FOR IMMEDIATE RELEASE

 

PALADIN ANNOUNCES RECORD THIRD QUARTER RESULTS

-- Announces 2003 Revenue and Earnings Guidance --

Montreal, Canada, October 31, 2002 - Paladin Labs Inc. (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 third quarter and nine-month periods ended September 30, 2002. For the quarter, the Company reported record revenue and net income performance. In addition, Paladin announced an increased investment in sales and marketing to accelerate future growth and its projected impact for 2003.

Highlights of the quarter include:

"Our record third quarter revenue and net income demonstrates our effectiveness in executing our business strategy and the resulting value we are creating for all our stakeholders, " said Jonathan Ross Goodman, President and CEO of Paladin Labs. "We are committed to ensuring that Paladin maintains its leadership position in the Canadian specialty pharmaceutical market. Today, we are announcing a strategic expansion of our sales and marketing efforts to accelerate Paladin's future growth."


Financial Results

Revenue for the third quarter of 2002 increased 25% to $6.09 million, compared to $4.86 million in the third quarter a year ago. Gross profit, as a percentage of revenue, was 73% for the three-month period ended September 30, 2002, compared to 71% in the same quarter last year. Net income for the third quarter increased 4% to $1.53 million compared to $1.47 million in the same period a year ago. Diluted earnings per share for the third quarter were $0.10 per share compared to $0.12 per share in the corresponding quarter of 2001.

Selling and administrative expenses for the quarter increased 41% to $2.39 million from $1.69 million in the third quarter last year. This increase was primarily due to increased sales and marketing spending associated with new product launches and higher staffing costs related to growth of the Company's product line during 2001 and 2002. Amortization expense increased 160% to $0.43 million for the quarter ended September 30, 2002 from $0.17 million for the same quarter last year. This increase reflects the impact of amortization expense related to the Company's acquisition of licenses, rights and intellectual property during fiscal 2001 and 2002.

For the nine-month period ended September 30, 2002, revenue increased 39% to $17.81 million compared to $12.89 million in the first nine months of 2001. Net income for the first nine months of 2002 increased 47% to $4.37 million from $2.98 million for the same period a year ago. Diluted earnings per share increased 29% to $0.31 per share compared to $0.24 per share in the corresponding period last year.


Product Developments

During the quarter, Paladin obtained the Canadian distribution rights to GlucaGen® (recombinant glucagon) from Novo Nordisk Canada Inc. GlucaGen® is chemically identical to human glucagon, a naturally occurring peptide that is indicated for emergency treatment of hypoglycemia in insulin-dependent diabetics and for relaxation of the gastrointestinal tract during routine radiology procedures. Paladin will work with Novo Nordisk Canada Inc., to file a NDS for GlucaGen® with the Biologics and Gene Therapies Directorate of Health Canada within the coming year.

On September 5, 2002, Paladin announced it had filed a NDS for the approval of Statex® SR (sustained-release morphine sulfate tablets) with the TPD of Health Canada. The submission seeks Health Canada's approval for the use of Statex® SR in Canada for the relief of severe pain requiring the prolonged use of an opioid analgesic preparation. Studies performed by the National Cancer Institute of Canada (Clinical Trials Group) have demonstrated that Statex® SR is equivalent to Purdue Pharma L.P.'s MS-Contin®, a leading controlled release morphine sulfate tablet brand, in terms of average scores in pain, nausea, drowsiness and insomnia.

Paladin 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 completed its response to Health Canada's request within the 90-calendar day window.

Subsequent to the end of Paladin's third quarter, on October 3, 2002, the Company announced that it had entered into a licensing agreement with Hydro Med Sciences, Inc., for the Canadian rights to its unique, once-yearly implant (Histrelin Hydrogel Implant) indicated for the treatment of advanced prostate cancer. It is anticipated that a regulatory submission will be filed in Canada by the end of the Company's first quarter of fiscal 2004.


Financial Guidance

Paladin is comfortable with previously announced projected estimates for revenue of $23 million for fiscal 2002. The Company expects diluted earnings for fiscal 2002 to be $0.36 per share.

For 2003, Paladin is projecting total revenue of $26 million and net income of $2 million. This projection excludes the impact of acquisitions that may be made by the Company in 2003. The Company intends to significantly increase the sales and marketing efforts behind Androderm®, Muse®, Plan B™, Oesclim®, and Estring®. The increased sales and marketing efforts will boost Paladin's reach from 1,375 physicians to more than 7,500 physicians.

"Paladin has reached a pivotal point in its development. It's time to take the next step to strengthen our leadership position in the Canadian specialty pharmaceutical market. As Androderm®, Muse®, Plan B™, Oesclim®, and Estring® are at an early stage in their product life cycles, we are extending more marketing and sales support to them in order to capitalize on strong growth opportunities," said Jonathan Ross Goodman. "We expect these initiatives to result in greater long term value for our shareholders."

For more information about the fiscal 2003 financial guidance, a detailed presentation is now available in the products section of Paladin's Web site at: http://www.paladinlabs.com/forinvestors/presentations.html


Conference Call Notice

Paladin will host a conference call to discuss its third quarter 2002 results on Thursday, October 31 at 10:00 a.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 1298925.

The call will be audio-cast live and archived for 90 days at www.financialdisclosure.ca and www.paladinlabs.com

About Androderm® Inc.
Androderm®, the only testosterone patch available in Canada, is indicated for the treatment of testosterone deficiency in men. Unusually low testosterone levels in men can be due to the natural ageing process or as a result of a variety of other conditions. Testosterone deficiency is characterized by symptoms of fatigue, negative moods, and loss of sex drive.

It is estimated that testosterone deficiency or andropause afflicts more than one million Canadian men, only five per cent of whom are being treated in Canada today. Androderm®'s effectiveness in treating testosterone deficiency along with its convenient once-a-day format makes it an innovative new option for the treatment of testosterone deficiency. Launched by Paladin in 2001, Androderm® is competing in a $23 million market that has grown at a four-year compounded annual growth rate of over 30%.

About Estring® Inc.
Estring® is an intravaginal ring that provides sustained local release of estrogen over a three-month period. Estring® is indicated for the treatment of post-menopausal urogenital complaints. Estring® offers women the option of taking a local estrogen therapy over other systemic hormone replacement therapy.

Paladin obtained the rights to distribute Estring® from Pharmacia Canada Inc. in January 2002. Estring® competes in a $150 million female hormone replacement therapy market, which is dominated by systemic therapies that have recently come under examination.

About Plan B™ Inc.
Plan B™ is the first progestin-only pill indicated to prevent pregnancy after a contraceptive failure or unprotected sex. It is highly effective and produces significantly less nausea and vomiting than other emergency contraceptive regimens. Health Canada approved Plan BTM as a prescription product in February 2000. During 2001, the provinces of British Columbia and Quebec authorized pharmacists to prescribe Plan B™. During 2002, Paladin, on behalf of Women's Capital Corp., submitted an application to Health Canada to change Plan BTM from prescription-only to non-prescription status.

In Canada, there are approximately 3,000,000 cases of unprotected sex annually due to either lack of use of a contraceptive or a contraceptive failure. This results in an estimated 235,000 unintended pregnancies and 112,500 abortions annually.

About Paladin Labs Inc.
Paladin Labs Inc., 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.
Bruce Wigle
Investor Relations
Tel: (416) 815-0700 ext. 228
E-mail: bwigle@equicomgroup.com

Paladin Labs Inc.

Balance Sheet

[In thousands of Canadian dollars]


 

September 30

December 31

 

2002

2001

 

$

$

 

(unaudited)

 

ASSETS

 

 

Current

 

 

Cash and cash equivalents

7,437 

1,978

Temporary investments

39,973 

20,470

Accounts receivable

1,944 

2,067

Inventories

— 

50

Income tax credits receivable

579 

487

Future income tax assets

2,275 

2,275

Total current assets

52,208 

27,327

 

 

 

Capital assets

14,545 

12,530

Investments, at cost

2,771 

2,771

Future income tax credits receivable

1,267 

347

Future income tax assets

347 

2,216

 

71,138 

45,191

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

Current

 

 

Accounts payable and accrued liabilities

6,277 

3,924

Income taxes payable

169 

181

Deferred credit

1,638 

1,638

Total current liabilities

8,084 

5,743

Balance of sale payable

584 

544

Deferred credit

— 

935

Future income tax liability

133 

133

 

8,801 

7,355

 

 

 

Shareholders’ equity

 

 

Capital stock

57,281 

37,154

Contributed surplus

87 

87

Other paid-in capital

23 

23

Retained earnings

4,946 

572

Total shareholders’ equity

62,337 

37,836

 

71,138 

45,191

 

 

STATEMENTS OF INCOME AND RETAINED EARNINGS

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

 

Three-month period ended

September 30

Nine-month period ended

September 30

 

2002

2001

2002

2001

 

$

$

$

$

 

(unaudited)

(unaudited)

(unaudited)

(unaudited)

 

 

 

 

 

Revenues

6,087 

4,859 

17,812 

12,858 

Cost of sales

1,615 

1,407 

4,764 

4,112 

Gross profit

4,472 

3,452 

13,048 

8,746 

 

 

 

 

 

Selling and administrative

2,393 

1,691 

6,546 

5,263 

Research and development

203 

248 

791 

492 

Amortization

433 

167 

1,289 

476 

Interest income, net

(365)

(232)

(710)

(828)

Income before under noted items

1,808 

1,578 

5,132 

3,343 

Gain on disposal of license

— 

109 

— 

109 

Income before income taxes

1,808 

1,687 

5,132 

3,452 

 

 

 

 

 

Provision for income taxes

 

 

 

 

Current

21 

5 

81 

15 

Future

254 

209 

677 

454 

 

275 

214 

758 

469 

Net income

1,533 

1,473 

4,374 

2,983 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

Basic

0.10 

0.12 

0.32 

0.24 

Diluted

0.10 

0.12 

0.31 

0.24 

 

 

 

 

 

Weighted average number of shares outstanding

 

 

 

 

Basic

14,777,171 

12,428,420 

13,724,021 

12,410,020 

Diluted

15,052,244 

12,486,145 

13,956,901 

12,476,703 

 

STATEMENTS OF CASH FLOWS

[In thousands of Canadian dollars]

 

 

 

 

Three-month period ended

September 30

Nine-month period ended

September 30

 

2002

2001

2002

2001

 

$

$

$

$

 

(unaudited)

(unaudited)

(unaudited)

(unaudited)

 

 

 

 

 

Operating activities

 

 

 

 

Net income

1,533 

1,473 

4,374 

2,984 

Add items not affecting cash

 

 

 

 

Amortization

433 

167 

1,289 

476 

Future income taxes

227 

173 

15 

371 

Imputed interest on balance of sale

13 

12 

40 

37 

Gain on disposal of license

— 

(109)

— 

(109)

 

2,206 

1,716 

5,718 

3,759 

Net change in non-cash balances relating to operations

1,163 

 (518)

1,241 

(514)

Cash flows from (used in) operating activities

3,369 

1,198 

6,959 

3,245 

 

 

 

 

 

Investing activities

 

 

 

 

Acquisition of capital assets

(16)

— 

(33)

(11)

Additions to pharmaceutical product licenses and rights

(519)

(2,311)

(3,270)

(5,126)

Accounts payable related to the acquisition of intellectual property

— 

— 

1,179 

— 

Investments

— 

(211)

— 

(211)

Net decrease (increase) in temporary investments)

(611)

(7,400)

(19,503)

1,627 

Cash flows (used in) from financing activities

(1,146)

(9,922)

(21,627)

(3,722)

 

 

 

 

 

Financing activities

 

 

 

 

Issuance of common shares

9 

103 

232 

236 

Issuance/conversion of special warrants

— 

— 

20,952 

— 

Share issue costs

— 

— 

(1,057)

— 

Cash flows from financing activities

9 

103 

20,127 

236 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

2,232

(8,621)

5,459 

(241)

 

 

 

 

 

Cash and cash equivalents, beginning of period

5,205 

11,238 

1,978 

2,858 

 

 

 

 

 

Cash and cash equivalents, end of period

7,437 

2,617 

7,437 

2,617 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

7,437 

2,617 

 

 

Temporary investments

39,973 

19,855 

 

 

 

47,410 

22,472