Adaltis Announces 2006 Fourth Quarter and Year End Financial Results



    MONTREAL, March 27 /CNW Telbec/ - Adaltis Inc. (TSX: ADS), an
international in vitro diagnostic (IVD) company, today reported its financial
results for the fourth quarter and fiscal year ended December 31, 2006.

    Financial Highlights:

    
    - Revenue for the year ended December 31, 2006, was $62.8 million
      compared to $72.3 million in the same period in 2005. Revenue in Asia,
      mostly sales of low-margin products, decreased by more than 20%
      year-over-year, in constant dollars, primarily as a result of the
      Chinese government's special audit programs aimed at improving
      efficiency and transparency in hospital purchasing procedures, the
      effects of which were felt during almost all of 2006.
    - Revenue was $16.8 million for the fourth quarter compared to
      $19.5 million in the fourth quarter of 2005. Sales from low-margin
      products in Asia decreased more than 35%, in constant dollars, as
      compared to the fourth quarter of 2005, but were up compared to the
      preceding quarter. Sales of higher-margin IVD products, including
      Eclectica(TM) and infectious disease microplate lines, increased in the
      fourth quarter as compared to 2005. Sequentially, total revenue
      increased 40% from the third quarter of 2006 as higher-margin IVD
      products achieved their highest quarterly sales of 2006.
    - Net loss for the year ended December 31, 2006, was $29.1 million
      compared to $26.1 million in the same period in 2005.
    - Net loss for the quarter was $9.0 million, compared to a net loss of
      $8.6 million in the fourth quarter of 2005.

    "Our fourth quarter revenue demonstrates that our investment in our
state-of-the-art manufacturing plant in Shanghai, China, has started to pay
off," said Mr. Pierre Larochelle, President and Chief Executive Officer of
Adaltis. "Our customers in emerging markets are increasingly demanding high
quality products at low prices, and our Shanghai facility gives us the ability
to meet this demand, as evidenced by the fourth quarter sales of our
higher-margin IVD products being the highest of any quarter in 2006. In
addition, our flagship product Eclectica(TM) is gaining momentum in emerging
markets, as demonstrated by our recent launch in Mexico where close to 40
instruments have already been installed to date."
    Mr. Larochelle also noted that "our sales performance in 2006, while
disappointing, is not indicative of the significant potential created by our
investments of the past few years. Rather, our decline in revenues in 2006 was
almost entirely the result of lower sales in Asia, which were largely affected
by the initiatives implemented in 2006 by the Chinese government to increase
transparency and efficiency in hospital procurement. This had a significant
impact on the sales of our low-margin products, and also created temporary
challenges in the regulatory approval process that resulted in delays in
obtaining approvals of select product registrations. Notwithstanding the
short-term effect, we expect these regulatory changes to be beneficial in the
long-term for the industry in general, and for Adaltis in particular, as they
will result in increased quality requirements in the IVD industry market,
which will be beneficial for high quality producers like Adaltis."

    2006 Operational Highlights:

    During the course of 2006, the Company took the following steps in
executing its strategy of becoming a leading provider of in vitro diagnostic
products in emerging markets, with a specific focus on China. The Company's
strategy remains focused around its three key pillars of growth.

    Providing tailored solutions to customers in emerging markets:

    - Rolled out Eclectica(TM), reaching in excess of 140 instruments
      installed, including a successful launch in Mexico.
    - Launched Detect-HIV(TM) (v.4), our new fourth-generation HIV screening
      test, which was confirmed by several independent studies as one of the
      best performing HIV screening tests.

    High quality manufacturing in a low-cost environment:

    - Received formal certification of our Shanghai facility by European
      authorities; this facility is now fully operational.
    - Started selling our infectious disease microplate products under the
      "CE" mark from our Shanghai facility.
    - Completed and validated the transfer of production know-how of all
      hepatitis and TORCH products to our production team in Shanghai.
    - Transferred the production of our Personal Lab(TM) diagnostic
      instrument to a China-based manufacturer.
    - Started to leverage our Shanghai manufacturing facility to penetrate
      emerging markets; in particular, we won various tenders and signed
      important distribution agreements for our infectious disease products
      during the course of the year, notably in the Middle East and in
      Brazil.

    Effective sales and marketing platform for emerging markets:

    - Strengthened our organization in China, which now totals almost
      300 employees, of which 175 are dedicated to sales and marketing.
    - Agreed to acquire control of Shanghai Hua Tai Biotechnology Co. Ltd., a
      manufacturer of infectious disease diagnostic products located in
      Shanghai. This acquisition will give Adaltis access to an existing
      customer base and will add 60 employees with considerable experience in
      production, sales and customer service to the Adaltis team.

    2006 Financing Highlights:

    The Company completed a private placement in March 2006 of $15 million of
convertible unsecured subordinated debentures, of which 30% were purchased by
the shareholders of Picchio Pharma Inc., our main strategic shareholder.
    In March 2006, the Company entered into a credit facility with a Chinese
bank secured by a mortgage on its plant in Shanghai, China, for an amount of
$2.2 million (RMB 15.4 million), maturing on March 1, 2007. This facility was
repaid on March 1, 2007 - see "Subsequent Financing Events" below.
    During 2006, the Company entered into credit facilities with an Italian
bank for a total amount of $14.2 million ((euro)10.0 million). A first tranche
amounting to $4.3 million ((euro)3.0 million) is secured by certain
receivables in Italy and matures in November 2007. The second tranche of
$9.9 million ((euro)7.0 million) is secured by the manufacturing facility in
Rome and matures in 2016.
    During the course of 2006, the Company also modified certain of its other
Italian credit lines resulting in an increase of its borrowing capacity to
$8.9 million ((euro)5.8 million) on December 31, 2006, compared to
$5.1 million ((euro)3.7 million) on December 31, 2005.

    Financial Results:

    Revenue (including sales, rental income, royalties and other revenue)

    Revenue for the year-ended December 31, 2006, was $62.8 million compared
to $72.3 million in 2005, a decrease of $9.5 million or 13.1%. The decrease
was mainly attributable to lower sales of low-margin products in Asia of
$8.6 million, and to foreign exchange fluctuations having a negative effect of
$3.6 million. This was partially offset by an increase of $2.7 million in
sales of our IVD products including Eclectica(TM) and infectious disease
microplate lines. The lower sales in Asia were primarily due to the Chinese
government's special audit programs aimed at increasing efficiency and
transparency in hospital purchasing procedures, and a small number of
important sales in 2005 not repeated in 2006.

    Cost of Sales and Rental Income

    For the year-ended December 31, 2006, cost of sales and rental income was
$52.6 million compared to $60.9 million in 2005, a decrease of $8.3 million or
13.6%. The decrease was due to lower sales, as explained under the "Revenue"
caption above, together with a change in sales mix, contributing a decrease of
$5.6 million to cost of sales and rental income. Foreign exchange fluctuations
accounted for the remaining $2.7 million of the variance.

    Selling and Administrative Expenses

    Selling and administrative expenses were $29.0 million in 2006, compared
to $28.0 million in 2005, an increase of $1.0 million or 3.6%. Actual expenses
increased by $2.5 million mainly as a result of costs related to the continued
set-up of our operating platform in China. This was partially offset by the
positive impact of foreign currencies fluctuation of $1.5 million.

    Research and Development Expenses

    Research and development expenses were $5.3 million in 2006 compared to
$5.6 million in 2005, a decrease of $0.3 million or 5.4%. The decrease was
mostly attributable to favorable foreign exchange fluctuations.

    Financial Expenses

    Financial expenses were $2.0 million in 2006 compared to $1.5 million in
2005, an increase of $0.5 million or 33.3%. $0.4 million of this increase is
due to the issuance of the convertible debentures in March 2006 and the new
credit facilities put into place during the course of 2006, not present in
2005.

    Stock-based Compensation

    Stock-based compensation expense, a non-cash item, was $1.9 million for
2006 relatively flat compared to 2005.

    Foreign Exchange Loss

    The foreign exchange loss for 2006 was $1.5 million compared to
$0.4 million for 2005, an increase of $1.1 million. The loss was due to the
strengthening of the Euro versus the Canadian dollar in the fourth quarter,
particularly as it relates to translating our net monetary liabilities at
current rates.

    Restructuring and Other Charges

    Restructuring and other charges were nil for 2006. The gain recognized in
2005 was due to reversals of previously recorded charges.

    Income Taxes

    Income taxes resulted in a credit of $0.4 million in 2006, versus an
expense of $0.3 million last year. The difference is primarily due to the
reversal of a provision for income tax payable that is no longer required and
to the increase of our future tax liabilities due to a change in a temporary
difference. Tax expense in 2005 was comparable to 2004 and was mainly recorded
in relation to potential assessments of prior years' filings.

    Net Loss

    For the reasons described above, for the year ended December 31, 2006, the
Company posted a net loss of $29.1 million or $0.57 on a basic and diluted per
share basis compared to a loss of $26.1 million or $0.50 on a basic and
diluted per share basis in 2005.
    For the year ended December 31, 2006, an amount of $0.8 million has been
recorded as an increase to the equity component of convertible debentures in
the consolidated statement of deficit. These amounts were taken into
consideration in determining basic and diluted per share data.

    Fourth Quarter

    For the quarter ended December 31, 2006, revenue amounted to
$16.8 million, a $2.7 million or 13.8% decrease over the $19.5 million
recorded in the corresponding quarter in 2005. The decrease was mainly
attributable to lower sales of low-margin products of $4.6 million in Asia as
a result of the Chinese government's implementation of special audit programs
aimed at increasing efficiency and transparency in hospital procedures. This
decrease was partially offset by growth of our higher-margin IVD products,
including Eclectica(TM) and infectious disease microplate lines, of $2.0
million. Foreign exchange fluctuations had a negative impact of approximately
$0.1 million.
    The net loss for the quarter was $9.0 million while the loss for the same
period last year was $8.6 million. The negative variance was mostly
attributable to $1.3 million of foreign exchange losses, and $0.3 million of
higher financial expenses. This was partially offset by a positive variance
related to income tax of $0.9 million, a higher gross margin of $0.2 million,
and lower stock-based compensation expenses of $0.2 million.
    The increase in foreign exchange loss was due to the strengthening of the
Euro versus the Canadian dollar in the fourth quarter, particularly as it
relates to translating our net monetary liabilities at current rates. The
increase in financial expenses was due to the issuance of the convertible
debentures and new credit facilities put into place during the course of 2006,
not present in 2005. The tax credit of $0.7 million in 2006 contrasted with a
tax expense of $0.2 million in 2005, and was primarily due to the reversal of
a provision for income tax payable that is no longer required.

    Selected Financial Data (unaudited)
    (In thousands of Canadian dollars, except per share amounts)

                             Three         Three        Twelve        Twelve
                      months ended  months ended  months ended  months ended
                           Dec. 31,      Dec. 31,      Dec. 31,      Dec. 31,
                              2006          2005          2006          2005
                      ------------- ------------- ------------- -------------
    Revenue                 16,827        19,496        62,803        72,306
    Loss before
     financial
     expenses,
     income taxes
     and selected
     items (1)              (7,161)       (7,417)      (24,099)      (22,244)
    Net loss                (8,958)       (8,573)      (29,091)      (26,129)
    Net loss
     per share               (0.18)        (0.16)        (0.57)        (0.50)
    Cash loss
     per share (2)           (0.15)        (0.14)        (0.47)        (0.40)


                                                   December 31,  December 31,
                                                          2006          2005
                                                   ------------  ------------
    Cash and cash equivalents, term deposit and
     restricted cash                                     7,366        11,747
    Total assets                                       127,189       134,693
    Bank indebtedness                                   13,480         4,827
    Total long-term debt (including current
     portion) (3)                                       18,811        10,697
    Shareholders' equity                                60,064        77,049

    (1) Selected items include stock-based compensation expense, foreign
        exchange loss and restructuring and other charges.
    (2) Cash loss per share is a non-GAAP measure based on the loss before
        amortization and stock-based compensation expense.
    (3) Includes liability component of convertible debentures.
    

    Subsequent Event:

    On February 22, 2007, the Company reached an agreement to fully and
finally settle a product liability suit against its United States subsidiary.
The lawsuit, launched in 2004, initially alleged damages of US$30,000,000,
which in 2005 were reduced by the court to US$10,000,000. The terms of the
settlement are confidential; however, taking into account the terms of the
Company's applicable insurance policies, the settlement had no material effect
on the Company's financial position or results of operations.

    Subsequent Financing Events:

    On February 27, 2007, the Company entered into an $8.0 million line of
credit with a Canadian bank. This line of credit matures on May 31, 2007 and
is guaranteed by certain strategic shareholders.
    On March 1, 2007, the Company repaid its credit facility in China with a
new $2.3 million (RMB 15.4 million) bridge loan with another Chinese bank.
This bridge loan is in the process of being replaced by a credit facility
authorized by the same Chinese bank, secured by a mortgage on the plant in
Shanghai, China, for an amount of $4.5 million (RMB 30.0 million).
    The Company's financial statements have been prepared using the
going-concern assumption, which assumes the Company will be able to realize
assets and discharge liabilities in the normal course of operations. The
Company's ability to continue as a going concern is contingent on its ability
to generate sales and earnings, and to obtain additional financing to meet
cash requirements. In connection with the Company's business plan, the Company
is seeking additional funds to finance its requirements in working capital for
the next twelve months, its requirements to meet long-term debt payment
obligations, the development of its facilities, and additions to manufacturing
equipment. The Company is presently considering a range of options including,
but not limited to, equity, debt or other non-dilutive funding alternatives.
At this time, there can be no assurance that the Company will obtain such
additional financing.

    2006 Fourth Quarter and Year End Results Available

    The complete financial statements, notes to financial statements, and
Management's Discussion and Analysis for the 2006 fourth quarter and year
ended December 31, 2006, will be available on the Company's website -
www.adaltis.com. These documents will also be filed on SEDAR, and will be
accessible from the SEDAR website at www.sedar.com.

    Conference Call Notice

    Adaltis will host a conference call to discuss its 2006 fourth quarter
and year end financial results on Tuesday, March 27, 2007 at 5:00 p.m. EST.
The dial-in number for the conference call is (800) 810-0924 (Canada and
United States) or (913) 981-4900 (International). If you are unable to
participate in the conference call, a replay will be available starting that
same day at 6:00 p.m. EST by dialing (888) 203-1112 (Canada and United States)
or (719) 457-0820 (International) and entering pass code # 6419829, until
April 3, 2007 at 12:00 a.m. EST or by audio web cast on Adaltis' Web site for
90 days.

    Non-GAAP Measures

    The Company reports its financial statements in accordance with GAAP.
However, this document uses a non-GAAP performance measure: cash loss per
share.
    We believe this non-GAAP measure provides useful information to
stakeholders regarding the Company's financial condition and results of
operations. Management believes cash loss per share is a pertinent measure of
the Company's performance considering the Company's significant non cash
expenses, such as amortization and stock-based compensation expenses. This
non-GAAP financial measure does not have any standardized meaning prescribed
by GAAP and is therefore unlikely to be comparable to similar measures
presented by other issuers. It should be considered as supplemental in nature
and not as a substitute for the related financial information prepared in
accordance with GAAP.

    About Adaltis

    Adaltis is an international in vitro diagnostic company that develops,
manufactures and markets diagnostic systems. It aims to leverage its
experience in Europe to become a leading provider of in vitro diagnostic
products in emerging markets, with a particular focus on China.
    With the assistance of its two strategic shareholders, CITIC Pacific
Limited (a large Hong Kong-based conglomerate) and Picchio Pharma Inc. (a
joint venture healthcare investment firm owned by FMRC Family Trust (a trust
of which Dr. Francesco Bellini is a beneficiary), and Power Technology
Investment Corporation, a subsidiary of Power Corporation of Canada), Adaltis
has completed building its manufacturing facility in Shanghai. Now
operational, the production facility manufactures high-quality products in a
low-cost GMP environment, in order to service existing markets in Europe,
while providing a platform to penetrate the high-growth Chinese in vitro
diagnostic market.

    Adaltis is headquartered in Montreal, with offices in China, Hong Kong,
Italy, Germany and Mexico.

    Caution Concerning Forward-Looking Statements

    Certain statements made in this press release, including in particular
the short term and long term impact of the recent Chinese government
initiatives, the anticipated market opportunities for our products, notably
Eclectica(TM), the suitability of our product offering, and our ability to
access future equity or debt financing, are forward-looking statements and are
subject to important risks, uncertainties and assumptions. The Company
cautions that, by their nature, forward-looking statements involve risk and
uncertainty and the Company's actual actions or results could differ
materially from those expressed or implied in such forward-looking statements.
The forward-looking statements contained in this press release represent the
expectations of Adaltis Inc. and its subsidiaries as at the date hereof and
accordingly are subject to change after such date. However, Adaltis Inc. and
its subsidiaries expressly disclaim any intention or obligation to update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by applicable law.
    For additional information with respect to the risks and uncertainties
and other factors that could cause the results or events predicted in these
forward-looking statements to differ materially from actual results or events,
please refer to the Annual Information Form of the Company filed with the
Canadian securities commissions.




For further information:

For further information: Jacques Deforges, Vice President, Finance and
Chief Financial Officer, Adaltis Inc., (514) 335-9922, ext. 245,
jacques.deforges@adaltis.com; Eddy Miller, Director, Investor Relations,
Adaltis Inc., (514) 335-9922, ext. 257, eddy.miller@adaltis.com

Organization Profile

ADALTIS INC.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890