Paladin Labs Inc. Reports Record Second Quarter 2010 Financial Results

MONTREAL, CANADA--(Marketwire - August 05, 2010) - Paladin Labs Inc. (TSX: PLB), a leading Canadian specialty pharmaceutical company, today reported its 2010 second quarter financial results.

2010 Second Quarter Highlights

 -- Revenues reached a record $32.9 million, an increase of 26% versus last year. -- EBITDA(1) reached a record $13.6 million, a 62% increase over the same period last year. -- Obtained approval from Health Canada for Seasonique®, the next generation extended-cycle oral contraceptive for the prevention of pregnancy. 

“We are pleased with the results for the first half of the year. We are seeing strong organic growth from our promoted portfolio coupled with solid non-organic growth from our acquisition of Pharmaplan. With a strong balance sheet, we are well poised to execute our business strategy.” said Jonathan Ross Goodman, President and CEO of Paladin Labs.

Financial Results

Revenue for the second quarter of 2010 increased 26% or $6.7 million to $32.9 million, compared to $26.3 million in the second quarter of 2009. This increase is due to sales growth of certain significant promoted products, including Tridural®, Trelstar®, Testim®, Metadol® and Plan B®, which combined increased by 29% in the second quarter of 2010 compared to the corresponding period a year ago.

Second quarter 2010, EBITDA(1) increased 62% to $13.6 million, compared to EBITDA(1) of $8.4 million in the second quarter of 2009. For the six months ended June 30, 2010, EBITDA(1) increased 30% to $25.2 million from $19.4 million. Paladin’s share of income from Pharmaplan was $335,000 for the quarter and $466,000 for the six months ending June 30, 2010.

Net income before extraordinary gain for the quarter was $4.7 million or $0.24 per fully diluted share, compared to net income before extraordinary gain of $1.8 million or $0.11 per fully diluted share in the second quarter a year ago. Net income for the three months ended June 30, 2009 was $27.7 million or $1.71 per fully diluted share.

At June 30, 2010, Paladin’s cash, cash equivalents and investments in marketable securities totalled $105.5 million. From this strong cash position, Paladin continues to pursue product acquisition and development opportunities.

Product Developments

In April 2010, Health Canada approved Seasonique®, the next generation extended-cycle oral contraceptive for the prevention of pregnancy. Under the Seasonique® extended-cycle regimen, women take active tablets of 0.15 mg levonorgestrel/0.03 mg of ethinyl estradiol for 84 consecutive days, followed by seven days of a low dose of ethinyl estradiol (0.01 mg). The regimen is designed to reduce the number of withdrawal bleeding periods from thirteen to four per year.

(1) EBITDA (earnings before interest, taxes, depreciation and amortization) does not have any standardized meaning under Canadian Generally Accepted Accounting Principles (“GAAP”) and therefore may not be comparable to similar measures presented by other companies. The Company defines EBITDA as earnings before interest expense, taxes, amortization, foreign exchange gains (losses), share of net income in companies subject to significant influence and unusual items; such as write-downs and gains (losses) on intellectual property and investments. EBITDA is calculated and presented consistently from period to period and agrees, on a consolidated basis, with the amount disclosed as “Earnings before under noted items” on the consolidated statement of income. The Company believes EBITDA to be an important measurement that allows it to assess the operating performance of its ongoing business on a consistent basis without the impact of amortization expenses. The Company excludes amortization expenses because their level depends substantially on non-operating factors such as the historical cost of intangible and capital assets. The Company’s method for calculating EBITDA may differ from that used by other issuers and, accordingly, this measure may not be comparable to EBITDA used by other issuers.

Conference Call Notice

Paladin will host a conference call to discuss its first quarter results on Thursday, August 5, 2010, at 10:00 a.m. ET. The dial-in number for the conference call is 800-954-1053 or 416-981-9031. The call will be audio-cast live and archived for 30 days at www.paladinlabs.com.

About Paladin Labs

Paladin Labs Inc., headquartered in Montreal, Canada, is a specialty pharmaceutical company focused on acquiring or in-licensing innovative pharmaceutical products. With this strategy, a focused national sales team and proven marketing expertise, Paladin has evolved into one of Canada’s leading specialty pharmaceutical companies. For more information, please visit the Company’s web site at www.paladinlabs.com

This press release may contain forward-looking statements and predictions. These forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. The Company considers the assumptions on which these forward-looking statements are based to be reasonable at the time they were prepared, but cautions that these assumptions regarding the future events, many of which are beyond the control of the Company and its subsidiaries, may ultimately prove to be incorrect. Factors and risks, which could cause actual results to differ materially from current expectations, are discussed in the annual report as well as in the Company’s Annual Information Form for the year ended December 31, 2009. The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information or future events and except as required by law. For additional information on risks and uncertainties relating to these forward-looking statements, investors should consult the Company’s ongoing quarterly filings, annual report and Annual Information Form and other fillings found on SEDAR at www.sedar.com.

 CONSOLIDATED BALANCE SHEETS (In thousands of Canadian dollars) June 30 December 31 2010 2009 $ $ -------------------------------------------------------------------------- (unaudited) (audited(1)) ASSETS Current Cash and cash equivalents 13,639 31,227 Marketable securities 74,833 73,274 Accounts receivable 16,604 14,167 Inventories 13,807 12,361 Other current assets 4,694 2,668 Income taxes receivable - 4,630 Investment tax credits recoverable 147 776 Future income tax assets 6,746 6,196 -------------------------------------------------------------------------- Total current assets 130,470 145,299 Long-term marketable securities 17,066 868 Property, plant and equipment 305 691 Pharmaceutical product licences and rights 30,579 42,543 Investments 22,398 62 Investments tax credits recoverable 14,736 14,903 Future income tax assets 27,642 31,029 -------------------------------------------------------------------------- Total assets 243,196 235,395 -------------------------------------------------------------------------- -------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS’ EQUITY Current Accounts payable and accrued liabilities 22,655 22,934 Accounts payable to related parties 447 1,122 Deferred revenue 57 1,776 Income taxes payable 9,045 7,109 Balance of sale payable 715 1,650 Future income tax liabilities 44 252 -------------------------------------------------------------------------- Total current liabilities 32,963 34,843 Long-term Balance of sale payable 1,402 1,743 Future income tax liabilities 3,968 4,007 -------------------------------------------------------------------------- Total liabilities 38,333 40,593 -------------------------------------------------------------------------- Shareholders’ equity Capital stock 121,826 119,652 Other paid-in capital 4,620 4,408 Accumulated other comprehensive income 43 98 Retained earnings 78,374 70,644 -------------------------------------------------------------------------- Total shareholders’ equity 204,863 194,802 -------------------------------------------------------------------------- Total liabilities and shareholders’ equity 243,196 235,395 -------------------------------------------------------------------------- -------------------------------------------------------------------------- (1) Derived from the audited annual financial statements filed on SEDAR at www.sedar.com CONSOLIDATED STATEMENTS OF INCOME (In thousands of Canadian dollars except for share and per share amounts) (unaudited) Three-month period Six-month period ended ended June 30 June 30 2010 2009 2010 2009 -------------------------------------------------------------------------- Revenues 32,936 26,225 63,773 52,040 Cost of sales 9,245 7,353 18,025 13,723 -------------------------------------------------------------------------- Gross profit 23,691 18,872 45,748 38,317 -------------------------------------------------------------------------- Expenses (income) Selling and marketing 5,414 6,884 11,202 12,396 General and administrative 2,439 2,413 4,726 4,331 Research and development 2,675 1,258 5,412 2,521 Interest income (493) (93) (794) (292) -------------------------------------------------------------------------- Earnings before under- noted items 13,656 8,410 25,202 19,361 -------------------------------------------------------------------------- Amortization of pharmaceutical product licenses and rights 6,071 5,972 12,341 12,064 Net gain on investments - (485) (7) (492) Foreign exchange (gain) loss (119) (18) 201 4 Other income (41) (110) (41) (110) Share of net income in companies subject to significant influence (335) - (466) - -------------------------------------------------------------------------- Income before income taxes 8,080 3,051 13,174 7,895 -------------------------------------------------------------------------- Provision for income taxes Current 2,416 (2,228) 2,838 (2,034) Future 979 3,508 2,606 5,106 -------------------------------------------------------------------------- 3,395 1,280 5,444 3,072 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net income before extraordinary gain 4,685 1,771 7,730 4,823 -------------------------------------------------------------------------- Extraordinary gain (net of $nil taxes) - 25,959 - 25,959 -------------------------------------------------------------------------- Net income for the period 4,685 27,730 7,730 30,782 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Earnings per share before extraordinary gain Basic 0.25 0.11 0.41 0.31 Diluted 0.24 0.11 0.40 0.30 Earnings per share Basic 0.25 1.77 0.41 1.96 Diluted 0.24 1.71 0.40 1.89 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Weighted average number of shares outstanding Basic 18,668,015 15,706,245 18,632,017 15,320,105 Diluted 19,334,082 16,251,887 19,247,928 15,741,757 -------------------------------------------------------------------------- -------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of Canadian dollars) (unaudited) Three-month period Six-month period ended June 30 ended June 30 2010 2009 2010 2009 -------------------------------------------------------------------------- Operating activities Net income 4,685 27,730 7,730 30,782 Add items not affecting cash Extraordinary gain - (25,959) - (25,959) Amortization 6,283 6,038 12,768 12,187 Future income taxes 979 3,508 2,606 5,106 Stock based compensation expense 606 687 959 1,089 Unrealized foreign exchange (gain) loss (148) (36) 190 43 Net gain on investments - (485) (7) (493) Net accreted interest (income) expense (50) 24 (68) (1) Share of net income in companies subject to significant influence (335) - (466) - -------------------------------------------------------------------------- 12,020 11,507 23,712 22,754 -------------------------------------------------------------------------- Net change in non-cash balances relating to operations 3,091 (245) 1,782 (3,169) -------------------------------------------------------------------------- Cash flows from operating activities 15,111 11,262 25,494 19,585 -------------------------------------------------------------------------- Investing activities Acquisition of investments (383) (130) (24,995) (130) Repayment of balance of sale payable - - (1,650) - Additions to pharmaceutical product licenses and rights - (5,475) - (5,476) Business acquisition - (7,594) - (7,594) Acquisition of property, plant and equipment (27) (81) (49) (109) Purchases of short-term marketable securities (31,493) (32,988) (70,908) (43,350) Maturities of short-term marketable securities 65 2,333 74,469 11,298 Purchases of long-term marketable securities (17,024) (9,235) (21,397) (11,204) Proceeds from the disposal of investments - 4,244 27 6,979 -------------------------------------------------------------------------- Cash flows used in investing activities (48,862) (48,926) (44,503) (49,586) -------------------------------------------------------------------------- Financing activities Net proceeds on issuance of common shares 639 56,561 1,410 56,749 -------------------------------------------------------------------------- Cash flows from financing activities 639 56,561 1,410 56,749 -------------------------------------------------------------------------- Foreign exchange rate change on cash and cash equivalents 29 18 11 (39) Net change in cash and cash equivalents during the period (33,083) 18,915 (17,588) 26,709 Cash and cash equivalents, beginning of period 46,722 12,439 31,227 4,645 -------------------------------------------------------------------------- Cash and cash equivalents, end of period 13,639 31,354 13,639 31,354 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Cash and cash equivalents 13,639 31,354 Short-term marketable securities 74,833 48,722 Long-term marketable securities 17,066 11,203 -------------------------------------------------------------------------- 105,538 91,279 -------------------------------------------------------------------------- --------------------------------------------------------------------------