Cangene Reports Third Quarter 2013 Results

Readers are referred to the cautionary notes regarding Forward-looking Information and non-IFRS Financial Measures at the end of this release. Unless noted otherwise, all dollar amounts are in U.S. dollars.

TSX: CNJ

WINNIPEG, June 5, 2013 /CNW/ - Cangene Corporation ("Cangene") today reports its financial results for the third quarter of 2013, which ended on April 30, 2013.

Total revenue for the quarter was $40.2 million, compared with $27.5 million in the same quarter last year. The increase primarily resulted from revenue from an $18.6-million holdback payment from the U.S. government that was triggered by Cangene achieving U.S. Food and Drug Administration licensure of BAT™. This revenue increase was partially offset by slightly lower HepaGam B® sales in the U.S. and the fact that the prior-year quarter included product and plasma deliveries under the BAT™ contract and $1.8 million in revenue from non-specialty plasma sales (following the sale of its plasma centres in October 2012, Cangene no longer collects and sells non-specialty plasma). In the third quarter, combined WinRho® SDF revenues were consistent with the prior-year period.

Net income for the current quarter improved to $3.8 million, from a net loss of $4.6 million in the same quarter last year. The Company recorded earnings per share for the current quarter of $0.06, compared with a loss per share of $0.07 in the same quarter one year ago. The improvements were primarily driven by the revenue received upon BAT™ licensure, although this was partially offset by lower gross margins on product sales and R&D services, higher taxes, and expenses related to the acquisition and development of IB1001, the Company's late-stage hemophilia compound. On a year-to-date basis, the Company recorded net income of $5.0 million, compared with a net loss of $12.9 million in the prior year.

"The U.S. FDA licensure of our botulism antitoxin (BAT™), and the completion of our acquisition of IB1001 were the major highlights of the third quarter. These milestones underscore our progress in executing on our long-term strategy," says John Sedor, president and CEO of Cangene. "While U.S. biopharmaceutical sales have been hampered by a challenging reimbursement environment and lower dosing practices for HepaGam B® following liver transplants, we are increasing product sales in the Canadian market and abroad. Overall, we are pleased with our continuing progress in building long-term value for shareholders by diversifying and strengthening our revenue streams."

At April 30, 2013, Cangene had no debt and a cash balance of $38.6 million, compared with no debt and a cash balance of $35.9 million at the end of the 2012 fiscal year. Cash of $11.0 million was provided by operating activities during the nine-month period ended April 30, 2013, compared with $0.1 million used in operating activities during the corresponding period of 2012. The current nine-month period includes a $0.9-million increase in working capital. The increase in working capital during the period was primarily attributable to a $16.0-million increase in accounts receivable, which mainly resulted from the $18.6-million receivable related to receiving BAT™ licensure. This payment was received subsequent to the end of the third quarter. The increase in accounts receivable was offset by a $4.8-million decrease in inventory, a $6.2-million decrease in taxes recoverable and a $6.4-million increase in accounts payable.

Highlights

  • Completed acquisition of a late-stage Factor IX product known as IB1001, as well as two product candidates in preclinical development, IB1007 (a recombinant FVIIa) and IB1008 (a recombinant FVIII), from Ipsen and Inspiration Biopharmaceuticals, Inc.
  • Obtained commercial rights to a technology platform targeting Alzheimer's disease through an immune therapeutic treatment approach following a successful research collaboration initiated in November 2011 with Dr. Neil Cashman at the University of British Columbia
  • Achieved U.S. FDA approval of BAT™ for use in the treatment of suspected or documented exposure to botulinum neurotoxin A, B, C, D, E, F or G. Cangene developed BAT™ as part of a $427-million contract with the Biomedical Advanced Research and Development Authority ("BARDA"), within the Office of the Assistant Secretary for Preparedness and Response in the U.S. Department of Health and Human Services. With the licensure of BAT™ by the FDA, the Company received a supplemental holdback payment from BARDA of $18.6 million in May 2013. Remaining product deliveries under the contract will be paid at full contract price (Cangene had received a discounted price for deliveries prior to FDA licensure).


Cangene Corporation                                                                                                       Incorporated under the laws of Ontario
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (unaudited)

in thousands of U.S. dollars At April 30, 2013 At July 31, 2012
     
ASSETS    
Current    
Cash $ 38,559   $ 35,870  
Accounts receivable 38,330   22,330  
Inventories and contracts in progress 52,833   57,650  
Taxes recoverable 250   4,355  
Prepaid expenses and deposits 4,292   2,221  
Total current assets 134,264   122,426  
Property, plant and equipment, net 57,996   61,467  
Taxes recoverable 15,447   17,539  
Deferred tax 15,855   14,636  
Intangible assets, net 61,726   19,249  
Other assets 7,767    
Total assets $ 293,055   $ 235,317  
     
LIABILITIES AND EQUITY    
Current    
Accounts payable and accrued liabilities $ 20,158   $ 13,782  
Derivative financial instruments   79  
Purchase consideration payable 665   759  
Provision for chargebacks 4,068   3,625  
Incentive plan liability 1,845   841  
Taxes payable 12   707  
Current portion of deferred income 2,544   1,883  
Total current liabilities 29,292   21,676  
Deferred income 5,860   5,912  
Royalty provision 1,258   2,253  
Purchase consideration payable 51,519   6,811  
Incentive plan liabilities 222   1,062  
Deferred share unit liability 1,339   481  
Deferred tax 3,054   1,770  
Total liabilities 92,544   39,965  
     
     
Equity    
Share capital 50,860   50,860  
Contributed surplus 595   439  
Retained earnings 149,056   144,053  
Total equity 200,511   195,352  
Total liabilities and equity $ 293,055   $ 235,317  
     
     

Cangene Corporation
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME (LOSS)
AND COMPREHENSIVE INCOME (LOSS) (unaudited)

in thousands of U.S. dollars except
share-related data
Three months
ended
April 30, 2013
Three months
ended
April 30, 2012
Nine months
ended
April 30, 2013
Nine months
ended
April 30, 2012
         
Revenues        
Product sales $ 8,746   $ 10,473   $ 33,857   $ 35,100  
Product services 26,902   12,386   59,466   34,144  
R&D services 4,593   4,665   9,323   13,333  
  40,241   27,524   102,646   82,577  
         
Cost of sales        
Product sales 8,635   9,406   28,715   27,346  
Product services 5,870   8,609   21,815   22,968  
R&D services 3,626   3,415   7,998   9,716  
  18,131   21,430   58,528   60,030  
         
Gross profit 22,110   6,094   44,118   22,547  
         
Expenses        
Independent R&D 5,376   4,454   11,076   18,085  
Selling, general and administrative 9,356   6,455   25,527   21,272  
Impairment of property, plant and equipment       5  
Impairment of intangible assets       636  
Loss (gain) on disposal of assets 47   36   (2,538)   127  
  14,779   10,945   34,065   40,125  
Operating profit (loss) 7,331   (4,851)   10,053   (17,578)  
         
Short-term interest income 25   25   67   39  
Foreign-exchange gain (loss)   (842)   (351)   2,877  
         
Income (loss) before taxes 7,356   (5,668)   9,769   (14,662)  
         
Tax expense (benefit)        
  Current 4,473   457   4,702   322  
  Deferred (916)   (1,542)   64   (2,095)  
  3,557   (1,085)   4,766   (1,773)  
         
Net income (loss) and comprehensive income (loss) for the period $ 3,799   $ (4,583)   $ 5,003   $ (12,889)  
         
Earnings (loss) per share        
  Basic and diluted $ 0.06   $ (0.07)   $ 0.07   $ (0.19)  
         
         

Cangene Corporation
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY (unaudited)

in thousands of U.S. dollars Share capital Retained
earnings
Contributed
surplus
Total
         
Balance as at July 31, 2011 $ 50,860   $ 172,340   $   $ 223,200  
Net loss for the year ended July 31, 2012   (28,287)     (28,287)  
Stock option expense     439   439  
Balance as at July 31, 2012 $ 50,860   $ 144,053   $ 439   $ 195,352  
         
Net income for the nine-month period ended April 30, 2013   5,003     5,003  
Stock option expense     156   156  
Balance as at April 30, 2013 $ 50,860   $ 149,056   $ 595   $ 200,511  
         
Balance as at July 31, 2011 $ 50,860   $ 172,340   $   $ 223,200  
Net loss for the nine-month period ended April 30, 2012   (12,889)     (12,889)  
Stock option expense     353   353  
Balance as at April 30, 2012 $ 50,860   $ 159,451   $ 353   $ 210,664  
         

Cangene Corporation
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (unaudited)

in thousands of U.S. dollars Three months
ended
April 30, 2013
Three months
ended
April 30, 2012
Nine months
ended
April 30, 2013
Nine months
ended
April 30, 2012
         
OPERATING ACTIVITIES        
Net income (loss) for the period $ 3,799   $ (4,583)   $ 5,003   $ (12,889)  
Add (deduct) items not involving cash:        
  Depreciation of property, plant & equipment 1,635   2,145   5,326   6,459  
  Amortization of intangible assets 1,155   631   3,105   1,957  
  Deferred income (433)   (961)   609   (478)  
  Incentive plan liabilities 832   7   164   (448)  
  Deferred share unit liability 618   92   857   251  
  Amortization of royalty provision (198)   (193)   (582)   (642)  
  Revaluation of royalty provision (492)   558   (413)   (397)  
  Deferred tax benefit (916)   (1,542)   64   (2,095)  
  Change in value of derivative financial instruments   704   (80)   (753)  
  Net change in purchase consideration payable 273     214    
  Loss (gain) on disposal of assets 47   36   (2,538)   127  
  Impairment of intangible assets       636  
  Impairment of property, plant & equipment       5  
  Stock option expense 45   89   156   353  
Changes in working capital:        
  Accounts receivable (14,550)   6,806   (16,000)   1,088  
  Inventories and contracts in progress 1,548   (25)   4,817   2,316  
  Taxes recoverable 8,607   8,956   6,197   6,399  
  Prepaid expenses and deposits (1,860)   793   (2,071)   590  
  Accounts payable and accrued liabilities 4,229   (3,231)   6,376   (2,325)  
  Provision for chargebacks (369)   (585)   443   (191)  
  Taxes payable   30   (695)   (62)  
  (2,395)   12,744   (933)   7,815  
         
Cash provided by (used in) operating activities 3,970   9,727   10,952   (99)  
         
INVESTING ACTIVITIES        
Purchase of property, plant and equipment, net (518)   (263)   (2,267)   (1,401)  
Acquisition of intangible assets (88)   (49)   (91)   (240)  
Purchase of business (3,701)     (8,701)    
Proceeds on disposal of assets 181     2,796    
Cash used in investing activities (4,126)   (312)   (8,263)   (1,641)  
         
Net increase (decrease) in cash during the period (156)   9,415   2,689   (1,740)  
Cash, beginning of period 38,715   34,021   35,870   45,176  
Cash, end of period $ 38,559   $ 43,436   $ 38,559   $ 43,436  
         
Interest paid1 $ 50   $ 9   $ 116   $ 15  
Taxes received2 $ (5,039)   $ (10,411)   $ (3,677)   $ (10,352)  
  1. Amounts paid and received for interest were reflected as operating cash flows in the consolidated statements of cash flows.
  2. Amounts paid and received for income taxes were reflected as either operating or investing cash flows in the consolidated statements of cash flows, depending upon the nature of the underlying transaction.

About Cangene Corporation
Cangene Corporation (TSX: CNJ), headquartered in Winnipeg, Canada, is one of the nation's oldest and largest biopharmaceutical companies. It is focused on the development and commercialization of specialty therapeutics. Cangene's products are sold worldwide and include products that have been accepted into the U.S. Strategic National Stockpile. Cangene has offices in three locations across North America. It operates manufacturing facilities in Winnipeg, Manitoba and Baltimore, Maryland (through its wholly owned subsidiary, Cangene bioPharma, Inc.) where it produces its own products and undertakes contract manufacturing for a number of customers. Cangene also operates a plasma-collection facility in Winnipeg, Manitoba under the name Cangene Plasma Resources. Its U.S. sales and marketing office is located in Philadelphia, Pennsylvania. For more information about Cangene, visit the Company's website at www.cangene.com.

Cautionary Note regarding Forward-Looking Information
This document contains forward-looking statements about the Corporation, including its business operations, strategy, and expected financial performance and condition. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as "expects", "anticipates", "intends", "plans", "will", "believes", "estimates", or negative versions thereof, and similar expressions. In addition, any statement that may be made concerning future financial performance (including revenues, earnings or growth rates), ongoing business strategies or prospects, future use, safety and efficacy of unapproved products or unapproved uses of products, and possible future action by the Corporation are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to, among other things, risks, uncertainties and assumptions about the Corporation, economic factors and the biopharmaceutical industry generally. They are not guarantees of future performance. Actual events and results could differ materially from those expressed or implied by forward-looking statements made by the Corporation due to, but not limited to, important factors such as sales levels; fluctuations in operating results; the Corporation'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; the availability and cost of raw materials, and in particular, the cost, availability and antibody concentration in plasma; progress and cost of clinical trials; 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 as well as general economic, political and market factors in North America and internationally; interest and foreign-exchange rates; business competition; technological change; changes in government action, policies or regulations; decisions by Health Canada, the United States Food and Drug Administration and other regulatory authorities regarding whether and when to approve drug applications that have been or may be filed, as well as their decisions regarding labelling and other matters that could affect the availability or commercial potential of drug candidates; unexpected judicial or regulatory proceedings; catastrophic events; the Corporation's ability to complete strategic transactions; and other factors beyond the control of management.

The reader is cautioned that the foregoing list of important factors is not exhaustive and there may be other factors listed in other filings with securities regulators, including factors set out under "Risk and Uncertainties" in the Corporation's Management Discussion and Analysis, which, along with other filings, is available for review at www.sedar.com. The reader is also cautioned to consider these and other factors carefully and not to place undue reliance on forward-looking statements. Other than as specifically required by applicable law, the Corporation has no intention to update any forward-looking statements, whether as a result of new information, future events or otherwise.

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

SOURCE: Cangene Corporation

For further information:

Investor Relations Contact
Jeff Lamothe
Chief Financial Officer
Tel: (204) 275-4267
Email: ir@cangene.com

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Cangene Corporation

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