Paladin Labs Inc.
TSX : PLB

Paladin Labs Inc.

August 03, 2006 07:30 ET

Paladin Reports Record Second Quarter Results and Provides Upward Revenue Guidance for 2006

MONTREAL, CANADA--(CCNMatthews - Aug. 3, 2006) - Paladin Labs Inc. (TSX:PLB), a leading Canadian specialty pharmaceutical company, today announced record revenues for the three and six-month periods ended June 30, 2006. The Company also reported increased revenue guidance for fiscal 2006, a result of stronger than expected sales from key promoted brands.

Second Quarter Highlights:



- Revenue reached a record $11.2 million, an increase of 44% compared
to the same period last year
- Net income was $1.2 million, an increase of 108% compared to the
corresponding period a year ago
- EBITDA(1) increased to $3.6 million during the second quarter
compared to $2 million during the second quarter a year ago
- Trelstar® and Trelstar® LA have been approved for listing
in Quebec by The Conseil du Medicament of Quebec
- The Common Drug Review (CDR) recommended that all other provincial
drug formularies list both formats of Trelstar®


"We are pleased with our record performance in the second quarter, posting a 44% increase in revenues versus last year. Our business is healthy and our products are responding to active promotion. In the third quarter, we will be launching Trelstar® (LHRH) and Vantas® (Histrelin Hydrogel Implant) for advanced prostate cancer. This will make us the only company to offer physicians and patients one month, three month, and one-year solutions to treat advanced prostate cancer. We are confident that Trelstar® and Trelstar® LA have the potential to make a real difference in people's lives," Said Jonathan Ross Goodman, President and CEO of Paladin.

Financial Results

Paladin reported record revenue of $11.2 million for the second quarter ended June 30, 2006, an increase of 44% compared to $7.9 million in the second quarter of 2005. For the six month period ended June 30, 2006, revenues increased 50% to $21.4 million compared to $14.2 million in the first six months of 2005. The Company's key promoted brands continue their strong performance. Revenues from Estring®, Oxytrol®, Plan B®, and Twinject® increased by 239% in the first six months of 2006, compared to the same period a year ago.

Paladin's earnings before interest, taxes, depreciation, amortization, and unusual items (EBITDA(1)) grew to $3.6 million for the second quarter of 2006, compared to $2 million for the second quarter of 2005. For the first half of 2006, Paladin's EBITDA1 increased 71% to $6.4 million, compared to EBITDA(1) of $3.9 million in the first six months of 2005.

Net income for the second quarter was $1.2 million or $0.08 per fully diluted share, compared to net income of $585,000 or $0.04 per fully diluted share in the second quarter a year ago. Net income for the six months ended June 30, 2006 was $2.4 million or $0.16 per fully diluted share compared to net income of $1.1 million or $0.07 per fully diluted share in the same period last year.

Gross profit, as a percentage of revenues, for the second quarter and six months ended June 30, 2006 totalled 76% and 75% respectively, compared to 72% and 73% for both the second quarter and six months ended June 30, 2005, respectively.

Selling and marketing expense for the second quarter of 2006 increased to $3.8 million from $3 million in the same period in 2005. Selling and marketing expense for the first six months of 2006 increased to $7.1 million from $5.2 million in the first six months of 2005. This increase is primarily due to the additional marketing efforts on our current products such as Twinject®, Oxytrol®, Plan B®, and Pennsaid®.

At June 30, 2006, Paladin's cash, cash equivalents and investments in marketable securities totalled $44 million. From this strong cash position, Paladin continues its relentless pursuit of product acquisition opportunities.

Product Developments

During the second quarter, The Conseil du Medicament of Quebec, which provides drug insurance coverage for an estimated 3.2 million Quebec residents, has given its approval in June 2006 to list both Trelstar® and Trelstar® LA. In addition, subsequent to the quarter, The Common Drug Review (CDR), a directorate of the federal government charged with reviewing and making listing recommendations for new drugs to all Canadian public drug plans (except Quebec), recommended that both Trelstar® formulations be listed by provincial drug plans in a similar manner to other LHRH agonists.

Trelstar® and Trelstar® LA are injectable luteinizing hormone-releasing hormone (LHRH) agonists indicated for the palliative treatment of advanced prostate cancer and for the treatment of endometriosis have been approved for sale in Canada. According to IMS Canada, the Canadian market for LHRH agonists for prostate cancer and endometriosis was over $131 million in 2005. Trelstar® compliments our growing urology franchise which includes Oxytrol® for Overactive Bladder and Vantas® (Histrelin Hydrogel Implant), a unique, once-yearly LHRH agonist implant for the treatment of prostate cancer.

Financial Outlook

Paladin is revising upwards its previously announced revenue guidance for fiscal 2006 from $40 million to $41 million generated in revenues to $42 million to $43 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 performance 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 second quarter results on Thursday, August 3rd, 2006, at 10:00 a.m. EST. The dial-in number for the conference call is 416-644-3420 or 1-866-250-4892. 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 leading specialty pharmaceutical company focused on developing, 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 Paladin Web Site at www.paladinlabs.com.

This news release may contain forward-looking statements or predictions. These statements represent our judgment as of this date and are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed in such forward-looking statements. Potential risks and uncertainties include, without limitation, those associated with product development, clinical trials, future revenues and profitability, and obtaining marketing approval and other factors that are discussed in the Management Discussion published in the Company's annual reports and Annual Information Form and other filings found on SEDAR at www.sedar.com.



CONSOLIDATED BALANCE SHEETS

(In thousands of Canadian dollars)

June 30 December 31
2006 2005
$ $
--------------------------------------------------------------------
(unaudited)
ASSETS
Current
Cash and cash equivalents 4,789 2,835
Marketable securities 39,141 39,484
Accounts receivable 8,341 8,128
Inventory 3,747 3,178
Other current assets 789 865
Investment tax credits receivable 827 827
Future income tax assets 2,949 3,158
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Total current assets 60,583 58,475

Property, plant and equipment 102 96
Pharmaceutical product licenses and rights 9,395 9,135
Deferred charges 3,692 3,908
Investments 2,682 1,433
Future investment tax credits recoverable 153 153
Future income tax assets 3,848 4,479
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80,455 77,679
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 7,704 7,679
Accounts payable to related parties 892 1,044
Deferred revenue 426 903
Income taxes payable 135 408
Balance of license agreements payable 464 698
Balance of sale payable 227 227
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Total current liabilities 9,848 10,959
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Long-term
Balance of sale payable 482 470
Future income tax liabilities 321 -
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Total long-term liabilities 803 470
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Shareholders' equity
Capital stock 58,341 57,378
Other paid-in capital 1,160 933
Retained earnings 10,303 7,939
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Total shareholders' equity 69,804 66,250
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80,455 77,679
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CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

(In thousands of Canadian dollars
except for share and per share amounts)
(unaudited)

Three-month period ended Six-month period ended
June 30 June 30
2006 2005 2006 2005
---------------------------------------------------------------------
$ $ $ $

Revenues 11,241 7,808 21,373 14,236
Cost of sales 2,696 2,153 5,261 3,802
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Gross profit 8,545 5,655 16,112 10,434
---------------------------------------------------------------------
Selling and marketing 3,808 3,004 7,146 5,047
General and administrative 1,057 820 2,371 1,661
Research and development 476 282 788 613
Amortization of
intangible assets
and deferred charges 1,734 1,096 3,611 2,182
Interest income, net (366) (325) (600) (627)
Other Income - (110) (724) (110)
---------------------------------------------------------------------
Income before income taxes 1,836 888 3,520 1,668
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Provision for income taxes
Future 622 303 1,156 584
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622 303 1,156 584
---------------------------------------------------------------------
Net income 1,214 585 2,364 1,084
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---------------------------------------------------------------------

Earnings per share
Basic 0.08 0.04 0.16 0.07
Diluted 0.08 0.04 0.16 0.07
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---------------------------------------------------------------------

Weighted average number
of shares outstanding
Basic 14,891,946 14,846,483 14,830,676 14,852,728
Diluted 15,112,323 14,856,774 15,026,206 14,862,999
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian dollars)
(unaudited)

Three-month period Six-month period
ended ended
June 30 June 30
2006 2005 2006 2005
------------------------------------------------------------------
$ $ $ $
Operating activities

Net income 1,214 585 2,364 1,084
Add items not affecting cash
Amortization 1,750 1,111 3,644 2,212
Stock based
compensation expense 212 125 346 192
Future income taxes 620 302 1,166 567
Unrealized foreign
exchange (gain) loss (1) (1) (1) (18)
Stock dividends - - (724) -
------------------------------------------------------------------
3,795 2,122 6,795 4,037
------------------------------------------------------------------
Net change in non-cash
balances relating
to operations (939) (142) (1,602) 33
------------------------------------------------------------------
Cash flows from
operating activities 2,856 1,980 5,193 4,070
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Investing activities

Additions to
pharmaceutical product
licenses,
rights, and deferred
charges (202) (807) (3,654) (1,009)
Acquisition of property,
plant and equipment - (12) (39) (19)
Purchases of short-term
marketable securities (27,133) (18,722) (29,712) (19,918)
Maturities of short-term
marketable securities 20,076 21,112 30,055 24,384
Investment in
portfolio company - - (500) -
Purchases of long-term
marketable securities - (1,483) - (1,983)
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Cash flows (used in) from
investing activities (7,259) 88 (3,850) 1,455
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Financing activities

Common shares issued for cash 227 12 847 25
Accounts payable related
to the acquisition of
intellectual property and
deferred charges (234) (234) (234) (598)
Repurchase of shares - (482) - (482)
Repayment of share
purchase loan - 20 - 20
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Cash flows from (used in)
financing activities (7) (684) 613 (1,035)
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Effect of exchange rate
change on cash and
cash equivalents (2) 3 (2) (5)

Net change in cash and
cash equivalents
during the period (4,412) 1,387 1,954 4,485

Cash and cash equivalents,
beginning of period 9,201 4,605 2,835 1,507

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Cash and cash equivalents,
end of period 4,789 5,992 4,789 5,992
------------------------------------------------------------------
------------------------------------------------------------------
Cash and cash equivalents 4,789 5,992
Short-term marketable
securities 39,141 36,651
Long-term marketable
securities - 1,483
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43,930 44,126
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