FOR IMMEDIATE RELEASE

 

PALADIN REPORTS 2005 SECOND QUARTER RESULTS

- Paladin increases 2005 revenue guidance -

Montreal, Canada, July 28, 2005 - Paladin Labs Inc. (TSX: PLB), a leading Canadian specialty pharmaceutical company, today reported its financial results for the three and six-month periods ended June 30, 2005. The Company also announced increased revenue guidance for fiscal 2005 as a result of stronger then expected sales with key promoted brands

Second Quarter Highlights:

“Paladin achieved record-breaking prescription volumes in the quarter on all four of our key promoted brands, including Dostinex®, Estring®, Oxytrol® and Plan B®. This strong performance in our business coupled with our strategic direction to internally develop new, late-stage innovative products is positioning Paladin for accelerated growth in the future. I look forward to providing an update to you as Paladin continues its search for innovative, promotion-sensitive brands to bring to Canada,” said Jonathan Ross Goodman, President & CEO of Paladin Labs.

Financial Results
Revenue for the second quarter ended June 30, 2005 increased 23% to $7.9 million, compared to $6.4 million in the second quarter of 2004. Revenue for the six months ended June 30, 2005 increased 20% to $14.4 million, compared to $12.0 million in the first six months of 2004. Revenue from the Company’s key promoted brands including, Dostinex®, Estring®, Oxytrol® and Plan B® increased by 50% in the first six months of 2005 compared to the same period a year ago and 60% in the second quarter of 2005 compared to the second quarter last year.

Paladin’s earnings before interest, taxes, depreciation, and amortization (EBITDAą) remained healthy at $2.0 million for both the second quarter of 2005 and the second quarter of 2004. For the first half of 2005, Paladin’s EBITDA increased 18% to $3.9 million, compared to EBITDA of $3.3 million in the first six months of 2004.

Net income for the second quarter was $585,000 or $0.04 per fully diluted share, compared to net income of $681,000 or $0.05 per fully diluted share in the second quarter a year ago. Net income remained steady at $0.07 per fully diluted share for both the six months ended June 30, 2005 and June 30, 2004.

Gross profit, as a percentage of revenues, for the second quarter and six months ended June 30, 2005 totalled 73% and 74% respectively, compared to 74% and 75% for both the second quarter and six months ended June 30, 2004, respectively.

Selling and marketing expense for the second quarter of 2005 increased to $3.1 million from $1.8 million in the second quarter of 2004. Selling and marketing expense for the first six months of 2005 increased to $5.2 million from $3.2 million in the first six months of 2004. This increase was primarily attributable to increased promotion activities associated with the launch of Oxytrol® and the re-launch of Plan B® as a non-prescription product.

At June 30, 2005, Paladin’s cash, cash equivalents and investments in marketable securities totalled $44.0 million. From this strong cash position, Paladin continues to pursue product acquisition opportunities.

Product Developments
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. “There has been a tremendous response in sales to our strong media plan of Plan B® since Health Canada’s decision. Sales have increased 37% in the second quarter of 2005 compared to the first quarter of 2005 and 60% compared to the second quarter of 2004,” said Mark Beaudet, Vice-President of Marketing and Sales of Paladin Labs.

The Company 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 first quarter of 2006. 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 Vantas™ (Histrelin Hydrogel Implant), a unique, once-yearly LHRH agonist implant for the treatment of prostate cancer.

Paladin received a Notice of Non Compliance on June 16, 2005 by the Therapeutic Products Directorate (TPD) of Health Canada that it’s New Drug Submission (NDS) for Vantas™ (Histrelin Hydrogel Implant) would not be approved at this time. The Company will submit a response to Health Canada’s issues by September 15, 2005 and expects to obtain regulatory approval for Vantas™ during the first half of 2006.

Subsequent to the second quarter, the Company entered into a Canadian marketing and supply agreement with Verus Pharmaceuticals, Inc., to market Twinject™ (epinephrine). Twinject™ is a novel epinephrine auto-injector indicated for the emergency treatment of severe allergic reactions (anaphylaxis). Twinject™ comes in two dosages for self-administration - a 0.3 mg used for adults and a 0.15 mg used for children. According to IMS Canada, the anaphylaxis market was $25 million in 2004 and grew at a compounded annual growth rate of 22% since 2001.

Corporate Developments
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 purchased 107,500 shares for a total amount of $482,000.

2005 Revenue Guidance
Paladin is revising upwards its previously announced revenue guidance for fiscal 2005 from $25 million to $26 million generated in revenues to $29 million to $30 million generated in revenues, due to better than expected performance of its key promoted products. 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.

(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 and guidance is presented herein because Paladin management believes that, in addition to net income, EBITDA is a useful supplemental measure of the Company’s performance.


Conference Call Notice

Paladin will host a conference call to discuss its second quarter results on Thursday, July 28, 2005, at 10:00 a.m. EST. The dial-in number for the conference call is 1-888-509-0081 or 416-695-5275. The call will be audio-cast live and archived for 90 days at www.paladinlabs.com.

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]

 

 

 

 

June 30

December 31

 

2005

2004

 

$

$

 

(unaudited)

 

ASSETS

 

 

Current

 

 

Cash and cash equivalents

5,992

1,507 

Short-term marketable securities

36,651

36,039 

Accounts receivable

5,796

5,878 

Inventories

2,347

2,718 

Other current assets

442

735 

Future income tax assets

1,054

600 

Total current assets

52,282

47,477 

 

 

 

Long-term marketable securities

1,483

4,578 

Property, plant and equipment

65

77 

Intangible assets

9,961

11,065 

Deferred charges

4,107

4,176 

Investments

1,433

1,433 

Future income tax credits recoverable

450

439 

Future income tax assets

682

1,715 

 

70,463

70,960 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

Current

 

 

Accounts payable and accrued liabilities

4,870

4,723 

Accounts payable to related parties

717

1,754 

Income taxes payable

386

229 

Balance of license agreements payable

464

1,062 

Total current liabilities

6,437

7,768 

 

 

 

Shareholders’ equity

 

 

Capital stock

57,464

57,837 

Other paid-in capital

741

554 

Retained earnings

5,821

4,801 

Total shareholders’ equity

64,026

63,192 

 

70,463

70,960 

 

 

STATEMENTS OF INCOME AND RETAINED EARNINGS

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

[unaudited]

 

 

 

 

Three-month period ended

June 30

Six-month period ended

June 30

 

2005

2004

2005

2004

 

$

$

$

$

 

 

 

 

 

 

 

 

 

 

Revenues

7,862 

6,397 

14,374 

11,994 

Cost of sales

2,153 

1,634 

3,802 

2,952 

Gross profit

5,709 

4,763 

10,572 

9,042 

 

 

 

 

 

Selling and marketing

3,058 

1,784 

5,185 

3,217 

General and administrative

820 

764 

1,661 

1,469 

Research and development

282 

500 

613 

1,678 

Amortization of intangible assets and deferred charges

1,096 

1,110 

2,182 

1,901 

Interest income, net

(325)

(270)

(627)

(599)

Other Income

(110)

— 

(110)

— 

Income before income taxes

888 

875 

1,668

1,376 

 

 

 

 

 

Provision for income taxes

 

 

 

 

Current

— 

25 

— 

50 

Future

303 

169 

584

301 

 

303 

194 

584

351 

Net income

585 

681 

1,084

1,025 

 

 

 

 

 

Retained earnings, beginning of period

5,300 

1,906 

4,801

1,562 

 

 

 

 

 

Purchase of common shares

(64)

— 

(64)

— 

Retained earnings, end of period

5,821 

2,587 

5,821

2,587 

 

 

 

 

 

Earnings per share

 

 

 

 

Basic

0.04 

0.05 

0.07

0.07

Diluted

0.04 

0.05 

0.07

0.07

 

 

 

 

 

Weighted average number of shares outstanding

 

 

 

 

Basic

14,846,483 

14,829,954 

14,852,728

14,916,400

Diluted

14,856,774 

14,935,709 

14,862,999

14,908,438

 

 

STATEMENTS OF CASH FLOWS

[In thousands of Canadian dollars]

[unaudited]

 

 

 

 

Three-month period ended

June 30

Six-month period ended

June 30

 

2005

2004

2005

2004

 

$

$

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

 

 

 

Net income

585 

681 

1,084

1,025 

Add items not affecting cash

 

 

 

 

Amortization

1,111 

1,125 

2,212

1,933 

Stock based compensation expense

125 

82 

192

218 

Future income taxes

302 

75 

567

150 

Unrealized foreign exchange (gain) loss

(1)

— 

(18)

— 

 

2,122 

1,963 

4,037

3,326 

Net change in non-cash balances relating to operations

 

(142)

 

(1,411)

 

33

 

(5,222)

Cash flows from (used in) operating activities

1,980

552 

4,070

(1,896)

 

 

 

 

 

Investing activities

 

 

 

 

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

 

(807)

 

(519)

 

 

(1,009)

 

 

(1,942)

Acquisition of property, plant and equipment

(12)

(2)

(19)

(2)

Purchases of short-term marketable securities

(18,722)

(14,016)

(19,918)

(16,769)

Maturities of short-term marketable securities

21,112 

21,173 

24,384

29,605 

Purchases of long-term marketable securities

(1,483)

(1,902)

(1,983)

(3,698)

Cash flows from investing activities

88 

4,734 

1,455

7,194

 

 

 

 

 

Financing activities

 

 

 

 

Common shares issued for cash

12 

217 

25

254 

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

 

(234)

 

(1,039)

 

(598)

 

(2,483)

Repurchase of shares

(482)

— 

(482)

— 

Repayment of share purchase loan

20 

20 

20 

20 

Cash flows used in financing activities

(684)

(802)

(1,035)

(2,209)

 

 

 

 

 

Effect of exchange rate change on cash and cash equivalents

3 

— 

(5)

— 

 

 

 

 

 

Net change in cash and cash equivalents during the period

 

1,387 

 

4,484 

 

4,485

 

3,089 

 

 

 

 

 

Cash and cash equivalents, beginning of period

4,605 

596 

1,507

1,991 

 

 

 

 

 

Cash and cash equivalents, end of period

5,992 

5,080 

5,992

5,080 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

5,992 

5,080 

 

 

Short-term marketable securities

36,651 

30,801 

 

 

Long-term marketable securities

1,483 

2,617 

 

 

 

44,126 

38,498