Cangene Reports First Quarter 2013 Results; Earnings of 7 Cents Per Share

TSX: CNJ

Readers are referred to the cautionary notes regarding Forward-looking Information and non-IFRS Financial Measures at the end of this release. Unless noted otherwise, all dollar amounts are in U.S. dollars.

WINNIPEG, Dec. 12, 2012 /CNW/ - Cangene Corporation ("Cangene") today reports financial results for the first quarter of 2013, which ended on October 31, 2012.

Revenues for the quarter were $36.5 million, compared with $21.5 million in the same quarter last year. The 70% increase in revenue is largely attributable to revenue from U.S. government stockpiling contracts that was $12.2 million in the current-year quarter, compared with $4.8 million in the prior year. Commercial contract-manufacturing and product sales also increased by a combined $6.6 million in the quarter. Product-sales revenues include net sales of $0.4 million from the newly launched episil^® product.

Net income of $4.5 million for the current-year quarter compares with a net loss of $4.4 million in the same quarter last year. The net income in the current-year quarter results from a combination of factors, including a higher gross  margin in the contract-manufacturing services segment, lower independent R&D expense because of the cancellation of IGIV development at the end of fiscal 2012, and a $2.5-million pre-tax gain on the sale of the three U.S.-based plasma centres. Earnings per share of $0.07 for the first quarter of 2013 compares with a loss per share of $0.07 in the same quarter last year.

"Our solid financial results this quarter reflect progress in our refocused strategy that's aimed at streamlining our operation and growing our commercial business," says John Sedor, President and Chief Executive Officer of Cangene. "We launched episil^® in the U.S. during the quarter, and it's already showing promise as a revenue generator. We are encouraged by the positive response to that product as well as some growth in WinRho^® SDF sales," he added. "We will continue to work hard to increase commercial product sales and generate returns for our stakeholders."

As at October 31, 2012, Cangene has a cash balance of $36.2 million and no debt. Excluding changes in working capital, cash provided by operations was $2.8 million for the current-year quarter, compared with cash used of $5.6 million in the same quarter last year. The current period includes a $4.6-million increase in working capital that resulted primarily from a $9.8-million increase in accounts receivable, although this was partially offset by a $3.1-million decrease in inventory. As a result, cash used in operations in the quarter was $1.8 million, compared with $5.7 million in the first quarter last year. A significant portion of the outstanding balances contributing to the increase in accounts receivable was collected in the first week of the second quarter of 2013.

Highlights

• Earned net income of $4.5 million for the quarter
• Maintained strong balance sheet with a cash position of $36.2 million as at October 31, 2012, and no debt
• Launched episil^® in the United States for the management and relief of pain associated with oral lesions, including oral mucositis that results from cancer therapy and other causes
• Posted strong commercial product sales and contract-manufacturing revenues
• Submitted Biologic License Application with the United States Food and Drug Administration for H-BAT™ [Botulism Antitoxin Heptavalent (A, B, C, D, E, F, G)(Equine)]
• Announced new biodefence-related contract with U.S. government related to supply of Vaccinia Immune Globulin Intravenous™ (Human), and expanded existing contract related to Anthrax Immune Globulin Intravenous (Human)
• Sold U.S.-based plasma centres to Grifols, through its wholly owned Biomat USA, Inc. subsidiary, in a transaction that closed on October 22, 2012.

Incorporated under the laws of Ontario

Cangene Corporation
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (unaudited)
in thousands of U.S. dollars	At October 31, 2012			At July 31, 2012
ASSETS
Current
Cash	$	36,195		$	35,870
Accounts receivable		32,129			22,330
Inventories and contracts in progress		54,519			57,650
Taxes recoverable		3,027			4,355
Derivative financial instruments		25			—
Prepaid expenses and deposits		2,554			2,221
Total current assets		128,449			122,426
Property, plant and equipment, net		60,043			61,467
Taxes recoverable		17,552			17,539
Deferred tax		15,052			14,636
Intangible assets, net		18,453			19,249
Total assets	$	239,549		$	235,317
LIABILITIES AND EQUITY
Current
Accounts payable and accrued liabilities	$	14,164		$	13,782
Derivative financial instruments		—			79
Purchase consideration payable		739			759
Provision for chargebacks		4,357			3,625
Incentive plan liability		962			841
Taxes payable		717			707
Current portion of deferred income		2,024			1,883
Total current liabilities		22,963			21,676
Deferred income		6,171			5,912
Royalty provision		2,104			2,253
Purchase consideration payable		6,809			6,811
Incentive plan liabilities		85			1,062
Deferred share unit liability		557			481
Deferred tax		977			1,770
Total liabilities		39,666			39,965
Equity
Share capital		50,860			50,860
Contributed surplus		505			439
Retained earnings		148,518			144,053
Total equity		199,883			195,352
Total liabilities and equity	$	239,549		$	235,317

Cangene Corporation
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) (unaudited)
in thousands of U.S. dollars except share-related data	Three months ended October 31, 2012			Three months ended October 31, 2011
Revenues
Product sales	$	13,848		$	11,564
Product services		19,999			5,536
R&D services		2,635			4,369
		36,482			21,469
Cost of sales
Product sales		10,746			7,578
Product services		9,587			4,272
R&D services		2,141			3,202
		22,474			15,052
Gross profit		14,008			6,417
Expenses
Independent R&D		2,725			6,701
Selling, general and administrative		7,169			6,813
Loss (gain) on disposal of assets		(2,585	)		80
		7,309			13,594
Operating profit (loss)		6,699			(7,177	)
Short-term interest income		10			2
Foreign-exchange gain (loss)		(288	)		3,139
Income (loss) before taxes		6,421			(4,036	)
Tax expense (benefit)
Current		3,165			945
Deferred		(1,209	)		(591	)
		1,956			354
Net income (loss) and comprehensive income (loss) for     the period	$	4,465		$	(4,390	)
Earnings (loss) per share
Basic and diluted	$	0.07		$	(0.07	)

Cangene Corporation
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY (unaudited)
in thousands of U.S. dollars	Share capital			Retained earnings			Contributed surplus			Total
Balance as at July 31, 2011	$	50,860		$	172,340		$	—		$	223,200
Net loss for the year ended July 31, 2012		—			(28,287	)		—			(28,287	)
Stock option expense		—			—			439			439
Balance as at July 31, 2012	$	50,860		$	144,053		$	439		$	195,352
Net income for the three-month period ended     October 31, 2012		—			4,465			—			4,465
Stock option expense		—			—			66			66
Balance as at October 31, 2012	$	50,860		$	148,518		$	505		$	199,883
Balance as at July 31, 2011	$	50,860		$	172,340		$	—		$	223,200
Net loss for the three-month period ended     October 31, 2011		—			(4,390	)		—			(4,390	)
Stock option expense		—			—			178			178
Balance as at October 31, 2011	$	50,860		$	167,950		$	178		$	218,988

Cangene Corporation
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (unaudited)
in thousands of U.S. dollars		Three months ended October 31, 2012		Three months ended October 31, 2011
OPERATING ACTIVITIES
Net income (loss) for the period		$	4,465		$	(4,390	)
Add (deduct) items not involving cash:
	Depreciation of property, plant and equipment		1,901			2,353
	Amortization of intangible assets		799			676
	Deferred income		400			(801	)
	Incentive plan liabilities		(856	)		(601	)
	Deferred share unit liability		76			16
	Amortization of royalty provision		(190	)		(224	)
	Revaluation of royalty provision		41			(176	)
	Deferred tax benefit		(1,209	)		(591	)
	Change in value of derivative financial instruments		(104	)		(2,101	)
	Net change in purchase consideration payable		(22	)		—
	Loss (gain) on disposal of assets		(2,585	)		80
	Stock option expense		66			178
Net change in non-cash working capital balances related to     operations			(4,562	)		(157	)
Cash used in operating activities			(1,780	)		(5,738	)
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net			(507	)		(650	)
Acquisition of intangible assets			(3	)		(130	)
Proceeds on disposal of assets			2,615			—
Cash provided by (used in) investing activities			2,105			(780	)
Net increase (decrease) in cash during the period			325			(6,518	)
Cash, beginning of period			35,870			45,176
Cash, end of period		$	36,195		$	38,658
Interest paid^1		$	98		$	6
Taxes paid^2		$	838		$	59

1. Amounts paid and received for interest were reflected as operating cash flows in the consolidated statements of cash flows.
2. Amounts paid and received for income taxes were reflected as either operating or investing cash flows in the consolidated statements of cash flows, depending upon the nature of the underlying transaction.

About Cangene Corporation

Cangene Corporation (TSX: CNJ), headquartered in Winnipeg, Canada, is one of the nation's oldest and largest biopharmaceutical companies. It is focused on the development and commercialization of specialty therapeutics. Cangene's products are sold worldwide and include products that have been accepted into the U.S. Strategic National Stockpile. Cangene has offices in three locations in North America. It operates manufacturing facilities in Winnipeg, Manitoba and Baltimore, Maryland (through its wholly owned Cangene bioPharma, Inc. subsidiary) where it produces its own products and undertakes contract manufacturing for a number of customers. Cangene also operates a plasma-collection facility in Winnipeg, Manitoba under the name Cangene Plasma Resources.  Its U.S. sales and marketing office is located in Philadelphia, Pennsylvania.  For more information about Cangene, visit the Company's website at www.cangene.com.

Cautionary Note regarding Forward-Looking Information

This document contains forward-looking statements about the Corporation, including its business operations, strategy, and expected financial performance and condition. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as "expects", "anticipates", "intends", "plans", "will", "believes", "estimates", or negative versions thereof, and similar expressions. In addition, any statement that may be made concerning future financial performance (including revenues, earnings or growth rates), ongoing business strategies or prospects, future use, safety and efficacy of unapproved products or unapproved uses of products, and possible future action by the Corporation are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to, among other things, risks, uncertainties and assumptions about the Corporation, economic factors and the biopharmaceutical industry generally. They are not guarantees of future performance. Actual events and results could differ materially from those expressed or implied by forward-looking statements made by the Corporation due to, but not limited to, important factors such as sales levels; fluctuations in operating results; the Corporation'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; the availability and cost of raw materials, and in particular, the cost, availability and antibody concentration in plasma; progress and cost of clinical trials; costs and possible development delays resulting from use of legal, regulatory or legislative strategies by the Corporation's competitors; uncertainty related to intellectual property protection and potential costs associated with its defence as well as general economic, political and market factors in North America and internationally; interest and foreign exchange rates; business competition; technological change; changes in government action, policies or regulations; decisions by Health Canada, the United States Food and Drug Administration and other regulatory authorities regarding whether and when to approve drug applications that have been or may be filed, as well as their decisions regarding labelling and other matters that could affect the availability or commercial potential of drug candidates; unexpected judicial or regulatory proceedings; catastrophic events; the Corporation's ability to complete strategic transactions; and other factors beyond the control of management.

The reader is cautioned that the foregoing list of important factors is not exhaustive and there may be other factors listed in other filings with securities regulators, including factors set out under "Risk and Uncertainties" in the Corporation's Management Discussion and Analysis, which, along with other filings, is available for review at www.sedar.com. The reader is also cautioned to consider these and other factors carefully and not to place undue reliance on forward-looking statements. Other than as specifically required by applicable law, the Corporation has no intention to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Cautionary Note Regarding Non-IFRS Financial Measures

This news release may contain non-IFRS financial measures. Terms by which non-IFRS financial measures are identified include but are not limited to "net cash", "sales" and other similar expressions. Non-IFRS financial measures are used to provide management and investors with additional measures of performance. However, non-IFRS financial measures do not have standard meanings prescribed by IFRS and are not directly comparable to similar measures used by other companies. Please refer to the appropriate reconciliations of these non-IFRS financial measures to measures prescribed by IFRS.

 

SOURCE: Cangene Corporation

Contact Information
Francis J. St.Hilaire
Vice President, General Counsel & Secretary
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Email: [email protected]