CANGENE ANNOUNCES FIRST QUARTER FINANCIAL RESULTS FOR FISCAL 2011

Readers are referred to the cautionary notes regarding Forward-looking Information and non-GAAP Financial Measures at the end of this release

Listed TSX, Symbol: CNJ

TORONTO AND WINNIPEG, Dec. 14 /CNW/ - Cangene Corporation today reports financial results for the quarter ended October 31, 2010.

Revenues for the first quarter of 2011 were $23.8 million, 43% lower than the $42.0 million recorded during the same period last year.  The lower total revenue in the quarter largely reflects the timing of deliveries on U.S. government biodefence contracts as there were no deliveries in the first quarter of 2011.  Similarly, lower R&D-services revenues in the contract-services segment for the current-year quarter reflect reduced R&D activity on the same contracts.  Royalty revenues received from Apotex were also lower in the first 2011 quarter compared with the first quarter of 2010, reflecting a reduced royalty rate, in accordance with the terms of an agreement with Apotex.

"The first quarter of 2011 did not include any deliveries on the U.S. government contracts and the timing of those deliveries always has a significant effect on our financial results.  However, we have already made one delivery of our AIG product in the second quarter of fiscal 2011 and anticipate making another delivery before the quarter end," said Dr. John Langstaff, Cangene's president and CEO. 

There was a net loss in the quarter of $5.4 million or $0.08 per share, compared with net income of $5.3 million or $0.08 per share in the same quarter last year. The drop in net income resulted largely from the much lower revenues, although greater independent R&D spending, higher amortization expenses, and increased selling, general and administrative ("SG&A") expense also contributed to the net loss.  The higher SG&A expense in the current-year quarter includes $2.2 million related to the new sales and marketing staff at Cangene bioPharma, Inc., for which no expenses had been recorded in the comparative quarter last year; however, the comparative period in the prior year included a similar amount that was paid as a marketing allowance to distribution partners and recorded as a reduction of product revenue (higher product revenue in the current-year quarter reflects this change).  Other areas of SG&A decreased by $0.5 million in the first quarter of 2011.  Increased expenses that contributed to the pre-tax loss were partially offset by an income tax recovery of $1.7 million in the current-year quarter compared with an income tax expense of $2.0 million in the first quarter of last year.

The Company had $23.5 million in cash at October 31, 2010, compared with $41.8 million at July 31, 2010. The net loss of $5.4 million, after considering non-cash items, only resulted in a $0.5-million decrease in cash.  The three main factors contributing the decrease in cash were increases in net non-cash working capital of $12.6 million, $3.6 million in capital expenditures and $1.2 million in share repurchases.  At October 31, 2010, Cangene had no debt. 

Readers are referred to the cautionary notes regarding Forward-looking Information and non-GAAP Financial Measures at the end of this release.  Certain comparative figures in the following 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 Wednesday, December 15, 2010 at 11:00 a.m. Eastern.  To access the conference call by telephone, dial 647-427-7450 or 1-888-231-8191.  The conference call will be archived for replay until Wednesday, December 22, 2010, at midnight.  To access the archived conference call, dial 416-849-0833 or 1-800-642-1687 and enter the reservation number 31119772 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.

CANGENE CORPORATION
CONSOLIDATED BALANCE SHEETS (unaudited)

Incorporated under the laws of Ontario           

in thousands of Canadian dollars At 
October 31, 2010 
  At 
July 31, 2010 
         
ASSETS        
Current        
Cash $ 23,498  $ 41,828 
Accounts receivable   19,671    18,908 
Inventories and contracts in progress   95,675    93,691 
Income and other taxes recoverable   9,971    10,846 
Future income taxes   4,165    4,671 
Prepaid expenses and deposits   3,693    3,196 
Total current assets   156,673    173,140 
Property, plant and equipment, net   107,089    106,776 
Income and other taxes recoverable   10,500    5,600 
Future income taxes   2,818    2,707 
Goodwill and intangible assets, net   55,703    56,458 
Other assets   4,636    4,619 
  $ 337,419  $ 349,300 
         
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current        
Accounts payable and accrued liabilities $ 20,555  $ 25,926 
Income and other taxes payable   130    76 
Current portion of deferred income   5,298    3,510 
Total current liabilities   25,983    29,512 
Deferred income   7,979    10,440 
Royalty liability   5,886    6,292 
Incentive plan liability   4,083    2,655 
Deferred share unit liability   226    181 
Future income taxes   3,225    3,612 
Total liabilities   47,382    52,692 
         
Shareholders' equity        
Share capital   64,464    64,802 
Contributed surplus   3,239    3,239 
Accumulated other comprehensive loss   (4,467)   (4,467)
Retained earnings   226,80   233,034 
Total shareholders' equity   290,037    296,608 
  $ 337,419  $ 349,300 
         

Cangene Corporation

CONSOLIDATED STATEMENTS OF INCOME (LOSS), COMPREHENSIVE INCOME (LOSS) AND RETAINED EARNINGS (unaudited)

in thousands of Canadian dollars except share-related data Three months ended
October 31, 2010 
  Three months ended
October 31, 2009
         
Revenues        
Product sales and services $ 19,102  $ 31,975 
R&D services   3,747    7,823 
Royalties   96   2,234 
    23,813    42,032 
         
Cost of sales        
Product sales and services   11,917    15,712 
R&D services   2,763    6,269 
    14,680    21,981 
         
Gross profit   9,133    20,051 
         
Expenses        
Independent R&D   4,310    3,461 
Selling, general and administrative   6,790    5,053 
Amortization   4,048    3,289 
Short-term interest income   (12)   (25)
Foreign-exchange loss   1,08   943 
    16,21   12,721 
Income (loss) before income taxes   (7,085)   7,330 
Income tax expense (recovery)        
  Current   (1,445)   736 
  Future   (280)   1,274 
    (1,725)   2,010 
Net income (loss) and comprehensive income (loss) for the period   (5,360)   5,320 
         
Retained earnings, beginning of period   233,034    227,909 
Purchase of common shares in excess of average stated capital   (873)   (363)
Retained earnings, end of period $ 226,801  $ 232,866 
         
Earnings (loss) per share                
  Basic and diluted $ (0.08) $ 0.08 
         
         

Cangene Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

in thousands of Canadian dollars Three months  ended 
October 31, 2010 
  Three months  ended 
October 31, 2009 
         
OPERATING ACTIVITIES        
Net income (loss) for the period $ (5,360) $ 5,320 
Add (deduct) items not involving cash:        
  Amortization of property, plant and equipment   3,293    3,063 
  Amortization of intangible assets   755    226 
  Deferred income   (673)   165 
  Incentive plan liability   1,428    2,026 
  Deferred share unit liability   45    60 
  Amortization of royalty liability   (320)   — 
  Future income tax expense (recovery)   (280)   1,274 
  Unrealized foreign-exchange loss (gain)   588    (471)
    (524)   11,663 
Net change in non-cash working capital balances and other assets related to operations   (12,603)   (21,961)
Cash used in operating activities   (13,127)   (10,298)
         
INVESTING ACTIVITIES        
Purchase of property, plant and equipment, net   (3,606)   (1,948)
Deposit on acquisition of intangible assets   —    (7,550)
Acquisition of intangible assets   —    (146)
Cash used in investing activities   (3,606)   (9,644)
         
FINANCING ACTIVITIES        
Shares repurchased for cancellation   (1,211)   (461)
Cash used in financing activities   (1,211)   (461)
Effect of exchange rates on cash   (386)   (483)
         
Net decrease in cash during the period   (18,330)   (20,886)
Cash, beginning of period   41,828    56,131 
Cash, end of period $ 23,498  $ 35,245 
         
Interest paid $ $ — 
Income taxes paid $ 12  $ 6,899 
         
         

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.  Cangene has approximately 800 employees in six locations across North America and its products are sold worldwide.  It operates manufacturing facilities in Winnipeg, Manitoba and Baltimore, Maryland where it produces its own products and undertakes contract manufacturing for a number of companies.  Cangene operates three U.S. and one Canadian plasma-collection facilities branded as Cangene Plasma Resources (www.cangeneplasma.com).  In addition, it has a regulatory affairs, sales and corporate communications office in Toronto, Ontario.

Cangene is focused on developing therapeutics for infectious diseases, and the Company uses patented manufacturing processes to produce plasma-derived and recombinant therapeutic proteins. Cangene has four FDA and/or Health Canada-approved hyperimmune products.  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 (investigational product), anthrax immune globulin (investigational product) and a vaccinia immune globulin, a product that may be used to counteract certain complications that may arise from smallpox vaccination.  Capitalizing on its drug manufacturing expertise, Cangene also operates a significant contract research and manufacturing business using the resources of Baltimore, Maryland-based Cangene bioPharma, Inc. (a wholly owned subsidiary; formerly Chesapeake Biological Laboratories, Inc.; www.cangenebiopharma.com).  Cangene's website, www.cangene.com, includes product and investor information, including past news releases.

Forward-looking and risk 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 costs 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.

The preceding cautionary statements 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", "anticipates", "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.

Cautionary Note Regarding Non-GAAP Financial Measures
This news release may contain non-GAAP financial measures.  Terms by which non-GAAP financial measures are identified include but are not limited to "net cash", "total assets", "sales" and other similar expressions.  Non-GAAP financial measures are used to provide management and investors with additional measures of performance.  However, non-GAAP financial measures do not have standard meanings prescribed by GAAP and are not directly comparable to similar measures used by other companies.  Please refer to the appropriate reconciliations of these non-GAAP financial measures to measures prescribed by GAAP.

"Cangene" is a trademark belonging to Cangene Corporation. 

SOURCE Cangene Corporation

For further information: For further information:

about Cangene Corporation, please contact Michael Graham at
(204) 275-4040 or by email at mgraham@cangene.com

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