Cangene Reports Fiscal 2012 Results

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, Oct. 24, 2012 /CNW/ - Cangene Corporation ("Cangene") today reports financial results for the year ended July 31, 2012.

Revenues for the year were $111.0 million, compared with $149.7 million in the prior year. The decrease in revenue is largely attributable to $32.8 million lower product-services revenue on its U.S. government anthrax immune globulin ("AIGIV") contract compared with the prior year as deliveries on the base AIGIV contract were completed in the prior year. This decrease in revenue was partially offset by increases in other activity in the contract-services segment relative to the prior year. These increases included plasma deliveries on the heptavalent botulism antitoxin (H-BAT™) contract and higher commercial contract-manufacturing revenue at Cangene's Baltimore-based subsidiary, Cangene bioPharma, Inc.

Net loss for the current year of $28.3 million, compares with net income of $1.5 million in the prior year. The net loss in 2012 results largely from a combination of lower revenue and gross profit on contract services and lower gross profit on biopharmaceutical product sales. The Corporation also recorded an additional $11.2 million in independent research and development expenses in the current year in comparison to the prior year. A loss per share for the current year of $0.42 compares with earnings per share of $0.02 in the prior year.

As at July 31, 2012, Cangene had a cash balance of $35.9 million and no debt. Cash used in operations was $5.7 million for the current year, compared with a positive cash flow of $15.7 million in the prior year. The $5.7-million use of cash was composed of $9.6 million of cash generated from non-cash working capital, primarily due to lower inventories and taxes recoverable, offset by a $15.3-million use of cash from operating items other than working capital.

"Our 2012 fiscal year consisted of significant challenges and change, and our financial performance does not yet reflect the solid progress we've made," says John Sedor, President and Chief Executive Officer. "We reorganized our workforce and made key changes to our senior leadership team, we redirected and energized our commercial business and R&D pipeline development efforts, and we recreated an entrepreneurial culture that sets the stage for future growth." Mr. Sedor adds "With these changes came a refocused strategy in the specialty biopharmaceutical space aimed at developing our R&D pipeline and adding commercial products while exploiting our core competencies in manufacturing and biodefence applications."

Highlights

• Strong balance sheet with a cash position of $35.9 million at July 31, 2012, and no debt
• New agreement with Camurus AB for the exclusive rights to commercialize 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; this product will be launched in the United States in October 2012
• Strategic decision to cancel the Immune Globulin Intravenous ("IGIV") development program
• Recent Biologic License Application filing with the United States Food and Drug Administration in respect of H-BAT^™ [Botulism Antitoxin Heptavalent (A, B, C, D, E, F, G)(Equine)]
• New biodefence-related contract with U.S. government related to supply of Vaccinia Immune Globulin Intravenous and expanded contract related to AIGIV
• Recent sale of U.S.-based plasma centres to Grifols, through its wholly owned Biomat USA, Inc. subsidiary in a transaction that closed on October 22, 2012

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

Incorporated under the laws of Ontario

Cangene Corporation
CONSOLIDATED  BALANCE SHEETS

in thousands of U.S. dollars	At July 31, 2012			At July 31, 2011
ASSETS
Current
Cash	$	35,870		$	45,176
Accounts receivable	22,330			20,083
Inventories and contracts in progress	57,650			67,177
Taxes recoverable	4,355			12,220
Prepaid expenses and deposits	2,221			2,334
Total current assets	122,426			146,990
Property, plant and equipment, net	61,467			74,175
Taxes recoverable	17,539			16,288
Deferred tax	14,636			16,338
Intangible assets, net	19,249			12,305
	$	235,317		$	266,096
LIABILITIES AND EQUITY
Current
Accounts payable and accrued liabilities	$	13,782		$	18,219
Derivative financial instruments	79			1,775
Purchase consideration payable	759			—
Provision for chargebacks	3,625			3,664
Incentive plan liability	841			—
Taxes payable	707			92
Current portion of deferred income	1,883			3,207
Total current liabilities	21,676			26,957
Deferred income	5,912			6,716
Royalty provision	2,253			3,316
Purchase consideration payable	6,811			—
Incentive plan liability	1,062			2,844
Deferred share unit liability	481			222
Deferred tax	1,770			2,841
Total liabilities	39,965			42,896
Equity
Share capital	50,860			50,860
Contributed surplus	439			—
Retained earnings	144,053			172,340
Total equity	195,352			223,200
	$	235,317		$	266,096

Cangene Corporation
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

in thousands of U.S. dollars except share-related data		Year ended July 31, 2012			Year ended July 31, 2011
Revenues
Product sales		$	48,616		$	51,172
Product services		45,793			78,872
R&D services		16,620			16,437
Royalties		—			3,226
		111,029			149,707
Cost of sales
Product sales		40,845			34,509
Product services		30,742			50,229
R&D services		13,581			11,273
		85,168			96,011
Gross profit		25,861			53,696
Expenses
Independent R&D		27,109			15,937
Selling, general and administrative		27,387			29,661
Impairment of property, plant and equipment		5,591			1,763
Impairment of intangible assets		636			2,328
Loss (gain) on disposal of assets		61			(118)
		60,784			49,571
Operating profit (loss)		(34,923)				4,125
Short-term interest income		60			51
Foreign-exchange gain (loss)		2,075			(4,908)
Loss before taxes		(32,788)				(732)
Tax expense (benefit)
	Current	(5,132)				(2,521)
	Deferred	631			280
		(4,501)				(2,241)
Net income (loss) and comprehensive income (loss) for the year		$	(28,287)		$	1,509
Earnings (loss) per share
Basic and diluted		$	(0.42)		$	0.02

Cangene Corporation
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

in thousands of U.S. dollars			Share capital			Retained earnings			Contributed surplus			Total
Balance at July 31, 2010		$	51,696		$	173,295		$	—		$	224,991
Net income for the year ended July 31, 2011			—			1,509			—			1,509
Common shares purchased and cancelled under Normal Course Issuer Bid			(836)			(2,464)			—			(3,300)
Balance 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 at July 31, 2012		$	50,860		$	144,053		$	439		$	195,352

Cangene Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS

in thousands of U.S. dollars		Year  ended July 31, 2012			Year ended July 31, 2011
OPERATING ACTIVITIES
Net income (loss) for the year		$	(28,287)		$	1,509
Add (deduct) items not involving cash:
	Depreciation of property, plant and equipment	8,560				10,355
	Amortization of intangible assets	2,630				2,751
	Deferred income	(2,128)				(3,045)
	Incentive plan liability	(941)				(750)
	Deferred share unit liability	259				48
	Amortization of royalty provision	(839)				(1,093)
	Revaluation of royalty provision	(224)				(1,663)
	Deferred tax expense	631				280
	Change in value of derivative financial instruments	(1,696)				1,213
	Loss (gain) on disposal of assets	61				(118)
	Impairment of intangible assets	636				2,328
	Impairment of property, plant and equipment	5,591				1,763
	Stock option expense	439				—
Net change in non-cash working capital balances related to operations		9,646				2,122
Cash provided by (used in) operating activities		(5,662)				15,700
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net		(1,604)				(7,530)
Acquisition of intangible assets		(2,106)				(271)
Proceeds on disposal of assets		66				209
Cash used in investing activities		(3,644)				(7,592)
FINANCING ACTIVITIES
Shares repurchased for cancellation		—				(3,300)
Cash used in financing activities		—				(3,300)
Effect of exchange rates on cash		—				2
Net increase (decrease) in cash during the year		(9,306)				4,810
Cash, beginning of year		45,176				40,366
Cash, end of year		$	35,870		$	45,176
Interest paid^1		$	15		$	15
Taxes received^2		$	(12,342)		$	(1,955)

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 hospital and oncology-clinic based 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 labeling 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", "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

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