Labopharm reports results for second quarter fiscal 2008



    
    - Positive Trends Emerging for Once-Daily Tramadol as Company Advances
    Follow-On Products Towards Commercialization -
    

    LAVAL, QC, Aug. 8 /CNW/ - Labopharm Inc. (TSX: DDS; NASDAQ:   DDSS) today
reported its results for the second quarter ended June 30, 2008. All figures
are in Canadian dollars unless otherwise stated.
    "We are seeing positive trends emerge for our once-daily tramadol product
highlighted by steady growth of in-market sales, steady growth in market
share, and sequential quarterly growth in our reported product sales," said
James R. Howard-Tripp, President and Chief Executive Officer, Labopharm Inc.
"At the same time, we are continuing to advance the development of follow-on
programs toward our goal of commercializing multiple products. We are in the
final stages of preparation of the New Drug Application for the most advanced
program in our pipeline, a novel antidepressant containing trazodone that we
believe could address a significant unmet need in the treatment of depression.
We are also progressing in our development of other unique pain products,
including a twice-daily formulation of tramadol-acetaminophen, the Phase III
clinical study for which we expect to complete this year, as well as our
misuse prevention platform, for which we are preparing to initiate
pharmacokinetic studies on two of the most widely misused pain drugs."

    Financial Summary

    Revenue from product sales of Labopharm's once-daily tramadol for the
second quarter of fiscal 2008 was $3.9 million compared with $4.1 million for
the second quarter of fiscal 2007. Sales of the Company's once-daily tramadol
to end users ("in-market sales") for Europe(1) experienced strong growth with
standard unit sales for the first five months of 2008 growing at an annualized
rate of 72%. Gross margin for the second quarter of fiscal 2008 increased to
56% from 46% for the second quarter of fiscal 2007. The second quarter of
fiscal 2007 excludes a $1.7 million provision for once-daily tramadol
pre-launch inventory and related deposits to manufacturers. Research and
development and selling, general and administrative expenses for the second
quarter of fiscal 2008 were $12.4 million compared with $11.7 million for the
second quarter of fiscal 2007. Net loss for the second quarter of fiscal 2008
was $10.1 million, or $0.18 per share, compared with $11.0 million, or $0.19
per share, for the second quarter of fiscal 2007.

    Recent Developments

    Once-Daily Tramadol Global Commercialization Program

    Product Continues to Steadily Gain Market Share - Labopharm's product
continues to steadily gain market share in Europe and Canada as evidenced by
May 2008 data. Overall share of the European(2) tramadol market(3) continued
to exhibit solid growth. Moreover, Labopharm's product moved into the number
one position in the once-daily segment of the market with a 45% share. Growth
continues to be particularly strong in France, where the product's share of
the tramadol market(3) reached 7.3%. In Canada, sequential monthly growth in
the number of prescriptions for the Company's product averaged 25% in March,
April and May 2008 and the product's share of the tramadol market increased to
17.5%.
    Both the European and Canadian markets for tramadol products continue to
grow, with standard unit sales in Europe growing at a compound annual rate of
12% over the last five years and the number of prescriptions in Canada
increasing by an average of 13% per month over the period of January to May
2008.
    Product Launched in Four Additional Countries - Labopharm's product was
launched in South Korea under the brand name TramaConti CR(R), in Australia
under the brand name Durotram XR(R), in Austria and Romania under the brand
name Noax(R) Uno. The launches bring the total number of countries in
which the product is being sold to 14, representing almost 55% of the global
market(4) for tramadol products.
    Reacquired Sales and Marketing Rights for UK - Labopharm reacquired the
sales and marketing rights to its product (Tradorec XL(R)) for the United
Kingdom from Recordati Ireland Ltd. The Company plans to relaunch the product
this fall.
    Submitted Complete Response to FDA and Assigned New PDUFA Action Date -
Labopharm submitted a complete response to the U.S. Food and Drug
Administration (FDA) that centered on the additional analysis of existing data
using the methodology previously put forward by the Agency. The response was
subsequently accepted as a complete, Class 2 response and the action date
assigned under the Prescription Drug User Fee Act (PDUFA) is January 2, 2009.

    DDS-04A Containing Trazodone for Treatment of Depression

    Finalizing NDA for Submission in Third Quarter 2008 - Labopharm is in the
process of finalizing the New Drug Application (NDA), which it expects to
submit in the third quarter of 2008. The Application will include the results
of the positive Phase III clinical trial, which, in addition to achieving
statistical significance for the primary endpoint (p value of 0.0183) for
efficacy in the treatment of depression, demonstrated improvement in the
overall quality of sleep. The study also showed that DDS-04A was statistically
superior to placebo by the end of the first week of treatment. The Company is
also in discussions with respect to establishing a marketing partner for the
United States.

    Twice-Daily Tramadol-Acetaminophen Combination Product

    Phase III Clinical Trial Continues - Enrolment for the North American
Phase III clinical trial (study 06CCL3-001) continues, as do discussions with
potential marketing partners for distribution of the product globally.

    Misuse Prevention Platform

    Preparing to Initiate PK Studies for Two Widely Misused Pain Drugs -
Following on positive pharmacokinetic studies on a misuse prevention
formulation of once-daily tramadol, Labopharm is preparing to initiate
pharmacokinetic studies for two of the most widely misused pain drugs.

    Financial Results

    Revenue for the second quarter of fiscal 2008 was $4.9 million compared
with $5.9 million for the second quarter of fiscal 2007. Revenue from product
sales was $3.9 million compared with $4.1 million for the second quarter of
fiscal 2007. Sales of the Company's once-daily tramadol to end users
("in-market sales") for Europe5 experienced strong growth with standard unit
sales for the first five months of 2008 growing at an annualized rate of 72%.
    Gross margin (as a percentage of revenue from product sales) for the
second quarter of fiscal 2008 increased to 56% from 46% for the second quarter
of fiscal 2007. The second quarter of fiscal 2007 excludes a $1.7 million
provision for once-daily tramadol pre-launch inventory and related deposits to
manufacturers. The increase in gross margin was due primarily to lower
packaging costs and higher average selling prices per tablet.
    Licensing revenue for the second quarter of fiscal 2008 was $1.1 million
and represented a portion of licensing payments received from the Company's
licensing and distribution partners for once-daily tramadol. Licensing revenue
for the second quarter of fiscal 2007 was $1.7 million. The decrease in
licensing revenue was primarily the result of the extension of the estimated
term over which the Company is recognizing the up-front payment of
US$20 million previously received from Purdue Pharma following receipt of the
second Approvable Letter from the FDA in May 2007.
    Research and development expenses, net of research and development tax
credits, for the second quarter of fiscal 2008 were $6.3 million compared with
$5.7 million for the second quarter of fiscal 2007. The increase was primarily
the result of a higher level of clinical trial activity in the second quarter
of fiscal 2008 as well as a general increase in our research and development
workforce to support the development of our growing product pipeline. Research
and development tax credits for the second quarter of fiscal 2008 were
$0.7 million compared with $0.8 million for the second quarter of fiscal 2007.
    Selling, general and administrative expenses for the second quarter of
fiscal 2008 were virtually flat year over year at $6.1 million versus
$6.0 million for the second quarter of fiscal 2007. Variances include
primarily higher legal and compensation costs, offset by lower non-cash
stock-based compensation expense.
    Net loss for the second quarter of fiscal 2008 was $10.1 million, or
$0.18 per share, compared with $11.0 million, or $0.19 per share, for the
second quarter of fiscal 2007.
    Cash, cash equivalents and available-for-sale marketable securities at
June 30, 2008 were $55.3 million, compared with $64.4 million at March 31,
2008. The cash, cash equivalents and available-for-sale marketable securities
position at June 30, 2008 does not include the Company's asset-backed
commercial paper (ABCP) investment with an estimated fair value of
$3.7 million that was reclassified as a long-term investment in the third
quarter of 2007. The decrease in cash, cash equivalents and available-for-sale
marketable securities was primarily the result of the use of funds for
operating activities.
    For the first six months of fiscal 2008, revenue was $8.1 million
compared with $11.3 million for the first six months of fiscal 2007. Revenue
from product sales was $6.0 million compared with $7.5 million in 2007. The
difference is mainly attributable to the fact that a significant proportion of
product sales for the first quarter of fiscal 2007 consisted of initial launch
quantities for new European markets.
    Gross margin (as a percentage of revenue from product sales) for the
first six months of fiscal 2008 increased to 56% from 47% (excluding a
$1.7 million provision for once-daily tramadol pre-launch inventory and
related deposits to manufacturers) for the first six months of fiscal 2007.
The increase in gross margin was due primarily to lower packaging costs and
higher average selling prices per tablet.
    Licensing revenue for the first six months of fiscal 2008 was
$2.1 million and represented a portion of licensing payments received from the
Company's licensing and distribution partners for once-daily tramadol.
Licensing revenue for the first six months of fiscal 2007 was $3.7 million.
The decrease in licensing revenue was primarily the result of the extension of
the estimated term over which the Company is recognizing the US$20 million
up-front payment previously received from Purdue Pharma.
    Research and development expenses, net of research and development tax
credits, for the first six months of fiscal 2008 were $12.0 million compared
with $10.2 million for the first six months of fiscal 2007. The increase was
primarily due to higher clinical trial activity in the first half of fiscal
2008, and an increase in research and development workforce. Research and
development tax credits for the first six months of fiscal 2008 were
$1.8 million compared with $1.6 million for the first six months of fiscal
2007.
    Selling, general and administrative expenses for the first six months of
fiscal 2008 decreased to $10.9 million from $11.2 million for the first six
months of fiscal 2007. The decrease is primarily due to lower non-cash
stock-based compensation expense, partially offset by the increase in legal
and compensation costs.
    Net loss for the first six months of fiscal 2008 was $19.8 million, or
$0.35 per share, compared with $17.5 million, or $0.31 per share for the first
six months of fiscal 2007.
    Labopharm continues to expect global sales of its once-daily tramadol
product to be variable from quarter to quarter as a result of pipeline fill
and other supply chain and market dynamics associated with the early stages of
product launches. Labopharm believes that the penetration of markets in which
its product has already been launched, as well as additional product launches
globally, will result in continued annual growth in product sales.

    Conference Call

    Labopharm will host a conference call today (Friday, August 8, 2008 at
8:30 a.m. ET) to discuss its second quarter fiscal 2008 results. To access the
conference call by telephone, dial 416-646-3095 or 1-800-814-4859. Please
connect approximately five minutes prior to the beginning of the call to
ensure participation. The conference call will be archived for replay until
Friday, August 15, 2008 at midnight. To access the archived conference call,
dial 416-640-1917 or 1-877-289-8525 and enter the reservation number 21278611
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.

    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
being commercially launched in key markets globally. The Company also has a
robust 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, which reflect the
Company's current expectations regarding future events. 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 uncertainties related to the regulatory process in various
countries for the approval of the Company's products and the successful
commercialization of the products throughout the world if they are approved.
Investors should consult the Company's ongoing quarterly filings and annual
reports 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.

    
    -----------------------------
    (1) Includes France, Germany, the United Kingdom, Spain and Italy.
    (2) Includes France, Germany, the United Kingdom, Spain and Italy.
    (3) Labopharm's target market consists of the market for immediate-
        release, twice-daily, once-daily and drop formulations of tramadol.
    (4) Sales in US dollars for the twelve-month period ended March 31, 2008.
    (5) Includes France, Germany, the United Kingdom, Spain and Italy.



    Labopharm inc.
    CONSOLIDATED BALANCE SHEETS
    (Unaudited)

                                                          As at        As at
                                                        June 30, December 31,
                                                           2008         2007
    (Thousands of Canadian dollars)                           $            $
    -------------------------------------------------------------------------

    ASSETS
    Current
    Cash and cash equivalents                            32,557       17,173
    Available-for-sale marketable securities             22,762       54,726
    Accounts receivable                                   1,870        1,972
    Research and development tax credits receivable       1,797        1,197
    Income taxes receivable                                 120          161
    Inventories                                           1,918        2,875
    Prepaid expenses and other assets                       783        1,460
    -------------------------------------------------------------------------
    Total current assets                                 61,807       79,564
    -------------------------------------------------------------------------

    Restricted long-term investments                        133        1,277
    Long-term investment                                  3,739        4,329
    Property, plant and equipment                        10,905       10,800
    Intangible assets                                     3,596        3,453
    Future income tax assets                                119          116
    -------------------------------------------------------------------------
                                                         80,299       99,539
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Accounts payable and accrued liabilities              9,038        8,719
    Current portion of deferred revenue                   4,339        4,325
    Current portion of obligations under capital
      leases                                                262          203
    -------------------------------------------------------------------------
    Total current liabilities                            13,639       13,247
    -------------------------------------------------------------------------

    Deferred revenue                                     15,037       17,083
    Obligations under capital leases                      5,482        5,613
    Long-term debt                                       14,318       13,647
    -------------------------------------------------------------------------
    Total liabilities                                    48,476       49,590
    -------------------------------------------------------------------------

    Shareholders' equity
    Share capital
      Unlimited authorization of common shares,
       voting, without par value; issued and
       outstanding 56,822,363 and 56,817,963 as at
       June 30, 2008 and as at December 31, 2007,
       respectively                                     241,962      241,955
    Warrants                                                541          541
    Contributed surplus                                  14,096       12,527
    Deficit                                            (224,756)    (205,024)
    Accumulated other comprehensive loss                    (20)         (50)
    -------------------------------------------------------------------------
    Total shareholders' equity                           31,823       49,949
    -------------------------------------------------------------------------
                                                         80,299       99,539
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Labopharm inc.
    INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
    (Unaudited)

    (Thousands of       For the three months ended: For the six months ended:
    Canadian dollars,         June 30,     June 30,     June 30,     June 30,
    except share and             2008         2007         2008         2007
    per share amounts)              $            $            $            $
    -------------------------------------------------------------------------

    REVENUE
    Product sales               3,859        4,149        6,017        7,541
    Licensing                   1,064        1,707        2,125        3,728
    -------------------------------------------------------------------------
                                4,923        5,856        8,142       11,269
    -------------------------------------------------------------------------

    EXPENSES
    Cost of goods sold
     (excluding
     depreciation)              1,683        4,003        2,634        5,704
    Research and
     development, net           6,306        5,681       11,997       10,151
    Selling, general and
     administrative             6,062        6,047       10,878       11,218
    Financial costs               709          491        1,420        1,040
    Impairment loss on
     long-term investment           -            -          691            -
    Depreciation and
     amortization                 524          500        1,049          972
    Interest income              (551)        (925)      (1,203)      (1,897)
    Foreign exchange (gain)
     loss                         (20)         393         (292)         387
    -------------------------------------------------------------------------
                               14,713       16,190       27,174       27,575
    -------------------------------------------------------------------------
    Loss before income
     taxes                     (9,790)     (10,334)     (19,032)     (16,306)
    Provision for income
     taxes - current              350          675          800        1,202
    -------------------------------------------------------------------------
    Net loss for the period   (10,140)     (11,009)     (19,832)     (17,508)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss per share basic
     - diluted                  (0.18)       (0.19)       (0.35)       (0.31)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number
     of common shares
     outstanding           56,821,651   56,795,490   56,819,919   56,784,151
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Labopharm inc.
    INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Unaudited)

                        For the three months ended: For the six months ended:
                              June 30,     June 30,     June 30,     June 30,
    (Thousands of                2008         2007         2008         2007
    Canadian dollars)               $            $            $            $
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Net loss for the period   (10,140)     (11,009)     (19,832)     (17,508)
    Items not affecting cash:
      Depreciation of
       property, plant and
       equipment                  460          442          915          856
      Amortization of
       intangible assets           64           58          134          116
      Amortization of
       premium or discounts
       on marketable
       securities                  13           76           27          150
      Impairment loss on
       long-term investment         -            -          691            -
      Non-cash financial
       costs                       92           36          187           77
      Unrealized foreign
       exchange (gain) loss       (20)         400         (261)         388
      Stock-based
       compensation               687        1,393        1,571        2,899
    -------------------------------------------------------------------------
                               (8,844)      (8,604)     (16,568)     (13,022)
    Net change in non-cash
      operating items            (213)      (1,060)         717          108
    -------------------------------------------------------------------------
                               (9,057)      (9,664)     (15,851)     (12,914)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Acquisition of
     marketable securities          -      (10,224)     (23,553)     (53,247)
    Proceeds from
     maturities of
     marketable securities     21,758        4,971       55,819       66,385
    Acquisition of
     restricted long-term
     investment                     -            -          (45)           -
    Acquisition of
     property, plant and
     equipment                   (629)        (326)      (1,148)      (1,146)
    Acquisition of
     intangible assets           (179)         (49)        (277)        (123)
    -------------------------------------------------------------------------
                               20,950       (5,628)      30,796       11,869
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Repayment of
     obligations under
     capital leases               (47)         (25)         (72)         (47)
    Repayment of long-term
     debt                           -       (1,014)           -       (2,057)
    Transaction costs            (118)           -         (118)           -
    Proceeds from issuance
     of common shares               3          110            5          225
    -------------------------------------------------------------------------
                                 (162)        (929)        (185)      (1,879)
    -------------------------------------------------------------------------
    Foreign exchange gain
     (loss) on cash and
     cash equivalents held
     in foreign currencies       (175)        (831)         624         (914)
    Net increase (decrease)
     in cash and cash
     equivalents during the
     period                    11,556      (17,052)      15,384       (3,838)
    Cash and cash
     equivalents, beginning
     of period                 21,001       26,936       17,173       13,722
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period                    32,557        9,884       32,557        9,884
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash flows include the
     following items:
    Interest paid                 622          368        1,145          779
    Income taxes received          43            -           43          472
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

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

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