LAVAL, March 16 /PRNewswire-FirstCall/ - LAB International Inc. (“LAB”), an integrated drug development company with subsidiaries focused on developing therapies for the inhalation market and on providing contract research services, today announced financial results for the three and twelve months period ended December 31, 2005.
Consolidated revenues for LAB International rose to a record $46.5 million in 2005, an 85% increase over the previous year and reached $11.3 million for the fourth quarter of 2005, a 77% increase over the same period in 2004. LAB Research generated revenues of $43.3 million and $10.2 million for the year and fourth quarter of 2005, representing increases of 82% and 70% respectively. LAB Research revenues in 2005 include an $18.2 million contribution from Scantox, its Danish subsidiary acquired in February 2005 and excludes $1.3 million of intercompany sales.
LAB is currently evaluating several strategic options to monetize LAB Research and unlock overall shareholder value. These options range from an outright sale of the LAB Research business unit to a Public Offering. As a stand-alone entity, LAB Research would have generated revenues of $44.6 million and $10.5 million of EBITDA for the year. LAB Research is a profitable and one of the fastest growing preclinical contract research organizations (CRO) in the world. It has operations in Canada, United States, Denmark and Hungary and currently employs more than 400 employees.
“2005 resulted in another year of record revenues for LAB. LAB Research has successfully integrated Scantox and continued to grow organically to become one of the world’s largest dedicated preclinical operations. Now that LAB Research has attained critical mass in terms of revenues, client base, international presence and scope of services offering, we strongly believe that the time has come for LAB to take full advantage of this situation to monetize its full worth and unlock overall value for our shareholders.” said Dr Halvor Jaeger, Chief Executive Officer of LAB International.
“2005 was also a good year for LAB Pharma as our three lead products have steadily advanced towards later-stage clinical trials. We are now anticipating positive Phase II efficacy results for all three of our lead products within the next few quarters which, in turn, should accelerate our evolution into a dedicated global player in the inhalation specialty field.” added Dr Halvor Jaeger.
Other Financial Highlights - After elimination of a $0.64 million contribution from intercompany studies for the year and $0.2 million for the last quarter of 2005, LAB Research’s EBITDA was $9.6 million for the year and $2.0 million in the fourth quarter, compared with $5.7 million for the previous year and $1.2 million for the fourth quarter of the previous year, a 68% and 74% increase respectively. - LAB Pharma contributed revenues of $1.1 million during the fourth quarter of 2005 and $3.1 million for 2005, compared with $0.4 million and $1.3 million for the comparable periods in 2004. - Consolidated net loss for the fourth quarter of 2005 was $3.3 million or $0.06 per share, compared with $3.6 million or $0.10 per share in 2004. Consolidated net loss for 2005 was $13.1 million or $0.24 per share compared with $9.9 million or $0.27 per share for 2004. - LAB Research continued its strong performance, with 2005 sales increasing 82% over 2004 despite the negative impact of the strong Canadian dollar versus the Euro and US dollar. On a consolidated basis, the Company continues to be naturally hedged against the Euro due to its R&D spending taking place in Europe. - LAB received approximately $2.6 million in 2005 to support product development and secured an additional $2.2 million from the National Technology Agency of Finland (TEKES). LAB also entered into a sale lease-back transaction for its LAB Research Laval facility for a total amount of $7.8 million. - LAB raised $12.3 million through a non-brokered private placement equally divided between Atlas Venture and Great Point Partners. LAB Pharma 2005 Operational Highlights - LAB Pharma initiated patient enrollment in a Phase II clinical trial for its lead product, Fentanyl TAIFUN(R) and successfully completed an additional comparative Phase I clinical trial against the commercially available Actiq(R) lozenge. - On July 5, 2005, LAB Pharma initiated patient enrollment in its first Phase II clinical trial for its Growth Hormone Releasing Hormone, LAB GHRH. - LAB Pharma initiated and completed patient enrollment in a Phase I clinical trial for its novel asthma product, LAB CGRP. Positive results were disclosed on September 22, 2005 LAB Research 2005 Operational Highlights - In February, LAB acquired all shares of Scantox, Biologisk Laboratorium, A/S of Denmark, the leading Scandinavian contract research organization. - LAB Research Canada successfully completed a GLP (Good Laboratory Practice) audit by the BfR Group (German Federal GLP compliance) validating the facility as meeting OECD standards of quality and making it the first of its kind in North-America. - Mr. Leigh Berryman, previously President of LAB Research, recently agreed to leave the Company following an unsuccessful management buyout attempt. Mr. Luc Mainville, Chief Operating Officer of LAB will now assume full responsibility for LAB Research. Financial Results
The 77% and 85% increases in LAB’s consolidated revenues for the fourth quarter and 2005 were primarily attributable to $4.4 million and $18.2 million contributions respectively from Scantox. With $1.7 million in revenues for the fourth quarter and $6.6 million in 2005, the Hungarian operations have exceeded 2004 fourth quarter and 2004 revenues by 21% and 32%, respectively, after elimination of $0.4 million and $1.3 million of revenues from LAB Pharma for the fourth quarter and for the full year. As LAB Canada is proceeding to expand its Laval facilities by 40%, revenues from the Canadian operations for the fourth quarter of 2005 and 2005 decreased 20% to $3.5 million and 4% to $17.0 million respectively, compared with the same period in 2004. These decreases were primarily attributable to large study delays, the significant drop in value of the U.S. dollar since more than 65% of its revenues come from US based customers and termination of lease arrangements for the provisions of study rooms. LAB Pharma generated revenues of $1.1 million during the fourth quarter of 2005 and $3.1 million for 2005, consisting mainly of co-development revenues compared to $0.4 million and $1.3 million for the same 2004 periods.
Consolidated SG&A expenses totaled $18.2 million for the entire year 2005 and $5.4 million for the fourth quarter of 2005, increases of 56% and 38% over the same 2004 periods respectively. Approximately 48% of the year-over-year increase related to Scantox. In addition, LAB’s organic growth and latest acquisitions have necessitated an increase in managerial resources to integrate and leverage its operating units.
R&D costs for 2005 were $9.4 million compared with $6.2 million in 2004. For the fourth quarter of 2005, R&D costs were $2.7 million compared with $1.9 million for the same quarter of 2004. The increase in spending is primarily attributable to the costs associated with advancing Fentanyl TAIFUN(R) and LAB’s other products into later stage clinical trials.
The consolidated net loss for the fourth quarter of 2005 was $3.3 million, or $0.06 per share, compared with a consolidated net loss for the fourth quarter of 2004 of $3.6 million, or $0.10 per share. The consolidated net loss for 2005 was $13.1 million, or $0.24 per share, compared with a consolidated net loss for 2004 of $9.9 million, or $0.27 per share. The overall increase in net loss is due to the higher rate of product development spending, SG&A expenses necessary to support LAB’s overall growth and long term interest expense from LAB’s convertible debenture.
The Company had cash and cash equivalents including cash held in escrow as of December 31, 2005 of $17.4 million. This compares with $12.0 million as of December 31, 2004 and $5.4 million as of September 30, 2005. This should provide LAB with sufficient liquidity to fund its Pharma business well into 2007.
About LAB International
LAB International (LAB Pharma and LAB Research) is an integrated drug development company. LAB Pharma is focused on the growing multi-billion dollar inhalation market. Its lead product, for the treatment of breakthrough cancer pain, is a fast-acting Fentanyl formulation delivered using the Company’s TAIFUN(R) dry powder inhaler platform. Its pipeline also includes therapeutics for asthma, COPD, and growth hormone deficiencies. LAB Research is a profitable and growing contract research services division supporting its clients base from state-of-the-art facilities in Canada, the US, Denmark and Hungary.
LAB’s common shares trade on The Toronto Stock Exchange (“TSX”) under the symbol “LAB”, on the Frankfurt Regulated Unofficial Market under the symbol “LD9.F” and on XETRA under the symbol “LD9.DE” with 70.0 million shares outstanding.
This news release contains certain forward-looking statements that reflect the current views and/or expectations of LAB International Inc. with respect to its performance, business and future events. Such statements are subject to a number of risks, uncertainties and assumptions. Actual results and events may vary significantly.
<< LAB INTERNATIONAL INC. Consolidated Balance Sheets December 31, 2005 and 2004 (in thousands of Canadian dollars) ------------------------------------------------------------------------- ------------------------------------------------------------------------- 2005 2004 ------------------------------------------------------------------------- Assets Current assets: Cash and cash equivalents $ 16,914 $ 12,049 Cash held in escrow 541 - Accounts receivable 8,469 6,025 Work in progress 2,314 1,381 Research tax credits receivable 1,333 830 Prepaid expenses 1,262 370 ------------------------------------------------------------------------- 30,833 20,655 Property and equipment 22,748 19,487 Intangible assets 11,831 9,024 Other assets 1,577 788 Future income taxes 6,957 4,213 ------------------------------------------------------------------------- $ 73,946 $ 54,167 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities and Shareholders’ Equity Current liabilities: Bank loan $ 432 $ - Accounts payable and accrued liabilities 11,046 6,922 Deferred revenue 6,059 3,339 Due to Scantox selling shareholders 541 - Holdback payable - 65 Current portion of long-term debt 2,328 1,200 Current portion of convertible debenture 1,509 - Deferred gain on sale of property 68 - Future income taxes 688 181 ----------------------------------------------------------------------- 22,671 11,707 Deferred rent liability 37 - Deferred gain on sale of property 1,603 - Long-term debt 12,496 11,433 Debt component of convertible debenture 2,510 - Future income taxes 4,021 2,801 Shareholders’ equity: Share capital 54,380 35,280 Share capital issuable - 254 Convertible debentures - 2,720 Warrants 794 1,986 Holder conversion option 1,099 - Additional paid-in capital 8,083 5,427 Cumulative translation adjustment (1,662) 131 Deficit (32,086) (17,572) ----------------------------------------------------------------------- 30,608 28,226 ------------------------------------------------------------------------- $ 73,946 $ 54,167 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LAB INTERNATIONAL INC. Consolidated Statements of Operations Years ended December 31, 2005 and 2004 (in thousands of Canadian dollars, except per share data) ------------------------------------------------------------------------- ------------------------------------------------------------------------- 2005 2004 ------------------------------------------------------------------------- Revenues $ 46,490 $ 25,188 Expenses: Direct costs 26,123 12,746 Selling, general and administrative 18,201 11,738 Research and development 9,373 6,242 Stock-based compensation 802 1,069 Amortization of property and equipment 2,968 1,597 Amortization of intangible assets 1,663 478 Interest on long-term debt 1,816 518 Foreign exchange (426) (59) ----------------------------------------------------------------------- 60,520 34,329 ------------------------------------------------------------------------- Loss before income taxes (14,030) (9,141) (Recovery of) provision for income taxes (955) 777 ------------------------------------------------------------------------- Net loss $(13,075) $ (9,918) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Loss per share: Basic $ (0.24) $ (0.27) Diluted (0.24) (0.27) ------------------------------------------------------------------------- ------------------------------------------------------------------------- LAB INTERNATIONAL INC. Consolidated Statements of Deficit Years ended December 31, 2005 and 2004 (in thousands of Canadian dollars) ------------------------------------------------------------------------- ------------------------------------------------------------------------- 2005 2004 ------------------------------------------------------------------------- Deficit, beginning of year: As previously reported $(17,572) $ (5,124) Adjustment to reflect adoption of fair value for employee stock options - (1,636) ------------------------------------------------------------------------- Deficit restated (17,572) (6,760) Net loss (13,075) (9,918) Share issue costs (1,439) (894) ------------------------------------------------------------------------- Deficit, end of year $(32,086) $(17,572) ------------------------------------------------------------------------- ------------------------------------------------------------------------- LAB INTERNATIONAL INC. Consolidated Statements of Cash Flows Years ended December 31, 2005 and 2004 (in thousands of Canadian dollars) ------------------------------------------------------------------------- ------------------------------------------------------------------------- 2005 2004 ------------------------------------------------------------------------- Cash flows from operating activities: Net loss $(13,075) $ (9,918) Adjustments for: Amortization and write-off of property and equipment 3,032 1,694 Amortization of intangible assets 1,663 478 Amortization of deferred financing fees 72 9 Stock-based compensation 802 1,103 Accretion expense on convertible debenture 915 - Unrealized foreign exchange gain (295) - Amortization of deferred gain of property (12) - Future income taxes (3,092) (871) Net changes in operating assets and liabilities 2,232 1,219 ----------------------------------------------------------------------- $ (7,758) $ (6,286) Cash flows from financing activities: Proceeds from private placements 14,683 7,265 Proceeds from exercise of warrants - 13 Proceeds from issue of convertible debentures 6,243 5,693 Repayment of convertible debentures (1,079) - Share issue costs (1,430) (662) Proceeds from issuance of long-term debt 2,606 5,185 Repayment of long-term debt (4,917) (741) Repayment of capital leases (726) - Proceeds from bank loan 432 - Repayments under bank credit facilities (53) (435) ------------------------------------------------------------------------- 15,759 16,318 Cash flows from investing activities: Business acquisition, net of cash acquired (6,171) 913 Payment of holdback payable (65) - Payment to TRC selling shareholders - (500) Costs related to acquisition of Scantox - (51) Additions to property and equipment (2,847) (3,299) Proceeds from sale lease-back 6,250 - Fees on sale lease-back transaction (613) - Proceeds from disposal of property and equipment - 47 Additions to licenses and patents (327) (567) Deferred financing fees (317) (40) Other assets (839) 8 ----------------------------------------------------------------------- (4,929) (3,489) ------------------------------------------------------------------------- Net increase in cash and cash equivalents 3,072 6,543 Cash and cash equivalents, beginning of year 12,049 5,656 Effect of exchange rate changes 1,793 (150) ------------------------------------------------------------------------- Cash and cash equivalents, end of year $ 16,914 $ 12,049 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash and cash equivalents are comprised of: Cash $ 5,112 $ 4,701 Term deposit, bearing interest at 2% matured in January 2005 - 1,348 Money market fund 11,802 6,000 ------------------------------------------------------------------------- $ 16,914 $ 12,049 ------------------------------------------------------------------------- ------------------------------------------------------------------------- >>
LAB INTERNATIONAL INC.
CONTACT: visit LAB’s website at www.labinc.ca, or contact: Luc Mainville,Chief Operating Officer, (450) 973-2240 ext. 1206, Fax: (450) 973-2259,mainvillel@labinc.ca; Frederic Dumais, Director, Communication and InvestorRelations, (450) 973-2240 ext. 1207, Fax: (450) 973-2259,dumaisf@labinc.ca; Kim Sutton Golodetz, Investor Relations, (212) 838-3777,Fax: (212) 838-4568, kgolodetz@lhai.com
