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Stellar Pharmaceuticals Shows Strong Third Quarter Revenue Growth to $3.2 Million

Tuesday, November 13, 2012 7:30 AM


MILTON, ONTARIO -- (Marketwire) -- 11/13/12 -- Stellar Pharmaceuticals Inc. (OTCQB:SLXCF)(OTCBB:SLXCF)(PINKSHEETS:SLXCF) ("Stellar" or "the Company"), a specialty pharmaceutical company with a primary focus on the acquisition, licensing, development and promotion of healthcare products in Canada, today announced financial results for its fiscal 2012 third quarter and nine months ended September 30, 2012. In this press release, all dollar amounts are expressed in Canadian currency - unless otherwise noted - and results are reported in accordance with United States generally accepted accounting principles (U.S. GAAP).

Third Quarter 2012 Highlights:

--  Revenues increased 366% in Q3 and 276% in the nine months ended
    September 30, 2012 
--  Gross profit up 179% in Q3 and 119% in the first nine months of 2012 
--  Entered into exclusive agreement with Pfizer Canada Inc. (NYSE:PFE) to
    market Gelfoam®, a medical device used in surgical procedures as a
    haemostatic agent, targeting the $30 million Canadian market for this
--  Conducted prelaunch of CAMBIA®, a treatment for migraine headaches,
    which launched on October 1 to serve the $150 million Canadian migraine

For the three month period ended September 30, 2012, Stellar reported total revenues $3,213,500, an increase of 366% compared to the same period in 2011. This increase was driven by licensed domestic product net sales of $2,267,500 (compared to nil in the previous year) as a result of the acquisition of Tribute Pharmaceuticals. Additional growth came from international sales which grew by 70% to $369,800 in the third quarter compared to the same period in 2011. There was also an increase in other domestic product sales for the three month period ending September 30, 2012 of 24% to $576,200 compared to the same period in 2011 due in part to sales of newly acquired Collatamp G®, a medical device used in the prevention of postoperative infections, which targets a $20 million Canadian market.

For the nine month period ended, September 30, 2012, total revenues from all sources increased by 276% to $9,004,700 compared to $2,395,900 for the same period in 2011.

Gross profits increased driven by a combination of higher revenues and lower costs associated with the revenues. The Company enjoyed a 179% increase in gross profit over the three month period ended September 30, 2012 and a 119% increase in gross profit over the nine month period of 2012.

Selling, general and administrative expenses for the third quarter were $2,131,400, an increase of 243% over the prior year period. The increase was due primarily to the expansion of the Company's sales force and CAMBIA pre-launch expenses. For the nine month period ended September 30, 2012, selling, general and administrative expenses were $6,240,000 compared to $2,024,600 in the same period of the prior year.

The Company's net loss in the third quarter of fiscal 2012 was $718,600 or $.02 per share compared to net income of $112,300 during the same period in 2011. The loss was mainly due to the significant investment Stellar made in the expansion of its sales force, marketing expenses to grow its existing products, marketing and sales expenses related to the launch of CAMBIA® on October 1, 2012, as well as an increase in business development activities.

For the nine month period ending September 30, 2012 net loss was $2,076,400 or $.05 per share compared to a prior year net loss of $132,200.

As of September 30 2012, the Company had cash and cash equivalents of $2,608,700.

During the third quarter Stellar executed on growing its revenues by expanding its product portfolio, which leveraged its strong sales and distribution infrastructure. Stellar further expanded and strengthened its Specialty Care Products group through its agreement with Pfizer to promote and sell Gelfoam® in Canada. Gelfoam® is a medical device approved in Canada and the United States for use in surgical procedures as a haemostatic agent, when control of capillary, venous, and arteriolar bleeding by pressure, ligature, and other conventional procedures is either ineffective or impractical. Gelfoam® is already used in hospitals and surgical centers across Canada and addresses a $30 million market. Stellar has begun promoting, selling and marketing Gelfoam®, while Pfizer is responsible for manufacturing, distribution, regulatory and medical activities. This marks Stellar's first agreement with Pfizer.

Stellar has created synergies in its product mix designed to increase sales of all of its specialty care products including NeoVisc®, Uracyst®, Collatamp G®, which was acquired in the second quarter of 2012, and now Gelfoam. In the third quarter Stellar also prepared for the launch of CAMBIA®, which was introduced on October 1, 2012. CAMBIA® has the potential to gain a significant proportion of the $150 million Canadian migraine market. It is the only available prescription non-steroidal anti-inflammatory drug ("NSAID") available with an indication for the acute treatment of migraine attacks with or without aura in adults.

"We continue to execute on our growth strategy with revenues of over $9 million in the first nine months of 2012. This is a strong foundation for what we believe will put us on a more accelerated path for growth," said Rob Harris, CEO of Stellar. "When our CFO Scott Langille and I merged our company, Tribute Pharmaceuticals, with Stellar, we came with a clear vision for evolving Stellar into a leading Canadian specialty care pharmaceutical company with global reach. Our goals, vision and strategy are very much aligned with and supported by Stellar's board as well as our entire management and sales team. Having led significant growth and expanded business development activities at other pharmaceutical companies, we feel confident in our path and our ability to execute."

About Stellar Pharmaceuticals Inc.

Stellar and its operating division, Tribute Pharmaceuticals, is an emerging Canadian specialty pharmaceutical company focused on the acquisition, licensing, development and management of pharmaceutical and healthcare products with its primary focus on the Canadian market.

Stellar also markets Bezalip® SR (bezafibrate), Soriatane® (acitretin), NeoVisc® (1.0% sodium hyaluronate solution) and Uracyst® (sodium chondroitin sulfate solution 2%), Collatamp G® and Gelfoam® in the Canadian market. Additionally, NeoVisc® and Uracyst® are commercially available and are sold globally through various international partnerships.

For further information on Stellar visit the Company's websites: www.stellarpharma.com, or www.tributepharma.com.

Stellar Pharmaceuticals' Forward-Looking Statement

This press release contains certain forward-looking statements about Stellar as defined in the Private Securities Litigation Reform Act of 1995, which statements can be identified by the use of forward-looking terminology, such as "may", "will", "expect", "intend", "anticipate", "estimate", "predict", "plan" or "continue" or the negative thereof or other variations thereon or comparable terminology referring to future events or results. Forward-looking statements, by their nature, are subject to risks and uncertainties, Stellar actual results could differ materially from those anticipated in these forward-looking statements as a result of numerous factors, including general economic conditions, the ability of Stellar to successfully integrate operations, and the timing of expenditures and expansion opportunities, any of which could cause actual results to vary materially from current results or anticipated future results. See Stellar reports filed with the Canadian Securities Regulatory Authorities and the U.S. Securities and Exchange Commission from time to time for cautionary statements identifying important factors with respect to such forward-looking statements, including certain risks and uncertainties that could cause actual results to differ materially from results referred to in forward-looking statements. Stellar assumes no obligation to update the information contained in this press release to update forward-looking statements to reflect changed assumptions, the occurrence of anticipated events or changes in future operating results, financial condition or business over time.

Soriatane and Bezalip are registered trademarks and under license from Actavis Group PTC ehf

Cambia is a registered trademark and under license from Nautilus Neurosciences, Inc.

Collatamp G is a registered trademark and under license EUSA Pharma (Europe) Limited.

Gelfoam is a registered trademark of Pharmacia & Upjohn Company LLC, used under license by Pfizer Canada Inc.

For further information on Stellar, visit www.stellarpharma.com.

                        STELLAR PHARMACEUTICALS INC.                        
                      (Expressed in Canadian dollars)                       
                                                    As at             As at 
                                            September 30,      December 31, 
                                                     2012              2011 
                                          ----------------  ----------------
                                          ----------------  ----------------
Cash and cash equivalents                  $    2,608,651    $    2,227,973 
Accounts receivable, net of allowance of                                    
 $nil (2011 - $nil)                             1,208,042           763,810 
Inventories                                       861,138           870,630 
Taxes recoverable                                 187,363           180,160 
Loan receivable                                    15,814            15,814 
Prepaid expenses and other receivables            348,955           124,101 
                                          ----------------  ----------------
    Total current assets                        5,229,963         4,182,488 
Property, plant and equipment, net              1,174,888         1,207,462 
Intangible assets, net                         10,394,006        10,409,744 
Goodwill                                        3,597,077         3,408,741 
Debt issuance costs, net                          358,516                 - 
                                          ----------------  ----------------
    Total assets                           $   20,754,450    $   19,208,435 
                                          ----------------  ----------------
                                          ----------------  ----------------
Accounts payable and accrued liabilities   $    3,075,183    $    2,684,542 
Amount payable and contingent                                               
 consideration due                                486,222         1,624,289 
Current portion of long term debt               1,183,514                 - 
Warrant liability                                 246,303             2,543 
                                          ----------------  ----------------
    Total current liabilities                   4,991,222         4,311,374 
Long term debt                                  2,092,309                 - 
Deferred tax liability                            793,800         1,524,200 
                                          ----------------  ----------------
    Total liabilities                           7,877,331         5,835,574 
                                          ----------------  ----------------
                                          ----------------  ----------------
Contingencies and commitments                                               
           SHAREHOLDERS' EQUITY                                             
Capital Stock                                                               
Common shares                                  17,589,957        16,469,621 
Additional paid-in capital options              1,738,162         1,277,830 
Deficit                                        (6,451,000)       (4,374,590)
                                          ----------------  ----------------
    Total shareholders' equity                 12,877,119        13,372,861 
                                          ----------------  ----------------
    Total liabilities and shareholders'                                     
     equity                                $   20,754,450    $   19,208,435 
                                          ----------------  ----------------
                                          ----------------  ----------------
                        STELLAR PHARMACEUTICALS INC.                        
                  COMPREHENSIVE (LOSS) INCOME AND DEFICIT                   
                      (Expressed in Canadian dollars)                       
                     For the Three Month Period   For the Nine Month Period 
                             Ended September 30          Ended September 30 
                    ---------------------------- ---------------------------
                    ---------------------------- ---------------------------
                             2012          2011          2012          2011 
                    -------------- ------------- ------------- -------------
                    -------------- ------------- ------------- -------------
Licensed domestic                                                           
 product net sales   $  2,267,509   $         -   $ 6,104,160   $         - 
Other domestic                                                              
 product sales            576,174       466,496     1,707,336     1,420,885 
 product sales            369,816       217,368     1,193,219       960,799 
Royalty and                                                                 
 licensing revenues             -         5,298             -        14,226 
                    -------------- ------------- ------------- -------------
Total revenues          3,213,499       689,162     9,004,715     2,395,910 
                    -------------- ------------- ------------- -------------
                    -------------- ------------- ------------- -------------
Operating costs and                                                         
Licensor sales and                                                          
 distribution fees      1,526,690             -     4,226,247             - 
Cost of products                                                            
 sold                     327,582       201,870       922,983       634,799 
                    -------------- ------------- ------------- -------------
Total cost of sales     1,854,272       201,870     5,149,230       634,799 
Selling, general and                                                        
 administrative         2,131,379       621,641     6,240,007     2,024,640 
Amortization              155,807        12,314       380,270        36,438 
                    -------------- ------------- ------------- -------------
    Total cost and                                                          
     expenses           4,141,458       835,825    11,769,507     2,695,877 
                    -------------- ------------- ------------- -------------
                    -------------- ------------- ------------- -------------
(Loss) from                                                                 
 operations              (927,959)     (146,663)   (2,764,792)     (299,967)
Non-operating income                                                        
  Change in warrant                                                         
   liability               66,183       266,029       203,396       201,759 
  Cost of extending                                                         
   the warrant                                                              
   expiration                   -             -      (135,157)            - 
  Change in fair                                                            
   value of                                                                 
   consideration                -             -        79,724             - 
  Research and                                                              
   development             (6,590)      (12,196)      (14,916)      (45,966)
  Accretion expense       (45,826)            -      (100,193)            - 
  Interest expense       (103,551)            -      (158,175)            - 
  Interest income          12,150         5,091        12,150        11,945 
                    -------------- ------------- ------------- -------------
(Loss) income and                                                           
 (loss) income                                                              
 before tax            (1,005,593)      112,261    (2,877,963)     (132,229)
Current income tax                                                          
 recovery                  71,153             -        71,153             - 
Deferred income tax                                                         
 recovery                 215,800             -       730,400             - 
                    -------------- ------------- ------------- -------------
Net (loss) income                                                           
 and comprehensive                                                          
 (loss) income for                                                          
 the period          $   (718,640)  $   112,261   $(2,076,410)  $  (132,229)
Deficit, beginning                                                          
 of period             (5,732,360)   (4,097,299)   (4,374,590)   (3,852,809)
                    -------------- ------------- ------------- -------------
Deficit, end of                                                             
 period              $ (6,451,000)  $(3,985,038)  $(6,451,000)  $(3,985,038)
                    -------------- ------------- ------------- -------------
                    -------------- ------------- ------------- -------------
Basic and Diluted                                                           
 (Loss) Earnings per                                                        
 share               $      (0.02)  $      0.00   $     (0.05)  $     (0.01)
                    -------------- ------------- ------------- -------------
                    -------------- ------------- ------------- -------------
                        STELLAR PHARMACEUTICALS INC.                        
                      (Expressed in Canadian dollars)                       
                                                  For the Nine Month Period 
                                                         Ended September 30 
                                                       2012            2011 
                                             --------------- ---------------
                                             --------------- ---------------
Cash flows from (used in) operating                                         
Net (loss)                                    $  (2,076,410)  $    (132,229)
Items not affecting cash:                                                   
  Deferred income tax recovery                     (730,400)              - 
  Amortization                                      412,490          78,889 
  Change in warrant liability                      (203,396)       (201,759)
  Cost of extending the warrant expiration          135,157               - 
  Change in fair value of contingent                                        
   consideration                                    (79,724)              - 
  Stock-based compensation                          460,332         138,327 
  Unrealized foreign exchange                       (54,378)              - 
  Accretion expense                                 100,193               - 
  Issuance of equity instruments for services                               
   rendered                                               -          14,467 
  Change in non-cash operating assets and                                   
   liabilities                                     (249,493)       (686,148)
                                             --------------- ---------------
Cash flows (used in) operating activities        (2,285,629)       (788,453)
                                             --------------- ---------------
Cash flows (used in) investing activities                                   
  Additions to property, plant and equipment        (32,489)         (5,008)
  Increase in intangible assets                     (32,270)        (23,191)
  Cash cost of acquisition                         (425,000)              - 
                                             --------------- ---------------
Cash flows (used in) investing activities          (489,759)        (28,199)
                                             --------------- ---------------
Cash flows from (used in) financing                                         
  Financing costs deferred                         (343,934)              - 
  Long term debt issued                           3,500,000               - 
  Share issuance costs                                    -         (24,243)
                                             --------------- ---------------
Cash flows from (used in) financing                                         
 activities                                       3,156,066         (24,243)
                                             --------------- ---------------
Changes in cash and cash equivalents                380,678        (840,895)
Cash and cash equivalents, beginning of                                     
 period                                           2,227,973       4,352,285 
                                             --------------- ---------------
Cash and cash equivalents, end of period      $   2,608,651   $   3,511,390 
                                             --------------- ---------------
                                             --------------- ---------------

Stellar Pharmaceuticals Inc.
Scott Langille

Stellar Pharmaceuticals Inc.
Arnold Tenney

Hampton Growth
Andrew Haag

(Source: Market Wire )
(Source: Quotemedia)


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