Labopharm Reports Results for Third Quarter Fiscal 2007



    - Quarter Highlighted by Continued Momentum in Global Commercialization
    Program for Once-Daily Tramadol and Completion of Enrolment for
    Once-Daily Trazodone Phase III Study -

    LAVAL, QC, Nov. 9 /CNW/ - Labopharm Inc. (TSX: DDS; NASDAQ:   DDSS) today
reported its results for the third quarter of fiscal 2007, ended September 30,
2007. All figures are in Canadian dollars unless otherwise stated.

    Recent Developments

    Once-Daily Tramadol Global Commercialization Program

    Sales of Labopharm's once-daily tramadol product for the third quarter of
fiscal 2007 increased to $2.8 million from $1.1 million for the third quarter
of fiscal 2006, the result of product shipments to a larger number of markets
in the third quarter of fiscal 2007, as well as higher average selling prices
in the third quarter of fiscal 2007, primarily due to the launch of the
product in Canada, where selling prices are higher than in Europe. Once-daily
tramadol sales for the first nine-months of fiscal 2007 increased to
$10.4 million from $4.0 million for the same period of fiscal 2006. Adjusted
gross margin for the third quarter and first nine months of fiscal 2007
increased to 56% and 50%, respectively, from 37% and 44% for the corresponding
periods in 2006.
    "While our quarterly product revenue will continue to fluctuate with the
timing of orders typically associated with the early stages of product
launches, our once-daily tramadol product is steadily achieving penetration of
our target market(1) in Europe with our market share(2) reaching almost 4% in
September," said James R. Howard-Tripp, President and Chief Executive Officer,
Labopharm Inc. "Our product has met with particular success in Spain, where it
achieved a market share in September of almost 14%. We are confident that we
can achieve similar results in other markets as we continue to address the
initial challenges in some of those countries."
    Labopharm and its marketing partner, Paladin Labs Inc., launched
once-daily tramadol in Canada under the brand name Tridural(TM). The Company
also completed licensing and distribution agreements for once-daily tramadol
for South Korea with WhanIn Pharmaceutical Co., Ltd., for Greece with
Lavipharm S.A. and for Israel with Dexcel Pharma Technologies Ltd. Labopharm
expects its product to be launched in the South Korean and Greek markets in
2008. Labopharm's formulation is currently under regulatory review in Israel
and the Company expects a response from the Israeli regulatory authority by
mid-2008.
    To date, Labopharm has secured marketing partners for its once-daily
tramadol in more than 50 countries worldwide and regulatory approval in 25
countries. The Company's partners will continue to launch its product in
additional markets, globally, throughout 2008.
    In the U.S., Labopharm continues to vigorously pursue regulatory approval
of its once-daily tramadol, appealing the U.S. Food and Drug Administration's
(FDA) decision in its Approvable Letter through initiation of the Agency's
Formal Dispute Resolution process. The Company believes that it has met the
statutory standards for approval of its formulation and that appealing the
FDA's decision through this process represents its best opportunity to
expeditiously resolve this matter.

    
    ---------------------------------
    (1) Labopharm's target market consists of the market for
        immediate-release, twice-daily, once-daily and drop formulations of
        tramadol.
    (2) Includes France, Germany, the United Kingdom, Spain and Italy.
    


    Once-Daily Trazodone Development Program

    Labopharm has completed patient enrolment in its North American Phase III
clinical trial for its once-daily formulation of the antidepressant trazodone,
ahead of schedule. More than 400 patients are enrolled in the study.
    "Our once-daily formulation represents the opportunity to address
significant unmet needs in the treatment of depression," said Mr.
Howard-Tripp. "Trazodone has a proven history of efficacy and we believe that
by controlling the blood concentration levels through our Contramid(R)
controlled-release technology, we can offer a once-daily formulation with a
potentially improved side effect profile that takes advantage of trazodone's
unique sedative effects, eliminating the need for adjunctive therapy often
associated with other anti-depressants to address related conditions such as
poor sleep quality. We look forward to reporting data from our Phase III study
in the second quarter of next year."

    Other Development Programs

    Labopharm continues to advance the development programs for other product
candidates in its pipeline, including its programs to develop a twice-daily
tramadol-acetaminophen combination formulation and a twice-daily acetaminophen
formulation, both of which are based on the Company's proprietary Contramid(R)
technology. The Company is currently in the process of preparing for pivotal
studies for the tramadol-acetaminophen formulation, which it expects to begin
imminently.

    Financial Results

    Revenue for the third quarter of fiscal 2007 increased to $5.1 million
from $3.3 million for the third quarter of fiscal 2006. Product sales
increased to $2.8 million from $1.1 million with the increase being the result
of higher volumes due to shipments of once-daily tramadol to a larger number
of markets in the third quarter of fiscal 2007 compared to the third quarter
of fiscal 2006, as well as higher average selling prices in the third quarter
of fiscal 2007, primarily as a result of launch of the product in Canada,
where selling prices are higher than in Europe. Product sales for the third
quarter of fiscal 2007 consisted of follow-on shipments of once-daily tramadol
to our marketing partners in Europe for distribution in various markets, as
well as initial shipments to Paladin Labs Inc. for distribution in Canada.
    Gross margin (as a percentage of product sales revenue), excluding a
non-recurring favourable adjustment of $236,000, for the third quarter of
fiscal 2007 increased to 56% from 37% for the third quarter of fiscal 2006.
The increase in adjusted gross margin compared to the third quarter of last
year was due to lower manufacturing costs and higher average selling prices
per tablet resulting primarily from the launch in Canada, which were partially
offset by a royalty expense payable to an affiliate of Purdue Pharma to avoid
any potential conflict with respect to patents.
    Licensing revenue for the third quarter of fiscal 2007 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 third quarter of fiscal 2006 was $2.2 million. The decrease in
licensing revenues was primarily the result of the extensions of the estimated
term over which the Company is recognizing the US$20 million up-front payment
previously received from Purdue Pharma.
    Revenue from research and development collaborations for the third
quarter of fiscal 2007 was $1.2 million and was related to the ongoing
development of an additional strength of Labopharm's once-daily tramadol
product. The Company did not generate revenue from research and development
collaborations in the corresponding quarter of last year.
    Research and development expenses before research and development tax
credits for the third quarter of fiscal 2007 increased to $7.9 million from
$3.4 million for the third quarter of fiscal 2006. The increase was primarily
due to the Phase III clinical trial for once-daily trazodone that was
initiated in the second quarter of fiscal 2007, several pharmacokinetic
studies for additional development programs and the general increase in the
Company's research and development activities. Research and development tax
credits for the third quarter of fiscal 2007 were unchanged from the
corresponding quarter of fiscal 2006 at $0.8 million.
    Selling, general and administrative expenses for the third quarter of
fiscal 2007 increased to $4.6 million from $4.1 million for the third quarter
of fiscal 2006. The increase is due primarily to increased headcount and
related compensation expense and increased sales and marketing and other
operational costs as the Company transitions from a research and development
company to a commercial operation.
    At September 30, 2007, the Company held investments in Canadian third
party asset-backed commercial paper (ABCP) with an original cost of
$5.6 million. When acquired, these investments were rated R1 (High) by
Dominion Bond Rating service (DBRS), the highest credit rating issued for
commercial paper. These investments matured in October 2007 but, as a result
of liquidity issues in the ABCP market, did not settle on maturity. As a
result, the Company has adjusted the estimated fair value of the investment
and taken a charge in the third quarter of $0.9 million and classified its
ABCP as a long-term investment.
    Net loss for the third quarter of fiscal 2007 was $9.0 million, or
$0.16 per share, compared with $4.4 million, or $0.08 per share, for the third
quarter of fiscal 2006.
    Cash, cash equivalents and marketable securities at September 30, 2007
were $68.4 million ($73.3 million including the ABCP that was classified as a
long-term investment) compared with $99.5 million at December 31, 2007.
Excluding the reclassification and write down of the ABCP discussed above,
Labopharm's cash, cash equivalents and marketable securities decreased
$25.3 million compared to December 31, 2007. This decrease was primarily the
result of the use of funds for operating activities.
    For the nine-month period ended September 30, 2007, revenue increased to
$16.3 million from $10.7 million for the first nine months of 2006. Product
sales increased to $10.4 million from $4.0 million, primarily the result of
higher volumes due to shipments of once-daily tramadol to a larger number of
markets in the first nine months of fiscal 2007 compared to the first nine
months of fiscal 2006.
    Gross margin for the first nine months of fiscal 2007, excluding the
provision for once-daily tramadol pre-launch inventory and related deposits to
manufacturers taken in the second quarter following the delay in the
anticipated U.S. launch of once-daily tramadol, net of the non-recurring
favourable adjustment discussed for the quarter, increased to 50% from 44% for
the first nine months of fiscal 2006. The increase in adjusted gross margin
for the first nine months of 2007 was due to higher average selling prices,
primarily attributable to the Canadian launch of once-daily tramadol and lower
manufacturing costs, which were partially offset by a royalty expense payable
to an affiliate of Purdue Pharma to avoid any potential conflict with respect
to patents.
    Licensing revenue for the first nine months of fiscal 2007 was
$4.8 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 nine months of fiscal 2006 was $6.8 million.
The decrease in licensing revenues was the result of the extensions 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 before research and development tax
credits for the first nine months of fiscal 2007 increased to $19.5 million
from $14.3 million for the first nine months of fiscal 2006. The increase was
primarily due to the Phase III clinical trial for once-daily trazodone that
was initiated in the second quarter of fiscal 2007, several pharmacokinetic
studies for additional development programs and the general increase in the
Company's research and development activities. Research and development tax
credits for the first nine months of fiscal 2007 were $2.4 million compared to
$1.8 million for the first nine months of fiscal 2006.
    Selling, general and administrative costs for the first nine months of
fiscal 2007 increased to $16.0 million from $11.1 million for the first nine
months of fiscal 2006. The rationale for the increase is consistent with that
for the third quarter and also includes an increase in non-cash stock-based
compensation expense of $1.3 million.
    Net loss for the first nine months of fiscal 2007 was $26.5 million, or
$0.47 per share, compared to $16.7 million, or $0.33 per share for the first
nine months of fiscal 2006.
    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 continued penetration of markets
in which its product has already been launched, as well as additional product
launches globally, will result in quarter over quarter growth in product
sales.

    Conference Call

    Labopharm will host a conference call today (Friday, November 9, 2007 at
8:30 a.m. ET) to discuss its third quarter fiscal 2007 results. To access the
conference call by telephone, dial (416) 644-3427 or 1-800-589-8577. 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, November 16, 2007 at midnight. To access the archived conference call,
dial (416) 640-1917 or 1-877-289-8525 and enter the reservation number
21251082 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 a fully 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.


    
    INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
    (Unaudited)

    For the:                      Three months ended       Nine months ended
                                 Sept 30,    Sept 30,    Sept 30,    Sept 30,
                                    2007        2006        2007        2006
    (Thousands of Canadian
     dollars, except share
     and per share amounts)            $           $           $           $
    -------------------------------------------------------------------------

    REVENUE
    Product sales                  2,818       1,097      10,359       4,044
    Licensing                      1,058       2,229       4,786       6,672
    Research and development
     collaborations                1,217           -       1,217           -
    -------------------------------------------------------------------------
                                   5,093       3,326      16,362      10,716
    -------------------------------------------------------------------------

    EXPENSES
    Cost of goods sold
     (excluding amortization)      1,012         691       6,716       2,267
    Research and development
     expenses, net                 7,171       2,611      17,088      12,466
    Selling, general and
     administrative expenses       4,596       4,069      16,048      11,060
    Financial expenses               434         644       1,474       2,056
    Impairment loss on
     long-term investment            874           -         874           -
    Depreciation and
     amortization                    510         430       1,482       1,276
    Interest income                 (810)     (1,271)     (2,707)     (2,277)
    Foreign exchange loss (gain)    (107)        (50)        280        (643)
    -------------------------------------------------------------------------
                                  13,680       7,124      41,255      26,205
    -------------------------------------------------------------------------
    LOSS BEFORE INCOME TAXES      (8,587)     (3,798)    (24,893)    (15,489)
    Provision for income taxes
      Current                        508         598       1,710       1,282
      Future                         (64)        (35)        (64)        (71)
    -------------------------------------------------------------------------
                                     444         563       1,646       1,211
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NET LOSS FOR THE PERIOD       (9,031)     (4,361)    (26,539)    (16,700)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    NET LOSS PER SHARE -
     BASIC AND DILUTED             (0.16)      (0.08)      (0.47)      (0.33)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number
     of common shares
     outstanding              56,817,963  56,747,093  56,795,545  50,938,493
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Unaudited)

    For the:                      Three months ended       Nine months ended
                                 Sept 30,    Sept 30,    Sept 30,    Sept 30,
                                    2007        2006        2007        2006
    (Thousands of Canadian
     dollars)                          $           $           $           $
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Net loss for the period       (9,031)     (4,361)    (26,539)    (16,700)
    Items not affecting cash:
      Depreciation of property,
       plant and equipment           448         375       1,304       1,105
      Amortization of intangible
       assets                         62          55         178         171
      Amortization of deferred
       financing costs                 -          51           -         162
      Amortization of premium
       or discounts on
       marketable securities          57           -         207           -
      Impairment loss on
       long-term investment          874           -         874           -
      Non-cash financial expenses     30           -         107           -
      Unrealized foreign exchange
       loss (gain)                  (106)        (74)        282        (547)
      Future income tax              (64)        (35)        (64)        (71)
      Stock-based compensation       674         492       3,573       1,857
    -------------------------------------------------------------------------
                                  (7,056)     (3,497)    (20,078)    (14,023)
    Net change in non-cash
     operating items               1,008      (6,274)      1,116     (15,941)
    -------------------------------------------------------------------------
                                  (6,048)     (9,771)    (18,962)    (29,964)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Acquisition of marketable
     securities                  (11,733)    (73,741)    (64,980)    (99,138)
    Proceeds from disposals of
     marketable securities         3,498       2,500       3,498       2,500
    Proceeds from maturities
     of marketable securities     15,491       4,585      81,876      20,499
    Acquisition of property,
     plant and equipment            (454)       (437)     (1,600)     (1,018)
    Acquisition of intangible
     assets                         (334)        (25)       (457)       (690)
    -------------------------------------------------------------------------
                                   6,468     (67,118)     18,337     (77,847)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Repayment of capital lease
     obligations                     (24)        (21)        (71)        (61)
    Repayment of long-term debt   (1,004)       (903)     (3,061)     (2,307)
    Proceeds from issuance of
     capital stock                     -         120         225     114,664
    Issuance costs of capital
     stock                             -      (1,456)          -      (9,240)
    -------------------------------------------------------------------------
                                  (1,028)     (2,260)     (2,907)    103,056
    -------------------------------------------------------------------------

    Foreign exchange loss on
     cash held in foreign
     currencies                     (207)        (12)     (1,121)         (9)

    Net decrease in cash and
     cash equivalents during
     the period                     (815)    (79,161)     (4,653)     (4,764)
    Cash and cash equivalents,
     beginning of period           9,884      94,679      13,722      20,282
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                 9,069      15,518       9,069      15,518
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash flows include the
     following items:
    Interest paid                    328         483       1,107       1,542
    Income taxes paid (received)    (430)         31        (902)        145
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED BALANCE SHEETS
    (Unaudited)

                                                          As at        As at
                                                   September 30, December 31,
                                                           2007         2006
    (Thousands of Canadian dollars)                           $            $
    -------------------------------------------------------------------------

    ASSETS
    Current
    Cash and cash equivalents                             9,069       13,722
    Available-for-sale marketable securities             59,370       85,747
    Accounts receivable                                   5,005        4,002
    Research and development tax credits receivable       1,264        1,869
    Income taxes receivable                                   -          939
    Inventories                                           3,258        5,287
    Prepaid expenses and other assets                     1,705        1,384
    -------------------------------------------------------------------------
    Total current assets                                 79,671      112,950
    -------------------------------------------------------------------------

    Restricted long-term investments                      1,273        1,280
    Long-term investment                                  4,867            -
    Property, plant and equipment, net                   10,845       10,909
    Intangible assets                                     3,484        3,205
    Deferred financing costs                                  -          156
    Future income tax asset                                 198          134
    -------------------------------------------------------------------------
                                                        100,338      128,634
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Accounts payable and accrued liabilities              9,460        8,908
    Current portion of deferred revenue                   4,326        7,916
    Current portion of obligations under capital leases     163           94
    Current portion of long-term debt                     3,890        4,425
    -------------------------------------------------------------------------
    Total current liabilities                            17,839       21,343
    -------------------------------------------------------------------------

    Deferred revenue                                     18,142       16,593
    Obligations under capital leases                      5,678        5,746
    Long-term debt                                            -        3,396
    -------------------------------------------------------------------------
    Total liabilities                                    41,659       47,078
    -------------------------------------------------------------------------

    Shareholders' equity
    Common shares, no par value, unlimited shares
     authorized, 56,817,963 and 56,747,963 issued
     and outstanding as at September 30, 2007 and as
     at December 31, 2006, respectively                 241,955      241,588
    Contributed surplus                                  11,848        8,417
    Deficit                                            (194,988)    (168,449)
    Accumulated other comprehensive loss                   (136)           -
    -------------------------------------------------------------------------
    Total shareholders' equity                           58,679       81,556
    -------------------------------------------------------------------------
                                                        100,338      128,634
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: At Labopharm: Mark D'Souza, 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: Eric
Bouchard, Tel: (514) 844-7997, ebouchard@equicomgroup.com

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