 2010. The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information or future events and 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 filings, annual report and Annual Information Form and other fillings found on SEDAR at www.sedar.com.INTERIM CONSOLIDATED BALANCE SHEETS[In thousands of Canadian dollars][unaudited]September 30, 2011December 31, 2010ASSETSCurrentCash and cash equivalents83,33196,295Marketable securities143,36943,094Trade and other receivables18,57221,912Inventories12,26713,877Income tax receivable4217Other current assets8704,717Total current assets258,451179,912Investment in an associate22,17015,739Financial assets31,99722,835Property, plant and equipment125221Pharmaceutical product licenses and rights14,27620,594Investment tax credits recoverable14,87414,736Deferred income tax assets23,52626,586Total assets365,419280,623LIABILITIES AND SHAREHOLDERS' EQUITYCurrentPayables, accruals and provisions34,11436,901Income tax payable20,47811,254Deferred revenue6191,939Balances of sale payable2,3341,145Total current liabilities57,54551,239Balances of sale payable1,024539Total liabilities58,56951,778Shareholders' equityShare capital165,396123,136Other paid-in capital5,1564,892Other capital reserves1,522175Retained earnings134,776100,642Total shareholders' equity306,850228,845Total liabilities and shareholders' equity365,419280,623INTERIM CONSOLIDATED INCOME STATEMENTS[In thousands of Canadian dollars except for share and per share amounts][unaudited]Three months ended September 30Nine months ended September 302011201020112010Revenues36,66031,782104,38395,555Cost of sales10,2497,72127,75125,746Gross profit26,41124,06176,63269,809Expenses (income)Selling, general and administrative7,8247,31523,05123,231Research and development1,8491,4776,1456,894Interest income(1,361)(580)(6,207)(1,306)Earnings before under-noted items18,09915,84953,64340,990Amortization of pharmaceutical product licenses and rights4,9595,14615,86017,487Other finance income(56)(61)(8,617)(136)Foreign exchange loss (gain)251(322)(204)(115)Other income(97)—(97)(41)Share of net income from an associate(331)(291)(1,096)(757)Income before income tax13,37311,37747,79724,552Provision for income taxes3,8773,41813,4188,588Net income for the period9,4967,95934,37915,964Attributable to shareholdersBasic earnings per share0.470.431.730.86Diluted earnings per share0.460.411.670.83Weighted average number of shares outstandingBasic20,204,10518,746,23719,882,26118,670,511Diluted20,864,04919,406,63720,595,22319,303,642INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS[In thousands of Canadian dollars][unaudited]Three months ended September 30Nine months ended September 302011201020112010Operating activitiesNet income for the period9,4967,95934,37915,964Adjustments reconciling net income to operating cash flowsAmortization of pharmaceutical product licenses and rights4,9595,14615,86017,487Deferred tax(201)1,6333,7213,966Share-based compensation expense3853911,5081,342Other finance income(57)(61)(8,618)(136)Unrealized foreign exchange loss (gain)182(329)(832)(139)Depreciation of property, plant and equipment3657165484Share of net income from an associate(331)(291)(1,096)(757)Changes in working capital and other non-cash balances10,2966,89310,8858,681Cash inflow from operating activities24,76521,39855,97246,892Investing activitiesPurchases of marketable securities(15,000)(35,257)(151,057)(127,562)Purchases of financial assets(2,937)(300)(88,873)(9,313)Purchases of pharmaceutical product licenses and rights——(7,617)—Investment in an associate——(2,936)(15,982)Repayment of balances of sale payable——(250)(1,650)Purchases of property, plant and equipment(4)(18)(69)(67)Proceeds from disposal of financial assets——89,01027Disposals and maturities of marketable securities35,25916,63651,35391,105Dividends from an associate640—891—Net cash inflow (outflow) from investing activities17,958(18,939)(109,548)(63,442)Financing activitiesCommon shares issued for cash, net of issue costs17761341,0382,023Common shares repurchased(321)—(321)—Net cash (outflow) inflow from financing activities(144)61340,7172,023Foreign exchange rate gain (loss) on cash and cash equivalents5329(105)40Increase (decrease) in cash and cash equivalents during the period42,6323,101(12,964)(14,487)Cash and cash equivalents, beginning of period40,69913,63996,29531,227Cash and cash equivalents, end of period83,33116,74083,33116,740Cash and cash equivalents83,33116,740Marketable securities143,369110,629226,700127,369FOR FURTHER INFORMATION PLEASE CONTACT: Samira Sakhia, CA, MBAPaladin Labs Inc.Chief Financial Officer514-669-5367514-344-4675 (FAX)info@paladinlabs.comwww.paladinlabs.com