Patheon reports third quarter results

Revenues increase by 85%, EPS by 83%

Patheon Inc. announces its results for the third quarter ended July 31, 2000.

Revenues for the quarter increased by 85% to $65,173,000 from $35,228,000 a year ago, with the increase in revenues from the company's sites in Europe accounting for 84% of the increase. Net earnings increased 89% to $3,229,000 from $1,710,000 in 1999, and earnings per share increased 83% to 7.5 cents from 4.1 cents.

Operating income in the third quarter increased by 59% to $8,715,000 from $5,471,000 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 and the continuing operating start-up costs associated with building the company's infrastructure in Europe. On a company-wide basis at the end of the third quarter, orders for delivery in the fourth quarter ending October 31, 2000 stood at approximately $67,000,000, or 81% higher than a year earlier.

For the nine months ended July 31, 2000 revenues doubled to $183,425,000, net earnings rose 80% to $8,238,000 (19.1 cents per share compared to 11.3 cents a year ago) and operating income increased 63% to $22,749,000. Operating margins declined to 12.4% from 15.3% for the reasons noted above.

In just over one year, Patheon has successfully established a leading position as a pharmaceutical contract manufacturer in Europe. For the third quarter, the company's European operations contributed 61% ($40,075,000) of total revenues, an increase of 71% from last year, and for the nine month period they contributed 62% ($112,927,000) of Patheon's total revenues. Strategically, Patheon intends to use this position to develop a very substantial business in Europe while continuing to expand its North American operations.

On September 1, 2000, Patheon acquired all the Global Pharm Inc. shares it did not previously own. In doing so, it gained control of an excellent FDA-approved manufacturing site that will allow Patheon to further build its U.S. business. A significant provision was taken in the third quarter of 2000 to restate the inventories of Global Pharm Inc. to net realizable values which resulted in an impact of approximately 1 cent per share in the third quarter and the year to date.

The Canadian dollar has been exceptionally strong against both the Euro and the British pound since November 1st, 1999, the beginning of the company's current fiscal year. Had the Canadian dollar remained constant in terms of foreign exchange translation, reported revenues for the nine months ended July 31, 2000 would have been higher by 4% or $6,570,000, and net earnings would have been higher by 5% or 1 cent per share. Assuming that the Canadian dollar maintains its current strength vis-a-vis the European currencies during the remainder of fiscal 2000, it is expected that reported earnings for the year could be reduced by as much as 2 cents per share.

Commenting on the quarter, CEO Robert Tedford said, "We are pleased with the progress of our strategic plan. Our operations in Europe are on target to be client-oriented service businesses and are already contributing strongly to both our top and bottom lines. In North America, our operations continue to achieve solid performance levels, with revenue growth of 23% during the third quarter. In addition, to support our strategic growth plan, we continue to seek suitable sites for acquisition in both Europe and North America, while expanding our existing facilities at our Toronto, Niagara and Monza (Italy) operations to meet the needs of our clients."

Patheon is a leading independent global provider of drug manufacturing and development services in the rapidly growing pharmaceutical outsourcing sector. Patheon operates eight cGMP facilities in Canada and Europe, employing over 1800 people. Patheon currently serves from its North American and European operations 17 of the world's 25 largest pharmaceutical companies and a growing number of pharmaceutical and biotechnology companies.