Cangene reports results for third quarter of fiscal 2007



    Listed TSX, Symbol: CNJ

    TORONTO and WINNIPEG, June 12 /CNW/ - Cangene today reports results for
the third quarter and nine months ended April 30, 2007.
    Revenues for the third quarter of fiscal 2007 were $22.7 million,
compared with $28.7 million in the same quarter of the prior year. Revenues
for the nine months ended April 30, 2007 were $68.2 million, compared with
$82.6 million in the same period last year. Stronger year-over-year WinRho(R)
SDF sales in the U.S. and growing HepaGam B(TM) sales during the quarter and
year-to-date partially offset reduced revenues from VIG - in the third quarter
of last year Cangene delivered the second half of a $16-million order of VIG
to the U.K. government. There was no equivalent VIG sale in the current
quarter. Higher royalty revenues also helped offset the resulting decrease in
total revenues. R&D-services revenues in the current periods 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 their submission for regulatory review. The
Company is not yet recognizing certain revenues related to new government
contracts signed during fiscal 2006; costs associated with these contracts
to-date total $25.7 million and have been charged to inventory, prepaids and
other assets. Revenues will begin to be recognized once the Corporation has
delivered usable product, as defined in the contracts, and submitted specific
regulatory data to the U.S. Food and Drug Administration. Cangene has
submitted the majority of this data and has begun manufacturing product; it
expects to meet the usable product requirements in either the fourth quarter
of fiscal 2007 or early in fiscal 2008.
    Net income for the current quarter was $1.8 million or $0.03 per share,
compared with $4.8 million or $0.07 per share, for the same quarter last year.
Net income for the first nine months of fiscal 2007 was $8.1 million or $0.12
per share, compared with $9.0 million or $0.14 per share in the same period
last year. Gross profit in the current quarter declined slightly to
$13.0 million or 57% of revenue, compared with $13.3 million or 46% of revenue
during the same period last year. The lower VIG sales and R&D-services
revenues were largely offset by improved gross margins on WinRho(R) SDF sales
in the U.S. Increased expenditures on independent R&D projects, higher
amortization, and the impact of foreign exchange losses all contributed to the
reduced level of earnings in the current quarter.
    Net non-cash working capital from operations, excluding bank debt, has
increased by $13.5 million since the end of fiscal 2006, mainly due to higher
inventory levels resulting from the start-up of the anthrax immune globulin
and botulinum toxin immune globulin stockpiling contracts. Long-term debt has
been reduced by $28.0 million from the balance at the 2006 fiscal year end as
the Company has repaid a significant portion of the non-revolving term 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.
    "Cangene passed several significant regulatory milestones during this
third quarter, including the significant U.S. approval of HepaGam B(TM) for
the liver transplantation indication and the Canadian approval of VIG," said
Dr. John Langstaff, president and CEO of Cangene. "And due to earlier
regulatory progress and new product launches, we posted solid financial
results for the quarter, despite the fact that we are not yet recognizing
revenue related to the U.S. government hyperimmune stockpiling contracts that
we were awarded in 2006. We anticipate those revenues will favourably impact
our results once we have met the usable product requirements specified in
those contracts," 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 to discuss these financial results on
Wednesday, June 13, 2007 at 11:00 a.m. E.S.T. To access the conference call by
telephone, dial 416-644-3418 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 Wednesday, June 20, 2007 at
midnight. To access the archived conference call, dial 416-640-1917 or
1-877-289-8525 and enter the reservation number 21236156 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)

                                      Incorporated under the laws of Ontario

                                                    At April 30,  At July 31,
    in thousands of Canadian dollars                       2007         2006
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash                                            $     4,473  $     7,691
    Accounts receivable                                  22,748       26,956
    Income and other taxes recoverable                   10,980        3,291
    Inventories                                          47,463       27,170
    Prepaid expenses and deposits                         2,849        2,640
    -------------------------------------------------------------------------
    Total current assets                                 88,513       67,748
    Property, plant and equipment, net                  105,993      105,392
    Future income taxes                                   8,742        9,941
    Goodwill                                             40,514       40,514
    Other assets                                          3,049        1,559
    -------------------------------------------------------------------------
                                                    $   246,811  $   225,154
    -------------------------------------------------------------------------
    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Accounts payable and accrued liabilities        $    19,995  $    16,009
    Current portion of deferred income                    3,799        4,532
    Current portion of long-term debt                     3,170        5,674
    -------------------------------------------------------------------------
    Total current liabilities                            26,964       26,215
    Long-term debt                                        1,339       26,854
    Incentive plan liability                                126          760
    Deferred income                                       3,143        3,770
    Future income taxes                                   7,237        1,618
    -------------------------------------------------------------------------
    Total liabilities                                    38,809       59,217
    -------------------------------------------------------------------------
    Commitments
    Shareholders' equity
    Share capital                                        66,179       32,250
    Contributed surplus                                   3,239        3,239
    Cumulative translation adjustment                    (4,467)      (4,467)
    Retained earnings                                   143,051      134,915
    -------------------------------------------------------------------------
    Total shareholders' equity                          208,002      165,937
    -------------------------------------------------------------------------
                                                    $   246,811  $   225,154
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (unaudited)


    in thousands of      Three months Three months  Nine months  Nine months
     Canadian dollars           ended        ended        ended        ended
     except share-           April 30,    April 30,    April 30,    April 30,
     related data                2007         2006         2007         2006
    -------------------------------------------------------------------------
    Revenues
    Product sales and
     services             $    14,282  $    21,015  $    42,954  $    53,617
    R&D services                5,945        6,428       19,258       24,439
    Royalties                   2,503        1,232        5,943        4,513
    -------------------------------------------------------------------------
                               22,730       28,675       68,155       82,569
    Cost of sales
    Product sales and
     services                   6,243       11,540       19,395       34,399
    R&D services                3,505        3,858       11,920       13,813
    -------------------------------------------------------------------------
                                9,748       15,398       31,315       48,212
    -------------------------------------------------------------------------

    Gross profit               12,982       13,277       36,840       34,357
    -------------------------------------------------------------------------
    Expenses
    Independent R&D             2,205        1,105        5,570        3,774
    Selling, general and
     administrative             3,287        3,031        9,299        9,005
    Amortization                2,950        2,148        7,391        7,131
    Interest expense (income)
      Short-term                 (127)          40         (411)         597
      Long-term                   100           27          183          122
    Gain on sale of building        -         (739)           -         (739)
    Foreign exchange
     loss (gain)                  848         (101)         187         (776)
    -------------------------------------------------------------------------
                                9,263        5,511       22,219       19,114
    -------------------------------------------------------------------------
    Income before
     income taxes               3,719        7,766       14,621       15,243
    -------------------------------------------------------------------------
    Income tax expense
     (recovery)
      Current                     512        2,626        2,706        6,993
      Future                    1,446          378        3,779         (702)
    -------------------------------------------------------------------------
                                1,958        3,004        6,485        6,291
    -------------------------------------------------------------------------
    Net income for the period   1,761        4,762        8,136        8,952

    Retained earnings,
     beginning of period      141,290      125,962      134,915      121,772
    -------------------------------------------------------------------------
    Retained earnings,
     end of period        $   143,051  $   130,724  $   143,051  $   130,724
    -------------------------------------------------------------------------
    Earnings per share
      Basic               $      0.03  $      0.07  $      0.12  $      0.14
      Diluted             $      0.02  $      0.07  $      0.12  $      0.14
    -------------------------------------------------------------------------

    Weighted-average
     number of                    No.          No.          No.          No.
     outstanding shares    70,243,153   65,484,291   68,042,592   65,238,619


              CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

                         Three months Three months  Nine months  Nine months
                                ended        ended        ended        ended
    in thousands of          April 30,    April 30,    April 30,    April 30,
    Canadian dollars             2007         2006         2007         2006
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net income for the
     period               $     1,761  $     4,762  $     8,136  $     8,952
    Add (deduct) items
     not involving cash:
      Amortization              2,950        2,148        7,391        7,131
      Deferred income            (140)         121       (1,360)        (947)
      Net investment tax
       credits                 (2,114)         525       (3,521)        (737)
      Incentive plan
       liability                   12         (767)        (634)         309
      Future income taxes       1,446          378        3,779         (702)
      Other assets                233            -       (1,490)           -
      Gain on disposal of
       building                     -         (739)           -         (739)
      Unrealized foreign
       exchange loss (gain)       576         (140)          66          619
    -------------------------------------------------------------------------
                                4,724        6,288       12,367       13,886
    Net change in non-cash
     working capital balances
     related to operations    (11,392)      10,404      (13,503)       5,727
    -------------------------------------------------------------------------
    Cash provided by (used in)
     operating activities      (6,668)      16,692       (1,136)      19,613
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
    Purchase of property,
     plant and equipment, net  (1,536)      (7,502)      (7,992)     (24,647)
    Proceeds on disposal of
     building                       -        1,867            -        1,867
    -------------------------------------------------------------------------
    Cash used in investing
     activities                (1,536)      (5,635)      (7,992)     (22,780)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Decrease in bank
     indebtedness, net              -      (15,524)           -      (16,157)
    Issuance of long-term debt      -        6,500            -       21,000
    Repayment of
     long-term debt            (1,795)        (580)     (28,019)      (2,410)
    Issuance of common
     shares, net of share
     issuance costs                 -            -       33,501            -
    Proceeds on exercise of
     stock options                107        1,003          428        2,451
    -------------------------------------------------------------------------
    Cash provided by (used
     in) financing activities  (1,688)      (8,601)       5,910        4,884
    -------------------------------------------------------------------------
    Net increase (decrease) in
     cash during the period    (9,892)       2,456       (3,218)       1,717
    Cash, beginning
     of period                 14,365        3,246        7,691        3,985
    -------------------------------------------------------------------------
    Cash, end of period   $     4,473  $     5,702  $     4,473  $     5,702
    -------------------------------------------------------------------------
    Interest paid         $        73  $       109  $       509  $     1,124
    Income taxes received $    (2,490) $    (3,163) $      (324) $    (3,163)
    


    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 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 and Health
Canada-approved products and a fourth that has been approved in Canada only.
One of its recombinant protein products has received an approvable letter from
the FDA and another has been submitted for regulatory review in Canada. 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 increased 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;
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 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.

    %SEDAR: 00002351E




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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