Cangene Reports Second Quarter 2013 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 13, 2013 /CNW/ - Cangene Corporation ("Cangene") today reports its financial results for the second quarter of 2013, which ended on January 31, 2013.

Total revenues for the quarter were $25.9 million, compared with $33.6 million in the same quarter last year. The decrease was primarily due to a $9.7-million reduction in revenue from U.S. government stockpiling contracts and lower WinRho^® SDF revenues versus the prior-year quarter. Partially offsetting these declines was a $4.0-million increase in Vaccinia Immune Globulin Intravenous ("VIGIV") revenue related to additional services performed under an existing product contract.

Net loss for the current quarter was $3.3 million, an improvement from a net loss of $3.9 million in the same quarter last year. The Company recorded a loss per share for the current quarter of $0.05, compared with a loss per share of $0.06 in the same quarter one year ago. The improvement was primarily driven by lower independent R&D expenses in the current period, although this was partially offset by lower revenues, reduced gross profit, a $1.0-million increase in SG&A expenses, which mainly resulted from transaction expenses relating to the recent IB1001 acquisition, and a $0.6­million swing from a foreign-exchange gain in the prior-year quarter to a foreign-exchange loss in the current quarter. On a year-to-date basis, the Company recorded net income of $1.2 million, compared with a net loss of $8.3 million in the prior year.

"We are continuing to make solid progress in the strategic transformation of Cangene, as demonstrated by the improvement in our net earnings on a year-to-date basis, and by our recent licensing agreements and acquisitions," says John Sedor, President and CEO of Cangene. "We are excited about IB1001, the late-stage intravenous recombinant Factor IX product we acquired in February, as well as our recent licensing agreement for technology to advance a potential treatment for Alzheimer's Disease. We remain focused on adding to our product portfolio to maximize the full potential of our exceptional commercial platform, and to diversify and strengthen our revenue streams. We believe Cangene is on the right path to delivering significant long-term value to shareholders."

As at January 31, 2013, Cangene had no debt and a cash balance of $38.7 million, compared with no debt and a cash balance of $35.9 million at the end of the 2012 fiscal year. Cash of $2.0 million was provided by operating activities during the six-month period ended January 31, 2013, compared with $9.8 million used in operating activities during the corresponding period of 2012. The current six-month period includes a $3.5-million increase in working capital, primarily because of a $5.2-million increase in prepaid expenses, which mainly resulted from a $5.0-million deposit placed in respect of the acquisition of IB1001 and certain other assets from Ipsen and Inspiration Biopharmaceuticals, Inc. The increase in prepaid expenses was partially offset by a $3.3-million decrease in inventory.

Highlights

• Strong results from contract-manufacturing operations at Cangene bioPharma, Inc.
• Advance of research aimed at developing immune-based therapies for Alzheimer's Disease through collaboration with the University of British Columbia.
• Acquisition of a late-stage 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 and Inspiration Biopharmaceuticals, Inc.
• The United States Food and Drug Administration ("FDA") approved VARIZIG^® (Varicella Zoster Immune Globulin (Human)) for post-exposure prophylaxis of varicella (chickenpox) in high-risk patient groups, including immunocompromised children, newborns and pregnant women.
• The U.S. FDA's Blood Products Advisory Committee voted unanimously in support of the positive benefit/risk profile of BAT™ and also that Cangene's studies adequately support the proposed dosing in adults. The target date for the approval of BAT™ by the FDA under the Prescription Drug User Fee Act ("PDUFA") is March 22, 2013.

	Incorporated under the laws of Ontario
Cangene Corporation
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (unaudited)
in thousands of U.S. dollars							At January 31, 2013					At July 31, 2012
ASSETS
Current
Cash						$	38,715			$		35,870
Accounts receivable							23,780					22,330
Inventories and contracts in progress							54,381					57,650
Taxes recoverable							6,690					4,355
Prepaid expenses and deposits							7,432					2,221
Total current assets							130,998					122,426
Property, plant and equipment, net							59,495					61,467
Taxes recoverable							17,614					17,539
Deferred tax							14,927					14,636
Intangible assets, net							17,302					19,249
Total assets						$	240,336			$		235,317
LIABILITIES AND EQUITY
Current
Accounts payable and accrued liabilities						$	15,929			$		13,782
Derivative financial instruments							—					79
Purchase consideration payable							1,231					759
Provision for chargebacks							4,437					3,625
Incentive plan liability							1,085					841
Taxes payable							12					707
Current portion of deferred income							2,509					1,883
Total current liabilities							25,203					21,676
Deferred income							6,328					5,912
Royalty provision							1,948					2,253
Purchase consideration payable							6,280					6,811
Incentive plan liabilities							149					1,062
Deferred share unit liability							720					481
Deferred tax							3,041					1,770
Total liabilities							43,669					39,965
Commitments
Equity
Share capital							50,860					50,860
Contributed surplus							550					439
Retained earnings							145,257					144,053
Total equity							196,667					195,352
Total liabilities and equity						$	240,336			$		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 January 31, 2013			Three months ended January 31, 2012			Six months ended January 31, 2013			Six months ended January 31, 2012
Revenues
Product sales	$	11,263		$	13,063		$	25,111		$	24,627
Product services		12,565			16,222			32,564			21,758
R&D services		2,095			4,299			4,730			8,668
		25,923			33,584			62,405			55,053
Cost of sales
Product sales		9,334			9,935			20,080			17,513
Product services		6,358			10,514			15,945			14,786
R&D services		2,231			3,099			4,372			6,301
		17,923			23,548			40,397			38,600
Gross profit		8,000			10,036			22,008			16,453
Expenses
Independent R&D		2,975			6,930			5,700			13,631
Selling, general and administrative		9,002			8,004			16,171			14,817
Impairment of property, plant and equipment		—			5			—			5
Impairment of intangible assets		—			636			—			636
Loss (gain) on disposal of assets		—			11			(2,585)			91
		11,977			15,586			19,286			29,180
Operating profit (loss)		(3,977)			(5,550)			2,722			(12,727)
Short-term interest income		32			12			42			14
Foreign-exchange gain (loss)		(63)			580			(351)			3,719
Income (loss) before taxes		(4,008)			(4,958)			2,413			(8,994)
Tax expense (benefit)
Current		(2,936)			(1,080)			229			(135)
Deferred		2,189			38			980			(553)
		(747)			(1,042)			1,209			(688)
Net income (loss) and comprehensive   income (loss) for the period	$	(3,261)		$	(3,916)		$	1,204		$	(8,306)
Earnings (loss) per share
Basic and diluted	$	(0.05)		$	(0.06)		$	0.02		$	(0.12)

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 six-month period ended    January 31, 2013					—			1,204			—				1,204
Stock option expense					—			—			111				111
Balance as at January 31, 2013				$	50,860		$	145,257		$	550		$		196,667
Balance as 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 as at January 31, 2012				$	50,860		$	164,034		$	264		$		215,158

Cangene Corporation
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (unaudited)
in thousands of U.S. dollars						Three months ended January 31, 2013			Three months ended January 31, 2012			Six months ended January 31, 2013			Six months ended January 31, 2012
OPERATING ACTIVITIES
Net income (loss) for the period					$	(3,261)		$	(3,916)		$	1,204		$	(8,306)
Add (deduct) items not involving cash:
	Depreciation of property, plant & equipment					1,790			1,961			3,691			4,314
	Amortization of intangible assets					1,151			650			1,950			1,326
	Deferred income					642			1,284			1,042			483
	Incentive plan liabilities					188			146			(668)			(455)
	Deferred share unit liability					163			143			239			159
	Amortization of royalty provision					(194)			(225)			(384)			(449)
	Revaluation of royalty provision					38			(779)			79			(955)
	Deferred tax benefit					2,189			38			980			(553)
	Change in value of derivative financial instruments					24			644			(80)			(1,457)
	Net change in purchase consideration payable					(37)			—			(59)			—
	Loss (gain) on disposal of assets					—			11			(2,585)			91
	Impairment of intangible assets					—			636			—			636
	Impairment of property, plant & equipment					—			5			—			5
	Stock option expense					45			86			111			264
Changes in working capital:
	Accounts receivable					8,349			(10,376)			(1,450)			(5,718)
	Inventories and contracts in progress					138			6,889			3,269			2,341
	Taxes recoverable					(3,725)			(2,975)			(2,410)			(2,557)
	Prepaid expenses and deposits					(4,878)			851			(5,211)			(203)
	Accounts payable and accrued liabilities					1,765			566			2,147			906
	Provision for chargebacks					80			343			812			394
	Taxes payable					(705)			(70)			(695)			(92)
						1,024			(4,772)			(3,538)			(4,929)
Cash provided by (used in) operating activities						3,762			(4,088)			1,982			(9,826)
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net						(1,242)			(488)			(1,749)			(1,138)
Acquisition of intangible assets						—			(61)			(3)			(191)
Proceeds on disposal of assets						—			—			2,615			—
Cash provided by (used in) investing activities						(1,242)			(549)			863			(1,329)
Net increase (decrease) in cash during the period						2,520			(4,637)			2,845			(11,155)
Cash, beginning of period						36,195			38,658			35,870			45,176
Cash, end of period					$	38,715		$	34,021		$	38,715		$	34,021
Interest paid^1					$	—		$	1		$	66		$	7
Taxes paid^2					$	524		$	90		$	1,362		$	149

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 "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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