Cangene Reports Third 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, June 12, 2012 /CNW/ - Cangene Corporation today reports financial results for the third quarter of 2012, ended on April 30, 2012.

Revenues for the quarter were $27.5 million, compared with $34.2 million in the same quarter last year. The decrease in revenue is largely attributable to lower bulk sales of non-specialty plasma in the biopharmaceutical-operations segment. The Company also recognized lower product-services revenue on its anthrax immune globulin ("AIG") contract, compared with the same quarter last year, which included a delivery of AIG product. Deliveries on the AIG contract were completed in 2011. These decreases in revenue were partially offset by activity in the contract-services segment in the current-year quarter, which included plasma deliveries on the botulism antitoxin ("BAT") contract and higher contract-manufacturing revenue at Cangene's Baltimore-based subsidiary, Cangene bioPharma, Inc., compared with the same quarter last year.

Net loss for the current quarter of $4.6 million, compares with a net loss of $1.4 million in the same quarter last year. The greater net loss in the current quarter results largely from lower revenues and gross margins on biopharmaceutical product sales and a smaller tax benefit, but was partially offset by a reduction in selling, general and administrative expenses and a smaller foreign-exchange loss. A loss per share for the current quarter of $0.07 compares with a loss per share of $0.02 in the same quarter last year.

"The 2012 fiscal year has been one of great transition for Cangene, and we have made many positive changes in the organization," 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 April 30, 2012, Cangene had a cash balance of $43.4 million and no debt. Cash used in operations, excluding changes in working capital, was $3.0 million for the current quarter, compared with cash flow of $0.1 million in the same quarter last year. The net change in non-cash working capital for the quarter was a decrease of $12.7 million, primarily due to lower accounts receivable and taxes recoverable, with the result that cash provided by operations in the quarter was $9.7 million.

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 April 30, 2012			At July 31, 2011
ASSETS
Current
Cash	$	43,436		$	45,176
Accounts receivable		18,995			20,083
Inventories and contracts in progress		64,861			67,177
Taxes recoverable		5,520			12,220
Prepaid expenses and deposits		1,744			2,334
Total current assets		134,556			146,990
Property, plant and equipment, net		68,951			74,175
Taxes recoverable		16,589			16,288
Deferred tax		17,048			16,338
Intangible assets, net		9,986			12,305
	$	247,130		$	266,096
LIABILITIES AND EQUITY
Current
Accounts payable and accrued liabilities	$	15,894		$	18,219
Derivative financial instruments		1,022			1,775
Provision for chargebacks		3,473			3,664
Incentive plan liability		1,113			—
Taxes payable		30			92
Current portion of deferred income		3,732			3,207
Total current liabilities		25,264			26,957
Deferred income		5,713			6,716
Royalty provision		2,277			3,316
Incentive plan liability		1,283			2,844
Deferred share unit liability		473			222
Deferred tax		1,456			2,841
Total liabilities		36,466			42,896
Equity
Share capital		50,860			50,860
Contributed surplus		353			—
Retained earnings		159,451			172,340
Total equity		210,664			223,200
	$	247,130		$	266,096

Cangene Corporation
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (unaudited)

in thousands of U.S. dollars except share-related data		Three months ended April 30,2012			Three months     ended April 30, 2011			Nine months   ended April 30, 2012			Nine months   ended   April 30, 2011
Revenues
Product sales		$	10,473		$	17,019		$	35,100		$	39,366
Product services			12,386			11,594			34,144			42,991
R&D services			4,665			4,775			13,333			12,642
Royalties			—			847			—			2,478
			27,524			34,235			82,577			97,477
Cost of sales
Product sales			9,406			13,620			27,346			26,831
Product services			8,609			6,817			22,968			30,008
R&D services			3,415			3,321			9,716			9,335
			21,430			23,758			60,030			66,174
Gross profit			6,094			10,477			22,547			31,303
Expenses
Independent R&D			4,454			4,579			18,085			10,086
Selling, general and administrative			6,455			7,570			21,272			22,855
Impairment of property, plant and equipment			—			—			5			—
Impairment of intangible assets			—			—			636			—
Loss (gain) on sale of assets			36			(125)			127			(87)
			10,945			12,024			40,125			32,854
Operating loss			(4,851)			(1,547)			(17,578)			(1,551)
Short-term interest income			25			17			39			43
Foreign-exchange gain (loss)			(842)			(3,633)			2,877			(5,592)
Loss before taxes			(5,668)			(5,163)			(14,662)			(7,100)
Tax expense (benefit)
	Current		457			(2,034)			322			(3,603)
	Deferred		(1,542)			(1,737)			(2,095)			(543)
			(1,085)			(3,771)			(1,773)			(4,146)
Net loss and comprehensive loss for the period		$	(4,583)		$	(1,392)		$	(12,889)		$	(2,954)
Loss per share
	Basic and diluted	$	(0.07)		$	(0.02)		$	(0.19)		$	(0.04)

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 nine-month period ended April 30, 2012		—			(12,889	)		—			(12,889	)
Stock option expense		—			—			353			353
Balance at April 30, 2012	$	50,860		$	159,451		$	353		$	210,664
Balance at July 31, 2010	$	51,696		$	173,295		$	—		$	224,991
Net loss for the nine-month period ended April 30, 2011		—			(2,954	)		—			(2,954	)
Common shares purchased and cancelled under NCIB		(766	)		(2,325	)		—			(3,091	)
Balance at April 30, 2011	$	50,930		$	168,016		$	—		$	218,946

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

in thousands of U.S. dollars		Three months   ended   April 30, 2012			Three months   ended   April 30, 2011			Nine months   ended   April 30, 2012			Nine months   ended   April 30, 2011
OPERATING ACTIVITIES
Net loss for the period		$	(4,583	)	$	(1,392	)	$	(12,889	)	$	(2,954	)
Add (deduct) items not involving cash:
	Depreciation of property, plant and equipment		2,145			2,478			6,459			7,599
	Amortization of intangible assets		631			681			1,957			2,047
	Deferred income		(961	)		(911	)		(478	)		(1,886	)
	Incentive plan liability		7			(217	)		(448	)		299
	Deferred share unit liability		92			35			251			110
	Amortization of royalty provision		(193	)		(228	)		(642	)		(848	)
	Revaluation of royalty provision		558			(156	)		(397	)		(1,736	)
	Deferred tax benefit		(1,542	)		(1,737	)		(2,095	)		(543	)
	Change in value of derivative financial instruments		704			1,686			(753	)		2,649
	Loss (gain) on disposal of assets		36			(125	)		127			(87	)
	Impairment of intangible assets		—			—			636			—
	Impairment of property, plant and equipment		—			—			5			—
	Stock option expense		89			—			353			—
Net change in non-cash working capital balances related to operations			12,744			10,544			7,815			(4,229	)
Cash provided by (used in) operating activities			9,727			10,658			(99	)		421
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net			(263	)		(1,235	)		(1,401	)		(6,857	)
Acquisition of intangible assets			(49	)		(106	)		(240	)		(219	)
Proceeds on disposal of assets			—			140			—			140
Cash used in investing activities			(312	)		(1,201	)		(1,641	)		(6,936	)
FINANCING ACTIVITIES
Shares repurchased for cancellation			—			(550	)		—			(3,091	)
Cash used in financing activities			—			(550	)		—			(3,091	)
Net increase (decrease) in cash during the period			9,415			8,907			(1,740	)		(9,606	)
Cash, beginning of period			34,021			21,853			45,176			40,366
Cash, end of period		$	43,436		$	30,760		$	43,436		$	30,760
Interest paid^1		$	9		$	6		$	15		$	13
Taxes paid^2		$	(10,411	)	$	(3,373	)	$	(10,352	)	$	(3,347	)

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 and it is focused on the development and commercialization of hospital-based 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 Corporation'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
John A. Sedor
President and Chief Executive Officer
Ph:  [phone]
Email: [email protected]