Cangene Reports First Quarter 2013 Results; Earnings of 7 Cents Per Share

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, Dec. 12, 2012 /CNW/ - Cangene Corporation ("Cangene") today reports financial results for the first quarter of 2013, which ended on October 31, 2012.

Revenues for the quarter were $36.5 million, compared with $21.5 million in the same quarter last year. The 70% increase in revenue is largely attributable to revenue from U.S. government stockpiling contracts that was $12.2 million in the current-year quarter, compared with $4.8 million in the prior year. Commercial contract-manufacturing and product sales also increased by a combined $6.6 million in the quarter. Product-sales revenues include net sales of $0.4 million from the newly launched episil® product.

Net income of $4.5 million for the current-year quarter compares with a net loss of $4.4 million in the same quarter last year. The net income in the current-year quarter results from a combination of factors, including a higher gross  margin in the contract-manufacturing services segment, lower independent R&D expense because of the cancellation of IGIV development at the end of fiscal 2012, and a $2.5-million pre-tax gain on the sale of the three U.S.-based plasma centres. Earnings per share of $0.07 for the first quarter of 2013 compares with a loss per share of $0.07 in the same quarter last year.

"Our solid financial results this quarter reflect progress in our refocused strategy that's aimed at streamlining our operation and growing our commercial business," says John Sedor, President and Chief Executive Officer of Cangene. "We launched episil® in the U.S. during the quarter, and it's already showing promise as a revenue generator. We are encouraged by the positive response to that product as well as some growth in WinRho® SDF sales," he added. "We will continue to work hard to increase commercial product sales and generate returns for our stakeholders."

As at October 31, 2012, Cangene has a cash balance of $36.2 million and no debt. Excluding changes in working capital, cash provided by operations was $2.8 million for the current-year quarter, compared with cash used of $5.6 million in the same quarter last year. The current period includes a $4.6-million increase in working capital that resulted primarily from a $9.8-million increase in accounts receivable, although this was partially offset by a $3.1-million decrease in inventory. As a result, cash used in operations in the quarter was $1.8 million, compared with $5.7 million in the first quarter last year. A significant portion of the outstanding balances contributing to the increase in accounts receivable was collected in the first week of the second quarter of 2013.

Highlights

  • Earned net income of $4.5 million for the quarter
  • Maintained strong balance sheet with a cash position of $36.2 million as at October 31, 2012, and no debt
  • Launched episil® in the United States for the management and relief of pain associated with oral lesions, including oral mucositis that results from cancer therapy and other causes
  • Posted strong commercial product sales and contract-manufacturing revenues
  • Submitted Biologic License Application with the United States Food and Drug Administration for H-BAT™ [Botulism Antitoxin Heptavalent (A, B, C, D, E, F, G)(Equine)]
  • Announced new biodefence-related contract with U.S. government related to supply of Vaccinia Immune Globulin Intravenous™ (Human), and expanded existing contract related to Anthrax Immune Globulin Intravenous (Human)
  • Sold U.S.-based plasma centres to Grifols, through its wholly owned Biomat USA, Inc. subsidiary, in a transaction that closed on October 22, 2012.

Incorporated under the laws of Ontario

 
Cangene Corporation
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (unaudited)
 
in thousands of U.S. dollars At October 31, 2012   At July 31, 2012
ASSETS          
Current          
Cash $ 36,195   $ 35,870
Accounts receivable   32,129     22,330
Inventories and contracts in progress   54,519     57,650
Taxes recoverable   3,027     4,355
Derivative financial instruments   25    
Prepaid expenses and deposits   2,554     2,221
Total current assets   128,449     122,426
Property, plant and equipment, net   60,043     61,467
Taxes recoverable   17,552     17,539
Deferred tax   15,052     14,636
Intangible assets, net   18,453     19,249
Total assets $ 239,549   $ 235,317
           
LIABILITIES AND EQUITY          
Current          
Accounts payable and accrued liabilities $ 14,164   $ 13,782
Derivative financial instruments       79
Purchase consideration payable   739     759
Provision for chargebacks   4,357     3,625
Incentive plan liability   962     841
Taxes payable   717     707
Current portion of deferred income   2,024     1,883
Total current liabilities   22,963     21,676
Deferred income   6,171     5,912
Royalty provision   2,104     2,253
Purchase consideration payable   6,809     6,811
Incentive plan liabilities   85     1,062
Deferred share unit liability   557     481
Deferred tax   977     1,770
Total liabilities   39,666     39,965
           
           
Equity          
Share capital   50,860     50,860
Contributed surplus   505     439
Retained earnings   148,518     144,053
Total equity   199,883     195,352
Total liabilities and equity $ 239,549   $ 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
October 31, 2012 
  Three months
ended
October 31, 2011
 
Revenues            
Product sales $ 13,848   $ 11,564  
Product services   19,999     5,536  
R&D services   2,635     4,369  
    36,482     21,469  
Cost of sales            
Product sales   10,746     7,578  
Product services   9,587     4,272  
R&D services   2,141     3,202  
    22,474     15,052  
Gross profit   14,008     6,417  
Expenses            
Independent R&D   2,725     6,701  
Selling, general and administrative   7,169     6,813  
Loss (gain) on disposal of assets   (2,585 )   80  
    7,309     13,594  
Operating profit (loss)   6,699     (7,177 )
Short-term interest income   10     2  
Foreign-exchange gain (loss)   (288 )   3,139  
Income (loss) before taxes   6,421     (4,036 )
Tax expense (benefit)            
    Current   3,165     945  
    Deferred   (1,209 )   (591 )
    1,956     354  
             
Net income (loss) and comprehensive income (loss) for
    the period
$ 4,465   $ (4,390 )
Earnings (loss) per share            
    Basic and diluted $ 0.07   $ (0.07 )
             

   
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 three-month period ended
    October 31, 2012
      4,465         4,465  
Stock option expense           66     66  
Balance as at October 31, 2012 $ 50,860   $ 148,518   $ 505   $ 199,883  
Balance as at July 31, 2011 $ 50,860   $ 172,340   $   $ 223,200  
Net loss for the three-month period ended
    October 31, 2011
      (4,390 )       (4,390 )
Stock option expense           178     178  
Balance as at October 31, 2011 $ 50,860   $ 167,950   $ 178   $ 218,988  
                         

Cangene Corporation    
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (unaudited)    
     
in thousands of U.S. dollars Three months
ended
October 31, 2012
Three months
ended
October 31, 2011
 
       
OPERATING ACTIVITIES      
Net income (loss) for the period $ 4,465   $ (4,390 )
Add (deduct) items not involving cash:            
  Depreciation of property, plant and equipment   1,901     2,353  
  Amortization of intangible assets   799     676  
  Deferred income   400     (801 )
  Incentive plan liabilities   (856 )   (601 )
  Deferred share unit liability   76     16  
  Amortization of royalty provision   (190 )   (224 )
  Revaluation of royalty provision   41     (176 )
  Deferred tax benefit   (1,209 )   (591 )
  Change in value of derivative financial instruments   (104 )   (2,101 )
  Net change in purchase consideration payable   (22 )    
  Loss (gain) on disposal of assets   (2,585 )   80  
  Stock option expense   66     178  
Net change in non-cash working capital balances related to
    operations
  (4,562 )   (157 )
Cash used in operating activities   (1,780 )   (5,738 )
             
INVESTING ACTIVITIES            
Purchase of property, plant and equipment, net   (507 )   (650 )
Acquisition of intangible assets   (3 )   (130 )
Proceeds on disposal of assets   2,615      
Cash provided by (used in) investing activities   2,105     (780 )
Net increase (decrease) in cash during the period   325     (6,518 )
Cash, beginning of period   35,870     45,176  
Cash, end of period $ 36,195   $ 38,658  
Interest paid1 $ 98   $ 6  
Taxes paid2 $ 838   $ 59  
             
  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 in North America. It operates manufacturing facilities in Winnipeg, Manitoba and Baltimore, Maryland (through its wholly owned Cangene bioPharma, Inc. subsidiary) 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 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; 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", "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

For further information:

Contact Information
Francis J. St.Hilaire
Vice President, General Counsel & Secretary
Ph:  (204) 275-4540
Email: fsthilaire@cangene.com