Paladin Labs Inc.

TSX : PLB


Paladin Labs Inc.

February 28, 2013 06:30 ET

Paladin Reports Record 2012 Results

MONTREAL, CANADA--(Marketwire - Feb. 28, 2013) - 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, 2012. The Company has achieved its 17th consecutive year of record revenues and its 10th consecutive year of record EBITDA(1).

2012 Highlights

Financial

  • Adjusted(2) revenues for 2012 totalled a record $179.0 million an increase of 27% over 2011
  • Adjusted(2) EBITDA(1) for 2012 increased 17% to a record $79.0 million compared to $67.7 million in 2011
  • Sales of promoted products including: Tridural®, Trelstar®, Testim®, Metadol®, Abstral®, Digifab®, Plan B®, Glucagen®, Urocit®-K and and Oralair® grew 13% in 2012 compared to 2011

Product Development

  • Filed a New Drug Submission (NDS) and obtained approval for Silenor®
  • Received regulatory approval from Health Canada and subsequently launched Oralair®
  • Filed a Non-Traditional Product License Application for Travelan®
  • Entered into a licensing agreement with QRxPharma Limited (ASX:QRX and OTCQX:QRXPY), for MOXDUO®
  • Entered into a licensing and distribution agreement with Dynamiclear Australia, for Dynamiclear Rapid™
  • Entered into an exclusive distribution agreement with Moberg Derma for Emtrix™
  • Entered into agreement to loan Nuvo Research Inc. (TSX:NRI) $8.0 million in two equal tranches, of which $4.0 million was advanced on closing

Corporate Development

  • Announced closing of the 44.54% acquisition of Litha Healthcare Group ("Litha" - JSE:LHG) effective July 2, 2012
  • Initiated launch of commercial operations in Latin America with acquisition of a controlling stake of 50.01% in Ativa Pharma S.A. ("Ativa") effective January 1, 2013
  • Appointed Jonathan Ross Goodman as Chairman of the Board of Directors of Paladin

Subsequent to year end

  • Entered into a Canadian distribution agreement with Allergy Therapeutics plc (AIM:AGY) for Pollinex®-R with an option to add Sub-Saharan Africa
  • Entered into an exclusive licensing agreement with Apeiron Biologics AG for APN311, in Canada and Sub-Saharan Africa

"The year 2012 further demonstrated our ability to leverage our expertise into opportunity and growth through the expansion of our footprint in Africa and the initiation of our expansion into Latin America. Our ability to capitalize on opportunities and to continue to deliver on growth both locally and internationally is demonstrated through our record 2012 results and record cash position of $258.0 million" said Mark Beaudet, interim President and CEO of Paladin Labs.

Financial Results

Adjusted(2) revenues increased $37.5 million or 27% to a record $179.0 million in 2012 from $141.5 million in 2011. For the quarter ended December 31, 2012, Paladin recorded adjusted(2) revenues of $52.6 million compared to $37.1 million in the fourth quarter of 2011, a 42% year over year increase. The increase is mostly attributable to the proportionate consolidation of Litha's revenues of $12.1 million for the quarter and $25.1 million for the second half of the year. In addition, revenues further increased as a result of incremental revenues from products acquired and/or launched by Paladin including corporate acquisitions since 2011, which contributed $10.2 million for the year. In addition, the sales growth of certain significant promoted products, including Tridural®, Trelstar®, Testim®, Metadol®, Abstral®, Digifab®, Plan B®, Glucagen®, Urocit®-K and Oralair®, combined increased by 13% for the quarter and year.

Consolidated revenues for the fourth quarter and year ended December 31, 2012 were $67.6 million and $210.2 million, an increase of 82% and 49% over the same periods last year. The increase is mostly attributable to the consolidation of Litha's revenues of $27.1 million for the quarter and $56.3 million for the second half of the year.

Adjusted(2) EBITDA(1) for the year increased 17% to a record $79.0 million compared to $67.7 million in 2011. Adjusted(2) EBITDA(1) for the fourth quarter of 2012 increased 63% to $22.8 million compared to EBITDA of $14.0 million in the fourth quarter 2011. The increase in adjusted(2) EBITDA(1) for Paladin was driven by the strong sales performance of our promoted products, partially offset by increased costs associated with the launch of new products, including Abstral® and Oralair®. Litha contributed adjusted(2) EBITDA(1) of $1.0 million for the quarter and $2.5 million for the second half of the year. Litha's adjusted(2) EBITDA(1) includes certain integration and acquisition costs related to Pharmaplan as well as the impact of the decline in the South African Rand. In addition, adjusted(2) EBITDA(1) from Litha was negatively impacted by fair value adjustments from the Paladin/Pharmaplan acquisition.

Consolidated EBITDA(1) for 2012 increased 21% to a record $82.0 million compared to $67.7 million in 2011. Consolidated EBITDA(1) for the fourth quarter of 2012 increased 71% to $24.0 million compared to EBITDA of $14.0 million in the fourth quarter 2011. The consolidation of Litha contributed $2.2 million for the quarter and $5.5 million for the second half of the year in consolidated EBITDA(1).

Net income attributable to shareholders of the company for the fourth quarter decreased 19% to $12.8 million or $0.61 per fully diluted share compared to net income of $15.8 million or $0.76 per fully diluted share for the same period in 2011. Net income attributable to shareholders for the year ended December 31, 2012 increased $9.7 million or 19% to $59.9 million from $50.2 million.

Consolidated selling, general and administrative expense for 2012 increased to $49 million compared to $32.0 million in 2011. Selling, general and administrative expense, as a percentage of revenues, remained steady at 23% for 2012. Selling, general and administrative expense for the fourth quarter of 2012 increased to $15.5 million compared to $9.0 million in the fourth quarter of 2011. Selling general and administrative expense, as percentage of revenues, decreased to 23% compared to 24% for the same quarter last year. The increase in selling, general and administrative expenses is attributable to Litha which contributed $8.7 million for the quarter and $18.3 million for the second half of the year.

Amortization expense for 2012 decreased to $16.1 million from $22.0 million in 2011. Amortization expense for the fourth quarter 2012 decreased to $5.6 million from $6.2 million in the corresponding period a year ago. The decrease in amortization expense is the result of certain pharmaceutical product licenses and rights having reached full amortization during the year, partly offset by amortization related to the acquisition of intangible assets, mostly for acquisitions of Litha and Labopharm.

As at December 31 2012, Paladin's cash, cash equivalents and investments in marketable securities net of bank overdraft totalled a record $258.0 million. From this strong cash position, Paladin continues to pursue acquisition opportunities.

Product Developments

During 2012, Paladin advanced its product pipeline with the in-licensing and launch of new products. Oralair®, a sublingual grass pollen immunotherapy tablet for the treatment of symptoms of moderate to severe seasonal grass pollen allergic rhinitis with or without conjunctivitis, obtained regulatory approval and was subsequently launched during the fourth quarter. Furthermore, Paladin obtained approval for Silenor® (doxepin) for the treatment and symptomatic relief of insomnia. Paladin expects to launch Silenor® in the first half of 2013. In addition, Paladin in-licensed MOXDUO®, a novel, patented, immediate release, fixed dose formulation of morphine and oxycodone for the treatment of acute pain. Paladin expects to submit MOXDUO® for regulatory approval in the first half of 2013.

During 2012, Paladin enhanced its OTC portfolio with the regulatory approval and in-licensing of new products. Paladin in-licensed and obtained approval for AmnioSense ™, a novel diagnostic test for the detection of amniotic fluid leakage during pregnancy, and VagiSense™, which is used to detect bacterial vaginosis or trichomonas infections. Both products are expected to launch in the first half of 2013. In addition, Paladin in-licensed two new OTC products for Canada: Dynamiclear Rapid™, for the symptomatic treatment of cold sores, and Emtrix™, for the treatment of fingernail and toenail fungal infections. Emtrix™ is approved for sale in Canada and Dynamiclear Rapid™ is expected to be submitted for regulatory approval in the first half of 2013.

Corporate Developments

On February 21, 2012, the Company entered into a strategic partnership whereby it agreed to accelerate the purchase of the remaining 55.01% interest in Pharmaplan it did not own at that date and to merge the Pharmaplan business with the pharma division of Litha. On July 2, 2012, the Company closed these transactions effectively owning a 44.54% interest in Litha.

In November 2012, Paladin initiated the launch of commercial operations in Latin America with the acquisition of a controlling stake of 50.01% in Ativa Pharma S.A., a Mexico City based start up specialty pharma company. The investment in Ativa provides Paladin with the management team, infrastructure and the necessary regulatory permits to import, distribute and promote pharmaceuticals in the Mexican market. Ativa is currently focusing its activities on the registration of various products for regulatory approvals and it is expected that the Ativa's first commercial launches will occur in 2014.

Financial Outlook

For fiscal 2013, Paladin expects to generate at least $255 million and $190 million in consolidated revenue and adjusted2 revenue respectively of which $115 million and $50 million is attributable to the consolidation of Litha. This forecast excludes the impact of acquisitions and of product launches resulting from new regulatory approvals that may be made by the Company between now and the end of 2013.

(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 expense (income), taxes, depreciation and amortization, foreign exchange gains (losses), share of net income (loss) in associates and joint venture 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.

(2) Adjusted

The term "adjusted" refers to the proportional consolidation of Litha's results. Given that Litha is being accounted for on a consolidated basis, the consolidated results include amounts attributable to minority shareholders. Consequently, adjusted results have been provided to highlight Paladin's 44.54% economic interest in Litha's results.

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 1-800-736-4594 or 416-981-9000. The call will be audio-cast live and archived for 30 days at www.paladinlabs.com.

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 and world markets. With this strategy, a focused national sales team and proven marketing expertise, Paladin has evolved into one of Canada's leading specialty pharmaceutical companies. Paladin's shares trade on the Toronto Stock Exchange under the symbol PLB. For more information, please visit the Company's web site at www.paladinlabs.com.

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, 2011. 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 www.sedar.com.

CONSOLIDATED BALANCE SHEETS
(In thousands of Canadian dollars)
As at December 31, 2012 December 31, 2011
$ $
ASSETS (unaudited) (audited3)
Current
Cash and cash equivalents 118,744 72,115
Marketable securities 146,258 166,894
Trade and other receivables 38,587 20,208
Inventories 37,441 13,327
Income tax receivable 5,479 718
Other current assets 1,661 1,476
Total current assets 348,170 274,738
Investment in associates 626 20,850
Interest in a joint venture 30,476 -
Loans receivable from a joint venture 11,661 -
Financial assets 4,561 9,311
Investment tax credits recoverable 24,840 24,674
Deferred income tax assets 25,402 40,613
Property, plant and equipment 9,754 162
Intangible assets 112,851 27,565
Goodwill 36,176 -
Total assets 604,517 397,913
LIABILITIES AND EQUITY
Current
Bank overdraft 7,044 -
Payables, accruals and provisions 50,165 38,849
Finance lease liability 796 984
Deferred revenue 2,734 2,999
Income tax payable 24,140 22,205
Other balances payable 2,000 2,306
Long-term liabilities 5,804 -
Total current liabilities 92,683 67,343
Finance lease liability 6,843 5,745
Deferred revenue 1,734 2,099
Deferred tax liability 24,415 -
Long-term liabilities 28,327 -
Total liabilities 154,002 75,187
Equity
Share capital 172,282 166,681
Other paid-in capital 7,039 5,144
Other capital reserves (4,076 ) 553
Retained earnings 208,461 150,348
Attributable to shareholders of the Company 383,706 322,726
Non-controlling interests 66,809 -
Total equity 450,515 322,726
Total liabilities and equity 604,517 397,913
CONSOLIDATED INCOME STATEMENTS
(In thousands of Canadian dollars except for share and per share amounts)
Three months ended December 31 Twelve months ended December 31
2012 2011 2012 2011
$ $ $ $
(unaudited) (unaudited) (unaudited) (audited3)
Revenues 67,608 37,083 210,200 141,466
Cost of sales 28,388 11,543 76,810 39,294
Gross income 39,220 25,540 133,390 102,172
Expenses (income)
Selling, general and administrative 15,508 9,049 49,013 31,983
Research and development 1,813 3,628 7,794 9,773
Interest income (2,123 ) (1,089 ) (5,460 ) (7,296 )
Earnings before under-noted items 24,022 13,952 82,043 67,712
Amortization of intangible assets 5,565 6,168 16,132 22,028
Depreciation of property, plant and equipment 445 19 703 136
Other finance expense (income) 314 (70 ) 1,164 (8,687 )
Other income 71 - (3,035 ) (97 )
Foreign exchange loss 1,089 284 1,211 80
Interest expense 1,225 18 2,181 18
Share of net loss from a joint venture (46 ) - 725 -
Share of net income from associates (19 ) (660 ) (999 ) (1,756 )
Income before income tax and under-noted items 15,378 8,193 63,961 55,990
Purchase gain on business combination - (17,070 ) - (17,070 )
Gain on revaluation of equity investment - - (12,294 ) -
Restructuring, shutdown and other costs - 8,795 - 8,795
Income before income tax 15,378 16,468 76,255 64,265
Provision for income taxes 3,958 696 17,900 14,114
Net income for the year 11,420 15,772 58,355 50,151
Attributable to:
Shareholders of the Company 12,834 15,772 59,906 50,151
Non-controlling interests (1,414 ) - (1,551 ) -
Attributable to shareholders
Basic earnings per share 0.63 0.78 2.94 2.51
Diluted earnings per share 0.61 0.76 2.86 2.43
Weighted average number of shares outstanding
Basic 20,402,565 20,232,947 20,347,805 19,970,658
Diluted 20,963,327 20,849,408 20,946,178 20,659,276

CONSOLIDATED STATEMENTS OF CASH FLOWS
Periods ended December 31 Three months ended December 31, 2012 Twelve months ended December 31, 2012
(In thousands of Canadian dollars) 2012 2011 2012 2011
$ $ $ $
(unaudited) (unaudited) (unaudited) (audited3)
Operating activities
Net income for the year 11,420 15,772 58,355 50,151
Adjustments reconciling net income to operating cash flows
Amortization of intangible assets 5,565 6,168 16,132 22,028
Deferred tax 4,276 (1,144 ) 15,845 2,577
Share-based compensation expense 966 438 3,216 1,946
Other finance expense (income) 318 (69 ) 1,164 (8,687 )
Unrealized foreign exchange loss (gain) 1,467 825 1,143 (7 )
Gain on revaluation of equity investment - - (12,294 ) -
Other income (3 ) - (2,838 ) -
Depreciation of property, plant and equipment 460 22 726 187
Share of net income from associates (19 ) (660 ) (999 ) (1,756 )
Share of net loss from a joint venture (46 ) - 725 -
Purchase gain on business combination - (17,070 ) - (17,070 )
Restructuring, shutdown and other costs - 3,946 - 3,946
24,404 8,228 81,175 53,315
Net change in non-cash balances relating to operations (1,407 ) 3,913 (11,572 ) 14,798
Cash inflow from operating activities 22,997 12,141 69,603 68,113
Investing activities
Disposals and maturities of marketable securities 47,474 27,020 187,575 78,373
Dividends from an associate - 1,980 3,319 2,871
Proceeds from disposal of financial assets 5,785 13,109 6,620 102,119
Proceeds from disposal of intangible assets 749 - 1,466 -
Proceeds from disposal of property, plant and equipment 180 - 220 -
Acquisition of subsidiaries, net of cash acquired (2 ) (1,109 ) (42,358 ) (1,109 )
Purchases of marketable securities (46,636 ) (50,561 ) (167,615 ) (201,618 )
Purchases of financial assets - (1,000 ) (4,000 ) (89,873 )
Payment of other balances payable - - (995 ) (250 )
Purchases of property, plant and equipment (926 ) (9 ) (1,453 ) (78 )
Additions to intangible assets (1,004 ) - (1,111 ) (7,617 )
Investment in an associate - - - (2,936 )
Net cash inflow (outflow) from investing activities 5,620 (10,570 ) (18,332 ) (120,118 )
Financing activities
Common shares issued for cash, net of issue costs of $nil (2011: $1,643) 127 880 1,478 41,918
Increase in bank overdraft 634 - 1,353 -
Repurchase of shares - (259 ) (2,278 ) (580 )
Settlement of finance lease liability - - (3,366 ) -
Repayment of long-term liabilities (1,230 ) (13,241 ) (1,766 ) (13,241 )
Payment of obligation under finance lease - (167 ) (500 ) (167 )
Net cash (outflow) inflow from financing activities (469 ) (12,787 ) (5,079 ) 27,930
Foreign exchange gain (loss) on cash and cash equivalents 12 - 437 (105 )
Increase (decrease) in cash and cash equivalents during the period 28,160 (11,216 ) 46,629 (24,180 )
Cash and cash equivalents, beginning of period 90,584 83,331 72,115 96,295
Cash, cash equivalents, end of period 118,744 72,115 118,744 72,115
Paladin cash and cash equivalents 113,229 72,115
Paladin marketable securities 146,258 166,894
Paladin cash, cash equivalents and marketable securities 259,487 239,009
Litha cash and cash equivalents 5,515 -
Litha bank overdraft (7,044 ) -
Litha cash and cash equivalents and bank overdraft (1,529 ) -
Cash, cash equivalents and marketable securities net of bank overdraft 257,958 239,009
Reconciliation of the adjusted2 consolidated results from operations
Three months ended December 31, 2012 Paladin Litha 100% Consolidated
results from
operations
Litha 44.54% Adjusted2
consolidated
results from
operations
$ $ $ $ $
Revenues 40,509 27,099 67,608 12,070 52,579
Cost of sales 12,023 16,365 28,388 7,289 19,312
Gross Income 28,486 10,734 39,220 4,781 33,267
EBITDA1 21,833 2,189 24,022 975 22,808
Net income (loss) before income taxes 18,742 (3,364 ) 15,378 (1,498 ) 17,244
Net Income (loss) 13,973 (2,553 ) 11,420 (1,137 ) 12,836
Net Income (loss) attributable to shareholders
13,973

(1,139
)
12,834

(1,139
)
12,834
Twelve months ended December 31, 2012 Paladin Litha 100 % Consolidated
results from
operations
Litha 44.54 % Adjusted2
consolidated
results from
operations
$ $ $ $ $
Revenues 153,873 56,327 210,200 25,088 178,961
Cost of sales 44,112 32,698 76,810 14,564 58,676
Gross Income 109,761 23,629 133,390 10,524 120,285
EBITDA1 76,521 5,522 82,043 2,459 78,980
Net income (loss) before income taxes 79,479 (3,224 ) 76,255 (1,436 ) 78,043
Net Income (loss) 61,065 (2,710 ) 58,355 (1,207 ) 59,858
Net Income (loss) attributable to shareholders
61,065

(1,159
)
59,906

(1,159
)
59,906

3 Derived from the audited annual financial statements filed on SEDAR at http://www.sedar.com/

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