Paladin Reports Sixteenth Consecutive Year of Record Revenues

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MONTREAL, CANADA--(Marketwire - Feb. 16, 2012) - Paladin Labs Inc. (TSX:PLB.TO - News), a leading Canadian specialty pharmaceutical company, today reported its financial results for the fourth quarter and year ended December 31, 2011. The Company has achieved its 16th consecutive year of record revenues and its 9th consecutive year of record EBITDA (1) . 

2011 Highlights

Financial

--  Revenues for 2011 totalled a record $141.5 million an increase of 11%
    over 2010 
--  EBITDA(1) for 2011 increased 20% to a record $67.6 million compared to
    $56.4 million in 2010 
--  Sales of promoted products: Tridural(R), Trelstar(R), Testim(R),
    Metadol(R), Plan B(R) and Abstral(R) grew 14% in 2011 compared to 2010 

 

Product Development

--  Obtained approval from Health Canada for and subsequently launched
    DigiFab(R) 
--  Acquired the Tempra(R) line of products in Canada 
--  Launched Seasonique(R), a next generation extended-cycle oral
    contraceptive for the prevention of pregnancy 
--  Out-licensed the exclusive right to develop and commercialize fomepizole
    to Takeda Pharmaceutical Company Limited (TSE: 4502)("Takeda") 
--  Acquired the exclusive Canadian rights to market and sell a controlled
    release hydrocodone product for the treatment of moderate to severe pain
    from an affiliate of Elan Corporation, plc. 
--  Filed a new drug submission for Oralair(TM) with Health Canada. 
--  Entered into an exclusive collaboration with Somaxon Pharmaceuticals,
    Inc. (NASDAQ:SOMX - News) to commercialize Silenor(R) 
--  Obtained approval from Health Canada and subsequently launched
    Abstral(R) 
--  Entered into a distribution agreement with Common Sense Limited for two
    diagnostic products: AL-SENSE OTC and VS-SENSE OTC for Canada, Latin
    America and Sub-Saharan Africa 
--  Entered into a licensing and distribution agreement with Immuron Limited
    (ASX:IMC.AX - News) for Travelan(R) for Canada, Latin America and Sub-Saharan
    Africa 

 

Corporate Development

--  Accelerated the purchase of Pharmaplan (pty) Ltd. ("Pharmaplan") shares
    leading to the acquisition of a total of 10% interest of Pharmaplan in
    2011 
--  Amended its existing agreements with Isotechnika Pharma Inc.
    ("IsoPharma") to transfer to IsoPharma certain ownership and rights and
    sold 12,500,000 common shares of IsoPharma to ILJIN Life Science Co.,
    Ltd ("ILJIN") 
--  Closed a bought deal agreement offering of 1,150,000 common shares,
    including 150,000 common shares issued pursuant to the exercise by the
    underwriters of their over-allotment option 
--  Received repayment of its secured debt facility from Prostrakan Group
    plc ("ProStrakan") and recorded an early termination gain of $8.4
    million in connection with the acquisition of ProStrakan by Kyowa Hakko
    Kirin Co., Ltd. ("KHK") 
--  Recorded a gain of $5.0 million in connection with its bid to acquire
    the outstanding shares of Afexa Life Sciences 
--  Acquired all of the issued and outstanding shares of Labopharm Inc.
    ("Labopharm") 

 

"This year was unprecedented in terms of the size and scope of our business development activity. With a growing commercial platform, a rich pipeline of products and over $239 million in cash to fund new licenses and acquisitions, Paladin remains well positioned to continue to grow, both domestically and internationally" said Mark Beaudet, Interim President and CEO of Paladin Labs.

Jonathan Goodman Update

On August 18, 2011, the Company announced that its President and CEO, Mr. Jonathan Ross Goodman, was involved in an accident and was hospitalized with serious injuries. As Mr. Goodman was unable to perform his duties as President and CEO, the Board of Directors of Paladin asked Mr. Mark Beaudet, Co-Founder, Director and Vice President Marketing and Sales of Paladin, to assume such duties on an interim basis. Mr. Goodman continues his recovery and rehabilitation program. As a result, Mr. Goodman will remain absent from the Company for an indeterminate period of time. The Company will provide further updates on Mr. Goodman's condition only when a change in circumstance warrants same.

Financial Results

For the quarter ended December 31, 2011, Paladin recorded revenues of $37.1 million compared to $32.4 million in the fourth quarter of 2010, a 15% year over year increase. Revenues increased $13.5 million or 11% to a record $141.5 million in 2011 from $128.0 million in 2010. The increase in revenues for the quarter and for the year ended December 31, 2011 is attributable to the sales growth of certain significant promoted products, including Tridural(R), Trelstar(R), Testim(R), Metadol(R) and Plan B(R), which combined increased by 10% for the quarter and 14% for the year. In addition, revenues increased as a result of incremental revenues from products acquired and/or launched, and corporate acquisitions since 2010, including the acquisition of Labopharm. 

EBITDA for the year ended December 31, 2011 increased 20% to a record $67.5 million compared to $56.4 million in 2010. EBITDA for the fourth quarter of 2011 decreased 10% to $13.9 million compared to EBITDA of $15.5 million in the fourth quarter 2010, primarily as a result of incremental research and development expenses due to license and submission fees for new products and overhead costs related to the integration of Labopharm, which is expected to be completed in the second quarter of 2012. 

Net income for the fourth quarter increased 14% to $15.8 million or $0.76 per fully diluted share compared to net income of 13.9 million or $0.71 per fully diluted share for the same period in 2010. Net income for the year ended December 31, 2011 increased $20.3 million or 68% to $50.2 million from $29.9 million.

Selling, general and administrative expense for 2011 increased to $32.1 million compared to $30.5 million in 2010 but decreased as a percentage of revenues to 23% for 2011 compared to 24% for 2010.. Selling, general and administrative expense for the fourth quarter of 2011 increased to $9.1 million compared to $7.3 million in the fourth quarter of 2010 and increased as a percentage of revenues to 24% from 22% for the quarter The increase in selling, general and administrative expenses for the year and the quarter ended December 31, 2011 is primarily the result of business development costs in relation to corporate development activities as well as overhead costs related to the integration of Labopharm and promotion expenses for newly launched products.

Amortization expense for the fourth quarter 2011 increased to $6.2 million from $5.4 million in the corresponding period a year ago. The increase in amortization for the period is primarily the result of amortization taken on newly acquired pharmaceutical product licenses and rights, including assets acquired as a result of the Labopharm acquisition, partially offset by certain pharmaceutical product licenses and rights having reached full amortization during the quarter. For 2011, amortization expense decreased to $22.0 million from $22.8 million in 2010. The decrease in amortization expense is the result of certain pharmaceutical product licenses and rights being fully amortized during the year partially offset by the amortization taken on newly acquired pharmaceutical product licenses and rights including assets acquired as a result of the Labopharm acquisition. 

As at December 31 2011, Paladin's cash, cash equivalents and investments in marketable securities totaled a record $239 million. From this strong cash position, Paladin continues to pursue acquisition opportunities. 

Product Developments

During the year Paladin launched three new products for the Canadian market. Paladin obtained regulatory approval and launched Abstral(R), a novel, rapidly-disintegrating, sublingual formulation of fentanyl, a well-established opioid used for the management of episodes of breakthrough pain experienced by cancer patients who are already receiving and tolerant to opioid analgesics for chronic pain. Also during 2011, Paladin launched Seasonique(R), a new approach in oral contraceptives and DigiFab(R) which is indicated for the treatment of patients with life-threatening or potentially life-threatening digoxin toxicity or overdose. 

The year was also marked by the acquisition of the Tempra(R) line of products in Canada from Bristol Myers Squibb. Paladin has been selling Tempra(R) in the Canadian market since February 2011.

Paladin also in-licensed two new prescription products which are not yet approved for sale in Canada: Elan's hydrocodone product, indicated for the treatment of moderate to severe pain; and, Silenor(R), which is indicated for the treatment of insomnia characterized by difficulty with sleep maintenance. Paladin holds the rights for Silenor(R) in Canada, South America and Africa and intends to submit for regulatory approval in the first half of 2012. In addition, Paladin in-licensed three over the counter products for Canada, Latin America and Sub-Saharan Africa: AL-SENSE and VS-SENSE OTC, novel diagnostic tests for the detection of detect amniotic fluid leakage during pregnancy and the detection of bacterial vaginosis or trichomonas infection respectively; and, Travelan(R) which is indicated for the prevention of Travellers' Diarrhea.

During 2011, Paladin entered into an out-licensing and distribution agreement under which Paladin granted Takeda an exclusive right to develop and commercialize fomepizole (marketed and distributed by Paladin under the trademark Antizol(R) in Canada and the United States) for the treatment of ethylene glycol and methanol poisonings in Japan.

In May 2011, Paladin submitted Oralair(TM) for regulatory approval. Oralair(TM) is a sublingual grass pollen immunotherapy tablet for the treatment of grass pollen rhinitis with or without conjunctivitis for patients uncontrolled with current symptomatic medications. Paladin expects to obtain regulatory approval in the second half of 2012. 

Corporate Developments

In January 2011, Paladin closed its agreement with ProStrakan Group plc whereby Paladin was granted an exclusive license to ProStrakan's products for certain emerging territories and acquired, by way of assignment, ProStrakan's existing secured debt facility of $77.2 million (GBP 50 million) with the addition of certain conversion rights. On May 17, 2011, Paladin received repayment of its secured debt facility including the receipt of a payment equivalent to the balance of interest payable for the first year together with a break free of $3 million (GBP 2 million) in connection with the acquisition of ProStrakan Group plc by Kyowa Hakko Kirin Co., Ltd. A total of $88.4 million representing $77.2 million to reimburse the original debt facility, $2.8 million in earned interest and $8.4 million related to the early termination of the agreement was received. 

Also in February, Paladin accelerated its investment in Pharmaplan by increasing its planned investment from 5%, as stipulated in the original agreement, to 10%. This increased Paladin's ownership from 34.99% to 44.99% effective March 1, 2011. Paladin remains confident in Pharmaplan's ability to grow and generate profits and ultimately, generate value for Paladin's shareholders.

On February 24, 2011, Paladin closed its bought deal offering of 1,150,000 common shares which includes 150,000 common shares issued pursuant to the exercise by the underwriters of their over-allotment option. The common shares were issued at a price of $35.00 per common share for total gross proceeds to Paladin of approximately $40.3 million. 

Also in August, 2011, the Company entered into a definitive agreement pursuant to which the Company would acquire all of the issued and outstanding common shares of Labopharm at a price of $0.2857 per share in cash, representing a 57.4% premium over the volume-weighted average price of Labopharm's shares of $0.1815 for the 30 trading days prior to the August 17, 2011 announcement. On October 7, 2011, following Labopharm shareholder and court approval, Paladin completed the acquisition of Labopharm.

Paladin received regulatory approval from the Toronto Stock Exchange to carry out a normal course issuer bid to purchase up to 935,367 of its common shares effective May 30, 2011. To date Paladin has purchased 16,704 shares under this normal course issuer bid.

Financial Outlook

For fiscal 2012, Paladin expects to generate at least $140 million in revenue. This forecast excludes the impact of acquisitions and of product launches resulting from new regulatory approvals that may be made by the Company between now and the end of 2012.

(1) EBITDA - Non-IFRS Financial Measures

The term EBITDA (earnings before interest, taxes, depreciation and amortization) does not have any standardized meaning under International Financial Reporting Standards ("IFRS") and therefore may not be comparable to similar measures presented by other companies. The Company defines EBITDA as earnings before interest expense, other finance (income) expense, taxes, amortization, foreign exchange gains (losses), share of net income in an associate and unusual items; such as write-downs and gains (losses) on intellectual property and investments. EBITDA is calculated and presented consistently from period to period and agrees, on a consolidated basis, with the amount disclosed as "Earnings before under-noted items" on the consolidated statements of income. The Company believes EBITDA to be an important measurement that allows it to assess the operating performance of its ongoing business on a consistent basis without the impact of amortization expenses. The Company excludes amortization expenses because their level depends substantially on non-operating factors such as the historical cost of intangible assets. The Company's method for calculating EBITDA may differ from that used by other issuers and, accordingly, this measure may not be comparable to EBITDA used by other issuers.

Conference Call Notice

Paladin will host a conference call to discuss its fourth quarter results today at 10:00 a.m. EST. The dial-in number for the conference call is 1-800-704-8781 or 416-352-0528. 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 specialty pharmaceutical company focused on acquiring or in-licensing innovative pharmaceutical products for the Canadian and select international markets. With this strategy, a focused Canadian national sales team and proven marketing expertise, Paladin has evolved into one of Canada's leading specialty pharmaceutical companies. For more information, please visit the Company's web site at www.paladinlabs.com.

This press release may contain forward-looking statements and predictions. 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 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 filings, annual report and Annual Information Form and other fillings found on SEDAR at www.sedar.com.

CONSOLIDATED BALANCE SHEETS

(In thousands of Canadian dollars)                                          
                                       December 31, 2011   December 31, 2010
ASSETS                                       (unaudited)       (restated(1))
Current                                                                     
Cash and cash equivalents                         72,115              96,295
Marketable securities                            166,894              43,094
Trade and other receivables                       20,208              21,912
Inventories                                       13,327              13,877
Investment tax credits recoverable                     -                   -
Income tax receivable                                718                  17
Other current assets                               1,476               4,717
----------------------------------------------------------------------------
Total current assets                             274,738             179,912
                                                                            
Investment in an associate                        20,850              15,739
Financial assets                                   9,311              22,835
Investment tax credits recoverable                24,674              14,736
Deferred income tax assets                        40,613              26,586
Property, plant and equipment                        162                 221
Pharmaceutical product licenses and                                         
 rights                                           27,565              20,594
----------------------------------------------------------------------------
Total assets                                     397,913             280,623
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
LIABILITIES AND SHAREHOLDERS' EQUITY                                        
Current                                                                     
Payables, accruals and provisions                 38,849              36,901
Finance lease liability                              984                   -
Deferred revenue                                   2,999               1,939
Income tax payable                                22,205              11,254
Balances of sale payable                           1,809               1,145
----------------------------------------------------------------------------
Total current liabilities                         66,846              51,239
                                                                            
Finance lease liability                            5,745                   -
Deferred revenue                                   2,099                   -
Balances of sale payable                             497                 539
----------------------------------------------------------------------------
Total liabilities                                 75,187              51,778
----------------------------------------------------------------------------
                                                                            
Shareholders' equity                                                        
Share capital                                    166,681             123,136
Other paid-in capital                              5,144               4,892
Other capital reserves                               553                 175
Retained earnings                                150,348             100,642
----------------------------------------------------------------------------
Total shareholders' equity                       322,726             228,845
----------------------------------------------------------------------------
Total liabilities and shareholders'                                         
 equity                                          397,913             280,623
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1)  Effective January 1, 2010, Paladin transitioned to IFRS. As a result  
     the comparative statements have been restated in accordance with      
     International Financial Reporting Standards                           

 

CONSOLIDATED STATEMENT OF INCOME

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

                      Three-month periods ended  Twelve-month periods ended 
                                    December 31                 December 31 
                             2011          2011          2011          2010 
----------------------------------------------------------------------------
                      (unaudited) (restated(1))   (unaudited) (restated(1)) 
Revenues                   37,083        32,434       141,466       127,989 
Cost of sales              11,543         8,381        39,294        34,127 
----------------------------------------------------------------------------
Gross income               25,540        24,053       102,172        93,862 
----------------------------------------------------------------------------
                                                                            
Expenses (income)                                                           
Selling, general and                                                        
 administrative             9,067         7,294        32,119        30,525 
Research and                                                                
 development                3,628         2,224         9,773         9,118 
Interest income            (1,071)         (916)       (7,278)       (2,222)
----------------------------------------------------------------------------
Earnings before under-                                                      
 noted items               13,916        15,451        67,558        56,441 
----------------------------------------------------------------------------
                                                                            
Amortization of                                                             
 pharmaceutical                                                             
 product licenses and                                                       
 rights                     6,168         5,357        22,028        22,844 
Other finance income          (70)       (6,360)       (8,687)       (6,496)
Other income                    -          (499)          (97)         (540)
Foreign exchange loss         285           174            80            59 
Share of net income of                                                      
 an associate                (660)          (43)       (1,756)         (800)
----------------------------------------------------------------------------
Income before income                                                        
 tax and under-noted                                                        
 items                      8,193        16,822        55,990        41,374 
----------------------------------------------------------------------------
Net purchase gain on                                                        
 business combination      (8,275)            -        (8,275)            - 
----------------------------------------------------------------------------
Income before income                                                        
 tax                       16,468        16,822        64,265        41,374 
Provision for income                                                        
 taxes                        696         2,930        14,114        11,518 
----------------------------------------------------------------------------
Net income for the                                                          
 year                      15,772        13,892        50,151        29,856 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
Attributable to                                                             
 shareholders                                                               
                                                                            
Basic earnings per                                                          
 share                       0.78          0.74          2.51          1.60 
Diluted earnings per                                                        
 share                       0.76          0.71          2.43          1.54 
                                                                            
Weighted average                                                            
 number of shares                                                           
 outstanding                                                                
                                                                            
Basic                  20,232,947    18,790,704    19,970,658    18,700,808 
Diluted                20,849,408    19,509,230    20,659,276    19,362,892 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                            
 (In thousands of    Three-month periods ended   Twelve-month periods ended 
 Canadian dollars)                 December 31,                December 31, 
                             2011          2010          2011          2010 
----------------------------------------------------------------------------
                      (unaudited) (restated(1))   (unaudited) (restated(1)) 
Operating activities                                                        
Net income for the                                                          
 year                      15,772        13,892        50,151        29,856 
Adjustments                                                                 
 reconciling net                                                            
 income to operating                                                        
 cash flows                                                                 
  Amortization of                                                           
   pharmaceutical                                                           
   product licenses                                                         
   and rights               6,168         5,357        22,028        22,844 
  Deferred tax             (1,144)        2,619         2,577         6,585 
  Share-based                                                               
   compensation                                                             
   expense                    438           373         1,946         1,715 
  Other finance                                                             
   income                     (69)       (6,360)       (8,687)       (6,496)
  Unrealized foreign                                                        
   exchange (gain)                                                          
   loss                       825           274            (7)          135 
  Depreciation of                                                           
   property, plant                                                          
   and equipment               22            79           187           563 
  Share of net                                                              
   income of an                                                             
   associate                 (660)          (43)       (1,756)         (800)
  Net purchase gain                                                         
   on business                                                              
   combination            (13,124)            -       (13,124)            - 
----------------------------------------------------------------------------
                            8,228        16,191        53,315        54,402 
----------------------------------------------------------------------------
Net change in non-                                                          
 cash balances                                                              
 relating to                                                                
 operations                 3,913         5,157        14,798        13,838 
----------------------------------------------------------------------------
Cash inflow from                                                            
 operating                                                                  
 activities                12,141        21,348        68,113        68,240 
----------------------------------------------------------------------------
                                                                            
Investing activities                                                        
Purchase of                                                                 
 financial assets          (1,000)       (7,690)      (89,873)      (17,003)
Purchases of                                                                
 marketable                                                                 
 securities               (50,561)       (6,108)     (201,618)     (133,670)
Purchase of                                                                 
 pharmaceutical                                                             
 product licenses                                                           
 and rights                     -             -        (7,617)            - 
Investment in an                                                            
 associate                      -        (2,879)       (2,936)      (18,861)
Acquisition of                                                              
 subsidiary, net of                                                         
 cash acquired             (1,109)            -        (1,109)            - 
Repayment of                                                                
 balances of sale                                                           
 payable                        -             -          (250)       (1,650)
Purchase of                                                                 
 property, plant and                                                        
 equipment                     (9)          (26)          (78)          (93)
Proceeds from                                                               
 disposal of                                                                
 financial assets          13,109           364       102,119           391 
Disposal and                                                                
 maturities of                                                              
 marketable                                                                 
 securities                27,020        73,593        78,373       164,698 
Dividends from an                                                           
 associate                  1,980           792         2,871           792 
----------------------------------------------------------------------------
Net cash outflow                                                            
 from investing                                                             
 activities               (10,570)       58,046      (120,118)       (5,396)
----------------------------------------------------------------------------
                                                                            
Financing activities                                                        
Common shares issued                                                        
 for cash                     880           236        41,918         2,259 
Repayment of debt         (13,241)            -       (13,241)            - 
Repurchase of shares         (259)            -          (580)            - 
Repayment of                                                                
 obligation under                                                           
 finance lease               (167)            -          (167)            - 
----------------------------------------------------------------------------
Net cash inflow from                                                        
 financing                                                                  
 activities               (12,787)          236        27,930         2,259 
----------------------------------------------------------------------------
                                                                            
Foreign exchange                                                            
 loss on cash and                                                           
 cash equivalents                           (75)         (105)          (35)
                                                                            
(Decrease) increase                                                         
 in cash and cash                                                           
 equivalents during                                                         
 the period               (11,216)       79,555       (24,180)       65,068 
Cash and cash                                                               
 equivalents,                                                               
 beginning of period       83,331        16,740        96,295        31,227 
----------------------------------------------------------------------------
Cash and cash                                                               
 equivalents, end of                                                        
 period                    72,115        96,295        72,115        96,295 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Cash and cash                                                               
 equivalents               72,115        96,295        72,115        96,295 
Marketable                                                                  
 securities               166,894        43,094       166,894        43,094 
----------------------------------------------------------------------------
                          239,009       139,389       239,009       139,389 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 

Contacts

Chief Financial Officer
Samira Sakhia
Paladin Labs Inc.
Tel: 514-669-5367
514-344-4675 (FAX)
Email: info@paladinlabs.com
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