MONTREAL, CANADA--(Marketwired - Aug. 14, 2013) - 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® from Bayer Pharma AG ("Bayer") for Latin America including Mexico, Brazil, Columbia, Ecuador and select countries in Central America
• Launched Silenor® (doxepin hydrochloride) for the treatment and symptomatic relief of insomnia
• Launched Amniosense™, 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® (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™ 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®, Trelstar®, Testim®, Abstral®, Digifab®, Glucagen®, Oralair® and Pollinex®-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 June 30				Six months ended 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 30				Six months ended June 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 30, 2013	Paladin	Litha & Ativa	Consolidated results from operations	Paladin	Litha & Ativa (proportionate consolidation)	Adjusted(2) consolidated results from operations
	$	$	$	$	$	$
Revenues	40,376	26,840	67,216	40,376	11,955	52,331
Cost of sales	11,348	14,779	26,127	11,348	6,583	17,931
Gross Income	29,028	12,061	41,089	29,028	5,372	34,400
EBITDA(1)	20,928	3,939	24,867	20,928	1,751	22,679
Net income before income taxes	17,803	1,460	19,263	17,803	645	18,448
Net Income	13,016	1,391	14,407	13,016	615	13,631
Net Income attributable to shareholders	13,016	605	13,621	13,016	605	13,620

Six months ended June 30, 2013	Paladin	Litha & Ativa	Consolidated results from operations	Paladin	Litha & Ativa (proportionate consolidation)	Adjusted(2) consolidated results from operations
	$	$	$	$	$	$
Revenues	79,036	57,140	136,176	79,036	25,451	104,487
Cost of sales	22,190	32,345	54,535	22,190	14,407	36,597
Gross Income	56,846	24,795	81,641	56, 846	11,044	67,890
EBITDA(1)	39,813	7,665	47,478	39,813	3,409	43,222
Net income before income taxes	32,786	1,648	34,434	32,786	724	33,510
Net Income	23,864	1,093	24,957	23,864	478	24,342
Net Income attributable to shareholders	23,864	536	24,400	23,864	536	24,400