Patheon Reports Second Quarter Results

Revenues and Earnings Reflect Success in Executing Strategy

Patheon Inc. announced its results for the second quarter ended April 30, 2000.

Revenues for the quarter virtually doubled to $67,886,000 from $34,650,000 a year ago, with the company's sites in Europe accounting for 84% of the increase. Net earnings increased 75% to $3,226,000 from $1,847,000 in 1999, and earnings per share increased 63% to 7.5 cents from 4.6 cents.

Operating income in the second quarter increased by 50% to $8,223,000 from $5,477,000 a year ago. As anticipated, operating margins on a same-quarter basis declined as a result of the lower initial margins on the new European contracts with Aventis and the one-time costs associated with establishing business operations in Europe.

The effective tax rate in the quarter was 35% compared with 43% a year ago. Net earnings benefited as more pre-tax profits were generated in the lower-taxed jurisdictions of the United Kingdom and France. On January 1, 2000, the effective tax rate in France was reduced five percentage points to 36.7%, although it remains considerably higher than the UK rate of 30%.

For the six-month period, revenues increased 111% to $118,252,000, net earnings rose 75% to $5,009,000 (11.6 cents per share compared to 7.2 cents a year ago) and operating income increased 65% to $14,034,000. While margins declined to 12% for the reasons as noted above, we expect to achieve margin improvements as we sign new contracts for the European sites.

"These results for the year to date reflect the successful execution of the company's strategy," commented CEO Robert Tedford. "We are making good progress in establishing our European organization with business development activity leading to new contracts for our recently acquired sites in Europe. Our European operations now account for just over 60% of total revenues and our North American operations achieved growth of 25% during the second quarter. As a result, on a company-wide basis, orders for delivery in the third quarter ending July 31, 2000 were approximately $67,000,000, 91% higher than a year earlier."

Looking to the future, CEO Tedford said, "We have already reported that we are at or near capacity in our North American sites. As the pharmaceutical industry continues to restructure, we expect to extend the Patheon manufacturing network in both North America and Europe through the acquisition of more high-quality sites."

In the company's 1999 Annual Report, it was reported that Patheon had made an application to the Court to seek the sale of Global Pharm Inc., a 48%-owned affiliate. The Court heard this application in April 2000 and is now considering its decision. Shareholders will be informed of the decision as soon as it is rendered.