Warnex Inc.
TSX : WNX

Warnex Inc.

March 18, 2010 07:30 ET

Warnex Reports Fourth Quarter and Year End 2009 Results

LAVAL, QUEBEC--(Marketwire - March 18, 2010) - Warnex Inc. (TSX:WNX) announced today financial results for the fourth quarter and year ended December 31, 2009.

2009 Highlights

  • Concluded the acquisition of Molecular World Inc., a laboratory located in Thunder Bay, Ontario, specializing in human DNA identification including forensic DNA testing
  • Obtained ISO 15189:2007 accreditation by the Standards Council of Canada (SCC) for its Medical Laboratories division
  • Successfully passed a Health Canada inspection of Warnex's analytical facilities in Laval and Blainville
  • Signed an exclusive distribution agreement with Rosetta Genomics to offer Rosetta Genomics's microRNA-based assays in Canada
  • Launched a test for the detection of the influenza A H1N1 virus that offers results in as little as 8 hours
  • Launched test for influenza A H1N1 virus mutation associated with resistance to Tamiflu®
  • Signed a distribution agreement with Biron-Laboratoire medical to promote and distribute Warnex's test for the influenza A H1N1 virus
  • Announced that Warnex Medical Laboratories now offers a new test in the field of personalized medicine: K-ras mutation analysis for patients with colorectal cancer
  • Received funding from the Northern Ontario Heritage Fund Corporation for Warnex's subsidiary, Warnex PRO-DNA Services Inc., located in Thunder Bay, Ontario, in collaboration with the Paleo-DNA Laboratory of Lakehead University to develop a forensics database based on mitochondrial DNA

"2009 was a very difficult economic period for all industries and the pharmaceutical industry was not spared," said Mark Busgang, President and CEO. "While these challenging conditions impacted Warnex's top and bottom lines compared to last year, we are proud to have generated nonetheless $23.6 million in revenues, a net loss of $0.2 million and a positive EBITDA of $2.2 million, while achieving several of our strategic objectives including the acquisition of Molecular World Inc. Going forward, we will focus on growth in revenues and cash flow while maintaining our commitment to quality science and customer service. We will also continue to look at new business opportunities, including strategic acquisitions, to expand our service offering and increase critical mass."

Financial Results

Consolidated revenue for the twelve-month period ended December 31, 2009, amounted to $23.6 million compared to $25.8 million for the same period of last year, a decrease of 8%. Net loss for the twelve-month period amounted to $0.2 million or $0.00 per share in 2009 compared to net earnings of $2.4 million or $0.04 per share in 2008. In 2008, net earnings included a gain on extinguishment of debt of $1.8 million.

For the twelve-month period ended December 31, 2009, adjusted earnings before interests, taxes, depreciation and amortization (EBITDA) amounted to $2.2 million compared to $2.8 million for the twelve-month period ended December 31, 2008, a decrease of $0.6 million.

Gross margins for the twelve-month period amounted to $5.8 million, representing 24% of revenue, in 2009 compared to $7.8 million and 30% of revenue in 2008.

Selling and administrative expenses for the year ended December 31, 2009, totalled $6.0 million, similar to last year. As a percentage of revenue, selling and administrative expenses were 25% in 2009 compared to 23% in 2008. Financial expenses decreased to $1.2 million in 2009 from $1.3 million in 2008, mainly due to less interest on its long term debt.

Operating Highlights

The Medical division's revenue increased by 14% from $3.9 million in 2008 to $4.4 million in 2009. Prenatal testing revenues increased by 5% and molecular diagnostics increased by 71%, while pharmacogenetic contracts decreased by 13% compared to last year.

The Bioanalytical division's revenues decreased by 25% from $9.9 million in 2008 to $7.4 million in 2009. This decrease is mainly due to a volume reduction caused by an unprecedented number of cancellations and postponements of projects in the third quarter, which were a testament to the economic and industry conditions experienced during the summer months. Revenues improved in the last quarter, returning to more normal levels, and our business development efforts are ongoing to increase our business from new and existing customers.

The Analytical division's revenues decreased by 2% from $11.8 million in 2008 to $11.6 million in 2009. The analytical laboratory in Laval generated $4.9 million during the year (2008 - $5.8 million) while the Neopharm division in Blainville generated $6.7 million (2008 - $6.0 million). The increase in Neopharm's revenues was due to significant growth in volume from existing and new customers, while the Laval laboratory experienced lower volume from two major customers.

Annual Meeting

The Company will be hosting its Annual Meeting of Shareholders on April 27, 2010, at 11:00 am at the Sheraton Laval, Salon Duvernay, 2440 Autoroute des Laurentides, Laval, Quebec.

About Warnex

Warnex (www.warnex.ca) is a life sciences company devoted to protecting public health by providing laboratory services to the pharmaceutical and healthcare sectors. Warnex Analytical Services provides pharmaceutical and biotechnology companies with a variety of quality control services, including chemistry, chromatography, microbiology, method development and validation, and stability studies. Warnex Bioanalytical Services specializes in bioequivalence and bioavailability studies for clinical trials. Warnex Medical Laboratories provides specialized testing for the healthcare industry as well as pharmaceutical and central laboratory services. Warnex PRO-DNA Services offers DNA identification tests for paternity, maternity and other family relationships, as well as for immigration and forensic testing purposes. Warnex has three facilities located in Laval and Blainville, Quebec, and Thunder Bay, Ontario.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this news release are forward-looking and are subject to numerous risks and uncertainties, known and unknown. For information identifying known risks and uncertainties, relating to financial resources, liquidity risk, key customers and business partners, credit risk, foreign currency risk, government regulations, laboratory facilities, volatility of share price, employees, suppliers, and other important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the heading Risks and Uncertainties in Warnex's most recent Management's Discussion and Analysis, which can be found at www.sedar.com. Consequently, actual results may differ materially from the anticipated results expressed in these forward-looking statements.

Financial statement to follow.

Consolidated Balance Sheets

As at December 31 2009   2008  
Assets        
Current        
  Cash and cash equivalents $894,031   $2,433,488  
  Accounts receivable 2,880,919   3,967,918  
  Work-in-progress 531,142   1,356,149  
  Inventory 177,027   121,701  
  Investment tax credits receivable 712,471   186,249  
  Prepaid expenses 388,502   306,238  
  5,584,092   8,371,743  
         
Future income taxes 1,221,000   750,000  
Property, plant and equipment 7,375,516   8,309,317  
Intangible assets 382,145   243,291  
Goodwill 937,695   937,695  
         
  $15,500,448   $18,612,046  
         
Liabilities        
Current        
  Accounts payable $3,008,594   $3,860,615  
  Deferred revenue 411,599   1,358,586  
  Current portion of long-term debt 1,800,372   1,267,184  
  5,220,565   6,486,385  
         
Long-term debt 447,661   1,872,557  
Liability component of debentures 6,245,274   6,952,881  
         
  11,913,500   15,311,823  
         
Shareholders' equity        
  Capital stock 40,981,049   40,551,049  
  Equity component of debentures 312,288   312,288  
  Contributed surplus 2,466,016   2,445,043  
  Deficit (40,172,405 ) (40,008,157 )
  3,586,948   3,300,223  
         
  $15,500,448   $18,612,046  

Consolidated Statements of Contributed Surplus

For the years ended December 31 2009 2008  
Balance, beginning of year $2,445,043 $1,210,708  
Transfer of the equity component of debentures extinguished during the year - 1,428,114  
Stock-based compensation 20,973 (193,779 )
Balance, end of year $2,466,016 $2,445,043  

Consolidated Statements of Deficit

For the years ended December 31 2009   2008  
Balance, beginning of year $(40,008,157 ) $(42,381,214 )
Net earnings (loss) (164,248 ) 2,373,057  
Balance, end of year $(40,172,405 ) $(40,008,157 )

Consolidated Statements of Accumulated Other Comprehensive Income

For the years ended December 31 2009 2008
Accumulated Other Comprehensive Income $- $-

Consolidated Statements of Earnings and Comprehensive Income

For the years ended December 31 2009   2008  
Revenue $23,646,987   $25,786,721  
Cost of goods sold 17,878,578   17,945,735  
Gross margin 5,768,409   7,840,986  
Operating expenses        
  Selling, general and administrative 5,956,234   6,047,020  
  Finance charges 1,185,473   1,284,681  
  Research and development tax credits (526,222 ) (230,284 )
  6,615,485   7,101,417  
Earnings (loss) before under noted items and income taxes (847,076 ) 739,569  
Unrealized foreign exchange gain (loss) on debentures 682,828   (930,704 )
Gain on extinguishment of debt -   1,814,192  
  682,828   883,488  
Earnings (loss) before income taxes (164,248 ) 1,623,057  
Income taxes (recovered)   - current 162,000   800,000  
  - future -   (750,000 )
Recovery of income taxes due to utilization of prior years' losses (162,000 ) (800,000 )
  -   (750,000 )
Net earnings (loss) and comprehensive income $(164,248 ) $2,373,057  
Basic and fully diluted net earnings per share $0.00   $0.04  
Weighted average number of shares and fully diluted shares outstanding 65,663,345   59,562,069  

Consolidated Statements of Cash Flows

For the years ended December 31 2009   2008  
Operations        
Net earnings (loss) $(164,248 ) $2,373,057  
Items not affecting cash:        
  Amortization of property, plant and equipment 1,592,034   1,523,858  
  Amortization of intangible assets 79,932   59,504  
  Gain on disposal of property, plant and equipment -   (6,946 )
  Accretion of interest 95,221   200,864  
  Unrealized foreign exchange loss (gain) on debentures (682,828 ) 930,704  
  Gain on extinguishment of debt -   (1,814,192 )
  Foreign currency fluctuation 267,647   (133,281 )
  Compensation cost for stock options 20,973   (193,779 )
  Future income taxes -   (750,000 )
  1,208,731   2,189,789  
  Net change in non-cash working capital items (1,066,248 ) 1,158,370  
Net cash provided by operations 142,483   3,348,159  
Investing activities        
  Decrease in long-term receivables -   125,000  
  Acquisition of property, plant and equipment (312,861 ) (510,451 )
  Proceeds on disposal of property, plant and equipment -   9,725  
  Acquisition of intangible assets (177,320 ) (10,189 )
Net cash used in investing activities (490,181 ) (385,915 )
Financing activities        
  Proceeds from long-term debt 350,000   2,000,000  
  Repayment of long-term debt (1,317,608 ) (2,234,389 )
  Repayment of liability component of debentures -   (1,377,737 )
Net cash used in financing activities (967,608 ) (1,612,126 )
Foreign exchange gain (loss) on cash held in foreign currencies (224,151 ) 66,419  
Increase (decrease) in cash and cash equivalents (1,539,457 ) 1,416,537  
Cash and cash equivalents, beginning of year 2,433,488   1,016,951  
Cash and cash equivalents, end of year $894,031   $2,433,488  

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