DRAXIS Health Announces Results for the Fourth Quarter and Year Ended December 31, 1997 (Part 1 of 2: Financial Tables to Follow).MISSISSAUGA, ONTARIO--(BUSINESS WIRE)--Feb. 18, 1998--DRAXIS Health Inc. (TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). :DAX.) (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :DRAXF) DRAXIS Health Inc. today reported improved operating results for the fourth quarter of 1997 with higher operating performance before interest, taxes, depreciation and amortization (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ) of 29 percent from a loss of $1,623,000 in the third quarter to a loss of $1,147,000 in the fourth quarter. Sales for the fourth quarter increased over the previous quarter by $2,064,000, or 33 percent, to $8,228,000. Sales for the year ended December 31, 1997 increased by 65 percent to $23,290,000 from $14,100,000 in 1996. The Anipryl(R) transaction with Pfizer has been accounted for as a disposition of the Company's interest in Anipryl(R). Under Canadian GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , this triggers a writedown of the full carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of Anipryl(R) against the first milestone payment of US$15,090,000 resulting in a one-time loss of $6,756,000 after provision for transaction and restructuring costs. The reduction of this carrying value will improve future annual amortization expense by $2,490,000, or $0.08 per share. Under United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. GAAP, the Anipryl(R) carrying value was written off in the fourth quarter of 1996 and accordingly the Pfizer transaction resulted in a one time gain of $17,060,000 or $0.57 per share. Under Canadian GAAP, DRAXIS' net loss for the three month period ended December 31, 1997 was $13,412,000, or $0.45 per share which included non-recurring items aggregating $9,316,000. Under United States GAAP, DRAXIS' net income for the fourth quarter was $13,377,000, or $0.44 per share, which includes non-recurring items aggregating $14,500,000. For the year ended December 31, 1997, the net loss was $20,923,000, or $0.70 per share, under Canadian GAAP as compared to net income of $1,777,000, or $0.06 per share, under United States GAAP. In commenting on the fourth quarter results Dr. Martin Barkin, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of DRAXIS stated: "The growth in quarterly revenue by $4.5 million, or 120 percent, between this quarter and the same quarter one year ago demonstrates the success the Company has achieved in meeting its strategic plan objectives of diversifying and growing the revenue base of the Company. The increase in DRAXIS' capital resources in the quarter permitted the early repayment of the $10 million in debt incurred on the acquisition of Draximage. Anipryl(R) is poised to grow under the strong leadership of Pfizer Animal Health, one of the most effective animal health organizations in the world. Its sales representatives began actively detailing Anipryl(R) in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. in early February 1998. The Company's strong cash position will allow it to continue the pace of acquisition activity that it has demonstrated over the past 18 months. The emphasis will be on areas that are complementary to its existing lines and that are accretive to earnings." -0-
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FINANCIAL HIGHLIGHTS
(thousands of Canadian dollars except per share amounts)
1997 1996
Q4 Q3 Q2 Q1 Q4
-------------------------------------- -------
Income Statement Information
----------------------------
Product Revenues
----------------
Canadian
Pharmaceutical
$ 3,147 $ 2,502 $ 2,762 $ 2,485 $ 3,347
Dermatology 1,681 1,476 1,491 671 275
Radiopharmaceutical
1,455 1,668 - - -
Veterinary 1,945 518 1,295 194 119
------- ------- ------- ------- -------
$ 8,228 $ 6,164 $ 5,548 $ 3,350 $ 3,741
------- ------- ------- ------- -------
EBITDA1 (1,147) (1,623) (1,116) (2,131) (822)
Loss From
Operations (2,646) (3,202) (2,409) (3,278) (1,423)
Net Loss (13,412) (2,919) (2,031) (2,561) (493)2
Net Loss
Per
Share $ (0.45) $(0.10) $ (0.07) $ (0.09) $(0.02)
Balance Sheet Information
-------------------------
Cash and Cash
Equivalents
$20,262 $8,181 $ 8,623 $12,323 $25,828
Shareholders'
Equity 48,828 58,308 60,303 61,805 63,830
Weighted
Average
Shares
Outstanding
30,086,415 29,709,723 29,597,582 29,381,351 25,698,666
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1 Earnings (loss) before interest, taxes, depreciation and
amortization.
2 Includes reversal of $697,000 of deferred taxes on prior
dilution gains.
FINANCIAL REVIEW
Product revenues in the fourth quarter of 1997 increased
$2,064,000, or 33 percent, to $8,228,000 from $6,164,000 in the third
quarter of the year and $4,487,000, or 120 percent, from $3,741,000
in the fourth quarter of 1996. The major items affecting fourth
quarter revenues were initial inventory sales of Anipryl(R) to Pfizer
and improved results in both DRAXIS Pharmaceutica and SpectroPharm
Dermatology.
EBITDA for the fourth quarter ended December 31, 1997 improved
$476,000 to an EBITDA loss of $1,147,000 as compared to a loss of
$1,623,000 in the previous quarter. This improvement is largely
attributable to the increased levels of sales partially offset by
higher operating expenses. Compared to the fourth quarter of 1996,
quarterly EBITDA declined by $325,000.
Net financial expense for the fourth quarter was $700,000 as
compared to interest income of $97,000 in the third quarter. This
increase is attributable to the interest charges associated with the
debt financing incurred in conjunction with the acquisition of
Draximage prior to its repayment in December 1997 and the write off
of deferred charges associated with such financing.
Depreciation and amortization expense for the fourth quarter was
virtually unchanged at $1,499,000.
The net loss for the fourth quarter was $13,412,000, or $0.45 per
share, as compared to $2,919,000, or $0.10 per share in the preceding
quarter. $9,316,000 of this loss is attributable to one time charges
including $6,756,000 associated with the Anipryl(R) transaction.
Cash and cash equivalents as at December 31, 1997, aggregated
$20,262,000, which represents an increase of $12,081,000 over the
previous quarter-end largely attributable to the initial Pfizer
milestone payment received from Pfizer in December 1997 and
$3,800,000 from the exercise of warrants which expired in December
1997 less the early repayment of $10,000,000 of long term debt.
UNITED STATES GAAP INFORMATION
The following table summarizes DRAXIS' results under both
United States and Canadian Generally Accepted Accounting Policies
(GAAP):
--------------------------------------------------------------
US AND CANADIAN GAAP INFORMATION
(thousands of Canadian dollars except per share amounts)
1997 1996
Q4 Q3 Q2 Q1 Q4
--------------------------------------- ---------
US GAAP
-------
Net Income
(Loss) $ 13,377 $ (8,369) $ (1,349) $ (1,882) $ (30,360)
Net Income
(Loss) Per
Share $ 0.44 $ (0.28) $ (0.04) $ (0.06) $ (1.18)
Canadian GAAP
-------------
Net
(Loss) $(13,412) $ (2,919) $ (2,031) $ (2,561) $ (494)
Net (Loss)
Per Share $ (0.45) $ (0.10) $ ($0.07) $ (0.09) $ (0.02)
--------------------------------------------------------------
The difference between the net loss reported under Canadian GAAP and the gain under United States GAAP is largely attributable to the differential accounting for the Anipryl(R) transaction which under Canadian GAAP resulted in a one time loss of $6,756,000 and under United States GAAP produced a one time gain of $17,060,000. In addition, under United States GAAP deferred income taxes were adjusted which resulted in a reduction of the tax provision of $2,270,000, in respect of the $6,289,000 portion of the Draximage purchase price which was written off in the third quarter of 1997. DEPRENYL ANIMAL HEALTH, INC. DRAXIS announced on November 13, 1997 that it had entered into a worldwide comprehensive alliance with Pfizer Inc. with respect to Anipryl(R). This transaction was completed on December 22, 1997. Under the terms of the alliance, DRAXIS' wholly-owned subsidiary, Deprenyl Animal Health, Inc. (DAHI DAHI Deck Aft High ) licensed the right to market, sell and distribute Anipryl(R) globally to Pfizer Animal Health and DRAXIS will supply the manufactured product to Pfizer. The arrangement resulted in DRAXIS receiving US$15 million (CDN (Content Delivery Network) A system of distributed content on a large intranet or the public Internet in which copies of content are replicated and cached throughout the network. $21 million) of total possible milestones of US$41 million (CDN$57 million). A further US$10 million (CDN$14 million) will become payable upon receipt of FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. approval of the cognitive dysfunction supplementary claim, which was filed in September 1997, and up to an additional US$16 million (CDN$22 million) is contingent upon Adj. 1. contingent upon - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent on, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent receipt of regulatory approvals for Anipryl(R) in specified major country markets. In addition, DRAXIS will receive royalties based on Pfizer's worldwide sales of Anipryl(R) based on a sliding scale slid·ing scale n. A scale in which indicated prices, taxes, or wages vary in accordance with another factor, as wages with the cost-of-living index or medical charges with a patient's income. where royalty rates are highest on the initial tranches Tranches A piece, portion or slice of a deal or structured financing. This portion is one of several related securities that are offered at the same time but have different risks, rewards and/or maturities. "Tranche" is the French word for "slice". of annual sales and decline as annual sales reach higher levels. DRAXIS successfully completed the transition of all sales and marketing functions, and transferred its remaining inventory of Anipryl(R) to Pfizer. Pfizer's field force began actively marketing and selling Anipryl(R) for canine canine or canid Any domestic or wild dog or doglike mammal (e.g., wolf, jackal, fox) in the family Canidae, found throughout the world except in Antarctica and on most ocean islands. Cushing's disease Cushing's disease: see Cushing, Harvey Williams. in Canada and the United States The United States and Canada share a unique legal relationship. U.S. law looks northward with a mixture of optimism and cooperation, viewing Canada as an integral part of U.S. economic and environmental policy. and for canine cognitive disorder in Canada early February 1998. SPECTROPHARM DERMATOLOGY dermatology (dûrmətŏl`əjē), branch of medicine concerned with diagnosis and treatment of diseases and disorders of the skin. Dermatology revenues for the fourth quarter were substantially unchanged over the previous quarter. Canadian sales of SpectroPharm products ended 1997 with a substantially higher rate from the rate of sales at the time the acquisition in February 1997. Progress continued on track with the launch of SpectroDerm(R) in the United States. Stocking orders from several of the largest United States retail drug store chains were received at the beginning of January 1998. On January 30, 1998, the Company announced the results from the second Phase 3 multi-centred, double-blind, placebo-controlled trial for LipoTECA(TM). DRAXIS has concluded that the results of its research into the development of a prescription pharmaceutical based on a liposomal delivery system together with the uncertainty concerning the timing of successfully developing a commercializable formulation do not justify the considerable further investment that would be required to pursue this line of research and work in this area will be discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: . Accordingly, the carrying value of DRAXIS' interest in this technology of $1.2 million of goodwill will be written off in the fourth quarter of 1997. DRAXIS PHARMACEUTICA Sales of Novo-Selegiline and Permax(R) increased in the fourth quarter of 1997 as compared to the previous quarter. In November 1997, Bone Care International Inc. (NASDAQ: BCII BCII Battle Command and Intelligence Integration ) announced the results of its Phase 3 clinical trial phase 3 clinical trial Phase 3 study. See Phase study. of One-alpha D2. These results will provide the basis for Bone Care's filing of an NDA (Non Disclosure Agreement) An agreement signed between two parties that have to disclose confidential information to each other in order to do business. In general, the NDA states why the information is being divulged and stipulates that it cannot be used for any with the FDA, which is expected to be late in the first quarter of 1998. DRAXIS holds the Canadian rights to One-alpha D2 and will make its own NDS See eDirectory. NDS - Netware Directory Services filing with the HPB HPB Health Promotion Board (Singapore) HPB Hrvatska Poštanska Banka (Croatian Post Bank) HPB Half Price Books (retail store) HPB High Ping Bastard , using data to be provided by Bone Care, shortly after the filing in the United States. DRAXIMAGE INC. Fourth quarter revenues of Draximage totaled $1,455,000 and were in line with expectations. In January 1998, it was announced that Draximage has successfully completed the Phase 1 trial for Fibrimage(TM), its imaging agent for deep vein thrombosis A blood clot (thrombos) in a vein deep within the muscle, typically in the thigh or calf. It is caused by disease or the lack of activity such as sitting for hours at a computer screen. (DVT See deep vein thrombosis. ). It is expected that the Phase 2 study will be completed and the Phase 3 clinical trials will commence in 1998. It is expected that a Phase 1 trial of Somatoscan(TM), Draximage's imaging agent for neuroendocrine neuroendocrine /neu·ro·en·do·crine/ (-en´do-krin) pertaining to neural and endocrine influence, and particularly to the interaction between the nervous and endocrine systems. neu·ro·en·do·crine adj. tumours, lymphoma, carcinoid carcinoid /car·ci·noid/ (kahr´si-noid) a yellow circumscribed tumor arising from enterochromaffin cells, usually in the gastrointestinal tract; the term is sometimes used to refer specifically to the gastrointestinal tumor and small cell lung cancer Lung Cancer, Small Cell Definition Small cell lung cancer is a disease in which the cells of the lung tissues grow uncontrollably and form tumors. Description Lung cancer is divided into two main types: small cell and non-small cell. , will be completed and a Phase 2 study will commence in 1998. Subject to regulatory approval, a Phase 1 trial of ANP ANP atrial natriuretic peptide. ANP atrial natriuretic peptide. ANP Atrial natriuretic peptide, see there , Draximage's agent for the imaging of kidney structure and function, is expected to commence in the fourth quarter of 1998. In addition to the above three new products, Draximage is actively considering several new projects, leveraging its knowledge and experience in radiopharmaceutical radiopharmaceutical /ra·dio·phar·ma·ceu·ti·cal/ (-fahr?mah-soo´ti-k'l) a radioactive pharmaceutical, nuclide, or other chemical used for diagnostic or therapeutic purposes. research and development, particularly its proprietary Technetium technetium (tĕknē`shēəm) [Gr. technetos=artificial], artificially produced radioactive chemical element; symbol Tc; at. no. 43; mass no. of most stable isotope 98; m.p. 2,200°C;; b.p. 4,877°C;; sp. gr. 11. labeling technology. INVESTMENTS Following a review of the carrying value of DRAXIS' interest in Stef International Corporation (Stef) and in light of continuing uncertainties regarding the achievement of the company's business objectives, DRAXIS has concluded that it is appropriate that the full carrying value of its investment in Stef, $1,300,000, be written off in the fourth quarter of 1997. DRAXIS continues to hold a 2.7 percent interest in Bone Care International, Inc. (NASDAQ: BCII) which, on December 31, 1997, had a market trading value of $3.5 million. OUTLOOK The Company expects to achieve a significant improvement in operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before in 1998 as compared to 1997. The amount of this improvement will be largely dependent on the amount and timing of sales of Anipryl(R) by Pfizer. The transfer of marketing and selling functions with respect to Anipryl(R) to Pfizer will result in a significant reduction in ongoing operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. ( provisions for this restructuring were taken in the fourth quarter of 1997. Ongoing Anipryl(R) revenues from royalties, milestones and the supply agreement will be more directly reflected in earnings going forward. Sales of SpectroPharm Dermatology in Canada are expected to show continued steady growth in 1998. The planned entry into the United States is expected to show positive results commencing in the first quarter 1998. Draximage sales and earnings are expected to remain stable until additional manufacturing capacity can be developed. Plans for new facilities development are expected to be complete by the end of the first quarter 1998 with anticipated production coming on line in the second half of 1999. DRAXIS Pharmaceutica's sales of Eldepryl(R) and Novo-selegiline are expected to decline in 1998 partially offset by continued sales growth of Permax(R). This division is awaiting regulatory approval of Alertec(R) (Modafinil) and is planning its launch for the second half of 1998. DRAXIS' substantial year-end cash reserves Cash reserves See: Cash investments cash reserves Investment funds that are held in short-term assets such as Treasury bills and certificates of deposit until more permanent investment opportunities are available. will enable the Company to continue to pursue business development initiatives consistent with its strategic plan. DRAXIS Health Inc. is a diversified pharmaceutical company with operations in four niche businesses: Deprenyl Animal Health, Inc. researches and develops prescription pharmaceuticals for companion animals, the lead product of which, Anipryl(R), has been licensed to Pfizer Animal Health on a worldwide basis; SpectroPharm Dermatology researches, develops, markets and sells prescription and non-prescription dermatologicals; Draximage researches, develops, manufactures, markets and sells radiopharmaceuticals for diagnostic and therapeutic purposes; and DRAXIS Pharmaceutica markets and sells prescription pharmaceuticals in Canada. Except for historical information, this news release contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve risk and uncertainties, which may cause actual results to differ materially from the statements made. Such factors include, but are not limited to, changing market conditions, clinical trial results, the establishment of new corporate alliances, the impact of competitive products and pricing, the timely development, regulatory approval and market acceptance of the Company's products, and other risks detailed from time-to-time in the Company's filings with the US Securities and Exchange Commission and Canadian securities authorities. CONTACT: DRAXIS Health Inc. Kendall McAlister, 905/677-5500 ext. 248 905/677-5502 (FAX) Kmcalister@draxis.com |
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