Pediapharm Announces Second Quarter Financial Results

MONTREAL, QUEBEC--(Marketwired - Nov. 28, 2014) -

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Pediapharm Inc. (TSX VENTURE:PDP) (the "Company") is pleased to announce the filing of its second quarter unaudited financial results ended September 30, 2014. All dollar amounts are expressed in Canadian currency and results are reported in accordance with IFRS accounting principles.

Highlights for the period ended September 30, 2014:

• NYDA®, a breakthrough treatment for head lice and its eggs, is a major contributor to the revenue growth and is on track to reach over $2,000,000 in revenue in the year ended March 31, 2015 ("fiscal 2015"). With approximately 10% market share (IMS data- June 2014) and given the market trends favoring the use of NYDA due to a high level of lice resistance with competitive pesticide-based shampoos, Management believes NYDA is well positioned to reach $3,200,000 in fiscal 2016 and its projected peak sales of $6,000,000-$8,000,000 by fiscal 2018.
  
  
• Total revenues for the three-month period ended September 30, 2014 increased by 5% compared to the three-month period ended June 30, 2014, which included $325,000 of revenue generated from an agreement with Sanofi Canada that was terminated June 30, 2014. Without this negative impact of $325,000, revenues would have increased by 66%. This supports management's view that, despite the previously announced termination of the agreement with Sanofi Canada, the Company is achieving substantial growth with its existing portfolio of products;
  
  
• The Company has over $4,675,000 of working capital as of September 30, 2014;
  
  
• As a result of its on-going business development efforts, Pediapharm has several potential product acquisitions and licensing agreements presently being evaluated and several others that have been filed or in the process of being filed with Health Canada;
  
  
• The Easyhaler®-budesonide filing is currently under review by Health Canada after clearing the screening process in July 2014;
  
  
• Company's first product acquisition:
  
  
  • On July 2, 2014, the Company entered into its first asset purchase agreement by acquiring the Canadian rights of naproxen suspension from Hoffman La Roche (Roche).

Recent highlights

On October 8, 2014, Pediapharm entered into an agreement with Laboratories SALVAT S.A., Ltd. ("SALVAT") which grants to Pediapharm the exclusive Canadian rights to a novel patented formulation of Ciprofloxacin 0.3% and Fluocinolone Acetonide 0.025% otic solution. Pediapharm intends to register the combination product for 2 indications in adults and children older than 6 months old: 1) acute otitis media in patients with tympanostomy tubes ("AOMT"); 2) acute otitis external (swimmer's ear). In addition to the recent results from two phase III trials in patients suffering from AOMT, SALVAT has been commercializing this product with success since 2011 in several European countries, where the product captured between a 22% and 28% market share. In Canada, this novel combination product will be competing in a market estimated by management to be approximately at $25,000,000 (IMS data-2013).

"Our strategic decision to keep investing in NYDA is paying off and will do so for years to come as the habits of recommending NYDA is becoming stronger across the country, stated Sylvain Chretien, President and Chief Executive Officer of Pediapharm. He added: "With The upcoming launch of Pediapharm Naproxen Suspension in January-March 2015, as well as the anticipated launch of Easyhaler-budesonide later in 2015, Pediapharm is in a good position to sustain its revenue growth. At the same time, we are still striving to further strengthen our product pipeline with new upcoming agreements; including product acquisitions", concluded Mr. Chretien.

The Company's focus remains to execute its commercial plan with existing products, such as NYDA®, a revolutionary treatment indicated for eradication of head lice and its eggs. Pediapharm has a product pipeline of secured exclusive agreements which management believes will enable the Company to obtain its corporate goal of reaching between $35,000,000 and $40,000,000 within the next 5-6 years. Furthermore, management is confident the Company can further strengthen its product pipeline by adding 2-3 new agreements over the next six months. As described below, projected revenues to be generated from existing licenses/products that have not yet been launched and/or require Health Canada approval are estimated at $28,000,000:

Pediapharm product Pipeline

The Company's core strategy regarding business development remains to acquire exclusive licensing agreements (commonly known as "in-licensing"), as well as products currently marketed in Canada, such as the aforementioned recent acquisition from Hoffmann-La Roche Limited. Pediapharm is currently negotiating to acquire more license agreements and strives to acquire another product currently marketed in Canada. This strategy will put Pediapharm in a strong position to further sustain its future growth.

Simultaneously, the Company is assessing various alternatives in order to optimize its short-term revenues and profits, including the pursuit of other Canadian co-promotion agreements for products already approved for sale in Canada.

Review of operating results for the period ended September 30, 2014

For the three months ended September 30, 2014, revenues reached $928,257 compared with revenues of $1,094,596 in the three months ended September 30, 2013. While there was a very strong revenue growth from NYDA®, it was negatively impacted by the termination of the Company's promotional sales agreements with Sanofi Canada for Suprax® and Allerject™, effective June 30, 2014. In the three month period ended September 30, 2013, over $600,000 of revenue was generated from the agreements with Sanofi Canada.

For the three months ended September 30, 2014, selling and administrative expenses were $2,121,969 (2013 - $1,061,868). The Company has deployed additional efforts in selling & marketing as well as in business development to capitalize on the Company's existing portfolio as well as future products and/or license agreements. Pediapharm continues to invest in marketing and sales efforts on NYDA. Furthermore, the Company has added key management personnel such as the Chief Financial Officer and the newly appointed Vice President, Marketing and Sales, in support of the expected revenue and profit growth. Expenses related to the listing on the TSX Venture Exchange also had an impact when comparing both periods.

The comprehensive loss for the three months ended September 30, 2014 was $1,186,937 compared to the $111,010 in the three months ended September 30, 2013. The comprehensive loss for the six months ended September 30, 2014 was $1,999,643 compared to $470,755 in the six months ended September 30, 2013.

About Pediapharm Inc.

Pediapharm is the only Canadian specialty pharmaceutical company dedicated to serving the needs of the pediatric community. Its mission is to bring to the Canadian market the latest innovative pediatric products with the objective to improve the health and the well-being of children in Canada. Since its debut in 2008, Pediapharm has entered into numerous commercial agreements with partners from Canada and other countries around the world. The company's innovative product portfolio includes NYDA®; a breakthrough treatment for head lice; EpiCeram® a non-steroid emulsion for eczema; KoolEffect™ which reduces the symptoms of fever; and VapoLyptus™; a soothing vapour patch of Eucalyptus and Camphor.

FORWARD LOOKING STATEMENTS

This news release contains forward-looking statements and other statements that are not historical. Such forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that could cause actual results to vary materially from target results and the results or events predicted in these forward-looking statements. As a result, investors are cautioned not to place undue reliance on these forward-looking statements.

The forward-looking statements contained in this news release are made as of the date of this release. Except as required by applicable law, the Corporation disclaims any intention and assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking information reflects the current expectations or belief of the Corporation based on information currently available and such information is subject to a number of assumptions, risks and uncertainties described in details at pp. 35 to 41 of the Management Information Circular of Chelsea Acquisition Corporation dated November 12, 2013 available on SEDAR at www.sedar.com and other risks associated with being a specialty pharmaceutical company.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.