Cangene announces third 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 & WINNIPEG, June 14 /CNW/ - Cangene Corporation today reports financial results for the third quarter ended April 30, 2010.
Revenues for the third quarter of 2010 were $41.1 million, 39% lower than the $67.3 million recorded during the same period last year. The higher revenue in the year-earlier quarter reflected a greater number of deliveries on U.S. government stockpiling contracts than in the current quarter. During this quarter the Company signed a contract modification with the U.S. government under which the deliveries on one U.S. government contract will be spread out over an additional two years. Biopharmaceutical product sales were also lower during the current quarter, primarily due to decreased sales of WinRho(R) SDF. The Company recently assumed the U.S. commercialization rights to this product, which had been distributed in the U.S. by Baxter Healthcare Corporation; this change took effect on June 1, 2010. In addition, R&D-services revenues declined to $5.7 million in the current quarter from $13.7 million in the prior-year quarter due to lower R&D activities in government contracts in the current quarter.
There was a net loss for the quarter of $0.3 million ($0.00 per share) compared with a net income of $11.3 million ($0.16 per share) in the same quarter last year. The lower net income is due to reduced revenues as well as lower gross margins. Gross margin for the quarter has decreased to 37% from 46% in the prior year largely due to excess production capacity, a decline in the market value of source plasma inventories to be used in development of IGIV, and plasma centre and sales force start-up costs. In addition, the current period net income was adversely affected by a $4.0-million foreign-exchange loss compared with a small gain in the comparative quarter.
"Our financial results for the quarter reflect the combination of a number of initiatives aimed at building our business for the long term. These have had the short-term effect of increasing expenses, such as the start-up costs as we build up our U.S. sales and marketing group at Cangene bioPharma, Inc., the costs associated with the expanded plasma centres, which are not yet operating at full capacity, and the costs associated with IGIV, the new anti-infective product we're developing," said Dr. John Langstaff, Cangene's president and CEO. "Nevertheless, we maintain a debt-free balance sheet and a strong cash position."
The investment in non-cash working capital balances and other assets related to operations decreased by $15.1 million during the quarter. Lower working capital levels at April 30, 2010 compared with January 31, 2010 resulted primarily from decreased inventories and contracts in progress and decreased accounts receivable. By comparison, the third quarter of 2009 included significant increases in accounts receivable and inventories and contracts in progress, although these were partially offset by higher accounts payable and accrued liabilities.
At April 30, 2010, the Company had $32.5 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 on Tuesday, June 15, 2010, at 11:00 a.m. Eastern to discuss these financial results. 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 Tuesday, June 22, 2010, at midnight. To access the archived conference call, dial 416-849-0833 or 1-800-642-1687 and enter the reservation number 79461007 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
April 30, July 31,
in thousands of Canadian dollars 2010 2009
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ASSETS
Current
Cash $ 32,531 $ 56,131
Accounts receivable 33,822 34,547
Inventories and contracts in progress 94,154 92,430
Income and other taxes recoverable 14,209 6,281
Future income taxes 5,515 8,231
Prepaid expenses and deposits 2,668 2,830
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Total current assets 182,899 200,450
Property, plant and equipment, net 104,792 96,405
Future income taxes 3,513 -
Goodwill and intangible assets, net 57,002 43,520
Other assets 3,689 5,460
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$ 351,895 $ 345,835
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 23,427 $ 27,948
Income and other taxes payable 9 4,126
Current portion of deferred income 5,032 5,875
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Total current liabilities 28,468 37,949
Deferred income 11,883 9,906
Royalty liability 6,416 -
Incentive plan liabilities 2,692 122
Deferred share units 161 -
Future income taxes 3,492 5,522
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Total liabilities 53,112 53,499
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Shareholders' equity
Share capital 65,187 65,655
Contributed surplus 3,239 3,239
Accumulated other comprehensive loss (4,467) (4,467)
Retained earnings 234,824 227,909
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Total shareholders' equity 298,783 292,336
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$ 351,895 $ 345,835
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CANGENE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME, COMPREHENSIVE INCOME AND RETAINED
EARNINGS (unaudited)
Three Three Nine Nine
months months months months
in thousands of Canadian ended ended ended ended
dollars except April 30, April 30, April 30, April 30,
share-related data 2010 2009 2010 2009
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Revenues
Product sales and services $ 33,662 $ 50,441 $ 101,179 $ 106,538
R&D services 5,677 13,721 17,623 40,309
Royalties 1,783 3,184 5,888 7,266
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41,122 67,346 124,690 154,113
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Cost of sales
Product sales and services 21,970 25,841 58,103 47,856
R&D services 3,987 10,381 13,307 28,816
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25,957 36,222 71,410 76,672
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Gross profit 15,165 31,124 53,280 77,441
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Expenses
Independent R&D 2,570 4,098 8,754 8,129
Selling, general and
administrative 5,701 6,529 18,167 17,358
Amortization 4,170 3,186 11,327 9,479
Interest expense (income)
Short-term (8) 3 (41) (39)
Foreign-exchange loss (gain) 4,001 (303) 4,740 (11,252)
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16,434 13,513 42,947 23,675
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Income (loss) before income
taxes (1,269) 17,611 10,333 53,766
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Income tax expense (recovery)
Current 471 7,442 3,520 15,680
Future (1,414) (1,083) (2,247) 111
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(943) 6,359 1,273 15,791
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Net income (loss) and
comprehensive income for
the period (326) 11,252 9,060 37,975
Retained earnings, beginning
of period 235,943 197,643 227,909 172,900
Purchase of common shares
in excess of average stated
capital (793) (310) (2,145) (2,290)
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Retained earnings, end
of period $ 234,824 $ 208,585 $ 234,824 $ 208,585
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Basic and diluted earnings
(loss) per share $ (0.00) $ 0.16 $ 0.13 $ 0.55
CANGENE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three Three Nine Nine
months months months months
ended ended ended ended
in thousands of April 30, April 30, April 30, April 30,
Canadian dollars 2010 2009 2010 2009
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OPERATING ACTIVITIES
Net income (loss) for
the period $ (326) $ 11,252 $ 9,060 $ 37,975
Add (deduct) items not
involving cash:
Amortization of property,
plant and equipment 3,434 2,834 9,572 8,460
Amortization of intangible
assets 736 352 1,755 1,019
Deferred income 96 1,653 1,134 303
Incentive plan liabilities (2,043) 434 2,570 922
Deferred share unit
liability 20 - 161 -
Amortization of royalty
liability (334) - (660) -
Future income tax expense
(recovery) (1,414) (1,083) (2,247) 111
Unrealized foreign-exchange
loss (gain) 2,077 797 1,428 (309)
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2,246 16,239 22,773 48,481
Net change in non-cash
working capital balances and
other assets related to
operations 15,094 (19,114) (15,632) (49,433)
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Cash provided by (used in)
operating activities 17,340 (2,875) 7,141 (952)
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INVESTING ACTIVITIES
Purchase of property, plant
and equipment, net (12,292) (2,875) (17,959) (8,385)
Acquisition of intangible
assets (49) (128) (7,768) (556)
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Cash used in investing
activities (12,341) (3,003) (25,727) (8,941)
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FINANCING ACTIVITIES
Shares repurchased for
cancellation (900) (379) (2,613) (2,874)
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Cash used in financing
activities (900) (379) (2,613) (2,874)
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Effect of exchange rates
on cash (1,781) 18 (2,401) 2,192
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Net increase (decrease)
in cash during the period 2,318 (6,239) (23,600) (10,575)
Cash, beginning of period 30,213 10,339 56,131 14,675
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Cash, end of period $ 32,531 $ 4,100 $ 32,531 $ 4,100
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Interest paid $ - $ 8 $ 1 $ 54
Income taxes paid $ 961 $ 6,238 $ 9,002 $ 11,426
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 750 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 (www.cangeneplasma.com). 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.; www.cangenebiopharma.com). Cangene's website, www.cangene.com, includes product and investor information, including past news releases.
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", "WinRho" and "WinRho SDF" are trademarks belonging to Cangene Corporation.
%SEDAR: 00002351E
For further information: about this release, please contact Michael Graham at (204) 275-4040 or by email at [email protected]
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