Paladin Labs Inc.
TSX : PLB

Paladin Labs Inc.

February 28, 2008 07:30 ET

Paladin Reports Record 2007 Fourth Quarter and Year End Results

Company Provides 2008 Guidance

MONTREAL, CANADA--(Marketwire - Feb. 28, 2008) - Paladin Labs Inc. (TSX:PLB), a leading Canadian specialty pharmaceutical company, today reported its financial results for the fourth quarter and year ended December 31, 2007. The Company achieved record revenues for the fourth quarter of 2007 and has achieved its 12th consecutive year of record revenues.

2007 Highlights

- Revenues for 2007 totaled a record $62.9 million, a 30% increase compared to 2006

- Sales of key promoted brands in 2007 including: Twinject®, Oxytrol®, Plan B®, Trelstar®, Pennsaid®, Metadol®, Testim® and Tridural™
grew 48% compared to 2006

- EBITDA(1) in 2007 increased 29% to a record $19.9 million compared to $15.4 million in 2006

- Paladin was inducted into the Canadian Marketing Hall of Fame with particular regard to Paladin's efforts in marketing Plan B®

Subsequent to the quarter

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

- Paladin and Nycomed Canada Inc., a subsidiary of Nycomed entered into a Canadian Co-Promotion Agreement for Tridural™ once-daily tramadol

- Exclusive Canadian Distribution Agreement with the KV Pharmaceutical Company for Micro-K® Extencaps® Capsules.

"This year marked our 12th consecutive year of record revenues. The promotional efforts behind Trelstar®, Twinject®, Plan B®, Pennsaid® and Testim® contributed to our strong organic growth. With the recent launch of Tridural™ and Seasoanle™, we expect to build from our strength in 2007 to post another record year in 2008," said Jonathan Ross Goodman, President and CEO of Paladin Labs.

Financial Results

Revenues for the fourth quarter of 2007 increased 24% to a record $17.7 million compared to $14.3 million in the fourth quarter of 2006. Revenues from the Company's key promoted brands including: Twinject®, Oxytrol®, Plan B®, Trelstar®, Pennsaid®, Metadol®, Testim® and Tridural™ increased by 39% in the fourth quarter of 2007 compared to the same period a year ago. For the year ended December 31, 2007, revenues increased 30% to a record $62.9 million compared to $48.4 million in 2006.

EBITDA(1) in the fourth quarter 2007 increased to $4.9 million compared to EBITDA(1) of $4.3 million in the fourth quarter 2006. For the year ended December 31, 2007, EBITDA(1) increased to a record $19.9 million compared to $15.4 million in 2006.

Net income for the fourth quarter 2007 was $1.0 million or $0.07 per fully diluted share compared to net income of $1.5 million or $0.10 per fully diluted share in 2006. Net income before extraordinary gain was $4.2 million or $0.27 per diluted per share for the year ended December 31, 2007. Net income for the year ended December 31, 2007 was a record $9.0 million or $0.59 per fully diluted share, compared to net income of $5.8 million or $0.38 per fully diluted share in 2006. This increase in net income includes a non-cash extraordinary gain of $4.9 million, related to the accounting treatment of the BioEnvelop acquisition.

Selling and marketing expense for the fourth quarter of 2007 increased to $7.3 million compared to $5.2 million in the fourth quarter of 2006. Selling and marketing expense for the year ended December 31, 2007 increased to $21.7 million from $16.2 million in 2006. Increased selling and marketing expenses in 2007 have resulted primarily from the increased promotion activities behind newly launched brands.

Amortization expense for the fourth quarter 2007 increased to $3.2 million from $2.1 million in the corresponding period a year ago. For the twelve-month period ended December 31, 2006, amortization expense increased to $12.5 million from $7.3 million in 2006. Increased amortization expense in 2007 reflects the amortization of newly acquired assets.

As at December 31 2007, Paladin's cash, cash equivalents and investments in marketable securities totalled $36.2 million. From this strong cash position, Paladin continues to pursue product acquisition opportunities.

Product Developments

During the quarter, Paladin submitted a patent application for its novel oral ingestible film composition delivery system, Thinsol™. Thinsol™ is a water-based, enzymatically-digested carboxymethylcellulose (CMC-enz) film that is suitable for the rapid delivery of pharmaceutical and nutraceutical active ingredients. Thinsol™ may offer significant advantages over current edible film technologies. BioEnvelop's™ research has determined that use of the Thinsol™ delivery technology allows for the development of products that others may not be able to formulate in a film strip format, such as products that are heat-sensitive and those that require high drug loads on each strip.

Subsequent to the year end, 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. Seasonale™ will appeal most to busy women who do not want to deal with the inconveniences of a monthly period and to women who suffer from period-related symptoms such as cramping, heavy bleeding and headaches.

In addition, Paladin and Nycomed Canada Inc., a subsidiary of Nycomed entered into a Canadian Co-Promotion Agreement for Tridural™ once-daily tramadol. Paladin acquired the Canadian license to Tridural™ from Labopharm Inc in July 2007 and launched Tridural™ in September 2007. 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.

Paladin also entered into an exclusive Canadian Distribution Agreement with the KV Pharmaceutical Company for Micro-K® Extencaps® Capsules. Micro-K is indicated for the prevention of potassium depletion when the dietary intake of potassium is inadequate for this purpose. It is also indicated for the treatment of potassium depletion in patients with hypokalemia and metabolic alkalosis, and in the treatment of chronic digitalis intoxication. According to IMS Canada, in 2007, Canadian sales of Micro-K amounted to approximately $2.2 million, up 6% versus 2006.

Financial Outlook

For fiscal 2008, Paladin expects to generate $72 million to $74 million in revenue. This forecast excludes the impact of acquisitions that may be made by the Company between now and the end of 2008.

Conference Call Notice

Paladin will host a conference call to discuss its fourth quarter results today at 10:00 a.m. EST. The dial-in number for the conference call is 1-800-731-6941 or 416-644-3421. The call will be audio-cast live and archived for 31 days at www.paladinlabs.com.

(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.

About Paladin Labs Inc.

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, 2006. 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)

December 31 December 31
2007 2006
$ $
-------------------------------------------------------------------------
(unaudited) (audited(1))

ASSETS
Current
Cash and cash equivalents 6,074 2,769
Marketable securities 26,041 33,305
Accounts receivable 11,920 9,495
Inventory 6,781 3,635
Other current assets 2,943 1,306
Investment tax credits receivable 244 831
Future income tax assets 2,992 2,550
-------------------------------------------------------------------------
Total current assets 56,995 53,891

Long-term marketable securities 4,101 -
Investment tax credits recoverable 773 -
Capital assets 300 151
Pharmaceutical product licenses and rights 24,366 21,482
Deferred charges 1,455 3,476
Investments 4,041 3,217
Future income tax assets 6,874 3,634
-------------------------------------------------------------------------
Total assets 98,905 85,851
-------------------------------------------------------------------------
-------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 11,582 8,208
Accounts payable to related parties 1,032 1,274
Deferred revenue 271 -
Income taxes payable 2,056 279
Balance of sale payable 89 227
Balance of license agreements payable - 231
-------------------------------------------------------------------------
Total current liabilities 15,030 10,219

Future income tax liabilities 1,357 1,397
Balance of sale payable 518 494
-------------------------------------------------------------------------
Total liabilities 16,905 12,110
-------------------------------------------------------------------------

Shareholders' equity
Capital stock 59,797 58,807
Other paid-in capital 2,019 1,223
Accumulated other comprehensive loss (324) -
Retained earnings 20,508 13,711
-------------------------------------------------------------------------
Total shareholders' equity 82,000 73,741
-------------------------------------------------------------------------
Total liabilities and shareholders' equity 98,905 85,851
-------------------------------------------------------------------------
-------------------------------------------------------------------------



CONSOLIDATED STATEMENTS OF INCOME
(In thousands of Canadian dollars except
for share and per share amounts)

Three-month periods Twelve-month periods
ended December 31 ended December 31
2007 2006 2007 2006
-------------------------------------------------------------------------
$ $ $ $
(unaudited) (unaudited) (unaudited) (audited(1))

Revenues 17,697 14,282 62,941 48,357
Cost of sales 4,023 2,967 14,289 11,220
-------------------------------------------------------------------------
Gross profit 13,674 11,315 48,652 37,137
-------------------------------------------------------------------------

Expenses (income)
Selling and marketing 7,255 5,197 21,668 16,181
General and
administrative 1,393 980 5,662 4,574
Research and
development 487 1,266 2,893 2,396
Interest income (386) (399) (1,484) (1,434)
-------------------------------------------------------------------------
Earnings before under
noted items 4,925 4,271 19,913 15,420
-------------------------------------------------------------------------

Amortization of
intangible assets
and deferred charges 3,175 2,079 12,504 7,293
Unrealized loss on
derivative financial
instruments 13 - 364 -
Gain on disposal of
investments (415) (173) (565) (173)
Other income (348) - (348) (724)
-------------------------------------------------------------------------
Income before income
taxes and
extraordinary gain 2,500 2,365 7,958 9,024
-------------------------------------------------------------------------

Provision for income
taxes
Current 807 90 1,766 374
Future 663 741 2,033 2,844
-------------------------------------------------------------------------
1,470 831 3,799 3,218
-------------------------------------------------------------------------
Net income before
extraordinary gain 1,030 1,534 4,159 5,806
-------------------------------------------------------------------------

Extraordinary gain
(net of $nil taxes) - - 4,874 -
-------------------------------------------------------------------------
Net income 1,030 1,534 9,033 5,806
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Earnings per share
before extraordinary
gain
Basic 0.07 0.10 0.28 0.39
Diluted 0.07 0.10 0.27 0.38

Earnings per share
Basic 0.07 0.10 0.60 0.39
Diluted 0.07 0.10 0.59 0.38
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Weighted average
number of shares
outstanding
Basic 14,884,960 14,955,131 15,008,544 14,886,555
Diluted 15,154,079 15,304,223 15,319,692 15,176,437
-------------------------------------------------------------------------
-------------------------------------------------------------------------



CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian dollars)

Three-month periods Twelve-month periods
ended December 31 ended December 31
2007 2006 2007 2006
-------------------------------------------------------------------------
$ $ $ $
(unaudited) (unaudited) (unaudited) (audited(1))

Operating activities
Net income 1,030 1,534 9,033 5,806
Add items not
affecting cash
Amortization 3,205 2,091 12,600 7,354
Future income taxes (221) 741 (3,792) 2,844
Stock-based
compensation
expense 228 100 977 551
Unrealized loss on
derivative financial
instruments 13 - 364 -
Other income (348) - (348) (724)
Gain on disposal of
investments (415) (173) (565) (173)
Accreted interest on
investment (17) - (74) -
Accreted interest on
balance of sale
payable 6 6 25 24
-------------------------------------------------------------------------
3,481 4,299 18,220 15,682
-------------------------------------------------------------------------
Net change in non-cash
balances relating to
operations 301 (534) (450) (2,630)
-------------------------------------------------------------------------
Cash flows from
operating activities 3,782 3,765 17,770 13,052
-------------------------------------------------------------------------

Investing activities
Additions to
pharmaceutical product
licenses and rights, and
deferred charges (36) (15,582) (13,327) (19,439)
Purchases of short-term
marketable securities (16,367) (1,491) (42,353) (50,906)
Maturities of short-term
marketable securities 13,470 12,162 49,626 57,086
Purchases of long-term
marketable securities (4,101) - (4,101) -
Proceeds from the
disposal of investments - 515 232 515
Acquisition of capital
assets (123) (77) (245) (117)
Investment in portfolio
companies - (901) (801) (1,401)
Repayment of current
balance of sale payable - - (227) -
Business Acquisition - - (650) -
-------------------------------------------------------------------------
Cash flows used in
investing activities (7,157) (5,374) (11,846) (14,262)
-------------------------------------------------------------------------

Financing activities
Common shares issued
for cash 73 209 1,010 1,211
Repurchase or shares (13) - (3,629) (67)
-------------------------------------------------------------------------
Cash flows from (used
in) financing activities 60 209 (2,619) 1,144
-------------------------------------------------------------------------

Net change in cash and
cash equivalents during
the period (3,315) (1,400) 3,305 (66)

Cash and cash equivalents,
beginning of period 9,389 4,169 2,769 2,835

-------------------------------------------------------------------------
Cash and cash equivalents,
end of period 6,074 2,769 6,074 2,769
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Cash and cash equivalents 6,074 2,769
Short-term marketable
securities 26,041 33,305
Long-term marketable
securities 4,101 -
-------------------------------------------------------------------------
36,216 36,074
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) Derived from the audited annual financial statements filed on SEDAR at
www.sedar.com

Contact Information