Paladin Labs Inc.

Paladin Labs Inc.

May 25, 2011 16:00 ET

Paladin Reports First Quarter 2011 Financial Results-Achieves Record Quarterly EBITDA

MONTREAL, CANADA--(Marketwire - May 25, 2011) - Paladin Labs Inc. (TSX:PLB), a leading Canadian specialty pharmaceutical company, today reported its first quarter 2011 financial results.

2011 First Quarter Highlights

  • Revenues reached $31.8 million, an increase of 3% over the same period last year
  • Net income was $8.1 million, an increase of 158% over the same period last year
  • EBITDA1 was a record $17.3 million, an increase of 50% over the same period last year
  • Obtained approval from Health Canada for DigiFab™
  • Acquired from Bristol Myers Squibb the Tempra® line of products in Canada
  • Amended its existing agreements with Isotechnika Pharma Inc. (TSX:ISA) to transfer to IsoPharma certain ownership and rights and sold 12,500,000 common shares of IsoPharma to ILJIN Life Science Co., Ltd
  • Closed a bought deal agreement offering of 1,150,000 common shares
  • Obtained approval from Health Canada for Abstral®
  • Acquired an additional 10% interest in Pharmaplan

Subsequent to First Quarter

  • Launched Seasonique™, a next generation extended-cycle oral contraceptive for the prevention of pregnancy
  • Granted Takeda (TSE:4502) an exclusive right to develop and commercialize fomepizole for the treatment of ethylene glycol and methanol poisonings in Japan
  • Entered into a licensing and distribution agreement with Elan Drug Technologies (NYSE: ELN) to market and sell Elan's controlled release hydrocodone product for the treatment of moderate to severe pain
  • Received a total of £55.4 million ($85.6 million) representing the repayment of its secured debt facility plus a penalty following the acquisition of ProStrakan Group plc by Kyowa Hakko Kirin Co., Ltd
  • Filed a new drug submission for Oralair™ with Health Canada

"The first quarter of 2011 was a strong quarter for Paladin, marked by important regulatory approvals and the acquisition of new products. Our record quarterly EBITDA coupled with the success of our recent financing and the early repayment of the ProStrakan loan has contributed to our strong cash position representing more than $190 million or over $9.50 per fully diluted share. We are working diligently at finding high return on asset investments that complement our existing business or allow us to gain a foothold in new, emerging markets." said Jonathan Ross Goodman, President and CEO of Paladin Labs.

Financial Results

Revenues increased $900,000 or 3% to $31.7 million for the first quarter of 2011 from $30.8 million for the same period in 2010. This increase is mostly attributable to the sales growth of certain significant promoted products, including Tridural®, Trelstar®, Testim®, Metadol® and Plan B®, which combined increased by 16% compared to 2010.

First quarter 2011, EBITDA¹ increased 50% to $17.3 million, compared to EBITDA¹ of $11.5 million in the first quarter of 2010.

Net income for the quarter was $8.1 million or $0.40 per fully diluted share, compared to net income of $3.1 million or $0.16 per fully diluted share in the first quarter a year ago.

At March 31, 2011, Paladin's cash, cash equivalents and investments in marketable securities totalled $105.7 million.

Product Developments

During the quarter, Paladin received regulatory approval for DigiFab™. DigiFab™ is indicated for the treatment of patients with life-threatening or potentially life-threatening digoxin toxicity or overdose.

In early February 2011, Paladin entered into an agreement with Bristol Myers Squibb to acquire the Tempra® line of products in Canada including both syrup and drop formulations. According to IMS Canada, the Tempra® line of products achieved sales of approximately $3 million in 2010 representing approximately 19% of the total sales in Canada of paediatric acetaminophen products.

On February 22, 2011, Paladin obtained Canadian regulatory approval for Abstral®. Abstral® is a novel, rapidly-disintegrating, sublingual (under the tongue) formulation of fentanyl, a well-established opioid used for the management of episodes of breakthrough pain experienced by cancer patients who are already receiving and tolerant to opioid analgesics for chronic pain. Paladin expects to launch Abstral® in the second quarter of 2011.

Subsequent to the first quarter of 2011, Paladin announced the Canadian launch of Seasonique™. Seasonique™ is a new approach in birth control pills and is designed reduce the number of periods a women experiences from 13 to 4 per year. Moreover, it is the first 91-day combination oral contraceptive regimen approved in Canada which is placebo free.

Also, subsequent to the first quarter, Paladin and Takeda Pharmaceutical Company Limited announced that they entered into a licensing and distribution agreement under which Paladin granted Takeda an exclusive right to develop and commercialize fomepizole (marketed and distributed by Paladin under the trademark Antizol® in Canada and the United States) for the treatment of ethylene glycol and methanol poisonings in Japan.

Moreover, in May 2011, Paladin and Elan Drug Technologies, a business unit of Elan Corporation plc entered into a licensing and distribution agreement under which Paladin was granted exclusive Canadian rights from an affiliate of Elan Corporation, plc to market and sell, upon regulatory approval, Elan's controlled release hydrocodone product for the treatment of moderate to severe pain.

Also in May 2011, Paladin filed a new drug submission for Oralair™ with Health Canada. Oralair™ is a sublingual grass pollen immunotherapy tablet for the treatment of grass pollen rhinitis with or without conjunctivitis for patients uncontrolled with current symptomatic medications.

Corporate Developments

In January 2011, Paladin closed its agreement with ProStrakan Group plc whereby Paladin was granted an exclusive license to ProStrakan's products for certain emerging territories and acquired, by way of assignment, ProStrakan's existing secured debt facility of £50 million (CDN $77.2 million) with the addition of certain conversion rights. On February 22, 2011, in connection with the acquisition of ProStrakan by Kyowa Hakko Kirin Co., Ltd., Paladin agreed to accept repayment of this secured debt facility together with a payment equivalent to the balance of interest payable for the first year and a break free of £2.0 million (CDN $3.1 million). Subsequent to the first quarter, Paladin received a total of $88.4 million representing $77.2 million to reimburse the original debt facility, $2.8 million in earned interest and $8.4 million related to the early termination of the agreement.

In early February 2011, Paladin agreed to amend its partnership with Isotechnika Phama Inc. ("IsoPharma"). In order to support a transaction between IsoPharma and ILJIN Life Science Co., Inc. ("ILJIN") for the continued development of voclosporin for transplantation and autoimmune diseases, Paladin assigned its intellectual rights to voclosporin for certain territories to IsoPharma. In consideration for this amendment, Paladin has received $1.0 million from IsoPharma. Further, Paladin sold 12.5 million shares of IsoPharma to ILJIN for $3.1 million. Paladin retains its rights to voclosporin for transplantation and autoimmune diseases for Canada, South Africa and Israel in addition to certain rights under the Lux and Atrium licenses and third party manufacturing agreements.

Also in February, Paladin further demonstrated its confidence in Pharmaplan by increasing its planned investment from 5%, as stipulated in the original agreement, to 10%. This increased Paladin's ownership from 34.99% to 44.99% effective March 1, 2011. Paladin remains confident in Pharmaplan's business model, their ability to grow and generate profits and ultimately, generate value for Paladin's shareholders.

On February 24, 2011, Paladin closed its bought deal offering of 1,150,000 common shares which includes 150,000 common shares issued pursuant to the exercise by the underwriters of their over-allotment option. The common shares were issued at a price of $35.00 per common share for total gross proceeds to Paladin of approximately $40.3 million.

Financial Outlook

For fiscal 2011, Paladin expects to generate $130 million to $135 million in revenue. This forecast excludes the impact of acquisitions that may be made by the Company between now and the end of 2011.

1 EBITDA – Non-IFRS Financial Measures

The term EBITDA (earnings before interest, taxes, depreciation and amortization) does not have any standardized meaning under International Financial Reporting Standards ("IFRS") and therefore may not be comparable to similar measures presented by other companies. The Company defines EBITDA as earnings before interest expense, other finance expense (income), taxes, amortization, foreign exchange gains (losses), share of net income in an associate 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 statements 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 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 Wednesday, May 25, 2011, at 4:30 p.m. ET. The dial-in number for the conference call is 800-676-1841 or 416-359-3129. The call will be audio-cast live and archived for 30 days at

About Paladin Labs

Paladin Labs Inc., headquartered in Montreal, Canada, is a specialty pharmaceutical company focused on acquiring or in-licensing innovative pharmaceutical products. 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

This press release may contain forward-looking statements and predictions. 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 Company considers the assumptions on which these forward-looking statements are based to be reasonable at the time they were prepared, but cautions that these assumptions regarding the future events, many of which are beyond the control of the Company and its 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 report as well as in the Company's Annual Information Form for the year ended December 31, 2010. The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information or future events and except as required by law. For additional information on risks and uncertainties relating to these forward-looking statements, investors should consult the Company's ongoing quarterly filings, annual report and Annual Information Form and other fillings found on SEDAR at

[In thousands of Canadian dollars]
March 31, 2011December 31, 2010January 1, 2010
Cash and cash equivalents19,64196,29531,227
Marketable securities86,06743,09474,142
Trade and other receivables19,51821,91215,243
Investment tax credits recoverable776
Income tax receivable174,630
Other current assets1,6674,7171,592
Total current assets139,421179,912139,971
Investment in an associate21,91515,739
Financial assets98,78322,83562
Investment tax credits recoverable14,73614,73614,903
Deferred income tax assets24,95426,58633,062
Property, plant and equipment171221691
Pharmaceutical product licenses and rights22,83120,59442,543
Total assets322,811280,623231,232
Payables, accruals and provisions28,90036,90124,056
Income tax payable12,62511,2547,109
Deferred revenue2,6491,9391,776
Balances of sale payable8951,1451,650
Total current liabilities45,06951,23934,591
Balances of sale payable5395391,743
Total liabilities45,60851,77836,334
Shareholders' equity
Share capital163,922123,136119,652
Other paid-in capital4,5574,8924,362
Other capital (deficit) reserves(18)17598
Retained earnings108,742100,64270,786
Total shareholders' equity277,203228,845194,898
Total liabilities and shareholders' equity322,811280,623231,232
[In thousands of Canadian dollars except for share and per share amounts]
Three months ended March 31
Cost of sales8,0408,780
Gross income23,71222,057
Expenses (income)
Selling, general and administrative7,0408,077
Research and development2,0712,743
Interest income(2,669)(283)
Earnings before under-noted items17,27011,520
Amortization of pharmaceutical product licenses and rights5,3306,270
Foreign exchange (gain) loss(381)294
Other finance expense (income)573(25)
Share of net income of an associate(201)(131)
Income before income tax11,9495,112
Provision for income taxes3,8491,970
Net income for the period8,1003,142
Attributable to shareholders
Basic earnings per share0.420.17
Diluted earnings per share0.400.16
Weighted average number of shares outstanding
[In thousands of Canadian dollars]
Three months ended March 31
Operating activities
Net income for the period8,1003,142
Adjustments reconciling net income to operating cash flows
Amortization of pharmaceutical product licenses and rights5,3306,270
Deferred tax2,2801,548
Share-based compensation expense423361
Other finance expense (income)573(25)
Unrealized foreign exchange (gain) loss(470)311
Depreciation of property, plant and equipment105219
Changes in working capital and other non-cash balances
Decrease (increase) in inventories1,349(1,303)
Decrease in trade and other receivables2,3941,463
Decrease in payables, accruals and provisions(8,001)(4,856)
Increase (decrease) in deferred revenue710(1,683)
Other working capital non-cash balances1,9105,067
Share of net income of an associate(201)(131)
Cash inflow from operating activities14,50210,383
Investing activities
Purchase of financial assets(80,338)(8,630)
Purchases of marketable securities(45,738)(43,788)
Purchase of pharmaceutical product licenses and rights(7,567)
Investment in an associate(2,936)(15,982)
Repayment of balances of sale payable(250)(1,650)
Purchase of property, plant and equipment(55)(22)
Proceeds from disposal of financial assets3,34427
Disposal and maturities of marketable securities2,91374,404
Dividends from an associate251
Net cash (outflow) inflow from investing activities(130,376)4,359
Financing activities
Common shares issued for cash, net of issue costs39,387771
Net cash inflow from financing activities39,387771
Foreign exchange rate loss on cash and cash equivalents(167)(18)
(Decrease) increase in cash and cash equivalents during the period(76,654)15,495
Cash and cash equivalents, beginning of period96,29531,227
Cash and cash equivalents, end of period19,64146,722
Supplemental cash flow information
Interest received285490
Income taxes (paid) received(45)3,764

Amounts received for interest and paid for income taxes were reflected as operating cash flows in the interim consolidated statements of cash flows.

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