Cangene Reports Second Quarter 2012 Results

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, March 14, 2012 /CNW/ - Cangene Corporation today reports financial results for the second quarter of 2012, ended on January 31, 2012.

Revenues for the quarter were $33.6 million, compared with $40.2 million in the same quarter last year. However, product sales increased due to non-specialty plasma sales, higher WinRho^® SDF sales in Canada and internationally, and higher HepaGam B^® sales in Canada. Contract-manufacturing revenue declined compared with the same quarter last year, which had included a significant delivery of anthrax immune globulin ("AIG") product. Deliveries on the AIG contract were completed in 2011. Compared with the same quarter a year ago, the current-year quarter included a delivery of botulism antitoxin ("BAT") product and a delivery of BAT plasma under the recently executed contract extension. Contract-manufacturing revenues at Cangene Biopharma, Inc. and contract-R&D revenues were relatively flat quarter-over-quarter.

Net loss for the current quarter was $3.9 million, compared with net income of $2.0 million in the same quarter last year. Net loss in the current quarter results largely from lower biodefence contract revenue, increased R&D expenditures on IGIV development and hyperimmune process improvements, reduced gross margins on biopharmaceutical product sales, write-downs related to inventory provisions, reorganization costs and an impairment loss on the write-down of certain patents. A foreign-exchange gain in the current quarter compared to a foreign-exchange loss in the same quarter last year helped offset the current-quarter operating loss. A loss per share for the current quarter of $0.06 compares with earnings per share of $0.03 in the same quarter a year ago.

"These results include $3.8 million in reorganizational costs and do not yet reflect the significant positive changes we are making within the organization aimed at re-creating our entrepreneurial culture and focusing on our strengths. During the quarter, we streamlined our organizational structure and established cross-functional teams that are focused on identifying and implementing specific strategies aimed at improved operating efficiency and growth," says John Sedor, President and CEO of Cangene. "As we work towards redefining our corporate priorities, we believe that we will be well positioned to generate added value for our stakeholders" adds Mr. Sedor.

As at January 31, 2012, Cangene had a cash balance of $34.0 million and no debt. Cash flow from operations, excluding changes in working capital, was $0.7 million for the current quarter, compared with $4.2 million in the same quarter last year. The net change in non-cash working capital for the quarter was an increase of $4.8 million due to higher accounts receivable and income taxes recoverable balances, which were partly offset by lower inventories.

Quarterly Highlights

• The Company's cash position remains strong at $34.0 million.
• The Company signed a collaborative research agreement with the University of British Columbia aimed at developing immune-based therapies for Alzheimer's disease.
• A workforce reorganization was implemented in the quarter that included changes to the Company's senior management team and a workforce reduction. The reorganization is intended to create greater alignment with the Company's strategy and optimize operating efficiencies.
• In line with its increasing focus on the U.S. commercial market, the Company opened a new office in Philadelphia, Pennsylvania that will serve as the headquarters for the U.S. sales and marketing team.

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

Incorporated under the laws of Ontario
Cangene Corporation

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (unaudited)

in thousands of U.S. dollars												At January 31, 2012					At July 31, 2011
ASSETS
Current
Cash											$	34,021				$	45,176
Accounts receivable												25,801					20,083
Inventories and contracts in progress												64,836					67,177
Taxes recoverable												15,251					12,220
Prepaid expenses and deposits												2,537					2,334
Total current assets												142,446					146,990
Property, plant and equipment, net												70,868					74,175
Taxes recoverable												15,814					16,288
Deferred tax												15,300					16,338
Intangible assets, net												10,568					12,305
											$	254,996				$	266,096
LIABILITIES AND EQUITY
Current
Accounts payable and accrued liabilities											$	19,125				$	18,219
Derivative financial instruments												318					1,775
Provision for chargebacks												4,058					3,664
Incentive plan liability												1,172					—
Taxes payable												—					92
Current portion of deferred income												3,905					3,207
Total current liabilities												28,578					26,957
Deferred income												6,501					6,716
Royalty provision												1,912					3,316
Incentive plan liability												1,217					2,844
Deferred share unit liability												381					222
Deferred tax												1,249					2,841
Total liabilities												39,838					42,896
Equity
Share capital												50,860					50,860
Contributed surplus												264					—
Retained earnings												164,034					172,340
Total equity												215,158					223,200
											$	254,996				$	266,096

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 January 31, 2012				Three months ended January 31, 2011				Six months ended January 31, 2012				Six months ended January 31, 2011
Revenues
Product sales												$	13,063			$	10,555			$	24,627			$	22,347
Product services													16,222				24,687				21,758				31,397
R&D services													4,299				4,273				8,668				7,867
Royalties													—				685				—				1,631
													33,584				40,200				55,053				63,242
Cost of sales
Product sales													9,935				6,014				17,513				14,106
Product services													10,514				17,812				14,786				22,296
R&D services													3,099				3,390				6,301				6,014
													23,548				27,216				38,600				42,416
Gross profit													10,036				12,984				16,453				20,826
Expenses
Independent R&D													6,930				950				13,631				5,507
Selling, general and administrative													8,004				8,560				14,817				15,285
Impairment of property, plant and equipment													5				—				5				—
Impairment of intangible assets													636				—				636				—
Loss on sale of assets													11				8				91				38
													15,586				9,518				29,180				20,830
Operating profit (loss)													(5,550)				3,466				(12,727)				(4)
Short-term interest income													12				15				14				26
Foreign-exchange gain (loss)													580				(537)				3,719				(1,959)
Income (loss) before taxes													(4,958)				2,944				(8,994)				(1,937)
Tax expense (benefit)
	Current												(1,080)				(243)				(135)				(1,569)
	Deferred												38				1,226				(553)				1,194
													(1,042)				983				(688)				(375)
Net income (loss) and comprehensive income (loss) for the period												$	(3,916)			$	1,961			$	(8,306)			$	(1,562)
Earnings (loss) per share
	Basic and diluted											$	(0.06)			$	0.03			$	(0.12)			$	(0.02)

Cangene Corporation
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY (unaudited)

in thousands of U.S. dollars													Stated 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 NCIB												(836)				(2,464)				—				(3,300)
Balance at July 31, 2011													50,860				172,340				—				223,200
Net loss for the six-month period ended
	January 31, 2012												—				(8,306)				—				(8,306)
Stock option expense													—				—				264				264
Balance at January 31, 2012												$	50,860			$	164,034			$	264			$	215,158
Balance at July 31, 2010												$	51,696			$	173,295			$	—			$	224,991
Net loss for the six-month period ended
	January 31, 2011												—				(1,562)				—				(1,562)
Common shares purchased and cancelled
	under NCIB												(610)				(1,931)				—				(2,541)
Balance at January 31, 2011												$	51,086			$	169,802			$	—			$	220,888

Cangene Corporation
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (unaudited)

in thousands of U.S. dollars														Three months ended January 31, 2012				Three months ended January 31, 2011				Six months ended January 31, 2012				Six months ended January 31, 2011
OPERATING ACTIVITIES
Net income (loss) for the period													$	(3,916)			$	1,961			$	(8,306)			$	(1,562)
Add (deduct) items not involving cash:
	Depreciation of property, plant and
		equipment												1,961				2,551				4,314				5,121
	Amortization of intangible assets													650				680				1,326				1,366
	Deferred income													1,284				(342)				483				(975)
	Incentive plan liability													146				(272)				(455)				516
	Deferred share unit liability													143				28				159				75
	Amortization of royalty provision													(225)				(310)				(449)				(620)
	Revaluation of royalty provision													(779)				(1,580)				(955)				(1,580)
	Deferred tax expense (benefit)													38				1,226				(553)				1,194
	Change in value of derivative financial
		instruments												644				287				(1,457)				963
	Loss on disposal of assets													11				8				91				38
	Impairment of intangible assets													636				—				636				—
	Impairment of property, plant and
		equipment												5				—				5				—
	Stock option expense													86				—				264				—
Net change in non-cash working capital
	balances and other assets related to
	operations													(4,772)				(1,618)				(4,929)				(14,773)
Cash provided by (used in) operating
	activities													(4,088)				2,619				(9,826)				(10,237)
INVESTING ACTIVITIES
Purchase of property, plant and equipment,
	net													(488)				(2,222)				(1,138)				(5,622)
Acquisition of intangible assets														(61)				(105)				(191)				(113)
Cash used in investing activities														(549)				(2,327)				(1,329)				(5,735)
FINANCING ACTIVITIES
Shares repurchased for cancellation														—				(1,442)				—				(2,541)
Cash used in financing activities														—				(1,442)				—				(2,541)
Net decrease in cash during the period														(4,637)				(1,150)				(11,155)				(18,513)
Cash, beginning of period														38,658				23,003				45,176				40,366
Cash, end of period													$	34,021			$	21,853			$	34,021			$	21,853
Interest paid^1													$	1			$	3			$	7			$	7
Taxes paid^2													$	90			$	14			$	149			$	26

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 focused on the development and commercialization of immune therapeutics. Cangene's products are sold worldwide and include products that have been accepted into the U.S. Strategic National Stockpile.  Cangene has approximately 580 employees in six 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 operates three U.S. and one Canadian plasma-collection facilities operating under the name Cangene Plasma Resources.  For more information about Cangene, go to 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, changes in accounting policies and the effect of applying future accounting policy changes required under IFRS, 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.

 

Contact Information

Michael Graham
Chief Financial Officer
Ph:  [phone]
Email: [email protected]