Paladin Labs Inc.
TSX : PLB

Paladin Labs Inc.

May 15, 2008 07:30 ET

Paladin Reports 2008 First Quarter Financial Results

Paladin Increases 2008 Guidance

MONTREAL, CANADA--(Marketwire - May 15, 2008) - Paladin Labs Inc. (TSX:PLB), a leading Canadian specialty pharmaceutical company, today reported its 2008 first quarter financial results.

First Quarter Highlights

- Revenues reached $16.8 million, an increase of 31% versus last year

- EBITDA(1) reached $5.4 million, a 12% increase over the same period last year

- Launched Seasonale™, the first and only extended cycle oral contraceptive in Canada

- Entered into a Canadian Co-Promotion Agreement for Tridural™ once-daily tramadol with Nycomed Canada Inc.

- Filed new drug submission to obtain regulatory approval for Seasonique®

- Entered into a definitive purchase and sale agreement with AEterna Zentaris with respect to all rights related to the manufacture, production, distribution, marketing, sale and or use of miltefosine

- Entered into an exclusive Canadian Distribution Agreement with the KV Pharmaceutical Company for Micro-K® Extencaps® Capsules

- Announced a normal course issuer bid effective February 28, 2008

Subsequent to First Quarter

- Paladin announced that the National Drug Scheduling Advisory Committee has recommended to the National Association of Pharmacy Regulatory Authorities to move Plan B® from Behind-the-Counter status to full Over-the-Counter status

"We are pleased with our first quarter results and have set the stage for our 13th consecutive year of record revenues." said Jonathan Ross Goodman, President and CEO of Paladin Labs.

Financial Results

Revenue for the first quarter of 2008 increased 31% or $3.9 million to $16.8 million, compared to $12.9 million in the first quarter of 2007. These increases are due primarily to strong performance from the Company's key promoted products, including Tridural™, Twinject®, Seasonale™, Plan B®, Pennsaid®, Metadol®, Trelstar®, and Testim® which combined increased by 31% in the first quarter of 2008 compared to the corresponding period a year ago.

First quarter 2008 earnings before interest expense, taxes, depreciation, amortization, and unusual items (EBITDA(1)) increased 12% to $5.4 million, compared to EBITDA(1) of $4.8 million in the first quarter of 2007.

Net income for the quarter was $1.5 million or $0.10 per fully diluted share, compared to net income of $1.3 million or $0.08 per fully diluted share in the first quarter a year ago.

Selling and marketing expense for the first quarter of 2008 increased 25% to $5.5 million from $4.4 million in the first quarter of 2007. This increase was primarily attributed to increased promotion activities relating to Paladin's launch of Seasonale™, Tridural™, Testim® and Trelstar® as well as the continued promotional activities for Twinject®, Plan B®, Pennsaid® and Metadol®.

At March 31, 2008, Paladin's cash, cash equivalents and investments in marketable securities totalled $33.3 million. From this strong cash position, Paladin continues to pursue product acquisition and development opportunities.

Product Developments

During the quarter Paladin launched Seasonale™, the first and only extended-cycle oral contraceptive available in this country. With Seasonale™, Canadian women now have a new contraceptive option that will allow them to have just four periods per year. Seasonale™ (levonorgestrel and ethinyl estradiol 0.15mg/0.03mg tablets) is a safe and effective contraceptive option for women, striking a balance between the benefits of having fewer periods with the reassurance of still having some periods.

In addition, Paladin filed a new drug submission for Seasonique® with the Therapeutic Products Directorate of Health Canada. Seasonique® is the next generation of extended-cycle oral contraceptives for the prevention of pregnancy. Under the Seasonique® extended-cycle regimen, women take active tablets of 0.15 mg levonorgestrel/0.03 mg of ethinyl estradiol for 84 consecutive days, followed by seven days of a low dose of ethinyl estradiol (0.01 mg). The regimen is also designed to reduce the number of withdrawal bleeding periods from thirteen to four periods per year.

Also during the quarter, Paladin and Nycomed entered into a Canadian Co-Promotion Agreement for Tridural™ once-daily tramadol product. Under this Co-Promotion Agreement, Nycomed Canada will share brand responsibilities and expenses with Paladin and will deploy a national primary care sales force to promote Tridural™. Paladin will continue to handle distribution of Tridural™ and will also continue to promote Tridural™ using its primary care sales force.

In March 2008, Paladin and AEterna Zentaris Inc. entered into a definitive purchase and sale agreement with respect to all rights related to the manufacture, production, distribution, marketing, sale and/or use of miltefosine for an aggregate purchase price of Cdn$9.125 million payable in cash.

Corporate Developments

During the quarter Paladin received regulatory approval from the Toronto Stock Exchange to carry out a normal course issuer bid effective February 28, 2008. Paladin has been authorized to purchase up to 786,000 of its common shares in the twelve-month period following the bid's effective date. During the first quarter, Paladin purchased 182,725 common shares at an average of $9.89 of which 55,525 common shares were purchased after February 28, 2008.

2008 Revenue Guidance

Due to the acquisition of products in the first quarter, Paladin is revising upwards its previously announced revenue guidance for fiscal 2008 from $72 million to $74 million generated in revenues to $73 million to $75 million generated in revenues. This forecast excludes the impact of acquisitions and/or new product launches that may be made by the Company between now and the end of 2008.

(1) EBITDA (earnings before interest, taxes, depreciation and amortization) does not have any standardized meaning under Canadian Generally Accepted Accounting Principles ("GAAP") and therefore may not be comparable to similar measures presented by other companies. The Company defines EBITDA as earnings before interest expense, taxes, amortization, and unusual items; such as write-downs and gains (losses) on intellectual property and investments. EBITDA is calculated and presented consistently from period to period and agrees, on a consolidated basis, with the amount disclosed as "Earnings before under noted items" on the consolidated statement of income. The Company believes EBITDA to be an important measurement that allows it to assess the operating performance of its ongoing business on a consistent basis without the impact of amortization expenses. The Company excludes amortization expenses because their level depends substantially on non-operating factors such as the historical cost of intangible and capital assets. The Company's method for calculating EBITDA may differ from that used by other issuers and, accordingly, this measure may not be comparable to EBITDA used by other issuers.

Conference Call Notice

Paladin will host a conference call to discuss its first quarter results on Thursday, May 15, 2008, at 10:00 a.m. EST. The dial-in number for the conference call is 1-800-732-6179 or 1-416-644-3418. The call will be audio-cast live and archived for 30 days at www.paladinlabs.com.

About Paladin Labs

Paladin Labs Inc., headquartered in Montreal, Canada, is a specialty pharmaceutical company focused on acquiring or in-licensing innovative pharmaceutical products for the Canadian market. With this strategy, a focused national sales team and proven marketing expertise, Paladin has evolved into one of Canada's leading specialty pharmaceutical companies. For more information, please visit the Company's web site at www.paladinlabs.com

These forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. The Companies consider the assumptions on which these forward-looking statements are based to be reasonable at the time they were prepared, but caution that these assumptions regarding the future events, many of which are beyond the control of the Companies and their subsidiaries, may ultimately prove to be incorrect. Factors and risks, which could cause actual results to differ materially from current expectations, are discussed in the annual reports, as well as in the Companies' Annual Information Forms for the year ended December 31, 2007. The Companies disclaim any intention or obligation to update or revise any forward-looking statements whether a result of new information, future events, or except as required by law. For additional information on risks and uncertainties relating to these forward-looking statements, investors should consult the Companies' ongoing quarterly filings, annual reports and Annual Information Forms and other filings found on SEDAR at www.sedar.com.



CONSOLIDATED BALANCE SHEETS
(In thousands of Canadian dollars)

March 31 December 31
2008 2007
$ $
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(unaudited)
ASSETS
Current
Cash and cash equivalents 5,747 6,074
Marketable securities 27,533 26,041
Accounts receivable 10,761 11,920
Inventory 7,247 6,781
Other current assets 1,102 2,943
Investment tax credits receivable 36 244
Future income tax asset 2,453 2,992
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Total current assets 54,879 56,995

Long-term marketable securities - 4,101
Investment tax credits recoverable 776 773
Capital assets 519 300
Pharmaceutical product licences and rights 30,716 24,366
Deferred charges 1,026 1,455
Investments 3,320 4,041
Future income tax assets 7,138 6,874
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Total assets 98,374 98,905
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 9,491 11,582
Accounts payable to related parties 2,182 1,032
Deferred revenue 15 271
Balance of sale payable 89 89
Income taxes payable 3,054 2,056
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Total current liabilities 14,831 15,030

Long-term
Balance of sale payable 525 518
Future income tax liability 1,112 1,357
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Total liabilities 16,468 16,905
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Shareholders' equity
Capital stock 59,557 59,797
Other paid-in capital 2,237 2,019
Retained earnings 20,913 20,508
Accumulated other comprehensive income (801) (324)
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Total shareholders' equity 81,906 82,000
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Total liabilities and shareholders' equity 98,374 98,905
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CONSOLIDATED STATEMENTS OF INCOME
(In thousands of Canadian dollars except for share and per share amounts)
(unaudited)

Three-month period
ended March 31
2008 2007
$ $
-------------------------------------------------------------------------

Revenues 16,834 12,893
Cost of sales 3,944 2,472
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Gross profit 12,890 10,421
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Expenses (income)
Selling and marketing 5,533 4,421
General and administrative 1,414 1,018
Research and development 1,043 545
Interest income, net (519) (383)
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Earnings before under-noted items 5,419 4,820
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Amortization of intangible assets
and deferred charges 2,937 2,618
Unrealized loss on derivative instruments 2 210
Gain on disposal of investment - (74)
Other income (3) -
-------------------------------------------------------------------------
Income before income taxes 2,483 2,066
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Provision for income taxes
Current 849 154
Future 157 648
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1,006 802
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Net income for the period 1,477 1,264
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Earnings per share
Basic 0.10 0.08
Diluted 0.10 0.08
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Weighted average number of shares
outstanding
Basic 14,830,560 15,003,709
Diluted 15,083,608 15,347,425
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian dollars)
(unaudited)

Three-month period
ended March 31
2008 2007
$ $
-------------------------------------------------------------------------

Operating activities
Net income 1,477 1,264
Add items not affecting cash
Amortization 2,982 2,638
Future income taxes 157 648
Stock based compensation expense 238 129
Unrealized loss on derivative instruments 2 210
Accreted interest (24) (17)
Gain on disposal of investment - (74)
Imputed interest on balance of sale 6 6
-------------------------------------------------------------------------
4,838 4,804
-------------------------------------------------------------------------
Net change in non-cash balances relating
to operations 2,536 (532)
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Cash flows from operating activities 7,374 4,272
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Investing activities
Additions to pharmaceutical product licenses
and rights, and deferred charges (8,867) -
Acquisition of property, plant and equipment (255) (39)
Purchases of short-term marketable securities (11,765) (25,986)
Maturities of short-term marketable securities 14,522 31,770
Purchases of long-term marketable securities - (10,378)
Proceeds from disposal of investment - 232
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Cash flows (used in) investing activities (6,365) (4,401)
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Financing activities
Repurchase of shares (1,806) (373)
Common shares issued for cash 470 328
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Cash flows (used in) financing activities (1,336) (45)
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Net change in cash and cash equivalents
during the period (327) (174)

Cash and cash equivalents, beginning of period 6,074 2,769

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Cash and cash equivalents, end of period 5,747 2,595
-------------------------------------------------------------------------
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Cash and cash equivalents 5,747 2,595
Short-term marketable securities 27,533 35,772
Long-term marketable securities - 2,166
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33,280 40,533
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