MISSISSAUGA, ON, Nov. 3 /PRNewswire-FirstCall/ - DRAXIS Health Inc. ; reported financial results for the third quarter and the first nine months ended September 30, 2005. The extended shutdown period in the third quarter impacted quarter over quarter results, but year-to-date comparisons remain favourable. All amounts are expressed in US dollars.
Highlights - Revenues for the third quarter were $17.5 million, down 4% from $18.2 million in the third quarter of 2004; revenues for the first nine months of 2005 were up 24% to $60.8 million compared to $49.0 million for the first nine months of 2004. Product sales of $16.0 million were unchanged from the third quarter of 2004 but were up 29% to $55.7 million for the first nine months of 2005 versus $43.3 million in the same period in 2004. - Net income for the third quarter of 2005 was $1.1 million, down from $2.1 million in the third quarter of 2004; for the first nine months of 2005 net income was $6.7 million, 18% ahead of the $5.7 million in the same period in 2004. - Basic and diluted EPS for the third quarter 2005 was 3 cents, compared to 5 cents in the third quarter of 2004; basic and diluted EPS for the first nine months of 2005 was 16 cents, an increase over the 14 cents earned in the first nine months of 2004. - Operating income for the third quarter of 2005 was $1.7 million versus $2.7 million for the third quarter of 2004; operating income for the first nine months of 2005 was $8.8 million, up 26% from $7.0 million in the first nine months of 2004. - Net cash flows from operating activities were $0.5 million for the third quarter and $3.4 million for the first nine months of 2005, compared to net cash flows of $2.3 million and $0.8 million for the same periods respectively in 2004. - Subsequent to the quarter, on October 4, 2005, Mr. Dan Brazier, formerly Senior Vice President, Corporate Development and Strategic Planning, was appointed Chief Operating Officer. Mr. Brazier immediately assumed responsibilities for the day-to-day operations across the Company, reporting to Dr. Martin Barkin, President and Chief Executive Officer.
“This quarter presented significant challenges as we dealt with the impact of an extended shutdown period for scheduled maintenance and repairs in our sterile products area, but the handling of this atypical event by our people and our processes demonstrated our commitment to the highest standards of quality and compliance,” said Dr. Martin Barkin, President and CEO of DRAXIS Health. “We remain confident in the underlying strength of our contract manufacturing business and its prospects going forward. In our radiopharmaceuticals business, we have moved to establish an enhanced management team and lay the foundations for a new strategy in that division, based on identifying and engaging partners to catalyze growth in Nuclear Medicine markets globally in the near to mid term.
Dr. Barkin also noted that, “the recent appointment of Dan Brazier to the newly-created position of Chief Operating Officer is a decision consistent with our intention to place an increased emphasis on operational excellence and execution. We have spent considerable time and energy focusing the Company in two growth-oriented specialized business units and as the scope of our operations increase we intend to maintain the discipline required to optimize long term performance in both these businesses.”
------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (in thousands of U.S. dollars except share related data and in accordance with U.S. GAAP) For the Three Month Periods For the Nine Month Periods Ended September 30, Ended September 30, ---------------------------- -------------------------- 2005 2004 2005 2004 (unaudited) (unaudited) (unaudited) (unaudited) REVENUES $16,034 $16,205 Product sales $55,716 $43,341 1,423 1,980 Royalty and licensing 5,057 5,693 ------------------------------------------------------------------------- $17,457 $18,185 $60,773 $49,034 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Research and $472 $440 development expense $1,591 $1,446 $5,659 $5,600 Product Gross Margin $20,309 $15,516 35.3% 34.6% Product Gross Margin % 36.5% 35.8% $1,657 $2,722 Operating income $8,791 $6,998 9.5% 15.0% Operating Margin % 14.5% 14.3% Cash and cash $7,349 $9,507 equivalents $7,349 $9,507 $0 $5,260 Total debt $0 $5,260 Cash flows from $460 $2,323 operating activities $3,361 $755 Cash flows used in investing (1,358) (344) activities (3,555) (2,208) ------------------------------------------------------------------------- ($898) $1,979 ($194) ($1,453) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net income (loss) from continuing $1,069 $2,058 operations $6,717 $5,710 from discontinued - 3 operations - (27) ------------------------------------------------------------------------- $1,069 $2,061 $6,717 $5,683 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic income per share from continuing $0.03 $0.05 operations $0.16 $0.14 from discontinued - - operations - - ------------------------------------------------------------------------- $0.03 $0.05 $0.16 $0.14 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Segment Highlights from Management’s Discussion and Analysis Contract Manufacturing - Results in the division were negatively impacted by an extended shutdown period for facility maintenance and repair in its sterile products area during the third quarter of 2005 as previously announced. - Revenues of $11.6 million for the third quarter of 2005 decreased by $0.3 million or 3% versus the third quarter of 2004; revenues for the first nine months of 2005 were $42.1 million, 33% greater than the first nine months of 2004 as a result of increased production demand from two of the Company’s top three customers. - Product gross margin increased slightly to 22.9% for the third quarter of 2005 from 22.5% in the third quarter of 2004, due to the positive impact of increased sterile products volumes prior to the shutdown; product gross margin percentage for the first nine months of 2005 increased to 27.8% from 23.4% compared to the same period in 2004 as a result of volume growth, principally of higher margin sterile products. - Operating income for the third quarter of 2005 was $0.5 million compared to $1.2 million for the third quarter of 2004 and for the first nine months of 2005 was $5.8 million, an increase of 78% over the $3.2 million in the same period in 2004. - The Company announced on September 1, 2005, that it renewed its production outsourcing agreement with Pfizer Canada Inc. under a new 3-year manufacturing agreement to produce several non-prescription products as one of a select number of approved suppliers to the Pfizer Consumer Healthcare Canada division. Radiopharmaceuticals - Product sales of $4.9 million for the third quarter of 2005 represent an 8% increase over the third quarter of 2004; nine month product sales of $14.4 million in 2005 are 9% ahead of the same period in 2004. The increases are primarily due to higher sales of radioiodine products, primarily higher volumes of sodium iodide I-131, resulting from greater U.S. market penetration. - Product gross margin percentage in the third quarter of 2005 was 61%, the same as in the third quarter of 2004, with radioiodine products continuing to contribute substantially. For the nine months ended September 30, 2005, product gross margin percentage was 60%, also unchanged from 2004. - Operating income of $1.3 million for the third quarter of 2005 was slightly ahead of the $1.1 million in the third quarter of 2004. - During the quarter, the Company strengthened its leadership team in the radiopharmaceutical division with two key appointments. Dr. Jean De Serres was appointed Vice-President, Clinical Research and Regulatory Affairs and will spearhead the development programs focused on new product additions for DRAXIMAGE. Mr. Francois Bergeron, the new Director of Marketing, will lead the initiatives to expand customer relations, increase market penetration and enter new markets. - On October 6, 2005 DRAXIMAGE President, Mr. Jean-Pierre Robert, outlined strategies for the long-term growth of the division through the addition of new and improved products, further penetration of its niche markets in North America and expansion into new territories and segments. The Company also provided an update on INFECTON(R) and introduced the expert medical panel that has been assembled to assess the results of FIBRIMAGE(R) clinical testing in conjunction with market related information and to provide advice on further development. Interim Financial Report
This release includes by reference the third 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 third quarter 2005 financial results at 11:00 a.m. (ET) on November 3, 2005. This call can be accessed by dialing 1(800) 289-0533 and using Access Code 5759643, 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 Specialty Pharmaceuticals Inc. employs over 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; 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 Nine Month Periods Ended September 30, Ended September 30, ------------------------- ------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ REVENUES $ 16,034 $ 16,205 Product sales $ 55,716 $ 43,341 Royalty and 1,423 1,980 licensing 5,057 5,693 ------------------------------------------------------------------------- 17,457 18,185 60,773 49,034 ------------------------------------------------------------------------- EXPENSES Cost of goods sold, excluding depreciation 10,375 10,605 and amortization 35,407 27,825 Selling, general 3,786 3,267 and administration 11,659 9,542 Research and 472 440 development 1,591 1,446 Depreciation 1,167 1,151 and amortization 3,325 3,223 ------------------------------------------------------------------------- 15,800 15,463 51,982 42,036 ------------------------------------------------------------------------- 1,657 2,722 Operating income 8,791 6,998 (21) (44) Financing expense, net (29) (234) (496) (170) Foreign exchange loss (438) (165) - - Other income - 96 ------------------------------------------------------------------------- 1,140 2,508 Income before undernoted 8,324 6,695 (71) (450) Income taxes (1,607) (981) - - Minority interest - (4) ------------------------------------------------------------------------- Income from continuing 1,069 2,058 operations 6,717 5,710 Income (loss) from discontinued operations, - 3 net of taxes - (27) ------------------------------------------------------------------------- $ 1,069 $ 2,061 Net income $ 6,717 $ 5,683 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic income per share ---------------------- from continuing $ 0.03 $ 0.05 operations $ 0.16 $ 0.14 from discontinued - - operations - - ------------------------------------------------------------------------- $ 0.03 $ 0.05 $ 0.16 $ 0.14 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Diluted income per share ------------------- from continuing $ 0.03 $ 0.05 operations $ 0.16 $ 0.14 from discontinued - - operations - - ------------------------------------------------------------------------- $ 0.03 $ 0.05 $ 0.16 $ 0.14 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted-average number of shares outstanding 41,600,860 40,877,133 - basic 41,419,801 39,517,321 42,524,245 42,028,861 - diluted 42,379,244 40,687,589 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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) September 30, December 31, 2005 2004 ------------ ------------ ASSETS (audited) Current assets Cash and cash equivalents $ 7,349 $ 5,926 Restricted cash - 428 Accounts receivable, net 17,347 13,724 Inventories (Note 3) 8,635 10,158 Prepaid expenses 1,419 830 Deferred income taxes, net 4,708 4,121 ------------------------------------------------------------------------- Total current assets 39,458 35,187 Property, plant and equipment, net 45,995 43,857 Goodwill 754 728 Intangible assets, net 471 737 Other assets 523 604 Deferred income taxes, net 6,260 7,672 ------------------------------------------------------------------------- Total assets $ 93,461 $ 88,785 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES Current liabilities Accounts payable and accrued liabilities $ 6,720 $ 10,436 Current portion of deferred revenues 3,721 3,676 Customer deposits 653 628 ------------------------------------------------------------------------- Total current liabilities 11,094 14,740 Deferred revenues 1,652 4,125 ------------------------------------------------------------------------- Total liabilities $ 12,746 $ 18,865 ------------------------------------------------------------------------- SHAREHOLDERS’ EQUITY Common stock, without par value of unlimited shares authorized $ 77,314 $ 75,840 Additional paid-in capital 15,546 15,546 Warrants 916 916 Deficit (20,848) (27,565) Accumulated other comprehensive income 7,787 5,183 ------------------------------------------------------------------------- Total shareholders’ equity 80,715 69,920 ------------------------------------------------------------------------- Total liabilities and shareholders’ equity $ 93,461 $ 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 Nine Month Periods Ended September 30, Ended September 30, ------------------------- ------------------------- 2005 2004 2005 2004 ------------------------- ------------------------- Common Stock (Number of Shares) Balance, beginning 41,599,804 40,844,993 of period 41,015,326 37,297,817 Issuance of - - common shares - 3,053,436 2,467 115,333 Exercise of options 586,945 554,177 Exercise of employee - - participation shares - 54,896 ------------------------------------------------------------------------- Balance, end 41,602,271 40,960,326 of period 41,602,271 40,960,326 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Common Stock Balance, beginning $ 77,306 $ 75,487 of period $ 75,840 $ 61,175 Issuance of - - common shares - 12,867 8 244 Exercise of options 1,474 1,485 Exercise of employee - - participation shares - 204 ------------------------------------------------------------------------- Balance, end $ 77,314 $ 75,731 of period $ 77,314 $ 75,731 ------------------------------------------------------------------------- Additional Paid In Capital Balance, beginning $ 15,546 $ 15,546 of period $ 15,546 $ 15,667 - - Stock compensation - (121) ------------------------------------------------------------------------- Balance, end $ 15,546 $ 15,546 of period $ 15,546 $ 15,546 ------------------------------------------------------------------------- Warrants Balance, beginning $ 916 $ 916 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, beginning $ (21,917) $ (31,859) of period $ (27,565) $ (35,481) 1,069 2,061 Net income 6,717 5,683 ------------------------------------------------------------------------- Balance, end $ (20,848) $ (29,798) of period $ (20,848) $ (29,798) ------------------------------------------------------------------------- Accumulated Other Comprehensive Income (Loss) Balance, beginning $ 3,872 $ (1,571) of period $ 5,183 $ 286 Other comprehensive 3,915 3,365 Income 2,604 1,508 ------------------------------------------------------------------------- 7,787 1,794 Balance, end of period 7,787 1,794 ------------------------------------------------------------------------- Total shareholders’ $ 80,715 $ 64,189 equity $ 80,715 $ 64,189 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Comprehensive Income Foreign currency translation $ 3,915 $ 3,365 adjustments $ 2,604 $ 1,508 ------------------------------------------------------------------------- Other comprehensive 3,915 3,365 income 2,604 1,508 1,069 2,061 Net income 6,717 5,683 ------------------------------------------------------------------------- Total comprehensive $ 4,984 $ 5,426 income $ 9,321 $ 7,191 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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 -------------------------------------------------------------------