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Pediapharm Announces First Quarter Financial Results

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MONTREAL, QUEBEC--(Marketwired - Aug. 27, 2015) -

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

Pediapharm Inc. ("Pediapharm" or the "Company") (TSX VENTURE:PDP) is pleased to announce the filing of its first quarter unaudited financial results ended June 30, 2015. All dollar amounts are expressed in Canadian currency and results are reported in accordance with IFRS accounting principles.

Highlights for the period ended June 30, 2015:

On May 5, 2015, the Company announced that it received a Notice of Deficiency - Withdrawal Letter from Health Canada regarding its new drug submission for Easyhaler Budesonide. The Company's file is eligible for the reconsideration process, which is part of normal regulatory actions available to sponsors. On August 4th 2015, Pediapharm has submitted its reconsideration package to Health Canada regarding Easyhaler Budesonide. The Company's objective remains to obtain a marketing approval by the end of 2015.

On June 8, 2015, Pediapharm and G. Pohl-Boskamp GmbH & Co KG announced the extension of their exclusive Canadian distribution agreement for NYDA until at least 2021. The revised agreement includes additional renewal clauses and similar terms and conditions as were included in the previous agreement. Furthermore, the revised agreement does not contain any material financial changes from the previous agreement.

NYDA's continued sales performance in the first quarter of fiscal 2016 is in line with the annual projected forecast. For the month of June 2015, the product captured 25.0 % market share in dollars in Canada (IMS Data-June 2015). This excellent performance is the result of a well-targeted marketing and promotional investment made by the Company with the key objective to fully exploit the sales potential of NYDA.

The Company has entered in discussion with numerous potential partners for the launch of its Naproxen Suspension in the United States. The objective is to finalize an agreement by the end of the 2015 with a product launch estimated to be in January-March 2016.

Recent highlights

On July 24th 2015, the Company has submitted to the Canadian Health Authorities its regulatory dossier of rupatadine, a novel generation of antihistamine to treat the symptoms of allergy and urticarial in both adults and children. Rupatadine has a unique dual activity by blocking both histamine H1 and platelet-activating factor (PAF) receptors; thus, providing additional anti-allergic benefits to patients. It comes in a once-daily formulation and is also available in the form of suspension (liquid) for children.

The Canadian second-generation anti-histamine market is estimated to be $105 million; of which $17 million from products with a prescription (Rx) status, which are growing at a rate of approximately 15%. The entire antihistamine market was approximately $120 Million in 2013 (IMS Data-2013).

"The financial results of this quarter are in line with our projections" stated Sylvain Chretien, President and Chief Executive Officer of Pediapharm. He added: " With the seasonality associated with head lice treatments, revenue from NYDA, which represents roughly 70-75% of our total revenue, has historically been lower in the first two quarters of the calendar year. With its on-going strong performance in the market as shown by its 25% dollar market share in June 2015 (IMS Data-June 2015), NYDA's revenue is expected to grow significantly in the upcoming quarters, which will improve our bottom line significantly. We have also invested in 3 new product filings with Health Canada, all from deals signed in 2014. Our future remains promising given our current product portfolio, our product pipeline as well as potential upcoming and selected business opportunities."

The Company's focus remains to execute its commercial plan with existing products, such as NYDA(R), a revolutionary treatment indicated for eradication of head lice and its eggs. NYDA(R) reached over $2,000,000 in revenue in fiscal 2015, is expected to reach $3,200,000 in fiscal 2016 and has the potential to achieve annual peak revenues of $6,000,000 to $8,000,000 by fiscal 2018.

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 $35,000,000 and $40,000,000 within the next 5-6 years. 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 $35,000,000. The Company intends on filing 2 additional products over the next few months for estimated Health Canada approvals before December 2016.

The chart below contains information on the secured exclusive agreements that are expected to be launched in the next 18 months. This chart is identical to the one presented in the last MD&A of the Company dated July 20, 2015.

Pediapharm product Pipeline



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PRODUCT PARTNER- INDICATION MARKET SIZE EST. ANNUAL EST.
COUNTRY (CDN $) PEAK SALES LAUNCH
(CDN $)
----------------------------------------------------------------------------
Pediapharm Acquired from Juvenile Suspension / 5M based on Q-1 2016
Naproxen Roche- Rheumatoid Liquid: 50- milestone
Suspension USA Arthritis & 80M (internal payments and
USA (#) Other Medical estimate) royalties
Pain
Conditions Tablets:
greater than
500M
(internal
estimate)
----------------------------------------------------------------------------
Easyhaler- Orion- Asthma 195M 15M Q-1 2016
Budesonide Finland
((i))
----------------------------------------------------------------------------
Cuvposa Merz Pharma- Severe 25M 5M Q-4 2016
((i)) USA Drooling -
Cerebral
Palsy
----------------------------------------------------------------------------
Cetraxal- Salvat Ear 25M 4M Q-4 2016
Plus ((i)) Laboratories- Infection,
Spain Swimmer's Ear
----------------------------------------------------------------------------
Rupatadine Uriach-Spain Antihistamine 120M 6M Q-4 2016
((i)) (RX
indication)
----------------------------------------------------------------------------
TOTAL 365M+ 35M
----------------------------------------------------------------------------
(#) US product to be out-licensed to a US commercial partner
((i)) Canadian license which requires Health Canada Approval
----------------------------------------------------------------------------



Now that Pediapharm has positioned itself with a strong pipeline as shown above, 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 exclusive licensing agreements (commonly known as "in-licensing").

Furthermore, before the end of 2015, the Company intends to sign an agreement with a US commercial partner for the selling and marketing of its first product acquisition in the US; namely the Pediapharm Naproxen Suspension. Pediapharm believes that with this agreement, the Company will reach profitability more rapidly.

With the excellent sales momentum of its current marketed products portfolio, including NYDA(R), the Company continues to make positive steps towards generating positive cash flow. The recent launch of Pediapharm Naproxen Suspension in Canada, the expected launch Pediapharm Naproxen Suspension in the US through a partner, as well as the potential launch of Easyhaler-budesonide in 2016 assuming Health Canada's approval, will positively impact revenue and profitability for years to come. In parallel, the Company is in the process of assessing potential product acquisitions, and strives to add more products to its portfolio within this fiscal year. 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 June 30, 2015

For the three months ended June 30, 2015, revenues reached $605,642 compared with revenues of $885,260 in the three months ended June 30, 2014. Revenue from sales of Pediapharm branded products increased by $110,658 while revenue from commissions decreased by $390,276 as a result of the termination of the Company's promotional sales agreements with Sanofi Canada for Suprax(R) and Allerject(TM), effective June 30, 2014.

For the three months ended June 30, 2015, selling and administrative expenses were $1,999,890 (2014 - $1,716,187). The main reasons for this increase are the additional efforts associated with the 5 agreements signed in fiscal 2015, the expenses associated with the additional marketing expenses, in support of the expected revenue and profit growth of new products such as Pediapharm Naproxen Suspension in Canada and in the US, as well as NYDA which is expected to keep growing significantly. Finally, since 90% of the Company's revenue comes from sales of Pediapharm branded products (2014 - 49%) vs revenue from commissions, expenses such as cost of goods and royalties increase accordingly.

The comprehensive loss for the three months ended June 30, 2015 was $1,594,646 compared to $812,707 in the three months ended June 30, 2014. The additional efforts associated with the 5 agreements signed in fiscal 2015 and the additional efforts in marketing & sales are the main reasons for the increased loss. There is also an expense of $168,779 in interest payable on the convertible debentures in the three months ended June 30, 2015.



----------------------------------------------------------------------------
June 30, 2015 June 30, 2014
(3 months) (3 months)
----------------------------------------------------------------------------
Revenue from Products 542,168 431,510
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Revenue from Commissions 63,474 453,750
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TOTAL Revenue 605,642 885,260
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Selling and administrative expenses 1,999,890 1,716,187
----------------------------------------------------------------------------
Net loss (1,594,646) (812,707)
----------------------------------------------------------------------------
Cash flow from (used in) operating
activities (1,336,657) (1,570,481)
----------------------------------------------------------------------------
Cash flow from (used in) investing
activities (3,840) (179,758)
----------------------------------------------------------------------------
Cash flow from (used in) financing
activities 70,965 -
----------------------------------------------------------------------------



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(R); a breakthrough treatment for head lice; EpiCeram(R) a non-steroid emulsion for eczema; KoolEffect(TM) which reduces the symptoms of fever; and VapoLyptus(TM); a soothing vapour patch of Eucalyptus and Camphor.

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.

FOR FURTHER INFORMATION PLEASE CONTACT:
Sylvain Chretien
President and Chief Executive Officer
Pediapharm Inc.
514-762-2626 ext. 201
sylvain.chretien@pedia-pharm.com


Roland Boivin
Chief Financial Officer
Pediapharm Inc.
514-762-2626 ext. 202
roland.boivin@pedia-pharm.com


Frank Candido
Direct Financial Strategies and Communication Inc.
514-969-5530
directmtl@gmail.com

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