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 paid1       $   $ 1   $ 66   $ 7
Taxes paid2       $ 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

For further information:

Investor Relations Contact
Jeff Lamothe
Chief Financial Officer
Tel: (204) 275-4267
Email: ir@cangene.com