First half results on track to meet guidance for 2005 MISSISSAUGA,
ON, Aug. 11 /PRNewswire-FirstCall/ -- DRAXIS Health Inc. (TSX: DAX;
Nasdaq: DRAX) reported financial results for the second quarter and
the first six months ended June 30, 2005. All amounts are expressed
in US dollars. Highlights - Revenues for the second quarter were
$20.5 million, up 22% from $16.7 million in the second quarter
2004; revenues for the first six months were $43.3 million, up 40%
over the first half of 2004. - Net income for the second quarter
2005 was $2.4 million, up $0.1 million from second quarter 2004;
net income for the first six months of 2005 was $5.6 million, 55%
ahead of the $3.7 million in the first half of 2004. - Basic and
diluted EPS for the second quarter 2005 was 6 cents, consistent
with the second quarter of 2004; basic EPS for the first half 2005
was 14 cents, versus 9 cents for first half 2004. - Operating
income for the second quarter 2005 was $2.6 million and for the
second quarter 2004 was $2.8 million; operating income for the
first six months of 2005 was $7.1 million, up 67% from $4.3 million
in the first half of 2004. - Net cash flows from operating
activities were positive $1.3 million for the second quarter and
$2.9 million for the first half 2005, compared to net cash outflows
of $1.5 million and $1.6 for the same periods respectively in 2004.
"Key results for the first half of 2005 are well above last year
and the Company is on track to meet our guidance for 2005 for
revenues, earnings and operating cash flows," said Dr. Martin
Barkin, President and CEO of DRAXIS Health. "During the second
quarter the Company made significant progress laying important
groundwork for future growth and improved performance. We changed
the leadership of our radiopharmaceuticals business unit as
Jean-Pierre Robert assumed the presidency of that business on May
9, 2005 and the transfer of leadership has been smooth. He has
initiated a full review of the current business, including product
development, and this will be communicated later in the second
half. In our contract manufacturing business we grew revenues by
30% and 56% in the second quarter and first half, respectively. The
start-up of our second lyophilizer was achieved during the second
quarter but since commercial production started late in the quarter
it has not yet materially contributed to revenue growth. We have
also undertaken an extensive production process improvement and
optimization program in this business to better manage current and
future growth, particularly in areas such as supply chain
management, documentation control processes and continuous
improvement initiatives. These activities have resulted in some
short-term pressure on SG&A expenses but we are committed to
these important investments in our people and processes in order to
achieve long term performance in this segment." FINANCIAL
HIGHLIGHTS (in thousands of U.S. dollars except share related data
and in accordance with U.S. GAAP)
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For the Three Month Periods For the Six Month Periods Ended June
30, Ended June 30, 2005 2004 2005 2004 (unaudited) (unaudited)
(unaudited) (unaudited) ---------------------------
------------------------- REVENUES $19,176 $14,927 Product sales
$39,682 $27,136 1,295 1,786 Royalty and licensing 3,634 3,713
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$20,471 $16,713 $43,316 $30,849
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Research and development $552 $545 expense $1,119 $1,006 $7,204
$5,678 Product Gross Margin $14,650 $9,916 37.6% 38.0% Product
Gross Margin % 36.9% 36.5% $2,594 $2,825 Operating income $7,134
$4,276 12.7% 16.9% Operating Margin % 16.5% 13.9% Cash and cash
$7,989 $7,126 equivalents $7,989 $7,126 $0 $4,965 Total debt $0
$4,965 Cash flows from (used in) operating $1,295 ($1,537)
activities $2,901 ($1,568) Cash flows used in (1,256) (1,219)
investing activities (2,197) (1,864)
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$39 ($2,756) $704 ($3,432)
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Net income (loss) from continuing $2,353 $2,264 operations $5,648
$3,652 from discontinued - (21) operations - (30)
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$2,353 $2,243 $5,648 $3,622
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Basic income per share from continuing $0.06 $0.06 operations $0.14
$0.09 from discontinued - - operations - -
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$0.06 $0.06 $0.14 $0.09
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Subsequent to the end of the second quarter, on July 27, 2005 the
NASDAQ Stock Market(R) announced that DRAXIS Health Inc. has been
included as a founding member of the new NASDAQ Health Care Index
(NASDAQ:IXHC). The NASDAQ Health Care Index is a market value
weighted index that contains NASDAQ listed companies classified,
according to the FTSE(TM) Global Classification System as "Health",
"Pharmaceutical" or "Biotechnology". Segment Highlights from
Management's Discussion and Analysis Contract Manufacturing -
Product sales revenues of $14.6 million for the second quarter and
$30.4 million for the first half of 2005 represented increases of
30% and 56% respectively over the same periods of 2004; almost all
of the revenue growth in the second quarter and first half of 2005
is related to sterile products, both injectable and topical creams
and ointments. - Product gross margin percentage of 30% for the
second quarter 2005 compared to 26% for the second quarter of 2004.
The increase is related to volume growth, principally of higher
margined sterile products, which was made possible by increasing
the capacity for manufacturing sterile products through the
introduction of additional production labour. - Operating income
was $2.2 million for the second quarter 2005 compared to $1.6
million for the second quarter of 2004. The Company increased
autoclave capacity in 2004 which is critical in reducing
bottlenecks and further increasing sterile capacity. Improved
capacity utilization has directly resulted in higher margins
through substantially improved absorption of overhead costs. -
DRAXIS Pharma commenced commercial production of freeze-dried
sterile products during the second quarter 2005 upon the final
validation of the recently installed second lyophilizer unit. -
During the quarter, the contract manufacturing operations embarked
on key process improvement initiatives aimed at increasing the
efficiency of the division's operations from production planning
all the way through the product release and shipment process.
Radiopharmaceuticals - Product sales were $4.7 million for the
second quarter 2005, representing a 10% increase over the second
quarter 2004. The increase is related to higher volumes resulting
from greater U.S. market penetration, primarily increased sales of
radioiodine products, including sodium iodide I-131. - Product
gross margin percentage was a strong 60% for the second quarter
2005, consistent with 61% for the second quarter 2004, driven by
the continued contribution of radioiodine products. For the
six-month period ended June 30, 2005 product gross margin of 60%
was consistent with that of the same period in 2004. - Operating
income in the second quarter 2005 of $1.0 million increased
slightly compared to $0.9 million in second quarter 2004. - During
the second quarter Mr. Jean-Pierre Robert was appointed as the new
president of the division, reporting to the Chief Executive
Officer, effective May 9, 2005. Mr. Robert also serves as a member
of the DRAXIS executive management group. Interim Financial Report
This release includes by reference the second quarter interim
financial report incorporating the full Management's Discussion
& Analysis (MD&A) as well as financial statements prepared
in accordance with U.S. GAAP. The interim report, including the
MD&A and financial statements, has been filed with applicable
Canadian and U.S. securities regulatory authorities, is accessible
on the Company's website at http://www.draxis.com/ in the Investor
Relations section under Financial Reports, through the SEDAR and
EDGAR databases and is available upon request by contacting DRAXIS
Investor Relations at 1-877-441-1984. Conference Call DRAXIS has
scheduled a conference call to discuss second quarter 2005
financial results at 10:30 a.m. (ET) on August 11, 2005. This call
can be accessed by dialing 1(800) 822-4794 and using Access Code
6633146, and will also be webcast live with access through the
Company's website at http://www.draxis.com/. The conference call
will also be available in archived format on the Company's website
for 30 days following the conference call. About DRAXIS Health Inc.
DRAXIS Health is a specialty pharmaceutical company providing
products in three categories. Sterile products include liquid and
freeze-dried (lyophilized) injectables plus sterile ointments and
creams. Non-sterile products are produced as solid oral and
semi-solid dosage forms. Radiopharmaceuticals are used for both
therapeutic and diagnostic molecular imaging applications.
Pharmaceutical contract manufacturing services are provided through
the DRAXIS Pharma division and radiopharmaceuticals are developed,
produced, and sold through the DRAXIMAGE division. DRAXIS Health
employs over 500 staff in its Montreal facility. For additional
information please visit http://www.draxis.com/. This news release
contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements
are not guarantees of future performance. By their nature,
forward-looking statements involve numerous assumptions, known and
unknown risks, uncertainties and other factors that may cause the
actual results or performance of the Company to be materially
different from such statements or from any future results or
performance implied thereby. Factors which could cause the
Company's results or performance to differ from current
expectations include, but are not limited to: the achievement of
desired clinical trial results related to the Company's pipeline
products; timely regulatory approval of the Company's products; the
ability to comply with regulatory requirements applicable to the
manufacture and marketing of the Company's products; the Company's
ability to obtain and enforce effective patents; the non-
infringement of third party patents or proprietary rights by the
Company and its products; factors beyond our control which could
cause interruptions in our operations; reimbursement policies
related to health care; the establishment and maintenance of
strategic collaborative and commercial relationships; the Company's
dependence on a small number of key customers; the disclosure of
confidential information by our collaborators, employees or
consultants; the preservation of healthy working relationships with
the Company's union and employees; the Company's ability to grow
the business; the fluctuation of our financial results and exchange
and interest rate fluctuations; the adaptation to changing
technologies; the loss of key personnel; the avoidance of product
liability claims; the loss incurred if current lawsuits against us
succeed; the volatility of the price of our common shares; and
market acceptance of the Company's products. For additional
information with respect to certain of these and other factors,
reference should be made to the Company's most recent Form 20-F
filed with the United States Securities and Exchange Commission
(available on EDGAR at http://www.sec.gov/) and with Canadian
securities regulators (available on SEDAR at
http://www.sedar.com/). Unless otherwise required by applicable
securities laws, the Company disclaims any intention or obligation
to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. DRAXIS
HEALTH INC. Consolidated Statements of Operations In Accordance
with U.S. GAAP
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(in thousands of U.S. dollars except share related data)
(unaudited) For the Three Month Periods For the Six Month Periods
Ended June 30, Ended June 30, -------------------------
------------------------- 2005 2004 2005 2004 -----------
----------- ----------- ----------- REVENUES $ 19,176 $ 14,927
Product sales $ 39,682 $ 27,136 Royalty and 1,295 1,786 licensing
3,634 3,713
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20,471 16,713 43,316 30,849
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EXPENSES Cost of goods sold, excluding depreciation and 11,972
9,249 amortization 25,032 17,220 Selling, general 4,233 2,983 and
administration 7,873 6,275 Research and 552 545 development 1,119
1,006 Depreciation and 1,120 1,111 amortization 2,158 2,072
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17,877 13,888 36,182 26,573
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2,594 2,825 Operating income 7,134 4,276 92 (60) Financing expense,
net 50 (185) - - Other income - 96
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2,686 2,765 Income before undernoted 7,184 4,187 (333) (501) Income
taxes (1,536) (531) - - Minority interest - (4)
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Income from continuing 2,353 2,264 operations 5,648 3,652 Loss from
discontinued - (21) operations, net of taxes - (30)
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$ 2,353 $ 2,243 Net income $ 5,648 $ 3,622
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Basic income (loss) per share ----------------------- from
continuing $ 0.06 $ 0.06 operations $ 0.14 $ 0.09 from discontinued
- - operations - -
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$ 0.06 $ 0.06 $ 0.14 $ 0.09
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Diluted income (loss) per share --------------------- from
continuing $ 0.06 $ 0.05 operations $ 0.13 $ 0.09 from discontinued
- - operations - -
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$ 0.06 $ 0.05 $ 0.13 $ 0.09
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Weighted-average number of shares outstanding 41,510,656 40,122,684
- basic 41,327,771 38,829,944 42,457,776 41,240,489 - diluted
42,305,243 40,009,482
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See the accompanying notes to the Consolidated Financial
Statements. These interim financial statements should be read in
conjunction with the annual Consolidated Financial Statements.
DRAXIS HEALTH INC. Consolidated Balance Sheets In Accordance with
U.S. GAAP
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(in thousands of U.S. dollars except share related data)
(unaudited) June 30, December 31, 2005 2004 ------------
------------ ASSETS (audited) Current assets Cash and cash
equivalents $ 7,989 $ 5,926 Restricted cash 424 428 Accounts
receivable 16,332 13,724 Inventories (Note 3) 8,313 10,158 Prepaid
expenses 1,743 830 Deferred income taxes, net 5,832 4,121
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Total current assets 40,633 35,187 Property, plant and equipment,
net 43,301 43,857 Goodwill 716 728 Intangible assets, net 501 737
Other assets 570 604 Deferred income taxes, net 4,480 7,672
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Total assets $ 90,201 $ 88,785
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LIABILITIES Current liabilities Accounts payable and accrued
liabilities $ 7,761 $ 10,436 Current portion of deferred revenues
3,621 3,676 Customer deposits 620 628
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Total current liabilities 12,002 14,740 Deferred revenues 2,476
4,125
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Total liabilities $ 14,478 $ 18,865
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SHAREHOLDERS' EQUITY Common stock, without par value of unlimited
shares authorized $ 77,306 $ 75,840 Additional paid-in capital
15,546 15,546 Warrants (Note 4 (c)) 916 916 Deficit (21,917)
(27,565) Accumulated other comprehensive income 3,872 5,183
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Total shareholders' equity 75,723 69,920
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Total liabilities and shareholders' equity $ 90,201 $ 88,785
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See the accompanying notes to the Consolidated Financial
Statements. These interim financial statements should be read in
conjunction with the annual Consolidated Financial Statements.
DRAXIS HEALTH INC. Consolidated Statements of Changes in Equity and
Comprehensive Income (Loss) In Accordance with U.S. GAAP
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(in thousands of U.S. dollars except share related data)
(unaudited) For the Three Month Periods For the Six Month Periods
Ended June 30, Ended June 30, -------------------------
------------------------- 2005 2004 2005 2004 -----------
----------- ----------- ----------- Common Stock (Number of Shares)
Balance, beginning of 41,304,388 37,755,245 period 41,015,326
37,297,817 Issuance of common - 3,053,436 shares - 3,053,436
295,416 36,312 Exercise of options 584,478 438,844 Exercise of
employee - - participation shares - 54,896
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Balance, end of 41,599,804 40,844,993 period 41,599,804 40,844,993
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Common Stock $ 76,598 $ 62,552 Balance, beginning of period $
75,840 $ 61,175 Issuance of common - 12,867 shares - 12,867 708 68
Exercise of options 1,466 1,241 Exercise of employee participation
- - shares - 204
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Balance, end of $ 77,306 $ 75,487 period $ 77,306 $ 75,487
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Additional Paid In Capital Balance, beginning of $ 15,546 $ 15,546
period $ 15,546 $ 15,667 - - Stock compensation - (121)
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Balance, end of $ 15,546 $ 15,546 period $ 15,546 $ 15,546
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Warrants Balance, beginning of $ 916 $ - period $ 916 $ - - 916
Issuance of warrants - 916
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Balance, end of $ 916 $ 916 period $ 916 $ 916
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Employee Participation Shares Balance, beginning of $ - $ - period
$ - $ 86 Exercise of employee participation - - shares - (86)
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Balance, end of $ - $ - period $ - $ -
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Employee Participation Shares-Loans Receivable Balance, beginning
of $ - $ - period $ - $ (86) Exercise of employee participation - -
shares - 86
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Balance, end of $ - $ - period $ - $ -
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Deficit $ (24,270) $ (34,102) Balance, beginning of period $
(27,565) $ (35,481) 2,353 2,243 Net income 5,648 3,622
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Balance, end of $ (21,917) $ (31,859) period $ (21,917) $ (31,859)
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Accumulated Other Comprehensive Income (Loss) Balance, beginning of
$ 4,927 $ (308) period $ 5,183 $ 286 Other comprehensive (1,055)
(1,263) loss (1,311) (1,857)
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Balance, end of 3,872 (1,571) period 3,872 (1,571)
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Total shareholders' $ 75,723 $ 58,519 equity $ 75,723 $ 58,519
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Comprehensive Income (Loss) Foreign currency translation $ (1,055)
$ (1,263) adjustments $ (1,311) $ (1,857)
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Other comprehensive (1,055) (1,263) loss (1,311) (1,857) 2,353
2,243 Net income 5,648 3,622
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Total comprehensive $ 1,298 $ 980 income $ 4,337 $ 1,765
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See the accompanying notes to the Consolidated Financial
Statements. These interim financial statements should be read in
conjunction with the annual Consolidated Financial Statements.
DRAXIS HEALTH INC. Consolidated Statements of Cash Flows In
Accordance with U.S. GAAP
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(in thousands of U.S. dollars) (unaudited) For the Three Month
Periods For the Six Month Periods Ended June 30, Ended June 30,
------------------------- ------------------------- 2005 2004 2005
2004 ------------------------- ------------------------- CASH FLOWS
FROM (USED IN) OPERATING ACTIVITIES Net income from continuing $
2,353 $ 2,264 operations $ 5,648 $ 3,652 Adjustments to reconcile
net income from continuing operations to net cash from (used in)
operating activities Amortization of deferred (952) (1,304)
revenues (2,002) (2,622) Depreciation and other 1,120 1,111
amortization 2,158 2,072 - - Stock compensation - 83 228 (164)
Deferred income taxes 1,215 (237) - - Minority interest - 4 122 26
Other 383 382 Changes in operating assets and liabilities (1,822)
(1,595) Accounts receivable (2,452) (2,250) 677 (1,195) Inventories
1,680 (2,323) (310) (551) Income taxes (347) (433) (905) (746)
Prepaid expenses (1,111) (936) Accounts payable and accrued 734 517
liabilities (2,575) 842 Current portion of deferred 50 100 revenues
304 198
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Net cash from (used in) operating activities of 1,295 (1,537)
continuing operations 2,901 (1,568)
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CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES Expenditures for
property, (1,218) (1,219) plant and equipment (2,012) (1,810) (38)
- Increase in intangible assets (185) (150) Proceeds from
disposition of - - product right - 96
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Net cash from (used in) investing activities of (1,256) (1,219)
continuing operations (2,197) (1,864)
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CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES - 4,965 Proceeds
from long-term debt - 4,965 - (9,795) Repayment of long-term debt -
(10,036) (Decrease) increase from 19 (17) customer deposits, net 2
- 708 68 Exercise of options 1,466 1,241 Issuance of common shares
and warrants, net of related - 13,385 expenses - 13,385 Repurchase
of common shares by subsidiary from minority - (9,557) interest -
(9,557)
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Net cash from (used in) financing activities of continuing 727
(951) operations 1,468 (2)
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Effect of foreign exchange rate changes on cash and cash (119) 324
equivalents (109) 40
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Net cash from (used in) 647 (3,383) continuing operations 2,063
(3,394) Net cash used in discontinued - (30) operations - (43)
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Net increase (decrease) in 647 (3,413) cash and cash equivalents
2,063 (3,437) Cash and cash equivalents, 7,342 10,539 beginning of
period 5,926 10,563
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$ 7,989 $ 7,126 Cash and cash equivalents, end of period $ 7,989 $
7,126
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Additional Information $ - $ 70 Interest paid $ - $ 140 $ 208 $ 686
Income taxes paid $ 436 $ 840
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See the accompanying notes to the Consolidated Financial
Statements. These interim financial statements should be read in
conjunction with the annual Consolidated Financial Statements
DRAXIS HEALTH INC. Notes to the Consolidated Financial Statements
In Accordance with U.S. GAAP
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(in thousands of U.S. dollars except share related data)
(unaudited) 1. Significant Accounting Policies These consolidated
financial statements have been prepared in accordance with U.S.
generally accepted accounting principles ("GAAP"). The functional
currency of the Company is the Canadian dollar however its
reporting currency is the U.S. dollar. For the current and prior
periods, the financial statements of the Company's operations whose
reporting currency is other than the U.S. dollar are translated
from such reporting currency to U.S. dollars using the current rate
method. Under the current rate method, assets and liabilities are
translated at the exchange rates in effect at the balance sheet
date. Revenues and expenses, including gains and losses on foreign
exchange transactions, are translated at average rates for the
period. The resulting unrealized translation gains and losses on
the Company's net investment in these operations, including
long-term intercompany advances, are accumulated in a separate
component of shareholders' equity, described in the consolidated
balance sheets as accumulated other comprehensive income. The
disclosures contained in these unaudited interim consolidated
financial statements do not include all requirements of GAAP for
annual financial statements. The unaudited interim consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements for the year ended December 31,
2004. The unaudited interim consolidated financial statements are
based upon accounting principles consistent with those used and
described in the audited consolidated financial statements for the
year ended December 31, 2004, other than as noted herein. The
unaudited interim consolidated financial statements reflect all
adjustments, consisting only of normal recurring adjustments, which
are, in the opinion of management, necessary to present fairly the
financial position of the Company as at June 30, 2005 and the
results of operations and cash flows for the three month and six
month periods ended June 30, 2005 and 2004. Operating results for
the three and six month periods ended June 30, 2005 are not
necessarily indicative of the results that may be expected for the
year ending December 31, 2005. 2. Acquisition of Minority Interest
On April 22, 2004, the Company completed the acquisition of the
32.7% interest in the Company's manufacturing subsidiary, DRAXIS
Pharma Inc. ("DPI"), that was previously owned by SGF Sante Inc.
("SGF"). The $9.6 million (CDN$13.0 million) cash acquisition has
been accounted for by the purchase method of accounting and
allocated to identifiable assets and liabilities based on their
estimated fair values as follows: Minority interest $3,992
Property, plant and equipment 6,785 Deferred income tax liability
(1,220) -------------------------------------------- Total purchase
price $9,557 --------------------------------------------
-------------------------------------------- The purchase price
paid to SGF was subject to contingent payment obligations which
expired on April 22, 2005 with no further payment required. 3.
Inventories June 30, December 31, 2005 2004 ---------- ----------
(audited) Raw materials $ 4,065 $ 5,491 Work-in-process 1,931 1,501
Finished goods 2,317 3,166
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$ 8,313 $ 10,158
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4. Shareholders' Equity (a) Stock Option Plan The following is a
summary of common shares issuable pursuant to outstanding stock
options: For the Three Month For the Six Month Periods Periods
Ended June 30, Ended June 30, --------------------
-------------------- 2005 2004 2005 2004 --------------------
-------------------- 2,789,170 2,752,877 Balance, beginning of
period 2,753,232 3,097,942 Increase (decrease) resulting from: - -
Approved for issuance - - 110,000 20,000 Granted 435,000 145,000
(295,416) (38,812) Exercised (584,478) (438,844) - (3,666)
Cancelled - (71,999) - - Expired - (1,700)
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2,603,754 2,730,399 Balance, end of period 2,603,754 2,730,399
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1,309,309 1,643,398 Exercisable at June 30 1,309,309 1,643,398
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Weighted-average exercise price of options: CDN$3.86 CDN$3.26
Outstanding, end of period CDN$3.86 CDN$3.26 CDN$3.54 CDN$3.34
Exercisable, end of period CDN$3.54 CDN$3.34 CDN$6.05 CDN$5.56
Granted CDN$5.81 CDN$4.47 CDN$2.97 CDN$2.03 Exercised CDN$3.08
CDN$3.73 - CDN$3.07 Cancelled and Expired - CDN$3.03 Range of
exercise price of 2005 2004 options: 2005 2004 CDN$6.05 CDN$5.56
Granted CDN$5.73 CDN$4.30 - $6.05 - $5.56 CDN$2.19 CDN$1.78
Exercised CDN$2.19 CDN$1.63 - $3.66 - $3.64 - $5.41 - $4.40 -
CDN$2.64 Cancelled and Expired - CDN$2.63 - $3.43 - $3.66
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The following table summarizes information about stock options
outstanding at June 30, 2005: Options Outstanding Options
Exercisable
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Weighted- Average Remaining Weighted- Weighted- Contractual Average
Number Average Range of Exercise Number Life Exercise Exercis-
Exercise Prices Outstanding (in years) Price able Price
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CDN$2.01 - $2.50 574,995 5.86 CDN$2.35 141,383 CDN$2.35 CDN$2.51 -
$3.00 100,833 3.37 $2.81 75,833 $2.87 CDN$3.01 - $3.50 360,000 1.27
$3.27 333,333 $3.27 CDN$3.51 - $4.00 637,926 1.44 $3.76 582,093
$3.77 CDN$4.01 - $4.50 220,000 2.64 $4.25 136,667 $4.22 CDN$4.51 -
$5.00 200,000 4.87 $4.70 - - CDN$5.01 - $6.17 510,000 5.08 $5.77
40,000 $5.27
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2,603,754 3.56 CDN$3.86 1,309,309 CDN$3.54
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(b) Stock-based Compensation Costs The following outlines the
impact and assumptions used as if the compensation cost for the
Company's stock options was determined using the fair value based
method of accounting. For the Three Month For the Six Month Periods
Periods Ended June 30, Ended June 30, -----------------------
----------------------- 2005 2004 2005 2004 ----------- -----------
----------- ----------- $ 2,353 $ 2,243 Net income as reported $
5,648 $ 3,622 (207) (166) Pro forma impact (408) (333)
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$ 2,146 $ 2,077 Pro forma net income $ 5,240 $ 3,289
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$ 0.06 $ 0.06 Basic net income per share, as reported $ 0.14 $ 0.09
(0.01) (0.01) Pro forma impact per share (0.01) (0.01)
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Pro forma net income per $ 0.05 $ 0.05 share (Basic) $ 0.13 $ 0.08
Pro forma net income per $ 0.05 $ 0.05 share (Diluted) $ 0.12 $
0.08
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0.0% 0.0% Dividend yield 0.0% 0.0% 59% 61% Expected volatility
59%-60% 60%-62% 3.5% 4.0% Risk-free interest rate 3.5-4.0% 4.0%
5-10 yrs 5 yrs Expected option life 5-10 yrs 5 yrs
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(c) Common Share Offering On April 22, 2004, the Company closed its
offering of 3,053,436 units at a price of $4.82 (CDN$6.55) per unit
for proceeds, net of related expenses, of $13,385 (CDN$18,213).
Each unit consisted of one common share of the Company and one-half
of one share purchase warrant. Each whole warrant entitles the
holder to acquire one common share of the Company at a price of
CDN$8.50 at any time prior to April 24, 2006. Included as a
component of shareholders' equity is $916, which represents the
fair value of the warrants issued. The fair value of the warrant
was determined based on the price of the offering. 5. Segmented
Information Industry Segmentation For purposes of decision-making
and assessing performance, management considers that it operates in
three segments: Radiopharmaceuticals, Manufacturing, and Corporate
and Other. Executive management assesses the performance of each
segment based on segment income before financing expense, income
taxes and minority interest. The accounting policies used to
determine segmented results and measure segmented assets are the
same as those described in the summary of significant accounting
policies. For the Three Month For the Six Month Periods Periods
Ended June 30, Ended June 30, --------------------
-------------------- 2005 2004 2005 2004 --------- ---------
--------- --------- PRODUCT SALES REVENUES $ 4,737 $ 4,296
Radiopharmaceuticals $ 9,471 $ 8,628 14,591 11,206 Manufacturing
30,442 19,569 (152) (575) Corporate and Other (231) (1,061)
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$ 19,176 $ 14,927 $ 39,682 $ 27,136
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ROYALTY AND LICENSING REVENUES $ - $ - Radiopharmaceuticals $ - $ -
- - Manufacturing - - 1,295 1,786 Corporate and Other 3,634 3,713
-------------------------------------------------------------------------
$ 1,295 $ 1,786 $ 3,634 $ 3,713
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TOTAL REVENUES $ 4,737 $ 4,296 Radiopharmaceuticals $ 9,471 $ 8,628
14,591 11,206 Manufacturing 30,442 19,569 1,143 1,211 Corporate and
Other 3,403 2,652
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$ 20,471 $ 16,713 $ 43,316 $ 30,849
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PRODUCT GROSS MARGIN $ 2,851 $ 2,606 Radiopharmaceuticals $ 5,648 $
5,140 4,419 2,899 Manufacturing 9,019 4,672 (66) 173 Corporate and
Other (17) 104
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$ 7,204 $ 5,678 $ 14,650 $ 9,916
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SELLING, GENERAL AND ADMINISTRATION EXPENSE $ 1,003 $ 938
Radiopharmaceuticals $ 2,139 $ 1,777 1,411 692 Manufacturing 2,260
1,538 1,819 1,353 Corporate and Other 3,474 2,960
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$ 4,233 $ 2,983 $ 7,873 $ 6,275
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RESEARCH AND DEVELOPMENT EXPENSE $ 552 $ 545 Radiopharmaceuticals $
1,119 $ 1,006 - - Manufacturing - - - - Corporate and Other - -
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$ 552 $ 545 $ 1,119 $ 1,006
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SEGMENT INCOME (LOSS) $ 1,296 $ 1,123 Radiopharmaceuticals $ 2,390
$ 2,357 3,008 2,207 Manufacturing 6,759 3,134 (590) 606 Corporate
and Other 143 857
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$ 3,714 $ 3,936 $ 9,292 $ 6,348
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DEPRECIATION AND AMORTIZATION $ 249 $ 223 Radiopharmaceuticals $
494 $ 450 773 626 Manufacturing 1,454 1,092 98 262 Corporate and
Other 210 530
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$ 1,120 $ 1,111 $ 2,158 $ 2,072
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OPERATING INCOME (LOSS) $ 1,047 $ 900 Radiopharmaceuticals $ 1,896
$ 1,907 2,235 1,581 Manufacturing 5,305 2,042 (688) 344 Corporate
and Other (67) 327
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$ 2,594 $ 2,825 $ 7,134 $ 4,276
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June December 30, 2005 31, 2004 IDENTIFIABLE ASSETS (audited)
-------------------- Radiopharmaceuticals $ 12,660 $ 12,354
Manufacturing 49,863 50,103 Corporate and Other 27,678 26,328
---------------------------------------------------- $ 90,201 $
88,785 ----------------------------------------------------
---------------------------------------------------- Geographic
Segmentation For the Three Month For the Six Month Periods Periods
Ended June 30, Ended June 30, --------------------
-------------------- 2005 2004 REVENUES(1) 2005 2004 ---------
--------- --------- --------- $ 9,228 $ 7,127 Canada $ 20,582 $
13,713 11,071 9,538 United States 22,438 16,978 172 48 Other 296
158
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$ 20,471 $ 16,713 $ 43,316 $ 30,849
-------------------------------------------------------------------------
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(1) Revenues are attributable to countries based upon the location
of the customer. LONG-LIVED ASSETS Substantially all of the
Company's Property, plant and equipment, Goodwill and Intangible
assets are located in Canada. For the Three Month For the Six Month
Periods Periods Ended June 30, Ended June 30, --------------------
-------------------- EXPENDITURES FOR PROPERTY, 2005 2004 PLANT AND
EQUIPMENT 2005 2004 --------- --------- --------- --------- $ 242 $
430 Radiopharmaceuticals $ 286 $ 639 950 787 Manufacturing 1,689
1,158 26 2 Corporate and Other 37 13
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$ 1,218 $ 1,219 $ 2,012 $ 1,810
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-------------------------------------------------------------------------
For the Three Month For the Six Month Periods Periods Ended June
30, Ended June 30, -------------------- --------------------
PRODUCT SALES REVENUES BY MAJOR 2005 2004 PRODUCT GROUPS 2005 2004
--------- --------- --------- --------- $ 4,737 $ 4,296
Radiopharmaceuticals $ 9,471 $ 8,628 11,188 8,173 Manufacturing -
Sterile 22,525 13,890 3,403 3,033 Manufacturing - Non Sterile 7,917
5,679 247 65 Corporate and Other 413 66 (399) (640) Intercompany
eliminations (644) (1,127)
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$ 19,176 $ 14,927 $ 39,682 $ 27,136
-------------------------------------------------------------------------
-------------------------------------------------------------------------
6. Contingency In July 2005, a claim was filed before the Ontario
Superior Court of Justice against the Company together with other
defendants alleging that Permax(R), a drug that the Company
distributed in Canada for a third-party manufacturer prior to July
2003, causes "compulsive/obsessive behaviour, including
pathological gambling". The plaintiff is seeking to have this
action certified as a class action. The Company believes this claim
against it is without merit and intends to vigorously defend this
proceeding and any motion for certification. 7. Reconciliation of
Results Reported in Accordance with U.S. GAAP to Canadian GAAP The
major differences between U.S. and Canadian GAAP which affect net
income are summarized in the following table with an explanation of
the adjustments. For the Three Month For the Six Month Periods
Periods Ended June 30, Ended June 30, --------------------
-------------------- 2005 2004 2005 2004 --------- ---------
--------- --------- Net income as reported under $ 2,353 $ 2,243
U.S. GAAP $ 5,648 $ 3,622
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Continuing operations --------------------- Intangible assets -
(104) 25 Radiopharmaceuticals segment (i) (51) (60) Intangible
assets - Corporate (518) (518) and Other segment (i) (1,035)
(1,035) (207) (139) Stock-based compensation (ii) (408) (279)
-------------------------------------------------------------------------
(829) (632) (1,494) (1,374)
-------------------------------------------------------------------------
$ 1,524 $ 1,611 Net income under Canadian GAAP $ 4,154 $ 2,248
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic income per share $ 0.04 $ 0.04 Canadian GAAP $ 0.10 $ 0.06 $
0.06 $ 0.06 U.S. GAAP $ 0.14 $ 0.09 Diluted income per share $ 0.04
$ 0.04 Canadian GAAP $ 0.10 $ 0.06 $ 0.06 $ 0.05 U.S. GAAP $ 0.13 $
0.09
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(i) Intangible Assets - Continuing Operations Amortization expense
associated with continuing operations under U.S. GAAP differs from
Canadian GAAP due to the differential treatment of the excess of
the purchase cost over the fair value of the assets acquired in
conjunction with the 1996 acquisition of Deprenyl Animal Health,
Inc., which was treated as acquired research and development, and
the portion of the 1997 acquisition cost of the Company's
radiopharmaceutical business assigned to acquired research and
development. (ii) Stock-Based Compensation Under Canadian GAAP, the
Company, in the first quarter of 2004, adopted retroactively with
restatement of 2002 and 2003 results, the application of the fair
value based method for measuring the compensation cost of employee
stock options granted in 2002 and beyond. Under U.S. GAAP, the
Company has elected to adopt the optional recognition provision for
its stock options plans and hence the cost of employee stock
options is disclosed in the note to the financial statements as pro
forma earnings and per share information. The difference between
U.S. and Canadian GAAP applicable to stock-based compensation
applies only to the Corporate and Other segment. (iii) Research and
Development Under Canadian GAAP, investment tax credits on research
and development are deducted from research and development expense.
Under U.S. GAAP, investment tax credits are recorded as a reduction
of the income tax expense. As a result, there is no impact in the
reconciliation of net income from U.S. to Canadian GAAP. 8.
Comparative Information The Company has reclassified certain prior
period's information to conform with the current presentation
format. DATASOURCE: DRAXIS Health Inc. CONTACT: Investor Relations:
Jerry Ormiston, DRAXIS Health Inc., Phone: 1-877-441-1984; John
Nesbett, The Investor Relations Group, Phone: (212) 825-3210
Copyright