Afexa Life Sciences Inc.
TSX : FXA

Afexa Life Sciences Inc.

November 10, 2010 08:00 ET

Afexa Announces 2011 Second Quarter Results

EDMONTON, ALBERTA--(Marketwire - Nov. 10, 2010) -



-- Revenue up 23% from same quarter in prior year
-- Net earnings $5.1 million or $0.05 per share
-- Product Pipeline continues to advance


Afexa Life Sciences Inc. ("Afexa" or "the Company") (TSX:FXA) today announced strong financial results for the three months ended September 30, 2010.



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Summary of consolidated financial results
Three months Six months ended
(in thousands except for per share ended September September 30
amounts) 30
2010 2009 2010 2009
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Revenue $ 19,189 $ 15,557 $ 20,947 $ 21,751
EBITDA(1) 7,549 3,922 2,488 3,103
Net earnings 5,124 2,782 1,049 1,662
Earnings per share - basic and diluted 0.05 0.03 0.01 0.02
(1) This financial measure is identified and defined under the section "Non-
GAAP Financial Measures".
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Driven by strong demand from retailers, that were stocking up on cold and flu products prior to the fall cold and flu season, revenue increased by 23% to $19.2 million during the quarter. In addition to higher revenue, the Company also generated strong gross margins during the quarter resulting in significant earnings growth. For the three months ended September 30, 2010, net earnings increased to $5.1 million or $0.05 per share from $2.8 million or $0.03 per share in the same quarter a year ago.

Trailing Twelve Month Results Reflect Continuing Growth in Core Business

In the past year, Afexa changed its financial year-end from September 30 to March 31 to better synchronize its financial reporting and business planning with its natural business cycle. The following table presents the Company's financial results on a trailing twelve-month basis for the past two fiscal years (using the Company's old financial year-end of September 30):



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Summary of annual financial results
(in thousands except for per share amounts)
12 month periods ended September 30 2010 2009
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Revenue $ 55,321 $ 47,592
EBITDA(1) 7,677 3,761
Net earnings 3,838 1,301
Earnings per common share - basic and
diluted 0.04 0.01
(1) This financial measure is identified and defined under the section "Non-
GAAP Financial Measures".
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"On a twelve-month trailing basis, we were able to achieve both revenue and profit growth as our lead product, COLD-FX®, continued to gain recognition among consumers in Canada," commented Jack Moffatt, Afexa's Chairman and CEO. "We expect this trend to continue. Although we will continue to have quarterly fluctuations in our revenue resulting from seasonal changes in the incidence of cold and flu, we expect our revenue will continue to grow on an annual basis. By the end of the next five years, our strategic plan is designed to deliver to our shareholders average annual revenue growth in excess of 10%. Our growth strategies are well underway to achieving this goal."

Moving into the next quarter ending December 31, 2010, the Company expects revenue to be strong as it enters the core of the winter cold and flu season. However, Afexa's actual revenue results will be highly dependant on the incidence of cold and flu activity in Canada and the related consumer demand for COLD-FX as the majority of the Company's large retail customers entered this season well stocked with product.

"We believe revenue during last year's quarter ended December 31, 2009 was unusually high, largely driven by the presence of H1N1, a pandemic strain of the flu," said Mr. Moffatt. "Revenue during this year's quarter ending December 31, 2010 should be more normal for this time of year and will not be as strong as the same period last year."

Product Pipeline Continues to Advance

Cold Sore

Afexa is continuing to advance its pipeline of new product candidates. In October 2010, Afexa signed an exclusive in-license agreement whereby it was granted the exclusive Canadian rights to use, develop, market, sell, and distribute a proprietary natural health product for the treatment of cold sores. This product was recently granted a Natural Product Number ("NPN") from Health Canada and has been clinically proven to shorten the healing time and relieve the pain associated with cold sores. The Company plans to launch this new product into the Canadian marketplace within the next twelve months.

Mr. Moffatt commented, "Every year approximately 20% of Canadians get cold sores, yet statistics show that only about seven per cent buy a cold sore remedy. We believe cold sore sufferers who try this product will be won over by its effectiveness."

COLD-FX Pediatrics

A multi-centre clinical trial was recently launched to explore the potential application of COLD-FX in a pediatric population. The randomized, double-blind, placebo-controlled trial is rare in the field and is designed to assess the potential of COLD-FX in reducing cold and flu symptoms and the burden of disease on children. The study is a follow-up to a positive, randomized controlled trial demonstrating the safety of COLD-FX in this population and providing early indications of efficacy, which was used in designing the current study.

Please see Afexa's Management Discussion and Analysis for the three and six months ended September 30, 2010 for additional discussion regarding the Company's other product pipeline candidates.

Normal Course Issuer Bid Renewed

Effective October 18, 2010, Afexa renewed its normal course issuer bid ("NCIB") with the Toronto Stock Exchange. The NCIB permits the Company to purchase, over a one-year period, up to 5% (5,212,941) of its issued and outstanding common shares. The NCIB will terminate on October 17, 2011. Under Afexa's immediately preceding NCIB, the Company repurchased 655,354 common shares at a weighted average trading price of $0.64 per share. Afexa's management believes the current market price of the Company's common shares does not reflect their underlying value.

Afexa Pays Out Mortgage

During the quarter, Afexa fully paid out the mortgage of approximately $5.0 million on the Company's Edmonton facility. With the exception of land held under capital lease, the Company is now substantially debt free. The Company has also entered into a new credit facility agreement that, among other things, consists of an operating line of credit of $15.0 million. The credit facility is currently undrawn.

A complete set of Afexa's most recent Financial Statements and Management's Discussion and Analysis will be filed on SEDAR (www.sedar.com) and posted on the Company's web site.

ABOUT AFEXA LIFE SCIENCES INC

Afexa Life Sciences Inc., founded in 1992, strives to deliver the most trusted health brand on the planet through pioneering evidence-based natural medicines that empower people to achieve their health potential. The Company's patented ChemBioPrint discovery and standardization technology enables the development of effective and safe medicines from complex natural sources, while ensuring reliable health benefits and batch-to-batch consistency. COLD-FX, a ChemBioPrint® product, is the Company's flagship product and Canada's leading over-the-counter ("OTC") cold and flu remedy. It is officially indicated in Canada to help reduce the frequency, severity and duration of cold and flu symptoms by boosting the immune system. COLD-FX products have NPNs and are supported by scientific evidence, including randomized, double-blind, placebo-controlled clinical trials.

COLD-FX was Canada's best selling cold and flu remedy for the 52-week period ended September 25, 2010, according to The Nielsen Company. In addition, COLD-FX remains the number one natural cold remedy recommended by pharmacists and doctors in Canada, based on 2009/2010 surveys of over-the-counter counseling and recommendations reported by Drugstore Canada and L'actualite pharmaceutique, as well as The Medical Post.

Non-GAAP Financial Measures

EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. The Company uses EBITDA as a supplemental financial measure of its operational performance. The Company believes EBITDA to be an important measure as it excludes the effects of items that primarily reflect the impact of long-term investment decisions, rather than the performance of its day-to-day operations and is used by its lenders in computing certain bank covenants. As compared to net earnings according to GAAP, this measure is limited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the Company's business. The Company evaluates such items through other financial measures such as capital expenditures and cash flow provided by operating activities. Management of Afexa believe this measurement is useful to assess a company's ability to service debt and to meet other payment obligations and as a valuation measurement.

Please see Afexa's Management Discussion & Analysis for the three and six months ended September 30, 2010 for a reconciliation of EBITDA to net earnings, the most directly comparable financial measure calculated and presented in accordance with GAAP.

Advisory Regarding Forward-looking Statements

This news release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "would", "project", "could", "should", "contemplate", "potential", "depend", "forecast", "believe", "plans", "targets", "intends" and similar expressions are intended to identify such forward-looking statements. These forward-looking statements reflect our beliefs and are based on information currently available to us. These statements require the Company to make assumptions which it believes are reasonable, and which are subject to inherent risks and uncertainties. Actual results and developments may differ materially from the results and developments discussed in the forward-looking statements, as certain of these risks and uncertainties are beyond Afexa's control. The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon.

Examples of such forward-looking statements include, but are not limited to: Afexa's goal to achieve average annual revenue growth in excess of 10% by the end of the next five years; belief that Afexa's growth strategies are well underway to achieving its revenue growth goals; expectation that revenue for the quarter ending December 31, 2010 will be strong, but will be heavily dependant on the incidence of cold and flu activity in Canada and the related consumer demand for COLD-FX; expectation that revenue for the quarter ending December 31, 2010 will be less than the same period last year; belief that cold sore sufferers that try Afexa's new cold sore product will be won over by its effectiveness; and management's belief that the current market price of the Company's common shares does not reflect their underlying value.

In addition, forward-looking statements are subject to the following risks and uncertainties which include, among other matters, the impact of competition; consumer confidence and spending levels; general economic conditions; interest and currency exchange rates; unseasonable weather patterns; the incidence of illnesses in the general population; the cost and availability of capital; the cost and availability of grants/funding; product development; lawsuit settlement finalized within insurance limits; reliance on third parties; dependence on a small number of major customers; hiring expectations and related anticipated capital expenditures; adequacy of the Company's cash position to mitigate potential tightening of credit terms; success and adequacy of the Company's long-term strategic objectives; success and adequacy of the IFRS conversion plan and the impact of the implementation on future financial statements; and the risk that actual results may differ from management's assumptions, estimates and interpretation of policies.

The Company believes that the expectations and assumptions reflected in the forward-looking information and statements contained herein are reasonable, but no assurance can be given that these expectations and assumptions are correct and that the results, performance or achievements expressed in, or implied by, forward-looking statements within this disclosure will occur, or, if they do, that any benefits may be derived from them. Afexa assumes no duty to update or revise forward-looking information, except as may be required pursuant to applicable laws. All forward-looking information is expressly qualified in its entirety by this cautionary statement. Further information regarding risks and uncertainties relating to Afexa and its securities can be found in the disclosure documents filed with the securities regulatory authorities, available at www.sedar.com. The Company claims exemptions under U.S. SEC Rule 12g3-2(b).

Contact Information

  • Afexa Life Sciences Inc. - FINANCIAL CONTACT:
    Allan Cleiren
    Chief Financial Officer and Senior VP Operations
    1-780-432-0022
    acleiren@afexa.com
    or
    Afexa Life Sciences Inc. - INVESTOR CONTACT:
    Jane Tulloch
    Senior Director, Investor Relations
    1-780-577-3724
    jtulloch@afexa.com
    www.afexa.com