FOR IMMEDIATE RELEASE

 

PALADIN ANNOUNCES STRONG SECOND QUARTER RESULTS

-- Revenues rise 26% and net income increases 45% --

Montreal, Canada, July 31, 2002 - - Paladin Labs Inc. ("Paladin" or "the Company") (TSX: PLB), a Canadian specialty pharmaceutical company focused on marketing and selling urology, endocrinology and women's health products, today announced its financial results for the second quarter and six-month periods ended June 30, 2002.

Highlights of the quarter include:

"Our quarterly financial results reflect a company-wide commitment to superior execution of our business strategy," said Jonathan Ross Goodman, President and CEO of Paladin Labs. "We are seeing continued revenue growth from our recently launched products such as Androderm®, Plan B™, Tapazole®, and Propyl-Thyracil® as well as first time revenues from products acquired from Novartis Pharmaceuticals Canada and Pharmacia Canada. We are confident that we will complete this year with our seventh consecutive year of record revenues and remain committed to our business model of in-licensing and acquiring innovative pharmaceutical products for the Canadian market. With over $40 million in cash and temporary investments and virtually no debt, Paladin is well positioned for future growth."


Financial Results

Revenues for the second quarter of 2002 were $5.7 million, representing an increase of 26% from $4.5 million for the comparable quarter last year. For the six-month period ended June 30, 2002, revenues increased $3.7 million or 47% to $11.7 million from $8 million for the same period in 2001. Gross profit, as a percentage of revenues, was 73% for the three-month period ended June 30, 2002, up from 69% in the same quarter last year.

Net income for the quarter ended June 30, 2002 was $1.4 million compared to $1.0 million for the same period in fiscal 2001, an increase of 45%. Diluted earnings per share increased 25% to $0.10 per share compared to $0.08 per share in the second quarter of 2001. For the six-month period ended June 30, 2002, net income increased 88% to $2.8 million from $1.5 million for the same period last year. Diluted earnings per share increased 75% to $0.21 per share compared to $0.12 per share for the same period last year.

Selling and administrative expenses for the quarter increased 6% to $2.1 million from $2.0 million in the same quarter last year. However, selling and administrative expense, as a percentage of revenues, decreased to 37% in the second quarter, from 44% in the same quarter last year. This decrease is a result of efficiencies realized from in-licensing and launching brands in the Company's key therapeutic areas. This strategy has allowed Paladin to leverage its existing sales and marketing infrastructure to launch new products. Amortization expense increased $0.3 million or 177% to $0.4 million for the quarter ended June 30, 2002 from $0.1 million for the same quarter last year. This increase reflects the impact of amortization expense related to the Company's acquisition of pharmaceutical products and product licenses over the past two years.


Product Developments

During the quarter, Paladin announced that, on behalf of Neurim Pharmaceuticals, it filed a New Drug Submission (NDS) for the approval of Circadin® (controlled release melatonin tablets) with the Therapeutic Products Directorate (TPD) of Health Canada. The submission seeks Health Canada's approval for use of Circadin® in the treatment of sleep disorders in the elderly. Unlike the U.S. where the FDA considers melatonin a health food supplement, the TPD regards melatonin as a new chemical entity and, as such, requires the filing of a full NDS. As a result, there is currently no melatonin being sold legally in Canada, despite robust sales in the U.S. Circadin® has the potential to be the first melatonin product approved for sale in Canada.

Also during the quarter, Paladin received TPD approval for Androderm® 5mg format for the treatment of male testosterone deficiency also commonly referred to as andropause. Paladin currently markets and sells Androderm® in a 2.5mg format. Androderm® is the only transdermal testosterone patch available in Canada.

The Company received a request from Health Canada in July 2002 for additional information on its application to have Plan B™ switched to non-prescription status. The switch from prescription to non-prescription status will allow Canadian women to have more timely access to this highly effective emergency contraceptive pill. Paladin will submit a complete response to Health Canada's request within the 90-calendar day window.


Notice of Conference Call

The Company will host a conference call to discuss the second quarter 2002 results on Wednesday, July 31 at 4:30 p.m. EST. The dial in number for the conference call is 1-800-273-9672 or 1-416-695-5806 and the reference number is 1230154.

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, headquartered in Montreal, Quebec, is a rapidly growing 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 most profitable publicly-traded 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.com

The Equicom Group Inc.
Mary S. Dellar
Investor Relations
Tel: (514) 939-3900 x236
E-mail: mdellar@equicomgroup.com

Paladin Labs Inc.

Balance Sheet

[In thousands of Canadian dollars]


 

June 30
2002
$

December 31
2001
$

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

Current

 

 

 Cash and cash equivalents

5,205

1,978

 Temporary investments

39,362

20,470

 Accounts receivable

3,202

2,067

 Inventories

--

50

 Income tax credits receivable

534

487

 Future income tax assets

2,275

2,275

Total current assets

50,578

27,327

 

 

 

Capital assets

14,442

12,530

Investments, at cost

2,771

2,771

Future income tax credits receivable

1,678

347

Future income tax assets

347

2,216

 

 

 

 

69,816

45,191

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Current

 

 

 Accounts payable and accrued liabilities

6,335

3,924

 Income taxes payable

160

181

 Deferred credit

1,638

1,638

Total current liabilities

8,133

5,743

 

 

 

Balance of sale payable

570

544

Deferred credit

185

935

Future income tax credits liability

133

133

9,021

7,355

 

 

 

Shareholders’ equity

 

 

 Capital stock

57,272

37,154

 Contributed surplus

87

87

 Other paid-in capital

23

23

 Retained earnings (Deficit)

3,413

572

Total shareholders’ equity

60,795

37,836

 

 

 

 

69,816

45,191

 

Paladin Labs Inc.

Statement of Income

[In thousand of Canadian dollars except share and per share amounts]

¨

 

Three months period ended June 30

Six months period ended
June 30

 

2002

2001

2002

2001

 

$
(unaudited)

$
(unaudited)

$
(unaudited)

$
(unaudited)

 

 

 

 

 

Revenues

5,687

4,515

11,725

7,999

Cost of Sales

1,539

1,414

3,148

2,705

Gross profit

4,148

3,101

8,577

5,294

 

 

 

 

 

Selling and administrative

2,093

1,977

4,153

3,572

Research and development

206

120

589

244

Amortization

429

155

856

309

Interest income,net

(268)

(302)

(345)

(596)

Income before income taxes

1,688

1,151

3,324

1,765

 

 

 

 

 

Provision for income taxes

 

 

 

 

 Current

39

5

60

10

 Future

209

151

423

245

 

248

156

483

255

 

 

 

 

 

Net income

1,440

995

2,841

1,510

 

 

 

 

 

Earnings per share

 

 

 

 

 Basic

0.10

$             0.08

$             0.22

$               0.12

 Diluted

0.10

$             0.08

$             0.21

$               0.12

 

 

 

 

 

Weighted average number of shares outstanding

 

 

 

 

Basic

13,820,655

12,407,224

13,188,718

12,400,668

Diluted

14,085,539

12,473,553

13,460,467

12,466,140

 

Paladin Labs Inc.

Statement of Cash Flows

[In thousands of Canadian dollars]

 

Three-month period ended June 30

Six-month period ended June 30

 

2002

2001

2002

2001

 

$
(unaudited)

$
(unaudited)

$
(unaudited)

$
(unaudited)

Operating activities

 

 

 

 

Net income

1,440

995

2,841

1,510

Add items not affecting cash

 

 

 

 

    Amortization

429

155

856

309

    Future income taxes

175

128

(212)

198

    Imputed interest on balance of
    sale

13

12

26

25

 

2,057

1,290

3,511

2,047

Net change in non-cash balances relating to operations

(291)

(22)

78

5

Cash flows from (used in) operating activities

1,766

1,268

3,589

2,047

 

 

 

 

 

Investing activities

 

 

 

 

Acquisition of capital assets

(5)

(4)

(16)

(10)

Accounts to pharmaceutical product licenses and rights

(663)

(246)

(2,752)

(2,815)

Accounts payable related to the acquisition of intellectual property

--

--

1,179

--

Net decrease (increase) in temporary investments

(7,606)

(2,061)

(18,891)

9,025

Cash flows from (used in) from financing activities

(8,274)

(2,311)

(20,480)

6,200

 

 

 

 

 

Financing activities

 

 

 

 

Issuance of common shares

132

133

223

133

Issuance/conversion of special warrants

--

--

20,952

--

Share issue costs

--

--

(1,057)

--

Cash flows from financing activities

132

133

20,118

113

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

(6,376)

(910)

3,227

8,380

 

 

 

 

 

Cash and cash equivalents, beginning of period

11,581

12,148

1,978

2,858

 

 

 

 

 

Cash and cash equivalents, end of period

5,205

11,238

5,205

11,238

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

5,205

11,238

Temporary investments

39,362

12,445

44,567

23,693