FOR IMMEDIATE RELEASE
PALADIN REPORTS 2003 FIRST QUARTER RESULTS
Montreal, Canada, May 7, 2003 - Paladin Labs Inc. (TSX: PLB), a leading Canadian specialty pharmaceutical company, today announced its 2003 first quarter financial results.
Revenues for the three-month period ended March 31, 2003 declined 5% to $5.1 million, compared to $5.3 million in the first quarter of 2002. Decreased year-over-year sales in the period resulted primarily from a 71% decline in Urispas® sales due to the product’s genericization, and Paladin’s suspended sales of Valtaxin® related to ongoing supplier manufacturing difficulties. The Company’s declining sales resulting from the aforementioned issues with Urispas® and Valtaxin® were partially offset by sales gains in other product segments.
Gross profit, as a percentage of revenues, was 76% during the period, as compared to 70% in the corresponding period last year. Selling and marketing expenses for the three-month period ended March 31, 2003 increased to $2.7 million from $1.4 million in the first quarter a year ago. This increase resulted primarily from the company’s recent expansion of its sales and marketing operations in support of Androderm®, Dostinex®, Estring®, Muse®, Oesclim®, and Plan B™.
Net income for the quarter was $672,000 or $0.05 per share, compared to net income of $1.4 million or $0.11 per share in the first quarter of 2002. The Company’s 2003 first quarter net income includes a gain on disposal of $278,000 related to the assignment and sale of licenses for certain over-the-counter products and other income of $341,000 which includes a one-time compensation payment for lost revenues of Dalacin® Vaginal Cream and other payments related to Paladin’s license agreements.
“Over the last few months we have been implementing our sales and marketing expansion and I am thrilled to announce that we have increased our sales force from 14 to 48 sales representatives. We expect to gradually improve the sales performance of our key brands as we move forward,” said Jonathan Ross Goodman, President and CEO of Paladin Labs. “We remain committed to acquiring or in-licensing additional products to strengthen our product pipeline and leverage our sales and marketing capabilities.”
At March 31, 2003, Paladin’s cash, cash equivalents and investments in both short-term and long-term marketable securities totalled $42.1 million, compared to $43.3 million as at March 31, 2002. From this strong cash position, Paladin is pursuing acquisitions of innovative products for the Canadian market that meet its disciplined investment criteria. Foremost, each acquisition must be regarded as having the potential to support the Company’s profitable growth.Product Developments
Paladin transferred the rights for several of its over-the-counter brands to Pharmascience Inc., effective January 1, 2003, in a related party transaction. Paladin assigned the licenses to Sialor®, the Baker Cummins Line of dermatology products and sold the Moi-Stir® trademark. This disposition is in-line with Paladin’s strategy to focus its sales and marketing efforts on its prescription brands and will not have a material impact on the Company’s 2003 revenues. Paladin recognized a gain on disposal of the licenses of $278,000 in the quarter ended March 31, 2003. Pharmascience Inc. is a privately held company controlled by Joddes Limited. Joddes Limited also owns 45% of Paladin’s common shares.2003 Financial Guidance
Paladin reiterates its previously announced guidance for revenues of $26 million and net income of $2 million in 2003. This projection excludes the impact of acquisitions that may be made by the Company during the year.
Conference Call NoticePaladin will host a conference call to discuss its first quarter results on Wednesday, May 7, 2003, at 4:30 p.m. EST. The dial-in number for the conference call is 1-800-273-9672 or 416-695-5806 (reference # 1416154). The call will be audio-cast live and archived for 90 days at www.financialdisclosure.ca and www.paladinlabs.com
About Paladin Labs Inc.
Paladin Labs Inc., headquartered in Montreal, Quebec, is a leading specialty pharmaceutical company focused on acquiring or in-licensing innovative pharmaceutical products for the Canadian market. With this strategy, a focused national sales team and proven marketing expertise, Paladin has evolved into one of Canada’s leading specialty pharmaceutical companies. Paladin’s shares trade on the Toronto Stock Exchange under the symbol PLB. For more information about Paladin, please visit the Paladin Web Site at www.paladinlabs.com.This news release may contain forward-looking statements or predictions. These statements represent our judgement as of this date and are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed in such forward-looking statements. Potential risks and uncertainties include, without limitation, those associated with product development, clinical trials, future revenues and profitability, and obtaining marketing approval and other factors that are discussed in the Management Discussion and Analysis published in the Company's annual report.
For further information please contact:
Paladin Labs Inc.
Samira Sakhia
Chief Financial Officer
Tel: 514-340-5067
E-mail: info@paladin-labs.com
Web Site: www.paladinlabs.comThe Equicom Group Inc.
Bruce Wigle
Investor Relations
Tel: (416) 815-0700 ext. 228
E-mail: bwigle@equicomgroup.com
BALANCE SHEET
[In thousands of Canadian dollars]
March 31
December 31
2003
2002
$
$
(unaudited)
ASSETS
Current
Cash and cash equivalents
10,047
2,020
Short-term marketable securities
32,077
36,572
Accounts receivable and other assets
2,539
2,586
Inventories
8
21
Income tax credits receivable
363
325
Future income tax assets
1,221
1,221
Total current assets
46,255
42,745
Long-term marketable securities
4,020
7,020
Property plant and equipment
84
72
Intangible assets
12,401
12,703
Deferred charges
1,832
1,515
Investments, at cost
2,771
2,771
Future income tax credits receivable
470
470
Future income tax assets
1,171
1,359
69,004
68,655
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Accounts payable and accrued liabilities
3,456
3,658
Income taxes payable
99
109
Balance of sale payable
610
597
Deferred credit
979
1,113
Total current liabilities
5,144
5,477
Shareholders’ equity
Capital stock
57,344
57,334
Special warrants
—
—
Contributed surplus
87
87
Other paid-in capital
23
23
Retained earnings
6,406
5,734
Total shareholders’ equity
63,860
63,178
69,004
68,655
STATEMENTS OF INCOME AND RETAINED EARNINGS
[In thousands of Canadian dollars except for share and per share amounts]
Three-month period ended
March 31
2003
2002
$
$
(unaudited)
(unaudited)
Revenues
5,065
5,344
Cost of sales
1,237
1,609
Gross profit
3,828
3,735
Selling and marketing
2,654
1,420
General and administrative
549
646
Research and development
337
383
Amortization
442
422
Interest income, net
(336)
(77)
Other income
(354)
(695)
Income before under noted items
536
1,636
Gain on disposal of license
278
—
Income before income taxes
814
1,636
Provision for income taxes
Current
30
21
Future
112
214
142
235
Net income
672
1,401
Earnings per share
Basic
0.05
0.11
Diluted
0.05
0.11
Weighted average number of shares outstanding
Basic
14,781,784
12,549,760
Diluted
14,784,285
12,833,496
STATEMENTS OF CASH FLOWS
[In thousands of Canadian dollars]
Three-month period ended
March 31
2003
2002
$
$
(unaudited)
(unaudited)
Operating activities
Net income
672
1,401
Add items not affecting cash
Amortization
455
427
Future income taxes
54
(387)
Imputed interest on balance of sale
13
13
Gain on disposal of license
(278)
—
916
1,454
Net change in non-cash balances relating to operations
(189)
369
Cash flows from (used in) operating activities
727
1,823
Investing activities
Additions to pharmaceutical product licenses and rights
(519)
(2,089)
Accounts payable related to the acquisition of intellectual property
—
1,179
Acquisition of property plant and equipment
(25)
(11)
Purchases of short-term marketable securities
(4,421)
(26,095)
Maturities of short-term marketable securities
11,915
14,810
Proceeds from disposal of pharmaceutical licenses
340
—
Cash flows (used in) from financing activities
7,290
(12,206)
Financing activities
Common shares issued for cash
10
91
Issuance of special warrants
—
20,952
Share issue costs, net of tax
—
(1,057)
Cash flows from financing activities
10
19,986
Net change in cash and cash equivalents during the period
8,027
9,603
Cash and cash equivalents, beginning of period
2,020
1,978
Cash and cash equivalents, end of period
10,047
11,581
Cash and cash equivalents
10,047
11,581
Short-term marketable securities
32,077
31,755
Long-term marketable securities
4,020
—
46,144
43,336