FOR IMMEDIATE RELEASE

 

PALADIN REPORTS 2005 FIRST QUARTER FINANCIAL RESULTS

Montreal, Canada, May 5, 2005 - Paladin Labs Inc. (TSX: PLB), a leading Canadian specialty pharmaceutical company, today reported its 2005 first quarter financial results.

First Quarter Highlights:

Subsequent to First Quarter: “We remain focused on pursuing additional acquisition opportunities to bring innovative, promotion-sensitive brands to the Canadian market, while continuing to grow sales of our existing products. I am pleased to report that our business is healthy and we continue on track with our strategic direction of focusing on internally developing new, late-stage innovative products. This plan will position Paladin to accelerate the organization for long term growth,” said Jonathan Ross Goodman, President & CEO of Paladin.

Financial Results
Revenue for the three-month period ended March 31, 2005 increased 16% to $6.5 million compared to $5.6 million in the first quarter of 2004. Revenue growth resulted primarily from a 37% increase in sales of the Company’s key promoted brands, including Dostinex®, Estring®, Oxytrol® and Plan B®, compared to the same period a year ago.

Paladin’s 2005 first quarter earnings before interest, taxes, depreciation, and amortization (EBITDA¹) increased 44% to $1.88 million compared to EBITDA¹ of $1.31 million in the first quarter of 2004.

Net income for the quarter was $499,000 or $0.03 per fully diluted share compared to net income of $344,000 or $0.02 per fully diluted share in the first quarter a year ago.

Selling and marketing expense for the first quarter of 2005 increased 48% to $2.1 million from $1.4 million in the first quarter of 2004. This increase was primarily attributable to increased sales and marketing spending associated with the launch of Oxytrol® and the re-launch of Plan B® as a non-prescription product.

Research and development expense for the first quarter of 2005 decreased to $331,000 from $1.2 million in the first quarter a year ago. Paladin’s Scientific Affairs team is focusing on investigating product opportunities for internal development.

Amortization expense for the first quarter of 2005 increased to $1.1 million from $791,000 in the first quarter of 2004. This increase in amortization expense is a result of the Company’s decision to reduce the estimated useful life of the carrying value of the intellectual property associated with products that face a heightened risk of generic competition.

At March 31, 2005 Paladin’s cash, cash equivalents and investments in marketable securities totalled $43.6 million. From this strong cash position, Paladin continues to pursue product acquisition and development opportunities.

Product Developments
During the first quarter, The Conseil du médicament of Quebec, which provides drug insurance coverage for an estimated 3.2 million residents of Quebec, gave its approval to list Oxytrol® (oxybutynin transdermal system). Oxytrol®, a unique patch medication, is indicated for the treatment of overactive bladder with symptoms of urge urinary incontinence, urgency and frequency. According to the Canadian Continence Foundation, approximately 1.5 million Canadians suffer from overactive bladder and according to IMS Canada, the total Canadian market for overactive bladder in 2004 was $50 million.

Subsequent to the first quarter, Paladin announced that Plan B®, a safe and effective “morning-after pill,” is now available at Canadian pharmacies without a prescription. The decision by Health Canada is supported by 70 percent of Canadians and every leading medical organization in the country. Plan B® is 95 percent effective in preventing unintended pregnancy if taken within 24 hours of unprotected sex.

Subsequent to the first quarter, Paladin signed an exclusive Canadian marketing and supply agreement for Trelstar® with Watson Pharmaceuticals, Inc. Trelstar® is an injectable, luteinizing hormone-releasing hormone (LHRH) agonist indicated for the palliative treatment of advanced prostate cancer and for the treatment of endometriosis and is approved for sale in Canada. Paladin expects to launch Trelstar® in the fourth quarter of 2005. According to IMS Canada, the Canadian market for LHRH agonists for prostate cancer and endometriosis was over $125 million in 2004. Trelstar® compliments our established urology franchise with Oxytrol® and VantasTM (Histrelin Hydrogel Implant), a unique, once-yearly LHRH implant for the treatment of prostate cancer.

Subsequent to the first quarter, Tapazole®, a leading anti-thyroid drug which Paladin acquired from Eli Lilly and Company in 2000 was genericized. Paladin has increased sales of Tapazole® 130% since its acquisition in 2000 from $780,000 to $1.8 million in 2004 according to IMS Canada. Tapazole® remains a successful acquisition for Paladin, having generated net operating cash flows of $2.9 million to date.

Corporate Developments
Dr. Patrice Larose was appointed to Paladin’s management team as Vice-President, Regulatory Affairs, Drug Safety and Medical Services. Before joining Paladin, Dr. Larose was Vice-President, Regulatory Affairs, Drug Safety and Medical Services at Schering Canada Inc. Dr. Larose obtained a Ph.D. in Pharmaceutical Sciences from the University of Montreal in 1987 and is a licensed pharmacist.

During the quarter, Paladin announced that it has received regulatory approval from the Toronto Stock Exchange to carry out a normal course issuer bid effective February 22, 2005. Paladin has been authorized to purchase up to 630,000 of its common shares, or approximately 10% of its public float of 6,300,990 common shares, in the twelve-month period following the bid’s effective date. To date, Paladin has not purchased shares.

2005 Financial Outlook and Strategic Update
Paladin reiterates its previously announced financial outlook for fiscal 2005, as it expects to generate $25 million to $26 million in revenue. This forecast excludes the impact of acquisitions and/or new product launches that may be made by the Company between now and the end of 2005.

During the quarter, the Company held its first investor conference to discuss the Company’s year-end financial results, strategic direction and 2005 revenue guidance. Paladin announced its plan to increase internal development of innovative new drugs.


Conference Call Notice

Paladin will host a conference call to discuss its first quarter results on Thursday, May 5, 2005, at 10:00 a.m. EST. The dial-in number for the conference call is 1-888-789-0150 or 416-695-6120. The call will be audio-cast live and archived for 90 days at www.paladinlabs.com.

(1) EBITDA does not have any standardized meaning prescribed by generally accepted accounting principles (GAAP) and therefore may not be comparable to similar measures presented by other public issuers. EBITDA performance is presented herein because Paladin management believes that, in addition to net income, EBITDA is a useful supplemental measure of the Company’s financial performance.

About Paladin Labs Inc.
Paladin Labs Inc., headquartered in Montreal, Canada, is a 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 Company’s Website 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. For additional information on risks and uncertainties related to the forward-looking statements, investors should consult the Company’s ongoing quarterly filings, annual reports and Annual Information Form and other filings found on SEDAR at www.sedar.com.

For further information please contact:

Paladin Labs Inc.
Samira Sakhia
Chief Financial Officer
Paladin Labs Inc.
Tel: (514) 340-5067
E-mail: info@paladin-labs.com




BALANCE SHEET

[In thousands of Canadian dollars]

 

 

 

 

March 31

December 31

 

2005

2004

 

$

$

 

(unaudited)

 

ASSETS

 

 

Current

 

 

Cash and cash equivalents

4,605 

1,507 

Short-term marketable securities

38,541 

36,039 

Accounts receivable

4,523 

5,878 

Inventories

2,564 

2,718 

Other current assets

483 

735 

Future income tax assets

702 

600 

Total current assets

51,418 

47,477 

 

 

 

Long-term marketable securities

500 

4,578 

Property, plant and equipment

69 

77 

Intangible assets

10,216 

11,065 

Deferred charges

4,141 

4,176 

Investments

1,433 

1,433 

Future income tax credits recoverable

450 

439 

Future income tax assets

1,337 

1,715 

 

69,564 

70,960 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

Current

 

 

Accounts payable and accrued liabilities

3,974 

4,723 

Accounts payable to related parties

738 

1,754 

Income taxes payable

386 

229 

Balance of license agreements payable

698 

1,062 

Total current liabilities

5,796 

7,768 

 

 

 

Shareholders’ equity

 

 

Capital stock

57,850 

57,837 

Other paid-in capital

618 

554 

Retained earnings

5,300 

4,801 

Total shareholders’ equity

63,768 

63,192 

 

69,564 

70,960 

 

STATEMENT OF INCOME

[In thousands of Canadian dollars except for share and per share amounts]

[unaudited]

 

 

 

 

Three-month period ended

March 31

 

 

2005

2004

 

 

 

$

$

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

6,512 

5,597 

 

 

Cost of sales

1,649 

1,318 

 

 

Gross profit

4,863 

4,279 

 

 

 

 

 

 

 

Selling and marketing

2,127 

1,433 

 

 

General and administrative

841 

705 

 

 

Research and development

331 

1,178 

 

 

Amortization

1,086 

791 

 

 

Interest income, net

(302)

(329)

 

 

Income before income taxes

780 

501 

 

 

 

 

 

 

 

Provision for income taxes

 

 

 

 

Current

—  

25 

 

 

Future

281 

132 

 

 

 

281 

157 

 

 

Net income

499 

344 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

Basic

0.03 

0.02 

 

 

Diluted

0.03 

0.02 

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

 

 

 

Basic

14,859,042 

14,802,846 

 

 

Diluted

14,872,337 

14,879,963 

 

 

 

STATEMENTS OF CASH FLOWS

[In thousands of Canadian dollars]

[unaudited]

 

 

 

 

Three-month period ended

March 31

 

 

2005

2004

 

 

 

$

$

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

 

 

 

Net income

499 

344 

 

 

Add items not affecting cash

 

 

 

 

Amortization

1,101 

807 

 

 

Compensation expense

67 

137 

 

 

Future income taxes

265 

75 

 

 

Unrealized foreign exchange (gain) loss

(17)

— 

 

 

 

1,915 

1,363 

 

 

Net change in non-cash balances relating to operations

 

175 

 

(3,811)

 

 

Cash flows from (used in) operating activities

2,090

(2,448)

 

 

 

 

 

 

 

Investing activities

 

 

 

 

Additions to pharmaceutical product licenses and rights and intellectual property and deferred charges

 

(202)

 

(1,423)

 

 

Acquisition of property, plant and equipment

(7)

— 

 

 

Purchases of short-term marketable securities

(1,196)

(2,753)

 

 

Maturities of short-term marketable securities

3,272 

8,432 

 

 

Purchases of long-term marketable securities

(500)

(1,796)

 

 

Cash flows from financing activities

1,367 

2,460 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

Common shares issued for cash

13 

37 

 

 

Accounts payable related to the acquisition of intellectual property and deferred charges

 

(364)

 

(1,444)

 

 

Cash flows used in financing activities

(351)

(1,407)

 

 

 

 

 

 

 

Effect of exchange rate change on cash and cash equivalents

(8)

— 

 

 

 

 

 

 

 

Net change in cash and cash equivalents during the period

 

3,098 

 

(1,395)

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

1,507 

 

1,991 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

4,605 

596 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

4,605 

596 

 

 

Short-term marketable securities

38,541 

36,876 

 

 

Long-term marketable securities

500 

1,796 

 

 

 

43,646 

39,268