Paladin Labs Inc.
TSX : PLB

Paladin Labs Inc.

November 02, 2006 07:00 ET

Paladin Reports Record Revenues for Third Quarter & Increases Revenue Guidance

MONTREAL, QUEBEC--(CCNMatthews - Nov. 2, 2006) - Paladin Labs Inc. (TSX:PLB), a leading Canadian specialty pharmaceutical company, today reported its unaudited financial results for the three and nine-month periods ended September 30, 2006. The Company achieved record revenues for the third quarter and first nine months of 2006 and is well positioned to achieve its 11th consecutive year of record revenues in 2006.

Third Quarter 2006 Highlights

- Revenues totalled $12.7 million, a 39% increase compared to the third quarter of 2005

- Net income was $1.9 million, an increase of 136% compared to the corresponding period a year ago

- EBITDA(1) increased to $4.8 million during the third quarter compared to $2.6 million during the corresponding period a year ago.

Financial Results

Revenues for the third quarter of 2006 increased 39% to a record $12.7 million compared to $9.1 million in the third quarter of 2005. Revenues for the nine months ended September 30, 2006 increased 46% to $34.1 million compared to $23.4 million in the corresponding period a year ago. Revenues from the Company's key promoted brands including, Estring®, Plan B®, Pennsaid®, Oxytrol®, and Twinject® increased by 112% in the third quarter of 2006 compared to the same period a year ago and 178% in the first nine months of 2006 compared to the same period last year.

EBITDA(1) increased to a record $4.8 million for the third quarter of 2006 compared to $2.6 million during the third quarter of 2005. For the nine months ended September 30, 2006, EBITDA(1) increased to $11.2 million compared to EBITDA(1) of $6.5 million in the first nine months of 2005.

Net income for the third quarter was $1.9 million or $0.13 per fully diluted share compared to net income of $808 thousand or $0.05 per fully diluted share in the third quarter a year ago. Net income for the nine months ended September 30, 2006 was $4.3 million or $0.28 per fully diluted share, compared to net income of $1.9 million or $0.13 per fully diluted share in the same period a year ago.

Gross profit, as a percentage of revenues, for the third quarter and nine months ended September 2006 totalled 76% compared to 74% during the same periods of 2005.

Selling and marketing expense for the third quarter of 2006 increased to $3.8 million compared to $3.2 million in the third quarter of 2005. Selling and marketing expense for the first nine months of 2006 increased to $11 million from $8.2 million in the first nine months of 2005. Increased selling and marketing expenses in 2006 have resulted primarily from increased promotion activities behind the launch of Twinject®, Trelstar® and Trelstar LA®, the continued promotional expenses relating to the previous years' launch of Oxytrol®, the re-launch of Plan B® as a non-prescription product and the co-promotion expenses relating to Pennsaid®.

As at September 30, 2006, Paladin's cash, cash equivalents and investments in marketable securities totalled $48.1 million. From this strong cash position, Paladin continues to pursue product acquisition opportunities.

2006 Revenue Guidance

Paladin is revising upwards its previously announced revenue guidance for fiscal 2006 from $42 million to $43 million generated in revenues to $44 million to $46 million, due to better than expected performance of its key promoted products. 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 2006.

(1) EBITDA does not have any standardized meaning prescribed by generally accepted accounting principles (GAAP) and therefore may not be comparable to similar measures presented by other public issuers. EBITDA is defined as earnings before interest, taxes, depreciation, amortization and unusual items. EBITDA performance and guidance is presented herein because Paladin management believes that, in addition to net income, EBITDA is a useful supplemental measure of the Company's financial performance.

Conference Call Notice

Paladin will host a conference call to discuss its third quarter results today at 10:00 a.m. EST. The dial-in number for the conference call is 1-866-249-1964 or 416-644-3429. 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. Paladin's shares trade on the Toronto Stock Exchange under the symbol PLB. For more information about Paladin, 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 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 subsidiary 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, 2005. The Company disclaims 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 Company's ongoing quarterly fillings, annual report and Annual Information Form and other fillings found on SEDAR at www.sedar.com



CONSOLIDATED BALANCE SHEETS
(In thousands of Canadian dollars)

September 30 December 31
2006 2005
$ $
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(unaudited)
ASSETS
Current
Cash and cash equivalents 4,169 2,835
Marketable securities 43,975 39,484
Accounts receivable 8,087 8,128
Inventory 4,188 3,178
Other current assets 805 865
Investment tax credits receivable 827 827
Future income tax assets 2,943 3,158
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Total current assets 64,994 58,475

Property, plant and equipment 87 96
Pharmaceutical product licenses and rights 7,871 9,135
Deferred charges 3,584 3,908
Investments 2,682 1,433
Future investment tax credits recoverable 153 153
Future income tax assets 3,338 4,479
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82,709 77,679
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 7,721 7,679
Accounts payable to related parties 963 1,044
Deferred revenue - 903
Income taxes payable 422 408
Balance of license agreements payable 233 698
Balance of sale payable 227 227
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Total current liabilities 9,566 10,959
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Long-term
Balance of sale payable 488 470
Future income tax liabilities 754 -
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Total long-term liabilities 1,242 470
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Shareholders' equity
Capital stock 58,515 57,378
Other paid-in capital 1,209 933
Retained earnings 12,177 7,939
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Total shareholders' equity 71,901 66,250
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82,709 77,679
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CONSOLIDATED STATEMENTS OF INCOME
(In thousands of Canadian dollars except for share and per share
amounts)
(unaudited)

Three-month Nine-month
period ended period ended
September 30 September 30
2006 2005 2006 2005
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$ $ $ $


Revenues 12,702 9,135 34,075 23,371
Cost of sales 2,992 2,357 8,253 6,159
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Gross profit 9,710 6,778 25,822 17,212
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Selling and marketing 3,838 3,201 10,984 8,248
General and
administrative 1,223 808 3,594 2,469
Research and development 342 666 1,130 1,279
Amortization of
intangible assets
and deferred charges 1,603 1,273 5,214 3,455
Interest income, net (435) (339) (1,035) (966)
Other Income - (37) (724) (147)
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Income before income
taxes 3,139 1,206 6,659 2,874
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Provision for income
taxes 284 - 284 -
Future 947 398 2,103 982
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1,231 398 2,387 982
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Net income 1,908 808 4,272 1,892
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Earnings per share
Basic 0.13 0.05 0.29 0.13
Diluted 0.13 0.05 0.28 0.13
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Weighted average
number of shares
outstanding
Basic 14,927,913 14,757,260 14,863,445 14,820,555
Diluted 15,152,341 14,835,682 15,074,139 14,851,610
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian dollars)
(unaudited)

Three-month Nine-month
period ended period ended
September 30 September 30
2006 2005 2006 2005
---------------------------------------------------------------------
$ $ $ $


Operating activities
Net income 1,908 808 4,272 1,892
Add items not
affecting cash
Amortization 1,619 1,416 5,263 3,628
Stock based
compensation expense 105 66 451 258
Future income taxes 947 398 2,103 959
Imputed interest on
balance of sale 6 - 18 -
Unrealized foreign
exchange (gain) loss 1 2 1 (15)
Stock dividends - - (724) -
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4,586 2,690 11,384 6,722
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Net change in non-cash
balances relating
to operations (257) 336 (1,864) 376
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Cash flows from
operating activities 4,329 3,026 9,520 7,098
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Investing activities
Additions to
pharmaceutical product
licenses, rights
and deferred charges (203) (202) (3,857) (1,211)
Acquisition of
property, plant and
equipment (1) (5) (40) (23)
Purchases of
short-term marketable
securities (19,703) (9,632) (49,415) (29,550)
Maturities of
short-term
marketable
securities 14,869 10,903 44,924 35,287
Investment in
portfolio company - - (500) -
Purchases of
long-term marketable
securities - - - (1,983)
Business Acquisition - (7,748) - (7,748)
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Cash used in
investing activities (5,038) (6,684) (8,888) (5,228)
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Financing activities
Common shares
issued for cash 155 18 1,002 42
Accounts payable
related to the
acquisition of
intellectual
property and
deferred charges - - (234) (598)
Repurchase of shares (67) - (67) (482)
Repayment of share
purchase loan - - - 20
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Cash flows from
(used in)
financing
activities 88 18 701 (1,018)
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Effect of
exchange rate
change on cash
and cash equivalents 1 1 1 (6)

Net change in cash
and cash
equivalents
during the period (620) (3,639) 1,334 846

Cash and cash
equivalents
, beginning of period 4,789 5,992 2,835 1,507

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Cash and cash
equivalents, end
of period 4,169 2,353 4,169 2,353
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Cash and cash
equivalents 4,169 2,353
Short-term marketable
securities 43,975 36,863
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48,144 39,216
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