Paladin Labs Inc.

Paladin Labs Inc.

August 29, 2011 08:30 ET

Paladin's Premium Offer Remains the Best Choice for Afexa Shareholders

- 57% premium to recent share price

- Provides fair value, liquidity and certainty

MONTREAL, QUEBEC--(Marketwire - Aug. 29, 2011) - Paladin Labs Inc. ("Paladin" or the "Company") (TSX:PLB), a leading Canadian diversified specialty pharmaceutical company, today reminded shareholders of Afexa Life Sciences Inc. ("Afexa")(TSX:FXA) of the benefits of Paladin's offer to acquire any and all of Afexa's issued and outstanding shares for $0.55 per share (the "Offer").

"Our Offer provides immediate fair value, liquidity and certainty for Afexa shareholders. The Afexa Board's response in its Directors' Circular is largely based on management's expectations and assertions about the future performance of Afexa." said Mark Beaudet, interim President and Chief Executive Officer of Paladin. "When considering the Paladin Offer and the Afexa Board's recommendation, shareholders should examine Afexa's actual track record. Afexa has consistently failed to meet the targets that its management has provided to investors."

  • Afexa has promised to increase household penetration for its key product, COLD-FX®, which provides most of the company's revenues, according to Afexa's annual report. In fact, Afexa's 12 month revenues ending June 30, 2011 declined by $9.3 million or 18% from the same period a year earlier which was affected by the H1N1 flu outbreak. More significantly, Afexa's past 12 month revenues are also down 8% and 3% from the same periods two and three years ago which had more typical flu seasons.

  • Afexa has promised geographic expansion and has reported that it has been evaluating markets outside Canada since 2003. Other than a failed launch of COLD-FX® in the United States in 2006-2007, Afexa's only reported progress has been the sale of "small amounts" of COLD-FX® in Hong Kong.

  • Afexa's promised initiative to increase in-licensing has resulted in only one agreement in five years. By comparison, over the same period, Paladin has in-licensed 38 products, adding more than $150 million in cumulative revenues.

  • Afexa has promised, and continues to promise, the development of new products and has spent over $20 million dollars of shareholders' money on R&D since the mass market launch of COLD-FX® in 2003. While Afexa has added some new products since 2005, six years later these products do not contribute significantly to the company's revenues. Afexa promotes its platform to develop and launch future new products but, despite announcements of interim, pilot and early stage findings, products appear to be stagnating in the pipeline. This raises questions about when, or if, they will ever come to market as well as their actual commercial potential.

  • Afexa has said its strategic plan is designed to deliver to shareholders average annual revenue growth of more than 10% within the next five years. By contrast, in the last five years ending June 30, revenues increased by an average of just 1% per year.

  • Afexa's past 12 month results ending June 30, 2011 illustrate its challenges in bringing operating expenses in line with revenues. Operating expenses have grown to equal 71% of revenues. In the same period a year ago, operating expenses were 60% of revenues; three years ago they were 52%. Afexa recently reported that it had to use $2.7 million dollars of a $15 million dollar demand line of credit to fund its operations. Afexa's cost structure is simply far too large for a company of its size.

"COLD-FX® would be a good addition to Paladin's product portfolio but, as the primary engine of Afexa's revenue, it has stalled," said Mr. Beaudet. "Paladin believes it is offering full value for an established but mature core product and an unproductive pipeline of potential products. Based on Afexa's past performance and failure to deliver on objectives, shareholders should critically examine management's assertions that there will be a significant change in Afexa's fortunes in the future."

Through the Paladin Offer, Afexa shareholders can be opportunistic. The Offer gives Afexa shareholders choices: One is the opportunity to receive cash or shares in a better-performing company at a substantial premium and fair valuation. The other choice is to continue to hold an illiquid investment with declining value.

  • Paladin's Offer represents a 57% premium above Afexa's share price on July 14, the day before Paladin announced it was considering making an offer.

  • Paladin believes that its market purchases of shares inflated the average Afexa share price in the first half of the year and that its Offer is supporting Afexa's current share price. In the absence of the Offer, Paladin believes Afexa's share price would return to the pre-Offer range or continue to decline.

  • At the time Paladin announced it was considering an offer, Afexa's share price had fallen to $0.35, continuing a long-term trend that had seen the share price in a general decline for more than five years.

"A realistic appraisal of Afexa and its prospects reveals the actual value in the company. Our analysis shows that Paladin is offering Afexa shareholders a fair price for that value," Mr. Beaudet said.

About the Offer

The Paladin Offer is open until 8:00 p.m. Toronto time on September 15, 2011 and has minimal and customary conditions. The Offer has no minimum tender condition and is not subject to due diligence or financing conditions.

Full details of the Offer are available in the offer to purchase and take-over bid circular that has been sent to Afexa shareholders and filed on SEDAR. The Offer and related documents are available at and through Paladin's website, or at

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. Paladin's shares trade on the Toronto Stock Exchange under the symbol PLB. More information is available at

This press release may contain forward-looking statements and predictions. These forward-looking statements, including any statements as to Afexa's acquisition by Paladin, 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 fillings, annual report and Annual Information Form and other fillings found on SEDAR at The information in this announcement concerning Afexa and its assets and projects is based on publicly available information and has not been independently verified by Paladin.

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