Readers are referred to the cautionary notes regarding Forward-looking Information and non-GAAP Financial Measures at the end of this release
Listed TSX, Symbol: CNJ
Cangene Corporation today reports financial results for the fiscal year ended July 31, 2010.
The Company has invested significantly in its commercial business, adding a U.S. sales force, distribution capability and additional warehouse space during the year.
Revenues for the year were $158.9 million, compared with $238.8 million last year, a decrease of 33%. The decrease results primarily from the lower revenue from the contract-services segment as a result of reduced R&D activities and fewer deliveries on U.S. government stockpiling contracts. Revenue related to these contracts was $80.1 million in 2010, compared with $147.1 million in 2009. Commercial product revenues shifted throughout the year as a result of a number of strategic changes. The most significant of these changes was the Company’s decision to build its own U.S. sales force and distribution network, and to bring the commercialization rights of HepaGam B® and WinRho® SDF in-house, effective November 1, 2009 and June 1, 2010, respectively. Overall, sales of WinRho® SDF decreased by $7.8 million, or 19%, during the year, primarily due to an exit from certain international markets and due to the prior year including a US$3.0 million contractual milestone payment. HepaGam B® revenues rose by $3.1 million, or 36%, during the year. In addition, the conclusion of an earlier R&D agreement with the Apotex Group, the Company’s majority shareholder, during fiscal 2009 meant there were no R&D services revenues in the biopharmaceutical segment during the current year, compared with $5.3 million a year earlier.
Net income for the year was $8.4 million, or $0.12 per share, compared with $60.5 million, or $0.87 per share, a year earlier. Similar to revenues, the decrease in net income is primarily due to the lower deliveries on government contracts during the year. In addition, the gross margin was lower due to excess production capacity, plasma centre start-up costs, inventory provisions and a decline in the market value of non-specialty plasma inventory being collected for the development of the IGIV product disclosed earlier this year. While R&D expenses overall dropped by 40% to $29.5 million, the Company’s investment in independent R&D rose by 13% to $14.4 million, or 49% of the overall R&D expense. A significant portion of this spending related to the Company’s development of IGIV as it scales up to expected clinical development in 2011. Higher amortization costs in the current year also reflect investment in the Company’s future. Lastly, the 2009 fiscal year included an $11.7-million foreign-exchange gain and a $3.5-million gain from bargain purchase related to the acquisition of Twinstrand Therapeutics Inc., compared with a $3.1-million foreign-exchange loss and no similar bargain-purchase gain in the current year.
“Our financial performance in 2010 reflects our investment in change that adds a new dimension to our business as we have brought our U.S. sales and marketing in-house for the first time in our history. We have also invested in pipeline development, particularly with respect to IGIV, a widely used anti-infective product that we believe will be a good complement to our hospital-based commercial product line-up. Our solid cash and debt-free position allowed us these opportunities to invest in our future growth,” said Dr. John Langstaff, president and CEO of Cangene.
Cash provided by operating activities was $22.3 million in 2010, compared with $60.6 million in the prior year, while cash used in investing and financing activities, which primarily consists of capital expenditures and share repurchases, was $35.2 million in 2010 compared with $21.2 million last year. The increase in net non-cash working capital and other assets of $1.4 million reflects increases in inventories, primarily relating to the stockpiling contracts.
The Company had $41.8 million in cash at the year end, compared with $56.1 million last year. At July 31, 2010 and July 2009, Cangene had no long-term debt.
Readers are referred to the cautionary notes regarding Forward-looking Information and non-GAAP Financial Measures at the end of this release. Certain comparative figures in the following financial statements have been reclassified to conform to the current year’s presentation.
Conference Call
Cangene will host a conference call to discuss these financial results on October 28, 2010 at 11:00 a.m. Eastern time. To access the conference call by telephone, dial 647-427-7450 or 1-888-231-8191. The conference call will be archived for replay until Thursday, November 4, 2010, at midnight. To access the archived conference call, dial 416-849-0833 or 1-800-642-1687 and enter the reservation number 19603835 followed by the number sign.
A live audio webcast of the conference call will be available at http://www.cangene.com/ and http://www.newswire.ca/. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above web sites for 90 days.
Cangene Corporation
Incorporated under the laws of Ontario
CONSOLIDATED BALANCE SHEETS
| As at July 31 | ||||
| in thousands of Canadian dollars | 2010 | 2009 | ||
| ASSETS | ||||
| Current | ||||
| Cash | $ | 41,828 | $ | 56,131 |
| Accounts receivable | 18,908 | 34,547 | ||
| Inventories and contracts in progress | 93,691 | 92,430 | ||
| Income and other taxes recoverable | 10,846 | 6,281 | ||
| Future income taxes | 4,671 | 8,231 | ||
| Prepaid expenses and deposits | 3,196 | 2,830 | ||
| Total current assets | 173,140 | 200,450 | ||
| Property, plant and equipment, net | 106,776 | 96,347 | ||
| Income and other taxes recoverable | 5,600 | — | ||
| Future income taxes | 2,707 | — | ||
| Goodwill and intangible assets, net | 56,458 | 43,578 | ||
| Other assets | 4,619 | 5,460 | ||
| $ | 349,300 | $ | 345,835 | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||
| Current | ||||
| Accounts payable and accrued liabilities | $ | 25,926 | $ | 27,948 |
| Income and other taxes payable | 76 | 4,126 | ||
| Current portion of deferred income | 3,510 | 5,875 | ||
| Total current liabilities | 29,512 | 37,949 | ||
| Deferred income | 10,440 | 9,906 | ||
| Royalty liability | 6,292 | — | ||
| Incentive plan liabilities | 2,655 | 122 | ||
| Deferred share unit liability | 181 | — | ||
| Future income taxes | 3,612 | 5,522 | ||
| Total liabilities | 52,692 | 53,499 | ||
| Shareholders’ equity | ||||
| Share capital | 64,802 | 65,655 | ||
| Contributed surplus | 3,239 | 3,239 | ||
| Accumulated other comprehensive loss | (4,467) | (4,467) | ||
| Retained earnings | 233,034 | 227,909 | ||
| Total shareholders’ equity | 296,608 | 292,336 | ||
| $ | 349,300 | $ | 345,835 | |
Cangene Corporation
CONSOLIDATED STATEMENTS OF
INCOME, COMPREHENSIVE INCOME AND RETAINED EARNINGS
| Years ended July 31 | ||||
| in thousands of Canadian dollars except share-related data | 2010 | 2009 | ||
| Revenues | ||||
| Product sales and services | $ | 130,314 | $ | 177,790 |
| R&D services | 21,259 | 51,882 | ||
| Royalties | 7,289 | 9,079 | ||
| 158,862 | 238,751 | |||
| Cost of sales | ||||
| Product sales and services | 76,546 | 82,129 | ||
| R&D services | 15,116 | 36,697 | ||
| 91,662 | 118,826 | |||
| Gross profit | 67,200 | 119,925 | ||
| Expenses | ||||
| Independent R&D | 14,417 | 12,735 | ||
| Selling, general and administrative | 24,713 | 23,117 | ||
| Amortization | 14,978 | 12,979 | ||
| Short-term interest income | (48) | (41) | ||
| Foreign-exchange loss (gain) | 3,070 | (11,709) | ||
| Loss on disposal of assets | 260 | — | ||
| Gain from bargain purchase | — | (3,470) | ||
| 57,390 | 33,611 | |||
| Income before income taxes | 9,810 | 86,314 | ||
| Income tax expense (recovery) | ||||
| Current | 2,570 | 25,597 | ||
| Future | (1,156) | 205 | ||
| 1,414 | 25,802 | |||
| Net income and comprehensive income for the year | 8,396 | 60,512 | ||
| Retained earnings, beginning of year | 227,909 | 172,900 | ||
| Purchase of common shares in excess of average stated capital | (3,271) | (5,503) | ||
| Retained earnings, end of year | $ | 233,034 | $ | 227,909 |
| Earnings per share | ||||
| Basic and diluted | $ | 0.12 | $ | 0.87 |
Cangene Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Years ended July 31 | ||||
| in thousands of Canadian dollars | 2010 | 2009 | ||
| OPERATING ACTIVITIES | ||||
| Net income for the year | $ | 8,396 | $ | 60,512 |
| Add (deduct) items not involving cash: | ||||
| Amortization of property, plant and equipment | 12,467 | 11,474 | ||
| Amortization of intangible assets | 2,511 | 1,505 | ||
| Deferred income | (1,831) | 4,679 | ||
| Gain from bargain purchase | — | (3,470) | ||
| Incentive plan liabilities | 2,533 | 122 | ||
| Deferred share unit liability | 181 | — | ||
| Amortization of royalty liability | (966) | – | ||
| Future income tax expense (recovery) | (1,156) | 205 | ||
| Loss on disposal of assets | 260 | — | ||
| Unrealized foreign-exchange loss (gain) | 1,244 | (4,340) | ||
| 23,639 | 70,687 | |||
| Net change in non-cash working capital balances and other assets related to operations | (1,384) | (10,096) | ||
| Cash provided by operating activities | 22,255 | 60,591 | ||
| INVESTING ACTIVITIES | ||||
| Acquisition, net | — | (1,707) | ||
| Purchase of property, plant and equipment, net | (23,228) | (11,237) | ||
| Acquisition of intangible assets | (7,922) | (1,505) | ||
| Proceeds on disposition of assets | 72 | — | ||
| Cash used in investing activities | (31,078) | (14,449) | ||
| FINANCING ACTIVITIES | ||||
| Shares repurchased for cancellation | (4,124) | (6,796) | ||
| Cash used in financing activities | (4,124) | (6,796) | ||
| Effect of exchange rates on cash | (1,356) | 2,110 | ||
| Net increase (decrease) in cash during the year | (14,303) | 41,456 | ||
| Cash, beginning of year | 56,131 | 14,675 | ||
| Cash, end of year | $ | 41,828 | $ | 56,131 |
| Interest paid | $ | 1 | $ | 63 |
| Income taxes paid | $ | 9,341 | $ | 12,945 |
About Cangene Corporation
Cangene is one of Canada’s largest and earliest biopharmaceutical companies. It was founded in 1984 and is headquartered in Winnipeg, Manitoba. Cangene has approximately 800 employees in eight locations across North America and its products are sold worldwide. It operates manufacturing facilities in Winnipeg, Manitoba and Baltimore, Maryland where it produces its own products and undertakes contract manufacturing for a number of companies. Cangene operates three U.S. and one Canadian plasma-collection facilities branded as Cangene Plasma Resources (http://www.cangeneplasma.com/). In addition, it has a regulatory affairs, sales and corporate communications office in Toronto, Ontario. Cangene is focused on developing therapeutics for infectious diseases, and the Company uses patented manufacturing processes to produce plasma-derived and recombinant therapeutic proteins. Cangene has four FDA and/or Health Canada-approved hyperimmune products. In addition, the Company has several more products in development at various stages. Three of Cangene’s products have been accepted into the U.S. Strategic National Stockpile—botulism antitoxin (investigational product), anthrax immune globulin (investigational product) and vaccinia immune globulin, a product used to counteract certain complications that may arise from smallpox vaccination. Capitalizing on its drug manufacturing expertise, Cangene also operates a significant contract research and manufacturing business using the resources of Baltimore, Maryland-based Cangene bioPharma, Inc. (a wholly owned subsidiary; formerly Chesapeake Biological Laboratories, Inc.; http://www.cangenebiopharma.com/). Cangene’s website, http://www.cangene.com/, includes product and investor information, including past news releases.
Forward-looking and risk information
The reader should be aware that Cangene’s businesses are subject to risks and uncertainties that cannot be predicted or quantified; consequently, actual results may differ materially from past results and those expressed or implied by any forward-looking statements. Factors that could cause or contribute to such risks or uncertainties include, but are not limited to: the regulatory environment including the difficulty of predicting regulatory outcomes; changes in the value of the Canadian dollar; the Company’s reliance on a small number of customers including government organizations; the demand for new products and the impact of competitive products, service and pricing; availability and cost of raw materials, especially the cost, availability and antibody concentration in plasma; fluctuations in operating results; government policies or actions; progress and cost of clinical trials; reliance on key strategic relationships; costs and possible development delays resulting from use of legal, regulatory or legislative strategies by the Company’s competitors; uncertainty related to intellectual property protection and potential costs associated with its defence; the Company’s exposure to lawsuits; and other matters beyond control of management. Risks and uncertainties are discussed more extensively in the MD&A section of the Company’s most recent annual report and annual information form, which are available on the Company’s website or on SEDAR at www.sedar.com. The preceding cautionary statements should be considered in connection with all written or oral statements, especially forward-looking statements, that are made by the Company or by persons acting on its behalf and in conjunction with its periodic filings with Securities Commissions, including those contained in the Company’s news releases and most recently filed annual information form. Forward-looking statements can be identified by the use of words such as “expects”, “plans”, “will”, “believes”, “estimates”, “intends”, “may”, “bodes” and other words of similar meaning (including negative and grammatical variations). Should known or unknown risks or uncertainties materialize, or should management’s assumptions prove inaccurate, actual results could vary materially from those anticipated. The Company undertakes no obligation to publicly make or update any forward-looking statements, except as required by applicable law.
Cautionary Note Regarding Non-GAAP Financial Measures This news release may contain non-GAAP financial measures. Terms by which non-GAAP financial measures are identified include but are not limited to “net cash”, “total assets”, “sales” and other similar expressions. Non-GAAP financial measures are used to provide management and investors with additional measures of performance. However, non-GAAP financial measures do not have standard meanings prescribed by GAAP and are not directly comparable to similar measures used by other companies. Please refer to the appropriate reconciliations of these non-GAAP financial measures to measures prescribed by GAAP. “Cangene”, “HepaGam B”, “Twinstrand Therapeutics”, “WinRho” and “WinRho SDF” are trademarks belonging to Cangene Corporation. %SEDAR: 00002351E
For further information: Cangene Corporation, please contact Michael Graham at
(204) 275-4040 or by email at [email protected]
