MISSISSAUGA, ON, May 12 /PRNewswire-FirstCall/ -- DRAXIS Health Inc. (TSX: DAX) reported first quarter operating results that reached new highs for quarterly revenues, product sales and operating income for the three months ended March 31, 2005. All amounts are expressed in U.S. dollars.

Highlights - Revenues were $22.8 million in the first-quarter, up 62% from $14.1 million in 2004; driven by record quarterly product sales of $20.5 million, which were 68% ahead of sales in the first-quarter 2004. - Net income for the first-quarter 2005 was $3.3 million, up 137% from $1.4 million in the same quarter the prior year. - Basic and diluted EPS was 8 cents for the first-quarter 2005; double the 4 cents per share in the first three months of 2004. - Operating income for the first quarter 2005 was $4.5 million, up 204% from the $1.5 million in the first-quarter 2004. - Net cash flows from operating activities increased to $1.6 million for the first-quarter 2005, compared to a small net cash outflow for the same period in 2004.

"The first three months of 2005 have seen us achieve the best quarterly operating performance since we acquired our two core operating businesses in 1997 and 1998," said Dr. Martin Barkin, President and CEO of DRAXIS. "The success of our business strategy continues to evolve: operating income is three times what it was a year ago, our operating margins continue to improve, and we are consistently generating positive operating cash flows quarter over quarter. Of our two operations, contract manufacturing continues to take the lead, growing 90% over last year's first-quarter and posting an operating margin of 19.4% as a result of our continuing focus in the specialized production of sterile products. Radiopharmaceutical product sales in first-quarter 2005 were 9% ahead of first-quarter 2004, but this was lower than we anticipated. We have made some significant organizational changes in this division, placing it under new leadership by recently appointing Jean-Pierre Robert as President of DRAXIMAGE."

In the first-quarter 2005 revenues included $0.9 million of contingent milestones earned in respect of product rights sold as part of the 2003 divestiture of the company's Canadian prescription pharmaceutical sales and marketing business. Basic EPS excluding this payment would be 7 cents per share for the first-quarter 2005.

------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (in thousands of U.S. dollars except share related data and in accordance with U.S. GAAP) Q1, 2005 Q1, 2004 (unaudited) (unaudited) REVENUES Product sales $20,506 $12,209 Royalty and licensing 2,339 1,927 ------------------------------------------------------------------------- $22,845 $14,136 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Research and development expense $567 $461 Product Gross Margin $7,446 $4,238 Product Gross Margin % 36.3% 34.7% Operating income $4,540 $1,451 Operating Margin % 19.9% 10.3% Cash and cash equivalents $7,342 $10,539 Total debt $0 $10,156 Cash flows from (used in) operating activities $1,606 ($30) Cash flows used in investing activities (941) (645) ------------------------------------------------------------------------- $665 ($675) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net income (loss) from continuing operations $3,295 $1,388 from discontinued operations - (9) ------------------------------------------------------------------------- $3,295 $1,379 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic income per share from continuing operations $0.080 $0.040 from discontinued operations - - ------------------------------------------------------------------------- $0.080 $0.040 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Segment Highlights from Management's Discussion and Analysis Contract Manufacturing - Product sales revenues of $15.9 million in the first-quarter 2005 represented an increase of $7.5 million, or 90%, over first-quarter 2004 product sales of $8.4 million; the increase was due largely to increased demand for production of Hectorol(R) Injection for Bone Care International, Inc. and products under the GlaxoSmithKline contract. - Product gross margin for the first three months of 2005 was 29.0% compared to 21.2 % for the same quarter in 2004, the increase being driven principally by volume growth of higher margin sterile products. - Operating income was $3.1 million for the first-quarter 2005 compared to $0.5 million for the first three months of 2004 as a result of both volume growth, which was made possible by increasing capacity through additional production labour, and improved capacity utilization that has directly resulted in better margins through substantially improved absorption of overhead costs. - During the quarter the division finalized the studies and analysis required to support the final validation of the recently installed second lyophilizer unit and commenced commercial production of freeze-dried sterile products at the beginning of the second-quarter 2005. Radiopharmaceuticals - Product sales for first-quarter 2005 were $4.7 million, a 9.3% increase over the $4.3 million for first-quarter 2004; primarily as a result of additional sales of radioiodine products, particularly in the United States. - Product gross margin for the first three months of 2005 increased slightly to 59.1%, compared to 58.5% for the first-quarter 2004, reflecting the positive impact of sodium iodide sales in both years. - On April 26, 2005, Mr. Jean-Pierre Robert was appointed the new President of DRAXIMAGE, the radiopharmaceuticals business, reporting to the Chief Executive Officer effective May 9, 2005. Mr. Robert has prior healthcare industry experience, particularly in the radiopharmaceutical sector, having served as Vice President and General Manager of Tyco Healthcare (Canada) following its acquisition of Mallinckrodt (Canada), where he held the same position. - Dr. Richard Flanagan will assume the position of Scientific Advisor to the CEO where he will continue to give the Company the benefits of his in-depth scientific knowledge and experience in radiopharmaceuticals and molecular imaging. - During the quarter the division received the first European regulatory approval for a diagnostic imaging kit product, MAA, which represents a significant milestone in the strategy of introducing products into European markets. - Subsequent to the end of the quarter, DRAXIS provided an update on the key aspects of the product development program for FIBRIMAGE(R), including the status of the Canadian Phase III clinical trial, the findings of two recently completed marketing studies by DRAXIS and the status of the clinical trial that is planned for the U.S. Interim Financial Report

This release includes by reference the first-quarter interim financial report incorporating the full Management's Discussion & Analysis (MD&A) as well as financial statements prepared in accordance with U.S. GAAP. The interim report, including the MD&A and financial statements, has been filed with applicable Canadian and U.S. securities regulatory authorities, is accessible on the Company's website at http://www.draxis.com/ in the Investor Relations section under Financial Reports, through the SEDAR and EDGAR databases and is available upon request by contacting DRAXIS Investor Relations at 1-877-441-1984.

Conference Call

DRAXIS has scheduled a conference call to discuss first-quarter 2005 financial results at 10 a.m. (ET) on May 12, 2005. This call can be accessed by dialing 1 (800) 565-5442 (Access Code 1420492) and will also be webcast live with access through the Company's website at http://www.draxis.com/. The conference call will also be available in archived format on the website for 30 days following the conference call.

About DRAXIS Health Inc.

DRAXIS Health (http://www.draxis.com/) is a specialty pharmaceutical company providing products in three categories. Sterile products include liquid and freeze-dried (lyophilized) injectables plus sterile ointments and creams. Non-sterile products are produced as solid oral and semi-solid dosage forms. Radiopharmaceuticals are used for both therapeutic and diagnostic molecular imaging applications.

Pharmaceutical contract manufacturing services are provided through the DRAXIS Pharma division and radiopharmaceuticals are developed, produced, and sold through the DRAXIMAGE division. DRAXIS Health employs over 500 staff in its Montreal facility.

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks, uncertainties and other factors that may cause the actual results or performance of the Company to be materially different from such statements or from any future results or performance implied thereby. Factors which could cause the Company's results or performance to differ from current expectations include, but are not limited to: the achievement of desired clinical trial results related to the Company's pipeline products; timely regulatory approval of the Company's products; the ability to comply with regulatory requirements applicable to the manufacture and marketing of the Company's products; the Company's ability to obtain and enforce effective patents; the non-infringement of third party patents or proprietary rights by the Company and its products; factors beyond our control which could cause interruptions in our operations; reimbursement policies related to health care; the establishment and maintenance of strategic collaborative and commercial relationships; the Company's dependence on a small number of key customers; the disclosure of confidential information by our collaborators, employees or consultants; the preservation of healthy working relationships with the Company's union and employees; the Company's ability to grow the business; the fluctuation of our financial results and exchange and interest rate fluctuations; the adaptation to changing technologies; the loss of key personnel; the avoidance of product liability claims; the loss incurred if the current lawsuit against us succeeds; the volatility of the price of our common shares; and market acceptance of the Company's products. For additional information with respect to certain of these and other factors, reference should be made to the Company's most recent Form 20-F filed with the United States Securities and Exchange Commission (available on EDGAR at http://www.sec.gov/) and with Canadian securities regulators (available on SEDAR at http://www.sedar.com/). Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Financial Tables Attached DRAXIS HEALTH INC. Consolidated Statements of Operations In Accordance with U.S. GAAP ------------------------------------------------------------------------- (in thousands of U.S. dollars except share related data) (unaudited) For the Three Month Periods Ended March 31, ---------------------------- 2005 2004 -------------- ------------- REVENUES Product sales $ 20,506 $ 12,209 Royalty and licensing 2,339 1,927 ------------------------------------------------------------------------- 22,845 14,136 ------------------------------------------------------------------------- EXPENSES Cost of goods sold, excluding depreciation and amortization 13,060 7,971 Selling, general and administration 3,640 3,292 Research and development 567 420 Depreciation and amortization 1,038 961 ------------------------------------------------------------------------- 18,305 12,644 ------------------------------------------------------------------------- Operating income 4,540 1,492 Financing expense, net (42) (125) Other income - 96 ------------------------------------------------------------------------- Income before undernoted 4,498 1,463 Income taxes (1,203) (71) Minority interest - (4) ------------------------------------------------------------------------- Income from continuing operations 3,295 1,388 Loss from discontinued operations, net of taxes (Note 2) - (9) ------------------------------------------------------------------------- Net income $ 3,295 $ 1,379 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic income (loss) per share ----------------------------- from continuing operations $ 0.08 $ 0.04 from discontinued operations - - ------------------------------------------------------------------------- $ 0.08 $ 0.04 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Diluted income (loss) per share ------------------------------- from continuing operations $ 0.08 $ 0.04 from discontinued operations - - ------------------------------------------------------------------------- $ 0.08 $ 0.04 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted-average number of shares outstanding - basic 41,142,854 37,537,205 - diluted 42,150,678 38,778,477 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See the accompanying notes to the Consolidated Financial Statements. These interim financial statements should be read in conjunction with the annual Consolidated Financial Statements. DRAXIS HEALTH INC. Consolidated Balance Sheets In Accordance with U.S. GAAP ------------------------------------------------------------------------- (in thousands of U.S. dollars except share related data) (unaudited) March 31, December 31, 2005 2004 -------------- ------------- ASSETS (audited) Current assets Cash and cash equivalents $ 7,342 $ 5,926 Restricted cash 428 428 Accounts receivable 14,348 13,724 Inventories 9,102 10,158 Prepaid expenses 936 830 Deferred income taxes, net 4,121 4,121 ------------------------------------------------------------------------- Total current assets 36,277 35,187 Property, plant and equipment, net 43,615 43,857 Goodwill, net 707 728 Intangible assets, net 587 737 Other assets 612 604 Deferred income taxes, net 6,643 7,672 ------------------------------------------------------------------------- Total assets $ 88,441 $ 88,785 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES Current liabilities Accounts payable and accrued liabilities $ 7,110 $ 10,436 Current portion of deferred revenues 3,705 3,676 Customer deposits 608 628 ------------------------------------------------------------------------- Total current liabilities 11,423 14,740 Deferred revenues 3,301 4,125 ------------------------------------------------------------------------- Total liabilities $ 14,724 $ 18,865 ------------------------------------------------------------------------- Minority interest (Note 3) - - SHAREHOLDERS' EQUITY Common stock, without par value of unlimited shares authorized $ 76,598 $ 75,840 Additional paid-in capital 15,546 15,546 Warrants (Note 4(c)) 916 916 Deficit (24,270) (27,565) Accumulated other comprehensive income 4,927 5,183 ------------------------------------------------------------------------- Total shareholders' equity 73,717 69,920 ------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 88,441 $ 88,785 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See the accompanying notes to the Consolidated Financial Statements. These interim financial statements should be read in conjunction with the annual Consolidated Financial Statements. DRAXIS HEALTH INC. Consolidated Statements of Changes in Equity and Comprehensive Income (Loss) In Accordance with U.S. GAAP ------------------------------------------------------------------------- (in thousands of U.S. dollars except share related data) (unaudited) For the Three Month Periods Ended March 31, ---------------------------- 2005 2004 -------------- ------------- Common Stock (Number of Shares) Balance, beginning of period 41,015,326 37,297,817 Exercise of options 289,062 402,532 Exercise of employee participation shares - 54,896 ------------------------------------------------------------------------- Balance, end of period 41,304,388 37,755,245 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Common Stock Balance, beginning of period $ 75,840 $ 61,175 Exercise of options 758 1,173 Exercise of employee participation shares - 204 ------------------------------------------------------------------------- Balance, end of period $ 76,598 $ 62,552 ------------------------------------------------------------------------- Additional Paid In Capital Balance, beginning of period $ 15,546 $ 15,667 Stock compensation - (121) ------------------------------------------------------------------------- Balance, end of period $ 15,546 $ 15,546 ------------------------------------------------------------------------- Warrants Balance, beginning of period $ 916 $ - ------------------------------------------------------------------------- Balance, end of period $ 916 $ - ------------------------------------------------------------------------- Employee Participation Shares Balance, beginning of period $ - $ 86 Exercise of employee participation shares - (86) ------------------------------------------------------------------------- Balance, end of period $ - $ - ------------------------------------------------------------------------- Employee Participation Shares-Loans Receivable Balance, beginning of period $ - $ (86) Exercise of employee participation shares - 86 ------------------------------------------------------------------------- Balance, end of period $ - $ - ------------------------------------------------------------------------- Deficit Balance, beginning of period $ (27,565) $ (35,481) Net income 3,295 1,379 ------------------------------------------------------------------------- Balance, end of period $ (24,270) $ (34,102) ------------------------------------------------------------------------- Accumulated Other Comprehensive Income (Loss) Balance, beginning of period $ 5,183 $ 286 Other comprehensive loss (256) (594) ------------------------------------------------------------------------- Balance, end of period 4,927 (308) ------------------------------------------------------------------------- Total shareholders' equity $ 73,717 $ 43,688 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Comprehensive Income Foreign currency translation adjustments $ (256) $ (594) ------------------------------------------------------------------------- Other comprehensive loss (256) (594) Net income 3,295 1,379 ------------------------------------------------------------------------- Total comprehensive income $ 3,039 $ 785 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See the accompanying notes to the Consolidated Financial Statements. These interim financial statements should be read in conjunction with the annual Consolidated Financial Statements. DRAXIS HEALTH INC. Consolidated Statements of Cash Flows In Accordance with U.S. GAAP ------------------------------------------------------------------------- (in thousands of U.S. dollars) (unaudited) For the Three Month Periods Ended March 31, ---------------------------- 2005 2004 -------------- ------------- CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES Net income from continuing operations $ 3,295 $ 1,388 Adjustments to reconcile net income from continuing operations to net cash from (used in) operating activities Amortization of deferred revenues (1,050) (1,318) Depreciation and other amortization 1,038 961 Stock compensation - 83 Deferred income taxes 987 (32) Minority interest - 4 Other 261 315 Changes in operating assets and liabilities Accounts receivable (630) (654) Inventories 1,003 (1,128) Income taxes (37) 118 Prepaid expenses (206) (190) Accounts payable and accrued liabilities (3,309) 325 Current portion of deferred revenues 254 98 ------------------------------------------------------------------------- Net cash from (used in) operating activities of continuing operations 1,606 (30) ------------------------------------------------------------------------- CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES Expenditures for property, plant and equipment (794) (591) Increase in intangible assets (147) (150) Proceeds from disposition of product right - 96 ------------------------------------------------------------------------- Net cash from (used in) investing activities of continuing operations (941) (645) ------------------------------------------------------------------------- CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES Repayment of long-term debt - (241) (Decrease) increase from customer deposits, net (17) 16 Exercise of options 758 1,173 ------------------------------------------------------------------------- Net cash from (used in) financing activities of continuing operations 741 948 ------------------------------------------------------------------------- Effect of foreign exchange rate changes on cash and cash equivalents 10 (284) ------------------------------------------------------------------------- Net cash from (used in) continuing operations 1,416 (11) Net cash used in discontinued operations - (13) ------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 1,416 (24) Cash and cash equivalents, beginning of period 5,926 10,563 ------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 7,342 $ 10,539 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Additional Information Interest paid $ - $ 71 Income taxes paid $ 228 $ 154 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See the accompanying notes to the Consolidated Financial Statements. These interim financial statements should be read in conjunction with the annual Consolidated Financial Statements DRAXIS HEALTH INC. Notes to the Consolidated Financial Statements In Accordance with U.S. GAAP ------------------------------------------------------------------------- (in thousands of U.S. dollars except share related data) (unaudited) 1. Significant Accounting Policies These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The functional currency of the Company is the Canadian dollar however its reporting currency is the U.S. dollar. For the current and prior periods, the financial statements of the Company's operations whose reporting currency is other than the U.S. dollar are translated from such reporting currency to U.S. dollars using the current rate method. Under the current rate method, assets and liabilities are translated at the exchange rates in effect at the balance sheet date. Revenues and expenses, including gains and losses on foreign exchange transactions, are translated at average rates for the period. The resulting unrealized translation gains and losses on the Company's net investment in these operations, including long-term intercompany advances, are accumulated in a separate component of shareholders' equity, described in the consolidated balance sheets as accumulated other comprehensive income. The disclosures contained in these unaudited interim consolidated financial statements do not include all requirements of GAAP for annual financial statements. The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2004. The unaudited interim consolidated financial statements are based upon accounting principles consistent with those used and described in the audited consolidated financial statements for the year ended December 31, 2004, other than as noted herein. The unaudited interim consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary to present fairly the financial position of the Company as at March 31, 2005 and the results of operations and cash flows for the three month periods ended March 31, 2005 and 2004. 2. Discontinued Operations In 2001, the Company adopted a formal plan to dispose of its Canadian sales and marketing division ("DRAXIS Pharmaceutica"). Pursuant to APB No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," the results of operations of DRAXIS Pharmaceutica have been reported as discontinued operations and the consolidated financial statements and notes thereto for the year ended December 31, 2001 and all subsequent periods presented have been reclassified. On March 31, 2003, the Company amended its License, Distribution and Supply Agreement with Elan Corporation, plc ("Elan") to return the Canadian rights to several of Elan's neurology products in exchange for a cash payment of $6,500, resulting in an after tax gain of $4,286 on this transaction. On July 22, 2003, the Company completed the divestiture of DRAXIS Pharmaceutica with the sale to Shire BioChem Inc. ("Shire"), of substantially all remaining products of the division. The Company received $9,600 in cash from Shire and could receive up to $2,900 in market driven milestones over the next several years. The Company realized an after tax gain of $4,054, net of transaction and related charges. In addition, the Company will receive royalty payments based on the continuing Canadian sales of the products. The Company also received the value of acquired inventories and Shire is now responsible for all financial provisions of the license agreement related to Permax(R). Commencing in the second quarter of 2002, the Company resolved to retain ownership of the Canadian rights to Alertec(R) and continue to market and sell Alertec(R) in Canada itself. Accordingly, discontinued operations did not include revenues and expenses directly attributable to Alertec(R) up until such time that third party approval was obtained. As a result of the ability to obtain third party approval upon closing with Shire, management decided to dispose of Alertec(R) through the sale of the Canadian rights to Shire and at that time included Alertec(R) as part of discontinued operations on a prospective basis. Interest expense directly attributable to license obligations included in the transaction has been allocated to the discontinued operations. The results of discontinued operations, presented in the accompanying Consolidated Statements of Operations, were as follows: For the Three Month Periods Ended March 31, ---------------------------- 2005 2004 -------------- ------------- Revenues $ - $ 73 --------------------------------------------------------------------- Operating loss from discontinued operations - (13) Income tax recovery - 4 --------------------------------------------------------------------- Net loss from discontinued operations - net of tax $ - $ (9) --------------------------------------------------------------------- --------------------------------------------------------------------- 3. Acquisition of Minority Interest On April 22, 2004, the Company completed the acquisition of the 32.7% interest in the Company's manufacturing subsidiary, DRAXIS Pharma Inc. ("DPI"), that was previously owned by SGF Sante Inc. ("SGF"). The $9.6 million (CDN$13.0 million) cash acquisition has been accounted for by the purchase method of accounting and allocated to identifiable assets and liabilities based on their estimated fair values as follows: Minority interest $3,992 Property, plant and equipment 6,785 Deferred income tax liability (1,220) ---------------------------------------- Total purchase price $9,557 ---------------------------------------- ---------------------------------------- The estimates of fair value were determined by the Company's management based on an independent valuation of Property, plant and equipment. The purchase price paid to SGF is subject to adjustment in limited circumstances involving a change of control of the Company or DPI or a sale of substantially all of the assets of DPI prior to April 22, 2005. 4. Shareholders' Equity (a) Stock Option Plan The following is a summary of common shares issuable pursuant to outstanding stock options: For the Three Month Periods Ended March 31, ---------------------------- 2005 2004 -------------- ------------- Balance, beginning of period 2,753,232 3,097,942 Increase (decrease) resulting from: Granted 325,000 125,000 Exercised (289,062) (400,032) Cancelled - (68,333) Expired - (1,700) --------------------------------------------------------------------- Balance, end of period 2,789,170 2,752,877 --------------------------------------------------------------------- --------------------------------------------------------------------- (b) Stock-based Compensation Costs The following outlines the impact and assumptions used if the compensation cost for the Company's stock options was determined under the fair value based method of accounting. For the Three Month Periods Ended March 31, ---------------------------- 2005 2004 -------------- ------------- Net income, as reported $ 3,295 $ 1,379 Pro forma impact (201) (167) --------------------------------------------------------------------- Pro forma net income $ 3,094 $ 1,212 --------------------------------------------------------------------- --------------------------------------------------------------------- Basic net income per share, as reported $ 0.08 $ 0.04 Pro forma impact per share - (0.01) --------------------------------------------------------------------- Pro forma net income per share (Basic) $ 0.08 $ 0.03 Pro forma net income per share (Diluted) $ 0.07 $ 0.03 --------------------------------------------------------------------- --------------------------------------------------------------------- Dividend yield 0.0% 0.0% Expected volatility 59-60% 60%-62% Risk-free interest rate 4.0% 4.0% Expected option life 5 yrs 5yrs --------------------------------------------------------------------- --------------------------------------------------------------------- (c) Common Share Offering On April 22, 2004, the Company closed its offering of 3,053,436 units at a price of $4.82 (CDN$6.55) per unit for proceeds net of related expenses of $13,385 (CDN$18,213). Each unit consists of one common share of the Company and one-half of one share purchase warrant. Each whole warrant will entitle the holder to acquire one common share of the Company at a price of CDN$8.50 at any time prior to two years from April 22, 2004. Included as a component of shareholders' equity is $916, which represents the fair value of the warrants issued. The fair value of the warrant was determined based on the price of the offering. The underwriters had an over-allotment option to purchase up to an additional 458,016 units, exercisable at the issue price any time up to 30 days following closing of the offering, representing additional gross proceeds of up to $2,206 (CDN$3,000) to the Company. The over-allotment option expired unexercised. 5. Segmented Information Industry Segmentation For purposes of decision-making and assessing performance, management considers that it operates in three segments: Radiopharmaceuticals, Manufacturing, and Corporate and Other. Executive management assesses the performance of each segment based on segment income before financing expense, income taxes and minority interest. The accounting policies used to determine segmented results and measure segmented assets are the same as those described in the summary of significant accounting policies For the Three Month Periods Ended March 31, ---------------------------- 2005 2004 -------------- ------------- PRODUCT SALES REVENUES Radiopharmaceuticals $ 4,734 $ 4,332 Manufacturing 15,851 8,363 Corporate and Other (79) (486) --------------------------------------------------------------------- $ 20,506 $ 12,209 --------------------------------------------------------------------- ROYALTY AND LICENSING REVENUES Radiopharmaceuticals $ - $ - Manufacturing - - Corporate and Other 2,339 1,927 --------------------------------------------------------------------- $ 2,339 $ 1,927 --------------------------------------------------------------------- TOTAL REVENUES Radiopharmaceuticals $ 4,734 $ 4,332 Manufacturing 15,851 8,363 Corporate and Other 2,260 1,441 --------------------------------------------------------------------- $ 22,845 $ 14,136 --------------------------------------------------------------------- PRODUCT GROSS MARGIN Radiopharmaceuticals $ 2,797 $ 2,534 Manufacturing 4,600 1,773 Corporate and Other 49 (69) --------------------------------------------------------------------- $ 7,446 $ 4,238 --------------------------------------------------------------------- SELLING, GENERAL AND ADMINISTRATION EXPENSE Radiopharmaceuticals $ 1,136 $ 839 Manufacturing 849 846 Corporate and Other 1,655 1,607 --------------------------------------------------------------------- $ 3,640 $ 3,292 --------------------------------------------------------------------- RESEARCH AND DEVELOPMENT EXPENSE Radiopharmaceuticals $ 567 $ 420 Manufacturing - - Corporate and Other - - --------------------------------------------------------------------- $ 567 $ 420 --------------------------------------------------------------------- DEPRECIATION AND AMORTIZATION Radiopharmaceuticals $ 245 $ 227 Manufacturing 681 466 Corporate and Other 112 268 --------------------------------------------------------------------- $ 1,038 $ 961 --------------------------------------------------------------------- OPERATING INCOME (LOSS) Radiopharmaceuticals $ 849 $ 1,048 Manufacturing 3,070 461 Corporate and Other 621 (17) --------------------------------------------------------------------- $ 4,540 $ 1,492 --------------------------------------------------------------------- --------------------------------------------------------------------- IDENTIFIABLE ASSETS March 31, December 31, 2005 2004 -------------- ------------- (audited) Radiopharmaceuticals $ 11,963 $ 12,354 Manufacturing 49,098 50,103 Corporate and Other 27,380 26,328 --------------------------------------------------------------------- $ 88,441 $ 88,785 --------------------------------------------------------------------- --------------------------------------------------------------------- Geographic Segmentation For the Three Month Periods Ended March 31, ---------------------------- REVENUES(1) 2005 2004 -------------- ------------- Canada $ 11,354 $ 6,586 United States 11,367 7,440 Other 124 110 --------------------------------------------------------------------- $ 22,845 $ 14,136 --------------------------------------------------------------------- --------------------------------------------------------------------- March 31, December 31, LONG-LIVED ASSETS(2) 2005 2004 -------------- ------------- (audited) Canada $ 44,909 $ 45,322 United States - - --------------------------------------------------------------------- $ 44,909 $ 45,322 --------------------------------------------------------------------- --------------------------------------------------------------------- (1) Revenues are attributable to countries based upon the location of the customer. (2) Represents property, plant and equipment, goodwill and intangible assets that are identified with each geographic region. For the Three Month Periods Ended March 31, ---------------------------- EXPENDITURES FOR PROPERTY, PLANT AND EQUIPMENT 2005 2004 -------------- ------------- Radiopharmaceuticals $ 44 $ 209 Manufacturing 739 371 Corporate and Other 11 11 --------------------------------------------------------------------- $ 794 $ 591 --------------------------------------------------------------------- --------------------------------------------------------------------- For the Three Month Periods Ended March 31, ---------------------------- PRODUCT SALES REVENUES BY MAJOR PRODUCT GROUPS 2005 2004 -------------- ------------- Radiopharmaceuticals $ 4,734 $ 4,332 Manufacturing - Sterile 11,337 5,717 Manufacturing - Non Sterile 4,514 2,646 Corporate and Other 166 1 Intercompany eliminations (245) (487) --------------------------------------------------------------------- $ 20,506 $ 12,209 --------------------------------------------------------------------- --------------------------------------------------------------------- 6. Reconciliation of Results Reported in Accordance with U.S. GAAP to Canadian GAAP The major differences between U.S. and Canadian GAAP which affect net income are summarized in the following table with an explanation of the adjustments. For the Three Month Periods Ended March 31, ---------------------------- 2005 2004 -------------- ------------- Net income as reported under U.S. GAAP $3,295 $1,379 --------------------------------------------------------------------- Continuing operations --------------------- Intangible assets - Radiopharmaceuticals segment, net of tax (i) 54 (84) Intangible assets - Corporate and Other segment, net of tax (i) (518) (518) Stock-based compensation (ii) (201) (140) --------------------------------------------------------------------- (665) (742) --------------------------------------------------------------------- Net income under Canadian GAAP $2,630 $637 --------------------------------------------------------------------- --------------------------------------------------------------------- Basic income (loss) per share Canadian GAAP $0.06 $0.02 U.S. GAAP $0.08 $0.04 Diluted income (loss) per share Canadian GAAP $0.06 $0.02 U.S. GAAP $0.08 $0.04 --------------------------------------------------------------------- --------------------------------------------------------------------- (i) Intangible Assets - Continuing Operations Amortization expense associated with continuing operations under U.S. GAAP differs from Canadian GAAP due to the differential treatment of the excess of the purchase cost over the fair value of the assets acquired in conjunction with the 1996 acquisition of Deprenyl Animal Health, Inc., which was treated as acquired research and development, and the portion of the 1997 acquisition cost of the Company's radiopharmaceutical business assigned to acquired research and development. (ii) Stock-Based Compensation Under Canadian GAAP, the Company, in the first quarter of 2004, adopted retroactively with restatement of 2002 and 2003 results, the application of the fair value based method for measuring the compensation cost of employee stock options granted in 2002 and beyond. Under U.S. GAAP, the Company has elected to adopt the optional recognition provision for its stock options plans and hence the cost of employee stock options is disclosed in the note to the financial statements as pro forma earnings and per share information. The difference between U.S. and Canadian GAAP applicable to stock-based compensation applies only to the Corporate and Other segment. (iii) Research and Development Under Canadian GAAP, investment tax credits on research and development are deducted from research and development expense. Under U.S. GAAP, investment tax credits are recorded as a reduction of the income tax expense. As a result, there is no impact in the reconciliation of net income or shareholders' equity from U.S. to Canadian GAAP. 7. Comparative Information The Company has reclassified certain prior period's information to conform with the current presentation format.

CONTACT: Investor Relations: Jerry Ormiston, DRAXIS Health Inc., Phone:1-877-441-1984, Fax: (905) 677-5494; John Nesbett, The Investor RelationsGroup, Phone: (212) 825-3210