Cangene announces second quarter financial results for fiscal 2010
Readers are referred to the cautionary notes regarding Forward-looking Information and non-GAAP Financial Measures at the end of this release
Listed TSX, Symbol: CNJ
TORONTO and WINNIPEG, March 16 /CNW/ - Cangene Corporation today reports financial results for the second quarter ended January 31, 2010.
Revenues for the second quarter of 2010 were $41.5 million, 20% higher than the $34.5 million recorded during the same period last year. The higher revenue in the current quarter reflects deliveries on U.S. government stockpiling contracts that generated $18.3 million in product revenue in the quarter. Partially offsetting this was reduced R&D-services revenue from development activities related to these and other third-party contracts. In total, R&D-services revenues declined to $4.1 million in the current quarter from $11.0 million in the prior-year quarter. Overall, $22.3 million in revenue was recognized on these stockpiling contracts in the current quarter, compared with $7.3 million in the first quarter of 2009. While contract-services revenues have increased by $11.1 million year-over-year for the quarter, biopharmaceutical sales declined by $4.1 million. This decrease reflects the fact that the Company is no longer receiving R&D revenues in that segment as joint-development agreements with Apotex have been concluded. Additionally, sales of WinRho(R) SDF have decreased from the year-earlier quarter, although this decrease is partially offset by a $1.5 million increase in HepaGam B(R) sales as the Company is no longer sharing this revenue with Apotex. Gross margin for the quarter has decreased to 43% from 52% in the prior year, largely due to a combination of plasma centre start-up costs, higher overheads due to lower manufacturing activity, a shift in revenue mix, and, higher long-term incentive costs.
"Our financial results for the quarter reflect the opposing combination of increased deliveries on biodefence contracts and higher operating costs, including the costs of establishing our commercial operations in the U.S. at Cangene bioPharma, Inc., our Baltimore-based subsidiary," said Dr. John Langstaff, Cangene's president and CEO.
Net income for the quarter was $3.8 million or $0.06 per share, compared with $5.6 million or $0.08 per share in the same quarter last year. The drop in net income resulted largely from the lower gross margin in the quarter, along with increased SG&A and amortization expenses. The increased SG&A results from higher incentive plan compensation expense and costs associated with building the sales force at Cangene bioPharma.
An $8.8-million increase in net non-cash working capital balances and other assets related to operations in the quarter resulted from increased inventories and contracts in progress, increased accounts receivable, and increased income and other taxes recoverable, combined with decreased accounts payable and accrued liabilities. By comparison, the second quarter of 2009 included a significant decrease in accounts receivable offset by a significant increase in inventories and contracts in progress, in addition to increased income and other taxes recoverable, and lower accounts payable and accrued liabilities.
At January 31, 2010, the Company had $30.2 million in cash and no debt.
Readers are referred to the cautionary notes regarding Forward-looking Information and non-GAAP Financial Measures at the end of this release. Certain comparative figures in the following financial statements have been reclassified to conform to the current year's presentation.
Conference Call
Cangene will host a conference call to discuss these financial results on Wednesday, March 17, 2010 at 11:00 a.m. Eastern. To access the conference call by telephone, dial 647-427-7450 or 1-888-231-8191. The conference call will be archived for replay until Wednesday, March 24 2010, at midnight. To access the archived conference call, dial 416-849-0833 or 1-800-642-1687 and enter the reservation number 61832411 followed by the number sign.
A live audio webcast of the conference call will be available at www.cangene.com and www.newswire.ca. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above web sites for 90 days.
CANGENE CORPORATION
CONSOLIDATED BALANCE SHEETS (unaudited)
Incorporated under the laws of Ontario
At At
January 31, July 31,
in thousands of Canadian dollars 2010 2009
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ASSETS
Current
Cash $ 30,213 $ 56,131
Accounts receivable 42,734 34,547
Inventories and contracts in progress 99,534 92,430
Income and other taxes recoverable 10,632 5,637
Future income taxes 5,400 8,231
Prepaid expenses and deposits 2,979 2,830
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Total current assets 191,492 199,806
Property, plant and equipment, net 95,934 96,405
Future income taxes 2,403 -
Goodwill and intangible assets 57,689 43,520
Other assets 4,327 5,460
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$ 351,845 $ 345,191
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 20,623 $ 27,948
Income and other taxes payable 17 4,126
Current portion of deferred income 5,525 5,875
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Total current liabilities 26,165 37,949
Deferred income 11,294 9,906
Royalty liability 7,137 -
Incentive plan liabilities 4,735 122
Deferred share units 141 -
Future income taxes 3,229 5,522
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Total liabilities 52,701 53,499
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Shareholders' equity
Share capital 65,356 65,655
Contributed surplus 3,239 3,239
Accumulated other comprehensive loss (4,467) (4,467)
Retained earnings 235,016 227,265
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Total shareholders' equity 299,144 291,692
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$ 351,845 $ 345,191
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CANGENE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME, COMPREHENSIVE INCOME AND RETAINED
EARNINGS (unaudited)
Three Three Six Six
in thousands of months months months months
Canadian dollars ended ended ended ended
except share-related January 31, January 31, January 31, January 31,
data 2010 2009 2010 2009
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Revenues
Product sales and services $ 35,542 $ 21,587 $ 67,517 $ 56,097
R&D services 4,123 11,036 11,946 26,588
Royalties 1,871 1,920 4,105 4,082
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41,536 34,543 83,568 86,767
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Cost of sales
Product sales and services 20,421 9,020 36,133 22,015
R&D services 3,051 7,580 9,320 18,435
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23,472 16,600 45,453 40,450
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Gross profit 18,064 17,943 38,115 46,317
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Expenses
Independent R&D 2,723 2,484 6,184 4,031
Selling, general and
administrative 7,413 5,614 12,466 10,829
Amortization 3,868 3,217 7,157 6,293
Interest income
Short-term (8) (6) (33) (42)
Foreign-exchange loss (gain) (210) (784) 733 (10,949)
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13,786 10,525 26,507 10,162
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Income before income taxes 4,278 7,418 11,608 36,155
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Income tax expense (recovery)
Current 2,313 894 3,049 8,238
Future (1,818) 936 (544) 1,194
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495 1,830 2,505 9,432
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Net income and comprehensive
income for the period 3,783 5,588 9,103 26,723
Retained earnings, beginning
of period 232,222 192,676 227,265 172,900
Purchase of common shares
in excess of average
stated capital (989) (621) (1,352) (1,980)
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Retained earnings,
end of period $ 235,016 $ 197,643 $ 235,016 $ 197,643
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Basic and diluted earnings
per share $ 0.06 $ 0.08 $ 0.13 $ 0.38
CANGENE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three Three Six Six
months months months months
ended ended ended ended
in thousands of January 31, January 31, January 31, January 31,
Canadian dollars 2010 2009 2010 2009
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OPERATING ACTIVITIES
Net income for the period $ 3,783 $ 5,588 $ 9,103 $ 26,723
Add (deduct) items not
involving cash:
Amortization of property,
plant & equipment 3,075 2,865 6,138 5,624
Amortization of intangible
assets 793 352 1,019 669
Deferred income 873 (1,257) 1,038 (1,350)
Incentive plan liabilities 2,587 488 4,613 488
Deferred share unit
liability 81 - 141 -
Amortization of royalty
liability (326) - (326) -
Future income tax expense
(recovery) (1,818) 936 (544) 1,194
Unrealized foreign-exchange
loss (gain) (174) 587 (645) (1,105)
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8,874 9,559 20,537 32,243
Net change in non-cash
working capital balances
and other assets related
to operations (8,775) (12,392) (30,736) (30,319)
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Cash provided by (used in)
operating activities 99 (2,833) (10,199) 1,924
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INVESTING ACTIVITIES
Purchase of property, plant
and equipment, net (3,719) (2,313) (5,667) (5,510)
Acquisition of intangible
assets (23) (84) (7,719) (428)
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Cash used in investing
activities (3,742) (2,397) (13,386) (5,938)
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FINANCING ACTIVITIES
Shares repurchased for
cancellation (1,252) (769) (1,713) (2,495)
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Cash used in financing
activities (1,252) (769) (1,713) (2,495)
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Effect of exchange rates
on cash (137) 336 (620) 2,173
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Net decrease in cash during
the period (5,032) (5,663) (25,918) (4,336)
Cash, beginning of period 35,245 16,002 56,131 14,675
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Cash, end of period $ 30,213 $ 10,339 $ 30,213 $ 10,339
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Interest paid $ 1 $ 11 $ 1 $ 46
Income taxes paid $ 1,142 $ 4,114 $ 8,040 $ 5,188
About Cangene Corporation
Cangene is one of Canada's largest and earliest biopharmaceutical companies. It was founded in 1984 and is headquartered in Winnipeg, Manitoba. Cangene has approximately 700 employees in eight locations across North America and its products are sold worldwide. It operates three large manufacturing facilities - two in Winnipeg, Manitoba and one in Baltimore, Maryland - where it produces its own products and undertakes contract manufacturing for a number of companies. Cangene operates three U.S. and one Canadian plasma-collection facilities branded as Cangene Plasma Resources. In addition, it has a regulatory affairs, sales and corporate communications office in Toronto, Ontario.
Cangene is focused on developing therapeutics for infectious diseases, and the Company uses patented manufacturing processes to produce plasma-derived and recombinant therapeutic proteins. Cangene has five FDA and/or Health Canada-approved products. In addition, the Company has several more products in development at various stages. Three of Cangene's products have been accepted into the U.S. Strategic National Stockpile-botulism antitoxin (investigational product), anthrax immune globulin (investigational product) and vaccinia immune globulin, a product used to counteract certain complications that may arise from smallpox vaccination.
Capitalizing on its drug manufacturing expertise, Cangene also operates a significant contract research and manufacturing business using the resources of Baltimore, Maryland-based Cangene bioPharma, Inc. (a wholly owned subsidiary; formerly Chesapeake Biological Laboratories, Inc.). Cangene's website, www.cangene.com, includes product and investor information, including past news releases. Further information about Cangene bioPharma can be found at www.cangenebiopharma.com and information about Cangene's plasma donation programs can be found at www.cangeneplasma.com.
Forward-looking and risk information
The reader should be aware that Cangene's businesses are subject to risks and uncertainties that cannot be predicted or quantified; consequently, actual results may differ materially from past results and those expressed or implied by any forward-looking statements. Factors that could cause or contribute to such risks or uncertainties include, but are not limited to: the regulatory environment including the difficulty of predicting regulatory outcomes; changes in the value of the Canadian dollar; the Company's reliance on a small number of customers including government organizations; the demand for new products and the impact of competitive products, service and pricing; availability and cost of raw materials, especially the cost, availability and antibody concentration in plasma; fluctuations in operating results; government policies or actions; progress and cost of clinical trials; reliance on key strategic relationships; costs and possible development delays resulting from use of legal, regulatory or legislative strategies by the Company's competitors; uncertainty related to intellectual property protection and potential costs associated with its defence; the Company's exposure to lawsuits; and other matters beyond control of management. Risks and uncertainties are discussed more extensively in the MD&A section of the Company's most recent annual report and annual information form, which are available on the Company's website or on SEDAR at www.sedar.com.
Cautionary Note Regarding Non-GAAP Financial Measures
This news release may contain non-GAAP financial measures. Terms by which non-GAAP financial measures are identified include but are not limited to "net cash", "total assets", "sales" and other similar expressions. Non-GAAP financial measures are used to provide management and investors with additional measures of performance. However, non-GAAP financial measures do not have standard meanings prescribed by GAAP and are not directly comparable to similar measures used by other companies. Please refer to the appropriate reconciliations of these non-GAAP financial measures to measures prescribed by GAAP.
The preceding cautionary statements should be considered in connection with all written or oral statements, especially forward-looking statements, that are made by the Company or by persons acting on its behalf and in conjunction with its periodic filings with Securities Commissions, including those contained in the Company's news releases and most recently filed annual information form. Forward-looking statements can be identified by the use of words such as "expects", "plans", "will", "believes", "estimates", "intends", "may", "bodes" and other words of similar meaning (including negative and grammatical variations). Should known or unknown risks or uncertainties materialize, or should management's assumptions prove inaccurate, actual results could vary materially from those anticipated. The Company undertakes no obligation to publicly make or update any forward-looking statements, except as required by applicable law.
"Cangene", "HepaGam B", "WinRho" and "WinRho SDF" are trademarks belonging to Cangene Corporation.
%SEDAR: 00002351E
For further information: about Cangene Corporation, please contact Michael Graham at (204) 275-4040 or by email at [email protected]
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