CANGENE CORPORATION 
By Listed TSX, Symbol: CNJ
TORONTO & WINNIPEG, June 13, 2011 /CNW/ - Cangene Corporation today reports financial results for the quarter ended April 30, 2011, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). Prior periods have also been restated to reflect the adoption of IFRS with effect from August 1, 2009 (the "Transition Date"), which includes the transition to reporting in U.S. dollars as the functional currency (dollar amounts in this release are in U.S. dollars).
Revenues for the third quarter of 2011 were $34.2 million, 13% lower than the $39.5 million recorded during the same period last year. As usual, Cangene's revenue is significantly impacted by the schedule of deliveries for U.S. government stockpiling contracts, and this quarter reflects the fact that only one delivery was made during the current-year quarter. As well, commercial contract-manufacturing revenue at Cangene bioPharma was temporarily reduced during the quarter due to a scheduled shutdown and renovation, which now that it's complete, has significantly increased the capacity of the facility. Partially offsetting these factors was the $7.9-million increase in commercial product-sales revenue over the comparative 2010 quarter; $6.6 million of this is attributed to initial sales of non-specialty plasma that was collected in Cangene Plasma Resources centres. Decreased royalty revenues received from the Apotex Group during the current quarter reflect the reduced royalty rate in fiscal 2011. Royalty revenues are being phased out in accordance with the terms of the Company's agreement with Apotex.
"Through this quarter we've taken action that lays a path for improved performance going forward," says Michael Graham, acting president and CEO of Cangene. "The restructuring in April that improves our efficiency, the recent exercise of contract options by the U.S. government that enhances our revenue stream, and our continued development of our commercial product business, which includes a three-year supply contract for plasma sales, are all positive steps." he says.
Net loss in the current quarter was $1.6 million or $0.02 per share, compared with net income of $6.2 million or $0.09 per share in the same quarter last year. The change in profitability is mainly due to three factors. First, product-services revenues and gross margin have declined, primarily due to the fact that there were no deliveries of botulism antitoxin to the U.S. government in the quarter. Second, independent R&D expenses increased by $2.2 million, largely due to the quarter's milestone of completing two test production runs of immune globulin intravenous ("IGIV"). And, third, the Company incurred a foreign-exchange loss of $3.6 million during the quarter, due to the strengthening Canadian dollar.
The Company had $30.8 million in cash at April 30, 2011, compared with $40.4 million at July 31, 2010. Cash of $0.4 million was provided by operating activities during the first nine months of 2011, compared with $6.8 million during the same period of the prior year. A $9.6 million decrease in cash since July 31, 2010 is primarily due to the acquisition of property, plant and equipment, and the purchase of shares for cancellation under a Normal Course Issuer Bid, which expired on May 31, 2011. At April 30, 2011, Cangene had no debt.
Readers are referred to the cautionary notes regarding Forward-looking Information and non-IFRS Financial Measures at the end of this release. Certain comparative figures in the following financial statements have been reclassified to conform to the current year's presentation.
Conference Call
Cangene will host a conference call to discuss these financial results on Tuesday, June 14, 2011 at 11:00 a.m. Eastern. To access the conference call by telephone, dial 1-888-231-8191 or 647-427-7450. The conference call will be archived for replay until Tuesday, June 21, 2011, at midnight. To access the archived conference call, dial 1-800-642-1687 or 416-849-0833 and enter the reservation number 74278534 followed by the number sign.A live audio webcast of the conference call will be available at www.cangene.com and www.newswire.ca. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above web sites for 90 days.
Incorporated under the laws of Ontario
Cangene Corporation
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (unaudited)| in thousands of U.S. dollars | At April 30, 2011 | At July 31, 2010 | At August 1, 2009 | |||
| ASSETS | ||||||
| Current | ||||||
| Cash | $ | 30,760 | $ | 40,366 | $ | 51,772 |
| Accounts receivable | 18,568 | 18,248 | 31,773 | |||
| Inventories and contracts in progress | 78,729 | 85,868 | 81,881 | |||
| Taxes recoverable | 13,331 | 10,467 | 5,505 | |||
| Prepaid expenses and deposits | 2,804 | 2,995 | 2,493 | |||
| Total current assets | 144,192 | 157,944 | 173,424 | |||
| Property, plant and equipment, net | 78,066 | 78,861 | 66,010 | |||
| Taxes recoverable | 12,662 | 5,404 | — | |||
| Deferred tax | 16,917 | 15,840 | 15,693 | |||
| Goodwill and intangible assets, net | 15,278 | 17,106 | 4,988 | |||
| Other assets | — | 40 | 849 | |||
| $ | 267,115 | $ | 275,195 | $ | 260,964 | |
| LIABILITIES AND EQUITY | ||||||
| Current | ||||||
| Accounts payable and accrued liabilities | $ | 26,837 | $ | 25,262 | $ | 25,855 |
| Taxes payable | 40 | 73 | 3,805 | |||
| Current portion of deferred income | 5,336 | 3,374 | 5,105 | |||
| Total current liabilities | 32,213 | 28,709 | 34,765 | |||
| Deferred income | 5,745 | 9,593 | 8,704 | |||
| Royalty provision | 3,488 | 6,072 | — | |||
| Incentive plan liabilities | 3,893 | 3,594 | 2,466 | |||
| Deferred share unit liability | 284 | 174 | — | |||
| Deferred tax | 2,596 | 2,062 | 2,717 | |||
| Total liabilities | 48,219 | 50,204 | 48,652 | |||
| Equity | ||||||
| Share capital | 50,930 | 51,696 | 52,376 | |||
| Retained earnings | 167,966 | 173,295 | 159,936 | |||
| Total equity | 218,896 | 224,991 | 212,312 | |||
| $ | 267,115 | $ | 275,195 | $ | 260,964 | |
Cangene Corporation
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) (unaudited)| in thousands of U.S. dollars except share-related data | Three months ended April 30, 2011 | Three months ended April 30, 2010 | Nine months ended April 30, 2011 | Nine months ended April 30, 2010 | |||||
| Revenues | |||||||||
| Product sales and services | $ | 28,613 | $ | 32,300 | $ | 82,357 | $ | 95,423 | |
| R&D services | 4,775 | 5,463 | 12,642 | 16,468 | |||||
| Royalties | 847 | 1,775 | 2,478 | 5,683 | |||||
| 34,235 | 39,538 | 97,477 | 117,574 | ||||||
| Cost of sales | |||||||||
| Product sales and services | 20,825 | 22,346 | 56,927 | 59,536 | |||||
| R&D services | 3,321 | 3,873 | 9,335 | 12,627 | |||||
| 24,146 | 26,219 | 66,262 | 72,163 | ||||||
| Gross profit | 10,089 | 13,319 | 31,215 | 45,411 | |||||
| Expenses | |||||||||
| Independent R&D | 4,579 | 2,406 | 10,086 | 8,065 | |||||
| Selling, general and administrative | 7,570 | 6,116 | 22,855 | 18,210 | |||||
| Loss (gain) on sale of assets | (125) | 173 | (87) | 182 | |||||
| 12,024 | 8,695 | 32,854 | 26,457 | ||||||
| Operating profit (loss) | (1,935) | 4,624 | (1,639) | 18,954 | |||||
| Short-term interest income | 17 | 8 | 43 | 38 | |||||
| Foreign-exchange loss | (3,633) | (635) | (5,592) | (313) | |||||
| Income (loss) before taxes | (5,551) | 3,997 | (7,188) | 18,679 | |||||
| Tax expense (benefit) | |||||||||
| Current | (2,204) | (418) | (3,641) | 2,805 | |||||
| Deferred | (1,737) | (1,743) | (543) | (2,547) | |||||
| (3,941) | (2,161) | (4,184) | 258 | ||||||
| Net income (loss) and comprehensive income (loss) for the period | $ | (1,610) | $ | 6,158 | $ | (3,004) | $ | 18,421 | |
| Earnings (loss) per share | |||||||||
| Basic and diluted | $ | (0.02) | $ | 0.09 | $ | (0.04) | $ | 0.27 | |
Cangene Corporation
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY(unaudited)| in thousands of U.S. dollars | Stated share capital | Retained earnings | Total | |||
| Balance at August 1, 2009 | $ | 52,376 | $ | 159,936 | $ | 212,312 |
| Net income for the nine-month period ended April 30, 2010 | — | 18,421 | 18,421 | |||
| Common shares purchased and cancelled under Normal Course Issuer Bid ("NCIB") | (373) | (2,029) | (2,402) | |||
| Balance at April 30, 2010 | $ | 52,003 | $ | 176,328 | $ | 228,331 |
| Balance at July 31, 2010 | 51,696 | 173,295 | 224,991 | |||
| Net loss for the nine-month period ended April 30, 2011 | — | (3,004) | (3,004) | |||
| Common shares purchased and cancelled under NCIB | (766) | (2,325) | (3,091) | |||
| Balance at April 30, 2011 | $ | 50,930 | $ | 167,966 | $ | 218,896 |
Cangene Corporation
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (unaudited)
| in thousands of U.S. dollars | Three months ended April 30, 2011 | Three months ended April 30, 2010 | Nine months ended April 30, 2011 | Nine months ended April 30, 2010 | |||||
| OPERATING ACTIVITIES | |||||||||
| Net income (loss) for the period | $ | (1,610) | $ | 6,158 | $ | (3,004) | $ | 18,421 | |
| Add (deduct) items not involving cash: | |||||||||
| Depreciation of property, plant and equipment | 2,478 | 2,316 | 7,599 | 6,813 | |||||
| Amortization of intangible assets | 681 | 698 | 2,047 | 1,599 | |||||
| Deferred income | (911) | 276 | (1,886) | 1,483 | |||||
| Incentive plan liability | (217) | (1,449) | 299 | 2,641 | |||||
| Deferred share unit liability | 35 | 28 | 110 | 160 | |||||
| Amortization of royalty provision | (228) | (310) | (848) | (619) | |||||
| Revaluation of royalty provision | (156) | — | (1,736) | — | |||||
| Deferred tax benefit | (1,737) | (1,743) | (543) | (2,547) | |||||
| Unrealized foreign-exchange gain | — | (631) | — | (422) | |||||
| Loss (gain) on disposal of assets | (125) | 173 | (87) | 182 | |||||
| Net change in non-cash working capital balances and other assets related to operations | 12,448 | 10,896 | (1,530) | (20,951) | |||||
| Cash provided by operating activities | 10,658 | 16,412 | 421 | 6,760 | |||||
| INVESTING ACTIVITIES | |||||||||
| Purchase of property, plant and equipment, net | (1,235) | (11,820) | (6,857) | (17,275) | |||||
| Acquisition of intangible assets | (106) | (71) | (219) | (7,209) | |||||
| Proceeds on disposal of assets | 140 | — | 140 | — | |||||
| Cash used in investing activities | (1,201) | (11,891) | (6,936) | (24,484) | |||||
| FINANCING ACTIVITIES | |||||||||
| Shares repurchased for cancellation | (550) | (889) | (3,091) | (2,402) | |||||
| Cash used in financing activities | (550) | (889) | (3,091) | (2,402) | |||||
| Effect of exchange rates on cash | — | 387 | — | 710 | |||||
| Net increase (decrease) in cash during the period | 8,907 | 4,019 | (9,606) | (19,416) | |||||
| Cash, beginning of period | 21,853 | 28,337 | 40,366 | 51,772 | |||||
| Cash, end of period | $ | 30,760 | $ | 32,356 | $ | 30,760 | $ | 32,356 | |
| Interest paid1 | $ | 6 | $ | 1 | $ | 13 | $ | 1 | |
| Taxes paid (received)2 | $ | (3,323) | $ | 936 | $ | (3,347) | $ | 8,493 | |
| 1. | Amounts paid and received for interest were reflected as operating cash flows in the condensed consolidated interim statements of cash flows. | ||||||||
| 2. | Amounts paid and received for income taxes were reflected as either operating or investing cash flows in the condensed consolidated interim statements of cash flows, depending upon the nature of the underlying transaction. | ||||||||
About Cangene Corporation
Cangene is one of Canada's largest and earliest biopharmaceutical companies. It was founded in 1984 and is headquartered in Winnipeg, Manitoba. Cangene has approximately 800 employees in six locations across North America and its products are sold worldwide. It operates manufacturing facilities in Winnipeg, Manitoba and Baltimore, Maryland where it produces its own products and undertakes contract manufacturing for a number of companies. Cangene operates three U.S. and one Canadian plasma-collection facilities branded as Cangene Plasma Resources (). In addition, it has a regulatory affairs, sales and corporate communications office in Toronto, Ontario.Cangene is focused on developing therapeutics for infectious diseases, and the Company uses patented manufacturing processes to produce plasma-derived and recombinant therapeutic proteins. Cangene has four FDA and/or Health Canada-approved hyperimmune products. In addition, the Company has several more products in development at various stages. Three of Cangene's products have been accepted into the U.S. Strategic National Stockpile—botulism antitoxin (investigational product), anthrax immune globulin (investigational product) and a vaccinia immune globulin, a product that may be used to counteract certain complications that may arise from smallpox vaccination. Capitalizing on its drug manufacturing expertise, Cangene also operates a significant contract research and manufacturing business using the resources of Baltimore, Maryland-based Cangene bioPharma, Inc. (a wholly owned subsidiary; formerly Chesapeake Biological Laboratories, Inc.; ). Cangene's website, , includes product and investor information, including past news releases.
Forward-looking and risk information
The reader should be aware that Cangene's businesses are subject to risks and uncertainties that cannot be predicted or quantified; consequently, actual results may differ materially from past results and those expressed or implied by any forward-looking statements. Factors that could cause or contribute to such risks or uncertainties include, but are not limited to: the regulatory environment including the difficulty of predicting regulatory outcomes; changes in the value of the Canadian dollar; the Company's reliance on a small number of customers including government organizations; the demand for new products and the impact of competitive products, service and pricing; availability and cost of raw materials, especially the cost, availability and antibody concentration in plasma; fluctuations in operating results; government policies or actions; progress and cost of clinical trials; reliance on key strategic relationships; costs and possible development delays resulting from use of legal, regulatory or legislative strategies by the Company's competitors; uncertainty related to intellectual property protection and potential costs associated with its defence; the Company's exposure to lawsuits; and other matters beyond control of management. Risks and uncertainties are discussed more extensively in the MD&A section of the Company's most recent annual report and annual information form, which are available on the Company's website or on SEDAR at .The preceding cautionary statements should be considered in connection with all written or oral statements, especially forward-looking statements, that are made by the Company or by persons acting on its behalf and in conjunction with its periodic filings with Securities Commissions, including those contained in the Company's news releases and most recently filed annual information form. Forward-looking statements can be identified by the use of words such as "expects", "plans", "will", "believes", "estimates", "anticipates", "intends", "may", "bodes" and other words of similar meaning (including negative and grammatical variations). Should known or unknown risks or uncertainties materialize, or should management's assumptions prove inaccurate, actual results could vary materially from those anticipated. The Company undertakes no obligation to publicly make or update any forward-looking statements, except as required by applicable law.
Cautionary Note Regarding Non-IFRS Financial Measures
This news release may contain non-IFRS financial measures. Terms by which non-IFRS financial measures are identified include but are not limited to "net cash", "total assets", "sales" and other similar expressions. Non-IFRS financial measures are used to provide management and investors with additional measures of performance. However, non-IFRS financial measures do not have standard meanings prescribed by IFRS and are not directly comparable to similar measures used by other companies. Please refer to the appropriate reconciliations of these non-IFRS financial measures to measures prescribed by IFRS."Cangene" is a trademark belonging to Cangene Corporation.
