Pediapharm Announces First Quarter Financial Results: 30% Revenue Growth Compared to Previous Quarter

MONTREAL, QUEBEC--(Marketwired - Aug. 28, 2014) -

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Pediapharm Inc. (the "Company") (TSX VENTURE:PDP) is pleased to announce the filing of its first quarter unaudited financial results ended June 30, 2014. All dollar amounts are expressed in Canadian currency and results are reported in accordance with IFRS accounting principles.

Highlights for the three-month period ended June 30, 2014:

• Total revenues for the three-month period ended June 30, 2014 increased by 30% compared to the three-month period ended March 31, 2014. This supports management's view that, despite the previously announced termination of the Sanofi agreement, the Company is achieving substantial growth with its existing portfolio of products;
  
  
• NYDA®, a breakthrough treatment for head lice and its eggs, is a major contributor to the revenue growth and is on track to reach over $2,000,000 in revenue in the year ended March 31, 2015 ("fiscal 2015");
  
  
• The Company has over $5,750,000 of working capital as of June 30, 2014;
  
  
• As a result of its on-going business development efforts, Pediapharm has several potential product acquisitions and licensing agreements under due diligence review;
  
  
• The Easyhaler®-budesonide filing is currently under review by Health Canada after clearing the screening process in July 2014;
  
  
• On April 4, 2014, the Company 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 most likely 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.
  
  
• Termination of 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. Furthermore, Suprax® is expected to be in a shortage situation until September 2015, as can be seen on Health Canada's website named www.drugshortage.ca.

Recent highlights

On July 2, 2014, the Company entered into its first asset purchase agreement by acquiring the Canadian rights of naproxen suspension from Hoffman La Roche (Roche). 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, which is expected to be in the first quarter of 2015 (calendar year).

"As we are building a robust product pipeline to accelerate and secure our future growth, it is important at the same time to grow our business within our current marketed products such as NYDA and EpiCeram" stated Sylvain Chretien, President and Chief Executive Officer of Pediapharm. He added: "The latest quarterly results ended on June 30^th 2014 are very encouraging. Although the termination of the Sanofi agreement has a short-term impact, our long-term goal of reaching revenues of 35 to 40 million dollars by fiscal 2020 does not change. The current sales momentum of NYDA combined with the upcoming product launches of Pediapharm Naproxen Suspension, Easyhaler-budesonide, Cuvposa and possibly others, are key contributors in achieving that objective. We take a lot of pride to execute and we are confident to finish off the year strong at all levels" concluded the CEO.

Despite the termination of the agreement with Sanofi, the Company strives to achieve revenue growth in fiscal 2015. 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 fiscal 2015 and has the potential to achieve peak revenues of $6,000,000 to $8,000,000 by fiscal 2018.

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 products currently marketed in Canada, such as the aforementioned recent acquisition from Hoffmann-La Roche Limited. This strategy puts Pediapharm in a strong position to further sustain its future growth.

Review of operating results for the three-month period ended June 30, 2014

For the three months ended June 30, 2014, revenues reached $885,260 compared with revenues of $851,376 in the three months ended June 30, 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™, effective June 30, 2014.

For the three months ended June 30, 2014, selling and administrative expenses were $1,716,187 (2013 - $1,104,535). The Company has deployed additional efforts in selling & marketing as well as in business development to capitalize on the Company's existing portfolio as well as future products and/or license agreements. Furthermore, the Company has added key management personnel such as the Chief Financial Officer and the newly appointed Vice President, Marketing and Sales, in support of the expected revenue and profit growth. Expenses related to the listing on the TSX Venture Exchange also had an impact when comparing both periods.

The comprehensive loss for the three months ended June 30, 2014 was $812,707 compared to the $359,745 in the three months ended June 30, 2013. The additional efforts in marketing & sales as well as business development are the main reasons for the increased loss. Furthermore, expenses related to the listing on the TSX Venture Exchange also had an impact when comparing both periods.

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.