Paladin Reports Record Third Quarter 2012 Results

Marketwired

MONTREAL, CANADA--(Marketwire - Nov 13, 2012) - Paladin Labs Inc. (PLB.TO), 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™ 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
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
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   -
Total assets 584,789   397,913
       
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   -
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   -
Total liabilities 144,955   75,187
       
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
Attributable to equity holders of the Company 370,867   322,726
Non-controlling interests 68,967   -
Total equity 439,834   322,726
Total liabilities and equity 584,789   397,913
       
       
       
INTERIM CONSOLIDATED INCOME STATEMENTS
 
(In thousands of Canadian dollars except for share and per share amounts)
 
  Three months ended September 30 Nine months ended September 30 
 Notes2012 2011 2012 2011 
Revenues866,899 36,660 142,592 104,383 
Cost of sales 27,253 10,249 48,422 27,751 
Gross profit 39,646 26,411 94,170 76,632 
Expenses (income)         
Selling, general and administrative816,817 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)
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 venture5771 - 771 - 
Share of net income from associates4(31)(331)(980)(1,096)
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 - 
Income before income tax 30,519 13,373 60,877 47,797 
Provision for income taxes 5,784 3,877 13,942 13,418 
Net income for the period 24,735 9,496 46,935 34,379 
Attributable to:         
Equity holders of the Company 24,938 9,496 47,138 34,379 
Non-controlling interests (203)- (203)- 
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 
          
          
          
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(In thousands of Canadian dollars)
         
  Three months ended September 30   Nine months ended September 30  
  2012   2011   2012   2011  
                 
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   -  
Cash inflow from operating activities 19,564   24,765   46,087   55,972  
                 
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 )
Net cash (outflow) inflow from investing activities (60,250 ) 17,958   (24,132 ) (109,548 )
                 
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 ) -  
Net cash (outflow) inflow from financing activities (2,302 ) (144 ) (3,910 ) 40,717  
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  
Cash, cash equivalents and restricted cash, end of period 90,585   83,331   90,585   83,331  
                 
Paladin cash and cash equivalents 81,671   83,331          
Paladin restricted cash 3,281   -          
Paladin marketable securities 147,095   143,369          
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 ) -          
Litha cash, cash equivalents and bank overdraft (853 )            
  231,194   226,700          
                 
                 
                 
Reconciliation of the adjusted consolidated results from operations
                   
Three months ended September 30, 2012 Paladin   Litha 100%   Consolidated results from operations   Litha 44.54%   Adjusted consolidated results from operations
  $   $   $   $   $
                   
Revenues 37,671   29,228   66,899   13,018   50,689
Cost of sales 10,920   16,333   27,253   7,275   18,195
Gross Income 26,751   12,895   39,646   5,743   32,494
Operating expenses 7,361   9,562   16,923   4,259   11,620
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
                   
Nine months ended September 30, 2012 Paladin   Litha 100%   Consolidated results from operations   Litha 44.54%   Adjusted consolidated results from operations
  $   $   $   $   $
                   
Revenues 113,364   29,228   142,592   13,018   126,382
Cost of sales 32,089   16,333   48,422   7,275   39,364
Gross Income 81,275   12,895   94,170   5,743   87,018
Operating expenses 26,587   9,562   36,149   4,259   30,846
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
Contact:
Samira Sakhia
Chief Financial Officer
Paladin Labs Inc.
Tel: 514-669-5367
514-344-4675
Email: info@paladinlabs.com
Website: www.paladinlabs.com

View Comments (0)