MISSISSAUGA, ON, Feb. 9 /PRNewswire-FirstCall/ - DRAXIS Health Inc. reported financial results for the fourth quarter and fiscal year ended December 31, 2005 to post the sixth consecutive year of increased revenues from product sales plus record operating cash flows for the fourth quarter and all of 2005, despite an extended shutdown period in the third quarter that impacted earnings performance during the second half of 2005. All amounts are expressed in US dollars.
Highlights - Consolidated revenues were down 8% in the fourth quarter of 2005 from the same period in 2004, but were up 15% in the full year to $79.4 million. - Net income from continuing operations of $1.1 million for the fourth quarter of 2005 was down $1.2 million compared to the fourth quarter of 2004 but for the full year was $7.8 million, down $0.2 million from 2004. - Basic EPS for the fourth quarter was 3 cents and for the full year was 19 cents. Results for the fourth quarter included one-time costs of $0.5 million related to the Company’s exit from the brachytherapy market plus $0.3 million of severance costs related to initial steps taken to reduce the overhead cost structure. - Net cash flows from operating activities, both quarterly and annually, reached record levels of $6.0 million for the fourth quarter and $9.3 million for 2005, resulting in cash and cash equivalents of $12.4 million at December 31, 2005.
“The extended shutdown of our sterile products area during the third quarter continued to negatively impact fourth quarter productivity and profitability, but our comprehensive response and our commitment to quality meant that we retained all customers and no customer was ever in a stock-out situation,” said Dr. Martin Barkin, President and CEO of DRAXIS Health. “The extended shutdown has delayed, by several months, the introduction of new contract manufacturing business as we allocated production capacity preferentially to our existing customers.”
Dr. Barkin also noted that, “In our radiopharmaceutical business we have begun to implement our new strategy by rationalizing underperforming products and introducing new offerings in our high margin radioiodine product line. We are also making progress in our efforts to engage new partners to enhance the growth of this business in new markets globally.”
Fourth quarter revenues from product sales were $17.3 million, down 6% from the fourth quarter 2004. Operating income for the fourth quarter of 2005 was $1.0 million compared to $2.9 million in the fourth quarter of 2004. For the full year 2005, revenues from product sales were $73.0 million, up 18% from full year 2004. Operating income for 2005 was $9.8 million versus $9.9 million for 2004.
------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (in thousands of U.S. dollars except share related data and in accordance with U.S. GAAP) (unaudited) For the Three Month Periods For the Years Ended December 31, Ended December 31, ------------------------ ------------------------ 2005 2004 2005 2004 REVENUES $17,273 $18,352 Product sales $72,989 $61,693 1,387 1,934 Royalty and licensing 6,444 7,627 ------------------------------------------------------------------------- $18,660 20,286 $79,433 $69,320 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Research and $512 $502 development expense $2,103 $1,948 $5,844 $6,384 Product Gross Margin $26,153 $21,900 33.8% 34.8% Product Gross Margin % 35.8% 35.5% $973 $2,858 Operating income $9,764 $9,856 5.2% 14.1% Operating Margin % 12.3% 14.2% Cash and cash $12,390 $5,926 equivalents $12,390 $5,926 $0 $0 Total debt $0 $0 Cash flows from $5,958 $3,999 operating activities $9,319 $4,755 Cash flows used in (825) (2,065) investing activities (4,380) (4,290) ------------------------------------------------------------------------- $5,133 $1,934 $4,939 $465 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net income (loss) from continuing $1,067 $2,267 operations $7,784 $7,977 from discontinued - (34) operations - (61) ------------------------------------------------------------------------- $1,067 $2,233 $7,784 $7,916 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic income per share from continuing $0.03 $0.06 operations $0.19 $0.20 from discontinued - - operations - - ------------------------------------------------------------------------- $0.03 $0.06 $0.19 $0.20 ------------------------------------------------------------------------- -------------------------------------------------------------------------
During the fourth quarter the Company initiated a Normal Course Issuer Bid to buy back for cancellation up to 3,522,530 of its common shares, representing up to 10% of the public float on December 6, 2005. As at February 8, 2006, 113,000 shares had been repurchased and cancelled at an average price of $4.39 (CDN$5.08).
Segment Highlights from Management’s Discussion and Analysis Contract Manufacturing - Results in the division for the fourth quarter reflect the negative carryover impact of the extended shutdown period in its sterile products area during the third quarter of 2005. - Revenues of $12.7 million for the fourth quarter of 2005 were 15% below the fourth quarter of 2004. Even factoring in the negative impact of the extended shutdown, revenues for 2005 were $54.7 million, up 18% over 2004, as a result of increased production demand from Genzyme Corp. and GlaxoSmithKline. - Product gross margin decreased to 23% for the fourth quarter of 2005 from 28% in the fourth quarter of 2004, due to reduced sterile products volumes created by the extended shutdown in the third quarter; product gross margin percentage for 2005 increased to 27% from 25% compared to 2004 as a result of volume growth, principally for higher margin sterile products prior to the shutdown. - Operating income for the fourth quarter of 2005 was $0.7 million compared to $2.4 million for the fourth quarter of 2004. Operating income for 2005 was $6.4 million, 15% greater than the $5.6 million in 2004. Radiopharmaceuticals - Product sales of $4.9 million for the fourth quarter of 2005 represent a 22% increase over the same quarter of 2004; product sales of $19.3 million in 2005 are 12% ahead of 2004. The increases primarily result from higher sales of radioiodine products, specifically higher volumes of sodium iodide I-131, resulting from greater U.S. market penetration. - Product gross margin percentage in the fourth quarter of 2005 was 60%, compared to 53% in the fourth quarter of 2004. For 2005, product gross margin percentage was also 60%, up slightly from 58% in 2004. - Operating income of $0.6 million for the fourth quarter of 2005 was double the $0.3 million in the fourth quarter of 2004. Excluding $0.5 million of one-time costs related to the exit from the brachytherapy market, operating income for the fourth quarter was $1.0 million. - During the fourth quarter, the Company began to implement its strategy to focus product offerings with the discontinuation of the manufacture and sale of implantable brachytherapy seeds and the establishment of a customer supply alternative with Oncura, Inc. - Subsequent to the quarter, in January 2006, the Company received FDA approval for its supplemental new drug application for Sodium Iodide I-131 Capsules USP, Diagnostic - Oral, which is a product intended to be used to evaluate thyroid function in patients prior to treatment with stronger therapeutic doses of sodium iodide I-131. General Guidance
As of February 8, 2006, the Company has not yet received forecast information from a number of customers in sufficient detail regarding timing and quantification of demand to allow the Company to provide meaningful guidance at this time on 2006 revenues. Based on the current information available, earnings per share are expected to range between 23 cents and 27 cents for 2006. This includes a non-cash charge of 2 cents per share for stock based compensation, according to new accounting rules which became effective January 1, 2006. Net operating cash flow in 2006 is expected to be at least $15 million.
Interim Financial Report
This release includes by reference the fourth 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 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 fourth quarter and year ended December 31, 2005 financial results at 10:00 a.m. (ET) on February 9, 2006. This call can be accessed by dialing 1(800) 811-8830 and using Access Code 7894739, and will also be webcast live with access through the Company’s website at www.draxis.com. The conference call will also be available in archived format on the Company’s website for 30 days following the conference call.
About DRAXIS Health Inc.
DRAXIS Health, through its wholly owned operating subsidiary, DRAXIS Specialty Pharmaceuticals Inc., provides 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 approximately 500 staff in its Montreal facility.
For additional information please visit www.draxis.com.
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 materially from a conclusion, forecast or projection in the forward-looking statements 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; (including, without limitation, material equipment breakdowns) 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 current lawsuits against us succeed; 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 www.sec.gov) and with Canadian securities regulators (available on SEDAR at 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 For the Years Ended December 31, Ended December 31, ------------------------ ------------------------ 2005 2004 2005 2004 ----------- ----------- ----------- ----------- REVENUES $ 17,273 $ 18,352 Product sales $ 72,989 $ 61,693 Royalty and 1,387 1,934 licensing 6,444 7,627 ------------------------------------------------------------------------- 18,660 20,286 79,433 69,320 ------------------------------------------------------------------------- EXPENSES Cost of goods sold, excluding depreciation 11,429 11,968 and amortization 46,836 39,793 Selling, general 4,526 3,724 and administration 16,185 13,266 Research and 512 502 development 2,103 1,948 Depreciation 1,220 1,234 and amortization 4,545 4,457 ------------------------------------------------------------------------- 17,687 17,428 69,669 59,464 ------------------------------------------------------------------------- 973 2,858 Operating income 9,764 9,856 - (62) Financing expense, net (29) (296) Foreign exchange 40 (209) (loss) gain (398) (374) - - Other income - 96 ------------------------------------------------------------------------- 1,013 2,587 Income before undernoted 9,337 9,282 54 (320) Income taxes (1,553) (1,301) - - Minority interest - (4) ------------------------------------------------------------------------- Income from continuing 1,067 2,267 operations 7,784 7,977 Loss from discontinued operations, - (34) net of taxes - (61) ------------------------------------------------------------------------- $ 1,067 $ 2,233 Net income $ 7,784 $ 7,916 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic income per share ---------------------- from continuing $ 0.03 $ 0.06 operations $ 0.19 $ 0.20 from discontinued - - operations - - ------------------------------------------------------------------------- $ 0.03 $ 0.06 $ 0.19 $ 0.20 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Diluted income per share -------------- from continuing $ 0.03 $ 0.05 operations $ 0.18 $ 0.19 from discontinued - - operations - - ------------------------------------------------------------------------- $ 0.03 $ 0.05 $ 0.18 $ 0.19 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted-average number of shares outstanding 41,626,094 40,984,891 - basic 41,471,798 39,886,219 42,323,702 42,148,741 - diluted 42,365,782 41,054,883 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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) December 31, December 31, 2005 2004 ------------ ------------ ASSETS Current assets Cash and cash equivalents $ 12,390 $ 5,926 Restricted cash - 428 Accounts receivable, net 16,301 13,724 Inventories (Note 3) 7,629 10,158 Prepaid expenses 1,003 830 Deferred income taxes, net 2,750 4,121 ------------------------------------------------------------------------- Total current assets 40,073 35,187 Property, plant and equipment, net 45,652 43,857 Goodwill 754 728 Intangible assets, net 399 737 Other assets 475 604 Deferred income taxes, net 8,467 7,672 ------------------------------------------------------------------------- Total assets $ 95,820 $ 88,785 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES Current liabilities Accounts payable and accrued liabilities $ 8,793 $ 10,436 Current portion of deferred revenues 3,671 3,676 Customer deposits 649 628 ------------------------------------------------------------------------- Total current liabilities 13,113 14,740 Other liabilities 252 - Deferred revenues 827 4,125 ------------------------------------------------------------------------- Total liabilities $ 14,192 $ 18,865 ------------------------------------------------------------------------- ------------------------------------------------------------------------- SHAREHOLDERS’ EQUITY Common stock, without par value of unlimited shares authorized $ 77,313 $ 75,840 Additional paid-in capital 15,370 15,546 Warrants 916 916 Deficit (19,781) (27,565) Accumulated other comprehensive income 7,810 5,183 ------------------------------------------------------------------------- Total shareholders’ equity 81,628 69,920 ------------------------------------------------------------------------- Total liabilities and shareholders’ equity $ 95,820 $ 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 For the Years Ended December 31, Ended December 31, ------------------------ ------------------------ 2005 2004 2005 2004 ------------------------ ------------------------ Common Stock (Number of Shares) Balance, 41,602,271 40,960,326 beginning of period 41,015,326 37,297,817 Issuance of common - - shares - 3,053,436 61,334 55,000 Exercise of options 648,279 609,177 Exercise of employee - - participation shares - 54,896 Repurchased for (75,600) - cancellation (75,600) - ------------------------------------------------------------------------- 41,588,005 41,015,326 Balance, end of period 41,588,005 41,015,326 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Common Stock Balance, $ 77,314 $ 75,731 beginning of period $ 75,840 $ 61,175 Issuance of - - common shares - 12,867 154 109 Exercise of options 1,628 1,594 Exercise of employee - - participation shares - 204 Repurchased for (155) - cancellation (155) - ------------------------------------------------------------------------- $ 77,313 $ 75,840 Balance, end of period $ 77,313 $ 75,840 ------------------------------------------------------------------------- Additional Paid In Capital Balance, $ 15,546 $ 15,546 beginning of period $ 15,546 $ 15,667 - - Stock compensation - (121) Common shares purchased for (176) - cancellation (176) - ------------------------------------------------------------------------- $ 15,370 $ 15,546 Balance, end of period $ 15,370 $ 15,546 ------------------------------------------------------------------------- Warrants Balance, $ 916 $ 916 beginning of period $ 916 $ - - - Issuance of warrants - 916 ------------------------------------------------------------------------- $ 916 $ 916 Balance, end of period $ 916 $ 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, $ (20,848) $ (29,798) beginning of period $ (27,565) $ (35,481) 1,067 2,233 Net income 7,784 7,916 ------------------------------------------------------------------------- $ (19,781) $ (27,565) Balance, end of period $ (19,781) $ (27,565) ------------------------------------------------------------------------- Accumulated Other Comprehensive Income Balance, $ 7,787 $ 1,794 beginning of period $ 5,183 $ 286 Other comprehensive 23 3,389 Income 2,627 4,897 ------------------------------------------------------------------------- 7,810 5,183 Balance, end of period 7,810 5,183 ------------------------------------------------------------------------- Total shareholders’ $ 81,628 $ 69,920 equity $ 81,628 $ 69,920 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Comprehensive Income Foreign currency translation $ 23 $ 3,389 adjustments $ 2,627 $ 4,897 ------------------------------------------------------------------------- Other comprehensive 23 3,389 income 2,627 4,897 1,067 2,233 Net income 7,784 7,916 ------------------------------------------------------------------------- Total comprehensive $ 1,090 $ 5,622 income $ 10,411 $ 12,813 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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 For the Years Ended December 31, Ended December 31, ------------------------ ------------------------ 2005 2004 2005 2004 ---------------------
