Litha acquisition is transformational Even before the Litha deal was done in mid-2012, PLB had sparkling fundamentals......
Consider...................
.........5 yr growth rate of 24 %
........very robust near-term growth with over 20 products in the pipeline
........strong cash cow, generating $68 million or over $3.15/share in cash flows for 2011
.......scintillating balance sheet, with no debt and a rapidly increaing cash position of over $230 million in cash ($11.50 per share )
......high net margins, generating net earnings of $2.51 /share in 2011 on sales of $142 million.
With Litha, which first reported in financials for Q3/12, the comparisons are.....
.....Record sales of $67 million or about $260 million annualized
......record Ebitda of $23 million or $92 million annualized
......record quarterly net earnings of $1.19 per share
Going forward and removing the one time acquisition costs along with subsequent business deals, PLB should earn about $5.25 per share in 2013, on the current business suite.....acquisition could boost this significantly.
Cash flows should exceed $100 million and should boost the cash positon to near $300 million....again assuming no further acquisitions.
At just 10 times net earnings, the fair value is $52.50 plus the $11.50 in hard cash amounts to a full fair value in excess of $60 per share.
Going foreward, and assuming a 30 % growth profile, PLB should be valued above $80 in 2014 and above $100 in 2015.
These targets could be accelerated, should PLB hitch up another deal like Litha...............which, with its huge cash positon, seems quite likley..
2012 third quarter highlights
Financial
- Adjusted revenues reached a record $50.7-million, an increase of 38 per cent over the same period last year.
- Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was a record $20.9-million, a 16-per-cent increase over the same period last year.
Corporate development
- The company announced the closing of the 44.5-per-cent acquisition of Litha Healthcare Group, effective July 2, 2012.
Subsequent to the quarter
- The company entered into a licensing agreement with QRx Pharma Ltd. for the exclusive rights to market and sell MoxDuo in Canada.
- The company entered into a licensing and distribution agreement with Dynamiclear Australia, an Australia-based natural health care company, under which Paladin received the exclusive rights to market and sell Dynamiclear Rapid in Canada.
"In Q3 we expanded our pipeline and reported our best results to date, driven by record EBITDA in our Canadian business and the addition of incremental sales and EBITDA from our acquisition of Litha," said Mark Beaudet, interim president and chief executive officer of Paladin. "Looking forward, we look to build from this position by driving increased results in both the domestic and international segments of our business."
Financial results
Adjusted revenues increased $14-million or 38 per cent to $50.7-million for the third quarter of 2012 from $36.7-million for the same period in 2011. The increase is mostly attributable to the proportionate consolidation of Litha's revenues of $13-million. In addition, revenues further increased as a result of incremental revenues from products acquired and/or launched by Paladin, including corporate acquisitions since 2011, which contributed $2.7-million to the quarter ended Sept. 30, 2012. The growth in the Canadian business was negatively affected by the supply issues related to Twinject and certain other products.
Consolidated revenues for the third quarter were $66.9-million, an increase of 82 per cent over the same period last year. The increase is mostly attributable to the consolidation of Litha's revenues of $29.2-million.
Third quarter 2012 adjusted EBITDA increased 16 per cent or $2.8-million to $20.9-million, compared with EBITDA of $18.1-million in the third quarter of 2011. This increase is primarily due to the acquisition of Litha, which contributed $1.5-million to adjusted EBITDA. The increase in adjusted EBITDA for Paladin was driven by the strong sales performance of its promoted products, partially offset by increased costs associated with the launch of new products, including Oralair. Litha's adjusted EBITDA includes certain integration and acquisition costs related to Pharmaplan as well as the effect of the decline in the South African rand. In addition, Litha's adjusted EBITDA was negatively affected by fair-value adjustments on acquisition by Paladin.
Consolidated EBITDA was $22.7-million, an increase of 25 per cent over the consolidated EBITDA for the quarter ended Sept. 30, 2011. This increase is primarily due to the consolidation of Litha, which contributed $3.3-million in consolidated EBITDA for the quarter.
Net income attributable to shareholders for the quarter was $24.9-million or $1.19 per fully diluted share, compared with net income attributable to shareholders of $9.5-million or 46 cents per fully diluted share in the same quarter a year ago.
As at Sept. 30, 2012, Paladin's cash, cash equivalents and investments in marketable securities totalled $231.2-million. From this strong cash position, Paladin continues to pursue acquisition opportunities.
Corporate developments
Effective July 2 2012, Paladin completed its most significant strategic investment to date through its investment in Litha, a Johannesburg Stock Exchange-listed diversified health care company located in South Africa. Under the terms of the agreement, Paladin acquired the 55.01 per cent of Pharmaplan it did not previously own and sold 100 per cent of the share capital of Pharmaplan to Litha in exchange for cash and the issuance of 169,090,909 shares in Litha at 2.75 rand per share. Paladin also acquired an additional 73,083,214 shares of Litha from third parties at 2.75 rand per share. Paladin deployed $47.5-million in cash and issued 88,948 shares at $44.97 per share. As a result, Paladin owns 44.5 per cent of the outstanding shares of Litha and, through various shareholder agreements, effectively controls 58 per cent of the outstanding shares of Litha.
This move into South Africa provides a stronger, more diversified platform from which Paladin is able to commercialize its South African and sub-Saharan portfolio of 10 products.
Subsequent to the quarter
Subsequent to the quarter, Paladin took steps to enrich both its over-the-counter (OTC) and pain portfolios through two separate agreements.
In early October, Paladin entered into a licensing agreement with QRxPharma, an Australia-based specialty pharmaceutical company, whereby Paladin received the exclusive rights to market and sell MoxDuo in Canada. MoxDuo is a novel, patented, immediate-release fixed-dose formulation of morphine and oxycodone for the treatment of acute pain.
On Oct. 18, 2012, Paladin entered into a licensing and distribution agreement with Dynamiclear Australia, an Australia-based natural health care company, under which Paladin received the exclusive rights to market and sell Dynamiclear Rapid in Canada. Dynamiclear Rapid is a novel OTC product for the symptomatic treatment of cold sores. In addition, Paladin received an option to acquire the same territorial rights to Dynamiclear's anti-viral formulation for herpes simplex virus 2 infections, which is currently under development.
Conference call notice
Paladin will host a conference call to discuss its third quarter results on Nov. 13 at 10 a.m. ET. The dial-in number for the conference call is 1-800-736-4594 or 416-981-9000. The call will be audiocast live and archived for 30 days at Paladin's website.