Cangene reports results for 2nd quarter of fiscal 2007



    Listed TSX, Symbol: CNJ

    TORONTO and WINNIPEG, March 15 /CNW/ - Cangene today reports results for
the second quarter and six months ended January 31, 2007.
    Revenue for the second quarter of fiscal 2007 was $20.6 million compared
with $29.8 million in the same quarter of the prior year. Revenue for the six
months ended January 31, 2007 was $45.4 million compared with $53.9 million in
the same period last year. In the second quarter last year, Cangene delivered
the first half of a $16-million order of VIG to the U.K. government and there
was no equivalent VIG sale in the current quarter. Stronger WinRho(R) SDF
sales in the U.S. partially offset a decline in product sales for the period.
R&D services revenues also declined, as activity on U.S. government research
contracts awarded in 2003 neared completion and R&D activities related to
Accretropin(TM) and Leucotropin(R), two follow-on biopharmaceutical products
being developed jointly with the Apotex Group, diminished following submission
for regulatory review. The Company is not yet recognizing certain revenues
related to new government contracts signed during 2006, and costs associated
with these contracts totalling $16.6 million have been charged to inventory
and other assets. Revenues will begin to be recognized once the Company has
delivered usable product and submitted specific regulatory data to the U.S.
Food and Drug Administration.
    Net income for the current quarter was $1.9 million or $0.03 per share,
compared with $3.6 million or $0.06 per share for the same quarter last year.
Net income for the first six months of fiscal 2007 was $6.4 million or $0.10
per share, compared with $4.2 million or $0.06 per share in the same period
last year. Gross profit in the current quarter decreased $3.7 million compared
to the same period last year, again due to reduced VIG sales volumes and
R&D-services revenues. Improved gross margins on WinRho(R) SDF sales and
billed R&D services partially offset the impact of reduced revenues. Operating
costs remained level when compared to the second quarter last year, while
income tax expense decreased due to the reduced level of earnings in the
current quarter.
    Net non-cash working capital, excluding bank debt, increased by
approximately $5.5 million in the quarter, with higher inventory levels
resulting from the start-up of the anthrax immune globulin and botulinum toxin
immune globulin stockpiling contracts, largely offset by an increase in trade
accounts payable and reduced accounts receivable. Long-term debt decreased by
$25.6 million during the current quarter as the Company repaid a significant
portion of the non-revolving, facility-expansion loan used to finance the
fractionation plant-expansion; $24.0 million of the proceeds from the recently
completed common share offering were used for this purpose. Additional net
offering proceeds of $9.5 million will be used for general corporate purposes,
including working capital needs.
    "Cangene posted reasonably strong financial results and furthered certain
key objectives during this quarter, despite the fact that we are not yet
recognizing revenue relating to the U.S. government hyperimmune-stockpiling
contracts that we were awarded in 2006," said Dr. John Langstaff, president
and CEO of Cangene. "The completion of the $81.0-million combined secondary
and treasury offering in December 2006 allowed us to pay off a substantial
portion of our debt, and increased our public float as well as the breadth of
our shareholder base, which should contribute to increased liquidity for our
shareholders. In addition, subsequent to the end of the quarter, we received a
letter from the FDA indicating that our Accretopin(TM) submission is
approvable after we provide some further support data relating to our
manufacturing process and Apotex Corp., our U.S. distributor for HepaGam
B(TM), has signed an agreement with a major healthcare supplier that will
allow HepaGamB(TM) to reach nearly 2,500 healthcare organizations," he said.
    Certain comparative figures in the financial statements have been
reclassified to conform to the current year's presentation.

    Conference Call
    Cangene will host a conference call on Friday, March 16, 2007 at 11:00
a.m. E.S.T. to discuss its financial results for the second quarter of fiscal
2007, ended January 31, 2007.
    To access the conference call by telephone, dial 416-644-3415 or
1-800-732-9303. Please connect approximately 15 minutes prior to the beginning
of the call to ensure participation. The conference call will be archived for
replay until Friday, March 23, 2007 at midnight. To access the archived
conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation
number 21223596 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.

    
    CONSOLIDATED BALANCE SHEETS (unaudited)
                                                 At January 31,   At July 31,
    in thousands of Canadian dollars                      2007          2006
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash                                          $     14,365  $      7,691
    Accounts receivable                                 17,830        26,956
    Income and other taxes recoverable                   9,867         3,291
    Inventories                                         39,789        27,170
    Prepaid expenses and deposits                        2,809         2,640
    -------------------------------------------------------------------------
    Total current assets                                84,660        67,748
    Property, plant and equipment, net                 107,407       105,392
    Future income taxes                                 10,451         9,941
    Goodwill                                            40,514        40,514
    Other assets                                         3,282         1,559
    -------------------------------------------------------------------------
                                                  $    246,314  $    225,154
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Accounts payable and accrued liabilities      $     21,501  $     16,009
    Current portion of deferred income                   3,726         4,532
    Current portion of long-term debt                    4,709         5,674
    -------------------------------------------------------------------------
    Total current liabilities                           29,936        26,215
    Long-term debt                                       1,595        26,854
    Incentive plan liability                               114           760
    Deferred income                                      3,356         3,770
    Future income taxes                                  5,179         1,618
    -------------------------------------------------------------------------
    Total liabilities                                   40,180        59,217
    -------------------------------------------------------------------------
    Commitments
    Shareholders' equity
    Share capital                                       66,072        32,250
    Contributed surplus                                  3,239         3,239
    Cumulative translation adjustment                   (4,467)       (4,467)
    Retained earnings                                  141,290       134,915
    -------------------------------------------------------------------------
    Total shareholders' equity                         206,134       165,937
    -------------------------------------------------------------------------
                                                  $    246,314  $    225,154
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (unaudited)

    in thousands of   Three months  Three months    Six months    Six months
     Canadian dollars        ended         ended         ended         ended
     except share-      January 31,   January 31,   January 31,   January 31,
     related data             2007          2006          2007          2006
    -------------------------------------------------------------------------
    Revenues
    Product sales
     and services     $     12,786  $     19,191  $     28,672  $     32,602
    R&D services             6,898         8,793        13,313        18,011
    Royalties                  957         1,783         3,440         3,281
    -------------------------------------------------------------------------
                            20,641        29,767        45,425        53,894
    Cost of sales
    Product sales
     and services            6,276        11,811        13,152        22,859
    R&D services             4,609         4,535         8,415         9,955
    -------------------------------------------------------------------------
                            10,885        16,346        21,567        32,814
    -------------------------------------------------------------------------
    Gross profit             9,756        13,421        23,858        21,080
    -------------------------------------------------------------------------

    Expenses
    Independent R&D          1,501         1,472         3,365         2,669
    Selling, general
     and administrative      3,417         3,455         6,012         5,974
    Amortization             2,231         2,241         4,441         4,983
    Interest expense
     (income)
      Short-term              (156)          276          (284)          557
      Long-term                 50            49            83            95
    Foreign exchange
     gain                     (625)         (136)         (661)         (675)
    -------------------------------------------------------------------------
                             6,418         7,357        12,956        13,603
    -------------------------------------------------------------------------
    Income before
     income taxes            3,338         6,064        10,902         7,477
    -------------------------------------------------------------------------
    Income tax expense
      Current                 (264)        3,617         2,194         4,367
      Future                 1,675        (1,152)        2,333        (1,080)
    -------------------------------------------------------------------------
                             1,411         2,465         4,527         3,287
    -------------------------------------------------------------------------
    Net income for
     the period              1,927         3,599         6,375         4,190

    Retained earnings,
     beginning of
     period                139,363       122,363       134,915       121,772
    -------------------------------------------------------------------------
    Retained earnings,
     end of period    $    141,290  $    125,962  $    141,290  $    125,962
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per
     share
      Basic           $       0.03  $       0.06  $       0.10  $       0.06
      Diluted         $       0.03  $       0.05  $       0.09  $       0.06
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted-average
     number of
     outstanding               No.           No.           No.           No.
     shares             68,038,870    65,183,628    66,942,312    65,108,716


    CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

                      Three months  Three months    Six months    Six months
                             ended         ended         ended         ended
    in thousands of     January 31,   January 31,   January 31,   January 31,
     Canadian dollars         2007          2006          2007          2006
    -------------------------------------------------------------------------
    OPERATING
     ACTIVITIES
    Net income for
     the period       $      1,927  $      3,599  $      6,375  $      4,190
    Add (deduct)
     items not
     involving cash:
      Amortization           2,231         2,241         4,441         4,983
      Deferred income         (522)         (189)       (1,220)       (1,068)
      Net investment
       tax credits          (1,725)          739        (1,407)       (1,159)
      Increase
       (decrease) in
       incentive plan
       liability                (8)        1,076          (646)        1,076
      Future income
       taxes                 1,675        (1,152)        2,333        (1,080)
      Other assets             234             -        (1,723)            -
      Unrealized
       foreign
       exchange
       loss (gain)            (472)          187          (510)          664
    -------------------------------------------------------------------------
                             3,340         6,501         7,643         7,606
    Net change in
     non-cash working
     capital balances
     related to
     operations             (2,538)       (3,104)       (2,111)       (6,295)
    -------------------------------------------------------------------------
    Cash provided by
     operating
     activities                802         3,397         5,532         1,311
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
    Purchase of
     property, plant and
     equipment, net         (2,984)       (8,496)       (6,456)      (15,535)
    -------------------------------------------------------------------------
    Cash used in
     investing
     activities             (2,984)       (8,496)       (6,456)      (15,535)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Decrease in bank
     indebtedness, net           -        (1,893)            -          (633)
    Issuance of
     long-term debt              -         7,500             -        14,500
    Repayment of
     long-term debt        (25,565)         (848)      (26,224)       (1,830)
    Issuance of common
     shares, net of
     share issuance
     costs                  33,501             -        33,501             -
    Proceeds on
     exercise of stock
     options                    55         1,275           321         1,448
    -------------------------------------------------------------------------
    Cash provided by
     financing
     activities              7,991         6,034         7,598        13,485
    -------------------------------------------------------------------------
    Net increase
     (decrease) in cash
     during the period       5,809           935         6,674          (739)
    Cash, beginning
     of period               8,556         2,311         7,691         3,985
    -------------------------------------------------------------------------
    Cash, end of
     period           $     14,365  $      3,246  $     14,365  $      3,246
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest paid     $        161  $        419  $        437  $      1,015
    Income taxes paid $      2,128  $          -  $      2,166  $          -
    

    About Cangene
    Cangene is one of Canada's largest and earliest biopharmaceutical
companies. It was founded in 1984 and is headquartered in Winnipeg, Manitoba.
Cangene carries out research and development in Mississauga, Ontario and in
Winnipeg. It uses patented manufacturing processes to produce plasma-derived
and recombinant therapeutic proteins. Cangene has three FDA-approved products
and a fourth that has been approved in Canada, one of its recombinant protein
products has received an approvable letter from the FDA and another has been
submitted for regulatory review in Canada, and in addition, the Company has
several more products in development at various stages. Capitalizing on its
drug manufacturing expertise, Cangene also operates a significant contract
research and manufacturing business using its Winnipeg facilities and the
resources of Baltimore, Maryland-based Chesapeake Biological Laboratories,
Inc. (a wholly owned subsidiary). An expansion in 2006 at the Winnipeg
location will increase the Company's capacity to fractionate plasma to
accommodate the growing manufacturing requirements. Cangene's website,
www.cangene.com, includes product and investor information, including past
news releases. Chesapeake's website is www.cblinc.com.

    Forward-looking 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; cost of
raw materials, especially the cost 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 cost 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. Scientific information that relates to unapproved products or
unapproved uses of products is preliminary and investigative. No conclusions
can or should be drawn regarding the safety or efficacy of such products. Only
regulatory authorities can determine whether products are safe and effective
for the uses being investigated. Healthcare professionals are directed to
refer to approved labelling for products and not rely on information presented
in news releases.
    The cautionary statements referred to above 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",
"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.






For further information:

For further information: Michael Graham at (204) 275-4040 or by email at
mgraham@cangene.com

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Cangene Corporation

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