Search form

 

Press Releases


Axcan Reports Second Quarter 2004 Results - Revenue up 38.6% to $63.2 million-net Income Rises 39.3%


May 06, 2004 - 12:00 ET

Axcan Reports Second Quarter 2004 Results - Revenue up 38.6% to $63.2 million-net Income Rises 39.3% 

MONT-SAINT-HILAIRE, Quebec, May 6 - Axcan Pharma Inc.
("Axcan" or the "Company") announced today operating results for the quarter
ended March 31, 2004, the Company's second quarter of the fiscal year ending
September 30, 2004. The Company reported revenue growth of 38.6% to $63.2
million and net income of $12.4 million, or $0.24 per share (fully diluted),
representing 39.3% growth in net income and 20% growth in diluted income per
share, as compared to the second quarter of fiscal 2003 (all amounts stated in
U.S. dollars).

"Based on our strong second quarter results, we believe that our solid
and consistent financial performance should continue throughout the remainder
of the fiscal year," stated Léon F. Gosselin, President and Chief Executive
Officer of Axcan.

INTERIM FINANCIAL REPORT

This release includes, by reference, the second quarter interim financial
report incorporating the financial statements in accordance with both U.S. and
Canadian GAAP as well as the full Management Discussion & Analysis ("MD&A")
including the reconciliation to Canadian GAAP of the U.S. GAAP presentation.
The interim report, including the MD&A and financial statements, is filed with
applicable U.S. and Canadian regulatory authorities.

RECENT DEVELOPMENTS

PHOTOBAR
In March 2004, the European Commission granted Axcan market authorization
for use in the European Union ("EU") of PHOTOBARR (porfimer sodium), its
photodynamic therapy ("PDT") for the ablation of High-Grade Dysplasia
associated with Barrett's Esophagus. PHOTOBARR was also granted orphan medical
product status at the time of its submission, which guarantees Axcan exclusive
marketing rights for PHOTOBARR in the European Union for a ten-year period
from March 2004. This represents a significant milestone for Axcan, because
this is its first regulatory approval in Europe. Launch in major EU markets is
expected near the end of the current fiscal year.

ITAX
In January 2004, the U.S. Food and Drug Administration ("FDA") endorsed
Axcan's development proposal to immediately initiate Phase III clinical trials
with ITAX (itopride hydrochloride). Axcan intends to initiate Phase III
clinical studies to evaluate the efficacy of ITAX in the treatment of
functional dyspepsia (also known as non ulcer dyspepsia). Axcan also plans to
study ITAX as a treatment for diabetic gastroparesis. As previously announced,
Axcan believes that if approved by the FDA, ITAX has the potential to become
its highest selling product. Axcan expects to file a New Drug Application
("NDA") in fiscal 2005.

MESALAMINE - NEW DOSAGE
In December 2003, Axcan submitted to the FDA a supplemental NDA for a 1-
gram mesalamine suppository dosage form for the treatment of ulcerative
proctitis. Axcan expects approval by the end of calendar year 2004.

URSO DS- NEW FORMULATION
In September 2003, Axcan filed a supplemental NDA for a new, double-
strength tablet formulation of URSO (ursodiol, URSO DS 500mg tablets). This
new formulation will simplify the dosing regimen used in the treatment of
Primary Biliary Cirrhosis. This new product is expected to gain approval by
the FDA in the last quarter of fiscal 2004.

HELIZIDE
The Company is in the process of qualifying a manufacturer of the
biskalcitrate potassium (bismuth salt) a component of Helizide combination
therapy for the eradication of Helicobacter Pylori bacterium. Axcan
anticipates FDA resubmission by December 2004. Assuming approval, we expect to
launch the product in the second half of fiscal 2005.

Research and development

    Phase III studies
    -----------------

SALOFALK 750 milligram tablets
Axcan completed a Phase III trial, for the Canadian market, on the
efficacy and safety of a new 750-milligram mesalamine (5-ASA) tablet for the
oral treatment of ulcerative colitis. The Company filed a supplemental New
Drug Submission for approval in Canada in the first quarter of fiscal 2004 and
hopes to launch the product in Canada in fiscal 2005.

CANASA / SALOFALK rectal gel
Axcan is currently completing Phase III studies to confirm the efficacy
and safety of a new mesalamine rectal gel in the treatment of distal
ulcerative colitis. Final results will be available in the second half of
fiscal 2004. Assuming the results of the Phase II studies are positive, the
Company plans to submit regulatory filings for approvals in the United States
and Canada and hopes to launch the rectal gel in the United States and Canada
in fiscal 2005.

HEPENAX
L-Ornithine L-Aspartate salt ("LOLA"), which is known as HEPENAX, was
developed by Merz Pharmaceuticals GmbH in Germany and is licensed to Axcan.
The Company intends to further develop HEPENAX in North America and Europe for
patients suffering from Porto-Systemic Encephalopathy ("PSE"). The Company
will conduct a Phase II/III clinical development program for HEPENAX and plans
to seek approval of the intravenous formulation to treat the acute symptoms of
PSE. The Company intends to initiate its clinical research program in the
third quarter of fiscal 2004 and complete such studies in fiscal 2005.

PHOTOFRIN
PHOTOFRIN is approved in a number of countries for the treatment of
different forms of cancers. Axcan is currently investigating the use of
PHOTOFRIN for the treatment of cholangiocarcinoma, a serious bile duct (liver)
cancer with a high morbidity rate. The treatment under investigation combines
PHOTOFRIN with PDT and the stenting of the bile ducts. The proposed Phase III
study will start in the third quarter of fiscal 2004.

    Pre-Clinical, Phase I and II studies
    ------------------------------------

NCX-1000
The FDA has accepted an Investigational NDA for NCX-1000, a patented
nitric oxide derivative of ursodiol, for the treatment of portal hypertension,
a late stage complication of chronic liver disease. The Phase I clinical
development program, which is designed to demonstrate the tolerability and
safety of NCX-1000, is almost completed. Phase II studies are planned to begin
during fiscal 2005. Completion of the entire clinical program is expected to
occur in calendar year 2006.

Ursodiol Disulfate
Axcan recently completed a proof of concept study in rats to evaluate the
effect of ursodiol disulfate on the development of colonic tumors. Axcan
intends to initiate animal toxicity studies in the third quarter of fiscal
2004, which will be followed by clinical Phase I studies.

NMK 150
Axcan and Nordmark GmbH, a German pharmaceutical firm, have set up a
joint-venture, Norax, in order to develop NMK 150, a new high protease
pancrelipase preparation. This product will be developed for the relief of
pain in small duct chronic pancreatitis. It is expected that NMK 150 will
enter clinical development before the end of fiscal 2004.

NMK 250
Norax is also developing NMK 250, a bacterial lipase intended to correct
steatorrhea in patients suffering from diverse causes of pancreatic
insufficiency (e.g., following surgery for cancer or due to cystic fibrosis).
Norax expects to complete the formulation work before the end of fiscal 2004.

FDA DRAFT GUIDELINES FOR
EXOCRINE PANCREATIC INSUFFICIENCY DRUG PRODUCTS

In April 2004, the FDA issued for comment, draft guidelines concerning
the approval status and timelines required for regulatory submissions of all
marketed exocrine pancreatic insufficiency drug products. Based on the current
draft document, the FDA will allow manufacturers four years to obtain
marketing approval. Axcan expects to meet all regulatory requirements and
timelines, as referred to in the FDA draft guidelines, for its exocrine
pancreatic insufficiency products marketed in the U.S.

DIGESTIVE DISEASE WEEK, MAY 15-20, 2004

On May 17, 2004, Dr. Kenneth Setchell will be presenting data from a rat
model toxicity study of the sulfated version of ursodiol ("SUDCA") for
treatment of colorectal polyps. On May 19, 2004, Dr. Gerald Holtmann will
present data from the German Phase II study of ITAX. Also, Axcan will be
sponsoring a PHOTOFRIN satellite symposium, discussing and demonstrating the
treatment for High-Grade Dysplasia associated with Barrett's Esophagus.

CONFERENCE CALL

Axcan will host a conference call at 4:30 P.M. ET, on May 6, 2004.
Interested parties may also access the conference call by way of webcast at
www.axcan.com . The webcast will be archived for 90 days. The telephone
numbers to access the conference call are (800) 814-4859 (Canada and United
States) or (416) 640-4127 (international). A replay of the call will be
available until May 13, 2004. The telephone number to access the replay of the
call is (416) 640-1917 code: 21043281.

ABOUT AXCAN PHARMA

Axcan is a leading specialty pharmaceutical company involved in the field
of gastroenterology. Axcan markets a broad line of prescription products sold
for the treatment of symptoms in a number of gastrointestinal diseases and
disorders such as inflammatory bowel disease, irritable bowel syndrome,
cholestatic liver diseases and complications related to cystic fibrosis.
Axcan's products are marketed by its own sales force in North America and
Europe. Its common shares are listed on the Toronto Stock Exchange under the
symbol "AXP" and on the NASDAQ National Market under the symbol "AXCA".

    "Safe Harbor" statement under the Private Securities Litigation Reform
    ----------------------------------------------------------------------
    Act of 1995.
    -----------
    To the extent any statements made in this release contain information
    that is not historical, these statements are essentially forward looking
    and are subject to risks and uncertainties, including the difficulty of
    predicting FDA and other regulatory approvals, acceptance and demand for
    new pharmaceutical products, the impact of competitive products and
    pricing, new product development and launch, reliance on key strategic
    alliances, availability of raw materials, the regulatory environment,
    fluctuations in operating results and other risks detailed from time to
    time in the Company's filings with the Securities and Exchange Commission
    and the Canadian Multijurisdictional Disclosure System.

    The names ITAX, Photobarr, Salofalk, Hepenax, Urso, Photofrin and Canasa
    appearing in this press release are trademarks of Axcan Pharma Inc. and
    its subsidiaries.


    Management Discussion and Analysis (MD&A), Financial Statements and Notes
    Attached

    Management's discussion and analysis of financial condition and results
    of operations

    This discussion should be read in conjunction with the information
    contained in Axcan's consolidated financial statements and the related
    notes thereto. All amounts are in U.S. dollars.

    Overview

Axcan is a leading specialty pharmaceutical company concentrating in the
field of gastroenterology, with operations in North America and Europe. Axcan
markets and sells pharmaceutical products used in the treatment of a variety
of gastrointestinal diseases and disorders. The Company seeks to expand its
gastrointestinal franchise by in-licensing products and acquiring products or
companies, as well as developing additional products and expanding indications
for existing products. Axcan's current products include ULTRASE, VIOKASE and
PANZYTRAT for the treatment of certain gastrointestinal symptoms related to
cystic fibrosis in the case of ULTRASE; URSO 250 and DELURSAN for the
treatment of certain cholestatic liver diseases; SALOFALK and CANASA for the
treatment of certain inflammatory bowel diseases; and PHOTOFRIN for the
treatment of certain types of gastrointestinal and other conditions. In
addition, Axcan currently has two products pending approval, one a new
formulation and the other, a new dosage form for products currently marketed
in the United States. Axcan also has a number of pharmaceutical projects in
all phases of development including ITAX for the treatment of functional
dyspepsia. Axcan reported revenue of $63.2 million and operating income of
$20.0 million for the three- month period ended March 31, 2004. For the six-
month period ended March 31, 2004, revenue was $120.8 million and operating
income was $37.0 million.

Much of Axcan's recent sales growth is derived from sales in the United
States and from sales by its French subsidiary, following recent acquisitions.
During the first quarter of fiscal 2003, Axcan acquired the worldwide rights
to the PANZYTRAT enzyme product line from Abbott Laboratories ("Abbott") and
the rights to DELURSAN, an ursodiol 250 mg tablet, from Aventis Pharma S.A.
("Aventis") for the French market. During the first quarter of fiscal 2004,
Axcan acquired the rights to a group of products from Aventis for a cash
purchase price of $145.0 million. These products are CARAFATE and BENTYL for
the U.S. market and SULCRATE, BENTYLOL and PROCTOSEDYL for the Canadian market
(collectively, "AVAX" product line). Revenue from sales of Axcan's products in
the United States was $81.1 million (67.2% of total revenue) for the six-month
period ended March 31, 2004, compared to $52.9 million (63.3% of total
revenue) for the same period of fiscal 2003. In Canada, revenue was       
$13.4 million (11.1% of total revenue) for the six-month period ended     
March 31, 2004, compared to $9.7 million (11.6% of total revenue) for the same
period of fiscal 2003. In Europe, revenue was $26.1 million (21.6% of total
revenue) for the six-month period ended March 31, 2004, compared to       
$20.8 million (25.0% of total revenue) for the same period of fiscal 2003.

Axcan's revenue historically has been and continues to be principally
derived from sales of pharmaceutical products, to large pharmaceutical
wholesalers and large chain pharmacies. Axcan utilizes a "pull-through"
marketing approach that is typical of pharmaceutical companies. Under this
approach, Axcan's sales representatives demonstrate the features and benefits
of its products to gastroenterologists who may write their patients
prescriptions for Axcan's products. The patients, in turn, take the
prescriptions to pharmacies to be filled. The pharmacies then place orders
with the wholesalers or, in the case of large chain pharmacies, their
distribution centres, to whom Axcan sells its products.

Axcan's expenses are comprised primarily of selling and administrative
expenses (including marketing expenses), cost of goods sold (including royalty
payments to those companies from whom Axcan licenses its products) and
research and development expenses.

Axcan's annual and quarterly operating results are primarily affected by
three factors: wholesaler buying patterns; the level of acceptance of Axcan's
products by gastroenterologists and their patients; and the extent of Axcan's
control over the marketing of its products. Wholesaler buying patterns,
including a tendency to increase inventory levels prior to an anticipated or
announced price increase, affect Axcan's operating results by shifting revenue
between quarters. To maintain good relations with wholesalers, Axcan typically
gives prior notice of price increases. The level of patient and physician
acceptance of Axcan's products, as well as the availability of similar
therapies, which may be less effective but also less expensive than some of
Axcan's products, impact Axcan's revenues by driving the level and timing of
prescriptions for its products.

Critical Accounting Policies

Axcan's consolidated financial statements are prepared in accordance with
generally accepted accounting principles in the United States of America
("U.S. GAAP"), applied on a consistent basis. Axcan's critical accounting
policies include the use of estimates, revenue recognition, the recording of
research and development expenses and the determination of the useful lives or
fair value of goodwill and intangible assets. Some of our critical accounting
policies require the use of judgment in their application or require estimates
of inherently uncertain matters. Although our accounting policies are in
compliance with U.S. GAAP, a change in the facts and circumstances of an
underlying transaction could significantly change the application of our
accounting policies to that transaction, which could have an effect on our
financial statements. Discussed below are those policies that we believe are
critical and require the use of complex judgment in their application.

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP
requires management to make estimates and assumptions that affect the recorded
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities as of the date of the financial statements and the disclosure of
recognized amounts of revenues and expenses during the year. Significant
estimates and assumptions made by management include the allowance for
accounts receivable and inventories, reserves for product returns, rebates and
chargebacks, the classification of intangible assets between finite and
indefinite life, useful lives of long-lived assets, expected cash flows used
in evaluating long-lived assets for impairment, contingency provisions and
other accrued charges. These estimates were made using the historical
information available to management. Actual results could differ from those
estimates.

Revenue Recognition

Revenue is recognized when the product is shipped to the Company's
customer, provided the Company has not retained any significant risks of
ownership or future obligations with respect to the product shipped. Revenue
from product sales is recognized net of sales discounts, allowances, returns,
rebates and chargebacks. In certain circumstances, returns or exchanges of
products are allowed under the Company's policy and provisions are maintained
accordingly. Amounts received from customers as prepayments for products to be
shipped in the future are reported as deferred revenue.

Goodwill and Intangible Assets

Axcan's goodwill and intangible assets are stated at cost, less
accumulated amortization. Prior to October 1, 2001, goodwill and intangible
assets were amortized using the straight-line method based on their estimated
useful lives from 7 to 25 years. Since October 1, 2001, the Company no longer
amortizes goodwill and intangible assets with an indefinite life. Management
evaluates the value of the unamortized portion of goodwill and intangible
assets annually, by comparing the carrying value to the future benefits of the
Company's activities or the expected sale of pharmaceutical products. Should
there be a permanent impairment in value or if the unamortized balance exceeds
recoverable amounts, a write-down will be recognized for the current year. To
date, Axcan has not recognized any permanent impairment in value. Intangible
assets with finite life are still amortized over their estimated useful lives.

Research and Development Expenses

Research and development expenses are charged to operations in the year
they are incurred. Acquired in-process research and development having no
alternative future use is written off at the time of acquisition. The cost of
intangibles that are acquired from others for a particular research and
development project, with no alternative use, are written off at the time of
acquisition.

Acquisition of Products

On November 18, 2003, the Company acquired the rights to a group of
products from Aventis. The acquired products are CARAFATE and BENTYL for the
U.S. market and SULCRATE, BENTYLOL and PROCTOSEDYL for the Canadian market.
The $145.0 million purchase price was paid out of Axcan's cash on hand.

On December 3, 2002, the Company acquired the worldwide rights to the
PANZYTRAT enzyme product line from Abbott for a cash purchase price of      
$45.0 million.

During a transition period, the seller in each of these acquisition
transactions acts as selling agent for the management of these products. For
the six-month period ended March 31, 2004, sales of these products were still
managed in part by the sellers. Axcan includes in its revenue the net sales
from such products less corresponding cost of goods sold and other seller
related expenses. Consequently, although net sales of such products for the
six-month period ended March 31, 2004 were $5,315,913, the Company included in
its revenue an amount of $3,440,421 representing the net sales less cost of
goods sold and other seller related expenses.

Results of Operations

The following table sets forth, for the periods indicated, the percentage
of revenue represented by items in Axcan's consolidated statements of
operations:

/T/
                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________
                                       %           %           %           %
    Revenue                        100.0       100.0       100.0       100.0
    _________________________________________________________________________
    Cost of goods sold              23.7        23.7        24.5        23.9
    Selling and administrative
     expenses                       31.7        34.8        31.8        36.6
    Research and development
     expenses                        6.3         7.1         6.6         6.4
    Depreciation and
     amortization                    6.6         4.4         6.5         4.8
    _________________________________________________________________________
                                    68.3        70.0        69.4        71.7
    _________________________________________________________________________

    Operating income                31.7        30.0        30.6        28.3
    _________________________________________________________________________

    Financial expenses               2.7         1.6         2.8         1.0
    Interest income                    -        (0.6)       (0.2)       (0.7)
    Loss on foreign exchange         0.4           -         0.3         0.3
    _________________________________________________________________________

                                     3.1         1.0         2.9         0.6
    _________________________________________________________________________

    Income before income taxes      28.6        29.0        27.7        27.7
    Income taxes                     8.9         9.4         8.8         9.1
    _________________________________________________________________________
    Net income                      19.7        19.6        18.9        18.6
    _________________________________________________________________________
    _________________________________________________________________________

/T/

Periods ended March 31, 2004 compared to periods ended March 31, 2003

Revenue

Revenue increased $17.6 million (38.6%) to $63.2 million for the second
quarter ended March 31, 2004 from $45.6 million for the corresponding quarter
of the preceding fiscal year. For the six-month period ended March 31, 2004,
revenue was $120.8 million compared to $83.5 million for the corresponding
period of the preceding fiscal year, an increase of 44.7%. This increase in
revenue primarily resulted from $18.9 million in U.S. and Canadian sales of
the AVAX product line which was acquired in November 2003 and strong sales of
ULTRASE in the U.S. . Revenues from sales made by the French subsidiary,
following the acquisitions of DELURSAN as well as the PANZYTRAT product line
also contributed to the increase.

Cost of goods sold

Cost of goods sold consists principally of costs of raw materials,
royalties and manufacturing costs. Axcan outsources most of its manufacturing
requirements. Cost of goods sold increased $4.2 million (38.9%) to        
$15.0 million for the quarter ended March 31, 2004 from $10.8 million for the
corresponding quarter of the preceding fiscal year. As a percentage of
revenue, cost of goods sold for the quarter ended March 31, 2004 remained
stable as compared to the corresponding quarter of the preceding fiscal year,
at 23.7%. For the six-month period ended March 31, 2004, cost of goods sold
was $29.5 million (24.5% of revenue) compared to $19.9 million (23.9% of
revenue) for the corresponding period of the preceding fiscal year. This
increase was due primarily to the newly acquired products which have a
slightly different margin than the products already sold by Axcan.

Selling and administrative expenses

Selling and administrative expenses consist principally of salaries and
other costs associated with Axcan's sales force and marketing activities.
Selling and administrative expenses increased $4.1 million (25.8%) to     
$20.0 million for the quarter ended March 31, 2004 from $15.9 million for the
corresponding quarter of the preceding fiscal year. For the six-month period
ended March 31, 2004, selling and administrative expenses increased        
$7.9 million (25.9%) to $38.4 million from $30.5 million for the corresponding
period of the preceding fiscal year. This increase is mainly due to an
increase in our sales force as a result of the recent acquisition of
additional products.

Research and development expenses

Research and development expenses consist principally of fees paid to
outside parties that Axcan uses to conduct clinical studies and to submit
governmental approval applications on its behalf as well as the salaries and
benefits paid to its personnel involved in research and development projects.
Research and development expenses increased $0.7 million (21.2%) to        
$4.0 million for the quarter ended March 31, 2004 from $3.3 million for the
corresponding quarter of the preceding fiscal year and $2.5 million (46.3%) to
$7.9 million for the six-month period ended March 31, 2004, from $5.4 million
for the corresponding period of the preceding fiscal year.

Depreciation and amortization

Depreciation and amortization consist principally of intangible assets
with finite life. Intangible assets include trademarks, trademark licenses and
manufacturing rights. Depreciation and amortization increased $2.2 million
(110.0%) to $4.2 million for the quarter ended March 31, 2004 from
$2.0 million for the corresponding quarter of the preceding fiscal year and
$3.9 million (97.5%) to $7.9 million for the six-month period ended March 31,
2004 from $4.0 million for the corresponding period of the preceding fiscal
year. The increase is mainly due to the amortization of the AVAX product line
acquired from Aventis on November 18, 2003 and of TAGAMET which was
reclassified from intangible assets with an indefinite life to intangible
assets with a finite life on October 1, 2003.

Financial expenses

Financial expenses consist principally of interest and fees paid in
connection with money borrowed for acquisitions. Financial expenses increased
$1.0 million to $1.7 million for the quarter ended March 31, 2004 from     
$0.7 million for the corresponding quarter of the preceding fiscal year and
$2.5 million to $3.4 million for the six-month period ended March 31, 2004
from $0.9 million for the corresponding period of the preceding fiscal year.
This increase is mainly due to interest expense on the $125.0 million
aggregate principal amount of 4 1/4% convertible subordinated notes due 2008
which were issued on March 5, 2003.

Income Taxes

Income taxes amounted to $5.7 million for the quarter ended March 31,
2004, compared to $4.3 million for the quarter ended March 31, 2003. Income
taxes amounted to $10.6 million for the six-month period ended March 31, 2004
compared to $7.7 million for the corresponding period of the preceding fiscal
year. The effective tax rates were 31.3% for the quarter ended March 31, 2004
and 32.5% for the quarter ended March 31, 2003.

Net income

Net income was $12.4 million or $0.27 of basic income per share and $0.24
of diluted income per share, for the quarter ended March 31, 2004, compared to
$8.9 million or $0.20 of basic and diluted income per share for the
corresponding quarter of the preceding year. The weighted average number of
common shares outstanding used to establish the basic per share amounts
increased from 44.9 million for the quarter ended March 31, 2003 to        
45.2 million for the quarter ended March 31, 2004, following the exercise of
options previously granted pursuant to Axcan's stock option plan. The weighted
average number of common shares used to establish the diluted per share
amounts increased from 45.6 million for the quarter ended March 31, 2003 to
55.1 million for the quarter ended March 31, 2004 as the convertible
subordinated notes became dilutive because a trigger event occurred during the
last quarter as a result of the stock trading price exceeding 110% of the
conversion price.

Net income was $22.9 million or $0.51 of basic income per share and $0.48
of diluted income per share, for the six-month period ended March 31, 2004,
compared to $15.5 million or $0.35 of basic income per share and $0.34 of
diluted income per share for the corresponding period of the preceding year.

Canadian GAAP
The differences (in thousands of dollars) between U.S. and Canadian GAAP
which affect net income for the periods ended March 31, 2004 and 2003 are
summarized in the following table:

/T/

                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________
                                       $           $           $           $
    Net income in
     accordance with U.S.GAAP     12,421       8,933      22,856      15,490

    Implicit interest on
     convertible debt             (1,023)       (294)     (2,049)       (294)
    Amortization of new
     products acquisition costs      (13)        (13)        (26)        (26)
    Income tax impact of
     the above adjustments             5           5          10          10
                             ____________  __________  __________  __________
    Net earnings in accordance
     with Canadian GAAP           11,390       8,631      20,791      15,180
                             ____________  __________  __________  __________
                             ____________  __________  __________  __________

/T/


On March 5, 2003, the Company closed an offering of $125,000,000
aggregate principal amount of 4 1/4% convertible subordinated notes due   
April 15, 2008. As a result of the terms of the notes, under Canadian GAAP, an
amount of $24,238,899 was included in shareholders' equity as equity component
of the convertible debt and an amount of $100,761,101 was included in long-
term debt, as the liability component of the convertible notes. For the six-
month period ended March 31, 2004, implicit interest in the amount of
$2,049,057 was accrued for and added to the liability component.

Under Canadian GAAP, research and development expenses are stated net of
related tax credits which generally constitute between 10% and 15% of the
aggregate amount of such expenses. Under U.S. GAAP, these tax credits are
applied against income taxes.

Under U.S. GAAP, acquired in-process research is included in operations
as at the date of acquisition if no alternative use is established. Under
Canadian GAAP, the acquired in-process research, including the new product
acquisition costs, is deferred and amortized from the date of commencement of
commercial production.

Liquidity and capital resources

Axcan's cash, cash equivalents and short-term investments decreased
$131.4 million to $39.5 million at March 31, 2004 from $170.9 million at
September 30, 2003. As of March 31, 2004, working capital was $59.3 million,
compared to $174.8 million at September 30, 2003. These decreases are mainly
due to the acquisition of the rights to the AVAX product line for a total cash
purchase price of $145.0 million plus transaction expenses. Total assets
increased $38.1 million (7.0%) to $583.4 million as of March 31, 2004 from
$545.3 million as of September 30, 2003. Shareholders' equity increased
$32.0 million (9.7%) to $363.0 million as of March 31, 2004 from
$331.0 million as of September 30, 2003.

Historically, Axcan has financed research and development, operations,
acquisitions, milestone payments and investments out of the proceeds of public
and private sales of its equity, cash flow from operations, and loans from
joint venture partners and financial institutions. Since it went public in
Canada in December 1995, Axcan has raised approximately $243.0 million from
sales of its equity and has borrowed from financial institutions to finance
the acquisition of Axcan Scandipharm Inc. and from Schwarz Pharma Inc., a
former joint venture partner, to finance the acquisition of Axcan URSO (these
amounts have since been repaid).

Axcan has credit facilities totalling $55.0 million with two Canadian
chartered banks. The facilities consist of a $15.0 million revolving operating
facility renewable annually and a $40.0 million 364-day, extendible revolving
facility with a three-year term-out option maturing on October 12, 2007.

The credit facilities are secured by a first priority security interest
on all present and future acquired assets of the Company and its material
subsidiaries, and provide for the maintenance of certain financial ratios.
Cash dividends, repurchase of shares (other than redeemable shares issued in
connection with a permitted acquisition) and similar distributions to
shareholders are limited to 10% of the Company's net income for the preceding
fiscal year. As of March 31, 2004, Axcan was in compliance with all credit
facilities' covenants.

The interest rate varies, depending on the Company's leverage between   
25 basis points and 125 basis points over Canadian prime rate or U.S. base
rate, and between 125 basis points and 225 basis points over the LIBOR rate or
bankers acceptances. The credit facilities may be drawn in U.S. dollar or in
Canadian dollar equivalent. As at March 31, 2004, there was no amount
outstanding under these credit facilities.

Cash Flows and Financial Resources

Cash flow from operating activities increased $6.6 million (56.4%) from
$11.7 million of cash provided by operating activities for the three-month
period ended March 31, 2003 to $18.3 million for the three-month period ended
March 31, 2004. This increase is mainly due to the increase in net income
before depreciation and amortization during the quarter following the increase
in sales and the acquisition of new products. Cash flows from financing
activities for the three-month period ended March 31, 2004 were $2.0 million
and cash flows used for investment activities for the same period were     
$1.0 million. For the six-month period ended March 31, 2004 cash flows from
operating activities decreased $15.9 million (48.2%) from $33.0 million of
cash provided by operating activities for the six-month period ended March 30,
2003 to $17.1 million. This decrease is mainly due to the increase in accounts
receivable and inventories during the first quarter of this year following the
increase in sales and the acquisition of new products. Cash flows from
financing activities for the six-month period ended March 31, 2004 were
$1.9 million. Cash flows used by investment activities for the six-month
period ended March 31, 2004 were $22.1 million mainly due to the net cash used
for the acquisition of intangible assets with the proceeds from the disposal
of short term investments.

Axcan's research and development spending totalled $12.1 million for
fiscal 2003. Axcan believes that its cash and operating cash flow will be
adequate to support its existing ongoing operational requirements for at least
12 months. However, Axcan regularly reviews product and other acquisition
opportunities and may therefore require additional debt or equity financing.
Axcan cannot be certain that such additional financing, if required, will be
available on acceptable terms, or at all.

Axcan believes that cash, cash equivalents and short-term investments,
together with funds provided by operations, will be sufficient to meet its
operating cash requirements, including the development of products through
research and development activities, capital expenditures and repayment of its
debt. Assuming regulatory approvals of future products and indications
stemming from its research and development efforts, Axcan believes that these
will also significantly contribute to the increase in funds provided by
operations.

Earnings coverage

The earnings coverage ratios are the following:

Under U.S. GAAP, for the twelve months ended March 31, 2004, our interest
requirements amounted to $5.9 million on a pro forma basis and our earnings
coverage ratio, defined as the ratio of earnings before interest and income
taxes to pro forma interest requirements, was 8.3 to one.

Under Canadian GAAP, for the twelve months ended March 31, 2004, our
interest requirements amounted to $10.3 million on a pro forma basis and our
earnings coverage ratio was 5.9 to one. The principal difference between the
earnings coverage ratios under Canadian GAAP and U.S. GAAP is attributable to
the inclusion of implicit interest of $4.4 million as required by Canadian
GAAP.

Risk Factors

Axcan is exposed to financial market risks, including changes in foreign
currency exchange rates and interest rates. Axcan does not use derivative
financial instruments for speculative or trading purposes. Axcan does not use
off-balance sheet financing or similar special purpose entities. Inflation has
not had a significant impact on Axcan's results of operations.

Foreign Currency Risk

Axcan operates internationally; however, a substantial portion of the
revenue and expense activities and capital expenditures are transacted in
US dollars. Axcan's exposure to exchange rate fluctuation is reduced because,
in general, Axcan's revenues denominated in currencies other than the
US dollar are matched by a corresponding amount of costs denominated in the
same currency. Axcan expects this matching to continue.

Interest Rate Risk

The primary objective of Axcan's investment policy is the protection of
principal. Accordingly, investments are made in high-grade government and
corporate securities with varying maturities, but typically, less than
180 days. Therefore, Axcan does not have a material exposure to interest rate
risk and a 100 basis-point adverse change in interest rates would not have a
material effect on Axcan's consolidated results of operations, financial
position or cash flows. Axcan is exposed to interest rate risk on borrowings
under the credit facilities. The credit facilities bear interest based on
LIBOR, US dollar base rate, Canadian dollar prime rate, or Canadian dollar
Bankers' Acceptances. Based on projected advances under the credit facilities,
a 100 basis-point adverse change in interest rates would not have a material
effect on Axcan's consolidated results of operations, financial position, or
cash flows.

Supply and Manufacture

Axcan depends on third parties for the supply of active ingredients and
for the manufacture of the majority of its products. Although Axcan looks to
secure alternative suppliers, Axcan may not be able to obtain the active
ingredients or products from such third parties, the active ingredients or
products may not comply with specifications, or the prices at which Axcan
purchases them may increase and Axcan may not be able to locate alternative
sources of supply in a reasonable time period, or at all. If any of these
events occur, Axcan may not be able to continue to market certain of its
products and its sales and profitability would be adversely affected.

Volatility of Share Prices

The market price of Axcan's shares is subject to volatility. Deviations
in actual financial or scientific results, as compared to expectations of
securities analysts who follow our activities can have a significant effect on
the trading price of Axcan's shares.

Forward-looking Statements

This document contains forward-looking statements, which reflect the
Company's current expectations regarding future events. These forward- looking
statements include the expected sales growth of the Company's products and the
expected increase in funds from operations resulting from the Company's
research and development expenditures. The forward- looking statements involve
risks and uncertainties. Actual events could differ materially from those
projected herein and depend on a number of factors, including the successful
and timely completion of clinical studies, the uncertainties related to the
regulatory process, commercialization of the drug or therapy after regulatory
approval is received, difficulty of predicting acceptance and demand for
pharmaceutical products, impact of competitive products and pricing, new
product development and launch, availability of raw materials, and
fluctuations in operating results. Investors should consult the Company's
ongoing quarterly filings, annual reports and 40-F filings for additional
information on risks and uncertainties relating to these forward-looking
statements. The reader is cautioned not to rely on these forward-looking
statements. The Company disclaims any obligation to update these forward-
looking statements.


    On behalf of Management
    (signed)
    Jean Vézina
    Vice President, Finance and Chief Financial Officer


/T/

    AXCAN PHARMA INC.
    Consolidated Balance Sheets
    _________________________________________________________________________
    In accordance with U.S. GAAP
    (in thousands of U.S. dollars)
                                                           March   September
                                                              31          30
                                                            2004        2003
                                                       __________  __________
                                                      (unaudited)
    ASSETS                                                     $           $

    Current assets
     Cash and cash equivalents                            34,837      37,773
     Short-term investments available for sale             4,682     133,112
     Accounts receivable                                  29,858      19,685
     Income taxes receivable                               6,564       5,294
     Inventories (Note 3)                                 28,091      20,163
     Prepaid expenses and deposits                         3,371       2,794
     Deferred income taxes                                 6,205       6,214
    _________________________________________________________________________
    Total current assets                                 113,608     225,035

    Investments                                              760       1,002
    Property, plant and equipment, net                    25,008      20,331
    Intangible assets, net (Note 4)                      410,520     265,423
    Goodwill, net                                         27,550      27,550
    Deferred debt issue expenses, net                      3,718       4,233
    Deferred income taxes                                  2,206       1,775
    _________________________________________________________________________

    Total assets                                         583,370     545,349
    _________________________________________________________________________
    _________________________________________________________________________

    LIABILITIES

    Current liabilities
      Accounts payable and accrued liabilities            47,615      43,418
      Income taxes payable                                 4,374       4,821
      Instalments on long-term debt                        1,569       1,528
      Deferred income taxes                                  753         494
    _________________________________________________________________________
    Total current liabilities                             54,311      50,261

    Long-term debt                                       128,790     129,474
    Deferred income taxes                                 37,317      34,603
    _________________________________________________________________________
    Total liabilities                                    220,418     214,338
    _________________________________________________________________________

    SHAREHOLDERS' EQUITY

    Series A preferred shares, without par value,
     shares authorized: 14,175,000; no shares issued.          -           -
    Series B preferred shares, without par value,
     shares authorized: 12,000,000; no shares issued.          -           -
    Common shares, without par value, unlimited shares
     authorized, 45,328,102 issued as at
     March 31, 2004 and 45,004,320 as at September
     30, 2003.                                           258,567     255,743
    Retained earnings                                     86,490      63,634
    Accumulated other comprehensive income                17,895      11,634
    _________________________________________________________________________
    Total shareholders' equity                           362,952     331,011
    _________________________________________________________________________
    Total liabilities and shareholders' equity           583,370     545,349
    _________________________________________________________________________
    _________________________________________________________________________

    See the accompanying notes to the Consolidated Financial Statements.
    These interim financial statements should be read in conjunction with the
    annual Consolidated Financial Statements.



    AXCAN PHARMA INC.
    Consolidated Statements of Shareholders' Equity
    _________________________________________________________________________
    In accordance with U.S. GAAP
    (in thousands of U.S. dollars, except share related data)
    (unaudited)
                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________

    Common shares (Number)
    Balance, beginning of
     period                   45,061,531  44,872,284  45,004,320  44,863,198
      Exercise of options        266,571       8,119     323,782      17,205
    _________________________________________________________________________
    Balance, end of period    45,328,102  44,880,403  45,328,102  44,880,403
    _________________________________________________________________________
    _________________________________________________________________________

                                       $           $           $           $
    Common shares
    Balance, beginning of
     period                      256,178     254,698     255,743     254,640
      Exercise of options          2,389          56       2,824         114
    _________________________________________________________________________
    Balance, end of period       258,567     254,754     258,567     254,754
    _________________________________________________________________________

    Retained earnings
    Balance, beginning of period  74,069      50,266      63,634      43,709
      Net income                  12,421       8,933      22,856      15,490
    _________________________________________________________________________
    Balance, end of period        86,490      59,199      86,490      59,199
    _________________________________________________________________________

    Accumulated other comprehensive
     income (loss)
    Balance, beginning of
     period                       20,161         605      11,634      (3,562)
      Foreign currency
       translation adjustments    (2,266)      3,610       6,261       7,777
    _________________________________________________________________________
    Balance, end of period        17,895       4,215      17,895       4,215
    _________________________________________________________________________
    Total shareholders' equity   362,952     318,168     362,952     318,168
    _________________________________________________________________________
    _________________________________________________________________________

    Comprehensive income
    Foreign currency
     translation adjustments      (2,266)      3,610       6,261       7,777
    Net income                    12,421       8,933      22,856      15,490
    _________________________________________________________________________
    Total comprehensive income    10,155      12,543      29,117      23,267
    _________________________________________________________________________
    _________________________________________________________________________

    See the accompanying notes to the Consolidated Financial Statements.
    These interim financial statements should be read in conjunction with the
    annual Consolidated Financial Statements.



    AXCAN PHARMA INC.
    Consolidated Statements of Cash Flows
    _________________________________________________________________________
    In accordance with U.S. GAAP
    (in thousands of U.S. dollars)
    (unaudited)

                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________
    Operations                         $           $           $           $
    Net income                    12,421       8,933      22,856      15,490
    Non-cash items
      Non-controlling interest         -         (49)          -        (103)
      Amortization of deferred
       debt issue expenses           258         104         516         129
      Other depreciation and
       amortization                4,196       1,998       7,919       4,036
      Loss (gain) on disposal
       of property, plant and
       equipment                     (47)          -          40           -
      Foreign currency
       fluctuation                  (120)        156        (120)        151
      Deferred income taxes        1,582        (529)      2,885       1,938
      Share in net loss of
       joint ventures                 60          33          60          88
      Changes in working capital items:
        Accounts receivable       (2,429)     (3,140)    (11,293)      4,967
        Income taxes receivable    1,241          21      (1,365)       (636)
        Inventories                  203       1,077      (8,173)      2,059
        Prepaid expenses
         and deposits                419         978        (630)       (465)
        Accounts payable and
         accrued liabilities       6,203       2,324       4,817       6,111
        Income taxes payable      (5,733)       (200)       (410)       (766)
    _________________________________________________________________________
        Cash flows from
         operating activities     18,254      11,706      17,102      32,999
    _________________________________________________________________________

    Financing
    Long-term debt                     -     125,277           -     125,413
    Repayment of long-term debt     (408)       (488)       (950)       (820)
    Issue of shares                2,389          56       2,824         114
    Deferred debt issue expenses       -      (4,500)          -      (4,500)
    _________________________________________________________________________
    Cash flows from financing
     activities                    1,981     120,345       1,874     120,207
    _________________________________________________________________________

    Investment
    Acquisition of short-term
     investments                       -        (700)          -        (700)
    Disposal of short-term
     investments                   2,030       5,992     128,390      60,740
    Disposal of investments        1,101         143       1,239         272
    Acquisition of property,
     plant and equipment          (4,151)       (721)     (6,514)     (1,012)
    Disposal of property,
     plant and equipment              52           -         378           -
    Acquisition of
     intangible assets               (14)          -    (145,604)    (71,935)
    Disposal of intangible assets      -         205           -         205
    _________________________________________________________________________
    Cash flows from
     investment activities          (982)      4,919     (22,111)    (12,430)
    _________________________________________________________________________

    Foreign exchange gain (loss)
     on cash held in foreign
     currencies                      (32)        149         199         397
    _________________________________________________________________________

    Net increase (decrease) in
     cash and cash equivalents    19,221     137,119      (2,936)    141,173
    Cash and cash equivalents,
     beginning of period          15,616      24,031      37,773      19,977
    _________________________________________________________________________
    Cash and cash equivalents,
     end of period                34,837     161,150      34,837     161,150
    _________________________________________________________________________
    _________________________________________________________________________

    Additional information
      Interest received               64         252         284         508
      Interest paid                   72          37       3,438         123
      Income taxes paid           10,421       3,147      11,373       5,522
    _________________________________________________________________________
    _________________________________________________________________________

    See the accompanying notes to the Consolidated Financial Statements.
    These interim financial statements should be read in conjunction with the
    annual Consolidated Financial Statements.



    AXCAN PHARMA INC.
    Consolidated Statements of Operations
    _________________________________________________________________________
    In accordance with U.S. GAAP
    (in thousands of U.S. dollars, except share related data)
    (unaudited)
                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________
                                       $           $           $           $

    REVENUE                       63,192      45,621     120,757      83,467
    _________________________________________________________________________

    Cost of goods sold            14,972      10,830      29,544      19,899
    Selling and administrative
     expenses                     20,043      15,877      38,410      30,507
    Research and development
     expenses                      3,991       3,252       7,924       5,354
    Depreciation and amortization  4,196       1,998       7,919       4,036
    _________________________________________________________________________
                                  43,202      31,957      83,797      59,796
    _________________________________________________________________________

    Operating income              19,990      13,664      36,960      23,671
    -------------------------------------------------------------------------

    Financial expenses             1,706         705       3,387         851
    Interest income                  (55)       (286)       (246)       (569)
    Loss on foreign currency         264          19         348         248
    _________________________________________________________________________
                                   1,915         438       3,489         530
    _________________________________________________________________________

    Income before income taxes    18,075      13,226      33,471      23,141
    Income taxes                   5,654       4,293      10,615       7,651
    _________________________________________________________________________
    NET INCOME                    12,421       8,933      22,856      15,490
    _________________________________________________________________________
    _________________________________________________________________________

    Income per common share
      Basic                         0.27        0.20        0.51        0.35
      Diluted                       0.24        0.20        0.48        0.34
    _________________________________________________________________________
    _________________________________________________________________________

    Weighted average number
     of common shares
      Basic                   45,188,011  44,878,289  45,105,013  44,872,564
      Diluted                 55,124,302  45,553,550  50,316,477  45,560,678
    _________________________________________________________________________
    _________________________________________________________________________

    See the accompanying notes to the Consolidated Financial Statements.
    These interim financial statements should be read in conjunction with the
    annual Consolidated Financial Statements.

/T/


    AXCAN PHARMA INC.
    Notes to Consolidated Financial Statements
    _________________________________________________________________________
    In accordance with U.S. GAAP
    (Amounts in the tables are stated in thousands of U.S. dollars, except
    share related data)
    (unaudited)

    1. Significant accounting policies

    The accompanying unaudited financial statements are prepared in
accordance with U.S. GAAP for interim financial statements and do not include
all the information required for complete financial statements. They are
consistent with the policies outlined in the Company's audited financial
statements for the year ended September 30, 2003. The interim financial
statements and related notes should be read in conjunction with the Company's
audited financial statements for the year ended September 30, 2003. When
necessary, the financial statements include amounts based on informed
estimates and best judgements of management. The results of operations for the
interim periods reported are not necessarily indicative of results to be
expected for the year. Consolidated financial statements prepared in U.S.
dollars and in accordance with Canadian GAAP are available to shareholders and
filed with regulatory authorities.

    2. Product acquisition

    On November 18, 2003, the Company acquired the rights to a group of
products from Aventis for a cash purchase price of $145,000,000. The acquired
products are CARAFATE and BENTYL for the U.S. market and SULCRATE, BENTYLOL
and PROCTOSEDYL for the Canadian market. On December 3, 2002, the Company
acquired the worldwide rights to the PANZYTRAT enzyme product line from
Abbott.

    During a transition period, the sellers may act as Axcan's agents for the
management of sales of these products. For the six-month period ended March,
2004, a portion of the sales of these products is still managed by the
sellers. Axcan includes in its revenue the net sales from such products less
corresponding cost of goods sold and other seller related expenses.
Consequently, although net sales of such products for the six-month period
ended March 31, 2004 were $5,315,913 ($6,108,286 in 2003), the Company only
included in its revenue an amount of $3,440,421 ($4,038,102 in 2003)
representing the net sales less cost of goods sold and other seller related
expenses.

/T/

    3. Inventories
                                                           March   September
                                                              31          30
                                                            2004        2003
                                                       __________  __________
                                                               $           $

    Raw materials and packaging material                   8,600       8,441
    Work in progress                                       1,738       1,466
    Finished goods                                        17,753      10,256
    _________________________________________________________________________
                                                          28,091      20,163
    _________________________________________________________________________
    _________________________________________________________________________


    4. Intangible assets

                                                   March 31, 2004
    _________________________________________________________________________
                                                     Accumulated
                                                Cost amortization        Net
    _________________________________________________________________________
                                                   $           $           $
    Trademarks, trademark licenses and
     manufacturing rights with a:
      Finite life                            279,632      25,890     253,742
      Indefinite life                        169,196      12,418     156,778
    _________________________________________________________________________
                                             448,828      38,308     410,520
    _________________________________________________________________________
    _________________________________________________________________________


                                               September 30, 2003
    _________________________________________________________________________
                                                     Accumulated
                                                Cost amortization        Net
    _________________________________________________________________________
                                                   $           $           $
    Trademarks, trademark licenses and
     manufacturing rights with a:
      Finite life                            111,327      19,998      91,329
      Indefinite life                        186,512      12,418     174,094
    _________________________________________________________________________
                                             297,839      32,416     265,423
    _________________________________________________________________________
    _________________________________________________________________________


    The cost of the product TAGAMET has been transferred from intangible
assets with an indefinite life to intangible assets with a finite life
following changes in the regulatory rules applicable to this product and
resulting in the modification of its useful life. The net cost of this product
as of October 1, 2003, which amounted to $21,852,859, is therefore amortized
over a 15-year period.

    5. Segmented information

    The Company considers that it operates in a single reportable field of
activity, the pharmaceutical industry, since its other activities do not
account for a significant portion of segment assets.

    The Company operates in the following geographic areas:

                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________
                                       $           $           $           $
    Revenue
      Canada
        Domestic sales             6,865       4,833      13,417       9,710
        Foreign sales                  -           -           -           -
      United States
        Domestic sales            41,958      27,650      79,769      52,860
        Foreign sales              1,363           -       1,363           -
      Europe
        Domestic sales            11,877      11,836      24,522      18,411
        Foreign sales              1,060       1,279       1,589       2,416
      Other                           69          23          97          70
    _________________________________________________________________________
                                  63,192      45,621     120,757      83,467
    _________________________________________________________________________
    _________________________________________________________________________

    Operating income (loss)
      Canada                         161      (1,385)      2,450         247
      United States               20,915      10,140      34,211      17,183
      Europe                        (680)      5,243       1,070       6,895
      Other                         (406)       (334)       (771)       (654)
    _________________________________________________________________________
                                  19,990      13,664      36,960      23,671
    _________________________________________________________________________
    _________________________________________________________________________

    Depreciation and amortization
      Canada                         471         379       1,195         740
      United States                  909         943       1,945       1,891
      Europe                       2,522         441       4,191         892
      Other                          294         235         588         513
    _________________________________________________________________________
                                   4,196       1,998       7,919       4,036
    _________________________________________________________________________
    _________________________________________________________________________


                                                           March   September
                                                              31          30
                                                            2004        2003
                                                       __________  __________
                                                               $           $
    Property, plant, equipment, intangible
     assets and goodwill
      Canada                                              36,642      14,622
      United States                                      131,790     133,695
      Europe                                             268,360     138,113
      Other                                               26,286      26,874
    _________________________________________________________________________
                                                         463,078     313,304
    _________________________________________________________________________
    _________________________________________________________________________


    6. Financial information included in the consolidated statement of
       operations

    a) Financial expenses

                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________
                                       $           $           $           $

    Interest on long-term debt     1,347         581       2,729         673
    Bank charges                      54          20          78          49
    Financing fees                    47           -          64           -
    Amortization of deferred debt
     issue expenses                  258         104         516         129
    _________________________________________________________________________
                                   1,706         705       3,387         851
    _________________________________________________________________________
    _________________________________________________________________________


    b) Other information

                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________
                                       $           $           $           $

    Non-controlling interest           -         (49)          -        (103)
    Rental expenses                  274         307         548         614
    Depreciation of property,
     plant and equipment             789         843       2,039       1,697
    Amortization of
     intangible assets             3,407       1,155       5,880       2,339
    Share in net loss of
     joint ventures                   60          33          60          88


    c) Income per common share

    The following tables reconcile the numerators and the denominators of the
basic and diluted income per common share computations:

                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________
                                       $           $           $           $
    Net income
      Basic                       12,421       8,933      22,856      15,490
      Interests on convertible
       subordinated notes          1,071           -       1,071           -
    _________________________________________________________________________

    Net income on a
     diluted basis                13,492       8,933      23,927      15,490
    _________________________________________________________________________
    _________________________________________________________________________


                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________

    Weighted average number
     of common shares
     outstanding              45,188,011  44,878,289  45,105,013  44,872,564
    Effect of dilutive
     stock options             1,012,178     433,130     773,790     448,306
    Effect of dilutive
     purchase price                    -     242,131           -     239,808
    Effect of dilutive
     convertible subordinated
     notes                     8,924,113           -   4,437,674           -
    _________________________________________________________________________
    Adjusted weighted average
     number of common shares
     outstanding              55,124,302  45,553,550  50,316,477  45,560,678
    _________________________________________________________________________
    _________________________________________________________________________
    Number of common shares
     outstanding as at
     April 30, 2004                                          45,332,742
    _________________________________________________________________________
    _________________________________________________________________________


    Options to purchase 404,950 and 1,242,600 common shares were outstanding
as at March 31, 2004 and 2003 respectively but were not included in the
computation of diluted income per share for the six-month periods ended
March 31, 2004 and 2003 respectively because the exercise price of the options
was greater than the average market price of the common shares.

    7. Stock options

    The estimated fair value of stock options at the time of grant using the
Black-Scholes option pricing model was as follows:

                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________

    Fair value per option          $8.71       $5.48       $6.34       $5.17
    Assumptions used in Black-Scholes
     option pricing model
      Expected volatility             44%         45%         44%         45%
      Risk-free interest rate       3.67%       4.50%       4.28%       4.46%
      Expected option life (years)     6           6           6           6
      Expected dividend                -           -           -           -


    The Company's net income, basic income per share and diluted income per
share would have been on a pro-forma basis as follows:

                                         For the three-month period
                                               ended March 31
                             ________________________________________________
                                       2004                    2003
                             ________________________  ______________________
                                      As                      As
                                reported   Pro-forma    reported   Pro-forma
                             ____________  __________  __________  __________
                                       $           $           $           $
    Net income                    12,421      11,282       8,933       8,090
    Basic income per share          0.27        0.25        0.20        0.18
    Diluted income per share        0.24        0.22        0.20        0.18


                                          For the six-month period
                                               ended March 31
                             ________________________________________________
                                       2004                    2003
                             ________________________  ______________________
                                      As                      As
                                reported   Pro-forma    reported   Pro-forma
                             ____________  __________  __________  __________
                                       $           $           $           $
    Net income                    22,856      20,747      15,490      13,868
    Basic income per share          0.51        0.46        0.35        0.31
    Diluted income per share        0.48        0.43        0.34        0.30


    8. Summary of Differences Between Generally Accepted Accounting
       Principles in the United States and in Canada

    The consolidated interim financial statements have been prepared in
accordance with U.S. GAAP which, in the case of the Company, conform in all
materials respects with Canadian GAAP, except as set forth below:


                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________
    Operations adjustments:            $           $           $           $

    Net income in accordance
     with U.S. GAAP               12,421       8,933      22,856      15,490
    Implicit interest on
     convertible debt             (1,023)       (294)     (2,049)       (294)
    Amortization of new product
     acquisition costs               (13)        (13)        (26)        (26)
    Income tax impact of the
     above adjustments                 5           5          10          10
    _________________________________________________________________________
    Net earnings in accordance
     with Canadian GAAP           11,390       8,631      20,791      15,180
    _________________________________________________________________________
    _________________________________________________________________________

    Earnings per share in accordance
     with Canadian GAAP
      Basic                         0.25        0.19        0.46        0.34
      Diluted                       0.24        0.19        0.45        0.33




                                      March 31, 2004      September 30, 2003
                             ________________________  ______________________
                                     U.S.   Canadian         U.S.   Canadian
                                    GAAP        GAAP        GAAP        GAAP
                             ____________  __________  __________  __________
    Balance sheet adjustments:         $           $           $           $

    Current assets               113,608     113,654     225,035     225,203
    Investments                      760         471       1,002         775
    Property, plant and equipment 25,008      25,025      20,331      20,351
    Intangible assets            410,520     422,908     265,423     277,837
    Goodwill                      27,550      29,342      27,550      29,342
    Deferred debt issue expenses   3,718       3,718       4,233       4,233
    Deferred income tax asset      2,206       2,239       1,775       1,775
    Current liabilities           54,311      54,515      50,261      50,634
    Long-term debt               128,790     108,893     129,474     107,527
    Deferred income tax
     liability                    37,317      38,446      34,603      35,742
    Shareholders' equity
      Equity component of
       convertible debt                -      24,239           -      24,239
      Capital stock              258,567     265,212     255,743     262,388
      Retained earnings           86,490      84,002      63,634      63,211
      Accumulated foreign currency
       translation adjustments    17,895      22,050      11,634      15,775



    AXCAN PHARMA INC.
    Consolidated Balance Sheets
    _________________________________________________________________________
    In accordance with Canadian GAAP
    (in thousands of U.S. dollars)
                                                           March   September
                                                              31          30
                                                            2004        2003
                                                       __________  __________
    ASSETS                                            (unaudited)
                                                               $           $
    Current assets
      Cash and cash equivalents                           34,877      37,886
      Short-term investments                               4,682     133,112
      Accounts receivable                                 29,828      19,665
      Income taxes receivable                              6,564       5,315
      Inventories (Note 3)                                28,091      20,163
      Prepaid expenses and deposits                        3,407       2,848
      Future income taxes                                  6,205       6,214
    _________________________________________________________________________
    Total current assets                                 113,654     225,203

    Investments                                              471         775
    Property, plant and equipment, net                    25,025      20,351
    Intangible assets, net (Note 4)                      422,908     277,837
    Goodwill, net                                         29,342      29,342
    Deferred debt issue expenses, net                      3,718       4,233
    Future income taxes                                    2,239       1,775
    _________________________________________________________________________
                                                         597,357     559,516
    _________________________________________________________________________
    _________________________________________________________________________

    LIABILITIES

    Current liabilities
      Accounts payable and accrued liabilities            47,819      43,791
      Income taxes payable                                 4,374       4,821
      Instalments on long-term debt                        1,569       1,528
      Future income taxes                                    753         494
    _________________________________________________________________________
    Total current liabilities                             54,515      50,634

    Long-term debt                                       108,893     107,527
    Future income taxes                                   38,446      35,742
    _________________________________________________________________________
                                                         201,854     193,903
    _________________________________________________________________________

    SHAREHOLDERS' EQUITY

    Equity component of convertible debt (Note 5)         24,239      24,239
    Capital stock                                        265,212     262,388
    Retained earnings                                     84,002      63,211
    Accumulated foreign currency translation adjustments  22,050      15,775
    _________________________________________________________________________
                                                         395,503     365,613
    _________________________________________________________________________
                                                         597,357     559,516
    _________________________________________________________________________
    _________________________________________________________________________

    See the accompanying notes to the Consolidated Financial Statements.
    These interim financial statements should be read in conjunction with the
    annual Consolidated Financial Statements.


    AXCAN PHARMA INC.
    Consolidated Cash Flows
    _________________________________________________________________________
    In accordance with Canadian GAAP
    (in thousands of U.S. dollars)
    (unaudited)
                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________
                                       $           $           $           $
    Operations
    Net earnings                  11,390       8,631      20,791      15,180
    Non-cash items
      Implicit interest on
       convertible debt            1,024         294       2,050         294
      Non-controlling interest         -         (49)          -        (103)
      Amortization of deferred
       debt issue expenses           258         104         516         129
      Other depreciation and
       amortization                4,213       2,013       7,949       4,067
      Loss (gain) on disposal of
       property, plant and equipment (47)          -          40           -
      Foreign currency fluctuation  (120)        156        (120)        151
      Future income taxes          1,577        (534)      2,875       1,928
      Changes in working
       capital items:
        Accounts receivable       (2,317)     (3,148)    (11,181)      5,052
        Income taxes receivable    1,262          29      (1,344)       (628)
        Inventories                  203       1,077      (8,173)      2,065
        Prepaid expenses
         and deposits                437         978        (612)       (463)
        Accounts payable and
         accrued liabilities       6,034       2,361       4,648       6,095
        Income taxes payable      (5,733)       (210)       (410)       (766)
    _________________________________________________________________________
    Cash flows from operating
     activities                   18,181      11,702      17,029      33,001
    _________________________________________________________________________

    Financing
      Long-term debt                   -     101,038           -     101,174
      Repayment of long-term debt   (408)       (488)       (950)       (820)
      Equity component of
       convertible debt                -      24,239           -      24,239
      Issue of shares              2,389          56       2,824         114
      Deferred debt issue
       expenses                        -      (4,500)          -      (4,500)
    _________________________________________________________________________
    Cash flows from financing
     activities                    1,981     120,345       1,874     120,207
    _________________________________________________________________________

    Investment
      Acquisition of short-term
       investments                     -        (700)          -        (700)
      Disposal of short-term
       investments                 2,030       5,992     128,390      60,740
      Disposal of investments      1,101         143       1,239         272
      Acquisition of property,
       plant and equipment        (4,151)       (721)     (6,514)     (1,012)
      Disposal of property,
       plant and equipment            52           -         378           -
      Acquisition of intangible
       assets                        (14)          -    (145,604)    (71,935)
      Disposal of intangible assets    -         205           -         205
    _________________________________________________________________________
    Cash flows from investment
     activities                     (982)      4,919     (22,111)    (12,430)
    _________________________________________________________________________

    Foreign exchange gain (loss)
     on cash held in foreign
     currencies                      (32)        149         199         397
    _________________________________________________________________________

    Net increase (decrease) in
     cash and cash equivalents    19,148     137,115      (3,009)    141,175
    Cash and cash equivalents,
     beginning of period          15,729      24,065      37,886      20,005
    _________________________________________________________________________

    Cash and cash equivalents,
     end of period                34,877     161,180      34,877     161,180
    _________________________________________________________________________
    _________________________________________________________________________

    Additional information
      Interest received               64         252         284         508
      Interest paid                   72          37       3,438         123
      Income taxes paid           10,421       3,147      11,373       5,522
    _________________________________________________________________________
    _________________________________________________________________________

    See the accompanying notes to the Consolidated Financial Statements.
    These interim financial statements should be read in conjunction with the
    annual Consolidated Financial Statements.



    AXCAN PHARMA INC.
    Consolidated Earnings
    _________________________________________________________________________
    In accordance with Canadian GAAP
    (in thousands of U.S. dollars, except share related data)
    (unaudited)
                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________
                                       $           $           $           $

    REVENUE                       63,213      45,892     120,928      83,922
    _________________________________________________________________________

    Cost of goods sold            14,972      10,833      29,544      19,908
    Selling and administrative
     expenses                     20,021      16,140      38,538      30,927
    Research and development
     expenses                      3,931       3,078       7,646       4,940
    Depreciation and amortization  4,213       2,013       7,949       4,067
    _________________________________________________________________________
                                  43,137      32,064      83,677      59,842
    _________________________________________________________________________

    Operating income              20,076      13,828      37,251      24,080
    -------------------------------------------------------------------------

    Financial expenses             2,736       1,001       5,443       1,173
    Interest income                  (58)       (286)       (249)       (569)
    Loss on foreign currency         264          19         348         227
    _________________________________________________________________________
                                   2,942         734       5,542         831
    _________________________________________________________________________

    Earnings before income taxes  17,134      13,094      31,709      23,249
    Income taxes                   5,744       4,463      10,918       8,069
    _________________________________________________________________________
    NET EARNINGS                  11,390       8,631      20,791      15,180
    _________________________________________________________________________
    _________________________________________________________________________

    Earnings per common share
      Basic                         0.25        0.19        0.46        0.34
      Diluted                       0.24        0.19        0.45        0.33
    _________________________________________________________________________
    _________________________________________________________________________

    Weighted average number
     of common shares
      Basic                   45,188,011  44,878,289  45,105,013  44,872,564
      Diluted                 55,124,302  45,553,550  50,316,477  45,560,678
    _________________________________________________________________________
    _________________________________________________________________________



    AXCAN PHARMA INC.
    Consolidated Retained Earnings
    _________________________________________________________________________
    In accordance with Canadian GAAP
    (in thousands of U.S. dollars)
    (unaudited)                         For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________
                                       $           $           $           $
    Balance, beginning of period  72,612      41,143      63,211      34,594
    Net earnings                  11,390       8,631      20,791      15,180
    _________________________________________________________________________
    Balance, end of period        84,002      49,774      84,002      49,774
    _________________________________________________________________________
    _________________________________________________________________________

    See the accompanying notes to the Consolidated Financial Statements.
    These interim financial statements should be read in conjunction with the
    annual Consolidated Financial Statements.

/T/

    AXCAN PHARMA INC.
    Notes to Consolidated Financial Statements
    _________________________________________________________________________
    In accordance with Canadian GAAP
    (Amounts in the tables are stated in thousands of U.S. dollars, except
    share related data)
    (unaudited)

    1. Significant accounting policies

    The accompanying unaudited financial statements are prepared in
accordance with Canadian GAAP for interim financial statements and do not
include all the information required for complete financial statements. They
are consistent with the policies outlined in the Company's audited financial
statements for the year ended September 30, 2003. The interim financial
statements and related notes should be read in conjunction with the Company's
audited financial statements for the year ended September 30, 2003. When
necessary, the financial statements include amounts based on informed
estimates and best judgements of management. The results of operations for the
interim periods reported are not necessarily indicative of results to be
expected for the year. Consolidated financial statements prepared in U.S.
dollars and in accordance with U.S. GAAP are available to shareholders and
filed with regulatory authorities.

    2. Product acquisition

    On November 18, 2003, the Company acquired the rights to a group of
products from Aventis for a cash purchase price of $145,000,000. The acquired
products are CARAFATE and BENTYL for the U.S. market and SULCRATE, BENTYLOL
and PROCTOSEDYL for the Canadian market. On December 3, 2002, the Company
acquired the worldwide rights to PANZYTRAT enzyme product line from Abbott.
    During a transition period, the sellers may act as Axcan's agents for the
management of sales of these products. For the six-month period ended March
31, 2004, a portion of the sales of these products is still managed by the
sellers. Axcan includes in its revenue the net sales from such products less
corresponding cost of goods sold and other seller related expenses.
Consequently, although net sales of such products for the six-month period
ended March 31, 2004 were $5,315,913 ($6,108,286 in 2003), the Company only
included in its revenue an amount of $3,440,421 ($4,038,102 in 2003)
representing the net sales less cost of goods sold and other seller related
expenses.

/T/

    3. Inventories
                                                           March   September
                                                              31          30
                                                            2004        2003
                                                       __________  __________
                                                               $           $

    Raw materials and packaging material                   8,600       8,441
    Work in progress                                       1,738       1,466
    Finished goods                                        17,753      10,256
    _________________________________________________________________________
                                                          28,091      20,163
    _________________________________________________________________________
    _________________________________________________________________________


    4. Intangible assets
                                                   March 31, 2004
    _________________________________________________________________________
                                                     Accumulated
                                                Cost amortization        Net
    _________________________________________________________________________
                                                   $           $           $
    Trademarks, trademark licenses and
     manufacturing rights with a:
      Finite life                            292,462      26,332     266,130
      Indefinite life                        169,196      12,418     156,778
    _________________________________________________________________________
                                             461,658      38,750     422,908
    _________________________________________________________________________
    _________________________________________________________________________


                                                 September 30, 2003
    _________________________________________________________________________
                                                     Accumulated
                                                Cost amortization        Net
    _________________________________________________________________________
                                                   $           $           $
    Trademarks, trademark licenses and
     manufacturing rights with a:
      Finite life                            124,157      20,414     103,743
      Indefinite life                        186,512      12,418     174,094
    _________________________________________________________________________
                                             310,669      32,832     277,837
    _________________________________________________________________________
    _________________________________________________________________________


    The cost of the product TAGAMET has been transferred from intangible
assets with an indefinite life to intangible assets with a finite life
following changes in the regulatory rules applicable to this product and
resulting in the modification of its useful life. The net cost of this product
as of October 1, 2003, which amounted to $21,852,859, is therefore amortized
over a 15-year period.

    5. Equity component of convertible debt

    The Company issued convertible subordinated notes for $125,000,000 on
March 5, 2003. According to the features of this debt, an amount of
$24,238,899, representing the estimated value of the right of conversion, was
included in the shareholders' equity as equity component of convertible debt
and an amount of $100,761,101 was included in the long-term debt as liability
component of convertible debt. As of September 30, 2003, implicit interest of
9.17% and totalling $2,292,478 was accounted for and added to the liability
component. For the six-month period ended March 31, 2004, implicit interest in
the amount of $2,049,057 was accounted for and added to the liability
component.

    6. Segmented information

    The Company considers that it operates in a single reportable field of
activity, the pharmaceutical industry, since its other activities do not
account for a significant portion of segment assets.

    The Company operates in the following geographic areas:

                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________
                                       $           $           $           $
    Revenue
      Canada
        Domestic sales             6,865       4,833      13,417       9,710
        Foreign sales                  -           -           -           -
      United States
        Domestic sales            41,958      27,650      79,769      52,860
        Foreign sales              1,363           -       1,363           -
      Europe
        Domestic sales            11,898      12,107      24,693      18,866
        Foreign sales              1,060       1,279       1,589       2,416
      Other                           69          23          97          70
    _________________________________________________________________________
                                  63,213      45,892     120,928      83,922
    _________________________________________________________________________
    _________________________________________________________________________

    Operating income (loss)
      Canada                         335      (1,210)      2,842         665
      United States               20,902      10,127      34,185      17,157
      Europe                        (755)      5,245         995       6,912
      Other                         (406)       (334)       (771)       (654)
    _________________________________________________________________________
                                  20,076      13,828      37,251      24,080
    _________________________________________________________________________
    _________________________________________________________________________

    Depreciation and amortization
      Canada                         471         379       1,195         740
      United States                  922         956       1,971       1,917
      Europe                       2,526         443       4,195         897
      Other                          294         235         588         513
    _________________________________________________________________________
                                   4,213       2,013       7,949       4,067
    _________________________________________________________________________
    _________________________________________________________________________

                                                           March   September
                                                              31          30
                                                            2004        2003
                                                       __________  __________
    Property, plant, equipment, intangible                     $           $
    assets and goodwill
      Canada                                              40,920      19,311
      United States                                      132,193     133,695
      Europe                                             268,775     138,530
      Other                                               35,387      35,994
    _________________________________________________________________________
                                                         477,275     327,530
    _________________________________________________________________________
    _________________________________________________________________________


    7. Financial information included in the consolidated statement of
       earnings

    a) Financial expenses

                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________
                                       $           $           $           $

    Interest on long-term debt     2,370         875       4,778         988
    Bank charges                      61          22          85          56
    Financing fees                    47           -          64           -
    Amortization of deferred debt
     issue expenses                  258         104         516         129
    _________________________________________________________________________
                                   2,736       1,001       5,443       1,173
    _________________________________________________________________________
    _________________________________________________________________________


    b) Other information

                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________
                                       $           $           $           $

    Non-controlling interest           -         (49)          -        (103)
    Rental expenses                  274         307         548         614
    Depreciation of property,
     plant and equipment             793         845       2,043       1,702
    Amortization of
     intangible assets             3,420       1,168       5,906       2,365
    Investment tax credits
     applied against research
     and development expenses        104         175         322         418


    c) Earnings per common share

    The following tables reconcile the numerators and the denominators of the
basic and diluted earnings per common share computations:

                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________
    Net earnings                       $           $           $           $

      Basic                       11,390       8,631      20,791      15,180
      Interests on convertible
       subordinated notes          2,024           -       2,024           -
    _________________________________________________________________________

    Net earnings on a diluted
     basis                        13,414       8,631      22,815      15,180
    _________________________________________________________________________
    _________________________________________________________________________


                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________
    Weighted average number
     of common shares
     outstanding              45,188,011  44,878,289  45,105,013  44,872,564
    Effect of dilutive
     stock options             1,012,178     433,130     773,790     448,306
    Effect of dilutive
     purchase price                    -     242,131           -     239,808
    Effect of dilutive
     convertible subordinated
     notes                     8,924,113           -   4,437,674           -
    _________________________________________________________________________
    Adjusted weighted average
     number of common shares
     outstanding              55,124,302  45,553,550  50,316,477  45,560,678
    _________________________________________________________________________
    _________________________________________________________________________
    Number of common shares
     outstanding at the end
     of the period                                    45,328,102  44,880,403
    _________________________________________________________________________
    _________________________________________________________________________
    Number of common shares
     outstanding as at April 30, 2004                        45,332,742
    _________________________________________________________________________
    _________________________________________________________________________

    Options to purchase 404,950 and 1,242,600 common shares were outstanding
as at March 31, 2004 and 2003 respectively but were not included in the
computation of diluted earnings per share for the six-month periods ended
March 31, 2004 and 2003 respectively because the exercise price of the options
was greater than the average market price of the common shares.

    8. Stock options

    The estimated fair value of stock options at the time of grant using the
Black-Scholes option pricing model was as follows:

                                        For the                 For the
                                  three-month period        six-month period
                                     ended March 31          ended March 31
                             ________________________________________________
                                    2004        2003        2004        2003
                             ____________  __________  __________  __________

    Fair value per option          $8.71       $5.48       $6.34       $5.17
    Assumptions used in Black-Scholes
     option pricing model
      Expected volatility             44%         45%         44%         45%
      Risk-free interest rate       3.67%       4.50%       4.28%       4.46%
      Expected option life (years)     6           6           6           6
      Expected dividend                -           -           -           -


    The Company's net earnings, basic earnings per share and diluted earnings
per share would have been reduced on a pro-forma basis as follows:

                                         For the three-month period
                                               ended March 31
                             ________________________________________________
                                       2004                    2003
                             ________________________  ______________________
                                      As                      As
                                reported   Pro-forma    reported   Pro-forma
                             ____________  __________  __________  __________
                                       $           $           $           $

    Net earnings                  11,390      10,251       8,631       7,788
    Basic earnings per share        0.25        0.23        0.19        0.17
    Diluted earnings per share      0.24        0.22        0.19        0.17


                                          For the six-month period
                                               ended March 31
                             ________________________________________________
                                       2004                    2003
                             ________________________  ______________________
                                      As                      As
                                reported   Pro-forma    reported   Pro-forma
                             ____________  __________  __________  __________
                                       $           $           $           $

    Net earnings                  20,791      18,682      15,180      13,558
    Basic earnings per share        0.46        0.41        0.34        0.30
    Diluted earnings per share      0.45        0.41        0.33        0.30


/T/


David W. Mims
Executive Vice President and 
Chief Operating Officer
Axcan Pharma Inc.
(205) 991-8085, ext. 3223
Julie Thibodeau
Manager, Investor Relations
Axcan Pharma Inc.
(450) 467-2600, ext. 2062
www.axcan.com
Source: AXCAN PHARMA INC.