Cangene reports results for third quarter of fiscal 2008; Revenues up 30% and net income up 79%



    Listed TSX, Symbol: CNJ

    TORONTO and WINNIPEG, June 12 /CNW/ - Cangene Corporation today reports
results for the third quarter and nine months ended April 30, 2008.
    Revenues for the third quarter of fiscal 2008 increased 30% to
$29.7 million, compared with $22.7 million in the same quarter of the prior
year. Revenues for the nine months ended April 30, 2008 were up 51% to
$102.9 million, compared with $68.2 million in the same period last year.
Delivery of a small quantity of Anthrax Immune Globulin ("AIG") under a
stockpiling contract with the U.S. government contributed to increased
product-services revenues during the periods. As well, the Company continued
to recognize R&D-services revenues relating to development activities on both
the AIG contract and a Botulism Antitoxin ("BAT") contract, also with the U.S.
government. These increased R&D-services revenues from the U.S. government
contracts were partially offset by reduced R&D-services revenues generated
from development agreements with the Apotex Group, Cangene's majority
shareholder. Growth in HepaGam B(TM) sales in the U.S. contributed to
increased product sales for the quarter but this was partially offset by lower
WinRho(R) SDF sales in the U.S. Royalty revenue for the quarter was lower than
the same quarter last year on lower sales of Ferriprox(TM) (deferiprone), a
drug that is marketed by the Apotex Group.
    Net income for the current quarter increased 79% to $3.1 million or $0.04
per share, compared with $1.8 million or $0.03 per share for the same quarter
last year despite recording a $2.8-million pre-tax provision to cost of sales
relating to a voluntary withdrawal of one lot of Vaccinia Immune Globulin
product that was announced during the quarter. Net income for the first nine
months of fiscal 2008 increased by 35% to $11.0 million or $0.16 per share,
compared with $8.1 million or $0.12 per share in the same period last year.
Gross profit in the current quarter was impacted by the lower margins on the
U.S. government contract activities relative to commercial product sales and
services, and by the product-withdrawal provision and reduced royalties.
Higher selling, general and administrative costs, and amortization were offset
by lower independent R&D expenditures and income tax expense. Cangene has
recorded the tax benefit of previously unrecorded tax loss carryforwards
relating to its U.S. subsidiaries and adjusted the tax rate applied to the
recorded losses, which resulted in a $1.1-million reduction in tax expense.
    Non-cash working capital increased by approximately $11.4 million in the
first nine months of the fiscal year, primarily due to higher accounts
receivable and higher inventory levels resulting from the AIG and BAT
stockpiling contracts. Long-term debt decreased by $2.7 million during the
first nine months of the fiscal year as the Company completed repayment of the
non-revolving term loan used to finance the fractionation-plant expansion in
the first quarter and repaid the remaining $1.3 million on Maryland Industrial
Development Bonds during the current quarter, which eliminated long-term debt
from the balance sheet.
    "Cangene furthered certain key objectives and posted solid financial
results during this quarter, despite the financial impact of a product-lot
withdrawal during the quarter," said Dr. John Langstaff, president and CEO of
Cangene. "We once again demonstrated our regulatory capabilities by receiving
orphan drug exclusive approval from the U.S. Food and Drug Administration for
one of our products, and we renewed and expanded our contract relationships
with Canadian Blood Services and Héma-Québec for the supply of WinRho(R) SDF,
VariZIG(TM) and now HepaGam B(TM) in Canada. And, subsequent to the end of the
quarter, we delivered the first significant quantity of BAT to the U.S.
Strategic National Stockpile, which will bring in approximately $20 million of
revenue for the fourth quarter of 2008," 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
Friday, June 13, 2008 at 11:00 a.m. E.D.T. to discuss these financial results.
To access the conference call by telephone, dial 416-644-3418 or
1-800-731-6941. 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, June 20, 2008, at midnight. To access the archived
conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation
number 21274723 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            At
                                                      April 30,      July 31,
    in thousands of Canadian dollars                      2008          2007
    -------------------------------------------------------------------------
    ASSETS
    Current
    Accounts receivable                             $   25,130    $   20,475
    Income and other taxes recoverable                  17,871        16,144
    Inventories                                         67,564        60,753
    Prepaid expenses and deposits                        2,841         3,105
    -------------------------------------------------------------------------
    Total current assets                               113,406       100,477
    Property, plant and equipment, net                  99,888       103,571
    Future income taxes                                  8,412         9,373
    Goodwill                                            40,514        40,514
    Other assets                                         2,114         2,815
    -------------------------------------------------------------------------
                                                    $  264,334    $  256,750
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank indebtedness                               $    2,178    $    2,136
    Accounts payable and accrued liabilities            22,866        23,140
    Income and other taxes payable                         257           450
    Current portion of deferred income                   5,593         3,623
    Current portion of long-term debt                        -         1,636
    -------------------------------------------------------------------------
    Total current liabilities                           30,894        30,985
    Long-term debt                                           -         1,112
    Incentive plan liability                                 -           226
    Deferred income                                      4,858         2,931
    Future income taxes                                  6,500        10,831
    -------------------------------------------------------------------------
    Total liabilities                                   42,252        46,085
    -------------------------------------------------------------------------
    Commitments
    Shareholders' equity
    Share capital                                       67,344        66,894
    Contributed surplus                                  3,239         3,239
    Accumulated other comprehensive loss                (4,467)       (4,467)
    Retained earnings                                  155,966       144,999
    -------------------------------------------------------------------------
    Total shareholders' equity                         222,082       210,665
    -------------------------------------------------------------------------
                                                    $  264,334    $  256,750
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

                                   Three       Three        Nine        Nine
                                  months      months      months      months
    in thousands of Canadian       ended       ended       ended       ended
     dollars except share-      April 30,   April 30,   April 30,   April 30,
     related data                   2008        2007        2008        2007
    -------------------------------------------------------------------------
    Revenues
    Product sales and
     services                 $   18,379  $   14,282  $   57,121  $   42,954
    R&D services                   9,487       5,945      41,295      19,258
    Royalties                      1,784       2,503       4,526       5,943
    -------------------------------------------------------------------------
                                  29,650      22,730     102,942      68,155
    -------------------------------------------------------------------------
    Cost of sales
    Product sales and services    11,984       6,243      32,925      19,395
    R&D services                   6,069       3,505      28,403      11,920
    -------------------------------------------------------------------------
                                  18,053       9,748      61,328      31,315
    -------------------------------------------------------------------------
    Gross profit                  11,597      12,982      41,614      36,840
    -------------------------------------------------------------------------
    Expenses
    Independent R&D                  933       2,205       4,354       5,570
    Selling, general and
     administrative                4,485       3,287      12,204       9,299
    Amortization                   3,006       2,950       9,193       7,391
    Interest expense (income)
      Short-term                      83        (127)        126        (411)
      Long-term                        -         100          72         183
    Foreign exchange loss (gain)     (78)        848         314         187
    -------------------------------------------------------------------------
                                   8,429       9,263      26,263      22,219
    -------------------------------------------------------------------------
    Income before income taxes     3,168       3,719      15,351      14,621
    -------------------------------------------------------------------------
    Income tax expense (recovery)
      Current                        555         512       8,224       2,706
      Future                        (531)      1,446      (3,840)      3,779
    -------------------------------------------------------------------------
                                      24       1,958       4,384       6,485
    -------------------------------------------------------------------------
    Net income and comprehensive
     income for the period         3,144       1,761      10,967       8,136

    Retained earnings, beginning
     of period                   152,822     141,290     144,999     134,915
    -------------------------------------------------------------------------
    Retained earnings, end of
     period                   $  155,966  $  143,051  $  155,966  $  143,051
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per share
      Basic                   $     0.04  $     0.03  $     0.16  $     0.12
      Diluted                 $     0.04  $     0.02  $     0.16  $     0.12
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted-average number
     of shares outstanding    70,505,170  70,243,153  70,502,064  68,042,592



    CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

                                   Three       Three        Nine        Nine
                                  months      months      months      months
                                   ended       ended       ended       ended
    in thousands of Canadian    April 30,   April 30,   April 30,   April 30,
     dollars                        2008        2007        2008        2007
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net income for the
     period                   $    3,144  $    1,761  $   10,967  $    8,136
    Add (deduct) items not
     involving cash:
      Amortization                 3,006       2,950       9,193       7,391
      Deferred income                339        (140)      3,897      (1,360)
      Incentive plan liability       (87)         12        (226)       (634)
      Future income tax expense
       (recovery)                   (531)      1,446      (3,840)      3,779
      Unrealized foreign
       exchange loss (gain) on
       future income tax asset      (188)        576        (226)         66
    -------------------------------------------------------------------------
                                   5,683       6,605      19,765      17,378
    Net change in non-cash
     working capital balances
     related to  operations       (5,639)    (13,273)    (11,999)    (18,514)
    -------------------------------------------------------------------------
    Cash provided by (used
     in) operating activities         44      (6,668)      7,766      (1,136)
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
    Purchase of property,
     plant and equipment, net     (2,049)     (1,536)     (5,510)     (7,992)
    -------------------------------------------------------------------------
    Cash used in investing
     activities                   (2,049)     (1,536)     (5,510)     (7,992)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Increase in bank
     indebtedness, net             2,178           -          42           -
    Repayment of long-term debt   (1,346)     (1,795)     (2,748)    (28,019)
    Issuance of common shares,
     net of share issuance
     costs                             -           -           -      33,501
    Proceeds on exercise of
     stock options                     -         107         450         428
    -------------------------------------------------------------------------
    Cash provided by (used in)
     financing activities            832      (1,688)     (2,256)      5,910
    -------------------------------------------------------------------------
    Net decrease in cash
     during the period            (1,173)     (9,892)          -      (3,218)
    Cash, beginning of
     period                   $    1,173  $   14,365  $        -  $    7,691
    -------------------------------------------------------------------------
    Cash, end of period       $        -  $    4,473  $        -  $    4,473
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest paid             $      107  $       73  $      316  $      509
    Income taxes paid
     (received)               $   (1,205) $   (2,490) $      641  $     (324)
    


    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 650 employees in eight locations across North
America and its products are sold worldwide. It operates three large
manufacturing facilities - two in Winnipeg, Manitoba and one in 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. In addition, it has a regulatory
affairs, sales and investor relations office in Toronto, Ontario.
    The Company uses patented manufacturing processes to produce
plasma-derived and recombinant therapeutic proteins. Cangene has five FDA
and/or Health Canada-approved 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, anthrax immune globulin and vaccinia immune globulin, a product
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 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 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. 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 labeling for products and not rely on information presented
in news releases. Drug names and prescribing information may differ in various
countries.
    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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