Labopharm Reports Results for Fourth Quarter and Fiscal Year 2009

- Company Preparing for Q3 2010 U.S. Launch of OLEPTRO(TM) -

LAVAL, QC, Feb. 25 /CNW/ - Labopharm Inc. (TSX: DDS; NASDAQ: DDSS) today reported its financial results for the fourth quarter and fiscal year ended December 31, 2009. All figures are in Canadian dollars unless otherwise stated.

"On February 2, Labopharm realized an important milestone - the FDA's approval of our once-daily antidepressant, OLEPTRO(TM), for the U.S. market," said James R. Howard-Tripp, President and Chief Executive Officer, Labopharm Inc.

Labopharm expects to launch OLEPTRO(TM) in the third quarter of 2010. The Company is focused on securing a marketing partnership that would allow Labopharm to participate in OLEPTRO(TM)'s marketing and sales effort. Labopharm's recently completed equity offering allows the Company to continue to prepare for the commercial launch of OLEPTRO(TM) in parallel with its partnering discussions.

"We have invested a considerable amount of time and effort to understand our physician, patient and payor audiences, are in the process of finalizing a commercial strategy, including positioning, market access and distribution, and are pleased with the preliminary indications regarding our payor status," added Mr. Howard-Tripp.

Financial Summary

Revenue from sales of the Company's once-daily tramadol product for the fourth quarter of fiscal 2009 increased to $4.7 million from $3.3 million for the fourth quarter of fiscal 2008 and was composed of product sales outside of the U.S. of $4.5 million and product sales in the U.S. of $0.2 million. Total revenue for the fourth quarter of fiscal 2009 was $6.7 million compared with $4.4 million for the fourth quarter of fiscal 2008.

Gross margin for sales outside of the U.S. for the fourth quarter of fiscal 2009 was 55% compared with 56% for the fourth quarter of fiscal 2008. Research and development expenses, net of research and development tax credits, for the fourth quarter of fiscal 2009 were $2.6 million compared with $5.2 million for the fourth quarter of fiscal 2008. Selling, general and administrative expenses for the fourth quarter of fiscal 2009 were $5.2 million compared with $10.6 million for the fourth quarter of fiscal 2008 and included an accrual of $1.2 million in 2009 compared to $4.8 million in 2008, for the Company's share of litigation costs for patent enforcement related to its once-daily tramadol product in the U.S. Net loss for the fourth quarter of fiscal 2009 was $6.4 million, or $0.11 per share, compared with $14.6 million, or $0.26 per share, for the fourth quarter of fiscal 2008.

Other Key Developments

OLEPTRO(TM) (Antidepressant)

Awaiting Canadian Regulatory Approval - Labopharm's New Drug Submission for OLEPTRO(TM) is currently under regulatory review in Canada with an anticipated action date of August 4, 2010.

Twice-Daily Tramadol-Acetaminophen Formulation

Initiated Regulatory Approval Process in Europe - Labopharm initiated the regulatory approval process for its twice-daily tramadol-acetaminophen formulation for a number of European countries under the Decentralized Procedure (DCP), which provides an efficient mechanism that allows a company to simultaneously pursue regulatory approval for a medicinal product in multiple jurisdictions in Europe. The countries for which the DCP has been initiated represent more than 25% of the European market for tramadol-acetaminophen products.

Once-Daily Tramadol

Global In-Market Sales Continue to Grow - In-market sales (in U.S. dollars) of Labopharm's product (that is, sales of Labopharm's product by its licensing and distribution partners to end users) for the 12-months ended September 30, 2009 grew by 63% compared to the comparable period of 2008.

Tridural is Canada's Best-Selling Once-Daily Tramadol Product for 2009 - Labopharm's product (marketed under the brand name Tridural(TM) in Canada) was the best-selling once-daily tramadol product in Canada for 2009.

Abuse-Misuse-Deterrent Platform

Initiated Clinical Development Program - Labopharm initiated the clinical program for its first product, an abuse- and misuse-deterrent formulation of a widely prescribed combination opioid pain product.

Financial Results

Three-Month Period Ended December 31, 2009

Revenue from product sales in all territories for the fourth quarter of fiscal 2009 increased to $4.7 million from $3.3 million for the fourth quarter of fiscal 2008. Revenue from product sales to territories other than the U.S. was $4.5 million compared with $3.3 million for the fourth quarter of fiscal 2008. The increase was the result of both higher sales volumes and a higher average selling price in the fourth quarter of 2009. Total revenue for the fourth quarter of fiscal 2009 was $6.7 million compared with $4.4 million for the fourth quarter of fiscal 2008.

Under its licensing and distribution agreement with Purdue Pharma Products L.P. for RYZOLT(TM) in the United States, Labopharm is currently entitled to royalty payments of 20% of Purdue's net sales of the product. Royalty revenue recorded on sales of RYZOLT(TM) in the U.S., which is recognized for accounting purposes upon dispensing of the product to the patient based on third-party prescription data (the "sell-through" method), was $0.6 million for the fourth quarter of 2009.

Labopharm supplies finished packaged RYZOLT(TM) product at cost to Purdue, for which the Company records revenue from product sales that generate essentially no gross margin. As a result, gross margin figures discussed below exclude sales and cost of goods sold for product sold in the U.S. to provide a more meaningful understanding of those figures. Gross margin (as a percentage of revenue from product sales) for territories outside the U.S. for the fourth quarter of fiscal 2009 was 55% compared with 56% for the fourth quarter of fiscal 2008.

Licensing revenue for the fourth quarter of fiscal 2009 was $1.2 million and represented a portion of licensing payments received from the Company's licensing and distribution partners for its once-daily tramadol product and twice-daily tramadol-acetaminophen formulation. Licensing revenue for the fourth quarter of fiscal 2008 was $1.2 million.

Research and development expenses, before research and development tax credits, for the fourth quarter of fiscal 2009 were $3.0 million compared with $4.2 million for the fourth quarter of fiscal 2008. The decrease was primarily the result of lower clinical trial costs in the fourth quarter of fiscal 2009. Research and development tax credits for the fourth quarter of fiscal 2009 were $0.4 million compared with negative $1.0 million in the fourth quarter of 2008. Negative R&D tax credits for the fourth quarter of 2008 were the result of a reversal due to a change in tax planning strategy in 2008.

Selling, general and administrative expenses for the fourth quarter of fiscal 2009 were $5.2 million compared with $10.6 million for the fourth quarter of fiscal 2008. The decrease is primarily the result of lower accruals for the Company's share of litigation costs incurred by Purdue to enforce certain of Purdue's U.S. patents related to Labopharm's once-daily tramadol product, which were $1.2 million for the fourth quarter of 2009 compared with $4.8 million for the fourth quarter of 2008. The Company also incurred a $0.9 million restructuring charge during the fourth quarter of 2009 as a result of the reduction in workforce announced in November 2009.

Net loss for the fourth quarter of fiscal 2009 was $6.4 million, or $0.11 per share, compared with $14.6 million, or $0.26 per share, for the fourth quarter of fiscal 2008.

Cash, cash equivalents and marketable securities as at December 31, 2009 were $24.5 million compared with $23.8 million as at September 30, 2009. During the fourth quarter of fiscal 2009, the Company received a 4.0 million Euros (CAD$6.2 million) payment under its distribution and supply agreement with Grunenthal GmbH. Subsequent to quarter end, the Company completed a draw down under its standby equity distribution agreement (SEDA) and an underwritten public offering of units that, combined, generated net proceeds of approximately US$21.9 million (CAD$22.9 million).

Twelve-Month Period Ended December 31, 2009

Revenue for fiscal 2009 was $24.6 million compared with $22.0 million for fiscal 2008. Revenue from product sales in all territories for fiscal 2009 increased to $18.5 million from $13.2 million for fiscal 2008. Revenue from product sales to territories other than the U.S. increased to $15.8 million from $13.2 for fiscal 2008. The increase in product sales to territories other than the U.S. is primarily the result of a higher average selling price per tablet in 2009 due to more favourable country and product dosage strength mixes. Product sales to the U.S. were $2.7 million. Royalty revenue recorded on U.S. sales was $1.0 million.

Gross margin (as a percentage of revenue from product sales) for territories outside the U.S. for fiscal 2009 was 62% compared with 56% for fiscal 2008. The increase is primarily the result of higher average selling prices per tablet during fiscal 2009.

Licensing revenue for fiscal 2009 was $4.9 million and represented a portion of licensing payments received from the Company's licensing and distribution partners for its once-daily tramadol product and twice-daily tramadol-acetaminophen formulation. Licensing revenue for fiscal 2008 was $8.9 million, including the non-recurring licensing revenue of $4.4 million related to the Company's reacquisition of the rights to its once-daily tramadol product for the United Kingdom.

Net loss for fiscal 2009 was $26.1 million, or $0.46 per share, compared with $40.6 million, or $0.72 per share, for fiscal 2008. The decrease in net loss is primarily the result of lower research and development costs, a higher foreign exchange gain and the absence of an impairment loss, which were partially offset by lower interest income, higher financial expenses and the restructuring charge incurred in fiscal 2009.

Conference Call

Labopharm will host a conference call today (Thursday, February 25, 2010) at 8:30 a.m. ET to discuss its 2009 fourth quarter and year end results. To access the conference call by telephone, dial 647-427-7450 or 1-888-231-8191. Please connect approximately five minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until midnight on Thursday, March 4, 2010. To access the archived conference call, dial 416-849-0833 or 1-800-642-1687 and enter the reservation number 54748406 followed by the number sign. A live audio webcast of the conference call will be available at www.labopharm.com. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above web site for 30 days.

About Labopharm Inc.

Headquartered in Laval, Canada with US offices in Princeton, New Jersey, Labopharm is an emerging leader in optimizing the performance of existing small molecule drugs using its proprietary controlled-release technologies. The Company's lead product, a unique once-daily formulation of tramadol, is now available in 17 countries around the world, including the U.S., Canada, major European markets and Australia. Its second product, OLEPTRO(TM), a novel formulation of trazodone for the treatment of major depressive disorder in adults, has received regulatory approval in the U.S. and is under regulatory review in Canada. Labopharm has initiated the European regulatory approval process for its third product, a twice-daily formulation of tramadol-acetaminophen. The Company also has a pipeline of follow-on products in both pre-clinical and clinical development. Labopharm's vision is to become an integrated, international, specialty pharmaceutical company with the capability to internally develop and commercialize its own products. For more information, please visit www.labopharm.com.

This press release contains forward-looking statements, including statements concerning the market opportunity for OLEPTRO(TM), statements concerning partnering discussions and commercialization plan for OLEPTRO(TM), and statements concerning the Company's pipeline of product candidates, which reflect the Company's current expectations regarding future events. These forward-looking statements involve risks and uncertainties, many of which are beyond the Company's control. Actual events could differ materially from those projected herein and depend on a number of risks and uncertainties, including risks related to the Company's ability to complete a partnering transaction and the terms of any such collaboration, if any, risks related to the market acceptance of the Company's products and the speed of adoption by clinicians, risks related to intellectual property protection and potential infringement of third-party rights, risks related to research and development of pharmaceutical products and regulatory approvals, and risks associated with intense competition in the pharmaceutical industry generally. For additional disclosure regarding these and other risks faced by Labopharm Inc., see the disclosure contained in its public filings in the U.S. with the Securities and Exchange Commission (SEC) and in Canada with the Canadian Securities Administrators (CSA), available on the Investor Relations section of the Company's website at www.labopharm.com and on the SEC's website at www.sec.gov and on the CSA's website at www.sedar.com. Investors are cautioned not to place undue reliance on these forward-looking statements. Unless required by law, the Company undertakes no obligation to update or revise the information contained in this press release, whether as a result of new information, future events, or circumstances or otherwise.

RYZOLT(TM) is a trademark of Purdue Pharma Products L.P.

OLEPTRO(TM) is a trademark of Labopharm Inc.

CONTRAMID(R) is a registered trademark of Labopharm Inc.

    
    Labopharm Inc.
    CONSOLIDATED BALANCE SHEETS
    (Thousands of Canadian dollars)

    As at December 31,                                      2009        2008
                                                                   (Restated)
                                                               $           $
    -------------------------------------------------------------------------

    ASSETS
    Current
    Cash and cash equivalents                             23,650       8,373
    Marketable securities                                    854      36,520
    Accounts receivable                                    4,736       3,277
    Research and development tax credits receivable        2,584       1,274
    Income taxes receivable                                  223         474
    Inventories                                            2,637       1,760
    Prepaid expenses and other assets                        701         641
    -------------------------------------------------------------------------
    Total current assets                                  35,385      52,319
    -------------------------------------------------------------------------

    Restricted long-term investments                         133         141
    Long-term investment                                   2,885       3,178
    Property, plant and equipment                          8,575       9,741
    Intangible assets                                      2,018       2,263
    Future income tax assets                                 124         145
    -------------------------------------------------------------------------
                                                          49,120      67,787
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
    Current
    Accounts payable and accrued liabilities              18,124      13,134
    Current portion of deferred revenue                    2,938       4,768
    Current portion of obligations under capital leases      309         271
    Current portion of long-term debt                      3,558       3,378
    -------------------------------------------------------------------------
    Total current liabilities                             24,929      21,551
    -------------------------------------------------------------------------

    Deferred revenue                                      14,364       9,094
    Obligations under capital leases                       5,033       5,342
    Long-term debt                                        18,939      20,265
    -------------------------------------------------------------------------
    Total liabilities                                     63,265      56,252
    -------------------------------------------------------------------------

    Shareholders' equity (deficiency)
    Capital stock
      Common shares, no par value, unlimited authorized
       shares, 57,456,364 and 56,826,063 issued as at
       December 31, 2009 and 2008, respectively          242,316     241,967
    Warrants                                                 937         751
    Contributed surplus                                   16,385      14,937
    Deficit                                             (273,625)   (247,515)
    Accumulated other comprehensive income (loss)           (158)      1,395
    -------------------------------------------------------------------------
    Total shareholders' equity (deficiency)              (14,145)     11,535
    -------------------------------------------------------------------------
                                                          49,120      67,787
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF OPERATIONS
    (Thousands of Canadian dollars, except share and per share amounts)

    For periods of :             Three months ended:    Twelve months ended:
                                 Dec. 31,    Dec. 31,    Dec. 31,    Dec. 31,
                                    2009        2008        2009        2008
                                           (Restated)              (Restated)
                                       $           $           $           $
    -------------------------------------------------------------------------

    REVENUE
    Product sales                  4,664       3,278      18,480      13,158
    Licensing                      1,238       1,155       4,902       8,856
    Royalties                        637           -         962           -
    Research and development
     collaborations                  182           -         228           -
    -------------------------------------------------------------------------
                                   6,721       4,433      24,572      22,014
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    EXPENSES
    Cost of goods sold
     (excluding amortization)      2,194       1,429       8,345       5,818
    Research and development
     expenses, net                 2,606       5,187      12,703      23,451
    Selling, general and
     administrative expenses       5,241      10,604      26,274      26,683
    Financial expenses             1,286         980       4,296       3,133
    Impairment loss on long-term
     investment                        -         200           -       1,291
    Amortization of property,
     plant and equipment and
     intangible assets               464         499       1,822       1,975
    Interest income                  (39)       (320)       (417)     (1,874)
    Foreign exchange loss (gain)     440       2,039      (3,239)      2,235
    Restructuring costs              897           -         897           -
    -------------------------------------------------------------------------
                                  13,089      20,618      50,681      62,712
    -------------------------------------------------------------------------
    Loss before income taxes      (6,368)    (16,185)    (26,109)    (40,698)
    Income tax expense (recovery)    (10)     (1,559)          1         (59)
    -------------------------------------------------------------------------
    Net loss for the period       (6,358)    (14,626)    (26,110)    (40,639)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss per share - basic
     and diluted                   (0.11)      (0.26)      (0.46)      (0.72)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number
     of common shares
     outstanding              57,428,695  56,826,063  57,123,105  56,822,506
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Thousands of Canadian dollars)

    For periods of :             Three months ended:    Twelve months ended:
                                 Dec. 31,    Dec. 31,    Dec. 31,    Dec. 31,
                                    2009        2008        2009        2008
                                           (Restated)              (Restated)
                                       $           $           $           $
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Net loss for the period       (6,358)    (14,626)    (26,110)    (40,639)
    Items not affecting cash :
      Amortization of property,
       plant and equipment           265         260       1,494       1,646
      Amortization of intangible
       assets                        199         239         328         329
      Amortization of premiums
       and discounts on
       marketable securities          20          20         110          53
      Loss on sale of property,
       plant and equipment             -           -          65           -
      Impairment loss on
       long-term investment            -         200           -       1,291
      Non-cash financial expenses    211         135         707         423
      Unrealized foreign exchange
       (gain) loss                  (636)      1,683      (2,648)      2,069
      Stock-based compensation       140         433       1,479       2,414
    -------------------------------------------------------------------------
                                  (6,159)    (11,656)    (24,575)    (32,414)
    Net change in other
     operating items               6,771       4,198       5,937      (1,708)
    -------------------------------------------------------------------------
                                     612      (7,458)    (18,638)    (34,122)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Acquisition of marketable
     securities                        -      (9,728)     (8,466)    (50,243)
    Proceeds from disposals of
     marketable securities             -       3,234       9,420       3,234
    Proceeds from maturities
     of marketable securities      9,034           -      32,639      67,019
    Acquisition of restricted
     long-term investment              -           -           -         (45)
    Acquisition of property,
     plant and equipment             (15)        (34)       (334)     (1,300)
    Acquisition of intangible
     assets                          (26)       (333)        (83)       (507)
    -------------------------------------------------------------------------
                                   8,993      (6,861)     33,176      18,158
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Repayment of obligations
     under capital leases            (72)        (65)       (271)       (203)
    Proceeds from issuance of
     common shares                    20           -         547           8
    Payment of issuance costs
     of common shares                (83)          -        (118)          -
    Proceeds from issuance of
     long-term debt                    -       5,647       2,549       5,647
    Proceeds from issuance of
     warrants                          -         190           -         190
    Financing costs incurred           -           -        (362)       (118)
    -------------------------------------------------------------------------
                                    (135)      5,772       2,345       5,524
    -------------------------------------------------------------------------

    Foreign exchange gain (loss)
     on cash held in foreign
     currencies                     (348)      1,192      (1,606)      1,640
    -------------------------------------------------------------------------
    Net increase (decrease) in
     cash and cash equivalents
     during the period             9,122      (7,355)     15,277      (8,800)
    Cash and cash equivalents,
     beginning of period          14,528      15,728       8,373      17,173
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                23,650       8,373      23,650       8,373
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow
     information:
    Interest paid                    764         696       3,281       2,473
    Income taxes paid (received)      16           -        (200)        267
    -------------------------------------------------------------------------
    

SOURCE LABOPHARM INC.

For further information: For further information: At Labopharm Inc.: Mark D'Souza, Senior Vice-President and Chief Financial Officer, Tel: (450) 686-0207; At The Equicom Group: Lawrence Chamberlain, Media and Investor Relations, Tel: (416) 815-0700 ext. 257, lchamberlain@equicomgroup.com; French: Joe Racanelli, Tel: (514) 844-7997, jracanelli@equicomgroup.com

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