Cangene Reports First Quarter 2014 Results and Election of Directors

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, Dec. 13, 2013 /CNW/ - Cangene Corporation ("Cangene") today reports its financial results for the three months ended October 31, 2013, and the voting results for the election of directors from its annual meeting of shareholders held on December 12, 2013.

Total revenue for the quarter was $24.6 million, compared with $36.5 million in the prior-year period. The decrease primarily resulted from reduced revenues related to the Company's Botulism Antitoxin (BAT™), along with decreased commercial contract manufacturing revenue. The comparative prior-year quarter also included $3.3 million of revenue from sales of non-specialty plasma, which the Company no longer sells.

Net loss for the current-year quarter was $5.2 million (loss of $0.08 per share), compared with a net income of $5.9 million (earnings of $0.09 per share) in the comparative quarter. In addition to the impact of the reduction in revenue, the current period included higher independent R&D expenses, largely related to the acquisition and development of IB1001 (the Company's investigational hemophilia B therapeutic) and higher professional and consulting expenses related to the sale transaction with Emergent BioSolutions, Inc. announced on December 11, 2013 (included in selling, general and administrative expenses). The comparative prior-year quarter also benefited from the $4.6-million gain on the sale of the Company's U.S.-based plasma centres. These factors were partially offset by a higher margin on biopharmaceutical product sales and a lower income tax expense in the current period.

"During this quarter we were awarded a new $264-million anthrax immune globulin contract as well as an up to $77­million vaccinia immune globulin intravenous™ contract extension by the U.S. government. Our WinRho® product also received marketing authorization in Portugal," says John Sedor, president and CEO of Cangene. "We have yet to record benefits of those achievements in our financial results, while we continue to invest in our commercial product pipeline. I believe it is important to remain focused on our long-term strategy of improving margins in and building our commercial biopharmaceutical business by expanding our product portfolio."

At October 31, 2013, Cangene had no debt and a cash balance of $38.7 million, compared with no debt and a cash balance of $46.4 million at the end of the 2013 fiscal year. Cash of $7.1 million was used in operating activities during the current period compared with $1.8 million used in operating activities during the comparative prior-year quarter. The current year included a $4.1-million increase in working capital, which was primarily attributable to increased accounts receivable, inventories and contracts in progress and accounts payable and accrued liabilities.

Operational highlights in the quarter

  • Posted strong balance sheet with a cash position of $38.7 million at October 31, 2013, and no debt.
  • Awarded new biodefence-related contract with U.S. government related to AIGIV [Anthrax Immune Globulin Intravenous (Human)]; first task/delivery order awarded for collection and storage of human anti-anthrax plasma worth approximately $63 million between 2014 and 2017; total potential contract value approximately $264 million.
  • Expanded scope of VIGIV [Vaccinia Immune Globulin Intravenous™ (Human)] contract, which could generate up to approximately $6.9 million in revenue over the next 18 months, with possible optional future services providing $45 million to $77 million more.
  • Received marketing authorization for WinRho® 1500 LQ in Portugal from the National Authority of Medicines and Health Products, I.P.; WinRho® 1500 LQ will be distributed by a local distributor in Portugal under this national licence.
  • Reinitiated clinical studies of our newly acquired hemophilia B therapeutic product candidate, IB1001 (a late-stage intravenous recombinant coagulation Factor IX). This was as a result of the FDA's July 2013 lifting of the clinical hold it had previously placed on the studies.

Election of Directors

The nominees listed in the management information circular for the annual meeting of shareholders of the Corporation held on December 12, 2013, were elected as directors of the Corporation. Voting was conducted by a show of hands as no ballot was requested, but the voting results set forth below are based on proxies received by the Corporation:

  Number of Shares Voted by Proxy Percentage of Votes Cast by Proxy
  FOR WITHHELD FOR WITHHELD
R. Craig Baxter 31,596,210 22,515 99.93% 0.07%
D. Bruce Burlington 31,606,610 12,115 99.96% 0.04%
Jeremy B. Desai 31,171,363 447,362 98.59% 1.41%
Philip R. Johnson 31,604,510 14,215 99.96% 0.04%
Jack M. Kay 29,159,333 2,459,392 92.22% 7.78%
J. Robert Lavery 31,606,610 12,115 99.96% 0.04%
R. Scott Lillibridge 31,597,379 21,346 99.93% 0.07%
John A. Sedor 31,602,610 16,115 99.95% 0.05%
John A. Vivash 31,606,610 12,115 99.96% 0.04%

Financial Results

Certain comparative figures in the following financial results have been reclassified to conform with the current year's presentation.

Cangene Corporation
Incorporated under the laws of Ontario
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (unaudited)

in thousands of U.S. dollars At October 31, 2013 At July 31, 2013
     
ASSETS    
Current    
Cash $ 38,692   $ 46,410  
Accounts receivable 25,295   21,206  
Inventories and contracts in progress 54,360   52,454  
Taxes recoverable 2,792   2,090  
Prepaid expenses and deposits 8,245   7,342  
Total current assets 129,384   129,502  
Property, plant and equipment, net 60,293   61,301  
Taxes recoverable 16,404   15,849  
Deferred development cost 215   178  
Deferred tax 12,242   12,374  
Intangible assets, net 58,306   59,353  
Other assets 8,077   7,961  
Total assets $ 284,921   $ 286,518  
     
LIABILITIES AND EQUITY    
Current    
Accounts payable and accrued liabilities $ 23,768   $ 20,607  
Provisions for chargebacks 4,820   4,530  
Royalty provision 553   605  
Royalty liability 914   604  
Incentive plan liability 1,364   1,436  
Taxes payable 12    
Current portion of deferred income 4,128   3,804  
Total current liabilities 35,559   31,586  
Deferred income 2,340   3,286  
Royalty provision 694   793  
Royalty liability 3,559   3,691  
Purchase consideration payable 46,341   45,638  
Incentive plan liability 334   301  
Deferred share unit liability 1,130   1,134  
Deferred tax 3,180   3,180  
Total liabilities 93,137   89,609  
     
     
Equity    
Share capital 50,860   50,860  
Contributed surplus 727   638  
Retained earnings 140,197   145,411  
Total equity 191,784   196,909  
Total liabilities and equity $ 284,921   $ 286,518  

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, 2013
Three months
ended
October 31, 2012
     
Revenues    
Product sales $ 9,631   $ 13,848  
Product services 13,309   19,999  
R&D services 1,675   2,635  
  24,615   36,482  
     
Cost of sales    
Product sales 6,947   10,603  
Product services 7,565   9,587  
R&D services 1,077   2,141  
  15,589   22,331  
     
Gross profit 9,026   14,151  
     
Expenses (income)    
Independent R&D 4,773   2,725  
Selling, general and administrative 8,460   7,130  
Gain on disposal of assets (125)   (4,680)  
Change in fair value of royalty provision   (98)  
  13,108   5,077  
     
Income (loss) before the following: (4,082)   9,074  
     
Financing charges, net (803)   (357)  
Foreign-exchange loss   (288)  
     
Income (loss) before taxes (4,885)   8,429  
     
Tax expense (benefit)    
  Current 197   3,165  
  Deferred 132   (676)  
  329   2,489  
     
Net income (loss) and comprehensive            
  income (loss) for the period $ (5,214)   $ 5,940  
     
Earnings (loss) per share    
  Basic and diluted $ (0.08)   $ 0.09  

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 August 1, 2012 $ 50,860   $ 144,053   $ 439   $ 195,352  
Net income for the year ended July 31, 2013   1,358     1,358  
Stock option expense     199   199  
         
Balance as at July 31, 2013 50,860   145,411   638   196,909  
Net loss for the three-month period ended October 31, 2013   (5,214)     (5,214)  
Stock option expense     89   89  
         
Balance as at October 31, 2013 $ 50,860   $ 140,197   $ 727   $ 191,784  
         
Balance as at August 1, 2012 $ 50,860   $ 144,053   $ 439   $ 195,352  
Net income for the three-month period ended October 31, 2012   5,940     5,940  
Stock option expense     66   66  
         
Balance as at October 31, 2012 $ 50,860   $ 149,993   $ 505   $ 201,358  

Cangene Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS

in thousands of U.S. dollars Three months
ended
October 31, 2013
Three months
ended
October 31, 2012
     
OPERATING ACTIVITIES    
Net income (loss) for the period $ (5,214)   $ 5,940  
Adjustments for:    
  Depreciation of property, plant and equipment 1,693   1,901  
  Amortization of intangible assets 1,090   760  
  Gain on disposal of assets (125)   (4,680)  
  Taxes recoverable, long-term (555)   (13)  
  Deferred income (622)   400  
  Incentive plan liabilities (55)   (856)  
  Royalty provision (192)   (236)  
  Royalty liability   (228)  
  Deferred share unit liability (4)   76  
  Change in fair value of royalty provision   (98)  
  Non-cash financing charges 822   367  
  Deferred tax expense (benefit) 132   (676)  
  Change in fair value of derivative financial instruments   (104)  
  Stock option expense 89   66  
Net change in non-cash working capital balances related        
  to operations (4,137)   (4,399)  
     
Cash used in operating activities (7,078)   (1,780)  
     
INVESTING ACTIVITIES    
Purchase of property, plant and equipment, net (685)   (507)  
Acquisition of intangible assets (43)   (3)  
Increase in deferred development cost (37)    
Proceeds on disposal of assets 125   2,615  
     
Cash provided by (used in) investing activities (640)   2,105  
     
Net increase (decrease) in cash during the period (7,718)   325  
Cash, beginning of period 46,410   35,870  
Cash, end of period $ 38,692   $ 36,195  
     
Interest paid1 $   $ 98  
Taxes paid2 $ 175   $ 838  
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 "EBITDA", "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