Cangene announces fiscal 2007 financial results
Listed TSX, Symbol: CNJ
TORONTO and WINNIPEG, Oct. 18 /CNW/ - Cangene Corporation today reports
financial results for the fiscal year ended July 31, 2007.
Revenues for the year were $92.4 million, compared to $109.3 million last
year. Stronger year-over-year WinRho(R) SDF sales in the U.S. and the
commencement of HepaGam B(TM) sales partially offset reduced revenues from VIG
- last year Cangene delivered a $16-million order of VIG to the U.K.
government. There was no equivalent VIG sale in the current year. Higher
royalty revenues also helped offset the resulting decrease in total revenues.
R&D-services revenues in the current year also declined as activity on U.S.
government research contracts awarded in 2003 were completed and R&D
activities related to Accretropin(TM) and Leucotropin(R), two follow-on
biopharmaceutical products being developed jointly with the Apotex Group, had
diminished following their submission for regulatory review. The Company is
not yet recognizing contract-services revenues related to government
stockpiling contracts signed during fiscal 2006; costs associated with these
contracts to-date total $38.0 million and have been charged to inventory,
prepaid expenses and other assets.
"We successfully executed on our plans during 2007 to achieve the
critical Usable Product milestone for the two significant U.S. stockpiling
contracts," said Dr. John Langstaff, president and CEO of Cangene. "And,
although these milestones were reached after the year-end meaning that
US$18-22 million of revenue, which could have been recorded in fiscal 2007 if
the milestones had been reached just a few weeks earlier, was not included in
the fiscal year, we still posted solid financial results in 2007. We
anticipate these contract revenues will favourably impact our results in the
first quarter of fiscal 2008," he said.
Net income for the year was $10.1 million or $0.15 per share, compared
with $13.1 million or $0.20 per share a year earlier. Despite reduced
revenues, gross profit in the current year increased to $50.0 million or 54%
of revenue, compared with $48.4 million or 44% of revenue during the same
period last year. The increase in gross profit and improved margins are due to
increased sales of the higher-margin liquid WinRho(R) SDF in the U.S. coupled
with reduced R&D-services revenues and VIG sales, which have relatively lower
gross margins. Higher operating costs, which include increased expenditures on
independent R&D projects, a higher amortization expense due to the new
fractionation facility now being operational and the increase in foreign
exchange losses of $2.2 million, contributed to the reduced level of earnings
in fiscal 2007.
Working capital balances related to operations increased by
$21.6 million, due mainly to higher inventories, prepaid expenses and other
assets resulting from the start-up of the anthrax immune globulin and botulism
antitoxin stockpiling contracts. Long-term debt has been reduced by
$29.8 million from the balance at the 2006 fiscal year-end as the Company has
repaid $29.0 million of the non-revolving term loan used to finance the
fractionation-plant expansion. The Company immediately used $24.0 million of
the proceeds from the common share offering that closed in December 2006 for
that purpose, while additional repayments of $5.0 million were made during the
remainder of 2007.
Certain comparative figures in the financial statements have been
reclassified to conform to the current year's presentation.
Conference Call
Cangene will host a conference call to discuss these financial results on
October 19, 2007 at 11:00 a.m. E.S.T. To access the conference call by
telephone, dial 416-644-3416 or 1-800-732-9303. Please connect approximately
15 minutes prior to the beginning of the call to ensure participation. The
conference call will be archived for replay until Friday, October 26, 2007 at
midnight. To access the archived conference call, dial 416-640-1917 or
1-877-289-8525 and enter the reservation number 21250750 followed by the
number sign.
A live audio webcast of the conference call will be available at
www.cangene.com and www.newswire.ca. Please connect at least 15 minutes prior
to the conference call to ensure adequate time for any software download that
may be required to join the webcast. The webcast will be archived at the above
web sites for 90 days.
Glossary of Products
Accretropin(TM): Cangene's Human Growth Hormone
HepaGam B(TM): Cangene's Hepatitis B Immune Globulin (Human) Injection
Leucotropin(R): Cangene's version of a protein called granulocyte-
macrophage colony-stimulating factor ("GM-CSF") that
stimulates the production of certain white blood cells
VIG: Vaccinia Immune Globulin Intravenous (Human), used for
treating certain complications that may arise due to
smallpox vaccination
WinRho(R) SDF Rh(o) (D) Immune Globulin (Human), which reacts with
certain types of red blood cells and is used for
treating hemolytic disease of the newborn and immune
thrombocytopenic purpura ("ITP")
CONSOLIDATED BALANCE SHEETS
in thousands of As at As at
Canadian dollars July 31, 2007 July 31, 2006
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ASSETS
Current
Cash $ - $ 7,691
Accounts receivable 20,475 26,956
Income and other taxes recoverable 16,144 3,291
Inventories 60,753 27,170
Prepaid expenses and deposits 3,105 2,640
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Total current assets 100,477 67,748
Property, plant and equipment, net 103,571 105,392
Future income taxes 9,373 9,941
Goodwill 40,514 40,514
Other assets 2,815 1,559
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$ 256,750 $ 225,154
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness $ 2,136 $ -
Accounts payable and accrued liabilities 23,140 16,009
Income and other taxes payable 450 -
Current portion of deferred income 3,623 4,532
Current portion of long-term debt 1,636 5,674
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Total current liabilities 30,985 26,215
Long-term debt 1,112 26,854
Incentive plan liability 226 760
Deferred income 2,931 3,770
Future income taxes 10,831 1,618
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Total liabilities 46,085 59,217
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Commitments
Shareholders' equity
Share capital 66,894 32,250
Contributed surplus 3,239 3,239
Cumulative translation adjustment (4,467) (4,467)
Retained earnings 144,999 134,915
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Total shareholders' equity 210,665 165,937
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$ 256,750 $ 225,154
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CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
in thousands of Canadian dollars Year ended Year ended
except share-related data July 31, 2007 July 31, 2006
-------------------------------------------------------------------------
Revenues
Product sales and services $ 58,844 $ 68,899
R&D services 25,281 33,925
Royalties 8,271 6,512
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92,396 109,336
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Cost of sales
Product sales and services 27,021 40,637
R&D services 15,370 20,278
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42,391 60,915
-------------------------------------------------------------------------
Gross profit 50,005 48,421
-------------------------------------------------------------------------
Expenses
Independent R&D 6,709 4,674
Selling, general and administrative 12,957 12,763
Amortization 10,314 9,188
Interest
Short-term (471) 433
Long-term 259 175
Gain on sale of building - (739)
Foreign exchange loss (gain) 1,484 (720)
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31,252 25,774
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Income before income taxes 18,753 22,647
-------------------------------------------------------------------------
Income tax expense
Current 1,910 9,338
Future 6,759 166
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8,669 9,504
-------------------------------------------------------------------------
Net income for the year 10,084 13,143
Retained earnings, beginning of year 134,915 121,772
-------------------------------------------------------------------------
Retained earnings, end of year $ 144,999 $ 134,915
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Earnings per share
Basic and diluted $ 0.15 $ 0.20
CONSOLIDATED STATEMENTS OF CASH FLOWS
in thousands of Year ended Year ended
Canadian dollars July 31, 2007 July 31, 2006
-------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income for the year $ 10,084 $ 13,143
Add (deduct) items not involving cash
Amortization 10,314 9,188
Deferred income (1,748) (538)
Net investment tax credits (9,122) (532)
Incentive plan liability (534) 760
Future income tax expense 6,759 166
Gain on disposal of building - (739)
Unrealized foreign exchange loss on
future income tax asset 568 929
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16,321 22,377
Net change in non-cash working capital
balances related to operations (21,558) 1,016
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Cash provided by (used in) operating activities (5,237) 23,393
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INVESTING ACTIVITIES
Purchase of property, plant and equipment (9,454) (29,922)
Proceeds on disposal of building - 1,867
-------------------------------------------------------------------------
Cash used in investing activities (9,454) (28,055)
-------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase (decrease) in bank indebtedness, net 2,136 (12,172)
Issuance of long-term debt - 24,000
Repayment of long-term debt (29,780) (2,579)
Issuance of common shares, net of share
issuance costs 33,501 -
Proceeds on exercise of stock options 1,143 3,104
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Cash provided by financing activities 7,000 12,353
-------------------------------------------------------------------------
Net increase (decrease) in cash during the year (7,691) 7,691
Cash, beginning of year 7,691 -
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Cash, end of year $ - $ 7,691
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Interest paid $ 563 $ 1,657
Income taxes received $ (160) $ (2,938)
About Cangene Corporation
Cangene is one of Canada's largest and earliest biopharmaceutical
companies. It was founded in 1984 and is headquartered in Winnipeg, Manitoba.
It uses patented manufacturing processes to produce plasma-derived and
recombinant therapeutic proteins. Cangene has three FDA and Health
Canada-approved products and a fourth that has been approved in Canada only.
One of its recombinant protein products has received an approvable letter from
the FDA and another has been submitted for regulatory review in Canada. In
addition, the Company has several more products in development at various
stages. Three of Cangene's products have been accepted into the U.S. Strategic
National Stockpile-botulism antitoxin, anthrax immune globulin and vaccinia
immune globulin, a product used to counteract certain complications arising
from smallpox vaccination.
Capitalizing on its drug manufacturing expertise, Cangene also operates a
significant contract research and manufacturing business using its Winnipeg
facilities and the resources of Baltimore, Maryland-based Chesapeake
Biological Laboratories, Inc. (a wholly owned subsidiary). An expansion in
2006 at the Winnipeg location increased the Company's capacity to fractionate
plasma to accommodate the growing manufacturing requirements. Cangene's
website, www.cangene.com, includes product and investor information, including
past news releases. Chesapeake's website is www.cblinc.com.
Forward-looking information
The reader should be aware that Cangene's businesses are subject to risks
and uncertainties that cannot be predicted or quantified; consequently, actual
results may differ materially from past results and those expressed or implied
by any forward-looking statements. Factors that could cause or contribute to
such risks or uncertainties include, but are not limited to: the regulatory
environment including the difficulty of predicting regulatory outcomes;
changes in the value of the Canadian dollar; the Company'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;
availability and cost of raw materials, especially the cost, availability and
antibody concentration in plasma; fluctuations in operating results;
government policies or actions; progress and cost of clinical trials; reliance
on key strategic relationships; 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 cost associated with its defence; the Company's exposure to
lawsuits, and other matters beyond control of management.
Risks and uncertainties are discussed more extensively in the MD&A
section of the Company's most recent annual report and annual information
form, which are available on the Company's website or on SEDAR at
www.sedar.com. Scientific information that relates to unapproved products or
unapproved uses of products is preliminary and investigative. No conclusions
can or should be drawn regarding the safety or efficacy of such products. Only
regulatory authorities can determine whether products are safe and effective
for the uses being investigated. Healthcare professionals are directed to
refer to approved labelling for products and not rely on information presented
in news releases. Drug names and prescribing information may differ in various
countries.
The cautionary statements referred to above should be considered in
connection with all written or oral statements, especially forward-looking
statements, that are made by the Company or by persons acting on its behalf
and in conjunction with its periodic filings with Securities Commissions,
including those contained in the Company's news releases and most recently
filed annual information form. Forward-looking statements can be identified by
the use of words such as "expects", "plans", "will", "believes", "estimates",
"intends", "may", "bodes" and other words of similar meaning (including
negative and grammatical variations). Should known or unknown risks or
uncertainties materialize, or should management's assumptions prove
inaccurate, actual results could vary materially from those anticipated. The
Company undertakes no obligation to publicly make or update any
forward-looking statements, except as required by applicable law.
%SEDAR: 00002351E
For further information: Michael Graham at (204) 275-4040 or by email at
mgraham@cangene.com
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