Paladin Labs Inc. (TSX:PLB), a leading specialty pharmaceutical
company, today reported its financial results for the quarter ended
September 30, 2012.
2012 Third Quarter Highlights
Financial
-- Adjusted(2) revenues reached a record $50.7 million, an increase of 38%
over the same period last year
-- Adjusted(2) EBITDA(1) was a record $20.9 million, a 16% increase over
the same period last year
Corporate Development
-- Announced closing of the 44.5% acquisition of Litha Healthcare Group
("Litha" - JSE:LHG) effective July 2, 2012
Subsequent to the Quarter
-- Entered into a licensing agreement with QRx Pharma Limited ("QRx" -
ASX:QRX and OTCQX:QRXPY) for the exclusive rights to market and sell
MoxDuo® in Canada
-- Entered into a licensing and distribution agreement with Dynamiclear
Australia, an Australian-based natural healthcare company, under which
Paladin received the exclusive rights to market and sell Dynamiclear
Rapid(TM) in Canada
"In Q3 we expanded our pipeline and reported our best results to
date, driven by record EBITDA in our Canadian business and the
addition of incremental sales and EBITDA from our acquisition of
Litha," said Mark Beaudet, interim President and CEO of Paladin
Labs. "Looking forward, we look to build from this position by
driving increased results in both the domestic and international
segments of our business."
Financial Results
Adjusted(2) revenues increased $14.0 million or 38% to $50.7
million for the third quarter of 2012 from $36.7 million for the
same period in 2011. The increase is mostly attributable to the
proportionate consolidation of Litha's revenues of $13.0 million.
In addition, revenues further increased as a result of incremental
revenues from products acquired and/or launched by Paladin
including corporate acquisitions since 2011, which contributed $2.7
million to the quarter ended September 30, 2012. The growth in the
Canadian business was negatively impacted by the supply issues
related to Twinject® and certain other products.
Consolidated revenues for the third quarter were $66.9 million,
an increase of 82% over the same period last year. The increase is
mostly attributable to the consolidation of Litha's revenues of
$29.2 million.
Third quarter 2012 adjusted(2) EBITDA(1) increased 16% or $2.8
million to $20.9 million, compared to EBITDA(1) of $18.1 million in
the third quarter of 2011. This increase is primarily due to the
acquisition of Litha, which contributed $1.5 million to adjusted
EBITDA(1). The increase in adjusted adjusted(2) EBITDA(1) for
Paladin was driven by the strong sales performance of our promoted
products, partially offset by increased costs associated with the
launch of new products, including Oralair®. Litha's adjusted(2)
EBITDA(1) includes certain integration and acquisition costs
related to Pharmaplan as well as the impact of the decline in the
South African Rand. In addition, Litha's adjusted(2) EBITDA(1) was
negatively impacted by fair value adjustments on acquisition by
Paladin.
Consolidated EBITDA(1) was $22.7 million, an increase of 25%
over the consolidated EBITDA(1) for the quarter ended September 30,
2011. This increase is primarily due to the consolidation of Litha,
which contributed $3.3 million in consolidated EBITDA(1) for the
quarter.
Net income attributable to shareholders for the quarter was
$24.9 million or $1.19 per fully diluted share, compared to net
income attributable to shareholders of $9.5 million or $0.46 per
fully diluted share in the same quarter a year ago.
As at September 30, 2012, Paladin's cash, cash equivalents and
investments in marketable securities totaled $231.2 million. From
this strong cash position, Paladin continues to pursue acquisition
opportunities.
Corporate Developments
Effective July 2 2012, Paladin completed its most significant
strategic investment to date through its investment in Litha, a
JSE-listed, diversified healthcare company located in South Africa.
Under the terms of the agreement, Paladin acquired the 55.01% of
Pharmaplan which it did not previously own and sold 100% of the
share capital of Pharmaplan to Litha in exchange for cash of and
the issuance of 169,090,909 shares in Litha at ZAR2.75 per share.
Paladin also acquired an additional 73,083,214 shares of Litha from
third parties at ZAR2.75 per share. Paladin deployed $47.5 million
in cash and issued 88,948 shares at $44.97 per share. As a result
Paladin owns 44.5% of the outstanding shares of Litha and, through
various shareholder agreements, effectively controls 58% of the
outstanding shares of Litha.
This move into South Africa provides a stronger, more
diversified platform from which Paladin is able to commercialize
its South African and sub-Saharan portfolio of 10 products.
Subsequent to the quarter
Subsequent to the quarter, Paladin took steps to enrich both its
over-the-counter and pain portfolios through two separate
agreements.
In early October, Paladin entered into a licensing agreement
with QRxPharma Limited, an Australian-based specialty
pharmaceutical company, whereby Paladin received the exclusive
rights to market and sell MoxDuo in Canada. MoxDuo is a novel,
patented, immediate release, fixed dose formulation of morphine and
oxycodone for the treatment of acute pain.
On October 18, 2012, Paladin entered into a licensing and
distribution agreement with Dynamiclear Australia, an
Australian-based natural healthcare company, under which Paladin
received the exclusive rights to market and sell Dynamiclear Rapid
in Canada. Dynamiclear Rapid is a novel, OTC product for the
symptomatic treatment of cold sores. In addition, Paladin received
an option to acquire the same territorial rights to Dynamiclear's
antiviral formulation for Herpes Simplex Virus-2 infections which
is currently under development.
(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 expense (income), taxes, depreciation and
amortization, foreign exchange gains (losses), share of net income
(loss) in associate and joint venture 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.
(2) Adjusted
The term "adjusted" refers to the proportional consolidation of
Litha's results for the period beginning July 2, 2012. Given that
Litha is being accounted for on a consolidated basis, the
consolidated results include amounts attributable to minority
shareholders. Consequently, adjusted results have been provided to
highlight Paladin's interest in Litha's results.
Conference Call Notice
Paladin will host a conference call to discuss its third quarter
results today at 10:00 a.m. EST. The dial-in number for the
conference call is 1-800-736-4594 or 416-981-9000. 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, 2011. 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.
INTERIM CONSOLIDATED BALANCE SHEETS
(In thousands of Canadian dollars)
As at September 30, 2012 December 31, 2011
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ASSETS
Current
Cash and cash equivalents 87,304 72,115
Marketable securities 147,095 166,894
Trade and other receivables 40,605 20,208
Inventories 34,259 13,327
Income tax receivable 5,345 718
Other current assets 2,607 1,476
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Total current assets 317,215 274,738
Restricted cash 3,281 -
Investment in associates 613 20,850
Interest in a joint venture 30,792 -
Loans to a joint venture 11,484 -
Financial assets 10,715 9,311
Investment tax credits recoverable 24,840 24,674
Deferred income tax assets 29,595 40,613
Property, plant and equipment 2,704 162
Intangible assets 117,205 27,565
Goodwill 36,345 -
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Total assets 584,789 397,913
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LIABILITIES AND EQUITY
Current
Bank overdraft 6,486 -
Payables, accruals and provisions 46,327 38,849
Finance lease liability - 984
Deferred revenue 2,008 2,999
Income tax payable 25,598 22,205
Loans and other balances payable 558 1,809
Short-term portion of the long-term
liabilities 7,355 -
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Total current liabilities 88,332 66,846
Finance lease liability - 5,745
Deferred revenue 1,645 2,099
Deferred tax liability 25,654 -
Loans and other balances payable 1,119 497
Long-term liabilities 28,205 -
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Total liabilities 144,955 75,187
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Equity
Share capital 172,126 166,681
Other paid-in capital 6,516 5,144
Other capital reserves (3,468) 553
Retained earnings 195,693 150,348
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Attributable to equity holders of the
Company 370,867 322,726
Non-controlling interests 68,967 -
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Total equity 439,834 322,726
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Total liabilities and equity 584,789 397,913
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INTERIM CONSOLIDATED INCOME STATEMENTS
(In thousands of Canadian dollars except for share and per share amounts)
Three months ended Nine months ended
September 30 September 30
Notes 2012 2011 2012 2011
----------------------------------------------------------------------------
Revenues 8 66,899 36,660 142,592 104,383
Cost of sales 27,253 10,249 48,422 27,751
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Gross profit 39,646 26,411 94,170 76,632
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Expenses (income)
Selling, general and
administrative 8 16,817 7,809 33,505 22,934
Research and
development 1,554 1,849 5,981 6,145
Interest income (1,448) (1,361) (3,337) (6,207)
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Earnings before
under-noted items 22,723 18,114 58,021 53,760
----------------------------------------------------------------------------
Amortization of
intangible assets 4,761 4,959 10,568 15,860
Depreciation of
property, plant and
equipment 206 15 257 117
Other finance
(income) expense (45) (56) 850 (8,617)
Other income (2,189) (97) (3,106) (97)
Foreign exchange
loss (gain) 84 251 122 (204)
Interest expense 941 - 956 -
Share of net loss
from a joint
venture 5 771 - 771 -
Share of net income
from associates 4 (31) (331) (980) (1,096)
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Income before income
tax and under-noted
items 18,225 13,373 48,583 47,797
----------------------------------------------------------------------------
Gain on revaluation
of equity
investment 12,294 - 12,294 -
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Income before income
tax 30,519 13,373 60,877 47,797
Provision for income
taxes 5,784 3,877 13,942 13,418
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Net income for the
period 24,735 9,496 46,935 34,379
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Attributable to:
Equity holders of
the Company 24,938 9,496 47,138 34,379
Non-controlling
interests (203) - (203) -
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Attributable to
shareholders
Basic earnings per
share 1.22 0.47 2.32 1.73
Diluted earnings per
share 1.19 0.46 2.25 1.67
Weighted average
number of shares
outstanding
Basic 20,390,981 20,204,105 20,329,409 19,882,261
Diluted 21,001,756 20,864,049 20,940,233 20,595,223
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INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian dollars)
Three months ended Nine months ended
September 30 September 30
2012 2011 2012 2011
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Operating activities
Net income for the
period 24,735 9,496 46,935 34,379
Adjustments reconciling
net income to operating
cash flows
Amortization of
intangible assets 4,761 4,959 10,568 15,860
Deferred tax 4,316 (201) 11,617 3,721
Share-based
compensation expense 923 385 2,250 1,508
Other finance (income)
loss (50) (57) 846 (8,618)
Unrealized foreign
exchange (gain) loss (201) 182 (324) (832)
Gain on revaluation of
equity investment (12,294) - (12,294) -
Other income (2,118) - (2,835) -
Depreciation of
property, plant and
equipment 211 36 266 165
Changes in working
capital and other
non-cash balances (1,459) 10,296 (10,733) 10,885
Share of net income
from an associate (31) (331) (980) (1,096)
Share of net loss from
a joint venture 771 - 771 -
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Cash inflow from
operating activities 19,564 24,765 46,087 55,972
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Investing activities
Disposals and maturities
of marketable
securities 24,938 35,259 140,101 51,353
Dividends from an
associate 1,502 640 3,139 891
Proceeds from disposal
of financial assets 36 - 835 89,010
Proceeds from disposal
of intangible assets - - 717 -
Proceeds from disposal
of property, plant and
equipment 40 - 40 -
Acquisition of
subsidiaries, net of
cash acquired (42,356) - (42,356) -
Purchases of marketable
securities (43,924) (15,000) (120,979) (151,057)
Purchases of financial
assets - (2,937) (4,000) (88,873)
Payment of loans and
other balances payable - - (995) (250)
Purchases of property,
plant and equipment (404) (4) (527) (69)
Additions to intangible
assets (82) - (107) (7,617)
Investment in an
associate - - - (2,936)
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Net cash (outflow)
inflow from investing
activities (60,250) 17,958 (24,132) (109,548)
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Financing activities
Common shares issued for
cash, net of issuance
costs of $nil for the
three-month and nine-
month period (2011:
$nil and $1,643,
respectively) 181 177 1,351 41,038
Increase in loans and
other balances payable 700 - 700 -
Increase in bank
overdraft 719 - 719 -
Repurchase of shares - (321) (2,278) (321)
Extinguishment of
finance lease (3,366) - (3,366) -
Repayment of long-term
liabilities (536) - (536) -
Payment of obligation
under finance lease - - (500) -
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Net cash (outflow)
inflow from financing
activities (2,302) (144) (3,910) 40,717
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Foreign exchange rate
gain (loss) on cash and
cash equivalents 491 53 425 (105)
Increase (decrease) in
cash, cash equivalents
and restricted cash
during the period (42,497) 42,632 18,470 (12,964)
Cash and cash
equivalents, beginning
of period 133,082 40,699 72,115 96,295
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Cash, cash equivalents
and restricted cash,
end of period 90,585 83,331 90,585 83,331
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Paladin cash and cash
equivalents 81,671 83,331
Paladin restricted cash 3,281 -
Paladin marketable
securities 147,095 143,369
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Paladin cash, cash
equivalents, restricted
cash and marketable
securities 232,047 226,700
Litha cash and cash
equivalents 5,634 -
Litha bank overdraft (6,486) -
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Litha cash, cash
equivalents and bank
overdraft (853)
----------------------------------------------------------------------------
231,194 226,700
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Reconciliation of the adjusted consolidated results from operations
Three months Adjusted
ended Consolidated consolidated
September results from results from
30, 2012 Paladin Litha 100% operations Litha 44.54% operations
$ $ $ $ $
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Revenues 37,671 29,228 66,899 13,018 50,689
Cost of sales 10,920 16,333 27,253 7,275 18,195
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Gross Income 26,751 12,895 39,646 5,743 32,494
Operating
expenses 7,361 9,562 16,923 4,259 11,620
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EBITDA(1) 19,390 3,333 22,723 1,485 20,875
Net income
before
income taxes 30,379 140 30,519 62 30,441
Net Income
(loss) 24,892 -157 24,735 -70 24,822
Net Income
attributable
to
shareholders 24,892 46 24,938 46 24,938
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Nine months Adjusted
ended Consolidated consolidated
September results from results from
30, 2012 Paladin Litha 100% operations Litha 44.54% operations
$ $ $ $ $
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Revenues 113,364 29,228 142,592 13,018 126,382
Cost of sales 32,089 16,333 48,422 7,275 39,364
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Gross Income 81,275 12,895 94,170 5,743 87,018
Operating
expenses 26,587 9,562 36,149 4,259 30,846
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EBITDA(1) 54,688 3,333 58,021 1,485 56,173
Net income
before
income taxes 60,737 140 60,877 62 60,799
Net Income
(loss) 47,092 -157 46,935 -70 47,022
Net Income
attributable
to
shareholders 47,092 46 47,138 46 47,138
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Contacts: Samira Sakhia Chief Financial Officer Paladin Labs
Inc. Tel: 514-669-5367 514-344-4675 (FAX) Email:
info@paladinlabs.com Website: www.paladinlabs.com