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Paladin Labs Reports Second Quarter 2013 Results

Paladin Labs Reports Second Quarter 2013 Results  Achieves Record EBITDA(1)  MONTREAL, CANADA -- (Marketwired) -- 08/14/13 -- Paladin Labs Inc. (TSX:PLB), a leading specialty pharmaceutical company, today reported its financial results for the quarter ended June 30, 2013.   2013 Second Quarter Highlights  Financial      --  Adjusted(2) revenues reached $52.3 million, an increase of 41% over the     same period last year  --  Adjusted(2) EBITDA(1) reached $22.7 million, an increase of 32% over the     same period last year     Product Developments      --  Acquired Binotal(R) from Bayer Pharma AG ("Bayer") for Latin America     including Mexico, Brazil, Columbia, Ecuador and select countries in     Central America  --  Launched Silenor(R) (doxepin hydrochloride) for the treatment and     symptomatic relief of insomnia  --  Launched Amniosense(TM), Canada's first OTC amniotic fluid leak     detection test  --  Submitted a new drug application ("NDA") to the U.S. Food and Drug     Administration (FDA) for Impavido(R) (miltefosine) and received priority     review status     Corporate Developments      --  Completed a strategic collaboration to refinance and increase Bioniche's     debt for up to US $30 million, to provide new equity of up to $0.5     million, and to enter into a licensing agreement for Bioniche's Phase     III bladder cancer product - Urocidin(TM) for Canada, South Africa and     Mexico.  --  Amended a secured loan agreement with Nuvo Research Inc. ("Nuvo") to     issue a second tranche of $4 million, add a potential third $4 million     loan tranche and issue up to 100,000 warrants to acquire Nuvo common     shares  --  Issued a combined balance of $4.2 million secured loans to two     additional undisclosed pharmaceutical companies  --  Entered into license agreement with Altus Formulation Inc. ("Altus") for     certain Labopharm Inc technology in exchange for a 35% equity ownership     interest     Subsequent to the quarter       --  Closed the agreements related to Bioniche and Nuvo  --  Acquired Allon Therapeutics Inc. ("Allon")     "In the second quarter, Paladin posted record EBITDA(1) while continuing to invest in its product portfolio and pipeline. Paladin further expanded its Latin American footprint with the acquisition of Binotal for Latin America and select Central American countries. In addition, we expanded our product portfolio and pipeline with the launch of Silenor and Amniosense and the in-licensing of Phase III product Urocidin. Furthermore, we deployed nearly $40 million through secured strategic loans to four pharmaceutical companies" said Mark Beaudet, interim President and CEO of Paladin Labs.  Financial Results  Adjusted(2) revenues increased $15.2 million or 41% to $52.3 million for the second quarter of 2013 from $37.1 million for the same period in 2012. The increase is mostly attributable to the proportionate consolidation of Litha's revenues of $11.9 million for the quarter ended June 30, 2013. Paladin's promoted products, including Tridural(R), Trelstar(R), Testim(R), Abstral(R), Digifab(R), Glucagen(R), Oralair(R) and Pollinex(R)-R combined increased by 30% for the quarter compared to the same period last year.  Consolidated revenues for the quarter ended June 30, 2013 were $67.2 million, an increase of 81% over the same period last year. The increase is mostly attributable to the consolidation of Litha's revenues of $26.8 million for the quarter.  Second quarter 2013 adjusted(2) EBITDA(1) increased 32% to $22.7 million, compared to adjusted(2) EBITDA(1) of $17.2 million in the second quarter of 2012. This increase is primarily due to the strong sales performance of Paladin's promoted products, partially offset by increased costs associated with the launch of new products. Litha contributed $1.8 million to adjusted(2) EBITDA(1) which includes impact of higher gross income margins as a result of the mix of products sold in the quarter offset by the impact of the continued decline in the South African Rand.  Consolidated EBITDA(1) reached a record $24.9 million, an increase of 44% over the consolidated EBITDA(1) for the quarter ended June 30, 2012. This increase is primarily due to the consolidation of Litha, which contributed $4.0 million in consolidated EBITDA(1) for the quarter.   Net income attributable to shareholders for the quarter was $13.6 million or $0.64 per fully diluted share, compared to net income attributable to shareholders of $10.9 million or $0.52 per fully diluted share the same quarter a year ago.  As at June 30 2013, Paladin's cash, cash equivalents and investments in marketable securities net of bank overdraft totaled $247.7 million. From this strong cash position, Paladin continues to pursue business and corporate development opportunities.   Product Developments  During the second quarter of 2013, Paladin advanced its product portfolio and pipeline.  Paladin grew its international business with the acquisition of Binotal from Bayer for Latin America and select countries in Central America. Binotal is used for the systemic treatment of a wide range of bacterial infections. Binotal has a strong market position in the region and recorded sales in 2012 in excess of $11 million in Latin America with Mexico and Brazil generating two-thirds of the revenues. Bayer will provide certain distribution support services for an interim period.  During the quarter, Paladin added to its prescription and OTC portfolio with the launch of Silenor and Amniosense. Silenor is indicated for the treatment and symptomatic relief of insomnia and competes in the Canadian prescription sleep aid market which in 2012 was valued at over $90 million(3). In addition, Paladin's OTC portfolio was expanded with the launch of Amniosense, Canada's first and only OTC amniotic fluid leak detection test.  During the second quarter, Paladin expanded its product pipeline with the in-licensing of Urocidin and the NDA for Impavido. Paladin entered into an exclusive license to market and sell Bioniche's phase III bladder cancer treatment Urocidin in Canada, South Africa and Mexico. Furthermore, Paladin submitted a NDA to the FDA for Impavido and was granted priority review status. If approved, Paladin will be authorized to commercialize Impavido in the U.S. and will receive a priority review voucher through the FDA's tropical disease priority review voucher program.   Corporate Developments  During the quarter, Paladin entered into a strategic agreement with Bioniche to refinance and increase its debt for up to US $30 million, provide new equity of up to $0.5 million and license Urocidin. Paladin acquired Bioniche's existing secured debt facility with Capital Royalty Partners II L.P. and its affiliates for approximately US $22 million. In addition, Paladin and Bioniche entered into an amended secured loan transaction whereby Paladin provided an additional US $8 million loan to Bioniche, US $5 million of which was paid upon closing and the remaining US $3 million will be available upon meeting certain conditions. The loan bears an interest rate of 13.25% and will mature on July 1, 2014. Furthermore, Paladin was granted warrants to acquire up to 2 million common shares of Bioniche, in addition to another 1 million warrants which may be issued to Paladin under certain conditions.  Paladin also amended its existing loan agreement with Nuvo and issued a second tranche of $4 million bearing an interest rate of 15%. The amendment includes a third $4 million tranche which may be drawn upon achieving certain conditions, the issuance of up to 100,000 warrants to acquire Nuvo common shares and the right to in-license WF10, Nuvo's immune modulation drug candidate, if certain conditions are met.  During the second quarter, Paladin issued a combined balance of $4.2 million in secured loans to two additional unnamed pharmaceutical companies. Paladin also entered into a license agreement for certain intellectual property and related technology of Labopharm Inc. to Altus Formulation Inc. ("Altus") in exchange for a 35% equity ownership interest, option to in-license and royalty rights on future products developed by Altus.  Subsequent to the quarter, Paladin acquired Allon which was restructured under the Bankruptcy and Insolvency Act (Canada) and under the Canada Business Corporations Act. All pre-existing issued and outstanding shares and other securities of Allon were, pursuant to the Court Order, cancelled without payment or other consideration.  (1) EBITDA - Non-IFRS Financial Measures   The term EBITDA (earnings before interest, taxes, depreciation and amortization) does not have any standardized meaning under International Financial Reporting Standards ("IFRS") and therefore may not be comparable to similar measures presented by other companies. The Company defines EBITDA as earnings before interest expense, other expense (income), taxes, depreciation and amortization, foreign exchange gains (losses), share of net income (loss) in associates and joint venture and unusual items; such as write-downs and gains (losses) on intellectual property and investments. EBITDA is calculated and presented consistently from period to period and agrees, on a consolidated basis, with the amount disclosed as "Earnings before under-noted items" on the consolidated statements of income. The Company believes EBITDA to be an important measurement that allows it to assess the operating performance of its ongoing business on a consistent basis without the impact of amortization expenses. The Company excludes amortization expenses because their level depends substantially on non-operating factors such as the historical cost of intangible assets. The Company's method for calculating EBITDA may differ from that used by other issuers and, accordingly, this measure may not be comparable to EBITDA used by other issuers.        (3) IMS Brogan - moving annual total for the 12 months ended December 31,      2012                                                                      (2) Adjusted  The term "adjusted" refers to the proportionate consolidation of Litha and Ativa's results. Given that Litha and Ativa are being accounted for on a consolidated basis, the consolidated results include amounts attributable to minority shareholders. Consequently, adjusted results have been provided to highlight Paladin's 44.54% and 50.01% economic interest in Litha and Ativa, respectively.  Conference Call Notice   Paladin will host a conference call to discuss its second quarter results today at 10:00 a.m. EST. The dial-in number for the conference call is 1-800-736-4610 or 416-981-9000. The call will be audio-cast live and archived for 30 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 and select international markets. With this strategy, a focused Canadian national sales team and proven marketing expertise, Paladin has evolved into one of Canada's leading specialty pharmaceutical companies. For more information, please visit the Company's web site at www.paladinlabs.com.  This press release may contain forward-looking statements and predictions. These forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. The Company considers the assumptions on which these forward-looking statements are based to be reasonable at the time they were prepared, but cautions that these assumptions regarding the future events, many of which are beyond the control of the Company and its subsidiaries, may ultimately prove to be incorrect. Factors and risks, which could cause actual results to differ materially from current expectations, are discussed in the annual report as well as in the Company's Annual Information Form for the year ended December 31, 2012. The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information or future events and except as required by law. For additional information on risks and uncertainties relating to these forward-looking statements, investors should consult the Company's ongoing quarterly filings, annual report and Annual Information Form and other fillings found on SEDAR at www.sedar.com.      INTERIM CONSOLIDATED BALANCE SHEETS                                          (In thousands of Canadian dollars)                                                                                                                        As at                                       June 30, 2013 December 31, 2012  ---------------------------------------------------------------------------- ASSETS                                                                       Current                                                                      Cash and cash equivalents                          93,400           118,744  Marketable securities                             160,096           146,258  Trade and other receivables                        42,934            38,587  Inventories                                        43,136            37,441  Financial assets                                      988                 -  Income tax receivable                                 533             5,479  Other current assets                                2,171             1,661  ---------------------------------------------------------------------------- Total current assets                              343,258           348,170                                                                               Investment in associates                              696               626  Interest in a joint venture                        26,860            30,476  Loans receivable from a joint venture              11,027            11,661  Financial assets                                   32,534             4,561  Investment tax credits recoverable                 22,647            24,840  Deferred income tax assets                         21,959            25,402  Property, plant and equipment                       8,499             9,754  Intangible assets                                 119,764           112,851  Goodwill                                           33,314            36,176  ---------------------------------------------------------------------------- Total assets                                      620,558           604,517  ---------------------------------------------------------------------------- ----------------------------------------------------------------------------                                                                              LIABILITIES AND EQUITY                                                       Current                                                                      Bank overdraft                                      5,790             7,044  Payables, accruals and provisions                  56,266            50,165  Current portion of finance lease                                              liability                                            745               796  Deferred revenue                                    3,894             2,734  Income tax payable                                 24,780            24,140  Other balances payable                              2,000             2,000  Current portion of long-term liabilities            5,349             5,804  ---------------------------------------------------------------------------- Total current liabilities                          98,824            92,683                                                                               Finance lease liability                             6,201             6,843  Deferred revenue                                    1,502             1,734  Deferred tax liability                             21,359            24,415  Other balances payable                                714                 -  Long-term liabilities                              23,900            28,327  ---------------------------------------------------------------------------- Total liabilities                                 152,500           154,002  ----------------------------------------------------------------------------                                                                              Equity                                                                       Share capital                                     176,964           172,282  Other paid-in capital                               6,860             7,039  Other capital reserves                            (10,069)           (4,076) Retained earnings                                 232,861           208,461  ---------------------------------------------------------------------------- Attributable to shareholders of the                                           Company                                          406,616           383,706  Non-controlling interests                          61,442            66,809  ---------------------------------------------------------------------------- Total equity                                      468,058           450,515  ---------------------------------------------------------------------------- Total liabilities and equity                      620,558           604,517  ---------------------------------------------------------------------------- ----------------------------------------------------------------------------                                                                                                                                                                                                                                        INTERIM CONSOLIDATED INCOME STATEMENTS                                                                                                                    (In thousands of Canadian dollars except for share and per share amounts)                                                                                                                Three months ended          Six months ended                                            June 30                   June 30                                  2013         2012         2013         2012  ----------------------------------------------------------------------------                                                                              Revenues                      67,216       37,136      136,176       75,693  Cost of sales                 26,127        9,981       54,535       21,169  ---------------------------------------------------------------------------- Gross income                  41,089       27,155       81,641       54,524  ----------------------------------------------------------------------------                                                                              Expenses (income)                                                            Selling, general and                                                          administrative               15,958        9,044       32,760       16,688  Research and development       2,162        1,879        4,787        4,427  Interest income               (1,898)        (993)      (3,384)      (1,889) ---------------------------------------------------------------------------- Earnings before under-                                                        noted items                  24,867       17,225       47,478       35,298  ----------------------------------------------------------------------------                                                                              Amortization of                                                               intangible assets             4,884        2,903        9,936        5,806  Depreciation of                                                               property, plant and                                                          equipment                       305           26          647           51  Other finance expense            841          340          783          895  Other income                     (36)        (717)        (549)        (917) Foreign exchange (gain)                                                       loss                           (953)         192         (402)          38  Interest expense                 818           14        1,859           16  Share of net (income)                                                         loss from a joint                                                            venture                        (157)           -          859            -  Share of net income from                                                      an associates                   (98)        (524)         (89)        (949) ---------------------------------------------------------------------------- Income before income tax      19,263       14,991       34,434       30,358  ----------------------------------------------------------------------------                                                                              Provision for income                                                          taxes                         4,856        4,113        9,477        8,158  ---------------------------------------------------------------------------- Net income for the                                                            period                       14,407       10,878       24,957       22,200  ---------------------------------------------------------------------------- ----------------------------------------------------------------------------                                                                              Attributable to:                                                             Shareholders of the                                                           Company                      13,621       10,878       24,400       22,200  Non-controlling                                                               interests                       786            -          557            -  ----------------------------------------------------------------------------                                                                              Attributable to                                                               shareholders of the                                                          Company                                                                                                                                                  Basic earnings per share        0.66         0.54         1.19         1.09  Diluted earnings per                                                          share                           0.64         0.52         1.16         1.06                                                                               Weighted number of                                                            shares outstanding                                                                                                                                       Basic                     20,574,460   20,331,736   20,511,366   20,308,241  Diluted                   21,127,270   20,926,103   21,080,176   20,992,924  ---------------------------------------------------------------------------- ----------------------------------------------------------------------------                                                                                                                                                                                                                                        INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                                                             (In thousands of Canadian dollars)                                                                                                                                                    Three months ended June   Six months ended June                                                   30                      30                                     2013        2012        2013        2012  ----------------------------------------------------------------------------                                                                              Operating activities                                                         Net income for the period        14,407      10,878      24,957      22,200  Adjustments reconciling net                                                   income to operating cash                                                     flows                                                                         Amortization of intangible                                                    assets                         4,884       2,903       9,936       5,806    Deferred tax                      773       2,985       4,130       7,358    Share-based compensation                                                      expense                        1,197         746       1,741       1,327    Other finance expense             841         340         783         895    Other income                      (36)       (717)       (549)       (717)   Unrealized foreign                                                            exchange (gain) loss          (2,292)        165      (2,188)        230    Depreciation of property,                                                     plant and equipment              353          29         730          56    Share of net income from                                                      associates                       (98)       (524)        (89)       (949)   Share of net (income) loss                                                    from a joint venture            (157)          -         859           -  ----------------------------------------------------------------------------                                  19,872      16,805      40,310      36,206  ---------------------------------------------------------------------------- Net change in non-cash                                                        balances related to                                                          operations                        (139)     (5,165)      1,096      (9,683) ---------------------------------------------------------------------------- Cash inflow from operating                                                    activities                      19,733      11,640      41,406      26,523  ----------------------------------------------------------------------------                                                                              Investing activities                                                         Disposals and maturities of                                                   marketable securities           33,388      75,656      69,834     115,163  Dividends from an associate           -       1,637           -       1,637  Proceeds from disposal of                                                     financial assets                    33         799          68         799  Proceeds from disposal of                                                     intangible assets                   50         717          50         717  Acquisition of subsidiaries,                                                  net of cash acquired                 -           -           9           -  Purchases of marketable                                                       securities                     (31,736)    (40,478)    (83,731)    (77,055) Purchases of financial                                                        assets                         (26,908)     (4,000)    (29,408)     (4,000) Purchases of intangible                                                       assets                         (22,565)        (25)    (23,680)        (25) Purchases of property, plant                                                  and equipment                     (167)       (106)       (332)       (123) Payment of other balances                                                     payable                              -        (995)          -        (995) ---------------------------------------------------------------------------- Net cash (outflow) inflow                                                     from investing activities      (47,905)     33,205     (67,190)     36,118  ----------------------------------------------------------------------------                                                                              Financing activities                                                         Common shares issued for                                                      cash                               967         598       3,420       1,169  Increase (decrease) in bank                                                   overdraft                        2,436           -        (727)          -  Repurchase of shares                  -      (1,458)          -      (2,277) Repayment of long-term                                                        liabilities                     (1,070)          -      (2,188)          -  Payment of obligation under                                                   finance lease                        -        (250)          -        (500) ---------------------------------------------------------------------------- Net cash inflow (outflow)                                                     from financing activities        2,333      (1,110)        505      (1,608) ---------------------------------------------------------------------------- Foreign exchange rate loss                                                    on cash and cash                                                             equivalents                        (42)        (55)        (65)        (66) (Decrease) increase in cash                                                   and cash equivalents during                                                  the period                     (25,881)     43,680     (25,344)     60,967  Cash and cash equivalents,                                                    beginning of period            119,281      89,402     118,744      72,115  ---------------------------------------------------------------------------- Cash and cash equivalents,                                                    end of period                   93,400     133,082      93,400     133,082  ---------------------------------------------------------------------------- ----------------------------------------------------------------------------                                                                              Paladin cash and cash                                                          equivalents                     90,107     133,082                          Paladin marketable                                                            securities                     160,096     128,077                          ---------------------------------------------------------------------------- Paladin cash, cash                                                            equivalents and marketable                                                   securities                     250,203     261,159                          ---------------------------------------------------------------------------- Litha cash and cash                                                           equivalents                      2,846           -                          Litha bank overdraft             (5,790)          -                          ---------------------------------------------------------------------------- Litha cash and cash                                                           equivalents and bank                                                         overdraft                       (2,944)          -                          ---------------------------------------------------------------------------- Ativa cash and cash                                                           equivalents                        447           -                          ---------------------------------------------------------------------------- Cash, cash equivalents and                                                    marketable securities net                                                    of bank overdraft              247,706     261,159                          ---------------------------------------------------------------------------- ----------------------------------------------------------------------------    Reconciliation of the adjusted(2) consolidated results from operations      Three months ended June            Paladin    Litha & Ativa     Consolidated  30, 2013                                                       results from                                                                   operations                                          $                $                $ ----------------------------------------------------------------------------                                                                              Revenues                            40,376           26,840           67,216 Cost of sales                       11,348           14,779           26,127 ---------------------------------------------------------------------------- Gross Income                        29,028           12,061           41,089 EBITDA(1)                           20,928            3,939           24,867 Net income before income                                                      taxes                              17,803            1,460           19,263 Net Income                          13,016            1,391           14,407 Net Income attributable                                                       to shareholders                    13,016              605           13,621 ----------------------------------------------------------------------------                                                                                                                                                             Three months ended June            Paladin    Litha & Ativa      Adjusted(2)  30, 2013                                    (proportionate     consolidated                                              consolidation)     results from                                                                   operations                                          $                $                $ ----------------------------------------------------------------------------                                                                              Revenues                            40,376           11,955           52,331 Cost of sales                       11,348            6,583           17,931 ---------------------------------------------------------------------------- Gross Income                        29,028            5,372           34,400 EBITDA(1)                           20,928            1,751           22,679 Net income before income                                                      taxes                              17,803              645           18,448 Net Income                          13,016              615           13,631 Net Income attributable                                                       to shareholders                    13,016              605           13,620 ----------------------------------------------------------------------------                                                                                                                                                           Six months ended June 30,          Paladin    Litha & Ativa     Consolidated  2013                                                           results from                                                                   operations                                          $                $                $ ----------------------------------------------------------------------------                                                                              Revenues                            79,036           57,140          136,176 Cost of sales                       22,190           32,345           54,535 ---------------------------------------------------------------------------- Gross Income                        56,846           24,795           81,641 EBITDA(1)                           39,813            7,665           47,478 Net income before income                                                      taxes                              32,786            1,648           34,434 Net Income                          23,864            1,093           24,957 Net Income attributable                                                       to shareholders                    23,864              536           24,400 ----------------------------------------------------------------------------   Six months ended June 30,          Paladin    Litha & Ativa      Adjusted(2)  2013                                        (proportionate     consolidated                                              consolidation)     results from                                                                   operations                                          $                $                $ ----------------------------------------------------------------------------                                                                              Revenues                            79,036           25,451          104,487 Cost of sales                       22,190           14,407           36,597 ---------------------------------------------------------------------------- Gross Income                       56, 846           11,044           67,890 EBITDA(1)                           39,813            3,409           43,222 Net income before income                                                      taxes                              32,786              724           33,510 Net Income                          23,864              478           24,342 Net Income attributable                                                       to shareholders                    23,864              536           24,400 ----------------------------------------------------------------------------  Contacts: Samira Sakhia, MBA, CPA, CA Chief Financial Officer Paladin Labs Inc. Tel: 514-669-5367 514-344-4675 (FAX) Email: info@paladinlabs.com Website: www.paladinlabs.com