Warnex Reports 2008 Results

2008 Highlights

Record revenues of $7.1 million in the last quarter

Cash and cash equivalents totalling $2.4 million

Restructured its debentures and received new financing facilities from Desjardins

Successfully passed an FDA inspection of its Analytical facilities

Obtained ISO accreditation for Warnex’s Medical Laboratories division and launched its DNA identification testing services for immigration and forensic purposes

Acquired two state-of-the-art TSQ Vantage mass spectrometers for Warnex’s Bioanalytical Services division

Purchased a state-of-the-art UPLC system for Warnex’s Analytical Services division

Launched PCA3 testing for prostate cancer and NPM1 testing for acute myeloid leukemia

Became the exclusive Canadian distributor of molecular diagnostic tests for GENDIA, an international network of laboratories offering more than 2,000 different genetic tests

Signed 10-year leases for Warnex’s facilities located in Laval and Blainville

“In 2008, we achieved two key objectives. First, we achieved our goal of being profitable in 2008, with net earnings of $2.4 million,” said Mark Busgang, president and chief executive officer. “Second, we restructured our balance sheet by renegotiating our debentures, reducing them effectively by $5 million, and by obtaining new financing facilities totalling $4 million from Desjardins. With our improved balance sheet and solid results in 2008, we are well-positioned for future growth opportunities and creating shareholder value.”

Financial Results

For the twelve-month period ended December 31, 2008, earnings before interests, taxes, depreciation and amortization (EBITDA) from continuing operations amounted to $3.3 million compared to $2.7 million for the twelve-month period ended December 31, 2007, an increase of $0.6 million.

Gross margins for the twelve-month period increased to $7.8 million, representing 30% of revenue, in 2008 from $6.3 million and 25% of revenue in 2007.

Selling and administrative expenses for the year ended December 31, 2008, totalled $6.1 million compared to $5.9 million in 2007. As a percentage of revenue, selling and administrative expenses are similar to last year at 24%. Financial expenses decreased to $1.3 million in 2008 from $2.0 million in 2007, mainly due to less interest on its debentures.

As of December 31, 2008, the Company had $2.4 million in cash and working capital of $1.8 million.

Operating Highlights

The Analytical division’s revenues decreased by 6% from $12.6 million in 2007 to $11.8 million in 2008. The analytical laboratory in Laval generated $5.8 million during the year (2007 – $6.3 million) and the Neopharm division in Blainville, acquired in September 2006, generated $6.0 million (2007 – $6.3 million). This decrease is due to reduced activity from some of our regular customers. During the year, this division successfully passed an inspection by the FDA and acquired a state-of-the-art UPLC system, which significantly improves turnaround times.

The Bioanalytical division increased revenue by 9% from $9.1 million in 2007 to $9.9 million in 2008. Business development efforts generated increased volume from existing customers as well as from new customers. Warnex acquired two state-of-the-art TSQ Vantage mass spectrometers for this division, making it the first CRO in Canada to acquire this new technology.

The Medical division’s revenue increased by 23% from $3.1 million in 2007 to $3.9 million in 2008. Prenatal testing revenue increased by 21% due to our increased sales and marketing efforts and despite the loss of our largest prenatal screening customer in the last quarter of 2006. Revenue from molecular diagnostics increased by 51% and revenue from pharmacogenetic contracts increased by 60%. These increases are the result of our business development efforts and our focus on highly specialized medical testing services.