Cangene Reports Fiscal 2013 Results; Net Income Up $29.6 million from Prior Year

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. 29, 2013 /CNW/ - Cangene Corporation ("Cangene") today reports its financial results for the year ended July 31, 2013.

Total revenue for the year was $127.3 million, compared with $111.0 million in the prior year. The increase primarily resulted from an $18.6-million holdback payment received following the U.S. Food and Drug Administration's ("FDA") approval of the Company's Botulism Antitoxin, which was developed under a U.S. government contract. Additionally, commercial contract manufacturing revenue at Cangene bioPharma, Inc. increased by $5.4 million compared with the prior year. The Company also benefited from increased sales of VARIZIG^®, following its FDA approval earlier in the year, and the launch of episil^® in October 2012. The revenue increase was partially offset by a $5.0-million decline in biopharmaceutical product sales; $2.3 million of this was due to a year-over-year decrease in unprofitable non-specialty plasma sales, which Cangene no longer sells following the disposition of its U.S.-based plasma centres in October 2012. The remainder of the decline resulted from lower sales of the Company's established biopharmaceutical products because of an increasingly competitive market environment.

Net income for the current year improved to $1.4 million or $0.02 per share, compared with a net loss of $28.3 million (a loss of $0.42 per share) in the prior year. The improvement was driven by the revenue increase, a $6.7-million reduction in inventory writedowns and improved margins, as well as a lower independent R&D expense, a reversal of impairment and the gain on the sale of the plasma centres. These positive factors were partially offset by an $7.3-million tax expense that compares with a $4.5-million tax recovery in the prior year and a $6.3-million increase in selling, general and administrative expenses in the current year that relates largely to the episil^® launch and IB1001 acquisition transaction costs.

"We have built significant momentum since the start of this fiscal year—highlighted by two FDA product approvals in the U.S. and one approval in Portugal, two new U.S. government biodefence contracts and two contract extensions, and the strategic acquisition of a late-stage product for our commercial pipeline," says John Sedor, president and CEO of Cangene. "Our financial results reflect continuing investment in our commercial product pipeline along with improved margins in both our operating segments and a contract payment triggered by a product approval. We remain focused on our long-term strategy of building and improving margins in our commercial biopharmaceutical business by expanding our product portfolio to maximize its potential."

At July 31, 2013, Cangene had no debt and a cash balance of $46.4 million, compared with no debt and a cash balance of $35.9 million at the end of the 2012 fiscal year. Cash of $19.9 million was provided by operating activities during the current year compared with $5.7 million used in operating activities during the prior year. The current year included a $10.5-million decrease in working capital. The reduction in working capital during the period was primarily attributable to increases of $5.1 million and $6.8 million in prepaid expenses and deposits, and accounts payable and accrued liabilities, respectively, and reductions of $5.2 million and $2.3 million in inventories and contracts in progress and taxes recoverable, respectively.

Operational highlights since beginning of the 2013 fiscal year

• Strong balance sheet with a cash position of $46.4 million at July 31, 2013, and no debt.
• New biodefence-related contract with U.S. government for supply of Vaccinia Immune Globulin Intravenous™ ("VIGIV") and expanded contract related to anthrax immune globulin ("AIGIV").
• Strategic sale of U.S.-based plasma centres to Grifols, through Grifols' wholly owned Biomat USA, Inc. subsidiary in a transaction that closed on October 22, 2012.
• FDA approval of VARIZIG^® for post-exposure prophylaxis of varicella (chickenpox) in high-risk patient groups.
• Acquisition of a late-stage coagulation Factor IX product known as IB1001, as well as two product candidates in preclinical development, IB1007 (a recombinant FVIIa) and IB1008 (a recombinant FVIII), from Ipsen Pharma S.A.S. and Inspiration Biopharmaceuticals, Inc. Cangene has worldwide rights to IB1001 and is moving aggressively to bring it to market.
• Acquisition of commercial rights to a technology platform targeting Alzheimer's disease through an immune therapeutic treatment approach following a successful research collaboration with Dr. Neil Cashman at the University of British Columbia.
• FDA approval of BAT™ for use in the treatment of suspected or documented exposure to botulinum neurotoxin A, B, C, D, E, F or G; this licensure triggered a supplemental holdback payment of $18.6 million from the U.S. government, which Cangene received in May 2013. Remaining product deliveries under the contract will be paid at full contract price (Cangene had received a discounted price for deliveries prior to FDA licensure).
• Received marketing authorization for WinRho^® 1500 LQ in Portugal from the National Authority of Medicines and Health Products, I.P. This national licence allows Cangene to market the product in Portugal; WinRho^® 1500 LQ will be distributed by a local distributor in Portugal.
• Expanded scope added to VIGIV contract that 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.
• New biodefence-related contract with U.S. government related to AIGIV; 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.

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
CONSOLIDATED BALANCE SHEETS

in thousands of U.S. dollars			At July 31, 2013					At July 31, 2012
ASSETS
Current
Cash		$	46,410				$	35,870
Accounts receivable			21,206					22,330
Inventories and contracts in progress			52,454					57,650
Taxes recoverable			2,090					4,355
Prepaid expenses and deposits			7,342					2,221
Total current assets			129,502					122,426
Property, plant and equipment, net			61,301					61,467
Taxes recoverable			15,849					17,539
Deferred development cost			178					—
Deferred tax			12,374					14,636
Intangible assets, net			59,353					15,900
Other assets			7,961					—
Total assets		$	286,518				$	231,968
LIABILITIES AND EQUITY
Current
Accounts payable and accrued liabilities		$	20,607				$	13,782
Derivative financial instruments			—					79
Provisions for chargebacks			4,530					3,625
Royalty provision			605					761
Royalty liability			604					320
Incentive plan liabilities			1,436					841
Taxes payable			—					707
Current portion of deferred income			3,804					1,883
Total current liabilities			31,586					21,998
Deferred income			3,286					5,912
Royalty provision			793					1,492
Royalty liability			3,691					3,901
Purchase consideration payable			45,638					—
Incentive plan liabilities			301					1,062
Deferred share unit liability			1,134					481
Deferred tax			3,180					1,770
Total liabilities			89,609					36,616
Equity
Share capital			50,860					50,860
Contributed surplus			638					439
Retained earnings			145,411					144,053
Total equity			196,909					195,352
Total liabilities and equity		$	286,518				$	231,968

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, 2013					Year ended July 31, 2012
Revenues
Product sales		$	43,598				$	48,616
Product services			71,010					45,793
R&D services			12,708					16,620
			127,316					111,029
Cost of sales
Product sales			33,925					41,044
Product services			31,111					30,742
R&D services			9,994					13,581
			75,030					85,367
Gross profit			52,286					25,662
Expenses (income)
Independent R&D			16,749					27,109
Selling, general and administrative			33,678					27,387
Impairment (reversal of impairment) of property, plant and equipment, and intangible assets			(4,116)					6,227
Loss (gain) on disposal of assets			(4,633)					61
Change in fair value of royalty provision			(714)					(983)
			40,964					59,801
Income (loss) before the following:			11,322					(34,139)
Financing charges, net			(2,324)					(724)
Foreign-exchange gain (loss)			(349)					2,075
Income (loss) before taxes			8,649					(32,788)
Tax expense (benefit)
Current			3,619					(5,132)
Deferred			3,672					631
			7,291					(4,501)
Net income (loss) and comprehensive   income (loss) for the year		$	1,358				$	(28,287)
Earnings (loss) per share
Basic and diluted		$	0.02				$	(0.42)

Cangene Corporation
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

in thousands of U.S. dollars			Share capital					Retained earnings					Contributed surplus					Total
Balance at August 1, 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
Net income for the year ended July 31, 2013			—					1,358					—					1,358
Stock option expense			—					—					199					199
Balance at July 31, 2013		$	50,860				$	145,411				$	638				$	196,909

Cangene Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS

in thousands of U.S. dollars				Year ended July 31, 2013					Year ended July 31, 2012
OPERATING ACTIVITIES
Net income (loss) for the year			$	1,358				$	(28,287)
Adjustments for:
	Depreciation of property, plant and equipment			7,000					8,560
	Amortization of intangible assets			4,268					2,630
	Loss (gain) on disposal of assets			(4,633)					61
	Taxes recoverable, long-term			1,690					(1,251)
	Deferred income			(705)					(2,128)
	Incentive plan liabilities			(166)					(941)
	Royalty provision			(740)					(864)
	Royalty liability			(691)					—
	Deferred share unit liability			653					259
	Change in fair value of royalty provision			(714)					(983)
	Non-cash financing charges			2,408					784
	Deferred tax expense			3,672					631
	Change in fair value of derivative financial instruments			(79)					(1,696)
	Impairment (reversal of impairment) of property, plant and equipment, and intangible assets			(4,116)					6,227
	Stock option expense			199					439
Net change in non-cash working capital balances related   to operations				10,487					10,897
Cash provided by (used in) operating activities				19,891					(5,662)
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net				(3,069)					(1,604)
Acquisition of intangible assets				(135)					(2,106)
Acquisition of business				(8,701)					—
Increase in deferred development cost				(178)					—
Proceeds on disposal of assets				2,732					66
Cash used in investing activities				(9,351)					(3,644)
Net increase (decrease) in cash during the year				10,540					(9,306)
Cash, beginning of year				35,870					45,176
Cash, end of year			$	46,410				$	35,870
Interest paid^1			$	116				$	15
Taxes received^2			$	(3,677)				$	(12,342)

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

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