Cangene Reports First Quarter 2014 Results and Election of Directors

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.

TSX: CNJ

WINNIPEG, Dec. 13, 2013 /CNW/ - Cangene Corporation ("Cangene") today reports its financial results for the three months ended October 31, 2013, and the voting results for the election of directors from its annual meeting of shareholders held on December 12, 2013.

Total revenue for the quarter was $24.6 million, compared with $36.5 million in the prior-year period. The decrease primarily resulted from reduced revenues related to the Company's Botulism Antitoxin (BAT™), along with decreased commercial contract manufacturing revenue. The comparative prior-year quarter also included $3.3 million of revenue from sales of non-specialty plasma, which the Company no longer sells.

Net loss for the current-year quarter was $5.2 million (loss of $0.08 per share), compared with a net income of $5.9 million (earnings of $0.09 per share) in the comparative quarter. In addition to the impact of the reduction in revenue, the current period included higher independent R&D expenses, largely related to the acquisition and development of IB1001 (the Company's investigational hemophilia B therapeutic) and higher professional and consulting expenses related to the sale transaction with Emergent BioSolutions, Inc. announced on December 11, 2013 (included in selling, general and administrative expenses). The comparative prior-year quarter also benefited from the $4.6-million gain on the sale of the Company's U.S.-based plasma centres. These factors were partially offset by a higher margin on biopharmaceutical product sales and a lower income tax expense in the current period.

"During this quarter we were awarded a new $264-million anthrax immune globulin contract as well as an up to $77­million vaccinia immune globulin intravenous™ contract extension by the U.S. government. Our WinRho^® product also received marketing authorization in Portugal," says John Sedor, president and CEO of Cangene. "We have yet to record benefits of those achievements in our financial results, while we continue to invest in our commercial product pipeline. I believe it is important to remain focused on our long-term strategy of improving margins in and building our commercial biopharmaceutical business by expanding our product portfolio."

At October 31, 2013, Cangene had no debt and a cash balance of $38.7 million, compared with no debt and a cash balance of $46.4 million at the end of the 2013 fiscal year. Cash of $7.1 million was used in operating activities during the current period compared with $1.8 million used in operating activities during the comparative prior-year quarter. The current year included a $4.1-million increase in working capital, which was primarily attributable to increased accounts receivable, inventories and contracts in progress and accounts payable and accrued liabilities.

Operational highlights in the quarter

• Posted strong balance sheet with a cash position of $38.7 million at October 31, 2013, and no debt.
• Awarded new biodefence-related contract with U.S. government related to AIGIV [Anthrax Immune Globulin Intravenous (Human)]; first task/delivery order awarded for collection and storage of human anti-anthrax plasma worth approximately $63 million between 2014 and 2017; total potential contract value approximately $264 million.
• Expanded scope of VIGIV [Vaccinia Immune Globulin Intravenous™ (Human)] contract, which could generate up to approximately $6.9 million in revenue over the next 18 months, with possible optional future services providing $45 million to $77 million more.
• Received marketing authorization for WinRho^® 1500 LQ in Portugal from the National Authority of Medicines and Health Products, I.P.; WinRho^® 1500 LQ will be distributed by a local distributor in Portugal under this national licence.
• Reinitiated clinical studies of our newly acquired hemophilia B therapeutic product candidate, IB1001 (a late-stage intravenous recombinant coagulation Factor IX). This was as a result of the FDA's July 2013 lifting of the clinical hold it had previously placed on the studies.

Election of Directors

The nominees listed in the management information circular for the annual meeting of shareholders of the Corporation held on December 12, 2013, were elected as directors of the Corporation. Voting was conducted by a show of hands as no ballot was requested, but the voting results set forth below are based on proxies received by the Corporation:

	Number of Shares Voted by Proxy		Percentage of Votes Cast by Proxy
	FOR	WITHHELD	FOR	WITHHELD
R. Craig Baxter	31,596,210	22,515	99.93%	0.07%
D. Bruce Burlington	31,606,610	12,115	99.96%	0.04%
Jeremy B. Desai	31,171,363	447,362	98.59%	1.41%
Philip R. Johnson	31,604,510	14,215	99.96%	0.04%
Jack M. Kay	29,159,333	2,459,392	92.22%	7.78%
J. Robert Lavery	31,606,610	12,115	99.96%	0.04%
R. Scott Lillibridge	31,597,379	21,346	99.93%	0.07%
John A. Sedor	31,602,610	16,115	99.95%	0.05%
John A. Vivash	31,606,610	12,115	99.96%	0.04%

Financial Results

Certain comparative figures in the following financial results have been reclassified to conform with the current year's presentation.

Cangene Corporation
Incorporated under the laws of Ontario
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (unaudited)

in thousands of U.S. dollars	At October 31, 2013			At July 31, 2013
ASSETS
Current
Cash	$	38,692		$	46,410
Accounts receivable	25,295			21,206
Inventories and contracts in progress	54,360			52,454
Taxes recoverable	2,792			2,090
Prepaid expenses and deposits	8,245			7,342
Total current assets	129,384			129,502
Property, plant and equipment, net	60,293			61,301
Taxes recoverable	16,404			15,849
Deferred development cost	215			178
Deferred tax	12,242			12,374
Intangible assets, net	58,306			59,353
Other assets	8,077			7,961
Total assets	$	284,921		$	286,518
LIABILITIES AND EQUITY
Current
Accounts payable and accrued liabilities	$	23,768		$	20,607
Provisions for chargebacks	4,820			4,530
Royalty provision	553			605
Royalty liability	914			604
Incentive plan liability	1,364			1,436
Taxes payable	12			—
Current portion of deferred income	4,128			3,804
Total current liabilities	35,559			31,586
Deferred income	2,340			3,286
Royalty provision	694			793
Royalty liability	3,559			3,691
Purchase consideration payable	46,341			45,638
Incentive plan liability	334			301
Deferred share unit liability	1,130			1,134
Deferred tax	3,180			3,180
Total liabilities	93,137			89,609
Equity
Share capital	50,860			50,860
Contributed surplus	727			638
Retained earnings	140,197			145,411
Total equity	191,784			196,909
Total liabilities and equity	$	284,921		$	286,518

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, 2013			Three months ended October 31, 2012
Revenues
Product sales		$	9,631		$	13,848
Product services		13,309			19,999
R&D services		1,675			2,635
		24,615			36,482
Cost of sales
Product sales		6,947			10,603
Product services		7,565			9,587
R&D services		1,077			2,141
		15,589			22,331
Gross profit		9,026			14,151
Expenses (income)
Independent R&D		4,773			2,725
Selling, general and administrative		8,460			7,130
Gain on disposal of assets		(125)			(4,680)
Change in fair value of royalty provision		—			(98)
		13,108			5,077
Income (loss) before the following:		(4,082)			9,074
Financing charges, net		(803)			(357)
Foreign-exchange loss		—			(288)
Income (loss) before taxes		(4,885)			8,429
Tax expense (benefit)
	Current	197			3,165
	Deferred	132			(676)
		329			2,489
Net income (loss) and comprehensive
	income (loss) for the period	$	(5,214)		$	5,940
Earnings (loss) per share
	Basic and diluted	$	(0.08)		$	0.09

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 August 1, 2012	$	50,860		$	144,053		$	439		$	195,352
Net income for the year ended July 31, 2013	—			1,358			—			1,358
Stock option expense	—			—			199			199
Balance as at July 31, 2013	50,860			145,411			638			196,909
Net loss for the three-month period ended October 31, 2013	—			(5,214)			—			(5,214)
Stock option expense	—			—			89			89
Balance as at October 31, 2013	$	50,860		$	140,197		$	727		$	191,784
Balance as at August 1, 2012	$	50,860		$	144,053		$	439		$	195,352
Net income for the three-month period ended October 31, 2012	—			5,940			—			5,940
Stock option expense	—			—			66			66
Balance as at October 31, 2012	$	50,860		$	149,993		$	505		$	201,358

Cangene Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS

in thousands of U.S. dollars		Three months ended October 31, 2013			Three months ended October 31, 2012
OPERATING ACTIVITIES
Net income (loss) for the period		$	(5,214)		$	5,940
Adjustments for:
	Depreciation of property, plant and equipment	1,693			1,901
	Amortization of intangible assets	1,090			760
	Gain on disposal of assets	(125)			(4,680)
	Taxes recoverable, long-term	(555)			(13)
	Deferred income	(622)			400
	Incentive plan liabilities	(55)			(856)
	Royalty provision	(192)			(236)
	Royalty liability	—			(228)
	Deferred share unit liability	(4)			76
	Change in fair value of royalty provision	—			(98)
	Non-cash financing charges	822			367
	Deferred tax expense (benefit)	132			(676)
	Change in fair value of derivative financial instruments	—			(104)
	Stock option expense	89			66
Net change in non-cash working capital balances related
	to operations	(4,137)			(4,399)
Cash used in operating activities		(7,078)			(1,780)
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net		(685)			(507)
Acquisition of intangible assets		(43)			(3)
Increase in deferred development cost		(37)			—
Proceeds on disposal of assets		125			2,615
Cash provided by (used in) investing activities		(640)			2,105
Net increase (decrease) in cash during the period		(7,718)			325
Cash, beginning of period		46,410			35,870
Cash, end of period		$	38,692		$	36,195
Interest paid^1		$	—		$	98
Taxes paid^2		$	175		$	838

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 across North America. It operates manufacturing facilities in Winnipeg, Manitoba and Baltimore, Maryland (through its wholly owned subsidiary, Cangene bioPharma, Inc.) 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 Company'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 "EBITDA", "net cash", "total assets", "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

Investor Relations Contact
Jeff Lamothe
Chief Financial Officer
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