Paladin Reports Sixteenth Consecutive Year of Record Revenues

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
Website: www.paladinlabs.com