MISSISSAUGA, ON, Nov. 1 /PRNewswire-FirstCall/ -- DRAXIS Health
Inc. (TSX: DAX); (NASDAQ:DRAX) reported financial results for the
third quarter and the nine months ended September 30, 2007.
Consolidated revenues and earnings for the third quarter and the
first nine months of 2007 were down from the same periods in 2006
primarily due to factors affecting the contract manufacturing
business including reduced demand as a result of inventory
adjustments by customers, continued production delays in contract
manufacturing that prevented the shipment of planned quantities
before the end of the quarter and severance costs, compounded by
the continued rapid strengthening of the Canadian dollar versus the
U.S. dollar. All amounts are expressed in U.S. dollars. Highlights
- Consolidated revenues for the third quarter of 2007 were $18.0
million, compared to $21.2 million in the third quarter of 2006;
nine month consolidated revenues were $58.4 million in 2007
compared to $64.6 million in 2006. Revenues were down due to
reduced short-term demand for selected products as customer
inventory adjustments were addressed primarily in the third
quarter. As a result, product sales for the third quarter of 2007
were $17.4 million versus $19.8 million for the third quarter of
2006. - Operating loss for the third quarter was $1.7 million in
2007 compared to operating income of $3.4 million in 2006; nine
month operating income was $3.3 million in 2007 and $10.7 million
in 2006. - For the third quarter of 2007 diluted EPS was negative 3
cents (or negative 2 cents adjusted diluted EPS - See Schedule of
Supplemental Information) versus diluted EPS of 6 cents (or 4 cents
adjusted diluted EPS) in the third quarter of 2006; for the first
nine months of 2007 diluted EPS was 5 cents (or 4 cents adjusted
diluted EPS) versus diluted EPS of 19 cents (or 14 cents adjusted
diluted EPS) for the same period in 2006. As indicated previously,
substantially all revenues related to the amortization of
previously received Anipryl(R) milestones terminated on December
31, 2006. The amortization of these deferred revenues has
previously resulted in non-cash revenues of $0.8 million per
quarter or $3.3 million per year. The termination of the
amortization of deferred revenues had no effect on cash flows but
had the impact of contributing 7 cents per share annually to 2006's
reported earnings per share. - Cash flows from operating activities
in 2007 were $2.1 million in the third quarter and $10.2 million
for the first nine months, compared to operating cash flows of $5.9
million and $10.4 million respectively for the same periods in
2006. The decrease relates to lower cash earnings in the contract
manufacturing segment. - Cash and cash equivalents at September 30,
2007 were $26.9 million compared to $19.9 million at September 30,
2006. Investments to date in 2007 have included capital projects
such as a new warehouse management system, information technology
and SAP platform upgrades and new installations related to a
substantial non-sterile contract signed during the third quarter.
"The third quarter was negatively impacted by continued poor
performance at our contract manufacturing division, due to the
previously disclosed decline in production volumes of sterile
products, particularly Hectorol(R) Injection, but compounded as
well by lower margins in our radiopharmaceuticals division and a
short-term delay in orders for selected products as a result of new
inventory management policies recently adopted by a key customer,"
said Dr. Martin Barkin, President and CEO of DRAXIS Health.
"Results have also been significantly affected again this quarter
by the continued and unprecedented strengthening of the Canadian
dollar against the U.S. dollar. On a positive note, the signing of
our significant contract with Johnson & Johnson Consumer
Companies, Inc. bodes well for profitability growth in our contract
manufacturing business. For this and the many other factors
contributing to our long term growth, we continue to believe that
2007 and the first part of 2008 is a period when the Company will
be in transition to be positioned for significant growth from late
2008 through to 2010 and 2011." Dr. Barkin also noted, "We have
been proactive in addressing performance issues. Jean-Pierre Robert
was appointed during the third quarter to head up DRAXIS Pharma as
well as DRAXIMAGE. At DRAXIS Pharma, he has recently recruited a
new head of quality operations and brought in a new head of
engineering services. We have initiated a comprehensive realignment
of accountabilities across the Company with the objective of
reducing expenses associated with core operations to manage our
cost structure in line with current revenue expectations and the
rapidly accelerating value of the Canadian dollar. This includes a
plan to reduce the number of corporate executives by one-third by
the end of 2007. Many of these actions have already resulted in
severance costs and will similarly impact results going forward,
particularly the fourth quarter. When these initiatives are
completed we expect that the Company will return to its historic
levels of revenue and earnings growth."
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FINANCIAL HIGHLIGHTS (in thousands of U.S. dollars except share
related data and in accordance with U.S. GAAP) For the Three-Month
Periods For the Nine-Month Periods Ended September 30, Ended
September 30, ---------------------------
-------------------------- 2007 2006 2007 2006 (unaudited)
(unaudited) (unaudited) (unaudited) REVENUES $17,370 $19,788
Product sales $56,048 $60,439 558 617 Royalty and licensing 2,235
1,657 Anipryl(R) deferred 30 825 revenues 90 2,475
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$17,958 $21,230 $58,373 $64,571
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$4,697 $8,127 Product Gross Margin $19,545 $26,016 27.0% 41.1%
Product Gross Margin % 34.9% 43.0% ($1,661) $3,423 Operating income
(loss) $3,319 $10,663 -9.2% 16.1% Operating Margin % 5.7% 16.5%
$26,928 $19,891 Cash and cash equivalents $26,928 $19,891 $0 $0
Total debt $0 $0 Cash flows from operating $2,053 $5,858 activities
$10,156 $10,438 Cash flows used in (2,965) (1,425) investing
activities (8,234) (3,742)
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($912) $4,433 $1,922 $6,696
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($1,376) $2,604 Net income (loss) $2,209 $7,860 Basic earnings
(loss) ($0.03) $0.06 per share $0.05 $0.19 Diluted earnings (loss)
($0.03) $0.06 per share $0.05 $0.19
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Two significant non-recurring items in the first nine months of
2007 positively affected financial performance relative to the
first nine months of 2006. During the first quarter of 2007 the
Company received a non-recurring milestone payment of $0.8 million
from Shire BioChem Inc. and an insurance payment of $0.5 million
from a business interruption insurance claim related to the
extended shutdown period in 2005. The impact of these items on
operating income (loss) and diluted earnings (loss) per share are
included in the Schedule of Supplemental Information below. Under
the Company's current Normal Course Issuer Bid, which began
December 20, 2006 and which ends no later than December 19, 2007,
approximately $0.7 million has been returned to shareholders as of
October 31, 2007 through the repurchase for cancellation of 130,100
common shares at an average price of $5.27 (CDN$5.21). Segment
Highlights from Management's Discussion and Analysis Contract
Manufacturing - Revenues for the third quarter of 2007 were $12.1
million or 17% lower than the third quarter of 2006. The decrease
was due to significantly lower production volumes of Hectorol(R) in
the third quarter of 2007, which is expected to be the low point of
quarterly production for 2007. In addition, volumes in the third
quarter of 2007 were $1 million below expectations due to the
decision of a specific customer to reduce its supply chain
inventory levels for 2007. This impact is expected to be a
short-term reduction in production volumes for this customer's
products with volumes returning to historical levels thereafter. -
Product gross margin percentage declined to 13% in the third
quarter of 2007 and 23% for the first nine months of 2007 compared
to 31% and 35% respectively for the same periods of 2006. The
decrease was driven by lower volumes of both sterile and
non-sterile products and the resulting negative impact of decreased
capacity utilization. The regular summer shutdown for maintenance
in the third quarter was extended in the non-sterile area to
accommodate new installations and facility expansions related to
the new long-term contract with Johnson & Johnson Consumer
Companies, Inc. - Operating loss for the third quarter of 2007 was
$1.4 million and operating income for the first nine months was
$2.4 million compared to operating income of $2.3 million and $8.9
million respectively for the same periods in 2006 due to lower
sterile volumes and increased severance costs, partially offset by
a revaluation of incentive awards. - During the third quarter the
Company announced the successful signing of a new contract with
Johnson & Johnson Consumer Companies, Inc. for non-sterile
products that is expected to generate incremental revenues in
excess of $120 million from commercial production during the period
2009 through 2013 plus approximately $6 to 8 million during
2007-2008 from product transfer activities. This new business is
expected to significantly increase capacity utilization in the
non-sterile area, provide a significant and stable revenue stream
beginning in 2009 and add substantial production capabilities with
little or no additional capital expenditures. This enhanced
business relationship with a key client is expected to increase the
probability of attracting new business as a result of increased
exposure and credibility. Radiopharmaceuticals - Product sales of
$5.8 million in the third quarter were up 3% over the third quarter
of 2006 with the inclusion of freight charges in product sales
revenues, which started April 1, 2007. Excluding freight charges,
product sales in the third quarter of 2007 were down slightly due
to the temporary suspension of production in the quarter of a
private label product for one customer, pending possible future
formulation changes. Nine month product sales for 2007 were up 10%
to $17.5 million, primarily as a result of higher sales of Sodium
Iodide I-131 products, increased cold kit sales and the inclusion
of freight charges in revenues. - Product gross margins in the
third quarter of 2007 were 54.1% of sales compared to 64.8% of
sales for the third quarter of 2006; for the first nine months of
2007 product gross margins were 58.3% versus 62.9% for the same
period in 2006, due to the dilutive impact of including freight
charges billed back to customers in revenues and cost of goods
sold, coupled with foreign exchange pressures caused by the
stronger Canadian dollar. - Operating income in the third quarter
of 2007 was $0.8 million compared to $1.8 million in the third
quarter of 2006 as a result of pressures on margins from a strong
Canadian dollar, regulatory filing fees and increased business
development activities. For the first nine months of 2007,
operating income of $3.3 million was 18% lower than the first nine
months of 2006, primarily due to regulatory filing fees and
increased research and development spending. - The FDA acknowledged
in July 2007 the receipt and acceptance for review of the
Abbreviated New Drug Application (ANDA) for DRAXIMAGE(R) Sestamibi
that was submitted in February 2007. - In July 2007 DRAXIMAGE
announced the filing of DRAXIMAGE(R) Sestamibi with European
regulatory authorities, marking another milestone in the
comprehensive plan to pursue major myocardial perfusion imaging
(MPI) markets globally. - DRAXIMAGE filed an Abbreviated New Drug
Submission (A/NDS) for DRAXIMAGE(R) Sestamibi with Health Canada in
August, 2007 and was advised in October 2007 that this submission
was found acceptable for review. - DRAXIMAGE is on track to obtain
product registrations required to enter European markets during
2008. The MAA kit product for diagnostic lung perfusion studies,
initially approved in the Netherlands in 2005, was recently
approved in Germany, the United Kingdom and Luxembourg. The MDP kit
product for diagnostic bone imaging has been approved in the
Netherlands and in addition I-131 Sodium Iodide Capsules, for the
treatment of thyroid cancer, was approved in Denmark during the
third quarter of 2007. - In August 2007 DRAXIMAGE announced the
establishment of a research collaboration with Med Discovery of
Geneva, Switzerland to explore the combination of Med Discovery's
targeted protein therapeutics with DRAXIMAGE radiopharmaceutical
expertise for the assessment and possible development of agents for
the detection of microtumors and the potential treatment of
prostate cancer and a variety of other cancers. Outlook Guidance
targets for 2007, which were revaluated subsequent to the second
quarter of 2007, have been subsequently reassessed following the
third quarter of 2007, taking into account the following factors: -
Subsequent to the second quarter of 2007, an ongoing assessment of
the Company's cost structure began with the appointment of Jean-
Pierre Robert as head of both of the Company's operating units. In
addition, a parallel review of the Company's corporate overhead
structure was initiated to reduce overhead costs and eliminate
redundancies Company wide. This is related to the higher cost
burden associated with these costs as a result of the stronger
Canadian dollar, the upgrade of our SAP systems and overall plans
to achieve greater efficiencies. Severance costs in the third
quarter of 2007 amounted to $0.6 million and are included in
selling, general and administrative expenses. The Company expects
further severance costs in the fourth quarter of 2007 which are
expected to impact earnings per share by approximately 3 cents per
share. - During the first nine months of 2007, the strengthening of
the Canadian dollar from $CDN1.165 per U.S. dollar as at December
31, 2006 to $CDN0.995 per U.S. dollar as at the end of September
30, 2007 has resulted in foreign exchange losses for the first nine
months of 2007 of approximately 3 cents per share or $1.6 million
($0.7 million in the third quarter alone). This foreign exchange
loss resulted from the revaluation of U.S. dollar-denominated net
monetary assets. - Since the vast majority of the Company's cost
structure is in Canadian dollars and a larger portion of the
Company's revenue streams is denominated in U.S dollars, the
strengthening of the Canadian dollar has a significant negative
impact on the Company's underlying gross profit margin and
operating expenses. We estimate the strengthening of the Canadian
dollar has reduced operating profitability by approximately 3 to 4
cents per share on an annual basis relative to 2006 assuming no
further material changes to foreign exchange rates to the end of
the year. - Volumes of radioactive products produced by the
radiopharmaceutical operations were lower than expected during the
third quarter due to a decision by a customer to cease production
of a private label radioactive product ($350,000 in revenues per
quarter) while the customer determines whether to continue to
supply the market in the future pending possible formulation
changes. - Based on the latest information from Genzyme, the
Company expects Hectorol(R) production volumes in 2007 to be
approximately $9 million lower than what they were in 2006 and
significantly lower than what was originally forecasted for 2007.
Production volumes in the third quarter of 2007 were particularly
low due to reduced customer demand. It is our understanding that
these volumes may still vary materially either positively or
negatively in future quarters as a result of continued uncertainty
in customer demand. The lower than expected volumes from Genzyme
have offset the positive impact of increased volumes related to new
business activities taking place during 2007 within our contract
manufacturing division. - The successful product transfer of the
IC-GREEN(TM) product during the third quarter of 2007, which is now
being produced for Akorn, Inc., is one of several sterile products
that DRAXIS Pharma is transferring in to begin to fill the gap
resulting from declining Hectorol(R) volumes. We believe that the
trend is for Hectorol(R) volumes to continue to decline and we are
planning under the assumption that the manufacturing of this
product by DRAXIS Pharma will ultimately be phased out by the end
of 2009. - R&D expenses at DRAXIMAGE will remain steady and
will continue to be allocated toward the successful filing and
commercialization of high value products such as DRAXIMAGE(R)
Sestamibi and the MOLY-FILL(TM) Tc-99m Generator. In addition,
resources will be directed toward the establishment of additional
external collaborations for the identification and co-development
of innovative radiopharmaceutical products. Formulation development
of INFECTON(R) targeting orthopaedic indications has to date not
been successful and we will allocate the resources devoted to this
product to other projects. Due to the expected financial
performance for 2007 resulting from the factors described above,
the Company expects earnings per share to be at least 7 cents lower
than the most recent guidance of 18 to 21 cents per share for 2007
and net operating cash flows to be at least $3 million lower than
the target of $18 million, subject to working capital fluctuations.
Our financial performance in the third quarter of 2007 is not
expected to negatively impact the long term financial performance
of the Company. Significant key milestones have already been
achieved in 2007 consistent with the sources of future growth
detailed below. Guidance for Future Years Beyond 2007, the Company
no longer plans to provide specific quantitative guidance given an
anticipated period of expansion and significant growth that is
expected to be accompanied by periods of increased forecast
variability. This growth will be driven by the following factors
(not in any particular order): - The timing and ramping up of
commercial production of non-sterile products under the new
contract with Johnson & Johnson Consumer Companies, Inc. will
be influenced by both the product transfer process and the receipt
of manufacturing site transfer approvals from appropriate
regulatory agencies. - Several potential new contract manufacturing
business opportunities have been identified as a result of
increased marketing and outreach activities initiated during 2007.
However, the rate of conversion of such opportunities to new
business contracts over the next several quarters has introduced
increased forecasting variability. - The timing and extent of
radiopharmaceutical product introductions to European markets is
highly dependent on receiving timely regulatory approvals in
several different countries plus the establishment of one or more
appropriate marketing and distribution partnerships, which will
influence the rate at which product sales will grow in the EU
markets. - Revenue and earnings from the potential introduction of
DRAXIMAGE(R) Sestamibi will depend on several factors including
regulatory approvals, competitive activity, marketing and
distribution partnerships and market acceptance following product
launch. This is expected to be a significant product for the
Company and the variability around its introduction alone is
expected to impact the accuracy of future forecasts for 2008 and
2009. - The potential introduction of the MOLY-FILL(TM) technetium
generator is expected to be a significant event given the limited
product offerings current available and the forecast variability
associated with this product is highly dependent on somewhat
unpredictable factors including regulatory approvals, marketing
and/or distribution agreements, pricing strategies and market
penetration rates. - The timing of regulatory approval of the
Company's improved radiopharmaceutical (cold kit) product for bone
scan imaging and its potential introduction into the U.S.
marketplace will be driven largely by the regulatory review and
approval process. - The successful completion of clinical trials
for I-131 MIBG for the diagnosis and treatment of neuroblastoma and
related malignancies will determine the timing of its filing and
approval by regulatory authorities. - The timing of the initiation
and completion of planned expansions to our Montreal-based
facilities will impact future forecast accuracy. Any and all of
these factors will have an impact on the Company's future growth to
a degree that small changes in timing could have important impacts
on short-term earnings. Schedule of Supplemental Information
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Reconciliation from reported operating income (loss) and diluted
EPS to adjusted operating income (loss) and diluted EPS (in
thousands of U.S. dollars except share related data and in
accordance with U.S. GAAP) For the Three-Month Periods For the
Nine-Month Periods Ended September 30, Ended September 30,
--------------------------- -------------------------- 2007 2006 %
Change 2007 2006 % Change Operating Income ($1,661) $3,423 (148.5%)
(Loss) - Reported $3,319 $10,663 (68.9%) Adjustments: (a)
Non-recurring Shire milestone - - receipt(2) (791) - (b) Insurance
- - proceeds(3) (517) - (c) DSU (recovery) (245) 16 (1631.3%)
expense(4) (119) (167) (28.7%) 592 - (d) Severance 592 - Anipryl(R)
deferred (30) (825) (96.4%) revenues (90) (2,475) (96.4%)
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Operating Income (Loss) - ($1,344) $2,614 (151.4%) Adjusted(1)
$2,394 $8,021 (70.2%)
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Diluted EPS - ($0.03) $0.06 Reported $0.05 $0.19 Adjustments: (a)
Non-recurring Shire milestone - - receipt(2) (0.01) - (b) Insurance
- - proceeds(3) (0.01) - (c) DSU (recovery) - - expense(4) - - 0.01
- (d) Severance 0.01 Anipryl(R) deferred - (0.02) revenues - (0.05)
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Diluted EPS - ($0.02) $0.04 Adjusted(1) $0.04 $0.14
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(1) "Adjusted Operating Income (Loss)" and "Adjusted Diluted EPS"
are defined as reported operating income (loss) and diluted EPS
excluding certain items. These terms do not have a standardized
meaning prescribed by U.S. GAAP and therefore may not be comparable
to similar measures used by other companies. Management uses
adjusted operating income (loss), among other factors to set
performance goals and to measure the performance of the overall
company. The Company believes that investors' understanding of our
performance is enhanced by disclosing these measures. (2) The
Company became entitled to and received non-recurring contingent
milestone payments from Shire. (3) Insurance proceeds related to a
business interruption claim filed resulting from equipment damage
during 2005 shutdown period. (4) Reflects the change in the value
of Deferred Share Unit Plan based on the market price of the
Company's common stock. See Note 7 of accompanying interim
financial statements. Interim Financial Report This release
includes by reference the 2007 third quarter interim financial
report incorporating the full Management's Discussion &
Analysis (MD&A) as well as financial statements for the quarter
and the nine months ended September 30, 2007 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 third quarter 2007 financial
results at 10:00 a.m. (ET) on November 1, 2007. This call can be
accessed by dialing 1 (800) 819-9193 and using Access Code 4571610,
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, through its wholly owned operating subsidiary, DRAXIS
Specialty Pharmaceuticals Inc., provides products in three
categories: sterile products, non-sterile products and
radiopharmaceuticals. 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 employs
approximately 500 staff in its Montreal facility. For additional
information please visit http://www.draxis.com/ Caution Concerning
Forward-Looking Statements This MD&A contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended (the "Securities Act") and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
and as contemplated under other applicable securities legislation.
These statements can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate,"
"estimate," "continue," "plan," "intend," "believe" or other
similar words. These statements discuss future expectations
concerning results of operations or financial condition or provide
other forward-looking information. Our actual results, performance
or achievements could be significantly different from the results
expressed in, or implied by, those forward-looking statements. You
should not place undue reliance on any forward-looking statement,
which speaks only as of the date made. 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 that could cause the Company's results or
performance to differ materially from a conclusion, forecast or
projection in the forward-looking statements 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 that could cause interruptions in our
operations in our single manufacturing facility (including, without
limitation, material equipment breakdowns); - 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; - market acceptance
of the Company's products; - factors described under "Outlook"
above and the Company's MD&A for the quarter ended September
30, 2007; and - the risks described in "Item 3. Key Information -
Risk Factors" in the Annual Report Form 20-F filed by the Company
with the United States Securities and Exchange Commission and which
is also filed as the Company's Annual Information Form with
Canadian securities regulators. For additional information with
respect to certain of these and other factors, and relating to the
Company generally, reference is made to the Company's most recent
filings with the United States Securities and Exchange Commission
(available on EDGAR at http://www.sec.gov/) and the filings made by
the Company with Canadian securities regulators (available on SEDAR
at http://www.sedar.com/). The forward-looking statements contained
in this document represent the Company's expectations as at October
31, 2007. 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 Nine-Month Periods
Ended September 30, Ended September 30, ---------------------------
-------------------------- 2007 2006 2007 2006 -----------
----------- ----------- ----------- REVENUES $ 17,370 $ 19,788
Product sales $ 56,048 $ 60,439 588 1,442 Royalty and licensing
2,325 4,132
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17,958 21,230 58,373 64,571
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EXPENSES Cost of goods sold, excluding depreciation and
amortization 12,673 11,661 (Note 3) 36,503 34,423 Selling, general
4,792 4,261 and administration 12,127 13,753 655 558 Research and
development 2,273 1,980 Depreciation and 1,499 1,327 amortization
4,151 3,752
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19,619 17,807 55,054 53,908
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(1,661) 3,423 Operating income (loss) 3,319 10,663 247 65 Financing
income, net 605 119 (655) (2) Foreign exchange loss (1,645) (240)
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Income (loss) before (2,069) 3,486 income taxes 2,279 10,542 Income
taxes (expense) 693 (882) recovery (70) (2,682)
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$ (1,376) $ 2,604 Net income (loss) $ 2,209 $ 7,860
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Basic earnings (loss) --------------------- $ (0.03) $ 0.06 per
share (Note 4) $ 0.05 $ 0.19 ------------------ Diluted earnings
(loss) ----------------------- $ (0.03) $ 0.06 per share (Note 4) $
0.05 $ 0.19 ------------------ Weighted-average number of shares
outstanding 42,076,726 41,870,614 - basic 41,948,449 41,608,623
42,117,209 41,870,614 - diluted 42,135,463 41,683,049
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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) September 30, December 31, 2007 2006 -------------
------------- ASSETS Current assets Cash and cash equivalents $
26,928 $ 21,446 Accounts receivable 16,267 20,683 Inventories (Note
5) 9,308 7,590 Prepaid expenses 1,536 735 Deferred income taxes,
net 4,139 3,179
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Total current assets 58,178 53,633 Accounts receivable, long term
1,621 - Property, plant and equipment, net 57,787 46,292 Goodwill,
net 882 753 Intangible assets, net 186 318 Other assets 393 407
Deferred income taxes, net 5,521 4,559
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Total assets $ 124,568 $ 105,962
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LIABILITIES Current liabilities Accounts payable and accrued
liabilities (Note 6) $ 10,251 $ 10,940 Current portion of deferred
revenues 222 329 Customer deposits 368 576
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Total current liabilities 10,841 11,845 Other liabilities 236 990
Deferred revenues 623 712 Customer financing 1,200 -
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Total liabilities $ 12,900 $ 13,547
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SHAREHOLDERS' EQUITY Common stock, without par value of unlimited
shares authorized $ 79,720 $ 77,749 Additional paid-in capital
16,142 15,475 Deficit (6,025) (8,234) Accumulated other
comprehensive income 21,831 7,425
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Total shareholders' equity 111,668 92,415
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Total liabilities and shareholders' equity $ 124,568 $ 105,962
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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 In Accordance with U.S. GAAP
-------------------------------------------------------------------------
(in thousands of U.S. dollars except share related data)
(unaudited) For the Three-Month Periods For the Nine-Month Periods
Ended September 30, Ended September 30, ---------------------------
-------------------------- 2007 2006 2007 2006 -----------
----------- ----------- ----------- Common Stock (Number of Shares)
Balance, beginning of 42,057,638 41,671,788 period 41,522,138
41,588,005 30,000 210,750 Exercise of options 565,500 542,333
Repurchased for (12,400) - cancellation (12,400) (247,800)
-------------------------------------------------------------------------
42,075,238 41,882,538 Balance, end of period 42,075,238 41,882,538
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Common Stock Balance, beginning of $ 79,588 $ 77,779 period $
77,749 $ 77,313 104 576 Exercise of options 1,812 1,555 Fair values
of options 58 - exercised 189 - Repurchased for (30) - cancellation
(30) (513)
-------------------------------------------------------------------------
$ 79,720 $ 78,355 Balance, end of period $ 79,720 $ 78,355
-------------------------------------------------------------------------
Additional Paid In Capital Balance, beginning of $ 15,915 $ 16,184
period $ 15,475 $ 15,370 Stock-based 319 248 compensation 890 736
Fair values of options (58) - exercised (189) - Common shares
purchased (34) - for cancellation (34) (590) - - Expiry of warrants
- 916
-------------------------------------------------------------------------
$ 16,142 $ 16,432 Balance, end of period $ 16,142 $ 16,432
-------------------------------------------------------------------------
Warrants Balance, beginning of $ - $ - period $ - $ 916 - - Expiry
of warrants - (916)
-------------------------------------------------------------------------
$ - $ - Balance, end of period $ - $ -
-------------------------------------------------------------------------
Deficit Balance, beginning of $ (4,649) $ (14,525) period $ (8,234)
$ (19,781) (1,376) 2,604 Net income (loss) 2,209 7,860
-------------------------------------------------------------------------
$ (6,025) $ (11,921) Balance, end of period $ (6,025) $ (11,921)
-------------------------------------------------------------------------
Accumulated Other Comprehensive Income Balance, beginning of $
15,278 $ 11,012 period $ 7,425 $ 7,810 Other comprehensive 6,553
(102) income (loss) 14,406 3,100
-------------------------------------------------------------------------
21,831 10,910 Balance, end of period 21,831 10,910
-------------------------------------------------------------------------
Total shareholders' $ 111,668 $ 93,776 equity $ 111,668 $ 93,776
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Comprehensive Income Foreign currency translation $ 6,553 $ (102)
adjustments $ 14,406 $ 3,100 (1,376) 2,604 Net income (loss) 2,209
7,860
-------------------------------------------------------------------------
Total comprehensive $ 5,177 $ 2,502 income $ 16,615 $ 10,960
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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
-------------------------------------------------------------------------
(in thousands of U.S. dollars) (unaudited) For the Three-Month
Periods For the Nine-Month Periods Ended September 30, Ended
September 30, ---------------------------
-------------------------- 2007 2006 2007 2006 -----------
----------- ----------- ----------- CASH FLOWS FROM (USED IN)
OPERATING ACTIVITIES $ (1,376) $ 2,604 Net income (loss) $ 2,209 $
7,860 Adjustments to reconcile net income (loss) to net cash from
(used in) operating activities Amortization of (30) (825) deferred
revenues (90) (2,433) Depreciation and 1,499 1,327 amortization
4,151 3,752 319 248 Stock-based compensation 890 736 (1,013) 616
Deferred income taxes (641) 1,991 655 2 Foreign exchange 1,645 240
Deferred Share Unit (recovery) expense (245) 16 (Note 7) (118)
(167) 162 348 Other 516 704 Changes in operating assets and
liabilities 223 (87) Accounts receivable 7,009 329 Accounts
receivable, (354) - long term (1,519) - (307) 519 Inventories (409)
(1,098) 701 698 Prepaid expenses (545) (214) Accounts payable and
1,799 392 accrued liabilities (2,006) (1,262) (21) - Other
liabilities (819) - 41 - Deferred revenues (117) -
-------------------------------------------------------------------------
Net cash from (used in) 2,053 5,858 operating activities 10,156
10,438
-------------------------------------------------------------------------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES Expenditures for
property, (3,002) (1,401) plant and equipment (8,097) (3,566)
Increase in intangible 37 (24) assets (137) (198) Proceeds from
disposition - - of equipment - 22
-------------------------------------------------------------------------
Net cash from (used in) (2,965) (1,425) investing activities
(8,234) (3,742)
-------------------------------------------------------------------------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES Proceeds from
customer - - financing 1,200 - Repayment of customer - - deposits
(135) (11) 104 576 Exercise of options 1,812 1,555 Common shares
purchased (64) - for cancellation (64) (1,103)
-------------------------------------------------------------------------
Net cash from (used in) 40 576 financing activities 2,813 441
-------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash and 435 1 cash
equivalents 747 364
-------------------------------------------------------------------------
Net increase in cash (437) 5,010 and cash equivalents 5,482 7,501
Cash and cash equivalents, 27,365 14,881 beginning of period 21,446
12,390
-------------------------------------------------------------------------
Cash and cash equivalents, end $ 26,928 $ 19,891 of period $ 26,928
$ 19,891
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Additional Information $ - $ - Interest paid $ - $ - $ 400 $ 1
Income taxes paid $ 603 $ 561
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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
-------------------------------------------------------------------------
(in thousands of U.S. dollars except share related data)
(unaudited) 1. Significant Accounting Policy These interim
consolidated financial statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") in the
United States of America. 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, 2006. 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,
2006, 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 September 30, 2007 and the results of
operations and cash flows for the nine-month periods ended
September 30, 2007 and 2006. 2. Change in Accounting Policy On
January 1, 2007, the Company adopted Financial Accounting Standards
Board Interpretation # 48 "Accounting for Uncertainty in Income
Taxes" ("FIN 48"). FIN 48 prescribes a minimum recognition
threshold that a tax position is required to meet before being
recognized in the financial statements and provides guidance on
derecognition, measurement classification, interest and penalties,
accounting in interim periods, disclosure and transition matters.
The adoption of FIN 48 did not impact the Company's consolidated
financial position, results of operations or cash flows. The
Company's policy is to recognize interest related to unrecognized
tax benefits and penalties as financial expense. There were no
interest or penalties accrued at September 30, 2007. As at January
1, 2007, the Company had provided $1.0 million of valuation
allowance in the deferred tax asset accounts with respect to the
tax filing position taken related to the disposition of assets in
prior years. The uncertainty arises from the fact that the tax
treatment taken is subject to interpretation and it was more likely
than not at the time of filing that the position would be
successfully challenged by the taxation authorities. If the filing
position is accepted by the taxation authorities, the provision
would be reversed into income as a reduction in deferred income tax
expense in the year of acceptance. The Company expects this matter
to be resolved during 2008. The Company has not recorded any
increases and decreases in unrecognized tax benefits as a result of
tax positions taken during the current period. The Company and its
subsidiaries' income tax returns are subject to examination by tax
authorities for the years ending December 31, 1999 through December
31, 2006. There are no other items of a material nature in accounts
with respect to uncertainty in income taxes. 3. Cost of Goods Sold
In the first quarter of 2007, DRAXIS received insurance proceeds of
$517 in settlement of business interruption losses related to the
extended shutdown in the third quarter of 2005. No accrual for
insurance proceeds had been previously recorded as the claim
represented a contingent gain. The proceeds were recognized as a
reduction to cost of goods sold in the first quarter of 2007. 4.
Earnings (loss) per Share Basic earnings (loss) per common share is
calculated by dividing the net income by the weighted-average
number of the Company's common shares outstanding during the
period. Diluted earnings (loss) per common share is calculated by
dividing the net income by the sum of the weighted-average number
of common shares that would have been outstanding if potentially
dilutive common shares had been issued during the period. The
treasury stock method is used to compute the dilutive effect of
stock options. The calculation of diluted earnings (loss) per
common share excludes any potential conversion of options that
would increase earnings per share. The following table sets forth
the computation of basic and diluted earnings (loss) per share: For
the Three-Month Periods For the Nine-Month Periods Ended September
30, Ended September 30, ---------------------------
-------------------------- 2007 2006 2007 2006 -----------
----------- ----------- ----------- Numerator: $ (1,376) $ 2,604
Net income (loss) $ 2,209 $ 7,860 Denominator: Weighted-average
number of common shares 42,076,726 41,870,614 outstanding - basic
41,948,449 41,608,623 Weighted-average effect of dilutive
securities 40,483 - - stock options 187,014 74,426
-------------------------------------------------------------------------
Weighted-average number of common shares 42,117,209 41,870,614
outstanding - diluted 42,135,463 41,683,049
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic earnings (loss) $ (0.03) $ 0.06 per share $ 0.05 $ 0.19
Diluted earnings (loss) $ (0.03) $ 0.06 per share $ 0.05 $ 0.19
-------------------------------------------------------------------------
-------------------------------------------------------------------------
5. Inventories September 30, December 31, 2007 2006
---------------------------------------------------------------------
Raw materials $ 4,937 $ 3,682 Work-in-process 963 1,094 Finished
goods 3,408 2,814
---------------------------------------------------------------------
$ 9,308 $ 7,590
---------------------------------------------------------------------
---------------------------------------------------------------------
6. Accounts Payable and Accrued Liabilities September 30, December
31, 2007 2006
---------------------------------------------------------------------
Trade $ 6,291 $ 4,688 Accrued liabilities 914 905 Employee-related
items 3,046 5,347
---------------------------------------------------------------------
$ 10,251 $ 10,940
---------------------------------------------------------------------
---------------------------------------------------------------------
7. Shareholders' Equity Stock Option Plan The following is a
summary of the number of common shares issuable pursuant to
outstanding stock options: For the Three-Month Periods For the
Nine-Month Periods Ended September 30, Ended September 30,
--------------------------- -------------------------- 2007 2006
2007 2006 ----------- ----------- ----------- ----------- Balance,
beginning of 2,135,828 2,583,745 period 2,257,995 2,652,620
Increase (decrease) resulting from: - - Granted 420,000 330,000
(30,000) (210,750) Exercised (565,500) (542,333) (75,000) -
Cancelled (81,667) (16,667) - - Expired - (50,625)
-------------------------------------------------------------------------
2,030,828 2,372,995 Balance, end of period 2,030,828 2,372,995
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Exercisable at 728,883 1,162,162 September 30 728,883 1,162,162 As
of September 30: Remaining unrecognized compensation cost related
to non-vested stock options $1,730 $1,998 Weighted-average
remaining requisite service period 1.9 years 2.1 years
Weighted-average exercise price of options: Outstanding, CDN$4.63
CDN$4.23 end of period CDN$4.63 CDN$4.23 Exercisable, CDN$4.67
CDN$4.09 end of period CDN$4.67 CDN$4.09 - - Granted CDN$5.69
CDN$5.06 CDN$3.66 CDN$3.07 Exercised CDN$3.70 CDN$3.26 CDN$5.52 -
Cancelled CDN$5.45 CDN$5.93 - - Expired - CDN$3.33 The following
table summarizes information about stock options outstanding at
September 30, 2007: Options Outstanding
------------------------------------------------------- Weighted-
Average Remaining Weighted- Aggregate Contractual Average Intrinsic
Range of Exercise Number Life Exercise Value Prices Outstanding (in
years) Price ($000's) CDN$2.01 - $2.50 454,994 4.47 CDN$2.35
CDN$1,821 CDN$2.51 - $3.00 37,500 5.87 CDN$2.63 CDN$138 CDN$3.01 -
$3.50 15,000 1.10 CDN$3.25 CDN$46 CDN$3.51 - $4.00 - - - - CDN$4.01
- $4.50 125,000 1.25 CDN$4.30 CDN$251 CDN$4.51 - $5.00 180,000 2.70
CDN$4.70 CDN$290 CDN$5.01 - $6.65 1,218,334 3.89 CDN$5.58 CDN$895
------------------------------------------------------- 2,030,828
3.78 CDN$4.63 CDN$3,441
-------------------------------------------------------
------------------------------------------------------- Options
Exercisable -------------------------------------------------------
Weighted- Average Remaining Weighted- Aggregate Contractual Average
Intrinsic Range of Exercise Number Life Exercise Value Prices
Exercisable (in years) Price ($000's) CDN$2.01 - $2.50 104,994 0.28
CDN$2.33 CDN$438 CDN$2.51 - $3.00 - - - - CDN$3.01 - $3.50 15,000
1.10 CDN$3.25 CDN$46 CDN$3.51 - $4.00 - - - - CDN$4.01 - $4.50
125,000 1.25 CDN$4.30 CDN$251 CDN$4.51 - $5.00 150,000 1.86
CDN$4.70 CDN$242 CDN$5.01 - $6.65 333,889 2.60 CDN$5.56 CDN$250
------------------------------------------------------- 728,883
1.85 CDN$4.67 CDN$1,227
-------------------------------------------------------
------------------------------------------------------- Deferred
Share Unit Plan Under the Company's Deferred Share Unit Plan,
members of senior management can elect to receive up to 20% of base
salary and up to 100% of any bonus payable in respect of that year
in deferred share units ("DSUs") in lieu of cash compensation. An
election must be made by December 1 of each year in respect of base
salary and bonus for the following year. The elected amount is
converted to a number of DSUs equal to the elected amount divided
by the closing price of the common shares on TSX or NASDAQ on
December 31 of each year, based on a purchase commitment as of
December 1 of the prior year. Participants are not entitled to
redeem any DSUs until cessation of employment with the Company for
any reason. The value of DSUs redeemable by the participants will
be equivalent to the market value of the common share at the time
of redemption. The DSUs must be redeemed no later than the end of
the first calendar year commencing after the date of cessation of
employment. The DSU liability is re-measured at the end of each
reporting period based on the market price of the Company's common
stock. The net increase or decrease in the value of the DSUs is
recorded as compensation cost included in selling, general and
administration expense. The following summarizes the number of DSUs
issued and outstanding and its impact on SG&A: For the
Three-Month Periods For the Nine-Month Periods Ended September 30,
Ended September 30, ---------------------------
-------------------------- 2007 2006 2007 2006 -----------
----------- ----------- ----------- Balance, beginning of 230,018
225,456 period 230,447 199,868 - 2,148 Issued - 27,736 - -
Cancelled (429) -
-------------------------------------------------------------------------
230,018 227,604 Balance, end of period 230,018 227,604
-------------------------------------------------------------------------
-------------------------------------------------------------------------
($245) $16 DSU (recovery) expense ($118) ($167)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
8. Segmented Information Industry Segmentation For purposes of
operating 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.
The segments are identified as reporting segments based on the
distinct management teams, customer base, production process and
regulatory requirements of each. The Corporate and Other segment
includes revenues earned via royalties and milestones, inter-
segment eliminations and corporate expenses. 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 in the 2006 annual Consolidated
Financial Statements. For the Three-Month Periods For the
Nine-Month Periods Ended September 30, Ended September 30,
--------------------------- -------------------------- 2007 2006
2007 2006 ----------- ----------- ----------- ----------- PRODUCT
SALES REVENUES $ 5,816 $ 5,668 Radiopharmaceuticals $ 17,450 $
15,935 12,076 14,535 Manufacturing 39,846 46,389 (522) (415)
Corporate and Other (1,248) (1,885)
-------------------------------------------------------------------------
$ 17,370 $ 19,788 $ 56,048 $ 60,439
-------------------------------------------------------------------------
ROYALTY AND LICENSING REVENUES $ - $ - Radiopharmaceuticals $ - $ 4
- - Manufacturing - - 588 1,442 Corporate and Other 2,325 4,128
-------------------------------------------------------------------------
$ 588 $ 1,442 $ 2,325 $ 4,132
-------------------------------------------------------------------------
TOTAL REVENUES $ 5,816 $ 5,668 Radiopharmaceuticals $ 17,450 $
15,939 12,076 14,535 Manufacturing 39,846 46,389 66 1,027 Corporate
and Other 1,077 2,243
-------------------------------------------------------------------------
$ 17,958 $ 21,230 $ 58,373 $ 64,571
-------------------------------------------------------------------------
PRODUCT GROSS MARGIN $ 3,144 $ 3,671 Radiopharmaceuticals $ 10,175
$ 10,031 1,511 4,487 Manufacturing 9,265(1) 16,104 42 (31)
Corporate and Other 105 (119)
-------------------------------------------------------------------------
$ 4,697 $ 8,127 $ 19,545 $ 26,016
-------------------------------------------------------------------------
SELLING, GENERAL AND ADMINISTRATION EXPENSE $ 1,434 $ 1,079
Radiopharmaceuticals $ 3,812 $ 3,240 1,741 1,230 Manufacturing
3,772 4,575 1,617 1,952 Corporate and Other(2) 4,543 5,938
-------------------------------------------------------------------------
$ 4,792 $ 4,261 $ 12,127 $ 13,753
-------------------------------------------------------------------------
RESEARCH AND DEVELOPMENT EXPENSE $ 655 $ 558 Radiopharmaceuticals $
2,273 $ 1,980 - - Manufacturing - - - - Corporate and Other - -
-------------------------------------------------------------------------
$ 655 $ 558 $ 2,273 $ 1,980
-------------------------------------------------------------------------
SEGMENT INCOME (LOSS)(3) $ 1,055 $ 2,034 Radiopharmaceuticals $
4,090 $ 4,815 (230) 3,257 Manufacturing 5,493 11,529 (987) (541)
Corporate and Other (2,113) (1,929)
-------------------------------------------------------------------------
$ (162) $ 4,750 $ 7,470 $ 14,415
-------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION $ 249 $ 275 Radiopharmaceuticals $
816 $ 824 1,159 968 Manufacturing 3,075 2,676 91 84 Corporate and
Other 260 252
-------------------------------------------------------------------------
$ 1,499 $ 1,327 $ 4,151 $ 3,752
-------------------------------------------------------------------------
OPERATING INCOME (LOSS)(4) $ 806 $ 1,759 Radiopharmaceuticals $
3,274 $ 3,991 (1,389) 2,289 Manufacturing 2,418 8,853 (1,078) (625)
Corporate and Other (2,373) (2,181)
-------------------------------------------------------------------------
$ (1,661) $ 3,423 $ 3,319 $ 10,663
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Includes $517 of insurance proceeds related to a business
interruption claim filed resulting from equipment damage during
2005 shutdown period. (2) Stock-based compensation expense was
recorded in SG&A in the amount of $319 in Q3, 2007 (Q3, 2006 -
$248) and $890 in YTD, 2007 (YTD, 2006 - $736). (3) Income (loss)
before depreciation and amortization, financing income, foreign
exchange loss and income taxes. (4) Income (loss) before financing
income, foreign exchange loss and income taxes. September December
IDENTIFIABLE ASSETS 30, 2007 31, 2006 ----------- -----------
Radiopharmaceuticals $ 19,509 $ 15,332 Manufacturing 63,672 54,162
Corporate and Other 41,387 36,468
--------------------------------------------- $ 124,568 $ 105,962
---------------------------------------------
--------------------------------------------- Geographic
Segmentation For the Three-Month Periods For the Nine-Month Periods
Ended September 30, Ended September 30, ---------------------------
-------------------------- 2007 2006 REVENUES(1) 2007 2006
----------- ----------- ----------- ----------- $ 8,949 $ 10,237
Canada $ 27,920 $ 29,132 8,474 10,668 United States 28,471 34,564
535 325 Other 1,982 875
-------------------------------------------------------------------------
$ 17,958 $ 21,230 $ 58,373 $ 64,571
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(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. Expenditures for Property, Plant and
Equipment For the Three-Month Periods For the Nine-Month Periods
Ended September 30, Ended September 30, ---------------------------
-------------------------- 2007 2006 2007 2006 -----------
----------- ----------- ----------- $ 294 $ 249
Radiopharmaceuticals $ 848 $ 941 2,705 1,152 Manufacturing 7,246
2,625 3 - Corporate and Other 3 -
-------------------------------------------------------------------------
$ 3,002 $ 1,401 $ 8,097 $ 3,566
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Product Sales Revenues by Major Product Groups For the Three-Month
Periods For the Nine-Month Periods Ended September 30, Ended
September 30, ---------------------------
-------------------------- 2007 2006 2007 2006 -----------
----------- ----------- ----------- $ 5,816 $ 5,668
Radiopharmaceuticals $ 17,450 $ 15,935 8,298 10,894 Manufacturing -
Sterile 28,458 37,397 Manufacturing - 3,778 3,641 Non Sterile
11,388 8,992 157 - Corporate and Other 487 259 (679) (415)
Intercompany eliminations (1,735) (2,144)
-------------------------------------------------------------------------
$ 17,370 $ 19,788 $ 56,048 $ 60,439
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Major Customers The major customers disclosed in this table are
included in the Manufacturing segment results. For the Three-Month
Periods For the Nine-Month Periods Ended September 30, Ended
September 30, ---------------------------
-------------------------- 2007 2006 2007 2006 -----------
----------- ----------- ----------- 10.0% 19.0% Customer A 14.0%
23.0% 22.0% 22.0% Customer B 19.0% 23.0% 11.0% 11.0% Customer C
11.0% 9.0% 12.0% 10.0% Customer D 10.0% 9.0%
-------------------------------------------------------------------------
55.0% 62.0% 54.0% 64.0%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
9. Contingency In July 2005, a claim was filed before the Superior
Court of Justice of Ontario 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. No amounts have been
accrued in the accounts pursuant to this claim. 10. Comparative
Information The Company has reclassified certain prior period's
information to conform with the current presentation format.
DATASOURCE: DRAXIS Health Inc. CONTACT: DRAXIS Health Inc., Jerry
Ormiston, Executive Director, Investor Relations, Tel:
1-877-441-1984
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