Cangene third-quarter revenues decline 39% to $41.1M

Cangene Corporation today reports financial results for the third quarter ended April 30, 2010.

Revenues for the third quarter of 2010 were $41.1 million, 39% lower than the $67.3 million recorded during the same period last year. The higher revenue in the year-earlier quarter reflected a greater number of deliveries on U.S. government stockpiling contracts than in the current quarter. During this quarter the Company signed a contract modification with the U.S. government under which the deliveries on one U.S. government contract will be spread out over an additional two years. Biopharmaceutical product sales were also lower during the current quarter, primarily due to decreased sales of WinRho(R) SDF. The Company recently assumed the U.S. commercialization rights to this product, which had been distributed in the U.S. by Baxter Healthcare Corporation; this change took effect on June 1, 2010. In addition, R&D-services revenues declined to $5.7 million in the current quarter from $13.7 million in the prior-year quarter due to lower R&D activities in government contracts in the current quarter.

There was a net loss for the quarter of $0.3 million ($0.00 per share) compared with a net income of $11.3 million ($0.16 per share) in the same quarter last year. The lower net income is due to reduced revenues as well as lower gross margins. Gross margin for the quarter has decreased to 37% from 46% in the prior year largely due to excess production capacity, a decline in the market value of source plasma inventories to be used in development of IGIV, and plasma centre and sales force start-up costs. In addition, the current period net income was adversely affected by a $4.0-million foreign-exchange loss compared with a small gain in the comparative quarter.

"Our financial results for the quarter reflect the combination of a number of initiatives aimed at building our business for the long term. These have had the short-term effect of increasing expenses, such as the start-up costs as we build up our U.S. sales and marketing group at Cangene bioPharma, Inc., the costs associated with the expanded plasma centres, which are not yet operating at full capacity, and the costs associated with IGIV, the new anti-infective product we're developing," said Dr. John Langstaff, Cangene's president and CEO. "Nevertheless, we maintain a debt-free balance sheet and a strong cash position."

The investment in non-cash working capital balances and other assets related to operations decreased by $15.1 million during the quarter. Lower working capital levels at April 30, 2010 compared with January 31, 2010 resulted primarily from decreased inventories and contracts in progress and decreased accounts receivable. By comparison, the third quarter of 2009 included significant increases in accounts receivable and inventories and contracts in progress, although these were partially offset by higher accounts payable and accrued liabilities.

At April 30, 2010, the Company had $32.5 million in cash and no debt.