CNJ Capital Investments Inc T.CNJ

Seasonally weak Q1 is now out of the way

[TheRock07]

Readers are referred to the cautionary notes regarding Forward-lookingInformation and non-IFRS Financial Measures at the end of this release. Unless noted otherwise, dollar amounts are in U.S. dollars

Listed TSX, Symbol: CNJ

TORONTO & WINNIPEG, Canada, Dec. 14, 2011 /CNW/ - Cangene Corporation today reports financial results for the first quarter of fiscal 2012, ended October 31, 2011, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board.

Revenues for the quarter were $21.5 million, compared with $23.0 million in the same quarter of last year, a decrease of $1.6 million or 7%. The prior-year quarter included
.9 million in royalty revenues; fiscal 2011 was the final year for this revenue stream. In the current period, a quarter-over-quarter increase in HepaGam B® sales and a sale of non-specialty plasma offset lower sales of WinRho® SDF, leading to consistent product sales in the biopharmaceutical segment, quarter over quarter. There were no deliveries on U.S. government contracts during the current or comparative quarter; however, related R&D revenues were earned in both periods. As there were no deliveries on government contracts during either the current or prior-year first quarters, the majority of product-services revenues in the contract-services segment in both fiscal periods results from commercial contract-manufacturing services at Cangene bioPharma, Inc. in Baltimore, which decreased by $1.0 million compared with the year-earlier period due largely to customer-driven scheduling changes. Partially offsetting this decrease, R&D-services revenue in this segment was
.8 million higher in the current-year quarter, compared with last year.

Independent R&D expense was $6.7 million in the current quarter, compared with $4.6 million in the prior year; an increase of $2.1 million or 47%. This increase results largely from activities aimed at development of the immune globulin intravenous ("IGIV") product. During the quarter, Cangene completed four clinical production runs and incurred additional labour and other charges related to this product.

A net loss of $4.4 million in the first quarter of 2012 compares with a net loss of $3.5 million in the comparative quarter. The net loss increased due to a combination of factors including lower gross profit due to the absence of royalty revenues, which were all profit; increased independent R&D expense and a tax expense compared with a tax benefit in the prior-year quarter. However, these impacts were partially offset by a foreign-exchange gain of $3.1 million, compared with a foreign-exchange loss of $1.4 million in the prior-year quarter, due to the strengthening U.S. dollar.

"We're now implementing strategies aimed at short-, mid- and long-term growth, and at re-creating our entrepreneurial culture. We have set up internal cross-functional teams that will work toward addressing key corporate priorities, including organizational and operational efficiencies. Going forward, we'll increase focus and work toward our redefined goals," says John Sedor, President and CEO of Cangene.

Cash used in operating activities was $5.7 million in the current quarter, compared with $12.9 million in the comparative 2011 quarter. In the comparative prior-year quarter, a net change in non-cash working capital balances of $13.2 million was the main contributor to cash used in operating activities. This compares with a net change in non-cash working capital balances of
.2 million in the current period. Cash used in investing and financing activities in the current quarter was
.8 million compared with $4.5 million last year; the use of cash in the prior-year quarter consisted primarily of capital expenditures and share repurchases. The lower capital spending in the current quarter is consistent with the Company's budget for additions to property, plant and equipment in 2012.

The Company had $38.7 million in cash at October 31, 2011 compared with $45.2 million at July 31, 2011. At October 31, 2011 and July 31, 2011, Cangene had no debt.

Readers are reminded that the full, unaudited condensed consolidated interim financial statements and associated notes, along with the management's discussion and analysis of financial condition and results of operations, will be available on SEDAR at www.sedar.com.

Readers are referred to the cautionary notes regarding forward-looking information and non-IFRS financial measures at the end of this release. Certain comparative figures in the following financial statements have been reclassified to conform with the current year's presentation.

Cangene Corporation
Incorporated under the laws of Ontario

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (unaudited)

in thousands of U.S. dollars		At October 31, 2011			At July 31, 2011
ASSETS
Current
Cash	$	38,658		$	45,176
Accounts receivable		15,425			20,083
Inventories and contracts in progress		71,725			67,177
Derivative financial instruments		326			—
Taxes recoverable		12,020			12,220
Prepaid expenses and deposits		3,388			2,334
Total current assets		141,542			146,990
Property, plant and equipment, net		72,358			74,175
Taxes recoverable		16,070			16,288
Deferred tax		15,147			16,338
Intangible assets, net		11,793			12,305
	$	256,910		$	266,096
LIABILITIES AND EQUITY
Current
Accounts payable and accrued liabilities	$	18,559		$	18,219
Derivative financial instruments		—			1,775
Provision for chargebacks		3,715			3,664
Incentive plan liability		1,163			—
Taxes payable		70			92
Current portion of deferred income		2,822			3,207
Total current liabilities		26,329			26,957
Deferred income		6,300			6,716
Royalty provision		2,916			3,316
Incentive plan liability		1,081			2,844
Deferred share unit liability		238			222
Deferred tax		1,058			2,841
Total liabilities		37,922			42,896
Equity
Share capital		50,860			50,860
Contributed surplus		178			—
Retained earnings		167,950			172,340
Total equity		218,988			223,200
	$	256,910		$	266,096

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME (unaudited)

			Three months			Three months
			ended			ended
in thousands of U.S. dollars except share-related data			October 31, 2011			October 31, 2010
Revenues
Product sales		$	11,564		$	11,792
Product services			5,536			6,710
R&D services			4,369			3,594
Royalties			—			946
			21,469			23,042
Cost of sales
Product sales			7,578			8,092
Product services			4,272			4,484
R&D services			3,202			2,624
			15,052			15,200
Gross profit			6,417			7,842
Expenses
Independent R&D			6,701			4,557
Selling, general and administrative			6,813			6,725
Loss on sale of assets			80			30
			13,594			11,312
Operating loss			(7,177)			(3,470)
Short-term interest income			2			11
Foreign-exchange gain (loss)			3,139			(1,422)
Loss before taxes			(4,036)			(4,881)
Tax expense (benefit)
	Current		945			(1,326)
	Deferred		(591)			(32)
			354			(1,358)
Net loss and comprehensive loss for the period		$	(4,390)		$	(3,523)
Loss per share
	Basic and diluted	$	(0.07)		$	(0.05)

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY (unaudited)

in thousands of U.S. dollars		Stated share capital			Retained earnings			Contributed surplus			Total
Balance at July 31, 2010	$	51,696		$	173,295		$	—		$	224,991
Net income for the year ended July 31, 2011		—			1,509			—			1,509
Common shares purchased and cancelled under NCIB		(836)			(2,464)			—			(3,300)
Balance at July 31, 2011	$	50,860		$	172,340		$	—		$	223,200
Net loss for the three-month period ended October 31, 2011		—			(4,390)			—			(4,390)
Stock option expense		—			—			178			178
Balance at October 31, 2011	$	50,860		$	167,950		$	178		$	218,988
Balance at July 31, 2010	$	51,696		$	173,295		$	—		$	224,991
Net loss for the three-month period ended October 31, 2010		—			(3,523)			—			(3,523)
Common shares purchased and cancelled under NCIB		(250)			(849)			—			(1,099)
Balance at October 31, 2010	$	51,446		$	168,923		$	—		$	220,369

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (unaudited)

			Three months ended		Three months ended
in thousands of U.S. dollars			October 31, 2011		October 31, 2010
OPERATING ACTIVITIES
Net loss for the period		$	(4,390)	$	(3,523)
Add (deduct) items not involving cash:
	Depreciation of property, plant and equipment		2,353		2,570
	Amortization of intangible assets		676		686
	Deferred income		(801)		(633)
	Incentive plan liability		(601)		788
	Deferred share unit liability		16		47
	Amortization of royalty provision		(224)		(310)
	Revaluation of royalty provision		(176)		—
	Deferred tax benefit		(591)		(32)
	Change in value of derivative financial instruments		(2,101)		676
	Loss on disposal of assets		80		30
	Stock-based compensation expense		178		—
Net change in non-cash working capital balances and other assets related to operations			(157)		(13,155)
Cash used in operating activities			(5,738)		(12,856)
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net			(650)		(3,400)
Acquisition of intangible assets			(130)		(8)
Cash used in investing activities			(780)		(3,408)
FINANCING ACTIVITIES
Shares repurchased for cancellation			—		(1,099)
Cash used in financing activities			—		(1,099)
Net decrease in cash during the period			(6,518)		(17,363)
Cash, beginning of period			45,176		40,366
Cash, end of period		$	38,658	$	23,003
Interest paid1		$	6	$	4
Taxes paid2		$	59	$	12

1. Amounts paid and received for interest were reflected as operating cash flows in the consolidated statements of cash flows.