Pediapharm Announces Annual Audited Financial Results

MONTREAL, QUEBEC--(Marketwired - July 28, 2014) -

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Pediapharm Inc. (the "Corporation") (TSX VENTURE:PDP) is pleased to announce the filing of its annual audited financial results ended March 31, 2014. As a result of the Corporation changing its financial year-end from December 31 to March 31, these are annual audited financial statements for a fifteen-month period. All dollar amounts are expressed in Canadian currency and results are reported in accordance with IFRS accounting principles.

Highlights for the period ended March 31, 2014:

• Total revenues for the fifteen-month period ended March 31, 2014 increased by 88% compared to the twelve-month period ended December 31, 2012. Using a twelve-month run rate for the period ended March 31, 2014, the increase in revenue is 50%;

• NYDA®, a breakthrough treatment for head lice and its eggs, was a major contributor to the revenue growth and is on track to reach over $2,000,000 in revenue in 2014;

• The Company has over $7,000,000 of cash and cash equivalents as of March 31, 2014;

• On December 27^th 2013, the common shares of Pediapharm began to trade on the TSX Venture Exchange under the ticker symbol PDP.V following an amalgamation transaction with Chelsea Acquisition Corporation. Concurrently, the Company successfully completed a round of financing with gross proceeds of approximately $7,000,000;

• On February 21, 2014, the Company completed a "bought deal" private placement of 5,555,556 common shares of the Company at a price of $0.36 per common shares for gross proceeds of $2,000,000;

• As a result of its on-going business development efforts, Pediapharm has a long list of potential product acquisitions and licensing agreements under due diligence review.

Recent Highlights:

On April 4, 2014, the Company announced the termination of its promotional sales agreements with Sanofi Canada ("Sanofi") for Suprax® and Allerject™, effective June 30, 2014. While this was disappointing news for the Company, Pediapharm knows this was not due to its own performance, as revenues for these products had experienced significant growth. In fact, the Company had tremendous success in more than doubling the revenues from Suprax® within 4 years.

Since then, the Company has entered into an exclusive supply and distribution agreement with Merz Pharma Canada, Ltd. regarding the Canadian rights to CUVPOSA™ (glycopyrrolate) oral solution intended for pediatric chronic severe drooling (sialorrhea) associated with neurologic conditions such as cerebral palsy. Pediapharm believes that CUVPOSA™ will be the first product to be officially approved in Canada to treat that disease and as such, the Company is hoping to be granted a Special Access Program and a priority review from Health Canada. There are approximately 6,000 patients that could potentially be treated by CUVPOSA™ and the company is confident to capture 20% of those.

Furthermore, the Company and Hoffmann-La Roche Limited ("Roche") have entered into an asset purchase agreement regarding the Canadian rights to Roche's naproxen suspension. Roche will retain the Naprosyn™ trademark and retains all product rights to the other oral dosage forms under this brand. This product in its suspension form is only available under prescription (Rx) and is indicated for the treatment of osteoarthritis, rheumatoid arthritis, ankylosing spondylitis, and juvenile rheumatoid arthritis. Due to the significant unmet medical need, it will be reintroduced to the market as Pediapharm naproxen suspension. On July 24, 2014, Pediapharm announced that a Special Access Program' (SAP) from Health Canada has been initiated for Naproxen suspension. This program allows physicians to prescribe the product to their patients when no commercially alternatives are available. This program has been initiated at the request of physicians mainly treating patients suffering of Juvenile Rheumatoid Arthritis (JRA). The product will be made available through Pediapharm and the SAP will be in place until the availability of Pediapharm Naproxen Suspension.

"We are seeing excellent sales momentum from our current product portfolio, such as NYDA® which is growing at a pace to reach $2,000,000 by year-end." stated Sylvain Chretien, President and Chief Executive Officer of Pediapharm. He added: "We have a strong cash position with over $7,000,000 as at March 31, 2014 and we are very active in assessing exclusive licence agreements and potential products acquisitions, as shown by the recent additions of CUVPOSA™ and Pediapharm naproxen suspension to our portfolio. We expect to add more license agreements and strive to acquire another Canadian product before the end of 2014." concluded the CEO.

Despite loss of agreement with Sanofi, the Company strives to achieve revenue growth in 2014. The Company's focus remains to execute its commercial plan with existing products, such as NYDA®, a revolutionary treatment indicated for eradication of head lice and its eggs. NYDA® is on track to reach over $2,000,000 in revenue in 2014 and has the potential to achieve peak revenues of $6,000,000 to $8,000,000 by 2017.

The future looks promising with four products presently under review with Health Canada or in the process of being filed for approval from Health Canada. The following represents a list of these products: Easyhaler®-budesonide, Pediapharm Naproxen suspension, Cesinex® and CUVPOSA™. The 2 most advanced files are Easyhaler®-budesonide and Pediapharm Naproxen suspension with an estimated product launch by March 2015. Easyhaler®-budesoninde will be competing in a market of $195 million and Pediapharm Naproxen suspension in a market of $76 million, including $8 million of the suspension form.

The Company's core strategy regarding business development remains to acquire exclusive licensing agreements (commonly known as "in-licensing"), as well as Canadian products, such as the aforementioned recent acquisition from Hoffmann-La Roche Limited. This strategy will put Pediapharm in a strong position to further sustain its future growth.

Review of operating results for the period ended March 31, 2014

For the three months ended March 31, 2014, revenues reached $677,969 compared with revenues of $821,413 in the three months ended March 31, 2013. While there was a very strong revenue growth from NYDA®, it was somewhat offset by a reduction of revenue from sales of Suprax®, as a result of the termination of the Company's promotional sales agreements with Sanofi Canada for Suprax® and Allerject™. The termination, effective June 30, 2014, had a negative impact of approximately $200,000 in the three months ended March 31, 2014, since the Company could not recognize revenue on the annual performance bonuses it was tracking towards, which it is no longer entitled.

For the fifteen months ended March 31, 2014, revenues reached $4,681,776 compared with revenues of $2,490,503 in the twelve months ended December 31, 2012, representing a 88% growth. Using a twelve-month run rate for the period ended March 31, 2014, the increase in revenue is 50%. The main reasons for the overall increase are important revenue growth from NYDA® throughout the fifteen-month period, as well as the solid performance of Allerject™ and Suprax® during the twelve-month period ended December 31, 2013.

The operating loss for the three months ended March 31, 2014 was $1,094,665 compared to the $210,220 in the three months ended March 31, 2013. The net loss for the three months ended March 31, 2014 was $1,566,442 compared to the $339,314 in the three months ended March 31, 2013. The expenses related to the amalgamation with Chelsea Acquisition Corporation as well as the expenses associated with the fact Pediapharm became listed on the TSX Venture Exchange were the main reasons for the difference in net loss.

The operating loss for the fifteen months ended March 31, 2014 was $1,534,829 compared to the $2,079,969 in the twelve months ended December 31, 2012. The improvement was mainly due to the increase in revenue of 88%. The net loss for the fifteen months ended March 31, 2014 was $4,079,633 compared to the $2,246,068 in the twelve months ended December 31, 2012. The expenses related to the amalgamation with Chelsea Acquisition Corporation were the main reasons for the difference in net loss.

	March 31, 2014 (3 months)		March 31, 2013 (3 months)		March 31, 2014 (15 months)		December 31, 2012 (12 months)
Revenue	677,969		821,413		4,681,776		2,490,503
Selling and administrative expenses	1,772,634		1,031,633		6,216,605		4,570,472
Operating loss	(1,094,665	)	(210,220	)	(1,534,829	)	(2,079,969	)
Other expenses	471,777		129,093		2,544,804		166,099
Net loss	(1,566,442	)	(339,314	)	(4,079,633	)	(2,246,068	)
Cash flow from (used in) operating activities	(426,833	)	(264,997	)	(2,010,333	)	(1,932,622	)
Cash flow from (used in) investing activities	154,977		(117,588	)	93,188		(78,372	)
Cash flow from (used in) financing activities	1,252,270		367,750		8,409,818		1,804,644

About Pediapharm Inc.

Pediapharm is the only Canadian specialty pharmaceutical company dedicated to serving the needs of the pediatric community. Its mission is to bring to the Canadian market the latest innovative pediatric products with the objective to improve the health and the well-being of children in Canada. Since its debut in 2008, Pediapharm has entered into numerous commercial agreements with partners from Canada and other countries around the world. The company's innovative product portfolio includes NYDA®; a breakthrough treatment for head lice; EpiCeram® a non-steroid emulsion for eczema; KoolEffect™ which reduces the symptoms of fever; and VapoLyptus™; a soothing vapour patch of Eucalyptus and Camphor.

FORWARD LOOKING STATEMENTS

This news release contains forward-looking statements and other statements that are not historical. Such forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that could cause actual results to vary materially from target results and the results or events predicted in these forward-looking statements. As a result, investors are cautioned not to place undue reliance on these forward-looking statements.

The forward-looking statements contained in this news release are made as of the date of this release. Except as required by applicable law, the Corporation disclaims any intention and assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking information reflects the current expectations or belief of the Corporation based on information currently available and such information is subject to a number of assumptions, risks and uncertainties described in details at pp. 35 to 41 of the Management Information Circular of Chelsea Acquisition Corporation dated November 12, 2013 available on SEDAR at www.sedar.com and other risks associated with being a specialty pharmaceutical company.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.