Pediapharm Announces Annual Audited Financial Results-Operating Profit of $1.9 Million in Q4 and Improvement of $3.7 Million in Annual Operating Loss

MONTREAL, QUEBEC--(Marketwired - June 27, 2016) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Pediapharm Inc. (the "Company") (TSX VENTURE:PDP) is pleased to file its annual audited financial results ended March 31, 2016. All dollar amounts are expressed in Canadian currency and results are reported in accordance with IFRS accounting principles.

KEY HIGHLIGHTS-PERIOD ENDED MARCH 31, 2016

• Quarterly operating profit of $1,910,221 vs loss of $1,833,051 in the quarter ended March 31, 2015

• Annual operating loss was reduced to $1,339,717 vs $5,048,176 in year ended March 31, 2015

• $4,941,494 of cash and cash equivalents as of March 31, 2016

• Total annual revenue increased by 22%, including 55% increase from NYDA®

• In fiscal 2016, NYDA®, a breakthrough treatment for head lice and its eggs, reached over $3,200,000 in revenue. NYDA is #1 in both unit and dollar market share in Quebec (IMS data-December 2015) and is ranked # 2 in the rest of Canada (IMS Data-December 2015)

• NYDA agreement with Pohl-Boskamp GmbH & Co KG was renewed until at least 2021

• Submitted regulatory dossiers of rupatadine (symptoms of allergy and urticaria) and Otixal® (ear infections) in July and November 2015 respectively

• Sold United States rights to Naproxen Suspension in a transaction valued at US$4.25 million with Atnahs Pharma US Limited, who also owns the global rights to the Naprosyn® brand. First payment of US$2.25 million was received in February 2016 while second and final payment of US$2 million was received in May 2016

• The US$2 million (approximately CDN$2.6 million) received on May 2016 is in addition to the $4.94 million of cash and cash equivalents the Company had at March 31, 2016

FUTURE OUTLOOK

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. NYDA® reached over $3,200,000 in revenue in fiscal 2016, is expected to reach $4,400,000 in fiscal 2017 and has the potential to achieve annual peak revenues of $6,000,000 to $8,000,000 within the next two years (IMS data and Management's estimate).

Pediapharm has a product pipeline of secured exclusive agreements which management believes will enable the Company to obtain its corporate annual revenue goal of reaching between $25,000,000 and $30,000,000 within the next 5-6 years. This projected peak sales forecast is based in using IMS data and the Management's estimate in the market share to be captured for each of the product. As described below, projected annual peak sales to be generated from existing licenses/products that have not yet been launched and/or require Health Canada approval are estimated at $15,000,000 (IMS data and Management's estimate). The Company intends on filing Cuvposa™ over the next few months.

The chart below contains information on the secured exclusive agreements that are expected to be launched in the next year. This chart has been updated since the last MD&A dated February 25, 2016 to reflect the changes in the estimated launch dates of Rupatadine and Cuvposa. Rupatadine's estimated launch is now estimated to be in the period of July-September 2016 vs October-December 2016 as previously stated due to the fact the Company now estimates it will receive Health Canada's approval by August 2016. Cuvposa's estimated launch date has been delayed by a quarter due to some delays regarding the dossier to be filed with Health Canada.

PRODUCT	PARTNER- COUNTRY	INDICATION	MARKET SIZE (CDN $)	EST. ANNUAL PEAK SALES (CDN$) (2)(6)	EST. LAUNCH DATE (Calendar Year) (7)
Rupatadine (Rupafin)(1)	Uriach - Spain	Antihistamine (RX Indication)	120M (5)	6M	Q-3 2016
Cetraxal-Plus (Otixal)(1)	Salvat Laboratories - Spain	Ear Infection, Swimmer's Ear	25M (4)	4M	Q-4 2016
Cuvposa(1)	Merz Pharma - USA	Severe Drooling - Cerebral Palsy	25M (3)	5M	Q-2 2017
TOTAL			170M+	15M
(1) Canadian License which requires Health Canada Approval
(2) Estimated Annual Peak sales is usually achieved within approximately 5 to 7 years of a product launch
(3) Based on prevalence of Cerebral Palsy patients from the Public Health Agency of Canada
(4) IMS Data - December 2014
(5) IMS Data - December 2013
(6) Based on Market Data (see above footnotes) and Management's estimates
(7) Based on Health Canada's timelines regarding approval of submitted files

Now that Pediapharm has positioned itself with a strong pipeline as shown above, for which most of the regulatory investments are behind, the Company's core strategy regarding business development has recently evolved to focus more on acquisitions of products with existing sales and on co-promotion for products already approved in Canada. The key objective is to generate profitability in a timely fashion while pursuing the regulatory process of the agreements signed in 2014. In parallel, Pediapharm will still assess additional exclusive licensing agreements (commonly known as "in-licensing").

In summary, with the recent sale of its United States rights to Naproxen Suspension, the Company has a solid cash position to execute its business plan, including the upcoming potential launches of Rupafin™ and Otixal® in the second-half of 2016, assuming Health Canada's approvals. Furthermore, the strong revenue growth from Pediapharm branded products such as NYDA®, combined with the reduction of some of its operating expenses, are important steps towards generating positive cash flows. In parallel, the Company is in the process of assessing potential product acquisitions with the key objective to accelerate its strategy to generate positive cash flow over a short period of time. Pediapharm is a growth company in the high-margin specialty pharmaceutical industry, and when opportunities arise to feed that growth, it may raise incremental capital to provide for necessary funding and flexibility.

Review of operating results for the period ended March 31, 2016

REVENUE

For the three months ended March 31, 2016, total revenue reached $650,320 compared with revenues of $406,655 in the three months ended March 31, 2015, representing a 60% increase. Revenue from NYDA® increased by 47%.

For the twelve months ended March 31, 2016, total revenue reached $3,750,236 compared with revenues of $3,068,683 in the twelve months ended March 31, 2015, representing a 22% increase. The 40% increase in revenue from sales of Pediapharm branded products was partially offset by the decrease of $326,315 in revenue from commissions.

SELLING AND ADMINISTRATIVE EXPENSES

For the three months ended March 31, 2016, selling and administrative expenses decreased by $194,967 to reach $1,763,543 (2015 - $1,958,510). The decrease in selling and administrative expenses is mainly due to the fact most of the marketing expenses related to the launch of Naproxen in Canada occurred in three months ended March 31, 2015. Furthermore, expenses in business development and medical affairs were lower in the three months ended March 31, 2016 due to the level of activity as well as timing of expenses.

For the twelve months ended March 31, 2016, selling and administrative expenses decreased by $312,936 to reach $6,750,581 (2015 - $7,063,517). Included in the fiscal 2016 expenses is an impairment expense of $216,975 for the Easyhaler Budesonide capitalized licence costs (included in intangible assets). Without this impairment, selling and marketing expenses have decreased by over $500,000 due to the maximization of every sales and marketing dollar spent as well as the fact most of the marketing expenses related to the launch of Naproxen in Canada occurred in twelve months ended March 31, 2015.

OTHER INCOME

In the three months ended March 31, 2016 the Company sold its US rights to the drug Naproxen Suspension in a transaction valued at approximately US$4.25 million (the "Transaction"). Financial terms of the Transaction included an unconditional payment by the Acquirer of US$2.25 million in cash ($3,134,249), which was received at closing and was recorded as other income.

OPERATING PROFIT OR LOSS

The operating profit for the three months ended March 31, 2016 was $1,910,221 compared to an operating loss of $1,883,051 in the three months ended March 31, 2015. In addition to the increase in revenue and gross profit, the Company benefited from the aforementioned sale of its US rights to the drug Naproxen Suspension, which had a positive impact of $3,134,249 in the three months ended March 31, 2016.

The operating loss for the twelve months ended March 31, 2016 was $1,339,717 compared to $5,048,176 in the twelve months ended March 31, 2015. In addition to the increase in revenue and gross profit, the Company benefited from the aforementioned sale of its US rights to the drug Naproxen Suspension, which had a positive impact of $3,134,249 in the twelve months ended March 31, 2016.

NET PROFIT OR LOSS

The net profit for the three months ended March 31, 2016 was $1,537,383 compared to a net loss of $1,878,160 in the three months ended March 31, 2015. In the three months ended March 31, 2016, the difference between operating loss and net loss is mainly due to $365,254 in finance costs. The majority of the aforementioned finance costs are related to the March 31, 2015 private placement of secured, convertible debentures of the Company and share purchase warrants of the Company for aggregate gross proceeds of $5,500,000.

The net loss for the twelve months ended March 31, 2016 was $2,299,294 compared to the $4,998,949 in the twelve months ended March 31, 2015. In the twelve months ended March 31, 2016, the difference between operating loss and net loss is mainly due to $1,001,046 in finance costs related to the March 31, 2015 private placement of secured, convertible debentures of the Company and share purchase warrants of the Company for aggregate gross proceeds of $5,500,000.

	March 31, 2016 (3 months)		March 31, 2015 (3 months)		March 31, 2016 (12 months)		March 31, 2015 (12 months)
Revenue from Products	$571,570		$479,065		$3,504,696		$2,496,828
Revenue from Commissions	78,750		(72,410	)	245,540		571,855
TOTAL Revenue	650,320		406,655		3,750,236		3,068,683
Gross Profit	416,672		104,103		2,454,237		2,105,863
Selling and administrative expenses	1,763,543		1,958,510		6,750,581		7,063,517
Other Income	3,134,249		-		-		-
Operating profit (loss)	1,910,221		(1,883,051	)	(1,339,717	)	(5,048,176	)
Net profit (loss)	1,537,383		(1,878,160	)	(2,299,294	)	(4,998,949	)
Cash flow from (used in) operating activities	1,731,941		(1,200,010	)	(1,286,300	)	(4,575,755	)
Cash flow from (used in) investing activities	(124,786	)	81,512		(659,127	)	(911,178	)
Cash flow from (used in) financing activities	(1,120	)	5,194,464		88,151		5,193,479

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; naproxen suspension, indicated to treat pain and inflammation due to various conditions, including Juvenile Idiopathic Arthritis; and a broad pipeline of products under registration.

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.

Sylvain Chretien, President and Chief Executive Officer
Pediapharm Inc.
514-762-2626 ext. 201
[e-mail]

Roland Boivin, Chief Financial Officer
Pediapharm Inc.
514-762-2626 ext. 202
[e-mail]

Frank Candido
Direct Financial Strategies and Communication Inc.
514-969-5530
[e-mail]